The Fed & Debt

Recently, I read an article about The Federal Reserve of New York. Only then did I realise they are not part of the US government. The Fed was created in 1913 by a group of private bankers. Rothschild, Bank of America, JP Morgan, Goldman Sachs belongs to the Fed. Or can I say, they are the owners of Fed. So in essence, they are a private entity or corporation that controls the money supply of US.

I recalled these events that took place. JP Morgan bought Bear Sterns at a initial proposed amount of $2 per share. Bank of America took over Merill Lynch. Paulson (ex chairman of Goldman Sachs and ex treasury secretary) allowed AIG to tap into bailouts, but let Lehman go. Both happened in the same week. The collapse of Lehman caused an enormous amount of panic and volatility in the global markets. Short-sellers were everywhere, shorting the shares of banks and of course Lehman. However, just as the short-sellers target Goldman Sachs and JP Morgan shares, SEC halted short sales temporarily. How clever.

There had been rumours that this financial crisis is pre-mediated to consolidate the powers of banks and their the elite owners.

I wondered why the creation of money and control of interest rates are left to a Central Bank that does not belong to the government ?

I particulary like a quote by Thomas Jefferson "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

The Fed is created as a Central Bank. It controls the money supply, interest rates and having control over these equates to having control over the entire economy, the lives of American people. The US dollar is the reserve currency of the world and it makes the FED even more important as any decision made now influences the global economy.

As a bank, it supplies money to the US government. But, it comes with a interest rate. So now, this supply of money becomes a form of debt to the taxpayers. Everyone knows US has huge amounts of trade deficits.

And how are they going to resolve this imbalance ? I'll probably talk about the trade deficits, the currency markets and inflationary pressures in the next post.