This story tells us that the Federal Reserve System supports the market for Government-issued bond notes and bills, but CNBC fails to tell us the most vital detail: Where does the FED get the trillions of dollars to purchase its “portfolio?”
The Fed’s new frontier: What happens, why it matters and what could go wrong
As CNBC explained a year ago in a lengthy story, “The Fed spent trillions of dollars to help stimulate the economy between 2008 and 2015, and some analysts worry pulling the money back out will slow the economy.
“Starting in 2008, the Fed began buying up assets in an effort to combat the 2008 recession by injecting money into the economy. The Fed would spend over $3.5 trillion between 2008 and 2015, buying everything from toxic mortgage-backed securities to Treasury notes.”
A three minute video explained by CNN tells us that “the Fed’s balance sheet is large enough to buy the 10 biggest companies in the S&P, including Apple, Amazon and Exxon!”:
Editor CEC returns to ask CNBC: Where did the FED get the $4.5 Trillion to buy all those Treasury securities that our government sells to finance our continued wars around the world? Answer: The FED created trillions from thin air to buy its “portfolio,” thus diluting the value of every dollar we individuals have saved.
Here is a simple explanation of what is left out, by one investment advisor, Alan Longbon (whom I read only this morning), but who has it correct as far as he goes. Alan writes:
“The Fed is the national government’s bank and remits its profits to the national government in the same way that taxes are remitted from the private sector to the government. Because the national government is the issuer of the dollar, it has as many dollars as it wishes to create and does not need to get them from an outside source. The $70 billion income stream to the government from a Fed rate rise is simply deleted from existence in the same way as national taxes are. It is a net reduction in the money supply.”
Mr. Longbon is better than most, in that he realizes the FED does not pay for its “Portfolio of Assets,” and It’s true and very significant that the FED does not keep the many billions of dollars of interests and profits that compound on the bonds and notes it pretends to buys from the Treasury. The simple reason is that it does not pay for a single bond, bill, or note – not one dime! Back in 1913, when the FED was allowed in the door, Congress was watchful enough not to let it steal the interest on money it prints. But those who own and control the FED make their billions by knowing in advance what it will do with our money.
Many, like Mr. Longbon, seems to think the Fed is part of the US government, and owned by it. Sadly it is not. The FED is a private bank owned by the world mega-banks. For some 100 years has controlled much of what our government does, including funding every war with printing-press money. For WHTT.ORG’s own summary see: Eclipse of Reason at Jackson Hole- – CEC