The article discusses the significant spending by the U. S. federal government and the Federal Reserve (Fed) over recent years, highlighting the resulting budget deficits and debt. It aims to explain how the Fed operates financially, its losses, and the implications for American taxpayers.
1. Government Spending and Debt:
• The federal government has accumulated nearly $2 trillion in annual budget deficits and has over $36 trillion in federal debt.
• This unprecedented spending has been ongoing since the 1960s, due to various factors including wars and entitlement programs.
2. The Role of the Fed:
• The Fed, established in 1913, is an independent central bank meant to manage the U. S. money supply and interest rates while being minimally accountable to Congress.
• Unlike other government agencies, the Fed does not receive funding from the federal budget but generates income through interest on $6. 5 trillion in Treasury bonds and mortgage-backed securities.
3. Fed’s Financial Mechanics:
• The Fed’s spending includes operational costs, interest on bank reserves, and dividends to member banks.
• Profits are typically transferred to the U. S. Treasury. However, since 2022, the Fed has faced monthly operating losses and has not remitted funds to the Treasury.
4. Deferred Assets:
• The Fed’s losses are recorded as "deferred assets," indicating the cumulative amount it has failed to remit to the Treasury.
• Observers question how the Fed can sustain such losses without consequences and whether its accounting methods are valid.
5. Impact on Taxpayers:
• Concerns arise regarding the genuine nature of the Fed’s accounting losses and the implications for taxpayer finances.
• Increased federal budget deficits linked to Fed operations inevitably cost taxpayers more.
6. Future Considerations:
• Questions remain about the sustainability of the Fed's current financial strategy and the potential long-term costs to taxpayers.
• Observers are urged to consider the legality and ethics behind the Fed's financial practices and whether corrective actions will be taken.
The article raises critical issues about the financial practices of the Federal Reserve and its effect on taxpayer finances. With ongoing losses and no remittances to the Treasury, it suggests a need for greater scrutiny and understanding of the Fed's financial strategies and their broader implications for the economy.
https://mises.org/mises-wire/fed-no-earnings-taking-us-magic-carpet-trip
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