The federal reserve is essentially a private institution and it is quite complex (see below), but it does serve the elites and keeps the poor poor. Basically under the gold standard, because there was real backing behind your money, essentially gold bars, the value of you money stayed constant, so the $100 you earned today would still be worth $100 in 10 years. Unlike the current system, where the FED is constantly manipulating the value of money by over and under supply and interest rate changes leading to ridiculous bubbles and crashes and sky high inflation. Essentially the $100 you earn today will be worth $20 ten years from now encouraging you to spend your money before it becomes worthless. This is good for stimulating economies, but bad if you don't want to have to work forever to stay afloat.
Imagine you had more than enough money (Big bankers and corporations) and weren't effected by these spikes in the market and you could manipulate things so that the value of other peoples assets (like their homes) would become worth a lot less than they currently are. You could foreclose on their loans and buy up their assets for a fraction of what they are worth. You then manipulate the market back in the other direction and make large profits on your newly acquired budget priced assets. The old cliché of "Buy Low - Sell High" is easy to do when you (The federal reserve) are the one responsible for the highs and lows.
I am trying to think of a reliable metaphor, but those who control the money supply hold a great deal of power over those at the middle to lower end of the financial spectrum. People like to think the federal reserve has the peoples best interests at heart, but don't be fooled they are only doing what is best for them, if sending everyone near broke and working 60 hours a week is in their best interests, than that's what they will create. And that's exactly what they have done.
1. The Fed is privately owned.
Its shareholders are private banks. In fact,
100% of its shareholders are private banks. None of its stock is owned by the government.2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”
Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:
“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”
3. The Fed generates profits for its shareholders.The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.
In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.
The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.
If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. Among other benefits to the taxpayers. a truly “federal” Federal Reserve could lend the full faith and credit of the United States to state and local governments interest-free, cutting the cost of infrastructure in half, restoring the thriving local economies of earlier decades.
