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.
Whatever the status of conspiracy theory claims regarding the supposedly pernicious nature of Fed operations, who thinks it would function more effectively as a federally administered agency under the direct behest of the President, Congress, and a bunch of government drones that would forever avoid accountability for fuck-ups? Can any person describe in detail how this alternative arrangement would function in good times and bad?
1. Instead of middle-men creating the wealth out of thin air, the government itself will do so. I don't see a substantive difference as far as principles go, then.
2. The government will suddenly avoid its profligate ways (see: fiscal policy) and become a responsible administrator of monetary policy, better than a nominally independent group of specialists insulated from political pressure?
3. Interest payments to the evil middlemen are rebated to the Treasury less operating costs, making the issue of profits irrelevant -- especially given that a "truly federal Fed" would have similar costs of its own.
blargh
The Reserve is legally required to return profits to the Treasury and its doing so is a well-documented empirical phenomenon. Further, the payments going to the Fed that subsequently return to the Treasury would otherwise go to a variety of investors (wealthy persons, foreign governments) with no better motivations than the Fed -- profit-seeking, potential economic warfare, etc.
Putting that issue on ice or a moment, are you aware of any remotely plausible alternative to the current institutional arrangement? Vague complaints of the current arrangement don't seem pertinent in a context where viable alternatives are non-existent.
