Silver bashers and history

A lot of people read articles ABOUT the Fed [mostly negative articles], but never bother to go to the Fed website(s) and check out what really goes on and how the banking system works. There is a lot of good information and links out there, particularly on the St. Louis Fed website.

 

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I actually gave the right answer above. If the question is simply who does the printing, then the answer is the "Bureau of Engraving" which is a department of the US Treasury. This currency however is not issued by the US Treasury, i.e. the US Government. They are simply acting as secure contractors for the Federal Reserve. Since 1971 the Federal Reserve has had the exclusive right to issue currency in the USA.

The reason that it is confusing to people is because the relationship is highly obfuscated to give the appearance to the general public that the dollars in their pockets and bank accounts come from the US Government. They don't. The come from the Federal Reserve which is a legislated into existence independent institution that issues the currency. The Federal Reserve is solely responsible for the supply of dollars, can adjust the supply at it's sole discretion, and isn't subject to any audits or federal oversight of it's internal monetary decisions and transactions.

Why did they create such a screwed up sounding monster? Simply because the other role of the Federal Reserve is to act at the banker for the USA. If congress needs to spend more money than it has, it can borrow the money from the Federal Reserve. They order the US Treasury to create US Bank notes backed by the US Taxpayer and/or investors. These are then sold to the Federal Reserve and the Federal Reserve credits the USA with the equivalent amount of dollars. The Federal Reserve charges interest for this. Hence this creation allows the Federal Government to deficit spend.

 

But people should also keep in mind that any profits earned by the Fed after paying member banks the 6% dividend on their shares in the Fed are returned to the federal government. So a lot of the interest loops back into the Treasury. A lot of articles on the Fed omit this point.

 

I wonder if they (FED) tax themselves on profit.

 

are you trying to market it? I'm still hearing that on commercials...lol

 

Ya know I had US Treasury there initially, but changed it to US Mint In any case, the REST of my post was much more pertinent so I hope that didn't get glossed over.

 

I doubt it since the funds would go back to the federal government either way.

 

Just remember that Brazil has had a history of dictatorships and monetary policies that were so bad, it often had to demonetize its currency and invent a new one.

Brazil's currency units in the last 80 years have included the

Reis
Cruzeiro
New Cruzeiro
Cruzado
Cruzeiro (again)
Cruzeiro Real
Real

That's not a monetary history that instills a lot of confidence in the currency.

 

Pick on Brazil as much as you want. You've still got India and China. And the population of those two constitutes a tidal wave.

And if Brazil's currency is that unreliable, it only gives it's people a greater incentive to hoard PMs.

 

U.S. debt and the price of silver

If the price of precious metals are directly tied to the U.S. dollar,how the price of silver has acted in the past should be irrelevant as the U.S. has never had a 14 trillion dollar debt problem and expected to be 20 trillion by 2015.Most people are investing in silver and gold because they are expecting the worse.
Those who never invested in precious metals before are now in the game,thus supply and demand is driving the price.When confidence in the U.S. dollar returns expect a price drop,until then anything could happen.

 

How long has this country been off a Dollar that's been backed up with some sort of precious metal? 1964? HMMMMM......

Faith in the Government is what has kept the Dollar strong. Barring a major catastrophy occuring in the US that faith will continue. Or should I go stand in the corner?

 

Missed this thread until this evening. All of this has been interesting but it always amazes me that some people look down there nose at people who mention excess money supply as an issue related to inflation. Sneering from their lofty position at the lowbrow economic neophytes who are capable only of making such elementary observations. There are many examples throughout history that are tragic testament to results of governments and central banks that mismanage money supply. It is a simple fact that the growth of US money supply far exceeds economic growth, that we have a debt problem, that we have a deficit spending problem, that we have an unfunded liability problem, that the world is a dangerous place and that the decline of our prominence is making the other problems worse. I suppose these factors do produce anxiety and fear but that does not mean the fear is not justified.

There are always potential threats in our world but to face them on an unsteady footing is dangerous. I believe the US is on unsteady financial legs very similar to Europe but unlike Europe who will be there to bailout the world's largest economy? Precious metals have always been recognized as a store of value and especially so in troubled times. So it is today.

Regards,

Bluesboy65

 

Didn't Keynesian economics always subscribe to deficit spending? Dang. The US has been doing that for oh so long........

 

I'm not picking on Brazil, per se, just pointing out historical fact, and why I wouldn't have much confidence in Brazilian currency.

 

Of course, the original discussion had nothing to do with confidence in Brazilian currency. The conversation was about how any historical analogies about silver prices would have to take into account three huge emerging economies.

 

It was 1971. Until that year other countries could exchange their dollars for gold. Nixon abruptly halted the practice which technically was the first bankruptcy of the USA's currency. At that time the US Treasury also stopped issuing currency. From this point on we were 100% fiat with the Federal Reserve being the only issuer of currency in the USA. Many banks at the time objected to this plan as being dangerous and moved to stop using the federal reserve dollar. They addressed this by passing a law in the 1970s that required all US banks to join the federal reserve system.

It should be noted that ~96% of the entire accumulated federal debt has been run up in just the 40 years since that happened. There is no historical precedent for it.

 

No. The idea was to balance the budget over the business cycle by deficit spending during recession and running surpluses during boom times. But it hasn't worked out that way.