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<p>[QUOTE=&quot;fatima, post: 1207441, member: 22143&quot;]You are not correct on this.&nbsp; First lets be clear what we are talking about.&nbsp; That is the Federal Reserve Note that is now the current definition of the dollar.&nbsp; Established as the only $ in 1971.&nbsp;&nbsp; The holder of this note is owed a debt by the Federal Reserve. No more no less. The Federal Reserve is only obligated to pay you back in more Federal Reserve notes.&nbsp;&nbsp; Beyond that, these notes are not obligations of the US Treasury.&nbsp;&nbsp; The Treasury will not redeem them for anything.</p><p><br /></p><p>Federal Reserve issues these notes using in part by using US Debt.&nbsp; That is the Federal Reserve will hand over dollars to the US Treasury in return for US Bank Notes promising to repay the debt + interest because the government has the power to tax people.&nbsp; This is why Congress has to vote to increase the debt limit.&nbsp;&nbsp; The government uses these dollars to pay its bills.&nbsp; &nbsp; And furthermore, when the government spends these dollars, the party who receives them is getting a debt from the Federal Reserve, not the US Government.&nbsp; But this only represents a small part of the $s in the economy that are issued by the Federal Reserve.</p><p><br /></p><p>The vast majority of Federal Reserve notes printed (or created electronically) are due to such things as QE2, Fractional Reserve Lending by the Federal Reserve Banks, and closed market and secret operations conducted by the Federal Reserve outside of any federal control.&nbsp; These have nothing to do with Treasury debt.&nbsp; As I said, the Federal Reserve is completely free to issue as many Federal Reserve notes as it likes to manage its &quot;monetary policy&quot;.&nbsp; These are conducted in secret and the Federal Reserve, except in very rare cases, is not obligated to even disclose how much money it has created and where it went.</p><p><br /></p><p>Why is it setup this way?&nbsp; Simply because it allows politicians to acquire money to spend without raising taxes as required otherwise if it issued the debt itself.&nbsp;&nbsp; The government can spend money without regards to the economic output of the USA.&nbsp;&nbsp; The Federal Reserve is happy to do this because in return they get the absolute monopoly on the currency and thus it makes their owners, officers and cohorts very rich people.[/QUOTE]</p><p><br /></p>

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