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<p>[QUOTE=&quot;Numbers, post: 1208511, member: 11668&quot;]You&#039;re contradicting yourself here.&nbsp; You say that most Treasury debt is owned by somebody other than the Fed.&nbsp; But you say that if we had no Fed, we&#039;d have no debt.&nbsp; These can&#039;t both be right.&nbsp; (Hint: the former is true, so the latter must be false.)</p><p><br /></p><p>Also, the Fed&#039;s full net profit goes to the Treasury.&nbsp; The Fed does pay 6% dividends on its stock to its member banks, but the total value of all such stock is tiny compared to the amount of Treasury debt owned by the Fed.&nbsp; The interest that the Fed earns on its Treasury debt is *far* more than needed to pay all the dividends *and* pay all the Fed&#039;s operating expenses (the cost of printing and shipping currency, processing checks, putting out economic reports, paying Bernanke&#039;s salary, and all the rest of it), and so quite a lot is left over to be transferred to the Treasury.</p><p><br /></p><p><a href="http://www.federalreserve.gov/newsevents/press/other/20110110a.htm" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.federalreserve.gov/newsevents/press/other/20110110a.htm" rel="nofollow">In calendar year 2010</a>, for example, the interest earned by the Fed on its holdings of Treasury debt was $76.2B.&nbsp; With small amounts of income from other sources added in, the Fed&#039;s total income was $80.9B.&nbsp; Total dividends paid out were only $1.6B, and after accounting for miscellaneous expenses, the annual payment to the Treasury was $78.4B (note that this is actually *larger* than the amount of interest the Treasury paid to the Fed!).&nbsp; The interest numbers were quite a bit smaller just a few years ago, before the Fed started buying up huge quantities of Treasury securities (&quot;quantitative easing&quot; or QE), but the basic fact that the lion&#039;s share of the Fed&#039;s income ended up as profit transferred to the Treasury still held true.</p><p><br /></p><p>Finally, let&#039;s suppose we eliminated the Fed and replaced all the FRNs with USNs.&nbsp; The great majority of the national debt--all the Treasury securities *not* owned by the Fed--would still exist, unaffected by the change.&nbsp; The Treasury would no longer have to pay interest to the Fed, but the Treasury would no longer receive profit payments from the Fed either; as seen in the figures above, it&#039;d basically be a wash.&nbsp; The costs of printing and shipping currency would be borne by the Treasury directly, instead of being netted out of the Fed&#039;s payment to the Treasury: again, no real change.&nbsp; Eliminating the Fed and its FRNs would have essentially zero impact on the Treasury&#039;s financial position.</p><p><br /></p><p>Thus the &quot;tremendous benefit&quot; you claim is entirely illusory.&nbsp; Certainly it&#039;d be wonderful if we had no national debt, but the national debt wasn&#039;t created by the Fed and won&#039;t vanish if the Fed is eliminated.&nbsp; The only ways to get out from under the national debt are to (a) pay it off, or (b) default on it.&nbsp; And neither is going to be pleasant, but that reality is not the Fed&#039;s fault.[/QUOTE]</p><p><br /></p>

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