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<p>[QUOTE=&quot;Numbers, post: 1210064, member: 11668&quot;]But the Fed <i>doesn&#039;t</i> do exactly the same thing.&nbsp; It can&#039;t, really, because it doesn&#039;t have anything to spend all that money on.</p><p><br /></p><p>Congress routinely spends large amounts of money, but (now that there are no USNs) Congress doesn&#039;t print currency.&nbsp; Meanwhile, the Fed routinely prints currency, but, relatively speaking, the Fed doesn&#039;t spend very much money (its operating expenses are on the order of a few <i>billion</i> dollars a year, a mere speck next to the multi-<i>trillion</i>-dollar federal budget.&nbsp; This division of responsibility helps to keep everybody honest.</p><p><br /></p><p>If Congress could print currency (i.e., if there were USNs), then it&#039;d be very easy, and entirely legal, for them to print extra currency and spend it on whatever would get them re-elected.&nbsp; In the extreme case, they could even print up some currency and hand it out to everyone for free (though in practice they&#039;d probably be more subtle about it).&nbsp; This would be bad for the economy (see my above posts about what happens when an excess of USNs is in circulation), but at least in the short term, it might not cause *enough* economic harm to come back and bite the Congressmen&#039;s re-election prospects (especially if the people knew the free money came from Congress, and didn&#039;t know enough economic theory to realize that the bad economy was Congress&#039;s fault).&nbsp; So we have a conflict of interest here.</p><p><br /></p><p>That conflict doesn&#039;t really exist for the Fed.&nbsp; Let&#039;s say the boys at the Fed print up a bunch of extra currency and want to use it to benefit themselves, never mind what it does to the country or the economy.&nbsp; What exactly are they supposed to do with it?&nbsp; They can&#039;t use it to pander to the voters; they&#039;re not up for election.&nbsp; They can&#039;t stick it directly into their own pockets; they&#039;d be caught and jailed for embezzlement in short order.&nbsp; They <i>might</i> be able to give their friends in the banking industry some sweetheart deals on the business that those banks do with the Fed; but the total volume of all such business is very small compared to the volume of money Congress handles, and anyway the Fed&#039;s business practices are somewhat regulated by Congress to prevent this.</p><p><br /></p><p>In a nutshell, that&#039;s why we have the Fed.&nbsp; It separates the power to print currency from the power to spend money.&nbsp; The Fed isn&#039;t in the Constitution, but it springs from the same separation-of-powers philosophy that motivated many provisions of the Constitution.&nbsp; And the Fed officials are unelected for exactly the same reason that federal judges are unelected: because the separation of powers works better when some of the powers are held by people who are worried about winning elections, and some of the powers are held by people who aren&#039;t.&nbsp; If *every* decision was made according to the will of the voters, that&#039;d be mob rule, not democracy.[/QUOTE]</p><p><br /></p>

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