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14 July 2017

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Peter in Toronto

Disagree with you entirely here. He has brought these people out and in full public view, denounced and humiliated their ideology.

And he's taken on numerous other agents of deception.

MRW

Croesus,

Hard to answer your question. The textbooks are wrong. You have to read reams of congressional documents, going back to 1912 to get at the truth.

Medici bank link. Overview. You can look things up from there. I have only a surface understanding of it.
http://thefinanser.com/2014/04/what-did-the-medici-bankers-ever-do-for-us.html/

Bank of England description of how money works/is created. (just like we do but their institutions handle it differently, and use different terms.) If you want an overview just read the first page, the summary section. The rest is details. England went off the gold standard domestically in 1931.
“Money creation in the modern economy”
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

US federal government/Federal Reserve. The US went off the gold standard domestically in 1933/34. You need to know the story of Marriner Eccles. Read these two in order. The first is an anecdotal overview. It was originally printed in the WSJ, but now under a paywall. This is a copy someone made without the paragraph breaks, annoying. But at least it’s short.
http://www.informationsociety.co.uk/the-secret-life-of-marriner-eccles-real-time-economics/

The second Eccles piece. Long essay. I loved it. At least read though footnote 15. Eccles was more popular that Miley Cyrus. And the public in those days understood how federal accounting worked far more than the public today. Eccles started work when he was eight, didn’t finish high school, became a millionaire by the time he was 22, when his father died, an avowed laissez-faire capitalist until the Great Depression hit, and he changed his mind.
http://neweconomicperspectives.org/2012/12/jumping-the-abyss-marriner-s-eccles-and-the-new-deal-1933-1940.html#_ftn28.

This is a recent piece put out by Federal Reserve bowel-level economists. Could be way-too-inside-baseball for you.
“Divorcing Money from Monetary Policy”
https://www.newyorkfed.org/medialibrary/media/research/epr/08v14n2/0809keis.pdf

Imagine a circle. split it 12-to-6. The left side is the issuer of the currency. The right side are the users of the currency.

The left side are the US federal government and the Federal Reserve. The right side are households, businesses, banks, state and local govts, foreign investors, banks, and govts, anyone who uses the USD.

Imagine the left side is split at the 9-to-3 line. Upper section is the federal government. Bottom section is the Federal Reserve.

The Federal Reserve is the federal government’s banker. So it works up and down on the left side implementing the federal government’s fiscal policy, which our know-nothing politicians haven’t done for the People’s benefit for 30 years. The Federal Reserve IS ALSO the institution that controls the payment system among the users on the right side of the circle, by implementing monetary policy. So it goes sideways, back and forth. Got that?

The big problem is that both sides of the circle use the same language to describe their operations, when they are opposite! (Example: “debt.” Federal government “debt” doesn’t come an offsetting liability. It is genuine currency creation. No one has to pay it back. “Debt” on the right side of the circle, however, is the kind you and I are familiar with; collateral, you gotta’ pay it back, time schedule, etc. etc.

The left side is macroeconomics. The right side is microeconomics. Two different animals.

If someone doesn’t educate Trump about this, and soon, the country is phucked.

MRW

Jack,
That is wrong. Only the Federal Reserve can create the currency and it is distinct from the federal government.

Absolutely 100% wrong, Jack. The US federal government creates physical currency through The Bureau of Engraving and Printing, a division of the US Treasury, and its banker, the Federal Reserve, distributes it to banks that need physical cash.

The US federal government issues treasury securities (88% of all currency, aka it’s a cash equivalent) AFTER Congress appropriates spending, by law. It’s actually Congress that ‘creates’ currency through that means. The US federal government issues treasury securities in the amount of congressional spending.

Actually, 97% of the money created in the country is bank ‘credit creation’, via bank loans, credit cards, checks. However, no one but the US federal government can actually print up physical cash, or issue treasury securities.

The only signatures on a physical dollar bill are US Treasury officials. No Federal Reserve official to be found. Pull one out and look at it.

MRW

What is the definition of "agent of Congress"? Who are the other agents of Congress?

Listen to Ben Bernanke: around 2 1/2 minutes.
Bernanke: "The Fed will do whatever Congress tells us to do.”
https://www.youtube.com/watch?v=pH2RLObp41o

"Bernanke - We are the agent of the Treasury”
http://www.3spoken.co.uk/2013/06/bernanke-we-are-agent-of-treasury.html

MRW

Stalin's Jews By Sever Plocker, Ynetnews, Dec 12, 2006
http://www.ynetnews.com/articles/0,7340,L-3342999,00.html

"And us, the Jews? An Israeli student finishes high school without ever hearing the name "Genrikh Yagoda," the greatest Jewish murderer of the 20th Century, the GPU's deputy commander and the founder and commander of the NKVD. Yagoda diligently implemented Stalin's collectivization orders and is responsible for the deaths of at least 10 million people. His Jewish deputies established and managed the Gulag system."

Pundita

I watched Tucker Carlson's exchanges with Peters and Boot. Carlson focused on Peters and Boot's ad hominem attacks and got in several ad hominem attacks of his own. He did not challenge inaccurate/misleading claims they made about Assad and the war; e.g., that Assad had killed 500,000 Syrians.

I don't know why he didn't take the opportunities Peters and Boot afforded him to show Assad in a more objective light. But on the theory that those who can, do, one guess is that Carlson simply isn't knowledgeable enough to set the record straight.

Yet it would be a matter of moments on the internet for Carlson or one of the Fox research assistants to find data that challenges the 500K number of Syrian dead and underscores that the number includes Syrian military and police -- that last a fact studiously avoided by those who quote the 500K number when demonizing Assad.

Granted, Carlson deals with many topics on his show and can't be expected to turn it into a forensic analysis of all the claims against Assad. But if, as he maintains, he is appalled by the uninformed claims about the Syrian war, there would be nothing preventing him from bringing on his show people who can easily challenge the most famous erroneous /misleading claims about Assad and the Syrian government's prosecution of the war. In addition to the 500K number, these claims include:

> use of barrel bombs
> use of chemical weapons notably sarin gas
> claims in the 'Caesar' report about mass torture and executions

Instead (from his conversations with Peters and Boot), Carlson takes the position that Assad is a bad guy and sometimes the U.S. has to work with bad guys to deal with even worse bad guys. This argument doesn't hold water for a great many Americans and would be unnecessary if more in the American public learned exactly why portrayals of Assad as a monster are propaganda.

Until and unless the propaganda is exposed on American national television it would be an uphill battle for the Trump administration to win support from the American public and Congress to work with Assad at ending the worst of the Syrian war and addressing the humanitarian crisis it created.

This said I'm not sure Tucker Carlson has the skill to deal with the propaganda via the interview process; I've only seen his show (via YouTube) four times. Two of the shows (with Peters and Boot) were debates. In the other two shows (with Steve Cohen and Mark Steyn) he let the guests talk pretty much uninterrupted.

But questions about Carlson's skills as an interviewer, and recommendations about which people he might bring on his show to challenge the most famous claims about Assad, would be a conversation for another day.

Now I must return to studying a couple of horror stories: "Rise in sandstorms threatens Middle East and North Africa" and "Turmoil in Saudi water sector as country runs dry."

http://www.middleeasteye.net/columns/rise-sandstorms-threaten-middle-east-and-north-africa-1218388304

http://www.middleeasteye.net/columns/turmoil-saudi-water-sector-country-runs-dry-465571093

Babak Makkinejad

Likewise in Hungary after WW2.

Jack

Clearly you did not get beyond the pretty picture and a signature on any dollar bills and missed the most important element which defines what it actually is. It says in nice bold letters on every bill what it actually is, a "Federal Reserve Note", which is a liability of the Fed and an obligation of the US government.

Let's quote the US Treasury.

"Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913....Federal Reserve Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government."

https://www.treasury.gov/resource-center/faqs/currency/pages/legal-tender.aspx

MRW, when you're substantively wrong on something as fundamental as who can lawfully create currency, it follows that the rest of your argument that derives from this fundamental fact is also incorrect. The US Treasury cannot create US dollar currency by law. It can borrow by issuing Treasury bills, notes and bonds. They are debt securities and not cash or legal tender. You can't send the IRS a 30 year Treasury bond to pay your taxes.

Until Congress changes the law to make the Treasury the issuer of the currency or authorizes another department of the federal government to create currency at will, your theory that the federal government can create currency into existence whenever it desires is fundamentally flawed. As of right now only the Fed can issue currency and record it on their balance sheet.

David Habakkuk

dc,

On all this, there is a fascinating book published in 2012 by an American scholar called Liliana Riga, now teaching at Edinburgh, entitled ‘The Bolsheviks and the Russian Empire.’ Usually, with important books, one can find reviews which enable you to see the gist of the argument in a few minutes. Frustratingly, the only reviews of her book I can find are academic ones behind a paywall.

However, the thesis on which the book was based is online, and the ‘Abstract’ provides a good account of the gist of the argument:

“This study concerns the sources of the revolutionary Bolshevik elite's social and ethnic origins in Late Imperial Russia. The key finding is that the Bolshevik leadership of the revolutionary years 1917-1924 was highly ethnically diverse in origin with non-Russians – Jews, Latvians, Georgians, Armenians, Poles, Lithuanians, and Ukrainians – constituting nearly two-thirds of the elite. The ‘Russian’ Revolution was led primarily by elites of the empire’s non-Russian national minorities. This thesis therefore considers the sources of their radicalism in the peripheries of the multinational empire. Although the ‘class’ language of socialism has dominated accounts not only of the causes of the Revolution but also of the sources of Bolshevik socialism, in my view the Bolsheviks were more a response to a variety of cultural, linguistic, religious, and ethnic social identities than they were a response to class conflict. The appeal of a theory about class conflict does not necessarily mean that it was class conflict to which the Bolsheviks were responding; they were much more a product of the tensions of a multi-ethnic imperial state than of the alienating ‘class’ effects of an industrializing Russian state. How ‘peripherals’ of the imperial borderlands came to espouse an ideology of the imperial ‘center’ is the empirical focus. Five substantive chapters on Jews, Poles and Lithuanians, Ukrainians, Transcaucasians, and Latvians, consider the sources of their radicalism by contextualizing their biographies in regional ethnopolitics and in relationships to the Tsarist state. A great attraction of Russian (Bolshevik) socialism was in what it meant for ethnopolitics in the multi-ethnic borderlands: much of the appeal lay in its secularism, its ‘ecumenical’ political vision, its universalism, its anti-nationalism, and in its implied commitment to “the good imperial ideal”. The ‘elective affinities’ between individuals of different ethnic strata and Russian socialism varied across ethnic groups, and often within them. One of the key themes, therefore, is how a social and political identity is worked out within the context of a multinational empire, invoking social processes such as nationalism, assimilation, Russification, social mobility, access to provincial and imperial ‘civil societies’, linguistic and cultural choices, and ethnopolitical relationships.

(See http://digitool.library.mcgill.ca/R/?func=dbin-jump-full&object_id=37820&local_base=GEN01-MCG02 .)

It is a book I have not yet had time to read, but only dipped into. However, the general argument – based upon looking as closely as she could at the political evolution of the ninety-three members of the Central Committees of the Bolsheviks in the key years from 1917 to 1923, which took a monumental amount of work – seems persuasive.

At the risk of putting too much of my own ‘spin’ on her argument: A key imperative of nationalism – which becomes of critical significance with the spread of industrialisation, urbanisation, mass education and ‘liberal’ ideas – is that the boundaries of culture and political sovereignty be coterminous.

For precisely this reason, nationalism can be integrative in some areas – in France one can turn peasants into Frenchmen. In the vast multi-ethnic and multi-religious empires of the Hapsburgs and Romanovs, however, it was fraught with the potentiality of a kind of ‘war of all against all.’

An effect of this was to increase the attractiveness of utopian visions imported from the West, involving the notion of history as tending naturally to the triumph of a ‘proletariat’ which was not subject to ethnic antagonism, to culturally-assimilating but politically excluded members of minority groups in the ‘borderlands.’

So it is no surprise that people from identical backgrounds could take radically different routes: Dzerzhinsky ends up running the Cheka, while his brother supported the Polish Home Army.

As regards Ukraine. What Stalinism represented was the absolutely subordination of everything to the imperative of turning a land of backward peasants into an an industrialised and urbanised society which, in particular, would possess the industrial base required to mass produce the weaponry required to fight modern mechanised warfare.

The only on-the-ground reporting of what is now called the ‘Holodomor’ in the Western press known to me was done by the Welsh journalist Gareth Jones. His father, Major Edgar Jones, a legendary figure in Welsh education, was headmaster of Barry County School, which my father and grandfather both attended.

As a talk Gareth Jones gave at the chapel where my parents worshipped in 1933 had a shaping influence on my father’s political outlook which was carried through to me, and has long been part of family legend, it was a somewhat bizarre experience actually to find the whole of his reportage up on the web. (See http://www.garethjones.org .)

Unfortunately, the West Ukrainian nationalists have got to the family. A crucial section is headed ‘Gareth’s final visit to the Soviet Union in March 1933, exposing the Holodomor (Soviet Ukrainian Famine-Genocide).’

But this is actually directly contradicted by remarks by Gareth Jones quoted in the first article reproduced:

‘He told the EVENING POST: “The arrest of the British engineers in Moscow is a symbol of panic in consequence of conditions worse than in 1921. Millions are dying of hunger. The trial, beginning Saturday, of the British engineers is merely a pendant to the recent shooting of thirty-five prominent workers in agriculture, including the Vice-Commissar of the Ministry of Agriculture, and is an attempt to check the popular wrath at the famine which haunts every district of the Soviet Union.

‘“Everywhere was the cry, ‘There is no bread. We are dying. This cry came from every part of Russia, from the Volga, Siberia, White Russia, the North Caucasus, Central Asia. I tramped through the black earth region because that was once the richest farm land in Russia and because the correspondents have been forbidden to go there to see for themselves what is happening.’

(See http://www.garethjones.org/soviet_articles/soviet_articles.htm ; http://www.garethjones.org/soviet_articles/millions_dying.htm .)

What did happen was that Stalin attributed the resistance to collectivisation and requisitioning not only to capitalist ‘kulaks’ but to Ukrainian nationalism. The Ukrainian Communist Party was purged, and in 1933 a campaign of cultural Russification launched.

However, these measures coincided with a scaling-down of requisitioning and arrests, and the mounting of famine relief efforts by the Soviet government. A key part of the background was the coming to power of Hitler, and the fear that, as in the previous conflict with Germany, Ukrainian nationalism would be exploited.

Of course, the famine did not affect the Western Ukraine, which had never been part of the Soviet Empire, and was part of Poland, until that country was divided in the Nazi-Soviet Pact. When the Soviets retreated in front of the German onslaught, however, the NKVD systematically murdered alleged nationalists and counter-revolutionaries: 100,000 prisoners were shot, bayoneted to death or blown up with hand-grenades in prisons in the Western Ukraine alone. This is, obviously, part of the background to the Lviv pogroms of June and July 1941.

Given the sheer scale of atrocities on all sides, the notion that one can construct a coherent Ukrainian identity, and particular one including Crimea, has always been, to put it mildly, problematic.

What however the West Ukrainian nationalists have been doing is, to put it bluntly, trying to use the frankly mythical notion that the famine in Ukraine was primarily a Russian genocide against Ukrainians in order to bring people from further East to accept a conception of national identity based on hatred of Russia.

To see the delusional imbelicity of the support given by the Western powers to this venture, I would recommend a presentation by my sometime BBC colleague Mark Laity, now Chief Strategic Communications at SHAPE.

An October 2014 presentation entitled ‘Behaviour approaches to Perception management’, included the following suggestions:

‘“I am a Ukrainian” “ We have this freedom inside our hearts … ...we have this freedom in our minds ... … and now I ask you to build this freedom in our country.’

And Laity then produced a slide entitled ‘Objects of desire …’ showing glossy pictures of expensive cars.

(See https://www.cmdrcoe.org/download.php?id=341 .)

In the second series of interviews with Oliver Stone, in May 2016, Putin talked about the deal for visa-free travel then being negotiated by Ukraine with the European Union. As he pointed, people have been led to believe that they will be able to work in Europe, but this is unlikely to happen. And he went on to comment:

‘Right now, a Ukrainian’s dream is to work as a nurse or a gardener or a nanny in a European country amid the complete de-industrialization of the country. Why did they need all that? I simply cannot imagine.’

This is, I think, essentially accurate. Those who tempted Ukrainians with promises that a ‘European choice’ would produce cornucopia, in my view, deserve to rot in Hell.

Fred

David,

This is an interesting dsicussion. The comment on Liliana Riga's book "The ‘Russian’ Revolution was led primarily by elites of the empire’s non-Russian national minorities." brings up the question as to whether the American left's ongoing cultural revolution can be said to stem from a similar grouping of elites.

David Habakkuk

Fred,

In haste, because I am about to disappear on holiday.

What you suggest is essentially what I think.

Much more needs to be said about this, but yes, it seems to me that we are seeing again the power of the delusion that a kind of ‘Flucht nach vorn’ into a utopian future where cultural difference and the legacies of the past do not matter is going to work.

There is here also an ironic ‘twist’. As may be apparent, sympathising with Bolsheviks is not something that comes very naturally to me.

But it is precisely because Liliana Riga has spent so much time looking at the dilemmas people like Dzerzhinsky faced that the parallels with what contemporary élites are doing, as it were, leap up and hit you.

And a really alarming parallel is the complete inability of such people to have any understanding of the depth of resistance and resentment they engender.

DianaLC

I have come to the point of not watching any news except for a short time in the day just to keep up with the hysteria over the newest scandalous revelation and to catch Tucker in the evening. I really enjoy watching him bring out the real idiocy of many of his guests who have deemed themselves experts we need to listen to.

different clue

Babak Makkinejad,

Lenin was ethnic Russian with some Kazakh ancestry. I don't know about Bukharin.

Kaganovich was Jewish. So was Yagoda. So were some other such. After they had engineered and set up all the basic skeletons and nervous systems of all the overseas spy and agent networks, Stalin had them both killed. I read a theory that he did that to erase all knowledge (outside of Stalin's own brain) they had of how these networks had been set up and who was in them.

I suspect the Jews in the Soviet government had already defected from Jewish cultural concerns and/or Jewish communal involvement or loyalty. Most of the Jews in the Soviet Union were not in the government and received no benefit from the presence of what one might well call JINOs ( Jews In Name Only) in that government.

different clue

David Habakkuk,

Your paragraphs on food-and-famine events in the Ukraine are very interesting and quite different from what I thought I know about that. Is it being suggested that the biggest famines were indeed in the early 1920s and that there was no separate famine in East Ukraine in the 1930s to weaken opposition to Collectivization by demographically attriting and degrading the peasant-class ethnic-East Ukrainians? I have never read Robert Conquest but only heard of his book on the Stalinist Holodomor. Is everything I have heard is in that book basically wrong?

Thank you also for the detailed paragraphs before that. If the Communist Revolution was indeed a heavily peripheral-nationality-driven Revolution, could some of the attitudes held by its makers against Russia have carried over into the USSR government even after Stalin de-"foreignized" it and "russified" its leaders and cadres?

different clue

Pundita,

I think I can guess why Carlson didn't do the patient disassionate exposure or invitation to self-exposure which you would have liked to see more of.

The Bootses and Peterses and such are very skilled at verbal combat. They can function like trolls whenever they want to derail the questioner's train of thought. They ad hominemed Carlson to bait him into ad homineming them back. They did that to degrade and derail the conversation. Peters was better at that then Boot was.

That is why I have voiced the hope that Carlson would watch the whole interview after each show the way football teams watch each game after the game. He would do it to analyse how the interview subject functions, how he reacts to that functioning, and how to work out different responses so as to deflect and derail the subjects verbal tricks, trolling attacks, etc.

paulj

"The twelve Federal Reserve Banks issue them into circulation…"

Correct. $ of physical currency are exchanged for $ in an account…that already exist. No new $ are created. It's an asset-swap so we can have cash if we want it. You can't put numbers in your wallet.

"It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government."

Correct. The Federal government is obligated to give you a $ just like the one you are presenting to the government to be redeemed. Not much of an 'obligation'. The obligation is a matter of double-entry accounting. When the government spends a $ it is an asset for the target of the spending and a liability (a debit or 'debt') for the issuer. A liability that can always be satisfied as demonstrated.

"US Treasury cannot create US dollar currency by law".

Correct. Article I Section 8 of the U.S. Constitution gives Congress and only Congress the power to create money.

Congress created the FRBS, and therefore the duties of the Fed. How does that put the Fed above Congress in the hierarchy of power?

Explain to us how the Fed 'creates' new $ (increases the money supply). What are the precipitating events?

"Until Congress changes the law to make the Treasury the issuer of the currency …"

Congress passes spending bills and Treasury is compelled to mark up the appropriate private sector bank account (the targets of the spending).

The Fed does accounting.

Further, every penny earned by the Fed is turned over to Treasury, less operating expenses. The Fed is a subcontractor that manages interest rates in the FRBS.

MRW

Jack, I think we’re quibbling over semantics.

From the Bureau of Engraving and Printing’s website: http://www.moneyfactory.gov/images/Currency_notes_508.pdf

The main difference between the Federal Reserve Notes and Federal Reserve Bank Notes was that the former were obligations [IOUs/liabilities] of the U.S. Government whereas the latter were obligations [IOUs/liabilities] of the individual Federal Reserve banks that issued them.

From that same document:

As a result, the Federal Reserve Act of December 23, 1913, established the Federal Reserve System and authorized the printing of Federal Reserve Notes. Since these notes were first issued in 1914, they have always been produced by the Bureau of Engraving and Printing.

Only the Bureau of Engraving and Printing (US Treasury) can print them. There are no printing presses at any Federal Reserve bank.

I think we’re quibbling over the word “issue.” The Federal Reserve is the US Treasury’s banker. You say it issues them. I say it distributes the FR Notes that the BEP produces for them and which the Federal Reserve pays for. You say tomayto, I say tomahtoe. Either way, the US Treasury (Executive Branch) and the Board of Governors of the Federal Reserve (federal government agency) authorizes their issuance, production, and amount.

MRW

Jack,

This is a portion of a personal email from a Division Manager at the Bureau of Engraving and Printing I communicate with at the BEP in Fort Worth, TX three years ago. One of many officials I consult; I think they think I’m a pest.

Over the past 150 years, the US Government has issued 10 different types of currency. Each type had limitations for issuance built into the authorizing acts. The US Code mentioned in the original email relates to United States Notes. The $300 million limit was set in 2006 to match up with the estimated amount of notes still considered to be in circulation. This was to correct the limit set in 1878 of $347,681,016. The limit was also imposed by Congress just to make sure that the Secretary of the Treasury does not restart issuing the notes, which he is still technically authorized to do.

Currently, only Federal Reserve Notes are issued. Originally, the 1913 act authorizing these notes limited the amount that could be issued as a percentage of the gold held by the different Federal Reserve Banks. In 1932, the collateral used for issuance was expanded to include United States securities. Overtime, the range of things that can used as collateral has expanded. At this time, a Federal Reserve Bank must hold collateral equal to the amount of notes it issues. This is spelled out in 12 USC 412: http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section412&num=0&edition=prelim.

The salient paragraph from 12 USC 412:

Any Federal Reserve bank may make application to the local Federal Reserve agent for such amount of the Federal Reserve notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal Reserve agent of collateral in amount equal to the sum of the Federal Reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under section 92, 342 to 348, 349 to 352, 361, 372, or 373 of this title, or bills of exchange endorsed by a member bank of any Federal Reserve district and purchased under the provisions of sections 348a and 353 to 359 of this title, or bankers' acceptances purchased under the provisions of said sections 348a and 353 to 359 of this title, or gold certificates, or Special Drawing Right certificates, or any obligations which are direct obligations of, or are fully guaranteed as to principal and interest by, the United States or any agency thereof, or assets that Federal Reserve banks may purchase or hold under sections 348a and 353 to 359 of this title or any other asset of a Federal Reserve bank. In no event shall such collateral security be less than the amount of Federal Reserve notes applied for. The Federal Reserve agent shall each day notify the Board of Governors of the Federal Reserve System [a federal government entity appointed by the President for 14-year terms] of all issues and withdrawals of Federal Reserve notes to and by the Federal Reserve bank to which he is accredited. The said Board of Governors of the Federal Reserve System may at any time call upon a Federal Reserve bank for additional security to protect the Federal Reserve notes issued to it. Collateral shall not be required for Federal Reserve notes which are held in the vaults of, or are otherwise held by or on behalf of, Federal Reserve banks.

The Bureau of Engraving and Printing (BEP) has no such obligations to some higher entity. It is governed by the US Treasury, the constitutional head cheese.

MRW

Jack

They are debt securities and not cash or legal tender. You can't send the IRS a 30 year Treasury bond to pay your taxes.

Technically, a treasury security (T-bill, T-note, T-bond) is a CD you purchase from the federal government through a “Primary Dealer” and is then held in a Federal Reserve savings account (called a securities account) through your bank.

Basically, It’s an asset swap. You transfer dollars in your commercial bank account—unprotected when more than $250,000 per account—for dollars protected in a risk-free US Treasury account and guaranteed by “the full faith and credit” of the USG. And you get interest on them, unlike physical currency! Or gold!

Individuals can buy treasury bonds through treasurydirect. gov. Treasurydirect allows you to specify up to 50% of your twice-yearly interest payments for withholding, and as treasury.gov specifies,

If you hold a Treasury bond with us, we can ease your tax burden by withholding up to 50 percent of your interest earnings.

TreasuryDirect allows you to specify online the percentage you want us to withhold.
[…]
With either system, we transfer your withholdings to the Internal Revenue Service and report the withheld amount on your Form 1099-INT. [It doesn’t touch your capital]

If a major corp or institution needs to cash in its CD to pay a humungous tax bill (Ha!), it authorizes the Federal Reserve to sell its treasury security through a Primary Dealer, and the sale amount (capital plus interest) is transferred back to the corp or institution’s commercial bank account.

The daily market in treasury security trades is currently around $750 billion. Everyone in the world wants them. Where else are they going to get such a great deal? And besides, USD cannot leave the US banking system. By law. So foreign govts either need to buy US goods with their USD, wire their USD profits back to their home country by exchanging them for other currency, or buy treasury securities. When they cash them in, it’s called “paying off the National Debt.” (See treasury.gov)

MRW

Paulj,

Article I Section 8 of the U.S. Constitution gives Congress and only Congress the power to create money.

100% correct. Which it does by "Appropriating."

MRW

Jack,

Paulj at 16 July 2017 at 04:40 PM said it better than I, and far more simply. Congress is the ultimate poo-bah, which I neglected to stress, and its spending bills dictate what the US Treasury can do, and does do. All the time. Don’t forget the US Treasury is obligated to honor the appropriations of past Congresses, even if you don’t hear them being renewed every year.

Congress passes spending bills and Treasury is compelled to mark up the appropriate private sector bank account (the targets of the spending).

Exactly. First, the Federal Reserve marks up the congressionally approved amount in the US Treasury’s General Account at the Fed, which the Fed then distributes to the “appropriate private sector bank account.”

This usually produces an overdraft in Treasury’s General Account. (It definitely increases the money supply in the real economy).

There’s a law on the book from the gold standard days that says Treasury’s General Account cannot have an overdraft (or be zero). No one got rid of it when we went off the gold standard domestically in 1933/34. Congress could get rid of it if it wanted (but I think they held onto it at the time because international payments were still denominated in gold, and no one understood what the effects might be if they lifted it. Now it’s just there as an operating constraint and everyone is used to it).

So currently two to four weeks later, the US Treasury issues treasury securities in the amount of the Congressional appropriation (spending/whatever Congress is buying from the private sector).

It sells these treasury securities on the open market to the private sector (aka The Public) and foreign investors/govts/banks through Primary Dealers. The Public and foreign entities swap the cash in their commercial accounts for savings instruments protected by the federal government. The Federal Reserve does not create these new treasury securities, sell them, or buy them. Not allowed to. It can only operate in the treasury security aftermarket.

The sale proceeds are returned to Treasury’s General Account and the money supply is restored to balance.

Croesus

Thank you.
See you in a month or so!

Neil Schipper
RangerRay

I concur with Publius Tacitus that Ralph Peters' comments should be carefully evaluated on the basis of their merits. However, I take exception to the implication that Peters' positions hold less relevance due to the fact that he retired from the US Army as an LTC vice an O-6, somehow not quite measuring up. According to Peter's Wikipedia bio, he spent only 18 years as a commissioned officer and retired in 1998 with 22 counting his earlier enlisted time. Considering the time frame in which Peters served, his relatively limited years of commissioned service, and the fact that he was a Russian Foreign Area Officer (FAO), retiring as an O-5 was par for the course.

Babak Makkinejad

In regards to Lenin, you are myth-informed.

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