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Let's be Competitive Free the Fed!
MoneyNews.com (Newsmax) ^ | May 30, 2007 | John Browne

Posted on 05/30/2007 9:47:17 AM PDT by Tolerance Sucks Rocks

Today's Financial Times headline ("Spitzer to Streamline Rules for Wall Street") is an example of government allowing good old Yankee free enterprise to become more competitive with other international challengers.

The Financial Times also contains additional evidence of increasing inflationary pressures and of interest rates around the world, particularly in the European Union (E.U).

Meanwhile, in face of growing inflationary evidence and increasing interest rates among our key competitors, our Fed has kept our rates on hold.

While it warns of inflation as its main concern, our Fed appears "frightened" to compete either against inflation or with the rising interest rates of other competing currencies, most notably the Euro, against which it has depreciated by 12.24% in under a year and by about a third in the past two years.

There is a legislative reason why our Fed understandably feels "frightened" and seemingly unwilling to do more that utter warnings of inflation.

In the old days, our country was the undisputed master of the world's economy and our mighty dollar was keenly held, often in preference to gold, as the crucial reserve of other competing nations.

From this dominant position, our past Congress was tempted to give our Fed not just the single mandate, of its competing international central banks, of controlling inflation, but a second (often competing contra) mandate of encouraging economic growth.

This government action made our Fed and thereby our currency, inherently uncompetitive, over the long term. The problem was not evident when our economy remained not just highly competitive but overridingly dominant around the world.

America was so dominant then that it is now hard to relate to in today's world.

When I worked as an investment banker at Morgan Stanley & Co (in the late 1960"s), the market capitalization of just one major U.S. company (IBM) was greater then the total capitalization of all the European Stock exchanges (excluding London) added together!

Today, after a series of Democrat Presidents and the luxurious, almost hedonistic, spread of liberalism in the U.S., the situation is very, very different.

The end of World War II allowed the countries of Europe to compete with the U.S.

The end of the Cold War opened free competition to some 3 billion hard working, tough and hungry people around the world.

Meanwhile, our Congress felt it could carry on in the same hedonistic, high-spending, liberal manner.

The countries of Europe got together, sacrificing much of their individual cultures and sovereignty to compete, on equal terms, in the form of the European Union.

The E.U. is an increasingly competitive threat to the U.S. Today, its stock and government bond markets are larger that those of America, and its currency, the euro, has more units in circulation than the U.S. dollars.

This past January, Germany alone (facing high interest rates and a greatly appreciated currency) knocked us into second place as the world's largest exporter. A month later, China pushed us into third place.

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Yesterday's New York Times ran an article asserting that the E.U. had recently displaced the U.S. as the "economic engine" of the world economy.

Worse still, the Euro has increasingly displaced the U.S. dollar as the "reserve currency" of the world's central banks.

The fact that our dollar was the world's "reserve currency" was of great strategic and economic advantage to our country. Worldwide demand for U.S. dollars allowed the U.S. to have relatively lower interest rates than our main economic competitors. This helped our economic growth, to a crucial degree.

In the "oil shock" of 1973, our Secretary of State Henry Kissinger was able to pull off a major strategic coup by persuading OPEC to take U.S. dollars as the exclusive payment for their oil. This allowed America to inflate with impunity without doing serious damage to our dollar in the foreign exchange markets.

Despite this vastly changed world, our Congress continues to "interfere" and even to threaten far greater "controls" over our free enterprise system.

Worst of all, in the face of a plunging dollar (threatening its credibility as a currency, not just as a reserve currency) and the growing evidence of inflation (despite the "cooked" CPI figures), our Congress continues to leave our Fed in a fettered and highly uncooperative position.

Last week we witnessed the galling experience of delegations of our government facing two of our biggest strategic competitors (China and Iran). The saddest thing of all was to see our negotiators with no "Royal" cards in their hands.

As we said last week, we believe our government must quit bleating and start competing, by freeing up good some old Yankee free enterprise competition (Sarbanes-Oxley, etc).

One place it could start and have immediate effect upon our entire economy would be to free our Fed from its second debilitating mandate to encourage economic growth.

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Free of its government imposed second mandate, our Fed would be put on a level playing field with its competing central banks.

Our dollar would be allowed to compete and so allow American business to compete, not just on price (the downward slope to long term failure) but on the essential long-term success determents of the "Product Marketing Mix", just as Germany and Switzerland have done so successfully for years.

Of course, it will be tough, particularly as interest rates will rise, and our government will have to face their financial realty of the liberal profligate policies by actually paying a market rate for their debt and their social security promises.

We believe that, in order to become truly competitive, our government must face international realty by freeing our Fed. Thus allowing us, the people, to compete.

Regardless of Congressional inaction, we note that at long last, the long bond market is beginning to signal increased interest rates as the yield curve steepens slowly to become more normal and in our view more realistic!

In light of this, we continue to urge our readers to remain averse to accepting the great risks we see as inherent in the price of long bonds.


TOPICS: Business/Economy; Editorial; Foreign Affairs; Germany; Government; News/Current Events; United Kingdom
KEYWORDS: america; china; congress; currencies; currency; dollar; economy; eu; euro; europeanunion; fed; federalreserve; financialmarkets; germany; gold; greatbritain; inflation; interest; interestrates; iran; liberalism; oil; oilshock; reserves; switzerland; uk; unitedstates; us; usa
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If the Fed decides to simply fight inflation, I'll praise the Lord that I locked my mortgage rate at 5.875%!
1 posted on 05/30/2007 9:47:20 AM PDT by Tolerance Sucks Rocks
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To: Tolerance Sucks Rocks
If the Fed decides to simply fight inflation, I'll praise the Lord that I locked my mortgage rate at 5.875%!

If the Fed fights inflation, long term rates will fall.

2 posted on 05/30/2007 9:53:52 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot

That’s what refinancing is for. :-)


3 posted on 05/30/2007 10:00:15 AM PDT by Tolerance Sucks Rocks (Will I be suspended again for this remark?)
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To: Tolerance Sucks Rocks; Toddsterpatriot

The Fed can’t fight inflation until it figures out what causes inflation.


4 posted on 05/30/2007 10:01:05 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Tolerance Sucks Rocks
So you mean if the Fed decides not to fight inflation, you’ll praise the Lord that you locked your mortgage rate at 5.875%.
5 posted on 05/30/2007 10:01:54 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Moonman62

Too much money. Don’t tell the goldbugs.


6 posted on 05/30/2007 10:02:28 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Tolerance Sucks Rocks
The end of World War II allowed the countries of Europe to compete with the U.S

It's because we saved their asses and took care of most of their defense since then that they've been able to compete with us, and they still hate us.

7 posted on 05/30/2007 10:03:36 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Tolerance Sucks Rocks
While it warns of inflation as its main concern, our Fed appears "frightened" to compete either against inflation or with the rising interest rates of other competing currencies, most notably the Euro, against which it has depreciated by 12.24% in under a year and by about a third in the past two years.

Just because other central banks are doing something stupid doesn't mean our own Fed should compete with them for the title of dumbest central bank.

8 posted on 05/30/2007 10:07:31 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Tolerance Sucks Rocks
From this dominant position, our past Congress was tempted to give our Fed not just the single mandate, of its competing international central banks, of controlling inflation, but a second (often competing contra) mandate of encouraging economic growth.

What's wrong with that? If the Fed ended the credit cycle and kept rates steady and in line with the yield curve, then we could have economic growth without inflation. Of course, we would also need the government to behave itself.

9 posted on 05/30/2007 10:11:27 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Tolerance Sucks Rocks

This is too funny. You do realize that the Federal Reserve is no more Federal than Federal Express and it is owned by a private banking cartel whose majority stakeholder seems to be the Rockefeller banking group followed by a bunch of Euro banking families such as the Rothschilds???? Private bankers are going to do whatever is best for private bankers, not what’s best for the American people.


10 posted on 05/30/2007 10:11:49 AM PDT by rednesss
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To: Toddsterpatriot
Too much money.

And that always seems to happen when the government doesn't have enough to pay its bills, usually because of its own misdeeds.

11 posted on 05/30/2007 10:12:43 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: rednesss

The Federal Reserve is a partnership between the government and private banks, but the government dominates that relationship by far.


12 posted on 05/30/2007 10:14:07 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Toddsterpatriot
If the Fed fights inflation, long term rates will fall.

I'm confused.

I thought the Fed fights inflation by raising interest rates and therefore reducing the amount people borrow, and resulting in constricting the money supply. Therefore they avoid deflating the value of the dollar, so you can buy more for a dollar.

If the Fed fights inflation, interest rates are going to go up.

13 posted on 05/30/2007 10:14:21 AM PDT by untrained skeptic
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To: rednesss
and it is owned by a private banking cartel whose majority stakeholder seems to be the Rockefeller banking group followed by a bunch of Euro banking families such as the Rothschilds????

You have a list of the owners and how many shares they own?

How much money do they make every year on their shares?

14 posted on 05/30/2007 10:14:54 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: untrained skeptic
I thought the Fed fights inflation by raising interest rates and therefore reducing the amount people borrow,

Inflation is caused when the money supply grows faster than the economy. The Fed could lower rates while also lowering money supply growth.

If the Fed fights inflation, interest rates are going to go up.

The Fed "controls" short term rates. If they raise those rates, long term rates could drop.

15 posted on 05/30/2007 10:17:18 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss

Federal Express has to report annually on its activities to the Speaker of the House of Representatives? Federal Express was created by an act of Congress?

Who knew?


16 posted on 05/30/2007 10:17:56 AM PDT by Fan of Fiat
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To: Fan of Fiat

Oh my, yes they have to answer some soft-ball questions every once in awhile. There has never been an audit of the Federal Reserve system. And lets talk about that act of Congress, undertaken just prior to the Christmas break when many of the members of Congress had already gone home, it was 1913, no 777’s to jet back and forth on. Signed by Woodrow Wilson who later said, “I have unwittingly ruined my country”. It all sounds so on the up and up.


17 posted on 05/30/2007 10:24:29 AM PDT by rednesss
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To: Toddsterpatriot

Well the IRS collects about $1 trillion dollars a year that we pay them to service the debt that we now owe them.


18 posted on 05/30/2007 10:25:41 AM PDT by rednesss
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To: Moonman62

Bwaahaaahaaahaa, have you taken a look at the “national debt” figures lately???? We owe the Federal Reserve close to $9 trillion dollars. Who is the monkey on whose back???? Keep fooling yourself.


19 posted on 05/30/2007 10:27:44 AM PDT by rednesss
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To: Toddsterpatriot

And if the Federal Reserve was a partnership with the Government don’t you think that that information should be made public???? You will never truly know who owns precisely how much. Doesn’t that tell you something about the system???? Aren’t we supposed to have transparency if they are conducting business on our behalf????


20 posted on 05/30/2007 10:30:00 AM PDT by rednesss
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To: rednesss
There has never been an audit of the Federal Reserve system.

You are mistaken.

Are the Federal Reserve System and Reserve Banks ever audited?

The Board of Governors, the Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review. Under the Federal Banking Agency Audit Act (enacted in 1978 as Public Law 95-320), which authorizes the Comptroller General of the United States to audit the Federal Reserve System, the Government Accountability Office (GAO) has conducted numerous reviews of Federal Reserve activities. In addition, the Board's Office of Inspector General (OIG) audits and investigates Board programs and operations as well as those Board functions delegated to the Reserve Banks. Completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board’s Annual Report (before 2002, the reviews were listed in the Board's Annual Report: Budget Review).

The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the OIG. The financial statements of the Reserve Banks are also audited annually by an independent outside auditor. In addition, the Reserve Banks are subject to annual examination by the Board. The Board's financial statements and the combined financial statements for the Reserve Banks are published in the Board's Annual Report.

Federal Reserve System

21 posted on 05/30/2007 10:32:16 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss
Well the IRS collects about $1 trillion dollars a year that we pay them to service the debt that we now owe them.

We pay $1 trillion to whom? To service what debt?

22 posted on 05/30/2007 10:33:10 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss
We owe the Federal Reserve close to $9 trillion dollars.

No we don't.

23 posted on 05/30/2007 10:34:07 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Tolerance Sucks Rocks
If the Fed decides to simply fight inflation, I'll praise the Lord that I locked my mortgage rate at 5.875%! Excessive inflation fighting will stall the economy. What's wrong with the balance approach that the Fed has taken since Volker. Inflation has been a low 3-4%, while the economy has mostly done well.

This past January, Germany alone (facing high interest rates and a greatly appreciated currency) knocked us into second place as the world's largest exporter. A month later, China pushed us into third place.

Who cares? This would only matter if we still believe in mercantilism, but that was debunked by Adam Smith in 1776.

24 posted on 05/30/2007 10:42:38 AM PDT by Barney Gumble (A liberal is someone too broadminded to take his own side in a quarrel - Robert Frost)
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To: Fan of Fiat

“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.” - Thomas Jefferson


25 posted on 05/30/2007 10:44:52 AM PDT by rednesss
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To: rednesss
We owe the Federal Reserve close to $9 trillion dollars.

We don't owe the Fed anything. Our debt is owned by whoever buys it, which is just about anybody.

26 posted on 05/30/2007 10:46:28 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Moonman62
Shhh, he’s on a roll. Any minute now he’ll blame the Jooooooos.
27 posted on 05/30/2007 10:51:54 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Moonman62
I'm sorry, we don't wholly own it, just the vast majority(75%) of it.


28 posted on 05/30/2007 10:52:10 AM PDT by rednesss
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To: Toddsterpatriot

Grow up.


29 posted on 05/30/2007 10:53:00 AM PDT by rednesss
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To: rednesss

We owe the Fed $9 trillion. That was funny!


30 posted on 05/30/2007 10:53:57 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot

Yeah I’m sorry, it’s JUST $6.5 trillion, but with interest it won’t be but a couple of years before it’s 9.


31 posted on 05/30/2007 10:57:20 AM PDT by rednesss
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To: rednesss
Yeah I’m sorry, it’s JUST $6.5 trillion,

We owe the Federal Reserve $6.5 trillion? Do you think your pie chart shows that? LOL!

32 posted on 05/30/2007 10:58:47 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss
“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.” - Thomas Jefferson

Thank goodness those in power at that time listened to Hamilton instead of Jefferson. Otherwise, we may not have become the powerhouse we are today.

33 posted on 05/30/2007 11:03:21 AM PDT by Mase (Save me from the people who would save me from myself!)
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To: Mase
"If we run into such debts as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, and give the earnings of fifteen of these to the government for their debts and daily expenses; And the sixteen being insufficient to afford us bread, we must live, as they do now, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account; But be glad to obtain subsistence by hiring ourselves to rivet their chains around the necks of our fellow sufferers; And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second, that second for a third, and so on 'til the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering...and the forehorse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression." Good ol Tom again.

Kinda looks like the modern work week to me. Tax freedom day anyone???? Nevermind, oohhhh look over there, it's a pre-approved Chase-Manhattan Uber Platinum card with a credit line of $25,000.

34 posted on 05/30/2007 11:09:09 AM PDT by rednesss
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To: rednesss
Nevermind, oohhhh look over there, it's a pre-approved Chase-Manhattan Uber Platinum card with a credit line of $25,000.

If I get one, do I make my payment to the Federal Reserve?

35 posted on 05/30/2007 11:11:59 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot

Ultimately. Especially since Chase is one of the major shareholders of the Federal Reserve. Funny though, all of my money says “Federal Reserve Note” on it.


36 posted on 05/30/2007 11:20:06 AM PDT by rednesss
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To: rednesss
Ultimately. Especially since Chase is one of the major shareholders of the Federal Reserve.

A major shareholder? How do you know? Did you ever find out how much profit they make from these shares every year?

Do the shareholders get to vote on interest rates at Fed meetings?

Funny though, all of my money says “Federal Reserve Note” on it.

Why is that funny?

37 posted on 05/30/2007 11:28:37 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss

So where is the Federal Reserve on your chart?


38 posted on 05/30/2007 11:37:33 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Toddsterpatriot

You never did say whether it was a good idea that that information is more closely guarded than the nuclear launch codes.


39 posted on 05/30/2007 11:38:13 AM PDT by rednesss
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To: rednesss
You said the Fed was never audited, you were wrong about that too.
40 posted on 05/30/2007 11:40:06 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss
Ultimately. Especially since Chase is one of the major shareholders of the Federal Reserve.

And who are the shareholders of Chase and the other money center banks?

41 posted on 05/30/2007 11:40:52 AM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Toddsterpatriot

Show me the audit.


42 posted on 05/30/2007 11:44:30 AM PDT by rednesss
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To: rednesss

Follow my link. Two links there will show you the audits.


43 posted on 05/30/2007 11:48:02 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: rednesss
You never did say whether it was a good idea that that information is more closely guarded than the nuclear launch codes.

Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."

The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

Who owns the Federal Reserve?

Wow! 6%!

44 posted on 05/30/2007 11:50:37 AM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot
Organization - The Federal Reserve System was established by Congress in 1913 and consists of the Board of Governors (Board), the Federal Open Market Committee, the twelve regional Federal Reserve banks, the Federal Advisory Council, and the private commercial banks that are members of the System.

The Board, unlike the Reserve Banks, was established as a federal government agency and is supported by Washington staff numbering approximately 1,800, as it carries out its responsibilities in conjunction with other components of the Federal Reserve System.

45 posted on 05/30/2007 11:56:31 AM PDT by rednesss
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To: rednesss
So what?

What'd you think about my uncovering of those top secret profit numbers? Pretty cool, huh?

Wow, 6% dividend! You'd think that controlling the Fed would get you a higher rate of return.

46 posted on 05/30/2007 12:14:47 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Toddsterpatriot
And Wikipedia is never wrong is it??? http://en.wikipedia.org/wiki/Federal_Reserve

Nice cut and paste. Wikipedia.

47 posted on 05/30/2007 12:17:38 PM PDT by rednesss
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To: rednesss

If you followed my link, you’d know it wasn’t Wikipedia.


48 posted on 05/30/2007 12:19:02 PM PDT by Toddsterpatriot (Why are protectionists (and goldbugs) so bad at math?)
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To: Tolerance Sucks Rocks

FAIRTAX!!!


49 posted on 05/30/2007 12:19:45 PM PDT by ovrtaxt (I would rather vote for Lindsay Lohan than Lindsey Graham.)
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To: Toddsterpatriot
Profit, from Latin meaning "to make progress", is defined in two different ways. Pure economic profit is the increase in wealth that an investor has from making an investment, taking into consideration all costs associated with that investment including the opportunity cost of capital. Accounting profit is the difference between retail sales price and the costs of manufacture. A key difficulty in measuring either definition of profit is in defining costs.

Dividends are payments made by a company to its shareholders. When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders of the company as a dividend. Many companies retain a portion of their earnings and pay the remainder to their shareholders.

And anyone who has ever been self-employed knows that the biggest friend to you when it comes time for taxes, is business "COSTS" wink wink, nudge nudge. Now where are those receipts.

50 posted on 05/30/2007 12:22:06 PM PDT by rednesss
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