Why People Stand out in the Rain in protests with Signs that say "End the Fed!" (or Part 1 of my education on the American monetary system)

I really believe that the average American moves through the financial system in an honorable fashion. We work to earn our money, we spend it responsibly (or if not, take responsibility for the consequences), and live our lives generally "within our means". However, as we do "our thing" we remain blissfully unaware of what goes on behind the scenes. Once you start reading about our monetary and banking system however, you begin to realize just how tenuous the whole thing really is.

I made a personal decision recently that I would no longer be complacent and pretend like things at a bigger level than my own personal sphere of influence a) don't matter, b) can't be influenced by me, or even worse and more naively c) would surely be taken care of by someone else far wiser than myself and with my best interests at heart. If Americans have gone wrong, this has been the path of destruction. Reading the 5000 Year Leap helped me gain the understanding that it is only by the majority of citizens being truly *educated* and aware of what is going on that we can hope to maintain our freedom. Education I've got plenty of, but I haven't actually applied it to politics, economics, or anything other than that which is natively interesting to me. So no longer will I abdicate my responsibility as an American citizen, but I'm determined to become one that the founding fathers would recognize and be proud of. I suppose this blog represents the beginnings of that quest, even before I knew what I was about.

So I've been learning about the monetary system and how it works. You've probably heard of the Federal Reserve. I always thought -- since they are the ones printing the money -- that they were part of the federal government. In actuality, they're not. They are private banking interests who were authorized by Congress (in 1913) to create our currency. In and of itself, this is probably unconstitutional, since only Congress has the power to coin money and it cannot abdicate that responsibility or transfer it to another (according to previous supreme court rulings), but that's an altogether different point.

So this seems to be how it works. When the federal government wants money they don't have (which is pretty much everything we're spending nowadays), they go to the U.S Treasury. The U.S. Treasury prints bonds and then sells them to whoever will buy them, both foreign and domestic sources who then "hold" a piece of our debt. If they can't find a buyer, they go to the Federal Reserve who prints money (from nothing) and hands it to the U.S. Treasury in return for the bonds. The federal government then owes the principal plus interest.

This is where things get interesting, because here, the U.S government ends up paying interest on its own money that it creates. Even more bizarre, the Federal Reserve earns interest on money it never had to begin with, but merely printed/created -- out of thin air! Who benefits from this system? Not the American taxpayer, but rather the private banking interests that run the Federal Reserve. Hmm. Is it any wonder that with government spending now at an unprecedented level, the Fed is happily running the printing presses night and day, heedless of the concerns of the American public about inflation, consideration of what might be in our "best interest", or the price we'll have to pay in taxes long-term for all this debt? Hmmm.

As Mikiel de Bary noted in a recent American Thinker article:

"The Federal Reserve Board has transformed itself into an obedient appendage of the Executive Branch of government. Few seem aware that it is managing our monetary system more recklessly than ever in its history. The historic quattuordecupling of bank reserves in the last six months (that's a multiplication by 14) sets the stage for a doubling or more of the money supply. (The Fed has never before dared to promote annual money supply increases of more than around 10 percent.)"

Want to see just how much more money we're printing now than ever before? See this chart. Ouch.