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Reply #25: they can NEVER create a liability for the american taxpayer [View All]

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bossy22 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Nov-28-11 06:56 PM
Response to Reply #19
25. they can NEVER create a liability for the american taxpayer
they are an entity of unlimited liquidity- they will never need to be "bailed out" (in fact the other way around is more likely- remember the fed has been buying lots of longterm Treasury bonds in an effort to keep interest rates low).

Your view of banking went out the window after the panic of 1907 and should be specifically seen with the european debt crisis- which is a direct result of the european nations NOT HAVING A FEDERAL RESERVE TYPE INSTITUTION from which they can borrow off of.

The Federal Reserve is the reason that the U.S. will never go bankrupt. You talk about giving banks power? Getting rid of the federal reserve will do just that- the banks will be our only line of credit. What would stop happening if their appetite for treasuries went away? What would happen then? Well if we have a federal reserve the fed would step in and buy the treasuries (creating inflation yes) but preventing a total bankruptcy of the federal government. IF we didn't have a Fed, we would be forced to accept harsh austerity package or feel the wrath of a 20% economic contraction.

BTW- the government does coin money- not the federal reserve. The fed buys the money from the treasury dept at cost. But coining money is different from creating money, physical currency is only a small part of the money supply (i believe its considered M0).

Wikipedia can be a great tool
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