Bitcoins and gold standard dollars -- was Re: Anyone want to make a housecall?

Levi Pearson levipearson at
Sun Jun 2 15:18:08 MDT 2013

On Sun, Jun 2, 2013 at 12:11 PM, Joshua Marsh <joshua at> wrote:
> On Sat, Jun 1, 2013 at 5:14 PM, Levi Pearson <levipearson at> wrote:
>> And you say "beholden to its anonymous shareholders" like that isn't how
>> all corporations work.
> This is coming from someone who listens to the No Agenda show, so take it
> with a grain of salt. I'm more concerned about the fact that the Fed *is* a
> corporation and not that is runs like one. The law does put limits on what
> shareholders can do, but we live in a capitalistic society and the all
> mighty dollar can get people to do wild things.

You have to have a plausible mechanism through which these mysterious
'people' could do 'wild things' if you expect anyone to take this

> so, if you want to know who the shareholders of your regional Fed are, look
>> at the largest banks in the region.
> I have never seen a list of shareholders. I've read a few people claiming
> to know who they are, but they don't have verifiable sources. The Fed
> doesn't release that information. We can assume that some banks have
> shares, but we don't know how much. There is only a minimum purchase amount
> for members. And the laws allow for some of the shares to be sold to the
> public. What I'm interested in is more transparency.

No, the law does not allow shares to be sold to the public.  There was
a provision that allowed it *at the time the Fed was created*, but
only *if* the regional banks did not meet their funding goals through
sale of shares to the banks as I described.  They did meet their
funding goals, so no public shares.  And the shares that the banks own
have to be maintained according to the rule that 3 percent of their
capital stock must be maintained as shares in the regional Fed.  They
can't otherwise be bought or sold.  And as I explained before, owning
shares only lets you have a say in day-to-day operations, and that say
is balanced equally against all the other member banks in the region,
regardless of size.  The open market operations that influence money
supply are *not* decided by regional shareholders, but by the FOMC.
The FOMC has more members appointed by the Federal Government (7) than
it has elected by regional banks (5).  So there's no mechanism for a
mysterious bank shareholder, or conspiracy of mysterious bank
shareholders, to control open market operations.

If you really must invent a conspiracy, you're going to have to have
someone buying off the President and Congress, who appoint and confirm
those 7 members of the Board. That's not really very plausible either,
but it seems more likely than controlling most of the nationally
chartered banks throughout the country.

> TINFOIL HAT ON: These people have the button that makes money out of thin
> air. There is nothing stopping them from working together to make small
> tweaks to the economy that slowly hurt individuals in the long run and make
> their shareholders billions of dollars. Add to that the fact that our
> government gets a large kickback on those profits and I don't see Congress
> or the President or anyone doing anything about it in the foreseeable
> future. The sad part is that we would never know.

By 'these people' I assume you mean the FOMC, because they're the ones
that control the open market operations of the Fed.  When have you
ever seen 12 elected or appointed people work together that closely on
something that requires that kind of subtle manipulation?  And where
are you getting the 'government gets a large kickback on those
profits' thing?  Are you referring to the Fed returning the majority
of the interest it collects on Treasury securities to the Treasury?
This means that somewhere around 7% of the national debt is actually
interest-free.  Not really a kick-back.

The Fed is actually audited on a regular basis in several different
ways.  The issue that some grandstanders in Congress have is that the
Government Accountability Office (GAO) is (by law) not given details
of certain kinds of operations that have to do with dealing with
foreign entities, open market trading, and that sort of thing. There
is some information about these released weekly as part of their
balance sheet (you can see this at the Fed's website) but the details
of individual transactions are kept private to allow the Fed to do its
job without short-term meddling by Congress.  It was explicitly set up
this way due to fears that short-term political pressure could force
the Fed to make bad decisions, which I think is a reasonable fear
given the election cycle of Congress.  But Congress is ultimately in
charge, and it authorized a full audit in 2011. The gross amounts
affecting the balance sheet were already known, but the audit showed
*where* the individual transactions were made. As predicted, this made
a lot of people really mad, however it did show that the outside
auditors that reported no accounting errors were correct in their
assessment. This means that the Fed is doing what the FOMC has
decided; nothing is going on "under the table" at regional Fed banks.
This is not necessarily what Congress or the President would have
done, but that is precisely why the Fed is not in direct control of
the President or Congress.

So, what this comes down to-- do you trust the idea of having elected
officials appointing people to make decisions for the governance of
the Federal Reserve?  Or do you think the people should have a more
direct say in what's happening via a more democratic process?  This
has strong parallels to the Federalism vs. Direct Democracy debates
that you often hear, but interestingly you will find people taking
opposite sides depending on whether you are discussing lawmaking or
monetary policy.  For my part, I think the Fed plays an essential role
in a modern economy, and I think that the way that the governance of
the Fed is organized is a compromise between insulation from
short-term political whim and operating in the long-term best
interests of the country.  Maybe not the best possible organization,
but certainly not as mysterious and sinister as some believe.
Ultimately, the Fed exists at the pleasure of Congress, which has the
power to destroy it with a single vote, and if a better system for
managing the currency comes along it will be replaced.


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