How come the Federal reserve can print money to lend but the Federal government can't do the same?

First let me say that Yahoo Answers does not provide enough space to respond with a complete answer. Therefore, for those who are interested let me suggest reading some excellent books and one of the easiest to understand is “The Truth In Money Book” by Theodore R. Thoren and Richard F. Warner [1980] (library of congress catalog number 83-51421; ISBN 0-9606938-1-5). There are many others and none of this has ever been secret.

As a foundation it may be helpful to understand that prior to the Central Bank (the Federal Reserve) there were many economic booms and busts. While we can all debate the realities of the cyclical nature of economic systems (of any type) it can be accepted as a truism that the investment community prefers economic futures as more reliable than not. I suggest that those legislative efforts which resulted (cir. 1913) in the creation of the Federal Reserve System were meant to ‘stabilize’ the economic system and were not some conspiracy to initiate a ‘global government.’ That this was not a good approach to meet that goal is clearly obvious in retrospect but at the time most believed that it would work. That it meant that the Congress would be abrogating their Constitutionally delegated power (responsibility) to control the money supply by turning it over to a private (uncontrolled) banking sector, was something that was clearly not well thought out. However, they did it and as so much from government actions, there are the unintended consequences.

Now this system doesn’t work exactly as most people understand it.

First, it is (as others have stated) a private sector business, in this case a bank.

Secondly, it is not as straight foreword as simply printing the money for the federal government and it works something like the following:

Congress votes to increase the federal debt, let us say by one billion United States Dollars (USD). By that vote it instructs the United States Treasury to write interest-bearing bonds for that amount of money.

The United States Treasury goes to the Federal Reserve to borrow money and offers bonds against taxpayers’ ability to pay.

The Federal Reserve buys the bonds by simply creating a bookkeeping entry for one billion to the credit of the government’s checking account.

The Treasury can now write checks against the created credit.

These checks are dispersed throughout the country, endorsed by recipients and deposited into banks.

The banks send the Treasury checks to the Federal Reserve to be cleared. The Federal Reserve debits the Treasury’s account and credits the banks with the amount. These credits increase the banks’ reserves.

These reserves serve as the base used by the commercial banks to create checkbook money and to lend it out at interest.

At this point the only thing of real value is the ability of the American people to pay the initial debt through taxes and whatever the federal government purchased with this created money. The banks have merely acted as a form of hired fiduciary agent and are being paid by interest earned. Keep in mind that this interest is not the only way the banks make money because they exist in what is termed a ‘factional’ banking system.

Keep in mind the ‘reserves’ that have been created out of these created funds. They are worth a lot more to the individual bank that the amount of the initial reserve deposited amount. Think of $1,000 dollars being deposited in a single bank. This increases their reserves by $1,000 dollars. Due to the factional reserve system they can only loan out a portion of that money, say 85% or $850. Which they do by depositing it into the account of the individual who borrowed it which, increases their reserves (the way banks do audits) by $850. That is, they have a new asset (the loan papers) of $850 and a deposit of $850. of this new deposit (addition to the reserves) they can loan ‘another 85% or $722. This cycle continues until that loanable 85% reaches zero. However that has converted into new reserves of $5,667.

Lets see now. An initial reserve of $1,000 created by paper created out of whole-clothe of federal bonds (good only due to the ability to pay of the American tax payer) and increased through this factional reserve into a total reserve of $5,667. So, in terms of the Money supply a one billion dollar note (bonds) of the federal government is actually converted into $5,667,000,000 in the U.S. money supply system. And, most significantly all of comes into existence based on debt.

Look into this system and study it, there is a lot more to the story and it is fascinating.

Clearly, others don't understand what the Federal Reserve Bank is. Sure, the Bureau of Engraving prints the physical notes, but those notes are created from thin air, backed with nothing, at interest, for the Federal Reserve Bank cartel. That's why they say "Federal Reserve Note". We cannot print our own counterfeit money, because Woodrow Wilson gave exclusive rights to the private Federal Reserve Bank cartel with the Federal Reserve Act of 1913. Only the cartel can create counterfeit money.

As properly stated in other answers, the Federal Reserve is an illegal, unconstitutional entity whose very existence was ramrodded through congress during a Christmas vacation in 1913. It is the brain child of the ultra-rich globalists who have been successful in pulling the wool over the eyes of the American people for decades.

As also properly stated, any former Presidents who were against the Federal Reserve were assassinated.

Only recently with access to information via the internet, have Americans found out the truth about what is happening to our money. Also, in researching the history of the Federal Reserve, you can also find out that the global government (or New World Order) is not a conspiracy theory. It is a fast-approaching reality. You will also find out who the 'players' are, and they include, among others, the Clintons, the Bushes, Obama, Paulson, Bernanke, Kissinger, etc. (Research Council on Foreign Relations - CFR).

It is a darn shame that so many still don't understand what is going on and what will soon happen to America. And it's a darn shame that Ron Paul was railroaded out of the primaries. He was the only one who told the truth then and still has the guts to do so now. Unfortunately I believe it is too late.

The Federal Reserve Bank is indeed a conglomeration of private for-profit banks. This private bank prints money and decides it's value. They print money at will and LOAN it to the US goverment. As you may understand as one who pays a mortgage, you are not as much the owner of your home as the bank is who holds the note, who holds title as collateral. It's the bank's house until you pay it off. Likewise, our government belongs to the Federal Reserve Bank. It is not a comforting thought to have one's country owned, and therefore controlled, by a private banking interest. For more info, see the links I've referenced below.

The Federal Reserve keeps NO reserves and is no more "federal" than McDonald's or Federal Express.

They have no Constitutional power to charge interest on money our Congress was ordered to create, coin, print and fix the value thereof.

If we chose to, there is the possibility that every dime of interest be adjudged fraudulent and all expenses related to the operation of the Fed be the sole responsibility of the Fed and not ours.

Of course, it would involve some determination and even - though I hope not - the loss of lives.

Sign me up.

...

"Banks are more dangerous to our Liberties than standing armies."

- - Thomas Jefferson

what? The Federal Reserve isn't Federel Government?

http://www.321gold.com/fed/greenspan/1966.html

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

###

Alan Greenspan

[written in 1966]

http://en.wikipedia.org/wiki/Alan_greenspan

Alan Greenspan (born March 6, 1926 in New York City) is an American economist and was the Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor, making speeches and providing consulting for firms through his company, Greenspan Associates LLC.

http://www.youtube.com/watch?v=ol3mEe8TH7w

"The Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take." ~ Alan Greenspan

--

1966, pro-gold standard.

1987, Chairman of the Fed

We can, but it takes taking back that control from the bankers that our government gave to them in 1913.

Apparently Kennedy was on track to do that, but was assassinated. Maybe by the very people who control our money.

There were several attempts to kill Andrew Jackson, allegedly by the Bankers who wanted control of the US money supply.

These people are probably the most powerful people on the planet, with far more power then our elected officials. It is not the government that is creating 1984, it is the money makers who made that happen years ago. But the American people think it is all political.

That is simply not the case.

Peace

Jim

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It all falls under the same Commander a chief but each bureaucracy has it privilege and territory. The mail is another one of those large government tools.

They have the power to cause inflation if it would do some good but it never does.

Because the rich elite ruling class forced this system on the usa, the Rothschild gang did this "crime against humanity". Because they believe in the talmud the book of the zionists. It says goyim or gentiles are sub human and can be treated like sheep.