This is a good one folks!

...it's just under shitty management as of late.

I'd be willing to bet that the US Congress polls less favorably than the Fed does. And yet nobody is talking about getting rid of Congress.

I do not, however, subscribe to certain theories about the fed, The fed is simply composed of member private banks.

Who is going to bail out California? It will default on its debt within a couple of years. Congress just got a mandate not to do anymore bail outs..so the FED is there last chance.

That's not a theory -- it's a fact. It requires no speculation.

There are OTHER theories pertaining to the fed, however, to which I do not subscribe.

In general, I believe the fed to be sinister, but sinister in the same sense as you would expect any conglomeration of bankers to be rather than part of some sort of scheme by Reptilian Extra Terrestrials or that sort of jazz.

First, let me appeal to your communist sensibilities.

What IS the fed? Is it part of the Federal Government and owned by The People?

No. It is a PRIVATE institution.

Who owns it then? Where do I buy stock?

Well, you can't buy stock. That's because it is PRIVATE. It is owned by a handful of member banks.

But doesn't Congress get to appoint whomever they want as Chairman?

Actually ... no. The Federal Reserve Board, a group of private individuals, gets to advance candidates for the position. So the People have no say. The chairman is always one of their own.

Okay ... so ... when the Federal Reserve prints money in order (for example) to give to a bank so that bank can lend it to you for a mortgage ... when you pay your bank and your bank pays them ... who gets to keep both principle and interest on that money that was created out of thin air? The Fed.

Does this largest of all corporations pay taxes? Don't be silly -- of course not.

Has it ever been audited? Are you kidding?

Why on earth, Willy, do you support the institution that lies at the very core of the huge wealth differentials in this country and is allowed to do whatever it wants unaccountably, including creation of money out of thin air, the whereabouts of which goes unaudited? Do you suspect some of that money might find its way into the pockets of cronies sans tax?

Hmmmmm.

Communist sensibilities? C'mon John. We've talked about that insult before.

The Fed isn't a private institution. It's one of those quasi private/public institutions.  

Now, I'd be the first to say that the Fed needs reform. As far as I'm concerned, Congress should appoint whomever they like to be on their board, and the people should have the power to remove people from their board. And I'm certainly on board with auditing them and turning them into a fully public institution.

But part of the fundamental problems with capitalism is that a large part of it isn't controlled by anybody. For instance, since 1973 productivity more than doubled. If all things were equal, than we could have just as much stuff as we did in '73, but work every other day instead.  

Who made that decision to double productivity? The answer is nobody did. It increased because of natural market forces. That has both positive and negative consequences.

And that's part of why it's a good reason to have the Fed. It's nice to have an outside referee just in case.

I'll give you a prime example. In '87 the stock market crashed. The crash was so significant that it could have caused a massive recession, if not a depression. Had that happened, there wouldn't have been any resources to develop the internet as we know it, and TER might not exist. None of this happened, because the Fed was there to pump the economy full of liquidity and prevent the crash from taking hold.

Of course, I know the Mises institute and the ARI would blame the fed for the collapse in the first place, but I've already stated in the past here that I don't accept the Austrian theory of market cycles.

I wasn't trying to be insulting -- more like joshing. I was kinda winking when I typed that.

The fed is NOT "quasi public." If it were, our government would at least have a share of its profits, would get to set the wages of employees, would be shareholders, etc.

Now, in theory, I do understand that as the wealth in a society increases; the supply of money has to keep pace to match in order for transactions to be facilitated. So I can understand the value of such an institution.

And increases in productivity, all other things being equal, will increase the wealth in society. (Sure sucks when most of that wealth winds up in very few hands, and NOT the hands of those whose productivity doubled ... yes?) So, yes, management of the money supply is needed.

And, at the same time, I can also understand the value of having that money supply managed by an entity independent of an unspeakably corrupt Congress.

But now consider something. WHO runs the fed? Who controls its actions? It sure isn't Congress. Congressional "oversight" is limited to questioning what happened after the fact. The members of the Federal Reserve Board are ALL, to a man, bigwigs of other private banks -- the banks who own stock in the fed. While the fed itself may make no "profit," it's shareholders certainly do by virtue of their share in the interest charged by the fed on every dollar issued.

You need to look deeper into the fed and our banking system generally.