The Venus Flytrap - About FED

Appendix C. About FED

13-01 Only a short mention is necessary about the conspiracy theory on the Federal Reserve System which appears in Zeitgeits Addendum. It is fact that the Federal Reserve System receives interests on money made out of nothing. So Peter Joseph says, "An analogy would be a game of musical chairs, for the once music stops, somebody is left out to dry. And that is the point. It invariably transfers true wealth for the individual to the banks."

13-02 What he does not say is that the most of profit earned from interest by the Federal Reserve System is being returned to the Department of the Treasury every year. If he understood this correctly, he would have been able to criticize the government instead of the Federal Reserve System! Look at http://www.publiceye.org/conspire/flaherty/Federal_Reserve.html, especially http://www.publiceye.org/conspire/flaherty/flaherty7.html. Wealth is not trasferred from individuals to banks. It is transferred to the government.

13-03 In reality, the argument that insolvency inevitably occurs is wrong. If an interest recipient expends money through consumption or investment, this expenditure becomes income of somebody and can be used to pay for the interest. (This expenditure only needs to be made using newly created money at the very first time. Money returned as interest is used on the second time.) This becomes more important when the government is the interest recipient. The government is an institution that exists in order to spend.

13-04 I am not arguing that the current Federal Reserve System is entirely desirable. In my opinion, it should not be allowed to make money out of nothing no matter who receives interest. Libertarians like Ron Paul have long been criticizing the Fractional Reserve Banking System and Federal Reserve System. Peter Joseph is failing to catch the essence. Read Ron Paul's End the Fed for correct criticism and alternative for the Federal Reserve System.