Originally Published at Conspiracy Archive on 2010/09/27
by Old Reb
The Federal Reserve uses euphemistic smoke and mirrors to obscure their operations. With full knowledge the following is not the way the Fed/government describes the system, allow me to offer a different analysis of their mathematical operation.
Congress can pay for federal expenses with funds collected from taxes, but Congress is never satisfied with this amount. The desire to buy votes/campaign contributions from special interest groups induces congress-critters to spend more, and this is identified as deficit spending. To create this make-believe money requires the assistance of the Federal Reserve.
Congress will give the Fed a security (bill, bond, or note) and the Fed will accept the document as an asset of one of the twelve FR Banks. The Fed will then establish a line of credit for the U.S. government for the same amount and list the liability as Federal Reserve Notes. Presto !! Fiat money has just been created for Congress to spend. Ref: 2009 Annual Report to Congress by the Board of Governors, page 448. The accumulated securities that are not redeemed add up to the national debt.
The fiat money is identified as a legal tender. A “legal tender” is something that is required by law to be accepted as payment for a debt – it is compelled satisfaction for, but not payment of, the debt.