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Thursday, August 16, 2007

The Federal Reserve has Never Been Audited

I can't believe that the Federal Reserve has never been properly audited. The official government story is that the Federal Reserve is audited. The criticism is that the government has never done a full audit, looking at every single transaction in the financial markets. I can't believe that. All the money it makes must go somewhere, and it isn't being returned to the government. If I was feeling more aggressive, I'd make a "Freedom of Information Act" request to get the Federal Reserve's books. However, I'm not a lawyer and don't feel like spending a lot of money tracking down the request, especially since the Federal Reserve claims that it is immune from disclosure. I want to see all the details of its "open market operations", when it buys and sells bonds to fix interest rates.

By auditing the Federal Reserve's open market transactions, it probably would be possible to determine what the free market interest rate would be if the Federal Reserve ceased its market manipulations.

That's why the Federal Reserve has never been fully audited. Only a partial audit is performed. The exact details of the Federal Reserve's open-market operations, where it fixes interest rates, are strictly confidential. The open-market operations have never been audited by Congress.

I checked the Federal Reserve website, and they claim that the Freedom of Information Act has a specific exemption for the Federal Reserve's open market transactions, so making a FOIA request wouldn't work. I couldn't find the specific law that makes the Federal Reserve's open market operations immune from the Freedom of Information Act. That seems odd. Why would currency transactions need to be protected as confidential? I suspect it's designed to prevent someone from looking at the full records and see what's actually happening. However, even though the Federal Reserve claims that exemption, I don't know if that exemption was tested in court.

Of course, I can predict what a detailed analysis of the Federal Reserve's open market transactions would show, without seeing the data. The Federal Reserve primarily acts to keep interest rates artificially low, compared to where they would be if interest rates were allowed to float. That means that most of the Federal Reserve's actions are designed to lower interest rates, which means that they are buying government bonds and issuing new money to pay for them. That money issued does not need to be reported; it is merely printed via bookkeeping. The new money cancels out when the Federal Reserve redeems bonds with the government. If you add up all that money that was printed, you would find it's a huge amount of money.

1 comment:

Anonymous said...

Why does Congress allow the printing of notes, being paid about .028 cents per note by the Federal Reserve, and then borrow the notes from the Federal Reserve at face value? Isn't Congress charged by our Constitution to coin and value all money? I mean, the last time I read our Constitution this was a job responsibility of there's. And, where does Congress get off being lazy on the job? They cannot give one good reason why our Federal Reserve is privately owned. I guess this private ownership is as close to a fascist government as I want to come. Could this have something to do with the 7 trillion debt we have? And where does the Bureau of Land Management fit into this equation? Is all this "government" land in hock to foreign governments? All these questions have been asked of neumerous Congress people and government officials. These are good questions and deserve an answer for the American people. Only two Presidents have tried to do something about the Federal Reserve, Abraham Lincoln and J.F. Kennedy. We all know what happened to them.

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