Money as Debt

[Pervilis Spurius]

Re: For now I support the current system !

There is no difference by the Fed or Treasury in their treatments of currency and coin, although coins do have an intrinsic value where paper has virtually zero.

I'll leave the rest of it up to others, other than to say we'll have to agree to disagree on your conclusions.

Hi Bart,

This site seems to say that there is an accounting difference between currency(FRNs) and coin:

http://www.federalreserve.gov/paymentsystems/coin/

Specifically, the bottom of the page under the paragraph heading (reproduced below): Federal Reserve Accounting for Currency and Coin

In short, the FED treats FRNs as its liabilities and treats US Treasury Bills, Notes, Bonds AND COIN as its assets. Furthermore, regarding coin, the FED must pay face value and can receive no income on COIN assets whereas they do get income on the Bills, Notes and Bonds they hold.

This implies that COIN is a for profit enterprise of the US Treasury.

I have a question of my own: Since coin is an asset on the FED's books, does that mean it is prohibited from being counted as reserves for the purpose of fractional reserve lending? It would seem so.

Reproduced from the site:

Federal Reserve Accounting for Currency and Coin
Federal Reserve notes are liabilities on the Federal Reserve's balance sheet. The asset counterpart to the Federal Reserve liability takes the form of securities of the U.S. Treasury and government-approved enterprises (Treasury and federal agency securities represent the majority of the total collateral for currency in circulation). Because the value of currency in circulation changes daily, the Reserve Banks monitor and report changes in net payments to the Board. Net payments represent the difference between the amount of currency that the Reserve Banks pay to and receive from depository institutions. If net payments are positive, the Federal Reserve will typically purchase securities through open market operations in an amount equal to the net increase of currency in circulation to offset the monetary policy implications of the drain on depository institutions' balances held at the Reserve Banks. Similarly, if net payments are negative, the Federal Reserve will typically sell securities in an amount equal to the decrease in currency in circulation. When a Reserve Bank makes a currency payment to a depository institution, the Reserve Bank charges the depository institution's account (or the account of the bank that acts as the settlement agent) for the amount of the order. Similarly, when a depository institution returns excess currency to a Reserve Bank, it receives a corresponding credit to its account.

Coin, however, is an asset on the Federal Reserve's balance sheet, and is a direct obligation of the U.S. Treasury. As an asset, the Federal Reserve buys coin from the Mint at face value. When a depository institution orders and deposits coin, its Reserve Bank adjusts the institution's account accordingly.

[bart]

Re: For now I support the current system !

Hi Bart,

This site seems to say that there is an accounting difference between currency(FRNs) and coin:

Poor choice of words on my part - I should have said "There is no difference by the Fed and Treasury in their treatments of currency and coin, although coins do have an intrinsic value where paper has virtually zero."

When one nets the effects at both the Fed & Treasury, there is no difference in the treatment of currency & coin.

[Finster]

Re: For now I support the current system !

Poor choice of words on my part - I should have said "There is no difference by the Fed and Treasury in their treatments of currency and coin, although coins do have an intrinsic value where paper has virtually zero."

When one nets the effects at both the Fed & Treasury, there is no difference in the treatment of currency & coin.

Well this just goes to show what I mean by needing expert help trying to unravel the Fed's balance sheet! It's no small task even for those who have studied it for years. Can you imagine what it must be like for us relative naifs? ;)

Your point is clear enough, though, and backed up by the observation that only the paper bills bear the words "Federal Reserve Note". This implies they are obligations of the Federal Reserve. The absence of such an inscription on coins implies they are not. On the other hand, they are fungible, even if not immediately so, so in the run "no difference" is a good way to put it.

[bart]

Re: For now I support the current system !

Well this just goes to show what I mean by needing expert help trying to unravel the Fed's balance sheet! It's no small task even for those who have studied it for years. Can you imagine what it must be like for us relative naifs? ;)

Your point is clear enough, though, and backed up by the observation that only the paper bills bear the words "Federal Reserve Note". This implies they are obligations of the Federal Reserve. The absence of such an inscription on coins implies they are not. On the other hand, they are fungible, even if not immediately so, so in the run "no difference" is a good way to put it.

Thanks Fin, and agreed on the Fed's balance sheet and income statement too.


Here are two lines from the income statement for example, which net to zero - not exactly what one expects with a normal accounting background

Issuance and Redemption of Federal Reserve Notes
Assessments levied on Federal Reserve Banks
for currency costs............................................. .... $491,962,202
Expenses for currency printing, issuance,
retirement, and shipping .......................................... $491,962,202

One other "interesting" item - KPMG did the 2006 audit... and noted 3 pages of "significant deficiencies".

[zoog]

Re: For now I support the current system !

One other "interesting" item - KPMG did the 2006 audit... and noted 3 pages of "significant deficiencies".

Care to elaborate/explain that one?

[Pervilis Spurius]

Re: For now I support the current system !

thanks for the gentle slap-down, bart.

[bart]

Re: For now I support the current system !

Care to elaborate/explain that one?

They're all under the headline "Improvement is needed in Internal Controls over Financial Reporting" and include things like misclassifying 2006 expenses and not recording them in the proper year. The amounts were not very large, the largest one being about $160,000... but one would hope that a Central Bank would be a bit better on their accounting controls and practices. They were busted in 2005 for similar things, and most of them were fixed per KPMG.


Start at page 311 in the link I provided earlier for more details.

[bart]

Re: For now I support the current system !

thanks for the gentle slap-down, bart.

Be gentle with me when I inevitably blow it... Finster will razz me unmercifully anyhow... ;)

[Finster]

Re: For now I support the current system !

Thanks Fin, and agreed on the Fed's balance sheet and income statement too.

Here are two lines from the income statement for example, which net to zero - not exactly what one expects with a normal accounting background

One other "interesting" item - KPMG did the 2006 audit... and noted 3 pages of "significant deficiencies"...

...The amounts were not very large, the largest one being about $160,000... but one would hope that a Central Bank would be a bit better on their accounting controls and practices. They were busted in 2005 for similar things, and most of them were fixed per KPMG.

Yikes!

On the other hand, those deficiencies pale in comparison to central banks' free pass on a commandment the rest of us must obey ... thou shalt not print thine own money!

[bart]

Re: For now I support the current system !

Yikes!

On the other hand, those deficiencies pale in comparison to central banks' free pass on a commandment the rest of us must obey ... thou shalt not print thine own money!

There goes that plan... *sigh*...

[Finster]

Re: For now I support the current system !

There goes that plan... *sigh*...

Ironic that such a bill would have Wilson's image on it! :rolleyes:

[bart]

Re: For now I support the current system !

Ironic that such a bill would have Wilson's image on it! :rolleyes:

Your father didn't call you sun because you're not bright... :eek:

[santafe2]

Re: Money as Debt

I don't have anything to add to this thread, but I wanted to thank Rajiv for posting this link to "The Crash Course" thread and thank the posters here for their thoughtful discourse. There's a lot of meat on this bone. Especially for those of us who've never taken the time to dig into the banking industry.

[Wild Style]

Re: Money as Debt

Terrific video! People are so brainwashed and ignorant that it takes a Canadian artist to present the problem in a way people can understand it. Russo tried but it didn't get any traction. Catherine Austin Fitts is trying also.

The video was more valuable in presenting the problem rather than offering a solution. I like Antal Fekete's solution of gold with "real bills" circulating as the ultimate solution to freeing men from the shackles of the elite banksters.

My favorite part was when he talked of interviewing college educated economists and businessmen who didn't have a clue about how money was created. No they wouldn't.. the banksters have blinders on the media and the education system.

One of my degrees is in International Economics. I studied under economists from the IMF and other well established organizations. In our studies we were taught about the gold standard and its eventual demise. However, as you pointed out, we were never told how this stuff was actually created as pointed out in this video. It is a eye opener, that's for darn sure.