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Mint vs Federal Reserve. Real Money vs Paper Money.

by James Denison / March 1, 2011 9:54 AM PST

What becomes fairly obvious when you wade through all this, by this including more than posted, is the biggest problem with the Federal Reserve is actually the US Govt's excessive borrowing from it, like a junkie with a credit card and a high limit allowed. Other than borrowing from the Federal Reserve, the other way the US Govt would have to get money is by raising taxes, but being able to "borrow" offsets that requirement. This means a natural control is removed (taxation of citizens) which would help control the spending of govt. It also removes Congress from the responsibility of saying "No!" to many government programs. The Federal Reserve allows easy money policies with seemingly no trigger on demand for repayment of the principle borrowed, just on interest due. All this does is allow the debt to continue to grow, year after year, until eventually it will collapse.

Minting coins with a stamped value worth a bit more than the underlying metal value, long a staple manner of coin circulation throughout mankind's history, in addition to collection of taxes can help avoid build up of such large govt debt, but even then a govt can issue interest bearing notes and bonds which do much the same as borrowing from the Federal Reserve, in that eventually the debt must be paid back, or defaulted on.

One of the main reasons supposedly for Federal Reserve was to avoid bank runs by temporarily increasing money supply during such times to offset and allay any panic that might sweep the nation's banks. So, why can't a surplus be stored instead for dealing with such a situation?

Whether there's a Federal Reserve or not, the biggest problem is and remains govt spending more than it gets in tariffs, taxes, sell of natural resources, etc.

We can blame the Federal Reserve setup for a lot concerning monetary policy and supply since that's removed from direct control of Congress, but ultimately it's Congress and the growing debt caused by decades of govt overspending which is the main problem that needs to be addressed.

https://answers.usmint.gov/app/answers/detail/a_id/10/kw/bullion/related/1

The Mint

Pricing for precious metal numismatic products (platinum, 24-k and 22-k gold) varies by the average cost of the underlying metal. For these products, the United States Mint establishes tables that determine the price using ranges that are based on the average cost of the metal for the week prior to sale. If the average weekly price of the precious metal moves up or down into another cost range, the price of the product will also go up or down, respectively, by a fixed amount.

Generally, all numismatic products are priced so the entire portfolio recovers its costs, plus a margin of 15%. Net income generated during the fiscal year (monies remaining after all costs are recovered) is then returned to the Treasury General Fund as an on-budget miscellaneous receipt, which may be used as current operating revenue or to reduce the annual budget deficit of the federal government.

The Federal Reserve

http://www.federalreserve.gov/generalinfo/faq/faqgs.htm
http://www.federalreserve.gov/generalinfo/faq/faqmpo.htm
http://www.newyorkfed.org/aboutthefed/fedpoint/fed01.html
http://www.frbatlanta.org/fedfaq/search/Dsp_itempopupUFAQNewYork.cfm?ID=D448691A-E5FD-430E-B988-9F7F722A01CB
http://www.frbatlanta.org/fedfaq/search/Dsp_itempopupUFAQNewYork.cfm?ID=72A44A3C-EB56-48E1-90DB-F53D1CE446F7


Is U.S. currency still backed by gold?

No, when the United States stopped selling gold to foreign official holders of dollars at the rate of $35 an ounce in 1971, it brought the gold exchange standard to an end. In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates. In August 1974, President Ford repealed the prohibition on the public's owning gold or engaging in gold transactions. Today, no country bans private ownership of gold.

Can I redeem my gold or silver certificate for gold or silver at a Federal Reserve Bank?

No. However, gold and silver certificates are sometimes more valuable to collectors than their face value. Check with a local coin or currency dealer in your area who can assess their worth as a collectible.

Does the Federal Reserve produce bank notes and coins?

No, the Federal Reserve does not produce bank notes or coins. The Bureau of Engraving and Printing (BEP) produces currency and stamps, and the U.S. Mint produces our nation's coins. The Federal Reserve issues Federal Reserve notes and places them in circulation.

The Federal Reserve orders new currency from the Bureau of Engraving and Printing, which produces the appropriate denominations and ships them directly to the Reserve Banks. Each note costs about four cents to produce, though the cost varies slightly by denomination.

Virtually all of currency notes in use are Federal Reserve notes. Each Federal Reserve Bank is required by law to pledge collateral at least equal to the amount of currency it has issued into circulation. The bulk of the collateral pledged is in the form of U.S. Government securities and gold certificates owned by the Federal Reserve Banks.

The distribution of coins differs from that of currency in some respects. First, when the Fed receives currency from the Treasury, it pays only for the cost of printing the notes. However, coins are a direct obligation of the Treasury, so the Reserve Banks pay the Treasury the face value of the coins. Second, large banks in some Federal Reserve Districts participate in a Direct Mint Shipment Program, and receive coins directly from the Mint.

How is the Federal Reserve funded?
ANSWER The Federal Reserve's income is derived primarily from the interest on U.S. government securities that it trades through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate).

After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."

http://en.wikipedia.org/wiki/Federal_Reserve_System
The government also exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Thus the Federal Reserve has both private and public aspects.[12][13][14][15] The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. The Federal Reserve transferred $78.4 billion to the U.S. Treasury in 2010.

Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve, through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation's coin and paper currency. The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation's cash supply and, in effect, sells the paper currency to the Federal Reserve Banks at manufacturing cost, and the coins at face value.

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