Wednesday, April 6, 2011

Federal Reserve Will Stay Open During Any Government "Shutdown"

Since the Fedral Reserve prints its own money with which it buys Treasury bills and counts the interest it earns on the Bills as part of its operating income, the Fed does not use Congressional funds for its operations and, thus, it will remain open during any government "shutdown".

The wars will also continue on.


  1. Good thing too, I was worried they might go out of business. :\

  2. Guess the CFPB will remain open too. At what point does Congress wise up and put the Pentagon and the SSA under the Fed's umbrella?

    "A helipad on every rooftop." -FDR

  3. Can the Treasury just put up an office chair on eBay, and then have Bernanke bid $100 billion for it? Federal budget=solved, no?

    Or is the Treasury actually not allowed to spend more money than Congress allots to it?

  4. "Since the Fedral Reserve prints its own money..."

    Not true.

    The FR banks buy FRNs from the Bureau of Engraving and Printing, which is part of the Department of the Treasury. The BEP, as I recall, receives no appropriations from Congress, and it has two manufacturing facilities, one in the DC and another in Forth Worth, Texas.

    In 2009 the BEP delivered 6.2b notes at a billing rate of $0.075 per note. Production cost was about $31.55 per 1000 notes, revenues from sales, almost $485m, and its profit ("excess of revenues over expenses") that year was a little more than $23m.

    Read about it in the CFO's performance and accountability report, published annually by the BEP. The report for 2009 includes KPMG's "Independent Auditor's Report" plus financial statements and notes.

  5. Anon 2:53pm, you are correct about the process of literal printing, but I believe Wenzel was using the term in a looser sense, as he was talking about buying T-Bills. When the Fed buys a T-Bill or coupon on the open market, it expands reserves (prints) by crediting the selling primary dealer's account, which is done digitally.

  6. English Bob, indeed I was being literal, and that's entirely fair given given the subject. We aren't in Duke U's English Dept., where every opinion can be valid, and the topic is not the fictional writing of Ayn Rand, which may permit nonliteral interpretations consistent with what the author herself intended. (Granted, it's more likely that there are nonliteral interpretations of her work that she might NOT have intended, much less have liked. For example, in "Atlas Shrugged", Galt's strike makes little sense unless we suppose that he wanted to put the power companies out of business and to scoop up their distribution networks from creditors at rock bottom prices. And then there's the odd metaphor of Atlas, a criminal whose participation in the rebellion against Zeus was punished by making him uphold the world. But I digress.)

    I think it wise to disdain any and all metaphorical references to the processes by which the FRS and the Department of the Treasury manipulate, expand, and contract the money supply. The reason is obvious: To diminish the abundant confusion about a system of money and banking that is already complicated enough even without misleading figures of speech. To understand the details requires repetition of the relevant details in a consistent way, not covering up or misrepresenting those details.

    When you refuse to refrain from misleading language, you contribute to a problem, namely ignorance, which I had hoped that you oppose. So Wenzel's words need no defense (e.g. "looser sense") and were, at best, an occasion of dumbing things down in the usual manner of a journalist. Well, that, or he is eager to look cool by using language that's popular among traders and others who think theirselves worldwise.

    So, just as the FRS does not mint coins, so also it never, ever "prints its own money".

  7. Gee, since the Fed is not a government department of any kind, but a private business, Bernanke is sure showing his overriding power not to be influence with politics.

  8. Okay Anonymous, let's be productive. How would you have written the post?