The headline on MarkeWatch blared: Fed earns $77 billion from balance-sheet explosion. That got my attention....A lot of readers stopped reading there. If they did, they are not curious people. They refused to follow the money. The next sentence is crucial: “The bumper earnings allowed the Fed to distribute $75.4 billion to the U.S. Treasury, also the second-highest level ever.” Got that? The FED gave almost all of the money back to the government. It did the same last year. It does the same every year. By law, the Federal Reserve System is not allowed to keep the money. That has been true ever since World War II. Most critics of the FED are unaware of this. They talk as though the FED keeps all this money. From 1914 until World War II, it did. But that was a long time ago....The FED is not about profit. It’s about control over the money supply. It’s about bailing out big banks. There is an old rule: “Know thy enemy.” If you think the FED is about making money, you don’t know the FED. It’s not about making money. It’s about controlling market forces so that the big banks are taken care of in any crisis. It’s about big bank bailouts.
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The Tea Party Economist