The US government does not borrow from the Fed. The Fed is only in charge of buying and selling, but the issuance itself is authorized by the government itself through the Bureau of Fiscal Service, a division of the US Treasury.
So this vid is wrong?
I suspect this vid is just another uneducated conspiracy theory
The Federal Reserve System was designed to prevent bank runs, and act as a lender of last resort when a bank run does occur. It gets its money from the U.S. Treasury which keeps a checking account with the Federal Reserve, as part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills. It also issues the nation's coin and paper currency and sets interest rates to best serve the economy
Here is where the vid lies as it does not mention that
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. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury so the government gets the interest paid out back
The Federal Reserve is the national bank so it is poorly named
Canada has the Bank of Canada which is owned by the Minister of Finance
The role of the bank is to "promote the economic and financial well-being of Canada." The responsibilities of the bank are: monetary policy; sole issuing authority of Canadian banknotes; the promotion of a safe, sound financial system within Canada; and funds management and central banking services "for the federal government, the Bank and other clients."
It can print money and buy the government's debt. The Bank of Canada is the sole authority authorized to issue currency in the form of bank notes in Canada. The bank does not issue coins; they are issued by the Royal Canadian Mint.
It sets interest rates like the Fed does.
It is important to distinguish between the right to "issue money," which is the right of the Bank of Canada, and the ability to "create credit," which is done by commercial banks through the issuance of loans.
If "money" is thought of as the combination of issued money and bank-created credit, then presently, the Bank of Canada "issues" less than 5% of Canada's money, with the remainder being "created" by commercial banks through the process of fractional-reserve banking.
The Bank has a zero book value policy on its balance sheet—matching total assets to total liabilities—and transfers any equity above this amount as a dividend to the Government of Canada.
It is important to note, the balance sheet policy employed by the Bank of Canada is that this base money is not permanent, as for each created dollar of credit there is a matching liability created on the Bank of Canada's balance sheet—and is a zero sum once the debt is paid off. True money is only issued as reserve currency for commercial bank lending by the government. Also called high-powered money,
this money can then be multiplied by a factor outside of government control through bank lending.
I am unsure why the banks need government money lended to them as they can just make up credit Can anyone explain this? Is it because the banks need a reserve fund that increases as more money is lent ?
I presume the banks can buy government bonds, like anyone else in the world can do, but prefers not to because of the low rates but the government does not borrow money from the banks by setting up an account, as far as I know
Banks creating monies, through credit, has a limited affect on inflation because this money is paid back,
AM I correct on this point
so they are forced to borrow from private banks? How does that work?
