The reason the privately owned bank known as Federal Reserve Corporation is really the government of the United States and Congress, the President and the Supreme Court are not the government is the following:
Fed Corp controls the tax rate by controlling the interest rate. The power to tax is the power to destroy, and therefore Fed Corp can threaten to make any sitting government very unpopular by forcing the sitting govt to raise taxes.
Therefore Congress and the President will do anything to keep Fed Corp happy and not force a tax hike.
How Fed Corp Controls The Tax Rate
The problem is that the government cannot create any dollars. Only Fed Corp can (and private banks via fractional reserve lending). In order to get dollars from Fed Corp, or anyone else, Congress must sell bonds. It sells the bonds, obtains dollars and then eventually has to buy back the bonds plus interest.
If Fed Corp buys the bonds, then when the bond matures it sells the bond back to the govt and collects the interest. At the end of the year, Fed Corp figures out what its operating expenses were, it keeps that amount to pay those expenses and then sends the rest of the profits it made from interest on bonds back to the govt.
Now, it wouldn’t be so bad if that’s as far as it went, but there are two big problems with this:
1.) Fed Corp isn’t the only group buying bonds. Sometimes the govt has to sell bonds to people who aren’t going to return the interest on the bonds at the date of maturity.
2.) What’s to keep Fed Corp from buying a bond and then selling it to the public? In that case, whoever gets the bond will simply keep the interest the bond pays them.
So the upshot is that the govt has to sell its bonds to people who are going to want the interest paid in full.
And in order to get people to buy its bonds, it has to set the interest rate on the bonds at a competitive rate with the rate banks are giving on CDs.
In order to pay the interest on the bonds it has sold, the govt must collect taxes. So the higher the interest rate the banks are offering, the higher the interest rate the govt must offer on its bonds, and the higher the taxes it must collect.
So pretty much Congress can do anything it wants as long as it doesn’t anger the banker Gods. Should Fed Corp become displeased with Congress, all it has to do is raise interest rates, force a tax hike and watch as Congress is voted out and replaced with a new set of puppets.
This is called “taxation without representation”. Congress has lost control over its ability to determine taxes. This is yet another reason why the current government is totally unconstitutional and needs rebooted.
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