The Fed Makes Record Profits for Itself by Inflating

About ten years ago a Wall Street Journal article described some of the perks that Fed bureaucrats enjoy with all of their loot, such as a fleet of corporate jets, millions in real estate holdings, elaborate buildings and offices, etc.  Even the head janitor at the time made over $160K a year plus benefits.  Where does the money come from to pay for all of this?  It comes from interest earned on bonds that the Fed owns.  The Fed inflates the currency by buying bonds, thereby putting more money into circulation.  It holds onto the bonds and keeps a large chunk of the interest income on them, sharing the rest with the crooks and conmen in Washington (Oops, I mean “the Treasury”).  Today there is an AP article on the Web that announces, “Federal Reserve generates a record profit for 2009.”  Last year was the biggest “payoff” for creating inflation and boom-and-bust cycles in the entire history of the Fed.

There is research in the economics subdiscipline of public choice that asserts that Fed bureaucrats have a built-in inflationary bias because they literally profit from inflation in the way described here.  The “mainstream” of the economics profession ignores this research because 1) most monetary economists are paid by the Fed in one way or another; and 2) They believe in the fantasy that government bureacrats are selfless public servants devoted to correcting “market failures” (with their help, of course).

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7:21 am on January 13, 2010