"As a direct result of logical and relentless agitation by members of Congress, led by Congressman Wright Patman as well as by other competent monetary experts, the Federal Reserve began to pay to the U.S. Treasury a considerable part of its earnings from interest on government securities. This was done without public notice and few people, even today, know that it is being done. It was done, quite obviously, as acknowledgment that the Federal Reserve Banks were acting on the one hand as a national bank of issue, creating the nation's money, but on the other hand charging the nation interest on its own credit – which no true national bank of issue could conceivably, or with any show of justice, dare to do."

This article argues that we should give up on Treasury borrowing and just have the Fed start "issuing the debt" (printing money, basically). This is a bit optimistic in the sense that if we run out of lenders to the Treasury, we have problems so big that having the Fed print money won't solve them.

We also take issue with the assumption that this wouldn't be inflationary in "today's climate". That assumes that the dollar doesn't crash and there's no capital flight. And in our book that is a big "if". About the only argument we can see that this won't happen is "it hasn't happened yet". Yeah, and the housing bubble wasn't going to crash in 2002 or 2005 or 2006 because it "hadn't happened yet" as well...

Even without a dollar crash, the article's implicit assumption that the national government can somehow intelligently direct newly-printed money to worthwhile projects that will sustainably stimulate the economy is highly dubious. Printing money can only avoid inflation (in the long run) if there is an "economic yield" from the ventures in which the new money is "invested". The only way I see this being possible would be if the Federal government stops sucking up most of the country's taxes into a black hole, or spearheads initiatives to direct capital into regional and communtiy banks.

Also, just because the Fed (might) be returning most of its profits to the Treasury, it doesn't mean that it isn't inexcusable that the Federal Reserve Act does not require it to do so. The Federal Reserve Act should be repealed and the central bank should be nationalized and be made much more transparent. At minimum, the Act should be modified to require the Fed to return all profits net of expenses. The Fed should be a non-profit, if it is going to be independent.

Finally, if the Fed truly engages in quantitative easing, it will essentially be doing what Brown calls for, as it will be creating money out of thin air to monetize Treasuries. So there is really no new regulation needed to implement this "wonderful" idea.

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