Federal Reserve Information

Repetition is an excellent teacher, so important information to remember will be repeated periodically throughout this informational page. Before we begin, remember that concerning the Federal Reserve System..."creates money out of thin air" means "has no money and creates money as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York." The money placed into the primary securities dealer's account as a credit came from nowhere, or in other words, out of thin air.

As you well know, money has to come from somewhere in order to be placed into any account as a credit. This is true for everyone, except the Federal Reserve System and its purchasing of securities to add liquidity to the banking system.

Question. Can you pay your mortgage, rent, car payment, car insurance, phone bill, cable bill, and credit card bill with no money?

Answer. You can't.

Question. Can the Federal Reserve pay for securities with no money?

Answer: Yes. The Federal Reserve creates money out of thin air to pay for securities.

The Federal Reserve has no money to begin the process of adding liquidity to the banking system. The Federal Reserve creates money out of thin air to purchase securities to add liquidity to the banking system, which makes it the perfect vehicle to utilize for funding our universal basic income program. Most people are unaware of this fact.

The Federal Reserve website at https://www.federalreserve.gov/aboutthefed/structure-federal-reserve-system.htm, states the following information:


[The Federal Reserve System is the central bank of the United States.

It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve

* conducts the nation's monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
* promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
* promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
* fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
* promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.]


Concerning community economic development activities, the Federal Reserve website at https://www.federalreserve.gov/aboutthefed/structure-federal-reserve-system.htm, states the following information:


"Community Advisory Council (CAC). This council was formed by the Federal Reserve Board in 2015 to offer diverse perspectives on the economic circumstances and financial services needs of consumers and communities, with a particular focus on the concerns of low- and moderate-income populations. The CAC complements the FAC and CDIAC, whose members represent depository institutions. The CAC meets semiannually with members of the Board of Governors. The 15 CAC members serve staggered three-year terms and are selected by the Board through a public nomination process."


The Federal Reserve website at https://www.federalreserve.gov/faqs/is-the-federal-reserve-act-going-to-expire.htm, states the following information:


“The Federal Reserve Act of 1913--which established the Federal Reserve as the central bank of the United States--originally chartered the Federal Reserve Banks for 20 years. But in the McFadden Act of 1927, the Congress rechartered the Federal Reserve Banks into perpetuity, and so there is currently no “expiration date” or repeal date for the Federal Reserve.”

The Federal Reserve Bank is the central bank of the United States. The Federal Reserve Bank's funding does not come from United States taxpayers through a congressional budgetary process. The Federal Reserve's funding is explained on the Federal Reserve website at https://www.federalreserve.gov/faqs/about_12799.htm, which states the following information:


"The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury."

The Federal Reserve's income comes from interest on government securities it acquires with no money, as it creates money as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York. The money placed into the primary securities dealer's account as a credit came from nowhere, or in other words, out of thin air. Remember, money has to come from somewhere in order to be placed into any account as a credit. This is true for everyone, except the Federal Reserve System and its purchasing of securities to add liquidity to the banking system.  


Concerning the funding of the Federal Reserve, The Federal Reserve website at https://www.federalreserve.gov/aboutthefed/structure-federal-reserve-banks.htm, states the following information:


"The Federal Reserve is not funded by congressional appropriations. Its operations are financed primarily from the interest earned on the securities it owns--securities acquired in the course of the Federal Reserve's open market operations. The fees received for priced services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations, are another source of income; this income is used to cover the cost of those services. After payment of expenses and transfers to surplus (limited to an aggregate of $10 billion), all the net earnings of the Federal Reserve Banks are transferred to the U.S. Treasury."

The Federal Reserve earns interest on securities it acquires with no money, as it creates money as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York. The money placed into the primary securities dealer's account as a credit came from nowhere, or in other words, out of thin air. Remember, money has to come from somewhere in order to be placed into any account as a credit. This is true for everyone, except the Federal Reserve System and its purchasing of securities to add liquidity to the banking system. The Federal Reserve owns the securities it purchased with no money.


Concerning open market operations, which is the procedure through which the United States Federal Reserve acquires its income and sets monetary policy...the United States Federal Reserve website at https://www.federalreserve.gov/monetarypolicy/openmarket.htm, states the following information:


"Open market operations (OMOs)--the purchase and sale of securities in the open market by a central bank--are a key tool used by the Federal Reserve in the implementation of monetary policy. The short-term objective for open market operations is specified by the Federal Open Market Committee (FOMC). Before the global financial crisis, the Federal Reserve used OMOs to adjust the supply of reserve balances so as to keep the federal funds rate--the interest rate at which depository institutions lend reserve balances to other depository institutions overnight--around the target established by the FOMC."


Concerning the Federal Open Market Committee "FOMC," The Federal Reserve website at https://www.federalreserve.gov/monetarypolicy/fomc.htm, states the following information:

[The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy.


The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.]

Remember, the Federal Reserve's income comes primarily from the interest on government securities it acquires with no money, as it creates money as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York. The money placed into the primary securities dealer's account as a credit came from nowhere, or in other words, out of thin air. Remember, money has to come from somewhere in order to be placed into any account as a credit. This is completed through open market operations, which the Federal Reserve controls...as stated above from the Federal Reserve website, as open market operations are listed as one of the three tools of monetary policy it controls, along with the discount rate and reserve requirements.

Where does the Federal Reserve get money to begin the process of adding liquidity to the banking system by buying securities in open market operations? Through monetizing debt...as debt, credit, liabilities, assets, and balance sheets, are what enable the Federal Reserve to create money. The Federal Reserve utilizes a credit to begin the process of adding liquidity to the banking system. The Federal Reserve purchases the securities through creating money out of thin air as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York. The money placed into the primary securities dealer's account as a credit came from nowhere, or in other words, out of thin air. Remember, money has to come from somewhere in order to be placed into any account as a credit.

The Federal Reserve website PDF at https://www.federalreserve.gov/aboutthefed/files/pf_3.pdf, entitled "Conducting Monetary Policy" in figure 3.3 on page 35, gives the following example of how the United States Federal Reserve conducts open market operations:

[When the Federal Open Market Committee (FOMC) sets monetary policy that, for example, requires adding liquidity to the banking system to spur economic activity, it instructs the Federal Reserve Bank of New York’s (FRBNY) Open Market Desk to purchase U.S. Treasury securities in the open market.


1. decides to reduce the target for the federal funds rate


2. instructs FRBNY Desk to purchase securities

3. purchases securities in the highly liquid market for U.S. Treasury securities from one of the designated, approved primary dealers

4. ensure that the market for U.S. Treasury securities is liquid—in other words, they are always willing to sell securities and always willing to buy securities

5. credits account that the primary dealer’s bank holds at FRBNY in exchange for securities

6. the securities acquired are assets, and the bank accounts credited with the payment are liability items on the Federal Reserve’s balance sheet

7. with the added funds in their accounts at the FRBNY, banks can make more loans to businesses and individuals

8. with increased opportunity to borrow, businesses and individuals are able to purchase mortgages, cars, and other items, boosting spending in the economy]

In the above example, where did the Federal Reserve get the money to pay the primary dealer for the securities? The money came from nowhere. It created the money out of thin air that was placed in the system as a credit to the primary dealer's account at the Federal Reserve Bank of New York. 

According to the above example in "Conducting Monetary Policy" in figure 3.3 on page 35...the Federal Reserve has no money to pay the primary dealer in order to purchase the securities. In essence, the process of adding liquidity to the banking system begins with the Federal Reserve making a securities purchase with no money to begin with, as it creates money out of thin air that is placed in the system as a credit to the primary dealer's account at the Federal Reserve Bank of New York. Remember, money has to come from somewhere in order to be placed into any account as a credit. 

Remember, the Federal Reserve creates money out of thin air and places it in the system as a credit to the primary securities dealer's account at the Federal Reserve Bank of New York, and the process listed in plain sight on the Federal Reserve website as we have just shown you above. The Federal Reserve does not touch tax money...the Federal Reserve creates money out of thin air to add liquidity to the banking system. In the following video from the show 60 Minutes posted to YouTube by CBS, listen to the words of former Federal Reserve Chairman Ben Bernanke who was chairman of the Federal Reserve from 2006-2014, as Ben Bernanke confirms these facts concerning adding liquidity to the banking system. *Note Listen carefully to the words of Bernanke as the truth is in plain sight. The video clip section where Bernanke addresses this is pre-selected and will play automatically. It is located from 7:58 to 8:15.

As I have proven unequivocally, the Federal Reserve, through typing whatever amount it is in need of through some keystrokes, creates the money it needs to purchase the securities in order to add liquidity to the banking system. The money was created out of thin air, as the Federal Reserve has no money to begin with. Think about this…an entity that has no money whatsoever, types some keystrokes to create the amount of money it needs. When you have no money to make a purchase, can you power up your computer and type some keystrokes to create the amount of money you need? Of course you can’t, but the Federal Reserve can when it purchases securities in order to add liquidity to the banking system. Now remember, the Federal Reserve purchases securities by typing some keystrokes to create the amount of money it needs. These keystrokes create the money out of thin air as a credit to the primary securities dealer’s account at the Federal Reserve Bank. Ben Bernanke also confirms these facts in a 2012 college lecture posted on YouTube by the Federal Reserve. Now listen carefully to this video clip, as these words of Bernanke also confirm how the Federal Reserve creates money out of thin air as a credit to the primary securities dealer's account at the Federal Reserve Bank. Also, remember the question I addressed earlier: Where does the Federal Reserve get money to begin the process of adding liquidity to the banking system by buying securities in open market operations? Through monetizing debt...as debt, credit, liabilities, assets, and balance sheets, are what enable the Federal Reserve to create money. Remember, the Federal Reserve creates money out of thin air and places it in the system as a credit to the primary securities dealer's account at the Federal Reserve Bank. This is also addressed by Ben Bernanke in the following video clip, as the truth is in plain sight. The video clip section where Bernanke addresses this is pre-selected and will play automatically. It is located from 19:11 to 20:20.

During this college lecture, Ben Bernanke stated that the Federal Reserve owned "about 800 billion dollars" of securities at the beginning of the financial crisis before they purchased 2 trillion dollars of new securities. Now where did the Federal Reserve get the money to purchase the 2 trillion dollars of new securities? The Federal Reserve created money out of thin air and placed it in the system as a credit to the primary dealer's account at the Federal Reserve Bank. The 2 trillion dollars was created out of thin air. How did the Federal Reserve get the 800 billion dollars of securities that were on the balance sheet before they created money out of thin air to purchase the 2 trillion dollars in new securities. The 800 billion dollars in securities that were on the balance sheet were acquired the same way they acquired the 2 trillion dollars in new securities. They were acquired by creating money out of thin air for the purchase, regardless of when they were purchased. The Federal Reserve purchases securities by creating money out of thin air and placing it in the system as a credit to the primary securities dealer's account at the Federal Reserve Bank. This is nothing new, the Federal Reserve has been doing this for many years, but most people don't know this truth.

Now remember, according to the Federal Reserve website and the Federal Reserve video clips, the Federal Reserve purchases securities through creating money out of thin air and placing it in the system as a credit to the primary securities dealer's account at the Federal Reserve Bank. Now, since the Federal Reserve can create money out of thin air and place it in the system as a credit to the primary dealer's account...then the Federal Reserve can create money out of thin air and place it in the system as a $2,000 monthly credit for every United States citizen eighteen years of age or older. This Federal Reserve "money from nowhere out of thin air to spur economic growth" system can fund $2,000 in monthly government guaranteed universal basic income, which will stimulate the economy and go a long way towards ending poverty in the United States...and eliminate any need for taxpayer dollars to fund this program.

In the above example, the Federal Reserve credits the primary securities dealer's account at the Federal Reserve Bank of New York in exchange for the securities. The securities purchased by the Federal Reserve are assets, and the bank accounts that receive the funds credited from the securities purchased are listed as liability items on the Federal Reserve's balance sheet. With added funds in their accounts at the Federal Reserve Bank of New York, the banks can make more loans to businesses and individuals. Increased borrowing by businesses and individuals results in a boost in spending in the economy. The money to make all of this possible came from nowhere, or in other words, the money to make all of this possible was created out of thin air.

In the above example, it is clear that the Federal Reserve created money out of thin air in order to pay for the securities purchased from the primary securities dealer, through crediting the primary securities dealer's account at the Federal Reserve Bank of New York. The act of crediting the primary securities dealer's account was the creation of money out of thin air, as it is clear that the Federal Reserve creates money out of thin air, which has been proven in the above example given by the Federal Reserve.

In an April 18, 2012 PBS Q&A article at https://www.pbs.org/newshour/economy/does-the-fed-create-money-out-of-thin-air entitled, "Does the Fed Create Money Out of Thin Air...Paul Solman stated the following:

"The two main forms of money created by the U.S. government are currency — about a trillion dollar’s worth out there at the moment — and “Federal Reserves:” electronic blips on the books of financial institutions — mainly banks. The Fed does indeed create these so-called reserves “out of thin air,” as you put it, when it buys securities to increase the money supply."

The Federal Reserve creates money as a credit into an account that the primary securities dealer’s bank holds at the Federal Reserve Bank of New York. The money placed into the primary securities dealer's account as a credit comes from nowhere, or in other words, out of thin air. Remember, money has to come from somewhere in order to be placed into any account as a credit. This makes the Federal Reserve the perfect vehicle to fund $2,000 in monthly government guaranteed universal basic income for all United States citizens.  

For those who may cry inflation concerning increasing the money supply to cover $2,000 in government guaranteed universal basic income for all United States Citizens. Concerning the money supply and its ties to GDP growth and inflation, the United States Federal Reserve website at https://www.federalreserve.gov/faqs/money_12845.htm, states the following information:


“Over recent decades, however, the relationships between various measures of the money supply and variables such as GDP growth and inflation in the United States have been quite unstable. As a result, the importance of the money supply as a guide for the conduct of monetary policy in the United States has diminished over time. The Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System, still regularly reviews money supply data in conducting monetary policy, but money supply figures are just part of a wide array of financial and economic data that policymakers review.”


In other words, the instability of the relationship between the money supply and economic variables such as GDP growth and inflation, has led to the diminishment of the importance of the money supply as a guide for the conduct of monetary policy in the United States. Although there is instability in the relationship between the money supply and economic variables such as GDP growth and inflation, which diminished the importance of the money supply as a monetary policy guide in the United States...the $2,000 in monthly government guaranteed universal basic income will be indexed to inflation as a safeguard for everyone who receives it.


The Federal Reserve issues Federal Reserve notes, as the Federal Reserve website at https://www.federalreserve.gov/faqs/currency_12600.htm states the following information:


"The Federal Reserve Board currently issues $1, $2, $5, $10, $20, $50, and $100 notes. The largest denomination Federal Reserve note ever issued for public circulation was the $10,000 note.


On July 14, 1969, the Federal Reserve and the Department of the Treasury announced that banknotes in denominations of $500, $1,000, $5,000, and $10,000 would be discontinued due to lack of use. Although they were issued until 1969, they were last printed in 1945."


The U.S. Treasury's Bureau of Engraving and Printing (BEP) handles the printing of the money that is going to be circulated. The U.S. Treasury's Bureau of Engraving and Printing (BEP) website at https://www.moneyfactory.gov/about.html, states the following information:


"As its primary function, the BEP prints billions of dollars - referred to as Federal Reserve notes - each year for delivery to the Federal Reserve System. The Federal Reserve operates as the nation's central bank and serves to ensure that adequate amounts of currency and coin are in circulation. The BEP does not produce coins - all U.S. coinage is minted by the United States Mint. The BEP also advises other federal agencies on document security matters. In addition, the BEP processes claims for the redemption of mutilated currency. The BEP's research and development efforts focus on the continued use of automation in the production process and counterfeit deterrent technologies for use in security documents, especially United States currency."


There is no gold standard in the United States, which makes this the perfect time for universal basic income in the United States. Concerning the gold standard in the United States, the Franklin Roosevelt administration...and ultimately, the Richard Nixon administration, ended the gold standard in the United States. These actions made it possible for government guaranteed universal basic income in the United States, without cost to the American taxpayer to cover the monthly disbursements. Back in the day, US dollars had to be backed by gold, which covered the value of the US dollars in circulation...otherwise the US dollars would be intrinsically worthless. The Richard Nixon administration followed ending the gold standard with ending the Bretton Woods fixed exchange rate system, which was based on the gold standard...and replacing it with a floating exchange rate system, which allowed exchange rates to float against a devalued United States dollar. These systemic moves were made by the Richard Nixon administration because of a surplus of US dollars that were in circulation, which devalued the United States dollar... as there was not enough gold to cover the value of those surplus US dollars in circulation. The Nixon Administration's systemic changes allowed people to spend those surplus US dollars, although there was no gold backing those surplus US dollars...which proved unequivocally that US dollars could be spent by people although there was no gold backing those US dollars...as the Nixon administration's ending of the gold standard made US dollars intrinsically worthless, but people still spent US dollars, as they had purchasing power without any gold backing them. This resulted in “fiat money,” which is money that is made to be legal tender by the government, even though it has no gold backing it. These events opened the door for the possibility of a monthly government guaranteed universal basic income in the United States, without cost to the American taxpayer to cover the monthly disbursements. The Federal Reserve Act can be amended to allow Federal Reserve notes to be printed and circulated, to cover $2,000 in monthly government guaranteed universal basic income for every United States Citizen at least eighteen years of age. This can be done without touching the collateral based system that exists today. This information and more is covered in detail in the upcoming broadcast and the bill, which will enlighten readers on this important topic.


Now is the time for universal basic income in the United States