The National Economic Stabilization and Recovery Act

Monetary and fiscal policy reform that will double the standard of living for every American
within one generation and restore economic and social prosperity across the land.

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General Questions
The Federal Reserve System

  1. When was the Federal Reserve Act enacted by Congress?
  2. Is the Federal Reserve Act Constitutional?
  3. What happens to the interest accrued every year by the Fed?
  4. How does the Fed control the money supply?
  5. The internet is full of confusing information regarding the Federal Reserve System. Where can I learn more?
  6. Should the Federal Reserve Act be abolished?

When was the Federal Reserve Act enacted by Congress?

1913. Same year, by the way, that the Sixteenth Amendment and Seventeenth Amendment were both supposedly ratified, and Rule 2 of the Federal Rules of Civil Procedure was proposed to merge the courts of law and equity. Quite a year, huh?


Is the Federal Reserve Act Constitutional?

Good question. Much of the debate in Congress over Lincoln’s Greenbacks was whether Congress had constitutional authority to print paper currency. The debate still rages today. However, several United States Supreme Court decisions essentially rendered the discussion moot.

Nonetheless, is the Federal Reserve itself constitutional? Congress certainly has power to coin and regulate the value of money. However, does that authority include delegating those duties to another institution such as the Fed? The Fed, although ultimately controlled by Congress, nonetheless is an entity existing outside the executive, legislative, judicial branches of government. This existence is the core of the long and heated debate over administrative agencies. This debate continues to rage today, but several Supreme Court decisions have rendered the discussions moot.

This is not say the Supreme Court is correct, only that the Court has quashed the debate. However, NESARA bypasses the Court and restores Constitutional money as well as restoring to the Treasury the duties to regulate the value of money .


What happens to the interest accrued every year by the Fed?

Depends upon the Treasury. Like any corporation, the Fed gets to spend profits throughout the year (reportedly, Christmas parties are quite extravagant), but most of the excess is recycled back into the Treasury.

However, the point is largely academic. The debt owed to the Fed is mere bookkeeping. NESARA will eliminate the facade and concern over interest paid. That is, once NESARA becomes law, the debt “owed” to the Fed is effectively cancelled.


How does the Fed control the money supply?

The Fed uses three mechanisms to implement monetary policy.

  1. Since 1980, the Fed has established the reserve requirements for all deposit institutions, not just member banks.
  2. The Fed sets the discount rate , a key interest rate the Fed charges member banks and banks charge each other to borrow additional reserves.
  3. The Fed also buys and sells government securities through its open-market operations.
Changes in these variables, to a greater or lesser degree, result in increases or decreases in the nation’s total supply of currency and credit. Most changes occur through open-market operations conducted exclusively at the Federal Reserve Bank of New York.

The problem with these three mechanisms is they are basically step functions (square-wave like). These mechanisms create and produce knee-jerk responses rather than smooth transitional feedback as in a typical feedback control loop. Hence, the tendency toward “booms” and “busts” and the rough ride in between. Imagine trying to control your car with the same type of step function response from the accelerator and brake pedals—you’d have whiplash every time you traveled. The reason for these boom and bust cycles is that the Fed is provided no lawful mandate—or a goal—of how to control the money supply. Within strict respect to these three mechanisms, creating money “out of thin air” is not the problem. The problem is not having a smooth control mechanism to regulate the money supply. Lastly, Congress has deemed that having a slightly inflationary money supply to be “politically expedient.” In other words, an inflationary money supply supports Congressional legal plunder.


The internet is full of confusing information regarding the Federal Reserve System. Where can I learn more?

What a great attitude! If only more people yearned for the truth rather than chasing emotionally exhausting rabbits!

First, this web site should answer many of your questions. Second, if you’d like to read more straight from the “horse’s mouth” then obtain the many publications issued by the Fed. Further information is available on this web site: Federal Reserve Banks .


Should the Federal Reserve Act be abolished?

If not abolished, at least strongly amended, and that is much of what NESARA is all about.


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