Federal Reserve: the
$1.4 trillion seigniorage debt to the US Treasury
and why do we need
to audit the accounting of money creation
by Marco Saba,
IASSEM, July 17, 2016
"In a
departure from Swiss GAAP FER, no cash flow statement has been
prepared."
- Swiss National
Bank, page 158 of the 2015 Report
" Taking account of the ECB’s role as a central bank, the
Executive Board considers that the publication of a cash-flow
statement would not provide the readers of the financial statements
with any additional relevant information. "
- European Central Bank Annual accounts 2015, page A27
"Federal Reserve notes, or currency, are a liability of the Federal Reserve."
- International Journal of Central Banking, March 2015, p.244
The American public
is being asked to pay more and more taxes to the IRS, with
tremendously stiff penalties if they fail to comply. In fact, to
encourage people to rat on those who do not pay their taxes, the IRS
offers rewards to those who report this sort of tax fraud.
HOWEVER, the biggest
tax fraud of all is something that very few people are aware of. In
this article I want to make this tax fraud very explicit.
The biggest
liability that is recorded in the balance sheet of the Federal
Reserve is: Currency in circulation, As of July 13, 2016, it is equal
to $ 1.4 trillion .
That is:
$1,464,626,00 millions, as you can see and check here:
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
In 2007 the US
scholar Willem Buiter - currently Global Chief Economist at CITI
bank in New York - wrote in a paper titled Seigniorage:
"The
solvency constraint of the Central Bank only requires that the
present discounted value of its net non-monetary liabilities be
non-positive in the long run. Its monetary liabilities are
liabilities only in name, as they are irredeemable: the holder of
base money cannot insist at any time on the redemption of a given
amount of base money into anything else other than the same amount of
itself (base money)."
- (pag. 20, Willem H.
Buiter (2007). Seigniorage. Economics: The Open-Access,
Open-Assessment E-Journal, 1 (2007-10): 1—49.
He was wrong.
The liability nature
of the currency in circulation is not to the holder of the currency -
i.e. the public - but to the US Department of Treasury as seigniorage
due for the use of the sovereign power of money creation.
Seigniorage is the
sovereign right of the government to the profits coming from the
issuance of the nation's fiat money – i.e. the difference from its
face value and the cost of production. Fiat money in this case is the
US dollar. It is a liability for the bank but an asset of the US
Treasury. It must be recorded by the Treasury's books as "seigniorage
on currency in circulation". BUT CURRENTLY IT IS NOT.
The Treasury DON'T
account for an asset equivalent to the FED liability of 1.4 trillion,
hence in a certain sense this liability is "fake" because
it is unresolved on the side of the Treasury books (the FED don't pay
to the Treasury the 1.4 trillion). Until the US Treasury discover
this credit against the Federal Reserve he is at a loss of 1.4
trillion on his budget.
But wait, here we
are speaking just about BANKNOTES - what the FED calls currency in circulation. What about the trillions the FED
issued in electronic currency ? What about the trillions the US banks
issued when they made loans and bought assets ?
There's a big black
hole in the US Treasury because they misunderstand the management of
the sovereign right of segniorage. And if they leave this sovereign
right to the banks, then you will end up having banks as sovereign in
town ! And that's exactly what's happening in the land of the
free...bankers.
THE OPPORTUNITY
AMERICANS HAVE to get out under the unfair tax burden that government
have illegally place on them is to ask loud and wide for an external
audit of the process of money creation and accounting by the banks,
both the central and the commercial ones.
Two open-eyes
documents on the issue of money creation in commercial banks are here
for further study:
- Torfason, A. -
Cash flow accounting in banks – a study of practice, Göteborgs
University, 2014
- Werner, R. - A
lost century in economics: three theories of banking and the
conclusive evidence, International Review of Financial Analysis, 2015
http://desiebenthal.blogspot.ch/2016/07/aveux-le-conseil-federal-monnaie-pleine.html
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