Private Federal Reserve Bank is not needed as a lender of last resort.
by tonytran2015 (Melbourne, Australia).
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(Blog No. 176).
Private Federal Reserve Bank is not needed as a lender of last resort.
#interest to Federal Reserve Bank, #lender of last resort, #gold standard, #fiat currency
1. The private Federal Reserve Bank of USA.
In the 1907, there was a crisis when many banks having taken GOLD BASED money from depositors did not have enough at counter for their customers to withdraw. A conglomerate of PRIVATE banks were then formed by private bankers to lend gold based money to those banks in crisis to prevent panic by the public. After that, in 1913 the US Government set up that conglomerate as a lender of last resort and it is named Federal Reserve Bank of USA.
“A financial crisis known as the Panic of 1907 was headed off by a private conglomerate (led by J. P. Morgan), who set themselves up as “lenders of last resort” to banks in trouble… the Federal Reserve System was created by the Federal Reserve Act of December 23, 1913, … to serve as a formal “lender of last resort” to banks in times of liquidity crisis” [1]
2. The abolishment of convertibility of US dollars to gold.
After President Nuxon removed the gold link from US dollars in 1971, [2] that money has become purely fiat money.
For that reason, the Treasury of the US Government can be the lender of last resort as it can PRINT AS MUCH MONEY AS NEEDED to supply all banks in ctisis. There is thus no necessity for any private bank to be a lender of last resort.
3. Conclusion.
For some unknown reason, the US government still lets the private Federal Reserve Bank of USA to be the lender of last resort and still pays interest to it. This creates an unfair interest burden on US citizens (England also has a similar private Bank of England operating there.).
On the other hand, the central banks of Australia and other countries are properly owned by their respective nations.
References:
[1]. https://en.m.wikipedia.org/wiki/Federal_Reserve_Bank
[2]. https://en.m.wikipedia.org/wiki/History_of_the_United_States_dollar
Added after 2018 Oct 16:
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