I read yesterday that the Fed is considering a policy of “quantitative easing”. In no article I read did anyone discuss the actual mechanics of what is involved in this.
The Federal Reserve, our nations central bank, can write checks in any amount to anyone. The money for the purchases is created in the act of writing the check.
The “System”, itself–which is really a cartel–consists in banks WHOSE NAMES WE DON’T KNOW WITH CERTAINTY, as I understand the issue. Take JP Morgan Chase, which is certainly one of the members (a special stock is issued to member banks, which is non-transferable and non-negoiable; in essence, it simply represents a ticket to the party). They are a bank which makes investments in many things. They buy overseas securities, they fund smaller banks, they invest in industries, and all the other things banks do. Their charter may be slightly limited in some ways, but that is my understanding.
Quantitative easing must necessarily consist mainly in what are called Open Market Operations, which consist in the Fed buying securities (or whatever) issued by someone. They bought up a bunch of Euros, when Europe was in the worst throes of their Greek crisis.
When the Fed talks about quantitative easing, what they mean is, in effect, giving money to banks like JP Morgan Chase, to be used however they want. JP Morgan prints some bonds, say, then the Fed buys them. Both sides are in effect printing money.
So if they pursue their recently stated policy, then they will give money to very large banks, which those banks can then use however they want. In theory, they could lend it to Americans needing capitalization, which is why some fear inflation. This money wasn’t there, now it is there, so there are dollars chasing dollars, which decreases the value of each dollar.
But they could equally go buy up some African country, or buy gold, or short Wall Street, or whatever they want to do. There is, as far as I know, no regulation on this, outside of the normal restrictions on normal trading activity.
So, in effect, JP Morgan votes JP Morgan free money. If things work out, they invest it, make a handsome return, then pay the Fed back. If they lose it, they ask the Fed for a “cash infusion” to perk things back up, since they are “too big too fail.”
This system is fundamentally fraudulent and undemocratic. It is not Capitalism at all, since they neither invented anything nor saved any money up. It could be argued it is in fact a type of Imperialism, in which countries and companies are not invaded, but who nonetheless transfer their property and liberty to someone who did nothing but write them a check from money they created for themselves.