Does the Federal Reserve actually have a Gold reserve?

Question

We all know the Fed is a privately owned bank that sells the US it's own money with interest when congress could actually print it's own money free of interest. So why would we pay a big bank for money we can make on our own with legitimate back-up?

Answer 1

Believe it or not, Yes, the Fed does have a gold reserve.

Check out the Federal Reserve balance sheet and you'll see they have about $11B in gold stock. (Ref: http://www.federalreserve.gov/releases/h41/Current/ ).

As a side note, the Federal Reserve bank of New York reportedly has the largest gold repository in the world, even more than Fort Knox. It holds approximately 5000 tons of gold. However, they are just caretakers of this gold for other countries(Ref:
http://en.wikipedia.org/wiki/Federal_Reserve_Bank_of_New_York )

- The statement that the Fed is privately owned is not wholly correct.The Federal Reserve System is organized with a government agency at the top (the Board of Governors), and branches beneath them that resemble private corporations. (http://www.federalreserveeducation.org/fed101/structure/ )

The Board of Governors are all appointed for 14-year terms by the president and confirmed by congress. It operates per it's charter and laws set by congress. it is overseen by congress. There is no structure or mechanism for private ownership at this level. Board members are forbidden by law to have any economic interest in a private bank.

The 12 branches, however, are organized similar to private corporations.

- Also, at the end of the year, the Federal Reserve gives all profit (after expenses) to the Treasury. All that interest they get from T-Bills? Most of it is returned.

Answer 2

First of all, the Fed is not privately owned. I don't know why you think "we all know" that because it's just wrong. The Fed is part of the government, but is seperate from the U.S. Treasury by Congressional mandate. The Fed is just the U.S. Central Bank (all governments have one).

Second, the Federal Reserve does have a Gold reserve, but it is not what backs up your currency. What I mean by this, is that your dollar does not correspond to a specific amount of gold in a bank somewhere. It in fact corresponds to nothing, it is just a placeholder in our economy. The Fed holds gold as an asset.

Congress can't print money free of interest because interest doesn't effect money (at least how you phrase it there). If you instead mean that Congress can print money free of inflation, you are again wrong. Should Congress decide to print a bunch of money (which they can't directly do anyway), it would cause inflation. This is because each dollar is now worth less since there are more dollars out there (you're splitting up the pie into smaller pieces). I know this seems odd since money isn't backed up by anything "real", but basically think of all U.S. currency as a piece of the total U.S. economy. A dollar is thus worth 1 one trillionth of the U.S. economy (assuming there are 1 trillion U.S. dollars out there). This is all very simple, but just go with me. If Congress then prints another 1 trillion dollars, your dollar is now worth 1/2 one trillionth of the U.S. economy. Thus, your dollar is worth less, which is inflation.

The reason you can't just make up your own money is because no one can trust that your money is actually backed up. Unless you want to carry around all your gold bricks with you everywhere to say your "money" is backed up, no one is going to believe you. And even if you did carry around your gold, people wouldn't know if you were just giving everyone your "money" and saying each "dollar" was one brick, when in fact you had printed 100 times more "dollars" than bricks you actually have. There would be no trust, so you can't just make up your own money.

Hope this helps clarify some things for you.

Answer 3

Paper money is just like a note when you have to sign to borrow money. It is actually worth less than the pennies. With the pennies, you are holing some metal which could worth exchanging for something. With the note issued by the government, which is the paper money, we are carrying just something that the government guarantee will pay back the value with gold.
It used to be that the government could only print out the amount of money equivalent to the worth of gold it has stored so in case all the paper money is turned for an exchange, there is enough gold to pay. I don't know what the policy of printing paper money is now.

Federal reserve is the government. So actually the government is printing the money and they charge interest to who borrowed from it. When the government need money, they usually sell bonds and pay interest to who ever buy the bonds (in other words - loan the money to the government).

Answer 4

Everything you say is true. I have heard many theorys behind this foolhardy business. Ther is, for all intents and purposes, no Gold to back up anything. If you would e-mail me I can give you the name of a man whose website you can visit to learn more than you ever wanted to know about the Fed.

Answer 5

Surely you've heard of Fort Knox.