Tuesday, January 10, 2012

Government Funny Money

The headlines today say that the U.S. Federal Reserve made $77 billion in profits last year, which it promptly turns over to the U.S. Treasury. So let me try to get this straight. The Federal Reserve prints the money which it then invests in government treasuries and government entities like Fannie Mae. These purchases pay the Fed interest on these investments. The interest collected by the Fed is then turned back to the government as a profit. There is some circular logic behind this that I just can't get my feeble non-MBA brain around. And I can't even get Medicare to reimburse me if my billing sheets are off by one minute.

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