Stewart speaks on Federal Reserve
Published 3:00 am Thursday, June 25, 2015
The workings of the Federal Reserve may be shrouded in mystery for many Americans, but Troy University Professor Robert Earl Stewart offered insight about the agency and its purpose to members of the Pike County Republican Women.
Stewart, who has been teaching at Troy for 48 years, explained to PCRW meeting attendees on Wednesday that the purpose of money is to spend it. The question, he said, is deciding whether to spend that money now or later.
“It doesn’t have to all be spent now,” Stewart said. “There are other things you can do with you money besides spend it now for purposes of spending it later.”
Stewart also explained that there were several misuses of terminology when it came to money matters, definitions of money and the definitions of business.
“If you made money, the government is going to come after you for counterfeiting,” Stewart said. “You do not ‘make’ money. You earn money.”
Stewart also explained the misuse of the word “money.”
“Money is the currency and coin that you carry around in your billfolds or purse or that you put under your mattress or you put somewhere, They are the deposits you have in the bank with which you can write checks. Most of your money would not be on your person, it would be in the bank. The definition of money is the amount of demand deposits that exist in the bank plus the amount of currency or coin that is circulation.”
The Federal Reserve was created in 1913, and Stewart said contrary to popular belief, the federal government does not own the Reserve. The members of the Federal Reserve own it, since they have bought stock in the Reserve.
“When you talk about money, the federal government technically has nothing to do with money,” Stewart said. “That is a big misconception. The federal government can come up with money or fund its operation two ways: they tax you and they borrow it. That’s the only two ways the federal government is going to obtain money to spend it … The handling of money, the printing of currency and the control of the money supply is in the complete hands of the Federal Reserve system.”
Stewart also debunked a popular political phrase that “the Federal Reserve needs to be audited.”
“The Federal Reserve has been audited every year that it has been in existence by the office of the inspector general. It has hired private independent firms to do the internal audits,” Stewart said. “It makes good political rhetoric to tell the public ‘well, the federal reserve needs to be audited,’ because very few people bother to check if its been audited before. You can look up and check and see income statements and all their financial statements online.”
Another myth Stewart busted was the idea that foreign countries, specifically China, own the country.
“With all the stuff you’ve heard on the media, let’s clear that up. The international interests, China, they’re not the largest holders of our federal debt like some of our news media report,” Stewart said. “The biggest holder of our federal debt is your Social Security system. They own about $2.7 trillion of securities that the federal government issues. The second largest holder of state debt is the Federal Reserve System. That’s the two largest owners, all of the foreign countries own about 22 percent of the debt.”
Stewart said the Federal Reserve controls the amount of money in circulation for the United States and often will buy or sell securities, but the entries are nothing more than numbers in a computer.
“Most of the reserves in the banking system today are computer entries,” Stewart said. “That’s all they are. It’s fictional. It’s just a number that appears on a computer. When the Federal Reserve issues that check to buy the security out on the market, the amount of money on in circulation goes up. If the transaction reverses itself, there is less money our in circulation.”
With the nation focused on the rising total of the national debt, Stewart said the Federal Reserve is under pressure by governmental officials to greatly expand the amount of money in supply.
“I am a strong believer in the Federal Reserve, but I believe the board of governors have succumbed to the pressures of our governmental officials and have gone out on a deep, treacherous limb here in the last few years because they have greatly expanded the money supply,” Stewart said. “They have expanded the money supply because they have bought over $2 trillion worth of federal government securities. You will hear this propaganda that interest rates are low because we want businesses to come back. Interest rates are low only for one reason, to make it easier for the federal government to borrow money. That’s it. The federal government is in no position for interest rates to go up. If they did, we would wreck the budget.”