25

They shutdown because they didn't have a budget, and the law limits what a US Government agency can spend if they don't have a budget. They can provide certain essential functions: air traffic control, border security, food inspections, military,...; but not other non-essential functions: national parks, department of education, large portions of NASA. This ...


25

As per U.S. Code › Title 31 › Subtitle IV › Chapter 51 › Subchapter II › § 5114 ("31 U.S. Code § 5114 - Engraving and printing currency and security documents") (b) ... Only the portrait of a deceased individual may appear on United States currency and securities. ... So, a President cannot put themselves on Money, while they are alive. Now, let's ...


21

The other answers address the legal reasons for the shutdown, so I'm going to address this part of the original question and the misconception about the role of the Federal Reserve. I understand that the current Federal Bond Buying program (80 Billion a month) are allowing a fixed supply of money to the American Government. This is incorrect. The Federal ...


13

Inflation When the Federal Reserve uses quantitative easing, it adds more money to banking ledgers and removes investment opportunities. The amount that they can do is limited by the reality of the economy. Too much and they cause inflation. Not enough and there is deflation. While nominally under the control of the Fed, in reality the amount is ...


11

Having funds available isn't the problem, they cannot spend money that hasn't been authorized by Congress under the Antideficiency Act Congress's authority on this matter derives from the Constitution. Article I, Section 9, Clause 7 imposes accountability on Congressional spending: No money shall be drawn from the Treasury, but in Consequence of ...


10

The appointments clause of the US constitution gives the president the power to appoint "Officers of the United States". Unlike the Bank of England, which was a private organisation that was later nationalised, the Federal Reserve was created by an Act of Congress, and the Board of Governors is appointed by the President, under the constitutional power ...


4

To answer the one sentence summary question, I would first correct and clarify not the simplifications made in the detailed summary, but the inaccuracies in the detailed summary. First, be careful to distinguish between "Fractional Reserve Banking" and "Central Banking, the Money Creation, and the Balance Sheet." Fractional Reserve Banking was defined in ...


3

The Federal Reserve (or at least the NY branch) has three classes of directors. According to their website, Class A directors are elected by the member banks to represent the banks, Class B directors are elected by the member banks to represent the public, and Class C directors are appointed by the Federal Reserve Board of Governors to represent the public. ...


3

You're correct. The government technically can never run out of money because it runs on the fiat standard Fiat currency is legal tender whose value is backed by the government that issued it. The U.S. dollar is fiat money, as are the euro and many other major world currencies. This approach differs from money whose value is underpinned by some ...


3

The Federal Reserve has been conducting Open Market Operations for many decades; the law was passed in 1913. Open market operations (OMOs)--the purchase and sale of securities in the open market by a central bank--are a key tool used by the Federal Reserve in the implementation of monetary policy. Historically, the Federal Reserve has used OMOs to ...


3

There's nothing in the Federal Reserve Act that I can see that requires the Federal Reserve governors or the chair to act without influence from the president or anyone else. Rather, the "independence" of the Fed describes the mechanism of their selection and removal. That is, it rests on the fact that the board members may only be removed "for cause." ...


2

Many of the arguments for and against the Federal Reserve have to do with it being separate from the Federal government itself. The Fed (Federal Reserve, NOT the Federal government) was created as an independent entity so that it would not become politicized and have to bend to the will of politicians. There is something to be said about the inefficiency of ...


2

There seem to be very few restrictions. 12 USC § 241 - Creation; membership; compensation and expenses: In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, ...


2

Can the Fed choose not to claim securities that they are holding, that are due? No. The US Treasury is bound to pay the interest due on the notes on a specific date. If the Treasury fails to do so then it is in default. The interest paid is an asset of the Federal Reserve bank and must be accounted for as such Is this allowed by their accounting or ...


2

Two words: Moral Hazard. There is a story that says Tim Geithner "wanted it to hurt," and forced a liquidation at $2 instead of $4/share, specifically in order to send a signal.


1

This is an excellent question and it speaks to the fact our media and our schools teach and speak to this topic as if we did not have the worlds' reserve currency. Also, we have been living in a time period where we are dependent on central bank interventions. The world hangs on every pronouncement of the Federal Reserve. So what? So we have the worlds' ...


1

QE was FED buying medium and long-term bonds. The effect of that was to reduce the interest rates of long-term bonds. The question's premise was that this was done to help banks, but it wasn't. It had the opposite effect. This can use some context. After the financial crises, FED lowered the short-term interest rate (FED primary job is overnight ...


1

It is a closed board so there is no real way to find out the particulars. But this board of advisors are not like a congressional committee. In congress many of the members have an adversarial relationship and agendas that often are quite contradictory. That is not the case here. The board members are generally friendly with goals that align with each ...


1

If the Treasury chose to pay some debt holders and not others, would the ones who got paid have any legal recourse due to the government actually being in default to some of its debtors? No. In order to sue in the federal courts (which would have exclusive jurisdiction over a lawsuit related to unpaid Treasury bonds), you must have standing to sue ...


1

This answer depends greatly on who you ask. Some may say the "fog of war" made it difficult to know whether to bail or not to bail. At one point in the "crises", the prevailing thought could have been to go "all no bail", but then seeing Lehman collapse threw cold water on their resolve to not bail the others. In the Great Depression there were certain ...


1

There are already some good answers to the original question so I will just clarify one thing: When government intends to spend an amount of money they typically must acquire it by issuing bonds to a foreign country or by issuing bonds to the Federal Reserve for the cash that it prints. This inevitably ties money creation by the central bank to ...


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