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what is the sense of earning a profit on government securities and returning it to taxpayers?

It's a vestigial structure left over from the evolution of modern reserve banking. Back in the bad old days before modern central banks, private banks would band together on an ad hoc basis to guarantee liquidity and thereby prevent bank runs. Back in those days, the reserve banks (plural) were private institutions with their own balance sheets and membership criteria. Of course that didn't quite work, and after a couple of nasty banking panics with associated general industrial depressions, the sovereign clamped down and nationalised the reserve banks, creating the modern central bank system.

The institutions were never really streamlined, in no small part because obfuscation of the fact that the central bank is a part of the public sector makes regulatory capture easier for the people the central bank is supposed to regulate.

What kind of debt is that?

One that is operationally meaningless but politically useful for certain parties.

What is exactly monetized?

"Monetising sovereign debt" is just bankerspeak for issuing money directly in the form of legal tender, as opposed to issuing money in the form of sovereign bonds.

It's another vestigial term, from back in the bad old days of the gold standard, where governments had to borrow to fund deficit spending. When they borrowed from their central bank, they were said to monetise their debts.

What can the big bankers like Rothschilds say to the Fed?

In principle, nothing. In the real world, "when you retire from the Fed, we may have a lucrative consultancy for you that will not unduly strain your mental capacity. Assuming we can still afford to pay for lucrative sinecures when you leave office <wink, wink; nudge, nudge>."

How many are supposed to know that in all respects?

One might expect central bankers to understand modern central banking. One would be wrong, though - central banks the world over are stuck in the conventional wisdom of the gold standard. Economists are supposed to understand central banking too, but of course most of the people who style themselves economists prefer to model a magic Ricardian pony world that contains neither money nor banks.

Can't the public be informed better and more uniformly?

Historical experience suggests that the answer to that question is "no."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Oct 15th, 2010 at 07:38:45 AM EST
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