This post is a response to a friend who suggested that JFK fought the Fed by printing US Notes:
My understanding is that US Notes were in circulation from 1862 until they were retired in 1971. There was a printing in 1963, but also in 1953 and 1928, in order to maintain the quantity already in circulation. There’s no evidence I’ve found that JFK directly attempted to increase the amount in circulation. (http://en.wikipedia.org/
As I understand it, and I have looked at the balance sheet of the Fed to verify it (http://www.federalreserve.gov/boarddocs/rptcongress/annual07/sec2/c3.htm#nl7), any interest that the Fed gets from the bonds backing the FRNs above its operating costs is returned to the Treasury. The main source of the compounding US Government debt is not from the Fed printing the notes, or even holding the bonds backing them. Rather it’s that the US Government is printing interest-bearing bonds to cover its operating costs and selling them on the open market to foreign and global banks, foreign central banks, used for reserves, etc. The responsibility lies with the US Government; it’s not a Fed problem. There is however the complicating factor that the Fed sets the interest rates.
In my opinion, just getting rid of the Fed doesn’t address the core problem, which is that the US Gov is using bonds to pay for its budget, and requiring interest bearing notes as banking reserves. The most intelligent reform I’ve seen is http://nesara.org/ which suggests and offers a bill that uses a basket of interest-free US Notes and some gold/silver as the backbone of the economy. It would also change lending laws to remove compound interest from loans, only allowing fees to cover the actual costs of lending. This would basically change the banking and finance system into a highly regulated public utility, which I think it should be. This is “our” money system after all.