A diary currently on the rec list is an embarrassment to this site for its description of the federal reserve system and links to conspiratorial sites that are essentially describing the Fed as either a big Jewish conspiracy or some sort of whore that bleeds us all dry. The diary is wrong on both accounts and is also factually deficient on other claims made throughout the diary. In essence Fed Diary is an ill informed conspiracy theory hack job that should be removed from both the rec list and the site.
Here is a relatively simple explanation of how the federal reserve system works. This link also contains a a copy of a recent Fed balance sheet (which are released every year contrary to popular belief) that clearly shows that
A little known fact: Did you know that we are paying the Federal Reserve over 800 billion dollars a year in interest alone?
this quote from the above linked diary is a load of shit. If you look at the Fed's balance sheet you can clearly see that their assets are approximately $2.2 trillion and thus to earn that $800 billion cited above, they would have to be getting an interest rate of around 30%. IN fact, the Fed only "owns" a total of about $500 billion in treasuries and current yields dictate that at most (ie if those were all 30-year term) they would receive somewhere in the neighborhood of $250 MILLION in interest a year. Also, the fed acquires its treasuries through the open market (ie it buys them from dealers, not the government) in order to increase the amount of money banks have to lend (ie lower rates), it sells these securities when it want to sop up extra money and slow down inflation (ie raise rates). This is so elementary and accepted by anyone with even basic knowledge of our financial system that to openly create disinformation or link to conspiracy sites makes everyone who posts on Kos look bad.
As to why the Fed keeps much of its operations secret (much to the dismay of conspiracy theorists), it is pretty simple, publishing who needs an overnight loan from the Fed WILL create a run on the bank, which can lead to collapse and loss for many for no real sound reason. Banks need to borrow from the discount window for a host of reasons, most of which have absolutely nothing to do with their solvency. Thus, secrecy is an important tool that is necessary for the success of the central bank. Finally, any public (ie government) involvement (besides the appointing of the Fed Board) in interest rate decisions will create an unstable and politicized economy that will be terrible for investment and will likely lead to a mass exodus of buyers for our debt because involvement of government in interest rate decisions will not be made with an eye toward currency or economic stability, but towards re-election.
I am calling on the rational Kos community to un-rec the above cited diary or to at least rec this one so that we can show that conspiracy theories don't fly at here.
Update: Warren Buffett agrees with me.