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Federal Reserve To Use Internet For Money Transfer
An anonymous reader writes "According to the New York Post, the Federal Reserve (i.e. Alan Greenspan and Co.) is going to change the way that it transfers money between banks so that transfers now take place over the internet instead of via a private banking network. They aren't specifying the types of security measures that will be used (security through obscurity?) Am I the only one who thinks that this is a very bad idea? Might a DDOS attack on the Fed's computers bring down the entire banking system?" The banks have put some thought into security.
First transaction
VPN and PGP encrypt. That's over the internet, but pretty damn secure - I work in the healthcare industry and PGP is pretty standard, usually over a VPN or secure FTP.
Shocking. To think they'd use the INTERNET instead of analog phone lines!
what makes you think "using the internet" equates to "having a server completely open to the public with no backup processes"? in the UK you can do your taxes online, I guess if they get DDOS'd no one will have to pay?
I'm more worried about another slammer-type attack that floods the Internet.
:)
Besides, encryption and such are fine, but just keeping everyone else off your network (the old method) makes the security model much simpler.
The more access there is, the more possible attacks there are. Which means that more attention has to be spent testing and checking these systems.
Which means more jobs! So it isn't all bad.
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Close, but no cigar. What gives money its value is our collective agreement to accept it in payment. When you come down to it, we're really bartering, but instead of having to have goods to swap, we swap something easy to carry and of a known (if artificial) value. Money is just an abstract representation of goods that simplifies commerce.
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Much has been made of the evil of monopolies on Slashdot (from Microsoft dominating the desktop to Apple regulating music formats).
The Federal Reserve is a private corporation operated and owned by private banks and given special monopoly existence by congress back on Christmas Eve in 1913. This is a very scary monopoly that has (perhaps unconstitutionally) usurped Congress's power to coin, issue, and regulate the American money supply.
While I won't attempt to proffer all of the observations (probably labeled as "tinfoil hat theories" because neither political party wants to call them into question) I will point out a very human readable web page that highlights some of these issues in a phone call to the Federal Reserve Bank of San Francisco.
I realize that the Internet is a public network and that the Fed has every right to switch its internals over to using it. But it will likely cause two bits of controversy.
First, they are a private corporation so if the receive a private set of Class A IP addresses or other special treats it will expose some flaws in the public vs. private issues of control of the internet. (This is probably of more interest to slashdotters.)
Second, The Fed may be exposing tremendous auditability and accounting problems that don't exist on the private network. While their books and procedures are publicly audited, they have simply "lost" money (both physical and transactional). The paranoid would suspect that perhaps they've been inspired by the Diebold voting systems which can apparently cause votes to simply come and go in an unaccountable manner. The less paranoid should still see that this change will need a great deal more publicly auditable security to keep robber barrons from simply coming up with a new means of screwing over those of us who rely on cash & credit.
I can understand the need to migrate from old proprietary technolgies to new ones, but this migration should be watched VERY closely and where possible should be opened up for further audit and regulation.
The Federal Reserve is a system set up by capitalists (banks) for capitalists (banks).
Wrong. The Federal Reserve System was set up by an act of Congress December 23, 1913. The Fed is a public/private organization with a complex structure that makes the Board of Governors Federal employees (like Mr. Greenspan) and the staffs of the regional banks private sector employees. Your questions about what it does will be answered somewhat here.
Instead of giving the money to individuals (which is the way it should be done in a truly free system), they pass it out to their buddies in the banking system who make a profit by leasing the money to individual borrowers.
How is this crap insightful? The Fed makes short-term loans to individual banks. These loans are at low interest rates but must be paid back quickly also. Banks also deposit cash reserves with the Fed. There is no 'giving' of money. Even if there were, that's a silly sentiment. "Let's power the economy by giving away worthless paper currency to everyone." It would be worthless because everyone had it in equal measure without any value being attached.
The Federal Reserve also has a very powerful way of making a shit load of money: inflation. They just print a lot more money that they would be allowed to print if the system were regulated by just laws. Who or where does all this money goes to? I have no idea.
Yes, you don't have any idea. You're completely clueless about our financial system. You probably aren't aware that at any moment, there are a few hundred billion in coin and currency in circulation (600 bil or so in 2003). The US GDP in 2003, for instance, was something on the order of 11 trillion dollars. Search that document, it's there. Please note that we aren't even considering bank deposits, stock ownership or any other securities, like bonds.
An intelligent person might come to the conclusion that most money doesn't exist as currency at all. It's only written on paper or stored in a computer somewhere. You'd be right if you came to that conclusion. Therefore, the Fed printing 100 billion more of $100 bills would have a negligible effect anyway.
There's an even more compelling reason why your statement above is stupid. The Fed doesn't *GIVE OUT* money. The funds are either loaned in the short term, or given out of the member bank's deposits to the Fed. Therefore, there is no inflationary pressure associated with $100 bills going to Bank X since they are paid for one way or another.
So how exactly were they making money off of this? Answer: they aren't. They make most of their money off of check processing and ACH transfers which they act as the middleman for.
Essentially, we have the wolves in charge of the chicken coop. There're making a killing, so to speak, and there's nothing you and I can do about it. Other than complain.
Next time you make a comment about something, how about knowing something...anything about what it is you are commenting about?
Thank you.
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"This is the system that has evolved, it works better than the alternatives, and it isn't going to go away."
Actually, the founding fathers of the US thought that central banking was a bad idea, and Madison even said that central banking was more of a cause for the war than taxes.
Thomas Jefferson:
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
James Madison:
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance."
Henry Ford:
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Alan Greenspan:
"[The] abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holdings illegal, as was done in the case of gold.... The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.... [This] is the shabby secret of the welfare statist's tirades against gold. Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
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