Hey, BE. I had been looking for an opportunity for my first RI, and then it suddenly appeared right in front of me.

As I've mentioned in some of my comments before, our department at my university has a notorious token Austrian professor. But honestly, calling him that isn't even fair to Austrians, as odd as that may sound.

This professor teaches more classes than any other professor, but he continually winds up at the center of controversy for the kinds of assignments he makes, the very biased grading of essays that he does, and the videos he shows in class.

The last one is the source of today's RI. Just recently, he decided it was a good idea to spend an entire class showing the following video from conspiracy theorist G. Edward Griffin, while promoting the video as practically economic gospel.

https://www.youtube.com/watch?v=lu_VqX6J93k

Now, I'm not going to RI the entire video obviously. For example, the first thirty minutes is closer to badhistory than badecon. But I will go through some highlights.

Basically what happens is Congress goes down to the Treasury and asks for - let's say it is a billion dollars more they need this day - and the Treasury official says "we don't have any money here, you spent it all long ago" ... so they go down the street to the printing office ... [description of Congress going through the process of ensuring that a treasury bond is printed] ... they walk further down the street to the Federal Reserve ... the Federal Reserve officer opens up his desk drawer, pulls out a big checkbook and he writes a check to the US Treasury for one billion dollars.

This is a gross misinterpretation of how the process works for a number of reasons, but let me focus on two big ones.

1) The Federal Reserve is always a secondary purchaser of bonds. It does not participate in the sealed bid auction that is the primary bond market. The Federal Reserve discusses this here, and emphasizes how this is important to their institutional independence.

2) There seems to be a subtle implication here that if the Federal Reserve did not buy the US Treasury Bond, that nobody else would. This is ridiculous, not only because the Fed wasn't the primary purchaser in the first place, but because treasuries are consistently in high demand.

In fact, Griffin ironically admits this high demand (and in the process contradicts himself) which brings me to our next highlight.

And a lot of people in the private sector and institutions are eager to loan money to the government - why? Because they have heard that it is the ... most secure investment because it is backed by the Full Faith and Credit of the United States government. And people aren't sure what that means, but it sounds pretty good. ... Full Faith and Credit of the United States government means that the United States government solemnly promises to pay you back your money plus interest. If it has to take everything you've got in the form of taxes, it will do it. It's a promise to tax you.

Nope. Debt now does not actually means that in a few years they're going to hike up all our taxes to pay down the national debt. The national debt can be kept sustainable through a good pace of economic growth, because tax revenue will grow as the economy grows without rates actually having to rise.

As a side note, people who buy US bonds are not irrational idiots who just say "idk what full faith and credit means but it sounds nice." They buy US bonds in the way they would buy anything - based on risk. If the risk of the US defaulting on its debt is very low (or even virtually zero) then yes, investors will consider treasury bonds to be a safe asset.

Now, when they met on Jekyll Island, it was clear in their mind that they were creating a central bank. But they had a problem - what to call it? ... They said first, let's use the word "Federal" to make it seem like it's a government operation. Secondly, let's use the word "Reserve" to make it seem like there are reserves somewhere...

I'm going to focus on the easy pickings here. Griffin seems to be implying that the Federal Reserve is an institution that is not a government operation, but it is tricking people into thinking that it is one. This is ridiculous. The Federal Reserve is an independent entity within government. And while it is independent in some ways, it still has mild checks and balances that connect it to the rest of the government, such as the appointment process for Fed Reserve chairs.

I have limited time today so I will go ahead and stop there. There is SO much more material there to RI (like about how the Federal Reserve is just a conspiracy to keep interest rates low so that Americans have no reason to save their money) so feel free to do more mini-RIs based on this in the comments, or even start a whole new thread.