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The Federal Reserve's Pension Program: Not Invested in U.S. Government Bonds

Gary North
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Feb. 7, 2011

The Federal Reserve System has a very nice retirement program for its employees. The assets are not in non-marketable Treasury IOUs, unlike Social Security's so-called Trust Fund. According to the audit for 2009, here is the breakdown of the FED's portfolio. It is listed here: The System Plan's policy and actual asset allocations at December 31, by asset category, are as follows:


This, of course, received little publicity.

The folks at the FED are not going to see their futures sink because: (1) the FED inflates the dollar to zero, or (2) the Treasury is forced to default because the FED ceases buying T-bills, in order to avoid hyperinflation.

The FED will take care of its own if it can. It will act on behalf of its own employees. That is the lesson of Adam Smith in Wealth of Nations That is the lesson of public choice theory in economics.

The FED manipulates supply and demand. Its decision-makers will manipulate the economy to their own advantage if they can.

Because FED employees have a vested pension fund that is invested in free market assets, this keeps the system's pension fund managers alert to the destructive power of hyperinflation. This is why they will stop short of hyperinflation if Congress lets them.

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