How the Federal Reserve Creates Money

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
This is an easy to understand step by step description of how money is created by the Federal Reserve:

From: http://political-resources.com/money/creation.htm
1. The Government wants to raise money. Rather than raise taxes (which could be political suicide), they create a gov. bond or Treasury note. This is essentially an IOU, which says they will pay it back at a specified date with a specified interest rate. It is no more than a piece of paper with ink on it, and has no more backing than just a promise to pay. Let's say it is for one million dollars.

2. The gov. gives this to the Federal Reserve System, where it is classified as a securities asset (they assume the government will pay when they say) They treat this note as an asset, so are able to balance the books with a corresponding liability in the form of a Federal Reserve check made out to the government.

3. The Fed's check is not drawn on any bank. They literally create it out of nothing. Actually, it is created out of government debt. The gov. then deposits this check into one of the Federal Reserve banks, where it becomes a gov. deposit of one million dollars.

4. The gov. pays its employees (postal workers etc)from its funds. Let's say 1,000 people receive $1,000 as wages from the government. These 1,000 people have now deposited their $1,000 into their individual accounts at commercial banks.

5. The commercial banks gladly receive the check for $1,000 and count it as an asset for the bank, even though it is a liability, as it is owed to the depositor. Now the bank's books are balanced with an equal asset and liability.

6. The bank assets are now called "bank reserves", which are to be used for paying the depositors back when they want. (hah!). However, through a useful trick the Feds allow, the banks are allowed to hold as little as 10% of their deposits in "reserve". The remaining 90% is classified as "excess reserves" .

7. The excess reserves can now be used by the bank for making loans. Think about this. If you deposit $1,000 into your account, the bank is paying you a few % interest, while they can go ahead and loan out 90% of your money

8. Bank loans out $900 at 8% or so to person A.

9. Person A's account grows by $900 (let's say it is at the same bank as your's for ease of this example)

10. The same bank now has increased its assets by $900 (this shouldn't make sense, but this is reality) because person A's account just went up by $900 when they took out the loan

11. Because the bank's assets just increased by $900, their excess reserves also went up, by 90% of $900 - in this example $810.

12. Person B comes along and takes out a loan for $810, puts it into their account at the same bank, the bank now has an additional $810 in assets, takes 90% as excess reserves

13. and so on and so on.

14. This process can go on many more iterations. If played out to the theoretical end, it loans the same money out over 50 times and at a total of 9 times the original $1,000 deposit. The bank charges the loan out at 8% or so, basically charging you interest on nothing. Isn't this a cool magic trick?

15. Add up the whole thing, and you can see that the total money introduced into the system can be up to 10 times the original gov. note.

16. Take this another step, and you have increased the nation's money supply, which leads to inflation, the hidden tax.
Let's keep something in mind while reading this folks, increasing the money supply is not in and of itself a bad thing. However, the way the government does it is ridiculous. First of all every dollar introduced into the economy is based on debt! New money cannot be created unless new debt is created. Second of all, the government & the Fed year after year increases the money supply greater than the output of the economy.

Let's say the economy grows by 3% in one year. The money supply should then grow by 3% in order to not have deflation. Does the government increase the money supply by 3%? Nope, it increases the money supply by 4-6%. That extra 1-3% is money that comes right out of your paycheck, a hidden tax.

This is why there has been a total of 1500% inflation since the Federal Reserve was established in 1913.

Keep in mind this is LONG TERM inflation I am talking about. Not short term inflation, which can be caused by market forces. I think short term inflation is a smokescreen for the cause of long term inflation as they can easily be confused by the common man.

Take a look at this quote:

While economists disagree about many issues, there is near unanimity about this one: continuing inflation occurs when the rate of growth of the money supply consistenty exceeds the rate of growth of output(of the economy).
- Laurence Ball, assistant professor of economics at Princeton University and a visiting scholar in the Research Department of the Philidelphia Fed.

From: What causes inflation?

This tells us that yearly inflation can only be caused be one thing and one thing alone, increase of the money supply greater than the output of the economy. Who controls the money supply? The Federal Reserve of course, and therefore the Federal Reserve deliberately causes inflation every single year. Why? Simple, to insure that the banking industry makes billions of dollars a year off of money that they create from nothing.

Laurence Ball of course goes on to say in his article that ending inflation would be bad beause it would cause a recession. This is to be expected since he is in bed with the Fed so to speak as he is a "visiting scholar".

In my opinion a recession is a small price to pay in order to end the inflation tax the government imposes on everyone every year. This is only one problem with the Federal Reserve and the fractional reserve banking system but I think it is one of the largest ones right after the national debt which is all tied in.
 

zephyrprime

Diamond Member
Feb 18, 2001
7,510
2
81
Only point 3 is interesting. The federal reserve is a huge scam. Why should the government pay interest to make currency when they have the power to simply create currency? Curse the bankers.

And, are you sure you're correct about the way banks lend money? I thought that the actual system is far worse than what you describe. I thought that a fractional reserve banking system with 10% reserve requirement would be capable of lending out up to $10 dollars for every dollar they received in deposits.

Example: You deposit $100 into your bank. They are now free to loan up to $1000.

link
 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: zephyrprime
Only point 3 is interesting. The federal reserve is a huge scam. Why should the government pay interest to make currency when they have the power to simply create currency? Curse the bankers.

And, are you sure you're correct about the way banks lend money? I thought that the actual system is far worse than what you describe. I thought that a fractional reserve banking system with 10% reserve requirement would be capable of lending out up to $10 dollars for every dollar they received in deposits.

Example: You deposit $100 into your bank. They are now free to loan up to $1000.

link
Yes, that is exactly what this money creation process describes. The banks loan out money they don't have, it is legalized counterfeiting.

Edit: I've read that article before. Good stuff.
 

Nietzscheusw

Senior member
Dec 28, 2003
308
0
0
But who owns the Fed?
ed2k://|file|Money.Banking.And.The.Federal.Reserve.wmv|84407701|C873A6D460D3672E937942A8D6D550B2|/
ed2k://|file|MONEY.MASTERS.-.Tape.1.(128KBps).wmv|91615850|55F7529D223A5F35C695F89C68216CC2|/
ed2k://|file|MONEY.MASTERS.-.Tape.2.(128KBps).wmv|72746928|7E6E23E5E58B888814D808577C380B0A|/

A link with the assassination of JFK?

John F. Kennedy vs The Federal Reserve


*

On June 4, 1963, a virtually unknown Presidential decree, Executive
Order 11110, was signed with the authority to basically strip the
Federal Reserve Bank of its power to loan money to the United States
Federal Government at interest. With the stroke of a pen, President
Kennedy declared that the privately owned Federal Reserve Bank would
soon be out of business. The Christian Law Fellowship has exhaustively
researched this matter through the Federal Register and Library of
Congress. We can now safely conclude that this Executive Order has never
been repealed, amended, or superceded by any subsequent Executive Order.
In simple terms, it is still valid.

When President John Fitzgerald Kennedy - the author of Profiles in
Courage -signed this Order, it returned to the federal government,
specifically the Treasury Department, the Constitutional power to create
and issue currency -money - without going through the privately owned
Federal Reserve Bank. President Kennedy's Executive Order 11110 [the
full text is displayed further below] gave the Treasury Department the
explicit authority: "to issue silver certificates against any silver
bullion, silver, or standard silver dollars in the Treasury." This means
that for every ounce of silver in the U.S. Treasury's vault, the
government could introduce new money into circulation based on the
silver bullion physically held there. As a result, more than $4 billion
in United States Notes were brought into circulation in $2 and $5
denominations. $10 and $20 United States Notes were never circulated but
were being printed by the Treasury Department when Kennedy was
assassinated. It appears obvious that President Kennedy knew the Federal
Reserve Notes being used as the purported legal currency were contrary
to the Constitution of the United States of America.

"United States Notes" were issued as an interest-free and debt-free
currency backed by silver reserves in the U.S. Treasury. We compared a
"Federal Reserve Note" issued from the private central bank of the
United States (the Federal Reserve Bank a/k/a Federal Reserve System),
with a "United States Note" from the U.S. Treasury issued by President
Kennedy's Executive Order. They almost look alike, except one says
"Federal Reserve Note" on the top while the other says "United States
Note". Also, the Federal Reserve Note has a green seal and serial number
while the United States Note has a red seal and serial number.

President Kennedy was assassinated on November 22, 1963 and the United
States Notes he had issued were immediately taken out of circulation.
Federal Reserve Notes continued to serve as the legal currency of the
nation. According to the United States Secret Service, 99% of all U.S.
paper "currency" circulating in 1999 are Federal Reserve Notes.

Kennedy knew that if the silver-backed United States Notes were widely
circulated, they would have eliminated the demand for Federal Reserve
Notes. This is a very simple matter of economics. The USN was backed by
silver and the FRN was not backed by anything of intrinsic value.
Executive Order 11110 should have prevented the national debt from
reaching its current level (virtually all of the nearly $9 trillion in
federal debt has been created since 1963) if LBJ or any subsequent
President were to enforce it. It would have almost immediately given the
U.S. Government the ability to repay its debt without going to the
private Federal Reserve Banks and being charged interest to create new
"money". Executive Order 11110 gave the U.S.A. the ability to, once
again, create its own money backed by silver and realm value worth
something.

Again, according to our own research, just five months after Kennedy was
assassinated, no more of the Series 1958 "Silver Certificates" were
issued either, and they were subsequently removed from circulation.
Perhaps the assassination of JFK was a warning to all future presidents
not to interfere with the private Federal Reserve's control over the
creation of money. It seems very apparent that President Kennedy
challenged the "powers that exist behind U.S. and world finance". With
true patriotic courage, JFK boldly faced the two most successful
vehicles that have ever been used to drive up debt:

1) war (Viet Nam); and,

2) the creation of money by a privately owned central bank. His efforts
to have all U.S. troops out of Vietnam by 1965 combined with Executive
Order 11110 would have destroyed the profits and control of the private
Federal Reserve Bank.

xoxox

Executive Order 11110

AMENDMENT OF EXECUTIVE ORDER NO. 10289 AS AMENDED, RELATING TO THE
PERFORMANCE OF CERTAIN FUNCTIONS AFFECTING THE DEPARTMENT OF THE
TREASURY. By virtue of the authority vested in me by section 301 of
title 3 of the United States Code, it is ordered as follows:

SECTION 1. Executive Order No. 10289 of September 19, 1951, as amended,
is hereby further amended - (a) By adding at the end of paragraph 1
thereof the following subparagraph (j): "(j) The authority vested in the
President by paragraph (b) of section 43 of the Act of May 12, 1933, as
amended (31 U.S.C. 821 (b)), to issue silver certificates against any
silver bullion, silver, or standard silver dollars in the Treasury not
then held for redemption of any outstanding silver certificates, to
prescribe the denominations of such silver certificates, and to coin
standard silver dollars and subsidiary silver currency for their
redemption," and (b) By revoking subparagraphs (b) and (c) of paragraph
2 thereof. SECTION 2. The amendment made by this Order shall not affect
any act done, or any right accruing or accrued or any suit or proceeding
had or commenced in any civil or criminal cause prior to the date of
this Order but all such liabilities shall continue and may be enforced
as if said amendments had not been made.

JOHN F. KENNEDY THE WHITE HOUSE, June 4, 1963

xoxox

Once again, Executive Order 11110 is still valid. According to Title 3,
United States Code, Section 301 dated January 26, 1998:

Executive Order (EO) 10289 dated Sept. 17, 1951, 16 F.R. 9499, was as
amended by:

EO 10583, dated December 18, 1954, 19 F.R. 8725;

EO 10882 dated July 18, 1960, 25 F.R. 6869;

EO 11110 dated June 4, 1963, 28 F.R. 5605;

EO 11825 dated December 31, 1974, 40 F.R. 1003;

EO 12608 dated September 9, 1987, 52 F.R. 34617

The 1974 and 1987 amendments, added after Kennedy's 1963 amendment, did
not change or alter any part of Kennedy's EO 11110. A search of
Clinton's 1998 and 1999 EO's and Presidential Directives has also shown
no reference to any alterations, suspensions, or changes to EO 11110.

The Federal Reserve Bank, a.k.a Federal Reserve System, is a Private
Corporation. Black's Law Dictionary defines the "Federal Reserve System"
as: "Network of twelve central banks to which most national banks belong
and to which state chartered banks may belong. Membership rules require
investment of stock and minimum reserves." Privately-owned banks own the
stock of the FED. This was explained in more detail in the case of Lewis
v. United States, Federal Reporter, 2nd Series, Vol. 680, Pages 1239,
1241 (1982), where the court said: "Each Federal Reserve Bank is a
separate corporation owned by commercial banks in its region. The
stock-holding commercial banks elect two thirds of each Bank's nine
member board of directors".

The Federal Reserve Banks are locally controlled by their member banks.
Once again, according to Black's Law Dictionary, we find that these
privately owned banks actually issue money:

"Federal Reserve Act. Law which created Federal Reserve banks which act
as agents in maintaining money reserves, issuing money in the form of
bank notes, lending money to banks, and supervising banks. Administered
by Federal Reserve Board (q.v.)".

The privately owned Federal Reserve (FED) banks actually issue (create)
the "money" we use. In 1964, the House Committee on Banking and
Currency, Subcommittee on Domestic Finance, at the second session of the
88th Congress, put out a study entitled Money Facts which contains a
good description of what the FED is: "The Federal Reserve is a total
money-making machine. It can issue money or checks. And it never has a
problem of making its checks good because it can obtain the $5 and $10
bills necessary to cover its check simply by asking the Treasury
Department's Bureau of Engraving to print them".

Any one person or any closely knit group who has a lot of money has a
lot of power. Now imagine a group of people who have the power to create
money. Imagine the power these people would have. This is exactly what
the privately owned FED is!

No man did more to expose the power of the FED than Louis T. McFadden,
who was the Chairman of the House Banking Committee back in the 1930s.
In describing the FED, he remarked in the Congressional Record, House
pages 1295 and 1296 on June 10, 1932:

"Mr. Chairman, we have in this country one of the most corrupt
institutions the world has ever known. I refer to the Federal Reserve
Board and the Federal reserve banks. The Federal Reserve Board, a
Government Board, has cheated the Government of the United States and he
people of the United States out of enough money to pay the national
debt. The depredations and the iniquities of the Federal Reserve Board
and the Federal reserve banks acting together have cost this country
enough money to pay the national debt several times over. This evil
institution has impoverished and ruined the people of the United States;
has bankrupted itself, and has practically bankrupted our Government. It
has done this through the maladministration of that law by which the
Federal Reserve Board, and through the corrupt practices of the moneyed
vultures who control it".

Some people think the Federal Reserve Banks are United States Government
institutions. They are not Government institutions, departments, or
agencies. They are private credit monopolies which prey upon the people
of the United States for the benefit of themselves and their foreign
customers. Those 12 private credit monopolies were deceitfully placed
upon this country by bankers who came here from Europe and who repaid us
for our hospitality by undermining our American institutions.

The FED basically works like this: The government granted its power to
create money to the FED banks. They create money, then loan it back to
the government charging interest. The government levies income taxes to
pay the interest on the debt. On this point, it's interesting to note
that the Federal Reserve Act and the sixteenth amendment, which gave
congress the power to collect income taxes, were both passed in 1913.
The incredible power of the FED over the economy is universally
admitted. Some people, especially in the banking and academic
communities, even support it. On the other hand, there are those, such
as President John Fitzgerald Kennedy, that have spoken out against it.
His efforts were spoken about in Jim Marrs' 1990 book Crossfire:"

Another overlooked aspect of Kennedy's attempt to reform American
society involves money. Kennedy apparently reasoned that by returning to
the constitution, which states that only Congress shall coin and
regulate money, the soaring national debt could be reduced by not paying
interest to the bankers of the Federal Reserve System, who print paper
money then loan it to the government at interest. He moved in this area
on June 4, 1963, by signing Executive Order 11110 which called for the
issuance of $4,292,893,815 in United States Notes through the U.S.
Treasury rather than the traditional Federal Reserve System. That same
day, Kennedy signed a bill changing the backing of one and two dollar
bills from silver to gold, adding strength to the weakened U.S. currency.

Kennedy's comptroller of the currency, James J. Saxon, had been at odds
with the powerful Federal Reserve Board for some time, encouraging
broader investment and lending powers for banks that were not part of
the Federal Reserve system. Saxon also had decided that non-Reserve
banks could underwrite state and local general obligation bonds, again
weakening the dominant Federal Reserve banks".

In a comment made to a Columbia University class on Nov. 12, 1963,

Ten days before his assassination, President John Fitzgerald Kennedy
allegedly said:

"The high office of the President has been used to foment a plot to
destroy the American's freedom and before I leave office, I must inform
the citizen of this plight."

In this matter, John Fitzgerald Kennedy appears to be the subject of his
own book... a true Profile of Courage.

This research report was compiled for Lawgiver. Org. by Anthony Wayne

xoxox

What is the Federal Reserve Bank?

What is the Federal Reserve Bank (FED) and why do we have it?

by Greg Hobbs November 1, 1999

The FED is a central bank. Central banks are supposed to implement a
country's fiscal policies. They monitor commercial banks to ensure that
they maintain sufficient assets, like cash, so as to remain solvent and
stable. Central banks also do business, such as currency exchanges and
gold transactions, with other central banks. In theory, a central bank
should be good for a country, and they might be if it wasn't for the
fact that they are not owned or controlled by the government of the
country they are serving. Private central banks, including our FED,
operate not in the interest of the public good but for profit.

There have been three central banks in our nation's history. The first
two, while deceptive and fraudulent, pale in comparison to the scope and
size of the fraud being perpetrated by our current FED. What they all
have in common is an insidious practice known as "fractional banking."

Fractional banking or fractional lending is the ability to create money
from nothing, lend it to the government or someone else and charge
interest to boot. The practice evolved before banks existed. Goldsmiths
rented out space in their vaults to individuals and merchants for
storage of their gold or silver. The goldsmiths gave these "depositors"
a certificate that showed the amount of gold stored. These certificates
were then used to conduct business.

In time the goldsmiths noticed that the gold in their vaults was rarely
withdrawn. Small amounts would move in and out but the large majority
never moved. Sensing a profit opportunity, the goldsmiths issued double
receipts for the gold, in effect creating money (certificates) from
nothing and then lending those certificates (creating debt) to
depositors and charging them interest as well.

Since the certificates represented more gold than actually existed, the
certificates were "fractionally" backed by gold. Eventually some of
these vault operations were transformed into banks and the practice of
fractional banking continued.

Keep that fractional banking concept in mind as we examine our first
central bank, the First Bank of the United States (BUS). It was created,
after bitter dissent in the Congress, in 1791 and chartered for 20
years. A scam not unlike the current FED, the BUS used its control of
the currency to defraud the public and establish a legal form of usury.

This bank practiced fractional lending at a 10:1 rate, ten dollars of
loans for each dollar they had on deposit. This misuse and abuse of
their public charter continued for the entire 20 years of their
existence. Public outrage over these abuses was such that the charter
was not renewed and the bank ceased to exist in 1811.

The war of 1812 left the country in economic chaos, seen by bankers as
another opportunity for easy profits. They influenced Congress to
charter the second central bank, the Second Bank of the United States
(SBUS), in 1816.

The SBUS was more expansive than the BUS. The SBUS sold franchises and
literally doubled the number of banks in a short period of time. The
country began to boom and move westward, which required money. Using
fractional lending at the 10:1 rate, the central bank and their
franchisees created the debt/money for the expansion.

Things boomed for a while, then the banks decided to shut off the
debt/money, citing the need to control inflation. This action on the
part of the SBUS caused bankruptcies and foreclosures. The banks then
took control of the assets that were used as security against the loans.

Closely examine how the SBUS engineered this cycle of prosperity and
depression. The central bank caused inflation by creating debt/money for
loans and credit and making these funds readily available. The economy
boomed. Then they used the inflation which they created as an excuse to
shut off the loans/credit/money.

The resulting shortage of cash caused the economy to falter or slow
dramatically and large numbers of business and personal bankruptcies
resulted. The central bank then seized the assets used as security for
the loans. The wealth created by the borrowers during the boom was then
transferred to the central bank during the bust. And you always wondered
how the big guys ended up with all the marbles.

Now, who do you think is responsible for all of the ups and downs in our
economy over the last 85 years? Think about the depression of the late
'20s and all through the '30s. The FED could have pumped lots of
debt/money into the market to stimulate the economy and get the country
back on track, but did they? No; in fact, they restricted the money
supply quite severely. We all know the results that occurred from that
action, don't we?

Why would the FED do this? During that period asset values and stocks
were at rock bottom prices. Who do you think was buying everything at 10
cents on the dollar? I believe that it is referred to as consolidating
the wealth. How many times have they already done this in the last 85 years?

Do you think they will do it again?

Just as an aside at this point, look at today's economy. Markets are
declining. Why? Because the FED has been very liberal with its
debt/credit/money. The market was hyper inflated. Who creates inflation?
The FED. How does the FED deal with inflation? They restrict the
debt/credit/money. What happens when they do that? The market collapses.

Several months back, after certain central banks said they would be
selling large quantities of gold, the price of gold fell to a 25-year
low of about $260 per ounce. The central banks then bought gold. After
buying at the bottom, a group of 15 central banks announced that they
would be restricting the amount of gold released into the market for the
next five years. The price of gold went up $75.00 per ounce in just a
few days. How many hundreds of billions of dollars did the central banks
make with those two press releases?

Gold is generally considered to be a hedge against more severe economic
conditions. Do you think that the private banking families that own the
FED are buying or selling equities at this time? (Remember: buy low,
sell high.) How much money do you think these FED owners have made since
they restricted the money supply at the top of this last current cycle?

Alan Greenspan has said publicly on several occasions that he thinks the
market is overvalued, or words to that effect. Just a hint that he will
raise interest rates (restrict the money supply), and equity markets
have a negative reaction. Governments and politicians do not rule
central banks, central banks rule governments and politicians. President
Andrew Jackson won the presidency in 1828 with the promise to end the
national debt and eliminate the SBUS. During his second term President
Jackson withdrew all government funds from the bank and on January 8,
1835, paid off the national debt. He is the only president in history to
have this distinction. The charter of the SBUS expired in 1836.

Without a central bank to manipulate the supply of money, the United
States experienced unprecedented growth for 60 or 70 years, and the
resulting wealth was too much for bankers to endure. They had to get
back into the game. So, in 1910 Senator Nelson Aldrich, then Chairman of
the National Monetary Commission, in collusion with representatives of
the European central banks, devised a plan to pressure and deceive
Congress into enacting legislation that would covertly establish a
private central bank.

This bank would assume control over the American economy by controlling
the issuance of its money. After a huge public relations campaign,
engineered by the foreign central banks, the Federal Reserve Act of 1913
was slipped through Congress during the Christmas recess, with many
members of the Congress absent. President Woodrow Wilson, pressured by
his political and financial backers, signed it on December 23, 1913.

The act created the Federal Reserve System, a name carefully selected
and designed to deceive. "Federal" would lead one to believe that this
is a government organization. "Reserve" would lead one to believe that
the currency is being backed by gold and silver. "System" was used in
lieu of the word "bank" so that one would not conclude that a new
central bank had been created.

In reality, the act created a private, for profit, central banking
corporation owned by a cartel of private banks. Who owns the FED? The
Rothschilds of London and Berlin; Lazard Brothers of Paris; Israel Moses
Seif of Italy; Kuhn, Loeb and Warburg of Germany; and the Lehman
Brothers, Goldman, Sachs and the Rockefeller families of New York.

Did you know that the FED is the only for-profit corporation in America
that is exempt from both federal and state taxes? The FED takes in about
one trillion dollars per year tax free! The banking families listed
above get all that money.

Almost everyone thinks that the money they pay in taxes goes to the US
Treasury to pay for the expenses of the government. Do you want to know
where your tax dollars really go? If you look at the back of any check
made payable to the IRS you will see that it has been endorsed as "Pay
Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in
Payment of U.S. Oblig." Yes, that's right, every dime you pay in income
taxes is given to those private banking families, commonly known as the
FED, tax free.

Like many of you, I had some difficulty with the concept of creating
money from nothing. You may have heard the term "monetizing the debt,"
which is kind of the same thing. As an example, if the US Government
wants to borrow $1 million ó the government does borrow every dollar it
spends ó they go to the FED to borrow the money. The FED calls the
Treasury and says print 10,000 Federal Reserve Notes (FRN) in units of
one hundred dollars.

The Treasury charges the FED 2.3 cents for each note, for a total of
$230 for the 10,000 FRNs. The FED then lends the $1 million to the
government at face value plus interest. To add insult to injury, the
government has to create a bond for $1 million as security for the loan.
And the rich get richer. The above was just an example, because in
reality the FED does not even print the money; it's just a computer
entry in their accounting system. To put this on a more personal level,
let's use another example.

Today's banks are members of the Federal Reserve Banking System. This
membership makes it legal for them to create money from nothing and lend
it to you. Today's banks, like the goldsmiths of old, realize that only
a small fraction of the money deposited in their banks is ever actually
withdrawn in the form of cash. Only about 4 percent of all the money
that exists is in the form of currency. The rest of it is simply a
computer entry.

Let's say you're approved to borrow $10,000 to do some home
improvements. You know that the bank didn't actually take $10,000 from
its pile of cash and put it into your pile? They simply went to their
computer and input an entry of $10,000 into your account. They created,
from thin air, a debt which you have to secure with an asset and repay
with interest. The bank is allowed to create and lend as much debt as
they want as long as they do not exceed the 10:1 ratio imposed by the FED.

It sort of puts a new slant on how you view your friendly bank, doesn't
it? How about those loan committees that scrutinize you with a
microscope before approving the loan they created from thin air. What a
hoot! They make it complex for a reason. They don't want you to
understand what they are doing. People fear what they do not understand.
You are easier to delude and control when you are ignorant and afraid.

Now to put the frosting on this cake. When was the income tax created?
If you guessed 1913, the same year that the FED was created, you get a
gold star. Coincidence? What are the odds? If you are going to use the
FED to create debt, who is going to repay that debt? The income tax was
created to complete the illusion that real money had been lent and
therefore real money had to be repaid. And you thought Houdini was good.

So, what can be done? My father taught me that you should always stand
up for what is right, even if you have to stand up alone.

If "We the People" don't take some action now, there may come a time
when "We the People" are no more. You should write a letter or send an
email to each of your elected representatives. Many of our elected
representatives do not understand the FED. Once informed they will not
be able to plead ignorance and remain silent.

Article 1, Section 8 of the US Constitution specifically says that
Congress is the only body that can "coin money and regulate the value
thereof." The US Constitution has never been amended to allow anyone
other than Congress to coin and regulate currency.

Ask your representative, in light of that information, how it is
possible for the Federal Reserve Act of 1913, and the Federal Reserve
Bank that it created, to be constitutional. Ask them why this private
banking cartel is allowed to reap trillions of dollars in profits
without paying taxes. Insist on an answer.

Thomas Jefferson said, "If the America people ever allow private banks
to control the issuance of their currencies, first by inflation and then
by deflation, the banks and corporations that will grow up around them
will deprive the people of all their prosperity until their children
will wake up homeless on the continent their fathers conquered."

Jefferson saw it coming 150 years ago. The question is, "Can you now see
what is in store for us if we allow the FED to continue controlling our
country?"


"The condition upon which God hath given liberty to man is eternal
vigilance; which condition if he breaks, servitude is at once the
consequence of his crime, and the punishment of his guilt."
John P. Curran

Source: http://www.roc-grp.org/jfk.html



<mailto:?subject=Lovearth Network News Article From A Friend&body=A
friend sent you this great article from Lovearth Network News asking you
to please read it. http://www.john-f-kennedy.net/thefederalreserve.htm>

*Back to John-F-Kennedy.net
 

razor2025

Diamond Member
May 24, 2002
3,010
0
71
wow.. simply wow... talk about Corporate America. Even our own national bank was privately owned. This wasn't mentioned AT ALL in our AP American Government. Talk about what the Gov't/Mega Corp. doesn't want you to know.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Good post you won'y know unless you've taken "money and banking" in college (a 300 level finance course)...I wish it was tought in HS.
 

alchemize

Lifer
Mar 24, 2000
11,489
0
0
Originally searched on tinfoilgoogle.com and copy/pasted by: Nietzscheusw
But who owns the Fed?
A link with the assassination of JFK?

John F. Kennedy vs The Federal Reserve
It really would be quicker if you would just type "the jews and the trilateral commission", that way you wouldn't have to waste time combing emule for stories.

PS time is running out, tis 5:00 PM Feb 2nd and no nuking of new york yet!
 

AmbitV

Golden Member
Oct 20, 1999
1,197
0
0
The Federal Reserve of course, and therefore the Federal Reserve deliberately causes inflation every single year. Why? Simple, to insure that the banking industry makes billions of dollars a year off of money that they create from nothing.
That line is just false. The federal reserve changes the money supply to either stimulate or slow down the economy. Inflation over the past decade has actually been quite modest, due mainly to efforts by the federal reserve to stabilize inflation. This focus on inflation was initiated by Fed Chairman Volcker and the cause has now been taken up by Greenspan. In fact the federal reserve raised rates in 2000 (i.e. lowered the money supply) after the economic figures were pointing to increased inflation. That put the brakes on the economy and sent us into the recession (along with 9/11 of course) that we're only now starting to come out of. If the federal reserve loved inflation so much they could have easily just let the bubble keep growing and would always leave interest rates low.
 

zephyrprime

Diamond Member
Feb 18, 2001
7,510
2
81
This wasn't mentioned AT ALL in our AP American Government.
Something related to it is but it's presented in such a dry manner that you would never know that it was related to anything important. Check out Andrew Jackson's efforts to destroy the national bank and checkout the silver standard battles of the early 20th century.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: vman
The Federal Reserve of course, and therefore the Federal Reserve deliberately causes inflation every single year. Why? Simple, to insure that the banking industry makes billions of dollars a year off of money that they create from nothing.
That line is just false. The federal reserve changes the money supply to either stimulate or slow down the economy. Inflation over the past decade has actually been quite modest, due mainly to efforts by the federal reserve to stabilize inflation. This focus on inflation was initiated by Fed Chairman Volcker and the cause has now been taken up by Greenspan. In fact the federal reserve raised rates in 2000 (i.e. lowered the money supply) after the economic figures were pointing to increased inflation. That put the brakes on the economy and sent us into the recession (along with 9/11 of course) that we're only now starting to come out of. If the federal reserve loved inflation so much they could have easily just let the bubble keep growing and would always leave interest rates low.
How is it false? Name one time of deflation..as a whole, the statement " causes inflation every single year," is very true. I will disagree with the diliberate part only because anytime you charge intrest for capital, which almost every civilized courty does, it has a precipitous relationship to inflation. For example, If I take out a note/SBA whatever for a McDonalds franchise I want to be able to pay the note, the intrest in addition to make some profit. I must raise prices to do this and every business in america does the same which has an inflationary result.
 

zephyrprime

Diamond Member
Feb 18, 2001
7,510
2
81
Inflation over the past decade has actually been quite modest
By modern standards yes but modern standards are messed up. Inflation should be 0% and there's no reason it can't be. Even at 0% inflation, we would be increasing the money supply at a rate matching increasing GDP. Anything above that is inflation and is money in the central banker's pocket.
 

robh23

Banned
Jan 28, 2004
236
0
0
no offence, these arent simple models, but basically you guys dont understand the process, and i dont know that much either from my studies but here goes.


the fed is a bank with assets of its own. i think im america it deals with debt management for the government as well.

if the fed and government want to do a loan then they can, there is no problem with that, if the government wants to sell the loan to the public they can as well.

inflation at a low rate is good for the economy, if prices are changing as a slow rate people get used to it and it helps prices stay competetive. it forces bad businesses out of business as well.

in terms of the money multipler aspect of fractional reserve banking; it works like this:


i have 1000usd and put it in a bank account, bank keeps 100usd in its vault, and loans 900usd. the borrower puts it in his bank account or the receiver of the money when it is spent puts it in his. this bank has 900usd, it keeps 90usd back and loans 810usd... this process repeats until 1000 in cash is left in bank deposits and 9000 in loans is spread across the system, therefore a fractional reserve system with a 10% reserve requirement multiplies the original amount by 10x.

this is helpful to the modern economy as sophisticated financing is essential for economic growth.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
3. The Fed's check is not drawn on any bank. They literally create it out of nothing. Actually, it is created out of government debt. The gov. then deposits this check into one of the Federal Reserve banks, where it becomes a gov. deposit of one million dollars.
I'd just like to ask what are the alternatives?

We obviosly can't have the exact same amount of cash in circulation as in 1776. The fed loans money out at the miniscule "Federal funds Market rate" of 1.15% which then gets loaned to commercial banks at the discount rate which then loaned to regional banks (the ones you borrow from) at prime rate. What? you expect these member banks to make zero profit? Sure it's monoploy money which only requires a 10% reserve to borrow more but it broadens oppotunity for all and grows the economy.

Guess the moral of the story is open a bank.:)
 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: Zebo
3. The Fed's check is not drawn on any bank. They literally create it out of nothing. Actually, it is created out of government debt. The gov. then deposits this check into one of the Federal Reserve banks, where it becomes a gov. deposit of one million dollars.
I'd just like to ask what are the alternatives?

We obviosly can't have the exact same amount of cash in circulation as in 1776. The fed loans money out at the miniscule "Federal funds Market rate" of 1.15% which then gets loaned to commercial banks at the discount rate which then loaned to regional banks (the ones you borrow from) at prime rate. What? you expect these member banks to make zero profit? Sure it's monoploy money which only requires a 10% reserve to borrow more but it broadens oppotunity for all and grows the economy.

Guess the moral of the story is open a bank.:)
Reforming the system is no simple matter, I give you that. Any solution would have to be carefully planned out and executed. However, banks can make profits in more honest ways, trust me.

Broadens opportunity for all? What makes you say that? It doesn't broaden opportunities for all, it only broadens opportunities for the few who get to take advantage of the system. No private company, institution or entity should EVER have the power to loan out or spend money it doesn't have. This is a power that should only be reserved to people holding public office and who are under the watchful eye of the voters.

No, we can't have the same amount of cash in circulation as in 1776, that would case severe deflation. However, the manner in which the government introduces new money is insidious as well as absolutely absurd. Money growth should be tied to the growth of the GDP, not at the whim of private bankers and the Federal Reserve! One way to grow the money supply without fractional reserve banking and without generating debt is to have the Treasury just pay government employees with new money directly.

For instance let's say the national budget is $2 Trillion. But the economy grows by 3%, well then what the government does is it just spends the $2 Trillion that was collected in taxes plus the 3% of the GDP to match the new economy growth. This would mean the government could spend more than it has without racking up debt and at the same time making it so there is 0 long term inflation.
 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: vman
The Federal Reserve of course, and therefore the Federal Reserve deliberately causes inflation every single year. Why? Simple, to insure that the banking industry makes billions of dollars a year off of money that they create from nothing.
That line is just false. The federal reserve changes the money supply to either stimulate or slow down the economy. Inflation over the past decade has actually been quite modest, due mainly to efforts by the federal reserve to stabilize inflation. This focus on inflation was initiated by Fed Chairman Volcker and the cause has now been taken up by Greenspan. In fact the federal reserve raised rates in 2000 (i.e. lowered the money supply) after the economic figures were pointing to increased inflation. That put the brakes on the economy and sent us into the recession (along with 9/11 of course) that we're only now starting to come out of. If the federal reserve loved inflation so much they could have easily just let the bubble keep growing and would always leave interest rates low.
You are confusing short term inflation with long term inflation. Did you not read the quote I put in my original post? Short term inflation is caused by market forces, granted this is what the Fed staves off. But like Dr. Ball said, long term inflation is caused by only one thing, consistent increases in the money supply beyond the growth of the GDP.

The Fed enjoys keeping the economy "healthy" while it bleeds off a chunk of the economy every year right under our noses. Look at the hyper inflation of the '70s. During the '70s inflation was so bad that people started exploring alternative currencies. The Fed could not let that go on because use of alternative currencies would shatter the Feds grip on the economy. Therefore, the Fed keeps inflation "low" but steady so that it can continue to leech.

 

Dari

Lifer
Oct 25, 2002
17,134
38
91
Hard money

Money used to be backed by gold. Now it is backed by the promises of central bankers. Are these worth less than they were?

IN BETWEEN saving the world from terrorism, President George Bush is finding time to dash off to Asia at the end of this week, first to Tokyo and then to Bangkok, where he will attend a meeting of the clumsily named Asia-Pacific Economic Co-operation, which sounds a little better as its acronym. There he will meet, among others, Hu Jintao, the president of the country American manufacturers most love to hate when they are not investing there. It is a racing certainty that the subject of China?s currency, the yuan, and whether it should be revalued from its present 8.3 per dollar, will be high on the agenda, if not atop it. It is, of course, always lovely to talk, but although America wants a lower dollar, and wants one now (which is understandable for a country with a current-account deficit of 5% of GDP and a congenital inability to save), China couldn?t seem to care less.

Quite probably, then, tension will increase and the dollar will fall against other currencies that do not have such a firm peg. The rapidity of this fall will depend on two things. The first is the force with which Washington rattles its sabre. On this subject, Buttonwood merely notes that next year is election year. The second is whether other countries, especially those in Asia which together hold $1.7 trillion of IOUs issued by the American government, are prepared to see the Treasuries in their portfolios rapidly devalued, their export competitiveness choked and deflationary pressures intensified.

Japan has such worries in spades. Though the world?s second-biggest economy nowadays receives less attention than it did, Japan?s recovery started in the fourth quarter of 2001 and growth is picking up. But officials there are increasingly worried that a rising yen will choke it off. The yen is close to a three-year high against the greenback. Its rise accelerated after the recent G7 summit in Dubai, when America?s weak-dollar policy became most obvious. Yet Japan needs the yen to fall because it needs inflation to help wipe out the massive debts the country incurred both during the bubble and in trying to get the economy going again after it had popped. Last week, the Bank of Japan further eased monetary policy, not in the usual way, by lowering the rate of interest, but by printing more money. The money supply, narrowly measured, is already rising at an annual rate of 21%.

At some point, perhaps even the European Central Bank will wake up to the fact that the rising euro will keep the European economy close to recession. All of which is to suggest that none of the world?s major currencies is especially alluring; for one reason or another governments in all three might want them to fall. Of course, they cannot all fall against each other. They can, however, fall against something largely unloved by those under the age of 50, and famously dismissed by Keynes as a ?barbarous relic?: gold.

All currencies are backed by something. When the world was on the gold standard, that something was the yellow metal: the value of each pound sterling, dollar or French franc was determined by the (fixed) amount of gold that the central bank agreed to deliver against it. Now those currencies are backed by something altogether less tangible: central bankers? promises that the currencies will maintain their value. Quite probably, these promises are not worth as much as they were.

It is only in very recent years that gold has lost its allure as a store of value. For centuries, the metal was virtually synonymous with money: the Egyptians were casting gold bars as money as long ago as 4000 BC. The gold standard?s heyday was from the 1870s to the 1930s (with a brief interruption in the first world war). Britain left the standard in 1931, a move pronounced as ?the end of an epoch? by no less an authority than The Economist. America did the same in 1933. One by one, other rich countries followed suit. The gold standard was revived in a famous agreement in Bretton Woods, New Hampshire after the second world war, but only in America, which by then had three-quarters of the world?s gold stock. Although other currencies were fixed to the dollar, they were not fixed directly to gold. As other countries prospered, so America?s current-account deficit began to rise and its stock of gold began to dwindle. By 1971, inflationary pressures were driving up the real value of the dollar. In August of that year, President Richard Nixon took America off the gold standard once again.

Since then there has been a central-banking standard instead. The standard was set by Paul Volcker, the Federal Reserve chief who quashed inflation (which erodes the value of money) with draconian interest rates in 1980, and killed off the bull market in gold, which had climbed from $35 an ounce in 1968 to $850 an ounce in 1980. In its place came a bull market in government IOUs. Bonds, after all, pay interest, unlike gold.

But hard money can be an unpleasant medicine, and the problems facing central bankers have not gone away since Mr Volcker?s day. Inflation has shown up in more than the price of carrots: it has also pushed up the prices of shares and property. For understandable reasons, central bankers have been slow to spot and prick asset bubbles. Thus have they swelled and popped in America and Japan in recent years, leaving mountains of debt in their wake, and weakening the credibility of central bankers as they try to control economies by tweaking the short-term rate of interest.

It used to be that gold perked up only when inflation did. But perhaps central bankers? lack of credibility explains why the price of gold has been rising even as deflationary pressures have mounted. It now fetches some $370 an ounce, down from its peak of nearly $390 last month, but way up from its price in the late 1990s, when it dipped to $253. Chris Wood, a strategist at CLSA, a stockbroker (and, in the interests of full disclosure, a former colleague at The Economist), reckons that the price could easily reach $3,400 or so?the level at the previous peak, adjusted for the rise in American personal income since then. ?Gold will rise as confidence in the ludicrous powers still attributed to central bankers wanes,? he says. Possibly, the debt mountains that economies have built up will have to be inflated away. But no one knows how savage deflation will have to get before central bankers take that step, nor how dramatic tensions between America and the rest of the world have to become before faith in central bankers slips still further. The Bank of Japan might be providing an answer to the first of those questions; Mr Bush and his team an answer to the second.

link
 

Dari

Lifer
Oct 25, 2002
17,134
38
91
link

A banker's delight

American banks are making very big deals and very big?nay record-breaking?profits. But for how much longer?

EVEN casual readers of the financial press will have noticed that another big banking merger was announced last week in America. This latest, between J.P. Morgan Chase and Bank One, will create America?s second-biggest bank by assets, which is to say a very big bank indeed, since the assets concerned amount to some $1 trillion or so. It follows on the heels of another megamerger, announced last October, between Bank of America and FleetBoston, which would have created the second-biggest bank had it not been for this latest deal. Most writers were swept along by the scale of the transaction and the undeniable human drama: Bank One?s boss, Jamie Dimon, was the prot&eacute;g&eacute; of Sandy Weill, the (apparently) former head of Citigroup, America?s biggest bank, before he was elbowed out by his mentor. Mr Dimon, it seems, is to come into a handsome inheritance after all, since he will become the chief executive of the new bank when Bill Harrison retires.

All good stuff. But what strikes Buttonwood is something else, albeit connected to this latest wave of coupling: America?s banks are astonishingly, jaw-droppingly profitable. Financial firms now account for a third of all corporate profits, compared with some 18% in 1988, their recent low. On January 20th, Citigroup announced that it made an astonishing $17.9 billion after tax last year?more than any financial institution has ever made?and a raft of other banks announced higher fourth-quarter profits on the same day. If the sector continued to make as much as it did in the third quarter, it would, according to figures compiled by Andrew Smithers, an independent consultant, rake in some $283 billion for the year as a whole?and this now seems a conservative forecast.

Why are the banks making so much money, and will they continue to do so? For those to whom reading this column is something of a chore, the answer to the second question is intimately connected to the answer to the first, and can be briefly summarised as ?no?.

Banks, as Mr Smithers points out, essentially take two risks: credit risk?the risk that a borrower won?t pay the money back?and what is succinctly dubbed maturity-transformation risk?taking in short-term deposits and lending the money out for a longer term at a higher rate of interest to companies or the government (by buying government bonds). Historically, banks have not been very good at managing either of these risks, which is why there have been so many banking crises in America, and elsewhere, over the years.

But American banks have been especially vulnerable, because until the mid-1990s laws made it very difficult for them to expand across state boundaries. Banks were thus small, even the biggest ones, and undiversified. So a property crisis in New England, say, would have a dramatic (and often fatal) effect on banks that could largely operate only in that region. After the laws were scrapped, banks started to leap into bed with one another. At the end of 1993, there were 10,600 banks in America; by September last year, there were 7,875. This process has not only made banks more diversified and stable, but it has also allowed them to strip out masses of overlapping costs. Bank One grew in exactly this way.

But if banks have been more stable, the environment has also undoubtedly been much kinder to them of late. The fact that hardly any banks have gone bust in recent years (just two went under last year, neither big), even after the popping of one of the biggest stockmarket bubbles in history, is not just a matter of skill. Credit risk has been of fairly minor concern because few borrowers have gone bust. Although a few big, well-known companies folded after the stockmarket fell, banks have in fact had to write off very few bad loans. Charge-offs for corporate lending, for example, peaked in December 2001 at just over $6 billion and have halved since then. They are likely to continue falling, partly because corporate profits have soared, but also because of a renewed surge in investors? appetite for risk, which has kept many a rocky company afloat. Moreover, consumers have kept spending, which has kept the economy buoyant and problem loans low.

For that, thanks goes mostly to Alan Greenspan and his colleagues at the Federal Reserve, for slashing interest rates to the bone and saying that they will keep them there. Low and falling short-term rates have been a bonanza for banks for another reason, too. The difference between short- and long-term rates, otherwise known as the yield curve, is close to historic highs, even though long-term rates have fallen remorselessly over recent years.

The result is that maturity-transformation risk has paid off handsomely: banks have snaffled up deposits and lent the money on at much higher rates. Better still, the value of the loans or securities in which they have invested (or most of them, anyway) has climbed as long-term rates have fallen. Mortgage-backed securities have been an especially profitable business. At the peak, commercial banks held some $400 billion of such paper.

In such conditions, in other words, bankers would have to be more than usually stupid not to thrive. Sadly, the wonderful times are unlikely to continue. Ten-year Treasury yields are now 4%, which is decidedly odd for an economy that is growing as fast as America?s. If growth peters out, bond yields will fall further but bad loans will rise and the difference between short- and long-term rates will narrow, since there is little scope for the Fed to push short-term rates down further than their current 1%. If growth continues to pick up, on the other hand, bond yields will rise, perhaps sharply, and so will short-term rates, perhaps even more sharply. Since much ?restructuring? of corporate balance sheets has been flattered by low interest rates, it would not be entirely surprising if, to add insult to injury, bad loans mounted too.

Which is where the latest megadeal comes in. Bizarrely for a developed economy, banking has been a growth business in America over the past decade. Since 1995, the banking component of the S&P 500 has returned 240%, outperforming the overall index by almost 100 percentage points. But banks are having to run very fast indeed to boost profitability. Too fast, perhaps. J.P. Morgan Chase is about to embark on another merger, even though the one that formed it in 2000?J.P. Morgan?s marriage to Chase Manhattan?still looks decidedly uncomfortable. A benign, profitable environment makes most deals look magical, since banks can throw money at problems. Whether the deals will work when things are choppier is quite another matter. But to keep profits up, banks will continue to couple.

 

zephyrprime

Diamond Member
Feb 18, 2001
7,510
2
81
I'd just like to ask what are the alternatives?

We obviosly can't have the exact same amount of cash in circulation as in 1776. The fed loans money out at the miniscule "Federal funds Market rate" of 1.15% which then gets loaned to commercial banks at the discount rate which then loaned to regional banks (the ones you borrow from) at prime rate. What? you expect these member banks to make zero profit? Sure it's monoploy money which only requires a 10% reserve to borrow more but it broadens oppotunity for all and grows the economy.
What you're speaking of is one of the ways the fed controls currency levels in the economy. It is different than what this thread is about. The trouble with what they do is that they have to power to create money. The money they lend out is created out of nothing. It's just printed. Don't you see how this is the same as counterfeiting? They (the bankers), get to own the new money that is printed. Why don't you or I get that money instead? Or the government? Why should any small group of people get all the newly printed money?

The government can perform the function you describe and not charge any interest or a very small amount. Much less than 1.15%. It doesn't take a lot of money to simply print money and then loan it out.
 

Zephyr106

Banned
Jul 2, 2003
1,309
0
0
As Robh23 said, the "money multiplyer" is the source of the the amount of money "in use". I say in use because banks do not simply print more money as they loan it out, the amount of money printed by the government is strictly regulated by the Fed, otherwise there would be serious devaluation of the currency. We see this all the time in South American countries, haphazardly printing more money is one of the worst things you can do.

Consequently, with the limited money production rate, and the money multiplyer in effect, there is definately not enough currency to back up all outstanding loans- if everyone wanted to get their hands on their cash, they can't- there's not enough bills, so not only currency, but consequently loans are legal tender merely due to good faith in the government.

It's a complicated situation that I know far from enough on, and I am curious as to how other countries handle their finances.

Zephyr
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: Dissipate
Originally posted by: Zebo
3. The Fed's check is not drawn on any bank. They literally create it out of nothing. Actually, it is created out of government debt. The gov. then deposits this check into one of the Federal Reserve banks, where it becomes a gov. deposit of one million dollars.
I'd just like to ask what are the alternatives?

We obviosly can't have the exact same amount of cash in circulation as in 1776. The fed loans money out at the miniscule "Federal funds Market rate" of 1.15% which then gets loaned to commercial banks at the discount rate which then loaned to regional banks (the ones you borrow from) at prime rate. What? you expect these member banks to make zero profit? Sure it's monoploy money which only requires a 10% reserve to borrow more but it broadens oppotunity for all and grows the economy.

Guess the moral of the story is open a bank.:)
Reforming the system is no simple matter, I give you that. Any solution would have to be carefully planned out and executed. However, banks can make profits in more honest ways, trust me.

Broadens opportunity for all? What makes you say that? It doesn't broaden opportunities for all, it only broadens opportunities for the few who get to take advantage of the system. No private company, institution or entity should EVER have the power to loan out or spend money it doesn't have. This is a power that should only be reserved to people holding public office and who are under the watchful eye of the voters.

No, we can't have the same amount of cash in circulation as in 1776, that would case severe deflation. However, the manner in which the government introduces new money is insidious as well as absolutely absurd. Money growth should be tied to the growth of the GDP, not at the whim of private bankers and the Federal Reserve! One way to grow the money supply without fractional reserve banking and without generating debt is to have the Treasury just pay government employees with new money directly.

For instance let's say the national budget is $2 Trillion. But the economy grows by 3%, well then what the government does is it just spends the $2 Trillion that was collected in taxes plus the 3% of the GDP to match the new economy growth. This would mean the government could spend more than it has without racking up debt and at the same time making it so there is 0 long term inflation.
The power IS vested in those who hold public office. While Federal Reserve banks are privately owned, but they are controlled by the publically appointed Board of Governors. I don't see the problem. You have a banking system which can adapt to economic conditions with the reserve sytem unlike with the rigid gold standard.

How does this benefit all? With the "loose" money supply it enables people to get business loans, home loans, consumer loans etc which before the federal reserve system you'd move into your first house at 50. This also grows the economy as a whole because more spending is going on thoughout a persons lifetime.

 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: Zebo
Originally posted by: Dissipate
Originally posted by: Zebo
3. The Fed's check is not drawn on any bank. They literally create it out of nothing. Actually, it is created out of government debt. The gov. then deposits this check into one of the Federal Reserve banks, where it becomes a gov. deposit of one million dollars.
I'd just like to ask what are the alternatives?

We obviosly can't have the exact same amount of cash in circulation as in 1776. The fed loans money out at the miniscule "Federal funds Market rate" of 1.15% which then gets loaned to commercial banks at the discount rate which then loaned to regional banks (the ones you borrow from) at prime rate. What? you expect these member banks to make zero profit? Sure it's monoploy money which only requires a 10% reserve to borrow more but it broadens oppotunity for all and grows the economy.

Guess the moral of the story is open a bank.:)
Reforming the system is no simple matter, I give you that. Any solution would have to be carefully planned out and executed. However, banks can make profits in more honest ways, trust me.

Broadens opportunity for all? What makes you say that? It doesn't broaden opportunities for all, it only broadens opportunities for the few who get to take advantage of the system. No private company, institution or entity should EVER have the power to loan out or spend money it doesn't have. This is a power that should only be reserved to people holding public office and who are under the watchful eye of the voters.

No, we can't have the same amount of cash in circulation as in 1776, that would case severe deflation. However, the manner in which the government introduces new money is insidious as well as absolutely absurd. Money growth should be tied to the growth of the GDP, not at the whim of private bankers and the Federal Reserve! One way to grow the money supply without fractional reserve banking and without generating debt is to have the Treasury just pay government employees with new money directly.

For instance let's say the national budget is $2 Trillion. But the economy grows by 3%, well then what the government does is it just spends the $2 Trillion that was collected in taxes plus the 3% of the GDP to match the new economy growth. This would mean the government could spend more than it has without racking up debt and at the same time making it so there is 0 long term inflation.
The power IS vested in those who hold public office. While Federal Reserve banks are privately owned, but they are controlled by the publically appointed Board of Governors. I don't see the problem. You have a banking system which can adapt to economic conditions with the reserve sytem unlike with the rigid gold standard.

How does this benefit all? With the "loose" money supply it enables people to get business loans, home loans, consumer loans etc which before the federal reserve system you'd move into your first house at 50. This also grows the economy as a whole because more spending is going on thoughout a persons lifetime.
Some powers are vested in those public offices in the Fed. However, I am not lying when I say that your local bank which is privately owned and operated can literally create new money out of nothing by executing a few clicks of a mouse on a computer. In fact they do this every single day. This power nets them billions of dollars a year and EVERYONE else pays for it in inflation. Please tell me how it is fair that everyone else gets smaller paychecks so that private banks reap billions?

Everyone who defends fractional reserve banking talks about how great it is that people can get all these loans, blah blah blah. Truth of the matter is that the economy does not need fractional reserve banking for lending. Venture capital firms and other mechanisms would pick up the slack and everyone would be better off.
 

djNickb

Senior member
Oct 16, 2003
529
0
0
Originally posted by: Zebo
Good post you won'y know unless you've taken "money and banking" in college (a 300 level finance course)...I wish it was tought in HS.

Yup I took a money and banking course in college. Turned out to be quite interesting.

Words of advice from a good book: "be the bank"

 

XZeroII

Lifer
Jun 30, 2001
12,572
0
0
The federal reserve system was created by President Wilson. On his deathbed, he admitted that he completely ruined this country when he signed it into action (not in those exact words, but similar words).
 

XZeroII

Lifer
Jun 30, 2001
12,572
0
0
It was also President Grant or Hamilton (a really early president. Late 1700's or early 1800's) who wanted to create a central bank, but Thomas Jefferson fought him the entire way saying that a central bank would be the most destructive thing this country would ever know. Jefferson took office soon after and stopped all progress on it.
 

ASK THE COMMUNITY