The Fed, fractional-reserve lending and source of inflation

Discussion in 'Economics' started by FireWalker, Jun 25, 2006.

  1. "I believe that banking institutions are more dangerous to our liberties than standing armies."
    Thomas Jefferson

    "Give me control over a nation's currency and I care not who makes its laws."
    Baron M.A. Rothschild

    How the government creates money:
    -Treasury prints a bond
    -If it isn't sold on the open market to an investor, the Fed buys the bond by creating new money
    -Treasury deposits the new money in bank and spends it
    -That new money came from nothing. It cost nothing and there is no risk to the Fed for lending it. If the government defaults on the loan, the Fed loses what? A book keeping entry.

    How the Fed creates money:
    -Fed decides to buy an existing bond
    -Fed creates money to buy the bond
    -Seller deposits new money in bank and spends it

    How banks create money:
    -Bank has no available reserves, but wants to lend (or invest)
    -Bank borrows money from Fed at the Fed funds rate
    -Fed creates new money and earns interest on the loan

    How banks create money 2 (Fractional Reserve Banking):
    -Only a certain % of assets are required to be held in the vaults
    -Banks can leverage their reserves by lending them out
    -When you borrow $30,000 for a new car, that money is created out of thin air. It is created by your act of borrowing.

    In all cases, interest is paid on the loan.
    In all cases, the money didn't exist and is borrowed into existence.
    Who creates money:
    - The Fed
    - The Government
    - The banks
    - The public by the act of borrowing

    All this money creation puts more dollar bills in the system.
    If you're playing Monopoly and the banker continually puts more dollar into the game, what will that do to the price of Marvin's Place? What does that do to the value of each bill?

    Since money is only created when new debt is created, then where does the money come from to pay the interest on the debt? By taking it from someone else who has borrowed it into existence. So this system must create constant monetary inflation until such point that noone will borrow any more money. Meanwhile everyone frantically runs around looking for ways to leverage or finance to create more money so they can meet their interest obligations. It's a reverse Ponzi scheme.

    - At the heart of this sits the Fed, collecting interest. A private organization. (A constitutionally forbidden organization)
    - Government condones this because the system allows them to print money at will (and keeps it hidden through the complexity of the banking system)
    - The public ends up paying the bill by working harder and harder to keep ahead of the constant devaluation in their dollars.
    (The Fed and the Government could care less if the dollars devalue because they'll just print some more.)

    So what's all that talk about the Fed "fighting inflation"? Since they are the root of inflation, what they are really fighting is "perceived inflation". Hence the misdirections and confusion tactics: CPI contortions, evil corporations, core rate, energy costs, blah blah blah.

    This is warfare, fraud, and mafia tactics all rolled into one. All condoned and perfectly "legal".

    Here's a film:
    Monopoly Men
  2. mizer


    Is the video link working for anyone?
  3. When are you going to get around to telling us that the solution is 100% backing by precious metals? Right now we're 100% backed by you and me. I'm holding up MY end. Are YOU? BTW, I keep gold in a sock under the mattress, under the wife, of course.
  4. congress should control the money supply. not a perfect solution, but at least it takes it out of the hands of a private corporation and into the hands of the democracy

    Jackson tried it, Lincoln tried it, Kennedy tried it.
  5. I was wondering why the fuss about Inflation and it supposedly being the reason for continued FFRate increases.
    Perhaps someone else has a longer term chart.
  6. ^yeah, pretty laughable, innit.
  7. The difference between those fights and this current one is the Internet and its ability to spread ideas without censorship.

    In essence, do you believe people are inherently stupid or can enough be educated? The more that help lead... maybe enough will wake up.
  8. maxpi


    O yeah, congress is doing such a great job with everything else, let's have them run the money supply.

    I can see the debate now, the Liberals are saying "screw inflation, we have a lot of poor people to take care of" and the conservatives are saying "how did we get into such a mess?" with a wink-wink to their cronies who are grinning and nodding back at them.
  9. Josh009


    I think the middle class would cease to exist.
    See you all in the poorhouse!

  10. great post.
    #10     Jul 7, 2006