The Beginning Of The End
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Debt = Money, Money = Debt

Where does money come from?  You would think that question should be so simple that any 10-year-old child could answer it, but that is not the case.  You see, the truth is that the vast majority of American adults cannot even answer that question.  Yet we all use money every day.  Without money our lives would fall apart fairly quickly.  But most of us never stop to think about how it comes into existence.  The truth is that bankers are the source of all money in the United States.  Either the Federal Reserve bankers create it, or individual bankers create it through the mechanism of fractional reserve banking.  In both cases, it is bankers that are creating the money.  In our financial system, the U.S. government cannot print money and no individual citizens are allowed to create money.  Rather, it is the bankers who have a complete and total monopoly on the creation of money in the United States.

Most of the time, any money that is created comes into existence as debt.  Either the U.S. government goes into more debt when it gets more dollars from the Federal Reserve or individual Americans go into more debt when they take out loans from individual banks.

First, let's examine what happens when the U.S. government gets more money from the Federal Reserve.

Under our current system (which is fundamentally flawed), the U.S. government cannot just fire up the printing presses and print a bunch of dollars if it decides that more money needs to be produced.

Rather, if the U.S. government needs more money it asks the Federal Reserve for it.

So who is the Federal Reserve?  Well, they are actually not part of the U.S. government.  In fact, the Federal Reserve is about as "federal" as Federal Express is.

The Federal Reserve is actually a privately-owned central bank that has been given authority by the U.S. Congress to issues our currency, set our interest rates and essentially run our economy.

All U.S. government debt is created through the Federal Reserve system.

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for "Federal Reserve notes", thus creating more government debt.  Usually the money isn't even printed up - most of the time it is just electronically credited to the government.  The Federal Reserve creates these "Federal Reserve notes" out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

The Federal Reserve then sells these U.S. Treasury bonds to investors, other nations (such as China) or sometimes they "sell" them back to themselves.  In fact, the Federal Reserve has been gobbling up a whole lot of U.S. Treasuries lately.  Some refer to this as "monetizing the debt", but that is not quite an accurate statement.

When the Federal Reserve creates money this way, it does not also create the money to pay the interest on the debt that has been created.  Eventually this puts pressure on the U.S. government to borrow even more money to keep the game going.  So what this creates is a spiral where the U.S. government must keep borrowing increasingly larger amounts of money, where the money supply is endlessly expanding and where the value of the U.S. dollar is destined to continue going down forever.

Do you think it is some big mystery why the value of the U.S. dollar has declined over 95 percent since the Federal Reserve was created in 1913?  Just look at what our national debt has been doing over the last 40 years.  It just continues to go up and up and up....

As long as the Federal Reserve system exists, the national debt will keep going up, the money supply will keep going up and the U.S. dollar will continue to decline in value.

This is not because of some big mistake.  This is what the Federal Reserve system was designed to do.  It was designed to trap the U.S. federal government (and by extension all of us) in perpetual debt.

If the U.S. government really wanted to get out of debt it would take back control of our currency from the bankers and would start issuing debt-free money.  But don't expect that to happen any time soon.

In fact, the Federal Reserve is just getting more powerful and becoming more out of control.  According to data released on Wednesday, over $9 trillion in overnight loans were made by the Federal Reserve to major banks and large financial institutions during the financial crisis in 2008 and 2009.

Now, the truth is that this number is inflated because each time one of these loans was "rolled over" it was counted as a new loan by the Fed.  So don't get too excited about the $9 trillion figure.  But still, the amount of money that the Federal Reserve just whipped up out of thin air and lent out to its friends at extremely low interest rates is absolutely mind blowing.

In 2010, the Federal Reserve has initiated a massive new round of "quantitative easing", and it is yet another example of how out of control the Federal Reserve is becoming.  So exactly what is quantitative easing?  Well, essentially what happens is the Federal Reserve conjures up gigantic amounts of money out of thin air and uses it to buy up things like U.S. Treasury bonds and mortgage-backed securities.  The Fed hopes that by injecting hundreds of billions into the system it will "stimulate" the economy.

Prior to 2008, the Federal Reserve had never been so bold as to print up hundreds of billions of dollars whenever it wants.  But now it seems as though the Federal Reserve is just going to zap hundreds of billions of dollars into existence whenever their friends are in trouble or whenever they feel the economy needs a little "stimulus".

So can you or I "zap" money into existence?  No, if we print money we go to jail.

Can the U.S. government "zap" money into existence?  No, only the Federal Reserve is allowed to do that.

But most Americans will never understand how this system works.

The second primary way that our money comes into existence is through fractional reserve banking.

According to the New York Federal Reserve Bank, fractional reserve banking can be explained this way....

"If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000)."

This is actually an oversimplification, but let's roll with it.  Many Americans would be shocked to learn that if we all went down to the bank today and wanted to take our money out, the bank would only be able to satisfy a small fraction of our requests.

The bank does not keep all of your money in the bank.  It lends most of it out.

In fact, any bank can loan out as much money as it wants as long as it keeps enough in reserve to satisfy legal requirements.

Each time a loan is made by a bank, more money is created and more debt is created.

Isn't this kind of insane?

Well, yes, but at least banks have to maintain a certain amount of discipline by keeping some money in reserve.

Unfortunately, Federal Reserve Chairman Ben Bernanke is on the record as saying that he wants to completely remove all reserve requirements for banks.

Keep in mind that Bernanke is in charge of "running" our economy.

There are a few members of Congress such as Rep. Ron Paul that have tried to hold the Federal Reserve accountable.  The following is an excerpt from remarks that Ron Paul made to Bernanke during a congressional hearing a while back....

"The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either."

Unfortunately, Ron Paul is vastly outnumbered by members of Congress who seem to believe that the Federal Reserve is doing a great job.  In fact, a bill that would have provided for a one-time audit of the Federal Reserve got shot down.  Apparently members of Congress did not think it was a good idea for the American people to be able to get a peek inside the institution that issues our money and runs our economy.

It is time for the American people to wake up.  The borrower always ends up the servant of the lender.  In America today, virtually all of our money comes into existence as debt, nearly all of our major purchases are made with debt, the popping of debt bubbles has caused almost every major financial crisis we have had, our state and local governments are drowning in a sea of debt, and our federal government has piled up the biggest mountain of debt in the history of the world.

Any economic system that is based on debt is destined to fail - including ours.  Isn't it about time to start asking ourselves how we got into this gigantic mess in the first place?

Unfortunately, Americans have been so dumbed-down by our pathetic education system and are so busy gorging themselves on endless amounts of entertainment that they literally have no idea how our system works.

Most people will never wake up until a complete and total economic collapse happens.  By then, it will be far too late.

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  • Gary2

    It is really as easy as this-TAX THE RICH AND CORPORATIONS AND SPREAD THE WEALTH. debt/deficit issue solved.

    Yes folks it is really this easy.

    The fact this does not get more attention is proof that the rich own darn near everything and so are able to block honest discussion.

    Look at the rigged Pete Peterson town hall meetings…The choice to tax the rich and corporations and spread the wealth was not even an option. Also for the cat food panel (deficit reduction panel)-tax the rich and corporations and spread the wealth is not even one of the choices even though it would solve the issue.

    Most people don’t give a hoot about the deficit/debt. We need family supporting jobs.

    Why is there no working people on all these commissions? No one on these commissions ever has to worry about paying the rent or eating. They do not know who we live so how can they possibly know equitable solutions. The rich got most of the gains and now they need to pay all the costs. Even the right wing-nuts should be able to see this.

  • flubadub

    Yeah but. . . yeah but. . . I got nothin’ man.

    Seriously, that was one of the best explanations of the Fed and the horrible financial situation it has put our country into that I have ever read or heard.

    One of my grown sons, who is working as a server in a restaurant while trying to pay back his student loans, was visiting on Thanksgiving and the topic of our national debt came up. I mentioned the Federal Reserve and its role in the economic pandemonium it will eventually be held responsible for. He asked for details. I told him that it was complicatd. He reminded me that he was not stupid so I told him I’d get him some information. This article ought to do it.

  • http://brunolem.wordpress.com Brunolem

    First, this is not an American problem; the same is true for the whole world. And every central bank, in every major country, is doing the same as the Fed.

    In fact, Japan has been doing this for over 2 decades, and is still standing, with a strong currency, even though its ratio debt/GDP is double that of the US.

    It all boils down to one thing: faith!

    Currencies are worthless, but people BELIEVE they have value and this is all that matters.

    Banks are to money what the Catholic Church is to religious fervor. The Fed is their Vatican and Bernanke is their Pope!

    The banks and the Church sell the same thing, faith, to the same herd of sheep.

    And despite repeated abuses and scandals, the Catholic Church has been rock and rolling for 2000 years…

    Click on my name to visit my blog.

  • bob

    bravo! system will crash, and reset with natures default currency gold and silver

  • Bruce

    Gary the welfare queen is that all you is sit on the computer and post over here spreading your communist cancer? You want solution arrest all the Eco Nazi and opening up logging mining and oil drilling on land here in America would create 5 millions jobs and drop the cost of gas down below a dollar. Gary you would have to really work in the oil field slacker on welfare smoking dope talking about unions and taxing the rich won’t cut it.

  • Grumpy

    Anyone care to guess how long Gary can remain totally, completely, and utterly clueless about reality? His whole life, you say?

    Your shtick is ignorant, ill-considered, ill-informed, puerile, juvenile, irrationally selfish, and boring. Get a new routine – this one was worn out months ago.

    Your continued harping on a false paradigm shows your complete lack of understanding of any of the issues posted to this otherwise fine and informative blog – truly a case of pearls before swine. Your vacuousness is a fine example of the average ‘Mercan lack of critical (or any other type of ) thinking skills, and those of us who understand the issues at hand hope like hell you never procreate.

  • http://www.planorperish.com/ Gutter Economist

    (1) Blaming all US problems on the Federal Reserve without discussing the Gold Standard is a waste of time.

    http://www.planorperish.com/?p=3311

    (2) It is too late for Americans to “wake up”.

    (3) If you want to prepare for what is coming and even profit, visit my own website.

  • Maria

    Wonderful piece of work E.C.B.! Thank you.

    I just pray that a “complete and total economic collapse” has not already happened. The speed at which we see entire nations succumbing to central banking’s intended purpose is alarming.

    The race for the gold has literally begun!

  • Maria

    The following is a link to a short video on the same subject

    http://www.youtube.com/user/thealexjoneschannel?blend=1&ob=4#p/u

    End the Fed and IRS.

    Research Save Vote Pray
    R.S.V.P.

  • Owen

    Planned collapse and introduction of the cashless mark of the beast system. Get your Bible out if you want to know more.

  • http://moneyedpoliticians.net Jack E Lohman

    What do you mean, Gary2? Tax corporations so they can pass the costs on to consumers, or outsource their jobs to other countries? No, taxes on corporations should be ZERO.

    Add tariffs or a VAT? Same effect.

    Tax the wealthy? Absolutely, and even more progressively. At least until they leave the country for tax havens elsewhere. But then change the corporate laws to prevent payments to them.

    So should we socialize healthcare and eliminate these costs from corporations, all while extending health care to 100% of the public.

    Eliminate the FED? What? And turn it over to the politicians that are on the payroll of the bankers? No, audit it and lay out regulations, but until we get public funding of campaigns I don’t want our politicians involved in anything.

    And no, I am not a shareholder. Just a retired geezer who cares.

    Jack Lohman …
    http://MoneyedPoliticians.net

  • Mr Carpenter

    As usual, our resident broken record Gary, comes up with his perpetual “solution” to everything….

    For the rest of us in the human race who realize that there are always going to be some kind of disparities in wealth, we can look past his comments and look back to the article in question and say – kudos.

    Very well written. Succinct, lucid and clear.

    I shall be forwarding a link to friends.

    Though Gary, I will admit that the top 1% of the US population owning 40% of the total wealth has put us beyond what virtually any Banana Republic ever has been in that regard.

    But the solution is not to try to “tax” the rich; they control the government. Bought and paid for! Any time it “appears” as if the rich pay higher taxes, if you dig past the veneer, you’d realize that there are tons of loopholes in the tax law. That’s how it works.

    It’s like this; humanity has this nasty habit – all of us – called our old nature. Evil. It comes out in many ways, but greed is what we’re talking about here.

    Greed can come in many forms. It can come in the lazy urban minority woman who becomes a baby factory for multiple minority men (who never see their children) so as to soak “the man” (i.e. the rest of us) for “free” money, food stamps, housing, etc. It can come in the Union ranks just as easily. It can come in the uber-wealthy and usually does, but not always. It can and does come to all of us in one way or the other.

    History is filled with nations, dynasties and empires which rose, flourished, decayed and died. We of the Western World in in terminal decay.

    It’s probably not “stop-able” at this point. But this does not mean we roll over and just give up.

    Get up! Learn things! Fight for what’s right! Go to work! Start a business! Do something constructive! Become wise! Put away some real money (gold, silver) for when things collapse!

  • David Robertson

    There are additional important facts worth mentioning to round out the picture and to gain an understanding of how the American public is being robbed blind and how the big banks are slowly absorbing all the smaller banks.

    Any bank in effect is acting as an INTERMEDIARY although the law has been written to give them the status of principals.

    When money is borrowed, i.e. created by the bank, it is deposited into the account of the borrower and used to purchase something which the borrower does not own e.g. a house. The money loaned is loaned against the security, the mortgage, on the house. So, the bank lends money it does not have against the security of an asset that the borrower does not own. (READ THAT AGAIN)

    The bank in every case is acting as a facilitator of the sale but in doing so acquires effective ownership of the security, AND THE UNDERLYING ASSET, until the loan is repaid. It does this by creating money out of nothing. Therefore, the banking system as a whole is fully guaranteed by the taxpayer and has been authorised to remove ownership of all assets from the taxpaying public.

    THE PROCESS OF CONSOLIDATION:

    A bank must begin with capital and lend out at the fractional reserve rate of from 12.5 times to 50 times tier one capital (was 8% but has been as low as 2%). These loans then become deposits in the accounts of the borrowers. This is one simple method for a bank to increase the number of its depositors.

    HOWEVER this is why smaller banks get into trouble and why larger banks gobble them up, or at least get to pick over their assets and acquire the better ones. In my opinion it is a deliberate strategy of the larger banks to freeze out smaller banks if their assets begin to exceed their liabilities by too great a measure. i.e. if they begin to cut into the big banks’ profit margins by making too many loans.

    THE MECHANISM OF CONSOLIDATION:

    The smaller banks do not hold as many deposit accounts as the larger banks. Therefore any money loaned out i.e.created by the smaller banks usually ends up in the accounts of the larger banks who then refuse to lend it back to the smaller banks in the interbank market when it suits their purposes to withhold it. This is always presented as a rational risk management decision but is simply a predatory move against the smaller banks. Since the taxpayer is always on the hook for any losses this is a risk free operation for the big banks.

  • Matt

    Gary,
    I’ll say it again (and forever) – your idea (socialism) only works until you run out of other people’s money – then you starve. If you became king and declared a 60% tax rate on the rich, they would leave the country, and then you’d have no rich to tax. Then what do you do? Problem not solved.

  • http://www.fortapopka.com Mike

    Seriously Gary how many spread the wealth nations still exist and are prosperous. Taking from one to give to another does not create anything it just makes the creators stop creating. European nations have been taxing at tremendous rates and they are worse off than us. I know I’m wasting my time with this as you post the same boiler plate comment on every post like a good socialist soldier.

  • Lennie Pike

    Currencies are worthless – true, unless they can be exchanged for real money which is gold and silver. Before 1965 you could take a $1 Federal Reserve note down to the corner grocery store and trade it in for 4 silver Quarters. The people behind the curtain at the Federal Reserve did know though that not everyone would get change for every FNR they had. Today things would be a little bit different.

    Some of this power that an individual had back then remained till 1968 when the JFK silver fifty cent piece was discontinued, and then all of that power evaporated when Tricky Dick Nixon was ordered to take us off the gold standard in 1971 because the U.S. could not or did not want to pay it’s debts in gold. You can be sure that was not an independent decision and that he knew of the consequences to him personally if he had not made that unconstitutional decision. Why do we even have a Supreme Court and how often do they have pressure placed upon them, or are they chosen members of this gang?

    Also you can be sure that the people who controlled the U.S.A’s gold did not consider it to be the property of the People of the U.S. but considered it to be their property as has been recently proven, and those people are not even Americans. How stupid is that?

    For those currencies which are not exchangeable for gold and silver (none of them anymore), faith in them IS the only important factor. The problem is that as the supply of a fiat currency grows larger by design to enslave people through debt, or by the hyperinflation that occurs mathematically when it is reaching the end of it’s usefulness, it commands less faith because it’s purchasing power decreases.

    In 1971 the U.S. defaulted on it’s debts by refusing payment in gold, and now it is very close to defaulting by offering payment in paper money due to it’s worthlessness – the amount owed remains the same but that amount won’t buy didly. All part of the plan to arrive at the proper time to implement a one world currency and enslave and control all people. Money is not what is most important to them – they have or can create all they need or want of course – already.

    Countries can stand only up to a certain point with this system until the day of economic collapse arrives and it alway does. Afterwards, sometimes there is a return to real money usually after a lot of understandable violence in the streets (the love of money is the root of all evil), but most of the time the deception, theft, and control continues on by the same people with a new currency. If there is a return to real money, the moneychangers who feel the need to partially enslave the world but more importantly control the events of the world, begin the quest to regain control of fiat currency and usually do so pretty quickly.

    Nice gig if you can get it, but to keep it, bribery using the very same currency you are in control of (so easy) usually suffices to keep you in control. If someone comes along who can not be bribed or blackmailed, the threat of violence or actual murder is required and it is sometimes necessary to carry it out. These are the basic laws of crime and kind of like the laws of physics there is no getting around them. You either choose to be a criminal or are one (severe disobedience to God and hate for your fellow man) or you don’t or are not.

    Of course there will always be fiat currency criminals, and a new fiat currency is very close to being offered to us on a global scale, so the command: “Give to Caesar that which is Caesar’s and to me what is mine” is a wonderful alternative to have available to EVERYONE – for God, everything is possible.

    p.s. To have your spirits lifted a lot, go to http://www.kingworldnews.com and listen to the great freedom loving English orator Nigel Farage talk about the intentional destruction of what remains of the sovereignty of the governments of countries who have joined the E.U. I think that’s what’s holding us back here in the U.S. from taking our country back – no one here has the ability to use the English language like this anymore.

    It’s no coincidence that financial collapse is happening eveywhere.

    • Andrew Patton

      What makes you think Nixon needed any persuasion? Most central banks were formed or gained substantial power because their nation’s treasury was depleted by war. Nixon was struggling to fund the Vietnam War, and inflation was heating up at home because of the deficit spending. $35 would not buy an ounce of gold in the US in 1971, but we were expected to sell our gold reserves for $35/ounce to foreigners.

  • ReBootd
  • sharonsj

    I have a reporter friend in NY who covers all the local news, especially town meetings and local government. I spent half an hour on the phone last night having her explain why–thanks to the tanking real estate market–municipalities have no money.

    The bottom line was that (1) banks weren’t lending money because they had none and (2) both the government and the banks used this debt=income funny accounting to pretend everything was okay. If you and I did this, we’d be broke and in jail. We are so screwed….

  • zack

    The Fed acts at the pleasure of Congress who acts at the pleasure of the American people. We bear some responsibility for enslaving our own nation in debt, and for allowing the Fed to funnel wealth off to fat-cat bankers. Spread the word about the Fed, and support politicians like Ron Paul that are trying to rein it in.

    We help Americans find jobs and prosperity in Asia. Visit http://www.pathtoasia.com/jobs/ for details.

  • Lennie Pike

    Clarification!!!

    Except this new currency may be the one that ain’t gonna have nothing to do with Caesar or the taxes he wanted paid to him, and will have the loss of your soul as a prerequisite to use it – hence the wonderful alternative that is available to everyone.

  • Richard W

    “It is really as easy as this-TAX THE RICH AND CORPORATIONS AND SPREAD THE WEALTH. debt/deficit issue solved.”

    Wow, some real original thinking going on here. I’m sure no one has ever come over with that one before…

  • Alan

    This article is typical, super-concervative twisted economics. Ron Paul is NOT an authority on economics and his ideas are way out there. The Fed Board is appointed by the President and the Senate. Before the Fed existed, the money system was completely chaotic and going to the gold standard would make gold $100,000 an ounce or more to back up all of the money supply.
    The debt problem is because taxes have been cut and spending has risen out of control. In every other war the US has been in, taxes were raised to pay for the war. Now we think we can have our cake and eat it too. Also deregulation of the financial sector led to the recession –markets fail unless they are regulated to prevent failure. So the issue is not the FED as this clever author thinks it is. The Fed is trying to solve the problems created by the conservative Republican administrations from 1980 to 2008 and Congress. Clinton, the only Democrat raised taxes, we had incredible prosperity and the government had a surplus!

  • Spencer

    Gary – you always so overly simplistic in your suggestion. Stealing (you call it taxation and wealth redistribution), is wrong and would lead the country to much worse peril and poverty then the measily 10% unemployement we have now.

    You seem to love good jobs, but you seem to hate employers and profit – if the government pits itself against employers (which unions always try to do), then they’ll have no use trying to invest in this country.

    Take a look around the world, when governments act the way you suggest the countries go bankrupt. When they are friendly to profit and friendly to business, they flourish.

    In America’s case, it isn’t fat profits that’s bringing the country to its knees…it’s the country’s over consuming, entitlement seeking people who elect governments who continue to feed those socialist needs.

  • http://thecivillibertarian.blogspot.com/ Frankenstein Government

    That people don’t understand that debt is money creation…speaks volumes about the deceptive means the FED employs to strip you of your wealth. Including their BS name which is intended to make you think the “FED” is on our side- your friend.

    The FED is the enemy.

    I saw someone mention Japan’s zombie economy. In Japan, the people own their enormous debt. It isn’t sold off to the world. This is an enormous difference and it’s like comparing apples to potatoes. Sure they are a zombie economy for two decades- but when the FED manages to get hyper inflation started here…we will have to sell our debt to the world. We don’t have any savings. When the SHTF here, the debt clock will be whirring like a propeller on a Cessna.

    Source: CIA factbook – National debt by Country

    Notes: Japan’s Public sector debt is very high. However, Japan has a high savings rate which makes it easier for the government to finance the debt. 90% of Japanese debt is owned by Japanese individuals. US has a low savings ratio and 25% of US debt is owned by foreigners. Nevertheless the National Debt of Japan is a real burden for the economy.

    We don’t have savings here. We must buy Icrap instead on credit cards.

  • Craig

    It took 97 years for the dollar to lose 95% value, it will take 10 years for it to lose most of whats left. Sure they may keep using it, but who wants to pay $200 just to fill up their mini van, so they can get to the store and spend $1000 on groceries. Its lookin bad folks, Is there any place I can buy silver in 1/10 oz rounds?

  • http://www.washingtonreb.com Walking Horse

    An old saw that is applicable:

    * Gold is the money of monarchs
    * Silver is the money of gentlemen
    * Barter is the money of serfs
    * Debt is the money of slaves

  • http://thelifeofmanquamanonearth.blogspot.com/ Mark Plus

    Libertarians like Ron Paul apparently don’t see the irony of using the power of the state to threaten the Fed owners’ private property rights. Wouldn’t abolishing the Fed amount to a “taking,” and therefore require the government to compensate the Fed owners for their loss under the Fifth Amendment? And how much would that cost all of us in additional taxes?

    • Andrew Patton

      The Federal Reserve “owners” (actually holders of preferred stock) would be entitled to be repaid in full for their paid-in capital and accrued dividends. This would be a one-time payment of about $28 billion. All of the profits generated by the Federal Reserve in excess of the amount required to pay dividends on the preferred stock and maintain a capital surplus equal to the paid-in capital are paid to the Treasury on a weekly basis.

  • Gary2

    I appreciate everyone’s feed back and comments on my continuing to say that we need to tax the rich and spread the wealth. The fact that I am often criticized personally (I do not mind this) simply reinforces my belief as people are not addressing my argument but me which must mean that I am for the most part correct.

    I really truly believe that this is the correct thing to do and the fact that a lot of folks agree both on this site and off this site means I am probably correct.

    People need to get rid of the capitalism myth. It may (I do not really believe this) be good at generating wealth but is fails miserably (I 100% believe this) at distributing it as anyone can see. I want my country back from the rabid tea baggers and rabid republicans. Whatever happened to the Eisenhower moderate republicans? (an oxymoron if there ever was one)

    Jack I will concede your point on taxing corporations but then no more corporate welfare ever. No more tax payer funded state health insurance supplementing their low pay crap jobs. Employee free choice act must be law to level the playing field. Then your idea of not taxing corporations MAY work.

  • http://www.FedUpUSA.org Steph

    {{Unfortunately, Federal Reserve Chairman Ben Bernanke is on the record as saying that he wants to completely remove all reserve requirements for banks.}}

    Uh, Ben Bernanke and Hank Paulson successfully DID remove all reserve requirements in 2008 with the passage of EESA. Reserve requirements are zero. In addition, all leverage limits were removed before that, by Hank Paulson.

  • jon

    “The Money Masters” and “Money As Debt” are two excellent documentaries to watch which quite thoroughly explain our system of money. “The Money Masters”, being the dryer of the two, goes the furthest in depth into this topic, while “Money As Debt” is the better of the two for the “simple” folk in getting the information across.

  • ReBootd

    Alan, watch the videos I posted above – it is a fascinating history of fiat and gold money, how the Fed came to be, and what is happening now. I promise it will change how you think of it.

  • Barry

    Compliments to the author…if everyone understood what you have written here…things might actually change…of course the right wing nuts have an agenda to prevent this knowledge from being known…they are too greedy and you could hit them over the head with the truth and they would still have the same opinion.

  • Barry

    The problem is we don’t forgive debt every 7 years and we don’t keep the Jubilee…don’t any of you right wing nuts read the Bible?….I doubt it. The Jubilee would be defined by you right wing nut jobs as “socialistic” well guess what..Jesus was the biggest “liberal” that ever lived…but oh yea…you don’t read the bible.

  • http://greeneracres.spaces.live.com/default.aspx Michael

    In addition to the excellent information and opinions on this blog, The Dylan Ratigan Show on MSNBC explains much of the “economics” and politics around what is going on.

    I wonder sometimes if Mr. Ratigan is going to end up like some of the others who have the brave heart to expose and stand up to the plutocratic financiers ruining, I mean running the economy and the world!

    I actually think there are silver linings in the dark clouds they are forming over our lives. One, more people realizing just how much control of our lives are in the hands of others, two, we take back our control and three, we realize we don’t need giant central banks or super markets like Walmart, credit cards/credit ratings or most of the other hocus pocus “economics” they say we do.

    I learned quite a bit about economics from a man named Henry George @

    http://www.progress.org/books/george.htm

    I am not saying his model of politcal economy is the right one, but I did learn a lot about the basic components of economy and how economy works.

  • RunVampRun

    Anyone bought silver from the US Mint lately? My American Eagle Silver Proofs order did not go through yesterday (online order)so I had to call them by phone….they were out of the coins, so my order could not be processed until several hours later! My coins will be minted on the 9th… looks like a ton of people are betting the dollar will be VERY WEAK for a long time!

  • Kevin

    If all the assets of all the rich were confiscated we would still come up short of funds. There is 600 TRILLION in debt and the entire world economy is 54 TRILLION per year. As Jack Swagart said in Apollo 13, “I can add”.

    Our trade deficit is aproximately 50 billion per month. That’s 50 billion in wealth leaving the US every month, month after month. That can’t be sustained with the continious creation of currency. Historic pictures printed on high quality paper has become the main export of the US.

    Gary2, you stated the below.

    “It is really as easy as this-TAX THE RICH AND CORPORATIONS AND SPREAD THE WEALTH. debt/deficit issue solved.”

    “Yes folks it is really this easy.”

    Nope it’s not “really this easy”. If the math worked out (and it does not, the profit just is not there)we cannot trade paper currency for foreign made goods indefinately. Every new additional dollar produced dilutes the value of the existing currency. The madness of de-industrialization and outsourcing has been with us since the early 1970s. Billy Joel wrote “Allentown” 30 years ago. Yes, it’s been going downhill for that long. Debt was the opiate that appeased the masses. The junky body politic is about to to go through either overdose or withdrawl. Neither outcome is too apealing.

  • Steve K

    What people, particularly gary, need to realize is that most of the people that are responsible for our financial system do not reside in this country.

  • flubadub

    In economics, as in physics, for every action there is an equal and opposite reaction. If I raise the taxes of a corporation that enjoys making, say, two billion dollars per quarter the corporation will pass the tax increase onto the consumer to maintain its two billion dollar quarterly profit.

    I hate to single out poor Gary because, well, let’s just say he’s got a lot to learn, but if I asked anyone if they’d be in favor of a $1 / gallon gas tax increase they’d probably tell me how that tax would hurt the poor.

    Levy huge tax increases onto profitable corporations and the only way they will pay those taxes is by passing them on to the consumer. Regardless of whether the tax is levied on the end product at the time of sale or on the profits of the corporation providing that product we, the consumers, will always be the ones paying that tax.

    Having said that I do beleive that moderate tax increases on most of us are warranted, both as individuals and businesses. In the past we prospered as a country with tax rates higher than those we have now and in times when less revenue was required to meet the rediculous outlays the treasury faces today.

    All the arguments criticizing the greedy rich or defending the hard working entrepreneur are moot. Taxes need to come from somewhere and, unlike Santa, the IRS has no naughty or nice list. Tax revenue needs to come from wherever it is available; not as punishment and not as begged alms. It takes X number of dollars to keep the U.S. economy running and, many who’ve benefited most from the American experience http://www.fiscalstrength.com/ are willing to pony up their fair share as long as their contribution is not a futile attempt to shoulder the burden alone.

  • orsobubu

    There are two main ideas here:

    -the author, says the money is created out of the thin air and worthless, and requiring to return to a gold standard, to tax reduction and so on.

    -alan or gary, say central banks have to create all the money required in order to re-ignite the economic cycle, and increase taxes above all for the rich.

    -both these theories are flawed. as karl marx discovered, money is work hours robbed by capitalists (surplus value) and transformed in capital and then money (largely uncorrect in these over-semplified terms). so money HAS value, when it is a result of real proletarian stolen hard work. alas, the theory says also that the profit (surplus value) rate is fatally going to fall, due to competition, automation and other factors, so crisis kicks-in, production/employment/money decline, banks stop borrowing money, frauds and crimes surge, protectionism spreads out, wars start.

    -to counteract these horrible effects, brought by the flawed free-market ideology, bourgeoise governments will have two main options: restrict business and monetary base (gold standard, higher interest rates, etc), with the result of millions of poors starving to misery and death, like in XIX century crisis. This will result in civil wars and counter-revolutions. Or take the inflationary route, like Weimar Republic, also transforming the economy in a controlled state capitalism, like Soviet empire, resulting in big wars among blocks, like in XX century fascist conflicts.

    -only solution is a proletarian international revolution leaded by a leninist party, where market, banks, salary work, surplus value, capital and money be abolished and substituted with centrally planned work where the products be exchanged with other products, depending – at least in a first stage – on individual effort and number of average worked hours.

    • Andrew Patton

      Capital is savings. Capital leverages labor (i.e. a farmer can produce more with a tractor than with a backhoe). To compensate the savers for the risks associated with investment and the act of delaying their gratification in order to save, investors demand a return. No return on investment=no savings=labor’s productivity drops, in some cases to zero.

  • Gary2

    kevin-then taxing the rich will be a good start to bring the debt/deficit under control.

    Barry-loved your posts.

  • Gary2

    BTW-Most other developed nations who are more socialist are WAY ahead of America on just about every measure such as:
    -High Speed Internet
    -Infant mortality
    -length of life
    -amount of paid vacation/sick leave/maternity leave
    -number of people who actually vote
    -No medical bankruptcies
    -Health care for all
    -a lot even have dental care
    -less people incarcerated
    -number of high school graduates

    I could go on and on. America at one time was maybe in the top 3 but we are no longer even close to #1

    Clearly more socialist countries beat capitalist America. Facts are facts.

    Before some brain dead right winger says I should move-this is my country and I am an American. I want to make my country better. I want my country back from the rabid right/rich who stole it. This is my country too!

  • mondobeyondo

    You don’t have any money.
    Not if you have Federal Reserve Notes in your pocket or in your bank account.
    What you have is debt. Our entire society is now built on debt.
    Charge your credit card – add to your debt. Take out a bank loan – you owe debt to the bank. And so on and so forth.

    None of us has had any real money, for ordinary daily financial transactions, in their pockets since 1964.

  • civonamzuk

    “The money masters”
    “The secret of Oz”
    “Renaissance 2.0″
    “Creature from Jekyll island” (you-tube)

  • Kevin

    Gary

    Were bleeding off 50 billion per month in trade. That’s 600 billion/ yr or 6 trillion over a decade (probably more because it has been increasing). I don’t care where the Tax funds come from we’re backsliding and there is no plan to reverse it. There’s where the problem is. The rest such as too much debt and insufficient tax revenues just addresses the symptoms. If we confiscated all the wealth from “the rich” we cannot come up with enough to settle the debt. As long as we import far more then we export we’re going to come up short in the wallet. A “service economy” is in reality the absence of an economy.

    OBTW both parties aided the industrial evisceration with 85% of the Senate Republicans and 80% of the Senate Democrats voting yea for China Free Trade. OBTW Clinton signed it into law along with NAFTA and deregulating the banks. No harsh words come from the media when a Democrat does Wall Streets bidding. A Republican President would have made on difference. While they would do the same the media tends to address their close ties to Wall Street while ignoring the Democrats doing the same.

    Ya cant loose when both horses are bought in a two horse race.

  • Mr Carpenter

    Are we to be pushed into a choice between Fascism, as currently seen forming in the Untied Status of Amerika, or Stalinistic Communism and total control, as it appeared that the world was poised to “choose from” 80 years ago?

    There is always a third way.

    The founding fathers of this once great country showed us that.

    People who “diss” Ron Paul and other Libertarians and Constitutionalists don’t seem to understand the concept that when people act as citizens for their own benefit, and are allowed to live their productive lives in peace, that prosperity flourishes. As long as honesty is allowed to come out on top.

    The current “paper fiat money” is dishonest at the most fundamental level, because of many reasons.

    1) It’s illegal. Read the Constitution. Congress had NOT authority to “give away” coining of silver and gold money to “the Fed”.

    2) It’s dishonest. Real money should have intrinsic value of some kind; why else do you suppose gold and silver as well as copper (for small change) have been used for the purpose for over 5000 years?

    3) If the gold in Ft Knox really still exists (which it probably does not since Clinton, for one, was known to have illegally sold much of it) – and it belongs to “the Government” – and (duh!) if we the people are truly what makes up the government, then we have a ready supply of raw materials for REAL MONEY. Of course, this relative lack of gold will mean the value of gold massively increases. Perhaps an ounce would be sufficient to buy an average US car, selling for $28,000? So an increase of 20 X in the “dollar” value of gold, in this example.

    I can already hear the objections of some who say “well what about those gold bugs who’ve managed to buy a few coins? It’s UNFAIR that they’ll suddenly be “enriched.” Why is being smart and realizing that honest and reality are what they are something to be punished or taken away? We’re back to control of dummycrats and repugnicans, in that case.

    So there will be a “new” wealthy group of people – average working American folks who had brains enough to buy a few gold coins….

    Better to have that than what we have now, I say.

  • knowdoubt

    The Federal reserve system is flawed but this does not mean that a fiat currency system is flawed. In fact the most just & logical system is a fiat currency.
    A GOLD STANDARD OR ANY FINITE COMMODITY BASED STANDARD
    IS NOT THE ANSWER!
    Wealth or value actually is created almost out of thin air, whenever a child is born, a precious commodity or resource is mined or harvested, or intellectual concept is conceived, etc.. Currency (money) is as we all understand a construct as a representative substitute for real things of value in order to serve as a universal asset or value trading certificate. In reality then, the total money supply is equivalent to the total value of all assets, commodities &
    ideas of the society. The sum of these diverse things of true value is in constant flux & of theoretical infinite supply potential, therefore gold, or any finite commodity is a horrible standard to base a money supply on as it will always inevitably lead to deflation of asset values as the pool of true value assets (people,things, constructs & ideas) this money represents outgrows the finite money (currency) supply. Thus actual things of value would continually drop in price in order for there to be enough money to go around. This paralyzes economic activity as no one wants to invest in something they know will be worth less in monetary exchange rate later. It’s a system of guaranteed devaluation of assets. A constant waiting game of buy later as it will be cheaper.

  • http://www.infowars.com/america-is-held-hostage-by-global-private-bankers/ Barry

    Everyone should watch the Alex Jones broadcast I have attached which reinforces why debts NEED to be wiped out and a Biblical Jubilee style redistribution needs to take place VERY soon.
    People really need to wake up to the dangers of concentrated wealth in union with geometric compound interest which the Bible clearly forbids!!

  • Mr Carpenter

    Barry, I suspect a Jubilee and write-off of all debts is what is really needed.

    But will it happen? Not a chance.

    Neither will honest money happen. Sadly.

  • Garyisacommiepinko!

    Poor Gary. He is so stupid, all he can ever manage to articulate in his posts is- “Tax the rich and redistribute the wealth.” I guess that is one’s only hope/goal for someone who works at a fast food restaurant. Just because he is not marketable, he feels he is owed by people who are.

    In his last post he states, “…most other developed nations that are more socialist, are way ahead of America…” Really??? Gary, which countries are you talking about? Greece? Ireland? Portugal? Spain? Iceland? Italy? Gary, how are those countries doing right now? Oh, I know, how about the UK? Oh, that’s right…you got patients dying over there, because the government run healthcare nurses don’t even give their patients water to drink. Yeah Gary, all of these countries sound like they are way ahead of us as you state.

    Gary, to make you feel better, I will close with something you’ve heard all your life- “Yes, I would like fries with that.”

  • http://h4x354x0r.com h4x354x0r

    If debt is how we create money, how do we pay off debt? There are other sources of wealth creation. Those sources of wealth creation are what pays off debt: Labor, resource extraction, and productivity gains all create wealth which is used as collateral for, and eventual payment of, debt.

    Look at the run-up in debt for households, the run-up in debt for government, and the run-up in apparent wealth of the richest 1% in this country. The rich people’s newfound wealth is really just our collective newfound debt. No wonder the economy seized up when people started losing their jobs in 2007.

    This country has been living off debt expansion for 30+ years now. At the height of the housing bubble, average mortgage and consumer debt together was 120% of after-tax income. That’s completely unsustainable. We still have a ways downward to go to reach baseline historical trends in debt too. Kinda scary.

    Just because gold has been the fiat currency from the dawn of human civilization until 1960 doesn’t mean it’s not still just fiat currency. In the end, it is. If the economy really collapses, who will give you food for those gold coins?

    • Andrew Patton

      One person’s debt is another person’s asset. Money and debt in general are claims on future resources, and people are willing to trade current resources for claims on future resources as long as they trust that those future resources will actually be delivered. When a bank makes a loan, they book the loan as an asset and the money created by the loan as a liability. When the borrower uses that money to buy something, the seller can demand that the bank redeem that money for legal tender, or they can keep the money on deposit. The borrower pledges resources in the future in exchange for the right to procure resources today, and the bank assumes the obligation to cover the claim on resources in exchange for the borrower’s promise to repay those borrowed resources with interest.

  • Lennie Pike

    I disagree with you Knowdoubt.

    With a gold, silver, nickel, and copper standard, the economy would not be paralyzed, history provides the proof. It would grow at a lot slower rate but that is a good thing because almost 100% debt free wealth is created as opposed to wealth which is based to a large percentage on debt.

    Fiat money causes debt bubbles which are intentionally built into the system to benefit the fiat money controlling criminals and their friends at the expense of everyone else due to the devaluation of the fiat currency that takes place during the growth of the bubbles.

    I bet you just thought to yourself: but everyone is affected by inflation. There are arguments which can cause anyone who makes that statement to be severely embarrassed. When the bubbles burst, the controllers of the fiat money and their friends are also the ones that benefit at the expense of everyone else and everyone else suffers even more than they did during the inflation. Most people have noticed the recent proof of that being true. The friends and owners of the fiat money system, (which is a PRIVATE!!!!!!! system) Wall Street and the Elite, are getting wealthier and everyone else is getting poorer. And they are not getting wealthier by creating wealth or even earning profits. They are getting wealthier through bailouts, direct gifts of freshly printed money from the Fed (themselves), theft and destruction of local and state governments, pension funds, other countries and any sucker they can con. What a big surprise.

    When the fiat system is approaching the end of it’s life due to out of control debt, then that inflation becomes hyper-inflation and at last the fiat system controllers and their friends usually get what they have coming to them as the suffering becomes impossible to bear. It is never pretty. History provides the proof of this also.

    With a gold standard, the fact that prices may decrease is irrelevant, the question is – what is the purchasing power of the money. With a gold standard, the purchasing power of gold has always remained constant regardless of the prices. And that confidence in the soundness of the money does a lot to create new businesses and stimulate existing ones because people know what can be expected far out into the future.

    For the same reasons, under a gold standard, financial institutions thrive and financial instruments are trusted. They are constructive for society and not destructive.

    Under this great fiat system we have now, Wall Street banks, AIG etc. are bankrupt. They have to break all accounting rules and steal money from the American People and others to stay in business but will not allow the American People to do the same – that would be a crime punished by imprisonment and they are the ones who enforce it. They own the law and can will make it up as they go along if they have to break the very laws they paid for.

    It is NOW that our economy is paralyzed, not during the years the U.S. had a gold standard. And it is due to the conditions that have been created by having a fiat money system. Business owners have zero confidence in the future and can not plan with confidence – so they don’t plan at all. This lack of confidence is due mainly to the unbelievable level of DEBT!!!! that the fiat money system has created.

    When wealth is created under a gold standard, it is mostly 100% owned by the person who created it and there is very little debt owed to a gang of criminal fiat money controllers. Also as most of us well know, wealth is not so easily created as you said, it sure isn’t almost created out of thin air unless you are a central banker or one of their friends, or ilk. The examples you gave of wealth coming from thin air were very weak. How about using examples like these instead – a house built, a car motor rebuilt, an airplane maintained, a brick laid, a ditch dug.

    Also and this is HUGE – under a gold standard, central bankers can not install a system of tyranny as they are doing now worldwide.

    The best argument for a gold standard would be to ask someone who has lived under both: ” under which system were you happier and more free” Take a poll.

  • A.N.

    We dont need to end the Fed, just strip it of its money power creation and return it back to the govt to create money interest-free. Its the interest off the debt that is killing the economy which is totally unnecessary. And end the practice of out-of-control fractional banking. Or the other option is to force the banks to redistribute the money the made off the interest (from generating ‘money’ that never existed to begin with) back into the economy instead of in their pockets. The whole debt-based system is nothing but sophisticated counterfeiting and should be outlawed. END THE PRACTICE OF DEBT-BASED MONEY CREATION AND ISSUE DEBT-FREE CURRENCY BY THE GOVT (PEOPLE’S REPRESENTATION) INSTEAD OF PRIVATE BANKS

    • Andrew Patton

      But why should we trust the politicians with control of the money supply, either? That whole gold vs. silver controversy in the late 19th century didn’t go over well.

  • Richard

    Check out a brilliant solution at, “The American Monetary Institute” (they have a website).

    There is a bill in language ready to intruduce in the house. It is called “The American Monetary Act.” I’ve never seen a better monetary reform proposal.

  • http://WBDM Joe in JT

    When the very first banker figured out he could hold a persons gold in his vault and issue paper money against the value of the gold (because gold is heavy to carry around) the gears in the bankers head began to spin and idea’s abounded. The banker figured out most people don’t claim their gold because the bank is safe. So he started floated checks rrrrrr paper money. Soon, the banker started to notice he had 1 million in gold but issued out 15 million in paper money. Ought ohhh, now what he said. Let’s change our name to the Federal Reserve. That’s my little Christmas story for tonight childrens, now nighty nite.

  • http://www.nds-gear.com EZFlash

    I agree with Lennie Pike. A slower-wealth but debt-free society would be so much better.

  • http://www.nodebtusa.com Debt Advice

    Gold, silver, nickel, and copper standard, the economy would not be affected,it provides the proof. It would grow at a bit slower rate but that is a good thing because almost 100% debt free wealth is created….

  • sharonsj

    About 10 years ago, I went to a paranormal conference and got into a conversation about end of the world prophecies. The woman I was speaking to was a low-level worker in the Federal government. She said that our system would probably collapse just based on the debt accounting used by both banks and governments.

    In that accounting, debt was not written down on the negative side of the balance sheet. Debt was considered to be income. So it was listed on the positive side. The result was to make these institutions look solvent when they weren’t.

    If you take a close look at just about everything connected to the government and the stock market, you’ll find that nothing is as it seems. The data is manipulated, from the claim that there is no inflation to our unemployment rate of only 9.8% I doubt these institutions will ever be free of real debt.

  • Richard

    “Once a nation parts with the control of its currency and credit,
    it matters not who makes the nations laws. Usury, once in control,
    will wreck any nation. Until the control of the issue of currency
    and credit is restored to government and recognized as its most sacred
    responsibility, all talk of the sovereignty of parliament and
    of democracy is idle and futile.”– William Lyon Mackenzie King

  • http://www.debtreliefsites.com Debt Collection

    One of the last things John F. Kennedy did before he was assassinated was declare his intention to reform the central banking system of the United States.

    No connection between these two events?

  • howie

    IT’S TIME FOR THE TEA PARTY TO ELIMINATE THE FEDERAL RESERVE , REMEBER THE STATEMENT WE CARE NOT WHO GOVERNS THE COUNTRY AS LONG AS WE CONTROL THE MONEY , IT WILL START WITH A SENATOR THAT WINS OVER SENATOR BILL NELSON OF FLORIDA AND BELIEVES IT PUTTING CONTROL OF THE USA BACK IN THE HANDS OF THE PEOPLE. WATCH FOR THIS FELLOW NAMED MIKE, IT STARTS TODAY

  • Marek

    The Fed should be abolished. There are too many “Illuminati” around like Greenspan, Bernanke and others from “builderberg group”. If you do NOT abolish Fed, some others of these guys will come back very soon and take over again.
    These people have it in their blood. Just watch it !
    This is NOT a joke.

  • GETaCLUE

    So gentlemen, we know that the federal government can’t sustain it’s current activities and we are definitely headed for economic collapse. What happens to the average person who has debt in an economic collapse? No one will bail out the rest of America…what do you predict?

  • knowdoubt

    Lenny, on the contrary. History does not favor
    a gold standard as a stable monetary policy.
    The inherent deflation it creates as economies
    grow & the gold supply doesn’t is exactly what
    turned us away from it. Ideally for a stable
    currency, the money supply should track the
    volume of the total real world wealth assets
    of the economy which generally does & has
    increased with growth of population & production.
    The gold supply is essentially finite & can
    not keep up with economic growth period, leading to
    disastrous consequences of DEFLATION among other
    things. This is really quite a basic imperical mathematical
    fact. you need to study up & get your head around this.
    Reality is that total wealth (assets) of a society are not
    fixed, they grow & thus so should a currency supply.
    A gold standard (being fixed/finite) does not accommodate
    this.

    A.N. is on the right track with his comment.
    The problem is not with fiat currency but
    with debt issued fiat currency. Fiat currency
    can be issued debt free.

  • Lennie Pike

    knowdoubt,

    If fiat currency were to be issued debt free by the U.S. Treasury it would still not solve the problems of inflation, disastrous bubbles, and inevitable catastrophic economic collapse. Because of the human traits of dishonesty and greed that are uncontrolled in some of us, just as much debauchery of the currency would eventually occur without interest payments to the Federal Reserve.

    There may well be a little deflation under a gold standard but that does not paralyze an economy. Of course steadily falling prices will occur under a gold standard due to the fixed amount of money, but it is the purchasing power of gold and silver that is important. Under a gold standard people do not wait for lower prices to buy because the rate of deflation is very slow – just as with a 5% inflation rate under a fiat system people don’t stockpile goods out of fear of higher prices in the future. Also the rate of deflation is always a lot smaller under a gold standard than the rate of inflation is under a fiat money system – take a guess why.

    There is no need for the money supply to grow as the economy grows under a gold standard because the money can track the volume of the total real world wealth assets (and there are no other type of assets other than real world wealth ones within the category of honest economics although it does make some sense to use those words in a fiat system) as population and production grows and that is a mathematical fact jack that you have not gotten your head around. Steady incremental deflation is not disastrous. Inflation is always present in a fiat system (it’s the reason the system exists – to steal) and it never grows at slow rate so if anything is disastrous it would be inflation in a fiat system – not deflation under a gold standard.

    The reason we turned away from the gold standard system was not because it failed. The main reason was that a group of snakes intentionally caused an economic problem (and we can see today that they are very good at) and then bribed, threatened and blackmailed (our?) representatives into giving them back this awesome power that they had previously held. If at that time the system had changed to one where fiat currency could be issued without interest payments to these snakes, like I said, the same problems would sooner or later cause the system to collapse, and with a lot of pain and suffering along the way.

    The founding fathers were not ignorant in the area of economics and were aware of the many examples throughout history of abuse that controllers of fiat money systems in other countries had inflicted upon their citizens. They also knew that all of those systems had always ended in collapse whether or not interest was paid to some foreign criminal thug central bankers. This is the reason the Founding Fathers stipulated money was to be gold and silver.

    J.P. Morgan stated: “money is gold and silver and nothing else”. Aristotle had a lot to say about money also. These people were not idiots and I HAVE studied up on money and it’s history and have even done a lot of my own thinking about it and have wound up with similar conclusions to those of the people I just mentioned. I think I do have my head correctly around it. Ludwig Von Mises makes a lot of sense also and there have been many failed fiat currency economic systems to prove him correct.

    There are many good arguments based on history and common sense against fiat systems and none against a gold standard. But by far the number one argument against a fiat currency system is very close to being witnessed by the entire world and it’s not going to be very pleasant for a lot of people. Most will wish instead that they could just raise crops and livestock, and use a barter system with no type of money whatsoever, but they will not be free to do so. They aren’t even free to do that now, it’s just that they’re not wishing they were free to do it – but they will be.

  • Lennie Pike

    Man does not live by bread alone.

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  • Georgiaboy61

    Alan, re: “Before the Fed existed, the money system was completely chaotic and going to the gold standard would make gold $100,000 an ounce or more to back up all of the money supply.” Sir, with all due respect, you are incorrect. How do you explain the fact that since the creation of the Federal Reserve in 1913 under Woodrow Wilson, our currency has been debased more than 95%? Debased, you say? Yes, via inflation – which is a polite word for theft by central bankers. Inflation allows enormous profits by banks and financial institutions, but pillages the wealth and prosperity of everyday people. Do yourself a favor and read the book “The Creature from Jekyll Island” by G. Edward Griffin; it is a history and expose of the Fed.

    • Andrew Patton

      True, but you can’t ignore the banking panics that occurred before the Federal Reserve was created. These panics would cause depressions, and furthermore, the lack of deposit insurance meant that depositors often lost most or even all of their deposits when their bank failed due to a run. The bank could be plenty profitable, but why buy the bank when you can wait for them to declare bankruptcy and buy up their assets at fire-sale prices? The surviving bankers get richer at the expense of the common depositor, who might also be out of a job because his employer couldn’t get the credit needed for working capital.

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  • joe

    Its a rigged game from the word go… Woodrow wilson died knowing he doomed us with the fed reserve, and jfk was killed after he made the fed able to print money from the treasury without the fed reserve. Its all in black n white…

  • madrid

    People want what money buys, not money itself. I have studied the concept of a resource-based economic model by thinkers from as early as the nineteenth century. The most up-to-date suggestion would be that of the Venus Project. The concept of money in a society does not fit in a society with the technological capabilities to produce high-quality goods in abundance. If you haven’t already, please educate yourself on the subject. The Venus Project website has a very informative FAQs section: http://www.thevenusproject.com/en/the-venus-project/faq

  • Jonathan

    The Fed IS part of the government?? right? The Fact Congress granted a charter gives it special status which can be changed. Debt creates money. Interest on the “debt” is a wash.. The money is printed all the same. What would be the difference in printing greenbacks vs issuing US treasuries?.. It does have the hocus pocus effect by creating an illusion of owing debt through the household budget analogy. Households cant print money unlike the federal government. So yes households,state and local governments can go bankrupt.

  • Mattg

    It’s not true that children don’t understand that money is debt. They can even understand it better than we do. Look up Victoria Grant on YouTube.

  • Calmarius

    The current monetary system is legalized usury and counterfeiting for some privileged. I you begin printing money you end up in jail (counterfeiting), if you start business of lending money and charge interest on it, you end up in jail again (usury). It’s forbidden for a reason. Commercial banking system should die, it should be replaced with investment banking: they don’t create any money and the system works (eg. Morgan Stanley).

    By the way, regardless what kind of monetary system we use, the wealthier will find the way to suck wealth from the less wealthy. But this not necessarily bad as long as the owner is not greedy and gives away his wealth: offers bigger salaries, better working conditions, etc.

    There is competition in the labor market too, and people apply for higher salaries and better work conditions.

    The exponentially growing economy is a bigger problem. The world uses 100 million barrels of mineral oil every day to sustain the current welfare, I cannot imagine what would happen when we run out of it…

  • Brian

    The problem with Tax the rich is due to the fact that those who seek power shouldnt have it. They are sociopaths who would litterly anything to spite having taxes and go to other countries. The purpose of the FED is a great idea and will lead to a great system of currency…that is if they followed terms of business. Not only have they broke a term of buisness, but they pretty much broke them all. Congress they broke the contract and you can take it back to a debt free-interest free currency where you only “print” money only if production of our country increases.

  • Brian

    this would instantly take care of appox 14 trillion dollars. Sad thing is that other countries banks are printing our money (8/12 are foreing banks) and losing that much money could cause a war

  • Andrew Patton

    The US government does have the authority to mint new coins, and receives millions in seigniorage each year for doing so. The Treasury also has the authority to print up to $300 million in US notes and as many gold certificates and Special Drawing Right Certificates as they have backing for. Also, private citizens can create their own money, but they’ll be hard-pressed to get anyone to accept it. The fact is that commercial bank money isn’t even legal tender, but it’s generally accepted because it’s redeemable on demand for legal tender. Truth is, banks won’t accept another bank’s commercial bank money; they demand that the other bank transfer either reserves, Federal Reserve Notes or US coin to cover the checks their depositors write.

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