The Beginning Of The End
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The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

House Of Cards - Photo by ArealastDid you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us?  We were always told that the goal of quantitative easing was to "help the economy", but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system.  Instead, most of it is sitting at the Fed slowly earning interest for the bankers.  Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed.  This caused an absolute explosion in the size of these reserves.  Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed.  Today, they have more than 1.8 trillion.  In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger.  This is utter insanity, and it will have very serious consequences down the road.

Posted below is a chart that shows the explosive growth of these excess reserves in recent years...

Excess Reserves

This explains why all of the crazy money printing that the Fed has been doing has not caused tremendous inflation yet.  Most of the money has not even gotten into the economy.  The Fed has been paying banks not to lend it out.

But now that big pile of money is sitting out there, and at some point it is going to come pouring in to the U.S. economy.  When that happens, we could very well see an absolutely massive tsunami of inflation.

Posted below is a chart that shows the growth of the M2 money supply over the past several decades.  It has been fairly steady, but imagine what would happen if you took the hockey stick from the chart above and suddenly added it to the top of this one...

M2 Money Supply

The longer that the Federal Reserve continues to engage in quantitative easing and continues to pay banks not to lend that money out to the rest of us, the larger that inflationary time bomb is going to become.

In a recent article for the Huffington Post, Professor Robert Auerbach of the University of Texas explained the nightmarish situation that we are facing...

One reason that the excess reserves grew to an extraordinary level is that in October 2008, one month after the financial crisis when Lehman Brothers went bankrupt, the Bernanke Fed began paying interest on bank reserves. Although it has been 1/4 of 1 percent interest, this risk free rate was not low compared to the Fed's policy of keeping short-term market rates near zero. The interest banks received was and is an incentive to hold the excess reserves rather than lend to consumers and businesses in the risky environment of the major recession and the slow recovery.

The Bernanke Fed is now facing a $1.863 trillion time bomb, they helped to create, of excess reserves in the private banking system. If rates of interest on income earning assets (including bank loans to consumers and businesses) rise, the Fed will have to pay the banks more interest to hold their excess reserves.

If interest rates move up dramatically (and they are already starting to rise significantly), banks will have an incentive to take that money out of the Fed and start lending it out.  Professor Auerbach suggests that this could cause an "avalanche" of money pouring into the economy...

Eighty five billion a month will seem tiny compared to the avalanche of the $1.863 trillion excess reserves exploding rapidly into the economy. That would devalue the currency, cause more rapid inflation and worry investors about a coming collapse.

So the Fed has kind of painted itself into a corner.  If the Fed keeps printing money, they continue to grossly distort our financial system even more and the excess reserves time bomb just keeps getting bigger and bigger.

But even the suggestion that the Fed would begin to start "tapering" quantitative easing caused the financial markets to throw an epic temper tantrum in recent weeks.  Interest rates immediately began to skyrocket and Fed officials did their best to try to settle everyone down.

So where do we go from here?

Unfortunately, as Jim Rogers recently explained, this massive experiment in financial manipulation is ultimately going to end in disaster...

I’m afraid that in the end, we’re all going to suffer perhaps, worse than we ever have, with inflation, currency turmoil, and higher interest rates.

The Fed and other global central banks have created the largest bond bubble in the history of the planet.  If the Fed ends quantitative easing, the bond market is going to try to revert to normal.

That would be disastrous for the global financial system.  The following is what Jim Willie told Greg Hunter of USAWatchdog.com...

Everything is dependent on Fed support. They know if they take it away, they’re going to create a black hole. The Treasury bond is the greatest asset bubble in history. It’s at least twice as large as the housing and mortgage bubble, maybe three or four times as large.

But even if the central banks keep printing money, they may not be able to maintain control over the bond market.  In fact, there are already signs that they are starting to lose control.  The following is what billionaire Eric Sprott told King World News the other day...

It’s total orchestration. And it’s orchestration because they might have lost control of the bond market. I find it such a juxtaposition that central banks on a daily basis buy more bonds today than they ever purchased, and interest rates are going up, which is almost perverted. I mean how can that happen?

They’ve lost control of the market in my mind, and that’s why they are so desperately trying to get us all to forget the word ‘taper.’ In fact, we probably won’t even hear the word ‘taper’ anymore because it has such a sickening reaction to people in the bond market, and perhaps even people in the stock market. They will probably do away with the word. But the system is totally out of control. And then we’ve got this quadrillion dollars of derivatives. It just blows blows my mind to think about what could really be going on behind the scenes.

Sprott made a really good point about derivatives.

The quadrillion dollar derivatives bubble could bring down the global financial system at any time.

And remember, interest rate derivatives make up the biggest chunk of that.  Today, there are 441 trillion dollars of interest rate derivatives sitting out there.  If interest rates begin skyrocketing at some point, that is going to create some absolutely massive losses in the system.  We could potentially be talking about an event that would make the failure of Lehman Brothers look like a Sunday picnic.

We are moving into a time of great financial instability.  People are going to be absolutely shocked by what happens.

Our financial system is a house of cards built on a foundation of risk, leverage and debt.  When it all comes tumbling down, it should not be a surprise to any of us.

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  • Tim

    Bernanke before Congress in 2009:

    REP. BILL POSEY: And while there may be a time lapse, certainly, unless that money gets sucked back in out of circulation, it’s going to cause inflation. There’s no denying it.

    BEN BERNANKE: If it’s not sucked back in. But as I was describing, we have ways of sucking it back in.”

    Utterly ridiculous.

    • MichaelfromTheEconomicCollapse

      Bernanke thinks that the Fed can control it.

      It would have been better if the Fed had not printed up all this money and created this time bomb in the first place.

      Michael

      • Round Objects

        Jeremiah 10:23
        Why is everybody so surprised?

    • Douglas M. Green

      To suck it back in, the fed must sell something. Selling treasuries and MBS forces rates higher, and given how much the fed has, rates are likely to go much higher, especially if China and Japan frontrun or sell their treasuries concurrently. Who would buy the fed’s treasuries and MBS (many toxic) in a rising rate environment? What will exploding rates do to debt service payments and hence MORE taxes and deficits to finance it. Is there any wonder Bernanke is leaving? He will be far gone when the SHTF!

  • Rodster

    Michael, I read the same thing that the Fed is very fearful of money leaving the Banks and entering into the private sector. It would cause interest rates to soar and could trigger HYPERINFLATION. The problem is that there aren’t any good paying jobs to offset hyperinflation.

    • MichaelfromTheEconomicCollapse

      Indeed – even know prices are rising and wages are not keeping pace.

      Michael

      • markthetruth

        Paid Via Card, Workers Feel Sting of Fees .

        Banks now have Companies paying employees with a Pre Paid Card they rip you off with fees .

        the end…

    • markthetruth

      Sorry but the Good Paying are gone and nobody knows the future , the only So called Money Jobs are in Sports and entertainment ( and Junk entertainment) that us poor people watch and listen to, because it’s rubbed in our face.

      the end…

      • Ralfine

        I neither pay for sports nor entertainment nor junk entertainment.

        I’m off walking now, just need some good shoes and underwear for that.
        With $100 you are fitted from head to toe and back to front. For the walk itself add 2l of tap water, a banana and a pinch of salt.

        • markthetruth

          No Weapon !

          the end…

          • Ralfine

            Well, I don’t need one.

  • Joe Palladino

    “It’s one big club and you ain’t in it”

    George Carlin

    • Beth

      IMHO, those were the most epic words of Carlin’s career!

    • FoonTheElder

      “What they do in Washington,
      is just look out for number one.
      And number one ain’t you.
      You ain’t even number two!”
      -Frank Zappa

    • Mondobeyondo

      So true.

      • ractivist

        Even bigger than shi.. That was one funny routine.

  • markthetruth

    I think Micheal has something with that Fred Story,
    Fred Flintstone has Tried these dumb things in the stone age and it didn’t work. One episode

    After Fred’s old friend Sherman extends an invitation to visit his hotel/casino, the Flintstones and the Rubbles head off to Rock Vegas. But before they even get the chance to check in, Fred has already gambled all of the foursome’s money away.

    the end…

    • Mondobeyondo

      I’d love to see how the Flintstones and the Jetsons get along, in this perpetual race to keep up with the Joneses.

      • El Pollo de Oro

        Mondobeyondo: If World War III becomes a reality, we might get to find out. Gerald Celente put it best when he said that if World War III is fought with suitcase nukes, dirty bombs, biological weapons and chemical weapons, World War IV will be fought with sticks and stones.

        • I AM POP SLAG.

          “I know not with what weapons World War III will be fought, but World
          War IV will be fought with sticks and stones.” Albert Einstein.
          I believe Celente was paraphrasing him…
          but that quote is most definitely Einsteins.

          • KarenB.

            You are a fool and an idiot – at least that’s what your father said when you sucked him off… scumbag.

          • I AM POP SLAG.

            This i new? sockpuppets? many of them all insulting me? im honored.
            Its that meathead from the cage fighting coment isnt it?
            aggressive much?

  • K

    Michael, this is all part of the plan. They will continue to try to beat every last penny, out of us. When there is no more, then comes the collapse. At that point they will do everything they can, to set us at each others throats. The sad thing is how many will fall for it. Hope you saw my book review in the previous article.

    • Ponto

      The gvt isn’t worried because the next massive market crash will allow them to go after our pensions, ira, and 401k. Cant put your money in risky stocks when you should be buying packaged government backed bonds and the fed’s newly owned bad mortgage backed securities.

    • ractivist

      It’s amazing how citizen politicians could take total control of our nation. Just ten or twenty thousand useful idiots and we allow them to do this. It’s beyond logic really. We need the military to be informed to the truth. That’s the paramount piece of the puzzle. I’m speaking of the mid level men and women. The top is corrupted.

  • Syrin

    It’s cute how the Fed, the gov’t and GARY all believe the laws of economics will not take hold at some point. All that’s happened is that they will have escalated the financial ruin that will ensue to a level that will take generations to recover from, if we can recover at all.

    -liberalism – destroying nations for centuries

    • Gay Veteran

      hey syrin, the banksters buy off “liberals” AND “conservatives”

      • Graham

        Despite your repeated attempts GV, that particular knowledge doesn’t seem to sinking in… yet.

      • Syrin

        No, the banksters buy off liberals which dominate both the democratic and republican parties. The democrats are now the party of Stalin, and the republicans the party of Mussolini. Regardless, both are liberal. There are very few conservatives in office any longer.

        • Bad_Mr_Frosty

          Exactly, don’t confuse Neo-Cons with conservatives

        • Gay Veteran

          And a liberal could just as easily argue that there are very few liberals in office any longer.

        • TooLittleTooLate

          I tend to look at politics as left right up and down…. not just left and right. Of course we know that left is all govt. and right is less govt. But, think of up as no authority and down as being all authority. Ghandi was a communist but, you have to admit that he was anti-authoritarian. In our own govt. it doesn’t really matter how much government you want… both parties want to fly drones over your house.. both parties want to take your internet records and listen to your phone calls. Our country needs to wake up and understand what has happened….

        • ractivist

          I thought it was the party of Satan….

          That too I guess…

  • toadsticker

    My understanding is that Bernanke didn’t print most of the money, but digitally deposited it in the banks and will soon make an announcement that the country will be transitioning into a cashless economy in the near future. The government will have complete control of us then.

    • Cairan

      No. They won’t. There will an Expulsion #110. That will be the Solution. The Solution will be global, this time and it will be FINAL.

      • Graham

        Get up to speed on “PROMIS”. Now is definitely the time!

        I have hinted at it in the forum for the past year and nobody has ever picked up on it.

        Dig deep, very deep. As a lead in, It involves the global spy networks, but that is just the tip of the iceberg.

        Biblioteca archives will prove useful.

        • Cairan

          Thanks for the tip.

  • MeMadMax

    Our entire financial system is one giant SCAM….

  • Stezie

    Good God, they’re relentless…

  • worldsgonenuts

    This is absolutely crazy! How can the Fed mess things up this bad accidentally?! It’s as if its all on purpose and a collapse is intentional. I refuse to believe it even though my mind is confronting it head on. Then again, I truly thought those that said our phone calls and emails were being watched by the government were insain for their conspiracies. I just don’t know what to believe anymore. This world has gone nuts.

    • Ayn Rand

      In a crazy world, you must look at the bigger picture. Who is pulling the strings? The elite. Government, corporations, banks, all working together to screw YOU over. We must fight to regain our freedoms.

      • markthetruth

        George Soros

        the en…

    • Mondobeyondo

      In a world gone crazy, you have to check your sanity in at the door. Otherwise, you won’t fit in…

    • LeseMajeste

      The Fed isn’t messing things up, at least not accidentally.
      This is all part of their plan to destroy the USD and then they’ll come back with another world-wide currency for us peons.

      • Jaybird7

        Bible says one world government necessary for the anti-Christ to come to power. The current admin with their support for Abortion, legal narcotics, and Gay marriage are paving the way for this to occur

        • EconomyTrap

          @Jaybird7:disqus …can you give me the scripture where the bible says that?

          • Jaybird7

            the thirteenth chapter of Revelation

          • Jaybird7

            Daniel 8:24,25 – His power
            will be great, but it will not be his own. He will cause terrible
            destruction and succeed in whatever he does. He will destroy the
            powerful along with the holy people. He will cause deceit to prosper
            through his cunning and by his influence, and in his own mind he will
            make himself great. In a time of peace, he will destroy many…

          • Jaybird7

            Sound like anybody in power right now?

        • ractivist

          Amen and Amen.

      • Kira00

        You realize that the FED were started long before any of these people were alive right? I am not saying FED are the good guys, but you have to realize that they are only doing what their mandate allows. The people have to become aware of what they are doing and demand change.

        • The Obvious

          You realize, of course, that the evil behind the Fed is not human, and operates on a time scale mortals cannot fathom??? What man lays plans that span centuries??

    • TooLittleTooLate

      I think of it as that the bankers and politicians only think about the quick fix or the next election. For now, the quick fix is to pour money into the banks to reflate all that money they lost when the housing crash left a smoking hole in their balance sheets. The money that was created by lending it into existence dissappeared when the loans went bad.

      It’s really not much better than financial whack a mole.

    • Don_in_Odessa

      Good! You are right where they want you. Confused and adrift in conflicting information. You and those like you are easily herdable.

      Best thing for you to do is hope for the best but prepare for the worst. Believe no-one but make them believe you do. Live each day as peaceably and unjudgingly of others as you can. Help when you can and always Love. I don’t mean you have to feel love all the time. No, you have to DO love all the time. Like I always say: Love is not a feeling. The feeling is the reward for love. You gotta’ do it to get it and keep it.

      Do this and all will be well with you.

  • defaultplayer

    Who is it that is being denied loans? It sure isn’t for auto loans.

  • JailBanksters

    I dunno why they’re so interested in making Interest, they can just print as much money as they want, it’s unlimited at a cost of F’all

  • Ralfine

    So? Why would you borrow that money?

    Save in time then you have in need.

    If you borrow money you only have to pay interest.

    Pay off all your debts, ditch all your credit cards except one or two for emergency use, like hospital on holiday in foreign countries.

    Always pay off your credit card values before incurring any interest.

    You will have some hard time for the next few weeks and months, but after that you will have an “abundance” of cash available to you.

    During your hard times within the next weeks you will change your life style and reduce your needs.

    Then you keep it up and save cash every day.

    And whenever an emergency comes your way, you have access to cash, without incurring any interest payments.
    Coming out of the emergency debt free.

    • markthetruth

      You trying to ruin the American economy with this Commonsense Logical Advice.

      We spend it all then worry !

      the end…

      • Ralfine

        Whatever.

        • I AM POP SLAG.

          …and if you save at a negative interest rate or in times of high inflation you lose too
          - like such will occur when that worthless counterfeit currency get outs into the hands of the populous- with no real economy to back it that is what will happen.
          your savings will be worth nothing in comparison to the pile of dough they have accumulated and hence- practically worthless.
          Save tangible commodities– not paper money.

          • Ralfine

            You can only buy a house with cash, not with tins of chickpeas.

          • I AM POP SLAG.

            Oh dont get me wrong- dont take the credit biscuit they offer- but the whole currency- the fiat money? defined by a govts ability to tax.
            they squeezed too hard there is no money for taxes and if taxes dont get paid, fiat money, war based currency, empire building money collapses.
            and your wheelbarrow of cash gets you nought but a loaf of bread.
            if there is any on the shelves in a nation that grow nothing but green deserts of monocultured, poisonous fertiliser dependant frankenfood.

          • Ralfine

            you might be right, but your writing is a bit too intellectual for me.

          • I AM POP SLAG.

            yggg

          • MTV

            Do people think you are a woman with such small cojones – pinche maricon.

  • Mondobeyondo

    Just like the government pays farmers NOT to plant crops…

    Yeah, there’s something going behind the scenes going on here. Come on Toto, pull that curtain! Let’s see what the wizard(s) are up to!

  • Mondobeyondo

    The hour is getting late …

    (and no, this isn’t about the summer solstice. That was a week and a half ago!)

  • Douglas M. Green

    Very good point about increasing rates forcing those excess reserves into the system. And when inflation takes hold, velocity is likely to spike as people buy before prices rise, and make inflation ramp even higher. One question I have is whether M2 already includes the new money that is sitting in excess reserves, i.e. you don’t add the hockey stick to M2 (as suggested in the article). Rather, the M2 graph overstates the money in the system since late 2009 because most of it went into excess reserves?

  • jokyjo

    When it all comes down it will be a surprise to most people. Nothing to see here, just move along.

  • Krotus

    I noticed the other day that none of the federal reserve notes in my wallet were dated after 2009. No one I know has currency dated 2010 or above including some brand new bills from the bank. I checked out the Bureau of Engraving and Printing website and it claims to have “delivered approximately 35 million notes a day” in fiscal year 2012. Now I know where they delivered it.

  • TooLittleTooLate

    At the end of the day, what has happened is that when we had the housing crash, a LOT of money just dissappeared…. It went POOF and that was that. It was a bubble that popped and all of that housing debt money that was created was gone and all that was left were bad mortgages held by banks…. Well, they couldn’t hold them on their books at current value so, they changed the laws so that they no longer had to mark them to market value…. so, by doing that, they had no incentive to sell them.

    The FED has created this money and pushed it into the banks to recapitalize them and, no doubt, they have succeeded with that effort. Of course in their own bumbling way, they’ve created yet more problems to fix other problems that they created previously.

    Now, we’re out of the last crisis and into yet another larger one. It’s the new “NORMAL”.

    This whole thing will come down one day, no doubt. I’ve stopped thinking it’s going to be anytime soon. I think we have a lot more to see before that happens. I believe the politicians will go for our 401k accounts first. I think we have taxpayer bail ins… higher taxes.. more banker manipulation and changing of rules in the middle of the next crisis…. We’ll know when the wheels are about to come off when you see the riots in the streets and the people will just not take it anymore…. All you have to do is look to the EU to see how they’re responding to their masters.

    Of course, I could be completely wrong and it could come apart tomorrow.

  • Guest2

    With the exception of Alberta and Saskatchewan (which are fairly stable because it isn’t overpopulated with high density), the rest of Canada are in a same type of financial bubble.

    In major cities like Vancouver and Toronto, rents are skyrocketing. In Toronto, people are finding difficulty renting a room for less than $650 a month+ utilities. Condominiums are selling like hotcakes even though you might find at McDonalds and Tim Horton’s job fairs that thousands of young adults are competing for no more than 100 vacancies.

    While America has it far worse in terms of a bubble and economic crisis, the provinces of Ontario and British Columbia are in for a rude awakening should a real estate crisis occur.

    • Graham

      British Columbia will be in for an even bigger awakening when “other” things become known aside from the real estate issue.

      Just a matter of time.

  • kleptom1

    This money will
    never make it into the economy unless one event happens. A run on the bank. This
    is how the US decided to recapitalize the banks. They used our tax dollars (our
    debt machine really). The banks are not allowed to use this money, it will
    never be put into the economy, there will never be inflation from this and the
    banks get to make interest off the tax payer money they stole and the economy doesn’t
    explode like all these people predict. So if you want to stick it to the banks while
    simultaneously taking down the American Economy everyone just needs to take
    their money out of the banks. If every citizen took their money out of the bank
    they would be forced to push those reserves into the economy, thereby causing inflation
    and the end would happen., We have the power to change the course of our
    financial history. To restart it anew. But how do you get the entire US to
    cause a run on the banks?

  • Trailer Park Investor

    The economy, money printing, bond bubble, derivatives, money borrowing, jobs, the FED, and many many others, something is going to give and soon. Tick – Tock – Tick – Tock – Tick – Tock

    Ready – Set – EXPLODE – (((BOOM)))

    Hope your ready?

  • Mondobeyondo

    “Welcome back, my friends
    To the show that never ends
    We’re so glad you could attend
    Come inside, come inside…”*

    Some irrelevant thoughts and stuff such as:

    - When the derivatives bubble bursts – well….
    I won’t post that Tsar Bomba link – most of you have already seen it. But for those of you who have not – it’s a perfect description of what will happen to the U.S. economy when it bursts. When, not if. It WILL happen. As a famous physicist and starship mechanic once said, “You cannot change the laws of physics, captain!”

    - Interest rates will rise. It’s already happening. Good luck buying a house or car cheap. Sing along now… “Happy days are gone for now, they’ll return again somehow…” If you had the cash or other financial means to do so, you should have bought that Lexus a year or so ago. It’s a bit late in the game right now.

    - Buy silver. Buy it NOW. It’s unbelievably cheap. If you have the financial resources, BUY SILVER.The only reason I’m not buying silver now is because I have no money, but that’s a whole ‘nother story.

    - Please pray for the people of Prescott, Arizona. They’ve lost 1/5th of their firefighters in the recent tragedy at Yarnell Hill. I’ve driven through Yarnell up to Prescott numerous times. Beautiful landscape, lovely people. They don’t deserve this.

    * – The Tubes. Can’t remember which specific song (definitely not “She’s A Lady”) – but it’s definitely from a Tubes song.

  • Paul

    Are the banks going to really have incentive to loan when interest rates rise? No one will qualify for taking out higher interest loans. It is a vicious, vicious cycle isn’t it? No Jobs = No Income = No Loans = No buying of consumer goods = No corporate profits = Corporations closing or moving or downsizing = No Jobs. The problem is the No Jobs at the end of the cycle carry a higher percentage then the previous No Jobs at the beginning of the cycle.

  • EconomyTrap

    Don’t be fooled, the FED has control…If the article as laid out does occur, it will be not because of stupidity or ignorance, but because it was planned that way. You better belive it that there are those few of mankind, the psycopathic control freaks, who desire unending power under a global governance and global financial system. They know that for this to occur, they must cause an un-repairable system, which then allows them to introduce a “better” foolproof system, a digital system, a cashless system. Rev. 13:16/17 – “And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand or in their foreheads: And that no man might buy or sell, except he that had the mark, or the name of the beast, or the number of his name”

    • I AM POP SLAG.

      I like people who quote the right bits of the bible- I think the loonies in the ivory tower have been reading it too- provides an insight into why it is they might actually be planning and encouraging some sort of armageddon.

      • KarenB.

        I think you are a scumbag.

        • I AM POP SLAG.

          you need to sort your head out you pituitary retard.

          • ractivist

            I think Karen is has issues.
            Econ trap has it right. No doubt about it. They have said this very thing. Ask Bill Ayers.

  • Seabee

    Do you understand that if and when liabilities leave at the FRB that assets will need to be sold as well? These will need buyers and thus not result in a “tsunami” of cash into the system. There would be no massive spike in inflation.

  • http://www.youtube.com/user/IAmDeepSpace Deep Space

    EXECUTE All Oath-Breakers NOW!!!

  • http://www.youtube.com/user/IAmDeepSpace Deep Space

    EXECUTE Every Single Oath-Breaker NOW!

  • Blair T. Longley

    “BUILT ON DEBT” MEANS BUILT ON FRAUD, BACKED BY THE FORCE OF GOVERNMENTS.

    Almost nobody wants to understand what is really going on. Or, they certainly no not want to think more seriously about the real resolutions to the actual situations, IF they seriously admit what has been going on. As discussed in the book “Money and Sustainability,” from the Club of Rome, 2012, in Chapter VI, “The Institutional Framework of Power,” the history of the money system that exists today emerged out of the history of war. A box on page 135, & more so on page 136, emphasized the MOST CRUCIAL point that: The power to TAX is what makes fiat money have value. That was well-known, but has been deliberately ignored! The power to tax is the power to rob, which is backed up with power to kill. Those the basic social facts, which are most deliberately denied, and almost never recognized to be necessary.

    MONEY IS BACKED BY MURDER,

    AND IT MUST NECESSARILY BE!

    There are no possible solutions which can actually operate outside of that context. Therefore, the REAL PROBLEMS are almost infinitely worse than people are willing to face. In that book’s conclusion, on page 187, it repeats crucial points made in its executive summary. That book recommends that the financial elites themselves ought to be aware of the works of Arnold Toynbee and Jared Diamond: Civilizations tend to collapse due to the combined factors of too much social polarization, and environmental destruction, which both happen because civilizations fail to adapt in time.

    The so-called “solutions” presented in that book are mostly fluff and feathers, because that book deliberately refuses to understand what has actually happened! The biggest gangsters, the international banksters, have taken control over governments, in order to legalize private banks making “money” out of nothing, as debts. AFTER that was achieved, all the rest of the runaway debts, leverage, and ridiculous risks followed after, because the foundation of our financial system is FRAUD, BACKED BY FORCE, because those are the BASIS of the established “money-as-debt” system.

    The vast majority people do not understand that, because they do not want to understand that! IF they understood that money IS backed by murder, then they would have to admit that ONLY by democratizing the death controls could it be possible to democratize the debt controls. However there are no good reasons to believe in the series of political miracles, and profound paradigm shifts in political science, which would be necessary to work through those processes. Rather, the most probable future is that the “house of cards” which is built on debts, which are based on triumphant, runaway, legalized FRAUD, shall grow until it finally collapses into chaos.

    The accumulating debt insanities will then go through a series of social storms and psychotic breakdowns, that result in insane forms of death controls, such as more genocidal wars, along with democidal martial law. MY POINT is that there are no ways to avoid that by avoiding the basic FACT that money is backed by murder, and must necessarily be. What has happened is that the banksters were able to apply the methods of organized crime to take control over governments, in order to legalized their lies, and legalize the violence to back up those lies, i.e,, build a financial accounting system that is FUNDAMENTALLY FRAUD, BACKED BY FORCE, WHICH IS INHERENTLY INSANE AND UNSTABLE, SINCE IT IS ALL BUILT ON THE TEMPORARY “SUCCESS” OF HUGE LIES, WHICH WERE LEGALIZED, AND THEREBY ABLE TO FORCE EVERYONE ELSE TO ACCEPT THOSE HUGE LIES, AND ADAPT TO LIVING INSIDE OF THAT SYSTEM, BASED ON THOSE HUGE LIES.

    However, the more radical truth continues to be that money MUST be backed by murder, and there are no genuine solutions to those problems which do not face that deeper radical truth. Of course, there are then even much more radical truths which are necessary to understand what that truly means! But, also of course, there is barely any point to bother to discuss those, since the vast majority of people are going to continue to deliberately ignore the basic social facts anyway.

    Instead, the “Dragon Kings” are coming to meet the Fraud Kings, that took over from the War Kings.

    To understand what the phrase “Dragon Kings” means in that context, watch the Ted Talk by Didier Sornette on “How we can predict the next financial crisis.”

  • Olivier Francoeur

    Federal Reserve Dollars are not money.
    Besides, this “excess reserve” really is not “excess”;
    How much of total demand deposits do you think those banknotes cover?
    Go read a book.

  • Herr Hur

    Time to buy silver and gold!

  • Mondobeyondo

    Where’s all this new money that the Fed is cranking out going to?

    You guessed it – the stock market, in part. There’s also a certain percentage that’s going into the Prada wallets of some certain CEO’s and other so-and-so’s on Wall Street

    Now you know why the Dow Wow Wow keeps reaching record highs (until recently at least).

  • JP

    Bullcrap on the inflation theory. That will only happen if the amount of dollars released into the system exceeds the amount of goods and services in the system. There is currently an excess of goods and services (high unemployment) in the economy coupled with a shortage of dollars. If this continues long term it will create a deflationary cycle.

    That being said, we can all really use a new monetary system that is designed to be a public utility for the people of the planet versus our current monetary system that has been designed to act as a weapon against the people of this planet.

  • Maria

    How can you fit so much crao into your mouth while your father tickles you from behind… pinche culero.

  • JamesFG

    And we should believe every word in this blog?

  • claude hansford

    Darn, was thinking of buying a house.

  • http://www.facebook.com/steve.delvecchio.56 Steve Delvecchio

    • Many talk as if banks can “lend out” their reserves, raising concerns that massive excess reserves created by QE could fuel runaway credit creation and inflation in the future. But banks cannot lend their reserves directly to commercial borrowers, so this concern is misplaced.

    • Banks do need to hold reserves (as a liquidity buffer) against their deposits, and banks create deposits when they lend. But normally banks are not reserve constrained, so excess reserves do not loosen a reserve constraint.

    • Banks in aggregate can reduce their reserves only to the extent that they initiate new lending and the bank deposits created as a result flow into the economy as new banknotes as the public demands more of them.

    • QE does aim to ease financial conditions and spur more bank lending than otherwise would have occurred, but the mechanisms by which this happens are much more subtle and indirect than commonly implied.

    • If the excess reserves created by QE were to be associated with too much credit creation, central banks could readily extinguish them.

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