No longer a slave to those who believe falsely of being free (Johann Wolfgang von Goethe, 1749-1832).
Some 'years ago, the Central Bank of the United States, the Federal Reserve, has prepared a document entitled "Modern monetary mechanisms. This publication sets out in detail the creation of institutionalized practices of money as proposed by the Federal Reserve and the banking network commercial claims.
the Welcome page, discusses the subject of the publication: "The purpose of this publication is to describe the basics of the process of money creation in a fractional reserve banking system." We proceed in the description of this system of "fractional reserve" banking through various terminologies whose translation in plain jargon may be more or less this: The U.S. government decides who needs the money. So call the Federal Reserve asking, for example, 10 billion dollars. The Fed (Federal Reserve) answered: "Okay, you buy $ 10 billion in bonds." So the government takes a few pieces of paper, We print on some official marks and calls them "Treasury bills". Then, enter a value in these securities until the preset value of 10 billion dollars and sends them to the Fed. In return, those of the Fed also print a lot of cards, only this time are called Federal Reserve notes "even giving them a value of 10 billion dollars. At this point, the Fed takes these notes and the exchange with the bonds. Once the exchange is completed, the government takes the $ 10 billion of notes from the Fed, and stores them in a bank account. With this filing, the paper notes officially become legal tender by adding $ 10 billion to the monetary base in the United States. Here guys. Ten billion of new money was created.
course, this example is a simplification, because, in reality, this transaction will take place electronically, without using any paper. In fact, only 3% of the U.S. monetary base consists of currency "physical" reality. The remaining 97% exists only within the archives. Now, Treasury securities are, by their nature, debt instruments and when the Fed buys these securities, money creation, in fact, out of nowhere, the government is actually promising to return that money to the FED. In other words, that money is created through debt. This paradox that stuns the mind, of how the money or its value can be created through the mechanism of debt, it will become clearer still continuing with again an example: The exchange took place and 10 billion dollars are deposited into the account of a normal Commercial Bank.
At this point the process starts to get interesting. Based on the practice of fractional reserve, that deposit of $ 10 billion of the money instantly becomes part of that bank, just like all its deposits. With regard to the requirements of this reserve, as stated in "Modern Money Market Mechanisms", "a bank must maintain reserves required by law equal to a fixed percentage of its deposits. " This percentage, then, is quantified by saying: "Based on current rules, the requirements of the reserve for most of the current accounts of 10%." This means that the deposit of $ 10 billion, 10%, amounting to a billion dollars, is retained and described as "compulsory reserve, while the remaining $ 9 billion are considered" excess reserve "that can be used as a basis for new loans. Now, it is logical to assume that these 9 billion will come from existing deposit of 10 billion dollars. However, in reality, this does not happen. What happens in reality is that 9 billion dollars are simply created from scratch based on the existing deposit of 10 billion dollars. This is the way in which the monetary base expands. As can be seen from "Modern monetary mechanisms," they (banks) do not actually make loans using the money they receive in deposit. If they did this, would not create new money. What they do, when granting a loan, is to accept promissory notes (loan agreements) in exchange for granting credit (money) on the current accounts of the borrowers. In other words, the $ 9 billion can be created out of nothing simply because there demand for that type of loan, and because there is a deposit of $ 10 billion that meets the mandatory requirements of the reserve.
Now, let's say somebody comes to this bank and borrows these "new" $ 9 billion. He most likely will take the money and deposit in your bank account. The process is then repeated. That deposit will become part of the reserves of that bank, 10% will be set aside and in turn 90% of those 9 billion, or $ 8.1 billion, is now available to create new money for new loans and, of course, 8.1 billion of those dollars can be lent again and redeposited creating additional $ 29 billion and then again, $ 6.5 billion, then 5.9 billion
... etc ... This cycle of creation of money through debt, it can technically go on forever. From a rough calculation shows that you can get about $ 90 billion on the basis of the initial $ 10 billion.
In other words, for every deposit that is created in the banking system, a sum of money about 9 times higher than can be generated from nothing.
"You have an urgent need for money? Ask thoughtful Bank of America a can full of money in the form of a convenient personal loan. "
Now, as we understand how the fractional reserve is created, should come to mind a logical question, albeit illusory: Actually, what gives value to this coin?
The answer is money that already exists. The new money, in effect, stealing value to the existing currency in circulation. For each increment of the total money in circulation is an increase in demand for goods and services and, by the law of supply and demand, you get the balance, prices rise, diminishing the purchasing power of every dollar in circulation. This is generally called "inflation".
L '"inflation" is nothing more than a HIDDEN TAX GROUP. What is the advice you get usually? Increase inflation, increasing the money supply. They do not say debase the currency. They do not say, diminish the value of money. Do not tell people that they are deceived. They say instead: lower the interest rate. The real trick is to distort the value of money. We create money literally out of nowhere, we have no savings. However, there is the so-called capital. So how can we, in the world, solve the problem of inflation, continuing to increase the money supply that leads to new inflation? Of course, you can not.
Monetary expansion of fractional reserve banking system is inherently inflationary. The expansion of monetary base, without which there is a proportional increase in the supply of goods and services in the economy, will always decrease the real value of money in circulation.
Giving a quick glance upon the historical value of the dollar compared with that of the USA, this fact is reflected in a definitive way. The inverse correlation is obvious. A dollar in 1913 corresponded to 21.6 dollars in 2007. This is a devaluation of 96%, began with the introduction of the Central Bank (96% devaluation in 94 years). Now, understand this reality because inflation is absurd and uneconomical as well as the functioning of the financial system. For our system Financial money is debt, and debt is money. ... More money circulates more and more debt is no debt, there is more money. To put it another way, every single dollar or euro you have in your portfolio, it is a debt that someone has contracted with someone else. Please note that the only way you can make money is through a loan. So, if everyone in the country were able to pay off debts, including government, no money would remain in circulation. "If there were no debts in our money system there could be no money" (Marriner Eccles - Governor of the Federal Reserve, 30/09/1941). In fact, the last time in American history the national debt was fully paid was in 1835, when President Andrew Jackson when he closed the Central Bank that existed before the Fed. In fact, the entire political program of Jackson was essentially focused on this commitment to shut down the central bank comes to declare at some point: "The tenacious efforts of the current Bank has made in order to control the government ... are not nothing more than warning signs of what awaits the American people could be fooled with the perpetuation of this type of institution or the creation of another similar institution. " Unfortunately this message was short-lived because the international bankers succeeded in setting up another central bank in 1913.
And as long as this institution exists, a perpetual debt will be secured.
the Welcome page, discusses the subject of the publication: "The purpose of this publication is to describe the basics of the process of money creation in a fractional reserve banking system." We proceed in the description of this system of "fractional reserve" banking through various terminologies whose translation in plain jargon may be more or less this: The U.S. government decides who needs the money. So call the Federal Reserve asking, for example, 10 billion dollars. The Fed (Federal Reserve) answered: "Okay, you buy $ 10 billion in bonds." So the government takes a few pieces of paper, We print on some official marks and calls them "Treasury bills". Then, enter a value in these securities until the preset value of 10 billion dollars and sends them to the Fed. In return, those of the Fed also print a lot of cards, only this time are called Federal Reserve notes "even giving them a value of 10 billion dollars. At this point, the Fed takes these notes and the exchange with the bonds. Once the exchange is completed, the government takes the $ 10 billion of notes from the Fed, and stores them in a bank account. With this filing, the paper notes officially become legal tender by adding $ 10 billion to the monetary base in the United States. Here guys. Ten billion of new money was created.
course, this example is a simplification, because, in reality, this transaction will take place electronically, without using any paper. In fact, only 3% of the U.S. monetary base consists of currency "physical" reality. The remaining 97% exists only within the archives. Now, Treasury securities are, by their nature, debt instruments and when the Fed buys these securities, money creation, in fact, out of nowhere, the government is actually promising to return that money to the FED. In other words, that money is created through debt. This paradox that stuns the mind, of how the money or its value can be created through the mechanism of debt, it will become clearer still continuing with again an example: The exchange took place and 10 billion dollars are deposited into the account of a normal Commercial Bank.
At this point the process starts to get interesting. Based on the practice of fractional reserve, that deposit of $ 10 billion of the money instantly becomes part of that bank, just like all its deposits. With regard to the requirements of this reserve, as stated in "Modern Money Market Mechanisms", "a bank must maintain reserves required by law equal to a fixed percentage of its deposits. " This percentage, then, is quantified by saying: "Based on current rules, the requirements of the reserve for most of the current accounts of 10%." This means that the deposit of $ 10 billion, 10%, amounting to a billion dollars, is retained and described as "compulsory reserve, while the remaining $ 9 billion are considered" excess reserve "that can be used as a basis for new loans. Now, it is logical to assume that these 9 billion will come from existing deposit of 10 billion dollars. However, in reality, this does not happen. What happens in reality is that 9 billion dollars are simply created from scratch based on the existing deposit of 10 billion dollars. This is the way in which the monetary base expands. As can be seen from "Modern monetary mechanisms," they (banks) do not actually make loans using the money they receive in deposit. If they did this, would not create new money. What they do, when granting a loan, is to accept promissory notes (loan agreements) in exchange for granting credit (money) on the current accounts of the borrowers. In other words, the $ 9 billion can be created out of nothing simply because there demand for that type of loan, and because there is a deposit of $ 10 billion that meets the mandatory requirements of the reserve.
Now, let's say somebody comes to this bank and borrows these "new" $ 9 billion. He most likely will take the money and deposit in your bank account. The process is then repeated. That deposit will become part of the reserves of that bank, 10% will be set aside and in turn 90% of those 9 billion, or $ 8.1 billion, is now available to create new money for new loans and, of course, 8.1 billion of those dollars can be lent again and redeposited creating additional $ 29 billion and then again, $ 6.5 billion, then 5.9 billion
... etc ... This cycle of creation of money through debt, it can technically go on forever. From a rough calculation shows that you can get about $ 90 billion on the basis of the initial $ 10 billion.
In other words, for every deposit that is created in the banking system, a sum of money about 9 times higher than can be generated from nothing.
"You have an urgent need for money? Ask thoughtful Bank of America a can full of money in the form of a convenient personal loan. "
Now, as we understand how the fractional reserve is created, should come to mind a logical question, albeit illusory: Actually, what gives value to this coin?
The answer is money that already exists. The new money, in effect, stealing value to the existing currency in circulation. For each increment of the total money in circulation is an increase in demand for goods and services and, by the law of supply and demand, you get the balance, prices rise, diminishing the purchasing power of every dollar in circulation. This is generally called "inflation".
L '"inflation" is nothing more than a HIDDEN TAX GROUP. What is the advice you get usually? Increase inflation, increasing the money supply. They do not say debase the currency. They do not say, diminish the value of money. Do not tell people that they are deceived. They say instead: lower the interest rate. The real trick is to distort the value of money. We create money literally out of nowhere, we have no savings. However, there is the so-called capital. So how can we, in the world, solve the problem of inflation, continuing to increase the money supply that leads to new inflation? Of course, you can not.
Monetary expansion of fractional reserve banking system is inherently inflationary. The expansion of monetary base, without which there is a proportional increase in the supply of goods and services in the economy, will always decrease the real value of money in circulation.
Giving a quick glance upon the historical value of the dollar compared with that of the USA, this fact is reflected in a definitive way. The inverse correlation is obvious. A dollar in 1913 corresponded to 21.6 dollars in 2007. This is a devaluation of 96%, began with the introduction of the Central Bank (96% devaluation in 94 years). Now, understand this reality because inflation is absurd and uneconomical as well as the functioning of the financial system. For our system Financial money is debt, and debt is money. ... More money circulates more and more debt is no debt, there is more money. To put it another way, every single dollar or euro you have in your portfolio, it is a debt that someone has contracted with someone else. Please note that the only way you can make money is through a loan. So, if everyone in the country were able to pay off debts, including government, no money would remain in circulation. "If there were no debts in our money system there could be no money" (Marriner Eccles - Governor of the Federal Reserve, 30/09/1941). In fact, the last time in American history the national debt was fully paid was in 1835, when President Andrew Jackson when he closed the Central Bank that existed before the Fed. In fact, the entire political program of Jackson was essentially focused on this commitment to shut down the central bank comes to declare at some point: "The tenacious efforts of the current Bank has made in order to control the government ... are not nothing more than warning signs of what awaits the American people could be fooled with the perpetuation of this type of institution or the creation of another similar institution. " Unfortunately this message was short-lived because the international bankers succeeded in setting up another central bank in 1913.
And as long as this institution exists, a perpetual debt will be secured.
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