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Banking and Money Creation Lesson 30 Section 25 The Monetary Role of Banks • Financial Intermediary • Bank Reserves – Reserve Ratio – Required Reserve Ratio • Bank Runs Bank Regulation • Deposit Insurance • Capital Requirements – Excess of capital over the required reserve • Reserve Requirements • Discount Window – Going to the Fed to borrow How Banks Create Money • Money Supply • Money Multiplier • Loans • Rothschild brothers of London, writing to associates in New York in 1863: “The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” • L. Tolstoy – Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal—that there is no human relation between master and slave. • James Madison also understood it: – History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. • London bankers themselves through their agent in the Hazard circular in July of 1862: – Slavery is likely to be abolished by the war power and all chattel slavery abolished. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led on by England, is that capital shall control labor by controlling wages. The great debt that the capitalists will see to it is made out of the war, must be used as a means to control the volume of money. To accomplish this the bonds must be used as a banking basis. We are now waiting for the Secretary of the Treasury to make this recommendation to Congress. It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we can not control that. But we can control the bonds and through them the bank issues