Download Federal Reserve and money

Federal Reserve and money
“Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private
banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow
up around the banks will deprive the people of all property until their children wake-up homeless on the continent their
fathers conquered.”
-Thomas Jefferson
When discussing the economy we are quick to point out how our money is used.
We argue how we should spend our money. We argue how the government should spend
our money. We argue how the government should tax our money. We argue how banks
should lend their money, and we argue how investors should invest theirs. The question
of how money should be used in order to enhance the economy is important, but an even
more important question we need to ask is, what should money be?
The Federal Reserve (“Fed”) works as the governments’ bank. When the
government spends more than it receives in taxes it has to borrow money. They borrow it
by selling bonds to foreign countries and to the public (when you buy bonds you are
loaning money to the government). Unfortunately those two together can’t lend enough
to fund our growing government. That is when the government turns to the Fed.
Like the foreign countries and the public the Fed buys bonds from the
government, but with a twist. The money they buy the bonds with comes from nothing.
That is the way the fed causes inflation, and the way they can control the value of the
dollar along with prices. That is the main function of the Fed.
Another job they have is lending to banks. Normally we are used to banks lending
money to us. The Fed is the banks bank. The Fed lends money to the banks and then they
lend it to us and charge interest, thus make a profit. Right now the fed lends money to
banks at a rate of 0%, in other words; for free. The banks then lend this free money to us,
charge interest, and make a nice profit. The Feds ability to simply create money and lend
has led to easy credit and the ease of credit has led to loans being made to the wrong
people (sub-prime loans). Sound crooked yet? I’m just getting started.
The Fed creates money by lending to the government and banks. Banks also
create money by lending to us. Banks use a reserve ratio. That means that they can lend a
certain amount of money out per dollar they actually have. The United States has a
reserve ratio of 9:1. Meaning that for every dollar a bank has they can lend out nine
dollars. The extra money is simply created. These newly created dollars expand the
money supply and cause inflation. So banks create money from nothing, lend it to us and
charge us interest, and in the process they inflate the dollar raising the cost of living and
destroying our savings.
The Fed was created by the Federal Reserve Act December 23rd 1913 on a day
when most congressmen were gone on holiday. Within hours the bill was rushed to
Woodrow Wilson and signed into law. Wilson supported the fed until he left office. That
is when he said,
"I am a most unhappy man. I have unwittingly ruined my country. A great
industrial nation is controlled by its system of credit. Our system of credit is
concentrated. The growth of the nation, therefore, and all our activities are in the hands
of a few men. We have come to be one of the worst ruled, one of the most completely
controlled and dominated governments in the civilized world. No longer a government by
free opinion, no longer a government by conviction and the vote of the majority, but a
government by the opinion and duress of a small group of dominant men."
-Woodrow Wilson
Now they are getting into the business of bailouts. Our government made a
monstrous bank bailout costing nearly a trillion dollars. What few people know is that the
Fed did their own bailout of the banks. This bailout did not cost nearly a trillion dollars,
but instead cost a few trillion dollars. This bailout was not created nor passed by our duly
elected representatives unlike the original smaller one, but instead was created by the
unelected board of governors of the Federal Reserve. In a hearing senator Bernie Sanders
asked Ben Bernanke (the chairman of the Fed) who were given these trillions. Bernanke
refused to answer.
All the trillions that they print to give to banks, the government, and in bailouts
cause inflation. When you heard your parents talk about how a coke used to cost a nickel
or how gas used to cost less than a dollar you are hearing stories of inflation in action, but
why does it happen?
Supply and demand determine the value of a product. The higher the supply the
lower the value. The lower the supply the higher the value. The Federal Reserve Note
(those things some call money) is no exception to this rule. The dollar has a certain
demand and a certain supply. When the Fed and the banks create money they increase the
supply thus the value of the dollar (or how much our dollar is worth) lowers.
You can explain inflation with coffee. One cup of coffee has 100 mgs of caffeine.
If you dump one cup of water into your coffee and mix it up it then seems like you have
two cups of coffee, but each cup only has 50 mgs of caffeine. The original cup of coffee
represents our money, the caffeine represents our moneys worth, dumping water into the
coffee represents an increase in the money supply which leads to inflation, and the new
amount of 50 mgs of caffeine represents the worth of our newly diluted (inflated) coffee
(money).
In another example, lets assume that there is one-trillion dollars in existence, and
one of these dollars is worth (can buy you) a coke. Then the Fed decides to double the
amount of money in existence to two-trillion dollars. Doubling the supply of money cuts
the moneys worth in half. Then the coke would cost two dollars.
Since the Fed has taken over the dollar inflation has sprang out of control. The
Fed was created to stabilize the dollar, and needless to say they have failed to do so.
From their creation in 1913 to present day the dollar has lost 96% of its value. Compared
to today’s dollar the dollar of 1913 is worth 2400% more thus prices have raised 2400%.
Because of inflation if you save your money you are punished. If in 1970 you
saved for retirement your retirement fund would have lost 82% of its value. Isn’t saving
your money supposed to be good? If so, why are we punished for it?
All this adds up to a dirty little secret about our dollar. In a capitalistic society
your wealth represents your contribution and your value to society. Bill Gates is wealthy
because he invented Microsoft. Society valued his product and contribution so we were
willing to buy his product and give him wealth. Movie stars are wealthy since we the
people are willing to make them wealthy because the entertainment they provide us is
worth it. If you are wealthy it is because you provide society with a service or product
that they value. Your wealth is the material measurement or representation of your
contribution to society. Your wealth is your property and it is given to you by the
voluntary consent of the people who make up society. If your wealth is your property and
it belongs to you then no one should be able to take it without your consent. If they do
they have committed either theft or fraud.
If that is true about wealth then our dollar cannot represent wealth as money
should.
You think our dollar represents wealth? A certain class of people (the banking
class) can create money out of thin air. Wealth represents productivity and the bankers
printing money are not being productive. Wealth represents contribution and the bankers
printing money are not contributing, but doing the opposite by robbing us. Wealth
represents value to society and yet who of us values the bankers?
You think our dollar represents wealth? Wealth represents productivity. Then why
after you work hard for hours on end and deposit your paycheck in to the bank its value
disappears without your knowledge or consent?
Do you think your wealth is your property? Right now any money you may think
is yours is being taken from you by inflation. As you read this book the Fed is taking
your money. If your money is being taken from you how can it be your property? If it is
not your property how can it be wealth?
What justification could someone have for the Federal Reserve and a currency
worth nothing? Some may say that without the endless credit that the system provides our
economy would slow down, as if credit and not productivity is what grows an economy.
In fact our economy grew nearly 25% faster before we had the Federal Reserve (4.15%
per year vs. 3.32% per year).
Do you care about the constitution? The Fed is also unconstitutional. Article 1
section 10 of the constitution states,
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of
Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and
silver Coin a Tender in Payment of Debts.
The constitution also says that it is congress’ responsibility to regulate our
currency, and now they gave that job to the Fed. The Federal Reserve note we have today
is not silver, it is not gold, nor is it regulated by congress. The Fed is illegal and it is
criminal to support it.
With the Fed printing unlimited amounts of money then how much money exist?
The answer is that we don’t know. The Fed use to publish the M3. The M3 is the measure
of all money in existence. On March 23, 2006 the Fed decided we knew longer needed to
know how much existed nor how much they have created so they stopped publishing the
M3.
Our best guess of how much money exist and how much money is being printed
is from the M0. The M0 measure how much cash exist, but keep in mind that the vast
majority of money is not in cash form. Looking at the M3 you should be shocked.
The amount of money has more than doubled in the last two years. During the last
near 100 years the Fed has been printing money, causing inflation, and raising prices.
Now they have done the same amount of damage they have done in the last 100 years
within a span of two, but it gets worse.
As said above banks can create money at a 9:1 ratio. This means that the money
supply has doubled, but that is before the banks multiply it by 9. Once this happens and
all of the new money works its way from the banks to our pockets prices will sky rocket
and the value of the dollar will plummet.
Now the Fed and its easy credit have crept its way so deep into our economy it is
like a cancer we cannot remove. To simply abolish the Fed would crash our economy and
cut us off cold turkey from the easy credit it provides. The wise solution would be to
create a gold standard but not abolish the Fed. The result of competition in the market
place leads to lower prices and better products. Why not use the benefits of competition
in the market place of currencies? Let the Fed’s funny money compete with gold and
we’ll see the outcome. What would you rather be paid in, gold or paper? Eventually
many would prefer the new gold backed currency to the currency backed by nothing and
the Federal Reserve Note would become irrelevant enough to abolish the Fed without
catastrophic consequences.
Many economists would tell you that a gold standard in this day and age is crazy,
but many of them were the same ones who in early 2008 preached that the United States
economy had “strong fundamentals”. Needless to say their expertise may be
questionable.
Gold has been valued for over 6000 years and its worth has been stable if not
climbing. The Federal Reserve note has been valued for less than 100 and has been in a
rapid decline ever since its conception.
Many argue that with a gold standard we would not have the easy credit of the
Fed and thus the economic growth would come to a halt. First they are right about one
thing. Easy credit would not be as common, but id that a bad thing? Our economic crisis
we are in now was caused by easy credit so I think we could live without it, but for being
right that is as far as they go. Some go as far as to say that their would be no credit with a
gold standard. That is nonsense! We could still have credit, but instead of creating the
loaned money out of thin air we would simply have to loan existing capital. Finally, as I
have said before, our economy grew faster while we had a gold standard.
Some argue that there is not enough gold to back all the dollars already in
existence. A new gold backed currency would be an entirely different currency than the
one we have now so we wouldn’t need to back the old dollars that we have.
Some argue that there isn’t enough gold to cover all the goods and services in the
economy, but this also is not true. By making gold our currency the demand for gold
would increase sufficiently to make it worth enough to cover the value of our economy.
Just how supply and demand changes the value of the Federal Reserve Note so would it
also change the value of a gold currency? As the economy grows the demand for money
would increase thus the value of gold would increase to meet the new demand.
The only reason our economy started the Feds paper money is because we were
forced to by legal tender laws. If our money was worth something our government
wouldn’t need to force us to accept it. The fact that they can force us too is an example of
how big and powerful our government really is. If you support small government then
you should be against the Fed because its endless credit allows endless government
expansion and endless government debt. If you are for free markets you should be against
it since a governing body controls it. If you are for the little guy you should be against it
because it helps the rich bankers get richer from our expense. If you care for the elderly
you should be against it since it pillages their retirement savings. If you are for humility
you should be against it since it makes life harder for us all.
If you receive money in exchange for you goods, services, and hard work then
why should you be paid with worthless paper? Your productivity has more value than
that. If we want true economic prosperity we must but an end to this system.