Money Illiteracy & The Federal Reserve

~None are more hopelessly enslaved than those who falsely believe they are free. (Johann Wolfgang Goethe) 1749-1732~

 

1% of the world population owns 40% of the worlds wealth.

34,000 children die everyday from poverty and preventable diseases.
50% of the world population lives on less then $3.00 a day.
The Federal Reserve banking system is operated by the Modern Money Mechanics handbook.
It is the Detailed publication detailing the institutionalized practice of money creation, As
utilized by the Federal Reserve and the global commercial banks it supports.
The Fractional Reserve Process For Creating Money (Example)
  1. Us Gov. Requests any sum of money for the example we will use 10 billion.
  2. Federal Reserve Replies to request by agreeing to purchase 10 billion Gov. Treasury Bonds.
  3. Gov. then prints 10 billion worth of treasury bonds.
  4. F.R. then prints Federal Reserve notes worth 10 billion.
  5. Gov. trades the Treasury bonds for the Federal Reserve notes.
  6. Gov. then  takes F.R. notes to any world, international or commercial bank.
  7. US Gov. now has 10 billion (Legal Tender) added to the us money supply.

~This Transaction is now done fully electronically.(No paper)

Only 3% of the us currency exists in physical currency, The other
97% essentially exists in computers alone~
Fractional Reserve Explanation(Same Transaction)
 
Gov. Bonds are by design instruments of debt When the F.R. purchases these Bonds
with money it just created out of thin air.
Gov. is actually promising to pay back that created money to the F.R. making it essentially a loan.(Meaning the money is being created out of Debt)
Based on the Fractional Reserve practice that 10 billion dollar deposit instantly becomes part of the banks Reserves.(Just as all deposits do)
As stated in Modern Money Mechanics; A bank must maintain legally Required Reserves equal to a prescribed percentage of its deposits, it
then explains this by stating; Under current regulations the Reserve Requirement against most transaction accounts is 10%
What does it mean?
 
Out of the 10 Billion the US Gov. deposited 10% or 1 billion is held as the Required Reserve.
While the other 9 Billion is considered an Excessive Reserve, And can be used as the basis for new loans.
Here is were it gets tricky, The 9 Billion is not coming from the existing 10 Billion dollar deposit.
The 9 Billion is created out of thin air, on top of the existing 10 billion dollar deposit, this is how the money supply expands
meaning there is now 19 billion in total that has been created.
As stated in Modern Money Mechanics; ~Of Course the banks do not really pay out loans from the money they receive as deposits.
If they did this, no additional money would be created ~
Instead they accept promissory notes (Loan Contracts) in exchange for credits (Money) to the borrowers transaction account.
In simpler terms the 9 Billion can be created out of nothing, Because there is a demand for such loans and there is a 10 billion dollar deposit
to satisfy the Reserve Requirements.(New Money Created)
What does it mean? (Explanation)
 
For instance someone walks into this bank and borrows the newly available 9 billion dollars.
They then most likely deposit the money into their own bank account.
The whole process then repeats, because that deposit becomes part of the Banks Reserves.
10% is isolated for the Reserve Requirement and in turn 90% of the 9 billion or 8.1 billion is now
available as newly created money for more loans.
That 8.1 billion can now be loaned out and re-deposited creating an additional 7.2 billion to 6.5 billion to 5.9 billion Etc.
~This deposit money creation / loan cycle can technically go on to infinity.~
~The average mathematical result is that roughly 90 billion dollars can be created on top of the original 10 billion.~
~For every deposit that ever occurs in the banking system roughly 9 times that amount can be created out of thin air.~
~Created money is given value by existing currency~
~one dollar in 1913 is the equivalent value of $21.60 in 2007~
~That is a 96% devaluation since the Federal Reserve Came into existence~ (Federal Reserve started in 1913)

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