Money on Trees

Okay, so while enjoying dinner and a few beers at a friend's place a discussion ensued regarding the destruction of our economy perpetuated by policies of the Federal Reserve. Somehow I'm always the only person in any given room with that interpretation.

As you can imagine, describing the complicated way our currency is manufactured and distributed, and illustrating the the dangerous cocktail of our fiat monetary system blended with public debt and fractional reserve lending is not a conquest for the faint of heart. Of course, it was designed that way. If we could all understand this stuff and could describe it over a couple beers it wouldn't have become a problem in the first place, or there would be massive outrage.

The first hurdle I was confronted with was a disappointing one as it demonstrated the long road ahead - the myth that our currency is coined/printed/created exclusively by the U.S. Treasury.

So, today's lesson, for my benefit as much as anyone's, is to describe how money is created, and how the system is designed to spiral into a bloated monstrosity and collapse catastrophically.

1. The Federal Government decides it needs some money to attack Canada. It prints a piece of paper with nifty designs and some words. They call it a "Treasury Bond" or "Treasury Note." These are IOUs to the Federal Reserve.
2. To convert these IOUs to bills, the Federal Government gives this bond or note to the Federal Reserve. The Federal Reserve classifies these IOUs as a "securities asset." To us (who fund the Federal Government completely), this Treasury Note is debt that we will have to pay back in the future. To the Federal Reserve, this is an asset, because it assumes we will pay it back with interest (with Income Tax).
   
3. Since this is an asset, it can be used to offset a liability, which the Federal Reserve does by printing a piece of paper with nifty designs and some words. This time they call it a "Federal Reserve Check." (Nothing backs this but the assumption that taxpayers will be fleeced of their earnings to pay it back).
   
4. The Federal Reserve Check is given to the Federal Government, who endorses it. Then, they deposit it in one of the 12 privately owned Federal Reserve Banks. It is a government deposit, and used to pay government expenses (businesses, entrepreneurs, etc.).
   
5. The Government Checks are deposited into commercial banks, where they are, again, treated as assets. 90% of this can be lent out, depending on the reserve ratio. This is called the "Fractional Reserve System," and is how all banks function - lending out the vast majority of their money. A loan is always considered an "asset" because it is earning interest. Banks want to make as many loans as possible to earn the greatest amount of profit.
   
6. The recipient of a loan deposits the loan proceeds into their bank account, where the process repeats itself, over, and over, and over, and over again. The fiat money created by this is 10 times the size of the original debt created by the federal government.
7. We attack Canada. Using money printed by the Federal Reserve cartel. It's counterfeit, and unconstitutional (only congress can coin and print currency) but congress likes unlimited wealth - it gets them power and votes - so they don't really mind.
   
8. Too many foreclosures cause a liquidity crisis.
   
9. More printing. More inflation. People are less able to pay back debt. The Fed needs to decide between financial collapse or rampant inflation. This really could get ugly.
   

Look on any bill and you will see "Federal Reserve Note." Yes, there is a signature of the Secretary of the Treasury, but in reality, a dollar is simply a promise by the American to pay back the Federal Reserve with interest, lining the pockets of the shareholders of the Federal Reserve (or funneled it through tax-free institutions such as the Ford Foundation - in which they avoid the income tax altogether...rrrr).

Throughout history, every single fiat currency, one not backed by a hard asset (usually gold), has devalued to the the paper or metal it is made from. I'm not saying the sky is falling, but I also can't say it isn't. Most disturbingly, something tells me when any of us regular folks get a clue it will be a moment too late.

(Here is a good site with diagrams and stuff)