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How exactly does the Fed do this? The astounding process is explained by G. Edward Griffin in his indispensable book, The Creature From Jekyll Island. The story starts centuries ago, when gold, the ideal medium of exchange, was used as coinage. Goldsmiths stored a customer's gold for a fee, issuing receipts which came to be accepted in commerce in place of the metal itself. But when the goldsmiths (soon to be called bankers) realized that individual owners never withdrew their gold all at once, they began to make interest-bearing loans for which receipts were issued instead of gold itself. However, since these new receipts were in addition to the original receipts, there soon came to be many more receipts than there was gold to cover them. Thus, bankers created "money" and placed it in circulation through unsuspecting borrowers by means of a scam vastly profitable to themselves but a hidden theft of the value of everyone else's money.
It would be folly to imagine that such a magnificent money machine could remain uncontrolled. Enter the idea of an independent central bank monopoly controlling a network of member banks with no competition and all issuing loans in the same ratio to reserves -- in short, a cartel. When leading financiers secretly planned our own cartel in 1912 at Jekyll Island, Georgia they realized they needed to make government their partner. Not only would this protect the cartel's monopoly, but it would ensure that the government would force public use of the anticipated paper money as "legal tender." When the politicians of the day realized they could have an open pipeline to any quantity of manufactured money without committing political suicide by raising taxes, they passed the Federal Reserve Act and Congress became a partner in the most evil and pernicious fraud ever put across on the American people.
The manner in which this mechanism is used by the Fed is laid bare by Griffin. As he explains it, the process begins with the Fed's "purchase" of Treasury securities. Treasury bonds -- IOUs (comprising the national debt) -- are pieces of paper promising to pay a certain sum at a certain interest rate on a certain date. These bonds are issued because Congress is addicted to spending billions more than the government extracts from us in taxes. Most Treasury bonds are sold to private investors, meaning that no new money is created on this part of a bond offering.
But what about the part not sold to investors? The function of the Fed is to convert into money the unsold part of the bond offering. The Treasury could pull this stunt off by itself, but this would not be half as obfuscating and people might catch on. So the Fed "purchases" Treasury bonds by writing itself a check. There are no deposits, gold, or anything else to back up this check. Anyone else doing this would land in jail. But Congress has made it all legal for the Fed because it is salivating for the money.
The Fed's check is endorsed by the Treasury and sent to one of the 12 Federal Reserve banks, where it is deposited in the government's account; checks are written on the account to pay government expenses. These checks become the first wave of created money flooding into the economy. Recipients deposit these checks into their own banks where the fractional reserve process goes into action. For instance, if the banks receive $1 million in deposits from the first wave of created money and have to keep on hand only ten percent ($100,000), this means they have $900,000 available for loans. But how can this money be available when it is owned by depositors? The answer is that the loans are made with new money created as an accounting procedure out of even more nothing. Adding insult to injury, these loans are interest-bearing. The $900,000 in loans to various borrowers moves through the economy as the second wave of created money. But it comes right back into the banking system (as borrowers spend it) in the form of more bank deposits. Thus the $900,000 less ten percent reserve ($90,000) gives birth to $810,000 as the third wave, which is then available for more interest-bearing loans. Griffin further explains:
It takes about twenty-eight times through the revolving door of deposits becoming loans until becoming deposits becoming more loans the process plays itself out to the maximum effect, which is ... approximately nine times the amount of the original government debt which made the entire process possible. When the original debt itself is added ... [t]he total amount of fiat money created by the Federal Reserve and the commercial banks together is approximately ten times the amount of the underlying government debt.
It can now be seen why it was imperative for the Insiders to wipe out any connection of our money to gold, which restricts money supply. The stage was set for this profound move by the Great Depression, itself caused by Fed expansion, then contraction, of the money supply. From 1913 until 1933 both the Treasury and the Federal Reserve issued paper currency. Both were redeemable for gold and looked so much alike that Americans were tricked into not realizing the difference. But in 1933 President Franklin Roosevelt abolished the gold connection and we were left with our present intrinsically worthless Federal Reserve paper (fiat) money.
It is one of the moral tragedies of our times that the man who, in the past, most brilliantly opposed the Insiders' thieving cartel was Alan Greenspan. As quoted by Griffin, in 1966 Greenspan wrote:
The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit....
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value....
Deficit spending is simply a scheme for the "hidden" confiscation of wealth.... [Gold] stands as a protector of property rights.Today Greenspan is calling the shots for that very confiscation of wealth through inflation. As the stock market was getting out of hand, he moved to curb his own expansion. His increase by a quarter of a percentage point (5.25 to 5.50) of the federal funds interest rate (the rate at which banks borrow from each other) may have seemed a small thing, but it was like dropping a pebble into a pond. It means that banks will borrow a little less from each other and thus have a little less to lend; it means that the banks will pass along the rate increase to their customers, which means that many businesses, industries, and individuals will borrow a little less, which means that less money will be created out of thin air. In other words, the money expansion will be slowed. If it does not slow enough to suit Greenspan, he will raise interest rates again to further discourage borrowing. Those businesses that borrow anyway will pass on the increase through higher prices, meaning that they will probably sell less. Whether business borrows less, or borrows and raises prices, earnings will fall or remain stagnant, which in turn will warn away investors.
In fact, anticipation of this scenario made April the wildest month in market history as investors tried to outguess Greenspan, alternately rushing in when data seemed to indicate he would not raise rates again on May 20th, then turning tail from fear he would. As we went to press, investors were still uncertain. The latest word from the Establishment's Wall Street Journal is that "growth is above what the Fed is willing to tolerate. If nothing else stops the economy, the Fed will."
As Thomas Jefferson put it: "A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army." Jefferson understood that "No one has a natural right to the trade of money lender but he who has money to lend."
Amen.
the complete article can be found here
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