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Tuesday, August 30, 2011

Money Creation - Michael E. Badgett

August 30, 2011
Wall Street Aristocracy Got $1.2 Trillion in Secret Fed Loans (Video):
Aug. 22 (Bloomberg) -- The Federal Reserve's unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup Inc. took $99.5 billion and Bank of America Corp. $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. Erik Schatzker and Sara Eisen report on Bloomberg Television's "InsideTrack."
Gerald Celente ~ $1.2 Trillion Secret Fed Loans to Wall St Aristocracy:

Money Creation

“Give me control of a nation’s currency and I care not who makes its laws.”
---Murray Rothschild, Banker"

It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford, Car Maker


The Federal Reserve

The Federal Reserve is not Federal and it doesn't have any reserves. The Federal Reserve is owned by private banks and is not under the control of our Congress. 

One of the jobs of The Federal Reserve is to supply money to the U.S. However, for every dollar The Federal Reserve supplies, a debt to the people is created. Article 1, Section 8 of the U.S. constitution states that our Congress has the power to coin money and regulate the value there of. Our Constitution does not say anything about a private bank controlling our money.

Recently, a partial audit of the Federal Reserve demanded by members of congress including Dennis Kucinich, Ron Paul and Bernie Sanders showed that the Federal Reserve had given or lent $16 trillion to both U.S. and foreign banks. 

 Many people believe that The Federal Reserve System is not the way to move us into the future.

Who Controls the Federal Reserve?

The Federal Reserve has a chairman. The Federal Reserve Chairman is appointed by the President of the United States. Alan Greenspan was the Federal Reserve Chairman From 1987-2006. During those years we saw the deregulation of the banks, the boom in derivatives trading, the tech bubble and the beginning stages of the housing bubble. Now, since 2006 we have Ben Bernanke. He is slated to be in office until 2014. So far under his guidance, we have seen the trillions and trillions of dollars lent at no or very low interest rates to mega banks both in the U.S. and overseas. We have also seen lending to small businesses slow and the pop of the housing bubble which has left millions of Americans unemployed and foreclosed upon.

These powerful individuals in control of our money system are not elected by us and don't seem to be in the business of helping us.

The Federal Reserve Supplies Money to the U.S.

There are two basic ways the Federal Reserve, the government and the member banks work together to get money into our system.

1) Treasury Bills, Notes and Bonds 

One way we get money into the system is by selling bills, notes and bonds. Countries, states, counties and cities sell bonds in order to raise money to spend.
The difference between bills, notes and bonds are their length until maturity: 
* Treasury bills are issued for terms less than a year.
* T-notes are issued in terms of 2, 3, 5, and 10 years.
* Treasury bonds are issued in terms of 30 years.

Who Buys Bonds?
Anyone can buy a bond. Some people buy bonds as a traditionally safe way to invest their money. Investment firms often invest retirement funds in bonds. When you buy a bond, you get paid back with interest.

Interest Paid to Bondholders
 We all know the costs associated with borrowing money from the banks, whether via our credit cards, our mortgages or car loans. However, There is a hidden cost of money that we don't often think. The money our tax dollars go to to pay interest to bondholders.

Interest Paid to U.S. Treasury Bondholders

When treasury bonds are sold, the U.S. government gets the money and uses it to pay for things in its budget like national defense, social security and Medicare. When we pay our federal taxes some of it goes to paying the bondholders. Most of this interest the Federal Reserve earns from its bond holdings is returned to the treasury, but not all of it. In fact, when you pay U.S. taxes, your money goes to paying off the bondholders!

In FY 2010 the interest on the debt, incurred largely by the sale of bonds, was $414 billion. The interest on the debt is the fifth largest Federal budget item, after Defense and Security spending ($890 billion), Social Security ($730 billion) and Medicare ($490 billion). (Source: U.S. Treasury, Interest)
2) Money enters our Economy When Banks Make Loans.
Besides the sale of treasuries, another way money enters are system is through loans. Essentially, there is no money until it is borrowed from a bank. Here is a typical sequence of events:

1) The Federal Reserve lends money to one of its member banks, such as The Bank of America, Wells Fargo, or U.S. Bank. If a bank borrows $1,000 it is entered as a credit on the Federal Reserve balance sheet. There is no actual money. Money is just a bookkeeping entry on a screen. (Member banks borrow money from the Federal Reserve at a low interest rate, 0.2% to 1.27%.)

2) The member bank now has $1,000 and can leverage this $1,000, which means it can multiply it. The bank can loan out $9000 to someone. (The bank just has to keep 10% of its money on its balance sheet in reserves.)

3) Someone comes in to borrow money $9,000 to buy a car. The banker types "$9,000" into his computer. The money didn’t exist until the loan was made. It is typed in as a credit to the bank. The bank might loan out this money at 12%.

4) Now the person who borrowed the $9,000 has to pay off the $9,000 with interest. Over the life of that loan, the person might end up paying back the bank $12,000.

A: Those banks can make a lot of money just by virtue of being banks! Here in North Dakota, credit is flowing, interest rates are low and my business is booming.

B: Here in Washington, things aren't quite like that yet. But we are on our way. More people are realizing that public money should be seen as a public resource rather than as a money making mechanism for banks

 Bottom LIne:  A chunk of our U.S. debt and state debt is because of having to pay interest to bond holders. Another part of our state debt is having to pay interest on money our state borrows from big banks.

Bonds, Debt to Banks----How would a Public Bank Differ?

Once a public bank gets started, (capitalized), it holds the tax payer revenue. A public bank is mandated to invest in the people and projects in their region or state. It makes low interest loans to small businesses. More credit to businesses increases employment and increases state tax revenue. Also there is less need to sell bonds for projects because the state has it's own credit creation machine using the principle of leverage that all banks use.

Public banks help end the debt cycle. They tilt us toward a growth cycle.

Private people profit from the money creation process?
A:  I'm a little bit confused, upset and shocked by this.

B:  I was too. But public banking is a solution! We should be able to
supply our own money debt free as the U.S. Constitution instructed us, or at least at very low interest and we shouldn't have to pay interest to private people for the use of our national currency! 

The Economic Future --- North Carolina

If North Carolina had a public bank, like the one in North Dakota, we would be able to control the interest rate and decide to whom the money was lent.

The interest earned from the loans would be returned to Washington state to be used to benefit North Carolinians. Less of our money would go to paying off bondholders.

Join the Push for Public Banking!

My suggestion is that we start printing pink slips for Democrat & Republican politicians instead of more dollars!

Dump Democrats & Republicans 2012

The Future Is Now!

Michael E. Badgett
217 W. Church St.
Mount Airy, NC 27030

1 comment:

Silence DoGood said...

Excellent piece Thom. If anyone ever wondered why Christ drove the money lenders from the temple, they now have their answer.