This page has been archived and commenting is disabled.
The Fed - Just One Giant Money Counterfeiter
Must read perspective on the Federal Reserve, by Robert Murphy, published originally at Ludwig von Mises Institute
San Jose State economics professor Jeffrey Rogers Hummel
tells all his students that the easiest way to understand the Federal
Reserve is to think of it as a giant, legalized counterfeiter. I had
always known that the Fed and other central banks were like
counterfeiters, but I still thought that the actual mechanics of
open-market operations and so forth actually provided some important
distinctions.
In large part because of my frequent email exchanges with Hummel, I
now realize that I was being naïve. Once you understand the details of
modern central banking, you are able to step back and see that it truly
is a way for the government to use the printing press to pay its bills.
All of the complicated process of targeting interest rates through
buying Treasuries simply hides this essential point — and perhaps
deliberately so.
An Old-Fashioned Monarch With a Printing Press
Before we examine Fed operations, let's start with something
simpler. Suppose there is a powerful monarch reigning over a large,
industrialized country. The monarch has managed to wean his subjects
off commodity money such as gold or silver, and instead they use fiat
notes, rectangular slips of paper featuring the king's portrait. The
king has a printing press at his disposal, which gives him unlimited
ability to create more slips of paper with which he can buy goods
throughout his kingdom.
At first, one might think that our hypothetical king has infinite
wealth. But upon reflection, we see that there are actually pragmatic
limits on how much new money he will print up each year. It's true that
there are no legal constraints on how many notes he can
create, but the more monetary inflation he sows, the greater the price
inflation he will reap.
At some point, the monarch would actually make himself poorer in the
long run by running the printing press too heavily in the present. For
example, if he doubled the stock of money in one year, the resulting
price inflation would destabilize his economy and cause much needless
capital consumption. His subjects would be less willing to invest in
their businesses and retirement portfolios, knowing that he might
effectively confiscate their savings again through massive creation of
new money. Foreign investors too would be wary of exposing themselves
to his country if he made his fiat currency too volatile.
Because of these considerations, the monarch would no doubt run off
new money every year from his printing press, but he wouldn't overdo
it. He would aim for a moderate level of constant price inflation, with
the purchasing power of his fiat currency slowly falling over time in a
predictable manner. Each year, the new influx of money into the economy
would represent a transfer of wealth from all other currency holders
into the king's possession.
Now what if our monarch is really profligate? What if he
wants to spend more money than the income and tribute he earns in his
position as monarch, even including the amount of new money he dares to
create each year with his printing press, can support? In this case,
the monarch can still resort to old-fashioned borrowing. Therefore in
any given year, the monarch can only spend what he collects in tribute
(taxes), debt financing, and inflation.
Modern Counterfeiting, Fed Style
At first glance, our present monetary system is nothing like the
simple tale of a king with a printing press. For one thing, the US
Treasury is a distinct entity from the Federal Reserve. When the US
federal government runs a budget deficit, it can't simply have the Fed
print up enough $100 bills to cover the shortfall. No, the Treasury always
covers its budget deficits by issuing debt, referred to as Treasuries.
These are bonds, IOUs sold by the Treasury to outside investors who
lend the Treasury money today in the hopes of being paid back in the
future.
But wait, there's more to the story. One of the main buyers
of this Treasury debt is the Federal Reserve itself. This phenomenon is
especially pronounced during emergencies such as major wars and the
current financial crisis. Indeed, in the second quarter of 2009, the
Federal Reserve was the effective buyer of some 48 percent of the new Treasury debt issued that period, as part of its "quantitative easing." It's true, the Fed doesn't show up at the Treasury auctions and directly
buy the new T-bills and so forth, but private dealers pay higher prices
for the Treasuries knowing that the Fed is waiting in the wings to pick
them up.
At this point let's review exactly what happens when the Federal
Reserve buys Treasuries from private dealers. Let's say the Fed wants
to buy $1 million worth of T-bills from Joe Smith. So it writes Joe a
check for $1 million, drawn on the Fed itself. Joe hands the T-bills
over to the Fed, where they end up on the asset side of its balance
sheet. Joe then deposits the check in his personal checking account,
which goes up by $1 million.
So at this point the Fed has increased the money supply by $1
million. In normal times, because of the fractional-reserve banking
system, Joe's bank would lend out $900,000 of the new deposit to
another customer, so that the money supply would grow even further. But
that's not what interests us in this article, so we'll leave that train
of thought.
What we want to focus on is the effect of the Fed's purchase on the
US Treasury. By entering the bond market and buying Treasuries (with
money created out of thin air), the Fed pushes up the price
of the bonds. That of course means that their yield drops. So, for
example, if the Treasury issues a T-bill promising to pay the holder
$10,000 in 12 months, then the auction price determines how much money
the Treasury actually gets to borrow now in exchange for this promise
to pay back $10,000 in one year. If the demand is such that people pay
$9,901 for each T-bill with a face value of $10,000, then the Treasury
gets to borrow money for a year at an interest rate of 1 percent.
Already we see why the folks at the Treasury are big fans of the
Fed's "quantitative easing" program, in which Bernanke decided it was
in the national interest to begin adding more than a trillion dollars'
worth of Treasury debt to the Fed's balance sheet. If nothing else, the
Fed's massive buying of Treasury debt pushes up the auction price of
the Treasuries, meaning the federal government can borrow at cheaper
interest rates.
Now, if this were the whole story, it would be fishy but not nearly
as bad as our hypothetical monarch with the printing press. Sure, the
Fed would create new dollars (which would push up dollar prices of
goods and services) in order to keep the Treasury's borrowing costs
low. But still, the Treasury would have to pay some interest
on its debt, especially for longer-dated debt with higher yields, like
10-year Treasury notes. So although the mechanism we have described
would encourage the Treasury to run higher deficits at the expense of
average people, who suffer from rising prices, things don't seem nearly
as crooked as they were in the case of our monarch.
Ah, but we're not done yet. Not only does the Fed's accumulation of
Treasury debt artificially push down the interest rate, but the Fed
gives the interest payments right back to the Treasury! After all,
interest is how the Fed "makes money." It writes checks on itself
(created out of thin air) and accumulates assets, and then earns the
interest and (in some cases) capital gains on the assets. But after the
Fed pays its employees, pays its electric bill, and throws the staff
Christmas party, it remits the excess earnings back to the Treasury.
For example, in fiscal year 2008 the Federal Reserve distributed to the US Treasury some $31.7 billion (page 173)
of its net earnings. To repeat, much of this money consisted of
interest payments that the Treasury paid out to the holders of its
debt, who just so happened to be the Fed for much of it. So not only is
the official rate of interest kept artificially low by the Fed's
money-creation, but the interest payments themselves are largely refunded to the Treasury, to the extent that the Fed ends up holding the Treasuries rather than outsiders.
All right, so the Fed (a) suppresses the interest rate on Treasury
debt and (b) refunds virtually all of the interest payments on Treasury
debt held by the Fed. And remember, the way the Fed does this is
through creating new dollars out of thin air, in order to buy the
Treasury debt from the original investors who lent money to the
Treasury. Therefore the Fed is clearly giving aid to the US
government's deficit spending at the expense of everyone holding assets
denominated in US dollars.
Still, the one thing holding back the complete recklessness of the feds is that they still have to pay off the principal
of their bonds when they mature, right? In other words, all we've
really shown is that the Fed allows the Treasury to run deficits
virtually at zero interest expense, at least for debt held by the Fed.
But this is still a far cry from our hypothetical monarch, who had a
whole component of his expenses which he met year in and year out by running the printing press.
Sorry, but our own monetary system has the same feature. When the
Treasury securities held by the Fed mature — so that the Treasury has
to pay back the face value in principal — the Fed rolls over
the debt. Over time, the nominal market value of the Fed's holdings of
Treasury debt continually grows. Barring a sudden reversal in this
policy, the Treasury knows that it will never have to pay off this debt. For all practical purposes, any Treasury debt ultimately finding its way onto the Fed's balance sheet is economically equivalent to our monarch running the printing press to pay his bills.[1]
We have just one last consideration. Up till now we've seen that the
modern US government, with its complicated central bank and fiat money
system, operates essentially as a king with a simple printing press, to
the extent that the Fed is willing to accumulate larger holdings of
Treasury debt. But what determines how much the Fed is willing to take
on? At what point would the Fed decide to ease off on its open-market
operations and stop creating so many new dollars to (indirectly) hand
over to the government?
The ultimate constraint on the Fed's operations is the same one our
hypothetical king faced: investor and citizen backlash in response to
rising prices. That is, the Federal Reserve can only absorb so much of
the Treasury's new debt each year because too much dollar-creation
would lead to unacceptably high price inflation. Thus our profligate
government, like the hypothetical monarch, must finance some of its
spending through traditional borrowing from private citizens and other
governments.
Conclusion
Stripped of its fancy terminology and confusing mechanics, modern
central banking boils down to a legalized counterfeiting operation. If
there were suddenly a widespread public outcry to "punt the press," we
can bet our hypothetical monarch would mobilize all his allies in the
media to discredit the people threatening his source of revenue. In
that light, we can understand the reaction today to people calling to
"end the Fed."
»
- 10966 reads
- Printer-friendly version
- Send to friend
- advertisements -
is this what they teach at um, San Jose State...?
I noticed in Ron Pauls bill that the oversight will not start for 2 years. That means the plot is still playing out. What ever these scumbags are up to, they have another 2 years to pull it off.
I noticed in Ron Pauls bill that the oversight will not start for 2 years. That means the plot is still playing out. What ever these scumbags are up to, they have another 2 years to pull it off.
"In large part because of my frequent email exchanges with Hummel, I now realize that I was being naive..............All of the complicated process of targeting interest rates through buying Treasuries simply hides this essential point — and perhaps deliberately so."
Unfortunately you still have a steep learning curve if you're going to overcome your naivety. We so desperately wish to believe the lie that these bastards are innocent of being malicious that we'll engage in tortured logic and magical thinking in order not to believe that the powers that be have us squarely in their gun sights and care not one iota about us or our welfare. Such an understanding is a tremendous shock to the system and we will do handstands before we will admit that they're doing these things deliberately.
But keep going, you're on the right path.
+1
Bravo Charlie Bravo!
So true, especially for white collar criminals, dressed in nice clothes with important jobs in private industry or the federal government. Unfortunately, that is the essence of a con man, a wolf in sheep's clothing.
Ending the Fed is only going to stop the current system from expanding immediately. The system was and is and always will be unsustainable as long as you guys continue to think you can attach compounding interest to your medium of exchange.
The Fed is not the problem, it's all you stupid people that think you can build a system that steals further and further from the future to supply the equation exponential growth.
It's over, see Fed Z1 report.
Basically the whole population is a counterfeiter but now it's over and the pain will be a whole generation this time. You will use the Fed as your scape goat. You will never provide the equation what it needs past a generation or so.
http://www.adambreckler.com/wp-content/uploads/2009/08/exponential_growt...
You can bitch at your Congressman, you can bitch at the Prez, you can bitch about the Fed, you can bitch at Timmay, etc. it's simply over, the amount of power needed to supply the equation is not linear.
Hey Mako, I always enjoy your posts. There only seem to be a handful of people at ZH who really "get it". It has always been about money/credit growth - money/credit growth to pay for the previous cycle of money/credit growth (compounding interest).
I'm of two minds regarding the Fed. On the one hand, you are correct in that they are simply a vessel by which the collective dreams of the global population believed in the illusion that they were becoming more 'wealthy'. On the on the hand, who maneuvered/conditioned everyone to accept & play this game? Or has it always been this way (ie the desire to attain riches/comfort without commensurate effort), and the PTB are merely controlling/exploiting deeply-embedded (residual evolutionary effects) emotional trigger points?
Regardless of who is or isn't at fault, you are entirely correct regarding the end result. The debt must be defaulted, price discovery must return, risk must be measured, and the "real" value of capital must be resolved.
Benron is wrong - money is a store of value, not a psychological device. Destroy the value of money, and the downside offsets any temporary advantage gained by government's first access to newly counterfeited tokens.
This fucker is going to crash so hard they'll be telling stories about it 1,000 years from now.
B9K9,
I do agree that a number of posters here on ZH think that if we just got rid of the Fed and changed a few things here and there, all would be better in the universe. Unfortunately this is wishful and magical thinking of the kind that is promoted by the MSM and the political class.
However, I do think that more than a few on ZH get it. The problem is that to maintain the awareness of the big picture problem means rejecting a life time of indoctrination and programming that charging interest is not only "good" but in fact required in order to run a financial system. It's difficult to see the world any other way when that idea is reflected back at you whereever you look.
Fold into that equation the constant drum beat from all sources, not just MSM, and many on ZH fall back into the same old habits when discussing the "system" and what's wrong with it.
Nice post generally agree.
nice post, completely agree.
Okay I have to step in and say while I normally agree with you but in this case I have to disagree about charging interest. Getting interest serves as an incentive to save, more so then just delaying consumption for a rainy day, and also serves as an incentive to invest in capital projects. After all would you save your hard earned capital and lend it to be at risk for no interest? No, no one would it would be madness, it would be impossible to get capital from others and all capital invests would have to be done through raw personal savings. I suppose one could look at the Sharia system and take a partnership but to many they would rather get money back then be a partner in an enterprise.
That is to say that I can clearly see the difference between creating funny money and charging interest on made up funny money vs real savings produced by labor. But the problem here is we have the funny money not the interest itself. The funny money has distorted things to the point where people borrow to consume in the present when borrowing should be done for capital investments that would make one more productive and make it easier to live as well as pay off the loan at interest.
"Getting interest serves as an incentive to save, more so then just delaying consumption for a rainy day, and also serves as an incentive to invest in capital projects."
You are 100% correct, unfortunately the equation is unsustainable. I mean we could all do a voodoo dance and worship to the Math god to change Math but at the end of the day you are working off of equation that is not sustainable.
You life and this system depend on that exponential growth to survive, unless you are God or God-like or maybe even more powerful than God... the system will fail.
Did Neo have any ideal choices when he was before the Architect? No, but he did have choice.
Alright for the sake of argument lets agree that it takes exponential growth to borrow for capital expenditures.
So what the proper system that will take into account man's frailties and base desires but still allow for capital growth and productivity? Modern man is a product of capital. The electricity you use, a major capital investment, the computer you are on represents a massive capital investment. Without savings and capital we would still be in the stone age and many of us would live short nasty lives, and earn nothing but a quick death. The only thing I can think of is a no growth system or a massive culling of the population. A no growth system is not in the interest of man's nature and would have to be forced upon him. And well culling the population I think an evil madman tried that 60 years ago, and not a popular chap.
Shameful.
You bring up a valid points, an alternate system is not ideal to humans because then they only get what the need instead of what they want.
Life certainly would be different, no doubt, it's a choice. Would it be better or worse? I don't know, but you have a higher likelyhood of avoiding the balloon payment at the end of the cycle imho.
Nice post by the way, you have correctly identified your other choice, although you might not necessarily like the choices.
Did Neo have any ideal choices when he was before the Architect? No, but he did have choice.
Those are not valid choices though.
Mass murder, yeah that's a rough sell to most people. I may not me Mother Theresa but I'm against that no matter what the claim. Just claiming that the survivors would live better...well fine then legalize murder and let it roll back to the law of the jungle. As it stands the mass murder would be done by the same banking oligarchs standing on our throats and done in their best interest. No thanks, I'd rather keep the system with them on our necks and not slitting our throats.
As to no growth, how do we enforce that. Well a brutal world wide dictator. And again I'm going to vote no. Would rather live "free" and take my chances then rest power in the hands of an all powerful state. After all a brutal world wide dictator is likely to pull option 1 on the undesirables anyway. And odds other with my freedom leanings I would be doing time in a death camp, gotta pass.
Now lets look what happens in this current unattainable system. Worst case it crashes and ushers in another dark age. Millions die maybe billions, of war, plague and starvation. So it's a lot like option 1 but without the same oligarchs getting control. So really the cure in this case is far worse than the disease. Lets let nature work it's course, let the fit survive. Now you may claim that it's the fit's right to kill the weak. That's fine but then we must acknowledge there is no moral code against murder and when that goes there is no moral code whatsoever. "Do what thou wilt shall be the whole of the law". I in no way advocate that, but that is where the line of reasoning goes to it's final conclusion.
"Those are not valid choices though."
But they are, we might not like our choices but we do have them.
"As to no growth, how do we enforce that."
Again, I agree the solution is not necessarily a solution, it's a choice. The only way I could see it is if you proclaim contract with compounding interest a fraud and not enforceable in court as an "impossibility".
I never claim life was easy, which is why I suspect humans will continue on their road to doom. You have correctly identified the choices and problems associated with the choices, which is good that you did that so quickly.
Neither choice is ideal but that is life.
Architect: Which brings us at last to the moment of truth, wherein the fundamental flaw is ultimately expressed, and the anomaly revealed as both beginning and end. There are two doors. The door to your right leads to the Source, and the salvation of Zion. The door to your left leads back to the Matrix, to her and to the end of your species. As you adequately put, the problem is choice. But we already know what you are going to do, don't we? Already, I can see the chain reaction - the chemical precursors that signal the onset of an emotion, designed specifically to overwhelm logic and reason - an emotion that is already blinding you from the simple and obvious truth. She is going to die, and there is nothing you can do to stop it.
@Shameful, what you are intuitively sensing was described in great length by Minsky. There are only a few rare instances where industries & enterprises are able to growth sufficiently to service their debt (principal + interest). All the rest fail.
The key is a free market banking. No more FDIC, no more backstops, no more gov't sponsored incentives. Let investors & lendors take the risks. Some may profit, most will fail.
Socializing the risk of failure simply elevated the systemic risk of default - that is where we are today.
All businesses are just slowly unfolding bankruptcies. Same goes with nations, and really people to. People will be gone one day. Nothing is static everything dies and everything must return to dust sooner or later. It's just the way things are. Life is not static so how can we expect any institution to last forever?
Totally agree about killing the FDIC, it's moral hazard writ large. Basically just transferring risk to the nation and the people so they can go bankrupt faster.
"So what (is) the proper system that will take into account man's frailties and base desires but still allow for capital growth and productivity?"
There is no system available that satisfies the components of your equation. We can not have our cake and eat it too. Thus man must either decide that living the inauthentic life is worth the inevitable suffering of the many to benefit the few (not likely) or we change. We either expand our consciousness and mature as humans or die. But take one look at the exponential growth curve of the human population and the answer is crystal clear. Change or die. And soon.
Our children's children will not survive the next 70 years. Technology, the newest God, will not save us because technology is being used to sustain an unsustainable system. Technology itself is not bad or evil. It's how it's being used and the purposes it's used for that's the problem.
Then the system will crash and burn and something new must be built on it's ashes. You cannot change the base nature of man, cannot be. It can be molded and shaped but at it's core not changed. The media moguls have shaped our perception by appealing to our deep base desires, now we can argue about the morality of that but we cannot ignore that these desires exist. And they exist in all of us. Surely they would have failed had they tried to play on desires that do not exist in humans.
One can speak of a consciousness shift, but don't think evolution works that fast, and besides remember nature selects for winners so paradoxically it would be best for a person to be as selfish as possible in preparing for the collapse for their genes to live on. I think we can all agree short of a mob tracking them down many bankers, if they chose to prepare, would ride out any storm quite nicely with their resources. After all they could afford a underground bunker with years of resources to ride out any problem. And while the mass of humanity might be in trouble in 70 years we can rest assured that their progeny would be far better off.
But all of humanity will not die no matter what, unless someone does the man dance with all the nukes and maybe not even then. Even if we have to start back at the caveman days nothing will really have changed. Mankind will crawl back out of the mud and be quite similar to what he was before. We have to accept what we are rather then expect a mass shift in our collective minds/souls. Longing for humanity to change will not make it so. I may not like all the nature of man but I accept it the same way that I must work for a living and that one day I will die. I cannot change facts.
"One can speak of a consciousness shift, but don't think evolution works that fast......"
A consciousness shift is not dependent upon evolution. In my view, it has nothing to do with evolution. The human brain as it is physically today is the same as it was 60,000 years ago. Thus evolution (the traditional definition at least) had nothing to do with the so called "progress" we have made. So what is behind the changes, particularly over the past few hundred years. The change has been remarkable, at least from a technology point of view.
I contend that we have not moved forward over the past 5 thousand years. In my view, we have moved backwards. There are fundamental problems with the way the scientific and technological world explains our past and our consciousness. It's fundamentally unable to explain or even explore that which it can't describe or reproduce. And there in lies the issue, for just because something can't be described using the scientific method doesn't mean it doesn't exist. But science would lead you to believe this is so.
5000 years ago? How does a 25% chance to be killed by another human sound to you? You don't realize how fortunate you are to live in this day and age.
Scientific method is just a tool to distinguish fiction from reality. Anyone can claim something, very few can actually support their claims. This is an impasse for many ideologies and dogmas, which i feel is what your comment was based on.
The way we look at consciousness is pretty much the same way ancient Greeks looked at the lightning. Their explanation was Zeus. Then someone did the hard work and gathered some actual knowledge. Suddenly, a consensus was reached because everyone could test and reproduce it.
Double Post.
shameful
I am pretty much convinced that humans will continue to open door #1, this time door #1 will cost billion... not in money but in lives, that choice was made a long time ago.
Some of the stuff I read on ZH is funny. You seem to get it, you do not have infinite growth on a finite planet. The first wall we will hit will be oil extraction going into terminal decline, Peak Oil. Depending on Iraq's extraction rate it's likely to occur prior to 2020 if it has not occurred already.
You are only stating half of the equation. The other half is that the business failures that exist must equal the rate of interest paid.
Stated another way, in a stable economic system, at a given rate of interest X, there must also be a given rate of capital failure (Failed business, stock prices falling, etc) that is also X (Actually, X minus the rate of interest).
So in a system with zero risk of failure, the interest rate, both earned and paid, should be zero. As there enters a chance of failure, the rate of interest must rise to offset the rate of failure. And the only true growth will come from new inputs into the system (Technological, resource availability, resource usability, worker productivity, etc). The only true growth of a system comes from outside of the financial side, it comes from an increase of the available inputs of a system.
So a system should show no growth over long periods of time (Or slight growth equal to the availability of able bodies workers) until such a time as a new resource, process, or technology is discovered which will enable a rapid rate of growth while it is incorporated into the system, at which time it will slow down again to the slow rate of growth equal to the population input. And there is the inverse as well, as resources are consumed or destroyed, the system should contract to represent this lost potential.
But in all of the above, the interest earned on money, for a given period of time, should equal the rate of failure of the total amount of capital in that system during that time.
And that is a system in balance.
Seems like all through history folks have made deals to finance business ventures. Even Colombus had to find money sponsors in King Ferninand and Queen Isabella. Simple interest loans, letters of credit, etc., have existed for at least since the Roman civilization. The equation/practice must have some sustainability.
Sure, if I loan you 10 pieces of rock, and attach compounding interest to it for five years and you agree to pay me back, well there is enough rocks on the earth to supply what you owe plus interest.
When you have billions of people over 100s of years using the same concept, over time you will eventually run out of rocks on this planet. Unsustainable. You are currently seeing that is action... see the Fed's Z1 report.
The way the system is built currently, you would have to be God or God-like or even beyond God to keep it going.
Speaking of which...
Isn't that the reason for the Jubilee?
In fact, what if.. What if Obama said tomorrow nobody owes anybody antying at this moment.
reset
reboot.
who loses? Does commerce immediately stop? Will houses go on sale everywhere ? Will new eloans on these fresh assets not be issued?
wondering
Z1 report, bitte.
Grazie!
what about deflation?
You are assuming that humanity will limit itself to Earth.
you can still be a partner and get money back. after all, your a partner.
Right but how do I get my money back? I take it from growth and profits, and those must be there for me to be willing to invest. So it is in effect the same as interest as I am relying on the fact there will be growth and profit when I invest. In much the same way as when the owner borrows he is relying on growth and profit to pay it back. The structure is different but they are forced to rely on the same principles. Now if you are willing to led at no interest in a company that has no growth or profit expectations then let me know I have many ventures I think you would love to sink youth teeth into. I say this in jest but merely trying to display the fact that profit is ingrained in us, you would not lend to me at nothing or no chance of return, if you did your genes would be wiped out and long since purged in the evolutionary arms race.
of course, you get your money back from 'growth and profits'. but its not confined to the rigid limitations of the conditions around 'interest'. obviously if the business was profitable then you can earn more than interest alone. as an invester in the business the downside responsibility is also shared by you. what people need to realise is that lending money and charging interest is unsustainable. because it is a rigid concept that history has shown does not fit in with reality.
"Now if you are willing to led at no interest in a company that has no growth or profit expectations then let me know I have many ventures I think you would love to sink youth teeth into." the present usury money system is exactly that.
of course, you get your money back from 'growth and profits'. but its not confined to the rigid limitations of the conditions around 'interest'. obviously if the business was profitable then you can earn more than interest alone. as an invester in the business the downside responsibility is also shared by you. what people need to realise is that lending money and charging interest is unsustainable. because it is a rigid concept that history has shown does not fit in with reality.
"Now if you are willing to led at no interest in a company that has no growth or profit expectations then let me know I have many ventures I think you would love to sink youth teeth into." the present usury money system is exactly that.
Shameful,
The system as conceived is unsustainable. The money system must continuously expand to "pay" the interest owed which means someone is suffering. So in all good faith and with the desire to maintain a civil discourse I ask you how are we to maintain something that is unsustainable? The problem as I see it is that having been fully indoctrinated into the present system, this is the only way we can conceive of a economic system "working" when in fact this isn't correct. On our part, it's a failure of imagination and guts to change what we have. From the view of the financial elite, it's simple self interest that the system isn't changed.
The question is not so much what we should transition to or even how we transition but how do you get the wealthy minority to agree to give up a system that is skewed in their favor. And the economic system is clearly skewed against the have nots regardless of the "get rich" and "made it big" stories we wish to fantasize about. The answer is that you don't change it because "they" won't change it.
Even if you could maintain the unsustainable mathematically, eventually the disenfranchised will revolt. Maybe not today or tomorrow or next decade but eventually they will. So from that point of view, and not even considering the math, the system is unsustainable. From my point of view, trying to maintain something that can't be maintained is the definition of insanity. From the financial elites point of view, it's simply of matter of how they can rig the next game, once this game collapses.
The system we have is unsustainable. But that is the creation of putting limitless monetary power in the hands of the few. This has nothing to do with interest in my mind. Even if there was no interest they would be able to have infinite monetary power and could just run the presses till they owned every asset, or there was a revolt.
I simply look at human nature and human history and go from there. For capital investment we must have interest, capital investment is vital to the growth and productivity of a society. We are able to have this discus because of computers. Would computers exist if there was no source of capital? Likely not. It's quite likely we would be serf farmers right now in the service of our fuedal lord. Now in many ways we are still serfs however ones with a better lifestyle an that is because we have allowed them to stand on our necks.
I agree that the wealthy minority has gone to far, but lets face facts they have always existed in some form or anther and will always exist. Even if you set everyone on a level playing field tomorrow within a generation you would start seeing a real serious gap again, and in 3-5 generations the system would have stratified out again. This is in many ways nature at work, the only way to prevent this would be constant revolution. I think the power to print needs to be removed and we need sound money again but no one has explained to me a system that would replace interest that also respects any sort of morality, freedom, or even basic human nature.
As to the Malthusian argument. Well I've heard it for a while and that group has been crying wolf for a few hundred years. Have to be honest a few hundred years of wrongly crying wolf and I stop paying attention. Science has bailed us out so far, and if it doesn't then nature will work itself out like it does with other animals in the wild. Preemptive population control gets in the way of my ideas of liberty and all humanities right to live free. Besides in the West and devolped world population gorwth is negative. Look at Japan and Europe, the US is bolstered by immigrant population.
If the system is to collapse then so be it. Some will ride it out and others will not and humanity will pick itself back up and rebuild. Short of an extinction event mankind will always pick itself up and move forward, we are not geared for zero growth or to be satisfied with just enough to live. We are filled with a desire for more, and like it or not this desire is a core of what we are and the way either nature or the creator made us.
I know that you don't see it but your statements are full of assumptions that are not self evident in the least.
We all assume (because this is what we have been taught) that 5, 10 even 20 thousand years ago things were worse than they are now. But that is an assumption that is not validated by the oral history of all indigenous cultures, who all speak of humans as having fallen from a higher level of existence, of conciousness.
I'm not talking about religion here, I'm not talking about Atlantis or magical thinking. I'm simply saying that if you study indigenous cultures (the ancient cultures of every continent) they all speak of a time many thousands of years ago when humans had a higher consciousness and life was much better, with extremely longer life times and a much closer working relationship with the world around them.
I understand that thinking in this manner is completely in odds with our modern culture. But I would beg to differ that we are better off today than we were 5 thousand years ago. 500 years ago, 1 thousand years ago, 2 thousand years ago I fully agree. But the studies I've engaged in over the past 3 years tell me a much different story if you go further back. We simply can't see this through the artificial haze we have created which we call our modern technological culture.
Some would say what I'm talking about has nothing to do with today. I say it has everything to do with today. It's a matter of perspective. I do not see modern man as living the good life today. I do not see having technology as being better if that means living in a world which we are destroying on a daily basis. At any one point the frog in the pot on the stove might think itself in good shape. But the other frogs seeing the big picture might have a different point of view.
You are not incorrect, I'm not incorrect. We simply see the world from different points of view. Am I happy with my present state? Yes, because that is all I know. But that doesn't mean that is all there is nor is that all there could be or should be. I often say that being well adjusted to an insane world is not a high aspiration to have.
Thank you for the polite discourse. I always enjoy your comments.
Yes I do have assumptions, everyone comes to every discussion with a lifetime of biases and assumptions. As to human history from what I have been able to see, and I am a history fan, that even in the far back history life was harsh and short according to anthropologists. And how could it not be, with limited tools and knowledge it is had to draw a living form the Earth. I have said many time in my personal life that for the majority of Western people life is easy. I make far more than my basic needs, and save most of it. Honeslty I would save at no intrest, but that's my nature, it's not the nature of many I see. And even I would not invest at capital for no intrest.
Now if you have sources about what life was like in the way back I would be interested. I approach a lot of things with an open mind, and I agree with most of your views which is why I'm surprised we diverge so much on this.
Because I to have heard these myths about ancient man. They can be seen in most cultures from the Native Americans to the Greeks. However I mostly view them as nostalgia for the past that never was, after all how did they all fall from grace as it were from such a lofty place? Much like we might watch Leave it to Beaver and become nostalgia for that time, when in reality it never existed.
And I agree this is not all there is. The universe is vast and doubtless filled with wonders we can only imagine, but we are experience life through the lens of our humanity. And for adjustment, one need not aspire to understanding the insane world, but it would serve them well if they are to live in it. The world is nuts, and I often jokingly say I slipped into the Twilight Zone, but like it or not that is the reality of the world I live in.
As the average person grows older, their belief system tends to cement or congeal into place. I'm not saying this is the case with you. I'm speaking generally.
I have found that I should hold my belief system and world view as I would hold a butterfly. Meaning that I should barely touch it and be ready to let go in an instant if it no longer serves my purpose. This view is at odds with the world today. Rigid thinking allows me to be controlled by my beliefs. My goal of a flexible and nearly non-existent belief system allows me to retain my sanity and freedom and expand my consciousness while still living in a rigid and inflexible world as described by the current consensus reality.
i remember learning at school that the average so called primitive man only had to work for approx 15 hours a week to supply all sustenance. the rest of the time was leisure. i dont even think it was that much imho
And now we have progressed to 40 hours a week. :>)
If we view the world through a blue lens, everything will appear blue. That doesn't mean the world is blue. We view the world through our modern eyes and see only the solutions that "work" using our limited vision.
If you lived in the Tropics.
Haven't ever hunted mastodon, I take it.
We can satisfy addictions like never before. It's not entirely our fault:
http://articles.mercola.com/sites/articles/archive/2001/08/15/perception...
When the unit of account (currency) is made very, very stable by backing it with a naturally scarce commodity, it becomes nearly impervious to manipulative distortion. With a dependable currency, investors can rely upon the eternal purchasing power of their stored labours. With stability interest demands come to encompass only the credit risk of the debtor and not the mischief of the counterfeiters. Durable money and gov't policy would chase out the high interest premiums demanded to manage the currency risk.
While compounding interest is always and ever exponential in nature, a low rate significantly dampens the tendency to blow-up. Keynesian, counter business cycle interventions that do not allow the natural reset of the exponential function also leads to destruction. Recessions or depressions must be endured for the long-term life of the system.
(1) Stable money (2) Stable policy (3) non-intervention in business cycle (4) Capable, robust regulation and prosecution of fraud and financial crime
That none of these were followed is why this is an epic CRASH.
Interest arises from time preference, people prefer things now rather than later, this is a fact. Therefore it is only possible to exchange future goods against present goods at discount, ie: with interest.
I generally agree with you that there's much to be explained in terms of the system of thought that's arisen around the financial sector but don't try and turn a simple, logical, and immutable market phenomena into a conspiracy.
Jerry Z. Muller
Cloth | 2010 | $24.95 / £16.95
272 pp. | 4 1/2 x 7 1/2
e-Book | 2010 | $24.95 | ISBN: 978-1-4008-3436-5
Shopping Cart | Endorsements | Table of Contents
Introduction [PDF]
Recommended reading.
system should be spelled System.
B9K9
Nice post generally agree.
Unfortunately this criminal enterprise has taken many billions of people to pull off and they still do not want to accept why the world is now in this position, I am starting to believe humans are doomed to repeat this failure over and over.
Unless humans understand the basic equation and chart i posted they are doomed to repeat over and over with or without a central bank. The books do not balance and never have, if they did the system would not exist.
Unlike the 20s,30s,40s - this will not be a simple popping a bubble within a larger bubble, it's will be the whole thing this time. There is no escape as long as human continue to use that equation.
Of course abandoning the equation will cause instance death to 100s of million or billions but that is probably going to come anyway, and if you go without using the compounding interest equation everyone will then have to live with what they need instead of what they want which is about 80-90% of what they have now. They would rather ignore the death that comes as the balloon payment owed at the end rather than live with what they NEED.
+1 for all of your above posts.
The moment one understands this, is the real-life equivalent of taking the red pill.
+1
In other words: buy gold.
Ending the Fed will have beneficial results as it will expose the fragile structure of our fractional lending system. However we can only end the fed is we have a parallel medium of exchange, otherwise ending the Fed outright will simply cause chaos. Once a parallel currency is established whether we keep the Fed or not is moot, but the idea of synchronized inflation of a currency that is backed by nothing has to be stopped. Unless we get sound money, we are doomed and ending the fed is a great first step in achieving that goal!
Pick any medium of exchange you want, if humans continue to lend/borrow at a rate of compounding interest you are back on the same road to doom.
If humans wish to engage in private lending at crazy rates than they can do so, we are not here to mandate the actions of what people wish to do with their own money.
But a separation of government and banking must be implemented and I believe that is the major cause of strife that we have been experiencing both here in America and other nations afflicted with hyper-inflationary economies.
Not if the interest rate is around the rate of growth in the supply of the commodity chosen as money. The amount of tobacco or wine is only limited by the amount of organic matter, yet they're rare, transportable, divisible, etc. enough to be used as money.
Good post. Yes it's a scam a scam that can only run for so long as the underlying mathematics distort beyond all reason to reality as the scammers perceive but yet actually do within it. The IMF is going to try to replace it with some sort of sustainable scam the probably relies more on forceful taking and less on sleight of hand stealing. As they gain more and more power they create more and more enemies and dis-ease and insecurity and it requires more and more violence and oppression to mainain the power imbalance.
The problem is that it goes as planned to some extent but little problems and resistances become to great to overcome but it smells complete domination and jumps on it.
I've heard the theory that have any system where compound interest or usury exists in inherently instable, but I don't buy it.
If people borrowed money and never repaid it, sure, the debt would grow exponentially and it would never end. That's not what happens in a normal economy, though. Someone that has saved some extra money would run across someone that had a great idea but not enough money to get it off the ground. They'd say, "Your idea seems good, I bet it would work. I'd be willing to give you 5,000 bucks to start it up, but I want you to pay me back 5,100 over the next two years." There's no debt ballooning out of control, there. The money gets paid back and the lender has a little more money for taking a risk, and the borrower benefits from the loan.
The lender is the one taking the risk. There's a possibility he could lose that money. No one is going to take a risk for free. That's why I don't understand the "interest will always lead to economic disaster." Maybe if it's money created in a computer somewhere, like what occurs in the fractional reserve banking system, and the bank is making money off of money that doesn't exist. Otherwise, the lender is performing a service. He's providing capital upfront, with the expectation that he'll be paid a premium for providing it.
What would you suggest take place? People just start loaning money for free, because they think it's the right thing to do? Not going to happen. In a free society, you should be able to charge interest.
yes. but to lend something you have to possess it in the first place. agreed. also 'people' can only' borrow 'what actually exists.
the trouble is banks lend more money than they actually possess ,this is the problem. and the scam can carry on until it gets' found out' and collapses. it collapses when people 'wake up ' which is what is happening now.
a good read that goes over the instability:
http://www.bibocurrency.org/Formal%20Stability%20Analysis%20and%20experi...(final)%20rev%203.4.pdf
Echoo Echoo Echhoo
Man standing on NYSE floor by all alone surrounded by tickets on the floor AND OTHER PAPER.
Man: Helloooo..I have these XLF shares I would like to sell. Is anyone here?
(Whirring Sound as Goldman Computer stirs to life.Buttons begin beeping and lights flashing)
Hal 9000: Hello Dave.
Dave: Hey Hal. Look Im back again. I really wanna sell these XLF and Apple shares.I know you told me last week to tell my friends that you would buy all my stocks and it was futile to sell because financials were going higher one way or the other.
Hal 9000: What are you doing Dave? Havent you seen the fine work I have been doing this morning and last night with the futures? I told you there is nobody left to trade and I will buy all stocks especially banks until the markets believe these are the real prices.
Dave: Listen Hal.That is all well and good but we still have not bounced back. This morning just looks like baby volume and I think people are either waiting to sell into strength or accustomed to bounces and strong Mondays on that mutual fund myth. I would really like to just sell these now and take my profits.
Hal 9000: Dave.You are going to miss the run back over 1100 and to new highs. I told you I am buying all shares and I never ever sell. Please turn around Dave and trust me. Everything is healing in the economy. The stock market says so.Do you not trust the markets Dave? They are leading indicators.
Dave: No Hal. I believe the biggest collapse in financial history should be followed with the largest bear market rally in history. Anytime there is volume the markets are down huge. Volume does not lie Hal.
Hal 9000: Well I am not selling Dave I promise. I am not selling into strength. So turn around Dave and trust me. I will let you know when it is time to sell your shares. These stocks are all doubles Dave
Dave: Ok Hal. But I do not feel comfortable with this.
HAL9000: That's better Dave. Just trust me.
(Dave turns around and heads out of the NYSE)
(Hal returns to sleep mode)
+Dow 8500.
If you haven't already, every American should read "The Creature from Jekyll Island" now. It explains central banking, it's origins, and how it is a complete and utter fraud. The above description is 100% accurate.
End the fed now!
"I second that emotion."
You don't need a central bank to commit fraud, the system has been a fraud since before the words "bank" and "central bank" were created. The fraud system has worked with and without central banks.
All you need is a bunch of stupid people start lending to each other with attachment of compounding interest and back on the road to doom you are.
Usury and manipulation of the currency and the use of debt for private interests have now coalesced into the institution of the secret activities of the Central Bank. Paul Warburg might have been a bad influence in Europe but his power became legion when a nation's entire financial system was taken over by himself and a handful of private bankers. Here’s how amacfly on 2008-12-09 09:06:25 capsulized it on RGE Monitor:
"With fully half the world's wealth in the hands of the Rothchild's, the Rockerfeller's, Warburg's and Morgan's of the world, we are in their grip since they basically own the NY Fed, which is the real hub of the Fed system. (Mullins, Griffin etc)
"We really need to create a better banking system that breaks this terrible cycle of debt slavery that these wicked masters have created, but who has the courage to go into the temple and throw over the money changer's tables in our time?
"They have created a system that holds them aloft while keeping us indebted to them using the IRS, the Government and the Treasury as their 'attack dogs' (Animal Farm - Orwell). We are living in a time of great evil, and that evil is born of the will and greed of these bankers. Until we can break this terrible privately owned Central Bank Cartel and in its place create a fair, efficient and honest national financial system we are bound to remain debt slaves to our master's greed."
At the risk of referencing pop culture, it really is eerily similar to the Matrix. If one were to dissect core human drivers, we are biologicall programmed to satisfy our impulses for safety/comfort, sex, stimulation & fear of mortality.
The desire for safety & comfort is assauged by the illusion of wealth. Only later do people realize that they are really (debt) slaves. The crime committed against humanity is the use of state power against the very people it is supposed to represent.
Our masters have woven a very tight web, but history has shown that it repeatedly breaks during various periods of peak stress.
The Matrix is good because it's about systems, most of the stuff was ripped off from scholars and writers going back 1000s of years.
I suspect humans continue to pick door #1 back on the road to Mount Doom.
Mako,
How do you then account for 1) risk and 2) short-term sacrifice of lenders to borrowers? In theory, in a free-market economy, these attributes would determine the rate of interest (and believe me, they would be much higher without a central bank). Not that I am in the least a proponent of the Fed, but what is your solution to this problem?
Jupiter
The solution to the problem is a problem within itself, life is not a cakewalk.
You make valid points which is why humans selected the system that is in place, it's the easy solution but it's not a solution... as there is a balloon payment owed at the end.
All I can say is any system built on compounding interest is a fraud and unless someone is God or God-like it will certainly crumble.
Like I said, you bring up valid points, lending would then not be in an ideal environment. On that I agree, either way their is a choice.
"short-term sacrifice of lenders to borrowers?"
if instead it was approached from the point of view of "partners in an enterprise" the rate of return (interest) would be commensurate with the success of the venture. so 'due dilligance' would be in order.
At the risk of being a pathetic fan boy, hear hear. I never understood the argument that fractional reserve banking creates inflation, to the exclusion of other private lending activity.
To wit, before there were banks, there were people willing to lend. Go back 5,000 years, and assume a hut costs 10 gold talons. If a wealthy merchant (let's call him Shylock) observes that Joe is a big, strong worker (forefather of today's NFL players), he calculates that Joe would be able to pay off a 10 year loan (with interest) that would let him sell one of his investment huts for 50 talons - 5x the going rate.
Joe will go for it because, while he doesn't have 10 gold talons today, he knows he is highly admired for his strength & stamina, and will easily be able to cover the 'nominal' annual tribute. Even better, the hot virgin down the row will marry him if he has a nice hut in which to offer as an abode.
Things work out so well for the merchant & Joe that other lenders & borrowers get into the game. And so it goes until the ability of the marginal buyers to service their respective notes erode either due to injury, sickness or laziness, and threaten to bring the whole system down.
That's where we are today. Make FRB illegal, abolish the Fed, and we'd still have credit growth in the private economy. It almost always works well in the beginning, since lending tends to be limited to only those with absolutely prime credentials. But once the threshold is crossed where less able borrowers can no longer cover the accumulating interest + principal, game over.
In the end, the real crime of the Fed/fedgov and other central banks/states is to institutionalize the exploitation of known human weaknesses. The masses are manipulated by banks & governments to service their own selfish ends on a grand scale.
The Fed is only to help in making the system bigger and to help slow the process when it starts to crumble. At the end of the line, it's billions of people lending and borrowing to each other with compounding interest attached that is the main issue.
The Fed does not have unlimited energy to sustain the equation, it's simply over but not all the humans have gotten the memo yet, in time they will.
The banks are there to supply crack to the crackhead, there is no bank without a crackhead. As long as humans continue to loan and borrow at a cost of compounding interest then nothing will change but the name of the players.
I have not used credit during this lifetime until this year. (fridge from Sears) I still owe 400.00.
Been self employed licensed,insured contractor for over 30 years never overcharged, never got rich but own my truck trailer and tools out right.
reverse mortgaged the house and put the money into silver.
My simple point is that i have myself, my honor and selfrespect and the respect of my fellows.
To myself i feel successful due to lack of GREED.
Remove greed and we would ALL profit.
So we need to learn what is enuff, understanding that MORE is not better. A sea change in conciousness must and will occur as pride comes before a fall and in arising from the fall, awareness and humility grow.
fear based emotions are certainly making themselves 'felt' globally , greed, anger, etc. just hope we all emerge wiser when the dust has settled
"reverse mortgaged the house and put the money into silver"
merehuman, in addition to being a contractor, you are also a financial genius.
Add to the sinister counterfeiter, these gems
(1) suspended or gated redemptions by fund managers who then either front-run or secretly conspire with other "colleagues" to short for a guaranteed win.
(2) Gov't policy which penalizes prudent savers or conservative investors by mandating that excess savings be put into risk assets or long-only funds or housing in order to escape inflationary and tax penalties. Only to be slammed down in the instant the growth Ponzi fails
(3) TBTF policies which reward mis- and malfeasance, obtain without consent the future productive capacity of the populace and redistribute it to itself where it levers up via fractional reserve banking rules and puts the new money into round-trip, laddering trading in equities, corporate bonds, securities of all kinds. Traders using cash-flow analysis or fundamentals for long- or short-term positions are ground in the gears. Entire markets are completely distorted and no longer function as gauges of macro behavior.
(4) The MOST productive sectors of the economy are most damaged by the creature, counterfeit, fractional reserve while the most risky, least creative are rewarded. When they fail, they are SUPER rewarded.
(5) The system disincentivizes hard work, innovation, fiscal prudence and encourages generations of "public servants" or emergency personnel with outrageous salaries and pensions. FIRE, gov't workers, and other parasitic economic malingerers crowd out the creative class. System starves. Desperation drives individuals, crowds, states to cruel military acts.
The more centralized the power is, the worse the effect. The impetus behind the 'end the Fed' movement is the decentralization of banking power. In Taleb's terms, the governmental structure reinforcing the central bank's control creates the illusion of a Gaussian system, wherein the 10-sigma negative black swan event becomes highly leveraged, decimating the system catastrophically. Whereas a free market (non)structure recognizes the Mandlebrotian nature of the system, allowing black swan risks to average out across time. In the first instance, the inevitable unpredictable failures are huge and affect everyone globally. In the second instance, unpredictable failures are more easily absorbed locally.
Leviathan! And nothing says it clearer than the bloated, puss-packed monster just about to swallow a tiny citizen…on the cover of the January 21st The Economist.
The polticians didn’t push against it, the academics and most economists ignored it. But the taxpayers are responsbile for The Economist cover headline: THE BACKLASH AGAINST BIG GOVERNMENT.
One factor enables politicians and government to pay for wars, welfare and big government when it doesn’t have the money: Fiat currency and a central bank that acts as the counterfeitor of last resort.
Excerpts from Jon Berkeley’s article:
America’s most vibrant political force at the moment is the anti-tax tea-party movement. Even in leftish Massachusetts people are worried that Mr Obama’s spending splurge, notably his still-unpassed health-care bill, will send the deficit soaring. In Britain, where elections are usually spending competitions, the contest this year will be fought about where to cut. Even in regions as historically statist as Scandinavia and southern Europe debates are beginning to emerge about the size and effectiveness of government…
How it grew and grewThe immediate reason for the rise of the state is the financial crisis. Governments have spent trillions propping up banks and staving off depression. In some countries they now play a large role in the financial sector; and thanks to bail-outs, stimulus and recession, the proportion of GDP made up by state spending and public deficits has rocketed.
But the rise of Leviathan is a much longer and broader story (see article). Long before AIG and Northern Rock ended up in state custody, government had been growing rapidly. That was especially true in Britain and America, the two countries in which “the end of big government” had been declared in the 1990s. George Bush pushed up spending more than any president since Lyndon Johnson. Britain’s initially frugal Labour government went on a splurge: the state’s share of GDP has risen from 37% in 2000 to 48% in 2008 to 52% now. In swathes of northern Britain the state now accounts for a bigger share of the economy than it did in communist countries in the old eastern bloc. The change has been less dramatic in continental Europe, but in most of those countries the state already made up around half of the economy.
Demography is set to push state spending up further. Ageing populations will consume ever more public health care and ever bigger pensions. Unless somebody takes an axe to them, entitlements will consume a fifth of America’s GDP in 15 years, compared with 9% now.
http://www.economist.com/opinion/displaystory.cfm?story_id=15330481
"Stripped of its fancy terminology and confusing mechanics, modern central banking boils down to a legalized counterfeiting operation."...
I always get a kick out the academic set that thinks 'Quantitative Easing' is a high level matter that could only have been dreamt up by their super brains, and only to be undertaken by supremely intelligent higher ups.
Regular people look at the whole charade, and then simply ask: "Aren't you guys just selling bonds to yourself? Let alone smart, is that even legal?"
just one big circle jerk and the average Joe doesnt see it.
It is amazing when you think about the magnitude of the charade. Central banks can't exist without government bonds.
You cant debase gold. And while everyone is trying to deflate their currency against all the other ones, eventually there is only one thing left to devalue against, and that is gold. It's coming. Get ready.
yep ..10-4 and yet read the comments about gold on
variousthreads here at zero hedge .
dumb and dumber comes to mind
A mixture of ingnorance and disinformation tentacles.
ponzi scheme sums it up. but hay .. this has been known for many years ,, now is this article to sum up a new found belief,, or to get a very diaper ready crew of harvard, keynesian guys on page one of the crises.?
as they run to uncle, to force feed a generation of economic
illiteratesthat have been buying bridges to no-where .
The Federal Reserve is a criminal organization. The biggest criminal organization in the history of the world. It exists only for the enrichment of its masters. Abolish the fucking Fed.
The criminal enterprise will continue until humans stop attaching compounding interest to their medium of exchange regardless if you get rid of the Fed.
thats it in a nutshell. while there is usury in any form the problems just get worse. im not religous but even christ was more pissed off with the moneylenders than he was with the people who nailed him to the cross.
Humans 2,000 years ago are smarter than the ones walking around today, they figured out that exponential growth is a fraud and put it down in writing. Today we have people defending a notion that humans can somehow break Math.
It never ends well.
Not even 200 years ago the Supreme Court nicely expanded the tersely written intent of the Founding Fathers:
MAKO:
Will using simple interest work or just slow the pace to the inevitable by about 2/3?
Would using a system like the Bank of North Dakota, the only state owned bank in the USA, work?
http://www.banknd.nd.gov/
What systems have worked in the past and had good economic growth?
With good reason.
He even asked his Father to forgive the stupid savages that nailed him to the cross. They being the equivalent of today's lethal injection technicians at the pen.
There will be no such forgiveness to our current day money changers or their predecessors. I hope their lives of wealth and domination are worth the shitty 50 or so years they live to enjoy it. Because they are going to flame for eternity.
MAKO:
Would using simple interest instead of compound interest, slow the time to detonation by about 2/3?
Same problem, longer time frame?
Does the Bank of North Dakota, the only state-owned bank in the nation, have the same problem, or is it a solution?
http://www.banknd.nd.gov/
What solutions have worked in the past and allowed growth?
TIA
I would generally agree, but in the end it's still using a failed concept which will one day be exposed but yes it might mean less destruction at the end or a longer time period.
Counterfeiting sounds.... so bad, almost illegal. Let us just call it a state-granted jurisdictional monopoly to a party to create money in that jurisdiction.
The biggest con ever perpetuated in history was getting the people, through their intelligent representatives, for the need for 'soft' money to 'manage' economic cycles.
-10-43=-53
The above story ended too abruptly. Does the King live happily ever after?
Also, in the story, fractional reserve banking was explained with the example that a $1 million deposit would result in $900,000 lent out, with a fraction, $100,000 kept in reserve.
Actually, the bank would hold the $1 million deposit, and lend out $10 or 20 million. That's fractional reserve banking, using a money multiplier of 10 or 20.
Nothing to see here, move along.
And which private entities/members own the Federal Reserve? Am glad you asked, see:
www.save-a-patriot.org/files/view/whofed.html
And how did the Rothschild family get most of their immense wealth? Am glad you asked, they purposefully CRASHED THE LONDON STOCK MARKET by having a messenger lie about the outcome of a war and then bought big at the bottom. The next day or so when the real truth about the war was received, the London market went up big.
Hey! Come ON! Cramer says that Bernanke & Geithner are doing a great job. All is well!
http://www.youtube.com/watch?v=4bo9jCSd15U&feature=player_embedded#
Oh and Jimmy says the Trilateral Commission, Iluminati & Bilderberg Group are just not bad people.
Sucking up is a way of life.
Here it is...the future....
Digital money
No crime....because no reward
Job tasks....paid by societal worthiness....
Based on the World's Economy....
No tax havens....no reason to have them....
Govt. itself would be digitized....govt. would just be the nucleus that accumulates internet populous data....
No more democracy by paid advertising....
...................................
The world will be going DIGITAL....
i dont mind digital money just so long as its backed by something .
www.RevokeTheFed.com
March 2008WHEREAS, Article I, Section 8 of the Constitution of the United States of America authorizes Congress "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures";
WHEREAS, on December 23rd, 1913 the US Congress enacted the Federal Reserve System;
WHEREAS, the Federal Reserve System is considered an independent agency within the federal government, with oversight of Congress and containing appointed public officials on its board of directors;
WHEREAS, the Federal Reserve System Controls the Federal Reserve Note, the official currency of the great nation of the United States of America;
WHEREAS, there may be controversies regarding the legality and constitutionality of the Federal Reserve System, it is recognized that the said system has operated continuously as the central banking system of the United States since the inception of the Federal Reserve Act of 1913;
WHEREAS, the Constitution of the United States of America granted Congress the authority to create the current Federal Reserve System, it also does grant Congress the authority to modify or revoke the Federal Reserve System;
WHEREAS, the actions of the Fedreral Reserve System represent the credit and currency of the United Stated of America to the citizens of this great nation and to the world;
WHEREAS, the Federal Reserve System, acting independently within the federal government allowed, supported, and even promoted parasitical and non-productive uses of the money and credit of the United States of America;
WHEREAS, the United States and likely the entire world's financial system is undergoing massive de-leveraging of the said parasitical and non-productive uses of the credit and money of the United States of America (as well as other nations' currencies);
WHEREAS, the US dollar, the "Federal Reserve Note" is declining in value due to these parasitical activites, as well as potentially other causes;
WHEREAS, it is recognized that the citizens of the United States and other nations did willingly participate at some level in the creation and propogation of said parasitical activities;
WHEREAS, it is also recognized that the United States of America, a sovereign nation, has the legal, moral, and God given authority to take actions to benefit its citizens and to protect its good name, credit and money in times of difficulty;
WHEREAS, it is recognized that the current time is such a time of great difficulty;
WHEREAS, it is recognized the parasitical financial institutions and their activities are at odds with citizens of the United States of America and the good credit and money thereof;
WHEREAS, the current indications are that the Federal Reserve System is acting to preserve the financial system currently flooded with the parasitical activities;
WHEREAS, the current indications are that the neither the Federal Reserve System, nor the Congress of the United States, nor the people of the United States have access to the books of the institutions being preserved by the Federal Reserve, and therefor the degree of inter-connectivity and risk associated with the institutions and other entities cannot be determined;
WHEREAS, the Federal Reserve System is accepting non-performing assets as collateral for credit with ultimate taxpayer responibility to entities not under its legislative mandate;
IT MUST BE CONCLUDED, that the Federal Reserve System is not acting to the benefit of the people of the United States of America, its credit, money, and good name;
WHEREAS, it is recognized that the political will and capability of the government of the United States of America may not be up to the task of prosecuting this proclamation ; It is also recognized that this may be the only hope for the continued survival of the United States of America as the great nation as it has historically existed.
NOW THEREFORE, it is PROCLAIMED by those supporting this Proclamation that the Congress of the United States of America FULLY NATIONALIZE the Federal Reserve System, and take full control of the credit and money of our great nation; The Congress must take whatever action necessary to seperate out, sequester, disown, or otherwise neutralize the effect of the parasitical financial activities which led to the current crisis; The Congress of the United States of America must reorganize, replace, or terminate the Federal Reserve System as appropriate; or otherwise devise a system for creation of the national currency.
IT IS FURTHER PROCLAIMED, that the Congress of the United States of America in cooperation with the Executive of the United States of America contact allied nations and any other nation willing to participate in the overhaul of the failing and parastical financial sytem currently in operation and create new treaties and alliances as necessary to create a sane and productive system of finance with the express goal of supporting a productive national, and by extension and through voluntary cooperation, world economy;
FURTHERMORE, it is PROCLAIMED that it should be the goal of such an international effort to maintain fair international trading practices allowing for protection in national interest of labor, resources, and productive capabilities;
WHEREAS, it is recognized that such a move on the part of the United States of America may result in the necessity of an isolationist policy IF the other developed nations do not follow our lead; If such occurs, so be it.
SO HELP US GOD!
The Medieval Swedish Kings had a good thing going, basically skimming off the top of the silver content of the coinage, and kept it running for 250 years.
It's when the elites get too greedy, I suppose, and push it too far too fast that they get into trouble.
During the Great Power period that happened in Sweden also, with recurring currency crashes over a period of more than 100years. Very interesting times for numismatists.
_______________________________________________
The fine silver content of the Swedish Mark was gradually reduced during the course of the Middle Ages. This debasement took place over a long time (Figure 1). People were aware that the fine silver content of the coin often was reduced. Therefore, they often specified the exchange ratio between the currency actually used and the stable silver Mark (mark lödig) that was to be applied in each particular economic transaction.
Figure 1. The fine silver content (in grams) of the Swedish Mark (mark penningar), 1291-1540
(see the original doc. for the graph. The silver content is gradually decreased from about 58g to about 7g over a period of 250 years.)
A Consumer Prise Index 1290-2006 (Sweden)
The Medieval Swedish Kings had a good thing going, basically skimming off the top of the silver content of the coinage, and kept it running for 250 years.
It's when the elites get too greedy, I suppose, and push it too far too fast that they get into trouble.
During the Great Power period that happened in Sweden also, with recurring currency crashes over a period of more than 100years.
Very interesting times for numismatists.
_______________________________________________
The fine silver content of the Swedish Mark was gradually reduced during the course of the Middle Ages. This debasement took place over a long time (Figure 1). People were aware that the fine silver content of the coin often was reduced. Therefore, they often specified the exchange ratio between the currency actually used and the stable silver Mark (mark lödig) that was to be applied in each particular economic transaction.
Figure 1. The fine silver content (in grams) of the Swedish Mark (mark penningar), 1291-1540
(see the original doc. for the graph. The silver content is gradually decreased from about 58g to about 7g over a period of 250 years.)
A Consumer Prise Index 1290-2006 (Sweden)
The Medieval Swedish Kings had a good thing going, basically skimming off the top of the silver content of the coinage, and kept it running for 250 years.
It's when the elites get too greedy, I suppose, and push it too far too fast that they get into trouble.
During the Great Power period that happened in Sweden also, with recurring currency crashes over a period of more than 100years.
Very interesting times for numismatists.
_______________________________________________
The fine silver content of the Swedish Mark was gradually reduced during the course of the Middle Ages. This debasement took place over a long time (Figure 1). People were aware that the fine silver content of the coin often was reduced. Therefore, they often specified the exchange ratio between the currency actually used and the stable silver Mark (mark lödig) that was to be applied in each particular economic transaction.
Figure 1. The fine silver content (in grams) of the Swedish Mark (mark penningar), 1291-1540
(see the original research doc. for the graph. The silver content is gradually decreased from about 58g to about 7g over a period of 250 years.)
A Consumer Prise Index 1290-2006 (Sweden)
http://www.riksbank.com/templates/Page.aspx?id=27394
"Counterfeit" is the wrong word given that they're creating actual notes. They may be worthless, backed by nothing, but they aren't "counterfeit."
Beside the point. Here's my question:
If the Fed gives that $1 million to the primary dealer, and he puts it in his bank, and the bank doesn't lend, then we don't have velocity of money.
HOWEVER, we're forgetting that one million also went to the Treasury, to be spent by government, mostly on employees. They take it and spend it on other things, which creates some measure of velocity.
My point being that the impression that the all the recently printed money is bottled up in bank reserves isn't totally accurate. All that borrowed by the Treasury is getting out there and therefore some of the printed money (inflation) is indeed already in the system.
Equal to the amount of Treasuries the Fed has purchased, no?
DJIA has been experiencing visible "inflation" since March '09. Just look at the P/E!
"HOWEVER, we're forgetting that one million also went to the Treasury, to be spent by government, mostly on employees. They take it and spend it on other things, which creates some measure of velocity.
My point being that the impression that the all the recently printed money is bottled up in bank reserves isn't totally accurate. All that borrowed by the Treasury is getting out there and therefore some of the printed money (inflation) is indeed already in the system. "
Thats not necessarily true. Those employees taking government money may simply save it or pay down debt, thus they do not create any velocity. Judging by the recent increase in savings I think this is the more likely scenario.
FED is trying to counter asset deflation(houses, stocks etc) by printing money (inflation)
whats wrong abt it?
If the big banks werent saved, the stock market wd have plunged rapidly doubling current unemployment figures & wiping off 401Ks
"Because of these considerations, the monarch would no doubt run off new money every year from his printing press, but he wouldn't overdo it. He would aim for a moderate level of constant price inflation, with the purchasing power of his fiat currency slowly falling over time in a predictable manner."
If we observe price inflation to be 'moderate' to 'low', can we then conclude the monarch didn't "overdo it"?
In the similar context, its also true with all the money that went to ponzi banks. This money didnt have velocity either as lending virtually got halted. But it however ended up as big bonuses to bank people & also helped toartificially prop up bank stocks & there by whole stock market. The 'perceived' worth of people's 401Ks are now higher there by triggering consumer spending.
Bernanke is the American equivalent of John Law.
Cedit Card companies domocile in South Dakota for the big fat 'Vig' of say 28% or whatever. But in states like Connecticut (home to AIG and Senator Chris Dodd) one cannot loan beyond a point of two about per-set 'usury' limits. Crazy as I am, I actually called the State of Ct Banking Dept. on this."If you don't like it, change the law." But the law works for Dodd, AIG just not for me.
Olagopoly presents the false choice 'Choose your bank'
Okay, I'm new to all this but let me see if I can get this right.
If Fed gets to print OUR money from nothing (essentially), then the least they can do is pay the interest back to the govt, correct? When Fed buys Treasuries, what money are they buying them with? Fractional reserve ledgar entries, correct? I understand it used to be even worse, we, the people, used to NOT get the interest paid back to Treasury until some congressmen started ruffling around about the FED.
So, if the Fed pays the interest and never asks for the principal back on some or all the Treasuries...then the FED has essentially monetized our debt, which is better than the FED asking for the money they printed back, no?
Now we can argue for weeks about whether we should monetize our debt...but let's suffice it to say, at this time we are doing it already thru the FED, shouldn't we at least want the monetization to be controlled by public and used for the benefit of the public. Sure, corruption of public institutions can occur, but when its in secret, private hands, corruption is guaranteed, with no chance of public even seeing what is going on behind the curtain and no chance of getting anything from the printing of money.
Per the article's example, lets say that the money supply the king creates from thin air whe he prints, he spends not on luxury yachts, private jets, and houses in the Hamptons, but rather he is a good king, and he spends his printed-money-for-nothing on common good projects like medical care for disabled/elderly/vets, clean water supply, defense of kingdom, roads, levees...to the point he hardly taxes his people for any of this (the tax is in the form of monetizing).
Also, via a King-controlled central bank, he lends out some of the money he has printed to solid, private businesses/enterprises at reasonable interest rates that keep the overall money supply (credit and currency) reasonable for needs of kingdom, via, say, the Taylor rule, and still yields profits for the Kingdom bank. Then say the good king took these interest payments to pay for more public, common good projects also (along with directly printed money). Would not this be a fairly good scenario for the Kingdom?
It does not bother me that we, the US monetizes our debt (if it is done in a resposible way) per se, and it certainly does not bother me the Fed is made to pay interest to US Treasury for money they created by writing debt onto a electronic ledger sheet and that they do not ask for the money they printed back... what does bother me is that private bank cartels reap most of the profit of this process of money/credit/debt creation when that right to create currency/money supply, which should rightly belong to the people, is hijacked and profits the few.
In the US, in theory, the King should rather be a Sec of Treasury beholden to the public will, and money supply should be determined but what we think is appropriate to best interests of country to tame inflation but not overly limit natural growth and any money printed to achieve those ends should be the public's to do good, common wealth projects, whatever we want. Instead, the King is the FED, with the Sec of Treasury a fake democratic institution to look as if the FED, and its private banks that own/run it, is not the one that is the primary beneficiary
Am I wrong here?
BINGO.
bingo x 2
if i printed money out of my room i would goto jail in 2 seconds
the fed hates competition
"They are Wizards of Alchemy; storied warriors. Bow to the all wise noblemen, pagans. You have them to thank for your pitiful existence."
They play games like children, creating worthlessness out of worthlessness, and get the simple involved. Paper burns. Metal withstands fire. Expose the oligarchs. Let there be light!
It is no secret the Fed is a counterfeiter. Here is a quick history of the changes made to the money in your wallet.
A 1914 $10 bill said:
(On the front)
Federal Reserve Note
The United States of America
Will pay the bearer on demand
Ten Dollars
The fine print read:
Authorized by the federal reserve act
Of December 23, 1913
On the back it said:
"THIS NOTE IS RECEIVABLE BY ALL NATIONAL AND MEMBER BANKS AND FEDERAL RESERVE BANKS AND FOR ALL TAXES, CUSTOMS, AND OTHER PUBLIC DUES. IT IS REDEEMABLE IN GOLD ON DEMAND AT THE TREASURY DEPARTMENT OF THE UNITED STATES IN THE CITY OF WASHINGTON, DISTRICT OF COLUMBIA, OR IN GOLD OR LAWFUL MONEY AT ANY FEDERAL RESERVE BANK."
A 1928 $10 bill said:
(on the front)
Federal Reserve Note
The United States of America
Will pay to the bearer on demand
Ten Dollars
The fine print read:
Redeemable in gold on demand
At the united states treasury,
Or in gold or lawful money
At any federal reserve bank.
A 1934 $10 bill said:
Federal Reserve Note
The United States of America
Will pay to the bearer on demand
Ten Dollars
The fine print read:
This note is legal tender for all debts,
Public and private and is redeemable in
lawful money at the united states treasury,
or at any federal reserve bank.
A 1950 $10 bill said the same as a 1934 bill but the fine print became so small it was almost unreadable.
In 1963 a $10 bill said:
Federal Reserve Note
The United States of America
Ten Dollars
The fine print read:
This note is legal tender
For all debts, public and private.
Legal money was out the window.
A FRN is an “I owe you nothing”
It is a slow Confisication of Money from Americans and re-deverted to the Bankers.
For every Dollar printed it lowers the value of the Dollars you hold. Not only does it lower the value of the Dollars you hold YOU now owe the Principal and Interest on thoes newly printed Dollars.
WOW, what a deal the FED prints money which reduces the value of the Dollars you hold and now you owe the amount of money Printed PLUS interest on that Money.
Why did Congress ever give the PRIVATE BANKS this POWER over our Currency? The Constitution calls for all Money to be Created by Congress.
If the Money was created by Congress then we would not owe a DEBT or Interest on the Money Created. The only cost to create the Money would be the Devaluation of the Money we hold.
So, every time they Create or Print Money it costs us Money thru the Devaluation of the Money we currently hold, the Debt and Interest.
There is no way that the Money can ever be repaid. I guess that is the plan.
When a Treasury security matures the Treasury will pay the holder the face value of the Bond. If the FED is the holder it will be paid. So then what happens? The FED has a choice, but the real key reason the FED has the power to create money, is it also has the power to destroy it. That is, to reduce the money supply. It can tighten, but history shows that it does not. What this means is that our central bank does not protect our currency. Why would foreigners still buy US Treasuries?
Mark Beck
"If all the bank loans were paid up, no one would have a bank deposit, and there would not be a dollar of currency or coin in circulation. This is a staggering thought. We are completely dependent on the commercial banks for our money. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp upon the picture, the tragic absurdity of our hopeless position is almost incredible - but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defects remedied very soon."
Robert H. Hemphill, Federal Reserve Bank of Atlanta
This is such a shame... Crooks running our USA... This will end badly.... Congress and Senate can't seem to stop it.. Gold and Silver will be the >>> last man standing ...
Mako:
I have to say that upon reading your comments regarding compound interest i disagreed with you on the basis that compound interest was sustainable as long as productivity growth outstripped the interest paid (ie on the whole, you are putting the borrowed money to work on capital goods that increase productivity and should inrcease wealth overall, using wealth as aloose descriptor here).
The lightbulb then went off. If i deconstruct the above thought, I am implicitly assuming that prices will continue to rise in the future, and that money will continue to expand at some rate. Basically, i am assuming that there will be inflation and that it is necessary, because the payment of interest assumes that a dollar today is worth more than a dollar tomorrow.
Inflation is a mechanism that robs from the poor and diverts to the rich. The assumption by society that prices rise allows interest to be charged, and we accept inflation that erodes our wealth as a given.
However inflation is NOT necessary. Increased productivity over time leads to lower costs, and lower costs lead to lower prices in the absence of money supply manipulation. Price deflation over time is the default setting, while inflation is artificially manufactured to keep the shell game going. Additionally, the rate of inflation from a zero base is not the true rate of inflation, the true rate of inflation is the the rate of price increase over and above the decrease that should exist if productivity gains dictated prices.
How does this relate to interest? Simply that in the absence of inflation, and with prices being allowed to fall as productivity increases, there is no need for interest! If prices fall long term, the $10 i borrow today can buy more in the future. So there is a cost of borrowing there without any interest, and there is an incentive to lend money because you get the $10 back later when its worth more.
But this is not a system that exponentially grows, and thats the key distinction. The other key distinction is that this does not automatically create a transfer of wealth from the poor to the 0.5% of the richest rich.
So i went from disagreement with you Mako to complete agreement. Abolish interest, abolish monetary manipulation and allow productivity and capital growth to drive our progress into the future without an exponentially growing system that eventually MUST fail.
To be honest I didn't even read your post. I just wanted to point out that unless you click on the right button ["reply"] most people won't even care to read your response. Just sayin'.
One of my favorite charts: Total Borrowings of Depository Institutions from the Federal Reserve http://chartfacts.com/chart_frame.php?cid=1679.
I just made it with Paint...sorry I do not own a Photoshop licence for fancy effects....however I think it gives you the idea...
Our tragic monetary Three-Card monte...
http://vaygzq.blu.livefilestore.com/y1pEdhc5frKAdhK_Ym8g8G-60MBp2nqk-YgCNEq38I1TUBJd2kprxMzmwNt38JWlT7NDeASJdgHgl-VuX_S2fH3gcvBdYzaVAOW/The%20Monetary%20Three-Card%20Monte.jpg
you guys should look into Islamic Banking. no interest. very interesting.