The History Of The Federal Reserve System

Tyler Durden's picture

For better or mostly worse, the Federal Reserve has been governing the monetary system of the United States since 1914. The visual history below maps the rise of the Fed from its origins as a relatively minor institution, often controlled by Presidents and The Treasury to its supposedly independent and self-aware current position as, arguably, the most powerful entity in the world. And because we always like to be 'fair-and-balanced' we juxtapose this clarifying truth of the maniacal growth of the Fed's balance sheet and shift from passive to hyperactive - highlighting every major macro-economic and political event on the way - with G. Edward Griffin's 1994 speech on 'The Creature From Jekyll Island'.


Full Infographic available here.







And The Creature From Jekyll Island:



and the full free edition of the visual history here:

History of Federal Reserve Free Edition

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iDealMeat's picture

Fuck You Bernanke.

knukles's picture

Had to figure the John Birch Society would come in handy one day.

Say, where are grandpa's old "Impeach Earl Warren" signs?

economics9698's picture

I wish I had a job where I could print money for 6 cents and sell it for $1.

jeff montanye's picture

i'll bite.  where's the six cents?  i imagine the cost at the electronic margin is several orders of magnitude cheaper.

Muppet Pimp's picture


Re-post of Steve Keen at INET

It is worth the 20 minutes IMO.  Steve is on point right here.  The basis of modern economic theory is going to be changing, period.

fnord88's picture

Why do we still even need banks? Why has ZH not done any articles on peer to peer lending? Seems like it has the power to render all banking obsolete. Savers connect directly with borrowers, cut out the middleman. The IT revolution should mean we are looking at all kinds of new financial systems, although i do know of one company 10 years ago that built a paypal like system for instantaneous international transfers, but was sued out of exiistance by the government as it made tax too difficult.

GetZeeGold's picture



I wish I had a job where I could print money for 6 cents and sell it for $1.


It use to only be 5 cents.......not even the Fed is immune to inflation.


paulypaul's picture

The 5 / 6 cent can also be printed, so its completely free.

Hopeless for Change's picture

Printed? HA!!! That would take hardware and paper.  The 'money' is created with a mouse click and a keyboard stroke.

Cadavre's picture

Seven, eight, nine and eleven may or may not be a numerological consideration to the majority of the Walmart masses, but in the case of the FED, is sure seems as the publisher of Tikkun once forwarded in his newsletter regarding an honorarium to be bestowed on a group of rabbis as a case of the "chosen of the chosen". There have been 14 FED chairs since it was hatched, with the latest to bear the "special mark" being our very own and one time South Carolina Porn King's bookkeeper during summer break from ivy league bankster madrases, Harvard. The numbers 7,8,9 and 11, are the only FED chairs not to have been London's Shadow Banking WZO parish queen debut antes.

Cute, hospital food-esque graphic - like a National Geographic insert foldout suitable for classrooms - BUT - to nurture the festering pestilence at the core of every corruption and failed ethic to virulently blossom into the world we see around us today required tankers of man-blood fed direct into the vampire squid's carotid artery.

Understood .. understood ... no need muddling to cutsie tutsie national geographic Wheaties Box cover girl aura of the article's infographic with some factual detail .. that;s why g*d invented ZH a backstop .. a strut .. an attentive helping hand so that off-book shunted facts can be underscored .. so lets let Benjamin Freeman fill in those uncomfortable details the infographic avoids ...

The Zionists in London sent these cables to the United States, to Justice Brandeis: “Go to work on President Wilson.  We're getting from England what we want.  Now you go to work, and you go to work on President Wilson and get the United States into the war."  And that did happen. That's how the United States got into the war.  We had no more interest in it; we had no more right to be in it than we have to be on the moon tonight instead of in this room.

     Now the war -- World War One -- in which the United States participated had absolutely no reason to be our war. We went in there -- we were railroaded into it -- if I can be vulgar, we were suckered into -- that war merely so that the Zionists of the world could obtain Palestine.   Now, that is something that the people  in the United States have never been told. They never knew why we went into World War One. Now, what happened?

    After we got into the war, the Zionists went to Great Britain and they said: “Well, we performed our part of the agreement.  Let's have something in writing that shows that you are going to keep your bargain and give us Palestine after you win the war.”   Because they didn't know whether the war would last another year or another ten years.   So they started to work out a receipt.   The receipt took the form of a letter, and it was worded in very cryptic language so that the world at large wouldn't know what it was all about.   And that was called the Balfour Declaration.

    The Balfour Declaration was merely Great Britain's promise to pay the Zionists what they had agreed upon as a consideration for getting the United States into the war.   So this great Balfour Declaration, that you hear so much about, is just as phony as a three dollar bill.   And I don't think I could make it more emphatic than that.

     Now, that is where all the trouble started.  The United States went in the war.  The United States crushed Germany.  We went in there, and it's history. You know what happened.  Now, when the war was ended, and the Germans went to Paris, to the Paris Peace Conference in 1919, there were 117 Jews there, as a delegation representing the Jews, headed by Bernard Baruch.  I was there: I ought to know. Now what happened?  

... what are we going to do?  The life you save may be your son's.  Your boys may be on their way to that war tonight; and you you don't know it any more than you knew that in 1916 in London the Zionists made a deal with the British War Cabinet to send your sons to war in Europe.  Did you know it at that time?  Not a person in the United States knew it.  You weren't permitted to know it.

     Who knew it?  President Wilson knew it.  Colonel House knew it.  Other 's knew it. Did I know it?  I had a pretty good idea of what was going on:  I was liaison to Henry Morgenthau, Sr., in the 1912 campaign when President Wilson was elected, and there was talk around the office there.

     I was 'confidential man' to Henry Morgenthau, Sr., who was chairman of the Finance Committee, and I was liaison between him and Rollo Wells, the treasurer.  So I sat in these meetings with President Wilson at the head of the table, and all the others, and I heard them drum into President Wilson's brain the graduated income tax and what has become the Federal Reserve, and also indoctrinate him with the Zionist movement.

     Justice Brandeis and President Wilson were just as close as the two fingers on this hand, and President Woodrow Wilson was just as incompetent when it came to determining what was going on as a newborn baby.  And that's how they got us into World War I, while we all slept.  

     Now, at this moment... at this moment they may be planning this World War III, in which we don't stand a chance even if they don't use nuclear bombs.

Oh regional Indian's picture

 A verbal history of the Federal reserve:

Fiat Every Dollar

Meaning, no let-up till it's all debased. That 97% or whatever the dollar has been debased since 1913? It's not at 100% because the last stage is always the long and hard stage, eh? They have to pump, pump and pump some more, every day, till all that's left is air.

Also, they have made sure that a recovery with-in the bounds of this system is impossible. Cannot go back to any of the turning points (especially 1933 and 1971) and lest anyone forget, LBJ's famous coinage debasement, sliver pulling new coinage act of 1967 (ish, I forget the exact year)......

It clearly seems like it was meant to be a 100 year experiment and it looks like they've suckceeded.

And of course the lie begins with the name. Not Federal and no reserves....

Mission suck-cess-pool!




TruthInSunshine's picture

The Non-Federal Reserve-less Non-Bank is just the latest entity & iteration of the literal Ponzi scam that perpetuates pure fiat monetary systems (see remarks/footnotes below regarding Plaza Accord and Nixon Shock, which closed the Bretton Woods pact) that some refer to as fractional reserve banking (see Modern Monetary Theory as described and admitted to in their own publication, 'Modern Money Mechanics' - Modern Money Mechanics is a booklet produced and distributed free by the Public Information Center of the Federal Reserve Bank of Chicago; MODERN MONEY MECHANICS*) , whereby this non-bank entity and front for The Money Masters uses taxpaying slaves, many of whom ostensibly believe they are free and sovereign citizens of a sovereign "nation," as collateral, to conjure what they claim is 'money,' but that which is really debt (since there is nothing of inherent value backing it), from thin air, leveraging it up by many multitudes (money multiplier/deposit multiplier, derivative contracts and other forms of leverage can ratchet this debt up by a magnitude of a thousand times or more from the point of inception/creation), getting a nation to endorse it as monopolistic fiat (and enforce the monopolistic recognition of it as such for the payment debt, both public and private, via codified law and corollary enforcement agencies). 

 * The Federal Reserve Bank of Chicago, describing, in small part, the ruse of Modern Money Mechanics (quote from Page 6, last paragraph):

"What they [banks] do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise by [the amount of the "loan"]."

When was the last time you lent money to a friend and suddenly found you had more funds? 

Theoretically, and just for illustration purposes, even if 95% of loans go bad (or more), the fractional reserve bankers lose nothing. They created this fiat money from nothing and received the protection of the nation in distributing fiat monopoly currency. Not only do they lose nothing, they actually gain any real assets that were pledged as collateral to securitize most of the loans that went 'bad' - Harvest.

Repeat this process of Harvest by first inflating the money supply, getting people deeply indebted (many of whom weren't indebted before), and soon enough, with enough cycles of harvest, what belonged to many will be concentrated in the hands of a few, all via the sham that is fractional reserve banking.

It's the biggest scam in the history of mankind.

Once a person grasps this basic concept, they'll understand why events have taken place as they have (Bretton Woods*; Plaza Accord; Federal Reserve Act of 1913; closing of the gold standard in 1971*, etc.), and they'll finally grasp how a select few have rigged the game to be able to harvest assets continually, and concentrate wealth and power, by doing nothing other than maintaining Deep Capture of a nation's legislative and judiciary branches (and executive, in the case of the U.S.) of government.

*On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully fiat currency, backed by nothing but the promise of the federal government." This action, referred to as the Nixon shock, created the situation in which the United States dollar became the sole backing of currencies and a reserve currency for the member states. At the same time, many fixed currencies also became free floating.

If you could print a currency at no cost, that had no instrinsic value, and get the legal system to recognize it as the only legally permissibly 'tender' to satisfy all debt, public and private, would you print as much as you could, loan it out to as many entities and people as you could, and sit back, not caring whether 90% or 9% of the loans were repaid, since it cost you nothing to produce the loan, meaning that you can only gain assets (securitized) and indebt institutions (create indebted parties that you can then garnish), and literally lose not one atom of anything of inherent value?

Further, if you had access to an entity that could do the above, and you could borrow that currency at absurdly low interest rates, and moreover, you had an express or at least implicit taxpayer guarantee against losses (too big to fail), would you also not do exactly the same?

If you're the former entity, you literally can lose nothing, no matter how reckless your actions or lending standards.

If you're the latter party, your risk of loss is inconsequential, since you're backed by the taxpayers (involuntarily), and even if you weren't, if you're a very large entity able to tap absurdly low interest loans from the former, unless you are galactically idiotic on a level that equals Lehman or beyond (where derivatives did them in, along with a non-bailout), you'd be hard pressed to lose money if even - completely hypothetical and arbitrary % - 20% of the cheap interest money you borrowed and then re-loaned out wasn't paid back to you.

If you're the former, you have not only no risk, but you can't possibly lose anything, since your investment is nothing.

If you're the latter, your risk is incredibly small.

This is why our economy, under fractional reserve banking practices, using currency created from thin air, tied to absolutely nothing of inherent value, and bestowed monopoly status as legal tender, is a factual, literal Ponzi Scheme.

This is why we had to close the gold standard, lest we couldn't show "growth" (even though it was merely nominal, credit/debt based transactions) in our official GDP going forward.

You don't even have to tie the fiat to gold in order to force the economy to produce honest numbers and detect the real level of economic growth or contraction: tie the currency to anything that has inherent value, and that can be stored, and that isn't infinite in quantity.

The mind bender part for the newly initiated (as I was at one time) to the Matrix is that there's no real 'debt' from the perspective of the fractional reserve central bank; it's hard for those steeped in conventional economics to rip out the notion from their brain that the fractional reserve central bank can't lose anything (they didn't lend anything of value or that cost them anything - they have ZERO skin in the game), and that their favored entities that are TBTF have only slightly less risk (because they will always be able to socialize their losses via taxpayer bailouts in the wake of busts, while they retain their ill-gotten gains during the booms), and that what most refer to as debt in this system is only a liability for the debtor. If the debtor doesn't repay what was they borrowed (a monopoly currency that cost the lender nothing to produce), they can lose their farm, construction equipment, home, machinery, infrastructure, vehicle, etc. that was used to securitize or collateralize the loan, or even if the loan was unsecuritized, they can at least see their revenue or wages garnished, be sent into involuntary bankruptcy (where their general pool of assets will be seized upon by creditors, including lenders), and squeezed in other ways.

The only way to avoid this is to not play the game. During crack up booms, you miss out on fiat-based gains, if you don't play the game, and the incentive for playing that game is that if your timing is correct, you can get rid of all debt and convert the excess fiat gains into hard assets having inherent value or other things of inherent value, before the fractional reserve alchemists induce another inflationary-deflationary (or vice-versa) harvest.

If one were fortuitous enough to play the game, and have the skill and/or luck to convert fiat gains into real wealth before the boom turns to bust, they'd probably be idiotic to repledge their real wealth assets as collateral for loans ever again (I say probably, because there are exceptions to every general rule, but these people would have to be extremely smart, competent and or connected to the alchemists in such a way that they'd be assured a bailout in the event of another bust whereby their real assets are pledged as collateral for fiat loans).

The Harvest is the end game for the fractional reserve bankers and their minions. As just one example of the rape that is harvest, even generations of families that were land rich (let's say a family that has owned two square miles of prime farmland yielding high value crops for three generations, carrying no debt) can find that an economic downturn suddenly forces them to take the step of obtaining a loan, pledging their farm and equipment as collateral, in the belief that the loan will allow them to survive the downturn and become more profitable at some future point - they're now 'harvestable.'

By pledging real assets to secure a loan of fiat money (conjured from thin air at no cost), one is playing right into the hands of The Money Masters.

On the more macro front, all is well in the scam of compelling nations (via Deep Capture) to 'borrow' the very "money" they need to fund their operations.

The Military-Financial-MultinationalMoneyMaster Complex is alive and well.


Paul Atreides's picture

Money masters is by far hands down the best documentary on the history of banking in the USA and covers how the scam was started (more then once) and perpetuated. I am glad you post this comment whenever Tyler drops some Fed history related article, I thoroughly enjoy reading it's eloquent no nonsense description of the fractional reserve scam and have found no other written piece like it, it isn't available anywhere else so I must assume that it is original and that you are the author.

Kudos and +1 to you sir, I wish I could write as well as you but unfortunately my brain is now 20 years plus hard wired for coding and mathamatics.


TruthInSunshine's picture

Thanks, but I can't take credit for the writing or analysis on the link The Money Masters.

It took "the conspiratorial" nature of the internet, which in many ways resembles the wild west in terms of dissemination of information, and a menu of information choices varying from the non-Main Stream Media/government approved textbooks, to awaken me.

Zero Hedge, as just one example, literally broke the HFT scam wide open, and the 'conventional' media outlets such as Bloomberg piggy-backed of the Tylers' efforts.

Let's face it; most of the "conspiracy" things on published via internet rags are rubbish.

There are notable exceptions, however, where "conspiracies" in terms of concerted actions and of propping up falsehoods about the economy, monetary policy, fundamental issues pertaining to "what money is", etc. (that have pre-packaged 'answers' tantamount to dogma that are so deeply ingrained in the conscience of the public via the repetitive propaganda that is spread by proxies of those who depend on the current system to continuing so they can continue to steal) can actually be supported in very objective, very complete, and very detailed analyses using such things as direct evidence, actual facts and basic arithmetic, and it is in this area that the internet has truly democratized and revolutionized the access to many of the truths TBTB have worked so hard for so many generations to keep buried from inquiring minds.

Zero Hedge isn't infallible (I voice quibbles with some of ZH's works from time to time, as should be expected where debate and disagreement serves a useful role in obtaining a better understanding of the topic/question at hand), but it and a few other select sites have ushered in this awakening, whether through posting original content (e.g. the HFT fiasco) or linking the original works of others.

When it comes to stripping away the layers of the rotten onions and multiple Ponzi Scams of such things as fractional reserve banking, the federal reserve, dark pools, HFT (and quote stuffing and other variations on the theme), democratization of information based on well reasoned analyses by many individuals and entities who never received the official license and weren't officially sanctioned to spread their opinions, theories, cases, analyses, facts and datum is truly causing TPTB to squirm, even if just a wee bit for now, but increasingly so, as more people are awakened each day.

Clashfan's picture

Bloomberg may be "piggy-backing," but do we really want this female reporter that close to our backsides? Is this real? Can anyone tell? If so, ZH ought to have fun with it.

Clashfan's picture

I mean, that looks real! Is it real? Do any of you watch BBerg enough to comment with authority? That's some weird stuff, man, for a financial news reporter to be doing--or is it?

Run it in slow motion, and watch her face as she realizes that they've caught her playing with her strapon. It's like they either did it on purpose or switched because of the sound problem, but wow.

Thought you folks would like this. Hope it doesn't cross any boundaries. :)

Disenchanted's picture




I couldn't get the video to work right, but if it is real she's needed at the SEC...


That's that Sarah Eisen with the alleged toy isn't it?


This says it was a faulty microphone pinned under her dress(no mention as to why she would need a 'microphone' under her dress) and calls it a wardrobe blooper...(video removed)


blurry pic:

Clashfan's picture

Yes, the credit line calls her Sarah Eisen. She's hot, and she's wearing a huge toy under her dress.

rambo1028's picture

Absolutely agree! I am a perfect example of how far reaching the awakening is.....

I am a working poor (broke but not eligible for assistance), single mother, LPN, who hasn't even owned a stock since 2004. I came here looking for answers because things didn't seem right. What "they" were telling me and what I saw as reality didn't match at all. Now this site had replaced the outlets who do nothing but spread disinformation.

Posts like yours help people like me come to grips with reality....even if it's an ugly, ugly, ugly reality.

Henry Chinaski's picture

Chew on this:  Is it a coincidence that the Federal Reserve System was established at the same time as federal income tax?  What better way to drive people into debt than tax incentives.  The more you think about this objectively, the more diabolical and conspiratorial the system appears. 

The Federal Reserve/income tax scam is just the baseline racket.  It's only when the banksters get really greedy and reckless, like in the subprime mortgage scam, that people even take notice. 

Next up: Student loan debacle.

rambo1028's picture

I say bring it! Uncle Sam has me on their tax list and a note for a school loan. I struggle to make rent and feed my family with the ridiculous amount of money they take from me every month. Health insurance has been a faraway dream for years now. When they force me to buy it (bc I won't be getting assistance by my calculations) it WILL break me. They have destroyed me and everyone like me unless they put a stop to the mandate (not likely) or can find a way to make insurance honestly affordable (def not likely). Creating a whole class of people with nothing to lose....probably wasn't one of their better ideas....

rambo1028's picture

Btw this is exactly how they force us into dependence. If I worked just a little less, they would "help" me. If I moved to a nicer place, where the rent was a little higher, they would "help" me. If I had another child, they would "help" me. I will do NONE of the above and if I am going down...I am going down swinging. For full disclosure.... on nights when I cannot sleep (like tonight) for worries over how I am going to manage this month... it is difficult not to wonder if I am making the wrong choice by standing fast with my integrity intact. Then I remember...integrity is one thing they CANNOT take unless I allow them to....

Living on the edge bitchez!

TruthInSunshine's picture

Good point on the "coincidental" timing of the rise of/creation of the new apparatchik with the passage of The Federal Reserve Act of 1913 (that was actually institiated, de facto, in 1910 on Jekyll Island), Henry.

WTFx10's picture

Two things to remember

"TRUTH is the enemy of the STATE"
Paul Joseph Goebbels was a German politician and Reich Minister of Propaganda in Nazi Germany

    “Truth hurts. Maybe not as much as jumping on a bicycle with a seat missing, but it hurts.”

                                      -Naked Gun

rambo1028's picture

"Truth is treason...." RP :) Trust me when I say I am fully awake. I will say...keeping up with the truth is ugly and a lot of work. I understand why so many people who know in their guts that something is very very wrong with this picture prefer to keep their heads buried in the sand. Truth be told, sometimes I wish I could unknow some of the stuff I know to be true...if only just for a day or two. I am sometimes able to forget for an hour or two...with a little help that is. :)

TruthInSunshine's picture

As an extremely wise, just and profoundly generous (in all manner) mentor of mine used to remind me:


You can't "un-ring" a rung bell.

IBelieveInMagic's picture

While it makes sense that the fractional reserve currency is unfair in many ways as it advantages the "creators" of "money", one could say that one redeeming aspect of this form of money is that it does encourage risk taking and consumption that provides fuel to economy. If there is no risk taking, how can we have progress? Smart borrowers take on calculated risk with higher probability of success, whereas the average person is lured/lulled into taking on easy debt that is often brain dead failures -- but both kinds of risk taking has provided fuel for economic progress (of course it can be characterized as pulling future consumption forward). Yes, failures do stand to lose control of assets but in many cases, even they did not have much skin in the game (for eg. in case of zero down loans, what is the risk of the "investor"? or Donald Trump's investments? and it should be OK if they are stripped of the asset in which they had no equity). Yes, the current system also imposes punishment in the form of impaired credit history and income docking -- this could be acceptable if it is egregious case of reckless credit taking.

The losers are the ones who actually re-mortgaged their assets like the farmer in your example but even this can be rationalized if it is merely inherited asset.

So, to summarize, it is hard to claim that complete nations have been fooled into participating in a giant scam -- the system is tolerated as it has some obvious faults but also has some redeeming features that has enabled improved living. Unfortunately, we humans have not been able to conceive an alternative system that is perfect -- all systems will be gamed by the smart and connected.

TruthInSunshine's picture

Fractional reserve banking systems using pure fiat money (i.e. units printed at zero cost/backed by nothing of value) are insidious as they always, inevitably lead to greater and greater boom-bust periods, because they inherently depend on the issuance/uptake/creation of greater and greater aggregate amounts and waves of debt in order to perpetuate and kick the can as a result of the last 'bust' cycle (think of the housing bubble replacing the one).

Additionally, with each successive boom, debt is issued and taken on to finance increasingly marginally productive activities and increasingly marginally useful goods (some would argue, and rightfully so, that we've crossed the rubicon into net-net negative sum value activities and goods - think of the law of diminishing returns in the context of increasingly negative externality costs - whether pollution, human injuries or deaths due to toxins, the production of weapon systems, etc. - associated with production). 

Here's an example of how this works, based on recent events: Even Krugman, in either a moment of unintentional candor or just a slip of the tongue, succinctly summed up the scam that is fractional reserve banking using pure fiat money that's printed at zero cost & backed by nothing of value:

2002 NYTimes article: Paul Krugman says we need a housing bubble

By PAUL KRUGMAN, published 2002

Writes the future Nobel laureate in the NY Times, August 2, 2002:

“To fight this recession the Fed needs…soaring household spending to offset moribund business investment. [So] Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”


*Krugman's Caught in Lie on Housing Bubble


A Nanny Moose's picture

Wouldn't a better histogram of the Fed be the purchasing power of the dollar, or an inflation chart?

rambo1028's picture

I have added these documentaries to my list of to watch stuff...but I don't think it would be wise to watch them right now. I am already so angry and sad they might just be the last straw. I have done a ton of reading about the fed tho.

How on earth do you guys keep going and stay (halfway) sane?? I feel like everyone around me can feel that something isn't right but when I try to help them figure out what that feeling might be coming from....they get a glazed over look im their eyes or they get really mad and insist that it's a bunch of tin foil hat jibberish that I am talking about.

It's so clear to me and I hope more people will figure it out before TSHTF or else I feel we will end up with worse tyranny than we have now.....they will use the chaos as the ultimate and final power grab.

WTFx10's picture

The shock wears off then you get mad. You have to try to inform as many as possible .Shake them out of the daze the government and the MOB (banks) propaganda puts them in. I worked on one person for 6 months before he finally took off the blinders. It can be done .Work on the people who have money to lose who are depending on their 401ks and all the other gambling games the bankers have set up for us. Use the fear of losing it to your advantage. Fear can be used for good too. Not just against perceived terrorism. Show them History and how it usually ended up exactly the oppisite of what the government told us

juangrande's picture

The root problem is exposed by this posting when the reader was repeatedly asked " Wouldn't you do this,too?" Too many put in this position would do just what is being done. Some say this is human nature. I say this is a collective "Samsara". Overcoming this fear based consciousness is the only solution to this continuing/repeating destructive pattern. It is fear which keeps us blind and in line.

So, you gotta ask yourself, "What am I doing today to free myself from fear?" This is, after all, the only meaningful purpose in life. Realizing truth!

X86BSD's picture

Haha. Thanks for the laugh! What absoulte drivel. 

A Nanny Moose's picture

Yeah, but in the event of a boating accident, paper sorta floats.

jekyll island's picture

G. Edward Griffin's book is a must read for everyone.  It was the beginning of enlightenment for me, although it was not without violence:  I threw the book against the wall at least three times because I was so pissed off by what the gubmint was doing.  I need to get a new book.  If you haven't had the chance to read this yet I offer it my highest recommendation.  It is well over 500 pages but well worth it.   

dick cheneys ghost's picture

Ok Girls, what is the alternative.........What will replace the current ponzi-based, debt-based fractional reserve banking system?????????


What happens when 'the fed' dies?

economics9698's picture

100% fractional reserve banking.  Banks print their own currency backed by 100% gold and silver.  This was sort of the system from 1837-62.  

Turin Turambar's picture

errr, you mean 100% reserve banking.  Fractional reserve banking is what we have now, and it's of the devil.

economics9698's picture

100% fractional reserve banking prevents explanation of the money supply.  This is important because it prevents malinvestment and rations money.

Very simply when the economy is “hot” consumers demand more money, gold or silver, and the value increases, interest rates increase, and capital users, large time investors, stop investing because the cost of money is to costly to build that new factory, mine, or other high end capital project.

When the economy cools and consumers switch to savings money is cheaper, interest rates fall, and capital users decide to build that new factory, mine, or other project.

There is a constant interaction between consumers and capital users.  With central banks this relationship is broken.  When the economy is hot the Federal Reserve (2003-04) can decide interest rates should go DOWN.

This means both consumer and producers are using money and spending, spending, spending, with the inevitable bust when they look at each other and realize there are 6 million more houses built than needed.

Ludwig von Mises used the example of a contractor building a house, there are not enough bricks (production capacity) tio build a three story house but the politicians/bankers do not want the contractor to realize this so they get him drunk.  Everything is going well, everyone is having a good time until the day comes where there are no bricks and the contractor has two thirds of a house he cannot sell, the bust.

Having money backed by gold or silver simply means that the money supply is restricted and the interaction between consumers and capital users is maintained intact.

economics9698's picture

Turin we have a reserve requirement of 10% for large banks.  This means they can expand the money supply by a factor of 10 or $100 becomes $1000.

Money multiplier = 1/reserve requirement 

100% fractional reserve banking means I put $100 into my account.  If I want to authorize the bank to make a loan I can at a specific interest rate.  If not the bank DOES NOT loan out my money.

MillionDollarBogus_'s picture

Through history, every fiat currency has failed.

The dollar is a fiat currency.

Only question is; when does it fail..??

otto skorzeny's picture

dude-don't besmirch the MBD name. I pine for Trav777.

MillionDollarBogus_'s picture

Through history, every fiat currency has failed.

The dollar is a fiat currency.

Only question is; when does it fail..??

akak's picture

Having lost ~97% of its former value in the last 80 years, one could argue that the US dollar has 97% failed already.

FEDbuster's picture

As Dr. Marc Faber said, "the next 97% loss of value won't take as long".

The fiat dollar will remain the reserve currency as long as the US military forces it on the rest of the world.   As we have seen recently, some bigger countries can get away with their direct currency trades, but little guys not so much.  China is still the biggest bagholder.   "Those are IOUs, they are just as good as money........"


New_Meat's picture

"This means they can expand the money supply by a factor of 10 or $100 becomes $1000."

Well, when you do the math, and consider "velocity of money" it is a Taylor series, so it is worse than you show.  'course, these days v(money)=0;

- Ned