Chapter 8 Money creation

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njp's picture
njp
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Joined: Sep 16 2008
Posts: 6
Chapter 8 Money creation


More on money cration:

 

Chapter 8 says that when the fed reserve buys T-bonds that "the Fed simply prints up the money" and that the money is "printed out of thin air". It is the Treasury that prints money. So how does this work? Does the Fed just call or email the Treasury and say "Send us some cash to buy some of your bonds from the banks"? And for the $800 billion "rescue"  program does the Fed ask the Treasury to "print up the money and send to us? Is there actually cash involved? If so who who gets the cash? Is it divided among the 12 Federal Reserve banks? Does the Fed have a bank account? $800 billion is a lot of new cash in the system.....

 

njp 

Carl Veritas's picture
Carl Veritas
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Posts: 294
Re: Chapter 8 Money creation

Paper money we use, or Federal Reserve Notes, are printed by the Bureau Of Engraving and Printing which falls under the US Treasury Dept. The Bureau Of Public Debt, also under the US Treasury Dept does the actual borrowing or issuing of Treasury bonds. The Federal Reserve banks acts as fiscal agent for the US Treasury, performing banking functions.

The Federal Reserve system is not part of the federal government.

When the Fed buys the bonds from the treasury, the payment is a blip on the screen. The Fed "credits" the governments account with the Fed so it's like depositing a check with no money backing it, yet the account owner is able to write checks from the account . The effect is the same as printing the same amount of Federal Reserve notes, or paper money. It was created "out of thin air". This is what monetizing the debt (Bond) means. About the $800 billion rescue package-----

The Federal Reserve stands ready to "buy" all unsold Treasury bonds during regular auctions.

The government can get the money from the citizens in three ways ------

(a) by increasing their taxes (politically unpopular),

(b) borrowing from them through bond issues (not enough to fund expensive wars)

(c) sell Treasury bonds to the Federal Reserve.

 

fisherdi's picture
fisherdi
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Re: Chapter 8 Money creation

I have a delemma with one of chris's points in this slide. that is his point on perpetual growth

 'perpetual growth is a requirment of modern banking'

I disagree with this statement and here is why

 when you deposit $100 at a bank you require interest... right. So the bank will then lend those dollars onto someone else and charge them a greater amount of interest for those very same 100 dollars. For example i lend a 100 dollars and receive 6% interest and the bank lends to someone else and receives 10% interest. In this case i make 6 dollars per year and the bank makes 10 dollars per year. Therefore the bank makes 4 dollars profit.

 Now in no way is there any dependance on perpetual growth in order to finance these loans as chris states. There could be zero growth and these loans could all get paid. What effects the ability of a loan to get paid is someone along the chain defaulting on there loan.

 

SO i suppose my question is why does there have to be the same about of credit lent out equal to the level of interest needed to be paid. In my opinioni increase credit lending and risk taking has simple been a function of wall street greed, not neccessity.

Cheers

Dillon

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surfmomtp
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Re: Chapter 8 Money creation

A very good book on the subject of the FED is Secrets of the Federal Reserve by Eustace Mullins.  It's difficult to get, but you can order it through a public library and they will get it from another one. Or, you can buy it for a fortune from Amazon.

It's good that the cat is finally out of the bag on this one and people are finally becoming interested where their money comes from --- now that everybody's going broke. Funny thing is, those who were aware of this pyramid scheme called "capitalism" (not to be confused with Democracy!!), are not at all surprised about the current collapse. Once we understand fractional reserve banking, we can rest assured there will always be boom and bust cycles. It's a fab way to monopolize holdings and become even more powerful (materially speaking, of course, which is only temporal power).  

Also: see Aaron Russo's great film From Freedom to Fascism.  He explains the FED and the IRS which came into being at the exact same time, a month before WWI which was funded almost entirely by......you guessed it.....the FED using CREDIT!!!

 

jneo's picture
jneo
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Joined: Jan 7 2009
Posts: 742
Re: Chapter 8 Money creation

Is this American or Russia?  10 planks in the communist manifesto and how we practice them. 

 

1. Abolition of private property and the application of all rent to public purpose.



The 14th Amendment of the U.S. Constitution (1868), and various zoning, school & property taxes. Also the Bureau of Land Management

2. A heavy progressive or graduated income tax.

Misapplication of the 16th Amendment of the U.S. Constitution, 1913, The Social Security Act of 1936.; Joint House Resolution 192 of 1933; and various State "income" taxes. We call it "paying your fair share".

3. Abolition of all rights of inheritance

We call it Federal & State estate Tax (1916); or reformed Probate Laws, and limited inheritance via arbitrary inheritance tax statutes.

4. Confiscation of the property of all emigrants and rebels

We call in government seizures, tax liens, Public "law" 99-570 (1986); Executive order 11490, sections 1205, 2002 which gives private land to the Department of Urban Development; the imprisonment of "terrorists" and those who speak out or write against the "government" (1997 Crime/Terrorist Bill); or the IRS confiscation of property without due process.

5. Centralization of credit in the hands of the State, by means of a national bank with state capital and an exclusive monopoly.

We call it the Federal Reserve which is a credit/debt system nationally organized by the Federal Reserve act of 1913. All local banks are members of the Fed system, and are regulated by the Federal Deposit Insurance Corporation (FDIC). This private bank has an exclusive monopoly in money creation which in reality has ended the need for revenue from taxes. So why do they tax? To FOOL YOU into thinking they need them.

6. Centralization of the means of communication and transportation in the hands of the State

We call it the Federal Communications Commission (FCC) and Department of Transportation (DOT) madated through the ICC act of 1887, the Commissions Act of 1934, The Interstate Commerce Commission established in 1938, The Federal Aviation Administration, Federal Communications Commission, and Executive orders 11490, 10999, as well as State mandated driver's licenses and Department of Transportation regulations. There is also the postal monopoly, AMTRACK and CONRAIL

7. Extention of factories and instruments of production owned by the State, the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

We call it corporate capacity, The Desert Entry Act and The Department of Agriculture. As well as the Department of Commerce and Labor, Department of Interior, the Evironmental Protection Agency, Bureau of Land Management, Bureau of Reclamation, Bureau of Mines, National Park Service, and the IRS control of business through corporate regulations.

8. Equal liablity of all to labor. Establishment of Industrial armies, especially for agriculture. 

We call it the Social Security Administration and The Department of Labor. The National debt and inflation caused by the communal bank has caused the need for a two "income" family. Woman in the workplace since the 1920's, the 19th amendment of the U.S. Constitution, the Civil Rights Act of 1964, assorted Socialist Unions, affirmative action, the Federal Public Works Program and of course Executive order 11000. And I almost forgot...The Equal Rights Amendment means that women should do all work that men do including the military and since passage it would make women subject to the draft.

9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country.

We call it the Planning Reorganization act of 1949 , zoning (Title 17 1910-1990) and Super Corporate Farms, as well as Executive orders 11647, 11731 (ten regions) and Public "law" 89-136.

10. Free education for all children in government schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc. etc.


People are being taxed to support what we call 'public' schools, which train the young to work for the communal debt system. We also call it the Department of Education, the NEA and Outcome Based "Education" .

 

yoshhash's picture
yoshhash
Status: Martenson Brigade Member (Offline)
Joined: Sep 20 2008
Posts: 271
Re: Chapter 8 Money creation

just stumbled across this-
http://www.liveleak.com/view?i=9e2_1225109931
which claims that The Federal Reserve Act - passed by 3 (THREE) senators in a unanimous voice vote on 23 December 1913 - while everyone else was home for the holidays.
If there's any truth to it...... I'm just suprised it wasn't mentioned in the crash course, simply because it's so darned interesting.....anyone care to comment on it?

000Cloud's picture
000Cloud
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Posts: 1
Re: Chapter 8 Money creation

I have the same issue as fisherdi: I don't see the reason for CM's claim that "'perpetual growth is a requirment of modern banking". My savings account pays less than 1% in interests, if I get a bank loan they ask for 10% in interests, I don't see where the "perpetual growth" is needed. Help me out guys... cheers

jerryl's picture
jerryl
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Joined: Feb 18 2009
Posts: 4
Re: Chapter 8 Money creation

Perpetual growth is a requirement in this debt monetary system. 

In replying to questions asked of the U.S. treasury, Russell Monk, Asst. general council for the treasury answered the following question. 

How is money created and how does it get into circulation?

His answer: "The actual creation of money (always) involves the extension of credit from private commercial banks."

In other words, we must borrow in order to have a medium of exchange.  All money is debt!

However, when we take out loans, there is never any money created to pay the interest on the borrowed money, so we are always creating a debt greater than the debt money supply created!

The money needed to pay the interest on the first loan, has to be captured through commerce from the debt principal of a second loan that has been spent into circulation.

The banks do not loan out your deposits.  If they did, you wouldn't be able to write checks on your accts., or withdraw at any old time. Wouldn't they have to disclose to you who they loaned your money to?

If you have money in your pocket, a checking or savings acct., 401K or IRA, you could not possibly have that money, unless someone else in this debt system, either individually or collectively, has an equal amount of debt!

We are financial slaves to this fractional banking, debt monetary system!

Think about it!  If you want to buy a $200,000 home, you go to a bank to borrow that amount.  The banker has you sign a loan agreement or mortgage, where you agree to pay that amount back to the mortgage holder, plus interest!

The banker then creates that amount electronically, on your promise to pay!  He doesn't really have that money to loan you. It is you who created the money on your promise to pay. However, the banker will now collect somewhere around $400,000 in interest over 30 years for doing about 2 weeks of preliminary mortgage paperwork, and sending out monthly statements for 30 years.  Sounds like ponzi to me.  Heck of a return on loaning you something they never had in the first place.

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