modern banking 101

The National Debt Scam

"Bankers are in the debt business, and if governments are allowed to create enough money to keep themselves and their constituents out of debt, lenders will be out of business.

The central banks charged with maintaining the banking business therefore insist on a stable currency at all costs, even if it means slashing services, laying off workers, and soaring debt and interest burdens.

For the financial business to continue to boom, governments must not be allowed to create money themselves, either by printing it outright or by borrowing it into existence from their own government-owned banks." - Ellen Brown

Federal Reserve issues stock which is held by over 2,900 banks.

The Federal Reserve pays a 6 percent dividend which amounted to $1.637 billion in 2012, the last year of available data.

Fed Open Market Committee creates money out of nothing!

Most "currency" is now in the form of electronic spreadsheets, rather than paper records such as ledgers.

Open market operations are conducted simply by electronically increasing or decreasing ('crediting' or 'debiting') the amount of currency that a bank has in its reserve account at the central bank in exchange for a fungible instrument - an entry in an electronic spreadsheet !

Currency magically appears when the balance in a reserve account is increased.

The newly printed currency is then used by the central bank to purchase on the open market fungible instruments which may or may not be backed with tangible financial assets, such as US bonds, foreign currency, or gold.

When the central bank sells fungible instruments on the open market, the amount of currency the purchasing bank holds decreases, effectively destroying currency.

The US Treasury sells marketable securities - T-Bills, promissary notes, bonds, and Treasury Inflation-Protected Securities (TIPS) to the public through regular public auctions to raise the cash needed to operate the US government and to refund maturing securities.

purchasing power

Marketable securities are fungible financial instruments.

Marketable securities are simply government IOU's.

Marketable securities can be bought, sold or transferred after they issue.

Marketable securities are purchased in order to get a secure rate of interest.

At the end of the term of the marketable security, the US Treasury repays the principle, plus interest and the marketable security is destroyed - ie. the fungible instrument is deleted from the electronic speadsheet.

For example one of the twelve Fed banks - Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco - that make up the Federal Reserve system exchanges a fungible instrument for $1,000,000 of marketable securities with the US Treasury.

When the fractional reserve is 10% - $10,000,000 can then be loaned on a $1,000,000 purchase of marketable Treasury securities.

Regional Federal Reserve Banks then issues loans to regional member banks.

To reduce the amount of money in circulation this process is simply reversed.

When the Federal Reserve sells marketable securities to the public the money flows out of regional banks.

When the fractional reserve is 10% - regional loans must be then reduced by ten times the amount of the US Treasury marketable securities.

A purchase of $1,000,000 in marketable securities results in a $10,000,000 reduction of currency in the regional economy when fractional reserve rules are observed.

"The financial system has been turned over to the Federal Reserve Board. That board administers the finance system by authority of a purely profiteering group." - Charles A Lindbergh Sr.

Federal Reserve controls the amount of currency in circulation in two ways.

The first way the Federal Reserve controls the amount of currency in circulation is through the purchase and sale of marketable securities.

The second way the Federal Reserve controls the amount of currency in circulation is through the interest rate it charges its member banks.

But the Federal Reserve also controls the interest rate on the marketable securities through the purchase and sale of marketable securities.

When the US Treasury offers more marketable securities than the rate of demand of those marketable securities then the Federal Reserve can step in and purchase the excess capacity to keep interest rates low or the Federal Reserve can refuse to purchase those marketable securities and the interest rate on those marketable securities will increase to draw in needed capital.

When interest rates go up less currency is loaned out and less currency in the system creates contraction - recession or depression.

Monetary policy, set by the privately owned and operated Federal Reserve, is highly independent of effective political control.

Federal Reserve is subservient only to Bank of International Settlements.

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