The Monarchs of Money

[osoab]

The Monarchs Of Money (http://www.zerohedge.com/news/2013-05-03/monarchs-money) http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 05/03/2013 20:38 -0400



The world's central banks have printed unimaginable amounts of money in recent years - "these guys are really more powerful than the government." Neil Macdonald explores what this means for the global economy and for your financial well-being - "can you imagine if the American public knew there was this 'club' that met secretly in Switzerland and made decisions that dramatically affected their lives, but we're not going to tell you about it because it's too complicated." This brief documentary should open a few eyes to the reality behind the world's most powerful (and real) cabal.



http://www.youtube.com/watch?feature=player_embedded&v=7T_VxdLJdDU

http://www.youtube.com/watch?feature=player_embedded&v=7T_VxdLJdDU

[Hypertiger]

In a credit system...money is credit...which is debt that is ultimately owed to the banks.

A consumer uses their current income which is composed of previously created credit which is debt owed to someone else and ultimately to a commercial bank or an asset inflated in price by previously created credit which is debt owed to someone else and ultimately to a commercial bank as collateral backing their request for a commerical bank to create new credit which is debt owed to someone else and ultimately to a commercial bank.

banks require more deposits than withdrawls to sustain their existance.

If you deposit money into a bank to save it from being spent...The banks use it as a base to create more money or credit than the savings in the bank.

People think a 10% reserve means that if you deposit 100 Dollars in a bank...the bank can lend out 90$ and keep 10$ in reserve.

But a 10% reserve means that for every Dollar deposited in a bank the bank can create $10 of credit to lend out.

The monetary system was fractionally reserved centuries ago...Until the fractional reserve of money shrank to nothing...and now credit backs credit.

and the only way to earn a yield from saving credit is if the money supply is inflating by the required amount.

In order to earn a yield of 5%...credit has to at least inflate by that amount...But the banks have a cost to sustain their operations...so credit has to inflate by more than 5%

So you need volume or demand.

If people are not demanding enough credit to be produced by the banks...then it's impossible to supply a yield.

The savers have no idea how the credit system works.

the people that are getting into debt supply the yield to the savers who live off the yield derived from the spenders.

one slight problem with this...

the spenders can be fractionaly reserved until they cease to exist.

Because in order for people to sustain spending...they have to continue requesting commercial banks to create more and more debt...and there is a maximum potential for people to request debt.

Eventually consumers use up their current income which is composed of previously produced debt as backing for their ability to request more new debt.

so then you have to engineer rates lower and make up the difference on volume...

Until of course you engineer rates to the maximum potential and the volume dries up as the consumers maxout...and the system becomes yield starved.

And they are not printing money.

They are monetizing collateral....The banks take an asset like a bond and use it as collateral backing the credit they issue.

If interest rates were allowed to rise...so that teh savers stopped their crying...the volume of borrowers would dry up...and the whole system would collapse.

The FED has not printed unimaginable amounts of money...just enough to keep the top money center banks from collapsing which would implode the global credit system to oblivion.

The documentary...does not explain how credit systems work...while it does point out some things...it still keeps teh secret of banking from being revealed.

The only way they could be keeping rates low in the rich countries is if the banks are directing liquidity flows into the bonds to keep the rates down.

Central bankers don't have magical powers to set interest rates...interest rates are set by consumer demand for debt in relation to the supply of bonds.

If you notice...there is massive deficit spending when the economies begin to slow down as interest rates drop...that is to build a floor under dropping yields...or all the money flooding out of the equity markets as they deflate inflates the prices of bonds causing yield to drop.

If the supply of bonds is not increased in relation to demand...rates would drop to zero and the banking system implodes.

And they didn't even mention bretton woods in that piece at all and that is key to the problem...in 1944 the US dollar was made the global trade medium of exchange and all the rest of the money in the world was fixed to the US Dollar.

meaning that in order to buy anything from the global market...you neede to obtain uS dollars...and the supply of US dollars is US consumers and the primary engine of US dollar production is real estate...basically new home construction in the USA.

the 1991-2005 real estate boom in the USA powered the inflation of the world until it ended...when the uSA ran out of line signers after 14 years...which cut off the supply of US dollar production in the USA and out into the world.

It's why th EU is collapsing and china is slowing down.

Because after over 6 decades...The USA is exhausted and can't supply the demand for inflation.