It's A Wonderful Lie — 100 Years of the Federal Reserve [Archive]

Hypertiger

25th December 2013, 10:00 PM

Flowing through New York per day is 3 Trillion Dollars of liquidity or debt...That works out to a flow of around 35 Million Dollars a second.

It's constantly inflating out of thin air and deflating back into thin air.

Central banks are mostly a red herring...every bank in the world "prints" money.

“The process by which banks create money is so simple that the mind is repelled.”--John Kenneth Galbraith.

"The actual process of money creation takes place in commercial banks. As noted earlier, demand liabilities of commercial banks are money."--Federal Reserve Bank of Chicago, Modern Money Mechanics, p.3

How commercial banking has worked for 6 centuries at least...since I traced the modern commercial banking operation back to Spain in 1400 and do not care to look back further...other than the bank of Venice...which is around 1172...but that was more like a central bank to the Government than a commercial bank like you see them today...plus once you go back far enough...the credit system which is s derivative of the monetary system disappears and all you see is monetary systems which operate differently than a credit system.

The money creation process...below

A consumer uses their current income which is composed of previously created credit/debt or an asset inflated in price by previously created credit/debt as collateral powering their request (demand) for a commercial bank to create new credit/debt. (supply)

"Credit (from Latin credo translation. "I believe" ) is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date."

“The study of money (Power), above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.”--John Kenneth Galbraith Money: Whence it came, where it went - 1975, p15

Credit is debt owed to someone else that is used as money and ultimately back to the bank which created it out of thin air at which point it returns back into thin air.

When a commercial bank loans money to a borrower it inflates/expands the credit/debt or money supply and when a borrower pays back the loan the credit/debt or money supply deflates/shrinks.

"The word mortgage is a French Law term meaning "death pledge", meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure."

Lets say a consumer wants to buy a house but is short $100,000 and goes to the bank to borrow it.

The bank creates an asset...A mortgage of $100,000 at 6.448% for 25 years...and a liability of $100,000 of credit which is debt used as money.

the $100,000 of new credit/debt inflates the money supply by that amount.

The payments per month for 300 months are $666

The bank buys the house and owns it tied to the mortgage contract.

The payment of $666 is amortized

"Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death."

The payment to the bank is broken down into two sections by the amortization.

The principal amount of the loan or $136

The first payment causes the amount of the mortgage contract or asset to shrink from $100,000 to $99,864 and the total credit/debt or circulating money supply to shrink by $136 or return back into thin air from where it came from.

And the interest amount or profit to the bank of $530 which is the profit the bank obtains for the creation of the credit out of thin air.

At the start of the amortization the interest portion is largest and the principal portion is smallest...New mortgage originations are highly profitable....but over time the interest portion to the bank shrinks and the principle portion to the loan increases

At the 170th month is where the principal amount and interest amount equal or $333 principle and $333 interest and from there the principal amount paying down the debt becomes more and more and the interest amount of profit to the bank becomes less and less

By the 300th month...The consumer has a house they own and the bank has $100,000 profit and the Mortgage contract or asset vanishes into thin air from where it came from and the liability portion has shrunk back into thin air from where in came from.

The bank inflates the money supply and then deflates the money supply by taking the money they create which they and the consumer does not have out of circulation into the banks hands.

I show this example because this is the equilibrium point of the amortization equation....$100,000 that will exist in the future is pulled to the present to be used for 25 years until the future is reached and the bank has the money they did not have in the past to lend to begin with.

6.448% is neutral...It is like the Bloch wall of a magnet where the positive and negative forces meet at the singularity or zero point.

Now above 6.448% is hyperinflationary...$100,000 at 14% interest or tax or rent attached to credit/debt created out of thin air will yield a profit of $252,162 by the 300th month...

You need less volume or consumer demand for loans to sustain this.

Below 6.448% is hyperdeflationary...$100,000 at 1% interest or tax or rent attached to credit/debt created out of thin air will yield a profit of $13,033 by the 300th month...

You need more volume or consumer demand for loans to sustain this.

The above process is just a fragment of the totality of the credit cycle of the commercial banking operation....An requires no central bank at all.

The only thing the FED was given in 1913 is the banknote issuing monopoly...prior to the creation of the FEDERAL RESERVE the individual commercial banks issued their own banknotes and basically every individual commercial bank in the world is just a just a smaller version of the FED.

The individual commercial banks inflate the credit/debt money supply of an economic zone...all the central bank does is act as a regulator.

All the people against the FED or the Bank of England...Are basically ignorant and have zero clue how banking works.

The USA was financed into existance by the city of London and has the largest number of individual commercial banking operations on Earth.

"There are 12 Federal Reserve Banks located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Each reserve Bank is responsible for member banks located in its district."

The New York Federal reserve bank is the main branch of all the rest...It is the central bank of the USA that all the other 11 are connected to.

"A member bank is a private institution and owns stock in its regional Federal Reserve Bank. All nationally chartered banks hold stock in one of the Federal Reserve Banks. State chartered banks may choose to be members (and hold stock in their regional Federal Reserve bank), upon meeting certain standards. About 38% of U.S. banks are members of their regional Federal Reserve Bank"

"According to the web site for the Federal Reserve Bank of Richmond, "more than one-third of U.S. commercial banks are members of the Federal Reserve System. National banks must be members; state chartered banks may join by meeting certain requirements.""

"The United States has the most banks in the world in terms of institutions (7,085 at the end of 2008) and possibly branches (82,000).[citation needed] This is an indicator of the geography and regulatory structure of the USA, resulting in a large number of small to medium-sized institutions in its banking system."

So only about 2338 banks in the USA are member banks or in the FEDERAL RESERVE system...making 4746 banks stand alone independent credit issuing institutions.

Prior to the FEDERAL RESERVE inflating their balance sheet and being the lender of last resort in 2009...The FED did not contribute to the inflation of the US credit/debt money supply in the slightest.

prior to the collapse of the US consumer in 2008.

from 2006 to 2007 the total credit market debt of the USA which is what the Federal reserve called the money supply...compounded or exponentially grew from $46,158,400,000,000 to $50,869,500,000,000

Or by 4.7 Trillion Dollars or 8.17%

That works out to $392,591,666,666 per month of new credit/debt which is used as money inflation.

That inflation was done entirely by US consumer requests for the commercial banks in the USA to lend them money created out of thin air. The demand of the population for more and more money is the cause or what powers the magic printing press...look in a mirror to find the cause of the inflation you are crying about or to see who is crushing you.

The FEDERAL RESERVE and the US Federal Government play no significant part in this....it's all the people and their demand for supply from the banking system for money.

In 1944 the total credit market debt or money supply of the USA was $355 Billion Dollars and US consumers were requesting the "magic printing press" of the commercial banks to inflate the money supply by around 1 Billion Dollars a month...From there to 2008 the US total credit market debt was inflated by consumer demand continuously (exponentially) by around 7.84% on average per year into 53.5 Trillion dollars.

The FEDERAL RESERVE did not contribute to this at all...It all was the commercial banks at the request of the US consumer.

The FED only began inflating the credit supply by 85 Billion a month...down to 75 Billion currently 2013...in 2009...when the USA reached maximum potential after a couple centuries and began collapsing in 2008.

Basically all the people on the internet and writing books telling you all about banking and finance are ignorant.

and the above is only a slight fraction of the totality of the information.