Comments On The Federal Reserve
This is a new article meant to accommodate further comments on the Federal Reserve and our Economic system started in the I Want a Constitutional Convention thread below.
Greg asked:
Are we speaking of going back to the “gold†standard (or whatever the new standard would be)?
I care little what the standard is so long as it has intrinsic value and is in limited supply. Having said that, precious metals served the purpose quite well for a very long time. And, that system did not “break”. What happened was the desire of our manipulators to be free of the restraints that system imposed.
So, representatives of the global financial cartel convinced a combination of gullible fools and dedicated crooks to create the Federal Reserve, which is neither “Federal” nor a “Reserve”. It is nothing more than a for-profit business with significant foreign ownership that manipulates our currency for fun and profit (their profit, not ours). Since the birth of this monster, economists estimate that our currency has “lost” (been robbed of) 95 to 98 percent of its value (choose the percentage you prefer — it makes little difference). It has brought us repeated recessions and one Great Depression, along with a lengthened recovery time from each such event.
Think about this for a moment… As the Federal Reserve approaches the 100th anniversary of its creation, it still has just enough time to match that with a 100% decline in the value of the currency it was supposedly created to protect. It is hard for me to imagine a more complete, more obvious failure that this. If, indeed, “failure†is what it be (we can discuss this line of thought later).
What we have today is a national currency based on debt. That is correct – debt.
And, it is not just Uncle Ben’s magic money machine that is contributing to it. Our banking system, uses a process called “fractional reserve bankingâ€. I think the “reserve†requirement at this time is 10%.
This means that every time some amount of “real†money (money obtained through production) is deposited in a bank, that bank can then lend 90% of that money to someone else. Thus, inflating the national money supply by 90% of the original deposit. But, it does not end there. The 90% that was lent can itself be deposited and 90% of that amount lent again. And on and on until we reach 0.
You can do your own spreadsheet and discover for yourself how much fiat money can be generated from an initial deposit of $100,000 in real money. You will be surprised.
Fast forward to today and here we are with an unsustainable mess, a currency system that is as stable as a house of cards, and no idea how to get out of the mess.
I maintain that the Federal Reserve is a cancer that is eating away the very flesh of our Republic and that no true recovery of our Republic is possible until it has been excised.
I further maintain that neither of the duopoly party candidates has any intention whatever of removing this cancer – not even of even diagnosing its extent (via a full public audit as Dr. Paul has been calling for). The reason I know this with such certainty is that I know that the duopoly party candidates are both “owned†by the same shadowy figures who “own†the FED.
Please, prove me wrong on this.
BTW, you need not take my word for any of this. There are a number of well-researched works about the FED. Simply Google “Federal Reserve†and start learning. I also highly recommend you read The Creature From Jekyll Island.
Troy L Robinson
Greg asks (under: http://www.thoughtsaloud.com/2012/07/09/i-want-a-constitutional-convention/)
The Federal Reserve establishes what is called “the prime rate” which is the rate the FED charges banks for the currency it lends them so that they can continue to operate. (Remember that the banks lend out 90% of their deposits, leaving them cash poor.)
The rate the banks then charge for the loans they make are some increment above this prime rate, so that the banks can make their own profit off the loans they make. And yes, mortgage rates are also derived from the prime rate.
What little competition remaining in the system comes from the fact that some banking institutions are willing to settle for less of a markup from the prime rate. Perhaps because of innate efficiencies, perhaps because of economies of scale, or, who knows?
Troy
I agree with you on the new “gold standard” completely! It would provide a unified way in which to understand the economic strength of any country, not just ours. 🙂
As to the prime rate… do you think that there even needs to be a prime rate? If not, should there be a “Rate standard,” from which banks can deviate in any direction they choose as long as there is a base number to compare it to? This is what I sort of meant by my last post in the other thread.
Finally, I’m glad that your blog has come to life! 😀
Greg, I think the better question is whether there needs to be a Reserve system (aka a Central Bank).
If there is a need for a Central Bank, then that bank would logically establish something like a “prime rate”.
If, on the other hand, we left it totally up to the free market system, then no Central Bank should be required. This would leave only one question…
Assuming that, lacking a Central or Reserve Bank, the Treasury simply injects new currency in response to GNP (or removes excess currency when needed), then how is the injection / removal carried out.
While I have no extensive understanding of banking, I would imagine that the existing hierarchy of “National” banks could continue, only governed by Treasury rules rather than the FED.
Perhaps someone who actually knows what they are talking about could chime in at this point (please)?
Troy