Tag Archives: Federal Reserve

The scam that is the global money system

It is a story that I have told in my own writings and presentations, particularly in my book, The End of Money and the Future of Civilization, but the video below is well worth viewing. I’ve not been a big fan of Glen Beck, and I abhor the Fox network, which I consider to be a propaganda instrument of the global elite, but this particular program is ironically quite good at telling the story of the creation of the Federal Reserve, the banking cartel, and the collusive arrangement between the bankers and the politicians (that pattern was actually established with the founding of the Bank of England in 1694). Beck’s featured guest, G. Edward Griffin, the author of The Creature From Jekyll Island, is particularly astute in his observations. The conversation only goes astray toward the end when it turns to gold backing, a proposal that is based on a still naive conceptualization of what money is and how it works.

Interestingly, Beck was fired by the Fox network shortly after this program aired, presumably for exposing the scam of the elite cabal that Fox is there to serve.

Bank of Japan announces plan for massive inflation of the Yen, as US Fed curtails dollar monetization (QE). What does it mean for you?

A recent article in the Guardian (UK) reports that the Japanese central bank has announced plans to “inject ¥80tn (£447bn) a year into the financial system, mainly through the purchase of government bonds, in a bid to ward off the threat of deflation.”

Thus, Japan takes over much of the burden of keeping a flawed global money system alive, as the US central bank (the Federal Reserve) ends its own program of dollar inflation.

Bloomberg provides a “quick take” on the FED policy saying, “It was the biggest emergency economic stimulus in history and now it’s over. The U.S. Federal Reserve’s once-in-a-lifetime program to buy immense piles of bonds, month after month, in an extraordinary effort to restart a recession-deadened economy came to an end in October after adding more than $3.5 trillion to the Fed’s balance sheet – an amount roughly equal to the size of the German economy. The bond-buying program, called quantitative easing or QE, had been controversial since its start in 2009, as had the Fed’s decision in 2013 to gradually reduce the monthly economic boost, a plan that became known as the taper. Whether the Fed tapered too soon, given global economic weakness, or too late, given signs of bubbles in some markets, was hotly debated. But even after the taper’s end the Fed continued to pump support into the economy the old-fashioned way, by holding its interest rates near zero.”

As I’ve pointed out before, “Quantitative easing” is simply a euphemism for inflation of the currency (mainly by central banks buying government bonds and other uncollectable debt). Other things being equal, currency inflation eventually leads to price inflation. But other things are not equal. The US has indeed seen significant inflation of prices in some sectors, especially food, but other prices are being kept down, primarily because of layoffs and underemployment, leaving consumers with lower incomes and reduced purchasing power. If income from wages and interest on savings are held down, people must either do without or borrow more money to maintain their levels of spending. The following table from the Federal Reserve shows the growth in consumer credit over the past few years.

Consumer Credit Outstanding ($ Billions)
2009 2010 2011 2012 2013 2014
As of 8/31
2,552.8 2,647.4 2,755.9 2,923.6 3,097.9 3,225.3

These figures cover most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate.

Those figures show a more than a 26% increase in consumer credit just over the past four and one half years, much of it high-interest credit card debt. Although credit card debt has declined somewhat from its 2009 peak, according to nerdwallet.com, falling indebtedness is largely due to defaults rather than repayment.

The same site reports that, in total, American consumers owe:

  • $11.63 trillion in debt, an increase of 3.8% from last year
  • $880.5 billion in credit card debt
  • $8.07 trillion in mortgages
  • $1,120.3 billion in student loans, an increase of 11.5% from last year

Central banks find currency inflation necessary in order to offset the reductions in the money supply caused by charging interest on money that banks create when they make “loans.” There is never enough money in circulation to enable repayment of the aggregate of principal plus accrued interest of money created as bank “loans.” Thus the “natural” tendency of the usury-based debt-money system is toward deflation. Central governments then must become the borrowers of last resort and central banks become the lenders of last resort as bankers and politicians continue their absurd dance that is a death spiral of recurrent and ever more extreme financial crises.

The real solution to our monetary, financial, and economic problems is to end the usury-based debt-money system. But the bankers, the rulers of the world, will not stand for that. By control of the money creation process, they have extended their power to tightly control the political process, as well. Thus, the wealth and purchasing power of the vast majority of people will continue to decline as the system continues to pump up the wealth and power of the few who control the money system, and their minions.

According to the Fed, between 2010 and 2013, “mean (overall average) family income rose 4 percent in real terms, but median income fell 5 percent, consistent with increasing income concentration during this period.” And “Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys.”

So, what can people and communities do to counter these trends and regain control of their economic fortunes and enhance their political power?

Considering the dynamics of power that prevail in the so-called democratic countries today, reliance on the political process to effect systemic reforms seems futile. So, while it is necessary to continue to protest the status quo and reframe the political dialog, it is even more important to take action to rebuild society from the bottom upward. We must reduce our dependence upon the very systems that are being used to disempower us, of which the political money system is foremost.

That is not so daunting as it might first appear, and conceptually it is not very complicated. It is what my work of the past quarter century as been all about. The biggest difficulties have had to do with dispelling erroneous myths about money and banking and helping people to see beyond the orthodox. This, and the lack of adequate tools have retarded the process of taking promising alternatives to scale, but that is quickly changing as new technologies that enable moneyless trading become available.

But don’t sit idly by waiting for things to happen “out there.” Start with your own personal development and empowerment, while working to strengthen your various communities and networks, your city, state, and region. Some tips to get you started can be found here. –t.h.g.

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The emerging market mess and US manipulations

Anyone who wants to understand present-day geopolitical phenomena must pay attention to former Assistant Treasury Secretary, Dr. Paul Craig Roberts. Roberts is one of a handful of people who understands what is going on–and is willing to tell people about it. Explore his website http://www.paulcraigroberts.org/, and be sure to listen to his recent interview with Eric King, here.

In that interview, Roberts tells the story of how and why the US interferes in money and securities markets, and the effects those manipulations have on others around the world. He also predicts that the Federal Reserve will soon be faced with the choice of either saving the banks or saving the dollar, perhaps as early as the end of this year. But I suspect that the Fed may not quite yet have exhausted their bag of tricks. Because banking corporations dominate politics in most of the world, and because the dollar’s role as the global reserve currency has served the purpose of Western dominance, the Fed, in alliance with other central banks, will try to save both the banks and the dollar for as long as they can.

What is actually being protected is the global usury-based debt-money regime, that unholy alliance between politicians and top level banks that enables central governments to spend far in excess of their tax and other revenues, thereby thwarting democratic government and the popular will, while enabling banking institutions to privatize our collective credit and charge us interest (usury) to access it.

So what do the central banks have left in their bag of tricks as they taper off their massive amounts of  “quantitative easing” (currency inflation)? That’s the question to ponder. I think it’s obvious that they will (1) try to corral everyone’s savings and all surpluses into government securities and Wall Street equities (think, privatization of Social Security), and (2) outright confiscation of bank deposits via selective bank failures and assessments on depositors (ala the recent Cyprus trial balloon).

Still, those can only be, at best, delaying tactics, and not without serious social and political repercussions. The real solution will continue to be denied and delayed by the powers that be. Thus it must emerge from the bottom, from the creative instincts and talents of innovators in many fields who are bringing to market better ways of mediating the exchange of value and financing the creation of sustainable, Earth-friendly, and life-supporting products and services. –t.h.g.

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FED: “your gold is safe with us, just don’t ask for it back.”

The global banking farce is becoming ever more hilarious (if you can ignore the tragic consequences of this monumental fraud). Germany is seeking to repatriate its gold that is supposedly held by the US Federal Reserve, but the Fed says, “Nein, you cannot even examine it.”

 Watch this RT report to get the story:

Do Banks Create Money out of Nothing?

One of my correspondents recently referred me to an article and asked for my opinion about it. The article is Creating Money out of Nothing: The History of an Idea, by Mike King, dated April 2012 .

I read the abstract, the conclusions, and part of the body text, but could not bring myself to make a detailed read. “The history of an idea” is not relevant to my interests nor to the debt crisis that plagues civilization. Verbose and tedious, it seems to be an academic exercise that I doubt  will be of interest even to historians.

On the positive side, it did prompt me to write a few words of clarification on the question, words that I think are both pertinent and helpful to those who truly wish to understand the nature of money and the role of banks in today’s world.

The accusation that banks create money out of nothing has, according to King, been made by many famous economists, including Schumpeter, von Mises, and Keynes. I too must admit to having once or twice used that statement as a sort of shorthand criticism of the global money and banking system.

It is surely true that saying that banks make “money out of nothing” is an exaggeration that can be misleading to the uninitiated.

Bank actually create money out of something. The question is, what is that something, and what is wrong with it?

The short answer is that banks create money on the basis of the promises of their borrowers to repay.

Mr. King would have us believe that banks simply take in money from savers and lend it out to borrowers. That is clearly wrong. Even the Federal Reserve, in its own publications, says that,

The actual process of money creation takes place primarily in banks.(1) As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.–Modern Money Mechanics

As I’ve pointed out in all of my books, banks serve two primary functions. They act as both depositories, reallocating funds from savers to borrowers, and banks of issue that monetize the promises of their borrowers. I’ve explained that in detail in Chapter 1 of my book, Money: Understanding and Creating Alternatives to Legal Tender, and in Chapter 9 of my latest book, The End of Money and the Future of Civilization.

But not all promises provide a proper basis for creating money. As Edward Popp, describes it, banks create both bona-fide and non-bona-fide money. (See Money, Bona Fide or Non-Bona Fide at http://www.reinventingmoney.com/documents/bonafidePopp.pdf).

The vast majority of the non-bona-fide money that banks create, is created on the basis of loans made to national governments (when banks buy government bonds). Further large amounts of non-bona-fide money are created when banks make loans to finance purchases of consumer goods and real estate (see my books for details). This is a violation of the principle that money should be created on the basis of goods and services on the market or soon to arrive there, which includes promises of established producers who are ready, willing and able to sell for money the things they ordinarily offer.

The bottom line remains: the present global, interest-based, debt-money system, is dysfunctional and destructive.

The creation of money on the basis of interest-bearing loans is the cause of the growth imperative, and the creation of non-bona-fide money is the cause of inflation.

If we are to achieve a sustainable society and assure the survival of civilization, we must transcend the present money and banking paradigm and reinvent the exchange process.  – t.h.g.

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Lie more about LIBOR—Giethner’s claims “not credible”

Here’s a video from Yahoo! Screen featuring an interview with Neil Barofsky, former Special Inspector General in charge of the TARP bailout and author of a new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.

In this interview, Barofsky says that Treasury Secretary Tim Geithner’s claims about his LIBOR whistle-blowing are “not credible,” and that the entire regulatory process has become “captured to the interests of the banks.”

Barofsky says that LIBOR was built into the bailout plan, so the fraud means the taxpayers are being repaid less than they should be, and added “I hope we see people in handcuffs.”

Watch it here.

Who buys US bonds when foreign countries and investors won’t?

Answer: The Federal Reserve

Question: Where does the Fed get the money to buy the bonds?

Answer: It creates it.

That’s right, the Fed has no money, but the Congress long ago empowered the Federal Reserve Bank to create money by buying government (and other) securities. This is known as “monetizing the debt,” which amounts to nothing more than “legalized” counterfeiting of dollars, and it has the same results as the injection of any other form of counterfeit money—the dilution of purchasing power of all the dollars already in circulation and the erosion of the value of all dollar-denominated assets.

Currency inflation must ultimately result in price inflation as those empty dollars (based on empty promises) work their way through the economy. Further, as those Fed-created dollars get deposited in banks, the banks are able to multiply their lending on the basis of these new “reserves.”

In an opinion article that appeared in the Wall Street Journal last Wednesday, a former Treasury official says that:

“The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.”

You might consider that to be a stealthy form of “quantitative easing.”

You can find out more about that, along with some pretty good analysis in an article that appears on the Money News website.