The Federal Reserve & The Fiat Monetary System

The fiat money system is not backed by anything physical (it has no intrinsic value), such as a precious metals like Gold or Silver.

The money is printed out of thin air by the Federal Reserve, who controls the nations monetary system and they are accountable to no one. The Federal Reserve has no budget, it is not subject to an audit, and no Congressional Committee knows of, or can truly supervise its operations.

When the US Government requires some money, it calls up the Federal Reserve and requests for example $10 Billion.

The Federal Reserve replies by telling the US Government that they will buy $10 Billion in Government bonds.

The Government then creates some treasury bonds printed on paper, to the value of $10 Billion and sends them over to the Federal Reserve.

The Federal Reserve then turns on its printing press and it creates $10 Billion in paper currency, which is called a Federal Reserve note. The $10 Billion in Federal Reserve notes is then sent over to the Government.

The Government then deposits the $10 Billion in Federal Reserve notes and deposits them into a bank account, and at this point the Federal Reserve notes become legal tender money, adding $10 Billion to the US money supply.

In actual fact only 3% of the US currency physically exists on printed paper, the other 97% exists electronically on computers.

A Government bond is an instrument of debt, therefor the money that now sits in the bank account was created out of debt.

Based on the fractional reserve practices, that $10 Billion deposit instantly becomes part of the banks reserve. The bank is required to keep just 10% as a deposit in its reserve, based on this the banks required reserve is $1 Billion. The other $9 Billion is considered a excessive reserve and can be used as the basis for new loans. The bank can now add an extra $9 Billion to the original $10 Billion that was originally deposited and this is how the money supply is expanded and money is created out of thin air. The $9 Billion can be created because, there is a demand for such a loan, and that there is a $10 Billion deposit to satisfy the reserve deposit, the bank now has $19 Billion on its books.

Lets say that someone goes to this bank and borrows the $9 Billion and then this money is deposited into their own bank account. This whole process starts again, 10% is isolated $900,000,000.00, 90% of the $9 Billion which is $8.1 Billion is now available as newly created money for new loans, and of course that $8.1 Billion can be loaned out and redeposited. This deposit money creation cycle can technically go on until infinity. The average mathematical result is that about $90 Billion can be created from the original $10 Billion. This means that money is created out of debt through loans.

When someone borrows money it almost always has to be paid back with accrued interest. Almost every single dollar that exists must be eventually returned to a bank with interest paid as well. But, if all money is borrowed from the central bank, and is expanded by commercial banks through loans. Only what would be called the principle is being created in the money supply.

The question is then this: Where is all the money to cover all the interest that is charged?

No Where!

It Does Not Exist!

The amount of money that is owed back to the banks will always exceed the amount of money that is in circulation. This is why inflation is a constant in the economy, for new money is always needed to cover a perpetual deficit built into the system, caused by the need to pay the interest. This also means, that defaults and bankruptcy are built into the system, and there will always be the middle and working class that will get the short end of the stick.

If you are unable to pay your mortgage, they will take your property. This is enraging because of the fact that the money that they loaned to you, did not legally exist in the first place.

In 1969 there was a Minnesota Court Case involving a man by the name of Jerome Daly. He challenged the foreclosure of his home by the bank who provided the loan in the first place. His argument was that the mortgage contract, required both parties, each put up a legitimate form of property for the exchange. Mr Daly explained that the money was not the property of the bank for it was created out of nothing as soon as the loan agreement was signed.

In the judges memorandum: The plaintiff (The Banks President) admitted that, in combination with the Federal Reserve Bank, did create the money and credit on its books by book keeping entry. The money and the credit first came into existence when they created it. The banks president admitted that no United States law or statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the note. The jury found that there was no lawful consideration and the judge agreed. The court rejected the foreclosure and Daly kept his home.

Every time you borrow money from a bank, whether it is a mortgage loan or a credit card charge. The money given to you is not only counterfeit, it is an illegitimate form of consideration, and hence voids the contract to repay. For the bank never had the money as property to begin with.

The Federal Reserve is a Private Banking Cartel.

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A Brief History of Central Banking

Gumwars

Sat Oct 11

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