Posted on 03/29/2008 6:48:20 PM PDT by ovrtaxt
How is Money Created? |
The Federal Reserve Bank of Chicago used to publish a pamphlet entitled Modern Money Mechanics, which explains M1, M2, and M3. It is a truly fascinating read. That pamphlet is no longer in print, and the Chicago Fed has no plans to re-issue it. However, electronic copies are available (see link).
In it, the process by which the Fed creates money "out of thin air" is detailed. Consider the opening paragraph:
"Money is such a routine part of everyday living that its existence and acceptance ordinarily are taken for granted. A user may sense that money must come into being either automatically as a result of economic activity or as an outgrowth of some government operation. But just how this happens all too often remains a mystery." (Modern Money Mechanics, Federal Reserve Bank of Chicago, page 2)
Really read that paragraph.
The USFed, in one of its own publications, is stating right there in black and white that money is not created from economic activity, nor from a government operation. How then is it created?
"The actual process of money creation takes place in the banks." (Modern Money Mechanics, Federal Reserve Bank of Chicago, page 3)
The pamphlet uses an example of $10,000 being deposited from the Federal Reserve Bank to "Bank A" and shows how that develops into an increase in assets to the amount of an additional $90,000.
Essentially the Federal Reserve simultaneously creates an asset and liability of the same amount with a private bank. The net sum is zero. This money is "deposited" in the bank's federal reserve account. The private bank can then use this money as a reserve through which they can lend out additional money to the public. This reserve rate is generally 10%. Thus, a "deposit" of the USFed of $10,000 will transform into the private bank being able to loan out $90,000.
A couple of points.
Firstly, if I loaned your company $10,000 would the net worth of your company increase by that amount? The answer is no, because while assets went up by $10,000 so did the liability. It would be fraudulent for you to report an increase in net worth of $10,000.
Secondly, your company could not lend out $90,000 from the initial $10,000 you borrowed from me. You simply would not have the funds and if you claimed to have them, again you would be committing fraud.
Thirdly, I would like to take a quote from another Reserve Bank publication, this time from page 8 of Philadelphia's The National Debt:
"The Federal Government, with the cooperation of the Federal Reserve, has the inherent power to create money - almost any amount of it. This power makes technical bankruptcy out of the question."
So not only are the banks committing fraudulent activity in the sense that they claiming asset value from their debt and secondly loaning out more than they have borrowed, they are protected from any risk of bankruptcy courtesy of the public! You and I would pay more for prices of goods and services should the Fed have to dilute the money supply further by printing sufficient money to prevent bankruptcy of a bank!
This is nothing short of outrageous.
Published on http://DollarDaze.org - Jun 6, 2006.
“Bear Stearns OWNS 3 billion shares” = Calpers OWNS 3 billion shares of Bear Stearns.
hehehe
I'm happy you can finally handle the truth.
It's actually rather Marxist of you to insist that bankers are mere parasites who add no value to the economy.
That's funny! Who said that?
That would be you.
No silly, who mentioned anything on the thread about bankers being parasites? You were the only one.
That would be you.
No, it wouldn't.
Indeed in the same post you said: I wouldn't equate deposits and loans with wealth creation.
Yes I did. That's still not anything about parasites. Sorry.
You said in that sentence that you would not equate what the banks do with wealth creation, did you not?
That's not what I said. When you get pressed you seem to lose some reasoning skills.
You said earlier that banks charge interest.
Was that the first time you ever heard that?
That is the definition of a parasite: an entity that consumes without contributing.
I never said banks don't contribute. Nice try.
I'm happy for you...
I'm just glad I could help you.
BTW Toddster, when someone else is wrong, that doesn’t automatically make you right...
You think we were laughing at THAT? Oh, no. We were laughing at you. After all, your post implied that Calpers owned more Bear Stearns stock than existed in the world. In fact, your post implied that Calpers owned all of Bear Stearns and that the California pension fund was over twice as large as it really is.
As I pointed out, Calpers didn't feel a thing when BSC went poof. It's ownership was less that .2% of the fund. LOL.
Yep.......that's what I said.
And........they did GET STIFFED for (whatever amount) Calpers (and others) invested in Bear Stearns.
Or do you have some "new math" that shows that ~40 a share purchase price is a profit at the revalued ~$2 - ~$10 a share? . . . Unless, of course, they divested themselves PRIOR TO the Bear Stearns collapse. My math shows that this is a loss....and they got stiffed.
Um, no. I posted figures from a Commissions Report that showed that they had invested in Bear Stearns....and had paid them commissions. My post raised the specter that Calpers, and therefore, the retirement accounts of a great many people, just within the California Retirement system, had been negatively effected by the collapse of Bear Stearns. The figures proved that they had, indeed, invested in Bear Stearns. That you wished to later state that I claimed they lost a specific amount is of your own doing and occurred during your own hysterics; and I allowed you to act hysterical....because...it's "all so funny" that so many people lost a great deal of money.
The most important thing, after all, is that the Bear Stearns CEO got over $100 million out between last year and just after the collapse. That is what's most important...oh....that and curiosity as to how much *I* had invested with Bear Stearns....because it's all about "me".
No, but when he's wrong, which is often the case, he deflects onto other things, responds with questions to questions....or just doesn't answer at all.
He is, after all, nothing but a government drone.
The one who is foolish, is you.
I know it was a commissions report. You thought it was a statement of shares owned. That's why you said...
.....unless, of course, CAlPERS divested itself of these shares
Because you thought these shares were shares of Bear Stearns. You were wrong. Again.
The figures proved that they had, indeed, invested in Bear Stearns.
No. The figures on the commissions report proved that they paid commissions to Bear Stearns. Not that they invested in Bear Stearns. Glad I could help.
You're lying. Again.
How many shares did your post claim they owned?
I showed my concern for those who lost monies in their retirement accounts because of that....you certainly didn't, and haven't.
no kidding.
The desperation forced him to attack me by carrying matters from another thread onto this one....a “no no” in FR.
*sigh*
Oh well.....as with Halgr, I applaud your posts on this thread. : )
I didn't state they owned ANY specific dollar amount, any specific number of shares, or the specific price they paid per share, or even when the shares were purchases.
Right, you just posted a report showing 3 billion shares and said, .....unless, of course, CAlPERS divested itself of these shares
It showed a June 2007 commissions report, evidencing that Calpers did, in fact, invest in Bear Stearns...
"Commissions paid" is not the same as "invested in".
I paid some commissions to Charles Schwab. I've never owned a single share of Charles Schwab stock.
You really shouldn't post on these market threads. It's obvious to everyone that you haven't a clue what you're talking about.
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