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.
What’s more obvious to a great many is your utter desperation to appear as a know-it-all....a mind reader, even.
When you are cornered, as was the case, again, in this thread, you can do nothing but make personal attacks, dragging things from other threads onto yet more.
I did NOT make any claim as to any specific total dollars invested, total shares owned, or dollar amounts at which shares were purchased.
You made the claim I did...and went on hysterically claiming that on that thread, and now this one as well, this thread which has absolutely NOTHING to do with the Bear Stearns collapse.
All because you were shown a fool by your betters.
I’m shocked. Just shocked, I tells ya!
hehehe
Don’t be. It’s SOP with him. : )
Oh, I get it. Because I was too busy pointing out what an idiot you are that I didn't have time to have a good cry for all the shareholders in BSC I must be a big, bad ogre.
Pointing out your silly errors doesn't make me a know-it-all, just a know-more-than-you.
You made the claim I did...and went on hysterically claiming that on that thread
The only hysteria is yours.
All because you were shown a fool by your betters.
Who? Where? LOL!
There were several people hyperventilating on that thread, too intent on their own presumed mind-reading skills, who showed themselves to be the idiots.
I wasn’t among the idiots in that group posters.
But there was a poster who did state their concern for the people who lost money...and their disdain the for the Bear Stearns CEO who got his $101 million out.
And that poster wasn’t you.
That's what it's all about with you then, huh? The guy is just too rich for you, isn't he?
Question, how would making him poor help you at all?
You can run but you can't hide from the fact that you were trying to imply that Calpers had a significant position in BSC. In your stupidity you posted the commissions report showing how many shares of SOMETHING Bear Stearns' brokers sold to Calpers. It would have been funny but then you implied that BSC took down a lot of Calpers retirees with it. If you are gong to be that foolish you aren't worth the effort. Pitiful.
When Bear Stearns collapsed.......it, no doubt, caused LOTS of people to lose their retirement accounts....you know, kind of like the Enron deal.
That was likely funny to you, too.
Posting a commission report and implying that it is a postitions report isn't hyperventlating? What is it then?
I wasn’t among the idiots in that group posters.
Well which group of idiots were you with? Or were you just going solo?
But there was a poster who did state their concern for the people who lost money...And that poster wasn’t you.
Excuse me for living. I lost money in BSC too. One of my mutual funds owned it. SO I'M GONNA DIE. There, do you feel better?
Pointing out the fact that Calpers had invested with Bear Stearns is pointing out that Calpers likely lost money...unless it divested itself of their shares prior to the collapse.
You, and other idiots, worked yourselves up into a frenzy because I made a post about that.
I will continue to put faces to the Bear Stearns collapse because it involves a huge loss, likely for a great many people.
But it’s all a joke to you, so I can understand why you couldn’t understand why someone would want to bring names and faces to the losses. Because then, it becomes less of a joke and more of a crime.
No, we were amused because your post implied that Calpers owned 3 billion shares of Bear Stearns which would have been worth over 5 billion dollars at one point even though Calpers had total assets of 250 billion. LOL. Not only that but you weren't smart enough to know that you were posting a commissions activity report. You got caught in your stupidity and now you're trying to wiggle off the hook.
I will continue to put faces to the Bear Stearns collapse because it involves a huge loss, likely for a great many people.
Well, I thank you for your sympathy but I really don't need it. I owned BSC but it was only a very small percentage of one of the mutual funds I own.
You might go find Joseph Lewis and hold his hand though.
would have been worth over 5 billion dollars at one point even though Calpers had total assets of 250 billion
5 billion = 500 billion.
Exactly why you were the ones posting in hysterics. I am not the one who implied that or stated such idiocies. YOU all did in your rush to will guilt upon me for saying that....when I hadn't even as much as SUGGESTED any specific dollar amount purchased by Calpers. So complete is your animosity against me, and intent to malign me that YOU will for it to be ME who makes statements and beliefs that you actually make and belief yourselves. That would be one definition of hyperventilating.
As to you, personally, I could care less if you get taken to the cleaners.
And that figure is evidence of just how astoundingly ridiculous of a presumption of error you attributed to me on YOUR part.
I knew that Calpers has ~248 billion invested TOTAL in ALL investments. Egads....what complete idiots YOU are to make such presumptions.
Now, perhaps if you had ASKED me a question about what I meant, rather than try to presume to speak for me, you wouldn't look such the fools you are.
Nope. I prefer to write the way I wish.
FreeRepublic is neither a grammar, nor an “English composition” forum.
Or English comprehension, apparently.
Remind me. What was it that was posted about Bear Stearns? A statement of CALPERS’ account activity?
I understand English just fine.
It is you who apparently do not. As I told you before, I shall write in the manner I wish. FreeRepublic is neither a grammar, nor English composition forum. You have not been assigned as my editor, or English police.
I would have it that you would honor honesty, integrity, context, content, truthfulness, patriotism, rather than typos, but, alas, I am not your conscience, and you have the freedom to be or act as the lowest common denominator if you so choose.
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