paper money, as per the constitution of the United
States.The plan that was concocted was to move the
power to print paper money from the Treasury, to a
new entity, misleadingly named the Federal Reserve.
The Federal Reserve however, was not federal. It was
and still is very private. So private in fact, that even
today, it is more secretive than the CIA. It is owned
by private banks, though the public are not allowed
to know which ones. One can only presume that the
ownership structure somehow involves the attendees
of the Jekyll Island meeting.
The Fed’s main function is the control of interest
rates, enabling it to regulate the overall money
supply. It is a difficult balancing act. Keeping interest
rates low makes money cheaper to borrow and hence
expands the amount of money in the system. The
converse also applies. There are many factors to be
taken into account and rates may be adjusted for any
number of reasons.
Former Republican presidential candidate and twelve
term congressman, Ron Paul recently marked a new
departure by getting a bill passed by the House of
Congress to audit the Federal Reserve. Due to the
fact that the US is the world’s largest economy and
the US dollar is the world’s reserve currency, this
development is hugely significant, as what happens in
the US, reverberates around the world.
The seemingly simple transfer of the power to print
money from the Treasury (a government department
situated next door to the White House) to the
Federal Reserve (a private central bank with limited
government oversight) created the fundamental flaw
in the monetary system that underlies all subsequent
booms and busts.
Under the system that was signed into law by
President Woodrow Wilson in 1919, the Treasury
now orders dollar bills to be printed by the Fed –
which then charges the government interest on the
newly created money.
Under the fractional reserve banking regulations,
banks are only required to only hold a reserve of
10% of the value of the loans that they make. This
effectively means that a bank must keep one dollar in
deposits for every nine dollars that is lent out.
This means that when a man walks into a bank and
asks for a loan of $10,000, the bank must only have
$1,000 in reserve in order to fulfill its fractional
reserve requirements.
When the loan contract is signed, in consideration of
the borrower pledging to pay back the full amount in
installments, the remaining $9,000 is literally created
by the private bank out of thin air.
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