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Can somebody explain the federal reserve to me?

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posted on Jan, 11 2011 @ 11:31 AM
The way I understand it, the Federal reserve bank in a country makes more money avaiable to banks, which in turn loan it out to people and corporations.

So every time the tangible economy of a country increases (Growing industry, more workers, more goods) and new cash is needed to prevent DEflation, the nation makes debt on every new piece of currency that gets into the system, which has to be repayed to the fed.

Firstly, did I get this about right? I do not see the benefit of this system. A lot of tax dollars are going torwards the federal reserve to pay off debt, which we have because we need more money to account for a growing tangible economy. What is the benefit of this system and dumping tax money on the federal reserve, as opposed to have a body that issues and retracts debt free money in a way to prevent inflation or deflation? And what does the fed do with the money they make, which is interest on every single Dollar they issue.
edit on 11-1-2011 by Cassius666 because: (no reason given)

posted on Jan, 11 2011 @ 11:55 AM
reply to post by Cassius666

In 3 words: Giant Ponzi Scheme.

The Creature from Jekyll Island is a good view for the history of the Federal Reserve:

posted on Jan, 11 2011 @ 11:58 AM
reply to post by Cassius666

That's how they spin it.

Central banking is a complicated issue but there are a couple basic things that that explanation misses.

First, there is no need for government in order to have money. Money evolves naturally out of any barter scheme when enough people get involved and it gets complicated enough. People start saving things that most people need; that thing becomes money. Government and corporate involvement in money is purely a scheme to allow those in power to have an unlimited supply of resources at the expense of everybody else (inflation). Regardless of how they spin it to the people or to themselves, they would not be involved in money if it did not give them that benefit.

Secondly, there is nothing wrong with natural deflation with natural money. People just come up with a way to "dilute" it. (For example precious metals can be literally diluted)

Central banking is purely a scheme to benefit the bankers at the expense of everyone else. More in-depth studies show the relationship between central banking schemes and the exacerbation of business cycles (as an example, while there are always small cycles, there were never any massive economy-wide "great" depressions until the Federal Reserve came on the scene). A good book for more information is "Human Action" by Ludwig von Mises, which is available free (pdf) online.

edit on 11-1-2011 by NewlyAwakened because: (no reason given)

posted on Jan, 11 2011 @ 12:03 PM
questions about the FEDs. One it will take hours to explain, Two when you know the truth you will be scared!

posted on Jan, 11 2011 @ 05:27 PM
reply to post by Cassius666

The way I understand it, the Federal reserve bank in a country makes more money avaiable to banks, which in turn loan it out to people and corporations.

Technically it has two functions (the US, UK, and EU versions)

1. Bank regulation .. the Reserve Bank(s) are not actual institutions but instead "boards", ie, nothing more than a boardroom.. it is not a "real" bank, and technically cannot own assets. It regulates other banks, which banks of members of. This is the primary reason for conspiracies (and rightly so) .. the Bank, who's board members are Member Banks and represented by heads of private banks to regulate... private banks.

Granted, the idea being that no one bank can become all powerful because other members of the board will be from it's competitors. However, when an entire industry gets together to manipulate pricing, availability, regulation and controls we call it price manipulation. For banks it's called a Reserve.

2. To establish the countries financial, economical and geoeconomical policies OUTSIDE of politics. Technically a Reserve member should not comment on politics or offer political guidance or remarks to Congress, they deal with money and money only. Whether the administration is Red or Blue, the bank is always Green. Theoretically this is the most important aspect of The Bank, because personally, I'd trust greedy bankers over inept politicians. Imagine Congress setting interest rates..

the nation makes debt on every new piece of currency that gets into the system, which has to be repayed to the fed.

No not at all. There are different types of "debt" for starters. A Currency has value based on whether or not other people accept it as payment for goods and services. To say a Dollar is a Debt, then turn around and buy something, theoretically you just purchased a tangible asset and or liability with negative value. Oxymoron.

Not all currency has to be "backed" by something, by which we mean you place a physical aspect behind a given currency, then the currency is either limited to supply of said resource (ie gold) or the systematic manipulation of said material (ie, gold) .. so if $1 bought you an oz of gold, the Government could manipulate the currency to that $.1 bought an oz, or .01, or 10, or 100 .. there's no limit.

Our currency is based on the belief that our government cannot fail, and that throughout the world it's always accepted (primarily because of oil) Because of this our currency has value, regardless of what the uneducated would say. If everyone accepted sea shells as currency for goods and services, sea shells would have value. Simple as that.

Also, the Federal Reserve does not print money, Congress does, and Congress alone sets the annual increase. The Reserve sets interest rates that through Reserve Banking the currency is inflated mostly through equity and debt. This is the deepest flaw in our system.. not what our currency is based on, but how Banking uses money to create money form nothing, then gain interest.

Also, the Federal Reserve actually pays Congress every year (which is usually destroyed) the interest on the debts.. it's called Monetization, or the new word "Quanitive Easing" .. the Government instead of printing dollars, buys dollars from it's self, boosting bonds and creating an illusion of stability.. it's a fraud of course, but it's a good trick, and as long as the dollar doesn't fall to far to fast, few care.

I do not see the benefit of this system

Politicians don't set monetary policy (good thing)
Our economic expansion is not limited to a finite resource (our economy would not have expanded at the rate it did and has under past currency forms)
And it provides economic stablity. Before the reserve depressions were common every 10 years, and our economy was a series of sharp ups and downs.

I am not a defender of the Fed though, I'd rather see it gone with a new experiment in place.

And what does the fed do with the money they make, which is interest on every single Dollar they issue.
The debt they make (they only make loans to other banks and the government) is usually destroyed or funneled into the Treasury, but the vast majority is rolled into new Tbills (gov debt) to keep the government functioning.

Congress and the Mints are the only ones "creating" actual money, and Congress holds The Bank's Charter.

The vast majority of money creation is through Member Banks, through Reserve Banking, which only make up the Fed.

posted on Jan, 11 2011 @ 08:24 PM
Money, in a fractional reserve system (central banking system), is created whenever a loan is issued. This money IS debt. A member bank can issue a loan as long as it meets its reserve requirements. Typically 9 to 1. A bank can loan, or create money, up to nine times what it has in reserve. This new money is then typically deposited at another bank and can be used as a basis for more loans but at a fraction of the deposit. In this way a loan, which is newly created money, can create more money larger than the original loan, but only as an additional loan. This money is created literally out of nothing - it is actually entered into a computer in the loan office. Interest is then charged on the loan for which the borrower must repay as a fee for the loan. This interest money also represents debt but it was not created at the time of the loan but it must eventually come from a loan. In other words the loans create money but not the interest to repay them. This means that more and more money in total must be borrowed to repay all the existing debt and interest. Eventually the debt becomes too large to repay and people will default. It is interesting to note that if all loans were repaid there would be no more money. Money IS debt (there is a good video by that title). It quite literally is a Ponzi scheme. This country is at peak debt right now and there is nothing that can be done about it except fail. It is the natural byproduct of a fractional reserve banking system. Failure has always been and is the inevitable and desired result.

After the dollar crash and TPTB get to push their solutions through on a willing, pliable and recently bankrupt public a new Ponzi scheme will take the place of the old one. Power and wealth will be consolidated at an unprecedented level. The poor decimated middle class will demand it!
edit on 11-1-2011 by MegaMind because: (no reason given)

edit on 11-1-2011 by MegaMind because: (no reason given)

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