Federal Reserve act of 1913
1.) The Federal Reserve Central Bank has the Federal Reserve Notes printed by the US Treasury with not a cent of reserve or investment.
2.) Then it lends this money to the Federal Regional Banks. For every billion dollars they borrow from the Federal Reserve Central Bank, Regional Banks lend seven billion dollars.
3.) The people and businesses(all Americans) who borrow this created credit line and are forced to pay it back with interest that is collateralized by real assets (their homes, cars, land, factories, etc.).
Reserve means that the bank has gold or silver to back the paper money. Otherwise this would seemingly work.
Since the FEDreserve decided not to back our paper money with anything, why are people giving real assets in exchange for nothing?
They print it for free, then make 7 times profit out of thin air, and we work for it ITS OUR MONEY. Why dont we just cut out the middle man? How is this not a SCAM?
2006-10-10 06:24:05 · 5 answers · asked by big-brother 3 in Politics & Government ➔ Politics
Just to clarify a few points.
- The Federal Reserve "Central" does not loan money to the Federal Reserve Branch banks. For proof, check out the here are balance sheets from the Fed Res http://www.federalreserve.gov/releases/h41/Current/ and the Chicago Branch http://www.chicagofed.org/economic_research_and_data/files/SEVENTH_DISTRICT.PDF . These loans do not show up on either balance sheet.
- Regarding the "7 times": I think you have a misunderstanding, or misapplying, of the Deposit Multiplier effect. In a single transaction, a bank cannot loan out more than it has in excess reserves, i.e. if it has $1 in the vault, it can only loan out $1, not seven. With the deposit multiplier, money from a loan will eventually be re-desposited and re-loaned.
There is a theoretical maximum. For M1 (the most liquid assets), the effective multiplier is about 1.6. For M2 (M1+time deposits), the effective muliplier is around 7.
- About 98% of all 'profit" is returned to the Treasury at the end of the Fiscal year. Member banks make a standard 6% on their shares regardless of the 'profit' generated by their branch.
- Side point: We typically say that Fed Reserve notes are not backed by anything. Which can, for most intents and purposes, be considered true. Technically, by law all Fed Notes have to be collaterizalized with some asset held by the Fed. Almost all of it is collateralized by Treasury Notes that the Fed purchases to get cash into circulation. And, believe it or not, a very small portion of Fed notes ($11B) is collaterized by gold. (see the Fed Balance sheet http://www.federalreserve.gov/releases/h41/Current/ ). One could look at the Fed balance sheet and say that 100% of Federal Reserve notes are backed by assets if you consider a T-Bill an asset. However, since this is government debt, it's like writing yourself an IOU for $100, then say you have $100 in assets. Sounds sort of scammish to me.
2006-10-10 10:53:10 · answer #1 · answered by gray shadow 6 · 4⤊ 0⤋
It's not a scam because they're not making money from it. Money is not something of value in and of itself - it's a process for transferring value. Besides, the US Government is much more stable than the price of gold, silver, or any other commodity that money could be tied to.
2006-10-10 13:58:57 · answer #2 · answered by JerH1 7 · 0⤊ 1⤋
It's more than just a scam. It is backed by police powers (guns).
I guess we can always count on freedom of the press to prevail within the US Mint.
2006-10-10 13:33:15 · answer #3 · answered by Search first before you ask it 7 · 3⤊ 0⤋
Yes, it's a SCAM!...
http://www.rense.com/general60/illum.htm
2006-10-10 14:52:45 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Didn't we go off the gold standard in 1971? (Bretton Woods)
2006-10-10 13:31:14 · answer #5 · answered by Brand X 6 · 1⤊ 0⤋