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Government

The Effect is: High Prices! Mal-investments Boom and Bust Cycles Recessions. 1913. Fiat Money (Paper). IOU’s ( Bonds ). Federal Reserve. INFLATION !!. $ 16 Trillion. Can only spend what it takes from it’s citizens. Government. $ Spend Trillions. $ Government Payroll

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Government

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  1. The Effect is: High Prices! • Mal-investments • Boom and Bust Cycles • Recessions 1913 Fiat Money (Paper) IOU’s ( Bonds ) Federal Reserve INFLATION !! $16 Trillion Can only spend what it takes from it’s citizens Government $ Spend Trillions $ GovernmentPayroll $ Federal Programs $ War We the People Keynesian Economics The General Theory, 1936 All Spending = Income Pay Taxes!

  2. - 10% Fractional Reserve Banking Sets Fed Fund Rate Buys the Bonds (Credits Reserve Account by $1 million) Discount Rate Federal Reserve Sells IOU’s: BONDS ($1 MILLION) Excess Reserves Above 10% of Deposits Deficit Reserves Below 10% of Deposits Overnight Can Not Extend Credit / Loans Commercial Bank Loans @ Fed Fund Rate Commercial Bank TOTAL: $10MILLION IN CHECK BOOK MONEY!! Prime Rate Expands Credit / Loans Businesses Individuals

  3. Inflation Process OPEN MARKET OPERATIONS $1 Million Purchase of Gov’t. Bonds Sells Buys Federal Reserve Securities Firm Wall Street Writes a check ----- Fed Bank Deposits $1 Million Check with Fed ======== Reserves increase by $1 Million Deposits Fed’s Check $1 Million TOTAL: $10 Million Money Supply Increase! via Check Book Deposits Commercial Bank Money Multiplier 10 / 1 $9 Million in New Loans

  4. Bank-to-Bank Inflation Process U.S. Competitive Banking System Formula (1 Minus the Minimum Reserve Requirement) Bank #A = $1 Million x .90 = $900,000 Bank #B = $900,000 x .90 = $810,000 Bank #C = $810,000 x .90 = $729,000 Eventually over 100 banks pyramid $9M on $1 Million in Reserves: Federal Reserve TOTAL $10 MILLION Lends $9M check book deposit to Macy’s Buys $9 Million in furniture from XYZ Company $1 Million Reserves Check from # A Macy’s Commercial Bank # A Bankrupts Bank # A Deposits $9M Check into Bank # B Bank # B Presents $9M check for redemption from Bank #A Commercial Bank # B

  5. THE PROBLEM • The Commercial banking System has Excess Reserves of about ($)1.5- Trillion Dollars! • Legally they can create ($) 15-Trillion Dollars in new loans (inflate the quantity of money)! • Already the National Debt at 16 Trillion is out of control. 2. The pressure on U.S. Treasuries and the Dollar is threatening. • Prices on everything are continually increasing and now poised to soar (including interest rates)!

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