BANKS CREATE MONEY OUT OF NOTHING
Knowing how money is created will help you understand how we can get you out of credit card debt, unsecured loans and lines of credit. Over the past 27 years the Managing Director of FDRS has done nothing but research money - how it works, who has it, how they got it and where it comes from. What changed my life was learning about how money is created. It is by far the most important financial aspect you will learn in this lifetime.
The current gross national debt is ridiculous, as you can see in the sum of personal and federal government debt, shown to the right. The counter doesn't include the Social Security and numerous other governmental debts totaling over $75 Trillion. So, everybody wants out of debt, but there is only $3.8 Trillion ($753 Billion in 02/06) in currency in the whole U.S. economy, so something doesn't add up, right? Let’s get to the bottom of it.
Currently the Federal Government spends more than they can tax us each year, entirely because they’re paying all of this revenue towards interest on previous years’ loans. So, what they do is have the Treasury print U.S. Bonds to exchange for loans from the privately owned Federal Reserve System.
The private Federal Reserve owners don’t have a trillion dollars to lend the Government, nor do they need it. All they do is create it, via a bookkeeping entry, and write a check to the U.S. Government as the loan in exchange for the U.S. Bonds. The U.S. Government banks at the Federal Reserve Bank so cashing this check is very easy.
The Government now spends this newly created money into the economy by paying the Court, Postal and Military employees, etc. These consumers then deposit their paychecks in a commercial bank, Bank of America for example. The commercial banks deposit their customers’ check (newly deposited money) at their local Federal Reserve Bank and the Reserve Bank allows the commercial bank to issue up to 33 times more new electronic money, some of which is used to cover the customers’ initial deposit. This is called "Fractional Reserve Banking."
When you sign a loan or credit card application and send it in, (say you are approved for $10,000.00) the commercial bank stamps the back of the application, as if it were a check, with the words: ’Pay $10,000.00 to the order of...;’ which changes your application into a promissory note.
They then deposit the promissory note at the local Federal Reserve Bank as new money. This new money is now a 3% fraction of what the commercial bank may now create and do whatever they want with.
So $330,000.00, minus the original $10,000.00, is now added to the commercial bank’s coffers. They then open a demand deposit transaction account in your name, (the same as a checking account), deposit $10,000.00 of their newly acquired funds into this account and then issue you a debit or (in this case) a credit card or paper check. Remember - it’s all just bookkeeping entries, because our money is backed by nothing.
Your asset, the original promissory note, not only funds your own supposed loan, but allows them to pocket up to 33 times the amount for doing nothing but fancy, yet fraudulent, bookkeeping entries. So, you funded your own loan, and they get to permanently keep your asset, the promissory note, along with the additional $320,000.00.
Don’t forget that when you spend your new deposit/loan, it ends up in someone else’s account and their bank gets to multiply it by