Currency in the marketplace.
Today’s discussion will be on currency. Typically in the Federal Reserve system there are 2 different forms of currency. Currency in which you see, the dollar bill that is in your pocket, and the currency you keep in the bank, which is only numbers stored on a hard drive.
Whenever you open an account at a bank, you hold yourself at risk of losing your investment to a certain point. Such as not banking with an FDIC establishment and FDIC Bank Reserves are low and can not account for all money inside the bank’s accounts.
However, this issue I want to show you today is a controlled example on what happens to your money once it enters the banking establishment.
Lets say this is my bank, and I put $10,000 dollars into a savings account. The bank will use my money as collateral to created $100,000 of credit to loan out to other individuals. Now on this fictional money that has been created will draw interest from the debtor, I will normally receive between 1.5 – 2.0% interest on average while the bank keeps the rest. Now the Interest + Principle from ex.A is real money being given to the bank to pay off fictional money.
Ex.B : This section of the circle shows the federal reserve seeding money to the bank, for use in the Sub Prime mortgages. Ex.C shows that the Bank has now created 10 million USD out of 1 million USD, both of which are fictional. However, this fictional money is going toward the purchase of a REAL object, a house. Just like your original $10,000 in the center of the circle $90,000 USD is going toward the purchase of real objects, however using fictional money stored on a harddrive.
Ex.D is where the real problems began in this circle / bubble. Banks began creating bonds using the Sub prime mortgages as collateral, in which private companies would invest into for “wealth” management. This means investing private “real” currency is being invested into a real product which was bought with fictional money.
How, these sub-prime mortgages were preferably given to people whom the banks new would never be able to repay the debt of owning a home. Also, with an Adjustable Interest Rate the banks were able to inflate the interest that an individual pays on top of their principal balance. This produced a hardship on many of these individuals, as many were unable to repay nor refinance with a Fixed Interest Rate.
The real thing to question here is, What really caused this? My theory is that the federal reserve made a call for its money in an attempt to contract the currency market place, and this caused the AIR’s to explode. In doing so, many people left their homes with none payment, and it leaves the banks with property that is now worth less than what it originally was when the initial loan was made. This is, in essence, your boom and bust cycle. The Federal Reserve is able to seed money into the marketplace, fictional money, which creates the appearance of a booming economy. In doing so, the federal reserve is creating inflation that is not seen until later.
When the federal reserve cuts off the money supplied to the banks, this is when things go awry. This is all but a small overview of how the federal reserve creates money through debt, and then inflation when they cut off the supply.
A lot of these banks were to caught up in the mess and were bailed out by the federal government, creating more debt, that we the people have to pay off. We just didn’t have a say in this, yet we’re stuck with the bill.
Now, building off of what the previous system was. If a bank over extended itself, the people would normally do a run on the bank. By withdrawing their cash, they have a say in the banking practices. However, during a panic, it is realized that there is not enough money accountable for every account, and that is why it is called a panic.
If the marketplace was filled with only real currency that was fully controlled by congress, this fractional reserve system of credit would not have taken off in the way that it has. However, in the climate of how our Congress works, a majority of our legislative servants are bought and paid for by the Banking Industry. Flawed by Design and this portion is hardly noticed by your everyday citizen.
