| Topic: |
Politics > Politics-USA |
| User: |
"Roedy Green" |
| Date: |
09 Jan 2004 01:44:28 AM |
| Object: |
US Reserve Bank |
I am trying to get a handle on how the US banking system works. I am
interested in what will happen after the national debt reaches
critical mass.
Please correct me if anything I say below is not accurate:
I understand there is a private corporation called the Federal Reserve
Bank that controls the creation of new money.
There are shareholders to this bank. The shareholders are officially
secret, but are presumed to be some of the planet's wealthiest people.
Do they receive dividends?
Who decides just how much money to create each year? It is just
controlled by the interest rate?
I understand that the bank lends money it creates to the government
and to banks. The prime rate is determined by Alan Greenspan. I
don't know who determines the rate to the government or what it is.
It thus seems to me that even in theory the loan can never be repaid,
since you need money+interest to repay the money and the original
source of all money is the bank. I detect a whiff of pyramid scheme,
and I don't mean that Masonic pyramid-eye on the dollar bill.
It seems to me then you must have some sort of periodic debt
forgiveness to the government, otherwise eventually its entire budget
would be spent on interest back to the US Reserve bank.
What does the US Reserve bank do with all the interest it earns on
money it creates for free? It must be exceedingly profitable.
The FDIC controls what percentage banks have to keep in reserve for
deposits. They can lend the rest out. Since loans are typically
deposited again in the same bank, they can be lent out over and over,
relending the same money perhaps 12 times over. Thus the bank can
collect interest 12 times over on the same money. This is how they
can make fabulous profit when there appears to be only a small point
range between interest on savings accounts and loan interest.
Lowering the reserve rate thus effectively increases the money supply.
Increasing the money supply causes inflation. It also devalues the
dollar internationally against other currencies. This makes imports
more expensive, but makes exports appear cheaper to customers.
If all goes well, this should increase exports and decrease imports,
helping reduce the American trade deficit. If the amounts of goods
travelling in both directions don't change, however, then devaluation
makes the trade deficit even worse.
--
Canadian Mind Products, Roedy Green.
Coaching, problem solving, economical contract programming.
See http://mindprod.com/jgloss/jgloss.html for The Java Glossary.
.
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| User: "Roedy Green" |
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| Title: Re: US Reserve Bank |
09 Jan 2004 05:39:42 PM |
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On Fri, 09 Jan 2004 07:44:28 GMT, Roedy Green
<look-at-the-website-for-actual-Roedy@mindprod.com> wrote or quoted :
Do they receive dividends?
According to Dr. Edward Flaherty:
The Federal Reserve System certainly makes large profits. According
to the Board’s 1999 Annual Report, the System had net income totaling
$26.2 billion, which would qualify it as one of the most profitable
companies in the world if the System were a typical corporation. How
were these profits distributed? $342 million, or 1.4% of the profits,
were paid to member banks as dividends. Another $479 million, or
1.8%, was retained by the 12 Reserve Banks. The balance of $25.4
billion -- or 96.9% of the profits -- was paid to the Treasury.
Obviously, Schauf's statement that the member banks are getting
"billions" in dividends every year is absurd. In addition, the Fed
has been rebating its profits to the Treasury since 1947.
----
Inflation is about 2%, so I assume this means about 2% of the entire
money supply is created each year. I don't know how big the entire
money supply is. I don't know what proportion of new money is created
by the feds and what proportion by the banks with their ability to
lend the same money out over and over. I don't know how much new
money is created each year.
Would this created money (minus minor expenses) be pure profit for the
Fed? That would mean the treasury would get 97% of it interest free,
would it not?
I am puzzled here. Many people have told me the treasury BORROWS
money from the federal reserve. Which is it?
--
Canadian Mind Products, Roedy Green.
Coaching, problem solving, economical contract programming.
See http://mindprod.com/jgloss/jgloss.html for The Java Glossary.
.
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| User: "Roedy Green" |
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| Title: Re: US Reserve Bank |
09 Jan 2004 05:52:09 PM |
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On Fri, 09 Jan 2004 07:44:28 GMT, Roedy Green
<look-at-the-website-for-actual-Roedy@mindprod.com> wrote or quoted :
Who decides just how much money to create each year? It is just
controlled by the interest rate?
"The Federal Reserve System is controlled not by the New York Federal
Reserve Bank, but by the Board of Governors (the Board) and the
Federal Open Market Committee (FOMC). The Board is a seven-member
panel appointed by the President and approved by the Senate. It
determines the interest rate for loans to commercial banks and
thrifts, selects the required reserve ratio which determines how much
of customer deposits a bank must keep on hand (a factor that
significantly affects a bank’s ability create new credit), and also
decides how much new currency Federal Reserve Banks may issue each
year"
~ Dr. Edward Flaherty
http://www.floodlight.org/theory/flaherty9.htm
So Greenspan and his board calls ALL the shots, including the ability
of banks to "print" money too.
It looks like inflation is a great way to raise huge amounts for the
treasury without the taxpayers blaming the politicians.
What then does an ordinary American retired or approaching retirement
age do to protect against that inflation? It robs the buying power of
his nest egg. Does he have to invest in gold or real estate in some
reasonably liquid way? Does it all work out in the wash since
interests rates rise to match inflation?
With a $7 trillion debt an the IMF breathing at the door, and huge
deficits, and promised tax cuts I'd think some politicians might be
tempted to crank the inflation rate up even higher.
--
Canadian Mind Products, Roedy Green.
Coaching, problem solving, economical contract programming.
See http://mindprod.com/jgloss/jgloss.html for The Java Glossary.
.
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| User: "Tlalocelotl Tlatoani" |
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| Title: Re: US Reserve Bank |
09 Jan 2004 11:07:24 PM |
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Roedy Green wrote:
It looks like inflation is a great way to raise huge amounts for the
treasury without the taxpayers blaming the politicians.
BINGO.
It helps cover war costs in the case of fascist regimes, and in the
case of socialist regimes, it also helps cover the enormous burden of
their system.
What then does an ordinary American retired or approaching retirement
age do to protect against that inflation?
Gold.
It robs the buying power of his nest egg.
Bingo. You're getting sharper these days.
Does he have to invest in gold or real estate in some
reasonably liquid way? Does it all work out in the wash since
interests rates rise to match inflation?
Things of real value appreciate in value during economics crashes. Real
estate is a bad investment, we're overbuilt and once more non-citizens
start to leave and they get down to kicking the illegals out, homes will
be fairly worthless for a while. Good if you're buying, bad if you're
selling.
With a $7 trillion debt an the IMF breathing at the door, and huge
deficits, and promised tax cuts I'd think some politicians might be
tempted to crank the inflation rate up even higher.
That's all they can do, but the harder they do it, the more the system
breaks down. It's a cure that doubles as a poison.
I hope this helps.
TT
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| User: "The Frog." |
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| Title: Re: US Reserve Bank |
09 Jan 2004 08:48:20 AM |
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On Fri, 09 Jan 2004 07:44:28 GMT, Roedy Green
<look-at-the-website-for-actual-Roedy@mindprod.com> wrote:
I am trying to get a handle on how the US banking system works. I am
interested in what will happen after the national debt reaches
critical mass.
Please correct me if anything I say below is not accurate:
I understand there is a private corporation called the Federal Reserve
Bank that controls the creation of new money.
There are shareholders to this bank. The shareholders are officially
secret, but are presumed to be some of the planet's wealthiest people.
Do they receive dividends?
Who decides just how much money to create each year? It is just
controlled by the interest rate?
I understand that the bank lends money it creates to the government
and to banks. The prime rate is determined by Alan Greenspan. I
don't know who determines the rate to the government or what it is.
It thus seems to me that even in theory the loan can never be repaid,
since you need money+interest to repay the money and the original
source of all money is the bank. I detect a whiff of pyramid scheme,
and I don't mean that Masonic pyramid-eye on the dollar bill.
It seems to me then you must have some sort of periodic debt
forgiveness to the government, otherwise eventually its entire budget
would be spent on interest back to the US Reserve bank.
What does the US Reserve bank do with all the interest it earns on
money it creates for free? It must be exceedingly profitable.
The FDIC controls what percentage banks have to keep in reserve for
deposits. They can lend the rest out. Since loans are typically
deposited again in the same bank, they can be lent out over and over,
relending the same money perhaps 12 times over. Thus the bank can
collect interest 12 times over on the same money. This is how they
can make fabulous profit when there appears to be only a small point
range between interest on savings accounts and loan interest.
Lowering the reserve rate thus effectively increases the money supply.
Increasing the money supply causes inflation. It also devalues the
dollar internationally against other currencies. This makes imports
more expensive, but makes exports appear cheaper to customers.
If all goes well, this should increase exports and decrease imports,
helping reduce the American trade deficit. If the amounts of goods
travelling in both directions don't change, however, then devaluation
makes the trade deficit even worse.
Get a business degree
Liberalism is Communism one drink at a time. - P.J. O'Rourke
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| User: "Roedy Green" |
|
| Title: Re: US Reserve Bank |
09 Jan 2004 05:53:13 PM |
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On Fri, 09 Jan 2004 08:48:20 -0600, The Frog. <jmattNOSPAM@ticnet.com>
wrote or quoted :
Get a business degree
If that is your recommended solution, how many degrees have you now?
Lets say 10. Have you asked yourself only 10 questions in your life?
--
Canadian Mind Products, Roedy Green.
Coaching, problem solving, economical contract programming.
See http://mindprod.com/jgloss/jgloss.html for The Java Glossary.
.
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| User: "Tlalocelotl Tlatoani" |
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| Title: Re: US Reserve Bank |
09 Jan 2004 02:03:43 AM |
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Roedy Green wrote:
There are shareholders to this bank. The shareholders are officially
secret, but are presumed to be some of the planet's wealthiest people.
The shareholders are the other Federal Banks, who are in turn, owned by
others.
It thus seems to me that even in theory the loan can never be repaid,
since you need money+interest to repay the money and the original
source of all money is the bank. I detect a whiff of pyramid scheme,
and I don't mean that Masonic pyramid-eye on the dollar bill.
It's called "Fractional Reserve Banking," go look it up.
It seems to me then you must have some sort of periodic debt
forgiveness to the government,
Nope.
The FDIC controls what percentage banks have to keep in reserve for
deposits. They can lend the rest out. Since loans are typically
deposited again in the same bank, they can be lent out over and over,
relending the same money perhaps 12 times over. Thus the bank can
collect interest 12 times over on the same money. This is how they
can make fabulous profit when there appears to be only a small point
range between interest on savings accounts and loan interest.
Add the above onto fractional reserve banking and you'll see how much
of a cluster f--- it is.
Increasing the money supply causes inflation.
Yes.
It also devalues the
dollar internationally against other currencies.
Yes.
This makes imports more expensive,
Kinda' sorta. Since many countries are pegged to the dollar, the ones
that are tend to drop as well, sometimes harder than the US. Countries
that are not tied to the dollar? Their imports become more expensive.
but makes exports appear cheaper to customers.
It's how the market reacts to heal itself from the artificial damage.
If all goes well, this should increase exports and decrease imports,
helping reduce the American trade deficit.
To a small point, but once the dollar melts down it's all for naught.
If the amounts of goods
travelling in both directions don't change, however, then devaluation
makes the trade deficit even worse.
Right.
You're close.
Read "The Creature From Jekyll Island" by Edgar J. Griffin (or was it
Edward J Griffith?) You can find it on amazon. Read that, and you will
have no further questions.
TT
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| User: "Gus" |
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| Title: Re: US Reserve Bank |
09 Jan 2004 06:38:56 AM |
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Roedy Green wrote:
I am trying to get a handle on how the US banking system works. I am
interested in what will happen after the national debt reaches
critical mass.
Many claims, some wild, have been made against the US Federal Reserve
Bank. If you want to understand it, you might want to start with:
http://www.floodlight.org/theory/flaherty9.htm
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