21+ Pages, Exposés on this Site (list)
Only rare Americans today know colonists despised what is best called debt money – also the monetary system of every nation currently – because they at least sensed and many understood how such monetary systems automagically transfer wealth from the many to the few, are what young Dr. Greenspan described as
a “Scheme for the Confiscation of Wealth.”
This page reveals the devils in the details, how they all work together to make this Confiscation Magic Diabolicus.
Although the hardest-fought battles of the Constitutional Convention were Jeffersonians vs. bankster Hamiltonians pushing their debt money scheme:
Present Americans typically feel like Alice groping in the rabbit hole when first attempting to get oriented in the Looking-Glass world of modern banking and money, what is best called Debt Money Bankstering.
Defenders of gold’s more democratic ways kept bankster/wealthy tyranny somewhat in check for more than the first century of the Republic.
While silver was used far more than gold in everyday transactions,
gold was the primary yardstick defining the value of money: the gold standard.
Pres. Nixon nixing the gold standard in 1971 is the primary reason the US reverted from the greatest middle class society of all time then, to now a typical banana republic wealth/income distribution, with especially the 0.1% calling all the shots.
Tragically far too few Americans have any idea their only hope is waking up to how debt money is the primary weapon the Crooks in Charge employed to destroy what few as yet know is long gone with the wind, but will soon be wailing and gnashing teeth about: by far the worst triumph of the Confiscation Scheme ever, reducing most Americans to serfs, at least in comparison:
Dozens of millions of households now depend on at least one form of government hand-outs, and most of the rest are hopelessly in debt – as most will discover far too late as the worst debt bubble of all time crashes back to reality God only knows how far down – as this site warns and explains in detail.
Despite millions of underwater mortgages recovering after millions lost their homes to foreclosure this century, yet millions more still remain underwater:
Horrifically few Americans have any idea the worst by far is yet to come, as described especially on this site’s page.
The below graph from the above page reveals the explosive debt orgy since 1971 that crushed what was the greatest middle class society ever is out of steam:
It hit end of the line in 2008, the beginning of the catastrophic collapse still just getting underway:
*incuding children and elderly
Colonists hated debt money especially because they at least sensed and many understood such monetary systems automagically transfer wealth from the many to the few; at least viscerally they knew European tyrannies they fled were empowered and sustained by such treachery – starting millennia ago in several Asian nations.
That’s the back-story to the Boston Tea Party the wealthy and their banksters* got erased from history books (written by professors with Chairs *they endowed):
Colonists had to pay the tea tax in hated British debt-money pounds (£) colonists had none of, meaning they’d also have to pay exorbitant fees to convert their genuine money into pounds, compounding injury onto the despised tyrannies of debt money, as well as “taxation without representation.”
Hatred of tyrannous debt money was no small part of the reason colonists outlawed debtors’ prisons.
How a debt money system works its wealth transfer sleights-of-hand is both simple plus obvious once one knows a few key facts, as this page aims to explain, without jargon or spin.
Since no one would readily admit advocating debt money because it transfers wealth/power from the many to the few, it is impossible to know who or how many are conscious of this “insidious process,” as Greenspan decried it – in his youth before he sold out* to become the worst debt money “Maestro” ever. – details below
*if not forced via an offer he couldn’t refuse
Millions of the 1%, however, and especially the 0.01% continue to rake in $Trillions of profits from the subprime/2008 swindles still just beginning to unwind and culminate one of, if not the worst transfer of wealth from many to few in all history.
A number of Wall Street greats – extremely rare honest ones – tell it more like it is than MainSpin Media would dare how Maestro Greenspan’s Federal Reserve horribly enabled the outrageous subprime transfer far from over, in this 1-hour video well worth digesting, taking to heart, and especially to wallet and portfolio.
The old saw, banks only lend to those who don’t need it, points to debt money’s primary oppressive function: confiscating wealth from many to benefit few.
Tragically for its victims, debt money’s diabolical temptations make it virtually irresistible.. plus far too easy to get out of hand, as history demonstrates repeatedly, especially the subprime plunder far from finished drowning millions in oceans of pain and tragedy:
To understand how debt money confiscates and transfers wealth from many to few, it’s crucial to understand banks conjure debt money out of nothing.
Since most Americans experience money as something one has to work if not slave for, many find it takes wrenching shifts of many mental gears to begin to comprehend debt money, what it is from banksters’ and the wealthy’s points of view – what and how debt money is in reality.
Unless one is a bank, one has to have money to lend it to someone. One has less money to spend if one lends some to someone else.
But in the Looking-Glass world of debt money bankstering, a seemingly impossible magic trick like conjuring a rabbit out of an empty hat actually, literally happens countless times daily:
In a debt money system, all paper currency and money is LENT INTO EXISTENCE OUT OF NOTHING by banks, literally created de novo, as the U.S. Federal Reserve Bank (the Fed) describes in its literature (see below), hence:
Money is just debt owed to banks — no matter what form it takes, whether check or paper dollar, etc. All such paper plus debt, and actually all money in any account represents someone or some organization’s or a business’ obligation to repay that amount to a lender.
Although Americans aren’t supposed to know this: Even money one deposits with a bank is legally a loan one makes to the bank. – See below for disastrous consequences dead ahead as untold millions learn this fact maximally painfully.
– In the case of paper dollars, the U.S. Treasury is obligated to repay the Fed. more below –
All legal tender and money in accounts in banks arises via lending, there is always a lender and borrower involved in each and every dollar, regardless what form it takes or how/where held, as the next section describes in detail.
Only those who grasp the debt nature of all the world’s money in bank accounts and circulating currently can comprehend how debt money is a “Scheme for the Confiscation of Wealth” ever automagically transferring wealth from the many to the few.
The next section provides further details necessary to understand how the Looking-Glass world of debt money banking actually works, what such money really is.
These details are crucial to understand the subsequent explanation how debt money systems transfer wealth from many to few, gradually over time, ever making the wealthy wealthier, virtually without any effort on their part.
Since everyone knows a check written for more than is in ones account will bounce, it takes suspending what most consider reality to begin to comprehend how banks and other lenders operate, how they are able to lend what they don’t own nor possess – now it’s dozens of $Trillions Americans owe banks.
Plus thanks to the Fed’s ZIRP,* since 2008 it costs banks virtually nothing to borrow! (They borrow vastly less than they lend.) *zero interest rate policy
Debt money banks not only can, they almost ALWAYS create money to lend out of much less than thin air, rather an empty vacuum: they have no requirement whatsoever to OWN money, to HAVE money before they lend it:
Banks essentially have an exclusive right to counterfeit, create money by lending about as much as they want to out of nothing, what’s otherwise illegal.
How banks pull off this seemingly impossible magic trick becomes clear once one grasps a few more details how banks lend out of nothingness:
For example: A greenback in your wallet has Federal Reserve “Note” printed on it because it’s a token, represents a tiny, minuscule portion of loans the Fed makes to the U.S. Treasury (usually), loans the Treasury is obligated to repay to the Fed. But the Fed doesn’t give the Treasury anything, it never had money to begin with. –
The Fed is unlike any other sort of bank:*
*in the U.S.; the rest of the world’s nearly 200 central banks issue currency the same way.
The Fed’s charter obligates it to print currency equal to how much the Treasury indebts itself to the Fed (for this purpose). see below for The Nitty-Gritty details*
The Fed just prints the money: Virtually the Fed’s sole cost to create a paper dollar is the pennies it takes to make that much special parchment and print it.
To back each paper dollar, Uncle Shame agrees to owe the Fed a dollar (the Fed then adds to its account of outstanding loans).
Hence, what really happens when one hands over a dollar at check-out is one trades a dollar’s worth of Uncle Shame’s obligations to the Fed for ones purchase.
(Or from the converse perspective: a dollar represents a claim the Fed has on a dollar’s worth of Uncle Shame’s assets.)
— The catch is about to come home to roost: Up until nowadays one could count on the U.S. Treasury to meet its obligations, hence one could trust the Fed’s Note: See below how Uncle Shame Himself admits He – the federal government – is utterly, hopelessly bankrupt. —
*The Nitty-Gritty details:
Treasury’s loans to the Fed usually take the form of Treasury notes or bonds (or “bills”)
the Fed takes possession of, hence can sell into the market whenever it chooses. Not least because there is (almost) always demand for these Treasury obligations, the Fed is able
to count them as ASSETS on its balance sheet. But most important is the US Treasury
is obligated to redeem any such Treasury obligation at maturity.
The Fed then prints paper dollars each representing a tiny fragment of the Fed’s claims
on U.S. taxpayers (via the Treasury), hence providing something of value
anyone can exchange for goods and services.
While greenbacks are an obvious form of debt money, such “cash” is of minimal significance overall.
The vast majority of money is created by private sector lending, and ever remains within the lending/banking system, especially nowadays when almost all transactions are either electronic or checks, including credit card charges:
All such transactions just transfer funds from one bank account to another, hence the vast majority of money lent into the system remains within banks. – And thereby conveniently ever keeps the system overall pretty much in balance.
That is the crucial reality that ever keeps the Confiscation Scheme afloat:
The banking system overall remains in balance because the vast majority of money lent into existence remains in the banking system as deposits, in either a personal or some business or CorpoRape account.
Banks overall thus remain in balance between deposits and loans: the total amount of loans is backed or balanced by essentially the same amount of deposits nationwide.
Nitty-gritty lovers: See note at bottom how overnight lending backstopped by the Fed is the essential Secret Sauce ever keeping the entire banking system in balance. (including credit unions, S&L’s, etc.)
As the Bank of England* puts it: “the act of lending creates deposits.”
E.g: Whenever a bank lends, the recipient of the loan spends the money thus created, perhaps to purchase a new home: The seller likewise will use most or all of those proceeds to pay off any mortgage, make new purchases and/or to pay bills, or other creditors, and those recipients will also spend those receipts on their bills and creditors, or lend the funds to other borrowers who will spend the funds borrowed yet again, and so on, pretty much never-ending – especially nowadays when the effective savings rate is negative:
Essentially the entire amount a bank creates by making a loan ends up within and stays in banks, in various if not countless accounts.
*England’s central bank, comparable to US Federal Reserve
Since everyone knows a check will bounce if ones account can’t cover it, it’s rather mind-boggling to grasp how banks routinely lend funds they don’t have, in effect have an inexhaustible checking account that automagically stays in balance.
As the above example of funds advanced demonstrates: The simple reason is lending also generates spending (directly, indirectly, or both):
Even if the proceeds of a loan are just deposited into a savings account, the bank owning* that account will then loan almost if not all those funds to some other customer(s), or another bank.
What’s crucial to grasp is the vast majority of debt money ever remaining within the completely integrated, single nationwide banking system of monetary wealth means the system itself remains balanced overall: the nationwide total of loans and deposits ever remain equal (or close enough) – as long as most everyone trusts the system, that is:
One can thus understand the threat of bank runs when people lose trust in banks is THE threat banksters fear astronomically most:
Withdrawing significant levels of deposits out of banks as cash = bankrupt banks.
One thus understands why Cyprus imposed limits on cash withdrawals during its financial crisis some years ago.
(If a loan defaults, hence the balance is deducted from a bank’s total assets, the funds lent into existence still remain within the banking/monetary system, hence become available to lend to another borrower, thus restoring the system to balance. – The thoughtful reader will thus understand why a large enough surge in defaults can threaten to decimate a nation’s entire banking system, as occurred in 1930’s.)
*As this site’s PORTAL page reports, few know bank deposits are legally owned by the bank:
legally, a deposit account is a loan to the bank. Since the banking system remains unprecedentedly bankrupt, there’s much wailing and gnashing of teeth dead ahead when depositors discover both FDIC and Uncle Shame are also hopelessly bankrupt. more below
Not least because the wealthy are banks’ favorite, most cherished customers/debtors (see PS for why), it’s not surprising a debt money system continually concentrates wealth in ever fewer hands, as the last four decades of American history tragically demonstrate in spades:
The greatest middle class society of all time in 1971, when a large majority of Americans owned most of the nation’s wealth—otherwise unheard-of in world history— collapsed since then into one of if not the worst banana republic wealth and income distributions ever:
the 1% and up now own/control most everything.
It’s no coincidence 1971 is when the gold standard got Nixed, making US dollars nothing but pure-dee debt money for the first time ever.
Since 2008, household wealth for most has collapsed even faster: now half of all households have less than $11,000 of net worth on average, essentially nothing, according to the Federal Reserve.
And 1% now own or control more wealth than 95% altogether.
These plus many other horrific details are referenced on this site’s home/Portal page.
Here are the details how debt money is “a Scheme for the Confiscation of Wealth,” as young Dr. Greenspan himself described it,¹ an elegantly simple, blatantly obvious fleecing in plain sight, as colonists well understood, but almost no one nowadays has even an inkling about.
Greenspan also lauded gold as the sole “protector,” the only force
that “stands in the way of this insidious process.” – Click the above link to his most influential written work, “Gold and Economic Freedom,” to open it at this highlighted conclusion. –
Hence: Central banks and megabanks wage continual, global wars against gold in numerous ways.
As former Federal Reserve Chair Volcker put it: “Gold is Enemy No. 1.” more below
–Tragically for all, Greenspan was unable to resist temptation, sold out* to become the worst debt money “Maestro” ever. —
*or was forced
It’s hard for non-bankers to get their heads around the way bankers (including bank owners) view debt: as wealth.
Contrary to prevailing notions:
A bank is just a pile of debts – in essence. (Many ginormous from gorging on this century’s unprecedented borrowing/lending orgy):
Banks essentially are just repositories of obligations by individuals, businesses and governments to repay their debts to the bank. That’s why loans are listed on bank balance sheets as “assets” of the bank: a loan is a claim on the borrower’s assets – regardless whether any of those assets are listed as collateral in the loan’s written terms or not, hence:
Before bankruptcy laws established limits on how much of a borrower’s assets banks could pursue, it was not uncommon borrowers in default lost real property, including ones homestead, even if the bank held no mortgage on the property.
Again: from banksters’ point of view, a loan means they virtually own that much of the borrower, can claim that much of the borrower’s assets in case of default.
As described above: The more money banks create by lending it into existence, the more money there is for everyone to spend.
Since, like everyone else, banks – and their owners – want evermore wealth, they tend more to lend than not, thus ever creating ever more debt money it costs them essentially nothing to lend into existence.
Unlike most of us, banks consider themselves better off the more people owe them.
And bankers are paid more the more loan fees and interest income they generate.
Incomprehensible as it can seem to everyone else:
Wealth from the point of view of bankers and banks’ owners is what everyone else calls and experiences as debt.
Bankers work very hard to keep borrowers from noticing a loan in effect transfers wealth from the borrower to the lender. The lender in effect has a claim against ones assets, in effect owns that much of a borrower’s wealth.
If a loan is secured, it’s easier for the bank to claim ownership of the specified collateral, as with a home mortgage. But as many Subprime borrowers discovered, banks can often go after other non-secured assets if foreclosure does not pay back the entire loan balance.
Many borrowers only learn this truth the hard way when a lender repossesses property, a car or home, for example.
Others are astounded when a lender places a lien against their unencumbered property in attempting to recover what the property owner owes them. Any property requiring a title can become encumbered with such an “involuntary” lien, usually vehicles, boats, and/or real estate. Lenders can also go after bank and brokerage accounts, the latter via an attachment. Etc.
Borrowing in effect transfers that much of ones wealth to the lender: That much is obligated to the lender.
But lenders taking possession of ones wealth is not what Greenspan referred to as a “Scheme for the Confiscation of Wealth.”
He rather pointed to the far more nefarious process whereby lending in a debt money system ever transfers ever more wealth from the many to the few – automagically, virtually essentially without any effort by the few.
To grasp how debt money works this sleight of hand tragically few notice requires reflecting on debt money’s all-pervading role in commerce:
Banks lending ever more debt money into existence is the fundamental reason prices ever rise (in a pure debt money system):
As economists put it: Ever more money to spend on the same amount of goods and services drives prices higher. In other words, borrowing growing faster than available goods and services grow pushes demand/competition for those goods and services higher, thus driving prices upward:
All markets are driven by dynamics similar to an auction: the more buyers are wanting an item, the more they compete to acquire it, plus the more interest or bidding sellers see, the more money they can demand.
For example, in 1933 when FDR outlawed gold, one US dollar was a decent day’s wage. A loaf of bread cost just a few pennies.
Prices and wages had actually been stable at those levels since colonial times, well over a century!
Just as dollars have lost well over 99.5% of their purchasing power since FDR, especially after Nixon decreed dollars nothing but debt money:
Money continually loses value in a debt money system: There is almost no limit on how high debts can fly and soar, as the past century demonstrates like never before!:
In the US, price inflation soared in the 1970’s after Nixon decapitated the dollar’s peg to gold, then especially housing prices took off after Great Depression restraints on lending (Glass-Steagall) were repealed in 2000 (gains below reflect SubPrime peak), along with prices of consumables like gas and food:
click image for source
Dozens of nations suffered collapse of its national debt money system the past century, the German Weimar hyperinflation during 1920’s one if not the most infamous example.
There is little restraint how high prices can soar, thus ever shrinking the value of debt money, hence debts as well: the economic effort or actual wealth required to pay debts off thus also diminishes. Only when debt, hence prices rise so rapidly they raise alarm does a monetary system become threatened by loss of confidence.
– The main reason dollars have not collapsed to worthless (yet) is a unique privilege devastated nations granted the U.S. at the end of World War II to issue the world’s sole reserve currency. Then Uncle Sham broke his promise not to abuse the privilege, became a whirlpool sucking value out of every other country fast as it could. –
As this site demonstrates in detail, however, the rest of humanity has been fleeing dollars at an ever-accelerating rate, actually for decades. It won’t be long before all of humanity knows the dollar has been in its final death throes, begins witnessing its last gasps.
— Since the U.S. presently is way further out on a limb than any nation ever before, before continuing explaining the debt money scheme, the next two paragraphs relate a few ways it’s obvious things are at the breaking point, the Fed having to become ever more a dreaded Lender of Last Resort, a desperate ploy no national economy nor currency ever survived, dozens of corpses the past century alone:
For instance, the NY Times Editorial Board has sided with FDIC’s multi-$Trillion dispute with the Federal Reserve over megabank soundness, a wake-up call far too few Americans know how desperately they need: Wall Street remains at least as hopelessly leveraged over the moon as in 2008. Plus the Federal Reserve is multiple times, $Trillions more leveraged than ever before, and Uncle Shame is dozens more $Trillions in debt, accelerating deeper into hopeless debt addict oblivion every year.
Many more details on US’ most hopeless bankruptcy of all time are on this site’s
home/Portal page. Again, a succinct overview is :
its first few charts reveal by far the worst debt binge ever, both private and public sectors. —
The wealthy love a debt money system partly because they are maximally creditworthy, allowing them to borrow ever more the wealthier they become.
But they especially love how debt money ever loses value, thus ever depreciates and shrinks their debts effortlessly!
A debt money system is thus a magic wealth escalator ever increasing the prices of assets while shrinking the cost of debts relative to current prices, profits, and values.
(Although value is also influenced by overall economic conditions, including scarcities, lending is the primary influence on price levels in a debt money system, by far: e.g: US dollars collapsed well over 99% in value since 1971, by numerous measurements.)
Since the wealthy have maximal access to credit, a debt money system turns them into automagic asset/wealth vacuums: their net worth ever rises effortlessly due to their assets ever rising in price, while their debts simultaneously shrink in relative cost/value since debt obligations are a set amount each: dollars ever shrinking in value also shrink the value of outstanding loans.
Perpetually rising net worth thus makes the wealthy ever more creditworthy, ever able to keep leveraging up, thus able to keep acquiring ever more of everyone else’s assets – as long as one doesn’t get too careless, of course.
Debt money’s automagic wealth vacuum/escalator ever transferring ever more wealth from the many to few virtually effortlessly transformed the US from the greatest middle class society of all time four decades ago to now a typical banana republic income and wealth distribution with the 1% owning/controlling pretty much everything, as demonstrated at this link:
The debt money dragon began savaging the 99% especially after the dollar’s final tie to gold was Nixed in 1971, creating the first exclusively debt money system in U.S. history:
In 1971 a large majority of Americans owned a majority of all the country’s assets, an occurrence unique in all human history.
A typical worker owned most or all of his own home, plus his sole full-time salary supported a full-time homemaker, who typically supervised the children when not at school.
The drastic transformation of the last four decades is the worst wealth transfer of all time:
As stated above, the average net worth of half of American households is now less than $11,000 = virtually nothing.
When FDR declared gold money illegal in 1933, millions of Americans knew it was treason against the American Revolution. Scores of Congressmen fought that outrage to the Supreme Court. But by then the 0.01% and their bankster henchmen had taken over, including the Supreme Justices-Not!
1971 was the culmination of bankster Hamiltonians’ war against Jeffersonians, the core, most contentious battles of the Constitutional Convention. Those battles tragically ended in a compromise it took the wealthy and banksters almost two centuries to completely eradicate.
It’s no coincidence the US also became undemocratic after 1971, as Princeton and Northwestern Universities found by examining federal legislation since: the wishes of the 1% virtually always prevail over the majority of Americans, as also discussed on this site’s home/Portal page (also linked above).
The Debt Money Scheme confiscates wealth, transferring it from many to few:
Since there is minimal, virtually no restraint on debt money increasing, continual increases of ever more debt money chasing the far more constant supply of goods and services force prices to rise continually.
Rising prices automagically expand net wealth of the wealthy, making them ever more creditworthy, able to borrow ever more and thus acquire ever more of everyone else’s assets.
Anyone with basic math skills can thus readily understand how
Debt Money is a Scheme for the Confiscation of Wealth
ever transferring wealth/power from the many to the few.
Indeed, a few closely-held investment funds own/control most of Wall Street banks’ stocks, hence the wealthiest control the megabanks that dominate U.S. banking = dominate the entire nation – not least because their banks also own/control most Federal Reserve System stock, thereby dominating monetary policy.
The trustees of even small local banks are usually among if not the wealthiest in that locality.
Virtually no innovation nor change occurs without bank financing, hence banksters and especially their ultra-wealthy owners rule —
as endless present realities attest.. many crucial, little-known ones reported on this site’s Solution(s)? page providing an overview how the world’s ultra-wealthy are now pretty much in charge of the first-ever global serfdom, as Americans will learn excruciatingly far too late.
PS – Why Banks Mainly Lend to Those Who Don’t Need It
Banksters like lending more the wealthier the borrower not least because of bankruptcy laws: In most states one can only protect a limited amount of ones assets in bankruptcy. E.g: in California, the maximum amount of home equity protected from creditors is $175,000, usually much less.
Hence, the more assets and net wealth someone has, the less risk a bank has lending to them: the greater the percent of a loan the bank is likely to recover by seizing the borrower’s assets in case of default.
Banksters and the wealthy are closely entwined, share essentially the same interests of cornering as much wealth/power as possible. — As noted, the wealthiest dominate the banking system as a whole.
(That’s also why bank regulations restrict how much a bank can lend to its owners.)
PPS – Bank Deposits Are a LIABILITY to Banks,
hence The Main Bellwether Regulators Track
Just as loans a bank makes are accounted on its balance sheet as ASSETS, funds its customers deposit with the bank are an obligation the bank owes to customers, hence listed on the bank’s balance sheet among its LIABILITIES.
One can thus understand when a bank goes bankrupt, depositors are at risk of a haircut or worse, since their deposits are just part of the bank’s obligations, including any loans the bank owes its lenders, as well as any stocks and bonds it issued. Before the New Deal, there were no government programs guaranteeing bank deposits, hence it was not at all uncommon depositors lost some to all of their funds when a bank went bust.
While few bank customers pay any attention to its balance sheet, banks are generally created by wealthy business interests like real estate developers, major industries, and/or other financial institutions, etc, who put up the money to create the bank, hence own stock in the bank.
Since these wealthy own significant interest in the bank, they also tend to get the best terms on their deposits and loans, hence tend to deposit any excess funds for safekeeping with the bank(s) they own. (Let your imagination run wild how major owners enjoy bank perks of all sorts.)
One can thus understand regulators pay especially close attention to the ratio between a bank’s deposits and liabilities: If those with significant interest and/or ownership in a bank start to lose trust in its soundness, they will start withdrawing funds from it (especially if their deposits exceed amounts guaranteed by FDIC, etc.)
The Banking System’s Secret Sauce
Banksters’ Secret Sauce is an exceedingly dangerous two-edged sword:
While there are some restraints preventing a bank from lending willy-nilly without end to whomever, banksters’ Secret Sauce helps keep the cost to banks of lending much lower, thus helps encourage bubbles like the S&L Loan crisis of the 1980’s and this century’s SubPrime catastrophe = extremely intense wealth confiscation events.
Untold effort is expended spreading spin and smokescreens to obfuscate the Sauce’s secret, keep it misunderstood as possible – particularly by academics – especially because banksters* don’t want the public understanding how their confiscation Scheme, including bubbles, are tools of tyranny, ever transferring wealth from the many to the few.
*Bankster is the term deserved by all those in finance and government who well know
debt money is a wealth confiscation scheme (or cultivate exploitation in comparable ways).
Few to rare tellers and loan officers have such understanding,
and perhaps even executives of many smaller institutions as well.
Every sort of bank has to stay in balance, including central banks, but the way banks stay in balance is entirely different to how an individual or business balances its check book.
Here is how The Fed is crucial to keeping each bank in balance via its overnight lending facility, the Secret Sauce:
Banks needing more deposits to balance their loan portfolio borrow overnight from banks who have more deposits than loans, hence need more loans to balance their excess deposits. That’s how each bank is able to remain in balance, to avoid getting into the potentially catastrophic troubles that arise when either total deposits or total loans exceed the other too much:
Requiring banks to have balanced books at the end of each business day is the primary way federal regulators prevent bank runs and failures.*
One can thus understand why investors hang on the Fed’s monthly to bimonthly meetings when the Fed Governors set the “target rate” of interest banks pay on the overnight loans they need to stay in balance. The target rate is the single most important determinant of banks’ profits and how much they’re willing to lend:
The lower the target rate, the less it costs banks to borrow overnight to stay in balance. The higher the rate, the more interest banks will need to charge borrowers, hence discourage borrowing, whence discourage economic expansion dependent on borrowing.
Hence, while endless factors can and do influence interest rates, especially the Fed’s massive balance sheet allows it to be the 800-pound gorilla with by far the single greatest influence on credit conditions, worldwide:
Even more Nitty-gritty: The Fed’s target rate is nothing like interest rates banks advertise on loans and deposits. Rather is it an instruction to the Fed’s trading desks to intervene in interest rate = credit markets whenever necessary to shift rates closer to the target, either downward or upward. Since lending rates of every type influence each other, the Fed’s traders intervene in whatever credit segment drifts furthest, is most threatening to shift overnight rates the most. As the world’s single largest credit type, US Treasuries are the most common instrument Fed traders influence – by buying or selling Treasuries. (Enough buying drives prices up, hence rates down, sufficient selling drives prices down, rates up:
God only knows how many traders the Fed ever has on watch, nearly if not continually intervening 24/7.
Especially those who understand the Federal Reserve System is owned almost entirely by megabanks know the concept of free markets does not apply there – except those who understand “free” to mean markets where crooks run free and get off scott free.
*This sketch excludes some details, e.g, banks’ balance sheets are lots more complicated, but the essential point is overnight lending is what keeps all banks in balance on a daily basis.
¹ ↑In addition to deficit spending = excessive borrowing by governments, Greenspan’s essay concluding with his legendary statement describes several ways excessive debt money expansion, or monetary debasement, is harmful, including blaming the Great Depression on the Federal Reserve issuing excessive debt money, destroying its purchasing power.
His recent return to embracing the gold standard also speaks clearly.
In the 1960’s when Greenspan published his essay, there had never been anything like the unprecedented over-the-moon debt bubble that since destroyed the greatest middle class of all time, a consequence of economic fundamentals Greenspan described so well.
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