How the World Turns:
The Federal Reserve System, Fiat Money, & the American Taxpayer
In Parts 1 and 2 of this series, Our Monetary System is Changing, we covered very important aspects of our money. I highly recommend reading Parts1 and 2 of this engaging series. To recap,
Part 1: Money is an agreement.
Part 2: Our money is fiat money created by the private corporation, the Federal Reserve central bank system, using fractional reserve lending through the commercial banking system we use.
Now, we learn how the American taxpayer plays into to this monetary system via The Federal Reserve central bank system and fiat money.
The Federal Reserve central bank is a private corporation of bankers. The Federal Reserve central bank works with the Government, so you will read that the Federal Reserve is a private-public partnership.
The Federal Reserve will also say the Federal Reserve does not “earn income” which is true, but, there is a lot of wealth created that is “shared” in various distribution forms that are obliquely glossed over with language so as to disguise that there is immense wealth created for a “few” in this system.
Alan Greenspan, Former Chairman (1987 -2006) of the Federal Reserve central bank system, a private corporation, said this on The NewsHour with Jim Lehrer (18 September 2007), “Alan Greenspan Interview with Jim Lehrer”
“Well, first of all, the Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don‘t, frankly, matter. And I’ve had very good relationships with presidents.”
This quote is often used ending after the first sentence. I find it more appropriate to use the quote in its entirety as cited above. Definitely read through more Alan Greenspan quotes. It can be very enlightening to see how his opinions change over time!
Where does our money come from?
The money is printed and issued by the Federal Reserve central bank at the request of the Government and then “created out of thin air” 9 times over through bank fractional reserve lending, lending money to people: mortgages, auto loans, credit cards, and other types of personal loans.
Again, I recommend reading The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin specifically Chapter 9 “The Secret Science” and Chapter 10 “The Mandrake Mechanism“ for all the evidence you need to understand this process completely.
As you learned in Part 2, fiat money has no value other than a stated value with the full faith and credit of the United States government. Fractional reserve lending as was explained in Part 2 of this series, is money created as debt.
Fractional reserve lending means our money is created as debt and in the simplest everyday language means that only a tiny fraction of the money that people deposit is “reserved” (held as reserves) and the bulk of the money deposited, is lent out via loans (mortgages, auto, credit cards, and other personal loans with interest attached). This interest is profit for the bank. Keep in mind, this is how our money is created; it is created as debt that we pay interest on. The money is created out of “thin air,” a piece of paper, brought to life as money through the “loan agreement.” No bank ever has enough money to pay out to depositors during a crash/bank run and this is
New Name, Bigger Problem
There is a lot of talk of “solving this problem” if we go to a Federal Reserve central CBDC - Central Bank Digital Currency.
This would be a fiat money CBDC. Fiat is fiat: no value to the money. This not only would not solve the problems of fiat currency, a digital fiat currency created in a fractional reserve banking system controlled by a private corporation, would create a bigger problem: the Government can control and surveil you through the CBDC itself and turn your money off with a click. You think it is your money and you control and use it as you want? A Federal Reserve System central bank CBDC would be the end of you having money that you control that you choose what you will do with your money. I recommend not getting lulled into the giddiness of the idea that technology solves everything.
We will move to a digital currency in a digital economy, this is coming. It won’t be a Federal Reserve System, a private corporation that we will use. The Federal Reserve System, as private corporation of bankers, is the root of the big problem. More on this in the upcoming editions in the series.
Government debt is created just as described above. It is the American taxpayer who pays the interest on this debt. And at $34 trillion dollars of debt, this equates to $1 trillion of our tax dollars in interest payments to the Federal Reserve. If “we” taxpayers do not make these interest payments in the form of taxes to the Federal government, the Government defaults.
The Federal Reserve creates money as debt. Every US Dollar you have in your possession as income, savings, and investments is debt you pay interest on. Every US Dollar of debt you have, such as mortgages, auto loans, credit cards, other types of loans is debt you owe interest on, and you are using earned income in which 50-60% (total taxes when you add it all up) of your earned income is sent to the Government as taxes. This leaves you with 40%-50% of your earned income as money you use for lifestyle, savings, investments and managing your personal debt… creating the life you want.
What does this scheme mean to you?
How do you think this impacts your capacity to save, invest and pay off your personal debt only having 40%-50% of your earnings to use? Paying personal debt: mortgages, auto loans, credit cards and other personal loans, you are using US dollars you paid interest on through taxes and you are paying the interest rates attached to the loans. This is our monetary system. This is how the Federal Reserve central bank system works for you. This does not work well for the American taxpayer. I don’t have a single client who likes this system. This monetary system works very well for the Federal Reserve, a private corporation of bankers, and the Government. This pathway to funding the Government is a pathway to not being accountable to the taxpayer for Government overspending. It is a process of obscure language that is purposely not easy to understand. So, the American taxpayer doesn’t understand this or realize the impact this has on their money.
The United States government takes 50-60% of our income (in total through various taxes) to cover Government expenditures and overspends more than our tax revenue receipts to the level of $34 trillion dollars of debt “today.” The American Taxpayer—You—pays the interest on this $34 trillion dollars of debt which is $1 trillion of the US government’s budget.
Next Edition:
Part 4: How the World Turns; American Taxpayer Money at Work Around the World. Who Profits?
Your thoughts and questions are always welcome!
MSM Advisory, LLC. is a professional practice designed to offer you the customized financial planning advice, strategies and implementation to make your dreams come true. Money matters and this is what the money is for… your vision for your life coming to life… for you.
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