Economics Questions

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Sat, 04 Jul 2009 18:44:21 GMT

Well, I did my best to rally the troops and educate the masses. The essence of the speach is attached below.

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Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Fri, 03 Jul 2009 00:36:35 GMT

Thanks. That is a good link. It reaffirms that I understand what the FOMC does fairly well.

You know, even though I'm interested in this topic my eyes still start to glaze over after a while.

One thing, however, was very blaring to me. They pointed out how they increased the money supply, but they never pointed out that the new money was created out of thin air. Now I wonder why they would leave that part out? I wouldn't have noticed it if I hadn't read several of Rothbard's books and The Creature from Jekyll Island first. They just sort of omit that part while openly saying that they create the money. Create it from what? They create the money they lend to us at interest based on a ratio of somebody else's money. Out of thin air they create something that we put up real collateral to borrow. What a racket!

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

bearing01 — Thu, 02 Jul 2009 23:09:03 GMT

You may find this free book interesting

http://www.rayservers.com/images/ModernMoneyMechanics.pdf

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Thu, 02 Jul 2009 20:53:01 GMT

Bank runs are what they can do it about it. That is the second half of my speach. I don't think there are any papers that would allow someone to advocate bank runs in their editorial pages.

I hope it does not get too technical that it loses them. I think the PowerPoint slides in the first post will clear that up for them. Hopefully it will lead to invitations to speak on it more and more. Who knows? Maybe I could quit my day job? But I'm not counting on that.

Thanks for the feedback!

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

wilderness — Thu, 02 Jul 2009 17:20:43 GMT

Anything is worth the try. I think it gets a bit technical as you progress through the editorial piece, but I can't say education is wrong. I loved the beginning with the government is a thief and the Federal Reserves role in this. The beginning is very persuasive. As you go on it's more of an effort of facts, which again how can anybody really say facts hurt. Of course some people like to think of their audience, but I don't think we can convince anybody - they have to do that themselves aka free-will. So you could try. It wouldn't hurt. I think seeing the word "Federal Reserve" besides the words 'stealing our hard earned money' would grab the attention of anybody. I think they will wonder what they can do about it. But that's what everybody thinks even if they do have solutions and are making strides in applying what needs to be done. So I guess I'm saying sometimes these efforts become "motivational speeches" trying to win the hearts and minds of people, but I wouldn't let that be the case. Do what you will, experiment, and see what happens.

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Harry Felker — Thu, 02 Jul 2009 17:10:09 GMT

Steven Faseler:

I think it will get posted in the local paper; I don't know about the larger regional papers.

There's a lot of latent anger in the general populace; they just need someone to channel it in the right direction. I'm going to propose depositors' bank runs on TARP banks on July 4th. A bank run by using checks to open new accounts in non-TARP banks may catch on. I like even better the idea of a bank run against TARP banks by using PayPal, but not everybody uses PayPal. Almost everybody has a check book. They can use their checkbooks to move their money from TARP banks to non-TARP banks. The large banks are not too big to fail, and if Congress wants to raise the ire of the taxpayers then the taxpayers can force the TARP banks to fail. All they need is for someone to point it out to them. They're ready for revenge.

Good luck with that, my bank already is a non-Tarp, it is attatched to my job....

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Thu, 02 Jul 2009 16:45:23 GMT

I think it will get posted in the local paper; I don't know about the larger regional papers.

There's a lot of latent anger in the general populace; they just need someone to channel it in the right direction. I'm going to propose depositors' bank runs on TARP banks on July 4th. A bank run by using checks to open new accounts in non-TARP banks may catch on. I like even better the idea of a bank run against TARP banks by using PayPal, but not everybody uses PayPal. Almost everybody has a check book. They can use their checkbooks to move their money from TARP banks to non-TARP banks. The large banks are not too big to fail, and if Congress wants to raise the ire of the taxpayers then the taxpayers can force the TARP banks to fail. All they need is for someone to point it out to them. They're ready for revenge.

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Harry Felker — Thu, 02 Jul 2009 12:27:27 GMT

Steven Faseler:
I found the answer here: http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation and I am correct. It's nice to have independent verification. Their charts for increase in money supply are very similar to mine. I know I'm not the first, but I'm about to embark on an education campaign about the banks.

Since you are not going to mention MJ's Death and how it might be overdose like Elvis, you are probably not going to get much feedback "if" the editorial ever sees posting....

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Thu, 02 Jul 2009 12:20:38 GMT

I found the answer here: http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation and I am correct. It's nice to have independent verification. Their charts for increase in money supply are very similar to mine. I know I'm not the first, but I'm about to embark on an education campaign about the banks.

Re: Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Thu, 02 Jul 2009 00:37:09 GMT

I was hoping someone would comment by now.

I've pasted in an editorial that I want to try to submit to local newspapers. I welcome your thoughts. I plan to present a speach similar to the editorial on July 4th at the county courthouse.

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Federal Government Steals Through Inflation:

Federal Reserve System is Accomplice

My fellow Americans angry about bailouts, stimulus packages, and runaway government spending, I have spent the majority of my free time since last October studying the banking system. I was determined to discover why Congress, when the chips were down, sided with the banks instead of the taxpayers. I am firmly convinced that we will not succeed in curtailing government spending without dismantling the Federal Reserve System, for it is the very entity by which Congress creates the money needed to fund whatever the politicians in Washington can dream up.

Most of us are hard working decent people that provide for the needs of our families. By the sweat of our brows we place food on our tables, clothe our families, and put a roof over our heads. We also pay our bills, pay our taxes, and try our best in the midst of all this to set a little aside for our old age. We place money in our savings accounts and certificates of deposit thinking these are safe investments, but there has been a thief at work. Even with interest, the money that you put into your accounts is worth more than the money you will get out of them. You may have more money, but you have less purchasing power. The thief is the federal government. He has stolen your purchasing power to fund government programs. His weapon of choice is inflation, and his accomplice is the Federal Reserve System.

Most of us know the Federal Reserve System sets interest rates and controls the money supply. We fairly well understand the interest rate process; it is relatively transparent. What is less clear is how the Federal Reserve System controls the money supply. This process is obscured with smoke and mirrors and presented as somewhat of a mystery. I am convinced that this is intentional. They don’t want us to understand it because they know if we understood it we wouldn’t stand for it. There are three ways the Fed regulates money supply – setting interest rates, setting reserve requirements, and through the Federal Open Market Committee (FOMC). By far its most common tool is the FOMC. When the government decides it needs more money, it sells treasury bonds. When most of us purchase a treasury bond we have to have the money in the bank before we can write the check to purchase the bond, but when the FOMC purchases a bond something very different takes place. When the FOMC purchases the bond it creates the money for the purchase at the instant it writes the check. I told you the truth was stranger than fiction. The Federal Reserve System creates the money from the clear blue sky to purchase the bond that we have to pay back with interest! But that’s just the beginning of the insult; it is only 1/10 of the story.

America operates on a 10% fractional reserve banking system. That means that the banks may retain as little as 10% of their deposits on hand and may loan the rest of the deposits out with interest. That’s right, they double commit the money. They get away with this because they know in the normal course of business that as customer A is taking $1,000 out of the bank customer B is putting $1,000 into the bank. So what happens to the new money the FOMC has created to purchase the treasury bond that we must pay back with interest? It is deposited into the government’s checking account, and the government starts writing checks on it. These checks are then deposited into commercial bank accounts, where 10% of them are classified as reserves and 90% of them are used as the basis for making new loans. In the first lending cycle the money supply has been increased by 1 + 0.9 = 1.9 times the original FOMC bond purchase. Then the cycle repeats itself. The new borrowers didn’t borrow the money to leave it in the banks, so they write checks. These checks are deposited into other bank accounts where 10% of them must be retained as reserves and the other 90% is available for making loans. Now the increase in the money supply is 1.9 + 0.9*0.9 = 2.71 times the original bond purchase. The cycle repeats ad infinitum with the final result being that the banks, through fractional reserve banking, can increase the money supply by nine times the amount of the initial bond purchase! The total increase in the money supply will be 10 times the amount of the initial bond purchase. The FOMC can also contract the money supply by running this pattern in reverse. To contract the money supply the FOMC sells treasury bonds on the open market. Since banks make money by lending money, it should be no surprise that the Fed rarely contracts the money supply. What does all this additional money in circulation do? The Law of Supply and Demand is a natural law. There is now an increased amount of money in the system chasing after a relatively unchanged volume of goods and services. Therefore each dollar decreases in purchasing power, including the dollars in your savings accounts and CDs. The federal government has stolen your purchasing power for federal projects without raising your taxes directly. The banks have made money in the process. Both the banks and the politicians benefit from the system, and that is why, when the chips were down, the politicians bailed out the banks over the protests of the taxpayers.

Don’t just accept my word for these things. Begin your own education at http://www.mises.org/story/3480 .

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Increasing the Money Supply through Open Market Committee and Fractional Reserve Banking

Steven Faseler — Wed, 01 Jul 2009 01:32:48 GMT

I've been studying up on banks and banking since the TARP bailout. Please take a look at this PowerPoint Presentation and let me know if I've got things right. I think I do, but I thought I would bring it to the experts for critique.

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And if I have got it right, please feel free to copy and distribute widely.