How the Fed Killed Us All

Here’s the most concise explanation I’ve ever read on how Central Banks (the Federal Reserve in the US) have made this huge world-wide economic mess. From Alf Field:

Briefly, the fractional reserve system requires approximately 10% of new deposits to be lodged with the Federal Reserve or Central Bank.

 

Thus if a new deposit of say $1.0 million of fresh money arrives in the banking system, the bank receiving the deposit must put $100,000 with the central bank and can loan the balance of $900,000. When that loan arrives as a deposit with another bank, $90,000 must be placed with the central bank and $810,000 can be loaned out. That in turn will arrive as a deposit elsewhere and $81,000 must be placed with the central bank and $729,000 can be loaned out, and so on. Finally when all these iterations are complete, the central bank ends up with $1.0 million as deposits from the banks that have made loans of  about $9.0 million.

 

At this point new loans can only be made from profits generated within the economy. This is important as the banking system will have reached a period of stability which will remain until a fresh deposit of newly created money appears in the system from somewhere. That new money will allow the banking system to generate loans of approximately 9 times the amount of new money.

 

ruhere2bailrlend 

What happens if there is a money tap open somewhere in the system and each day a large dollop of newly created money enters the system? Very soon the banks will be awash with deposits and desperately seeking new secure loans.

 

As lions kill instinctively in order to survive, bankers make loans instinctively in order to survive. Eventually in these circumstances of excess deposits, lending standards deteriorate and new loans are made to less credit worthy borrowers. In time, anyone with a good story gets a loan.

 

It is this desperate search for secure new loans by the banking systems of the world that is the primary cancer referred to earlier in the medical analogy. It allowed Wall Street to develop racy new products which were gobbled up by banks around the world in the belief that they were secure investments.

 

  

end-the-fed-with-ron-paulThis is what actually happened in the real world. There was an open tap pouring large dollops of newly created money into the world banking systems over many years that created the insatiable appetite for new banking loans and investments.

 

What is important to understand is that without this insatiable demand for secure loans and investment by banks, it would not have been possible for all the other irregularities to have taken place. Credit standards would have remained robust and the banks would have avoided the bulk of the toxic waste that they got involved with.

 

What was the money tap that was left running? It is a flaw in the international monetary system which allows the USA to pay for its trade deficit using newly created US Dollars. This has been going on for two decades but has mushroomed in recent years.

 

Ten years ago, the US trade deficit was of the order of $100 billion per annum. This number grew steadily until a couple of years ago it was running at $800 billion per annum. An injection of $800 billion into the world’s banking system could accommodate new loans of nine times that amount, or $7.2 trillion in a single year!
 

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Recently the US trade deficit has been averaging $700 billion per annum, allowing new loans of the order of $6.3 trillion per annum to possibly be created. These numbers are in addition to other sources of new money which individual countries injected into their local monetary systems to stimulate their economies.

 

The simple fact is that the world’s banks were awash with deposits looking for anything that resembled a reasonable loan or investment. Wall Street created the products required to meet that demand, resulting in the huge debt bubble that recently came to an end. In addition, banks (prompted by the large availability of new deposits) made many unwise loans across national borders which are now creating problems in countries in Eastern Europe and South America.

 

 

Alf Field

13 November 2008. [more]

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11 Responses

  1. f * f * a says this site melt.-
    down 20 eleven is…abandonded? see
    backward. –
    ation jul 2 3 ’10

  2. Scott, wouldn’t it be something if we could establish and promote a legal fund through your site or maybe David Morgan’s that would offer a reward to any individual or individuals that would come forward and expose this obvious Comex crime in progress. We could get this out to all the big PM sites and ask for donations to a registered account. No one to date has offered this idea so far, but I think it could work, as there are many people interested in the outcome. There has to be a few underlings working at the Fed, Comex, etc. that are aware of the crime but have not considered coming forward and testifying with info that could really bust this crime in progress.

  3. Robert:

    Maybe he did her bidding?

  4. I think the Queen should be locked in the Tower of London, and placed on a diet of bread and water until she provides a public explanation as to why she knighted Alan Greenspan

  5. […] How the Fed Killed Us All  **new**  – Attack of COMEX Gold & Silver  **new**  – Pay Off Mortgage with Inflated $?  […]

  6. […] How the Fed Killed Us All In addition, banks (prompted by the large availability of new deposits) made many unwise loans across national borders which are now creating problems in countries in Eastern Europe and South America. Alf Field. 13 November 2008. [more] […]

  7. equtiel: AMEN!
    BP: thanks for reading!

  8. Scott – As someone (me) just recently starting to study how the money system works and trying to understand the why and wherefore of all the recent bailouts, this article is most heplful; thanks for passing along your wisdom in plain english.

  9. So, let’s eliminate the FED and the Regional Banks and withdraw the authority to the US Treasury.

    • Thats what gets presidents assassinated! Start sniping Rothschilds. Jail and man rape the high level cronies (Rockefeller)

  10. […] How the Fed Killed Us All  **new**  – Attack of COMEX Gold & Silver  **new**  – Pay Off Mortgage with Inflated $?  […]

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