What is our current money?
Let's recap, shall we.....
Let's recap, shall we.....
Within the U.S. there is a debt free money already available that circumvents bank lending, it's called "legal tender". Legal tender (public money*1) is not borrowed, loaned or spent into circulation and the only legal way to get it, is by your demonstrated productivity and by demand for the medium.
Another interesting thing, neither the Fed or the banks possess the legal authority to create money, and they don't. What they do create is asset backed, debt based private credit, not a legal tender.
You see, ours is a Legal Tender Monetary System. This means that our money is not defined by Ludwig von Mises, John Maynard Keynes, Murray Rothbard, Milton Friedman, Joseph Salerno, G. Edward Griffin, Paul Krugman, Mike Maloney, Peter Schiff, Tom Woods, Ron Paul or any other economist or talking head. Nor is it defined by Austrian Economics, Keynesian Economics, Monetarist Economics, Capitalist Economics, Socialist Economics, Modern Monetary Theory, the Federal Reserve, the U.S. Banking system, conventional wisdoms, esoteric blather or what people may use. It means our money is defined by law. And nowhere in law does it designate or even acknowledge Fed and bank generated asset backed, debt based private credit as being a legal tender, or money, or currency, or a medium of exchange, it is 100% private issue, Bank Debt, even when it comes from the Fed.
The legal tender (public money) in use today is provided as a duty, an obligation of the U.S.G., born from the outlawing and confiscation of gold as money back in 1933. People with and without bank accounts, turned in their gold property and received the legal tender as replacement property. The legal tender system today is an extension of that time. That time has obscured the legal tender's gold origins, existing as the people's property first, makes it no less our property in the present, and the banking system's legal obligation to provide either upon demand or over time, the fruits of our labor as represented by those deposit accounts, our legal tender property.
The legal tender (Federal Reserve notes, U.S. notes and coins) is the official currency of the United States, it is what the U.S.G. owes in payment of its debts and it is what the banks owe to their depositors. Fractional reserve banking allows banks to generate credit (a non-monetary unit) in excess of the legal tender held as reserves. The reason that the credit is a non-monetary unit is that it fails to meet any of the qualifying aspects of a money, it has no physical presence so it's not a medium, it doesn't store or transfer value, it's a marker of debt, and it requires an intermediary for its use and continued existence. The only reason private credit is accepted is the underlying belief that it represents the transfer and payment of actual legal tender money and that, the legal tender is available upon demand. In other words, it is the legal tender that is being utilized 'in absentia' by people in commerce, not the debt obligations of the banks.
People are confusing a means of payment, the transfer of a debt obligation (credit), for the medium of exchange, what is owed as payment (an asset). By legal definition United States coins and currency, including Federal reserve notes, are legal tender money, a medium of exchange by law. Checks as well as debit cards, credit cards, money orders, etc., are a means of payment, referred to as a generally accepted (institutional) arrangement or method that facilitates delivery of money from one to another. Payment has not been made unless or until actual money proper has changed hands. All credit is debt outstanding.
All you’re doing when you use a debit/credit card (private bank credit) to make a purchase is, transferring your obligation to pay the vendor, to the bank, payment has yet to be made. The bank deducts the amount from its debt to you, as represented by your account with them, and adds that amount to the debt it owes to the vendor, as represented by his account with the bank. There was no money or currency of any type, digital, electronic or otherwise, used or exchanged in that transaction, just a transfer of an obligation to pay, which has yet to be met.
The notion that we’re using ‘digital money’ or ‘digital currency’ or ‘digital dollars’ or 'credit dollars' or 'credit money' (an oxymoron) as a medium of exchange is nothing more than a trick of the mind, a figment of our overactive imaginations, a deception, it’s how we rationalize the transaction, and it's how the banksters get away with stealing our labor and wealth.
The "Money Multiplier" theory, is pure fiction.
The Bank of England Corrects a Widespread Myth
Does the Money Multiplier Exist?
“The role of reserves and money in macroeconomics has a long history. Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons. First, when money is measured as M2, only a small portion of it is reservable and thus only a small portion is linked to the level of reserve balances the Fed provides through open market operations. Second, except for a brief period in the early 1980s, the Fed has traditionally aimed to control the federal funds rate rather than the quantity of reserves. Third, reserve balances are not identical to required reserves, and the federal funds rate is the interest rate in the market for all reserve balances, not just required reserves. Reserve balances are supplied elastically at the target funds rate. Finally, reservable liabilities fund only a small fraction of bank lending and the evidence suggests that they are not the marginal source data for the most liquid and well-capitalized banks. Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected. Specifically, our results indicate that bank loan supply does not respond to changes in monetary policy through a bank lending channel, no matter how we group the banks."
Here's a good explanation on how pseudo-loans are actually created.
Banks do not loan money.
Basics of Banking: Loans Create a Lot More Than Deposits
Banks are not intermediaries between borrowers and savers, they originate pseudo-loans as deposits, irrespective of credited savings accounts or current reserves held.
Banks do not loan money.
Working Paper No. 529: Banks are not intermediaries of loanable funds
Legal tender money (cash) is not borrowed or loaned into circulation.
Banks do not loan money.
How Currency Gets into Circulation
Applicable Laws and Information.
Federal Reserve Act, Section 16
Legal Tender Status
Legal tender Law
Now, we can observe in the Treasury's Legal Tender Status, (a brief synopsis of the Federal Reserve Act) that the Fed must pay for the production of FRN notes, and they must post collateral of equal value to the notes it issues into circulation. (The Fed assets used as the collateral mentioned, have changed to Mortgage Backed Securities and Treasuries.) Also noteworthy is that member banks must buy the notes at face value from the Fed by drawing down their accounts with the Fed and that, Federal Reserve notes represent a first lien on all the assets of the Federal Reserve banks and on the collateral specifically held against them.
Taking that into consideration along with congress's right to take possession of the notes and collateral upon the dissolution of the Fed, we can infer that, the Fed does not own the legal tender Federal Reserve notes. Combine that with the New York Fed's explanation of how FRNs get into circulation, we can also infer that FRNs are neither borrowed, loaned or spent into circulation.
From this, we can objectively conclude that Federal Reserve notes are a debt free legal tender currency (public money), issued into circulation through the Fed and the banking system, in compliance with their legal obligation to supply that money property, as represented by the credited deposit accounts, to the account holders upon their demand.
As I cannot prove a negative, the next three assertions require a little bit of effort, they require disproving.
1) There is no law anywhere that grants to the Federal Reserve or the banking system the authority to create money, and they don't.
2) There is no law anywhere that designates or acknowledges the debt based credit generated by the Fed or the banking system as being a legal tender, or money, or currency, or even a medium of exchange.
3) The only legal validity given to the debt based credit, is held by the debts incurred with its use.
If the banking system collapsed tomorrow and all debt based credit !POOF!ed out of existence, all debts will still be valid and collectible even though the debt based credit used to create and service them, no longer exists. See: 1930's Great Depression. 2007-10 Credit Collapse.
The takeaway from all of this should be the realization that, there are two Federal Reserve administered systems in operation and running concurrently within the U.S.:
1) The legal tender monetary system. - Implemented by U.S. Law.
2) The Fed and Banks' asset backed, debt based private credit system. - Implemented by Rote Hearsay.
Currently, there is only $1.45-Trillion in U.S. legal tender money in circulation around the globe, with about $280-Billion of that in circulation within the U.S., all the rest is Fed and bankster generated asset backed, debt based credit, not money.
Note: The U.S.G. is under no legal obligation to make good on Fed and bankster generated debt based credit. They proved that point in the 1930's and again in 2008, so the notion that the U.S.G. will simply print to cover, is erroneous.
Note: *1Public Money: money issued into circulation by a government or its agent and used in daily commerce by the public; legal tender is public money.
To Be Continued......