MONEY Part II

MONEY

The Big Lie

Destroying The Narrative

"Do not be alarmed by simplification,

complexity is often a device for claiming sophistication,

or for evading simple truths." 

John Kenneth Galbraith

"Credit dollars are a debt generated currency
that is denominated by a unit of account.

Unlike money, credit itself cannot act as a unit of account. 

However, many forms of credit can readily act as a medium of exchange. 

As such, various forms of credit are frequently referred to as money

 and are included in estimates of the money supply."

Board of Governors, Federal Reserve
(You Believe Ergo We Affirm Your Beliefs, Regardless Of Fact)

Banking Is Government Sanctioned
ORGANIZED CRIME

Money.

In spite of the instilled beliefs and ongoing gaslighting to the contrary, money is still cash by US law 31 USC 5103, which designates 4 paper notes a US legal tender money.  3 of those notes are no longer produced or in circulation leaving 1, Federal Reserve Notes (FRNs).  FRNs, along with US minted coin, constitutes the official legal tender currency of the United States.  If it's not FRNs and US coin, it is not US money.   There is no other money in use within the US that is designated or recognized as such in US law.

Federal Reserve notes are a debt-free US legal tender money/currency produced and initially owned by the US government.  It is issued through the Federal Reserve banking system for the express purpose of supplying depositor demand for the monetary medium wereupon, it becomes the property of the people in legal possession of the notes.   It is against the law (12 USC 411) for the Federal Reserve to use US legal tender notes in any of its market operations or for any other purpose whatsoever.   Federal Reserve notes represent a first lien on all the assets of the Federal Reserve banks and on the collateral specifically held against them.

Putting it all together.

I thought I would explain in simple and concise terms what all of my previous arguments explaining the money means in the real world and the real consequences that are always the same each time the bankster's debt posing as 'our money' blows up in our faces, yet again, as it did in the 1930s and in 2008 when bankster asset-backed, debt-based credit !POOF!ed out of existence in a cascading collapse, bankrupting entire nations and impoverishing 10s of millions of people who had bank 'deposit accounts' full of empty promises. 

Deposit Accounts

Bank deposit accounts are nothing more than bank-managed records of legal claims held by account holders against the legal tender money that is supposed/assumed to be in the bank's vault.  That's why deposit accounts are categorized as liabilities of the banks, why account holders are designated as "the creditor" and banks are designated as "the debtor" in all deposit account contracts, it's why the interbank settlements system exists and why the FDIC was created.  A deposit account represents the account holder's legal claim to US legal tender money, ergo deposit accounts cannot be the money the banks owe.  Deposit Accounts Are Bank Liabilities, Not Money.   (But the 'theory', the BoE and the Fed says....)

Bank 'Loans'

Banks do not ‘loan’ from deposits (bank liabilities). Banks do not ‘loan’ from reserves (assets). Banks do not ‘loan’ money, period. There is no such thing as a ‘supply of loanable funds’. There is no such thing as a ‘money multiplier'.  There is no such thing as 'high power money'.  There is no such thing as 'broad money'.  There is no such thing as a 'digital dollar' or a 'digital FRN'.  The Federal Reserve does not create reserves.  The Federal Reserve does not monetize USG debt.  All of the above are just theoretical fictions that have no basis in fact or law.  The Federal Reserve has no legal authority to create money. The banks have no legal authority to create money. The debt-based credit generated by the Fed and the banks is not money.  Crediting deposit accounts with the amounts does not add a single penny's worth of money to the actual US money supply.   (But the 'theory', and the Fed says....)

See: Money (or the lack thereof)

Fortunately for us, Ludwig von Mises, of Austrian Economics fame, wrote a chapter in his book "The Theory of Money and Credit" that clears up any confusion that may linger from misinterpretations being read into his work.

2. Fiduciary Media and the Clearing System

Exchanges made with the help of money can also be settled in part by offsetting if claims are transferred within a group until claims and counterclaims come into being between the same persons, these being then canceled against each other, or until the claims are acquired by the debtors themselves and so extinguished. In interlocal and international dealing in bills, which has been developed in recent years by the addition of the use of checks and in other ways which have not fundamentally changed its nature, the same sort of thing is carried out on an enormous scale. And here again credit increases in a quite extraordinary fashion the number of cases in which such offsetting is feasible.3 In all these cases we have an exchange made with the help of money which is nevertheless transacted without the actual use of money or money substitutes simply by means of a process of offsetting between the parties. Money in these cases is still a medium of exchange, but its employment in this capacity is independent of its physical existence. Use is made of money, but not physical use of actually existing money or money substitutes. Money which is not present performs an economic function; it has its effect solely by reason of the possibility of its being able to be present.

The reduction of the demand for money in the broader sense which is brought about by the use of offsetting processes for settling exchanges made with the help of money, without affecting the function performed by money as a medium of exchange, is based upon the reciprocal cancellation of claims to money. The use of money is avoided because claims to money are transferred instead of actual money. This process is continued until claim and debt come together, until creditor and debtor are united in the same person. Then the claim to money is extinguished, since nobody can be his own creditor or his own debtor.4 The same result may be reached at an earlier stage by reciprocal cancellation, that is by the liquidation of counterclaims by a process of offsetting.5 In either case the claim to money ceases to exist, and then, and not until then, is the act of exchange which gave birth to the claim finally completed. 

That's your "deposit money" and how it works.  In other words, you're using a line of the bank's credit in the amount of your deposit account, Not A US Money/Currency or a money of any type, it's just banks crediting and debiting user accounts in the amounts, shuffling their deposit liabilities between account holders.

Thanks to electronic banking, 100% of all bank-mediated transactions, to include debit/credit card use, direct deposits, and bank 'loans', are conducted via the bank offsetting process (in near real-time) where no money or money substitutes are used or exchanged. Deposit accounts are merely a bank-managed record of that process, which are being credited and debited accordingly. Because people were gaslighted and propagandized into believing they're using money (fictional digital dollars) where no money is used or exists, the banks get away with it.

It's the false belief that deposit accounts are money promulgated by banksters and "economists" that has gotten the banking system to the profoundly bankrupt condition it's in today.  The banking system's ability to generate credited deposits as loans based upon the value of the assets tendered as collateral affording the borrower the 'liquidity' they want or need, without regard for actual money held, has resulted in 6 corporations owning or controlling 90% of all news media outlets, and this:

That's what you get when you can generate credit based upon asset values that are established by the credit received, without regard for any actual cash money held.  In other words, this was all created without the use of money.  The entire system, from the USG, to Wall Street, to Main Street, Blackrock, Vanguard, Cargill, State Street, the WEF, Open Society, the UN, the WHO, and the Bilderberg group literally runs on the Full Faith and Credit of the administering commercial banks.

If not for the fraudulent practices of the Fed and banks, aided and abetted by a complicit Congress and explained away by dumbass 'economists', none of that tyrannical corporate structure, or Federal Government structure for that matter, would exist.  And all of this is being done in bank debt, administered as lines of credit, denominated in the prevailing monetary medium in ever-shrinking use.

One of the most successful gaslighting/propaganda campaigns ever perpetrated in all of human history has been convincing entire populations that the banks' debt to them is their incorporeal money.  And to think, we are here today in this financialized nightmare all because of that 19th-century perception-based, theoretical fiction, and farcical gaslighting lie "bank deposit liabilities are money".  Making the bank's debt to you, your money.

I'm reminded of a quote from Henry Ford: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Well, judging from the lack of reaction from the 10's of thousands who've visited this site, I would say Mr. Ford's assessment is wrong.  I think that people of the nation when told about our banking and monetary system would just stare at you blankly for a moment, then turn around, walk off, and go back to doing whatever they were doing in the exact same way they were doing it before the system was explained to them.  And rightly so because it's just too big to comprehend, the theft so broad and complete, and there is no recourse or remedy for this scale of fraud that the banking systems have perpetrated against the entire world.  I take that back, history provides us with fitting examples of recourse to those who sought to subjugate the people under debt bondage, but nobody wants to go there.....yet.

I would like to give a big shout-out to

G. Edward Griffin

For his failure to look up the word "issue"

in a dictionary before writing a book

claiming it meant "create, print, and control" 

the US money supply.

Thank you for the misinformation

that has led millions of people

away from the factual truth.

Oh and,

Mike Maloney is a liar and a Fraud.

Not Money

Some of the most egregious lies are held in place by what people consider to be those expressed as "commonly known".

The only reason reserve requirements exist is because deposit accounts are not money.  

The only reason interbank settlements exist is because deposit accounts are not money.  

The only reason the FDIC exists is because deposit accounts are not money.  

The only reason capital requirements exist is because banks do not loan money and deposit accounts are not money.

Every time a bank fails, deposit accounts are proven not to be money.

US money is a matter of law, not a matter of economic theory or indoctrinated beliefs.

These are what is known as matters of fact.  Telling me what you've been indoctrinated into believing, is not a counter to the facts as presented.

Subject to editing, to be continued.........

The Federal Reserve's Balance Sheet

Dispelling some of the myths and hysteria 

"The Federal Reserve has to be one of the most talked about and least understood institutions on the face of the planet.  It's attributed with powers it does not possess and functions that it does not do, and the majority of the misunderstanding stems from the profound and systemic conflation of money, credit and asset values, which is exacerbated by an apparent systemic inability to discern the difference between theory and factual reality."

Dwain Dibley

Here is the key to understanding the Federal Reserve Banking System:

There is no US law granting the Federal Reserve the authority to create 

US legal tender money, or any money of any type.

It is against US law (12 USC 411) for the Federal Reserve 

to use US legal tender money in any of its market operations.

Having established these facts, read on.

In order to understand the Fed's $4.5-Trillion 'denominated in dollars' balance sheet, you have to understand what comprises that balance sheet.  So in that vein, let's cover just two of its primary components.

The first component is $2.4-Trillion of bank assets (not money) held on deposit at the Fed.  The majority of these bank-owned assets (primarily Treasuries and Agency Mortgage Backed Securities) are referred to as "excess reserves". The Fed, being a depository for the banking system, has little control or say over the disposition of those assets.

The second component is $1.8-Trillion of assets (primarily Treasuries and Agency Mortgage Backed Securities) held as collateral backing the issue of legal tender from the Treasury, it cannot get rid of that.

Setting aside several billion in other Fed held assets they can’t unload, you’re looking at maybe about $520 Billion or so in Fed held assets that they can actually work with. Not so much, is it.

Let’s look at this from a different angle, 'reserves'. 'Reserves' is one of those ambiguous Fed doublespeak terms that can reference a range of different items and aspects of the bankster system serving different functions. So, let’s cover, what the Fed claims are ‘reserves’.

1) Reserves are: Cash held in bank vaults (actual money).
2) Reserves are: Bank assets held on deposit at the Fed  (not money).
3) Reserves are: Assets purchased by the Fed in its open market operations (credit generation).
4) Reserves are: The liquidity provided by #2 and #3 in the interbank settlement system (credit).

When the Fed talks about 'adjusting bank reserves', it’s talking about using #3 to effect changes in #4 and because the interbank system is a closed system, under normal conditions, the Fed could affect the overnight interest rates (interest charged on loans within the interbank system) by buying and selling its reserve assets, which affected available liquidity (also referred to as 'money supply') in the interbank system, which also affects the banking system's ability to generate debt/credit as 'loans'.

That’s not the case anymore. With the banks holding excess reserves (assets) providing liquidity (credit) to the interbank system, the Fed’s ability to affect Interbank interest rates in the traditional manner has been effectively naturalized. This is because the Fed’s share of the liquidity is proportionally insignificant to the liquidity provided via the banks’ reserve assets parked at the Fed.  The Fed has effectively lost control of the interbank system and its balance sheet.  Think about it, if the Fed controls the interbank interest rate by adding or subtracting liquidity, then what do you think all that excess liquidity held by the banks is doing to that interest rate?  It's pushing it down and holding it at zero. The only thing the Fed can do is arbitrarily set interbank interest rates, as it has always been doing, along with paying interest on excess reserves as a means to establish a floor under those rates and,  hopefully, temper the pavlovian responsiveness of the markets and Wall Street by dazzling them with bullshit.

One of the primary reasons the Fed is reluctant to reduce its balance sheet by selling its comparatively meager assets is because, they know full well that the banks that buy those assets will turn right around and park them in their reserve accounts, effectively nullifying their efforts while highlighting what a farcical joke the entire Fed system is.  And this is why the Fed has chosen to reduce its balance sheet in the manner it has, which is by allowing a set amount of securities come to term and simply zeroing that amount off their balance sheet.  A side effect of the Fed reducing its balance sheet in this manner is that it also reduces USG debt by the same amount.

*Even if the Fed could convince the banks to relinquish their control over the interbank system and withdraw their reserve assets, those assets would just become 'assets held outside the Fed', not money.

And none of this has anything to do with the actual US money supply,
which currently stands @ $2.2-Trillion in U.S. Legal Tender.

Note: In case it wasn't made clear enough; the bank reserves provided by the banks and held at the Fed are the assets, not the liquidity (electronically transferable claims) the assets provide to the interbank system, which is managed by the Fed via it's Open Market Operations.

Also, the Fed does not create reserves. The only agencies that create reserves are the Bureau of Printing and Engraving (Federal Reserve notes), the Treasury (Treasury Bonds & Special Drawing Rights Certificates),  Government National Mortgage Association, Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation (Agency MBSs).  Federal Reserve notes, Treasuries, SDRs and Agency MBSs, along with Gold Certificates, are the only items that legally qualify as reserves, none of which are created by the Fed.  Fed and bank generated deposit credit is not a reserve asset.

In over 85 years of the FRN being designated the official currency of the United States, not a single economist has ever identified a single instance where the Fed actually used that official currency in any of its market machinations, and that's because they can't and that's because to do so would be against the law (12 USC 411).  The Fed uses deposit credit denominated in dollars, not a US currency.  And yes, this also means that the Fed is not 'monetizing' US Treasuries via its Open Market Operations, generating a credited deposit in the amount of the Treasury is not 'monetization', 'monetization' only occurs when actual legal tender dollars are used, and the only time that occurs is when the Fed posts US Treasuries and other reserve assets as collateral in order to get FRNs, US legal tender, from the Treasury.

Who Is Holding All the Excess Reserves?

Standard & Poors: Banks cannot and do not lend out reserves

Covering a few points made in the S&P article: The first point is, assets equal reserves (A=R).  This means that without the assets there can be no reserves.  Second, the act of the Fed buying assets in its open market operations does not create reserves, it creates deposits, it is the asset purchased, that creates the reserves (again A=R).  Those two points, as I have contended, were affirmed in the article.  

OK, skipping over the kabuki theater that was QE, other than to note that the Fed was buying assets from outside the system during QE, which means it was creating new reserves in the system and new deposits outside the system,  let's cover some other points the article made.

"The Fed can create reserves as needed".  This assertion was unequivocally proven false during the 2008 financial crisis.  Remember at the beginning of the crisis the Fed was crying about the banks being under-reserved?  If the Fed can create reserves as needed, then how could the banks be under-reserved?  The correct answer is, the Fed cannot create reserves as needed, it can only create reserves in the dollar amount of the assets it currently holds.  How did the banks respond to the Fed's cry?  They responded by depositing qualifying assets to their reserve accounts, which created the requisite reserves.  Also of note is that those reserves are carried as a liability on the Fed's books because the Fed doesn't own them.  If the Fed doesn't own the bank reserves created by the bank deposited assets, then it cannot own those assets either, which means that the Fed cannot sell those assets in any effort to reduce its balance sheet because if it did so, it would be stealing reserves from the banks (remember A=R, without the A, there's no R).  This last part was proven in 2015/16 and it will be proven again as the Fed currently goes about reducing its balance sheet in the exact same manner as it did in 2015/16.

Moving on to the three ways individual banks can reduce their reserves, two of which just shuffles ownership of the reserves held at the Fed, and the third way was by people withdrawing their money from the bank (loans, as implied by the article, are not required for this to occur).  This applies in so far as 'cash in vaults' are counted as reserves held, which is optional for the banks.  The broader picture is that if the cash didn't come into the bank's possession via deposit then the bank had to buy the cash from their regional Fed bank using their reserves held at the Fed.  Because the Fed is required to post collateral equal to the cash issued for circulation and that collateral being the assets used to create reserves, the Fed gets that collateral from the assets deposited by the bank receiving the cash, thus balancing the reserves paid by the bank for the cash with the assets held.  There is a fourth way, not covered, that the banks can reduce their reserves at the Fed, they can simply take back their assets, but why would they when they're being paid to keep them there.

This comes back to the nature of the liquidity called reserves and why that liquidity is almost always equal to the assets held and that is this; the liquidity is electronically transferable claims to the assets held, which means A is R, which also means the Fed does not create reserves, it just manages the liquidity created by the reserve assets held.  Think about it, if the Fed controlled the supply of reserves then there would've never been any shortage or excess reserves.  Therefore, the claim that the Fed creates reserves or that the liquidity created by the assets are the reserves is as valid as the claim that bank-generated credit or bank deposit liabilities are the money.

Addendum: On the Fed's Open Market Operations (OMO).  There are three primary assets that the Fed works with, they are Treasuries, Agency Mortgage Backed Securities (AMBS), and Special Drawing Rights Certificates (SDR).  These assets are primary because they are guaranteed to pay at face value by the USG, regardless of market conditions.  These assets provide the backing for the liquidity, referred to as reserves, it uses throughout its market operations.  

When the Fed buys an asset via its OMO, it credits the seller's reserve account in the amount.  This credited deposit does not add to the reserves at the Fed because it has no asset backing, which is required for it to be reserves, it's just a credit, like the credit in your deposit account, the Seller recoups its cost for the asset + profit.  

This is key to understanding how the Fed functions, it is the assets purchased by the Fed that add liquidity reserves to the interbank system affecting the Fed Funds Rate, and driving it lower.  When the Fed sells assets (which I don't think it has done since 2007, it has been letting them mature and zeroing them off the books), it drains reserve liquidity out of the interbank system causing the Fed Funds Rate to go up.  

So you see, the Fed's Open Market Operations is not being used to affect the overall money supply in the economy to affect the Fed Funds Rate, it is using its OMO to adjust liquidity reserves in the interbank system to affect the Fed Funds Rate, which affects interest rates throughout the economy, which, in turn, affects the supply of credit, erroneously referred to as money in the economy.

Three theories of banking and the conclusive evidence

Feel Free To Comment

MONEY (or the lack thereof)

What is our current money?
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 is not borrowed, loaned or spent into circulation.  The only way it gets into circulation is by your demonstrated productivity and by your 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, which is not designated or acknowledged in law as being a money, or a currency, or a medium of exchange, with the only legal aspect associated with it, residing in the debts incurred with its use.

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, Paul Krugman, Mike Maloney, Peter Schiff, Ron Paul or any other economist or talking head.  Nor is it defined by Austrian Economics, Keynesian Economics, Monetarist Economics, Capitalist Economics, Socialist Economics, the Federal Reserve, the U.S. Banking system, IAS-IFRS, US GAAP, 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% Bank Debt, even when it comes from the Fed.

The legal tender 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 surrendered 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 the legal tender 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. It was our money/property first.

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, the medium of exchange (the asset) 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 the 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 card (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, it's just the banks transferring their legal obligations to pay from one account to another.

The notion that we’re using ‘digital money’ or ‘digital currency’ or ‘digital dollars’ or 'credit dollars' or 'credit money' (terms made-up by ignorant people who believe in magic) 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.

Note: Bank deposit accounts are nothing more than bank managed records of legal claims held by account holders against the legal tender money that is supposed/assumed to be in the bank's vault.  That's why deposit accounts are categorized as liabilities of the banks, why account holders are designated as "the creditor" and banks are designated as "the debtor" in all deposit account contracts, and it's why the FDIC was created.  A deposit account (a.k.a. record of bank debt, a legal liability) is not, and cannot be money in and of itself.

When you write a check or use a debit card you are directing the bank to transfer a specified amount of 'money proper' to a designated recipient. Debiting your account signifies that the transfer of money has been made, and crediting the recipient's account signifies that the money has been received and is available for immediate withdrawal or for use in other bank administered transactions.

That the banks resort to debiting and crediting user accounts with the amounts without effecting the transfer of money as directed, is perpetrating a fraud upon the account holders. That the banks do not have the money and do not possess the means to get the money, and referring to that condition of insolvency as 'fractionally reserved banking', only compounds the fraud.

Regardless of anyone's acceptance of a bank crediting their account in the amount as payment, by law, claimed or not, money is still owed to the account holder by the bank.  Crediting a deposit account with the amount and payment are two separate events, especially so in a banking system that is chronically necessitous of the money it owes, in other words, institutionally bankrupt.

The only reason(s) their fraudulent system gives the appearance (perception) of working is the Fed ran interbank settlements system which allows the use of securities as a means to settle accounts between banks instead of the legal tender, which bolsters the perception that their debt-based system works. And I find it puzzling that people claim a credit to a deposit account is money/payment when the Fed ran interbank settlements system conclusively demonstrates that it is not.

.....

Correcting a few reassuring lies.

The Federal Reserve has to be one of the most talked about and least understood institutions on the face of the planet.  It's attributed with powers it does not possess and functions that it does not do, and the majority of the misunderstanding stems from the profound and systemic conflation of money, credit and asset values, which is exacerbated by an apparent systemic inability to discern the difference between theory and factual reality.

The "Money Multiplier" theory, is pure fiction.

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."

Please Note: This also debunks the myth of "Base Money", "Central Bank Money", and "High Power Money" as well.

Money creation in the modern economy

Note: This paper is a neat piece of work.  They go about debunking one theoretical fiction "the money multiplier" while promoting another theoretical fiction, "bank deposit liabilities are money".  There is nothing in law that designates bank deposit liabilities as being "money" so, when they use the term "money", think "bank managed debit/credit".

Banks do not loan money.

Working Paper No. 529: Banks are not intermediaries of loanable funds
Note: Banks are not intermediaries between borrowers and savers (because there's no money), they originate pseudo-loans as pseudo-deposits, irrespective of credited savings accounts or current reserves held.

Banks do not loan money.

How Currency Gets into Circulation

Note: Legal tender money (cash) is not borrowed or loaned into circulation.
Banks do not loan money. 

** They are attempting to remove this information, read it while you can.

Applicable Laws and Information.

Federal Reserve Act, Section 16

Added to provide a different perspective and tone

Codified Section 16

Legal Tender Status

** They are attempting to remove this information, read it while you can.

Legal tender Law

Payment of obligations and interest on the public debt
"The faith of the United States Government is pledged to pay, in legal tender, principal, and interest on the obligations of the Government issued under this chapter."

Seigniorage in the United States
How Much Does the U. S. Government Make from Money Production?
All profits obtained by the Fed's monetary activities and surrendered to the Treasury are counted as seigniorage interest payments on the notes issued (rent).  In other words, the Fed is paying the Treasury interest on the notes it puts into circulation, and that interest rent is all of the Fed's profits minus dividend payments and expenses.

-------------

Now, we can observe in the Treasury's Legal Tender Status, (a brief synopsis of Section 16 of the F.R.A.) that the Fed must pay for the production of notes (FRNs), and they must post collateral of equal value to the notes it then issues into circulation.  (The Fed assets used as the collateral mentioned, have expanded to include Mortgage-Backed Securities and Special Drawing Rights Certificates, along with Treasuries and Gold Certificates.  This collateral backs the issue of the notes to the Fed, regulating the Fed's access to the legal tender money.)   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, the seigniorage interest payments on the note issue made by the Fed to the Treasury and the fact that the U.S.G. can pay its debts with U.S. legal tender, we can infer that, the Fed does not own the legal tender Federal Reserve notes.  Combining 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, 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 US money or any money of any type, 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 associated with the debt-based private credit, is held by the debts incurred with its use. 

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 the FOMC as Fed "Monetary CREDIT Policy" and Rote Hearsay.

Currently, There is a total of *$2.23-Trillion in U.S. legal tender money/currency in circulation around the globe. Of that, there is an estimated total of *$210-Billion in circulation within the U.S. Of that, there is *$94-Billion held in bank vaults.  (*updated)

That $94-Billion held in bank vaults backs the $4.9-Trillion in credited demand deposit accounts. It also backs the $13.5-Trillion in credited savings accounts. It also backs the $100s of billions in bank mediated credit transactions that occur on a daily basis. It also backs all government expenditures.

And that, is the stark reality of the Fractionally Reserved Banking Fraud.

Please note, they're counting $18+Trillion in bank debt to deposit account holders as being the "money supply".  Yes, that's right, The bank's debt to you is your money.

How the Debit/Credit Card System Actually Works

Note: The U.S.G. is under no legal obligation to make good on Fed and bankster generated debt-based private 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.

100% of ALL Monetary Theories are Pure Bullshit

To Be Continued......

Feel Free To Comment

The Ban on Cash - Part II

Chasing After Debt

So anyway, I ran my little observation of the 'ban on cash' by Mike "Mish" Shedlock and his reaction was, shall I say, less than receptive.  His response; "banning cash does not eliminate debt the notions is totally absurd and it should be obvious why".

Now, I know that on rare occasions I have managed to miss sighting the tree standing in the forest but, I don't think this is one of those occasions.  I think Mish's apparently startled and clipped response is a product of his rote learning and let me explain why.

If I repeatedly called an apple an orange and I managed to convince others around me to call the apple an orange to the point that everyone routinely referred to the apple as an orange, would the apple be an orange?  The 'obvious' answer is NO.  The apple is an apple and the orange an orange, one cannot change the nature of an apple simply by changing what you call it, obvious.

As with our inability to change the nature of the apple to an orange by simply calling it an orange, calling credit 'money' does not change the true nature of credit to money.  And I think this is the key to understanding Mish's response, and in the push to ban cash.  People have gotten so used to referring to credit as if it were money, they actually believe that credit and money are the same thing, especially so if that credit populates their deposit accounts or comes in the form of loans or even, from the Federal Reserve.  That is simply not the case because unlike money, all credit is someone else's debt, it cannot exist otherwise.  For example, the credit that populates your deposit account, is the bank's debt.

To aid you in understanding my position, let me break it down to its base: Our 'money' is defined by law, specifically Section 31 U.S.C. 5103, it's a short paragraph.  In it, you will not find the credit generated by the banks or the Federal Reserve listed.  In point of fact, there is no law anywhere that grants to either the Federal Reserve or the banks the authority to create money, not even the Federal Reserve Act does that.  That right/privilege/authority is exclusively retained by the U.S. government via the U.S. Department of the Treasury (it's a 'Sovereign Right' thing).

This means that, as of 02/2017 the actual Money Supply stands at $1.53-Trillion in circulation and another $2.6-Trillion of U.S.G. securities held as reserves.  That is the extent of our Legal Tender Money (LTM) Supply, everything else is Credit, a ledger book account entry that denotes a legal obligation to pay LTM, or the assumption that LTM will be paid, either upon demand or over time.  Thanks to modern technologies, we can use these "ledger book account entries" to mimic a medium of exchange, so much so, that we don't even bother with the LTM that supposedly backs the credit's use, and are promised in payment in the end when all ledger book accounts are settled, LTM = Unit of Account (UoA).  Credit cannot be the UoA because it's a promise to pay LTM, all credit is debt.

**UPDATED**
Let's do a little math: $1.53-Trillion LTM in circulation (-) $1.18-Trillion LTM overseas (-) $11-Trillion in Deposit Accounts (-) $18-Trillion in Public Debt (-) $59-Trillion Total Economic Debt (-) $1,000-Trillion in Derivatives (+) $183-Billion LTM in Reserves (+) $24-Billion in FDIC (I don't know what the FDIC is holding, it could be LTM, or just their fingers crossed for luck) (=) Somebody Is Not Getting Paid.  Can you guess who?

Bankster solution: Ban Cash, Ban LTM/UoA, in effect, they force the apple to be an orange.  Not an unprecedented move, they've managed to get the LTM/UoA outlawed once before, when it was Gold.

What does banning LTM (cash) do for the UoA?  It makes credit the de facto 'money' by which all accounts can be settled.  Hooray for the banksters!  They get out of their obligations to pay LTM upon demand and over time, and the account entries that were on the debit side of their ledger get moved over to the credit side.  (For them, not you, you still owe, you still have to pay.)  Your credited deposit accounts, which were bank debt, are 'monetized' and reserves are no longer needed, as all accounts are now fully covered with credit as the money.  And all those few people with over $250,000 in deposits will be happy because their deposits will be more than just 'iffy bank debt' subject to POOF!ing out of existence the moment their bank goes insolvent. (Goodbye FDIC, your placebo services are no longer needed.)

Most people probably wouldn't even notice the change.  That is, until the Fed sets the interest rates at below zero and the amount is deducted from their deposit accounts. (Gesell's demurrage comes into play.)  With credit as the de facto money, and your deposit account directly affected by interest rates, with a negative rate your only options to prevent loss will be to move your credit to an investment that pays interest, spend your credit. Or, you can just sit back and watch your earnings/savings dwindle away, demurrage.  Most, with investable credit, will choose to invest and those with modest or humble means, will spend.  Banksters and Wall Street win again, the economy and stock markets get boosted and the banksters get more credit deposited under their "care".

So the banksters have finally reached their promised land, total control over the money supply and the economy via a system of debits/credits, that is 100% theirs.  No bothersome LTM limitations, no more reserves to maintain or constrict their activities, no more threats of insolvency and, no apparent down side.  Well, there is that one pesky little thing, the U.S. government's sovereign right to coin money.

Question: When is the issue of U.S. Treasury Bonds not a debt?  Answer: When the bonds are used to back the medium with which they are paid......WOAH, WAIT, What????

On the Federal Reserve note the 'FRN', our 'LTM': Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the FRNs that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides "backing" for the note issue.  A commercial bank belonging to the Federal Reserve System can obtain FRNs from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.  Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

The "Federal Reserve Note" designator on every Dollar is not a mark of ownership, it's a mark of Liability.  What is the topic?  Oh yes,  Banning Fed/Bankster Liabilities.....I mean 'cash'.

Within the U.S., that equates to an $11-Trillion, measured in legal tender dollars, gift to the banks.  (For the readers from other countries, just add up total deposit liabilities of your banks, and that will be your gift to your banking system when they implement a ban on cash.)

Question: When is U.S. Government not borrowing to spend?  Answer: When the spending by U.S. Government automatically creates the payment.

The Banksters get their way, cash is banned, their obligations are mitigated, a system of credit/debts is locked in and the entire economic system is theirs to command and control, except they've lost one key element, government debt.  You see, it's not just the banksters that get the benefit of moving their debit to the credit side of the ledger, the U.S.G. gets to do that too.  With the ban  on cash, the U.S.G. takes back its LTM and, it also gets all the assets held by the Fed that were used to back the LTM, as well.  As for the Treasuries held by the banks, the banksters would most likely have to prove that there are no credit obligations attached to the bond at maturity in order to get a reimbursement for holding and using them as collateral backing for the credit they've created, otherwise they may be considered paid in full, or any outstanding credit attached, due and payable.

And the reason for this; it's the U.S.G.'s sovereign right to coin the money.  Credit is now the money, which means that the 'money' (formerly credit) generated from U.S.G. debt is now, the payment in full.  The 'money' generated by banksters using U.S. bonds to cover their obligations, is the property of the U.S.G. as well.  In effect, the banksters were acting as a proxy of the U.S.G. when they used the bond to create the credit, now money.  (Goodbye Federal Reserve, your services are no longer needed.)
Hooray! for the U.S.G.....

As the monetary system currently stands, it is almost entirely a credit/debit system with cash being little more than an addendum, acting as a weak restraint upon the banksters due to its status as the UoA (Unit of Account), the medium in which all credit generated by the banksters is due and assumed payable.  In that regard, LTM (Legal Tender Money) represents the Sword of Damocles hanging over the bankster's head.  And it is that sword they're attempting to get out from under with the banning of cash.

Note: When you use a debit card, you are using bank debt administered as a line of credit. This is because all deposit accounts are merely a record of legal claims held by depositors against the money (checkable deposits) that is supposed to be in the bank's vault. All deposit accounts are bank debt. That's why depositors are listed as the 'creditors' and the banks are listed as the 'debtors' in all deposit contracts.

When a bank generates credit as a deposit, it is creating a legal claim against itself, a legal obligation to pay the account holder in legal tender dollars upon their demand. Luckily for the banks, hardly anyone bothers to make that demand. (It's so much easier to use a debit card.)

Summary:  

The U.S.G. does not 'borrow' the Legal Tender Money from the Fed.

 Neither the Fed or the banks can create 'Money'.

They can generate credit and use a percentage of 'Money'

as a reserve backing for depositor withdrawals.

That's called "Fractional Reserve Banking".  

The 'Fractional Reserve System' was born in bankruptcy and it will die bankrupt.

ADDENDUM:

Making It Real

Rendering total Bankster controlled, Government administered ownership

of your lives and livelihood.

Can you say, TOTALITARIANISM

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The Cashless Society Is Going to Backfire for the Establishment

Joshua Krause

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Money is Coined Liberty – The Latest Salvos in the War on Cash

Acting Man

Feel Free To Comment

On The Banning of Cash...

Doesn’t banning cash transform credit/debt into the de facto ‘Unit Of Account’?

If so then, it will make the Fed, whose primary function is converting government checks/debt into spendable credit, obsolete as the very act of deposit creates the credit to pay in one step.  There is nothing to settle, the check is paid in full upon deposit, and any bank can do that. Banning cash would totally eliminate government debt. What would they owe? It’s already paid in full at the moment of deposit !!

What value would a Treasury Bond held by any bank hold? They would no longer be I.O.U. Cash Dollars, they would no longer represent a government debt obligation, as any ‘Promise To Pay’ by government, is paid the instant the banks used it to create credit, paid in full.

With credit as the de facto ‘Unit Of Account’, any credit created by banks using Government Bonds, would have to be returned to the government with the bond as that credit is a product of the bond and is attached to the bond throughout its existence. No bond, no credit. This transforms banks into the primary debtors, effectively reversing the rolls of obligor and obligee.

Those fools in the banking system who are promoting the banning of cash are totally outwitting themselves as it will make all centralized banking with its attendant government debt obsolete, and place the banks who use Treasuries to create credit, in debt to the government!

Also: If they ban the use of cash, that ban would have to be 100%, any less than that, and they leave in place a tool to measure the value of the credit in use, a means by which credit can and would be discounted. To give you an idea of that potential discount; if we were to properly value the 'credit dollar' against the current unit of account, the legal tender FRN, the true value of the bankster's fictitious 'credit dollar' would be around $0.03 in legal tender.

Note: 97% of the dollar's value has been stolen via the use of bankster generated debt/credit, erroneously referred to as 'dollars' and operating in the guise of 'our money'.

Wow......

Random Thought: The reason the QE's didn't work is simply due to the fact that it did not add any 'money' to the economy.  It increased credit/debt but not the actual money supply.  Credit, which is always someone else's debt, is channel locked, it cannot and does not flow the way actual, debt free, money flows, it is not dynamic.  And new credit always has to be borrowed into economic existence.  It is my contention that the economy is starved for the lack of free-flowing, debt-free cash.

Credit as currency is invisible, it does not provide the tangible, visible proof of quantity and it is this intangible, lack of proof of quantity that lets the government run up an $18-Trillion debt with little inflationary consequence.   Can you just imagine the effects from $18-Trillion in Legal Tender Notes flooding the world?  The dollar's value would have been crashed into a hyper-inflated mass, long before it reached $18-Trillion.    Seeing is Believing.
Something to think about.....

See: The Ban on Cash - Part II

There is a difference between Money and Credit.

Money as defined by law.  Section 31 U.S.C. 5103, defines legal tender as "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.

The Fed defines credit as such: "Credit dollars are a debt generated currency that is denominated by a unit of account. Unlike money, credit itself cannot act as a unit of account. However, many forms of credit can readily act as a medium of exchange. As such, various forms of credit are frequently referred to as money and are included in estimates of the money supply."

As an aside; why does the Fed count 'credit', which is primarily BANK DEBT, as if it were money and include it, even though they admit it isn't, as being part of the 'money supply'?  Also noteworthy is the Fed's use of the term "credit dollars", which is shorthand for "credit denominated in dollars" and a fiction.  The credit they generate is neither dollars or a currency.

Do you think you would confuse a gold sovereign with a paper demand note? They were both used to purchase the same basic things at the same basic price. Because they shared this functional commonality, does that make them the same thing?  Money - Credit.

What about the official legal tender money supply which is a product of Law and Government, and deposit credit, which can be created by anyone in contract. They are both used to purchase the same basic things at the same basic price. Because they share this functional commonality, does that make them the same thing?  Money - Credit.

As with that gold sovereign, you can hold a legal tender note free from any obligatory attachments, not so with credit, it only exists as a debt obligation. In fact, unlike demand notes, you can't even hold credit, you are totally dependent upon the banking system to hold and manage its existence for you. And when I say existence I mean exactly that, the bank goes insolvent and your credit is gone!...POOF!

And think about this; they're counting $19+Trillion in bank debt obligations to deposit account holders as being the "money supply".  How insane is that?

Read this carefully:
Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if Congress dissolved the Federal Reserve System, the United States would take over the notes (Fed liabilities). This would meet the requirements of Section 411 (Federal Reserve Act), but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.

Do you comprehend that? (I knew you would)

Now, what does the government NOT get in that transaction?

It does not get the Trillions in credit created by the banks and Wall Street!

Why is that you may ask?

Because all that credit created by the banksters and Wall Street IS NOT PART OF THE MONEY SUPPLY!!!

It is because we conflate money with credit, we are living in a bankster's paradise (debt hell for us).

Do you think the banksters give a rat's ass worth of care that their exuberant over-expansion of credit drives inflation up and the value of the legal tender down?  NO!  They just create more credit by having you go further in debt to compensate!

There is no law anywhere that grants to banks the power to create money, not even the Federal Reserve has that power, which is a right retained exclusively by the government via the U.S. Department of the Treasury.

The whole credit system runs on the belief that somebody will eventually pay what is owed.

'Crediting Your Account' and 'Payment' Are Two Different Things

Do you still believe legal tender money and credit are the same things?

Addendum:

The only ones who benefit from the conflation of money and credit are the issuers of credit with no money.

Has the term 'Fractional Reserve Banking' lost all meaning?  If the banks are holding US money as reserves then what are the banks creating for your use in its place?  It's not US money so, what is it?

This is how safe your 'money' is when it is deposited in a U.S. bank; it is stolen by the bank at the moment of deposit (assuming the 'money' existed in the first place) and your account is credited with the amount stolen. This means that the richest amongst us have exactly the same amount of 'money' in their credited accounts as the poorest amongst us have in theirs, $0.00.

That a bank maintains some 'money' on hand to placate a few requests for the medium, does not negate the fact that all credited accounts maintain a zero monetary balance. A ledger book entry denoting the amount of 'money' the bank owes to (stole from) the depositor, is not 'money', regardless of anyone's ability to 'simulate spending' that ledger book entry with a debit card. Passing around bank debt from one recipient to another, is not payment for anything. Crediting an account with the amount and actual payment are two different things.

Some people bitch, howl, whine and complain all the time about 'gold' and 'silver' being 'real money' and denounce the 'fiat paper', and they're not even getting or using the 'fiat paper', which is the money as defined by law. Do you know what is not listed in that legal definition of money?  Ledger book entries made by the Fed and the banks denoting the amount of money they owe.

**By the way, I just gave you a description of real 'fractional reserve banking', did you spot it?

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Basics of Banking: Loans Create a Lot More Than Deposits

How Does Europe Borrow Dollars From The Fed?

John Carney
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The Bank of England Corrects a Widespread Myth

Working Paper No. 529: Banks are not intermediaries of loanable funds

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 Does the Money Multiplier Exist?

Federal Reserve Board
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