If you’ve found anything I’ve said before interesting, shocking or appalling then you’ve seen nothing yet until you’ve learned where money comes from.  The history of the FED is an entirely different can of worms riddled with some of the craziest historical facts you were never taught in school, but that is a topic for another day. To put it bluntly, there is no way you can learn its inner workings and history of the FED and not get p*ssed off.

Ok, so how does money come into existence?

  1. First, the Treasury gives the authority to print money to the FED.

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  1. From there the FED then lends money to the TBTF (Too Big To Fail) Mega banks otherwise known as the primary dealers at .5

 

 

fed-logo2016-09-24_15-00-31primary-dealers

 

  1. Then these same banks then lend money back to the US Govt in the open market at an amount that is infinitely higher than what they charged the FED to begin with.

 

primary-dealers2016-09-24_15-02-142016-09-24_15-02-53

4. To make matters even worse, The FED was purchasing back bonds from the primary dealers to help stimulate the economy.  In actuality, this was a huge bailout for the banks as they got to arbitrage the bonds with no risk and guarantee to make money on the deal by front running the FED.

fed-logo2016-09-24_14-53-46primary-dealers

 

Federal Reserve Balance Sheet

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It took this country from 1913, (when the FED was created) until 2008 to accumulate $800BN in excess reserves.  It only took another 6 years to go from $800BN to 4.4 Trillion!

You might now be thinking to yourself ok, but the FED hasn’t had to stimulate for two years, we’re finally getting out of the woods…WRONG!

As shown below in Figure 6, no sooner did the FED stop Quantitative easing which will be referred to as printing money from here on out, than the other central banks of the world had to pick up the slack and crank up the printing presses.

 

 

Figure 6

money-supply-globa

 

The reason this is so concerning is that the FED thinks they are throwing the economy a life jacket when in fact they are throwing it an anchor.

 

Every dollar that comes into existence represents debt.  The first dollar that came into existence in 1913 carried a 4% interest rate on it, as obtained from Figure 7

Figure 7

 

 

100-yr-interest-rate

The real question is, if you only created $1 but now owe $1.04 where do you get the extra 4 cents?

You have to borrow the 4 cents, and the cycle continues.

Therefore, to borrow money, we have to create debt.  The debt is mathematically impossible to pay off from day 1, and the real kicker is things do not have to be this way.

There is NO reason the FED has to exist.  There is no reason we have to go through to middlemen to borrow money from ourselves.   The Treasury has the authority to perform this function and to issue debt free money.  If they did this the parasitic TBTF banks would lose out on Billions in arbitraged bond sales or as some would call it… front running.

 

 

 

Thomas Jefferson said it best when he said: “”If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks, and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their Fathers conquered…. I believe that banking institutions are more dangerous to our liberties than standing armies…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

To make matters worse, the FED is private.  That’s right the 12 member banks are private corporations that are then owned by the megabanks themselves.  This is a classic fox guarding the hen house scenario.

Now for some background, I was a part of a very select class that won the National competition on the FED.  I wasn’t a part of the team because I had commitments as VP of the Water Polo team, but I was in the same class that they were in and by the time I learned the FED was private I was also a fully licensed Financial Advisor.

I still remember the guy who told me this resembled Rob Zombie, and I immediately sought out to prove him wrong.  I ended up being wrong, so believe me, if this sounds crazy to you, it sounded crazy to me too!

Now getting back to the worst part of this all, the FED gets a 6% dividend of all the interest of all the debt!  That’s right they are incentivized to increase the national debt because it will further enrich their pockets in the short term.

So not only do we have to borrow our own money from the big banks and the FED but the FED who are owned by the big banks get to siphon off an automatic 6% for doing nothing!!!!

When the FED prints money it goes to the richest people in the world first, so they can speculate.  When they speculate, it drives up the costs of those goods and usually is seen with higher consumer prices.  Many consumers are feeling the hit as evidenced by the fact Donald Trump won the GOP primary, and Bernie Sanders would’ve won if it weren’t for Hillary stealing it from him.

If you want to attack income inequality you have to attack and understand the FED.  Forcing the minimum wage to go up is reacting to the symptom and not the cause.  In 1960 the minimum wage was $1.  Expressed another way the minimum wage was four quarters.  In 1960 Quarters were made of real silver.  Those four quarters would each be worth roughly $5 a piece based on the price of silver being just under $20 /OZ (as of 9.4.16).

“Expressed another way, if our money still had silver in it, the true minimum wage would have to be close to $20, to equal the purchasing power someone had in 1960.” The Libertarian Advisor

Our current monetary paradigm represents modern day high tech feudalism or high-tech slavery or a high-tech Ponzi scheme whatever you want to call it but it, cannot last forever. Ultimately it’s my goal for you to educate yourself and others how this insidious process works so we can have actual Change so we can Make America Great Again.

The only way to change the world is for others to know about this.  If you found this post useful, please share this post and if you haven’t already please like my page.

Together we can fix this.

 

Cheers,

Tim Picciott

 

 

 

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