Friday, June 8, 2012

Why Americans SHOULD Hate the Fed, and Why They Don't

The really insidious effect of the fed isn't so much that we're borrowing our own money from them. That's just kind of ridiculous. What's insidious is the way it redistributes wealth.

Because we have a floating economy the value of the dollar is not set by the value of silver or gold. It has a set value based on the supply of dollar bills. Beyond the intrinsic absurdity of that, there is a profound effect on a floating economy when a new dollar is printed.

Now... keep in mind that the fed is NOT a part of the government. It's a private cartel of bankers. This is important because when money is printed it is distributed to banks.

The act of printing money does not in itself create any wealth. Back in the old days this was compensated for by the storage of gold and silver into "reserve". This gave every dollar printed an intrinsic value. This is no longer the case, and because the gold reserve is not longer used, and because the printing of new money doesn't add any real wealth to the economy, each time a dollar is printed it DEVALUES every other dollar in circulation.

Let's take a closer look at the process of printing money in a floating economy.  Economics of scale is a great way to obfuscate this issue, so we're going to scale it back to make the numbers more manageable.

Say there are 5 people in the country, and each has one dollar. There is also a bank, and the bank has $5 in it. This means there is a total of $10 in the entire country.

In a floating economy each dollar is worth 1/10, or 10%, of the value of the country.

Now, say the bankers print another dollar. This dollar is not backed by gold or silver, and there has been no ensuing increase in the value of the country, so the only real effect is that the value of a dollar has dropped. Where it used to be worth 10% of the country, now each dollar is only worth 9% of the country.

What the fed does when it prints money is distribute wealth to themselves.

Look at the example above. Before the extra dollar was printed the banks had $5 out of 10, exactly 50% of the value of the economy. After the new dollar was printed they had $6 out of 11, or 54% of the economy. They have STOLEN 4% of the economies total value.

The fleecing doesn't stop there, of course. The fed then LOANS us this dollar, collecting INTEREST on it and moving even more of the economies value into it's own coffers.

So why do Americans tolerate this?

Not to put too fine a point on it... because we're lazy. We just don't know any better, and we don't care enough to find out.

Most Americans have no idea what the Federal Reserve Bank is. The real genius of this deception though, is that the vast majority of us think we do.

We all know that the Fed sets interest rates and prints money, but we think the Fed is a government agency. Many of us think our currency is still backed by a gold standard. We have no idea that the value of a dollar is no longer tied to a reserve at all, or that the economy is being controlled by unelected, unappointed bankers with no accountability. And even if we did know, most of us are afraid of the numbers. It's not that we lack the basic mathematical skills to understand what they're doing, it's that the numbers involved are so huge we tell ourselves we can't possibly comprehend them. Once we do get it we often decide it can't possibly be that simple. This is an illusion, though, and our "leaders" take full advantage of it. Most of them don't understand the Fed much better than we do, and the ones that do are more than happy to have us believe it's because they are somehow smarter and wiser than the rest of us.

It's all lies.

You don't need any fancy math skills to understand the way the fed works. It really is that simple.

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