Federal Reserve System: Creating Money from Debt

Creating money from debt? Sound absurd? But that’s exactly how the United States of America money system works. Fiat money is created out of thin air-without the backing of intrinsic assets to back up the receipts (money) to ensure credibility and value. Clearly, the private Federal Reserve System was implemented without the citizens’ long term survival in mind.

G. Edward Griffin, author, The Creature From Jekyll Island, Fourth Edition, American Media said it best in the following quote taken from pages 193 and 194:

“There are three general ways in which the Federal Reserve creates fiat money out of debt. One is by making loans to the member banks through what is called the Discount Window. The second is by purchasing Treasury bonds and other certificates of debt through what is called the Open Market Committee. The third is by charging the so-called reserve ratio that member banks are required to hold. Each method is merely a different path to the same objective: taking the IOUs and converting them to spendable money.”

One has to wonder how any purchasing power has managed to survive at all with that kind of Dollar dilution. The U.S. Dollar will buy about three percent of what it would buy in 1913, the year the money system was handed over to the private Federal Reserve System through the Aldrich plan.

Unfortunately, few Americans and many professionals working in the field of finance, banking, and investing to not understand the money system and do not understand how money is created from debt. How does that work, exactly?

A simplified explanation is as follows:

The U.S. Treasury has no money. What about all those Treasury bills and notes sold every week and several times a month? Treasury borrows that “money” from the Federal Reserve who loans it to them and then charges interest for money it did not have and created out of nothing. And that’s the way your money system functions. It is not surprising that money loses value so quickly.

James Clark King, LLC