Switch the flow of causality and you can understand it better.

When a person defaults on a loan he causes the money supply to contract.

Hey MrBill and nero,
I’m sure glad we have people like you who really know and understand all the finer details of how the markets and money system we use work. If I ever need that kind of advice, the two of you will be the first I will ask. Most of us commoners are probably closer to my level of understanding at the very best. (Looking at the results of the poll on this thread, I would have to say most are clueless.) Personally, if I were to think about trying to have to understand it all on your level, I would just as soon let my head explode! You remind me of many of the modern physicists who theorize of multiples of compound universes with eleven dimensions beyond the four common ones, and make things so complex that no average person could even begin to understand just what the heck they are talking about!
Much thanks all the same!
Joe

I wake up every morning at nine and grab for the morning paper. Then I look at the obituary page. If my name is not on it, I get up.
Benjamin Franklin

Matt Simmons said that if we do nothing to address Peak Oil, "Jim Kunstler will have turned out to be an optimist."

All these constructions and the laws connecting them can be arrived at by the principle of looking for the mathematically simplest concepts and the link between them.
Albert Einstein

I really don't have time to go into a detailed debate like you guys have been involved in, but I have a few questions and points to make.

I think MonteQuest, nero, and MrBill all have decent understandings of the workings of our current monetary system, certainly far above the average person today.

First of all, have you guys read the book "The Creature from Jeckyll Island"? It gives a great history of the Federal Reserve, and the history of American banking before it. I strongly suggest everyone read it, American or not.

I think we all agree that money doesn't and can't create energy.

I think MonteQuest *MAY* be wrong about the Fed's resolve to avoid deflation.

I think nero is *CERTAINLY* wrong that saving the federal reserve is a good thing. He didn't say that directly, but that is the gist I have gotten. If that is not what you were mean, then I apologize.

If you look at the history of the Fed, and other fiat currencies, there is ample proof that deflation can exist for certain time periods without destroying the currency, however, that is very dependant upon the state of the currency, and also the level of fascist control of the people and the economy.

As a currency becomes weaker due to debt levels, bubbles(mispriced assets due to negative real rates), inflation, and/or shrinking demand(for the currency), the ability to inflate and deflate the supply without causing crisis becomes severly diminished.

Can fiat last during during a long period of diminishing energy supplies? Certainly, but only with the help of fascist control over the people. Long term inflation is a certainty with fiat. Once inflation gets above a certain level(which it will with less energy), people begin to notice and will *attempt* to shift to alternative forms of money, such as gold and silver. However, if you throw enough fascist control into the mix, the people will have no choice but to use the fiat. The US gov already confiscated gold from the people and made it illegal to own, any government will do so in the future if they can get away with it.

Does that mean that the dollar can survive? Not a chance in hell. The debt levels are too high compared the the current and future output that is and will be priced in dollars. The value of the dollar at this point is only based on the demand for the inflating assets priced in dollars. There is no more room to inflate those asset prices, as they deflate so will the value of the dollar. Once the dollar index breaks support at 82, all hell will break loose.

Why did I above say that MonteQuest may be wrong about the Feds resolve to inflate? Because I personally believe the bankers who own and control the fed also own and control the Euro, and are the same group of people who are working to bring about the Amero and North American Union. This will come about when the dollar collapses. It is likely that our government will go with it, which will provide a wonderfull oportunity for the UN to come in and help accelerate the formation of the North American Union.

That is why our current government is so intent on running up debts and destroying our military, all the while taking out regimes in the middle east that are hostile to the interests of these same bankers. It's just as much about destroying America as it is about taking out the governments in Iran and Iraq.

I hope that someday we will once again be using honest, constitutional money(gold, silver, and real bills), and will have gotten rid of the fascism and fiat that causes so many problems in this world. I think that things are going to get a whole lot worse though before they start to get better.

Cheers,
Matt

P.S. When the dollar begins to fall hard, we are going to have a deflating money supply, and vastly inflating prices of goods, because of all the debt that will be cashed in for whatever goods they can get. Essentially you get a form of hyperinflation whether they actually hyperinflate the money supply or deflation takes hold.

Hi newellm,

I believe I have seen things similar to "the creature from Jeckyll Island" where they charge that the Fed is a private company and is really a way to rip us all off by manipulation of the money supply. (Well, not me since I'm Canadian) Now the charge is a serious one. Usually such charges don't specify how much profits the Fed distributes and where the profits go exactly. Care to make a guess? The answer is burried in this thread somewhere.

Yes I think the Fed is an improvement over the direct control of a fiat money supply by politicians or alternatively a metal standard. It isn't a perfect solution, and if you are pessimistic about our collective self control you would say it is better to live with the problems of a metalic currency rather than live with the threat that some day all our money will be worthless because some Mugabe type got a hold of the printing press. But the thing is, that no country is going to voluntarily give up the advantages of a fiat currency by itself. It would cost billions and would only pay dividends in the event that we have a monetary crisis.

My reputation supports that.



You don't have a clue as to the point I was making, do you?

Arguing my argument back at me? WTF?

No, but all fiat money is, save the coins in your pocket.



So, in the future, only those who have residual incomes or equity that can be converted to non-fiat forms of money like gold and silver can pay their debts and the linear income folks who depend upon wages or savings in the form of fiat currency cannot?

Doesn't sound too compatible with oil decline.

Not if that money cannot buy energy that doesn't exist. Money in hand does not create the energy required to spend it.

Money in hand cannot create the energy necessary to spend it. If the shelves are bare or the store is closed, money is worthless. And the energy stores are going to be closed or the shelves bare almost upon opening in a post-peak world.

The 1970's gas lines and rationing speak volumes of what we are in store for. Gas for two hours and then zip...at any price.

But I agree largely with much of what you posted.

nero,

Do you believe in a free market? If so then why not the banking system?

The Fed IS a private corporation. I have done the research, you prove me wrong.

Inflation is a confiscation of wealth from those with savings by those who create money.

Confiscation of wealth(theft), hurts free markets and real people. Fiat confiscation of wealth is the single largest reason we have so many wars, and is the overriding reason for such extreme and growing wealth inequality.
http://news.bbc.co.uk/2/hi/business/6211250.stm

If you knew the (true) history of the Fed, you would probably not be taking the position you are taking.

One important question, why do you believe monetary freedom will not work?

Monetary freedom simply means people are free to create their own banks and currencies, and people are also free to choose which banks and currencies they use for their savings and business. Honest banks that issue bills backed by gold and silver will never have inflating money supplies, and therefore will be trusted as a store of value and medium of exchange. Dishonest banks(fractional-reserve,fiat,etc.) will go bankrupt, and the managers will rightfully be put in jail for fraud, with their assets seized in order to pay off the creditors. This will eliminate the incentive for banks to inflate the money supply, effectively regulating the industry with no government intervention.

Cheers,
Matt

I never disputed that the Fed is a private corporation set up by statute. However, since the charter of the Fed is specified by the regulations created by the government, it is a pretty unique private corporation.

You didn't care to make a guess about the percentage. But would you be suprised if i said over ninety percent of the profits go back to the government? Member banks are required to invest in the Fed and receive a 6% dividend on their investment. Other than that the profits go to the treasury.
I'm sure you already new that since you stated you did the research. So my question is, if their profits are specified by statute to be pretty much the equivalent of a bond how exactly do the controllers of the Fed gain from their supposed control over the Fed? I really would like to know how it is supposed to work.

Inflation is a wealth tax quite true. Tax is the term usually used when the state confiscates a portion of your wealth.




Actually I think that people and corporations have quite alot of freedom to make money already. When you write a cheque against your account that piece of paper is then exchanged between various parties as if it was worth something. Until that check is returned to you, it can be and often is used like money. Grocery stores will take a cheque instead of cash for example.

Newellm, I'll have to give props to the author of the Creature from Jeckyll Island, he does a very good job. I didn't read all of this speech but what I did read was pretty accurate.

Creature from Jeckyll Island speech

He acurately depicted the Fed as a government- private corporation hybrid that is effectively controlled by the government.

He correctly notes that the bulk of the profits from issuing new money goes to the government.

He also strangely harps on about fractional reserve banking as if it was something that is due to the Fed and fiat money whereas it is simply how banking works, they had fractional reserve banking long before they had fiat money.

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Hello Ive enjoyed reading the entire thread (2days later) and it would seem the discussion agrees (at times) to support the basic notion that current health of the US economy(debt both public and private) faced with spiralling energy prices would not fair well . I agree that a system based on a fait money system run at the extreme of reserve lending would suffer perhaps at levels not before experienced in North America .

I wonder how over time in light of oil at a 25% annual increase would ripple through the economy and the effects it would have on the core of the economy the middle class.

If anyone would like to comment on the effects to debt, default on debt , wages , standard of living, pension plans , health care etc


thanks enjoying peak discussions

As we correctly linked earlier, much earlier in this thread, the Federal Reserve along with the Bundesbank and the Bank of Japan were in fact separate legal entities. I am not going to look for the links again, but if you scroll back through this thread you will find the posts if you're interested.

Of course, if they were not separate legal entities they could not enter in legally binding contracts for example. But their main shareholders in the case of the Bundesbank and the Bank of Japan are the Federal Republic of Deutschland and Japan who own their share capital.

It is my understanding the Federal Reserve, like the BIS, is owned by its member banks. However, there is no conspiracy and it is not a big secret. They are legal entities. If their charter and memorandum of association or incorporation charges them with certain duties then like any public corporation or limited liability company they have a fiduciary duty to perform them.

And if the Federal Reserve is bound by its charter to return retained earnings back to the US government then it is all a matter of public record if you can be bothered looking for it. I know I cannot be bothered one way or another!

Sometimes we waste so much time just having to cover the same well-plowed ground everyweek. Nothing to do with peak oil at all. Debunking the Federal Reserve Conspiracy Theories

UPDATE: I think this guy's CV says it all!
In otherwords as a publisher of videos and books he is looking for the type of sensationalism that sells books and videos. Infotainment. He is not interested in impartially presenting the facts in all their routine dullness. Not unlike Micheal Moore. Nothing like the hint of a good conspiracy to sell books.

Hi Mr. Bill,

I don't think I am diagreeing with you in any way about the ownership and controlling structure of the Fed. and what is more neither did Mr Griffin.

You're quite right that Mr. Griffin does hype up the conspiracy but at least he seems to get a few more things right than your average "Fiat money is a ponzi scheme" conspiracy theorist on PO.com.



I was bothered enough to look it up and it is somewhere up in this thread but I can't be bothered to find it again. As I recall it is the 4th or 5th largest income source to the federal government and that the Fed distributes about a billion dollars a year to it's member banks.