Government $ Spend Trillions $ Government Payroll$ Federal Programs$ War

Can only spend whatit takes from it’s citizens

Federal Reserve$ 16 Trillion

1913

IOU’s ( Bonds )Fiat Money(Paper) INFLATION !!

The Effect is: High Prices!•Mal-investments•Boom and Bust Cycles•Recessions

The General Theory, 1936

All Spending = Income

Keynesian Economics

Fractional Reserve Banking

FederalReserve

Sets Fed Fund Rate

Discount Rate

Buys the Bonds(Credits Reserve Account by$1 million)

Overnight

Loans @ Fed Fund Rate

Sells IOU’s: BONDS($1 MILLION)Excess Reserves

Above 10% of Deposits

Commercial Bank

Commercial Bank

Deficit Reserves Below 10% of Deposits

Can NotExtendCredit / LoansPrime

Rate ExpandsCredit / Loans

Businesses

Individuals

- 10%

TOTAL: $10MILLIONIN CHECKBOOK MONEY!!

Inflation Process

OPEN MARKET OPERATIONS$1 Million Purchase of Gov’t. Bonds

FederalReserve

Commercial Bank

Securities Firm Wall Street

Sells

Buys

Writes a check ----- Fed Bank

Money Multiplier 10 / 1

$9 Million in New Loans

TOTAL: $10 Million MoneySupply Increase! via Check Book Deposits

Deposits Fed’sCheck $1 Million

Deposits $1 MillionCheck with Fed======== Reserves increase by$1 Million

U.S. Competitive Banking SystemBank-to-Bank Inflation Process

FederalReserve

Commercial Bank # A

Commercial Bank # B

$1 MillionReserves

Lends$9Mcheck bookdeposit toMacy’s

Buys $9 Millionin furniture fromXYZ Company

Check from # AMacy’s

Deposits $9M Check into Bank # B

Bankrupts Bank # A

Bank # BPresents $9M check forredemption from Bank #A

Formula(1 Minus the Minimum Reserve Requirement)Bank #A = $1 Million x .90 = $900,000Bank #B = $900,000 x .90 = $810,000Bank #C = $810,000 x .90 = $729,000 Eventually over 100 banks pyramid $9M on $1 Million in Reserves:

TOTAL $10 MILLION

THE PROBLEM

• The Commercial banking System has Excess Reserves of about ($)1.5- Trillion Dollars!

• Legally they can create ($) 15-Trillion Dollars in new loans (inflate the quantity of money)!

1. Already the National Debt at 16 Trillion is out of control.

2. The pressure on U.S. Treasuries and the Dollar is threatening.

3. Prices on everything are continually increasing and now poised to soar (including interest rates)!