Finding the fulfillment that you inwardly seek.

I am reading The Values Factor: The Secret to Creating an Inspired and Fulfilling Life By Dr. John Demartiini and want to share this with you:

Only by being true to yourself can you maintain your integrity, achieve your own authority, and find the fulfillment that you inwardly seek. The alternative was chillingly described by Emerson’s contemporary Henry David Thoreau, who wrote, “The mass of men live lives of quiet desperation. What is called resignations confirmed desperation.“ Thoreau saw quite clearly that most people never tap into what really inspires them. Instead, they subordinate themselves to social idealisms (what they think they “ought” to do), the values of others whom they look up to, or their own limited beliefs about what is possible for them. They stand in sharp contrast to the people who dare to leave a legacy by creating a life based on their highest values, a life that makes a unique contribution to current and future generations of humanity.

Isn't it interesting that so many people subordinate themselves to great leaders – political, religious, and artistic leaders – and yet, the great leaders achieved their influence precisely by not subordinating themselves? Great leaders refuse to placate the social norm or to remain stuck in stagnate traditions or old paradigms. Instead, they embrace the challenge of giving birth to new ideas and new visions, and succeed in making significant and novel contributions to the world.

(The Values Factor: The Secret to Creating an Inspired and Fulfilling Life

By Dr. John Demartiini © 2013; Berkley Books, New York, NY; p. 34)

How Money Is Created: Part 3 – Fractional Reserve Banking

In Part 2, I discussed the illegal activities of the Dutch bankers who came up with the idea of creating money out of thin air. Today, this is called “Fractional Reserve Banking” and it is not only legal – it is the foundation of our banking system. It is also one of the best kept unhidden secrets in the world. I bet you will probably be surprised to hear that most bankers don’t know anything about it either.

Here is how I found out about it. Back in the “old days” I was a banker and graduated from the Graduate School of Banking at LSU (back then it was the School of Banking of the South at LSU). I remember the first class we had about the Federal Reserve. The lecturer worked for the Federal Reserve and everyone in the class was an officer in a bank. He began the lecture that day by saying something like  – “How would you like to learn how to create money out of thin air?” Of course, we all shook our heads “yes.” He looked at us for a few minutes without saying anything and then smiled and said – “You have been doing it for years!”

The amazing thing about this secret is that anyone can find out about it. A great source is the Federal Reserve itself. It published a booklet called Modern Money Mechanics and you can download a pdf version for free at -- https://ia600202.us.archive.org/3/items/ModernMoneyMechanics/MMM.pdf. When I use quotes from it, I am referring to the “PDF Page Number.”

Let’s begin with a quote from the booklet:

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their "deposit receipts" whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment. (Modern Money Mechanics p. 3).

The only things this version left out is that the people depositing the gold and silver didn’t know what the goldsmith-bankers were doing with their money -- and it was illegal.

What is fractional reserve banking. Below is the definition:

A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal.[i]

This is the definition of reserve:

Currency held in bank vaults may be counted as legal reserves as well as deposits (reserve balances) at the Federal Reserve Banks.

(Modern Money Mechanics p. 4)

Now let’s see how fractional reserve banking works using a reserve requirement of 10%. This means that the bank must keep 10% of every deposit in cash in its vault or on deposit with a Federal Reserve Bank. This example begins with a man named Adam who has $1,000.00 and deposits it in a bank.

The bank takes Adam’s deposit of $1,000 and places $100 in reserve and loans Bill $900. Adam’s bank account shows that he has $1,000 in the bank and Bill’s account shows he has $900 in the bank. The bank only has $100 in cash, thus it created $900 of Bank Credit Money out of thin air. The US Treasury Department and the Federal Reserve were not involved. No Federal Reserve Notes were created. The new $900 Bank Credit Money was created by making an entry in a set of books.

Now, using the above example, you will be able to follow Bill’s $900. Think about the mechanics of each new transaction.

If we looked at the bank’s books at this point we would see this:

Adam’s $1,000.00 deposit has been used to create $5,859.00 of new Bank Credit Money and the bank is now being paid interest on it.

Do you owe the bankers any money? How much does debt influence your life? How much influence and power does it have in the lives of its borrowers? How much real property can a lender take from borrowers if they can’t pay and thus turn money made out of thin air into real property?

There is much more involved here than simply as business transaction. The power to do this creates an elite class of people who affect – our political system, our justice system, our economic system, our educational system, our military, our relationships with one another – just to name a few!

How much money can bankers create out of thin air?  We will discuss that in the next part of this series – Part 4.

PS: Adam’s $1,000 will ultimately create $8,906.00 (see the example in Modern Money Mechanics, pages 6-11). 

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[i] http://www.investopedia.com/terms/f/fractionalreservebanking.asp

Who Are the Primary Dealers of the Federal Reserve?

In “How Money Is Created: Part 1” I mentioned the “Primary Dealers.” They are the only ones authorized to trade directly with the Federal Reserve System and they buy US Treasury Bills, Notes & Bonds and resell them. As of October 31, 2011 according to the Federal Reserve Bank of New York, the Primary Dealers are (I rearranged them by nation):

Canada

● Scotiabank Global Banking and Markets

● BMO Capital Markets Corp.

● RBC Capital Markets, LLC

France

● BNP Paribas Securities Corp.

● SG Americas Securities LLC.

Germany

● Deutsche Bank Securities Inc.

Great Britain

● Barclays Capital Inc.

● HSBC Securities (USA) Inc.

Japan

● Daiwa Capital Markets America Inc.

● Mizuho Securities USA Inc.

● Morgan Stanley & Co. Incorporated

● Nomura Securities International Inc.

Scotland

● RBS Securities Inc.

Switzerland

● Credit Suisse Securities (USA) LLC

● UBS Securities LLC.

United States

● Cantor Fitzgerald & Co.

● Citigroup Global Markets Inc.

● Goldman, Sachs & Co.

● Jefferies & Company Inc.

● J.P. Morgan Securities LLC

● Merrill Lynch, Pierce, Fenner & Smith Incorporated

Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence. (John Adams)

How Money is Created: Part 2 - Creating Money Out of Thin Air

In Part 1 of this series, How Money Is Created, we learned how the Federal Reserve Bank creates money in the form of Federal Reserve I.O.U.s called “Federal Reserve Notes.” In this part we will learn about the origin of another form of money called “Bank Credit.” The story begins in the Netherlands in the 17^th century.

The Netherlands had become a commercial crossroads where the East and West met and created a new economic class -- the first middlemen. They discovered how to make huge profits by purchasing unfinished imported products, finishing them, and then selling them to exporters. They became accomplished craftsmen and benefited handsomely.

Their success did not go unnoticed by “old money” aristocrats, who spoke of them with disdain. They called the middlemen “commoners who were only devoted to making money; crude and greedy people that were cursed by bad manners.”[i] But, as the power and wealth of the “commoners” grew, so did their innovations and they transformed commerce --  free ports, secure titles to land, efficient processes for settling lawsuits, teaching bookkeeping in schools, and licensing agents to sell marine insurance. 

Commercial transactions required immediate access to gold and silver coins or bars, and that created a number of problems and increased risks. Gold and silver were bulky to handle, heavy to transport, robbery was always a risk, just as was the loss of value through normal wear, as well as being “shaved” by thieves who melted down the shavings. The Dutch middlemen looked for ways to simplify financial transactions and decrease the risks involved. A new financial institution was created that accepted foreign and local coinage at its real, intrinsic value. The Bank of Amsterdam was founded in 1609 under protection of the City of Amsterdam and laws were passed that required anyone doing business in the city to have an account at the bank.

The bank accepted deposits of gold and silver and stored them in their vaults, after deducting a small coinage and management fee. The bank was basically a warehouse and was nothing like banks today. Depositors delivered their gold and silver to the bank and received deposit receipts. The bank stored it until the depositor returned and withdrew it. When customers needed gold or silver to transact business, they also had to go to the bank and withdraw it. However, as time passed, customers and merchants discovered they could transact business by simply trading deposit receipts instead of physically handling gold or silver. Deposit receipts became known as “bank money.”[ii]

“Bank money” quickly became very popular and resulted in a rapid increase in bank deposits. But, as time passed, the bankers realized that at any point in time they only needed a small portion of the gold and silver they were holding for depositors to handle the cash requirements of conducting business. They secretly set out to determine the minimum amount of gold and silver they needed to keep on hand to meet the average withdrawal demands of their depositors – and they made sure that it was done in absolute secrecy.

Next, they started lending money, but they gave borrowers “bank money” instead of gold or silver. If a borrower came to withdraw gold or silver that had never been deposited in the bank, the bankers paid him with gold or silver from that owned by another depositor. As long as the majority of their customers did not show up at the bank at the same time and demand gold or silver, the bankers were able to continue the scam -- and they became very rich. How could they not become rich when they created money out of thin air, loaned it to borrowers, and charged them interest?

In the beginning they only lent a small fraction of their customers’ deposits, but slowly they increased it to more than fifty percent. The thing they feared the most, that depositors would lose confidence in the bank and demand their gold and silver, happened in 1791. A major panic occurred and forced the bank to close. Depositors lost a great deal of their deposits.  The bankers were tried and found guilty.[iii] The story of the criminal actions of the bankers faded from memory as time passed, but the huge profits their scam produced by convincing people to trade pieces of worthless paper as if they were gold and silver was not forgotten by an elite few.

So, what do you think happened to the idea of creating money out of thin air? Are you sitting down? Would you be surprised to learn that it became the model for our modern banking system? Today, this system is called “fractional reserve banking,” and we will discuss how it creates huge amounts of money called “Bank Credit” today in Part 3 of this series. Unless you understand “fractional reserve banking,” you cannot understand the facts behind the major economic and political problems facing us now.

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[i] The Gods of Money: Wall Street and the Death of the American Century By F. William Engdahl © 2009; published by edition.engdahl; Wiesbaden, Germany, p. 43

[ii] The Gods of Money; p. 48

[iii] The Gods of Money; p. 49

How Money Is Created: Part 1

The first way money is created in American begins with the Congress.

(1) Congress passes laws that specify what the government will pay for.

(2) When money is needed to pay for something that Congress has authorized, the Treasury Department creates Treasury Bills, Notes and Bonds in the amount that is needed. The Treasury Bills, Notes and Bonds are I.O.U.s that taxpayers have to pay.

(3) The Treasury Department orders the amount of money they need and sends the Taxpayer I.O.U.s over to the Federal Reserve Bank to pay for the new money created by the Federal Reserve. (By the way, the Federal Reserve is not a government agency. It is a corporation owned by private banks.)

(4) The Federal Reserve Bank creates the new money ordered by the Treasury Department.

(5) The new money created by the Federal Reserve Bank are I.O.U.s from the Federal Reserve Bank called “Federal Reserve Notes.” The Treasury Department traded Taxpayer I.O.U.s for Federal Reserve Bank I.O.U.s.

(6) The Federal Reserve Bank delivers the new money (Federal Reserve I.O.U.s) to the Treasury Department.

(7) The Treasury Department pays the bills with the Federal Reserve I.O.U.s.

(8) The Federal Reserve Bank sells the Taxpayer I.O.U.s to 21 Primary Dealers (banks or securities broker-dealers). They are the only ones authorized to trade directly with the Federal Reserve System.

(9) The 21 Primary Dealers sell the Taxpayer I.O.U.s to the public for a profit.

(10) Uncle Sam pays the interests due on the Taxpayer I.O.U.s (Treasury Bills, Notes & Bonds) to those who hold them.

(11) If the Treasury Department does not have enough money to pay off the Taxpayer I.O.U.s or the interest due on them, the process starts over again (go back to #1 above).

Making good decision requires knowing the facts about the subject. This lesson should have been taught to you in elementary school. But, I have met many people -- from high school drop-outs to college professors with Ph.D.s -- who knew nothing about how money is created. Now that you understand this phase of money creation, think about who is involved, what they do, and how they make money. 

Make sure you share this with others and teach it to your friends and family. You know that they won't learn about it in most schools.

Well that's enough cogitating for this lesson.
JM

Random Thought About the Power of the 1%

The power & wealth of the 1% depend on their ability to keep the 99% weak, poor, ignorant, unformed and in conflict with one another. The institutions they bless with their favor – wealth and support – political, economic, educational, media, and religious are tools they use to accomplish their goals of keeping the 99% weak, poor, ignorant, unformed and in conflict with one another. What do you think?