Tuesday, February 5, 2008

The Big Bank.

Hi everybody. Let's try to talk about economics today. Let's try to know what is the Federal Reserve, who owns it, and above all if this owners are making the interests of all American and World citizens or what. Trying to find all the informations I needed to write this article I right away understood two things: the first is that this issue is really hot and the second is that the Federal Reserve is not a bank, is a system. If you go and see the Fed official web site (federalreserve.gov), you won't read Federal Reserve Bank but: Board of Governors of the Federal Reserve System. Ok, is a system. How is this system is organized? The basic structure of the system includes:
  • The Federal Reserve Board of Governors,
  • The Federal Open Market Committee,
  • The Fedral Reserve Banks,
  • The member Banks.
I'll ignore in this occasion the first two point to focus on the third and fourth, I know, maybe looking inside the Board of Governors and the Open Market Committee we'll find some nice surprise, and we'll have other occasions to talk about that. Ok, we have 12 Banks (the Federal Reserve Banks), located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Luis, Minneapolis, Kansas City, Dalas, S. Francisco. These 12 Regional Banks have the power to determine major aspects of banking activity. The only "ownership" of the Fed is in shares of each of the 12 Regional Banks wich are interely owned by the private member banks (point nr. 4) whitin their respective districts, according to a formula based on their size. The ownership is highly restricted in that such ownership is mandatory: the shares can't be sold and they pay a guaranteed 6% annual dividend. So what about these member banks? National banks are required to be member bank in the Federal Reserve System, other banks (not the national ones) may elect to become member banks according to the Federal Reserve of Boston. Ok, everything is clear, national banks control the 12 Regional Banks that control Federal Reserve (as concept or system). If you wanna take a look at the national banks just go to helpwithmybank.gov and digit "list" on the banner, then "national bank list from the OCC". That's the long long long long long list of the banks that own Fed, i mean part of them, we should consider the non-national banks as well. The list is long, and very funny...you can find: Armed Forces Bank, Banker's Bank, Trinity Bank and others funny names. Actually all these banks are PRIVATE that's mean that individual banks whitin the system are privately owned for-profit businesses. They decide on their own where the money will be invested. Ok, the owners of the American (and European) Central Banks work for profit, that's it. They want to make as money as possible. Isn't it weird? I'm sure if you go to an elementary school and ask to a 7 years old kid what does he think about the fact that the owners of the Insitute that is supposed to create money is a mass of private banks working for profit; I bet he will answer that is impossible to be true. But i'm afraid this is terribly true. I mean, I'm not a comunist, leninist or statalist...but...come on. I'd like the bank supposed to create our money could belong to the entire community, under a Government kind of control.
How these banks make profits partecipating at Fed? To know that, we primarily have to understand the concept of State, Public, National or Government Debt. Nobody knows what exactely is and where it comes from, what we just know is that we have to pay it, that's why taxes exist. We can say, in an easily way, that this debt is State's indebt towards an organization (that shouldn't be private) since it has created money. Billions of billions of dollars come up from nothing...because Central Banks create more or less 98% of them using computer technology (virtual money), remaing 2% as banknotes, that cost a few cents to be produced... virtual money's cost production is zero! Starting 1971 there isn't any gold as reserve beside the creation of money so banks are able to create as much money as they want with an interest that they decide (the discount rate). It's just paper guys, nothing else. Is all this money that the Central Bank produce, going to be delivered to Governments or States as a gift? Unfortunately not. The entire sum of money that the Central Bank give to the Government figure as "expense" (or outlay) in its accounting. At the same time the Treasury Department create State Securities from nothing as well, they exchange them: money for State Securities that naturally represent a State Debt, the debt that we, all together, have to pay. Let's get clearer: I'm the Central Bank, for this year I decide to create and put into the system 100 billions dollars. To create this sum of money I will spend 30/40,000 dollars ok? I give this money to the Tresury Secretary of my State, this sum of 100 billion will figure as outlay as a liability in my accountig, I mean, on the debit side. Now, I can pretend 100 billion State Securities from the Government, the Treasury will create it as a magician, and will give it to me. So: I gave 100 billion banknotes or virtual money to the Treasury that gave me back 100 billion in State Security. No profits. Right? But there is a problem...the State Securities the Government gave to me in a view to be discounted have been already bought by private citizens as investment. Where this money is? I honestly have no idea. I just can say that a guy, Denis Robert, published an excel tab showing 33,000 bank's accounts where all this money (he affirms) have been put. The end of the story is this: the more money Fed produce and put into the system through private banks, the more mine, yours, ours debt grow up. So I wonder: why a Government or a State, using its own sovereignty, could not arrange its own money creation and production? In this way no debt for people would be created, and - I guess this is the problem - no extra profits for private banks.
I apologize if I couldn't be clearer. The next post will be strictly correlated to this one, a kind of part two. We'll talk about President Kennedy and the executive order 11110. Thank you for your time and attention.

- wikipedia.org - federalreserve.gov - helpwithmymoney.gov - euroschiavi on google video -

1 comment:

Audrey said...

That was the best explanation of our Federal Reserve System that I've read. I could never understand it before