REPORT DEAD LINKS --- we can't keep this site up-to-date without your help
| THIS TABLE IS A COMMON HEADER / THE INFORMATION BELOW THIS TABLE IS UNIQUE TO THIS PAGE |
|---|
20 Questions / Front cover / page 1.....................................................Page. 1
Introductory information ...................................................................Page. 2 Table Of Contents..............Links to every page in the book............Page. 3 Read the entire book online -- right here, right now. CLICK ON PAGE 3 ABOVE and click on the various subjects in whatever sequence suits your fancy. You Da Boss! This is a 52-page, INTRODUCTION to our new 220-page book “What YOU, I, the EXPERTS, our GOVERNMENT, the AMERICAN PUBLIC and WIKIPEDIA do not know about our Money and Banking system" . . .it is an amazing story of how the engine, the fulcrum and the heart and soul of capitalism works. |
This is page 9 -- go to page 10
Continued from page 8 -- Paper Money was and is-not created by God.
(5) Money is created (a) when a commercial bank lends money to an individual, corporation, government entity or company and (b) when the Fed creates reserves for commercial banks. In (a), When the loans are paid back, the money is extinguished. Presumably, if the loan is not paid back, the bank removes the balance of the money from their books and that effectively extinguishes the money represented by that balance. I could be wrong on that last point. I have never read that in any authoritative source. I frankly do not know how the records of the bad debts are handled.
(6) Transaction account money is created (literally created) when a bank lends money to an individual, corporation, government entity or company. That created money does not come out of the bank’s money or the transaction account of any of the bank’s customers. It is brand new money, indistinguishable from any other money. When the loans are paid back, the money is extinguished. Presumably, if the loan is not paid back, the bank removes the balance of the money from their books through bookkeeping entries
7) Individual banks across the country effectively decide how much transaction account money to create by evaluating potential borrowers and lending money to those who are trustworthy and have adequate collateral and a reasonable plan to use the money wisely.
8) It is worth noting that any single bank can lend an infinite amount of money as long as the bank (1) can find borrowers who will pay the money back and (2) does not violate the banking laws or rules.
Question B. -- Who decides how much money to make in total?
The Central Bank, in accordance with the Federal Law governing banks. The Central Bank can either be a private corporation, a public corporation or a part of the government. In the USA, it is now a quasi government institution / quasi private corporation. The Federal Reserve System is run as a private corporation owned and managed by non-government employees, operating under laws passed by Congress in 1913. The organizational structure is very complex and quite unique. Probably nobody outside of top Fed management understands its operations. By the way, the Fed will tell you that it is audited regularly -- but those audits are, in this writer’s opinion, shams whereby (a) the auditing organization are not independent of the Fed and (b) the results of the audits are not fully disclosed.
Question C. -- Who decides where the money shall be placed in the economy?
1) At the commercial bank level, individual banks around the country decide that. They do so by lending the money to individuals, corporations, private companies and local government entities. Those loans actually create new money out of thin air when the loan is made. By lending that money to responsible individuals who will often use that money to create real wealth, the banks are doing a vital service. In that sense, and only in that sense, -- the money is not truly created -- it is traded for wealth in the form of collateral and a promise to pay the money back at some interest rate. The money is extinguished when the loans are paid back -- but in the meantime most of the loans are invested by the borrowers to create wealth in the form of goods and services. Those goods and services can later be used as collateral for new loans and the system repeats itself endlessly, generating new wealth as it does so.
2) At the Fed and U.S. Government level, -- the money is created when it is lent by the Fed, at interest, to the U. S. Government. The money gets into the economy when the Government spends it or lends it. When it is lent -- presumably it will be paid back and thereby extinguished and will not cause inflation (although I would not bet on it -- it would be easy for the government to “forget” to extinguish that money and, instead, recycle it. When it is spent, it theoretically circulates forever in the economy and could conceivably create inflation if it is not spent wisely in an effort to create wealth.
Question D. How did paper money first come to be? -- See page 11