Federal Reserve System CAUSES unpayable debt, unemployment, inflation, high interest rates

The Federal Reserve System’s mechanics cause ever-increasing and unpayable debt (over $17 trillion now), unemployment, inflation, and high interest rates. Ellen Brown is right: it’s time to transform the Fed into a public utility. This shift from the Fed being a privately-owned business to maximize its owners’ profits to a public service would end the national debt, provide full-employment, end inflation, and have interest rates as a tool to manage money supply and/or pay taxes. Of course, this would require transparency and accountability unimaginable under current conditions.

On the 100th birthday of the Fed, let’s examine their factual mechanics to create what we use for money (revised from 2011):

The Federal Reserve System causes unpayable debt: Because private banks and their admitted privately-owned pinnacle bank, the Fed, create credit/debt for what we use as money, this becomes the mother of all conflicts of interest (so to speak). If the Fed were to deliver its three stated goals (page 15) of “maximum employment, stable prices, and moderate long-term interest rates,” we have a stunning observation: an honest Fed would at least ask for independent professional cost-benefit analyses to determine if government-created debt-free money would do better than their ever-increasing and unpayable aggregate debt

US debt is unpayable under the Federal Reserve System because the US does not have a money supply; it’s a “debt supply.” If we paid the debt, what we use for money would disappear entirely. The 1% in government gave the 1% in banking legal authority to create debt and lend it to the 99% of us at interest. The 1% in government can also borrow at interest and then tax the 99% to pay the interest cost. The Federal Reserve System causes Americans to be perpetual debt-slaves. This is the 1% parasitizing the 99%’s work.

Federal Reserve System causes unemployment: To maximize employment, isn’t the only policy one can imagine to do so for the government to use debt-free created money to be the employer of last resort for infrastructure investment?

Think about this, please. Can you think of any other policy that could maximize employment other than the government employing people for useful work who do not find it in the free market?

Debt-free money has no direct cost. And because infrastructure investment (hard and soft) historically contribute more economic output than cost of inputs, we have the triple benefits of full employment, the best infrastructure available, and lower overall prices.

Federal Reserve System causes inflation: Banks expand what we use for money, credit, when they make loans. Banks profit from making loans. Increased credit, our “debt supply” and Orwellian opposite of debt-free money supply, works to increase inflation. So in our current Federal Reserve System, the very profit-generating mechanism of the banks is in conflict with a stated goal of the Fed. The 1% is thereby causing inflation to charge the 99% interest on the increasing “debt supply.” The 99% pay for this twice: in the decreased value of their savings and by paying interest.

Federal Reserve System causes high interest rates: Corporate banks with fiduciary responsibility to maximize their own profits are OBVIOUSLY NOT the best people to minimize interest costs. Banks maximize their profits by maximizing interest rates. Minimizing interest rates would occur only at non-profit rates as a public service. Bank profits are over $100 billion a year; a cost to the average US family of $1,000/year (~100 million US households). This $100 billion cost doesn’t include all the business and advertising costs that would disappear if banking were a simple public service.

The simple and obvious solutions: Many groups and citizens work to explain solutions that are indeed obvious upon inspection. Leaders include Public Banking Institute and American Monetary Institute. Benefits of the solutions:

The 1% in government changed the definitions of unemployment and inflation to mask their damage: The 1% lie to the 99% every time these figures are reported because they do not remind us of the changed definitions. When adjusted to their previous definitions, economist John Williams’ Shadow Stats website shows inflation to be at ~8% higher than officially reported (and compare prices here). Unemployment is roughly double when adjusted to its previous measure. The same criminal liars will never honestly ask to compare the system of the 1% that we have to alternative systems.

Former Assistant Secretary of the Treasury and Assistant Editor for the Wall Street Journal, Paul Craig Roberts explains:

“The unemployment rate, as reported, is a fiction and has been since the Clinton administration.  The unemployment rate does not include jobless Americans who have been unemployed for more than a year and have given up on finding work. The reported 10% unemployment rate is understated by the millions of Americans who are suffering long-term unemployment and are no longer counted as unemployed. As each month passes, unemployed Americans drop off the unemployment role due to nothing except the passing of time.

The inflation rate, especially “core inflation,” is another fiction.  “Core inflation” does not include food and energy, two of Americans’ biggest budget items.  The Consumer Price Index (CPI) assumes, ever since the Boskin Commission during the Clinton administration, that if prices of items go up consumers substitute cheaper items.  This is certainly the case, but this way of measuring inflation means that the CPI is no longer comparable to past years, because the basket of goods in the index is variable.

The Boskin Commission’s CPI, by lowering the measured rate of inflation, raises the real GDP growth rate.  The result of the statistical manipulation is an understated inflation rate, thus eroding the real value of Social Security income, and an overstated growth rate.”

And why do you have to hear this from a high school economics teacher rather than government, corporate media, or economics journals? Chair of the Economics Department of George Mason University (ranked 8th in the world for political economy by econphd.net), Donald J. Boudreaux, concludes that US politicians in their economic policy act like pimps who supply taxpayers’ services as enslaved prostitutes to corporate customers who lust after the taxpayers’ money.

Corporate media has been suspect since 1917 when the House of Representatives found evidence (but never formally investigated) that J.P. Morgan purchased the editorial boards of the leading 25 publications.

As for economics journals, half their editorial board members are current or former Fed employees.

Together we’ll accomplish our three objectives:

  1. Public recognition of the 1%’s crimes, centering on war and money.
  2. End war and money crimes that annually kill millions, injure billions, and loot trillions of our dollars.
  3. Build a brighter future for 100% of Earth’s inhabitants.
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  • WrenchMonkey

    This is news? Anyone who has been paying attention would know that the Federal Reserve Act of 1913 turned the country, lock, stock and barrel, over to the bankers. They’ve been persistent and patient and it’s taken them just one century, with a few “regulatory” bumps in the road, to reduce this country to “third world” status. The international banking cartel is now working just as diligently on the rest of the “civilised” world. It won’t be much longer until Earth is a bona fide third world planet.

    Just my opinion

    • colinjames71

      Unfortunately, it IS news- to most people, sadly- so you never know when this might be someone’s first time reading this suff.

      • WrenchMonkey

        I suppose you’re right. It’s amazing. Usury has been the weapon of choice for the money power forever. Get control of the money and you’ve got control of the empire.

  • WrenchMonkey

    This is news? Anyone who has been paying attention would know that the Federal Reserve Act of 1913 turned the country, lock, stock and barrel, over to the bankers. They’ve been persistent and patient and it’s taken them just one century, with a few “regulatory” bumps in the road, to reduce this country to “third world” status. The international banking cartel is now working just as diligently on the rest of the “civilised” world. It won’t be much longer until Earth is a bona fide third world planet.

    Just my opinion

  • Tonto

    Carl Herman- “Build a brighter future for 100% of Earth’s inhabitants.”

    Yeah, sure, Carl. You are so incredibly funny, because it is absolutely impossible to take you seriously.

    You’re really better at this than Simon Wheeler.

  • Sam Spade

    Well, if you like the current system, then I guess she is right. Because moving money printing from a private bank to the government will just give the Banksters another umbrella under which to print more money and bribe more officials.

    We have banking regulations now, right? And they don’t work, right? Why? Because $1 trillion will bribe a lot of government officials. And, if we give the Banksters the cover of government ‘ownership’, it still will.

    The power to print money is just to strong for anyone to handle. The force of greed is too great. The only solution is to go back to using equity for money. Like gold (NOT ‘gold-backed currency’), which has been a stable assert since as far back as economists can make reasonable guesses.

    Got questions about how it would work? Read The Creature From Jekyll Island by Griffin for details. Or, if that’s too heavy, pick up Thieves Emporium by Hernandez. Either is excellent.

    So, yes, if you want more of the same, follow Ellen Brown’s stalking horse. But if you would rather get back your freedom, do away with any central bank, ‘owned’ by the government or otherwise.

    • Carl_Herman

      Sam: your argument seems the strongest for those preferring a gold-based system for money: human beings are not capable of avoiding corruption with any created symbol for value (such as paper).

      As I stated, the technical/mechanical solution is unimaginable in today’s corruption. That is why I advocate for arrests of the obvious criminals, and whistle-blowers’ freedom so humanity can get the whole story of how far we’ve been played.

      The ability to use created money or credit to directly pay for public goods and services has powerful advantages for efficiency and managing supply relative to economic output.

      All proposed solutions can be publicly considered if we win.

      • Sam Spade

        There are two assumptions in your comment that I must question. The first is that a technical/mechanical solution is unimaginable with today’s corruption. That is not true. If seigniorage is close to zero, there will be no financial advantage to capturing the creation of money. An equity money satisfies this requirement, though I would argue that gold is the best of the available choices.

        Your second assumption is that we can count on someone in government to be uncorrectable if we allow money printing: Good legislatures to make excess printing legal, good cops to arrest those that do it, good judges to recognize what is excessive and put the perps in jail. If the corrupting influence of free money is available, no matter how honest any individual is when he takes up one of these positions, he will become corrupt in a short time.

        We are back to the original conclusion. Regardless of how attractive state printed money is, the only honest money will always be equity money.

        Have you ever read the novel Thieves Emporium? You would probably find it very interesting, not so much for the ideas which it presents (which are quite basic for someone with your level of understanding), but because it is an excellent introductory read for anyone not familiar with the issues.

        http://www.amazon.com/Thieves-Emporium-Max-Hernandez-ebook/dp/B00CWWWRK0

  • unflippingbelievable

    The American Revolution was, in large part, due to the British demanding that the American colonies stop printing their own money (scrip) and instead borrow and use British pounds from the Bank of England. The BoE pressured the King into that war. After winning that fight, the USA eventually put its head into that same bankers’ noose with the creation of the Federal Reserve. It is utterly insane that a free nation would pay interest to bankers on newly created money rather than just issuing the money.

  • unflippingbelievable

    p.s central banks love war, as it forces massive debt to be laid on the population. War = profit for the large private banking cartels, such as that led by the Fed.

  • theblues77

    What makes you think a public utility can’t be corrupted as well?

  • 1Robert4

    It would be true that “Debt-free money has no direct cost. And because infrastructure investment (hard and soft) historically contribute more economic output than cost of inputs, we have the triple benefits of full employment, the best infrastructure available, and lower overall prices.”

    But only if USA reverted to the former Australian REDS scheme method of Federal Grants to States & Local Governments to direct hire from unemployment benefit labor and usingntheir own near idle Maintenance Engineers, staff labor, equipment etc with a small local tax contribution even. Rather than as they now do subcontracting to the likes of Bechtel Corp to take huge profits from your Tax dollar spending and debt creations. Viz.,

    Rob Carter : Inserts the REDS Scheme Direct Hire Regional Employment Development Scheme (What PK admits JMKeyenes go “cleaver stuff” right without PK’s dream “Stimuluis” of “Trickler out” Profit to rich 1% Corp’s in stead of Keynes “Trickle up” from REDS created “Domestic disposable Incomes” Krugmsn changes evidence from Keynes to suit each opposing argument he creates. REDS did not allow subcontracting to Corps. For profit only direct hire of unemployed (So half the cost came from Fed to Fed by reducing welfare UEB payments to build infrastructure, much more of the cost came from Local Government using their near idle Maintenance plant FOC to Fed. And some from their local share of LG Budget, their staff Engineer design & Supervision FOC, in lieu of Bechtel Corp and so-on.

    Aussie Gov.t. Library Fed Report extracts…. “Early responses to higher unemployment included job creation schemes and subsequently, training courses to increase the employability of the unemployed.

    More recently these have been replaced with a regime that focuses on forcing the unemployed to comply with ‘responsibilities’ including Work for the Dole, an approach enforced by the CES, Job Network and Centrelink as discussed in Section 3.

    Section 4 outlines Australian regional policy developments in relation to the federal, state and territory governments. Concluding remarks follow..[…].. Conclusions: […].. There is widespread recognition that although local government is ideally placed to assess community needs, councils are financially constrained due to limited revenue raising abilities and the increasing burden of service
    provision due to reductions in services provided by other levels of govt…[…]..

    The major impetus for the development of localised initiatives has been the failure of national policies to address the major problems associated with unemployment over a prolonged period of time. Compounding the ineffectiveness of employment policy that has concentrated on supply-side solutions has been the preoccupation of governments with fiscal responsibility that is interpreted to
    mean that deficit budgets cannot be tolerated. Hence, there have been significant cuts in the financial resources devoted to public services by both federal and state governments and local government is financially constrained.

    Other policies, notably the contraction of public housing & restricted eligibility has further entrenched areas composed largely of people suffering extreme disadvantage and amplified social problems. In these circumstances the contribution of initiatives such as social enterprise to solving unemployment problem can only be described as woefully inadequate.

    In summary, regional policies implemented by the federal, state & local governments have generally been small scale and incapable of addressing major problem of labour underutilisation that has persisted over the past 3 decades. ..[…].. The REDS Details are :- in summary…[..]… The Regional Employment Development Scheme is designed to improve employment opportunities in areas of high unemployment by encouraging local initiative in these areas to develop suitable work programs.

    Projects with a high proportion of funds allotted for wages are generally preferred. Recruitment of labour for projects under the Scheme will be administered by the local, office of the Commonwealth Employment Service. excluding supervisory and specialist personnel, all labour requirements will
    be drawn from persons eligible for unemployment benefits.

    In selecting the labour required, preference will be given to persons with dependents who have been unemployed the longest. Married persons working part-time or on short time will not necessarily be
    disqualified from employment on projects.

    All persons employed under the scheme will be ” worktested” for suitable employment at not less than monthly intervals and their continued employment on a project at Australian Government expense will be conditional on there being no such alternative employment.

    This will ensure that projects do not compete for labour with regular employers.

    Proposals for projects may receive assistance may emanate from such bodies as local government authorities, community groups, special purpose groups, business enterprises, or State Departments. They should receive the endorsement of the appropriate local government authority.

    RC adds: we improved the scheme by supervisors, design Engineering & specialist staff could be contributed from the applicant body’s own Engineering & Specialist maintenance staff, likewise standby emergency vehicles and maintenance machinery not routinely deployed at the time. Local
    Government/State applicants could also contribute budget support reserves as available to improve acceptability to the Federal agency approval process for REDS financial proportion.

  • Christian Abel

    “However, in the real world something is money only when the government authorizes it as “legal tender.””

    What a bunch of crap.

    You are illiterate.

  • Anthony J. Alfidi

    US government statistics can track the wage-price spiral and a key statistical discrepancy for economic growth. This should indicate a transition from stagflation to hyperinflation. http://alfidicapitalblog.blogspot.com/2013/12/measure-wage-price-spiral-and-economic.html

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