Modern Money Mechanics
The Federal Reserve Bank of Chicago published a booklet titled Modern Money Mechanics, this booklet describes the workings of the Federal Reserve and is available for free online (Link available in the "Sources" page). The above picture are three excerpts of the book that detail what i have described above. "Finally, it must maintain legally required reserves...equal to a prescribed percentage of its deposits...Under current regulations, the reserve requirement against most transactions is 10%." So if the government supplied the Federal Reserve with $1,000,000,000 in treasury bonds, the Fed. would only have to keep $1,000,000 on hand, and the other $9,000,000 can be used as the basis for new loans. "Of course, they do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers accounts." Using the fractional reserve banking process the Federal Reserve can and does create new money out of thin air to loan to people and governments on top of the existing money supply. Although this process can technically go on to infinity the average result is that about $9,000,000,000 would be created out of a $1,000,000,000 loan.
So all money is created out of debt?
Simply put, yes, because all money created is owed to the Federal Reserve. An excellent way to put it is that every dollar in your wallet or anyone elses for that matter, is technically owed to somebody by somebody. Even if you yourself currently owe $0.00 in debt, the money that you possess is still technically owed to the bank by somebody.
If all bank loans require that you pay interest, where does that money come from?
Well to be quite honest, no where. As you probably know any loan you or any one else (including the government) takes out, has to be paid back with interest. Because of this there will always be more debt in a society than there is money to pay off said debt.
“…slavery is but the owning of labor & carries with it care of the laborers, while the European plan…is that capital shall control labor by controlling wages. This can be done by controlling the money.” The Hazard Circular: A document issued by the Rothschild Bank of England in response to the creation of the greenback, 1862
“…slavery is but the owning of labor & carries with it care of the laborers, while the European plan…is that capital shall control labor by controlling wages. This can be done by controlling the money.” The Hazard Circular: A document issued by the Rothschild Bank of England in response to the creation of the greenback, 1862