Most people don’t really understand the truth behind our banking system because it isn’t taught in our schools, not even to financial professionals. Oddly enough, the inconvenient history is omitted from all educational curriculums. I obtained a business degree in finance and there was one thing that never was taught to me about the origins of our banking system that I believe is key to the state of our banking system and our economy today. It is the fact that it was created under cover of legislation that was supposed to protect the economy and stabilize it. That is the primary mission of the Federal Reserve Bank. However, the real motivation was to shield the owners of the banks from competition and create a cartel.
I was also created to start a franchise that could print a fiat currency. A fiat currency is one that has no basis of value except by the good faith in the government to pay its debts. It means that if more money is needed in the economy, the bank simply creates it. This central bank could also then take control of all the reserves of all banks to protect the more wreck less banks from runs at the cost of the conservative ones, and get access to taxpayer money when the bank is in trouble. All the while, the Federal Reserve Act of 1913 was sold as a law that would protect the public. In terms of stabilizing the economy, the Federal Reserve Bank has failed miserably. In terms of reaching its true and hidden goals, it has been extremely successful.
People believe that the financial crisis is somewhat of a mystery. But every financial crisis we have had since the Federal Reserve Banking System has been in place has been related to debt. Under the current system, debt is used to create new money or to shrink the supply of money (by paying debt off) to attempt to control the economy, and allegedly stabilize it. In reality, since the loans were made with money created from nothing, the bank loses very little money. It is money that it never had in the first place. Technically, a retail bank with too many bad loans becomes insolvent, so the game is to roll bad loans over into larger ones and creates more money and gives the borrowers more money to continue to make the interest payments. There is also insurance that backs loans, so the government will pay for bad loans with taxpayer money. The Federal Reserve Bank has convinced the government that allowing big banks to fail would create great hardship in the economy, however, it is the massive creation of debt that fuels this system that causes the great hardship when the final cost of bailouts is passed to the public in the form of inflation due to an excess supply of money created by excessive lending to cover bad loans.
There is a rich history of how the banking bailout system has …