The Federal Reserve is neither Federal nor a Reserve! It is one of the Greatest Scams of Alltime!

Episode 7: How the Fed Works

The Federal Reserve System, although it makes itself to appear as though it's a government operation of some kind, is in reality a cartel of privately owned banks who are protected by law, and who are in Partnership with the Government.

Here's how it works! Everything starts with the government side of the partnership. As we know all too well, government always spends more money than it has, hence they're perpetualy living in an ever-increasing deficit world.

Let's say that Congress, in its always questionable wisdom, has decided that it needs an extra billion dollars to spend on something or another. So they walk down the street to the Treasury and ask for the money. The Treasury says, "no can do boys, the cupboard is bare." Oh no ... what to do?

So then the Congress and the Treasury walk further down the street to the printing office and run-off a stack of certificates that say either "U.S. Government Bond" or "Note" or "Bill" depending on what the maturity date is going to be.

Then they offer these certificates to the private sector hoping that people will buy them, in effect loaning the government the money that it needs.

Investment advisors will then tell you that these certificates are the most sound investment that you can make because they are "backed by the full faith and credit of the U.S. Government." Uhhuh .... the same government which didn't have the money in the first place and is floating in a sea of seriously mounting debts.

Full faith and credit of the U.S. government means that the government swears on a stack of Bibles that you will get your money back with the promised rate of interest even if they have to tax you to death to raise the money.

All of the certificates have been sold but the government still needs more money. So they now walk past the printing office to the Federal Reserve building, where an officer of the Fed pulls out a checkbook and writes a check to the U.S. Treasury for a billion dollars with no questions asked.

Question ... where did the Fed get the billion doillars to give to the Treasury when in fact there is NO MONEY in the account at the Federal Reserve and technically there isn't even a Federal Reserve account?

The answer is simple. The billion dollars "is created" the instant that the officer at the Fed signs the check. It's called "monetizing the debt."

The government is a willing partner in this SCAM because they can get instant access to any amount of money, at any time, from the bankers without having to go to you as the taxpayer. Without this "shell game" known as the Fed, the government would have to go to you directly for funds through increased taxation every single time they needed money (we'll expand on that later). That would most certainly upset you and if there is one thing that the dunces in Washington know is that you do not purposely upset voters.

Now the Treasury takes the billion dollar check which was created out of thin air, with no reserves to back it, and money which did not exist anywhere in the entire solar system before the check was written and deposits it into the government checking account. Presto ... all of a sudden the government computers show that it has a billion dollars to spend.

Not bad. Wonder what would happen if you and I wrote checks on money that we created out of thin air. I think that we might wind up dancing with big hairy men in Leavenworth.

Next: Episode 7 How the Fed Works - the Fed controls the Government and not the other way around!