What follows here is essentially a primer on fake wealth creation by the Fed, and its implications. More specifically it's an explanation of how our financial system, as it currently exists, depends on the creation of fake "wealth" (created from nothing), and why the entire delusional scheme is on the verge of imploding.
What follows is almost entirely based on a great article by Zeus Yiamouyiannis, Ph.D. If you'd like to read the two parts of his original version, in full, click here and here. And if you wish to reprint any part of his article (or my synopsis, simplification and clarification of it for the layman, which follows here), please do not do so without first getting his permission. Contact Zeus through LinkedIn.com.
"Only God can create value out of nothing"
--Justice Martin V. Mahoney, in First National Bank of Montgomery vs. Jerome Daly.
"(I'm) doing God's work."
-- Goldman Sachs CEO, Lloyd Blankfein
But what is fraud except creating "value" from nothing and passing it off as something?
Frauds interlink and grow upon each other. And our debt-based money system serves as the fraud foundation. In our debt-based money system, debt must grow in order to create more money. Therefore, there is no way to pay off aggregate debt with available money: Ever more money must be lent into the system in order to make the payments on old debts. This causes overall debt to forever expand as new money [for actual people, and the gov't] always arrives at interest (i.e. with the obligation to pay interest on any new money received), with that interest compounding exponentially. This process is called financialization.
Financialization begins with the process of creating money from nothing, in which debt is paradoxically considered an asset (i.e. a wealth gain). In current financialized economies, "wealth expansion" comes from the parasitic taxation of productivity, in the form of paid interest on fiat lending (i.e. lending money that has been created from nothing, by the private banks that issue it.)
Payment of this ever growing amount of interest, over time, inevitably consumes an ever greater share of resources, assets, labor, and livelihood -- until nothing is left except indebtedness.
Only in a debt-based money system could debt be cast as an asset. In our debt-based system we use the term "extend and pretend" as a quaint phrase referring to the financial lying that is aimed toward preventing (delaying?) the collapse of the debt-based system that was (already) doomed, by its initial design, to collapse!
Therefore the purpose of this primer is to detail the major components and basic evolution of the fake wealth creation, accelerating debt expansion, hollowing out of the economy -- and the financial implosion that must inevitably result, unless radical steps are taken, soon enough, to prevent it.
Stage one: Fiat money origination, multiplication, and distribution
Let's begin with definitions of the terms we will be using:
The US Federal Reserve System ("The Fed"): A private, non-transparent entity, formed in 1913, representing and serving private, profit-driven banks that create our money from nothing (fiat money) and to which the US government has delegated and effectively ceded its constitutional power, to create.
As a result of this ceding, the Fed essentially lends our "sovereign" public money to us, at interest, providing money for things like government spending by means of ever more debt, thus forever expanding our nation's indebtedness. By contrast, the Fed currently gives away money to its constituent private banks at zero percent interest, thereby allowing those banks to buy US Treasury bonds, which yield a 2-3 percent interest mark-up. This is interest that is to be paid by US taxpayers, thereby forever adding to citizen indebtedness in that way as well. This arrangement, or scheme, amounts to a continuous and ongoing wealth transfer from the citizenry to the big banks.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).