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OpEdNews Op Eds    H3'ed 6/11/09

This Never Happens, But It Just Did

Author 17738
Message Richard Distelhorst
For probably the first time in history on June 7, 2009, the Chairman of the Federal Reserve System was interviewed on the 60 Minutes program.  It is interesting that Chairman Bernanke and the Fed feel the need to start a public relations campaign to try to convince the American people that bailing out the big banks instead of bailing out the people was a good and necessary idea.       

The Fed has even hired a lobbyist, Linda Robertson, to try to improve the Fed's image.  According to Bloomberg News, Robertson worked for Bob Rubin, who led the effort to repeal the Glass Steagal Act which opened the doors to the gambling casino which has almost destroyed our economy.  She also worked for Obama's current economic advisor, Larry Summers, who led the opposition to regulating derivatives, the main cause of the present financial crisis.  And she worked for Enron, the largest corporate Ponzi scheme of them all.  She surely has the right experience!   

Last October, when the Congress was about to vote on the $700 billion TARP bailout for the big banks, the American people were almost unanimously opposed to that idea.  One Congressman said, "50% of  the people calling and writing my office say "No" to bailing out the banks, and the other 50% say "Hell No."  But Congress went against the will of probably 98% of the people and voted for the $700 billion bank bailout anyhow.     Federal Reserve Chairman Ben Bernanke spent almost the entire interview trying to justify the fact that, in addition to the $700 billion bank bailout approved by Congress, the Fed has provided trillions of dollars more to help, not the American people, but the big banks.  And he says he will never let the big banks fail, no matter how much bailout money it takes.    

Here are just a few of his comments on 60 Minutes and my response to his comments:     Quoting Bernanke, "The employment rate's gonna go higher than it is.  But I think that if we do succeed in stabiilzing the financial system, that we'll begin to see a slower pace of decline and eventually, a stabilization that will set the basis for a recovery."     My response: In other words, he is saying that when the big banks are in a position to loan again, there will be a recovery.  But to whom are the big banks going to loan?  The average American family is deeply in debt and banks will not loan them even more. 

The only way out of this recession is to put more money, not more debt, into the hands of the average American family.  We cannot borrow our way out of debt.  The only legislation that will put money back in the hands of the American people and will create millions of jobs rebuilding our country with debt-free, interest-free money is the American Monetary Act.  Click the link below to read this Act. click here Again quoting Bernanke. "The Federal Reserve is an institution that people don't hear so much about, but it's a very important one.  It manages monetary policy for the country.  It's one of the main tools we have for stabilizing our economy and keeping prices stable."    

My response: And the Fed has done a lousy job of doing that.  A dollar in 1913, when the Federal Reserve Act was passed, was worth a dollar.  Today the dollar is worth, in relation to 1913, a little over four cents.  Is that what Bernanke calls price stability?  Also, when he calls the Federal Reserve "an institution" he fails to mention that it is a privately owned and controlled institution to which Congress, in 1913, delegated its power to Coin (create) money and regulate its value.  As two time Presidential candidate Congressman Dennis J. Kucinich (D-OH) says, "The Federal Rserve is no more Federal than the Federal Express."  Article I, Section 8, Clause 5 of the United Stated Constituion mandates the power "to coin money and regulate its value" to the Congress, not to a privately owned institution.     Quote:  Asked if it's tax money the Fed is spending, Bernanke said: "It's not tax money.  The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. 

So, to lend to a bank, we simply use the computer to mark up the size of the account they have with the Fed.  It's much more akin to printing money than it is to borrowing."     My response:  In his own words, Bernanke said that the Fed simply creates money out of thin air with a few computer key strokes, increasing the banks' deposits at the Fed in the form of new "bank reserves."  And for each dollar thereby created out of nothing by the Fed, the commercial banks can create, also out of nothing, another $10 to $33 of new debt-dollars, depending on whether the bank's reserve requirement on demand deposits is 10% (big banks) or 3% (smaller banks). 

This process, called fractional reserve banking, is what has put our nation over $52 trillion in debt, a fact reported by the Federal Reserve itself.  Click the following link to see that report... click here Quote:  The interviewer then stated: "He's not kidding about printing money.  The Fed issues U.S. Currency.  The Treasury's Department of Engraving and Printing prints the money at the Fed's request."  My response:  And the Fed buys those Federal Reserve Notes at the cost of production, about 4 cents per bill, regardless of denomination, and then issues them at face value, and the Fed, not the government, makes the profit.  How would you like to buy $100 bills for 4 cents and then get to spend them for $100?  The technical term for this profit is "seniorage" and it should go to the government, not to the privately owned Federal Reserve.     Quote: The interviewer then stated, "The Fed actually pays for itself and returns billions in profits to the Treasury."    

My response:  And how does the Fed make these profits?  A small part of it was just described, buying currency at 4 cents and issuing it at face value.  But that's small time profits compared to the profit provided by the operation of the fractional reserve banking system.    The real profit is made from the interest the Fed receives on the nearly $800 billion worth of government securities held by the Fed (2007), and acquired through Open Market Operations when the Fed buys U.S. securities to create new "reserves" for the private commercial banks.  

The Fed simply creates the money out of thin air to buy these government securities and, then it keeps the securities and collects the interest on them.  In 2007 this amounted to about $24 billion of income for the Fed.  The Fed then spends whatever it wants to pay its people and operate the Federal Reserve System and turns over whatever is left at the end of each fiscal year to the United States Treasury.      

But that profit, large as it is, is peanuts to what happens next because of the new "bank reserves" created by Open Market purchases.  Based on those new "bank reserves" the private commercial banks can create 10 to 33 times as much money as the Fed created to buy the government securities in the first place.  Talk about a Ponzi scheme.  The result of all this debt-based activity is that our country goes perpetually ever deeper in debt.  See the link above to see how our total debt continues to rise, year after year.  So the Federal Reserve buys government securities by simply creating the money out of nothing.  Wouldn't you like to buy government securites on the same basis?  But you can't - only the privately owned Federal Reserve System has that power.  A power which must be restored to the government by passing the American Monetary Act, which you can read at the following link: click here

What has just been explained is what the Federal Reserve and the big banks do not want you to know.  As Henry Ford, Senior, once said, "It's just as well that the American people to not understand our monetary system, because, if they did, I think there would be a revolution by morning."    

What the so-called "too big to fail" banks don't want you to know is that all of their money is and was created in the form of debt, and when they can no longer create more "debt-money" it will disappear as the debts are paid or defaulted, which means we will have to replace their debt money by spending real U. S. dollars into circulation.      Then we will finally get the benefits we should have received in the first place - and all these benefits come without debt, without taxes, and without inflation. It will be a permanent money supply, not temporary as is the present bank-created "debt-money" which disappears when debts are paid.  The real money we will need to spend into circulation to replace this "debt-money" is literally trillions of dollars.  And it all will appear as a bonus or dividend for the people.  This will be permanent money with no debt or interest charges attached.      

To allow this recession or depression to continue when the way out is well known is inexcusable. The American Monetary Act is the way out of the present recession.


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Richard Distelhorst Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

I am a veteran of World War II. I served with the First Marine Division on Guadalcanal. My working life was in the supermarket field in the executive area. My purpose in life now is to get our privately owned, debt-based monetary system replaced. (more...)
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