Dude! Where’s my car?

            So, let’s say you want to borrow my car.  In order for me to loan you my car, I would have to have an actual car to loan to you.

[pregnant pause]

            Let’s just think about that for a moment.  Actually, you might want to meditate on that statement for an hour or two.  It’s really quite profound, although not obviously so.

            It’s not that I’m so profound; this is not about me.  It’s not even about the car.

* * *

            Okay.  So now let’s say that I don’t even have a car, and you decide that you are going to borrow some money to buy a car.  If I had any money (I don’t), I could lend you some money to buy a car.  But even then I would need to have ACTUAL MONEY to loan to you.

Digression: What is money is a much bigger conversation, but let’s just say, for the sake of this discussion, that Federal Reserve Notes (FRNs) are money.  (Yes, I know they are not really money!)

            Well, maybe I don’t have enough money for you to buy a car.  So you go to the bank to get a car loan.  Now it gets interesting!  The bank has plenty of money, right?  Well, maybe.  We’ll see.

            The bank agrees to loan you $20,000 to buy a used car.  (I remember when I could have bought ten NEW cars with $20,000, but that’s another discussion.)  The bank pays for the car, and a lien is placed on the title of the car indicating that you can’t sell the car without paying off the bank loan first.  In other words, you don’t really own the car, the bank does. 

            But the real question here is:  Where did the bank get the money to loan to you to buy the car?  The bank has plenty of money from depositors, right?  But it didn’t loan you that money.  The answer is that it just created the money out of nothing!  The bank did not even have to print the paper money; it just entered a transaction on its computer indicating that you now owe it $20,000, and it wrote a check to pay the dealer for the car.  Until that loan was made, the money did not even exist!  If I had done that … well, first of all, I would have had to print actual paper money because I don’t have the right kind of computer.  But if I had done that, it would be called counterfeiting, and I would have been investigated by the Secret Service (yes, that’s what they do), and I would have been prosecuted and sent to prison.  But when the bank does it, it’s perfectly legal.  Legalized counterfeiting! Great work if you can get it.

            Don’t believe me?  The Federal Reserve Bank of Chicago, in its publication Modern Money Mechanics*, describes in detail that this is how money gets created.

            But what is the impact of this transaction on the economy and on you and me specifically?  The ability of banks in the Federal Reserve System to create money out of nothing means that they have the power to own everything by stealing our wealth. 

            Prior to the creation of the Federal Reserve in 1913, banks would routinely act in this manner:  issue bank notes that were not backed by actual, real money, ie. gold.  (Yes, gold is real money.)  But they were hampered by the fact that sometimes depositors would want to withdraw their money, the gold, and if they issued too many bank notes, then they could not meet the withdrawal demands.  A bank run would ensue, and the bank would collapse, leaving depositors SOL.  Rather than acknowledge the fraud inherent in these banking practices, blame was placed on the free market and used as a justification – by the banksters themselves –  for the establishment of a central bank, the Federal Reserve System.  (Of course, they didn’t call it a “central bank” at the time; it was characterized as a way to regulate the banks. Just another example of more fraud.)

            Since 1913, the Federal Reserve, and the big banks that own it (yes, the Federal Reserve System is privately owned), has been able to acquire enormous wealth through the issuance of fiat currency, federal reserve notes, to the detriment of the economy at large and most individuals within that economy, who are sometimes referred to as the 99%.  When we borrow money from each other, no money is created, it is just transferred.  But when we borrow money from a bank, the bank creates the money out of nothing, loans it to us, and then we pay it back, plus interest, with money representative of the value that we have added to the economy through our time, labor and creativity.  The bank has added no value to the economy, or to you and me.  It is in this manner that the banks steal our wealth.

            And that is why the rich get richer, and the poor get poorer.

            And since the government is largely bought and paid for by the 1%, the government will never do anything to correct the situation.

            Of course, such a system cannot last forever.  The Federal Reserve System is now in decline and will eventually collapse.  But although that particular fraud will self-destruct, the banksters have more fun and games in store for us.  The plan is to introduce Central Bank Digital Currencies (CBDCs), under which we will all yearn for the days of getting fraudulently ripped off by the Federal Reserve System.  Under CBDCs, we will all be strictly controlled in our ability to transact, but that is a story for another day.

            Enjoy your new ride!

*Modern Money Mechanics, Federal Reserve Bank of Chicago, PO Box 834, Chicago, IL 60690-0834, 312-322-5111, 1994.