John, the Fed prints money (generates new money out of nothing, and loans it at interest, requiring repayment as per terms of contract negotiated with those to whom it lends). 

[It is true that we speak of it this way. The Physical Sciences, History, and the Bible disagree with us. The net witness of these three insist that the banks are just saying that they are doing this, without really doing this. They do not generate anything. Nothing exists in the Universe after they say they have done this. When they say they loan, they are not really loaning anything, and after they say they have been paid back there is nothing that exists (their own publications admit this, but sanctify and praise it). When the actual printing is done (if it is at all), it is not done by the banks, but by the Treasury wing of the Federal Government, and these printed bills do not create anything, or represent any thing other than the imaginary quantities that the banks say they owe. Neither does the printing of those bills profit the Treasury by any amount, as their printing costs are only reimbursed by the Fed. The Treasury must still obtain their credit by having citizens relinquish, involuntarily, what banks say they owe (taxes), or by having citizens relinquish, voluntarily, what banks say they owe (investing in Treasury debt).

If the scenario I attest here is true, is it not perpetuating the Lie by continuing to speak as if the commonly-understood meme is true [ie. Money is, and that it is created, and that it is printed]?

As to the contract between bank-loaner and borrower, all that is agreed-upon is that the borrower arrange, within a time-frame, to have some other bank shift the qty owed the borrower -- back over to the loaning bank. No other action is, or can be, required. If I understand your constant theme, this is not enough, this is not just, this is not right. More should be required.

For the privilege of getting this loan cheaper than on the free market...

(And this is the real issue. Any account-holder- A - can contract with any other account-holder B -- to relinquish what bank says they owe account-holder A over to account-holder B, in exchange for account-holder B having their bank later switch what is owed account-holder B back to account-holder A with interest. The Loaning account-holder, in order not to impoverish himself, and to not forego the normal increase he would get if he employed that capital in other ventures, will have to charge more interest to the borrower than the bank will.)

.....you say the borrower must do more than just "pay back" the loan. He must add to the pool of goods and services available on the open market.

If borrower should fail to produce the addition to the marketplace, you imply it will be a sin or a crime. Let me afflict you with a series of questions to stimulate your imagination and enable you to assist me to understand why your position is non-contradictory.

- How would "Produce" be defined? Must the new "good or service" be available for sale on the open market (how "open", how wide the advertising?), or can it be for the producers own use? If he builds a house for himself, does that count? If he buys an instrument and plays a song for a pub for tips, is that sufficient? How much in tips must he collect to justify his loan: ten cents or the cost of the instrument?

- Which principle in the Bible....what passages clearly define this principle such that the average person should be able to understand it?

- Which institutional Body has responsibility to define and interpret what constitutes sin in this area, and what will God do to them if they fail to define what the sin consists of correctly?

- Which institutional Body has responsibility to define and interpret what constitutes crime in this area, and what will God do to them if they fail to define what the crime consists of correctly, or if they sentence the wrong civil punishment upon the borrowing and loaning parties.

- What civil punishment/church discipline should be implemented if borrower should:

use what he has gained from earlier production (savings) to pay back?

use what he was given to pay back?

use what he has earned by destroying products or preventing services from being delivered to the marketplace (think government employee's wages) to pay back?

produce - by help of the loan - plenty of goods and services, but chooses to pay the loan back with other bank owings, instead of what he has earned by production?

- What punishment should be rendered against the bank-loaner if they knowingly loan to - and receive payment from - a borrower who has not paid back with "money" from the right source? Or is only the borrower liable?

-Why should the loaner or borrower be punished for wrong kind of source of loan (from fractional-reserve loaning) repayment, and not have any punishment when borrower borrows from non-fractional-reserve loaning?

-Should there be punishment when a bank loans money in a 100%-reserve, time-contract type of covenant, instead of a fractional-reserve way?

-Should there also be a defined punishment if the borrower borrows quantities of measurable substance, instead of imaginary quantities banks say are owed between parties (ie fiat money)? If borrower borrows a lawn-mower to mow his own lawn, is he more liable than if he uses a mower to hire out to mow someone else's lawn?

-What if someone borrows money or a lawn-mower for free, and instead of doing something productive - increasing goods and services - they reduce goods and services, like mowing down someone garden? Is it more wrong or less wrong because he didn't end up paying interest/rent for it. If he wanted to pay an inflatedly-high rate of rent/interest for it, would it be ok then, to not pay it back by doing something productive?

- If private party gives up the use of his own money for the course of the loan - at the same interest rate as the bank fractional-reserve-loan, should that loaner be punished?

- Why should borrower be punished from borrowing from one party, vs another, or one interest rate vs another?

- Which institutional body has the ethical authority to define the criminality of what interest rates constitute...

The Fed loans that newly printed money to various entities. (I do not know how the recipients of continued loan/new money support are chosen, but it appears to be endemic, smooth, common, and well traveled.  There may be some new, urgent, ad hoc loans, but I suspect these loans are channeled through various instruments to banks and government to maintain the appearance of their solvency/profitability/equitability.)  This allows governments with excessive debt to GDP ratios, and banks with insufficient reserve, to continue operating without a change of ownership and management.  The lack of consequence for the malinvestment of governments and banks enables them to continue their policies of unprofitable investment.  The malinvestment continues unchecked, the new loans/new money is issued, small increases in productivity, reduction is consumable to money ratio, resulting in inflation.  

[And even if the ratio of productivity to money quantity held steady, you are still moving wealth to banks that does not belong to them under Biblical principles.

On Mal-Investment: If men were holding to God's law, not lying or stealing with their means of exchange, there would be a natural brake on foolish investments. They wouldn't borrow money unless they were sure they could make more profit than they needed to pay the interest. They wouldn't loan the money, if they weren't convinced the speculator could repay.

The bottom line, is that FractReserve loaning can make a profit charging less interest than others who have to give up the use of what they are loaning. Banks can make money charging 5% interest on a mortgage, in a 8% annual-Inflation environment because the banking System as a whole can create all the loan-money the market will bear, without having to give up any of their own money they have or earn. Since the loaned-money only "exists" in the loaning environment, it is not like the bank would "have it " to use, spend, or invest any other way if they chose not to loan it. Consequently, the private dollar-holder doesn't even break even unless he is loaning the money at more than the inflation rate. Add in the risk of not being paid at all to some kind of expected Return on his money -- and you are up in the 12-20% bracket.

If these higher interest rates were being paid, entrepreneurs would be very sure they were going to get investment returns on a project before they contracted such debt loads. This would accomplish your idea of prosperity much better than the fractional reserve system, because there would be more overall productivity. But it is not like the loan sharks would make a killing, either, because when everyone was being careful to not borrow more than they could be productive with, the loaners would have to trim their prices to meet demand. At the same time, a 10% return would end up being better than 12-16% return now, because if you shut down the Fractional-reserve loaning -- there wouldn't be the 8% inflation rate that keeps people sliding back all the time now.

Thus, the primary problem with malinvestment is that new money is being introduced into circulation that produces a sub-market rate of increase in goods and services.  Thus, the increase in money supply does not have a correspondent object available for consumption.  This necessarily results in a reduction in the value correspondent to a unit of money.  Reiterating this point, malinvestment is loaning new money to low productivity investments.  The mechanism of monetary depreciation is the introduction of new money without a commensurate increase in goods and services.  In simple terms, more money in active consuming circulation is chasing the same amount (or a smaller increase than the competitive market would produce) of consumable wealth.  This is the essence of the problem, that the currency is debased when new money is loaned into circulation without an appropriate increase in capital goods (the ability to produce goods and services -- note: there is a time delay with capital investment before goods and services are increased) and/or no market appropriate increase in consumable goods and services (e.g. full utilization of installed capital investment).  This is the essence of malinvestment -- the investment (loaning money) in projects that do not return profit at a rate expected by the market for a commensurate/market competitive investment. 

The concern/belief in the inherent fraudulence of fiat money, and the inherent goodness of commodity money/gold, fails to identify the underlying mechanism/reason why gold/commodity money is considered superior to fiat money.  This belief is grounded in the fact that hard money prevents people from loaning new money into existence to support malinvestment.  Gold/commodity money is necessarily difficult to create, which prevents its easy creation.  Autocrats/accountants/bureaucrats/executives cannot fabricate gold/commodity money at will, thus new money is introduced only upon the exertion of effort.  In such a hard money economy, the economy can only grow as fast as commodity money can be produced.  In effect, men must first exert labor before new money is made available to the general consuming public.  

[re: Economy grows? The Economy grows as fast as God blesses it and people produce more than they consume or destroy.

It doesn't seem like you have thought this through. The fractional-reserve loaning doesn't jump all prices at once. They keep rising after the spigot is turned off. Dollar-denominated prices don't instantly drop, either, just because you freeze or contract the money supply. You should see that when new money is created for borrowing, perhaps used to increase goods and services that could be traded for money in the marketplace -- then paid back to the loan issuer -- the money is gone out of the economy, at that point. Paying it off annihilates it. Now you are left with the increased goods and services, but the same amount of money around to trade for them. This cannot help but bring about the lowering of nominal prices that you and the Keynesians fear so much.

The only way to prevent this cycling around to continual price-lowering, is to Maintain F-R loaning so that banks are always earning interest on new loans to replace the old money that is disappearing on the pay-back. They would have to at least be generating new loans to match the depreciation of goods and services in the marketplace. I hope you can see that the more the economy grows, and the more that is produced, the richer and richer the banks are getting, because they get to "own" for renting, as much money as matches all the productivity of the whole country. (Actually, the bitter part, is that they are appropriating the wealth of other countries also.) The harder people work productively, the richer the banks get without having to work for it.

Until, pretty soon, the banks are strong enough to take control of law-making, judging and executing punishments. So that now we see no one being punished for stealing billions and trillions of dollars "worth" of wealth from former owners who have no idea how it has happened, or has yet to happen.

Bottom line, is that the banks spook the sheep, threatening them with prices going down (which is a good or neutral thing), and in consequence they get richer while others get poorer.

The work required to produce commodity money is an effective governor.  The work required to produce it is the automatic/inherent law that prevents the introduction of money that has no contract to produce goods and services underlying its appearance.  In the case of commodity money, the money itself is a consumable, and the goods and services it trades for are likewise consumables.  Every aspect of the gold/commodity-based economy has come into existence by work, sweat, and toil.  Commodity money is dear, having been produced by labor.  The goods and services exchanged in trade are equally dear. 

Fiat money is not evil, bad, wrong, or inherently fraudulent.  It can, and should, be an instrument representing an honest, market-based/appropriate contract to produce goods and services. 

Quantities that are added and subtracted in a fiat money system can be computed and reckoned honestly. And contracts regarding the honest reckoning of these quantities can be kept or violated, rewarded or punished. That said, it does not address the deeper issue that the quantities do not refer to anything. They are no count of any unit of measure of any substance. This has to mean that nothing is loaned, nothing is paid, nothing is owed, nothing is invested.

By the time you get to "fiat' you "have" something whose only reality is that someone says that it is real. When the God of the Bible says, "Let there be.. (fiat)", now there is a World that you can hurt your head on. It is real, it is there. When finite, fallen Men lie and say "let there be.." Everybody can pretend all they want (to their own hurt), but there is nothing there still.

The bankers & Sayers are hurting themselves and others, because they are contradicting God's Universe Creation by lying and stealing labor and property from other men which will incur upon them condemnation from a just God who requires restitution.

The victims of the banker/sayers are hurt because of the destructive idolatrous faith in evil men who cannot provide and protect -- in defiance of the required faith in the true creator and savior.

The agreement to allow some men to just "say" they have money they are loaning you at interest is not "an honest, market-based/appropriate contract".

The proper honest, market-based/appropriate contract is to have men who do, in reality, own quantities of measurable substance -- give up the control of that QMS into the control of other people in exchange for sharing the in the increase possible from the exchange. It is no crime to charge rent for the compensation of going without the control of that QMS for the time of the contract.

You gotta be honest about the time of the contract.

You gotta be honest about the substance borrowed.

You gotta be honest about the unit of measure by which you are measuring that substance.

You gotta be honest about the rent that will be charged.

Finally You gotta be honest about how many units of measure you are talking about loaning and charging for rent (Quantity).

In all this, you have to remember that you can have just as fine a contract exchanging/loaning/paying non-fiat money that Christ Did create.

It is just that Fiat is cheaper for the Banks (everyone else is punished if they do Fiat). It is cheaper because others must give up the wealth instead of the Banks.

Note, there are various types of goods and services.  There are end user consumables (von Mises refers to these as goods of the first order), and capital goods that produce goods and services (referred to as goods of the second order).  In an honest fiat system, those who have engaged in malinvestment, whether governments, banks, industry, small business, or individuals will all be dissolved and restructured under new management if they fail to meet the productivity commitment associated with their contract. 

this is not different than using non-fiat, honest money. Malinvestment is much less likely to happen when credit is left to a free and honest market, by not allowing the special privilege of the banking system to counterfeit the money.

The failure of fiat money comes in the continued loaning of money to any of the above institutions/individuals who have broken their commitment to the contract of productivity.  The ease with which this continued enabling is perpetuated in a fiat money system removes or diminishes the punishment for failure to meet the terms of contract.  Thus, malinvestment becomes endemic within the monetary/economic system, and the resultant gradual increase in money supply in relationship to the productivity & production results in a gradual depreciation of the amount of consumable value corresponding to a unit of money.

T. 

One more shot here about value. When the fiat money is "issued", and appears in the bank account of the borrower -- and the meter is ticking for interest-rate/rent owed to the Bank who is the titular owner of that miraculously-created "money" -- People value that money. Where does the value come from? The value that is infused into that money comes from somewhere. It does not come from the divine creative power of the Bank, as it would be if God the Son decided to create a brand new million troy ounces of fine silver.

Actually if God did that, He would be slightly reducing the trade value of all the other silver ounces in the world, stewarded by human beings. We would not condemn Him for stealing, in that regard, because we acknowledge that He owns all the human silver-owners in the world, and all of their labor. It is His to do with what He pleases.

11 “Worthy are You, our Lord and our God, to receive glory and honor and power; for You created all things, and because of Your will they [f]existed, and were created.”

And even if we didn't understand the stewardship/owner part of all that, we would still have to admit that God would be right/just to do such a thing, because His character and actions define what is Right and not us. As it is, when the Federal Reserve reckons a new trillion USD's into the world, value ends up being sucked out of all the other USD's in the world to rebalance into these new ones. The lie, is that dollars already held in accounts by global inhabitants are more real that the dollars the Fed has not yet reckoned into existence. And then, after the Fed does reckon them into existent, they are not more "real" than they were before.

My contention is that if the new dollars have value (are valued by people), that value is stolen from others. Forgetting about the nature of dollars already in "existence" - If it were possible that men could be given the insight that these newly "created" fiat dollars were imaginary and not real: 1) the borrower would say, "Hey, this is not true, you are charging me for something that is not really there. This is Fraud!"; and 2). Anybody the borrower tries to offer these imaginary dollars to in trade - would say, "Hey, this is not money, what do you mean trying to trick me in to giving you something when you are giving me nothing?"

As it is, the vendor is happy to make the sale, because if the borrower couldn't get the money, he might not be getting the business, and he wants the profit from the business, even though his profit will depend on him passing on the "hot potato" of the imaginary money and getting something for it before his potential vendors catch on. (and the time is getting shorter for all of us). The borrower is happy to keep quiet, because this imaginary money is costing him way less than if he had to go out and borrow real created anything on the free market.

But the illusion of value persists, because value of pre-"existing" dollars instantly "colors" these new dollars so that they are accepted, but in the long run trade value of other dollars are lessened. Only the Owner would be right in doing this if He so chose, and men would only be authorized to participate in this kind of thing if He so directed them to. As it is, we are commanded to love our neighbor by requiring thieves to pay double restitution. If we disobey, we will all be robbed.

Fasten your seat belt.

----- Original Message -----

From:Humberto Pujals

To:Undisclosed recipients:

Sent: Tuesday, December 18, 2012 6:28 AM

Subject: The enemy within: Federal Reserve is committing Economic Treason against America..... Here's why.

(the purposeful bankrupting of America.... While stealing its wealth.... Every American needs to understand the sinister plan of the great enemy from within.)

What You Probably Don't Know About The Federal Reserve and Why It's So Dangerous

DECEMBER 18, 2012

BY SHAH GILANI, Capital Wave Strategist, Money Morning

The Federal Reserve System is a government-sanctioned private enterprise that functions as a socialist tool.

It was conceived in 1910 and constructed for the benefit of the private bankers who control it. Congress blessed the scheme in 1913 with passage of the Federal Reserve Act.

These days the Fed doesn't just backstop America's too-big-to-fail banks. It has expanded its doctrine of socializing banking losses globally. 

The Fed helped bail out private businesses, foreign big banks and central banks in Europe and Japan in the credit crisis of 2008 and is the model for the European Central Bank (ECB), as well as the ECB's primary backstop.

To understand how the Fed gets taxpayers around the world to pay the losses its member banks routinely incur, let's pull back the curtain on the Fed and explain how it operates.

Here's What the Fed Really Does

Banks lend money and sometimes they don't get paid back. That's not a problem if it doesn't happen too often and if profits from other loans and investments cover the loan losses. 

But since banks have gotten really big and have to make big loans (due to economies of scale and return on capital expectations) they need big borrowers. There are no bigger borrowers on the planet than governments, and that's where a lot of banks are lending.

Of course, governments aren't immune to over-borrowing and insolvency.

All the big banks that lent to banks in countries now in financial straits continue to lend to them because if they don't they won't get paid back what they are owed. Banks would fail from a cascade of losses and would either have to be bailed out or shut down.

That's where the Federal Reserve comes in. 

They don't let their constituent members go under. If they have to, they will printpretend money and give it to them, no matter how much they need. 

That includes foreign banks and foreign governments. The Fed's member banks lend all the time to both foreign banks and foreign governments. It only follows that our banks are not immune to what goes on anywhere they have lent money. They are directly in the line of fire.

If there was no Fed or no ECB, there wouldn't be a backstop for banks that have lent to borrowers in Europe who can't pay them back. Countries would fail. 

But they don't fail because central banks print money to give to banks so they can extend the loans they made, reschedule them, or in some way keep them going so they don't have to write them off as losses. 

What's Wrong With Bankers Helping Bankers?...Plenty

The Federal Reserve System was designed to ensure that bankers always get paid. Congress blessed this scheme because Congress can be bought, was bought in 1913, again in 1977 when the Fed was given its "dual mandate," and is still being bought and paid for by bankers today. 

Essentially, the Fed operates on a socialist model. It's not capitalism because banks would be "allowed" to fail under the rules of capitalism. 

But they are protected from failing by virtue of taxpayers being called upon, in one way or another (mostly by future inflation and currency debasement, in other words, less purchasing power) to "socialize" banks' losses. 

There is no going backwards. Globally we couldn't endure the hardships [under truthful definitions these banks have already failed and the consequences are made more severe by every day of false witness denial of the facts. We will endure or die. But it is irrational to say it is not going to happen, because it will hurt if it does.] that would befall us if a cascade of big banks failed. [why keep using "if"?] So don't worry, that won't happen [Don't worry, it won't be allowed to happen now when it is easier, it will happen later when you won't have freedom and wealth to do anything about it.]. But you should be worried about the creeping socialism. [only if socialism is theft, murder, enslavement, and poverty through deceit.]

The elitist class of bankers and money brokers, whose incredible wealth is protected by taxpayers, is going to have to increase the size of loans they make since they have more capital to disperse and earn income on, and will end up needing more taxpayers under their thumbs to keep their game a win-win for themselves. [why are they trying to kill us, then?]

Not that there isn't a way out for us taxpayers, those of us who would like to earn more than half a percent on our fixed income investments. There is a way out... 

We have to end the Fed. It's just that simple. [Not so simple as you think. Main reason being that civil government, as we know it now, is not going to help you. Civil Government cannot function without the banks - they are not going to outlaw them, punishment, force them to make restitution, or stop them. The discovery of the nature of their theft also discovers that They have nothing with which they could pay for restitution. You have a few stockholders and employees who were only partially responsible. Their lifetime labor of indentured servitude won't come close to reimbursing those trusting souls who used the dollar, and trusted the banks to owe them quantities, only to lose them. Besides that, there is no possibility of accurate human calculation of whom wealth has been stolen from. That is nature of inflation - to obscure it. You can only identify a partial restitution scheme -- and do not expect much agreement.]

End the Fed and all the big banks would have to be either shrunk or broken up, because there would be no more backstopping them with taxpayer money [There is no money. Think about solving that first, then decide how to transition] . The truth is they should all be made small enough to be allowed to fail without encumbering the national economy, or unfortunately today, the global economy.

Think about it. Banks that should have failed in 2008 are bigger than ever. 

They've paid off what they borrowed to stay alive. They are paying dividends again. They are buying back billions and billions of dollars of their stocks again. They are paying big fat bonuses again. But they still complain that tougher capital standards and reserve ratios will ruin their profitability and they won't be able to lend to the people who need them.

Seriously, this is what the Federal Reserve does, has done, and will continue to allow to happen -- unless we end the Fed and their game for good. [Cut off your mother's breasts? Bon Appetite!]

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