Posted: 9/18/2005 1:38:26 PM EDT
[#9]
Quoted: Ron Paul is a kickass guy, but you gotta admit he's some what eccentric I think, isn't he the guy who wanted to send our economic system back to the gold trade? or am I losing my mind and getting my people mixed up?
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He would eliminate the Federal Reserve and prevent .gov from creating new money out of thin air so your money is worth less (inflation). He would also limit fractional reserve banking. How does the Fed Create Money
When the Fed wants to add money to the economy, it buys government securities from brokerage houses and banks with new money that hasn’t existed before. When the brokerages and banks lend this new money to their clients, who use it to buy goods and services, even more money is generated as credit.
1. The Fed writes a check for $100 million, which it uses to buy securities from a brokerage house. 2. The brokerage house deposits the check in its own bank, Bank 1. With this deposit, the bank's cash increases by $100 million. 3. Because the Fed requires all banks to hold 10% of their deposits in reserve, Bank 1 is able to lend $90 million of this deposit to its customers. 4. A young couple borrows $100,000 from the bank to buy a new house. The sellers of the house deposit that $100,000 into their own bank in this case, Bank 2. 5. Bank 2 holds $10,000 in reserve, but has $90,000 more to lend than it had before. 6. A woman borrows $10,000 from Bank 2 to buy a car. The dealer deposits her check into her own bank, Bank 3. 7. Of the $10,000 deposit, Bank 3 can lend $9,000, keeping $1,000 on reserve.
This one series of transactions has created $190,099,000. Through a repetition of this loan process involving a wide range of banks and their customers, the $100 million that the Fed initially added to the money supply could become almost $900 million in new money.
pathtoinvesting.org/trips/pdfs/fed.pdf
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