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It´s actually aimed at all the different privately owned reserves.
My understanding is this, let´s use USA as an example.
The government needs to borrow money, they go to the FED´s, ask them to print money, let´s say one dollar.
With that one dollar comes a small fee or debt (let´s say one cent on top of that dollar)
This means that USA will always be in debt and more in debt the more they borrow from the reserve.
So my question is this, why does a country let a privately owned company be in charge of the money, borrow money with interest to the government when they can simply shut that down and start up their own money-printing machine and thus never be in debt as they are essentially borrowing money from themselves.
Anyone know why these privately owned reserves exist? And why the governments simply doesn´t take over the business.
"Il Phenomeno" - The one they fear the most!
"2% of the world's population own 50% of the world's wealth."
Despite appearances to the contrary, the U.S. Federal Reserve System isn't private. Its Board of Governors and Chairman are both appointed by the president, and profits are retained by the U.S. Treasury.
The answer to the rest of your question is pretty complicated. Briefly put - and in no way should this be considered comprehensive - the government can't just direct the Fed to increase the supply of currency. That would cause "money" to have no value. Instead, the Federal Reserve buys and sells government bonds (obligations) in an open market.
When it wishes to contract the supply of "money," it sells bonds, which removes from circulation the "money" used by dealers to pay for them when that "money" is withdrawn from the accounts they hold at a Federal Reserve Bank. When the Fed wishes to increase the "money" supply, it buys bonds, and that adds "money" to the dealers' accounts, which they can then withdraw from a Federal Reserve Bank in the form of Federal Reserve Notes, or paper "money."
These kinds of transactions happen so often and routinely cancel each other out to such a degree that most "money" is never printed. When it is, it's because a Federal Reserve Bank ordered it from the U.S. Treasury using various public and private obligations as collateral, and they paid a fee for the physical currency itself.
All governments have debt in this regard. If they didn't, there would be no way for them to print "money." The trick is to have a national economy in which other economies owe you more than you owe them. That's why trade deficits get a lot of attention.
(The whole thing is basically psychological, though. Removed from a gold standard, it's only the appearance of value that gives "money" value. Then again, all value is subjective, I guess.)
EDIT: Oh, yeah. Central banks exist, because they are the tools with which governments execute monetary policy. Such policy cannot otherwise be dictated like laws or regulations. It must happen in a market environment that lends credibility to the process.
Last edited by bhall on 22 Nov 2012, 01:43, edited 1 time in total.
Bit complicated but i think i get half the picture on how it works, thanks!
Pretty interesting with the Fiat currency and how nations are creating money out of thin air sort of.
Which is a contrast to what China is doing from what i´ve read. It seems they are on a gold hunt at the moment.
Why would they buy so much gold? Security?
"The trick is to have a national economy in which other economies owe you more than you owe them."
So basically you will always have countries that lose out? in order to have "winners" (other nations owe you more then you owe them)
"Il Phenomeno" - The one they fear the most!
"2% of the world's population own 50% of the world's wealth."
Yeah, that's the appearance to the contrary I mentioned. But, because it was created by Congress, which has the Constitutional authority "to coin Money [and] regulate the Value thereof," it's public in scope. That's why it's administered by executive appointees.
And, yeah, until the world stops making people, which doesn't look likely, national economies will continually need to grow. In a global market, that means global competition, from which there will always be winners and losers. (Not a bad reminder that we haven't advanced too far beyond tribes.)
Lol how unlucky am i....
Went to bed, turned on TV and first channel theres a documentary on the central banks and about all the mess tha't been caused by the wealthy few, watched a minute then it was over.....
"Il Phenomeno" - The one they fear the most!
"2% of the world's population own 50% of the world's wealth."
autogyro wrote:Not quite.
Find out who started central banks and who owns them.
Should explain a lot of things.
Well i would guess the Rockefeller and the Rothschild´s have had something to do with it.
but please, educate us, it´s an interesting subject.
Wiki is good start. Many holder central banks were normal banks that were nationalised (eg Bank of England) while others were created by government (Federal Reserve or ECB).
Central Banks cannot be national in concept.
Their purpose is to balance international trade, commerce and warfare.
If there is a central bank stating it is owned by a nation, then it has to have a controlling interest from members who are in effect stateless in fact but not perhaps by superficial appearance.
This power over politics and economics therefore permeats down to other banks that rely on the structure.
This is why governments are forced to bail out banks in crisis and why the money to do so will always be available no matter how corrupt bankers and politicians act. It is their get out of jail free card. They just print more money.
The real cost of course ends up being paid for by the 'plebs'.
Your federal state reserve is simply an illusion constructed by people given the power to print money.
The Chinese are side stepping this dieing system and buying gold for their reserves.
Gold does have a real value based on rarity.
When gold was dropped as the safety net reserves of nations, it opened the way for uncontrolled gambling with the world's resources. All traces of the old moral codes attached to world banking were destroyed and wealth was replaced with worthless paper. Political power became controlled by international finance. Politicians have no control over world events any longer.
Nando wrote:Bit complicated but i think i get half the picture on how it works, thanks!
Pretty interesting with the Fiat currency and how nations are creating money out of thin air sort of.
Which is a contrast to what China is doing from what i´ve read. It seems they are on a gold hunt at the moment.
Why would they buy so much gold? Security?
"The trick is to have a national economy in which other economies owe you more than you owe them."
So basically you will always have countries that lose out? in order to have "winners" (other nations owe you more then you owe them)
Well yes, concerning loans you will have "winners" and "loosers". A specific winner and a specific looser might even be closely related, even on the global market. In your example, USA has a huge debt, and most of that comes from China, a country with huge reserves.
However, economies are much more complex then that. We are here speaking about budget deficits/surpluses, but you also have trade deficit/surpluses. Sometimes you need to find a compromise. In China's case, they don't need to.
Btw, i just read yesterday Goldman Sachs increased their shares in Nokia by 400% or something like that.
Who´s money are they using to do that? Do they have their own capital they use or do they gamble with people´s money?
"Il Phenomeno" - The one they fear the most!
"2% of the world's population own 50% of the world's wealth."
