BY TPATH | OCTOBER 30, 2013
The mechanics of quantitative easing and the destruction of the American economy
The magician’s dream but America’s nightmare
We have heard all the terms and all the phrases such as Quantitative Easing, or Monetizing Debt and just plain QE4 (or whatever number they are currently up to). But how many people, even those in Congress, Wall Street and the banking industry, those who benefit the most from this destructive charade, understand just what it is and how it's actually pulled off?
The answer is, of course, very, very few.
TPATH will show in this article how this massive cartel of manipulation, comprised of the Federal Reserve, the government and the commercial banking system, supported by progressives in both parties, go about creating money from thin air, then using it to create more money from more thin air. A policy which has, every time it's been implemented, not only devalued the currency in the form of inflation but in some cases, destroyed entire countries. At the very least the effects of Quantitative Easing are equal to a hidden tax. Politicians enjoy the power that comes with the money but because the people don't understand it, they are not held accountable.
The time has come to reveal how this is done and expose those who exploit it.
So if you are more interested in Lady GaGa's latest display of stage nudity, this article may just bore the pants off you. So to speak.
But if you want to take a few minutes to digest the steps your government, the Federal Reserve, as well as commercial banks and Wall Street, undertake to create massive wealth from nothing more than a few sheets of paper. Then, read on.
Contrary to popular belief, they are not actually printing money.
The first thing that needs to be made clear is Quantitative Easing (hereafter QE) has nothing to do with printing of money. Why? Well for one thing the amount of unearned money that QE generates would be impossible to print. There just wouldn't be enough time in the work week for them to print that many bills in usable configurations. And second, just printing bills and dumping them into the Federal Reserve System would be too blatant even for these scoundrels. Besides, in relation to the amount of fake money QE generates, printing just $85 billion a month is just child's play.
The Magical Mechanics of Quantitative Easing
This step by step description will use several "accounting terms" which are known to most of us who have tried to balance our books in business or home finances. It's important to understand that the deception behind QE requires the Federal Reserve (hereafter the Fed) and the government use those terms as cover while bastardizing their true meaning.
Follow along as we show how billions of dollars are created, from nothing.
The government designs a very impressive looking Treasury Note in any amount they desire and then prints it up in impressive font and fancy seals. There is nothing tangible behind this note except the promise to pay the holder a specified interest for a specified time and a redeemable amount at a specified time. This bond (Treasury Note) may have its value listed in the amount of $50 billion, its actual value, is zero. It was created from nothing.
These bonds are then sent over to the Fed (remember Fed is the Federal Reserve Bank) at the cost of, well nothing. The Fed does not pay the government one dime at this time. That would, you see, leave an unbalance on the Fed's books. We can't have that, can we?
The first of the several re-classifications now takes place. The Fed declares these bonds as "Securities Assets" despite the fact that these assets didn't exist just hours before. But now they are an asset which in reality is just more government debt. Which by the way, your children and theirs will pay for, one way or another.
This is the good part. With no money anywhere in any account, the Fed drafts a check in the amount of those bonds and issues it to the government. Oh, it gets better. Now the Fed holds the bonds which the government, using your tax dollars, will pay them interest on and will pay them face value upon maturation.
Your government then quickly and happily endorses that check and deposits it, guess where? Yeah, where else, the same Federal Reserve banking system that wrote the check. Now, in accounting terms, the government has balanced its liabilities and assets. And how good is this, they now have that $50 billion to spend even though, minutes before, it did not exist. And what do you know, spending it will not show up as deficit spending. My, what a country.
Just a side note. This type of accounting has resulted in many prison terms for individuals and corporate CFOs.
The deposits from Step 5 above are used to generate government checks which flood the economy as the recipients of these checks deposit the money into banks where it is now called "Commercial Bank Deposits". These deposits, again in accounting terms, become both asset and liability for each bank. This is important because how this made up money earns usury interest (usury= exploitation, stealing).
The re-named Commercial Bank deposits now take on a new classification and are now called Bank Reserves. This is where the real accounting excitement begins. This is where the fiat money (fake, but legal by law) begins to really grow. Up to 9 times.
The Fed, conveniently enough allows banks to hold in "reserve" only 10% of their assets. These reserves which are now re-classified as, how nice, "Excess Reserves", enables them to lend out 90% of their stated assets to Wall Street investors, speculators, corporations and individuals. Keeping in mind that these reserves were created out of thin air, by your government.
These Excess Reserves now become "Bank Loans" where the banks can collect interest for up to 9 times the amount of cash they have on hand. The banks clearly do not have the money they are lending, but lend it they do. They are charging their debtors interest on money they don't have and money that has no value.
Repeats Steps 7 though 9, over and over again with the banking system creating debt and inflating the money supply which is backed by nothing more than fiat money.
What was not mentioned in the beginning is that the Fed does try to sell some of the bonds the government transferred to them in Step 2. This is done only as show in an effort to hide the invented money. The government really doesn't want those bonds bought by the public or even foreign investors or governments because even though the sale of them balances the accounting books, no further money is generated by those bonds which, if actually sold create a liability in the form of government interest having to be paid.
It's easy to see why Wall Street goes bonkers over QE and why bankers love it. So if QE generates all this money why is it so bad? For one thing, it all must be paid back. All the face value of the bonds as well as the interest must be paid for by the government and that's, We the People, or our heirs.
But that is not the worst of it. Every economist knows, as do each of the criminals monetizing debt that the poor and the middle class will suffer from the inevitable loss of buying power.
That loss is not negotiable and it's not ignorable. At present the underlying government debt is less than 10% of the fiat (fake) money created by the Fed and the commercial banks. As this created money floods into the economy the ratio between it and actual goods and services (the real economy) increases and buying power is depleted. This is not only common sense, but it's natural law, it's mathematics and it's physics.
To put it in plainer terms, the government is promising to pay less than 10% of the fiat money it created. If that percentage drops just a little lower, inflation could spiral out of control with no known method to stop it short of total financial collapse.
Short of that collapse and well prior to it the retired and those on fixed income and those who can't earn extra money will suffer. This system is nothing more than a hidden tax that Congress uses without the people knowing they are being taxed.
The only way to stop this madness is first, audit the Fed, then shut it down.