This is a picture of the United States Federal Reserve Bank.
The US Federal Reserve Bank (FED) is actually not a government entity. It is a private Corporation with share holders who are paid by law 6% dividends per year. It is owned by the richest and most powerful banks and people in the world. It has been given, by congress, the authority to create US currency out of thin air and thus control the flow of capital and rates of interest in the nation.
The Federal Reserve has a zero balance in its check book. It has no "reserves" of any kind. So it is not Federal and it has no Reserves.
Heres how it all works...
The United States has what we call a Treasury, every country has some sort of institution just like it though they are called by different names. The Treasury controls the finances for the nation. They give the government the money they need to fund the different sectors like the military, congress or any government sponsored programs, etc. Think of our country as a business; we produce things, and purchase things and invest in things, and the overall goal is to turn a profit at the end of each year. As citizens we all work our jobs and own our property and we pay taxes on those things to the government every year. the IRS monitors all of these things to ensure we're paying properly. So those taxes are given back to the Treasury so they may be lent back out accordingly.
Because we, as a nation, are producing a deficit every year we have no money to fund the government sectors and programs necessary to keep our country operating.
So thats when the Treasury turns to the Federal Reserve and says "we need money to keep things afloat or we'll go bankrupt". So the Treasury produces an IOU called a Bond that promises to pay back the borrowed amount plus interest over a 30 year period and gives it to the FED. The FED then writes the Treasury a check, from their zero balance checking account, for the amount of the IOU and hands it over. The Treasury then prints that money and puts it into circulation, this is called "Quantitative Easing".
It took 200 years to go from the first US Dollar printed to $825 Billion in existance. Then the crisis of 2008 occurred and it took about 2 years to go from that $825 Billion to $2.4 Trillion, thats an expansion of nearly 3 times. And there are another estimated 3 or $4 Trillion created that were not reported. Heres a chart of the reported Currency supply courtesy of GOLDSILVER.com
This chart depicts what is called the "base money" supply, or M1.
Inflation is properly defined as the expansion of the currency supply, and rising prices are just the symptom of the actual monetary inflation. There is always a lag in time between the inflation of the currency supply and the rises prices felt by consumers, so it is possible to look into the future in this way by studying the charts. Perhaps now you can better understand the severity of the previous news headline i posted about.
