Down With The Fed : Eradication Of The Federal Reserve

1065 Words5 Pages
Jacob Waddell Professor Gulley POLI 3270 April 20th 2015 Down with the FED: Eradication of the Federal Reserve Our nation faces many problems, and has for many years. Today’s generations, and especially the mainstream media, seem most concerned with social issues such as abortion and same sex marriage. While these issues are important, our economic situation should receive more urgent attention. Americans are desperate for better days, but lack a meaningful understanding of how our financial system works. Almost 100 years ago, the creation of the Federal Reserve Banking System was instated. One could argue that this system is the base of why we are 18 trillion dollars in debt, and rising. The Federal Reserve Banking System has contributed…show more content…
Today, Congress no longer prints money. It has given that power over to the FRB. Whenever Congress needs money, they cannot print up the amount they need. If they could, the national debt would be zero because we cannot owe money to ourselves. Instead, when Congress needs 1 billion dollars, they coordinate with the FRB to print 1 billion dollars out of thin air. Now, what does Congress give the FRB in exchange? The FRB receives 1 billion dollars in “Treasury Bonds” which are, more or less, an IOU. Treasury notes themselves hold no value, just something to say “I’ll pay you back”. Now, this is not necessarily the problem. The problem lies in an aspect of our financial system known as “Fractional Reserve Banking”. The money that is deposited into banks becomes part of the bank’s reserves until transacted again. As stated in Modern Money Mechanics (MMM), when money is deposited, the bank must adhere to the reserve requirements. “It must maintain legally required reserves … equal to a prescribed percentage of its deposits” (MMM). It later states, “Under current regulations, the reserve requirement against most transactions is 10%” (MMM). For example, when $1000 is borrowed from the FRB that means $1100 dollars (initially) must be paid back. The $1000 dollars is deposited into another bank. This bank must adhere to the regulations, and keep 10% on reserves and can only lend out $900 and keep $100 dollars
Open Document