What You Probably Don't Know About The Federal Reserve and Why It's So Dangerous

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The Federal Reserve System is a government-sanctioned private enterprise that functions as a socialist tool.

It was conceived in 1910 and constructed for the benefit of the private bankers who control it. Congress blessed the scheme in 1913 with passage of the Federal Reserve Act.

These days the Fed doesn't just backstop America's too-big-to-fail banks. It has expanded its doctrine of socializing banking losses globally.

The Fed helped bail out private businesses, foreign big banks and central banks in Europe and Japan in the credit crisis of 2008 and is the model for the European Central Bank, as well as the ECB's primary backstop.

To understand how the Fed gets taxpayers around the world to pay the losses its member banks routinely incur, let's pull back the curtain on the Fed and explain how it operates.

Here's What the Fed Really Does

Banks lend money and sometimes they don't get paid back. That's not a problem if it doesn't happen too often and if profits from other loans and investments cover the loan losses.

But since banks have gotten really big and have to make big loans (due to economies of scale and return on capital expectations) they need big borrowers. There are no bigger borrowers on the planet than governments, and that's where a lot of banks are lending.

Of course, governments aren't immune to over-borrowing and insolvency.

All the big banks that lent to banks in countries now in financial straits continue to lend to them because if they don't they won't get paid back what they are owed. Banks would fail from a cascade of losses and would either have to be bailed out or shut down.

That's where the Federal Reserve comes in.

They don't let their constituent members go under. If they have to, they will print money and give it to them, no matter how much they need.

That includes foreign banks and foreign governments. The Fed's member banks lend all the time to both foreign banks and foreign governments. It only follows that our banks are not immune to what goes on anywhere they have lent money. They are directly in the line of fire.

If there was no Fed or no ECB, there wouldn't be a backstop for banks that have lent to borrowers in Europe who can't pay them back. Countries would fail.

But they don't fail because central banks print money to give to banks so they can extend the loans they made, reschedule them, or in some way keep them going so they don't have to write them off as losses.

What's Wrong With Bankers Helping Bankers?…Plenty

The Federal Reserve System was designed to ensure that bankers always get paid. Congress blessed this scheme because Congress can be bought, was bought in 1913, again in 1977 when the Fed was given its "dual mandate," and is still being bought and paid for by bankers today.

Essentially, the Fed operates on a socialist model. It's not capitalism because banks would be "allowed" to fail under the rules of capitalism.

But they are protected from failing by virtue of taxpayers being called upon, in one way or another (mostly by future inflation and currency debasement, in other words, less purchasing power) to "socialize" banks' losses.

There is no going backwards. Globally we couldn't endure the hardships that would befall us if a cascade of big banks failed. So don't worry, that won't happen. But you should be worried about the creeping socialism.

The elitist class of bankers and money brokers, whose incredible wealth is protected by taxpayers, is going to have to increase the size of loans they make since they have more capital to disperse and earn income on, and will end up needing more taxpayers under their thumbs to keep their game a win-win for themselves.

Not that there isn't a way out for us taxpayers, those of us who would like to earn more than half a percent on our fixed income investments. There is a way out…

We have to end the Fed. It's just that simple.

End the Fed and all the big banks would have to be either shrunk or broken up, because there would be no more backstopping them with taxpayer money. The truth is they should all be made small enough to be allowed to fail without encumbering the national economy, or unfortunately today, the global economy.

Think about it. Banks that should have failed in 2008 are bigger than ever.

They've paid off what they borrowed to stay alive. They are paying dividends again. They are buying back billions and billions of dollars of their stocks again. They are paying big fat bonuses again. But they still complain that tougher capital standards and reserve ratios will ruin their profitability and they won't be able to lend to the people who need them.

Seriously, this is what the Federal Reserve does, has done, and will continue to allow to happen — unless we end the Fed and their game for good.

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About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. Seamus | December 18, 2012

    Can you detail the structure of the ECB and its relationship if any to the Fed Res?

    Who is the ECB answerable to?

    Is there political accountability?

    • steven machat | December 18, 2012

      We have put together a movement to end the fed and open up a central us bank. please check our website thewheelparty.org out. I am the founder, steven machat. I will be putting together concerts and gatherings around the US with the intend to educate the population about this federal intentional private cartel called the federal reserve system. I am looking for people to join and help get this done if not for our generation but our children's.

    • deb | December 23, 2012

      Can you explain step by step how to discharge debts like, bank loans for homes, etc….

    • James Francescangeli | August 13, 2013

      Clearly, the insidious Rothschild syndrome proceeds to its socialistic, destructive global agenda. Obama remains the perfect co-player for the Fed Rothschild agenda. Coupled with Security State and UN Agenda 21-like measures, the stage is progressively set for that which even Scripture warns. – james francescangeli

  2. fred schlageter | December 18, 2012

    Shah, you did read the book, read one called the truth about money a few years back and thats what got me started. You mentioned Jykel Island and I got the book out again, then bought the book you recommended and laughed righy from the gewt go. The best part you dont need to be a finacial wizard to figure out how bad this is and what a racket this is. andhere I thought that they (the government) got it from the MOB. Hang in there and keep it comming, one of the few sane places left

  3. william basham | December 18, 2012

    What need is there now for a function detrimental to our viable economy, except to preserve the immense wealth of the "Chosen Few" directors. It is not even a mandated govt. body, only an idea for wealth preservation of a few,(5) when originally organized on an island off Georgia, strictly by invitation only, no public records of the meet were ever published, nor likely will their be! Ron Paul was not even able to get an audit done of the dark shadows of the Fed! You would certainly think that any entity that controls so much of the world's economy, should certainly be open to at least the U.S. citizens. All other joint interest endeavors of companies, all have the right and indeed the necessity to have audit rights to explore how it's funds are used.. Almost appears communistic in scopse!

  4. Lourenco Vignone | December 18, 2012

    there are a lot of us that agree with you, and Ron Paul spoke openly the same way, but what would substantially help your cause is if you gave us a THOROUGH explanation of what would happen IF we indeed end the Fed. Would there be chaos? If so, how much? How's this going to affect my mortgage, my credit cards, my ATM card, if the Fed is finished? Will the small business owner be able to make his typical 1-2 month small loan to stock his inventory?? These things have to be SPELLED OUT in advance before the average American voter even gives a thought to it – even the reality of imminent doom due to the status quo, as Ron Paul explained, isn't going to be enough for Average Joe to vote to change it. So there are many of us that agree with you, but you, or Ron Paul, or someone else, needs to explain to us, and to the American voter(who needs to be politically spoon-fed) what exactly would happen if the Fed were ended. If the potential scenario was palatable and could be reasonably prepared for, maybe it would catch on.

    • Doris Kelsey | December 18, 2012

      We got along just fine without the Fed prior to 1913. We don't need a bunch of private bankers telling us how they should manage our money. We fought a war in 1776 to get rid of a central bank. Our founding fathers realized they were just con artists scamming the colonialists. North Dakota has a great state bank. They did not get hit by the recession of 2008. More states should have one. States should keep their money at home, not at Wall Street.

  5. Michael D. Suermann | December 18, 2012

    Shau, Interesting articles about the Federal reserve. If the central banks are included in the behind the scenes group that undoubtedly governs the world – who 'will not allow the system to fail'. How does that gel with the Pyramid Crisis presented by your Money Morning colleagues Chris Martensen, Kent Moors and Keith Fitz-Gerald? Can we really anticipate an impending financial crisis on the near horizon, or will the central banks (who finance governments) prevent that (or use that to further their objectives)? What's your position on their crisis conjecture? I'd love to hear your thoughts on that. Thanks.

  6. Archy Cary | December 18, 2012

    Two chances the FED will end: none and zero. Unfortunately, socialism has taken hold of America and is not likely to let go till the whole system fals – and fail it inevitably will.

  7. J.Patrick Hickey | December 18, 2012

    Dear Shah Gilani, Certainly the FED is the centerpiece of big money duplicity. I agree with you 100% about ending the FED! The fat cat bankers callously suggest that those of us near the bottom of the heap should be handled with "tough love". Well I'm not in favor of too much of that kind of tough love, but ending the FED is the type of tough love I'd like to see. With tough love by terminating the FED, big banking's socialistic dependency would be made to stand on it's own two feet again. You know, like do or die! Certainly, the soft, dependent bankers deserve to feel the sort of pain that they so relentlessly expose on the rest of us through foreclosures, etc. We must let the free market prevail in banking, and end the FED! Three cheers to Shah Gilani!

  8. Myron Martin | December 18, 2012

    Finally someone with mainstream background is "telling it like it is" brave enough to tell the truth about our corrupt banking system that is a disaster for all but the 1%. Banker propaganda extolls the virtue of the "Magic of Compounding" (investing in debt instruments) but the truth is now coming full circle and revealing reality which is "Compounding in Reverse" (accumulation of DEBT) the inevitable result of a fractional reserve banking system that requires BORROWING of our currency into existence as debt.

    What not one in a million among the masses understands is the mathematical impossibility of EVER paying off our debts because ONLY the PRINCIPAL is ever created, the INTEREST demanded can only be paid by exponentially increasing new loans to REPLACE principal paid back, AND all the interest that has accumulated that is never created. It is a PONZT SCHEME by definition and had only been made possible by the passing of the Federal Reserve Act of 1913 in defiance of the U.S. Constitution.

  9. W. G.Staley | December 18, 2012

    I believe the Fed's have so much power that they are un-touchable. The Government won't stop them because that is what is financing their scheme of making money and control of the common person. Look at unemployment, Inflation, crime! What we are told does not compute with what I read.
    W.G.

  10. Jay B | December 18, 2012

    Dear Mr. Shah:

    You are right about so many observations that you have made.
    Former U.S. Rep Ron Paul has been publicly talking about the dismantling of the Federal Reserve besides other public policy and foreign policy matters affecting the U.S..
    Is it not also true that the excesses of the vested interest groups holding the country by the balls through the pimps in Congress are also the reason why you have the growing masses of dependents voting a democratic President for the reasons you state?

    The banks have been masters of the politics of plunder of the money earned by hard working Americans.
    Now it appears that about $5 trillion of the $16 trillion debt is owed to other countries (this is the 'good news' in the 'bad'?).
    The $11 trillion is owed in U.S.mortgages, credit card debt, student loans and so on.
    Is the extension of debt owed to foreigners another extended phase of the heist?
    Can you elaborate on where this is likely to lead the U.S.?
    Is devaluating the currency a solution, and if so, to what extent will it work?

    The imminent outcome much more serious than the fiscal cliff was predicted a long time ago, in fact as early as 2003 by Girard Celeste, Marc Faber and others (on the website).
    If they could read the crystal ball at that time, why did it take so long for these strident calls to build to the present crescendo in financial newsletters – was it a fear of being called alarmists by any chance?
    To me, this has been in the cards for a long long time.

    Oh, by the way, I just remembered that the average tenure of the elected person in Congress is about 10 years.
    These are the cream of the pick from our society.
    Is it fair to blame them or should the blame be shared by the constituency who votes for them?
    I guess there were about 100 million voters in the national elections.
    Our leaders are a reflection of the bulk of a society's values.
    Duh, I guess we should not be picking on elected representatives …

    I have placed an order for the Creature from Jekyll Island.
    Thank you for the recommendation.

    Jay

    • Jennifer Barker | December 19, 2012

      I do thank you very much for stepping in with your two feet.

      Sincerely you'res,
      Miss. Jennifer Susan Barker

  11. Steve | December 18, 2012

    You've done a good job explaining how corrupt and intertwined the banking cartel is worldwide but you have only touched the surface regarding what is really going on, I am surprised that you make the statement:

    "There is no going backwards. Globally we couldn't endure the hardships that would befall us if a cascade of big banks failed. So don't worry, that won't happen. But you should be worried about the creeping socialism."

    There is a real possibility in the very near future that a large number of banks will fail. Your explaination falls far short of what is really happening with the Fed and a worldwide Ponzi Scheme. Pay attention to Japan and Europe and become aware of number of countries who no longer are willing to accept dollars. Our reserve currency status is all but over!

    To date, the information you put out has been fairly accurate and worth reading so why are you not telling the truth about how bad this really will be…banks will fail…hyperinflation is just around the corner!?!?

  12. Simon | December 18, 2012

    Shah, please note: what you are describing is not socialism but oligarchy, rule for and by the few. In the private sector it's called a cartel.

  13. CRN | December 18, 2012

    Is it true that the Federal Reserve Act was set-up as a 100 year charter? If so, the expiration would be 2013?

  14. fallingman | December 18, 2012

    Thank you again for shining the light on the Fed. You are the MAN.

  15. bernadette panzarella | December 18, 2012

    Whoever control the money control it's people. This was why our early founding fathers forbid individual riches control money system. They sneaked in by the cooked politians who gave Fed the power. In turn, the powerful picks the suitable politians for their purpose. Majority of Americans do not know the danger, They think Fed. has done us a great favors.

    Our country need many big changed, honesty is the top. Not the change that politians taiking about.

  16. Roger Weber | December 18, 2012

    I am always concerned about the all inclusive use of bankers. I work for a community bank and there are no to big to fail community banks. I would like to remind everyone that over the past 3 years there has been plenty of capitalism at work with over 150 closing / year. There has been closing of community banks that had the same percentage of capital as Citi but we were governed by a different set of rules. We do not come under the two big to fail. In summury I would ask that we be careful when lumping all banks in the same category as the top 20 banks.

  17. Ted C | December 18, 2012

    How much of the $700 billion that the Federal Reserve gave AIG is yet to be paid back to the Federal Reserve?

    You should point out that when our government gives a bond to the Federal Reserve in exchange for currency, that there is only enough currency to pay back the principal and none exists to pay the interest.

    Can you do an article on Ft. Knox regarding how much gold is there and WHO owns it? Or, is that something that no one really knows or can find out?

  18. Curtis Edmark | December 18, 2012

    Ending the Fed may indeed make things better in the long run, but it will make things far worse in the short term. People in general tend to be very myopic in their outlook. I am not sure the American people would be willing to endure that.

  19. irving taylor | December 18, 2012

    that kind of talk already got at least one president.

  20. Karen | December 18, 2012

    "But you should be worried about the creeping socialism."

    I am stunned that you call this socialism. Guess we have different definitions of that word.
    Socialism, in the classic perjorative, takes money from the rich to give to the poor.

    This takes money from the middle to give to the rich. I would use the word oligarchy.

  21. robert | December 18, 2012

    The rich have always controlled everything.
    The only cure, even temporaryily, is revolution, French style.
    But that won't happen as long as the masses have bread.

  22. Benton H Marder | December 18, 2012

    The only way the Fed is going to be done away is to take the big bankers and the politicians out and waste them in public. Otherwise, it will rise again in no very long time.
    When I was a boy, I could never understand why Antoine Lavoisier, the scientist, was guillotined during the Terror. Many years later, I learned that the Lavoisiers were major tax-farmers during L'ancien regime. The Fed and the politicians and their bureaucratic regime are just the same as tax-farmers—-social parasites and useless eaters. In charity, they all belong in the Gulag Archipelago.

  23. les szarka | December 18, 2012

    Great article Shah. Keep the expose of the fed coming!

  24. les szarka | December 18, 2012

    Shah,

    Have you heard anything about the rumor that $5 – 15 TRILLION that was funneled from the Fed to HSBC bank a few years ago? I've seen a few articles alluding to it as well as 2 youtube video's, one by a british parlimentarian and the other by Ron Paul. Supposedly the money wasn't given to them but rather they were allowed to earn the interest on it. There may have veen some other European banks involved as well.

  25. Adrian | December 18, 2012

    You all have some good points here.You also forget that we all Americans live on this US
    PLANTATION seence 1862(cca). You all want to be patriots,to be a realy patriot you have to live
    in a place called <>,in other words,nation,fatherland. Where is your <> now?
    Wake up and see reality the way it is. NOW it's been upon us seence 1933. The only way out of
    this bad situation is thru a bloody arm struggle. Stop talking about money and get organized.
    Socialism is not the enemy,unionism,communism,zionism is.
    Think about and take action.

    • Buck OFama | December 20, 2012

      Zionism my foot. Leave that out, it's an old, red herring. Communism, that's the real culprit. Communist spies, in the pre-KGB days, have infiltrated American society in every meaningful way (press corps, academe, even FDR's inner circle) deftly planting the poison of their insidious doctrine in ways that would matter later. The main agitators during the anti-Vietnam protests were on the KGB payroll.
      So this is something very stupid you have just said, my friend. Socialism IS the enemy, it is just the same thing as Communism, only dressed nicely.
      Oh, and about the FED, it also serves a useful purpose, other than fattening out the fat cats. It would be catastrophic to dismantle it.

  26. End the Fed - not easy | December 18, 2012

    During the last presidential election debate, neither candidate will touch the subject of too big to fail or trillions in bail out because our politician and the system have already been sold out to bankers. The public were only given the choice of 2 puppets to vote for. A person like Ron Paul will never get elected. How can you fight the power that can print unlimited money. They will fight every tooth and nail and I will not rule out – to even kill anyone looking to end their way. The dollar need to crash for the rest of the country to wake up that the Fed got to go and the whole political system overhaul.

  27. Ilyan Thomas | December 18, 2012

    Simon is right. Far too many people writing use very sloppy language.

    Marx made a brilliant analysis of Capitalism that many have used to get Rich. He also showed an internal contradiction that causes Capitalism to collapse so that Society has to be rescued by Socialism.

    Greedy Capitalists empower the contradiction that collapses Capitalism (recent financial crises) more effectively than all the efforts of all the Lefties that ever existed.

    Saving Capitalism by misusing Keynes is another nonsense now miscalled Keynesianism. He called for printing money to get out of Depression, but wanted it then taxed back when things got better, Instead of taxing, the Imbeciles continue printing to drive the Stock Market higher.

    If the people in the Governments and Treasuries are not Imbeciles, they must be Leninists. Lenin said "If you want to destroy a country, first debauch its currency". Inflation has he potential to destroy Civilisation. (about time?)

  28. JohnB | December 18, 2012

    Governments can and should print, issue, circulate whatever you like to call it, their currencies directly instead of "outsourcing" it banks. That's why Govts have a Treasury Depts to pay for Gov expenses interest free.

  29. Harry Harlan | December 18, 2012

    If the small banks are alowed to go under, the big banks would gobble them up and in the end you would have one superbank controlling everything. Either way we are in for some troubled times ahead. The only solution is to receive Christ as Savior and let God work this out. I tell you, everything we see happening today is happening according to God's devine plan. Each one of us has to get right with God and than means receiving Christ as Lord and Savior. Amen

  30. Kevin Donnelly | December 18, 2012

    So Socialism at a Federal level is being used to promote Capitalism at a Corporate level nationally and internationally? Seems that is OK with Banking Institutions, which are "too big to fail", and too bad for others which are not! This is not likely to change until a Government which is "too big to fail" starts to fall apart and we can't see that happening but how can it not?

  31. Helmut | December 18, 2012

    Read about inflation in the Weimar Republic.
    What happened then will happen again because all the elements that contributed to that disaster are happening exactly the same right now.
    Looking at the graph of the price of one gold Mark in paper Marks, I think 2013 corresponds with 1918. If the time line repeats, US$ hyper inflation should commence in 2017.
    But what will be the peg? Will it be gold? Chinese Yuan? A basket of currencies? Is it possible that all currencies will hyper inflate? Against what?
    What's your take on this, Shah?

  32. Michael Prosser | December 18, 2012

    Dec. 18, 2012
    aH THE RIIGHT WING mONEY nEWS iS AT IT AGAIN!
    mICHAEL

  33. Jim | December 18, 2012

    Shah

    Im not sure I agree with your description of how the Federal Reserve works.

    When the Fed was created in 1913, if a bank was in a cash and near cash tight
    situation and as facing a run by depositors (think Jimmy Stuart in "Its a Wonderfull
    Life") the banks only two options were 1) to call the loans the bank had made
    to businesses and individuals demanding immediate repayment or 2) borrow
    from a larger Bank. And at the time the larger bank was usually JP Morgan, the
    largest bank in the country.
    While it was good the JP Morgan was willing to step in and prevent small localized
    financial runs from snowballing into generalized financial panics, Congress was
    concerned up to 1913 with the concentration of power which existed in the likes
    of a JP Morgan.
    Thus the Federal Reserve was created, with a system of local banks which were
    capitalized by banks which bought stock in a Regional Federal Reserve Bank
    (think the Chicago Fed, The Saint Louis Fed, The New York Fed). Ownership
    of stock in a local Fed Bank enabled the smaller private banks to borrow at
    the local Feds discount window by offering loans on the banks books as collatoral
    for a loan or loans from the local Federal Reserve Bank. The Fed was thus
    a bank owned by bankers, in essence a bankers bank, which loaned to banks
    which found themselves in cash reserve tight situations.

    I will admit Shah that the Monetary Policy, exacerbated by Mr. Obamas fiscal
    policy seems ,pardon my saying so, like the "Voodoo Economics" which the late
    Martin Feldman, Reagans head of the Council of Economic Advisors accused
    the late Mr Reagan of practicing. I don't know how it makes sense to drive
    interest rates to Zero and create distortion in the markets makes sense, in the
    short or long run.

    I ask, in closing, what Shah you propose as a replacement for the Federal Reserve
    as a banker of last resort for cash and near cash short banks which are in
    need of cash reserves????

  34. Jim | December 18, 2012

    Shah

    Im not sure I agree with your description of how the Federal Reserve works.

    When the Fed was created in 1913, if a bank was in a cash and near cash tight
    situation and as facing a run by depositors (think Jimmy Stuart in "Its a Wonderfull
    Life") the banks only two options were 1) to call the loans the bank had made
    to businesses and individuals demanding immediate repayment or 2) borrow
    from a larger Bank. And at the time the larger bank was usually JP Morgan, the
    largest bank in the country.
    While it was good the JP Morgan was willing to step in and prevent small localized
    financial runs from snowballing into generalized financial panics, Congress was
    concerned up to 1913 with the concentration of power which existed in the likes
    of a JP Morgan.
    Thus the Federal Reserve was created, with a system of local banks which were
    capitalized by banks which bought stock in a Regional Federal Reserve Bank
    (think the Chicago Fed, The Saint Louis Fed, The New York Fed). Ownership
    of stock in a local Fed Bank enabled the smaller private banks to borrow at
    the local Feds discount window by offering loans on the banks books as collatoral
    for a loan or loans from the local Federal Reserve Bank. The Fed was thus
    a bank owned by bankers, in essence a bankers bank, which loaned to banks
    which found themselves in cash reserve tight situations.

    I will admit Shah that the Monetary Policy, exacerbated by Mr. Obamas fiscal
    policy seems ,pardon my saying so, like the "Voodoo Economics" which the late
    Martin Feldman, Reagans head of the Council of Economic Advisors accused
    the late Mr Reagan of practicing. I don't know how it makes sense to drive
    interest rates to Zero and create distortion in the markets makes sense, in the
    short or long run.

    I ask, in closing, what Shah you propose as a replacement for the Federal Reserve
    as a banker of last resort for cash and near cash short banks which are in
    need of cash reserves????

    • Jennifer Barker | December 19, 2012

      I just want to say thank you very much for stepping in with your two feet.

      Sincerely You'res,
      Miss. Jennifer Susan Barker

      • Nuffalready | December 23, 2012

        Jim:
        The fed is JP Morgan writ large. To make things worse, it cornered the power to regulate the currency. A power Congress had no right to sell. Your alternative Jim? Congress takes back its power to regulate the currency.

  35. Owen K. | December 18, 2012

    Read "The Creature From Jekyll Island." This book will tell you everything you need to know regarding the global banking cartel and its member institutions. The fiat currency system is now global.

    • bernadette panzarella | December 22, 2012

      Yes, All Americans need to be more informed. This is why the crooked politicians get in and ruin our country and bankers rob us blind.

  36. JAN | December 19, 2012

    There does not seem to be a single solution available. It is not possible to imagine a rational way-out. I tend to agree with what Doug Casey says: "It wil be worse than even I can imagine."
    Try to be ready. It will be mayhem, causing untold misery but also great investment opportunities.

  37. Helmut | December 19, 2012

    Can you see the similarities between Germany from 1918 to 1923 and the US in 2013? Instead of the Treaty of Versailles imposing a huge debt on Germany it is now the dysfunction of Congress that imposes a huge debt on the US. Then as now the resulting budget deficit was financed by the central bank creating more money. To quote Wikipedia…

    "The cause of the immense acceleration of prices that occurred during the German hyperinflation of 1922–23 seemed unclear and unpredictable to those who lived through it, but in retrospect was relatively simple. The Treaty of Versailles imposed a huge debt on Germany that could be paid only in gold or foreign currency. With its gold depleted, the German government attempted to buy foreign currency with German currency, but this caused the German Mark to fall rapidly in value, which greatly increased the number of Marks needed to buy more foreign currency. This caused German prices of goods to rise rapidly which increased the cost of operating the German government which could not be financed by raising taxes. The resulting budget deficit increased rapidly and was financed by the central bank creating more money. When the German people realized that their money was rapidly losing value, they tried to spend it quickly. This increase in monetary velocity caused still more rapid increase in prices which created a vicious cycle. This placed the government and banks between two unacceptable alternatives: if they stopped the inflation this would cause immediate bankruptcies, unemployment, strikes, hunger, violence, collapse of civil order, insurrection, and revolution. If they continued the inflation they would default on their foreign debt. The attempts to avoid both unemployment and insolvency ultimately failed when Germany had both."

  38. CoreyG/Texas | December 22, 2012

    Greetings fellow Earth Citizen,

    We are covering Global and Western Corruption from both the inside and outside. As a former Army Intel and Employee of the Federal Reserve Bank and 4 others (U.S. & E.U.)in an IT Security (With DIRECT access to much of what you are hearing about) capacity I had some extremely eye opening and direct personal FIRST HAND experiences (No second hand conjecture here).

    We have some great insight into this Global Economic Corruption that is finally being exposed… KEEP THE HEAT ON THEM!

    Follow us please for more info like this that all ties together in one location. Please contribute knowledge as well as strategy as we are the FEW willing to stand up and end corruption. We have been divided and conquered long enough. Time to no longer be a Debt slave to this current corrupt financial system. Let US all stand together and ignore the plots to divide us further.

    CoreyG/Texas

    FB Site: http://www.facebook.com/BankAndPoliticianFinancialCorruption

  39. Floyd Bernier | December 22, 2012

    More and more people are catching on to what the Fed and our paid for government are up to. Gun confiscation is now their latest promotion, knowing what an armed rebellion is capable of. Our freedoms are deteriorating rapidly.

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