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07/14/2009

Above Money� The Federal Reserve Bank Secrets Of Money

By Benjamin Gisin

Mention the Federal Reserve Bank (the Fed) and you will likely get one of two responses. The most common is no response due to not understanding it. The other is one of outrage, conspiracy and dark deeds. Neither are much help. The Fed performs functions whose processes (and consequences) are difficult for the public, elected officials and even accomplished economists to understand.

The Fed has three primary functions: 1) Help banks create virtual money (bank deposits) and to clear those deposits between banks. 2) Encourage an interest rate environment that gives money a return above inflation when invested. 3) Issue the nation�s debt-backed currency. The Fed, with its banking partners, do two things the public wants a lot of: 1) The public wants money. The Fed and banking system manufacture that money (bank deposits and currency). 2) The public wants interest on their savings and financial investments.

In keeping with the principle of the �time value of money,� banks charge interest on what they manufacture out of nothing. The Fed is always on the watch for inflation and a reason to raise interest rates to meet investor demand for a return on investment above inflation. The Fed, the banking system and secondary lenders perform the activities necessary to give the investing public what it wants � money and a return on financial investments.

Unfortunately, the physical economy of goods, services and jobs is of lesser priority and therein accrues the problem of escalating unemployment. What little service the banking system�s money products perform as a means of exchange is inferior to the service the banking system�s money products do to garner a return on investment. The financial system and the investing and saving public, have been working diligently to saturate the economy with the maximum amount of debt to provide the maximum return.

When the economy gets saturated with debt, as it is today, and investors are unable to find qualified borrowers to saddle with their investment-return expectations, money stops flowing, the economy begins to seize up and debts go unpaid. Everyone loses, the economy, the investors and the debtors. It has the ear markings of a lose/lose/lose system.

The banking and larger financial system provide the tools used to exploit people and the environment first and as a means of exchange second. The future lies in extracting our children and the economy from this system. The banking and financial system, with public demand for its money and investment-return principles, are in the process of not just limiting economic growth, but curtailing what�s there.

Since 1996, for every $1 trillion in the GDP growth, debt grew by $4.7 trillion � an amazing feat by financial investors and a public fighting for money by getting in debt. Chasing after a return on investment (and the colossal debt empires that this activity requires) is slowing the economy.

America farms only one-fourth the acres (on a per capita basis) than it did in 1900. America�s infrastructure (roads, bridges, levees, etc.) is in such sad shape, the American Society of Civil Engineers now estimates a need of $2.2 trillion to bring basic infrastructure up to par. Food banking is one of the fastest growing grocery chains. Job loss continues to grow. The economy is shrinking to fit within a fickle system of money and investment. The nation (public and private) must incur ever increasing levels of debt for a declining level of economic activity.

We can point fingers at bankers and ourselves which solves very little. We need a change in perspective and a commitment to start looking at a new process of exchange based upon principles of love, service and cooperation. Our process of exchange must evolve beyond one of competitive weaponry. Only then will we discover what it takes to create the next Golden Age. It is then that the unseen reality � that which is greater than us � can come into service for human progression.

For more information and discovering what options are emerging, subscribe to Peaceful Economics newsletter. $21.95 annual subscription (6 issues) (208) 523-2717 or send check to PO Box 3662, Idaho Falls, Idaho 83403.

For speaking engagements, radio interviews or comments phone (208) 523-2717, or e-mail editor@touchthesoil.com.

Benjamin Gisin is a veteran banker and former senior agricultural approval officer for one of the nation�s largest agricultural banks. Since 1998, he consults businesses and agricultural producers facing credit challenges. He writes and lectures extensively on the evolution of money, economics and food security.



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