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The Soon Coming Judgment Of God Upon America and How To Escape It 309
How The Fed Makes Money
The Federal Reserve is a private institution owned by American and European banks, it is
not part of the Federal Government. The Federal Reserve is essentially a central bank except it is
not owned by the government or controlled by the government. In most countries central banks
are government agencies. The chief responsibility of a central bank is the control of the
economy. This is done through the control of interest rates and money supply. Although it is
commonly believed that the Federal Reserve can print money whenever they want, this is not
true even though a statement by a Federal Reserve economist would seem to support this:
We make money the old fashioned way. We print it.
Art Rolnick, former Chief Economist, Minneapolis Federal
Reserve.
1241
The truth is the US Treasury prints the money and the Federal Reserve issues it. Although
it isn’t true that they can print money whenever they want, they can create it whenever they want
by ordering additional currency from the treasury. But the greatest share of the money supply is
created by the stroke of a pen. Money is created by loaning money and the Fed itself can also
create money by writing a check. This is revealed in a Federal Reserve publication that states:
When you or I write a check there must be sufficient funds in our account
to cover that check, but when the Federal Reserve writes a check, it is creating
money.
Boston Federal Reserve Bank in a publication entitled Putting It Simply.
1242
This is actually true; it will briefly be explained later how they do this. The Federal
Reserve has several tools in order to control and increase the money supply as follows: They can
increase the currency in circulation, they can make loans to member banks; they can buy and sell
treasury bonds of the US government; they can also buy the debt of foreign governments; they
control the interest rates of member banks and the rates of interest on overnight loans between
banks; and they set the reserve limits (the amount of money a bank must have on hand to meet
depositors demands). Having minimal reserve limits is called Fractional Reserve Banking and it
is one of the biggest influences on the money supply.
Fractional Reserve Banking (FRB) works as follows: A reserve limit, which is now
approximately 10%, is how much money the bank must have on hand to meat depositors
demands. A 10% reserve limit means that if someone deposits $100,000 in a bank, the bank can
loan out $90,000 of the $100,000 deposited. With two corresponding ledger entries the bank can
create $90,000. It can do this same transaction over and over till it as created $1 million from the
original $100,000 deposit. When you loan $100 to a friend, you have $100 less to spend but
when the bank lends money both the depositor and borrower have access to their money. A bank
can multiply a deposit into loans totaling approximately ten times the original deposit.
Following is an example of how this works. For the purposes of this example, we'll
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