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How the Fed steals our money
Date: Friday, 15 May 2009, 3:03 pm

"When a central bank requires new money to pay for whatever expenditure public or private, bailout or stimulus, or to push whatever economic button it desires, the central bank simply creates it. Their new money appears out of thin air. They then have the audacity to charge the public interest for its use. These interest charges go solely toward private gain.

It can be said that the power to create money is the power to never incur any cost. Think about it. If you have the ability to create money from nothing what do you care how much you need to print to pay for what you want? For you it’s free money. But for the people who can’t print their own money they are the ones who will bear your cost. All real cost is passed on to the consumer of money through an increase in general prices. This is how new money created from thin air is used for free by its creator and then absorbed into the economy where the creators folly is paid for by the end users of money who absorb the inevitable increase in general prices.

Remember, the creator gets to use its newly created money for whatever it wants. Price is not an issue. Have you ever wondered why Congress spends money so foolishly? It simply does not matter to them because for them money has no value. It comes from nowhere, at least in the minds of our leaders. In reality fiat money only has value when it enters the economy. And at that point we must absorb the new money by accepting a lower divisible value of our existing money.

Here’s an example of what I mean. Picture a man approaching you with a briefcase full of a million brand new dollars never before used. The man hands over the case then turns and walks away. You now have a million dollars. It cost you nothing. No labor, no risk, nothing whatsoever you simply had no money, then you had a million dollars. You spend every dime of it immediately. But here’s the catch. A million new dollars have now entered the economy and nothing was done to make room for these dollars so they have to squeeze into the economy with all the other dollars. This creates a greater divisible value between all previously existing money. Hence, each dollar is now worth less as it is divided into the economy with all the other dollars.

In a fiat currency system we know that money is created essentially from nothing. Before it enters the economy fiat money has no value because it does not exist. Money that does not exist can therefore have no influence on general prices, as it causes no drag on the value of existing money. But the moment a central bank issues even one new dollar all existing money is then worth less. And when a central bank issues trillions of new dollars, well, you do the math. The value of your previous dollars just got divisibly hammered by trillions of new dollars. When your dollar is worth less you then need more of them at the cash register than you did before. (You multiply to undo the division)."

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How the Fed steals our money
Annas -- Friday, 15 May 2009, 3:03 pm