In America, the US dollar is the nation's fiat currency. It all starts off with the US Treasury who creates bonds which are government IOU's that are paid back over a specific time period with interest. The Treasury holds monthly auctions to sell off its bonds to primary dealers, who are the major banks. Then the US Federal Reserve enters the game by purchasing all the bonds from the banks through something called "open market operations". Once again the banks go back to the US Treasury auctions the next month buying more bonds and selling them to the Federal Reserve. And every month this cycle of buying and selling keeps on getting repeated.
Finally over time, there becomes an excess of bonds at the Fed and cash in the Treasury. The Treasury now takes this excess cash and deposits it into the various branches of government. Which is then spend on wars, military, government salaries, social programs, public work projects and other deficit spending that keeps on re-occurring. Next all those government employees and military personnel take their salaries and deposit them into various bank accounts throughout the nation. This is how the fiat money now enters the commercial banking sector.
Within the commercial banking sector we now have what I refer to as "magic money creation" which is actually called "Fractional Reserve Lending". Here is an example of how fractional reserve lending works. Let's say someone deposits $100.00 into a bank account, the bank that received that deposit is now legally allowed to remove $90.00 or ninety percent of your deposit and re-lend it to someone else. Thereby actually leaving your account with only $10.00 or ten percent of your total deposit. However your bank statement will still show the entire $100.00 dollars or one hundred percent of your deposit, on deposit in your account.
The person who received your money from the bank as a loan will use it to buy something such as a car. Then that person will pay the car dealer with the money he borrowed. Now the car dealer will deposit this money into his own account at the bank. Now there is $190.00 on deposit and the bank can legally steal Ninety percent again or $81.00 and lend it out. The next person then comes along, and borrows money. Once the new borrower pays the seller for what they bought the money again is re-deposited into the bank and now there is $271 dollars on deposit. This creation of money through deposits and loans (fractional reserve lending) keeps re-occurring to where at some point your original $100.00 deposit has grown to $1000.00 (ten times the amount of your original deposit) in fiat currency created from the bank.
The entire system of creating money from nothing is a complete scam. It all starts with the Federal Reserve and the US Treasury exchanging IOU's. A check is an IOU for cash and a bond is an IOU to be paid back with interest at some later date. Cash comes into existence once the Fed issues someone a check. However, it's important to note, that when the Fed writes and issues a check, there is no money what so ever in the account to cover the amount of that check. The account these checks are written from will always carry a zero balance.
Therefore each dollar that exists, is actually borrowed and must be paid back. Once again nothing backs these dollars except IOU's. Furthermore, for the hard work each US citizen does to earn his or her salary, a portion of it eventually ends up at the Treasury in the form of income taxes. This is what pays the principle and interest on the bond that the Fed bought with a check from nothing. US citizens are forced into paying taxes for the use of our current money supply system.
This is the Ultimate Government backed and sponsored pyramid scheme, where only the banking elite who own the Fed and other central banks around the world, massively profit by stealing from generations of innocent citizens.
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