The Biggest Scam In The History Of Mankind - Hidden Secrets of Money

[LiteCoinGuy]

over 650.000 clicks in just a few days, thats cool!

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[johnyj]

Fractional-Reserve banking is essential to understanding precisely what you are failing to understand: how money becomes debt. It starts with fractional-reserve banking, then evolves into central banking.

Suppose that you have a $100 bill and 0 reserve requirement, you loan out and deposit back this same $100 note for 10,000 times. You have created lots of transactions and deposit records, but you did not create any money: you still have that $100 bill

However, in the common FRB misconception (also in this video), you have created 1 million dollar in the process! FRB add the same dollar at different time together again and again. But this calculation is just a measurement of the money turn over volume, it does not change the money supply: The maximum money that you can loan out at any given moment will always be $100, no new money were created

So, banks use the FRB to create an illusion that lots of money are created during FRB process, at the same time they quietly created some base money for themselves. Since the number of base money is dwarfed by the checkbook money generated by FRB, they could easily claim the ownership of those base money without being noticed. But since all the checkbook money comes from the base money, they will naturally own all the checkbook money later on

The practice of FRB started from goldsmith, but even then, the base money is gold. They must first have gold to run FRB, and in order to acquire gold, they must do business or work just like anyone else. But today, central banks just create base money out of nothing. Notice that unlike checkbook money, which is backed by a corresponding debt, base money is not backed by anything, this video successfully explained this critical concept very well

[theonewhowaskazu]

What is far more malicious than the Fractional Reserve Banks is the Federal Reserve. That means that there is at all times an interest rate attached to every dollar, a fraction of which 'leaks' to banks.

Consider, for a second, the absolute most 'ideal' situation that could ever arise from this. Consider a scenario in which all of the wealth of the entire population is taxed by the US Government every year at a rate of 100%. A scenario in which the US Government has no expenses other than interest to the Federal Reserve. A scenario in which the bankers always spend all money allocated  to them. Assume an auction interest rate of  1.1%, and assume that the federal reserve is buying bonds at an interest of 1% to keep rates down. Assume the firest $100 is borrowed into existence on Year 0. Assume that the federal reserve paid all profits to the treasury, even though it really doesn't. Also, assume that the US Government never actually asks the Feds to expand the monetary base. In other words, when we did nothing other than pay back our unpayable debt.

In order to prevent a default, the original $100 principal would have become a $270.75 debt by Year 100 (the Federal Reserve System was created in 1913, now its 2013). Although on Year 0, the bankers would have only had $0.10, or about 0.1% of the money supply, by Year 100, the bankers would have 0.26% of the entire money supply to spend. Over the 100 year period, the government has paid them $17.05 in what is effectively 'free money.' Contrast this to how the rest of the population had everything taxed from them and not a dime spent on them except for the original $100 in existence.

Fun, right?

[Mike Christ]

This really opened my eyes; I knew it was bad but not this bad.  Thank you for sharing this, I would've never seen it otherwise.  Time to save up in Bitcoin...

Edit:  Also, it seems Maloney does not consider Bitcoin a money, but a currency; I can see why he would believe this, since Bitcoin, in its simplest form, is nothing more than a distributed ledger (numbers in a system as one might call it), but I believe the aspect which makes Bitcoin a money is the fact that its supply cannot be increased (without consensus anyway), which does make it suitable as a store of wealth, unlike a currency.

A shame, but from his standing point, if you're invested primarily in gold and silver, you'll want others invested in it as well.  I'm the same way with Bitcoin.

[mirelo]

Fractional-Reserve banking is essential to understanding precisely what you are failing to understand: how money becomes debt. It starts with fractional-reserve banking, then evolves into central banking.

Suppose that you have a $100 bill and 0 reserve requirement, you loan out and deposit back this same $100 note for 10,000 times. You have created lots of transactions and deposit records, but you did not create any money: you still have that $100 bill

So all those transactions are illusions? Is the house I bought with the borrowed money (sorry, it is not money) also an illusion? Is the resulting inflation also an illusion? If I default on a bank loan, will my default also be an illusion?

However, in the common FRB misconception (also in this video), you have created 1 million dollar in the process! FRB add the same dollar at different time together again and again.

Each dollar the bank loans and the borrower deposits into a new bank account exists in two bank accounts at the same time, so the loaner and the borrower can and usually do spend it at the same time.

The practice of FRB started from goldsmith, but even then, the base money is gold. They must first have gold to run FRB, and in order to acquire gold, they must do business or work just like anyone else. But today, central banks just create base money out of nothing. Notice that unlike checkbook money, which is backed by a corresponding debt, base money is not backed by anything, this video successfully explained this critical concept very well

The money created by central banks is created in exchange for government promises of paying it back plus interest, just like the money created by commercial banks is created in exchange for the promise of private entities to pay it back plus interest. It is exactly the same process, whether the borrower is respectively public or private.

[mirelo]

This really opened my eyes; I knew it was bad but not this bad.  Thank you for sharing this, I would've never seen it otherwise.  Time to save up in Bitcoin...

Edit:  Also, it seems Maloney does not consider Bitcoin a money, but a currency; I can see why he would believe this, since Bitcoin, in its simplest form, is nothing more than a distributed ledger (numbers in a system as one might call it), but I believe the aspect which makes Bitcoin a money is the fact that its supply cannot be increased (without consensus anyway), which does make it suitable as a store of wealth, unlike a currency.

A shame, but from his standing point, if you're invested primarily in gold and silver, you'll want others invested in it as well.  I'm the same way with Bitcoin.

This is the only flaw in Maloney's monetary ideas: his conceptual distinction between "money" and "currency" does not resist a serious examination.

[pinnpe]

Thanks for sharing knight22
 

[Erdogan]

You can envision debt as money without thinking about interest.

Who can create new money as debt? Anybody. Here is how:

Imagine a bunch of people, all have something of value, but only one person has a 1 $ federal note. He can obviously buy something with the note, and so can the next holder of the note.

Then, the current holder lends the note to a friend. In exchange, he gets a cheque that he can transfer to otheres, that is, the note says: Pay to the holder of this cheque 1 dollar, signed by that person. This can just be remembered, if everybody knows each other, but it is easier to write it down on a piece of paper. Is this checque just as good as money? Yes, if you trust that the person writing the cheque always have, or can aquire the dollar bill in time.

We have now one dollar bill and one cheque circulating, both are good money. Every person that has the dollar note, can lend it out against a cheque. Let's say this repeats 10 times. We now have 1 dollar note and 10 cheques circulating as money. The more money supply, the higher the prices, or which is the same thing, the lower is the value of each unit of money.

Guess what happens if suddenly each cheque holder demands the same dollar note? This is what we have now, circulating debt is 10 times the volume of the actual money notes.

[johnyj]

Suppose that you have a $100 bill and 0 reserve requirement, you loan out and deposit back this same $100 note for 10,000 times. You have created lots of transactions and deposit records, but you did not create any money: you still have that $100 bill

So all those transactions are illusions? Is the house I bought with the borrowed money (sorry, it is not money) also an illusion? Is the resulting inflation also an illusion? If I default on a bank loan, will my default also be an illusion?

The money in your bank account statement are illusions, but when you withdraw or spend them, banks must deliver base money, that is true money. If they are running out of base money, they will have a bank run like Lehman. The risk of a bank run normally is low because they can borrow base money from other banks. If you default on a bank loan, it means those base money they gave it to you are forever lost, that will cause a huge problem for them, so they need more fresh base money from FED as bailout.

Once base money entered the circulation, they will never become more, just become less and less through each lending, because more and more of them will be deposited as reserve at FED.

Each dollar the bank loans and the borrower deposits into a new bank account exists in two bank accounts at the same time, so the loaner and the borrower can and usually do spend it at the same time.

Not at the same time. Before the loan process started, that dollar belongs to bank; after that, the dollar belongs to borrower. The borrower then have the ability to spend that dollar, but the original bank lose the ability to spend that dollar, they only have a number saying that customer A owes them that dollar

The money created by central banks is created in exchange for government promises of paying it back plus interest, just like the money created by commercial banks is created in exchange for the promise of private entities to pay it back plus interest. It is exactly the same process, whether the borrower is respectively public or private.

They are very different

Commercial banks can only loan out base money again and again and create lots of checkbook entrys like account statements, but they can not create base money. It they are running out of base money, they must wait for more customer deposit, or sell valuable assets to FED in exchange for base money. For them, the base money they received from FED is as valuable as any other base money, totally exchangeable

However, when FED running out of base money, they do not need to sell assets to anyone in exchange for base money. They just create it out of nothing. On the contrary, they buy assets (for example government bond) with those base money, means those base money belong to them directly after the creation. Can you see the difference here?

The misconception comes from the claim that commercial banks can create money through loaning. In fact, they can only create lots of checkbook entries, but they can not create base money. If this puzzle is cleared, then rest is all clear

Of course, from a higher abstraction level, both commercial bank and FED loan out base money that does not belong to them: Commercial bank's base money comes from other customer's deposit, and FED's base money comes from printing, both stealing but at different degree. Since commercial banks also have their own base money reserve acquired through normal business operations, their lending operation is maybe 50%-80% stealing, while FED is 100% stealing from other social members

[mirelo]

Each dollar the bank loans and the borrower deposits into a new bank account exists in two bank accounts at the same time, so the loaner and the borrower can and usually do spend it at the same time.

Not at the same time. Before the loan process started, that dollar belongs to bank; after that, the dollar belongs to borrower. The borrower then have the ability to spend that dollar, but the original bank lose the ability to spend that dollar, they only have a number saying that customer A owes them that dollar

Suppose you deposit $1,000.00 into your bank. Before loaned by the bank, the money belongs to you (unless you consider your act of depositing it as a donation to the bank). When the bank loans it, the money goes into the borrower's account without living yours. Then, both of you can spend it, regardless of whether at the same time or not, and whether by withdrawing it from the bank or not, which is precisely why the money supply increases (to simplify things, imagine the borrower has an account in the same bank as you and after the loan is credited in his account both of you simultaneously spend that money merely by transferring it to other two accounts in the same bank).

[Dealer]

Even though the video has their facts right, it should be noted that he his exaggerating greatly: yes, the money is created this way. But don't forget there are -many- laws created to counter this. I won't ever say this is enough, and that it is a fair system, but the effect the video describes is smaller than it might seem from the video.

People on earth are all, knowingly or not, "agreeing" with this system by living in the community. If you don't want it, no matter how stupid it sounds, you have to move to somewhere with no government that uses no IOUs or taxes.

Before the flames: I'm not saying I agree on the current monetary system, I'm just making sure people don't interpret it wrongly.

[superresistant]

Can't wait to watch it at home. Thx.

[maursader]

Even though the video has their facts right, it should be noted that he his exaggerating greatly: yes, the money is created this way. But don't forget there are -many- laws created to counter this. I won't ever say this is enough, and that it is a fair system, but the effect the video describes is smaller than it might seem from the video.

People on earth are all, knowingly or not, "agreeing" with this system by living in the community. If you don't want it, no matter how stupid it sounds, you have to move to somewhere with no government that uses no IOUs or taxes.

Before the flames: I'm not saying I agree on the current monetary system, I'm just making sure people don't interpret it wrongly.

You're right, there are many laws that govern the creation of currency in the US, but I think if you have zero background in finance, this video is awesome in explaining the big picture on how it's created, you know?

[Dealer]

Even though the video has their facts right, it should be noted that he his exaggerating greatly: yes, the money is created this way. But don't forget there are -many- laws created to counter this. I won't ever say this is enough, and that it is a fair system, but the effect the video describes is smaller than it might seem from the video.

People on earth are all, knowingly or not, "agreeing" with this system by living in the community. If you don't want it, no matter how stupid it sounds, you have to move to somewhere with no government that uses no IOUs or taxes.

Before the flames: I'm not saying I agree on the current monetary system, I'm just making sure people don't interpret it wrongly.

You're right, there are many laws that govern the creation of currency in the US, but I think if you have zero background in finance, this video is awesome in explaining the big picture on how it's created, you know?

That's true, it's great info for people less informed on economics, but I thought it would be a good thing to make this clear In the video the system is called a "lie" and a "scam", but it's not. I agree that the system is sneaky, under-the-belt and unfair, but it's neither a lie or a scam.

Most people don't understand the system and yes, if they did they wouldn't agree. However, the system is created to be able to trade easily without having to take your horse to the market and trading it for some food. In my opinion there have been made an extremely big amount of mistakes and wrong choices by the government for personal interest, but without that, the system would be a very good system. It's not the system that's wrong, it's the people trying to achieve personal gains with it.

[mirelo]

It's not the system that's wrong, it's the people trying to achieve personal gains with it.

Debt-based money is unsustainable because it requires an exponential growth of the money supply: when money is debt, paying interest on this debt requires creating more money, hence more debt.

[Dealer]

It's not the system that's wrong, it's the people trying to achieve personal gains with it.

Debt-based money is unsustainable because it requires an exponential growth of the money supply: when money is debt, paying interest on this debt requires creating more money, hence more debt.

The thing is, the system didn't have to be debt-based in the way it is now. That's one of the things he actually explains in the video.

[theonewhowaskazu]

This really opened my eyes; I knew it was bad but not this bad.  Thank you for sharing this, I would've never seen it otherwise.  Time to save up in Bitcoin...

Edit:  Also, it seems Maloney does not consider Bitcoin a money, but a currency; I can see why he would believe this, since Bitcoin, in its simplest form, is nothing more than a distributed ledger (numbers in a system as one might call it), but I believe the aspect which makes Bitcoin a money is the fact that its supply cannot be increased (without consensus anyway), which does make it suitable as a store of wealth, unlike a currency.

A shame, but from his standing point, if you're invested primarily in gold and silver, you'll want others invested in it as well.  I'm the same way with Bitcoin.

This is the only flaw in Maloney's monetary ideas: his conceptual distinction between "money" and "currency" does not resist a serious examination.

Not really. He never actually states what "intrinsic worth" is, other than "a store of value." Obviously Bitcoin is a store of value. So, IMO, his definition is accurate, albeit vague.

[theonewhowaskazu]

Even though the video has their facts right, it should be noted that he his exaggerating greatly: yes, the money is created this way. But don't forget there are -many- laws created to counter this. I won't ever say this is enough, and that it is a fair system, but the effect the video describes is smaller than it might seem from the video.

People on earth are all, knowingly or not, "agreeing" with this system by living in the community. If you don't want it, no matter how stupid it sounds, you have to move to somewhere with no government that uses no IOUs or taxes.

Before the flames: I'm not saying I agree on the current monetary system, I'm just making sure people don't interpret it wrongly.

You're right, there are many laws that govern the creation of currency in the US, but I think if you have zero background in finance, this video is awesome in explaining the big picture on how it's created, you know?

That's true, it's great info for people less informed on economics, but I thought it would be a good thing to make this clear In the video the system is called a "lie" and a "scam", but it's not. I agree that the system is sneaky, under-the-belt and unfair, but it's neither a lie or a scam.

Most people don't understand the system and yes, if they did they wouldn't agree. However, the system is created to be able to trade easily without having to take your horse to the market and trading it for some food. In my opinion there have been made an extremely big amount of mistakes and wrong choices by the government for personal interest, but without that, the system would be a very good system. It's not the system that's wrong, it's the people trying to achieve personal gains with it.

Only, there is a "lie" and there is a "scam." One such lie being inherent in the concept of unpayable debt, because, of course, an IOU is a promise to pay someone a specific amount, and when that IOU is inherently unpayable you are lying. The scam, of course, is fractional reserve banking with a M0 of effectively 0.

[Dealer]

Even though the video has their facts right, it should be noted that he his exaggerating greatly: yes, the money is created this way. But don't forget there are -many- laws created to counter this. I won't ever say this is enough, and that it is a fair system, but the effect the video describes is smaller than it might seem from the video.

People on earth are all, knowingly or not, "agreeing" with this system by living in the community. If you don't want it, no matter how stupid it sounds, you have to move to somewhere with no government that uses no IOUs or taxes.

Before the flames: I'm not saying I agree on the current monetary system, I'm just making sure people don't interpret it wrongly.

You're right, there are many laws that govern the creation of currency in the US, but I think if you have zero background in finance, this video is awesome in explaining the big picture on how it's created, you know?

That's true, it's great info for people less informed on economics, but I thought it would be a good thing to make this clear In the video the system is called a "lie" and a "scam", but it's not. I agree that the system is sneaky, under-the-belt and unfair, but it's neither a lie or a scam.

Most people don't understand the system and yes, if they did they wouldn't agree. However, the system is created to be able to trade easily without having to take your horse to the market and trading it for some food. In my opinion there have been made an extremely big amount of mistakes and wrong choices by the government for personal interest, but without that, the system would be a very good system. It's not the system that's wrong, it's the people trying to achieve personal gains with it.

Only, there is a "lie" and there is a "scam." One such lie being inherent in the concept of unpayable debt, because, of course, an IOU is a promise to pay someone a specific amount, and when that IOU is inherently unpayable you are lying. The scam, of course, is fractional reserve banking with a M0 of effectively 0.

True, but that's not really what I'm trying to say. I'm saying the system itself isn't a scam or a lie. You are right about the unpayable debt, but that the debts are unpayable isn't the fault of the system: it's the fault of the banks abusing the system to create more money for themselves (=> people trying to achieve personal gains). About the scam part, I think it's quite discussable what you want to call the fractional reserve banking amount, but it's a result of, once again, the people going for personal gain.

Now, it's in a humans nature to do everything for personal gain, so I won't say I'm surprised by it. A bank is a commercial enterprise with just 1 goal: profit. So it's obvious they'll do anything for personal gain. It's the stupid decision of the people (government="the people") to let banks regulate the financial sector on earth.

So all by all, it's not a lie in my eyes: it's just a few people playing the game extremely smart, and a lot of people being blatantly stupid. The ones playing it smart (the banks) are open and quite transparant about it, people just don't understand it. I repeat, it's sneaky, under-the-belt and mean, but not a lie.

[mrkent]

I watched all 4 episodes and it sums up things pretty nicely, but I thought two claims in the 4th episode didn't make too much sense. He claims that Fed buying bonds from banks via check (from account of balance 0) is essentially money popping into existence. Then he goes on to say that the govt's debt can only get higher because they always have to borrow more to pay off debt because money can't be created. Isn't that a bit contradictory?

In addition, the gov't can in fact balance the budget to start having profit in order to start paying off the principle on the debt. Suppose the govt shut down all together and continued to collect same amount of taxes, the debt would be paid off in 7-8 years right?