11.29.2008

moment of clarity/doubt

just watched the money banking and federal reserve video. it was clear and direct with info. here's what i learned. 

every major war in history disregarded the gold standard of money and printed paper money to fund the war. Abraham Lincoln was the first to print paper money to fund the civil war. 

to address this problem, powerful bankers, JP Morgan and John D. Rockefeller, wrote the Federal Reserve Act, which would create a more powerful bank to regulate the banks so they couldn't print money whenever they wanted. this was passed by Woodrow Wilson in 1913. 

now the Fed. 

the Federal Reserve System's main purpose is to control the money supply and circulation. its goal is keep the economy stable and allow for prosperous growth. 

in actuality, the Fed prints more money when ever the government wants to borrow that money. the government needs more money in order to fund the wars they engage themselves in. 

so the Fed prints more money and this puts more money in circulation with the economy. with more money in the economy, there is more spending. when there is more spending, there is more demand for goods. so businesses have to raise prices in order to provide for the demand. when prices go up, interest rates go up and this is inflation. 

wars equals inflation. 

also, whenever more money is printed, it looses value. similar to diamonds, if there were more available, it would not be worth as much as it is worth today. 

so the Fed controls the economy by controlling the money supply.  

so how does inflation stop? 

wouldn't the Fed need to put more money in circulation so that the people are able to pay those interest rates? 

if so, then wouldn't the cycle just perpetuate itself over and over?

1 comment:

............................ said...

with you until "wars equal inflation."

back up and go slower with that.

you skipped a few steps that will help make that sensible.

okay?

g.