Re: Hidden Secrets of Money

Most of the video (except the FRB part) is correct
...

What is wrong about the FRB part?

FRB does not create money, it just created larger amount of checkbook numbers in bank's account, prove that money has been stored there, but those numbers can not be spent, if there is a bank run, those numbers will vanish quickly. The base money will never increase by means of FRB

A larger amount of checkbook numbers is money.

It is an illusion of money, like after you deposite your money at MTGOX, the web interface shows you a number on your account, and you think that money is real Wink

When the Federal Reserve buys a U.S. Treasury bond, it credits the U.S. Treasury with new money, created out of thin air. The only collateral is "the good faith and credit of the U.S. Government." The Treasury can spend that money, illusory or not, for real goods and services. It does this over and over again, thus causing inflation, a hidden tax on everyone who holds dollars.

Even with so called tapering, or totally removing QE, the govenment could continue money productions in the semi private bond market. For instance, the USPS could issue a bond with implicit government insurance, or through a newly created empty company. This is what happened to the Reichsmark.

Edit: http://en.wikipedia.org/wiki/Reichsmark
"Dummy Company Currency Expansion"