A lot of people in the USA now understand that the Federal Reserve (similar to most other central banks around the world) is a private bank that controls the money supply, allegedly on behalf of the government, despite that the government has the right to do this itself through Congress. That’s thanks to people like Ron Paul and the Campaign for Liberty. But most still do not really understand how the Fed works. Allow me to break it down for you in personal terms.
Imagine that you are the government of the United States; or more specifically, you are the US Treasury. Now imagine that your bank (let’s call your bank Fubar Bank International) is the Federal Reserve. Finally, imagine that your wages or other forms of income were the taxes raised by government and the IRS (also a private company). If that were the case, this is how your banking would work:
You would work, and when your paycheck arrived, it would not actually belong to you. It would be directly deposited into Fubar Bank.
Then Fubar Bank would loan you special Fubar Notes worth a bit more than the dollars that had gone in on deposit, and charge you interest on that loan. You wouldn’t have a choice about the size of the extra amount they gave you, or about the interest rate charged on the loan, and you wouldn’t have the option to just take the money and avoid the loan. All that would be up to Fubar’s discretion, not yours.
When the time came to pay the loan back, Fubar would demand payment in Fubar Notes, which you would then have to borrow, increasing your debt further.
In order to continue paying back Fubar Bank without going bankrupt, you’d have to continually increase your income. You’d need to find new sources. After a few years, you might be working three jobs and running several investment opportunities just to keep treading water.
No matter how much you earned, however, you’d never be able to pay Fubar back the full principal and interest, because Fubar always demands payment in Fubar Notes, which come with a loan and interest attached.
Really, the only way for you to pay back Fubar without eventually going bankrupt is to steal the Fubar Notes from someone else. Your neighbor has a whole bunch of Fubar Notes. Why don’t you go over there and kill him so you can have the notes? Sounds like a good idea. You can finally clear up that debt.
(This explains why we’re constantly at war; we have to keep stealing more notes to pay back the extortion on the notes we’ve already “borrowed.”)
So, who wants to bank with Fubar Bank? Does it sound like a good deal; a good place to invest your hard-earned money? Yeah. I thought so.