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649 days ago

These are the guys who control the monetary supply of the country. The Federal Reserve Bank, a public-private organization, is one of the most important, powerful institutions not only in this country, but in the world. Entire markets are shaped by their actions. The basic idea behind the FED's regulation of the money supply is to keep the economy as healthy as possible by limiting inflation on the one hand and preventing recessions on the other. They contract and expand the money supply accordingly, theoretically tightening when there is too buying and inflation and loosening when credit goes slack and the lack of lending and business stimulation threatens recession.

The FED gets its pseudo-religious aura from its ability to create money out of thin air, or to contract the money supply as it sees fit. In the days of ancient Egypt, the religious authorities were actually the same ones who controlled the graineries, which was the currency back in those days. Today, the Federal Reserve is sort of structured like the Catholic Church, with a Pope (the chairman), the cardinals (the regional governors--Herman Cain was once one), and a curia (the senior staff). The Federal Reserve Bank in Washington DC even vaguely resembles a temple.

One way that money is created is through new issuance of private credit; when private banks issue new loans, they essentially create money out of thin air. The FED supervises the process and theoretically monitors the amount of new loans issued by the banks. It can raise or lower the amount of new loans by raising margin requirements (i.e. the number of hard dollars each bank has to keep on hand every time it makes a loan). If the margin requirement is 10 percent, banks have to keep one dollar parked in reserve at the FED for every ten they lend out. If the FED feels like increasing the amount of money in circulation, it can lower the margin rate to, say, 9 percent, allowing banks to lend out about eleven dollars for every one kept in reserve at the FED.

The FED can also inject money into the system directly, mainly through two avenues. One is by lending money directly to banks at a thing called the discount window, which I mention a lot in some of my financial reviews. This allows commercial banks to borrow from the FED at relatively low rates (especially large money center banks who are also significant shareholders in the FED itself) to cover short-term financing problems. The other avenue is for the FED to buy Treasury bills or bonds from banks or brokers. It works like this: The Government (the Treasury), decides to borrow money. One of a small group of private banks called primary dealers (which are Goldman Sachs, Citigroup, Deutschebank and a few major domestic and international players) are contracted to raise that money for the Treasury by selling T-Bills or bonds or notes on the open market. Those primary dealers occasionally sell those T-Bills to the FED, which simply credits that dealer's account when it buys the securities. Through his circular process the government prints money to lend to itself through FED interests, adding to the money supply in the process. This also makes the large money center banks the middlemen in the whole process, who usually profit handsomely off these trades.

In recent times, thanks to an utterly insane program spearheaded by Ben Bernanke called "Quantitative Easing", the FED has gotten into the habit of buying more than just T-Bills and is printing money every week buy up privately held assets like worthless financial derivatives. It's no longer just about manipulating interest rates like it has been historically, but they still use it. How that mechanism works is that when a banks falls short of the cash it needs to meet its reserve requirement, it can borrow cash either from the FED or from reserve accounts of the other banks in the FED system.

The interest rate that banks have to pay to borrow that money is called the Federal Funds Rate, and the Fed can manipulate it. When rates go up, borrowers are discouraged from taking out loans, and banks end up rolling back their lending. Today, interest rates are at historic lows, but the system is so riddled with debt that it is practically impossible to borrow. And that goes for most levels of the economy. When the FED cuts the funds rate, banks are suddenly easily able to borrow the cash they need to meet their reserve requirements, which in turn dramatically impacts the amount of new loans they can issue, vastly increasing the amount of money in the system.

There are also different auxiliary units of the Federal Reserve like FOMC (Federal Open Markets Committee), formed after the 1987 stock market crash. They directly manages the liquidlty needs of the stock market, along with making rate adjustments. It's a highly secretive, Politburo-like entity, and there's a movement underway to formally audit its books.

The upshot of all of this is that the FED has enormous power to create money both by injecting it directly into the system and by allowing private banks to create their own new loans. If you have a productive economy and an efficient financial services industry that rapidly marries money to solid, job-creating business opportunities, that stimulative power of a central bank can be a good thing. But if a national economy is a casino like ours currently is, and the financial services industry is turning one market after another into a Ponzi Scheme, then frantically pumping new money into such a destructive system, it can lead to disastrous outcomes. Its a question of investment and which priorities are seeded. If you throw good money after bad, the outcome will always be the same. Ultimately, finance has to be subservient to the productive economy and the needs of the people. Financiers who ply their trades with worthless speculative debt instruments should kicked out of the temple.

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1185 days ago

Attorney Seymour is one of the most professional and kind lawyers I have ever dealt with. She is knowledgeable yet able to explain things i...

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1185 days ago

Attorney Seymour is one of the most professional and kind lawyers I have ever dealt with. She is knowledgeable yet able to explain things i...

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1248 days ago

I needed new tires on my car and I didn't have any extra money at the time. I went to Grace period and they helped my out quick, fast and in a hurry. I left with a check in hand and was able to establish an emergency fund for future needs with the help of Grace Period.

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1313 days ago

It's a great place to get a fast loan. I never had a problem. Just have the paperwork and be prepared to pay it back on your pay day. Also, ...

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1313 days ago

It's a great place to get a fast loan. I never had a problem. Just have the paperwork and be prepared to pay it back on your pay day. Also, ...

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1328 days ago

I hired Jan when my ex started playing games with our previously verbally agreed on custody arrangement. He got the custody agreement written up fairly quickly, to my satisfaction, and sent it out to her attorney. He had recommended a few changes and to my amazement, my ex actually agreed and we did not have to go through arbitration. It was a pleasure to deal with Jan Medoff.

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1376 days ago

SHE STEALS YOUR MONEY!!!! DO NOT WORK WITH HER!

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1376 days ago

I highly recommend running as far away from this business as possible. The person running it is unprofesional and unethical. BEWARE!!

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1379 days ago

My name is Nelson Gaugler. I read the review of attorney James Cole written by SittingBull and I feel the need to make some observations. First let me say that I have been practicing law for 24 years, and almost all of that time has been devoted exclusively to civil trial work, so I know my way around a courtroom. Second, I was one of the defense lawyers involved in the trial to which SittingBull is referring in his review and I was present during the entire trial and I also participated fully in all phases of pretrial investigation, discovery, etc. With that background, I will address some of the points made in SittingBull's review. While it is true that the case took quite some time to come to trial, Mr. Cole did not become involved in the case until two years after the accident. I will also say it was a complicated case and such cases take time to prepare properly, and there were also several other lawyers involved and the more lawyers involved the longer things take. As for the outcome of the trial, there is no question that it did not end well for SittingBull, who I believe was one of the passengers in the car. A little background is necessary to understand the situation. SittingBull was a passenger in a car being driven by a teenage boy with two other teenage boys as passengers, for a total of four occupants in the car. As the teenage driver was rounding a right hand curve he encountered a car coming in the opposite direction and there was a violent head-on collision. The critical question at trial was which vehicle was across the center line, SittingBull's driver or the other car. The physical evidence showed that the accident unquestionably happened well into the other driver's lane of travel. SittingBull's driver claimed that the other driver was partially in his lane and so he (the teenage driver) swerved to the left to try to avoid the collision and that was his explanation for why the accident happened in the other lane of travel. The investigating police officer put all of the responsibility for the accident on SittingBull's driver, and one of the boys stated at the scene that their driver had lost control of the car. It was obvious to me that the jury simply did not accept the teen driver's explanation and had instead concluded that the teenage driver took the turn too wide and crossed the center line. This was a very difficult case to win from SittingBull's perspective and it is understandable that he is disappointed at the outcome. However, it is not at all fair for him to blame Mr. Cole for the loss, nor to accuse Mr. Cole of collusion with the defense, which most assuredly did not happen. In my professional opinion Mr. Cole did an excellent job with a poor case, and I was quite impressed with his skill, knowledge and courtroom presentation. SittingBull was very well represented.

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