POMO Is Back: Here’s What Treasury Bills The Fed Will Buy

Scroll to toward the bottom of this post to see a part of my handout for a presentation: “Do You Know What Money Is? It’s Not What You Think.”  Richard Duke

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“As it pre-announced last Friday, the Fed will resume QE by purchasing $60billion/month in bills at least until 2Q 2020 starting on October 17. As has been widely discussed, and mocked, already, the Fed highlighted that these purchases were for reserve management only and have “no material implications for the stance of monetary policy”, although how a restoration of financial conditions hit during the greater monetary policy experiment in history is not seen as, well, monetary policy is ludicrous.”

https://www.zerohedge.com/markets/pomo-back-heres-what-treasury-bills-fed-will-buy

SEE:

The Federal Reserve Explained—Xtranormal-POMO

 

Plan now to understand why a crash is coming-Richard Duke

 

Austrian Economics & Asset Protection Planning–Richard Duke (Video)

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Fractional Reserve Banking–Video

Sir Josiah Stamp, the president of the Bank of England in the 1920s and the second richest man in Britain, made this revealing comment: “Banking was conceived in inequity and was born in sin.” The bankers on the earth take it away from them but leave them the power to create deposits, and with a flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all of the great fortunes like mine will disappear. And they ought to disappear. For this would be a happier and better world to live in. But if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create deposits.”

Read Nehemiah 5 (MUCH WORSE NOW BECAUSE WE HAVE DIGITAL CURRENCY AND THE FRACTIONAL RESERVE SYSTEM). UNDER NEHEMIAH 5, DEBASEMENT OF SILVER CAUSED THE POOR PEOPLE TO HAVE TO SELL THEIR CHILDREN TO STAY ALIVE. YOU CAN READ NEHEMIAH FROM THE BELOW BLOG POST:

Debasement and Crony Capitalism; Nothing is New Under the Sun

YOU CAN ALSO READ THE SECULAR DISCUSSION UNDER THE “CANTILLON EFFECTS”–THOSE GETTING THE NEWLY-CREATED CREDIT FIRST BENEFIT  AT THE EXPENSE OF LATER RECIPIENTS. SEE NEHEMIAH 5 BELOW:

Review by Richard Duke on the Mises Institute website of the book: The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century by Dr. Mark Thornton

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See also:  FRACTIONAL RESERVE BANKING EXPLAINED IN ONE MINUTE–VIDEO

See also:  THE FRACTIONAL-RESERVE BANKING QUESTION

 

Money as Debt – Fractional Reserve Banking part 1 of 5

 

Money as Debt – Fractional Reserve Banking part 2 of 5

 

Money as Debt – Fractional Reserve Banking part 3 of 5

 

Money as Debt – Fractional Reserve Banking part 4 of 5

 

Money as Debt – Fractional Reserve Banking part 5 of 5

 

A part of the handout for a presentation Richard Duke made to AALS…the Association for Legal Professionals, on September 13, 2019, titled: “Do You Know What Money Is? It’s Not What You Think.”  

I COULD NOT FIX THE OUTLINE FORMAT.  RICHARD DUKE

  1. Legal banking reserve requirement.

 

  1. The reserve requirement (or cash reserve ratio) is a central bank regulation employed by most, but not all, of the world’s central banks, that sets the minimum amount of reserves that must be held by a commercial bank. An institution that holds reserves in excess of the required amount is said to hold excess reserves.

 

  1. The amount that a bank cannot loan out or invest.

 

  1. Generally set at 10 percent.

 

  1. Inflation.

 

  1. Inflation occurs two ways: (i) increase of the money (currency) supply; and increase of credit (fractional-reserve system).

 

  1. Currency is increased by the Federal Reserve by printing paper dollars or entering digits of money (digital entries) in bank accounts.

 

  1. Fractional-reserve banking (remember the blacksmiths)

 

XII.      Fractional reserve banking.

 

  1. Explanation of fractional reserve credit by the Federal Reserve – See the Federal Reserve – Modern Monetary Mechanics –Workbook on Bank Reserves and Deposit Expansion. See: https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf

 

  1. Example of credit expansion – An example of the credit expansion under the Federal Reserve banking system shows how credit is created out of thin air. See: https://jrichardduke.com/2016/09/02/fractional-reserve-banking-fractional-reserve-banking-video/

 

  1. Assume the government wants to borrow $10 billion. The Federal Reserve, through strokes on a keyboard, enters digits of $10 billion into the bank account of the U.S. Treasury in exchange for an IOU called U.S. Treasury bonds or securities.

 

  1. The U.S. Treasury owes $10 billion to the Federal Reserve, plus interest. This adds to the bank’s reserves.

 

  1. The reserve requirement is ten percent, and any amount in excess of $10 billion is referred to as excess reserves. In this case the excess reserve is $9 billion.

 

  1. It is logical to assume that this $9 billion comes out of the $10 billion deposit. But this is not the case. Nine billion is created out of this air in addition to the existing $10 billion deposit, or $19 billion. This is how money is expanded through credit, which is created out of thin air. Banks do not make loans from the money the banks receive ($9 billion) as deposits. If the banks did make loans on the $9 billion, no additional money is created. What banks do when they make loans is to accept promissory notes in exchange for credits (money) to the borrowers’ bank accounts. The $9 billion is created out of nothing. This is because the initial $9 billion deposit becomes a part of the reserve; and 90 percent of $9 billion is $810 million, which is now available as newly created money for more loans. To make this simple, let us assume that one person borrows $9 from one bank. This process is repeated (see below)

 

  1. The borrower deposits the $9 billion into his bank account. Ninety percent of the $9 billion he borrowed, or $8.1 billion, is now available as newly created money for more loans for this bank. And when $8.1 billion is loaned out and redeposited, $7.2 billion is available to be loaned out by the bank.

 

  1. Approximately $90 billion can be created on top of the original $10 billion deposit. In other words, for every deposit into a bank account, about nine times as much can be created out of thin air to be loaned out or invested by the banks.

 

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