The Federal Reserve, fractional reserve banking and the high cost of fractional reserve lending practices.

The Federal Reserve, fractional reserve banking and the high cost of fractional reserve lending practices.

People are upset at the high cost of living. Angry, resentful, and often pointing their fingers at the businesses providing their pay checks. Accusing them of corporate greed and blaming them for the spiraling cost and effects of inflation. The truth is far from that simple. The real culprit lies in fractional reserve banking practices. When a financial institution holds, for example $1,000.00 in real assets, fractional reserve practice allows that institution to loan out $10,000.00. Money it never had and that exists as only notations on a ledger.

This ability to loan money that does not exist diminishes the value of the money over all. By being able to loan out funds that it does not have, these institutions then extend long-term mortgages and loans, charging interest rates for non-existent capital. These loans and interest charges in turn artificially inflate the cost of housing and business expansion.

This drives up the overhead cost of doing business as well as the overall cost of living of the average American. One major expense is housing. Consider how Long term, 30 year mortgages have inflated the cost of home ownership. By the time a home, mortgaged for $50,000.00 @ 6% with a monthly payment of $299.78 , is paid off, the cost is increased by more than 2 times the original value of the home, thus a mortgage of $50,000.00 becomes a pay out of $107,919.09. In order to recoup the investment, the property must then be sold at no less than $107,919.00. ( The new mortgage cost becomes $232,930.42 with a payment of $647.03 monthly)

The compounded interest is another factor driving this. 10% of $50,000.00 is $ $5,000.00. Had the Mortgage been at a flat interest rate, the lender would have earned a profit of $5,000.00. People balk at high interest, of for example, 20 or even 30 percent yet they fall for the 6% compounded interest over 30 years hook line and sinker. Six percent compounded yields the lender tremendous profits. $57,919.09 to be exact. Whereas a flat rate of 50% would have cost the borrower $75,000.00 and only yielding the lender $25,000.00 in profit. Profit that was essentially based on non existing capital to begin with! Compounded interest Literally Doubles the cost of the mortgage.

This is how $20,000 dollar houses fifty years ago became the $200,000.00 homes of today. The monthly cost skyrockets faster than average wages increase. This is not the fault of any employer. If pay scales were to mirror the cost of mortgages and loans, then the cost of products would increase dramatically as well.

Employers did not create this problem and are not responsible for it. Increasing minimum wage increases the cost of operations, which increases the cost of goods and services. Which can only worsen the problem and does not address the cause.

Factor in the cost of business loans used for expansion, building stores factories etc. Then add in Credit Cards or car loans. Then you have even more costs accrued. All powered by fractional reserve banking practices.

I believe the problem is not the perceived greed of business owners, rather the real cause of our financial issues lies in fractional reserve banking practices. Were financial institutions not able to loan more than they actually hold in real assets, or charge compounded interest rates. These artificially inflated costs would not exist. As long as the fractional reserve lending practices continue, the profits from the financial institution will always out pace the inflation they cause. It is not in the interests of financial institutions to address this issue or to encourage or allow an audit of the Federal Reserve. Such an audit would clearly expose the causes of inflation and the insane methods by which these financial institutions have accrued their incredible wealth literally out of thin air.

The power which the Federal reserve wields is staggering. The impact on day-to-day lives escapes the notice of the average American. The influence on political as well as economic realities beggars the imagination. Fractional Reserve Banking along with Compounded interest practices have had a devastating impact over all. Creating the rising inflation rate, devaluing the Dollar and enslaving a once free nation.

I believe we must audit the Federal Reserve, we must also end the practice of fractional reserve banking along with compounded interest. Should we as a nation fail to do so, our Republic is doomed to fall into economic collapse. Our freedoms bought and sold in the hands of the Bankers holding the mortgage on our financial soul.