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I have been trying to get a handle on the current economic situation and the following is my feeble attempt to communicate what I understand. Please make corrections where I have erred. Again this is JUST ME and I am probably wrong but desperately wish to understand.
Here is something to think about. The Federal Reserve (people who are empowered to regulate the US currency) say that the total amount of dollars in circulation currently is 263 Billion. Now that is just money that is being circulated so don't overly focus on that number as the Federal Reserve considers MOST of the dollars of the US economy simply as ledger entries between its member banks.
Even then the vast majority of that 263 Billion dollars cannot be accounted for due to people stashing cash in their back yards and other contrarion behaviors such as drug lords hording vast cash reserves out of the country. For all intents and purposes the vast amount of money that we see invested in stocks, bonds and mutual funds exists no where but in the accounting books of a bank.
Now the Federal Reserve was created by Congress in 1913 and is a corporation of stockholders (only available to the member banks) that are also corporations that are publicly traded stocks. As an agency of the US government the Federal Reserve is not subject to audits or outside oversight but they have not been audited by the US Congress since their creation. Essentially, with the exception of a single publicity trip to the main Federal Reserve in Fort Knox to inspect the gold deposits in a single vault, the world essentially takes what they claim as fact.
When pressed the Federal Reserve admits that they have on hand only a small fraction of reserves in the form of gold and Government Securities. Government Securities are a promise against the governments ability to lay taxes upon its citizens in case you were wondering.
There are twelve Federal Reserve banks in the US. They represent the tip of the pyramid of banking for the country and were created to balance the interests of the member banks and the centralized responsibility of government. The goal was to provide structure to protect banks against runs on their assets while providing some flexibility in currency to provide for the expansion and contraction of the value of the dollar in relation to other currencies.
In common terms this system is known as fiat currency because it is no longer backed by hard assets but instead by the full faith and backing of the issuing government. If the government says the currency is worth so many loafs of bread then it is. Exchanging for hard assets such as gold or silver is no longer an option.
The secret to how this works is that the assets of the government are not fixed. One dollar is not out of circulation when it sits in your pocket. When that dollar was authorized by the Treasury department the Federal Reserve actually created seven additional ledger dollars that are lent out to its member banks for use as loans. These loans are what fuels economic expansion but are backed by nothing more than the promise of the government to lay taxes upon its citizenry.
Assuming that all the money actually in circulation was held by US citizens (the actual percentage held by the our citizenry is to sad to share) the total economy of the US is $877 each for a little over 310 million citizens. In other words that is the AVERAGE amount of money each of us has to our name that if we each had to hold in our hands the money dollars in circulation.
Those citizens have promised to cover our nations 4 Trillion dollar national deficit (not counting interest...over 10 Trillion with interest).
For the roughly 100 million citizens who pay taxes each year that works out to $100,000.00 each and every tax payers has been committed to owe the foreign banks that have lent the US government money to pay for its programs and expenses. Let me say that again.
In concrete terms that is 4 Trillion divided by 100 million tax payers or $40,000. Each person who PAID taxes (not just filed and received a full refund). The current average annual US salary is stated at $50,000 or roughly $24 dollars an hour. That works out to 42 weeks of work we owe foreign lenders who have loaned the US government in exchange for Government Securities.
Now to get a grasp of the personal value of bailing out the banks (coincidentally many of whom are members of the Federal Reserve) let us take the 1 Trillion dollar cost of buying all their debt and divide this by the 100 million tax paying citizens of the United States and we will see that it will cost BEFORE INTEREST $10,000 per person.
Again using the average annual salary of $50k per that equates to 417 hours of work assuming we only work 40 hours a week and take ONLY the Federally mandated holidays of leave. So lets call it 10.5 weeks or 2.25 months of labor.
Therefore to bail out the US banking system from the sub-prime mortgage disaster will cost every tax paying citizen of this country 52.5 weeks of work we owe to the foreign investors backing the US government. That is an awesome number but again doesn't take into consideration the INTEREST on that debt that is being predicted to push the total debt to over 11 Trillion dollars or more than doubling the work each tax payer owes.
As the Gregorian calendar is complicated by leap years it is easier to use the mathematical average of 1 year = 52.177457 weeks. 105 weeks of labor divided by the mathematical year is 2.01236331 years. Lets be generous and say two years of labor.
As a comparison let us consider that when the United States was created a common form of paying the enormous expense of transportation, housing and food to the new world was a contractual form of debt bondage (slavery) called indentured servitude. A contract between two parties (worker and owner) to pay these expenses in exchange for a fixed amount of labor.
Historically this contract varied based upon the skill level of the labor and the popularity of settling in the New World but on average was three to seven years. As the ongoing expenses of these workers usually ended up being an additional debt owed to the owners this practice was considered immoral and eventually outlawed in the US.
I must confess I see no difference between owing foreign investors two years of labor with the US government being the work supervisor and the slavery of indentured servitude. What do you think?
Here is something to think about. The Federal Reserve (people who are empowered to regulate the US currency) say that the total amount of dollars in circulation currently is 263 Billion. Now that is just money that is being circulated so don't overly focus on that number as the Federal Reserve considers MOST of the dollars of the US economy simply as ledger entries between its member banks.
Even then the vast majority of that 263 Billion dollars cannot be accounted for due to people stashing cash in their back yards and other contrarion behaviors such as drug lords hording vast cash reserves out of the country. For all intents and purposes the vast amount of money that we see invested in stocks, bonds and mutual funds exists no where but in the accounting books of a bank.
Now the Federal Reserve was created by Congress in 1913 and is a corporation of stockholders (only available to the member banks) that are also corporations that are publicly traded stocks. As an agency of the US government the Federal Reserve is not subject to audits or outside oversight but they have not been audited by the US Congress since their creation. Essentially, with the exception of a single publicity trip to the main Federal Reserve in Fort Knox to inspect the gold deposits in a single vault, the world essentially takes what they claim as fact.
When pressed the Federal Reserve admits that they have on hand only a small fraction of reserves in the form of gold and Government Securities. Government Securities are a promise against the governments ability to lay taxes upon its citizens in case you were wondering.
There are twelve Federal Reserve banks in the US. They represent the tip of the pyramid of banking for the country and were created to balance the interests of the member banks and the centralized responsibility of government. The goal was to provide structure to protect banks against runs on their assets while providing some flexibility in currency to provide for the expansion and contraction of the value of the dollar in relation to other currencies.
In common terms this system is known as fiat currency because it is no longer backed by hard assets but instead by the full faith and backing of the issuing government. If the government says the currency is worth so many loafs of bread then it is. Exchanging for hard assets such as gold or silver is no longer an option.
The secret to how this works is that the assets of the government are not fixed. One dollar is not out of circulation when it sits in your pocket. When that dollar was authorized by the Treasury department the Federal Reserve actually created seven additional ledger dollars that are lent out to its member banks for use as loans. These loans are what fuels economic expansion but are backed by nothing more than the promise of the government to lay taxes upon its citizenry.
Assuming that all the money actually in circulation was held by US citizens (the actual percentage held by the our citizenry is to sad to share) the total economy of the US is $877 each for a little over 310 million citizens. In other words that is the AVERAGE amount of money each of us has to our name that if we each had to hold in our hands the money dollars in circulation.
Those citizens have promised to cover our nations 4 Trillion dollar national deficit (not counting interest...over 10 Trillion with interest).
For the roughly 100 million citizens who pay taxes each year that works out to $100,000.00 each and every tax payers has been committed to owe the foreign banks that have lent the US government money to pay for its programs and expenses. Let me say that again.
In concrete terms that is 4 Trillion divided by 100 million tax payers or $40,000. Each person who PAID taxes (not just filed and received a full refund). The current average annual US salary is stated at $50,000 or roughly $24 dollars an hour. That works out to 42 weeks of work we owe foreign lenders who have loaned the US government in exchange for Government Securities.
Now to get a grasp of the personal value of bailing out the banks (coincidentally many of whom are members of the Federal Reserve) let us take the 1 Trillion dollar cost of buying all their debt and divide this by the 100 million tax paying citizens of the United States and we will see that it will cost BEFORE INTEREST $10,000 per person.
Again using the average annual salary of $50k per that equates to 417 hours of work assuming we only work 40 hours a week and take ONLY the Federally mandated holidays of leave. So lets call it 10.5 weeks or 2.25 months of labor.
Therefore to bail out the US banking system from the sub-prime mortgage disaster will cost every tax paying citizen of this country 52.5 weeks of work we owe to the foreign investors backing the US government. That is an awesome number but again doesn't take into consideration the INTEREST on that debt that is being predicted to push the total debt to over 11 Trillion dollars or more than doubling the work each tax payer owes.
As the Gregorian calendar is complicated by leap years it is easier to use the mathematical average of 1 year = 52.177457 weeks. 105 weeks of labor divided by the mathematical year is 2.01236331 years. Lets be generous and say two years of labor.
As a comparison let us consider that when the United States was created a common form of paying the enormous expense of transportation, housing and food to the new world was a contractual form of debt bondage (slavery) called indentured servitude. A contract between two parties (worker and owner) to pay these expenses in exchange for a fixed amount of labor.
Historically this contract varied based upon the skill level of the labor and the popularity of settling in the New World but on average was three to seven years. As the ongoing expenses of these workers usually ended up being an additional debt owed to the owners this practice was considered immoral and eventually outlawed in the US.
I must confess I see no difference between owing foreign investors two years of labor with the US government being the work supervisor and the slavery of indentured servitude. What do you think?
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