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Posts Tagged ‘Federal Reserve Act’

Your country is desolate, your cities are burned with fire; strangers devour your land in your presence; and it is desolate as overthrown by strangers. Isaiah 1:7

“…because of Western civilization’s love of material comforts, there is an unwillingness to face unpleasant realities.”

  • Gordon H. Clark, A Christian View of Men and Things, p.53

“‘How did you go bankrupt?’ Bill asked.  ‘Two ways,’ Mike said.  ‘Gradually and then suddenly.’“ So wrote Ernest Hemmingway in his novel The Sun Also Rises

Although Hemmingway’s book was a work fiction, what he said about bankruptcy is a phenomenon many of us have seen in real life.  Individuals and organizations that appear to be in robust financial health experience sudden financial collapse. 

Perhaps the poster child for sudden financial ruin is Lehman Brothers, a famous 150-year-old Wall Street investment bank.  Having earned record profits during the height of the real estate bubble from 2005-2007, early in the morning on Monday, September 15,2008, Lehman Brothers filed for bankruptcy.   

The collapse of Lehman Brothers to this day is still the largest bankruptcy in American history. 

Gradually, then suddenly.  That same pattern can be seen in the Scriptures as well.  In Deuteronomy 32:35 we read, “Their foot shall slide in due time.”   Some will recognize this as the text on which Jonathan Edwards based his famous sermon “Sinners in the Hands of an Angry God.” Wrote Edwards,

It [the saying “their foot shall slide in due time”] implies, that they were always exposed to sudden unexpected destruction.  As he that walks in slippery places is every moment liable to fall, he cannot foresee one moment whether he shall stand or fall the next; and when he does fall, he falls at once without warning: Which is also expressed in ‘Surely thou didst set them in slippery places; thou castedst them down into destruction:  How are they brought into desolation as in a moment? (Psalm 73:18-19).

Sodom and Gomorrah met with destruction in a single day. 

After centuries of rebellion against God, Jerusalem was sacked in a single day. 

In Daniel’s time, the mighty city of Babylon was overthrown in a single day. 

In Revelation, the voice from heaven prophesies that the destruction of Babylon the Great will come in a single day.  The kings of the earth are said to lament her destruction, crying out, “Alas, alas, that great city Babylon, that mighty city!  For in one hour your judgment has come” (Revelation 18:10).  

In all of these cases, the sudden final destruction was really the end result of a process that had been going on for many years.   

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Jerome Powell, Federal Reserve Chairman.

“We print it [money] digitally.  So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government securities.  And that actually increases the money supply.”

I probably shouldn’t be, but I often am, amazed an God’s providential timing in providing illustrations of points I plan to talk about.  As I’ve been thinking about this series of posts, I planned this week to write about the Fed and the process of money, more properly currency, creation. 

In one respect, the process the Fed uses to bring currency into being is fairly easy to grasp.  On the other hand, it is so obviously fraudulent that it shocks people when they hear about it. “That simply can’t be.” is, I think, a fairly common reaction. 

In the Lord’s providence, and quite apart from any planning by me, it so happened that Jerome Powell, the Chairman of the Federal Reserve, was interviewed on 60 Minutes last Sunday by correspondent Scott Pelley of CBS News.  You can watch the full interview and ready the transcript here.  In my opinion, Pelley did a good job asking important questions of Powell, especially concerning the process by which the Fed prints money.  At one point, Pelley asked Powell about the Fed’s response to the coronavirus (CV) crisis, and Powell ticked off a list of the Fed’s market interventions.  Here’s what was said next,

PELLEY: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That’s another way to think about it. We did.

PELLEY: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.

There you have it.  The Fed chairman admitting on national television that the Fed creates money and uses it to buy, “Treasury Bills or bonds or other government guaranteed securities.”  He also noted that this activity, “actually increases the money supply.” 

What I would like to do in today’s post is to examine these statements – Powell’s saying that the Fed “creates money” and that this act “actually increases the money supply” – in greater detail.  Just how does the Fed create money and what are the effects of “increasing the money supply” on our daily lives? 

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