Fractional Reserve Banking: Power, Profits, & Pain
Posted by Orrin Woodward on April 19, 2015
The key to understanding the Financial Matrix is to recognize how the banking system uses the fractional reserve banking (FRB) process in partnership with the central bank to form a bank cartel insured by the national government. Without this trilateral partnership, the banking cartel, with the FRB systems inherent inconsistencies would cause the cartel to collapse under its own weight. Indeed, the whole point of my new book to be released by LIFE Leadership next week is to describe a plan out of the FRB fueled banking cartel to protect your family. Just how bad is the FRB system?
Imagine playing a game of musical chairs where the same chair is fraudulently issued to 10 different people without their knowledge. While the music is playing, during the “boom” phase, everyone is happy and the economy appears to be growing rapidly; however, as debt increases, so too do the prices of everything caused by the predictable inflation. Eventually the prices of houses, cars, and other big ticket items outrun the ability of the consumers to service the debt and the music stops abruptly. The “boom” period has now transformed into the “bust” phase as the highly unstable and inflated money supply burst because the consumers cannot afford to pay the interest and principal payments on their bloated debt.
Not surprisingly, when the music stops, the consumers discover they do not have actual chairs (real commodity money) to sit down in. Thus, the weakest financially crash to the ground first, but it doesn’t stop there. For the failure of the banks marginal loan qualifiers causes a cascading effect (I would say like a row of falling dominoes, but I don’t want to mix my metaphors 🙂 ) until only the most conservative financially can survive at all during the bust.
For example, remember how the failures of the riskiest mortgages brought the failures of many others who thought they had solid mortgages? The domino effects of bad bad loan failures to “good” loan failures happened when the housing prices dropped 50% or more during the “bust”. Loans, in other words, that are good when house is worth $500,000 and a person owes $400,000, are defaulted upon when house falls in price to only $250,000 and the person still owes $400,000! The person has quickly realized he is missing his chair.
Of course, the banks win during the “boom” with massive amounts of profit from interest payments and also win during the “bust” because they are insured from loss by government bailouts and the central bank money injections. The coup-de-grace is when they also foreclose on real properties for pennies on the dollar leaving the debtor bankrupted. Absurdly, the system is set up for “heads” the bankers win and “tails” the borrowers lose. For the consumers are bankrupted by the counterfeit paper chairs and the banks are bolstered by bailouts and property surrendered by debtors as collateral. Sadly, it doesn’t even end there. Because now the bank cartel can start the music all over again, offering incredible interest rates and no money down, to seduce new borrowers into the shearing room for the next game of musical chairs.
The more I study the money system, the more amazed I am at the gullibility of the masses and governments to support a game that leads to their own demise. It’s seems like the modern world enjoys to punish itself for Big Banker profits. In reality, the Financial Matrix relies upon the unsuspecting people’s Financial Literacy ignorance. Indeed, few understand how money is created even though it is hidden from them. Rather, most people do not like to think upon issues that threaten them and choose the ostrich approach of working 8-10 hours per day for 40 plus years wondering why it seems they have to work harder every year for less gain.
Productivity increases around the world and yet the masses get broker and no one seems to know why. Then, paradoxically, we demand our government (BTW, this is beyond a party issue as Republicans and Democrats both love borrowing fiat money from the bank cartel) to help us even though they are the ones supporting the cartel in the first place. This would be like crying out for the bully’s right arm to defend us from his left arm currently pummeling us.
Do you really think that is going to work? To be sure, the national government will raise your taxes and launch numerous initiatives, but the money cartel isn’t afraid because no one gets elected without their approval (after all they can print money out of thin air, who is in a position to out fund them?) and financial support. Allowing bank cartel to print money out of thin air is nothing less than a total surrender of sovereignty and our nation has become a government of the banks, by the banks, and for the banks.
There is one thing, however, that the people could do. And, if they did so, it could change everything. Not just for themselves but for our nation. Get out of DEBT and stay out of DEBT! When the masses awake and learn Financial Literacy, I can promise you the banker cartel will tremble in its fiat paper boots. For only then will the people stop enslaving themselves for things they do not truly need and the game of musical chair will end. Further, when the people set themselves free, then we are in the moral position necessary to demand the government set itself free from the Financial Matrix also. Isn’t it hypocritical, in other words, to demand our government to be debt free when we are not debt free ourselves?
The great economist of the Austrian School, Murray Rothbard studied how the Banking Cartel creates money:
Here’s how the counterfeiting process works in today’s world. Let’s say that the Federal Reserve, as usual, decides that it wants to expand (i.e., inflate) the money supply. The Federal Reserve decides to go into the market (called the “open market”) and purchase an asset. It doesn’t really matter what asset it buys; the important point is that it writes out a check. The Fed could, if it wanted to, buy any asset it wished, including corporate stocks, buildings, or foreign currency. In practice, it almost always buys US government securities.
Let’s assume that the Fed buys $10,000,000 of US Treasury bills from some “approved” government bond dealer (a small group), say Shearson Lehman on Wall Street. The Fed writes out a check for $10,000,000, which it gives to Shearson Lehman in exchange for $10,000,000 in US securities. Where does the Fed get the $10,000,000 to pay Shearson Lehman? It creates the money out of thin air. Shearson Lehman can do only one thing with the check: deposit it in its checking account at a commercial bank, say Chase Manhattan. The “money supply” of the country has already increased by $10,000,000; no one else’s checking account has decreased at all. There has been a net increase of $10,000,000.
But this is only the beginning of the inflationary counterfeiting process. For Chase Manhattan is delighted to get a check on the Fed, and rushes down to deposit it in its own checking account at the Fed, which now increases by $10,000,000. But this checking account constitutes the “reserves” of the banks, which have now increased across the nation by $10,000,000. But this means that Chase Manhattan can create deposits based on these reserves, and that, as checks and reserves seep out to other banks (much as the Rothbard Bank deposits did), each one can add its inflationary mite, until the banking system as a whole has increased its demand deposits by $100,000,000, ten times the original purchase of assets by the Fed. The banking system is allowed to keep reserves amounting to 10 percent of its deposits, which means that the “money multiplier” — the amount of deposits the banks can expand on top of reserves — is 10. A purchase of assets of $10 million by the Fed has generated very quickly a tenfold ($100,000,000) increase in the money supply of the banking system as a whole.
Did you get that? The Federal Reserve (Central Bank) writes a check backed by no real bank assets (instead its merely a debt imposed upon American productivity without collateral) to purchase Treasury Bills from one of the Big Banks. The Big Banks then start the music again and seduce the next round of musical chair victims (usually mortgage loans since approximately 70% of USA money supply is created from house mortgages). The banks make interest on money created out of thin air, the government funds it debts, and the consumer play another round of musical chairs as the prices of everything rise during the boom and fall during the predictable bust. The people are sheared yet again because they do not understand the Misean/Hayekian Austrian Business Cycle theory.
Jorg Guido Hulsmann
Jörg Guido Hülsmann, in his fascinating treatise, The Ethics of Money Production, described the fiat money and fractional reserve banking cartel. He explained the whole system relies on legal privileges and special deals for the few against the many. Hülsmann has nailed the reason why the Financial Matrix is thriving and why each reader ought to protect his family by eliminating ALL DEBT through applying the principles taught in our #1 bestselling product the Financial Fitness Program:
There is no tenable economic, legal, moral, or spiritual rationale that could be adduced in justification of paper money and fractional-reserve banking. The prevailing ways of money production, relying as they do on a panoply of legal privileges, are alien elements in the capitalist [i.e., true free market] economy. They provide illicit incomes, encourage irresponsibility and dependence, stimulate the artificial centralization of political and economic decision-making, and constantly create fundamental disequilibria that threaten the life and welfare of millions of people. In short, paper money and fractional-reserve banking go a long way toward accounting for the excesses for which the capitalist economy is widely chided.
We have argued that these monetary institutions have not come into existence out of any economic necessity. They have been created because they allow an alliance of politicians and bankers to enrich themselves at the expense of all other strata of society. This alliance emerged rather spontaneously in the seventeenth century; it developed in multifarious ways up to the present day, and in the course of its development it created the current monetary institutions.
…The driving force that propelled the development of central banks and paper money was the reckless determination of governments, both aristocratic and democratic, to increase their revenue, if necessary in violation of good faith and of all established rules of commerce.
In sum, government power, banker profits and the people’s pain all increase while the people’s freedoms and pocketbook decrease. This is the “joy” of living in the Financial Matrix.
Sincerely,
60 Responses to “Fractional Reserve Banking: Power, Profits, & Pain”
Sorry, the comment form is closed at this time.
Chad Palmer said
Orrin exellent article once again, I witnessed this first hand working as a superintendent supervisor for a company who bought about 5000 homes in the Phoenix area after the banks took them from the home owners and sold them cheap to investors. It was our job to fix up the homes and the rent them as fast as possible. It worked so well they took our system and bought almost 50,000 homes in 10 different states. Thanks to your 90 day Mental Fitness challenge and the Financial Fitness Program we are on our way out of the financial matrix and daily directing other families on the underground railroad to do the same. God bless you and thanks for your courage to lead from the front line trenches. cap
Orrin Woodward said
Chad, this is great stuff. I look forward to talking further with you on this. Keep leading! thanks, Orrin
Curtis Spolar said
Great article, very simple explanation of the complex!
Orrin Woodward said
Curtis, loved your most recent LIFE CD. Great teaching and inspiring example you and Debbie have set. God Bless, Orrin
Edwin said
Another great article, helping us understand and fully grasp the effects of the financial matrix, thanks for sharing and leading in regaining our freedom! Sincerely,
Edwin Miller
Orrin Woodward said
Learn, Apply, and Lead Edwin. You are on your way out of the Financial Matrix. thanks, Orrin
David Nelson said
I also like your explanation that makes the difficult and unknown, fun, interesting and easy to comprehend. If we could only realize earlier in life that a good job is a sacrifice to becoming great. The salary and benefits of a good job seem to be taking a nose dive as companies seek to comply with government requirements. We are also enticed by the entertainment/electronics industry to have the latest and greatest due to software not working on older gadgets. We are being attacked on all fronts for our money. Then there is the health care, where we are obligated to purchase what we don’t want or need by the people we elected. They have turned against us and operate on their own agenda. I am amazed at how fast people are turned greedy when they go to Washington, DC.
You are so right in the need to get out of debt. What ever a person has to do , do it. If it includes, recording money spent, buying with cash, getting rid of all but one credit card, living way below our means, living like grandma and grandpa did, no cable tv, reading, etc. Then we must make the hard choices. In a book I read, yes I picked it up at a major convention, Brian Tracy says to procrastinate on the 80% things that produce almost nothing, and make habits of the 3 things that will most improve our lives. The reason it makes sense is I’ve already read the same thing in your books said differently, such as having 13 resolutions in Resolved.
If we don’t change we will be slaughtered with everyone else when the government financial fiasco makes a correction.
Best Regards, Dave Nelson
Make profits not wages
Orrin Woodward said
Well said Dave. You have educated yourself and applied the principles to escape the Financial Matrix. thanks, Orrin
Lynn said
The more I learn the more I realize just how broken the system is… It’s up to us to share this knowledge and start making the very necessary changes to turn this economy around.
Thank you Orrin and Life Leadership for giving us the education and tools to help change our path and right the wrongs.
Orrin Woodward said
We are escaping the Financial Matrix as a community Lynn. Keep leading! thanks, Orrin
Jim Martin said
Thanks Orrin for this scary understanding of money and how it can be corrupted for the power of banks and governments! Like your cd “financial matrix” we are serfs giving fiat money back to the government in return they are controlling millions of lives by enticing people to buy “stuff” on credit that is backed by nothing. All in all we need to get out of debt and stay out of debt, and educate everyone of the wool being pulled over their eyes.
Thanks
Orrin Woodward said
You said it Jim! Keep rocking! thanks, Orrin
Elaine Mallios said
Stunning isn’t it? I want out of the matrix! Thank you Orrin – great explanation and research.
Orrin Woodward said
You are on your way Elaine! God Bless, Orrin
Mike Lewis said
Make perfect sense. This post created a deeper hunger and passion to get free from the financial matrix. Amazing! Thank you
Orrin Woodward said
Go Mike! Be the example for others to follow! thanks, Orrin
Melinda Shaum said
I was in the audience in Ashland, Ohio when you explained the difference between fiat and commodity money and this blog further explains what has happened with the boom and the bust and now the cycle begins again. My husband and I have heard and read all we need to know that we need to be financially free and we have an attainable goal for Life of 2 years. Thank you for the information you share in your blog and the Financial Fitness information.
Orrin Woodward said
Way to go Melinda! YOU guys are part of the answer, not the problem. We need to inspire the people to be the model so we have an authentic message. God Bless, Orrin
Tim Marks said
Great post Orrin. So many folks are becoming aware of the FM because of your research and writings, thanks!
God bless
Tim
Orrin Woodward said
Timbo, There are going to be millions more with your help! 🙂 thanks, Orrin
Zach Frey said
Orrin, thank you for continuing to share in a way that we all can connect the dots and understand. These blog posts and all of your talks on the FM have made it so much easier to help others understand the incredible importance of changing their own situation. Rob Robson said something last night at an Open in Raleigh that goes right along with this post… “You can’t fix THE economy, but you can fix YOUR economy….And when we help enough people fix THEIR economy, we fix THE economy.”
Living Intentionally,
Zach
Orrin Woodward said
Zach, LOVE IT! Keep rocking! Thanks, Orrin
Maura Galliani said
Can’t wait to get your book into my hands … and into the hands of anyone else who opts for the “blue pill.” 🙂
Orrin Woodward said
Maura, I cannot wait for you to have access to it. So much to do and so little time! 🙂
Chad Palmer said
We look forward to hearing and reading more about how we too can help more with freeing families from the financial matrix. We’re headed to Disney World this week on the free trip from lifeleadership.com, God Bless you and your family. Love the Palmer’s.
Nancy Monsipapa said
Orrin,
Thank you so much for your leadership and courage to educate the masses on Financial literacy. For a very long time I was afraid to try understand money and the monetary system because it seemed so far above my thinking. But your ability to spell out the financial matrix in simple terms has me longing for more and more education on the subject matter – and that education has changed to future of my family and so many others who we reach out to daily.
Sincerely Grateful!
Nancy Monsipapa
Orrin Woodward said
Nancy, YOU are on your way out of the Financial Matrix because you are hungry to learn. Keep leading! thanks, Orrin
Steve Leuquin said
You know what upsets me the most? I have always been taught to trust and respect people in authority. It really burns when the two groups we are supposed to trust and respect are the ones who are slapping us in the face! It hurts when you don’t know who you can trust!
I look forward to the challenge of getting the financial matrix message out to the world. Like me, many will be hurt to find out the truth of what they already know, the people they were supposed to trust have pulled a con.
Let the healing begin!
Steve
Orrin Woodward said
Steve, I only promise you the truth. 🙂 Actually, LIFE Leadership promises the truth and a plan out of the Financial Matrix. All the people have to add is courage and financial discipline. 🙂
Steve Leuquin said
I am reading the book for the second time! We are going to set a million people free and beyond!
Tennyson Heen said
Great article as usual. We’ve been conditioned to accept debt as part of life, that it is inevitable, by the main stream media that is lock step with the big financial institutions. Now, with a concerted effort to open everyone’s eyes with the right information and get back to basics. It is good to be debt free, though I have had people tell me that there is “good debt”. I just get that quizzical look of “really?”. So glad to be part of LIFE and get this through to our kids and friend’s kids so that they don’t think it’s just their parents talking to them. It’s the right principle and the right way to think.
Orrin Woodward said
Tennyson, The only good debt is paid of debt! 🙂 Seriously, I have heard it hundreds of times that there is good debt, but nearly everyone of those people later suffered either bankruptcy of severe financial stress when the music stopped and they realized their chair was made of paper, not precious metals. 🙂 thanks, Orrin
Ken and Joan Hendon said
Wow! Thanks for the clarity of economic truth.
Leah Stadel said
Orrin, I love how you are relentless in uncovering truth…..an example that each of us needs to and IS following. LIFE Leadership might not own the truth, but because of your example, it is the BEST AT COMMUNICATING the truth. I am so excited about this article and the book to follow because I can share it over and over again with others, and at the same time, get it deeper and deeper into my own thinking. A business with a duplicatable system means the message gets duplicated right at us every day. this is hard truth to know….how absolutely hopeful to know there are answers!
Orrin Woodward said
Leah, It’s time to reach millions with truth to protect families and our nation. Keep leading! thanks, Orrin
Scott Russell said
Thanks for another great article on the Financial Matrix!!
Orrin Woodward said
Scott, this is the year to help so many people see what living outside of the Financial Matrix looks and feels like. Once the vision is caught, the work will be done and we will lead millions to freedom! God Bless, Orrin
John Mossner said
Thanks for bringing a systematic way out of the financial matrix to the masses! Otherwise we’d be slaves forever. Worse yet, our kids would be slaves as well.
Orrin Woodward said
John, keep paying it forward big man! We have much to do and we are the community to launch a financial revolution! 🙂 thanks, Orrin
Rob Brown said
“Anyone can make the simple complicated. Creativity is making the complicated simple.” (Charles Mingus)
Orrin, you have a gift for taking complicated topics and making them simple to understand. Thank you for taking the time to share your talent with us. It’s pretty cool that you take time to reply to all the posts too! You’re awesome! -Rob
Orrin Woodward said
Rob, YOU are going to play a huge part in helping the next-generation think right about life, finances, and purpose! Keep leading from the front! thanks, Orrin
Anthony Longlois said
Orrin,
Thank you so much for taking time to study the history of the Financial Matrix and how it is affecting all of us. I never knew how deep the rabbit hole went until I started reading your blogs, listening to the Financial Matrix cd’s and attending live seminars where this financial truth is being taught. This information has made impact on my financial future and my families as well.
Orrin Woodward said
Anthony, because you are hungry, hone-able, and honorable, you are breaking free from the Financial Matrix. Getter done! God Bless, Orrin
Lou Minnis said
Orrin, This is the best thing that I’ve heard in over 30 years. I was made aware of the Federal Reserve System in the 1980’s, the problem was after it was explained no one had a simple way out. There was a long term answer (10 to 15 years) but not an short term “Offense” (2 to 5 years). You have opened a way for the masses to be free. I am so glad that I joined your TEAM. Lord willing and the law of averages (lol) I am happy to help free our people (the human race).
God Bless You,
Lou
brian said
Orrin,
We must stay the course. We have a God given duty to share truth! Amen
BP
Chad Palmer said
Orrin, just a quick note to thank you, Laurie and Chris and Terri for the time away from your precious families to help the rest of us out of the financial matrix. Tonight as Chris said the rare occasion to have dinner with his whole family together hit Julie and I like a ton of bricks. Words cannot express how grateful we are to all the founders families sacrifice and dedication to the cause of truth and the blessings that are being poured out upon all of us as we liberate the captives from financial bondage.
Steve Meixner said
Orrin, I read the book “Ethics of Money Production” about a year or so ago because you mentioned it in a post. Thank You, it was quite an Eye opener! This Financial Matrix is something I now understand and makes Total Sense to me, but never would have known without your help. Again, Thank You!! I am doing my best to get out of any Debt. I will have only my Mortgage or less by the end of 2015 thanks to you,
Steve
CJ Calvert said
Orrin, if Murray Rothbard were alive today, I am confident that he’d want an autographed copy of the Financial Matrix adorning his bookshelf. What else would make a teacher more proud than to see you, arguably one of his most esteemed students, pick up his book and brandish it like a flag for Financial freedom? Thanks Orrin for a fantastic post.
Kari said
Thank you Orrin! This is an amazing post.You broke it down so I can completely understand it. Now that I do it makes me hunger for financial freedom even more! Thank you again! Kari
Kirk Birtles said
Orrin, Its time my man! Thanks for investing the 5 hours to make something that can be quite confusing more understandable for the people that want to know the truth and are prepared to do something about it!
On to a million…
kb
Cory McWhinney said
Orrin, just a quick note to say thank you for leading from the front.
Cory McWhinney
Elizabeth Sieracki said
All this new financial information is mind-boggling. Thank you SO much Orrin for all your hard work, research and dedication in standing for and presenting the truth. You are in our prayers.
Greg Nguyen said
Hello Orrin,
Your blog and books are priceless for exposing the banking cartels’ mechanisms for manipulating the money supply, which in turn steals the productive capacity of the populace and impairs household balance sheets. Speaking of balance sheets, the Fed’s own is massively leveraged to its current ratio of 77-to-1. To give color, Iceland had a 100-1 leverage ratio when their country imploded, catalyzing the 2007/2008 financial crisis. Lehman Brothers’ leverage ratio was 30-to-1 when it collapsed in 2008.
The Fed’s balance sheet is on their own website: Total Liabilities are $ 4,427,677,000,000 and its Total Capital is a measly $ 57,689,000,000
http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1
So with a leverage ratio of 77-to-1, the Fed’s capital is merely 1.3% of total assets. A small decline in the Fed’s asset values and it’s technically insolvent.
The bigger problem is most of its balance sheet consists of US Treasury bonds and toxic mortgage-backed securities purchased to provide liquidity as part of the bank bailouts and QE. If/when interest rates normalize (i.e. rise), those asset values will plummet. And with bond yields (e.g. interest rates) already near the zero bound, they can only rise over the long-term. Essentially, the Fed has purchased these securities at high prices (low yields) and will be forced to sell them at lower prices (rising yields) in the future. Buy high, sell low is what they are doing. The Fed has boxed itself into a corner, unable to raise interest rates. But the longer they keep interest rates low, and the longer they have a bloated balance sheet of $4.5 trillion, the bigger the bubble they are creating.
Similarly in 2008, this won’t end well. Back then, it’s balance sheet was $800 billion, not $4.5 trillion. During the next financial crisis, the Fed itself will need a bail out. The question is: who will be the savior? Probably the US Treasury, as it gins up its printing press even more. The bankrupt is bailout out the bankrupt.
Greg Nguyen said
Sorry for the typo at the end. The last sentence should be:
The bankrupt are bailing out the bankrupt.
Thanks again Orrin for all you and LIFE Leadership have done to educate people on the financial matrix. You’ve injected hope in many who have given up hope and on themselves. We have millions more to reach, and LIFE Leadership is the vehicle.
Easton Kelsey said
Orrin,
This article says it all. I LOVE your boldness to say it like it is. If just 10% of our working age populace Get this, surely the Financial Matrix Exodus will commence for the masses through the leadership of the 10%.
I have been messaging my own prior hypocrisy as a Tea Party leader and former candidate for US Congress while being in over $80k of personal debt.
Thanks to you and Life Leadership & the Financial Fitness Program, we are out of the matrix and currently conducting (coordinating) others out in the Modern day Underground Railroad. Just as Harriet Tubman did when she escaped the Physical Matrix.
God bless and full speed ahead!
Jim Wilson said
Hello Orrin,
Thanks for doing the heavy lifting in research. For those of who are still in the matrix and trading time for $’s, this information is invaluable. We are privileged to leverage your time. Sara and I are still about 40k into the matrix, but it is all unsecured. I have considered making a loan on the property to get the interest down, but in light of your article, I think it best just to grind it out and get more aggressive on the offense.
Thanks again,
Jim Wilson
Deborah Katz said
Orrin, my husband and I are finally on the same page regarding debt. We feel such gratitude for the wisdom of this training and are looking forward to being debt-free within 12-18 months. The cars and mortgage are paid off and the credit cards are a-tumbling here in the next few months. Thank you and the leaders of Life Leadership for sharing their testimony of how to steer clear of this financial matrix that exists outside of our financial neighborhood. The dark alley of despair and debt is no longer our stomping grounds. Our son, Eli Bowman, is young enough to truly make a difference in the world as he is learning this at a grand time in his and his family’s life. Be well and ONWARD!
yaya said
i spoke with a cpa you would have thought he had been with you all day, smart young man.
Joel said
Thank you, Orrin! One of the Commandments states “Thou shalt NOT steal.” The government-fed reserve/central bank fascist regime will someday answer to our Lord. To say that “they are thieves” is a gross understatement for sure. In the meantime, I have been preserving what little ‘wealth’ I have by converting my hard-earned fiat dollar into God’s money – silver and gold. And like most Life members, I’ve been sharing life-changing information to as many people as I can. We have a mission to show others the TRUTH.
God Bless!
thom adams said
Couldn’t agree more.