The next topic for discussion will be the future of money. I have reserved the conference room at the Sarasota Selby library for Friday, January 30 from 10 AM to 1 PM.
Between now and then, I hope to address the topic in three parts:
- · Part 1: Where does money come from? How is it created?
- · Part 2: What are the problems of how money is created in the United States?
- · Part 3: What are some proposed alternatives to creating money in a different way?
The process of creating money begins with the Federal Reserve. Before we can get into the mechanics of this process, it is important to understand the Federal Reserve System. There is a great deal of confusion and misunderstanding regarding the Federal Reserve. I think this is because the Federal Reserve System is comprised of three different levels. What can be said of one level may not be said of some of the others. To avoid confusion and argument, here is a simple way to look at the structure of the federal reserve system:
- · Level I: the strategic policy function - this level contains the Fed Chairman, the Board of Governors and The Federal Open Market Committee (FOMC). It is at this level that the process of creating money begins.
- · Level II: the operational function - comprised of 12 Federal Reserve Banks located throughout the country. The biggest one is the Federal Reserve Bank of New York. The others are in Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago St. Louis, Minneapolis, Kansas City, Dallas and the San Francisco.
- · Level III - the ownership function - comprised of the stockholders of the Federal Reserve Banks listed above. These stockholders or owners are primarily large private banks like Bank of America, Wells Fargo, and Chase. These three own about 50% of all 12 banks.
A few more details on the Fed in the next blog entry.
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