Hi, Lee.

Lee Lofaso - Wayne Harris  writes:

> Hello Wayne,
>
> [..]
>
>  WH>>> Let me begin with these questions only.  Thank you.
>
>  >> The Congress does not spend money. It merely appropreates funds.
>  >> That is what most folks fail to realize, or simply do not understand.
>  >> Bankers understand the process, and how to make money work for them.
>  >> You see, money is nothing more than a medium of exchange. And as you
>  >> know, no real money ever passes hands in Congress.
>
>  WH> I think you answer the questions above, but not in an explicit way as I
>  WH> need to.  I'm slow.  I need more explicit help.  You might be saying the
>  WH> Fed provides Congress with the money for buying out the bonds the people
>  WH> did not buy, but it's not clear.  If you're saying that, I'd need you to
>  WH> say it explicitly and hopefully with a pointer of the accounting events
>  WH> that would show it.
>
> Griffin does not have a very good grasp on how things work.

It was you who recommended me the book. :-)

> The Congress does not spend money. It appropriates funds. The
> Department of the Treasury is part of the Executive Branch, not the
> Legislative Branch. How can the Department of the Treasury sell what
> it cannot own?
>
> It's kinda like robbing Peter to pay Paul. There has to be a victim,
> even if that victim never realizes he/she is the victim.
>
> Paper bills and coins made of metal have no real value. People are
> able to spend it as "legal tender" only because government endorsed
> it. Otherwise, those paper bills and coins made of metal would be
> just as worthless.
>
> IOW, people spend it because they believe it has value. If they did
> not believe it had value, it would be used for something else.
>
> Some people like to save it rather than spend it. But what they
> are actually doing is allow other people to spend it since they are
> not spending it themselves.
>
> See how that works? Are you catching on yet?
>
> What Griffin calls the "Mandrake Mechanism" is his way of trying
> to put the blame on inflation as being the root cause of all evil.
> But if you take the time to analyze what is really happening, you
> will find deflation to be far more destructive than inflation.
>
> If you want to make money you have to spend money. Preferably
> other people's money. Saving money is losing money, since all money
> loses value over time. And you are talking about paper bills, which
> have no value to begin with.
>
> Austerity has never worked in the past. It will not work now.
> And it will never work in the future. What happens, is people just
> wait. And wait. And wait. For prices to drop. And drop. And drop.
> That is no way to build an economy.
>
> The idea of fiat money, or scrip, is nothing new. People place
> value on objects of their own choice, or what the leaders of their
> tribe have dictated. Even primitive societies use fiat money.
>
> We could just as well be using snake oil. The people of Yap use
> giant round stones as their currency. They haul these giant stones
> from island to island, hoping their canoe does not sink along the
> way.
>
> How much gold is stored at Ft. Knox? Or at any vault in the US?
> If Germany requested the US to return its stash of gold being held
> in US vaults, would the US comply? I doubt it.
>
> Suppose the US no longer has the gold it was storing for Germany.
> What would happen to whatever investments the US has in Germany?
> If I was holding your gold, and you wanted it back, and I couldn't
> find it, you would not be a happy camper.
>
> Back to the original question.
>
> How can the Fed give money to the Congress when the Fed has no
> money of its own?
>
> The Fed can print money. Or what it calls money. As much, or as
> little, as it wants. It can raise interest rates. It can lower interest
> rates. It can do lots of other things. It can create, and control, what
> is commonly called "money". But what happens when all the money that
> is printed gets out of control?
>
> We know what happened in Germany. People had so much money they did
> not what to do with it. Then came Hitler, who gave Germans everything
> he promised, and more.
>
> We also know what happeed in the USA. People had no money, and did
> not know what to do. Then came FDR, who gave Americans everything he
> promised, and more.
>
> Yep. If you want to make money, gotta spend money, preferably other
> people's money. Kinda like robbing Peter to pay Paul.

I appreciate your attention.  You're not answering the question, but I
take responsibility for it.  I didn't express myself well.  The question
has been snipped, so I'll have to recover it.

--88---
 On page 192 of the 5th edition, George Edward Griffin begins to describe
 the ``Mandrake Mechanism''.  I was warned that the process might not
 make much sense, but I'm not trying to find any sense in this.  My
 interest in only in clarity.

    ``First, the Fed takes all the government bonds which the public does
    not buy and writes a check to Congress in exchange for them. (It
    acquires other debt obligations as well, but government bonds comprise
    most of its inventory.)''

 Let me take each step carefully.  The government issues bonds.  Some
 people buy it.  Some bonds are not bought.  How does Congress get
 involved in this?  Is it the case that Congress buys all those people
 did not buy?  With what money does Congress buy?  Is Griffin saying that
 the Fed itself ``writes a check to Congress'' so that Congress can
 afford it?
--88---

As I tried to convey above, I'm interested in understanding each step of
the process with a maximum of clarity.

Child A slapped child B in school and there is no question as to the
fact --- it's been filmed by a security camera and many people have
already seen it.  Parents are making a whole fuss about it.  A meeting
has been scheduled.  Some claim it was an act of evil and others said
it's just normal children stuff.  These are all profound questions.  All
I'm asking is to see the video: it must show the fact and I haven't seen
it yet.

My own attempt at answering the question might clarify, but it won't be
as clear as I would like it to be, so please rewrite it or fill it in as
you can.

Governments eventually find themselves having spent all the resources
they had.  More resources are coming all the time through the revenue
service, so when pockets are empty they could first check with the
Department of Treasury whether they've earned some more in the meantime.
Suppose the answer is no: the government has spent it all from their
``last paycheck''.  They'll need a plan B.

As a plan B, the government decides to sell bonds.  Some people buy it
because it's considered by many a very good investment, after all it's
the treasury promising to pay it back with an interest.  However, after
selling all securities people were willing to buy, they still didn't
raise all they needed, so they need a plan C.

As a plan C, the Treasury approaches the Federal Reserve to provide the
resources they couldn't raise by themselves.  The Federal Reserve
provides the Treasury with _something_ that allows the Treasury to let
government start spending, which they do.  From here on money starting
flowing hand in hand as payments are made and banks go on lending it to
whoever borrows and earning interests over their ``excess reserves'' ---
for sure the best business model there is.

So, when Griffin says ``the Fed takes all the government bonds which the
public does not buy and writes a check to Congress in exchange for
them'', perhaps he means that the Federal Reserve buys all bonds the
public did not buy, letting the Treasury raise the resources they wanted
to, but couldn't do it themselves alone (because people just didn't buy
it all.)

It should be clear now that I'm interested in the process.  I may not
know whether we are counting cats or dogs, but I should be able to see
the arithmetic in clear steps.  If I've counted 3 things already in day
1 and then I count 4 more things in day 2, then putting these two days
together, I've counted 3 + 4 = 7, which I verify by looking up my
addition table, which is something I assume to be correct.

Thank you!

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