How is Your Money Made….
Do You Know Jack ….?
The U.S. Treasury looks for loans by selling Treasury Bonds Bills, Notes, and Securities. They sell these to primary dealers. A primary dealer is a bank or securities broker-dealer who can trade directly with the Federal Reserve after purchasing Treasury Bonds or Securities or sell them to the public. They also make bids or offers on open market operations and provide information to the Fed’s open market trading desk. They consult with U.S. Treasury and the Fed about the budget deficit and implementing monetary policy. Primary dealers can work at the Treasury because of their expertise in the government debt markets, but the Federal Reserve avoids a similar revolving door policy.
The trading between primary dealers, called inter-dealer trading. Located on floors 101 to 105 of One World Trade Center was Cantor Fitzgerald, the single largest inter-dealer broker, who alone controlled 25% of the volume in securities. On 9-11 $500 billion in repos and $80 billion in securities had been traded but the settlement instructions were burned Fed regulators worked many long, over-time hours to accomplish to salvage records of these sales.
All of the top ten dealers in the foreign exchange market are also primary dealers, and between them account for almost 73% of foreign exchange trading volume. Who are the primary dealers whose job is to distribute U.S. Debt? Daiwa Securities and Mizuho Securities distribute the debt to Japanese buyers. BNP Paribas, Barclays, Deutsche Bank, and RBS Greenwich Capital (a division of the Royal Bank of Scotland) distribute the debt to European buyers. Goldman Sachs, and Citigroup account for many American buyers. Most of these firms compete internationally and in all major financial centers. Citigroup was First City National Bank which was influential in the early formation of the Federal Reserve during the period of Stillman and Fifi’s divorce years. After the 2008 Financial Collapse the Federal Reserve set up the Primary Dealers Credit Facility (PDCF), whereby primary dealers could borrow at the Fed’s discount window using several forms of collateral including mortgage-backed loans.
The Primary Dealers today are:
- Bank of Nova Scotia, New York Agency
- BMO Capital Markets Corp.
- BNP Paribas Securities Corp.
- Barclays Capital Inc.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Daiwa Capital Markets America Inc.
- Deutsche Bank Securities Inc.
- Goldman, Sachs & Co.
- HSBC Securities (USA) Inc.
- Jefferies LLC
- J.P. Morgan Securities LLC
- Merrill Lynch, Pierce, Fenner & Smith Incorporated
- Mizuho Securities USA Inc.
- Morgan Stanley & Co. LLC
- Nomura Securities International, Inc.
- RBC Capital Markets, LLC
- RBS Securities Inc.
- SG Americas Securities, LLC
- TD Securities (USA) LLC
- UBS Securities LLC
- Wells Fargo Securities LLC
J.P. Morgan and Morgan Stanley & Co. continue George Peabody’s tradition today selling state securities abroad. They also follow his steps to make a perfect panic. Both corporations were fined for orchestrating the 2008 Financial Scandal among other crimes recently. The largest fine only equaled about 13% what they could make in one year.
The Bank of Nova Scotia is rumored to have been robbed after September 11th when World Trade Center Building 4 was compromised. The long tunnel that was converted over from a PATH way that serves as its entrance was in the film Die Hard 3. Although in the film it was the Federal Reserve NY branch and New York City Water Tunnel #3.
Wells Fargo is owned by Kuhn, Loeb & Co. and linked by the Schiffs to N.M. Rothschild & Sons.
Who prints the Federal Reserve notes? Crane & Company. Winthrop Murray Crane was an advisor to Presidents Theodore Roosevelt and William Howard Taft, and served as a political mentor to Calvin Coolidge who gave his firm the contract.
Stephen Crane was the first in the Crane family to make paper. “The Liberty Paper Mill” opened in 1770. They sold currency-type paper to engraver Paul Revere, who printed the American Colonies’ first paper money. Crane embed parallel silk threads in banknote paper to denominate notes and prevent counterfeiting in 1844. In 1879, Crane grew when Winthrop M. Crane won a contract to deliver U.S. currency paper to the Bureau of Engraving and Printing in Washington, D.C. In 1922, Crane & Co. incorporated, with Frederick G. Crane elected as president. Dixon also came up with an anti counterfeiting practice.
What is the discount window and how do banks profit?
When the government needs money for their budget they print Treasury Bonds, Bills, and Notes. The Primary Dealers buy them and sell them to the Federal Reserve, other nations, and large corporations. At other times the Federal Reserve sells the securities to the Primary Dealers. The Primary Dealers buy them from Treasury Automated Auction Processing System (TAAPS). The dealers who bid on the largest amount of the debt with the lowest yield wins the portion they bid on. They then sell these to the Federal Reserve at a higher yield.
Then the Federal Reserve prints new money and digitally increase their accounts. They then lend this money to banks throughout the nation at a higher yield. On top of that they hold 10% of all the money they sell to the banks. Example…The Federal Reserve prints up $10 billion in new bills, and they credit an additional $90 billion in readily liquefiable accounts. So you think it stops there with $100 billion, but you would be wrong…
Now all of that extra $100 billion enters banking reserves. So your bank borrows a million. They now have $900,000 to lend out. Ten percent of what they borrowed is held by the fed who pays them 2.5% interest. Yes the Fed pays your bank 2.5% interest for borrowing money. Now your bank makes more money that enters circulation. They can lend out $10 million. So if they issue you a loan and you make a purchase, the buyer receives the money from the bank and now it enters circulation when they make purchases. So, in a fractional reserve banking system, like the Fed, new loans actually create even more new money. With a legally reserve ratio of 10%, the new $100 billion in bank reserves could potentially result in a nominal monetary increase of $1 trillion by all the banks lending out 10 times the money they borrowed.
Then you have inflation. It only starts with the government spending more than they receive in taxes and other funds. They are like the fleas on Norwegian Brown Mice that bite you, the Federal Reserve and the bankers are the ones who really spread the plague.
It is a slight of hand. The government didn’t raise your taxes, it just stripped your buying power of every dollar. Every year it gives you an invisible pay cut. Crafty fingers are no longer needed to pick pocket you.
So who owns the debt? Well there is public debt and intergovernmental holdings. On November 7, 2016, debt held by the public was $14.3 trillion or about 76% of the previous 12 months of GDP. Of that debt 55% is held by state and local pensions and mutual funds. The remaining 24% is held by foreign government and investors. $1.5 Trillion is held by China and $1.25 Trillion is held by Japan. Third is Ireland who owns $271 million. Go figure the Cayman Islands is fourth. Brazil is Fifth and the United Kingdom is 8th.
The Bank of England’s plan escaped them? The nation they fought during the Opium War usurp them in holdings of our national bank. Well Americans sold a lot of Opium to them too, but in truth it probably was the old New England shipping families and bankers who continued their trade of shipping goods over manufacturing that have did us in.
The yield on 10 year Treasury Notes set the Federal Fund Rate that sets the PRI or Primary Rate Interest for banks. Also there is overnight and 9 month lending through the Discount Window. Depending on a bank’s liquidity and trust they can borrow at the primary or secondary credit rate. The Primary Rate is 1% higher than the Federal Fund Rate. A bank borrows from the Federal Reserve overnight to remain liquid during internal or external disturbances like transferring money between their internal accounts and external accounts with other banks. So say a bank borrows $10 million overnight the Federal Reserve can create $100 million more until the debt is paid. Also banks can borrow at a seasonal rate which is closer to the Federal Fund Rate for a week or 30 days. Plus the Discount Window can act as lender of last resort during emergencies to prevent bank runs.
Repos? The Federal Reserve buys $1 billion repo to inject reserves today from a bank to pay back tomorrow. Under such arrangement the bank promises to buy it back. So imagine they borrow $1 Billion, another one tomorrow and an additional one the next day, $3 billion will have been injected, but $2 billion will have expired by the third day. Bank reserves are only $1 billion above previous levels, since the first repurchase agreement expired on the second day, the second one expired on the third day and so on.
So in short that is how money is created out of thin air.
To find out more and other fabulous stories about how Salem, MA shaped American History read Sub Rosa by Christopher Jon Luke Dowgin published by Salem House Press.