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Please allow me to add that fractional reserve banking allows private corporations to extend the fiat money inflation by also creating money out of thin air.

In the case of the US Dollar, this is made far worse where other nations peg their currency to the dollar. When, for example, a Panamanian bank extends a local loan, the local money it creates out of thin air is just as much part of the US money supply as any $20 bill we print up for a few cents. The reason is that money is fungible and once the Panamanian borrower gets his money, because of the dollar peg, it is has the same economic effect as if the bank had created dollars instead.

The flip side of money creation by fractional reserve bank loans is the equal amount of leverage on the contraction of the money supply when loans are reduced, either through policy or lack of demand.

The two policies of fiat money and fractional reserve banking guarantee a business cycle of expansion, boom and bust. Learn it, love it, live it, because too many people either want it that way, benefit from it, or just consider it to be the natural state of affairs.

You appear as an astute poster on the subject.

One question that still fascinates me was posed by Aaron Russo (freedomtofascism.com)

http://video.google.com/videoplay?docid=-4312730277175242198&q=

and that question is why does the government pay interest to the 'Federal' Reserve (indeed no more 'federal' that Fedex). The 'Fed' does not even print money so much anymore than they just create it as digits on a computer. Simply put, the 'Fed' has the power to sit at a computer and write 1000000000 into a data field and presto they created a billion dollars. So the question he asks is why can't our government do the same and forgo the interest payments?

Of course we can get distracted and start arguing well, we really don't want our government 'printing' or creating money. That's not the point unless we seek to return to dollars backed by gold or silver. But that's getting off the point. The point is it's all about interest.

Russo ask why do we pay personal income taxes on our labor. Not excise taxes, not corporate taxes but personal 1040 taxes. Does it go for schools? No. Does it go for roads? No. Does it go for the military? No. (Corporate taxes pay for the military). Does it go for social security? No. (That's FICA tax). Does it go for Medicare? No.

Where do our 1040 taxes go?

Answer by Russo: to pay the 'Fed' for the interest on the debt that our government takes out, debt exchanged for money that was created out of thin air.

Was the debt taken out by our government taken for our benefit? No.

Then who benefits?

Answer: it's a secret of the 'Fed's. The individuals behind the 'Fed' curtain can create money out of thin air and reap an interest on it at a rate that they decide for themselves.

The 'Fed' controls the whole show.

Who might these mysterious individuals be? The American public does not know but we have a strong suspicion that Rockefeller is connected to them, Soros is likely connected to a connected 'Fed' shareholder beneficiary. (Money from nothing to buy and wield power)

I think it's safe to infer that the beneficial shareholders of the 'Federal' Reserve form the ruling class of the USA and are cliqued to the ruling class of the New World Order.

Russo goes on to encourage by noting that we the American people still have the 'power' to get rid of the 'Fed'. We still have the power if our voting system is not yet controlled to the point that it is ineffective for us.

And would it be a bad thing to get rid of the 'Fed'? I can't think of why we need it. Our government can create money the same as they and it would eliminate mounting interest payments and begin the process of paying down the debt. Our government could hold committees of academic scholars and business leaders to formulate monetary policy. We need not hand it over to a private corporation 'Fed' who will charge whatever interest they decide to create money from nothing.