Kill the Fed, Free the Markets – How to Replace America’s Scheming Central Bank

25 | By Shah Gilani

As we talked about on Wednesday, the public doesn’t know that America’s central bank is a private banking corporation that creates money out of thin air to enrich its big-bank shareholders and finances government deficits so politicians can pay for votes with handouts without having to raise taxes.

I told you that the only way to free markets and capitalism from the central-planning board at the Fed and free America’s hijacked democracy is to kill the Federal Reserve scheme and replace it with something altogether different.

Here’s why the Fed has to be replaced and what should replace it…

This Is the Key to the Fed’s Control

The key to the staggering wealth and control the Federal Reserve possesses is their ownership of the fiat money fractional reserve banking system they created and had made into law.

Fiat money is made up money. It’s money because a government decrees it’s money, also known as “legal tender.”

The Federal Reserve Act of 1913 gave the Fed the right to create its own money. Congress blessed the Fed’s fiat money by declaring it legal tender.

The U.S. Treasury doesn’t issue money, it prints Federal Reserve Notes, the Fed’s fiat money. The Treasury is nothing more than a printing press contractor for the Fed.

In a fractional reserve system, which is what the Fed created to self-propagate the money it owns, money is deposited in a bank that has to hold “in reserve” a fraction of the amount deposited.

Reserves held at banks are supposed to comfort depositors that if they come to take out their money there’ll be enough at the bank (because the bank isn’t allowed to lend out all your money).

But here’s how it really works.

If you deposit $100 in a bank and the bank’s “reserve requirement” is 10%, the bank has to put aside 10% of your deposit, or $10, and can lend out the other $90.

The bank could then lend $90 to me, which I might leave on deposit at the bank. It would then have to reserve 10% of my $90 and could lend out another $81.

So, it looks like the bank has a nice little business – but it continually has less and less money to lend out.

Of course, there’s another way to calculate “reserves.”

What if the bank took your $100 and simply said, we have $100, which we are calling our reserve requirement.

Holding $100 as a reserve implies the bank has held 10% of $1000.

That’s what they do.

Instead of having $90 to lend and make interest on, your bank uses your $100 to create $1000 it can then lend out.

Fractional reserve banking is magic for banks. It self-propagates the Fed’s fiat money.

That’s how banks make money. And when they get too greedy and lose out on their profiteering schemes, the Federal Reserve is there to bail them out.

How the Fed’s Scheme Really Works

The fact that the nation’s central bank backstops the big banks that own it, and that that same central bank is the “regulator” of the banks that own it, isn’t widely understood.

But it’s part of how the scheme works.

As far as controlling the government, the Fed can create (sometimes referred to as “printing” although credit is just an electronic check on a digital ledger) any amount of money it wants to buy as much government debt (bonds) as the Treasury issues.

Politicians don’t have to raise taxes to spend money. They rely on the Fed to purchase the debt obligations they issue so they can spend to their hearts content.

The fact that the Federal deficit is growing rapidly doesn’t matter to politicians. They’re more concerned about getting elected and staying in office by giving the public whatever they can to buy votes.

As far as the old fear of “crowding out,” where if the government issues too many bonds and other debt financing issuers are selling bonds there would be upward pressure on interest rates as issuers compete for buyers, that’s been eliminated.

Interest rates aren’t rising because the Fed is buying all the bonds the government issues under the guise of keeping interest rates low to stimulate more borrowing.

It’s not even subtle government capture, it’s the outright buying of our government.

Markets have no idea how to fairly price financial assets any more. That’s because we don’t have free markets any more.

The Fed has manipulated interest rates so low, bought so many bonds and other debt instruments, that normal, healthy market-driven capital allocation and prudent risk-taking has been overthrown by a central-planning board of governors at the Fed who believe they alone know how to manage interest rates, and that their pumping-up of financial assets is in the best interest of the economy, and of course their constituent bank shareholders.

Replacing the Fed Is Easier Than You Think

America’s become a giant banana republic controlled by officers and oligarchs of the banking elite, with the Fed being the head of the snake.

The fix is easy.

The Fed needs to be overthrown and replaced with a better, more transparent apparatus.

This would have to be done in phases, but here’s what should happen:

  1. The U.S. Treasury has to issue U.S. (public-owned) dollars, interest free.
  2. Make the “reserve requirement” at banks a flat 50% on all deposits and assets.
  3. Devise a transparent mathematical model to keep the quantity of money increasing at a rate commensurate with economic growth.
  4. Make banks into utilities such that with a 50% reserve requirement they wouldn’t fail but could earn interest on loans, earn fees for services, and build “profit-pools” that could be distributed to shareholders at the end of a calendar or fiscal year.
  5. To “tighten” the money supply if inflation becomes a problem, another mathematical model should be initiated to have banks use their “profit-pools” to take excess money out of the banking system.

All that’s easy to do.

And without a buyer of first and last resort to absorb government issued debt, politicians would have to raise taxes to be able to spend, which would instill fiscal discipline.

America’s been held hostage far too long by the capitalist cronies who run the Federal Reserve System and its big banks.

It’s time to free ourselves and our economy.



25 Responses to Kill the Fed, Free the Markets – How to Replace America’s Scheming Central Bank

  1. scott bostic says:

    Good Model- make sure the model is tested such as “Pilot Tested”. Run the Pilot Model, first,
    then make adjustments as needed to get the desired results. Afterwards, use problems to see
    how the “pilot model” responds towards solving them and look at the results. When the problems
    and the solutions are measured and looked at , the test(s) will provide much needed data- numbers
    explaining what the potential good and the damage, will be telling.
    Thank You, Scott Bostic

    • Robert Pescatore says:

      We need to impeach the liar in chief which is president Obama and stop him from breaking the law and the constitution and also stop him from taking our guns or other fire arms and in November get on the Trump train and vote Republican.

  2. Jim B says:

    Shah – nice dream! Now put down the pipe and have an oblivious weekend – free from thoughts of vampire squids, scheming Oompa Loompas and soulless politicians. Don’t worry, you can have it all back on Monday – if you must.

  3. Clint Sterry says:

    Hallelujah! Finally, someone who can explain the problem in simple, everyday words. I just finished “Harry Browne’s Money Book.” It fills in the rest of the details for which Shaw’s column lacks space. A Kindle copy is available from Amazon for $5.99. Tom Dyson, formerly with Stansberry Research and currently with Palm Beach Letter, highly recommends Browne’s book. I second Tom’s recommendation. According to Browne, inflation is not caused by rising prices, but by a rising supply of too much fake money (Federal Reserve Notes).

  4. Rob says:

    Hello Shah, I urge you (or your staff) to create a respectful letter and use your joint connections and know-how to get this “proposal” into the hands of both Hillary Clinton and Donald Trump or their teams. Just to go on record. Just to push the conversation toward one of the front burners. Thank you.

  5. randy a says:

    Yes, overthrow the Fed & the IRS which have both been stealing Americans freedoms & money since they were created. Of course first you would have to replace our government, as in ” When a long train of abuses & usurpation …”

  6. Martin says:

    Bravo! But nothing will happen until it’s all gone down the proverbial shute. This may take a few more years because people have such faith in money.
    Robert Prechter has been arguing for the end of the Fed for donkeys’ years, and for the same reasons…

  7. John B. Schroeder says:

    This sounds way too sensible for Congress to understand let alone pass. No politician wants to kill the Golden Goose that enables letting spending run amuck. Sure, it may save the country from the debt morass we are sinking into, but would Congress even care? I remember Dick( one should be stuck up his rear) Cheney saying “Deficits don’t matter” Spoken like a true Republican!!

    • Edouard D'Orange says:

      Well, Cheney may have said it, but he wasn’t insane like Democraps, who have driven deficits over $1 Trillion dollars and continue to run deficits that make Republicans look like pikers. In Obamao’s two terms the debt has piled up astronomically, from $10 Trillion to over $19 trillion, you dumb, little, sniveling democrap scumbag. So don’t attack Republicans unless you attack the true wasteful spending fools known as Democraps.

  8. Bernd Pelz says:

    Dear Shah,
    as you are probably aware of, social systems do only change as a result of insight, and/or enduring pain, and/or coercion; and social system resist change.
    Since decision makers don`t seem to follow your insight, and coercion is not readily available, it is likely that a change takes place only through suffering. We will probably have to go through this phase.
    Best wishes

  9. Robert Pescatore says:

    Make sure you get to the polls in November and vote the Republican ticket down the whole thing and let’s not give Obama his third term in the guise of Hillary Clinton because Hillary will be Obama on steroids and will take America down the same path as Obama. Make sure you vote for Donald Trump.

  10. Gordan Finch says:

    Kill the Fed,

    SHAH its a fine idea but what about the entrenched position of the other Central Banks and the ECB, BIS, IMF, and the EU intertwined with the BOE, Vatican, Royalty, City of London etc.

    Democracy has been sold off to an infestation of corrupt career politicians banks and bankers who promote wealth as weapons of war sold to the third world to create conflict and sell more weapons;

    [America and Britain has been sold off to the corporate war monger and the public still believe we have democracy].

  11. Ryan N. says:

    I agree that the Fed needs to be scaled back. Their four main functions are to clear checks, regulate banks, full employment within the context of a stable currency. Let’s see about their record.

    They do a very good job clearing checks. After watching Elizabeth fry William Dudley over regulation, they don’t do any regulation. The dollar lost 98 to 99 percent overthe last 100 years, so that is a fail. They hhey don’t seem to know what they’re doing economically, so that is a fail.

    Why don’t they remove the dual mandate and turn over regulation to the Treasury Department. Leave in place the currency stability and pay the executives bonuses on currency stability using real inflation data, not the fantasy numbers of today.

    Don’t think it will happen since the gov’t, banking industry, and other financial have a vested interestin and benefit from having the Fed in existence.

  12. M. R. Cumming says:

    I can’t believe they actually provided a way to repeal the Federal Reserve Act. It is included in Section 30.
    This should be a top issue of the election, but it is one that had better wait until after you are in office and WELL PROTECTED!!!
    Go Trump.

  13. JohnnieD says:

    When we had money based on gold and silver, and any paper was fully payable in gold or silver, we had no need to devise other mechanics, even as suggested here by Shah..just needed to enforce the discipline of the natural benefits of a real money system on the government – Treasury- itself. Gold and silver grow their own supply each year to accommodate economic growth, and the growth in gold actually tracks population growth reasonably. After a great run with real money for all the years pre-1913, despite bank cheating on fractionalizing it, with short lived recessions, why would we want to do anything else? And why would we want to leave any remote possibility of the system being ‘managed’ even under some clever mechanism, to man? We just need to enforce the discipline of a real money system on the banks, keep them from cheating.

    • erich kellner says:

      Who would enforce the discipline of a real money system on the banks? … Man! …
      You just can’t get around man.

  14. Jason Bauer says:

    I agree that we need to replace America banking system basically the financial system we use in America to be more competitive in the world economy let alone our our own country The United States of America. We need to realize that England has made the first move with bendexit to set the market because they have more gold and legal tender then the other countries and by changing to bendexit their currency is going to be worth more. I heard A young man by the name Eirc Mac talk about A credit system to replace the dollar =Hard currency basically he was saying that money is just based on a percentage and was a waste of time to work with in the physical world and in the digital world we now live in because hard currency is analog technology. We the people need to make some changes in the United States of America because of the banks we the people bailed out and now the banks have turned their backs on the American citizen. For America to survive in the future we need to change how we do business and that way is to switch to digital currency.

  15. Renrah says:

    Everyone should watch the documentary available on youtube titled –
    “The Money Masters – how international bankers gained control of America”

    at 3.5 hours for the full viewing, this is a much more detailed and informative explanation of the “criminal” workings of central banks.

    A MUST SEE and please share w/ everyone you know

  16. Ken says:

    The number one thing that needs to be done to save the economy is to emulate Byzantine Emperor Alexios I Komnenos. In 1092, when the Byzantine economy was following the Roman lead, he restored 95% gold coinage, and that economy continued for more than 350 years when the Byzantine Empire was conquered by the Turks. After Rome “fell” it was eventually followed by the complete collapse of Persia and the Gupta Empire of India, and the economic collapse of China and the Arabic states. Note now that China emerged from that middle ages after the death of Mao Ze Dong, and the Moslem world is now in approximately the same position as Western Europe was during the 16th century, except that, at that time, there was as yet no well-developed civilization to emulate. The forces of theocracy are unbelievably strong. Remember that theocratic governments have a three-point approach to those who do not belong to their sect. 1. Convert them if you can. 2. If you can’t, drive them out. 3. If you can’t drive them out, kill them. You can see this at work today. This is the kind of situation we should always avoid, because everyone loses.
    Back to gold. You cannot have an honest economy without gold backing, because gold cannot be counterfeited. This is important, because fiat currency economies give rise to all sorts of corruption in both the public and private areas, as we can see now. There is a group of people now who are above the law, and no one now even thinks of prosecuting them for their crimes. That is death to any economy, and ours will soon follow that lead if we don’t come to our senses. And now we are coming very close, because the whole process has been accelerating during the past decade or so.

  17. T Mehan says:


    Kind of like herding cats isn’t it. The scary part is how many really don’t understand the whole system. Thanks for being bold enough to put this out there. Lets hope that when this merry-go-round stops there are enough people that can understand what you propose, needs to be implemented. This is not a Democrat/Republican issue. It is a freedom issue.

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