INFLATION IS CAUSED BY FRACTIONAL RESERVE VALUATION – NOT EITHER PARTY, BUT BOTH

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by boutreality

The Fed changes its fund rates and the market reacts; in 1980 as Carter (D) was leaving office the rates raised, and under Reagan the nation saw an inflation hike almost as steep as what we’re seeing today. But Reagan and the Republicans did not do anything to end the Federal Reserve, not even with the conservative supermajorities of the following decades, and to end the Fed would require an Act of Congress -think Prohibition; an Act started it and it took an Act to stop it, but all Presidents can certainly recommend, the Supreme Court can even (technically) declare it unlawful, but it would still take an Act of Congress to get rid of the federal reserve.

Then as Obama (D) leaves the Fed Funds Rate changed in a way that caused this current inflationary cycle -all the way back then is when it started- and early impacts under Trump were holdout grocers and other merchants installing self-checkout stands and getting rid of checkers on staff (cutting down overhead). But again, the result saw no conservative call to action; no true end the Fed movement (of course no democrat started one either – no party controls the Fed so both parties can escape the blame).

Blaming parties is, honestly, what the US department of education gave the citizenry, but the Fed is its own entity as outlined in the constitution – it doesn’t even answer to the US Department of the Treasury. When the Fed gets involved the hierarchy is the other way around; the Fed says then the government does. To make clear where inflation comes from, for anyone willing to take the time to learn (be honest, most don’t know), it would be wonderful if you’d think about the following:

MACROECONOMICS 101 (“MICRO” IS YOUR OWN BUDGET – THIS IS THE OTHER ONE)

Two rectangles on a white board, each has a slash running vertically through it, and about one third of each rectangle is to the right of the slashes. The two rectangles represent two different nation’s currencies and the nations are in a trade relationship. Let’s say the left rectangle represents the US dollar and the right the Chinese Yuan. By theory, everything China produces for national trade only has real value in China’s own currency, and the same is said for anything produced by the US, so the area to the right of the slash of both rectangles is called the “reserve” of the currency.

China’s Yuan has an “inherent value” that is stated in the total worth of its national product. The US dollar has the same thing; the currencies are worth their nation’s product and at the same time, the currencies define worth for anything traded, so a marker called “reserve” is applied to the idea of China’s currency from the US perspective, and in a trade relationship China applies the same idea to US currency. This means that when it comes time to balance the books between the nations, some of the currency used to pay one another back only has value in terms of the total trade balance, and the currency itself only has value because national product is available to be traded in the first place.

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-To make that work you put two hypothetical rectangles on the board, and put a slash through both. Now, the US can only trade with what is valued at the worth of its own dollar, so the reserve section of the fictional dollar cannot be used to balance trade discrepancies; it has to be set apart or else nothing the US trades on has any value in its own land (by the theory), therefore, the “rest” of the fictional dollar on the board can be used to pay back China when the US comes up short on the trade sheet – the reserve part cannot.

So, if the US is running at a deficit in its trade with China, each US dollar then pays back less of the total debt, and once the US is in too much physical debt to China, eventually China will decide it must move the reserve line on the US currency, and here’s why:

Let’s say a trade partner has a valuable product from its nation, valuable as measured in its currency, and valuable enough for others to want to trade for it, so trade relationships begin, and for anyone always on the losing side of total product traded (total value of product traded), eventually the value of their currency will have to decrease, while the value of the currency belonging to the partner in the stronger trading position will have to increase, or else the currency used by the position with the stronger product will lose value in other trade relationships.

-Given the basic macroeconomics on fractional reserve valuation, the US will never pay China back, and by treaties bound to the fractional reserve paradigm, China will begin to more and more valuate its currency according to its trade relations with Russia, India, Brazil, and Singapore (BRICS) – it will be their only choice – or else the value of the Yuan will collapse (the US is too big a trading partner and its debt too massive). BRICS applies to China just as much as NAFTA applied to the US. Because of what NAFTA (the North American Free Trade Agreement) became, the US will only have a dollar worth anything if its worth is valuated against the national products of Mexico and Canada, and this is by treaty; BRICS for China and for the US it’s the USMCA (US, Mexico, Canada) treaty signed by Trump, that is widely considered nothing more than a rebranding and narrowing of the trade arrangements that began with NAFTA. (Bill Clinton signed the US into NAFTA in the 90s and Trump signed its update; the value of the dollar is not a partisan issue – neither side is doing anything about it.)

IT WAS ALL A SET UP

In fact, the above rundown on macroeconomics doesn’t tell the whole story. The way it worked out, all of the world’s industrialized nations decided to make the US dollar their “universal” reserve currency, mainly because of the US’ position in post World War Two finance, and the gold backing the dollar. TO make that work you don’t have two rectangle on the whiteboard; you have one currency held in reserve and the regular cycling of other currencies whose value is determined in how their nations trade measures up to that of the US, and as if the move was ordered by the BIS itself the US Federal Reserve soon removed gold backing from its currency, creating what eventually became the fractional reserve scenario explained above, but applied differently; according to how treaties, like NAFTA or BRICS, made certain international trade relationships more economically prudent than others, while at the same time every nation valuated their county’s currency against a reserve they each held on the US dollar.

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The US dollar is still used as the world’s “reserve”, but if you put that into practice, the entire ploy is a negotiating tactic used for global fiscal management, where every other nation on the planet that isn’t the United States, in their trade relationships, will be able to steer the fiscal infrastructure of the US to collapse indirectly over about five generations, through how the fractional reserve valuation of currency model the world has agreed to, has subjected people to their currency buying less or more than it did yesterday, at any given time, as a planetary standard.

When you’re talking value of the dollar, fractional reserve valuations, and the infrastructure, let’s say a public project for new roads gets approved and funded at 5 billion, but due to on the ground issues with contractor logistics, the project doesn’t start until two years after its approval. If the dollar lost value in those two years and the project hasn’t started, the same project is liable to cost 5.1 or 5.2 billion, which is one or two hundred million dollars more – where’s the new money coming from?

-So, apply that to all the nations that have regularly been on the losing side of key trade relations for long enough, and the result is a planet of countries with collapsing infrastructures, leaving only the elite, who at the top are living aristocracy, to buy everything they can own regardless of public concern or welfare.

 

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