(L85) Counterfeiting & Fractional Reserve Banking

Is it counterfeiting when government-licensed banks create money out of nothing?

Fractional reserve banking is a system that allows banks to issue more deposits (by lending money out) than they have actually taken in. The banks basically create money out of thin air (deposit slips), and lends it to businesses and consumers with interest rates.

Deposit slips are a form of counterfeiting, and counterfeiting is theft. In the words of Gary North, “all good things that are counterfeited must come to an end”; the economic booms created by these low short-term interest rates result in a rise in prices because in reality, there was no saving throughout the economy as had been portrayed.

(L80) The New Deal & The Industrial Revolution

1.) Evaluate this claim: “The New Deal was a wise series of government actions that healed the problems afflicting the economy.”

The New Deal was a series of atrociously planned government actions that resulted in a famished, unemployed, and economically unsound people. The National Industrial Recovery Act for example allowed each industry to draft production codes for itself; this meant minimum wages, minimum prices, hours of production, specific production methods, etc. The claim backing this decision was that what businesses really needed was stability, rather than competition. The result of acting on this claim was basically stomping out smaller businesses on a major scale. Big businesses, having multiple locations and bountiful resources were in no competition with smaller businesses in the sense of service; however, the one area small businesses could compete in was prices. With new codes preventing small businesses from competing with prices, most perished by the hand government intervention. It was stated by UCLA professors Harold Cole and Lee Ohanian that “the abandonment of these policies coincided with the strong economic recovery of the 1940s”.
Another “wise” government action attached to The New Deal was the Agricultural Adjustment Act. This time, the government decided to stimulate the economy and raise food prices by destroying crops that had already been planted and grown. Acreage limitation was also implemented, and pigs were slaughtered needlessly to raise pork prices. This caused about 2 million tenant farmers and sharecroppers to become jobless, and to top it all off it was soon discovered after the fact that the United States was not producing enough food to sustain the population, even at a minimum subsidence level diet. What a way to heal the economy, way to go government intervention!

2.) How was the standard of living affected by the Industrial Revolution?

In short, the industrial revolution created numerous opportunities for workers that hadn’t previously existed. Before the industrial revolution, workers could have either made a profitable living through agriculture, or by gaining the tools necessary to enter into an independent trade. After the industrial revolution however, there was newly made space in the economy for a work force of people who were able to do neither of these things; factory work employed many people who would have otherwise suffered because they did not have the resources to meet the needs of the economy.

Economic Evaluation 2015 (L155)


According to investment and financial educators Mike Maloney and Peter Schiff, a huge financial crisis is in the making. Through pinpointing similarities in trends from the 2008 financial crisis and information today (2015), they have built quite a strong case for the instability of the United States’ economy. A big issue that they discuss in their video Charts The Government Doesn’t Want You To See: Schiff & Maloney Reveal The Truth, is the fact that people, it seems, are no longer investing! (At least not as much as they typically would/should be.) People not buying new goods is causing the value of those goods (as a whole) to drop. This is reflected in multiple charts on the FRED website; including the Value of Manufacturers’ New Orders for Consumer Goods Industries. A current drop in value, much like the drop appearing during the 2008 financial crisis is clearly visible. (Charts).



Another worrisome connection in financial trends is found in the NACM credit application rejections numbers; in 2015 the United States saw their biggest spike in credit application rejections in recorded history. In this case, 2015’s numbers are not only similar to that of 2008’s, but the rejection spikes actually exceed the previous largest spike on record (which occurred in 2008). According to Maloney and Schiff, these could be the warning signs of a crash much, much worse than that of 2008 approaching. (Charts).


(US Inflation Calculator)

Inflation, being just a fancy word for the devaluation of the dollar, (or the increase of prices), is representative of the economy as a whole. As inflation rises, your dollar is able to purchase a smaller and smaller amount of any given good. Already in 2015 the United States’ inflation rates have outdone those of 2008. (Although it seems that inflation rates are the lowest in times of recession, it is more likely than not that things have been planned to look that way, in order to shield inflation from economic blame. Factually, it does not make sense that this could be the case.) Also equally suspicious, the United States Bureau of Labor Statistic’s unemployment rates reflect lower rates in times of recession too. 2015’s records closely match those of 2008, with only a difference of %0.1 for the month of May. (In May of 2008, the employment rate was 5.4%; in May of 2015 the unemployment rate was 5.5%.) (Bureau of Labor Statistics.) However, with unemployment rates being shown at their lowest right before (and during the beginning of) recessions, wouldn’t that mean that it was not really a recession? It is obvious here, that with all the changing standards of calculation, as well as interest rates and inflation, records do not necessarily accurately reflect the economy. (Fake government numbers covering up real government mistakes? The American people have not ever witnessed any behavior like that before…) In the words of a good friend and teacher, “the books are being cooked”.

This report has honestly confused me a lot more than it has clarified things for me. I understand the snags in our economy as of now, and I understand who is to blame. I do not understand however, how it is that the majority of Americans are blind to these issues. These numbers and books all mean nothing if they aren’t filled by credible sources; do your research folks, it can be a deceptive world out there, but the truth really is all around us.


Charts The Government Doesn’t Want You To See: Schiff & Maloney Reveal The Truth. Perf. Mike Maloney and Peter Schiff. Youtube, 2 June 2015. Web. 6 June 2015. <https://www.youtube.com/watch?v=Q62atnTQldI&feature=youtu.be&gt;.

US. Bureau of the Census, Value of Manufacturers’ New Orders for Consumer Goods Industries [ACOGNO], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ACOGNO/, June 11, 2015.

“US Inflation Calculator.” US Inflation Calculator. COINNEWS MEDIA GROUP, n.d. Web. 15 June 2015. <http://www.usinflationcalculator.com/inflation/current-inflation-rates/&gt;.

“Bureau of Labor Statistics.” United States Department of Labor. Us Bureau of Labor Statistics, n.d. Web. 15 June 2015. <http://data.bls.gov/pdq/SurveyOutputServlet&gt;.