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The Federal Reserve System – Fiat Money and Fractional Reserve Banking

by P. V. O’LEARY, J.D.

“I sincerely believe . . . that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” Thomas Jefferson1 Third President of the United States (1801 – 1809)

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This article is a brief primer on the Federal Reserve System (the “Fed”), the central bank of the United States. It is not a comprehensive exposition of the whys, the hows, or the players who control this system, or its manifold influence in all areas of life. Materials covering such topics proliferate in hundreds, if not thousands, of books, newspaper and magazine articles, videos, blogs and websites. Only the basic structure of the United States banking system and the nature of money and its creation are summarily set forth, with references for those who wish to pursue the subject further. The nature and workings of the US Federal Reserve System are relevant for European readers, as in many ways the Fed functions as the central bank of the world.

read more: PDF THE FEDERAL RESERVE SYSTEM, FIAT MONEY AND FRACTIONAL RESERVE BANKING