Thank you so much for explaining this and please don’t apologize for the long explanation. We need more of them. This economic crisis cannot be summed up in sound bites. Important issues never can or should be.

This Sunday, March 22 I’ll be joining Political Voices of Women Contributing Editor, and editor of What Tami Said, Tami Winfrey Harris in a discussion on the economy at 4 p.m. EDT.
http://www.blogtalkradio.com/What-Tami-Said/2009/03/22/The-Best-of-What-Tami-Said

I recall learning in high school economics that there was nothing tangible, like the mythical gold in Fort Knox, to back our currency. I also recall being taught that FDR’s “New Deal” combined with WWII war spending brought the nation out of The Great Depression. But now I’m hearing some economists, pundits and elected officials claiming that what the New Deal did not work. And, since we’re currently in two wars, I suspect that we can’t count on war spending to save us. It’s all mind-boggling.

I’m not sure that I will ever fully understand the economy, how it is supposed to work and how it is being manipulated. But I promise you, that I intend to spend the rest of my life paying much, much closer attention as well as urging others to do the same.

For more information on this event go to:
http://whattamisaid.blogspot.com/2009/03/as-long-as-only-canaries-are-dying-was.html

I have struggled to understand the meaning behind the Federal Reserve and fractional reserve banking. I first learned about this in college macroeconomics and was really shocked that it isn’t taught in high school civics. It’s the crux of how big business and government work together. I’d always thought of business and government as distinct entities! No way. They go hand in hand. Here’ the easiest to understand explanation I’ve found lately (From http://mises.org/story/3355):

“Right now, when the Federal Reserve engages in “open-market operations,” Bernanke goes into the market and buys, say, $10 million worth of US Treasuries from a bond dealer. How does Bernanke pay for this? Why, he simply writes them a check written on the Federal Reserve.

When the bond dealer deposits the $10 million check, his bank credits his checking account with $10 million. Then the bank itself turns the check over to the Fed. Get ready, here’s the fun part: when the Fed receives a check — written on itself — from Acme Bank, the Fed processes the check and increases Acme’s checking balance with the Fed by $10 million. But there is no corresponding debit to any other checking balance! The total amount of member-bank reserves, held on deposit with the Fed, has magically increased by $10 million.

As everyone who didn’t skip the relevant college lecture will recall, the fractional-reserve nature of our banking system means that the injection of $10 million in new reserves will actually allow up to $100 million in new money to enter the economy.”

Sorry for the long reply, but this stuff is complicated!! Thanks for your post. More regular people need to understand this stuff.

Bobbie