By Ellen-Brown

In the last two weeks, two federal interest rates hit all-time record lows. On December 16, the market was taken by surprise when Fed Chairman Ben Bernanke lowered the federal funds rate (the interest banks pay to borrow the reserves they need to meet their reserve requirement) to zero. The explanation given was that the Federal Reserve was just setting the rate closer to where banks had already been trading with each other for weeks.

The biggest "trade secret" of the banking business is that banks create the money they lend out of thin air. "The process by which banks create money is so simple," wrote economist John Kenneth Galbraith, "that the mind is repelled." Banks simply write "credit" into an account in exchange for the borrower's promise to repay. In the case of the federal government, the bank that "monetizes" its promise to repay is the privately-owned Federal Reserve; and today the Fed is taking that monetizing power to such dangerous lengths that the currency could be hyperinflated into oblivion.

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