What is Fiat Money, The Federal Reserve and Inflation?


I must admit that understanding the Federal Reserve, Fiat Money, inflation and the Central Banking industry is a complicated matter, which is why they have been so successful in their endeavors. Most people simply cannot wrap their brains around the concept of Fiat money. Fiat money is paper money that has no intrinsic value except for what the government deems. People don't know what that means and they don't understand how it affects them. Consequently, the criminals who perpetuate such a system are enabled through the majority's ignorance.


I am going to try and explain, in the simplest terms, exactly what happens when you allow a private group of people to print money and lend it to the government with interest. As if having the power to print money out of thin air isn't bad enough, the Federal Reserve actually multiplies the damage by charging INTEREST on FAKE MONEY! What a deal! Don't you wish you could do that?


Let's take this down a notch so that we can all understand what exactly is going on. Let's say you lived in a small village and in that village you were the only person who owned a printing press. You are also related to the mayor of the village. For all time the people of the village used gold, silver and copper coins for money. Eventually, the printing press was invented and you have the only one. In fact, there is actually a law that makes it illegal for anyone else in the town to own a printing press. Gold, silver and copper are heavy. Once the printing press was created someone came up with the idea that they would store your gold and silver and give you a receipt. Anytime someone came with a receipt and wanted to redeem it with gold and silver they could, including governments. The people of the town became accustomed to carrying around paper receipts instead of gold, silver and copper. Very seldom did they bother to redeem the paper money for gold, silver or copper.


Then, the mayor of the village makes an announcement one day that gold and silver are no longer to be considered money. That from now on the only thing that is to be considered money is the paper dollars that his relative prints up, because most of the villagers were used to using the paper receipts they didn't really notice what was happening. They bought and sold as usual. Not only that but the power to tax the income of the villagers was also instituted. Of course it was all for a good cause, some outside threat, to pay for the education of the villagers children (of course they never are really educated because the mayor and his cohorts do not want an educated village because then they might wise up and revolt) or for a new dam. The only person who had the power to borrow money from the owner of the printing press was the mayor.


Well, you know the old saying “Power Corrupts and Absolute Power Corrupts Absolutely”. Eventually, the mayor figured out that he could “borrow” money from the printing press owner, also known as The Federal Reserve, and he could tax the people of the village for the money borrowed. As you could well imagine, the printing press was working full steam. Eventually, with so much money infused into the village, inflation crept in. Inflation is nothing but an invisible tax on the people. When you have a limited amount of goods with an unlimited amount of paper (fiat) money chasing those goods, the prices rise to meet the demand. At the same time taxes start going up because the debt is never paid down, there is always a new crises to be met, an outside threat, an institution that is crucial to the village needs to be bailed out. The mayor and the printing press owner have so much money that it is very easy to buy off the town crier (or the press). They hire journalists to tell the people that everything is OK, that they just have to be smarter, maybe they should get a higher education so that they can get a better paying job so that they can afford the things that their parents and grandparents could afford. More debt is created with student loans. It doesn't matter that there are no jobs and even if you can get a job the tax rate is now 40% and the inflation rate is higher than ever so that the villager's actual quality of life is never better. The only people who really have a lot of money are connected to the mayor and his buddies. But the media keep telling the villagers that they just need to work harder/smarter and that everything is really getting better. The mayor (in his generosity) provides free TV to the villagers not so that they can enjoy the entertainment as much as to keep the villagers distracted and also as a way to continue to tell them through the media that everything is OK.

The printing presses are rolling like crazy and the mayor and the printing press owners are getting richer and richer, so much so that the now own everything, including all the mortgages for the homes, cars, the military, the media and the infrastructure that provides water, electricity and food to the town. They own it all! What they don't own, they tax.

The people of the village become virtual slaves over a very short time. Of course there are a few “village idiots” who try and warn the people of what is happening but they are shrugged off as “conspiracy theorists”. They live off the land, going off the grid and refuse to support the mayor and his cohorts. Eventually, they are silenced as well.


The whole ponzi scheme can be undone if the villagers would just stop supporting the money system, but the villagers are afraid, they are afraid that they will lose their jobs, friends or be silenced and never heard from again. So they continue into slavery until...eventually the mayor and his friends realize that they just don't need most of the villagers anymore. Most of them are ignorant beasts by now, unable to think for themselves, dependent upon “the system” and they decide that they might as well purge about 90% of them. They even create a monument telling the villagers that that is what they are going to do but the villagers are too stupid to understand (see The Georgia Guidestones).

All of this could have been avoided had the villagers simply understood the power of printing money, but now it was too late.

Is it too late now?

Did this article help you to understand what is happening in our society?

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Comments 27 comments

Kristen Howe profile image

Kristen Howe 22 months ago from Northeast Ohio

Anytime Brie

Brie Hoffman profile image

Brie Hoffman 22 months ago from Manhattan Author

Thanks Kristen.

Kristen Howe profile image

Kristen Howe 22 months ago from Northeast Ohio

This was an interesting read on what's going on with our money. It's real useful and insightful, too. Voted up!

Brie Hoffman profile image

Brie Hoffman 2 years ago from Manhattan Author

Super Duper..Thanks!

walk the line profile image

walk the line 2 years ago

Sure thing... just posted it on my website's Facebook page.

Brie Hoffman profile image

Brie Hoffman 2 years ago from Manhattan Author

Thanks "walk the line"; feel free to share!

walk the line profile image

walk the line 2 years ago

Brilliantly explained! I'm glad someone put it in easy terms that most people will understand. Since we are so deep in this, I suspect that spreading awareness of what is going on is the most powerful way to fight back at this point. As the famous quote goes; "None are more hopelessly enslaved than those who falsely believe they are free". Great job.

Brie Hoffman profile image

Brie Hoffman 2 years ago from Manhattan Author

Yep, the system is completely corrupt, but at least if you know you can plan accordingly!

Hendrika profile image

Hendrika 2 years ago from Pretoria, South Africa

Well onwards we slave. A new system will come into being but only once everything has collapsed and our limited brains cannot work that out yet. A higher hand will have to inspire someone to come up with a better system. Until then the banks will just go on their way creating the biggest bubble ever until it bursts. The bubble that was the reason for 2008 is well on its way again already.

Brie Hoffman profile image

Brie Hoffman 2 years ago from Manhattan Author

Thanks..spread the word! The more people who are aware of this scam the better!

word55 profile image

word55 2 years ago from Chicago

Hi Brie, Very well put and understood. Thank you for sharing!

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

I agree Michele.

Michele Travis profile image

Michele Travis 3 years ago from U.S.A. Ohio

It is very easy to understand. But, as you know there is so much connected to it. The Federal Reserve was the reason Kennedy was assassinated.

Banks were also behind Lincoln's assassination.

I am going to read more of your hubs, but there is so much that is connected when it comes to politics, money, banks, illumianati, etc.

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Thanks "KenWu", that was my objective.

KenWu profile image

KenWu 3 years ago from Malaysia

This is awesome, you made it very simple. I can digest it thorough by just one reading,.. nah ain't need to re-read. Imagine you got to read the textbook full of theories.

Voted up and Shared!

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

What do you mean it has no choice..this is a recipe for disaster and will end up in disaster.

SilentReed profile image

SilentReed 3 years ago from Philippines

Oil is purchase in U.S. dollars."Petro-dollars" is the reason the U.S. can and continues to export their inflationary funny money to the rest of the world. The rest of the world have to convert their currency to dollars in order to buy oil. What if Russia which is now the biggest producer of oil and China which is suspected to be the biggest buyer and hoarder of gold get together with Middle east, African and South American oil producing countries hostile to the U.S., pool their resources together, dump their dollars and use gold as a standard of exchange for oil and other essential raw materials? With the trillions of dollars borrowed from other countries and the huge government budgetary deficits that keep piling up, the U.S. really has no choice but to continue printing and using "fiat" currency to keep it's economy afloat and the government apparatus running.


Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Thanks "A Little Truth".

A Little TRUTH profile image

A Little TRUTH 3 years ago

Excellent hub on a very important topic! You provide an easy to understand review of the centuries-long transition from asset to fiat money. The end result, modern banking, is the most sinister instrument of covert slavery ever created, and is the foundation of the mass miseries of today’s world. Most people don't realize just how much they’re being scammed. It’s great that you’re getting this information out to people. The more people know about how this works, the sooner the house of cards will fall.

In case anyone finds some of this hard to believe, one of my hubs “Biggest Scam in History - The Federal Reserve System” goes in to the details of how the Fed creates money from nothing, lends it to the government, and uses the IRS to collect perpetual interest on it. It has references from the Fed, government and IRS to back everything up. And on the positive side, the hub covers some of the many solutions that are already well under way.

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Thanks "TheMoneyGuy", I just wanted to make it simple enough to explain to a child so that people could grasp what is happening. I know there are nuances but I had to keep it simple. Please share and vote up.

TheMoneyGuy profile image

TheMoneyGuy 3 years ago from Pyote, TX

Been a long time since I have been tempted to comment, but you did a good job explaining this. Of course there are more nuances in practice, but this is quite nice. The only problem, is it has been so long that man has been enslaved in this manner and the only attempt to free himself was the First American civil war (Called the Revolutionary War). By the time the war ended there was no real desire to continue the fight, and both sides made concessions. I think Andrew Jackson, made the best thrust, but it was quite temporary, in the last hundred years, we have had the internet to complain on, but I think that just makes people even more passive and accepting. Just some thoughts, all in all quite good.

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Thanks Bibowen, please share it on your facebook too.

Bibowen profile image

Bibowen 3 years ago

There is no greater educational task than taking the complex and making it simple.

People have trouble understanding the concept of "intrinsic value" and that what we are circulating as money has no value. So, in the exchange, one person got "something" and the other person got paper. This isn't a problem so long as the music is running and the money keeps moving. But once the music stops, the scheme is revealed: the people holding the paper are holding nothing.

Good job; voted up.

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Yeah, that was the goal. I wanted to make it really simple, I just hope it gets exposure.

The Frog Prince profile image

The Frog Prince 3 years ago from Arlington, TX

Brie - You wrote this so even a 5th grader can understand it. does the average American get what is being done and the down side of it? Not in the least.

Good Hub.

The Frog

Brie Hoffman profile image

Brie Hoffman 3 years ago from Manhattan Author

Thanks Gawth. I know so many people who know this but are unable to explain it to others so that they can wrap their minds around it. I hope this article gets around but I'm afraid it wont. Please share it with others, put it on your facebook and like it so that it can get some exposure. What do you think of the title? Can you think of a better title?

Gawth profile image

Gawth 3 years ago from Millboro, Virginia

I pretty much knew this already but I wanted to compliment you on doing such a find job explaining it. I just hope a lot of people read your Hub. This is a critical issue and fundamental to the survival of America. Thanks very much. Nicely done.

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