The Federal Reserve: many loathe it, a few see it as the world’s economic savior, and most of us — just don’t understand it. I didn’t for a long time. At least not in the simple way I always could have and never took the time to think through.

It really is very simple. But not necessarily in the way you might think. When you think of the Fed, what do you think? It prints money, right? We don’t have a gold standard or anything like it, so obviously it prints money. But wait! How much printed money do you use today? Not much, right?

PayPal, Venmo, Uber, AirBnB — they all exist without ever exchanging any paper money. And yet, they all use the same standard to determine the value of what’s traded with them, the US dollar. And the dollar is issued from one place and one place only — the Federal Reserve.

So, the Fed creates money. To be more precise, it issues money. In a sense, it creates it, but that depends on how you define creates. What it really is issue money, that is, it puts money in the economic system. That is what it does.

It places money into the economy and it sets the cost (interest rates) of getting money from it. Easy to understand so far, right? But then think about the next question: how does it put money into the system?

I’m going to oversimplify here a bit, but the bottom line is it places lots of money and it uses banks. Lots of money means big banks. Tons of money means huge banks. So the Fed is putting tons of money into the banks, and the banks are in turn lending it out to others. Why?

One reason — to earn profits. The banks exist to profit from their work, and their work is simply to lend out the money that is lent to them through the Fed.

They pay for the money they get from the fed. They pay for it by paying interest on what they get. And they make money by charging interest on the money they lend to others. And as long as the Fed keeps issuing money, and the banks keep lending it, it’s a great system, right?

So what happens when they lend more money than its borrowers can repay? Well, if the borrower is the federal government, it just raises it’s debt ceiling and borrows more and keeps paying.

But if the borrower is a business, an individual, a family, even a smaller government entity like a municipality — it can’t raise its own debt ceiling and becomes insolvent, a/k/a bankrupt. Bankrupt isn’t a good place to be.

In essence, bankruptcy is like poverty. People don’t lose their homes because they can afford to pay their debts on their housing. They lose their homes because they can’t!

How do all of these dots connect? The Fed creates money — and it uses debt to do it. The banks lend money to the government that can only be repaid if they keep raising the debt ceiling. That means a continuing spiral of higher and higher debt. The Fed needs the federal government debt to ensure it has a reason to continuing issuing money, for profit. The government is the only borrower that has the means to ensure it will continue to be able to pay.

The leftover loans that go to you and me, don’t have to be repaid for the Fed system to continue to work — they have the government to ensure that will happen. By the same token, if that money is thrown into loans by big enough banks, who get money directly from the Fed, they will be taken care of through government repayment of debt (or bailouts) as well, and even if we default, they’re covered, either way.

Because of the indifference as to the payoff of private loans, the banks lend the money freely, and not according to underwriting guidelines they know will ensure a high percentage is repaid, but through guidelines that ensure they are involved in lending enough money to participate in the Fed’s system of continuing to increase the pool of money they have to make use of. With guidelines that are indifferent to repayment, you be sure default rates are higher than they would be in anything resembling a stable banking system.

Which brings us back to impoverishment. The unsuspecting, less suspecting, or desperate borrower will be offered loans they probably can never repay, and will take them. Even people who could repay their debts when they assumed them, are subject to health and other life issues that force them into situations they can’t handle in the end, but under the current system of underwriting, any default of any kind is likely to mean the inability to repay a loan at any time in the future.

Think about what that means. Because of the system the government has created through the Fed, people who were at one time financially healthy enough to qualify for some kind of loan were offered, and accepted, loans that were actually beyond their ability to repay — at least on a long term basis. And guess what? They default. Millions of them default.

And the fallout from default is bad credit, which means it’s much tougher to get your next job, impossible to borrow more money, affects licensing and certifications in various businesses, and on and on. People who should be in the middle of the economy, working productively, are left on the fringe, barely able to survive. And this is happening to people by the millions. It is not the fault of companies moving overseas, it isn’t really the fault of the borrowers, they were taking the lenders’ decisions at face value, it’s the fault of the federal government and the banking system it’s created.

But it actually serves the government well to build a larger and larger list of people dependent on the government. The more people in need, the more excuses for issuing more government debt and continuing to expand the money supply.

We need to bring an end to this system, and the sooner the better. It’s evil and it’s unnecessary. Instead of the Fed, we could have a system that is: (1) backed by assets, gold or any other hard asset, (2) open to competition from competing currencies, and (3) subject to accountability from end users of the money placed into the system.

If we don’t take the actions and steps necessary to bring this about on our own, it will be done for us. But if we don’t step up and make the changes on our own, when it happens, it will likely be done through violence, more oppression and a redistribution of life opportunities that will be managed by more direct force. If we take these changes into our hands in appropriate ways now, we may avoid the costs of even greater oppression and displacement later.

I hope people will heed the call and join together to make it happen.