Simply put (assuming you know what the Fed is), it contracted the money supply and completely caused the 1st Great Depression.
If you dont know what the Fed is, its basically a Private Bank. All US currency that is printed is pretty much a "loan" with interest. $100 scenario. $100 bucks is all the currency in existence. Every year, 10% interest is owed to the Federal Reserve. So $10 bucks is paid back to the Federal Reserve, which leaves $90 bucks in existence. The value of each Dollar basically goes up. So in order to offset that, the Federal Reserve must print and inflate the money supply by $10 or 10%. If less than 10% is introduced, the money supply is being contracted, or deflation. If more than 10% is introduced, inflation occurs.
Now, to make this more complex, introduce the Fractional Reserve Banking System (thats not really an organization, its a method of banking). Again, $100 bucks is all the currency in existence, also with 10% interest attached. A person takes $10 bucks and deposits that in a bank. By the Fractional Reserve method, (using the current 10 to 1 ratio, the ratio we currently use), the bank now has an excess deposit. Only 1/10th of that must be kept on hand, so $9 bucks is loaned out, again at interest.
Now, one would think that when the bank loans this money out, it counts against their current deposit. It doesnt. The bank keeps that $9 bucks, and offers loans, at the 10-1 ratio. So if they loan out $90 bucks, they only have to have $9 bucks as a deposit. Now it gets worse. The $90 bucks that exists is taken to other banks, and again loaned out at a 10-1 ratio. For simplicity's sake I'll say it all happens in one transaction instead of a bunch of smaller transactions. Someone has $90 bucks, which is almost the entire value of all the money in existence. They deposit it at a bank, the bank now has an excess reserve and offers $810 in loans, which is backed by their $90 deposit.
This cycle can continue indefinitely. Since new money is created out of thin air by, not just the Federal Reserve, but every entity that can offer loans, the money is inflated until the value goes so low that it now has no value. It takes a while, but the faster that loans are processed by banks, the faster the money supply is increased, and the faster that the value drops thru the floor.
Now, in the original scenario, without thinking at all about the Fractional Reserve method, you can consider teh interest that is paid, as theft of 10% of the wealth in existence, for that year.
Introduce the Fractional Reserve method, and it is nearly impossible to calculate the total ammt of currency in existence, or regulate the value thereof. If you dont know how much money their is, because money is created from loans, then you cant set the value of it. A free market cant do it either. To do so, it would require a level of interconnectivity that isnt even possible even with mathemeticians. The free market influences the value because they get "new money" from the Federal Reserve when it is originally printed. When Wall Street has this new money, it hasnt been introduced into the populus, so when they spend it, they spend it at its original value. Once its spent, the money supply is increased and the value of each dollar drops.
Introduce Interest: Now here's the next tricky bit. Every dollar that smaller banks create thru deposit and loans and the 10-1 ratio, 10% of that is owed to the Federal Reserve. In this situation of 10% (now currently at .25%), the money supply must be both contracted by 10% and inflated by 10% for perfect balance. How do you set a cap like that? Count every loan in existence, and when the total number of available loans is reached, you STOP LOANING? It wont happen. Banks, thru use of computers, technology, internet, automation, etc have done nothing more than sped up the process of loan processing. Which means, they make loans faster, it gets deposited faster, and loaned out again at a ratio of 10-1 again, even faster, which speeds up the entire process.
The entire Brenton Woods II system is designed to fail, simply because it uses the Fractional Reserve method. The only way for Fractional Reserve banking to function, is to, like I said, contract the money supply by 10%, and offset it by setting a minimum / maximum required inflation by banks thru the 10-1 of 10%. What it creates is the transfer of wealth (thru interest to the smaller banks) from the people to the banks.
It gets even worse. Lets go back to the initial scenario $100 bucks in existence. 10% is owed to the Federal Reserve. At the end of the year, although only 10% itnerest is applied, the TOTAL debt that is owed is $110. In this scenario, that is more money than exists.
IT IS IMPOSSIBLE TO PAY OFF THE ENTIRE DEBT.
Then add Fractional Reserving back into the equation, again. Total ammt of the initial debt is $110, which is loaned out again at a ratio of 10-1, and again, and again, and even by the 2nd time, I have completely lost track of how much money is in existence, and is owed. So money is created from NOTHING, and 10% of that is owed to the Federal Reserve EVERY YEAR. So to calculate this you have to track every dollar and figure in the number of times that it has been reloaned, and at what interest rate, and how long its been since the initial loan, and how much has been paid back on that loan (since when a loan is paid off, currency is DESTROYED), then how much the money supply has been withdrawn, oh forget it, I give up, I cant even do it with a SIMPLE example of $100. How the hell are you going to do that when a single dollar can get spent, deposited, and loaned out again several times in ONE DAY, let alone a year, with ALL THE MONEY IN EXISTENCE! It is near impossible.
The Federal Reserve knows that in order to "stabalize" the economy, they need to contract a certain percentage of the money in existence in order to offset the increase in money supply for the money that is created from NOTHING thru loans from smaller banks. That is their estimated "Interest Rate", or Prime. The one that is at 0.25%.
Next problem, from 1800 to 1900, our Inflation was less than 1% for 100 years. When we allowed the Fed to take power in 1913, from that day until today, the dollar has lost 98% of its value. The wealth has already been transferred to the most elite of the elite, and since we dont have anything to back the dollar with, we now have THE GHOST OF MONEY. It has no value, it has no purchase power, and loses more every year. More accurate estimates of the current rates of inflation are around 20% per YEAR. But people want to "Invest In The Stock Market" for "Retirement". How the fuck is that supposed to work if you get 10%-12% return on investments on average per year (big key is "on average" because there are going to be years that it doesnt "perform" as well as expected. Make an extra 10% per year to offset a decrese in the value of that money that is about 20%? So basically youre losing 10% of your investments per year? Ok, fuck that then, fuck 401K plans, fuck the IRA's, fuck every retirement investment plan. They do ONE THING. Separate you from your money. You give someone else your money so they can make themselves money on Wall Street (literally make, counterfeit make, IE, thru LOANS) then give you 10% back? How is that supposed to work?
IT DOESNT. Unless you are a Bank, and can legally counterfeit.
