"The actual process of money creation takes place in commercial banks. As noted earlier, demand liabilities of commercial banks are money."
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Source:
Modern Money Mechanics, p.3 (1961,1971,1992), Modern Money Mechanics is a booklet produced and distributed free by the Public Information Center of the Federal Reserve Bank of Chicago. On back cover: "This publication was originally written by Dorothy M. Nichols in May 1961. The June 1992 revision was prepared by Anne Marie L. Gonczy. Revised May 1968, September 1971, June 1975, October 1982, June 1992."
see http://liberty-tree.ca/research/Modern.Money.Mechanics
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On this same page 3, the Fed admits they operate a confidence game and that the history of banking is a history of fraud. It matters none what they admit if less than one percent read it and the few who recite it are ridiculed.
 -- Dave Wilber     
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    Those that ridicule the truth knowingly, do it because they are afraid to admit the truth, the same is true for those who see it and choose to look away and hope for the best. The saddest and most dangerous ones are the ones who don't see it, and yet ridicule. In total ignorance of natural law cause and effect they continue to kill themselves and us first thus society next. Ignorance is our downfall. That's what we, all Americans, get for trying to fool mother nature as regards the laws of nature. We don't live by them politically so the inevitible course of natures' exaction of punishment, or unbiased judgement, we pay for it. The further we get away from and the less we use these self evident truths in our political system the more harm we do to ourselves and the further society drifts from the truth of nature and the closer we get to disruptions in or lives. Disruptions can be civil unrest and of course chaos depending on the particular circumstances of the nation at a particular time. We, America, have just begun to pay for trying to fool mother nature for too long.
     -- Anon     
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    Dave and Anon said well. I chose a thumbs down because real money has intrinsic value, in and of itself, such as that which is taken from the earth, not the bank. The actual process of money creation takes place someplace other than a commercial bank. Commercial banks create debt, liabilities, and the illusion of money.
     -- Mike, Norwalk     
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    It is the demand liabilities utilized in keynesian economics that is causing the current melt down. The FR could absorb and forgive all the 'toxic assets' and bankruptcies could take care of the rest. A competing gold standard would soften the inevitable collapse and sustain a real wealth building economy.
     -- Mike, Norwalk     
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    The real shame is that they no longer teach ths in the government skools {read brainwashing centers}. This fact may explain the reason for the comment by Anon. We are a society that has been INTENTIONALLY DUMBED DOWN. See 'the intentional dumbing down of america' by Charlotte Iserbyt
     -- Marv Graham, West Columbia     
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    The government has people thinking banks can talk and are printing quotes made by banks???? Foolish quote written by a fool who won't even admit they wrote it.
     -- G Natural, Bloomsbury     
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    Fancy jargon to hide what is really going on. What it means is that when I give my IOU to the bank in exchange for a deposit into my account, the IOU is a tradeable 'asset.' But it is still nothing but a promise to pay another promise to pay...
     -- E Archer, NYC     
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    G Natural, the Federal Reserve Banks do publish pamphets and reports often with no reference to an author. These publications are compiled and revised periodically. We have updated the source with whatever information is found on the booklet. We have archived the booklet here: http://liberty-tree.ca/research/Modern.Money.Mechanics
     -- Editor, Liberty Quotes     
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    The quote is an absolutely correct and truthful statement. The "demand liabilities of a bank" are your deposits. Because of the "law of large numbers" the bank while still promising you access to your money on demand also is able to lend some of it to others. Thus in effect you and the others both have access to your money at the same time. Because there are so many individual depositors at any one time and no one demands their money at the same time the banking process can continue indefinitley. This quote is a simple truth and you guys get off on it and go gaga. I don't get it! It has nothing to do with the Fed or the USA, this is a universal attribute of banking.
     -- Waffler, Smith     
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    THIS IS A RESPONSE TO WALFFLER SMITH's COMMENT "The quote is an absolutely correct and truthful statement. The "demand liabilities of a bank" are your deposits. Because of the "law of large numbers" the bank while still promising you access to your money on demand also is able to lend some of it to others. Thus in effect you and the others both have access to your money at the same time. Because there are so many individual depositors at any one time and no one demands their money at the same time the banking process can continue indefinitley. This quote is a simple truth and you guys get off on it and go gaga. I don't get it! It has nothing to do with the Fed or the USA, this is a universal attribute of banking. FLAW #1. Have you ever heard of anyone's personal checking account being debited when a loan is created?. Majority of the money or loans in circulation is created as a book keeping entry, 1s and 0s in cyber space to be more specific. This fact is possible because of the smoke screen of the Federal Reserve. If you break the Federal Reserve, the system crumbles. when you local banks creates a loan, it makes a book keeping entry using your sweat and labor to back it up. It brought nothing to the table for that transaction FLAW #2: THe reason your bank doesn't shut down is because it is relaying on deposits from checks issued by other banks. The minute the incoming deposit drops below the checks drawn against the banks, the bank goes under.. The bank of Venice operated for 500 yrs without gold or silver. It operated on credits issued by the government. This was an exchange between producers (government providing security) and citizens produce goods. This was an organic money system. The system failed after Napoleon's invasion. The current money supply in the US is a parasitic money system. The non producers, the banks steal the wealth from the citizens.
     -- John Edwards, Sterling, VA     
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    This is nothing but a scam for those who are in the government and its elite members. The question that should be asked is...who authorized the "government" to create "securities" out of thin air when the government is made up by human and only God can create something out of nothing. The "Federal Reserve" is just an institution that created by men of elites and the government that helped sponsored this cycle of slavery. The Corporatocracy of this great nation has utilized and instilled corruptions in this "government" and "FR" to enslave entire planet earth for the sake of their own gratifications and self perservations. Just look at during the meltdown after September 11, 2001. The Housing Industry, the Saving and Loans, the Stock Market and Security Exchange; they are all in this together for the sake of reaping an enormous profits from slavery of its own citizens. While entire US populations suffering from this market depression, their own Corporate Elites got bailouts in the billions and these CEOs turned around and said," Fuck You America! As long as I got my shares from this collapsing market I am happy." I tell you, after having lived in America for more than 28 years I sure have learned alot from United States government and its agencies. I hope there are some honest US citizens will step up and proclaim that this behavior must stop once and for all. We Are the People is clearly written at the beginning of US Constitution ought to say something about this great nation and that this country belongs to the people and US Corporatocracy.
     -- XMEN, XMEN     
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