“Give me control of a nation’s money and I care not who makes the laws.”
– Mayer Amschel Rothschild
So why did you have to suffer thru all my definitions in part 1? Because without the proper definitions you will not see the con. This con is designed to part you with your wealth and you are a voluntary participant in the con. You don’t believe me. It’s OK, you have been trained not to see the con. And to make matters worse you have been trained to attack anyone who points out the con. Don’t feel bad. It is not your fault. In these pages I will lay out the con and what you can do not to play anymore.
Please take 6 minutes before we begin to watch this video. I did not prepare it, it was done by Professor Chesterton and it’s a good start to the next conversation.
The Setup- In this phase you were told that money and currency are the same thing. Let’s examine the setup. Let’s say you were a factory worker in Tennessee making 20 dollars an hour. Not too bad really. You can take care of your family’s basic needs. You can afford to make payments on your car and your boat and have a bit of money going to your 401K every month. You are doing good right? So, your boss is giving you one of these and hour:
That is 20 dollars right? Nope. That is a token, a note for 20 dollars redeemable in the future. But redeemable for what? 20 dollars? No Siree, redeemable for 20 dollars worth of someone else’s work. Notice the top of the note. It says Federal Reserve Note. The irony here is that it says so above Andrew Jackson’s head. So what it really represents is an hour of your life. Ok, so what is the big deal, you ask. Well, what if your boss offered you this instead?
Would you accept it? No you say? Why not? What is the difference between the piece of paper (linen actually) with Old Hickory’s picture and the 20 in Monopoly money?
The State dictates that you must accept the Federal Reserve Note as “legal tender redeemable for all debts public and private” You see it printed there, right besides Jackson’s head. So, a piece of linen with some ink on it has been deemed by the State as worth one hour of your life. So what, you may ask. Don’t we need currency as a way to trade between each other? Sure. But, patience grasshopper, this is only the set up. You see, many years ago that bank note was redeemable for money. Remember the casino chip? Same deal. But by the magic of State mandate, FDR made those notes non-redeemable. So they went from a coupon for real money to “money”.
So where do those notes come from? After all, you have to earn your notes so they must be earned by everyone in the chain right? Nope.
The Birth of a Federal Reserve Note
When the Federal Government needs money (and when don’t they need money?), they must either confiscate it by force from the citizens (taxation) or borrow it. So, let’s say they borrow it. The Treasury Department does not print US Notes, they print US Treasury Bonds:
As you can clearly see it is a promise to pay back a debt in the future, an IOU. But, the government does not actually produce any goods that it can sell in the open market. There are no Federal Factories producing tires or cars (General Motors been the closest it comes to this). So how is the government capable of fulfilling such a promise? What are they actually promising?
Remember that a fiat note is not a token redeemable for money but a token redeemable for someone else’s production. You sell a part of your life for a token (salary) on someone else’s life. So, in a very real sense, currency is backed by your life. So what is the Federal Government promising to pay with? What is the collateral? You are the collateral on that loan backed by the creditor’s trust that the Federal Government will use violence to confiscate a portion of your life.
You are been sold in the open market just as if you were standing in the auctioneers block.
Keep this in mind while we continue.
The Treasury offers these bonds, or IOU’s in what is called Permanent Open Market Operations. This POMO auction can only be attended by three types of buyers. Direct buyers, that is private companies in the US that buy the bonds as part of investment or retirement plans; Indirect buyers, foreign purchasers that buy the bonds via an intermediary (China, Japan, etc) and Primary Dealers, a select group of banks that have a legal charter to purchase bonds.
Let’s take a look at Primary Dealers. Who are the primary dealers? The primary dealers are a group of international banks who have a single thing in common; they are all members of the Federal Reserve Board. I bet you thought that the Federal Reserve was a part of the Treasury Department. No. The Federal Reserve is a private organization of banks that received a charter of privileges in 1913 under the Federal Reserve act. In exchange of allowing the Federal Government to appoint its senior leadership they get full control of the currency in the US.
Let me say it again. The Federal Reserve is an exclusive private organization with the legal monopoly on U.S. currency.
Where do the Primary Dealers get the funds to purchase the US Treasury bonds? From the Federal Reserve of course. They own the franchise, why not get funds form it? So, where does the Federal Reserve gets the funds? They create the funds. Let me say that again, they create the funds from thin air. It is called expanding their balance sheet.
When a member bank asks for a loan from the Federal Reserve, the Federal Reserve considers the loan a no-risk loan and adds the funds to the member bank’s account. Then the member bank deposits the bond they purchased into their reserve account in the Federal Reserve Bank extinguishing the loan but, keeping the additional balance.
Let me personalize it a bit. Joe needs $10,000 to buy a used car. He goes to his buddy Bill who works at a bank. Bill adds $10,000 to Joe’s account balance and once Joe buys the car, he gives Bill a copy of the receipt. Bill then cancels the debt and Joe gets to keep the car. Yes, it is that simple.
And how did this create currency? Well, the Primary Dealers paid the Treasury for the Bonds by adding the funds into the Treasury’s checking account. So now, the Treasury has a million more notes to spend, the Primary Dealers have a million dollars in reserves in their accounts and the Federal Reserve has a million dollars more in their balance sheet. Presto, Chango, “money” was created!
Wait it gets much better. Since the Primary Dealers now have an additional million dollars in reserve and, by regulations (written by the Federal Reserve) they only have to keep 10% of assets in reserve, they are free to loan to the public an additional $900,000 in debt. A million dollars just became 1.9MM dollars. Hold on to your hats, it gets better. Let’s say 1000 people borrow $900 a piece to buy laptops at Best Computers and Stereos, Inc. (unsecured credit). Best Computers and Stereos, Inc. deposits the funds into their bank account. This $900,000 deposit is considered new funds. Since the bank only has to keep 10% of funds in reserve, they are free to loan $810,000 in new debt. This continues until the bank, using the $1MM that the Federal Government borrowed, issues $9MM in new debt. So, $1MM became $9MM in debt and the Primary Dealers get to charge interest in all of it!! $10MM plus interest wished into existence by a piece of printer paper printed at the Treasury. Good racket if you can get into it.
Angry yet? No? Let me make you angry now. The process above is not the only way the banks “create” money. You are the other way they can create it.
When you buy a home, you sign a document called a “mortgage”. Simple enough document. You “borrow” $250K from the bank and they get to charge you interest and keep the house if you default. Simple enough. Where do you think that money they loaned you came from? Don’t get ahead of me now, wait for the punch line. The money came from your signature in the mortgage!
When you sign a mortgage, your signature creates an instrument called a Mortgage Backed Security (MBS). This MBS is deposited by the bank in their accounts at the face value of the loan. Because they deposited the funds into their account, they now get to add the value of the funds to their account and issue a check against the value of your home. Let me repeat it here. Your signature gave them the legal right to add the $250K into their balance and they loaned you that money. Your signature created the money and they loaned it to you with interest. And since this check is going to be deposited into someone’s bank account, the receiving bank gets to loan out $225K in unsecured debt based on that MBS. $250K of your money just became $2.5MM of the bank’s money! And they get to loan it out to your friends with interest.
To review, a group of private banks, with the assistance of the Federal Government, have the legal right to create money out of thin air, money that is backed by your life, and charge you interest on it. And if you try to compete against them, you go to jail for counterfeiting. No wonder Bank CEO salaries average 500x the median salaries in the US.
It’s good to be the king!