Modern Monetary Mechanics – Part 2 – You are being conned! – The Setup

“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:


20 Dollar bill


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?


Monopoly money


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?


Government mandate.


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:

US Treasury bond


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?


Your life.


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.


 Slave Auction

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!

19 comments to Modern Monetary Mechanics – Part 2 – You are being conned! – The Setup

  • Silverlicious

    Hey Goldsaver.. The title should read “You are BEING conned” or “You have been conned”.. I don’t mind misspellings or grammatical errors in the article, however the title should at least be correct..

  • @Silverlicious, thanks, fixed it

  • BTW, Silverlicious, did you read the piece? What did you think?

  • Silverfox

    Very thought provoking Goldsaver, I think I’m starting to wrap my head around the facts. I did not pay it much mind before but what you wrote is true. The casino chip resonated with me for I indulge occasionally. The chip has no value outside the casino. And if many more much wealthier people started to wager then the casino would just make many more larger denominated chips to handle the action. However, I didn’t wrap my head around everything. I don’t truly understand how the monetary system can collapse if money is lost that never existed in the first place and furthermore, how it could collapse if the Fed can theoretically continue to print more money forever. These are a lot of new ideas for someone that just woke up 6 months ago. I will re read and I thank you for your work.

  • Silverlicious

    I did read it.. Good article.. I’ve been awake for about 4 years now, and I’m always looking for different articles to help wake up others.. I will definitely use this one..
    Thanx Goldsaver!

  • rainmaker

    This is a very cool video just over 5 mintues long. Its entitled “The Money That is Sold Abroad is YOU”:

  • rainmaker

    This is another UTube video to get your head around thats about 13 minutes:!

  • Andrew Rumpel

    Hi Goldsaver… very good article. I especially like the end where you discuss MBS money creation.
    I think more people are becoming aware of the difficulties with fractional reserve banking, and the introduction of MBS information really illustrates exactly how broken the system is.

  • Prudentis

    “Let me say it again. The Federal Reserve is an exclusive private organization with the legal monopoly on U.S. currency.”


    For a much more accurate and non less crushing description of the FED and the government I suggest “The creature from Jekyll Island”

    You have some good points GoldSaver but please be careful. We cannot afford mistakes like this.

  • rainmaker

    As E.G. Griffin says in this video, “The Federal Reserve System is basically a cartel, a banking cartel, that has gone into partnership with the Federal Government of the United States, so that the Federal laws can be used to enforce the cartel agreement”.

  • Prudentis

    Yes, and his observation is firstly more accurate and secondly even more disturbing than simply saying the FED was a private bank.

  • rainmaker

    Lets give SilverSaver the benefit of the doubt….his assessment was not inaccurate as much as it under-scored the importance of the depth of the conspiracy, much like Griffin’s explaination. Its hard for people to get their head around this stuff. Even for me, I still have to pinch myself to ask “How did this all happen? How could it have gone on as long as it has? And how do we continue on this path without massive resistance?”

  • Prudentis, could you please explain what part of the statement,”The Federal Reserve is an exclusive private organization with the legal monopoly on U.S. currency” is incorrect?

    The Federal Reserve is exclusive. You and I can not join it.
    The Federal Reserve is a private organization. By definition, if only a selected group can be part of an organization and such organization is not a part of teh government it is private.
    They have a legal monopoly on U.S. currency. What other organization can print or issue US currency?

    Now, we can get much deeper into the organization of the Federal Reserve board, its members and its charter. I was trying to generalize the description in order to make the point that only Federal Reserve Bond Agents, specifically from the membership of the Federal Reserve System, can be Primary Dealers.

    Because they are the only ones that can be Primary Dealers and own the organization, they get to create currency at will and pay themselves bonuses in such currency regardless of the performance of the currency.

  • Thanks rainmaker. I am a fan of Stefan Molenyux and consider him the modern day Ayn Rand. His writings cu to the core of logic and can do much more than I could in illustrating the evil of the Statist system.

  • trailhiker

    Fantastic articles Goldsaver. To answer Rainmakers question of how we got here, it is the corrupt education system that indoctrinates our children, and has created at least 3 generations of zombies. I will be sharing these articles with my daughter, who argued relentlessly in HS with a teacher with the brains of a small nat, that the fed was not a government entity, and is now in college studying history and economics and sees the useless babble, that supposed “higher education” is handing out. Keep up the good work, these articles are great tools to reach the un-reachable.

  • rainmaker

    @ trailhiker

    I get it. Been awake for a long time and I still have a hard time shaking that peculiar programming that has been inbedded so deeply into my psyche. Not only does the system indoctrinate (maybe corrupted is a better definition) our children, it has corrupted our generation, and probably the three other preceeding ours (albeit in different dosages). I guess my melancholia cannot understand how they (our parents, grandparents and great grandparents), let it happen, how we and our children allow it to happen and continue even now. We have to take some of the responsibility for what we have allowed to happen.

    We can’t go back, but we can go forward. We just need to point out who’s who and take appropriate measures. Hopefully, we won’t continue to squabble amongst each other (as we have been programmed to and have done for the last 100 years or so)and can stand together in the face of Tyranny.

  • Prudentis

    “Prudentis, could you please explain what part of the statement,”The Federal Reserve is an exclusive private organization with the legal monopoly on U.S. currency” is incorrect?”

    Of course.
    The incorrect part is witht the “private organization” part.
    It happens that I know a bit about private organizations, since I own one.
    The FED does not fulfill the basic definitions of private organizations.
    But I do not blame you for misjudging the fact, that the FED plays a major role in US monetary policy and in alliance with the US Treasury and the government has control over the monetary supply of US Dollars.
    It just isn’t a private organization.

  • Prudentis

    As always, I should read my posts before hitting “post”.
    The last sentence doesn’t make sense at all. I guess I mixed two sentences into one.
    What I wanted to say was, that I do not blame you for this just ask you not to let minor mistakes spoil your valuable work. And you have it right, that the FED plays a major role in US monetary policy and in alliance with the US Treasury and the government has control over the monetary supply of US Dollars.
    The only way I see to end this corrupt system is to be 100% precise and leave no room for attack.
    So just don’t repeat that easily disproven sentence.

  • Brian

    Goldsaver: Have you looked into “lawful money”? FR notes/credit are NOT “lawful money”. Take a peek at Title 12 section 411. YOU have a RIGHT to demand redemption for “lawful money”. When you sign your paycheck you are endorsing Federal Reserve Credit and all its liabilities. Why not restrict your endorsement? This will certainly raise antenna at the bank because you are banning them from using your funds to fractionally lend against. I had to quit using a credit union because they would not accept my paychecks and opened an account at a mainline bank. I signed the signature card “all transactions to be conducted in lawful money pursuant to USCA12 section 411” and every check I deposit is similarly signed.
    The short and skinny is: I demand debt free money for the benefit of the public as a whole. When I restrict my endorsement, I am making my demand known. In effect I’m asking for united states notes in the form of FRN’s (cause they don’t print USN’s anymore) The best part is see Title31 section 5115 (b)2.—-000-.html

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