Sunday, November 09, 2008

Legal Tender: Is it Legal, Lawful, Constitutional? Part 2.

The same way most of us worship God, all of us - atheists and agnostics included - worship money, as money is the "god" at the center of the religion we all subscribe, monetary theism. We have little choice but to go along, because as blood is to the human body, money is to the institution - from familial to political to religious to legal to educational and of course, monetary - it functions as the lifeblood of society, without which, life would be unbearable.

Like religion, money unifies, divides, starts wars, provides peace, involves ritual and most important of all, requires us to have faith. In fact, there is no more unquestioned form of faith in America, than the trust we place in the value of our established monetary system. The last couple of months have shown us just how dependent our economy is on our continued reverence. While it's true our current economy, headquartered at the Federal Reserve, does indeed require our loyalty, it does not necessarily mean that loyalty is deserved.

So, what's wrong with the way our government has chosen to create and distribute money? Nothing. What's wrong, is allowing private unaccountable banks create and distribute money for private profit at the expense of we, the people.

Sure, everything is made to make it look as if the central bank operates in the public interest but the Federal Reserve is a private corporation, chartered in total secrecy by an act of Congress, the Federal Reserve Act of 1913 on December 23, 1913.

The Federal Reserve is not federal. There is no reserve. And it’s not even a bank.
Those in the know, central bankers and the like, who benefit from our monetary system, purposefully obfuscate the mechanics of money supply (fractional reserve banking) so that we the people will not figure out that the creation of money is designed to perpetually rip us off by consistently transferring the wealth back to the banks.

The more complicated the economy and money creation process appears, the more we will avoid trying to figure it out, hence, just as we do with religion, we end up putting our absolute faith in this unseen entity, that works by a method that we don't fully understand. Faith is not the problem here, the issue is our knowledge of what we put our faith in.

God is mysterious and beyond human comprehension, however enough evidence exists that has convinced 75% of our nation to place our faith in His existence, and still we are constantly searching for clues to how He works. The irony is, that unlike God who we believe created us, we, human beings, create money. It's not all that mysterious and well within our grasp, nevertheless, humans who prosper so from having complete control of our money supply have a vested interest in convincing us that this institution is "sacred" and far beyond our understanding.

To truly understand the way our world works, the first thing we have to do is understand money.

Years ago, the Federal Reserve, produced a document entitled Modern Money Mechanics. This publication detailed and described the basic process of money creation in a fractional reserve banking system.

Our government decides it needs $10 billion, so the treasury prints up $10 billion of treasury bonds and places a call to the federal reserve (FR). The FR then prints up $10 billion in notes and buys the government bonds and the exchange is made. Only, in reality nothing is printed up, it is all done electronically.

Once this exchange is complete, the government than takes the $10 billion in FR notes, and deposits it into a bank account, and this deposit officially makes the FR notes, legal tender or money and adds $10 billion to the US money supply.

But wait, there's more...that was just the beginning. Government bonds are by design, instruments of debt because the government is actually promising to pay back that money to the FR. In other words, the money was created out of debt.

Based on fractional reserve banking, that $10 billion deposit instantly becomes part of the banks reserves, just as all deposits do, however only the prescribed reserve requirement needs to be present and accounted, normally 10% of the deposit. In this case, $1 billion is held as the required reserve, while the other $9 billion is considered an excessive reserve, and can be used as the basis for new loans.

One might assume that the $9 billion in excessive reserve is literally coming out of the existing $10 billion deposit. Not true. The $9 billion is created out of thin air, once again, ON TOP of the existing $10 billion deposit. Magically, our money supply expands.

From Modern Money Mechanics:

"Of course the banks do not really pay out loans for the money, they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes (loan contracts) in exchange for credits (money) to the borrowers transaction accounts."
This process then repeats over and over again. Let's say someone walks into this bank and borrows $9 billion and then takes that money and deposits it into their own bank account. The bank would hold 10% of the $9 billion deposit, the other 90% or $8.1 billion is now available as newly created money for more loans. And then that $8.1 billion can be loaned out and redeposited creating an additional $7.2 billion to $6.5 billion… etc…

For every deposit that ever occurs in the banking system, about nine times that amount can be created out of thin air.

So, what is giving this newly created money value? The already existing money supply. That's right, every time new money is created, it steals value from the existing money supply. Why? Because the money supply is being increased irrespective to demand for goods and services. This throws supply and demand way off so prices rise which in turn diminishes the purchasing power of each individual dollar. This is called inflation and this is why inflation is called a hidden tax on the population and why the fractional reserve system of monetary expansion is inherently inflationary as it debases the currency. This can be seen when we see that one dollar in 1913 requires $21.60 today to match value. That is a 96% devaluation since the Federal Reserve came into existence.

In this system, the only way money can come in to existence is from loans. Therefore, if everyone in the country were able to pay off all debts including the government, there would not be one dollar in circulation, hence we have the double-enrichment, debt-based currency system, which predominates throughout most of the western world.

Next up: The real scam: Interest.
"The modern banking system manufacturers money out of nothing. The process is perhaps the most astounding piece of sleight of hand ever created. Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits". -- Sir Josiah Stamp, Director of the Bank of England,1928-41
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."---Thomas Jefferson

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