What Do North Dakota and Libya Have in Common?

We have a confused understanding of the federal money system because we base it on what we know about our own personal bank account, and we were never taught that the federal system does not operate in the same way. If you look at a chart of historical national debt and compare it to a chart of national money supply, they're the same. They both go up at the same rate. Why? Because the federal debt IS our money supply. Our money is credit and debt.

The federal government can initiate the supply of money by writing checks (debits in fed acct) that directly jumpstarts our economy. When the government writes checks to its employees, for real goods and services, that shows up as credits in real people's accounts that they, in turn, spend into the economy. The federal government can also write checks for infrastructure, which shows up as credits in commercial accounts, and creates jobs, thus creating credits in real people's accounts that they can spend into the economy.

States can create their own credit, as well. North Dakota is the only state that escaped the credit crisis. They own their own bank, which partners with the local banks and keeps credit moving within the state. So, why aren't all 50 states taking control of their money supply in the same way? Well, this would greatly threaten the international banking cartel (ibc). And, when you threaten the ibc, you end up like Libya, who had the nerve to create their own central bank that issues the money and issues credit for the nation's infrastructure, interest free; therefore, they had the lowest debt to GDP ration in the world.

However, unlike the political leaders in North Dakota, Khadaffi was trying to mobilize all of the African countries to follow his lead, while setting up an African monetary fund that would compete with the International Monetary Fund.

So, yes, we have the money to do anything we want to do. That's what money is: the credit of the nation, and the nation can advance the credit for what it needs to do.

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Power of the Purse: How the Wealth of the World Remains in the Hands of the Few.

"When the government fears the people, there is freedom. When the people fear the government, there is tyranny." - Thomas Jefferson

The Power of the Purse Volume 1 Part 1




The Power of the Purse Volume 1 Part 2

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Deleveraging the Monster Bubble

From Econotwist's blog:

How long will the deleveraging process take? How painful? Will it create the conditions for growth, and if so, what kind of growth?  Will we seek and find light at the end of this dark tunnel?  Or will we let it get progressively darker to the point where seeking becomes damned near impossible?

The point of the chart above is to emphasize the enormous growth of leverage within the global financial system (individuals, corporations, banks, and governments) over time and the "deleveraging of the greatest economic/finance bubble in history" according to Christopher Laird:

Once the level of leverage reached 60 to 1, it becomes impossible to stay ahead of the deleveraging, even for central banks. The implications are staggering. Every major economy in the world is involved. The outcomes of deleveraging this monster bubble, represented by the green oval, will be what I term Credit Crisis II. At 60 to 1 leverage, a loss of 1 to 2% wipes out the capital.

It is in crisis that the seeds of opportunity are supposed to take root. However, instead, it appears all the seeds of opportunity planted themselves in and around the Big Six.

"Fifteen years ago, the assets of the six largest banks in this country totaled 17 percent of GDP ... The assets of the six largest banks in the United States today total 63 percent of GDP." -- Sen. Sherrod Brown of Ohio quoted from Simon Johnson's book, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

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Credit-Default Swaps Solution For Too Big To Fail?

"Too Big to Fail" refers to the idea that our government cannot allow the large, highly interconnected financial institutions to fail because as one goes, so do the rest. This would result in economic disaster.

The most dangerous legacy of the financial crisis is the perception that some institutions are too big to fail. This perception distorts competition and the allocation of capital, favoring risk-taking and incubating the conditions for the next crisis. Ignoring the problem will only make it bigger. Intelligent regulation is essential. We have proposed a new market-based capital requirement system that we believe is superior to current regulatory proposals.

Well, what if the "tools for the fix" can be found inside the banks themselves? The following article, How the Tricks That Crashed Wall Street Can Save the World propose the following:

There is a way forward, beyond new regulators, new requirements, and new rules, for the banks to figure out how to skirt. An intervention mechanism centered within banks and reliant on market signals will work much better than a Washington edict. And we believe such a system is possible to create and put in place.

The way to do it, contrary though it might seem, lies in the much-maligned credit-default swaps (CDSs), which are like insurance policies against a loan defaulting and whose value rises as the chance of failure increases. When these contracts are traded on an exchange that ensures that they are properly collateralized, they provide a daily assessment of the risk of a loan's default. Our idea is to use this timely information to monitor banks.

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Will the Next Credit Tsunami Drown Us All?

Many of us are still feeling, and some even reeling, from the effects of the financial credit crisis last year. Well, prepare yourself, because another tsunami of defaults might just be on the horizon, threatening any chance of full economic recovery. Once again, as excess on Wall Street continues, despite the disastrous results of their previous actions, another sector - the private equity industry - is about to deliver another giant credit disaster.

What are private equity firms?

Essentially they are companies that buy other companies with the help of huge loans. In a nutshell, these companies put 20% down, raised mostly from public pensions, in much the same way you and I would arrange a mortgage, with one major difference. While we put 20% down and borrow 80% for a mortgage, PE firms make the companies they acquire borrow the 80% to finance the deal and the companies they acquire are responsible for that debt. They then try to resell the companies or take them public before the loans come due. Often times, private equity companies make huge profits while destroying the companies they buy and sell.

The giant tax loophole that makes this all possible is called, interest tax deductibility, which states that any company can deduct the interest they pay on loans from their taxes.

Joshua Kosman predicts this crisis in his new book, The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis . Kosman said, the Boston Consulting Group predicts that half of the 3,188 companies purchased by PE firms will default on their loans by the end of 2011. The problem is that the companies owe more than $1 trillion in debt and if a significant amount of those loans become worthless, that will cause a freeze in lending. Not to mention, PE firms are the largest employers in the country when combined. They employ one out of every ten Americans.

Remember the Collatorized Debt Obligation (CDO) - mortgage debt sliced and diced, packaged and repackaged, sold and resold in the form of exotic instruments - involved in our current crisis? Well, the Collatorized Loan Obligation (CLO) will replace the CDO in the next crisis. the "exotic instrument that PE firms use to make it much easier for them to fund leveraged buyouts (LBO).

The same hedge funds that were creating CDOs which caused the mortgage market to boom also created collatorized loan obligation funds which made it much easier for PE firms to borrow money to finance LBOs. Hedge funds and banks would buy a pool of LBO loans, slice them up, and sell them to Sub-Saharan African countries. Ratings agencies gave these CLOs triple A ratings just as they did the CDOs, when they knew they were junk. When the LBOs collapse, these CLOs will be nearly worthless.

In addition, private equity fund managers, like hedge fund managers are taxed at a much lower rate than most Americans pay, even though they are providing services that are normally taxed at the ordinary income tax rate up to 39%. They take in 20% of the profits from investments, and under current law, this is often treated as long-term capital gains, therefore much of their pay is being taxed at the capital gains tax rate of 15%.

Should private equity firms register with the SEC?

In September 2008, the Federal Reserve relaxed bank ownership rules for private equity firms, allowing an investor to buy up to a 15 percent voting stake instead of the previous 9.9 percent limit. It also allowed investors to buy up to 33 percent total equity interest, including voting and nonvoting shares, instead of the 25 percent prior limit.

In other words, private equity firms are engaging in activities that closely resemble what investment banks do: operate hedge funds, taking ownership interest in banks and acting as counter-parties in derivative transactions.

“Leveraged private investment funds with assets under management over a certain threshold should be required to register with the SEC to provide greater capacity to protect investors and market integrity.” – Tim Geithner

Related news:

Report Says Big Buyouts Are Likelier to Default - "The 10 largest companies bought by private equity companies are performing worse than similar stand-alone companies or smaller private equity deals, according to a new report from Moody’s, the rating agency."

Private equity's get-rich-quick days 'are over' -- "Banks are not interested in cleaning up their balance sheets because they would have to recognise additional losses, forcing them to take more government bail-out cash. This could stop increased lending, which would otherwise help recovery."

Which private equity firms return the most bang for the buck? -- The three biggest names in private equity firms are the Carlyle Group, Blackstone Capital Partners, and Kohlberg Kravis Roberts, however, one recent study using the HEC-Gottschalg method looked at which private equity firms return the most bang for the buck, and found few brand names. The top 10 shown in the image at left.

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Legal Tender: Is it Legal, Lawful, Constituional? Part 1.

On a cold December morning in 1968, in the State of Minnesota, one month short of 40-years ago, a jury of 12 handed down the “Credit River Decision”. This decision, rendered in the case of First National Bank of Montgomery vs. Jerome Daly, with Justice Martin V. Mahoney, presiding, declared that creating money out of thin air is unconstitutional and against the laws of the United States of America. In other words, Jerome Daly, with the help of Justice Mahoney and 12 jurors took on the Federal Reserve... the moneychangers...our entire monetary system, and won. Six months later, in June of 1969, Justice Mahoney was dead, his body pumped full of poison, in what appeared to be a boating accident, and Jerome Daly, an attorney, disbarred.

Jerome Daly, the defendant in the case, dared to challenge the foreclosure of his home. Daly argued that the mortgage contract required both parties, he and the bank (the plaintiff), to put up a legitimate form of property for the exchange. In legal terms, this is called consideration.

Daly went on to explain that the credit (money) did not come from the bank because it was created out of thin air as soon as the loan agreement was signed. Then, the bank's president, Mr. Morgan took the stand. According to the judge's personal notes, Mr. Morgan admitted, "in combination with the Federal Reserve Bank, the bank did create the money and credits upon its books by bookkeeping entry. The money and credit first came into existence when they created it." Mr Morgan then added, "no US Law or Statute in existence gave him the right to do this."

For this contract (mortgage) to be considered legal, a lawful consideration must exist and be tendered to support the loan. The Jury found that there was no lawful consideration and decided against the bank because the bank had not lent Jerome Daly actual money, and because the bank advanced nothing of value in this exchange, it was not entitled to the property that had been handed over as collateral for the loan.

"Only God can create something of value out of nothing." - Jerome Daly

Plaintiff’s act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the Law to support any thing or upon which any lawful right can be built. -- Justice Mahoney

This decision, revealing the process behind our debt-based currency, could have put the banking cartel - without mentioning any names, the epitome of the "money trust" - and all of those who profit so handsomely from our current system, in the "poor" house. The powers that be would never allow that to happen...look what happened to poor Justice Mahoney and Mr. Daly. Something had to be done to make sure this decision never saw the light of day.

The Supreme Court of Minnesota overturned the Credit River Decision, obscuring their reasons for doing so behind the complexity of our legal system. In order to simplify things just a bit, let's say their main reason for overturning the decision boiled down to the fact that Credit River is not a town, not a city nor a county; it is a township. What does this have to do with the price of money? Not being an attorney, I can't begin to figure it out, but this "fact" enabled the higher court to render this potentially elite cartel-shattering decision a legal nullity, stripping the case of any power to set precedent, meaning it only has "theoretical value" at best. Or at least that's what "they" are counting on.

If the higher court had not rescinded the Credit River Decision, every time we borrow money from a bank, obtain a mortgage, charge our credit card, etc. we could claim the "money" lent to us is not only counterfeit, it is an illegitimate form of consideration; hence voids the contract because the bank never had the money in the first place.

However, consider the fact that Jerome Daly continued to live in his home for many years following the Order and Decree. He was never evicted. Now, if the higher court overturned the decision, why did Daly continue to live in his home for approximately 22 more years? Could it be because the Supreme Court of Minnesota - or any US Court for that matter - does not have the authority to overturn the decision of a jury? Therefore, could the Credit River Decision be valid? Therefore is it possible...? Nah...we won't even go there, except to say that only 3% of the US money supply exists in physical currency. Where is the other 97%? Well, let's just say if every American citizen decided to cash out all their accounts, our monetary system would be exposed for what it is.

Next: Part 2: On second thought, let's go there, and explore how legal, "legal" tender really is.

Some informative links:

Minnesota State Law Library: Credit River case files

In the Matter of Jerome Daly: Credit River case files

The Bankers Manifesto of 1892

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Tomorrow, and tomorrow, and tomorrow...

One of the hardest things to accept, and perhaps the most frustrating aspect of this crisis, is that what so many of us worked so hard to obtain, over years, decades and in some cases, a half-century, disappeared in a mater of days.

What's the point? Why did I "waste" my time? Why should I continue, "wasting" my time, if what I worked so hard for can evaporate before my very eyes?

And to make things worse, it's all due to the greedy decisions of a few "tax-payer-blood drenched" psychopaths seated on their waste-collecting, solid-gold thrones, embedded in their castles sculpted from the bones of hard-working, tax-paying, red-blooded (is there any other kind?) Americans.

John Bogle, founder of Vanguard, and inventor of the first mutual index fund in 1975, which introduced investing to the middle class is one of the good guys. He has predicted this all along. He refers to the daily moves of the stock market as "a tale told by an idiot, full of sound and fury, signifying nothing."

The basic lesson in all of this is that our financial system is based on nothing more than an illusion. However, the key line in the MacBeth's passage that John Bogle took that quote is "Tomorrow, and tomorrow, and tomorrow". Increasingly we have come to expect more and more and to pay for it later and later. This way of thinking has grown to epidemic proportions and unfortunately, the time has come to pay Peter Piper. Unfortunately, this crisis does not discriminate between the so-called "guilty" and "innocent" nor does it discriminate between those who have time to build up their retirement and those who are set to retire now.

MacBeth to messenger:
She should have died hereafter;
There would have been a time for such a word.
To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

In the long run, this financial "crisis" may be a gift to American culture as it might provide those of us, or most of us - who bought into and consequently became addicted to consumerism - a way out, where they will not be alone. They will have the company of millions of other Americans breaking free of a culture saturated with consumer goods.

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All the Bank's Fault?

Recently, while visiting Madrid, as part of a European tour including Switzerland, Germany, Italy and Spain, Warren Buffet blamed the banks for the credit crisis.

"The banks exposed themselves too much, they took on too much risk .... It's their fault. There's no need to blame anyone else",

Warren Buffet went on to say he didn't think conditions would continue to worsen in the financial markets, only general conditions in the business world and that he had no idea when an upturn would occur.

"I don't think the situation will get worse in financial markets. General conditions in the business world will get worse, but it will only last a while",

Keeping in mind, Warren Buffet may know a little more than me when it comes to the world of finance, I respectfully disagree with him. Yes, the banks are at fault but they are not the only ones at fault...far from it.

There is plenty of blame to go around including we, the American people. We let things get out of hand perceiving reality through the prism of deliberate ignorance and greed allowing politicians to gloss over the harshness of what exists objectively and in fact.

As long as we're (my loved ones and I) doing OK, we blind ourselves to those Americans who having very little to begin with and who must adapt to getting by with less and less as we not only permit but champion legislation created, amended and destroyed over the last 30 years that we thought mistakingly would line our pockets. However, now that we may be facing the grim truth we only thought applied to others, we start to tune in and find out what's going on.

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Borrow Safely

SafeBorrowing.com

Consumer credit can be complicated. From the unusual legal terms to the complex mathematical formulas, understanding how credit works can be a big task. The Committee on Consumer Financial Services of the Section on Business Law of the American Bar Association has created this website to provide you with the tools to help you on your way to financial success. This website covers the four basic types of consumer credit: financing your home, financing your car, financing your education, and credit cards. At some point in your life you will be faced with decisions about most, if not all, of these types of credit. By reading through this website and others that we point you to, you will be able to get a grasp on understanding these types of credit and how to use them safely and wisely.

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Protect Yourself from Credit Protection Plans!

Credit card "credit protection plans" - an insurance plan that is supposed to cover your minimum payments should the customer lose his job, is admitted to the hospital, becomes disabled or dies - are the biggest rip-off going, yet they get very little bad press, more than likely, because of their "affiliation" with the big credit card companies. "Affiliation", more than likely, means the credit protection plan is just another division of your bankcard company, although they will do their very best to make you believe otherwise. After asking several times, in several different ways I finally found out my parent's credit card "credit protection plan" was with the same bank that issued their credit card, Bank of America.

Having worked for a bank card company at one time, I know a good percentage of customer inquiries are from customers who signed up for credit card protection plans who were not aware of being enrolled until they saw the charge on their statement. This has happened to me several times. I will have to call, cancel the service and have them credit the charge back to my account. I did not agree to enrollment because why would I want to add, what would be the equivalent of 10%, to my APR for absolutely no reason? No matter what the credit protection plan advertises, the eligibility requirements are so restrictive, the chances of the customer collecting are slim to none.

I also have personal experience with the so called "benefits" advertised by these plans...

After discovering a $69 charge on her credit card statement for a "credit protection plan", my mother knew nothing about, but had been paying on since 2003, we inquired to see if - since they could not reverse the charges - we could cash in on the benefits considering my mother (71-years old) had just been released from the hospital less than one month ago. We were told we had only 30 days from the time she was admitted to the hospital to request, collect the necessary proof, and then submit the forms. So, after paying a couple of thousand dollars, at least, my mother and father (77-years old) never collected a penny, even though they have been hospitalized repeatedly over the last five years.

One could definitely argue my parents should have paid closer attention to their credit card bill, but in their defense, with as much as they've gone through; it's amazing their bills were paid at all. I'm sure even if my mother knowingly enrolled in 2003, she was sold a bill of goods.

The sad truth is the credit card industry targets the elderly because they know they are the most vulnerable. Even if one takes the time to read the "mouse print", barely readable with 20/20 eyesight, there are so many loopholes that allow the bank to deny claims under credit protection policy, that there is no way to comprehend what would be covered. We need protection plans protecting us from "credit card protection plans"!

Credit insurance -- This "perk" preys on fear and is as necessary as a bee suit in Alaska. For an exorbitant premium, the insurer agrees to make minimum payments on your debt should you become unable to. You'll pay $13 a month to get a credit protection plan for a $2,000 balance. The laws of probability -- and the FTC -- are on your side anyway. And they're free.

Here are a few of examples of the millions of people scammed by credit protection.

Assad of Miami FL (02/12/08) says, "I have been paying for credit protection on this credit card in case of an emergency. Last year I lost my job in part because I was sick. I called and emailed washington mutual about my problem so said they would send me paperwork to activated the credit protection plan I have been paying every month. They never sent me anything and sent me to a collection company. This is after almost $50.00 they charged me every month for the credit protection..."

FIA card services added what they called a credit protection plan to my closed account that took a 3k bal to 7 k since 2002 with no purchases. This company is a scam! They do not even have a credit protection department, I have called over 20 times trying to get this problem solved....

I called FIA Card Services on 9/11/07 to transfer balances to their FIA Card Services Account/Sovereign Bank Card account. I got my first statement end December 07. In fact I have been out of home at the time I received the statement and I saw this statement first week January. I immediately called and made a phone payment. Approximately two weeks after I made the payment, I noticed an amount of $ 61.77 on the statement against credit protection Plan. Then, I called FIA Card Services who directed me to the Credit Protection Plan Customer Services Rep who informed me that I have committed myself for a Credit Protection plan and began explaining benefits of Credit Protection Plan (“If you die or lose your job you are being protected”) which words I am hearing for the first time. I requested him to kindly cancel the Plan which he did without any hesitation. When I asked to be reimbursed, I was told that this is not possible, because 30 days have lapsed since the enrollment in November 07....

I was charged for protection plan monthly that i did not authorized or trial on.

I am steaming mad about being lied to or treated unfairly...I received the bill I noticed that my min payment was for 168.00..and 44.00 was going to go to some program called 'credit protection plan'....I immediately questioned this, called the 800 number on my bill..it was really weird because there was no Bank of America greeting it was pretty generic and did not identify the company I had to call at least two times to verify I actually dialed the correct number....

When I signed up for my First Equity Credit Card I also signed up for their credit protection plan as well. It stated that by signing up for the plan it would cover my monthly bill for me in the case of disabilty from my job, that was one of about 10 different situations. Well I called the company to activate it and it was. 1 month later I recieved my bill with no credits paid towards it late fees and they still charge me for my credit protection coverage. I paid anywhere from $35 to $55 a month for this coverage and for it not work for me...

Please let everyone know...If someone calls during your dinner to sell you a Citibank Credit Protection Plan- JUST HANG UP! It is not the cardholders credit that they are protecting. It is another corporate ploy to exploit those who can least afford it...

After receiving my mastercard...statement (closing date 11/08/2001) I noticed a very high charge for credit card protection (insurance) for $100.99...

In addition, Federal law limits every credit card customer to a maximum of $50 liability for unauthorized use of his or her credit card. Every credit card bank must have procedures in place for disputing unauthorized charges.

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Plastic Economy

Plastic Economy site features tools, information, and resources to help individuals manage and reduce their credit card debt.

TrackCards allows you to track and manage credit card debt through a simple, easy to use interface. It's simple to get started: sign up, login, and enter in some basic information. That's it.

Debt Stats illustrates the average amount of household credit card debt and interest rates by state. This data is being retrieved from actual credit card owners using TrackCards.

Credit Counselors helps you find a credit and debt counseling company in the United States.

Glossary of Credit Card Terms provides definitions of common credit card terms -- without the legaleze.

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Living on the Edge of a Cliff.

Mostly ordinary middle-class American families are paying $90 billion dollars a year to the credit card industry.
Harvard Law Professor Elizabeth Warren is an expert on bankruptcy and is an outspoken critic of consumer lenders. She has appeared before the Senate Banking Committee to discuss the abusive lending practices by credit card companies and explains what many of us do not understand about the credit card industry.

Eight billion pre-approved credit card solicitations were sent out last year to American families advertising the lowest interest rate in big bold letters up front. Lurking in the finest print there is; the credit card company discloses that it reserves the right to change the interest rate in what could be written in Farsi as far as anyone understanding what they've written. But, it all comes down to this one statement:

“We reserve the right to change the terms of your credit card agreement at any time for any reason.”

The reasons for changing can literally be just because they feel like it, but here are some common reasons:

Customer is over the limit
Customer is one day late getting their payment in.
Took out another credit card
Dispute with another creditor
Demographics

The Universal Default Rate is one tactic credit card companies use to maximize their profit. The universal default rate means the credit card company checks your FICO score and if they find the customer does not meet every payment, every where, every time, the credit card company can raise that customer's interest rate to the default rate which can jump your APR as much as 30 percentage points in some cases.

3% cash back experiment:
Ms. Warren's class of 80 Harvard Law students ready to graduate were given the task of figuring out a 3% cash back offer one credit card company was offering in class She asked two questions:

What’s the effective interest rate on this card?

How do you get the money back?

It took Ms. Warren’s entire class of 80 ready-to-graduate Harvard law students the entire time the class ran (one hour) to decipher the 3% cash back offer.

Since the bankruptcy laws became tighter in 2005, the credit card companies, between 2005 and 2006, increased the number of mailings by 30%. They are looking harder for less than stellar customers and pushing them harder with tricks and traps pricing knowing they can hang on to them longer because they would less likely to declare bankruptcy

Credit card companies pushed for this law and literally drafted this law, their lobbyists wrote it and then paved its way through Washington and now they are reaping the benefits.

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50 Fun Facts About Credit Cards

Blueprint For Financial Prosperity found 50 very interesting facts about the credit card industry.

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