How To Enslave A Nation

As many voices as I hear in the US against monopolies, I am surprised that no one ever mentions the dollar as being the biggest one of all. I am also surprised at how so many people speak out about which way is best to fix our economy, yet few of them ever mention this little piece of paper as being the culprit. On the contrary, it is conventional wisdom that says that the dollar is a stable measure in reference to the value of purchasing a good or service. The idea that there might be a better way to have a stable economy is virtually unthought-of. Few people ask where the money comes from, how much is in circulation, who controls its distribution, and how a few hundred pieces of cloth with ink on it is equal to a new computer.

To start with, the money is created at the Bureau of Printing and Engraving. I kid you not people, their website is http://www.moneyfactory.gov/ - scary, yet accurate. From there it gets sent to Reserve Banks belonging to the Federal Reserve - http://www.federalreserve.gov/pubs/frseries/frseri.htm . Despite its name and website address, the Federal Reserve is not a government entity, but rather a large private bank charged with regulating money supply and credit. The Federal Reserve accomplishes this by setting a reserve requirement. This is simply the amount of money a subsidiary bank must have to get money from the Federal Reserve – currently set on a 1 to 10 basis on an amount over 55.2 million. This means that any bank needing 55.2 million in new currency has to have at least 5.2 million in its reserve. Once the smaller branches like Wachovia (who is owned by Wells Fargo) request more money, the parent bank applies to the Federal Reserve using the above listed rate to obtain the new monies.

This does not mean however that the bank you do business with maintains that reserve. A bank can make as many loans out as it sees fit. It should be noted at this point that few banks (if any) have the amount of cash on hand to cover all of the money it has loaned out at any given time. This is because the funds available to a bank exist not in actual cash amounts, but as numbers on a balance sheet. Whenever you take out a loan, or take on a line of credit, your bank is merely reducing the number in their database by that amount, and sending it to another bank with no real money being transferred at all. The other bank then takes in that amount and updates their available fund amount.

Given such circumstances, it is no surprise that so many banks became insolvent (having no available funds to conduct daily or routine business) in 2008. In a hurry to grab whatever funds were still out there to continue fueling the credit bubble that allowed for the ‘housing’ bubble, and keep spending on the new levels, the banks continued to provide credit to housing and a myriad of other markets. When these markets grew past the level of being able to pay the banks back the money they borrowed, the banks in turn grew unable to maintain their operations. In an effort to keep the spending levels up and banks in business, our government issued the TARP funds. To make this money available, they had to have more money issued. This is called inflation. Being that the government itself had no money to back up the release of this new money supply, it had to borrow money (deficit spending). Whenever the money supply grows to cover deficit spending, it is call monetizing. This is never a good thing because there is nothing of solid value the government can use to maintain the value of the newly created money.

The mistake in this case is both on the people and the banking system alike. It is on the people for not understanding the true value of money, taking it for granted, and abusing it. It is on the banks for loaning out more money than they could cover knowing full well that the assets they were loaning the money to buy were not valued at the price they were sold at. In such a case, the banks got to greedy for their own good. They know that as long as people perceive the value of a good to have a greater future value, that they will pay a premium for it. They literally ‘bank’ on the notion that people will do whatever it takes to maintain their lines of credit by making their scheduled payments. This ensures more money the bank can put to their reserve requirement (as discussed earlier), and borrow more money, and make even more loans. They hope that the cycle can continue for as long as possible and therefore allow the bank itself to grow. They were wrong.

In all of this, there is one thing that still gets to me. How is a bank (that only has 10-20% real money) allowed to hold people responsible for money lent that they themselves never owned to begin with? How can a bank repossess your house and your car for your refusing to pay back money that never existed to begin with?

The answer is sad and pathetic and no one ever sees fit to discuss it. We have a credit based system. When the credit runs out, or stops rising, the economy shrinks. When the credit is expanded, it grows. This is why all you hear from our politicians is ‘lines of credit must be made available’, or the popular term ‘credit crunch’. That’s right America – your whole economy is not based off of much of anything being of real value, but rather a number in a database that can go away at any time. That car or house that you worry so much about making payments on is nothing more than a few digits inserted the balance sheet of non-existent funds that your bank made. Feels good huh? Oh, and don’t let anyone tell you that the GDP is the measurement by how much the dollar is worth. While that certainly is the explanation we are often given, remember that the GDP is nothing more than a measure of goods and services produced. That means that the Federal Reserve is basing the value of a dollar on a measurement of high dynamic – not a stable one.

If you are thinking that this is criminal, then you are absolutely correct. Our founders (save for a few like Hamilton) not only warned of the dangers of a credit based system, but of central banks as well. They knew that as long as it appeared to be working, that such a system would be welcomed by the American people. They also knew that when the credit issues started happening via inflation, bank failures, loan overextensions, and lack of production driven by the created greed, that the people would falsely assume that it was part of the game, and wait for better days. Finally, they knew that if such a system were to continue long enough, that it would bury the people in a hole so deep that they would never be able to get out.

Our founders were correct on this, but unfortunately, it went a few steps further. The Federal Reserve is allowed to buy government debt in the form of Treasury securities. Remember that the Federal Reserve is a Private bank, not a government entity. This means that the US treasury is indebted to the Federal Reserve – your taxable earnings promised to a private bank to pay for government programs that are not affordable. The big farce behind this whole thing is that the biggest government debts are warfare and welfare based. So basically, the monetary systems creates poverty, the government runs to the rescue using money it does not have, so it borrows it from the same entities that created the problem to begin with, and hold the taxpayer accountable to pay it back.

More interesting is the fact that the government actually has a bad record of encouraging spending. They do this because they believe that as long as a reasonable amount of spending is done, that the credit lines can be maintained, and (because nobody cares about the debt) can go up forever. I would like to believe that nobody is that stupid, but my congressman has written me several letters expressing his support for this system.

The worst part about this is, people are so caught up in the idea of money, that many have no wish to change the system. Because their TIME magazine labels the chairman of the Federal Reserve Board as a very smart dude, people actually believe that TIME magazine editors are smarter than they are. If the president of the US is in good standing with the people, then typically the FED chairman is as well – after all, the president appoints the FED chairman. Ironically the recent president who promised change appointed the same FED chairman as his predecessor – Ben Bernanke. To be blunt – the FED chairman holds more power than the president himself through monetary control, and even more so because he controls the FED which commands a great deal of legislative abilities.

So the next time you go to buy a gallon of milk, or a gallon of gas, pull a bill out of your wallet and take a long look. On the top – ‘Federal Reserve Note’ – not ‘United States Treasury Note’. This means that you use a banks currency – not our countries. Middle left hand side – ‘This Note Is Legal Tender For All Debts, Public And Private’ – reminding you that this note is to pay on one thing – debt. And the biggest insult of all is written on the top middle portion of the back of the bill – ‘In God We Trust’. I hardly think God approves of such a blatant disregard for basic morals that even a good many atheists have. When you hear someone shouting ‘end the fed’ – it is not because they are just being rabble-rousers, but because they are tired of being held in chains to an entity that our constitution never allowed for. They realize that we have been sold out, and rightfully want their lives back. Ask yourself – Whose side are you on?