From: Gary S. Gevisser
Sent: Tuesday, January 31, 2006 10:36 AM PT
To: Goldman Sachs
Cc: rest;
Henninger@wsj.com; Eliot Spitzer - Attorney General of New York State;
JRK@class-action-law.com; SupremeInternetCourt@yahoogroups.com
Subject: ...---...: banksters...SPARE NO EFFORT...---...GOLD LAST TRADE
$572.00 A TROY OUNCE...---...
FYI…GOLD JUST HIT A SIGNIFICANT BARRIER.
IT IS TIME FOR
YOU TO CONVENE A MEETING OF THE BOARD OF DIRECTORS OF GOLDMAN SACHS WHERE I
WILL PRESENT YOU WITH ONE VIABLE OPTION FOR YOU TO BOTH SAVE FACE AS WELL AS
PROTECT YOUR INVESTORS OR FACE IN THE VERY NEAR FUTURE SUPERIOR AND
OVERWHELMING FORCES OF LIGHT FROM WHICH THERE IS NO ESCAPE.
[Word
count 63]
From: Gary S. Gevisser
Sent: Tuesday, January 31, 2006 9:30 AM PT
To:
Cc: rest;
Thabo Mvuyelwa Mbeki - President of South Africa; Trevor Manuel -
Subject: RE: banksters...SPARE NO EFFORT...---...
T4,
Now
factor in a factor for what each government on the planet has allowed the DAAC to create and then you begin to
understand how extraordinarily brain dead is each and every one of us who is distracted
by anything else other than helping me succeed at this time.
Bear
in mind, however, that this inordinate amount of stupidity has now been heaped
on to 4 generations, you, your parents, your grandparents and great
grandparents.
Most
disturbing is that you will find that the more educated someone is the more
they will argue whether it is a lesser or larger number of generations.
The
sickness of the human race is all contained in the clear logic presented below,
most of all the failure of the writer to even mention the reality of the DAAC’s role in making mankind in just
one century so extraordinarily selfish causing me to seriously consider
“pulling the plug” sooner than someone can put a bullet to the back of my head.
But
in the next instant I think of you, your parents and the increasing number of
independent thinkers who understandably are taking a shorter time than the
slave masters to understand the awesome power you now have at your fingertips
and to spare no effort, fear no one in demanding back what is rightfully yours.
Of
course I don’t need anyone alongside me to bring each and every government
official to their senses although under the right conditions I would get on a
plane and meet Thabo Mbeki so long as he doesn’t allow his autobiography
written by my disgusting cousin to see the light of day without me signing off
on it.
I
wouldn’t wait for me to change my mind and without warning “pull the plug”
given how I have now begun to lay things out in simple English translatable
into every language and for each of us to use the “goods” I have been “gifted”
to make good on their purpose for being here.
Kgotso-Shalom,
Gg
[Word
count 336]
From:
Sent: Tuesday, January 31, 2006 6:48 AM
To: Gary S. Gevisser
Subject: banksters
THE MANDRAKE MECHANISM...What is it? It is the method by which the
Federal Reserve creates money out of nothing; the concept of usury as the
payment of interest on pretended loans; the true cause of the hidden tax called
inflation; the way in which the Fed creates boom-bust cycles.
In the 1940s, there was a comic strip character called Mandrake the
Magician. His specialty was creating things out of nothing and, when
appropriate, to make them disappear back into that same void. It is fitting,
therefore, that the process to be described in this section should be named in
his honor.
In the previous chapters, we examined the technique developed by the
political and monetary scientists to create money out of nothing for the
purpose of lending. This is not an entirely accurate description because it implies
that money is created first and then waits for someone to borrow it.
On the other hand, textbooks on banking often state that money is created
out of debt. This also is misleading because it implies that debt exists first
and then is converted into money. In truth, money is not created until the
instant it is borrowed. It is the act of borrowing which causes it to spring
into existence. And, incidentally, it is the act of paying off the debt that
causes it to vanish. There is no short phrase that perfectly describes that
process. So, until one is invented along the way, we shall continue using the
phrase "create money out of nothing" and occasionally add "for
the purpose of lending" where necessary to further clarify the meaning.
So, let us now...see just how far this money/debt-creation process has been
carried -- and how it works.
The first fact that needs to be considered is that our money today has no
gold or silver behind it whatsoever. The fraction is not 54% nor 15%. It is 0%.
It has traveled the path of all previous fractional money in history and
already has degenerated into pure fiat money. The fact that most of it is in
the form of checkbook balances rather than paper currency is a mere
technicality; and the fact that bankers speak about "reserve ratios"
is eyewash. The so-called reserves to which they refer are, in fact, Treasury
bonds and other certificates of debt.
Our money is "pure fiat" through and through.
The second fact that needs to be clearly understood is that, in spite of the
technical jargon and seemingly complicated procedures, the actual mechanism by
which the Federal Reserve creates money is quite simple. They do it exactly the
same way the goldsmiths of old did except, of course, the goldsmiths were
limited by the need to hold some precious metals in reserve, whereas the Fed
has no such restriction.
The Federal Reserve is candid.
The Federal Reserve itself is amazingly frank about this process.
A booklet published by the Federal Reserve Bank of
Elsewhere in the same publication we are told: "Banks are creating
money based on a borrower's promise to pay (the IOU)...Banks create money by
'monetizing' the private debts of businesses and individuals."
In a booklet entitled Modern Money Mechanics, the Federal Reserve Bank of
In the
What, then, makes these instruments -- checks, paper money, and coins --
acceptable at face value in payment of all debts and for other monetary uses?
Mainly, it is the confidence people have that they will be able to exchange
such money for other financial assets and real goods and services whenever they
choose to do so. This partly is a matter of law; currency has been designated
"legal tender" by the government -- that is, it must be accepted.
In the fine print of a footnote in a bulletin of the Federal Reserve Bank of
Modern monetary systems have a fiat base -- literally money by decree --
with depository institutions, acting as fiduciaries, creating obligations
against themselves with the fiat base acting in part as reserves. The decree
appears on the currency notes: "This note is legal tender for all debts,
public and private."
While no individual could refuse to accept such money for debt repayment, exchange
contracts could easily be composed to thwart its use in everyday commerce.
However, a forceful expl
Money would vanish without debt.
It is difficult for Americans to come to grips with the fact that their
total money-supply is backed by nothing but debt, and it is even more mind
boggling to visualize that, if everyone paid back all that was borrowed, there
would be no money left in existence.
That's right, there would not be one penny in circulation -- all coins and
all paper currency would be returned to bank vaults -- and there would be not
one dollar in any one's checking account. In short, all money would disappear.
Marriner Eccles was the Governor of the Federal Reserve System in 1941. On
September 30 of that year, Eccles was asked to give testimony before the House
Committee on Banking and Currency. The purpose of the hearing was to obtain
information regarding the role of the Federal Reserve in creating conditions
that led to the depression of the 1930s.
Congressman Wright Patman, who was Chairman of that committee, asked how the
Fed got the money to purchase two billion dollars worth of government bonds in
1933.
This is the exchange that followed.
ECCLES: We created it.
PATMAN: Out of what?
ECCLES: Out of the right to issue credit money.
PATMAN: And there is nothing behind it, is there, except our government's
credit?
ECCLES: That is what our money system is. If there were no debts in our money
system, there wouldn't be any money.
It must be realized that, while money may represent an asset to selected
individuals, when it is considered as an aggregate of the total money supply,
it is not an asset at all. A man who borrows $1,000 may think that he has
increased his financial position by that amount but he has not. His $1,000 cash
asset is offset by his $1,000 loan liability, and his net position is zero.
Bank accounts are exactly the same on a larger scale. Add up all the bank
accounts in the nation, and it would be easy to assume that all that money
represents a gigantic pool of assets which support the economy. Yet, every bit
of this money is owed by someone. Some will owe nothing. Others will owe many
times what they possess.
Robert Hemphill was the Credit M
If all the bank loans were paid, no one could have a bank deposit, and there
would not be a dollar of coin or currency in circulation. This is a staggering
thought. We are completely dependent on the commercial banks. Someone has to
borrow every dollar we have in circulation, cash, or credit. If the banks
create ample synthetic money we are prosperous; if not, we starve. We are
absolutely without a permanent money system. When one gets a complete grasp of
the picture, the tragic absurdity of our hopeless situation is almost
incredible -- but there it is.
With the knowledge that money in
Here is the bottom line from the System's own publications. The Federal
Reserve Bank of
"A large and growing number of
The Federal Reserve Bank of
"Debt -- public and private -- is here to stay. It plays an essential
role in economic processes.... What is required is not the abolition of debt,
but its prudent use and intelligent m
What's wrong with a little debt?
There is a kind of fascinating appeal to this theory. It gives those who
expound it an aura of intellectualism, the appearance of being able to grasp a
complex economic principle that is beyond the comprehension of mere mortals.
And, for the less academically minded, it offers the comfort of at least
sounding moderate. After all, what's wrong with a little debt, prudently used
and intelligently m
An honest transaction is one in which a borrower pays an agreed upon sum in
return for the temporary use of a lender's asset. That asset could be anything
of tangible value. If it were an automobile, for example, then the borrower
would pay "rent." If it is money, then the rent is called
"interest." Either way, the concept is the same.
When we go to a lender -- either a bank or a private party -- and receive a
loan of money, we are willing to pay interest on the loan in recognition of the
fact that the money we are borrowing is an asset which we want to use. It seems
only fair to pay a rental fee for that asset to the person who owns it. It is
not easy to acquire an automobile, and it is not easy to acquire money -- real
money, that is. If the money we are borrowing was earned by someone's labor and
talent, they are fully entitled to receive interest on it. But what are we to
think of money that is created by the mere stroke of a pen or the click of a
computer key? Why should anyone collect a rental fee on that?
When banks place credits into your checking account, they are merely
pretending to lend you money. In reality, they have nothing to lend. Even the
money that non-indebted depositors have placed with them was originally created
out of nothing in response to someone else's loan. So what entitles the banks
to collect rent on nothing? It is immaterial that men everywhere are forced by
law to accept these nothing certificates in exchange for real goods and
services. We are talking here, not about what is legal, but what is moral. As
Thomas Jefferson observed at the time of his protracted battle against central
banking in the
Third reason to abolish the system.
Centuries ago, usury was defined as any interest charged for a loan. Modern
usage has redefined it as excessive interest. Certainly, any amount of interest
charged for a pretended loan is excessive. The dictionary, therefore, needs a
new definition.
Usury: The charging of any interest on a loan of fiat money.
Let us, therefore, look at debt and interest in this light. Thomas Edison
summed up the immorality of the system when he said:
People who will not turn a shovel of dirt on the project [Muscle Shoals] nor
contribute a pound of materials will collect more money...than will the people
who will supply all the materials and do all the work.
Is that an exaggeration? Let us consider the purchase of a $100,000 home in
which $30,000 represents the cost of the land, architect's fee, sales
commissions, building permits, and that sort of thing and $70,000 is the cost
of labor and building materials. If the home buyer puts up $30,000 as a down
payment, then $70,000 must be borrowed. If the loan is issued at 11% over a
30-year period, the amount of interest paid will be $167,806. That means the
amount paid to those who loan the money is about 2 1/2 times greater than paid
to those who provide all the labor and all the materials. It is true that this
figure represents the time-value of that money over thirty years and easily
could be justified on the basis that a lender deserves to be compensated for
surrendering the use of his capital for half a lifetime. But that assumes the
lender actually had something to surrender, that he had earned the capital,
saved it, and then loaned it for construction of someone else's house. What are
we to think, however, about a lender who did nothing to earn the money, had not
saved it, and, in fact, simply created it out of thin air?
What is the time-value of nothing?
As we have already shown, every dollar that exists today, either in the form
of currency, checkbook money, or even credit card money -- in other words, our
entire money supply -- exists only because it was borrowed by someone; perhaps
not you, but someone.
That means all the American dollars in the entire world are earning daily
and compounding interest for the banks which created them. A portion of every business
venture, every investment, every profit, every transaction which involves money
-- and that even includes losses and the payment of taxes -- a portion of all
that is earmarked as payment to a bank.
And what did the banks do to earn this perpetually flowing river of wealth?
Did they lend out their own capital obtained through investment of
stockholders? Did they lend out the hard-earned savings of their depositors?
No, neither of these were their major source of income. They simply waved the
magic wand called fiat money.
The flow of such unearned wealth under the guise of interest can only be
viewed as usury of the highest magnitude. Even if there were no other reasons
to abolish the Fed, the fact that it is the supreme instrument of usury would
be more than sufficient by itself.
Who creates the money to pay the interest?
One of the most perplexing questions associated with this process is
"Where does the money come from to pay the interest?" If you borrow
$10,000 from a bank at 9%, you owe $10,900. But the bank only manufactures
$10,000 for the loan. It would seem, therefore, that there is no way that you
-- and all others with similar loans -- can possibly pay off your indebtedness.
The amount of money put into circulation just isn't enough to cover the total
debt, including interest. This has led some to the conclusion that it is
necessary for you to borrow the $900 for interest, and that, in turn, leads to
still more interest. The assumption is that, the more we borrow, the more we
have to borrow, and that debt based on fiat money is a never ending spiral
leading inexorably to more and more debt.
This is a partial truth. It is true that there is not enough money created
to include the interest, but it is a fallacy that the only way to pay it back
is to borrow still more. The assumption fails to take into account the exchange
value of labor. Let us assume that you pay back your $10,000 loan at the rate
of approximately $900 per month and that about $80 of that represents interest.
You realize you are hard pressed to make your payments so you decide to take on
a part-time job.
The bank, on the other hand, is now making $80 profit each month on your
loan. Since this amount is classified as "interest," it is not
extinguished as is the larger portion which is a return of the loan itself. So
this remains as spendable money in the account of the bank. The decision then
is made to have the bank's floors waxed once a week. You respond to the ad in
the paper and are hired at $80 per month to do the job. The result is that you
earn the money to pay the interest on your loan, and -- this is the point --
the money you receive is the same money which you previously had paid. As long
as you perform labor for the bank each month, the same dollars go into the bank
as interest, then out of the revolving door as your wages, and then back into
the bank as loan repayment.
It is not necessary that you work directly for the bank. No matter where you
earn the money, its origin was a bank and its ultimate destination is a bank.
The loop through which it travels can be large or small, but the fact remains:
all interest is paid eventually by human effort. And the significance of that
fact is even more startling than the assumption that not enough money is
created to pay back the interest. It is that the total of this human effort
ultimately is for the benefit of those who create fiat money.
It is a form of modern serfdom in which the great mass of society works as
indentured servants to a ruling class of financial nobility.
Understanding the Illusion……
That's really all one needs to know about the operation of the banking
cartel under the protection of the Federal Reserve. But it would be a shame to
stop here without taking a look at the actual cogs, mirrors, and pulleys that
make the magical mechanism work. It is a truly fascinating engine of mystery
and deception.
Let us, therefore, turn our attention to the actual process by which the
magicians create the illusion of modern money. First we shall stand back for a
general view to see the overall action.
Then we shall move in closer and examine each component in detail.
The Mandrake Mechanism: An Overview
The entire function of this machine is to convert debt into money. It's just
that simple. First, the Fed takes all the government bonds which the public
does not buy and writes a check to Congress in exchange for them. (It acquires
other debt obligations as well, but government bonds comprise most of its
inventory.) There is no money to back up this check. These fiat dollars are
created on the spot for that purpose. By calling those bonds
"reserves," the Fed then uses them as the base for creating nine (9)
additional dollars for every dollar created for the bonds themselves. The money
created for the bonds is spent by the government, whereas the money created on
top of those bonds is the source of all the bank loans made to the nation's
businesses and individuals. The result of this process is the same as creating
money on a printing press, but the illusion is based on an accounting trick
rather than a printing trick.
The bottom line is that Congress and the banking cartel have entered into a
partnership in which the cartel has the privilege of collecting interest on
money which it creates out of nothing, a perpetual override on every American
dollar that exists in the world.
Congress, on the other hand, has access to unlimited funding without having
to tell the voters their taxes are being raised through the process of
inflation. If you understand this paragraph, you understand the Federal Reserve
System.
Now for a more detailed view. There are three general ways in which the
Federal Reserve creates fiat money out of debt.
One is by making loans to the member banks through what is called the
Discount Window.
The second is by purchasing Treasury bonds and other certificates of debt
through what is called the Open Market Committee.
The third is by changing the so-called reserve ratio that member banks are
required to hold. Each method is merely a different path to the same objective:
taking IOUs and converting them into spendable money.
THE DISCOUNT WINDOW
The Discount Window is merely bankers' language for the loan window. When
banks run short of money, the Federal Reserve stands ready as the
"bankers' bank" to lend it. There are many reasons for them to need
loans. Since they hold "reserves" of only about one or two per cent
of their deposits in vault cash and eight or nine per cent in securities, their
operating margin is extremely thin. It is common for them to experience
temporary negative balances caused by unusual customer demand for cash or
unusually large clusters of checks all clearing through other banks at the same
time. Sometimes they make bad loans and, when these former "assets"
are removed from their books, their "reserves" are also decreased and
may, in fact, become negative. Finally, there is the profit motive. When banks
borrow from the Federal Reserve at one interest rate and lend it out at a
higher rate, there is an obvious advantage. But that is merely the beginning.
When a bank borrows a dollar from the Fed, it becomes a one-dollar reserve.
Since the banks are required to keep reserves of only about ten per cent,
they actually can loan up to nine dollars for each dollar borrowed.
Let's take a look at the math. Assume the bank receives $1 million from the
Fed at a rate of 8%. The total annual cost, therefore, is $80,000 (.08 X
$1,000,000). The bank treats the loan as a cash deposit, which means it becomes
the basis for manufacturing an additional $9 million to be lent to its
customers. If we assume that it lends that money at 11% interest, its gross
return would be $990,000 (.11 X $9,000,000). Subtract from this the bank's cost
of $80,000 plus an appropriate share of its overhead, and we have a net return
of about $900,000. In other words, the bank borrows a million and can almost
double it in one year. That's leverage! But don't forget the source of that
leverage: the manufacture of another $9 million which is added to the nation's
money supply.
THE OPEN MARKET OPERATION
The most important method used by the Federal Reserve for the creation of
fiat money is the purchase and sale of securities on the open market. But,
before jumping into this, a word of warning. Don't expect what follows to make
any sense. Just be prepared to know that this is how they do it.
The trick lies in the use of words and phrases which have technical meanings
quite different from what they imply to the average citizen. So keep your eye
on the words. They are not meant to explain but to deceive. In spite of first
appearances, the process is not complicated. It is just absurd.
THE MANDRAKE MECHANISM: A DETAILED VIEW
Start with...
GOVERNMENT DEBT
The federal government adds ink to a piece of paper, creates impressive
designs around the edges, and calls it a bond or Treasury note. It is merely a
promise to pay a specified sum at a specified interest on a specified date. As
we shall see in the following steps, this debt eventually becomes the
foundation for almost the entire nation's money supply. In reality, the
government has created cash, but it doesn't yet look like cash. To convert
these IOUs into paper bills and checkbook money is the function of the Federal
Reserve System. To bring about that transformation, the bond is given to the
Fed where it is then classified as a.….
SECURITIES ASSET
An instrument of government debt is considered an asset because it is
assumed the government will keep its promise to pay. This is based upon its
ability to obtain whatever money it needs through taxation. Thus, the strength
of this asset is the power to take back that which it gives. So the Federal
Reserve now has an "asset" which can be used to offset a liability.
It then creates this liability by adding ink to yet another piece of paper and
exchanging that with the government in return for the asset. That second piece
of paper is a.….
FEDERAL RESERVE CHECK
There is no money in any account to cover this check. Anyone else doing that
would be sent to prison. It is legal for the Fed, however, because Congress
wants the money, and this is the easiest way to get it. (To raise taxes would
be political suicide; to depend on the public to buy all the bonds would not be
realistic, especially if interest rates are set artificially low; and to print
very large quantities of currency would be obvious and controversial.) This
way, the process is mysteriously wrapped up in the banking system. The end
result, however, is the same as turning on government printing presses and
simply manufacturing fiat money (money created by the order of government with
nothing of tangible value backing it) to pay government expenses. Yet, in
accounting terms, the books are said to be "balanced" because the
liability of the money is offset by the "asset" of the IOU. The
Federal Reserve check received by the government then is endorsed and sent back
to one of the Federal Reserve banks where it now becomes a.….
GOVERNMENT DEPOSIT
Once the Federal Reserve check has been deposited into the government's
account, it is used to pay government expenses and, thus, is transformed into
many...
GOVERNMENT CHECKS
These checks become the means by which the first wave of fiat money floods
into the economy. Recipients now deposit them into their own bank accounts
where they become.….
COMMERCIAL BANK DEPOSITS
Commercial bank deposits immediately take on a split personality.
On the one hand, they are liabilities to the bank because they are owed back
to the depositors. But, as long as they remain in the bank, they also are
considered as assets because they are on hand. Once again, the books are
balanced: the assets offset the liabilities. But the process does not stop
there. Through the magic of fractional-reserve banking, the deposits are made
to serve an additional and more lucrative purpose. To accomplish this, the
on-hand deposits now become reclassified in the books and called.….
BANK RESERVES
Reserves for what? Are these for paying off depositors should they want to
close out of their accounts? No. That's the lowly function they served when
they were classified as mere assets. Now that they have been given the name of
"reserves," they become the magic wand to materialize even larger
amounts of fiat money. This is where the real action is: at the level of the
commercial banks. Here's how it works. The banks are permitted by the Fed to
hold as little as 10% of their deposits in "reserve." That means, if
they receive deposits of $1 million from the first wave of fiat money created
by the Fed, they have $900,000 more than they are required to keep on hand ($1
million less 10% reserve). In bankers' language, that $900,000 is called.….
EXCESS RESERVES
The word "excess" is a tip off that these so-called reserves have
a special destiny. Now that they have been transmuted into an "excess,"
they are considered as available for lending. And so in due course these excess
reserves are converted into.….
BANK LOANS
But wait a minute. How can this money be loaned out when it is owned by the
original depositors who are still free to write checks and spend it any time
they wish? The answer is that, when the new loans are made, they are not made
with the same money at all. They are made with brand new money created out of
thin air for that purpose. The nation's money supply simply increases by ninety
per cent of the bank's deposits. Furthermore, this new money is far more
interesting to the banks than the old. The old money, which they received from
depositors, requires them to pay out interest or perform services for the
privilege of using it. But, with the new money, the banks collect interest,
instead, which is not too bad considering it cost them nothing to make. Nor is
that the end of the process. When this second wave of fiat money moves into the
economy, it comes right back into the banking system, just as the first wave
did, in the form of.….
MORE COMMERCIAL BANK DEPOSITS
The process now repeats but with slightly smaller numbers each time around.
What was a "loan" on Friday comes back into the bank as a
"deposit" on Monday. The deposit then is reclassified as a
"reserve" and ninety per cent of that becomes an "excess"
reserve which, once again, is available for a new "loan." Thus, the
$1 million of first wave fiat money gives birth to $900,000 in the second wave,
and that gives birth to $810,000 in the third wave ($900,000 less 10% reserve).
It takes about twenty-eight times through the revolving door of deposits
becoming loans becoming deposits becoming more loans until the process plays
itself out to the maximum effect, which is.….
BANK FIAT MONEY = UP TO 9 TIMES GOVERNMENT DEBT
The amount of fiat money created by the banking cartel is approximately nine
times the amount of the original government debt which made the entire process
possible. When the original debt itself is added to that figure, we finally
have...
TOTAL FIAT MONEY = UP TO 10 TIMES GOVERNMENT
The total amount of fiat money created by the Federal Reserve and the
commercial banks together is approximately ten times the amount of the
underlying government debt. To the degree that this newly created money floods
into the economy in excess of goods and services, it causes the purchasing
power of all money, both old and new, to decline. Prices go up because the
relative value of the money has gone down. The result is the same as if that
purchasing power had been taken from us in taxes. The reality of this process,
therefore, is that it is a.….
HIDDEN TAX = UP TO 10 TIMES THE NATIONAL DEBT
Without realizing it, Americans have paid over the years, in addition to
their federal income taxes and excise taxes, a completely hidden tax equal to
many times the national debt! And that still is not the end of the process.
Since our money supply is purely an arbitrary entity with nothing behind it
except debt, its quantity can go down as well as up. When people are going
deeper into debt, the nation's money supply expands and prices go up, but when
they pay off their debts and refuse to renew, the money supply contracts and
prices tumble. That is exactly what happens in times of economic or political
uncertainty. This alternation between period of expansion and contraction of
the money supply is the underlying cause of.….
BOOMS, BUSTS, AND DEPRESSIONS
Who benefits from all of this? Certainly not the average citizen.
The only beneficiaries are the political scientists in Congress who enjoy
the effect of unlimited revenue to perpetuate their power, and the monetary
scientists within the banking cartel called the Federal Reserve System who have
been able to harness the American people, without their knowing it, to the yoke
of modern feudalism.
RESERVE RATIOS
The previous figures are based on a "reserve" ratio of 10% (a
money-expansion ratio of 10-to-1). It must be remembered, however, that this is
purely arbitrary. Since the money is fiat with no previous-metal backing, there
is no real limitation except what the politicians and money m
At any time there is a "need" for more money, the ratio can be
increased to 20-to-1 or 50-to-1, or the pretense of a reserve can be dropped
altogether. There is virtually no limit to the amount of fiat money that can be
manufactured under the present system.
NATIONAL DEBT NOT NECESSARY FOR INFLATION
Because the Federal Reserve can be counted on to "monetize"
(convert into money) virtually any amount of government debt, and because this
process of expanding the money supply is the primary cause of inflation, it is
tempting to jump to the conclusion that federal debt and inflation are but two
aspects of the same phenomenon. This, however, is not necessarily true. It is
quite possible to have either one without the other.
The banking cartel holds a monopoly in the manufacture of money.
Consequently, money is created only when IOUs are "monetized" by the
Fed or by commercial banks. When private individuals, corporations, or
institutions purchase government bonds, they must use money they have
previously earned and saved. In other words, no new money is created, because
they are using funds that are already in existence. Therefore, the sale of
government bonds to the banking system is inflationary, but when sold to the
private sector, it is not. That is the primary reason the United States avoided
massive inflation during the 1980s when the federal government was going into
debt at a greater rate than ever before in its history. By keeping interest
rates high, these bonds became attractive to private investors, including those
in other countries.15 Very little new money was created, because most of the
bonds were purchased with American dollars already in existence. This, of
course, was a temporary fix at best.
Today, those bonds are continually maturing and are being replaced by still
more bonds to include the original debt plus accumulated interest. Eventually
this process must come to an end and, when it does, the Fed will have no choice
but to literally buy back all the debt of the '80s -- that is, to replace all
of the formerly invested private money with newly manufactured fiat money --
plus a great deal more to cover the interest. Then we will understand the
meaning of inflation.
On the other side of the coin, the Federal Reserve has the option of
manufacturing money even if the federal government does not go deeper into
debt. For example, the huge expansion of the money supply leading up to the
stock market crash in 1929 occurred at a time when the national debt was being
paid off. In every year from 1920 through 1930, federal revenue exceeded
expenses, and there were relatively few government bonds being offered. The
massive inflation of the money supply was made possible by converting commercial
bank loans into "reserves" at the Fed's discount window and by the
Fed's purchase of banker's acceptances, which are commercial contracts for the
purchase of goods.
Now the options are even greater. The Monetary Control Act of 1980 has made
it possible for the Creature to monetize virtually any debt instrument,
including IOUs from foreign governments. The apparent purpose of this
legislation is to make it possible to bail out those governments which are
having trouble paying the interest on their loans from American banks. When the
Fed creates fiat American dollars to give foreign governments in exchange for
their worthless bonds, the money path is slightly longer and more twisted, but
the effect is similar to the purchase of U.S. Treasury Bonds. The newly created
dollars go to the foreign governments, then to the American banks where they
become cash reserves. Finally, they flow back into the U.S money pool
(multiplied by nine) in the form of additional loans. The cost of the operation
once again is born by the American citizen through the loss of purchasing
power. Expansion of the money supply, therefore, and the inflation that
follows, no longer even require federal deficits. As long as someone is willing
to borrow American dollars, the cartel will have the option of creating those
dollars specifically to purchase their bonds and, by so doing, continue to
expand the money supply.
We must not forget, however, that one of the reasons the Fed was created in
the first place was to make it possible for Congress to spend without the
public knowing it was being taxed. Americans have shown an amazing indifference
to this fleecing, explained undoubtedly by their lack of understanding of how
the Mandrake Mechanism works. Consequently, at the present time, this cozy
contract between the banking cartel and the politicians is in little danger of
being altered. As a practical matter, therefore, even though the Fed may also
create fiat money in exchange for commercial debt and for bonds of foreign
governments, its major concern likely will be to continue supplying Congress.
The implications of this fact are mind boggling. Since our money supply, at
present at least, is tied to the national debt, to pay off that debt would
cause money to disappear. Even to seriously reduce it would cripple the
economy. Therefore, as long as the Federal Reserve exists,
The purchase of bonds from other governments is accelerating in the present
political climate of internationalism. Our own money supply increasingly is
based upon their debt as well as ours, and they, too, will not be allowed to
pay it off even if they are able.
EXPANSION LEADS TO CONTRACTION
While it is true that the Mandrake Mechanism is responsible for the
expansion of the money supply, the process also works in reverse. Just as money
is created when the Federal Reserve purchases bonds or other debt instruments,
it is extinguished by the sale of those same items. When they are sold, the
money is given back to the System and disappears into the inkwell or computer
chip from which it came. Then, the same secondary ripple effect that created
money through the commercial banking system causes it to be withdrawn from the
economy. Furthermore, even if the Federal Reserve does not deliberately
contract the money supply, the same result can and often does occur when the
public decides to resist the availability of credit and reduce its debt. A man
can only be tempted to borrow, he cannot be forced to do so.
There are many psychological factors involved in a decision to go into debt
that can offset the easy availability of money and a low interest rate: A
downturn in the economy, the threat of civil disorder, the fear of pending war,
an uncertain political climate, to name just a few. Even though the Fed may try
to pump money into the economy by making it abundantly available, the public
can thwart that move simply by saying no, thank you. When this happens, the
olds debts that are being paid off are not replaced by new ones to take their place,
and the entire amount of consumer and business debt will shrink. That means the
money supply also will shrink, because, in modern
In conclusion, it can be said that modern money is a grand illusion conjured
by the magicians of finance in politics. We are living in an age of fiat money,
and it is sobering to realize that every previous nation in history that has
adopted such money eventually was economically destroyed by it. Furthermore,
there is nothing in our present monetary structure that offers any assurances
that we may be exempted from that morbid roll call.
Correction. There is one. It is still within the power of Congress to
abolish the Federal Reserve System.
SUMMARY
The American dollar has no intrinsic value. It is a classic example of fiat
money with no limit to the quantity that can be produced. Its primary value
lies in the willingness of people to accept it and, to that end, legal tender
laws require them to do so.
It is true that our money is created out of nothing, but it is more accurate
to say that it is based upon debt. In one sense, therefore, our money is
created out of less than nothing. The entire money supply would vanish into the
bank vaults and computer chips if all debts were repaid.
Under the present System, therefore, our leaders cannot allow a serious
reduction in either the national or consumer debt. Charging interest on
pretended loans is usury, and that has become institutionalized under the
Federal Reserve System.
The Mandrake Mechanism by which the Fed converts debt into money may seem
complicated at first, but it is simple if one remembers that the process is not
intended to be logical but to confuse and deceive. The end product of the
Mechanism is artificial expansion of the money supply, which is the root cause
of the hidden tax called inflation.
This expansion then leads to contraction and, together, they produce the
destructive boom-bust cycle that has plagued mankind throughout history
wherever fiat money has existed.
From one of the Most Important books in the world:
"The Creature from