The creation of currency stripped bare .... March 27, 2014 at 9:29am 1 – The government creates glorified IOU’s. It all starts when some politician says vote for me and my government will provide you more free stuff than my opposition will. There is no ‘free stuff’, so for a government to supposedly provide this ‘free stuff’ the politicians vote to spend more money than its income, this is called deficit spending. To pay for this deficit spending the treasury borrows currency by issuing a bond. What is a bond? It is nothing more than a glorified IOU. It’s a pretty piece of paper with numbers printed on it that says, “Loan me a billion dollars today and I promise over a ten year period I’m going to pay you back that billion dollars plus interest. What you need to understand is that treasury bonds are our national debt. These glorified IOU’s are to be paid back by you and I and our future descendants through taxation. Therefore when a government issues a bond, it steals prosperity out of the future so that it can spend it today. The treasury then holds a bond auction and the world’s largest banks show up and compete to buy part of our national debt, and make a profit on it by earning interest. As we move through this process you will notice the big banks are there taking a cut every step of the way. This isn’t by chance. 2 – Banks swap the IOU’s for currency. Then through a shell game called ‘open market operation’, the banks get to sell some of those bonds to the Federal Reserve at a profit. To pay for the bonds the Federal Reserve opens up its cheque book and writes bad bogus counterfeit cheques that should bounce, because they’ve drawn on an account which always has a zero balance…there isn’t one cent in there. To quote from the Boston Federal Reserve, “When you or I write a cheque there must be sufficient funds in our account to cover the cheque, but when the Federal Reserve writes a cheque there is no bank deposit on which that cheque is drawn. When the Federal Reserve writes a cheque it is creating money”. The Fed then hands those cheques to the banks and at this point currency springs into existence. The banks then take that currency and buy more bonds at the next treasury auction. But what is a cheque? A cheque is also an IOU. When you write a cheque you are making a note that says, “Here’s my IOU for cash. All you have to do is go to a bank and pick it up. Now it’s very important that you understand this process so that you understand the devastating effect it has on you. Let’s recap. The treasury issues IOU’s, bonds. The banks then buy those IOU’s with currency. The Federal Reserve then writes IOU’s (cheques) and then hands them to the banks in exchange for the treasury IOU’s (bonds) and currency is created! So what is actually happening is the treasury and the Federal Reserve are just swapping IOU’s, using the banks as middle men and abra cadabra currency magically springs into existence! This process repeats over and over again, enriching the banks and indebting the public by raising the national debt. The end result is that there is a build-up bonds at the Federal Reserve and currency at the treasury. This process is where all paper currency comes from. The Federal Reserve and the government mistakenly call it base money, because they don’t know the difference between money and currency. We will correctly refer to it as base currency, because it is not money, it is currency. There is a big difference. Money has to be a store of value and maintain its purchasing power over long periods of time. Earlier in our history our paper currency was just a claim cheque. It was a representation for real money of intrinsic value, of gold and silver that was held on deposit at the treasury. You could walk into any bank, and place your $20 currency on the counter and redeem it for real money, a $20 gold piece. But now the base currency which is piling up is nothing more than a receipt, or a claim cheque, an IOU, that bond. So it’s really nothing more than a supply of numbers. 3 – The treasury then deposits the newly created currency into the various departments of the government, and the politicians say, “Hey! Thanks for that!” And the government then does some deficit spending on public works, social programs and war. The government employees, contractors and soldiers then deposit their pay into the banks. Now this may come as a shock to you, but when you deposit your currency with the bank you are not actually depositing it into an account to be safely held in trust for you. Instead you are actually loaning the banks your currency, and within certain legal limits, they can pretty much do anything with it they please. This includes gambling in the stock market and loaning it out, for a profit of course. 4 – Now this is where the machine of currency creation really gets cranking! Because this is where something called ‘fractional reserve lending’ comes into play. Fractional reserve lending is exactly what it says. The banks are allowed to reserve only a fraction of your deposit, and loan the rest out. Although reserve ratios may vary, I’m going to use a 10% reserve ratio as our example. If you deposit $100 into your account, the bank can legally take $90 of it and loan it out without telling you. The bank must hold $10 of your deposit in the reserve just in case you want some of it. These reserves are called ‘vault cash’. But why does your bank account still say you have $100 if the bank has stolen $90 of it? Because the bank left IOU’s it created called ‘bank credit’ in its place. Now I know this sounds crazy, but here it is in black and white from the Fed. “Commercial banks create cheque book money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower’s IOU’”. These are nothing more than numbers that the banks type into their computers, and even though these bank credit IOU numbers are very different from base currency numbers, because they only exist in computers, they are still currency. So now there is $190 in existence. Now the reason people take out loans from the banks is to buy something. They either buy a house or a car or something like that. So the borrower takes the $90 that the bank loaned to him from your account, and pays the seller of the item. But then the seller deposits that currency into his account, and his bank loans out 90% of that and leaves bank credit numbers in its place. So now there’s $271 in existence! This process repeats and repeats until under a 10% reserve ratio, an initial deposit of just $100, can create up to $1000 of bank credit. All backed by $100 of vault cash, just 10%! Now reserve ratios vary wildly. On some deposits it’s 10%, on others it’s 3% and on some forms of deposits reserve requirements are zero! The result is that the expansion of currency supply by the banks is far greater than even this example will lead you to believe. This is where the vast majority of our currency supply comes from. In fact 92 – 96% of all currency in existence is created not by the government, but in the banking system. Now massive amounts of currency spewing into society may at first sound like a fun idea, and it is, until you remember one of the most important hidden secrets of money. The prices of everyday goods and services act like a sponge on an expanding currency supply. The more currency we have, the more prices rise. This is where inflation comes from. The true definition of inflation is an expansion of the currency supply. Rising prices are merely the symptom. Our entire currency supply is nothing but a couple of dollars whipped up in this hocus pocus scam, where the treasury and the Federal Reserve swap glorified IOU’s, and a bunch of numbers that the banks just type into their computers! That’s it! That’s our entire currency supply! It’s nothing but a supply of numbers! Some of them printed, most of them typed….and there is nothing else. 5 - But if you thought that was crazy, get ready to head into the twilight zone of modern economics. We work for some of that currency supply. True wealth is your time, but we trade away moments of our lives. Hour by hour, day by day and year by year, for numbers that somebody printed on pieces of paper, or just typed into a computer. Now those numbers represent our blood, sweat, tears, labour, ideas and talent. We are what give the currency its value! But here comes the really cruel joke. We work hard so that we can save some of that currency so that we can pay the tax collector. They in turn pass it over to the treasury so the treasury can pay the principal plus interest on that bond that the Federal Reserve bought with a cheque drawn on an account that has nothing in it. This is where the system begins to rob you and I on a massive scale, most of our taxes are not used for schools, roads and public services, but to pay interest on bonds that the Federal Reserve bought with a cheque drawn on an account that has nothing in it. The Federal Reserve is committing fraud, but here’s one of the biggest secrets of all. Before the establishment of the Federal Reserve there was no need for personal income tax. The Federal Reserve was created in 1913 and in 1915 the Australian Federal income tax was introduced. Do you really think this was just a coincidence? Ask yourself how much income tax you’ve paid over your lifetime. Much of it has been silently syphoned away into the hands of those that own the system. Yes this system has owners. Who they are is an even bigger secret that we’ll get to shortly, but first you need to understand the mumbo jumbo of so called ‘debt ceiling’ (here’s one for all you Labour devotees) 6 – The so called debt ceiling is all based on a huge paradox. There was interest due on that bond, and there was interest due on every one of those loans that the banks made. That means that there is interest due on every dollar in existence. Let me ask you something. If you borrowed the very first dollar into existence, and that’s the only dollar that exists on the planet, but you promise to pay it back plus another dollar in interest, where do you get the second dollar to pay the interest? The answer is you have to borrow that one into existence and promise to pay it back with interest as well. So now there are 2 dollars in existence, but you owe four. And so on and so on. The result is there is never enough currency to pay the debt. There is always more debt in the system than there is currency in existence to pay the debt. Therefore the whole system is impossible! It is finite, and it will come to an end one day. What would happen if the government stopped borrowing to do deficit spending? Are the payments on those treasury bonds going to stop? What would happen if the public stopped borrowing and going deeper into debt? Are your house and car repayments going to stop? No! There is a payment due every month on the principal plus the interest, on every dollar in existence, and those payments do not stop. If we stop borrowing, then no new currency is created to replace the currency we used to make those payments. Whether you’re making a payment on a loan or paying tax to make a payment on a bond, the portion of the payment that goes to pay off the principal, extinguishes that portion of the debt, but the debt also extinguishes the currency. Currency and debt are like matter and anti-matter. When they meet they annihilate each other. If we just pay off the principal only, on all the loans and bonds that exist, the entire currency supply just vanishes. So if we don’t go deeper into debt every year, look what happens. The whole thing goes into a deflationary collapse under the weight of those payments. Politicians and pundits alike talk about balancing the budget, paying down the debt and living within our means. They don’t understand that that is deflationary. It is impossible to do under our current monetary system without collapsing the whole economy. This is why any talk of a debt ceiling is not only ridiculous, it’s delusional! The system is designed to required ever increasing levels of debt just to continue. And that’s why politicians will always kick the can down the road and raise this so called ‘debt ceiling’ over and over again, until the whole system finally collapses under its own weight. In other words they don’t want it to collapse on their watch. https://youtube/watch?v=iFDe5kUUyT0&feature=youtu.be.
Posted on: Thu, 27 Mar 2014 14:10:51 +0000
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