Posted on 06/18/2007 12:02:56 AM PDT by keyd
If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, where as the currency pays nobody but those who contribute directly in some useful way. Is it absurd to say that our country can issue $30 million in bonds and not $30 million in currency? Both are promises to pay, but one promise fattens the usurers and the other helps the people.” - Thomas Edison
“Banking was conceived in iniquity and born in sin. Bankers own the earth; take it away from them but leave them with the power to create credit, and, with a flick of the pen, they will create enough money to buy it all back again. Take this power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this world would be a happier and better world to live in. But if you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit.” - Lord Stamp, Director of the Bank of England, 1940
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.
We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.” - Woodrow Wilson, 1919 (Referring to the Federal Reserve and the transition to a debt-based economy)
“The stock of money, prices and output was decidedly more unstable after the establishment of the Reserve System than before. The most dramatic period of instability in output was, of course, the period between the two wars, which includes the severe (monetary) contractions of 1920-21, 1929-33 and 1937-38. No other period in American history contains as many as three such severe contractions. This evidence persuades me that at least a third of the price rise during and just after World War 1 is attributable to the establishment of the Federal Reserve System… and that the severity of each of the major contractions - 1920-21, 1929-33, and 1937-38 - is directly attributable to acts of commission and omission by the Reserve Authorities… Any system which gives so much power and so much discretion to a few men, (so) that mistakes - excusable or not - can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic - this is the key political argument against an independent central bank… To paraphrase Clemenceau, money is much too serious a matter to be left to the central bankers.” - Milton Friedman, Nobel Prize winning economist.
Presidential candidate and Congressman Ron Paul (R-TX) introduced H.R. 2755 “To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.” This legislation would help to restore the U.S. Constitution, which mandates that only Congress can coin money (Article I, Section 8, Clause 5), and that US debts be settled in silver and gold Article I, Section 10, Clause 1).
This is the second time he has introduced legislation.
Given that one out of six Americans works for government (local, state and federal) or an organization/corporation that receives the majority of its revenues from government, it is easy to see why this news isn’t considered newsworthy for the mainstream press. Government workers are dependent upon the printing presses. Politicians certainly don’t want the dissolution of the Fed. They borrow money from the bankers and make your great grandchildren pay interest on the debt so they can “bring home the pork”. You did not participate in these loans, you receive no financial benefit from these loans, nor did you sign any contracts making you responsible for the debt, but you and future generations will be forced to pay until Congress dissolves the Fed or there is revolution. There is no other choice.
Then I won't add that the government used the $100 to pay my military salary.
There is no doubt the scheme also depends on the law of averages, such that, on average enough dollars are held so that even unusually high demands for dollars in the form of cash can be dealt with. With the bottomless Central Bank (in this case the Federal Reserve) running the printing presses in a support role, the bank cannot “run out” of cash as long as it has sufficient other assets such as performing bank loans, bonds, etc.
However, for a person who wants to be strictly honest, the scheme, when it works in conjunction with other fractional reserve banks, does in fact create money out of thin air, out of nothing, because, at its core, it is lending out the same money multiple times. It is, a “money factory”.
In another context, say that of a bookkeeper for a small business who decides to use the company money for personal use for a few days because it won’t be needed for the payroll until the end of the week, it would be a crime, a form of fraud or theft.
This would all be academic or philosophical except that sometimes shocks occur to the system and the bank is prevented from performing and being able to really honor all demands the account holders place on it to redeem their accounts. It is only a matter of time before only a limited number of claims on the same dollar of deposit can be honored. We really found this out when Roosevelt closed the banks for a “holiday”, to stop withdrawal demands.
If the Federal Reserve ever announces that it will “guarantee liquidity”, which it did during the 9/11 crisis when Wall Street was prevented from functioning due, it is saying that the door is open to any amount of dollars that any financial institution thinks it needs to meet the demands of business to continue to function.
But there is no lender of last resort for the US Federal Reserve.
While I regard the dollar a generally safe (except from deliberate inflation), I would not make the serious mistake of confusing money in the form of paper dollars with wealth. I would also make sure I had at least a little of my wealth in the form of gold bullion coins. Their liquidity is never in question. And I would not keep them in a “safe deposit box”, a place that might be distinctly unsafe during a crisis. Roosevelt issued an order during his bank holiday that all safe deposit boxes could only be opened in the presence of an IRS agent.
Written by Daniel Doyle Benham
Tuesday, 09 January 2007
Who owns the Federal Reserve Bank? A phone conversation about the unseen operations of the Federal Reserve System
The following is a conversation with Mr. Ron Supinski of the Public Information Department of the San Francisco Federal Reserve Bank. This is an account of that conversation.
CALLER - Mr. Supinski, does my country own the Federal Reserve System?
MR. SUPINSKI - We are an agency of the government.
CALLER - That's not my question. Is it owned by my country?
MR. SUPINSKI - It is an agency of the government created by congress.
CALLER - Is the Federal Reserve a Corporation?
MR. SUPINSKI - Yes
CALLER - Does my government own any of the stock in the Federal Reserve?
MR. SUPINSKI - No, it is owned by the member banks.
CALLER - Are the member banks private corporations?
MR. SUPINSKI - Yes
CALLER - Are Federal Reserve Notes backed by anything?
MR. SUPINSKI-Yes, by the assets of the Federal Reserve but, primarily by the power of congress to lay tax on the people.
CALLER - Did you say, by the power to collect taxes is what backs Federal Reserve Notes?
MR. SUPINSKI - Yes
CALLER - What are the total assets of the Federal Reserve?
MR. SUPINSKI - The San Francisco Bank has $36 Billion in assets.
CALLER - What are these assets composed of?
MR. SUPINSKI - Gold, the Federal Reserve Bank itself and government securities.
CALLER - What value does the Federal Reserve Bank carry gold per oz. on their books?
MR. SUPINSKI - I don't have that information but the San Francisco Bank has $1.6 billion in gold.
CALLER - Are you saying the Federal Reserve Bank of San Francisco has $1.6 billion in gold, the bank itself and the balance of the assets is government securities?
MR. SUPINSKI - Yes.
CALLER - Where does the Federal Reserve get Federal Reserve Notes from?
MR. SUPINSKI - They are authorized by the Treasury.
CALLER - How much does the Federal Reserve pay for a $10 Federal Reserve Note?
MR. SUPINSKI - Fifty to seventy cents.
CALLER - How much do they pay for a $100.00 Federal Reserve Note?
MR. SUPINSKI - The same fifty to seventy cents.
CALLER - To pay only fifty cents for a $100.00 is a tremendous gain, isn't it?
MR. SUPINSKI - Yes
CALLER - According to the US Treasury, the Federal Reserve pays $20.60 per 1,000 denomination or a little over two cents for a $100.00 bill, is that correct?
MR. SUPINSKI - That is probably close.
CALLER - Doesn't the Federal Reserve use the Federal Reserve Notes that cost about two cents each to purchase US Bonds from the government?
MR. SUPINSKI - Yes, but there is more to it than that.
CALLER - Basically, that is what happens?
MR. SUPINSKI - Yes, basically you are correct.
CALLER - How many Federal Reserve Notes are in circulation?
MR. SUPINSKI - $263 billion and we can only account for a small percentage.
CALLER - Where did they go?
MR. SUPINSKI - Peoples mattress, buried in their back yards and illegal drug money.
CALLER - Since the debt is payable in Federal Reserve Notes, how can the $4 trillion national debt be paid-off with the total Federal Reserve Notes in circulation?
MR. SUPINSKI - I don't know.
CALLER - If the Federal Government would collect every Federal Reserve Note in circulation would it be mathematically possible to pay the $4 trillion national debt?
MR. SUPINSKI - No
CALLER - Am I correct when I say, $1 deposited in a member bank $8 can be lent out through Fractional Reserve Policy?
MR. SUPINSKI - About $7.
CALLER - Correct me if I am wrong but, $7 of additional Federal Reserve Notes were never put in circulation. But, for lack of better words were "created out of thin air " in the form of credits and the two cents per denomination were not paid either. In other words, the Federal Reserve Notes were not physically printed but, in reality were created by a journal entry and lent at interest. Is that correct?
MR. SUPINSKI - Yes
CALLER - Is that the reason there are only $263 billion Federal Reserve Notes in circulation?
MR. SUPINSKI - That is part of the reason.
CALLER - Am I mistaking that when the Federal Reserve Act was passed (on Christmas Eve) in 1913, it transferred the power to coin and issue our nation's money and to regulate the value thereof from Congress to a Private corporation. And my country now borrows what should be our own money from the Federal Reserve (a private corporation) plus interest. Is that correct and the debt can never be paid off under the current money system of country?
MR. SUPINSKI - Basically, yes.
CALLER - I smell a rat, do you?
MR. SUPINSKI - I am sorry, I can't answer that, I work here.
CALLER - Has the Federal Reserve ever been independently audited?
MR. SUPINSKI - We are audited.
CALLER - Why is there a current House Resolution 1486 calling for a complete audit of the Federal Reserve by the GAO and why is the Federal Reserve resisting?
MR. SUPINSKI - I don't know.
CALLER - Does the Federal Reserve regulate the value of Federal Reserve Notes and interest rates?
MR. SUPINSKI - Yes
CALLER - Explain how the Federal Reserve System can be Constitutional if, only the Congress of the US, which comprises of the Senate and the House of representatives has the power to coin and issue our money supply and regulate the value thereof? [Article 1 Section 1 and Section 8] Nowhere, in the Constitution does it give Congress the power or authority to transfer any powers granted under the Constitution to a private corporation or, does it?
MR. SUPINSKI - I am not an expert on constitutional law. I can refer you to our legal department.
CALLER - I can tell you I have read the Constitution. It does NOT provide that any power granted can be transferred to a private corporation. Doesn't it specifically state, all other powers not granted are reserved to the States and to the citizens? Does that mean to a private corporation?
MR. SUPINSKI - I don't think so, but we were created by Congress.
CALLER - Would you agree it is our country and it should be our money as provided by our Constitution?
MR. SUPINSKI - I understand what you are saying.
CALLER - Why should we borrow our own money from a private consortium of bankers? Isn't this why we had a revolution, created a separate sovereign nation and a Bill of Rights?
MR. SUPINSKI - (Declined to answer).
CALLER - Has the Federal Reserve ever been declared constitutional by the Supreme Court?
MR. SUPINSKI - I believe there has been court cases on the matter.
CALLER - Have there been Supreme Court Cases?
MR. SUPINSKI - I think so, but I am not sure.
CALLER - Didn't the Supreme Court declare unanimously in A.L.A. Schechter Poultry Corp. vs. US and Carter vs. Carter Coal Co. the corporative-state arrangement an unconstitutional delegation of legislative power? ["The power conferred is the power to regulate. This is legislative delegation in its most obnoxious form; for it is not even delegation to an official or an official body, presumptively disinterested, but to private persons." Carter vs. Carter Coal Co...]
MR. SUPINSKI - I don't know, I can refer you to our legal department.
CALLER - Isn't the current money system a house of cards that must fall because, the debt can mathematically never be paid-off?
MR. SUPINSKI - It appears that way. I can tell you have been looking into this matter and are very knowledgeable. However, we do have a solution.
CALLER - What is the solution?
MR. SUPINSKI - The Debit Card.
CALLER - Do you mean under the EFT Act (Electronic Funds Transfer)? Isn't that very frightening, when one considers the capabilities of computers? It would provide the government and all it's agencies, including the Federal Reserve such information as: You went to the gas station @ 2:30 and bought $10.00 of unleaded gas @ $1.41 per gallon and then you went to the grocery store @ 2:58 and bought bread, lunch meat and milk for $12.32 and then went to the drug store @ 3:30 and bought cold medicine for $5.62. In other words, they would know where we go, when we went, how much we paid, how much the merchant paid and how much profit he made. Under the EFT they will literally know everything about us. Isn't that kind of scary?
MR. SUPINSKI - Yes, it makes you wonder.
CALLER - I smell a GIANT RAT that has overthrown my constitution. Aren't we paying tribute in the form of income taxes to a consortium of private bankers?
MR. SUPINSKI - I can't call it tribute, it is interest.
CALLER - Haven't all elected officials taken an oath of office to preserve and defend the Constitution from enemies both foreign and domestic? Isn't the Federal Reserve a domestic enemy?
MR. SUPINSKI - I can't say that.
CALLER - Our elected officials and members of the Federal Reserve are guilty of aiding and abetting the overthrowing of my Constitution and that is treason. Isn't the punishment of treason death?
MR. SUPINSKI - I believe so.
CALLER - Thank you for your time and information and if I may say so, I think you should take the necessary steps to protect you and your family and withdraw your money from the banks before the collapse, I am.
MR. SUPINSKI - It doesn't look good.
CALLER - May God have mercy on the souls who are behind this unconstitutional and criminal act called the Federal Reserve. When the ALMIGHTY MASS awakens to this giant hoax, they will not take it with a grain of salt. It has been a pleasure talking to you and I thank you for your time. I hope you will take my advice before it does collapse.
MR. SUPINSKI - Unfortunately, it does not look good.
CALLER - Have a good day and thanks for your time.
MR. SUPINSKI - Thanks for calling.
Yes, it is called the well known multiplier effect. It's not some conspiratorial scheme.
In another context, say that of a bookkeeper for a small business who decides to use the company money for personal use for a few days because it won’t be needed for the payroll until the end of the week, it would be a crime, a form of fraud or theft.
It would be fraud simply because the bookeeper isn't a bank. You're comparing apples and oranges, and trying to imply there is something morally wrong with banks because they aren't regulated as bookeepers.
We really found this out when Roosevelt closed the banks for a “holiday”, to stop withdrawal demands.
You act as if that happened yesterday. How many bank runs have we had since then? Perhaps the system works better than you think.
But there is no lender of last resort for the US Federal Reserve.
A few paragraphs above you said the Fed is bottomless with a printing press. Put 2 and 2 together.
I would also make sure I had at least a little of my wealth in the form of gold bullion coins. Their liquidity is never in question.
Unless they are chunks of lead made to look like gold.
Then I won't add that the government used the $100 to pay my military salary.
That's clever. Are you sure there isn't a "European banker" creating money and receiving interest payments in that transaction somewhere? You aren't a "European banker" are you?
The “multiplier effect” is the essence of fractional reserve banking. It is not a “conspiracy” as if it was secret, for it is the subject of many textbooks and an entire regulatory bureaucracy! But that does not make it any less than it really is: a scheme that functions by structuring multiple claims on the same single dollar of deposits.
Just because government allows it, regulates it and licenses it, doesn’t change that simple fact. It is not “apples and oranges” different in effect, operation or risk to the real owner of the money than when a bookkeeper takes from the till on Tuesday for her own personal use because she knows the money won’t be needed by the real owner for the payroll on Friday. Everything runs fine as long as the bookkeeper makes sure that the money she takes is returned before someone else expects to use it. But what if she suddenly falls seriously ill and cannot return the money? The other claim on it cannot be fulfilled and her fraud will be discovered.
If you think there is a difference, the only one is one of legality, for government allows the bank to do this with “demand deposits” (deposits which can be demanded at any moment), yet calls it a crime when the bookkeeper does the same exact thing.
Oh, the system works pretty well, and I said so, but the point is: the system is based on the expectation that nothing will happen in society or the economy to cause too many people from demanding their money back at the same time. Nothing prevents that from happening, especially in an exigent circumstance, say another broad-scale 9/11 attack.
The reason for citing Roosevelt was to show that this is not just pure speculation. It has happened within the memory of some people who are still alive.
Yes, I wrote that the Fed can print money and that there is no lender of last resort for the Fed. I suggest that you carefully, and slowly think your criticism through. If the Fed prints too much money, it becomes worthless, for it is just paper money. Should the Fed attempt to deal with a run on the banks by printing more money, it **cannot create any more wealth**. More money but no more wealth is the exact description of inflation. People who fear inflation tend to not hold their wealth in cash. The use of Fractional Reserve Banking amplifies the effects of a widespread cash withdrawal, causing your favored “multiplier effect” to operate in reverse. That is to say, to multiply the contraction in the money supply, causing a recession, or even worse.
There is no greater central reserve to prop up the value of a highly inflated dollar. The US can bail out Mexico, which it did in my lifetime. Mexico cannot bail out the US. For that matter, the World Bank could not bail out the Federal Reserve simply because US dollars supplied by the Fed are the bulk of the World Bank’s reserves. Should the dollar collapse, it will take the World Bank along with it.
The same way that $4 trillion in debt was run up with only $263 billion in FRNs.
When I bought my house, I didn't use any FRNs. It must be a conspiracy. I guess I can never pay my mortgage off now. LOL!
The difference is when you deposit money in the bank you earn interest on it. Should we outlaw interest? Are you a Muslim?
Oh, the system works pretty well, and I said so, but the point is: the system is based on the expectation that nothing will happen in society or the economy to cause too many people from demanding their money back at the same time.
That was the way it worked under the gold standard. Remember those bank failures? When all those depositors lost their money? Has that happened lately? I guess there may be a few benefits over the way the old system (didn't) work.
Should the Fed attempt to deal with a run on the banks by printing more money, it **cannot create any more wealth**. More money but no more wealth is the exact description of inflation.
Temporarily providing liquidity will not cause inflation and is less dangerous than allowing banks to fail and allowing depositors to lose their funds.
The use of Fractional Reserve Banking amplifies the effects of a widespread cash withdrawal, causing your favored “multiplier effect” to operate in reverse. That is to say, to multiply the contraction in the money supply, causing a recession, or even worse.
You think inflation will cause a drop in the money supply? That's funny!
Nothing else needs to be said. You can convert your FRN's into gold any time you want, and if that's still not good enough you can move to a country that uses Islamic banking.
An economy cannot function without recognizing the vital importance that the owner of wealth must be compensated for both the time value of money and the risk that always is implied when he lends his money to someone else. When this is prohibited, under the theory that charging interest is somehow evil, then there is no reason for the holder of wealth to rent it out at all, even to someone who may have a very valid justification to borrow it.
The flip side of debt is equity, but equity is not at all suitable for many transactions, such as a home loan. This would just lead to a concentration of wealth. People who start with nothing could never accumulate any property.
The way that Islamic banking gets around that religion’s prohibition on charging interest is to repackage the interest, call it something else that can pass for what is allowed under the religious authority. For example, instead of charging monthly interest for an installment loan, the interest is lumped into a one-time fee.
I would also add, that in my experience, Islam also tends to foster a fatalistic mindset, such that when a bad thing happens, it is not anyone’s fault, but only “Allah’s will”. This makes it harder for people to accept responsibility for their decisions and policies. I have seen it myself in my business relationships. I don’t know how this translates into how frequently banks fail that are run by followers of the Religion of Peace as compared to those run by infidels (and especially by Joooos), but I personally know one 5 star money manager who fled an Islamic country because he found it far better to do business in the west than there for that exact cultural reason.
We have you on record as saying that our current system works well. You don’t like Islamic banking, and you think people should be paid interest when they put their money at risk. I really don’t know what you’re complaining about.
Loaning money is just like embezzling. Get it?
Yes, the present system works well. Having said that, the present system has structural vulnerabilities that are totally unnecessary. Every central bank/fractional reserve banking system has eventually failed, and destroyed a lot of wealth of anyone foolish enough to have assumed such failure could not have occurred.
We could say that the construction of homes in Bam, Iran works well, having housed people for centuries. But compare the engineering standards and construction practices between there and in California and you will see a big difference. We could choose one construction system or the other, but we choose to have a system that minimizes vulnerabilities.
In 2003, a Richter 6.6 earthquake near Bam, Iran, leveled about 70% of the city, killing some 80,000 people. In 1989, a magnitude 6.9-7.1 earthquake struck Loma Prieta, California, killing 57 people.
In Bam, it was reported that “the collapsing mud-brick structures had completely disintegrated and buried people in piles of earth, rather than trapping them in voids or air pockets between building slabs...” [1]
One of the reasons we choose to have the present banking system is that it facilitates deliberate inflation of the currency, as well as allowing the government to profit from asset inflation by taxing income defined in nominal dollars.
This is just a sophisticated way for government to seize private wealth without having to formally pass the levy in the form of a legal tax.
Worse, it sets in place a system that, just like the mud brick construction of Bam, has a known track record of failure. Indeed, the financial system failed in the 1930’s to such an extent that Roosevelt had to close all the banks for a few days. In historical terms, that is not that long ago. It was within the lifetime of my father.
We could have a system that is far sounder, a system that fully carries out the essential functions of banking (lending, borrowing, savings, demand deposits, etc.), but has none of the same vulnerabilities. But this is very unlikely because government is addicted to inflation, and the banking system is addicted to being able to create money out of thin air.
Yes, I keep some of my wealth in the form of dollars and even some of them in the bank. I even invest in some of the money factories. But I am ever-alert for the signs of stress that if taken to an extreme, signal a risk level that becomes to high for me.
Once again, for the record.
Every central bank/fractional reserve banking system has eventually failed,
Can't that be said for every banking system that's been tried, including the ones backed by metal?
We could say that the construction of homes in Bam, Iran works well, having housed people for centuries. But compare the engineering standards and construction practices between there and in California and you will see a big difference. We could choose one construction system or the other, but we choose to have a system that minimizes vulnerabilities.
Obviously, Iran needs to convert its banks into bookkeepers.
When I study the Great Depression or the Panic of 1837, what I see as the biggest problem was a lack of liquidity. The greatest capability, though not automatic, of our current system is being able to add liquidity in a time of crisis. Look at what happened after 911. The Fed added liquidity that led to a short term recovery.
Perhaps you don't like that. Perhaps you are pulling for a total financial collapse so you can go around bragging about your gold holdings as everyone else is breaking out their fishing poles and hunting rifles so they can survive.
LOL! Except for the ones that exist today.
Exactly. The gold standard worked so well that no one uses it anymore.
The gold standard has its own problems, not the least of which is that there is far too little gold to ‘describe’ today’s actual money supply. To put it another way, if the US were to convert over to a gold-based dollar, the price per ounce would have to dramatically rise from today’s $650-700 range to several thousand dollars. The public would not accept that a few people who were smart enough to hold gold today would be the beneficiaries of such a happenstance gain.
Every central bank / fractional reserve banking systems that hasn't failed will fail, because all those that have failed, failed.
Huh?
I'm glad you understand that fact.
Do you still think inflation will cause a drop in the money supply?
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