Lies the government told you (22 page)

Private independent banks were not able on their own to do what they could with the Federal Reserve behind them. As Professor Murray Rothbard stated, private “banks . . . would never be able to expand credit in concert were it not for the intervention and encouragement of the government. For if banks were truly competitive, any expansion of credit by one bank would quickly pile up the debts of that bank in its competitors, and its competitors would quickly call upon the expanding bank to redeem in cash.”
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In essence, a bank could not expand too quickly and therefore cause inflation, without risking its own crash. But when the banks get together and work from one central place, no one needs to worry about crashing because it cannot pay back its debts, since it and its competition are all backed by a “lender of last resort.” It’s like a teenager with an unlimited credit card, who knows that no matter how much money she spends, her parents will always pay the bill. And then imagine that the parents were able to force their neighbors to contribute to payments for that bill. Well, we are those neighbors, paying the bankers’ bills through the constant fall of the value of our dollar.

The Federal Reserve does something similar to fractional reserve banking, except that it has no reserves at all. Let’s say Congress is having a bad year by spending more than it takes in (that would be every single year since the end of the presidency of Andrew Jackson) and some of the bills from social programs have come in, but there is no money in the Treasury. That’s okay, they say, and head over to their favorite banker: The Federal Reserve Bank.

Now, their banker knows that the government already owes him a lot of money, but it’s all right because the interest payments are making the banker very rich. So the banker (the Fed) takes out his checkbook and writes Congress a nice check, with a lot of zeroes at the end of it. The check is signed, and Congress walks away happy. The Federal Reserve does too, even though it should actually be very worried considering that the check should bounce because there is no money in the Federal Reserve account, at least not technically, but that is not a problem. It is called “monetizing the debt,” and if you or I tried to do it, we’d be going straight to jail. But this is one of the functions of the Federal Reserve, and the government is glad to accept it. Not only accept it, but now the Federal Reserve can charge interest on money that it created out of thin air.
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Now the best part is that the government cashes that check and starts spending the money. Those who get the money from the government put it in their bank accounts. And here is where things might get a little complicated. The local bank gets this money; let’s say it is a deposit of one hundred dollars. The local bank is very happy because that one-hundred-dollar deposit will allow it to lend out nine hundred dollars.

Surprising? Not at all, as banks are only required to have 10 percent of their debts on deposit at any given time. This is called “fractional reserve banking” and is practiced in order to hide the fact that banks spend their clients’ money; they don’t actually “save” it for them. So the bank is happy as well. Even though this “money” came from nowhere and did not exist until the moment that the Federal Reserve issued a check, it is still valid and legal money that can be spent. This is all valid and legal, but illusory, and in direct contravention to the Constitution.

Finally the Perfect Tax: Infinite
and
Invisible

It was a very hot Las Vegas day in May 2003, and Robert Kahre had the air-conditioning on full blast when the door to his office swung open and he was confronted with a gun pointed directly at his head. Before he had time to question, he and more than twenty of his workers were handcuffed and held in the sweltering sun without water, while IRS agents swarmed inside, paving a path of disarray. To anyone observing, the situation looked as though Mr. Kahre and his workers had committed multiple felonies. But no, all Mr. Kahre had done was pay his workers, and they chose to accept his payment.

What the IRS was unhappy about was that the form of payment was U.S. government-minted gold coins. The coins had a face value of 50 dollars but the gold in them was actually worth 806 Federal Reserve dollars. Because there were no tax code regulations
that distinguished between coin and paper money, Kahre and his workers paid taxes on the face value of the coins. So in essence, if a worker earns one gold coin a week, his annual salary is only 2,600 dollars, and therefore he is not required to pay taxes. And everyone knows that the federal government is never happy when it does not get taxes, especially from someone like Mr. Kahre. The government charged Kahre with 109 counts of tax-related crimes, including tax evasion, willful failure to file, and conspiracy to evade taxes.
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The government brought fifty-two total charges against the other defendants combined.
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Fortunately for Kahre and his employees, the jury did not agree with the government, and all those charged were either acquitted or released after a hung jury.
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The government has not yet decided whether it will retry him,
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but considering the results already obtained, one can hope that the Constitution will prevail this time around, and the government will stop scamming us by pretending that any crime was committed.

Kahre’s story illustrates the worst part of the Federal Reserve— that it is in essence imposing a secret tax on each and every one of us, a tax that most will not complain about because we do not realize it exists. Most of us do not know how the system works, so we do not complain and live in not-so-blissful ignorance, not entirely blissful because we are still paying for the inflationary money tricks that the Federal Reserve is allowed to play. This is why a family in the 1950s was easily able to survive happily on one income, whereas now it takes two working people to retain that same standard of living. Even if we attempt to save for our retirement, the more we save, the higher this invisible tax will be on us. But the worst effects are usually on the poorest of us, those living on a fixed income, such as the retired or disabled, who are receiving a specific monthly amount. When the value of the dollar falls, then the price of goods adjusts to that, and the buying power of those on a fixed income dwindles. The secret tax is called inflation, and it is the Fed’s most lethal weapon.

But why would the government constantly expound private banking and allow the Federal Reserve to grow to its size without any regulatory control? If there was no advantage for the government, why would it not only allow the fraud to continue but also support it at every step? To understand the answer, we must understand the concept of inflation and deflation. We need to know how the concept affects the value of money, and therefore the value of our labor.

The idea of a central bank in Western culture, to control the banking and finance structure of a country, harkens back to 1694 and the creation of the Bank of England by King William III. The King wanted a perpetual money machine for the monarchy so as to assure that the King’s treasury would never run out of money and to circumvent the uprisings that would ensue with increased taxes. With the power of banking, the King could print more money on the sly, so it would not be directly linked to him, and therefore fund his armies and treasury without stealing by assessing taxes. Then, when the money flooded the market, the purchasing power of money bottomed out. And the King, having spent the money before this time, profited, while the people lost out on payments of their labor. Yet, the people, not being knowledgeable about inflation, did not blame the King and no uprisings happened. The monarchy continued this tradition, and it migrated to America as soon as there was profit to be had.

In essence, Congress struck a deal with the private bankers who would run the Federal Reserve, granting them absolute power over the control of America’s money (a power delegated
to Congress
in the Constitution) in exchange for infinitely deep pockets. Whenever Congress needs money, the Federal Reserve prints it. And the more money printed by the Federal Reserve, the more inflation, and the less worth is attached to each day’s labor. And the best part, for Congress, is that this tax is not only invisible and infinite, but Congress also does not have to attempt to raise the money, either through taxation or transfer of funds from expenditures; it can just get it without any direct, immediate consequences. Rather, the consequences land on the American people, who are forced to work harder and longer hours in order to get the same buying power that they used to get with a shorter day’s work.

Essentially, the Federal Reserve, through its inflationary policies, has found a neater way to do what used to be done by monarchs when they ordered their Treasury officials to shave off or clip coins as they passed through the Treasury. If a private person did that, or if the king’s treasury officials did that and helped themselves to whatever they could shave or clip, and got caught, that would be instantly recognized as theft and fraud; yet when the Federal Reserve does the exact same thing to paper money that the King did to coins, no one says a word, because Congress has legalized the theft. And the only person who pays is you, when you attempt to take out your 401(k) and notice that the money you put in for the past twenty years is really only going to buy you less than the amount you put in, less than had you accumulated the cash in a shoe box. The Federal Reserve has in essence diluted the value of the 1914 dollar to seven cents. But don’t worry; at least the same banks of today will always be doing business, having been bailed out by the Fed many a time before.

What we have to understand is that nothing in life is free, everything has a price, and right now the invisible tax is having a large impact on the middle class, lowering standards of living and causing job losses, while the economic elite gain the benefit of being the first to spend any issue of money before it is deflated in worth. A one-time Chairman of the Fed, Alan Greenspan, even admitted that if the top-secret monetary policies sometimes leaked prior to the Fed’s actions,
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those to whom it leaked could make a fortune.

For anyone who would question the impact on the value of the dollar without the backing by gold, and for whom the example of the Continental does not suffice, compare what you could buy with an ounce of gold only forty-five years ago as compared to today. In 1964, an ounce of gold was worth thirty-five U.S. dollars, which could buy a gentleman a very nice business suit; in 1979, the same suit could be bought for three hundred U.S. dollars, coincidentally, the price of an ounce of gold at the time;
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today, a nice suit can still be bought for three hundred U.S. dollars, yet the price of gold is now around twelve hundred dollars an ounce. And if that were not enough, the prices of oil, milk, and eggs have not actually risen; that is, they are worth the same if priced in 1908 twenty-dollar gold pieces; rather, the only thing that has changed is that the dollar of today has the same buying power as the nickel of a hundred years ago.
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These are just some illustrations of how unstable the purchasing power of fiat money is compared to gold, of which the same amount can buy today what it could buy forty-five years ago.

Requiem for a Dollar

Economist Jeffrey Sachs of Columbia University recently noted that “the US crisis was actually made by the Fed. Monetary expansion generally makes it easier to borrow, and lowers the cost of doing so, throughout the economy . . . The Fed, under Greenspan’s leadership, stood by as the credit boom gathered steam, barreling toward a subsequent crash.”
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This is shocking candor and a damning admission from a Big Government guy.

It looks as if we haven’t learned from our mistakes, as recently a new proposed bill would grant the Federal Reserve sweeping new powers. Even the
Washington Times
sometimes forgets that the Federal Reserve is a privately run corporation, as it claimed the Fed is “. . . already arguably the most powerful agency in the U.S. government.”
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When even the conservative media reports the Fed to be a government agency, you know that the deception spawned by the government has been so pervasive that no one thinks to question the myth. Until we realize that our monetary situation is run by a private banking cartel, we cannot gain stability in the economy and the dollar will continue to plummet.

In the same article, the
Washington Times
quotes Treasury Secretary Timothy Geithner, attempting to justify the new, broad powers being granted to the Fed, stating that we need to prevent future crises, and in order to do that, in order to make our system stronger, we have to give one entity “clear accountability, responsibility and authority for preventing future crises.” This sounds like a recycled Wilson speech right before enactment of the Federal Reserve Act. It also sounds like someone utterly ignorant
of history or willfully deceptive about it.

Once again, an expansion of the Federal Reserve Act is being called for in the guise of a need for economic stability. Proponents claim that granting expanded powers to a central regulatory authority is the only way to ensure that stability occurs. Will we keep ignoring the lessons of history and allow the government to continue to delude us into believing that it is running the Fed and we need the Fed to keep our economy stable? How can one say with a straight face that because we worry that private bankers will go off the deep end and cause an inflation, we should therefore ensure that a group of bankers working together will ensure that this does not happen? They never have in the past and won’t do so now. And the government now appears to believe its own lies, as President Obama is expounding the Fed’s role as supercop of the markets and is expounding that he will not let the country forget history.

The President might not let us forget the federal government’s version of history, but maybe he should take a look a little bit further back and note that the economy has become more and more unstable the more that power has been given to the Fed. As Senator Christopher J. Dodd, Chair of the Senate Banking Committee, once made clear, giving the Federal Reserve more power is like awarding your son a bigger, faster car right after he crashes the family sedan. Maybe this time we should listen. Thomas Jefferson foresaw this two hundred years ago, when he said: “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered.”