Crime of the Century

"Besides medical care, pension and defense expense are also need to be significantly modified as they are where the debt came from." - anonymous blog

You haven't been paying attention for the last 100 years, have you?! While I don't believe that medical care or an old age pension is an "inalienable right", nor that it's wise to amass armies for building nations, none of those expenditures are why we're so deeply in debt. Don't worry though, once Einstein had immigrated to the US, even he marveled at the miracle of compound interest. The clue is inside of a buried congressional report from the Subcommittee on Domestic Finance, Committee on Banking and Currency, chaired in 1964 by  Representative Wright Patman, called "A Primer on Money".

Flip to page 71 first, and you'll see how the Federal Reserve System went from earning only 7% of it's interest income from US Government Securities in 1914, to 99% by 1963. Now, to be fair, of those earnings, the Fed remits approximately 80% back to the Treasury (at least it did in 1963), but the bulk of US Government Securities are not directly purchased by the Federal Reserve.

Our Bonds are auctioned through the FOMC, first purchased through a dozen "Primary Dealers", some names of which you'd immediately recognize like JP Morgan, but a few of which are agents of European banks. After the dealers take their 2% commission paid by the Treasury, other parties, many of which are the large American and European banks, take possession of the securities and send them back to the Federal Reserve to be held in reserve as capital reserves for the banks. While there, rather than the Fed collecting interest which it would remit back to the treasury, the banks collect and keep the interest generated on the debt.

Now ask yourself this, where did the banks get the money to "lend to the government"? Don't even waste your time trying to figure it out, because before it was lent out, it didn't exist. Upon purchasing the bonds, the banks did a double ledger entry adding the money paid to their liabilities, the bonds in reserve as assets, creating no new net imbalance, but creating money from thin air which they can further lend to us consumers of debt (the muliplier effect). Are the banks liable for this newly "minted" currency? No, because the Federal Debt is backed by the Faith and credit of We the People. As we see now, we are on the hook, or our children, or their children, but not the banks. Yet they are the ones collecting interest...?! Go figure!

Of course, if the Federal Reserve purchased the Government Securities directly (ibid, page 48), there would be no commission, and short of the Fed's operating expenses (accounting and clearing), all of the interest collected would be remitted back. Considering we've been doing this wrong for 100 years, it's not a wonder that the debt is so huge, because our interest payments, even at today's low low rate of less than 3%, are over 20% of our tax revenues, equal to our expenditures on Social Security. It's too bad Lincoln's Greenbacks died with him, because he had the perfect formula for creating money without adding interest to the public debt.

Unfortunately, after McKinley fought the banks (and lost), by Wilson's time (1913), carrying on through FDR, and all the way to Obama, with the exceptions of Kennedy and Reagan who dared to mess with the Fed, our leaders have been complicit to this Crime of the Century. To keep us distracted, congress perpetuates arguments about taxing and spending, green energy and acid rain, affirmative action and air traffic controllers, and during a dry news cycle, they've even brought radio DJs and sports jocks for congressional hearings. My favorite of course was the debate over recognizing the contributions of Michael Jackson.

Wow are we ever a bunch of schmucks, a hundred years of getting sucked into a three card monty by the banks!

The American Illusion

"The chains of habit," said one man, "are too small to be felt until they are too strong to be broken" - Samuel Johnson

Before reading any further, first you must decide... if you take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe, go on paying your taxes, looking for deductions, structuring your behavior to conform with the tax code. If you take the red pill, you'll never look at taxes, our government, or even an ATM the same way again... don't say I didn't warn you!

It's not just a coincidence that 1913 heralded both the Federal Reserve Act and the Revenue Act. The idea of a central bank, particularly one with a reserve (ability rush to the rescue in the even of a liquidity crisis) facility is not inherently evil, but what evolved as the FOMC is truly treacherous. We've survived two world wars, nuclear meltdowns, earthquakes, famines, Cabbage Patch Kids™,... even the Mullet and Leg Warmers, but our economy surviving after a century of being milked by banker families from Europe, it's not looking so good. Yah, you know who I'm talking about, not just the Rothchilds, but the Morgans, Kuhns, Rockefellers, Loebs, the Paulsons, Khans, Warburgs, Schiffs, et al., the ones that manipulated every banking crisis in modern history and surprisingly are always the ones our pristine and incorruptible leaders look to for a solution (can you say "unhealthy passive-agressive codependency").

The Income Tax is simply collected to service a contrived debt, where we lend ourselves money but pay commissions and interest to the Banksters. Think about it, we could issue Treasury Notes, or, we can commission the Federal Reserve System to control the money. If we print the money (Lincoln did in 1862 with $500M in Greenbacks, with no inflationary crisis ensuing), there is no interest, or if we issue Government Securities directly, the interest, if any, is remitted back to our own money stock. However, when we let private banks control our currency, first they take a commission (or fee), and then charge us interest, compounded annually, in perpetuity because we now need them to issue more debt so that we have money to pay the interest on top of the principal.

But, wait! The banks are neither the party creating the money (other than the delegation of that authority by a corrupt and slothful congress), nor the party that backs it. They create new money with simply a double ledger entry - a new loan note issued as a negotiable instrument (asset) = monies tendered to the borrower's deposit account (liability) - ergo no net impact on the balance sheet, but money from nowhere! You'd think the smart people in Washington could do that without relying upon the even smarter people in Manhattan, but maybe our elected representatives aren't as smart as we give them credit.

Remember, our money isn't backed by Gold or any tangible, but by the "Faith and Credit" of the United States Government, a government "of the people, for the people, by the people", meaning us. I don't recall seeing Greenspan, Bernanke, or for that matter Paulson or Geitner, and certainly not Moynihan or Dimon on an election ballot, yet together, these men (interestingly, no women) decide our monetary policy... independent of any of the three branches of government. Kinda sounds "unconstitutional" when you think about it too hard!

But, when the Federal Reserve Act was signed into law by the dauntless Woodrow T. Wilson late in the evening of December 23rd, 1913 (surprising that both houses of Congress could form a quorum so close to the holidays!), it needed to be coupled with Income Taxes so that the private banks could exact a usury from "we the people", both through our (I repeat our) government, and also individually. There was no angle for the banksters if the country couldn't be swayed into an easy-to-collect taxation. (next time you wonder why your representative wants to raise taxes, check to see if a bank is contributing to his campaign.)

If you don't believe there exists a consipiracy, it's easy to validate. Until 1913, we had no income tax other than sporadic attempts by politicians serving the Central Bankers' interests that tried repeatedly in spite of constitutional problems (1895, the Supreme Court struck down any income tax with Pollock v Farmers' Loan & Trust Co.) to levy taxes upon the citizenry without apportionment. How did the Union get along for over 100 years without this source of revenue? Even inflation adjusted, there was no mammoth debt and just prior to the Civil War, we even had a brief period of virtually no public debt, all revenue coming from Tariffs and Fees.

Strangely, it took almost 4 years for the 16th amendment to be ratified by the various states, and in spite of technical problems (some states ratified versions of the amendment with different wording, hardly the care needful for such a grand amendment that alters both the Constitution and nullifies prior Supreme Court Rulings), the Secretary of State, Philander Knox ratified the amendment. Also strange, Senator Aldrich of RI had been working with the banks from 1908 to 1913 on a Central Banking proposal. Even more strange is that no one at the time seemed to grasp what was about to unfold. Even in retrospect, few see the nefarious connections. Aldrich arranged the marriage of his daughter, Abby to John D. Rockefeller, Jr., son of the industrialist banker, and surprise, surprise, their son Nelson Aldrich Rockefeller ended up Vice President of the United States under Ford. Isn't it romantic when financiers have open access to the budoirs of Congress and the Whitehouse!

Many falsely believe that the Income Tax was implemented to fund the War Efforts in Europe, but I checked my calendar, and Duke Franz Ferdinand wasn't assassinated until 1914, the year after the Revenue Act was passed and the 16th Amendment was ratified. It seems more likely that we needed a war to justify the new income tax than a tax to pay for the war, which the US didn't enter until 1917 (even after the sinking of the Lusitania in 1915). So, what fiscal purpose did (does) the Income Tax serve? Sure, we grew government, but my gosh, the banks have grown even faster. We haven't avoided recessions or even long drawn out depressions, so we have to wonder why we're paying into the Federal Reserve System at all!?

Which takes us back to the Fed, by holding interest rates high (under the auspice of boogeyman inflation), by using private dealers for selling Government Securities in the "Open Market" (hardly "open" if only members of the banking cartel can bid), the National Debt increased almost exactly dollar for dollar with the interest on our debt. It's a bit more complicated now because of foreign investments, but one must ask why the Federal Reserve, which is empowered to purchase Securities directly from the Treasury (which it can then remit back to the Treasury with the interest accrued, thus extinguishing the debt and abating the interest), has historically ran our debt through interest-collecting private banks and commission collecting security dealers in less-than-open bond auctions? I note with caveat, this has been the modus operandi for over 95+ years, until the current crisis.

Of course, something changed in 2008. Interest rates are now unsustainably low (.14 of a percent), and the Fed now holds Trillions of Dollars of Government Securities. A couple of explanations might serve...

1. Why have high interest rates on the bonds if it's just going to be remitted to the treasury?
2. Consider that the banks inadvertantly through a rampage of mortgage securitizations and exotic derivatives pretty much cooked the goose that would otherwise provided gilded eggs,... there's still a pulse, but it's getting weak.
3. Finally, consider the danger of duration mismatch on all those mortgages (the ones not yet in default) issued at sub 5% interest rates, that if the interest rate were to even get close to 5%, the member banks of the Federal Reserve would be screaming bloody murder because through Fractional Reserve Lending (or "Fictional Reserve" lending), the books only clear with new money, which, if interest rates rose (and they have, just check your credit card statement), the banks would lose money in perpetuity.

But that's another chapter in what can go wrong when you entrust the wealth of a nation to greedy old men. Next time the discussion turns to "green jobs" or "universal healthcare", consider these just slight of hand tricks that distract us from the Crime of the Century.