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Is a Federal Reserve Note Money?
Yes, technically it is! It is
called fiat money. Fiat money is money because the government has
declared it to be so. It isn't backed by anything of value but legal
tender laws punish anyone who refuses to accept the federal reserve note
as legal tender money.
The federal reserve note is both
currency and a debt instrument. All federal reserve notes are the
private property of the Federal Reserve Banks and are loaned into existence.
The root problem with this system is that it creates only the principle on
debt and never the interest, the debt is always greater than the money
supply.
Inventing
Money From Thin Air
Federal Debt and Fractional Reserve Banking
Whether money is printed in the form of
federal reserve notes or is created electronically on spreadsheets, it all
comes into existence as debt. The federal reserve has a contract with
the US Mint to print them notes. Each notes costs about 3 cents.
It isn't much different than if you or I went to Kinko's. Still, it's
awfully expensive printing up all of that money, so the most profitable way
to make more money is to do it electronically. For the purposes of our
discussion, we will represent all money as being printed on green paper.
Federal
Debt
The first way that money comes into existence
is for the government to borrow it. It works sort of like this.
The secretary of treasury needs money so s/he calls the federal reserve and
orders some. They don't have any, so they call the US Mint and have
some printed at 3 cents a note. Then they take this green paper and
give it to the secretary of treasury whose signature appears on each note
attesting to the fact that this is really a promissory note and that it must
be paid back with about 3% interest. Of course the government spends
every note that it receives so it can never pay any of them back. Who
pays them back, you ask? The department of treasury and the department
of justice work cooperatively with the federal reserve to make sure that
their collection agency has access to the collective wealth of the
nation. What? You didn't know that their was a collection agency
working for the federal reserve to collect payments directly from American
citizens? The agency is called the Internal Revenue Service and if you
think they are an official agency of the United States of America, think
again, they aren't! The United States government has incurred over
$23,300 in federal reserve debt on behalf of every man, woman and child in
this country and the debt goes up over a million dollars a day. Even
this is not enough to feed the animal. They also borrow every excess
dollar paid into social security and other federal retirement or trust
funds, interest free, and when that is not sufficient they borrow from the
markets with various debt instruments at about 7½% interest. The entire operation of our
nation is funded from revolving credit accounts.
It is even worse than that though!
When WorldCom told their investors how much debt they had incurred, they
failed to mention certain future obligations that weren't, strictly
speaking, debt. WorldCom hid about $4 billion in debt out
of $32 billion of total debt. While the official, reported debt of the
United States federal government may only be about $7 trillion, it has
been estimated that combined with the public and intragovernmental debt,
the total federal debt burden (future obligation to pay) is an
unimaginable $35 trillion. That amounts to roughly $120,000 for
every man, woman and child in America (see Which
is Worse: WorldCom or Congress?). Here is how it works: what you
have borrowed and spent and must now repay is debt, but so is the future
obligation to pay for programs like Medicare, Medicaid and Social
Security, and the Federal Government has a HUGE future UNREPORTED
obligation to pay. If the
public knew this, it would dilute the value of the Federal Reserve Note in
the same way the value of stock is diluted when the investors learn about
future obligations of corporations. Compared to the U.S. Government, Enron and WorldCom
are grade A debt reporters.
Fractional
Reserve Banking
If the US government has only borrowed
about $7 trillion into existence, where does the rest of the money come
from? It too is borrowed into existence! The miracle of
fractional reserve banking creates more money out of thin air. Here is
how it works. If your bank is part of the Federal Reserve Banking
System, they may deposit with the Federal Reserve a small sum of money and
then immediately borrow back a much larger amount of money at about 3%
interest. They may then loan this money out to the consuming public at
7%, 10% , 14% or even 21% interest. Sounds like a pretty good
deal. But where did this money come from? Thin air!
I'll use an over simplified model to
demonstrate. The government borrows $10,000 into existence to pay for
goods and services at 3% interest. The $10,000 is deposited at a
bank. The bank places the $10,000 on reserve and promptly borrows into
existence another $90,000 at again 3% which they loan you to buy a house,
you pay 7%. The seller of the house deposits the $90,000 at their bank
who puts it in reserve and promptly loans a small business $800,000 to build
a commercial building at 7%. You get the picture yet? None of
this money ever existed and yet it is being created out of thin air.
Who profits? The Federal Reserve banks, which are very much privately
owned, earn about 3% on every dollar in circulation. Remember ALL of
this money was created out of thin air!!! Then the banks that are part
of the Federal Reserve Banking System earn overhead on every dollar they
borrow out of thin air!!! And remember, they only loaned the principle
into existence, so how will the borrows pay back principle plus
interest? They can't, they will have to borrow more! This system
guarantees that 250,000 people will get rich while 150 million people go
broke.
Counterfeiting
- Fraud - Theft - Extortion - Treason
There are many words that describe what
the Federal Reserve, the Internal Revenue Service, the Department of
Treasury, the Department of Justice and our elected officials do, but I
think the most important one is "treason". Our elected
officials have willfully ignored their sworn duty to uphold the constitution
and injured not only the many individuals that make up our nation but also
the well-being of the nation itself. They are desperate for a
diversion of some kind to keep the public looking the other way. I'm
not much in favor of a firing squad but I am in favor of firing them
all. We need to begin now to elect officials that will uphold the
constitution and the rights of individuals, even if it is painful.
Today over 53% of the nations economy is driven by government and government
programs, some people call that socialism. We MUST stop electing
main-stream Democrats and Republicans for office NOW! It is time to turn to
liberty-oriented caucuses and third
parties for answers. The Republican
Liberty Caucus, the Democratic
Freedom Caucus, the Libertarian Party,
the Constitution Party and
many independents are ready to make a difference but they need your support.
What Else?
Educate yourself! Organizations
like We The People have been
formed to do just one thing, educate the people! You'll find many
helpful links on this site and many more if you do a little searching on
your own. Once you've become educated, educate others. We cannot
be saved in ignorance. Good luck in your quest for more knowledge.
For a brief, but thorough, explanation
of our monetary system, visit Money
Talk$ or NORFED's Money
FAQ: What Every American Citizen Should Know About Money.
For another great source of
information on money, the economy and inflation, read Whatever
Happened to Penny Candy? by Richard J. Maybury. The book is
simple to read and fun.
Understanding the twisted plot that
produced the Federal Reserve System might be more work than most of us are
up to, but if you really want to know, a very brief outline can be found
in The Federal
Reserve: History of Lies, Thievery and Deceit and a truly exhaustive
discourse can be found in Secrets
of the Federal Reserve.
Possibly the best study of federal
government debt can be found at Grandfather
Economic Report. If you want to know what the US National Debt
is today, visit U.S. National
Debt Clock.
To understand how your
freedom is eroded by our current paper money system, read "Paper
Money and Tyranny", Congressman Ron Paul's address to the U.S.
House of Representatives on September 5, 2003.
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