Theft By Deception
January 2012
The financial crisis of 2008 provoked a response by then Treasury Secretary Hank Paulson to ask Congress for $800 billion to save the financial industry. That plan eventually was codified into legislation known as the TARP bailout and was followed by the rise of the Tea (Taxed Enough Already) Party movement in 2009 and 2010 in protest. Ultimately the Tea Party managed to shift control of the U.S. House of Representatives to the Republicans from the Democrats, weakened the Democrat majority in the Senate, and encouraged further calls for cuts in federal spending as well as cuts in taxes.
However, Congress is notoriously ineffectual and slow. (It was designed that way.) Taxing, spending and borrowing continued unabated, and in 2011 the United States was confronted with what was characterized as a debt crisis. The U.S. was at the self-imposed limit of its borrowing capacity, and the newly elected Tea Party congresspersons took this opportunity to dramatize the enormous debt that had been accumulated by the federal government, particularly the trillions of new debt racked up since January of 2009 when Barack Obama assumed the office of the Presidency. (It is appropriate to point out here that the President has no power to borrow or spend money; that power is vested in Congress.) After much wrangling and hand-wringing, the “crisis” was averted by a political shell-game of “cover your ass”, and responsibility for reining in spending and borrowing was delegated to a group of 12 senators and representatives, the Joint Deficit Super Committee, to solve the problem at a later date. That Committee subsequently failed.
The backdrop to this fiscal uproar was and is an unraveling debt crisis in Europe, which includes violence in the streets and threatens to bring down very large banks and destroy the financial system of the world. In addition, what has been called the “Arab Spring” was changing regimes in the Middle East, one country after another, in a seemingly spontaneous call for freedom and democracy. (Freedom and democracy go together like ice cream and anchovies, but that’s another discussion.)
Then suddenly, Occupy Wall Street was born. Thousands of unemployed workers, indebted students, graduates and others decided to squat in Manhattan’s financial district to protest – well, it’s not entirely clear what – and the movement spread to other cities around the nation. According to occupywallst.org, the goal is “to restore democracy in America.” (Never mind that the United States has never been a democracy.)
The common complaint underlying both the Tea Party and Occupy Wall Street is that most wealth is being accumulated by a few privileged bankers and their friends, and the mass of Americans is getting screwed. Unfortunately, many in both movements are casting blame haphazardly at Wall Street, immigrants, Republicans, Democrats, low taxes, high taxes, spending cuts, too much spending, corporate greed, moral decay, etc. This staggering lack of focus in both groups, and among the general public, exists because very few people understand the real problem. That lack of understanding is by design. The real problem is theft by deception.
The history of humankind is, in no small measure, the story of one group stealing from another group, whether by guile or outright violence. In the ancient world, the expropriation of assets was fairly straightforward: larger, stronger forces would dominate the weak and take as they pleased. However, after the fall of the Roman Empire, new methods of manipulation and larceny began to rise.
Although banking and lending has existed throughout recorded history, it was in the Middle Ages and the Renaissance when these activities matured into fully-fledged tools of pilferage through duplicity. The basics of banking at the time were that a depositor would receive a receipt, or note, from the bank attesting to the deposit of gold or silver with the bank. When the depositor needed his gold or silver to buy something, he would go to the banker, surrender his note, and receive his metal. Eventually for convenience, the bank notes themselves were used for purchasing goods and services. The seller then would take the note to the bank to receive the metal, or simply use the paper note in a future transaction.
Of course, bankers also lent money for a fee (interest). Much of the early financing took place among merchants and farmers. Gold or silver would be lent to the borrower who would then repay the loan at a later date when his shipment of goods arrived or his crop was harvested. Over time, however, the bankers discovered that they could lend out, not necessarily the gold or silver, but just the bank notes which had begun circulating as currency.
By the seventeenth century, the negotiability of bank notes had become firmly established. People just generally accepted bank notes as currency, and the trust in any particular currency depended upon the stability of the bank which issued it. Here is where it gets interesting. The bankers soon realized that almost no one came to the bank to get the gold or silver. It was heavy, bulky, conspicuous and vulnerable to theft. Better to keep the bank notes nicely folded in your pocket than to carry around a big bag of coins.
The bankers found that because no one came for the metal, they could just issue new bank notes whenever they made a new loan. Therefore, there was now no limit to the amount that they could loan at interest, except of course, if too many depositors showed up to redeem their bank notes. This practice is known as fractional reserve banking. It is the basis of the banking system around the world today, and it is the fundamental foundation of fraud by which the banksters systematically steal from the population of America and the world. The banksters had discovered a way to steal without the victims even knowing that the theft is happening!
How does it work? Let’s demonstrate with a more concrete, albeit fanciful, example. Suppose Archie manufactures and sells laptop computers. In order to make money and stay in business, Archie must buy components, hire employees, rent or buy space, and churn out computers cheaply enough so that consumers will buy them. Pretty simple, right? This is the basic paradigm of business with which we are all familiar, and we can apply this same model to plumbers, auto manufacturers, retail stores, and medical doctors. But what if Archie discovered an entirely new technology which allowed him to produce his computers with no costs other than incidentals? What if this technology could shift Archie’s costs to the rest of the world?
Let’s imagine that Archie’s new technology enabled him to build a laptop by surreptitiously taking value from all the existing laptops in the world. That is, Archie’s new device would reach out from his factory, invisibly and silently, through the “ether” to every laptop around the world, and take just a tiny amount of performance and capacity from each one. Those individual tiny amounts of performance and capacity would then be reconstituted by this technology into a new laptop computer in Archie’s shop. Then Archie could turn around and sell this laptop at virtually no cost to himself; the cost would be realized by the millions of laptop owners around the world who now have diminished computers.
That crude example is an apt description of what happens every time a banker makes a loan. Banks don’t loan money from depositors; they loan money that does not exist. They loan money that HAS NO COST TO THEM. The cost is borne by the millions of holders of existing currency which is thereby diminished in value by such loans. That is the brilliance of the thieves known as bankers. They covertly and systematically steal from everyone holding the currency that they issued. This is also known as inflation and is described by some as a “hidden tax”.
Of course, when banks compete with each other, issuing their own respective currencies, they are naturally limited in their ability to steal. They need to keep enough reserves on hand to satisfy any depositors who might want to make a withdrawal. If word got out that the bank could not pay its depositors, the result could be a run on the bank in which all the depositors would ask for their money at once, thereby shutting down the bank. The answer to this natural limitation is the concept of the national central bank. Most countries in Europe had created (and effectively were run by) central banks by the nineteenth century. But the United States, under Andrew Jackson, shut down its central bank in 1836.
The banksters, of course, wanted a new central bank in the United States. After decades of manipulation and intrigue, they eventually got their wish when Woodrow Wilson signed the Federal Reserve Act into law in 1913, creating the Federal Reserve System. This is essentially a consortium of private banks empowered to manipulate the new currency of the realm, federal reserve notes, to benefit themselves at the expense of everyone else. Because it has monopoly power over the issuance of currency, banking regulations, and interest rates, the Federal Reserve completely controls the nation’s wealth, including the value of the notes in your pocket and of the balance in your bank account.
But let’s take a closer look at the mechanism of theft inherent in fractional reserve banking. In our earlier example, Archie was able to steal value from every laptop owner around the world by producing new laptops. Upon the sale of those laptops, Archie got to keep the proceeds, and no one ever even knew that he or she had been ripped off. The theft was completely unseen. Eventually Archie gets richer and richer, and he uses that wealth to buy up valuable assets, mostly from the very people who he had earlier swindled because they were now poorer and could not afford to hold onto those valuable assets.
The concept of theft by lending money is well established. An individual, company, group or country feels squeezed by financial circumstances, and seeks relief in the form of a loan. The lender, whether a bank, the IMF (International Monetary Fund), or Jimmy the local loan shark, loans the money and then uses that loan as leverage to extract wealth. In the farm belt in the United States, it was and is common practice to loan money to farmers for new, expensive equipment to farm more efficiently. Unfortunately, the terms were often so draconian that the farmer would be unable to comply and would lose the farm, which more often than not was also the family home. This is reflected in the decline of the family farm and the rise of giant agribusinesses such as ADM and Monsanto over the last 100 years or so.
Fractional reserve banking facilitates the practice of theft by lending. In the field of international assistance to third world countries, run by the IMF, the World Bank, the WTO (World Trade Organization), and private international banks, this behavior is commonplace. A country’s ruling class will borrow money (newly created out of nothing) that it cannot possibly repay, implicitly pledging the assets of the country as collateral. The terms are such that the country and its people become debt slaves to the bank. The banksters eventually move in and seize what they want. In Greece this year, for example, the Greeks are losing islands and water rights to help alleviate their crushing debt.
In 2008 we saw the collapse of the housing market bubble. That bubble was created through easy credit (newly created money) from the Federal Reserve and federal government policies and mechanisms to encourage home ownership – that is, ownership of homes by those who could not afford to do so. As a result, prices were bid up dramatically as people entered the housing speculation industry, flipping houses to make extraordinary profits in very short periods of time. The houses weren’t really going up in value, so the bubble would inevitably burst. When it did, suddenly people realized that they had paid way too much for their homes and were now stuck with mortgages that exceeded the real value of the houses. As part of the aftermath, banks are sweeping up properties in foreclosure or bankruptcy and speculators are buying these properties at auction, all while the families that had bought the homes at inflated prices fall into financial ruin. Some of the less fortunate are those who hold onto the homes and continue to make the mortgage payments, thereby continuing in their status as debt slaves.
College tuition has been skyrocketing in recent years, due to the perception that education will lead to higher incomes and more prosperity. However, the education that is being offered at the current inflated prices is, to a large extent, worthless because it has no relation to the earning ability of the student either before or after graduation. The prices are inflated because borrowing (newly created money) for tuition is being encouraged and subsidized by government. Education is a much bigger topic that deserves more attention, but the upshot is that students are graduating with a debt burden that cannot be discharged in bankruptcy and a degree that does not lead to gainful employment and higher income. The result is an entire generation of college graduates who work just to make payments on student loans.
Debt slavery is the new norm. Ordinary people are forced into toiling for decades to make payments on debt due to student loans, home mortgages and credit cards, and then they retire – on what? Social security? In a few short years social security will be essentially worthless. Oh, you’ll still get the checks, and maybe there will be a cost of living increase along the way, but the value of the money will be dramatically less than it is today. This is inevitable. In the meantime, the bankers and their cohorts collect all the real wealth, in real assets like land, gold, commodities, etc. They are systematically stealing the wealth of the world, and the world does not even see that the theft is happening.
If the banks, through fractional reserve banking, can create money out of nothing to lend, why can’t I just create my own money and loan it to myself? That is called counterfeiting, and it is punished severely by the authorities. Why is counterfeiting so bad? Because by creating new money out of nothing, you are stealing value from everyone around you. And yet, the banks do this routinely – creating wealth for themselves at the expense of everyone else.
What if I start my own bank and then loan out money that I create out of nothing to my friends and family? Well, when a bank loans out money, thereby creating it, all it does is make a computer entry in your account. There is no actual physical money created. In order to do this I would need to belong to the Federal Reserve System monopoly which controls the movement of money through banks all across the United States.
In a world in which banks create money and loan it at interest, the borrower needs to pay back the principal of the loan as well as the interest. This doesn’t seem that significant until you realize that under the Federal Reserve System, every dollar (federal reserve note) that is in circulation today was created out of nothing by the Federal Reserve and LOANED to the government at interest. That means that the amount of money in circulation is equal to the principal debt owed by the people to the banks. If everyone tried to pay off their debts at once, including principal and interest, there would not be enough currency to pay it all. It is literally impossible, under the Federal Reserve System, for everyone to become debt free. The U.S. monetary system is based on indebtedness. Therefore, the people of the United States, under the Federal Reserve System, are perpetually in debt.
The situation is similar to that of a casino. Everyone knows that the odds are against them, but each gambler hopes to be one of the lucky ones who will hit it big and walk away richer than when he entered. However, the house always wins over the long term. Most will lose and go home poorer than when they arrived. The illusion of opportunity is maintained to perpetuate the system, but we are all actually big losers in this casino run by the Federal Reserve.
The answer to this problem is two-fold. Firstly, the abolition of the Federal Reserve System and the return to honest money. The precise mechanics of this reform can and will be debated, but the fundamental goal needs to be currency, the value of which is not subject to manipulation by government or private interests. Secondly, the abolition of fractional reserve banking. That would cause credit to be properly valued, thereby ending the seemingly perpetual booms and busts we routinely experience in our economy. As part of these measures, the owners of the Federal Reserve should be held accountable and made to pay reparations to the people in the country that they have been fleecing for the past 98 years. Wealth would be returned to the people who actually earn it and deserve it.
However, Congress is notoriously ineffectual and slow. (It was designed that way.) Taxing, spending and borrowing continued unabated, and in 2011 the United States was confronted with what was characterized as a debt crisis. The U.S. was at the self-imposed limit of its borrowing capacity, and the newly elected Tea Party congresspersons took this opportunity to dramatize the enormous debt that had been accumulated by the federal government, particularly the trillions of new debt racked up since January of 2009 when Barack Obama assumed the office of the Presidency. (It is appropriate to point out here that the President has no power to borrow or spend money; that power is vested in Congress.) After much wrangling and hand-wringing, the “crisis” was averted by a political shell-game of “cover your ass”, and responsibility for reining in spending and borrowing was delegated to a group of 12 senators and representatives, the Joint Deficit Super Committee, to solve the problem at a later date. That Committee subsequently failed.
The backdrop to this fiscal uproar was and is an unraveling debt crisis in Europe, which includes violence in the streets and threatens to bring down very large banks and destroy the financial system of the world. In addition, what has been called the “Arab Spring” was changing regimes in the Middle East, one country after another, in a seemingly spontaneous call for freedom and democracy. (Freedom and democracy go together like ice cream and anchovies, but that’s another discussion.)
Then suddenly, Occupy Wall Street was born. Thousands of unemployed workers, indebted students, graduates and others decided to squat in Manhattan’s financial district to protest – well, it’s not entirely clear what – and the movement spread to other cities around the nation. According to occupywallst.org, the goal is “to restore democracy in America.” (Never mind that the United States has never been a democracy.)
The common complaint underlying both the Tea Party and Occupy Wall Street is that most wealth is being accumulated by a few privileged bankers and their friends, and the mass of Americans is getting screwed. Unfortunately, many in both movements are casting blame haphazardly at Wall Street, immigrants, Republicans, Democrats, low taxes, high taxes, spending cuts, too much spending, corporate greed, moral decay, etc. This staggering lack of focus in both groups, and among the general public, exists because very few people understand the real problem. That lack of understanding is by design. The real problem is theft by deception.
The history of humankind is, in no small measure, the story of one group stealing from another group, whether by guile or outright violence. In the ancient world, the expropriation of assets was fairly straightforward: larger, stronger forces would dominate the weak and take as they pleased. However, after the fall of the Roman Empire, new methods of manipulation and larceny began to rise.
Although banking and lending has existed throughout recorded history, it was in the Middle Ages and the Renaissance when these activities matured into fully-fledged tools of pilferage through duplicity. The basics of banking at the time were that a depositor would receive a receipt, or note, from the bank attesting to the deposit of gold or silver with the bank. When the depositor needed his gold or silver to buy something, he would go to the banker, surrender his note, and receive his metal. Eventually for convenience, the bank notes themselves were used for purchasing goods and services. The seller then would take the note to the bank to receive the metal, or simply use the paper note in a future transaction.
Of course, bankers also lent money for a fee (interest). Much of the early financing took place among merchants and farmers. Gold or silver would be lent to the borrower who would then repay the loan at a later date when his shipment of goods arrived or his crop was harvested. Over time, however, the bankers discovered that they could lend out, not necessarily the gold or silver, but just the bank notes which had begun circulating as currency.
By the seventeenth century, the negotiability of bank notes had become firmly established. People just generally accepted bank notes as currency, and the trust in any particular currency depended upon the stability of the bank which issued it. Here is where it gets interesting. The bankers soon realized that almost no one came to the bank to get the gold or silver. It was heavy, bulky, conspicuous and vulnerable to theft. Better to keep the bank notes nicely folded in your pocket than to carry around a big bag of coins.
The bankers found that because no one came for the metal, they could just issue new bank notes whenever they made a new loan. Therefore, there was now no limit to the amount that they could loan at interest, except of course, if too many depositors showed up to redeem their bank notes. This practice is known as fractional reserve banking. It is the basis of the banking system around the world today, and it is the fundamental foundation of fraud by which the banksters systematically steal from the population of America and the world. The banksters had discovered a way to steal without the victims even knowing that the theft is happening!
How does it work? Let’s demonstrate with a more concrete, albeit fanciful, example. Suppose Archie manufactures and sells laptop computers. In order to make money and stay in business, Archie must buy components, hire employees, rent or buy space, and churn out computers cheaply enough so that consumers will buy them. Pretty simple, right? This is the basic paradigm of business with which we are all familiar, and we can apply this same model to plumbers, auto manufacturers, retail stores, and medical doctors. But what if Archie discovered an entirely new technology which allowed him to produce his computers with no costs other than incidentals? What if this technology could shift Archie’s costs to the rest of the world?
Let’s imagine that Archie’s new technology enabled him to build a laptop by surreptitiously taking value from all the existing laptops in the world. That is, Archie’s new device would reach out from his factory, invisibly and silently, through the “ether” to every laptop around the world, and take just a tiny amount of performance and capacity from each one. Those individual tiny amounts of performance and capacity would then be reconstituted by this technology into a new laptop computer in Archie’s shop. Then Archie could turn around and sell this laptop at virtually no cost to himself; the cost would be realized by the millions of laptop owners around the world who now have diminished computers.
That crude example is an apt description of what happens every time a banker makes a loan. Banks don’t loan money from depositors; they loan money that does not exist. They loan money that HAS NO COST TO THEM. The cost is borne by the millions of holders of existing currency which is thereby diminished in value by such loans. That is the brilliance of the thieves known as bankers. They covertly and systematically steal from everyone holding the currency that they issued. This is also known as inflation and is described by some as a “hidden tax”.
Of course, when banks compete with each other, issuing their own respective currencies, they are naturally limited in their ability to steal. They need to keep enough reserves on hand to satisfy any depositors who might want to make a withdrawal. If word got out that the bank could not pay its depositors, the result could be a run on the bank in which all the depositors would ask for their money at once, thereby shutting down the bank. The answer to this natural limitation is the concept of the national central bank. Most countries in Europe had created (and effectively were run by) central banks by the nineteenth century. But the United States, under Andrew Jackson, shut down its central bank in 1836.
The banksters, of course, wanted a new central bank in the United States. After decades of manipulation and intrigue, they eventually got their wish when Woodrow Wilson signed the Federal Reserve Act into law in 1913, creating the Federal Reserve System. This is essentially a consortium of private banks empowered to manipulate the new currency of the realm, federal reserve notes, to benefit themselves at the expense of everyone else. Because it has monopoly power over the issuance of currency, banking regulations, and interest rates, the Federal Reserve completely controls the nation’s wealth, including the value of the notes in your pocket and of the balance in your bank account.
But let’s take a closer look at the mechanism of theft inherent in fractional reserve banking. In our earlier example, Archie was able to steal value from every laptop owner around the world by producing new laptops. Upon the sale of those laptops, Archie got to keep the proceeds, and no one ever even knew that he or she had been ripped off. The theft was completely unseen. Eventually Archie gets richer and richer, and he uses that wealth to buy up valuable assets, mostly from the very people who he had earlier swindled because they were now poorer and could not afford to hold onto those valuable assets.
The concept of theft by lending money is well established. An individual, company, group or country feels squeezed by financial circumstances, and seeks relief in the form of a loan. The lender, whether a bank, the IMF (International Monetary Fund), or Jimmy the local loan shark, loans the money and then uses that loan as leverage to extract wealth. In the farm belt in the United States, it was and is common practice to loan money to farmers for new, expensive equipment to farm more efficiently. Unfortunately, the terms were often so draconian that the farmer would be unable to comply and would lose the farm, which more often than not was also the family home. This is reflected in the decline of the family farm and the rise of giant agribusinesses such as ADM and Monsanto over the last 100 years or so.
Fractional reserve banking facilitates the practice of theft by lending. In the field of international assistance to third world countries, run by the IMF, the World Bank, the WTO (World Trade Organization), and private international banks, this behavior is commonplace. A country’s ruling class will borrow money (newly created out of nothing) that it cannot possibly repay, implicitly pledging the assets of the country as collateral. The terms are such that the country and its people become debt slaves to the bank. The banksters eventually move in and seize what they want. In Greece this year, for example, the Greeks are losing islands and water rights to help alleviate their crushing debt.
In 2008 we saw the collapse of the housing market bubble. That bubble was created through easy credit (newly created money) from the Federal Reserve and federal government policies and mechanisms to encourage home ownership – that is, ownership of homes by those who could not afford to do so. As a result, prices were bid up dramatically as people entered the housing speculation industry, flipping houses to make extraordinary profits in very short periods of time. The houses weren’t really going up in value, so the bubble would inevitably burst. When it did, suddenly people realized that they had paid way too much for their homes and were now stuck with mortgages that exceeded the real value of the houses. As part of the aftermath, banks are sweeping up properties in foreclosure or bankruptcy and speculators are buying these properties at auction, all while the families that had bought the homes at inflated prices fall into financial ruin. Some of the less fortunate are those who hold onto the homes and continue to make the mortgage payments, thereby continuing in their status as debt slaves.
College tuition has been skyrocketing in recent years, due to the perception that education will lead to higher incomes and more prosperity. However, the education that is being offered at the current inflated prices is, to a large extent, worthless because it has no relation to the earning ability of the student either before or after graduation. The prices are inflated because borrowing (newly created money) for tuition is being encouraged and subsidized by government. Education is a much bigger topic that deserves more attention, but the upshot is that students are graduating with a debt burden that cannot be discharged in bankruptcy and a degree that does not lead to gainful employment and higher income. The result is an entire generation of college graduates who work just to make payments on student loans.
Debt slavery is the new norm. Ordinary people are forced into toiling for decades to make payments on debt due to student loans, home mortgages and credit cards, and then they retire – on what? Social security? In a few short years social security will be essentially worthless. Oh, you’ll still get the checks, and maybe there will be a cost of living increase along the way, but the value of the money will be dramatically less than it is today. This is inevitable. In the meantime, the bankers and their cohorts collect all the real wealth, in real assets like land, gold, commodities, etc. They are systematically stealing the wealth of the world, and the world does not even see that the theft is happening.
If the banks, through fractional reserve banking, can create money out of nothing to lend, why can’t I just create my own money and loan it to myself? That is called counterfeiting, and it is punished severely by the authorities. Why is counterfeiting so bad? Because by creating new money out of nothing, you are stealing value from everyone around you. And yet, the banks do this routinely – creating wealth for themselves at the expense of everyone else.
What if I start my own bank and then loan out money that I create out of nothing to my friends and family? Well, when a bank loans out money, thereby creating it, all it does is make a computer entry in your account. There is no actual physical money created. In order to do this I would need to belong to the Federal Reserve System monopoly which controls the movement of money through banks all across the United States.
In a world in which banks create money and loan it at interest, the borrower needs to pay back the principal of the loan as well as the interest. This doesn’t seem that significant until you realize that under the Federal Reserve System, every dollar (federal reserve note) that is in circulation today was created out of nothing by the Federal Reserve and LOANED to the government at interest. That means that the amount of money in circulation is equal to the principal debt owed by the people to the banks. If everyone tried to pay off their debts at once, including principal and interest, there would not be enough currency to pay it all. It is literally impossible, under the Federal Reserve System, for everyone to become debt free. The U.S. monetary system is based on indebtedness. Therefore, the people of the United States, under the Federal Reserve System, are perpetually in debt.
The situation is similar to that of a casino. Everyone knows that the odds are against them, but each gambler hopes to be one of the lucky ones who will hit it big and walk away richer than when he entered. However, the house always wins over the long term. Most will lose and go home poorer than when they arrived. The illusion of opportunity is maintained to perpetuate the system, but we are all actually big losers in this casino run by the Federal Reserve.
The answer to this problem is two-fold. Firstly, the abolition of the Federal Reserve System and the return to honest money. The precise mechanics of this reform can and will be debated, but the fundamental goal needs to be currency, the value of which is not subject to manipulation by government or private interests. Secondly, the abolition of fractional reserve banking. That would cause credit to be properly valued, thereby ending the seemingly perpetual booms and busts we routinely experience in our economy. As part of these measures, the owners of the Federal Reserve should be held accountable and made to pay reparations to the people in the country that they have been fleecing for the past 98 years. Wealth would be returned to the people who actually earn it and deserve it.