Curried Wealth Building
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November 1, 2009
Issue 68  -  The Fraud of Modern Banking
 
 The first "banks" were palaces or temples where you could store your grain or other commodities.  A receipt was issued for any deposits and those receipts could be exchanged as money.  After the invention of coinage, there was a problem of too many different types of coins.  This brought the advent of the money changer, the true first bankers, who would convert one coin to another type for a fee.  These guys were usually wealthy and had money of their own. 
 
After paper currency was invented things changed.  Originally paper money was backed by something of value, like the grain receipts.  This was typically a precious metal.  There was a limit on the amount of paper money.  Eventually as people accumulated this money they needed some place to put the money.  It was very risky to keep your money on your person.  Think about having $50,000 cash in your house.  That doesn't seem like a very good plan.  Too many risks.  Fire, theft, misplacement.  All of these things could happen and there would be no recourse.  The money would be lost. 
 
A bank was a safe place to keep your money and in fact you would pay the banker to hold it.  That was an income stream for him.  He was already a wealthy guy and needed the bank to protect HIS money.  Letting people pay a fee to store their money was a natural activity. 
 
The rich bank owner would lend out his money for profit.  As time progressed, it was noticed that only a small amount of the money on deposit was ever being taken out.  Why not lend out some of THAT money and earn some interest?  As long as the amount lent was reasonable, the banks deposits would be adequate.  Before long, the bankers noticed the incredible profits possible and they lent out more and more money.  Theoretically the amount kept would never be below 10%. That is no longer true.  Not by a long shot. 
 
Today, you no longer need to be super wealthy to start a bank.  You need connections.  This is because money is now lent into existence.  This is because there is nothing backing it.  No gold, no silver, no grain.  Today the money creation is started by the Federal Reserve.  To see how this works, and it is very confusing, watch this:
 
 
 
Our banking system is a complete fraud.  Simple.  End of story.  This isn't really debatable if you know the facts.  The only people who will argue with you are those who profit from the fraud and the ignorant who have been "taught" that the Fed is a benign entity.  The first part of the fraud is that without debt, there would be NO money.  Read that again.  Think about it.  There is no way that this should be true.  But it is.
 
Our money is created out of thin air.  We don't even have to print it anymore.  It can just be digits on a computer screen.  When gold backed our money, it was real, at least for the most part.  Once that was stopped by Nixon, then all constraints were gone.
 
Once this game starts, there is no happy end game.  It must, at some point crash.  There is no alternative.  The only way to keep this going longer and longer is to create more things that need debt.  Wars are a favorite.  Look how that is going: (from GATA)
 
 
"Costs are out of control, and priorities are skewed in the interest of rich organized interest groups at the expense of the vast majority of citizens. For example, war at all cost, which enriches the armaments industry, the officer corps and the financial firms that handle the war’s financing, takes precedence over the needs of American citizens. There is no money to provide the uninsured with health care, but Pentagon officials have told the Defense Appropriations Subcommittee in the House that every gallon of gasoline delivered to US troops in Afghanistan costs American taxpayers $400.

“It is a number that we were not aware of and it is worrisome,” said Rep. John Murtha, chairman of the subcommittee.

According to reports, the US Marines in Afghanistan use 800,000 gallons of gasoline per day. At $400 per gallon, that comes to a $320,000,000 daily fuel bill for the Marines alone. Only a country totally out of control would squander resources in this way.
 
 
A lot of people mistakenly think that wars are primarily used to pad the pockets of the defense contractors, and while that is true, the real reason is to create more debt, which creates more money.  The system needs more debt to keep the system from imploding.  When you need to create debt continuously you end up with things like $400 a gallon gas......in the Middle East for cryin' out loud.  The stuff practically flows out of the water pipes over there and we are paying $10,000 to fill up a Humvee?!?!??  Geez.
 
It all comes down to fraud.  The whole system is built on lies and mirages.  Think about this.  Did you know that for a large majority of citizens, paying of income taxes is voluntary?  Watch this video with an interview of a former IRS commissioner.  He struggles to answer the most basic of questions:  (please, please, please watch this video)
 
 
 
 
 
 
This video, and let me first say, that I am NOT telling you to not pay income taxes.  You will, in all likelihood, get steam rolled.  Why I'm showing it is to further demonstrate the dishonesty and lies of the power brokers.  This "suit" tries to equate the terms mandatory and voluntary.  Unbelievable.   After it becomes clear that his lies aren't working he cowardly stops the interview.  These are the type of people who are in CHARGE.  They could care less what's constitutional.  Just the system continues paying them.  That's why the system is terminally broken.  Speaking of broken, how about the true results of that brain dead program, cash for clunkers:
 

"Report: Cash for Clunkers Auto Program Cost Taxpayers $24,000 Per Vehicle

A report conducted by the automotive information firm Edmunds.com found that of the nearly 690,000 vehicles sold under the program, only 125,000 of the sales were incremental.

FOXNews.com

American taxpayers doled out $24,000 per vehicle sold under the government's "Cash for Clunkers" auto program, according to a study released Wednesday.

The report, conducted by the automotive information firm Edmunds.com in Santa Monica, Calif., found that of the nearly 690,000 vehicles sold under the program, only 125,000 of the sales could be credited directly to the Cash-for-Clunkers program.

The rest of the sales would have happened anyway, despite the government program, the report said -- raising questions over its effectiveness.  

The report also said that the average cost for a vehicle in August 2009 was only $26,915 -- minus an average cash rebate of $1,667.

Cash for Clunkers -- officially known as the Car Allowance Rebate System -- was a $3 billion program intended to provide economic incentives to Americans to purchase a new, more fuel efficient cars when they traded in an older, less efficient vehicle.

The program was touted for giving a boost to auto sales while increasing the sales of more fuel-efficient vehicles."

 
 
So, another typical government program.  Doesn't do what it said it would.  Sure it increased car sales but only a small amount of them weren't going to be bought anyway.  What was really wanted was more.... you guessed it, debt.  That's what is needed, as explained above.  Right now debt is contracting, and that is bad, bad, bad for the system.  People are pulling in their horns and paying off debt.  This is suicide to a debt based system.  Expect another "stimulus" package and some other clunkers type program.  Notice how they have already agreed to extend the first time homeowners credit.  This is to encourage more debt.  Debt makes this system spin and if it stops or even slows down, it puts everything at jeopardy. 
 
One last thing, and I'll call it a day.  The stock market has been elevated for quite a while and the fundamentals haven't really improved at all.  So why is this happening?  Read this clip from this article:
 

"Recently, Zero Hedge presented a snapshot analysis of the various securities that made up the triparty repo agreement involving JPM, Lehman and the Fed. We uncovered numerous bankrupt companies' equities that were being pledged as collateral for what ultimately was taxpayer exposure. To our surprise, this discovery is not an exception, and in fact in the days immediately preceding the collapse of Bear Stearns first, and subsequently, Lehman Brothers, the Federal Reserve established and refined a program that permitted banks to pledge virtually any security as collateral, including not just investment grade bonds and higher ranked securities, but also stocks of companies, the riskiest investment possible, and a guaranteed way for taxpayer capital to evaporate in the context of a disintegrating financial system, all with the purpose of bailing out Wall Street's major institutions. On two occasions last year: on March 16, 2008, and subsequently on September 14, 2008, the Federal Reserve first established what is known as the Primary Dealer Credit Facility (PDCF), and subsequently amended it, so that the Fed, in becoming the lender of last resort, would allow any collateral, up to and including stocks, to be funded by the Federal Reserve's credit facility, in order to prevent the $4.5 trillion repo financing system from imploding. By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

Readers who have been concerned with the moral hazard provided by the Fed's monetization of Treasury and Mortgage debt, should be doubly concerned by this Fed action which sent three key messages to Wall Street: i) it made sure that Primary Dealers would generate massive profits on risky assets as the Fed would provide the funding to acquire any and all stocks (keep in mind the cost of funding of the PDCF to primary dealers was negligible); ii) it tipped its hand as to the existence and modus operandi of the rumored "plunge protection team," iii) and it made clear that the much maligned, by none other than Chairman Bernanke, concept of "moral hazard" is the one and only systemically relevant doctrine as long as the Fed's Chairman is in control, and not subject to any auditing auspices. The fact that PDs used over $140 billion of taxpayer money within a few weeks of the program's expansion in September to fund what one can assume were exclusively equity purchases, demonstrates that the American financial system got the message."
 
 
I realize this is dense reading and the whole article is very long so I'll try and make it simple.  The Fed will give you money, which they create out of thin air, for collateral.  This article basically says that banks were given permission to buy stocks and then give them to the Fed for money.  In essence, the Fed is now BUYING stocks!  They are doing this with money they just created.  There is no limit to this money.  This is why the stock market is going up.  The government doesn't want to have the market swan diving which would further add to the debt contraction.  There is now an unlimited amount of money backing the stock market.  Imagine what would happen if that ever ended?  (Hint:  you wouldn't want to have any money in the market that day)
 
This whole con job will not end well.  It must eventually lead to inflation.  Again, this always leads back to one plan of action:  buy gold and silver.  This is the investment no brainer of the last 50 years.  Have a great week!