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Usually when conspiracy and money are mentioned in the same sentence
most people’s brains automatically shut off at the thought of talking repitles or cloaked figures in dark rooms. While I do not
discount talking reptiles, haven’t you seen Gieco’s
talking gekko on television, but this broad, deep
and complicated article is for those whose brains have not been devoured or
turned to mush by conspiring reptiles and will objectively address the fiat
legal tender currency and fractional reserve banking conspiracy.
But this conspiracy is far worse than cloaked figures in dark rooms
because this is a conspiracy
of economics. But what is exciting is that some of the
fundamental tectonic plates of economics have begun shifting and what has
appeared to the perceptive is actionable, peaceful and extermely
effective strategies to harness the ecnomics in
favor of the average person’s freedom.
He who has the
gold makes the rules.
MONEY, ILLUSIONS AND CURRENCY
Currency is usually the
most widely used medium of exchange in economic transactions. Currency can be
composed of either money, money substitutes or
illusions. The only significant element for money is that it must be a tangible asset and
throughout history there has been a wide range of substances that functioned
as money ranging from seashells to salt and giant stones to the King and
Queen of commodities; gold or silver.
Money substitutes are merely
certificates for money and a common form were silver or gold certificates
that operated as currency in various countries and formed the foundation for
terms like Dollar, Franc, Mark, Pound, etc. that have since been redefined as they have
become illusions.
Illusions are figments
of people’s imagination that, as long as they are accepted, maintain
some amount of purchasing power. Illusions are usually represented as
ephemeral entries in databases or can take corporeal form as little colored
coupons like the Federal Reserve Note Dollar, Euro, Yen, etc. Illusions have
no intrinsic value and can become worthless. Their only value is in the mass
delusion of people’s imagination that they represent real value.
The main cause of the 2008 financial crisis was the loss of faith in
debt denominated in
illusions. The real and inevitable
financial and economic crisis, which will make 2008 look like a calm Sunday
picnic, will be the evaporation of trust in the prima donna fiat legal tender
currency illusion and world reserve currency the Federal Reserve Note Dollar,
through hyperinflation.
LEGAL TENDER
Fiat currency is a medium of
exchange used in commerce that has no intrinsic value but does receive legal
privileges. Legal tender laws
are used to force one of the exchange partners to accept a payment for debt
in a form that is against
their will. The market interference acts like a price control and supports
the market value for the legal tender.
This is how an intrinsically worthless illusion that is the figment of
someone’s imagination gains economic value. Because more people are
willing to own these illusions this results in an inflation of the legally
privileged currency because it can be produced and held in larger amounts
than would otherwise be possible without the price control.
 
This type of price control has many deletrious
effects such as (1)
a higher purchasing power for the legally assisted currency, (2) a decline in
purchasing power and price of competing currencies because of the lack of
demand for cash balances even if they enjoy legal tender status such as the
$50 1 ounce American gold eagle, (3)
exacerbations of the business cycle due to inaccurate interest rate signals
and (4)
costly logistical efforts to reduce currency risk by exchanging one medium of
exchange for a more reliable substitute.
With these nefarious economic effects
it begs the questions: Why are legal-tender laws so frequently undertaken
throughout history by monetary organizations? Only two rational answers are
possible: (1)
ignorant political leadership or (2)
brazen villainy.
Many apoligists for The State support the
first defense. But since political leaders are often surrounded by court economists and enjoy the
services of knowledgeable counselors it only makes sense that they are
engaged in brazen villainy with the intent to reap personal profits, export
the undervalued currency and reduce the real economic effect of contracted
debts, a subtle form of sovereign default.
Legal tender laws allow illusions to function as currency which should
be valued like the common stock of the governments. The main source of
revenue for governments is confiscation through inflation which is a form of
taxation without representation. Legal tender laws eliminate all technical
obstacles to an infinite debasement of coins or currency. The governments
throughout the world are engaged in quantatitive
easing and are acting like penny-stocks with no sustainable or rational business
model so the only way to ensure the next paycheck is through massive
dilution.
FRACTIONAL RESERVE BANKING
Fractional reserve banking is
the practice of accepting demand deposits, deposits that can be demanded at
anytime by the depositor, while at the same time lending a fraction of those
deposits where the loan repayment cannot be demanded at anytime. Usually
depositors become genreal unsecured creditors of
the bank.
The result is a mismatch of time horizon between the bank’s
assets and liabilities which renders the bank de facto insolvent. Because the
bank has deliberately and with specific intent engaged in conduct knowing
that it cannot meet its outstanding liabilities therefore it has commited fraud by engaging in the practice of a
fractional reserve banking conspiracy.
The reserve ratio
is the ratio between demands held by the bank divided by total demand
deposits. For example, if deposits are $100 and loans are $85 and there is
$15 at the bank then the reserve ratio would be 15%. For a bank to not be
engaged in fraud it would have a 100% reserve ratio.
This practice of having a reserve ratio less than one also has an
inflationary effect because there usually more total demand deposits and
loans than underlying currency. In as much as the debt functions as currency,
like Auction Rate Securities, Commercial Paper or Money Market Funds, this
has an effect of increasing the currency supply. In aggregate, the liquidity
pyramid is increased.
THE FIAT LEGAL TENDER CURRENCY FRACTIONAL RESERVE
BANKING CONSPIRACY
One likes to think that one man equals one vote. But if that is the
case then why do banks receives trillions of dollars in bailouts while
millions of people get evicted from their homes on the basis of fraudulent
mortgage documents used in sham forclosure
proceedings?
Well, as Eric Schmidt, CEO of Google remarked, “Laws are written
by the lobbyists.” The lobbyist industry has grown because as a whole
it generates a positive return on investment.
Frank Fetter in the 1904 version of The Principles of Economics made two
great insights: (1) “The market is a democracy where every penny gives
a right to vote.” (page 395) and (2) “So
each is measuring the services of all others, and all are valuing each. It is
the democracy of valuation.” (410).
When viewing access to lobbyists and political influence through the
lens of economics it becomes apparent that the effect of fractional reserve
banking conspiracy and legal tender laws has is to create votes out of
nothing which dilutes existing voting power.
Thus fraudulent actors engaged in a fractional reserve banking conspiracy
are able to use ill acquired gains from criminal activity of the fractional
reserve banking conspiracy to fund lobbying efforts that ex post facto
legalize their immoral behavior. This vote
inflation through merger of bank and state apportions to
bankers many more votes than they would otherwise have in a free society or a
society where one man equaled one vote.
If bankers were
receiving the death penalty instead of bailouts then there would be a quick
economic recovery and increased standard of living because moral hazard would
be greatly reduced and malinvestments quickly
liquidated.
But this insight is not new as both Nicholas Oresme, a 14th century French bishop and Thomas Jefferson
warned about this vile activity. Nicholas Oresme
wrote in chapter 17 page 28 (page 105 of the PDF) of A Treatise On The Orgin,
Nature, Law and Alteration of Money,
The usurer has lent his money to one who takes it of his own free
will, and can then enjoy the use of it and relieve his own necessity with it,
and what he repays in excess of the principal is determined by free contract
between the parties. But a prince, by unnecessary change in the coinage,
plainly takes the money of his subjects against their will, because he
forbids the older money to pass current, though it is better, and anyone
would prefer it to the bad; and then unnecessarily and without any possible
advantage to his subjects, he will give them back worse money …. In so farthen as he receives more money than he gives, against
and beyond the natural use of money, such gain is equivalent to usury; but is
worse than usury because it is less voluntary and more against the will of
his subjects, incapable of profiting them, and utterly unnecessary. And since
the usurer’s interest is not so excessive, or so generally injurious to
the many, as this impost, levied tyrannically and fraudulently, against the
interest and against the will of the whole community, I doubt whether it
should not rather be termed robbery with violence or fraudulent extortion.
As I quote in chapter three of The Great Credit Contraction Thomas
Jefferson wrote:
The [Bank of the United States] is one of the most deadly hostility
existing against the principles and form of our Constitution. The nation is,
at this time, so strong & united in its sentiments that it cannot be
shaken at this moment. But suppose a series of untoward events should occur sufficient to bring into doubt the competency of a
republican government to meet a crisis of great danger, or to unhinge the confidence of the people in the public
functionaries; an institution like this, penetrating by its branches every
part of the Union, acting by command and in phalanx may, in a critical
moment, upset the government. I deem no government safe which is under the
vassalage of any self-constituted authorities, or any other authority than
that of the nation or its regular functionaries.
Because of the unfair, immoral and dangerous consequences vote
inflation poses to a free society or system of government the Founding
Fathers enacted into law restrictions on legal tender such as Article 1
Section 10 of the United States Constitution that reads ‘No State shall
… coin Money; emit Bills of Credit; make any Thing but gold and silver
Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto
Law, or Law impairing the Obligation of Contracts’.
In addition they enacted extremely draconian penalties for engaging in
activities like treason or quantitative easing which is the debasement of the
currency. For example, Section 19 of the 1792 Coinage Act reads:
SEC. 19. And be it
further enacted, That if any of the gold or silver coins which shall be
struck or coined at the said mint shall be debased or made worse as to the
proportion of fine gold or fine silver therein contained, or shall be of less
weight or value than the same ought to be pursuant to the directions of this
act, through the default or with the connivance of any of the officers or
persons who shall be employed at the said mint, for the purpose of profit or
gain, or otherwise with a fraudulent intent, and if any of the said officers
or persons shall embezzle any of the metals which shall at any time be
committed to their charge for the purpose of being coined, or any of the
coins which shall be struck or coined at the said mint, every such officer or
person who shall commit any or either of the said offences, shall be deemed
guilty of felony, and shall suffer death.
Under Section 3 of the United States Constitution it should be noted
that “The Congress shall have power to declare the Punishment of Treason,
but no Attainder of Treason shall work Corruption of Blood, or
Forfeiture except during the Life of the Person attainted.” This means
that should a person be convicted of treason and executed then Congress may
confiscate the property of traitors but that property must be inheritable at
the death of the person convicted.
Therefore, the Founding Fathers used gold and silver not as mere
commodities but as essential
checks and balances in the political machinery. Additionally,
they felt so strongly that tampering with these essential checks and balances
posed such a threat to the peace and safety of society and government that
they prescribed capital
punishment as a strong deterrent to engage in these morally
hazardous activities. Thus we see that if bankers were receiving the death
penalty instead of bailouts then there would be a quick economic recovery and
increased standard of living because moral hazard would be greatly reduced
and malinvestments quickly liquidated.
INDUSTRIAL AGE VERSUS INFORMATION AGE ECONOMICS OF
VIOLENCE
During the Industrial Age the return on investment from engaging in
violence was extremely high. For example, a factory, mine, railroad or
skyscraper required tremendous amounts of capital for their construction and
the barrier to exit was extremely high. This allowed governments or labor to
organize and extort the holders of capital through strikes, collective
bargaining agreements and other coercisive tactics.
Additionally, the barrier to exit geographically was likewise
extremely high. How easy is it to move a mine, factory or skyscraper? This
allowed governments or labor, which derive jurisdiction based on geography,
to extort holders of capital through regulations, taxes and other legal tender
laws. After all, politics is force and force is violence.
But in the Information Age the return
on investment from engaging in violence is falling tremendously
and in most cases going negative. While some economists would attribute the
decline in violent crime to the legalization of abortion, implying that
low-income crime destined babies are the majority being aborted, instead I
would attribute it to the fact that engaging in violent crime profitably is
getting increasingly difficult.
One reason is the cost
of protection in the Information Age is so much lower. For
example, if someone were to rob you how much valuable stuff will they get and
what is the probability that they will be caught? Even nefarious criminals,
whether strutting around in costumes or not, perform mental calculations of
value to determine whether their behavior will be profitable. One example for
why robberies have declined is like that so much less cash is carried while
credit or debit cards can be quickly canceled leading to lower expected
returns from the behavior.
Another example that illustrates the extreme disparities between
protection costs and violence returns is a pure Information Age technology: encryption. TrueCrypt is free and it takes about 10 or 20 seconds
to mount and close a volume which then protects your information against
snoops, identity thieves or other nefarious individuals. TrueCrypt
and Dropbox make a particularly potent duo.
What are the costs to access the information against the will of the encryptor?
Sure, even strong encryption like 256-bit AES or Swordfish which meets
Department of Defense standards and is used by TrueCrypt
can be broken but it requires thousands of dollars worth of resources and
lots of time. This creates an expontially expensive
curve for the extortionar in terms of both time and money as you
can create 100 encrypted volumes for free in less than 10 minutes for every
volume that contains actionable useful information and then if someone were
to try and access that information without your consent it would cost
hundreds of thousands of dollars. Thus, the cost benefit analysis begins to
weigh heavily in favor of the individual using encryption. And the more
people who use encryption to protect their information against criminals the
more likely it is that criminals will look for easier targets.
One result of the high return on investment from violence in the
Industrial Age was the greater use of violence. The transition from the Agricutural Age to the Industrial Age, which took about
500 years, led to the rise of tremendously large nation-states that exercised
tremendous amounts of violence because it was profitable and the elites
needed their capital assets protected.
An unfortunate side-effect of these economics was that during the 20th
century the leading non-natural cause of death was governments; Mao, Polpot, Stalin, Lenin, Hitler, Hiroshima, Nagasaki,
Vietnam and etc. What do you expect when violence is so profitable?
But there is a new order of the ages that is rising like the sun and
requiring the vampire squids that rely on violence to retreat into the
increasingly scarce shadows. And unlike the 500 year transition into the
Industrial Age we are already 15 years into a 40-50 year transition into the
Information Age because of the rapid relentless advance
of technology.
The things you
own end up owning you.
HOW TO HARNESS THE INFORMATION AGE ECONOMICS TO
DEFEAT THE CONSPIRACY
I have found that the number one comment I receive from people who
unsubscribe from my email list is ‘No time’. This is probably
because they have designed their lifestyle in such a way that it is far too
complicated. They probably have too many committments,
too many distractions and too much stuff. As Tyler Durden
said in Fight Club, “The things you own end up owning you.”
First, simplifying
your life is an excellent example of how to starve the vampire squid
while increasing your quality of life. The social change of the 1960′s
was not caused by the marches or the police dogs, the fire hoses or the
riots. The social change of the 1960′s was caused by one thing: boycotts.
Every aspect of our lives have been pervaded
by corporations and government. Instead of fresh, simple, wholesome and local
food we eat processed, unnatural and packaged or fried food at chain
restaurants. Starbucks coffee, Apple computers, Microsoft or Adobe programs,
Nike shoes, Gap clothes, etc. paid with Visa or Mastercard
with debt denominated in illusions. When not drooling in front of the TV
being programmed by lies our time is spent at the mall, or talking on the iPhone or Crackberry while
consuming news from CNN or The New York Times being connected by AT&T or
Verizon.
Consider that a corporation wants to maximize shareholder value with
profits and to do so it will often cut corners, endangering our health and
the environment. BP, Bhopal, Valdez, Iraq, etc. It will deceive us to spend
our money on its products. It will treat its employees horribly to cut costs
and increase production. It will happily make us fat then employ lobbyists to
pass laws forcing us to buy their healthcare all the while knowing that by
selling fried food devoid of nutrition is good for profits and increased
rates of heart disease, diabetes and cancer just mean higher revenues from
the sickness industry.
The madness can be stopped. The corporation and government are a hungry beast that we keep feeding. The solution: walk away and let it die from hunger.
There are many advantages to voluntary
austerity. By stripping out the unnecessary you are able to
make more room for what gives you joy. You will have more freedom, time, room
for important things, less worry, more pleasure, develop provident living principles, frugality
and most important become healthier. Want to start chopping off the vampire
hydra’s heads and simultaneously cauterizing the neck so it cannot grow
back? Instead of buying stuff then simply buy gold, silver or platinum with any disposable income.
Second, work towards
increasing your location
independence. Governments derive their jurisdiction based on
geography. Why do you think as the Information Age has risen that banks and
their subsidaries, governments, have attempted to
make geography more important through KYC (Know Your Client) and AML
(Anti-Money Laundering) regulations and laws? The PATRIOT ACT, over a third
of which is devoted to financial institutions, could better be called the
Cash-Flow Control Act which is primarily aimed at keeping capital in the
Federal Reserve Note Dollar illusion.
But the Information Age makes geography far less important than
before. To achieve location independence you simply arrange your affairs so
that your geography is irrelevant to your ability to enjoy life and conduct
business. In desperation as governments become increasingly desperate for
revenue they will continue raising income and sales taxes, registration
requirements and fees, etc.
So it will become increasingly important to consider the last of four critera in Meredith Whitney’s 600 page report about
municipal versus state debt. As Bloomberg reported,
“Whitney’s report rates the states on four criteria: the economy,
fiscal health, housing and the flexibility
to raise taxes.” For those serious
about increasing their ‘tax flexibility’ which results in
decreasing the ability to have their taxes raised then I highly recommend
getting our new report State Income Tax
Optimization because you can keep a lot more of your money through proper
planning and be better prepared for the future.
Third, begin to use alternative and substitute
currencies. Legal tender laws are undergirded by the ability to
require someone to use a medium of exchange against their will. GATA has done tremendous work in exposing the central bank
gold price suppression scheme, besides the de facto manipulation that results
from legal tender laws, which is resulting in the recent CFTC denouncement of the silver price
manipulation. There are approximately 100-140 ounces of paper gold or
silver for every one physical ounce.
So if you begin acquiring physical bullion you can exercise principles
of reverse leverage
with the potential for huge profits. If your bullion is unencumbered then you
can remain solvent longer than the market can remain irrational.
As you develop a location independent lifestyle you will need the
ability to transmit value around the world. So begin using a substitute
currency in the ordinary daily transactions that you can. I find GoldMoney a perfect solution to (1)
acquire gold, silver and platinum that is held in (2) 100% reserves and (3) can be
used in ordinary daily transactions like more expensive alternatives such as Paypal or wire transfers to buy assets, pay contractors,
receive payment for services or goods, etc. Even billionaires like Eric Sprott, who was recently interviewed
by Eric King, endorse this practice.
I don’t know the exact number but I would bet my number is way
beyond 50% in precious metals and I sleep very well at night. I would not be
sleeping that well if I were owning government bonds
or a mortgage on a building somewhere. It is the one asset that no-one has a
claim on so I heartily endorse everyone moving all of their currencies [into
gold and silver]. … There are lots of ways to do it to. I think of GoldMoney and I happen to have a small interest GoldMoney that James Turk runs. And I have some of my
money there and that is perfect. I get to put my money in the bank and it is
gold at the same time. How cool is that?
Fourth, as the
economics of violence have changed and because those economics undergird the
largest and most powerful institutions the Information Age inspired massive
sea-change for society, business and government in favor of peaceful and
cooperative behavior will continue to intensify.
Like a hapless idiot that falls into the piranha infested Amazon river
or like an iron beam submerged in nitric acid; the current Establishment is
being corroded on all sides all at once by this ginormous
change in the economics of violence. As a result The Great Credit Contraction has
started and cannot be stopped which has resulted and will continue to result
in both real and fictitious capital burrowing down the liquidity pyramid
searching for safety and liquidity.
The choice you have is to go with the new mega-trend or try or resist
it. The economics of the age were not kind to carriage makers, telegraph operators
or blacksmiths. Change is not mandatory; you can go extinct. This change in
economics coupled with the Internet makes other epics of human history and
advances in technology look miniscule.
You can continue getting milked or turned into hamburger by
corporations and governments or
you can take matters into your own hands and implement simplicity in your
life, increase your location independence and use alternative currencies in
order to starve the beast to death.
That is where things are going anyway so why give them any extra
fruits from your labor? Remember the golden rule: He who has the gold makes the rules.
Will you be among those who make the rules in the Information Age?
CONCLUSION
For hundreds of years the fiat legal tender currency and fractional
reserve banking conspiracy has been tyrannically oppressing mankind. In the
Information Age the economics of violence are radically different so as the
world transitions into a new order of the ages there will be significant
turmoil and likely greater degrees of violence from desperation. But when the
dust settles there will be a much more free, prosperous and peaceful world.
The trick will be to avoid becoming collateral damage.
Now we can see the mutually exclusive conclusion Dr. Edwin Vieira asserts: “Thus, the fight
over gold and silver as media of exchange is about more than mere money, let
alone making money. For it is a fight with only two possible outcomes: either
control of their own lives by the people themselves, or control of the people
and their lives by political and economic elitists.”
Please tell us what you think!
DISCLOSURES: Long physical gold, silver and platinum
and short governments.
Trace Mayer
RuntoGold.com
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