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Earlier this month in Nashua, New Hampshire, Congressman
Ron Paul said that 1913 was a bad year and that we need to repeal that entire
year. The crowd cheered him. Well, what exactly happened in
1913? Two very important events took place in the United States that year. The first was in February, when the 16th Amendment was
passed by Congress and income tax began (see www.thelawthatneverwas.com).
The second event occurred in December, of that same
year, when Congress authorized another Federal Bank in the form of the
Federal Reserve Bank. (President Andrew Jackson killed the previous
federally chartered Second National Bank, by refusing to renew its charter in
1836, he claimed it was the greatest accomplishment of his life. Two
years later, in 1838, he paid off the national debt entirely.)
How are these two acts related? Going back in history, we find Lincoln
was hard pressed for funds to pursue his invasion of the Southern
States. He simply issued paper notes directly from the U.S. Treasury
called "greenbacks." These notes were payable in gold
without interest at some unspecified date in the future. He then used
these same notes to pay troops and purchase supplies. They were
declared legal tender and circulated along side regular gold-backed
currency. They were good for all debts, EXCEPT for payment of taxes to
the government. For that, Lincoln wanted gold-backed notes. Even
though the greenbacks were legal tender, they were discounted against the
gold-backed notes. Eventually, they were redeemed at full value a
couple of decades after they were issued. So, if a country can directly
issue bonds, why can't it issue notes (currency)? Why do we need a
private bank (the Federal Reserve) to issue them for us? Thomas Edison
stated that a country that can issue bonds can also issue notes or
currency. Both are promises to pay, but one fattens the bankers and the
other helps the people. As a matter of fact, the U.S. Treasury issued
silver certificates directly with the government's silver backing it up as a
government-issued note or currency until 1963, when the Federal Reserve
started printing small notes.
Why does the government print bonds and sell them to the privately owned
Federal Reserve Bank in exchange for currency (notes) and pay interest on
those bonds to a private bank, when it could just issue the notes (currency)
themselves without having to pay any interest at all?
Let's look a little further back in history to King Henry I in England.
King Henry invented the "talley stick". This was a
carved wooden stick that was broken in half lengthwise. One half was kept
by the Chancellor of the Exchequer and the other half was "spent"
by the King. Later, the halves would be matched up to prevent
counterfeiting. Why you ask would anyone accept a broken stick in
exchange for crops or goods of real value? What if the King only accepted
those same talley sticks in payment of taxes? The King declared that
only talley sticks would be accepted to pay certain taxes and if you didn't
have them the King's men would knock on your door, take you away to jail by
force of arms and confiscate your lands. What gave the talley sticks
their value? Was it the fact that they were pretty pieces of wood or
was it the fact that they were declared valuable by the King at tax
time? These talley sticks circulated in England for 726 years until
1826, when the Bank of England could stand it no longer.
Now just think for a minute. If the government can fund their
operations by issuing bonds (or currency), why do they need to collect
taxes? It is the very fact that those taxes are collected in unbacked
worthless paper Federal Reserve notes that give them their value.
Without the income tax, fiat money issued by the Federal Reserve would not
have value. The private Federal Reserve notes are given value due to
their enforcement arm, the U.S. Treasury collection agents who will knock on
your door, take you away to jail by force of arms and confiscate your lands
or assets if you do not pay your income tax with them.
It is no coincidence that both were passed in the same year. In 1924,
shortly before his death, President Wilson said in regards to the federal
reserve, "I have unwittingly ruined my country."
In our current little liquidity crisis, the nasty secret of the Federal
Reserve and fractional reserve banking comes into play. When the U.S.
Treasury sells a one dollar bond to the Federal Reserve, the Federal Reserve
gives the U.S. Treasury a one dollar note (that costs the Federal Reserve
nothing). The Federal Reserve then charges interest on the note.
After the U.S. Treasury spends the dollar into circulation and it ends up at
a private bank it gets even better. The private bank can send the
single dollar to the Federal Reserve Bank and place it on deposit there, and
then borrow nine dollars from the Federal Reserve (that it creates out of
thin air) to loan out in commercial loans. So with a 10% Bank Reserve
for every one dollar, the U.S. Treasury borrows and spends into circulation
nine dollars get created out of thin air in commercial banks in conjunction
with the Federal Reserve Bank. When one dollar of currency is pulled
out of the system, the money in circulation decreases by nine dollars.
When the 10% reserve requirement is lowered, it gets even crazier. Is
there any wonder that panics can cause liquidity crisis with our present
system? Top it all off with Wall Street's new leveraging tricks, and
the multiplier effect is staggering during a contraction. No wonder the
Federal Reserve has to flood the market with money to keep up with a
contraction. The entire system is flawed because of greed.
Do you ever wonder where the interest comes from to pay on all the money that
was created out of thin air? And, what is the true rate of return on a
note that didn't cost the Federal Reserve Bank anything in the first
place? Infinity!
While other presidential candidates are hacking at the branches, only one has
the sense to strike at the root. The more you learn about Dr. Ron Paul,
the more you will like him. I wonder if he is related to Andrew
Jackson?
Opt out of a dishonest system and save in silver and gold. You can
either trust the "banksters" or 5,000 years of history with
your savings.
Larry Laborde
Silver Trading
Company
www.silvertrading.net
Larry lives in the occupied South with his wife Puddy and sells
precious metals at the Silver Trading Company. Larry can be contacted
at llabord@aol.com. You can view
his web site at www.silvertrading.net.
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