The Problem with the Dollar Jake Towne, 2009 TowneForCongress.

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Dishonest Money: The Fall of the Dollar

The purchasing power of the dollar has lost >94% since FDR took America off the classical gold standard in 1933 through monetary inflation. The monetary inflation was caused by the FED. They debased the dollar by creating more and more irredeemable paper dollars. TowneForCongress.com

Dishonest Money How to Create $900 from $100

The banking system creates dishonest money each time you deposit money. Here's how it is done, using the current approximate fractional reserve ratio of 10%.
Step 1) A depositor deposits $100 at a bank. Total Reserves: $100 Total Loans: $0 Total Money Supply: $100 "Give me control of a nation's money and I care not who makes its laws." - Mayer Amschel Rothschild, 1744 -1812, Leader of the Rothschild Banking Cartel of Europe
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Dishonest Money How to Create $900 from $100

Step 2) The bank holds $10 for its reserves and loans out the other $90 to others. Total Reserves: $10 Total Loans: $90 Total Money Supply: $100
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford
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Dishonest Money How to Create $900 from $100

Step 3) This $90 is deposited elsewhere. Next, this second bank takes the $90 in deposits, holds $9 for its reserves, and loans out the other $81. Total Reserves: $19 Total Loans: $171 Total Money Supply: $190
"When an assembly undertakes to issue paper as money, the whole system of safety and certainty is overturned, and property set afloat. Paper notes given and taken between individuals as a promise of payment is one thing, but paper issued by an assembly as money is another thing. It is like putting an apparition in the place of a man; it vanishes with looking at it, and nothing remains but the air." - Thomas Paine, Dissertations on Gov't

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Dishonest Money How to Create $900 from $100

Step 4) Step 3 repeats. The third bank takes the $81 as a deposit, holds $8.10 for its reserves, and then loans out $72.90. Total Reserves: $27.10 Total Loans: $243.90 Total Money Supply: $271
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The few who understand the system, will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class. The great body of people, mentally incapable of comprehending the tremendous advantages, will bear its burden without complaint." - Lord Rothschild

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Dishonest Money How to Create $900 from $100

Step 5) The process keeps repeating. The bulk of the money creation is done after 15 repeats, but what is eventually left after 40 or 50 repeats is pretty much: Total Reserves: $100 Total Loans: $900 Total Money Supply: $1000 So within a short period of time, banks transferring to other banks within the system can CREATE $900 from the initial $100 deposit. For those hearing the above for the first time, this process is such NONSENSE that it is a little hard to grasp.
Source: Federal Reserve Bank of Chicago, Modern Money Mechanics (1994)
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Dishonest Money FED Open Market Operations

The FED itself also creates or destroys dollars, but they do not even require deposits. The Federal Reserve conducts open market operations by purchasing or selling any type of asset. In the past the FED mostly bought Treasuries. In the past several years, the FED has mostly bought company assets or bad debt, such as AIG's.
"Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back." - Josiah Stamp, former President of the Bank of England

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Dishonest Money FED Open Market Operations

Heres what happens when the FED buys Treasuries or other assets 1) The FEDs Open Market Committee (FOMC) decides to expand the nations money supply. They purchase, for example, $100 billion in Treasury bonds. 2) The FED writes a check on itself for $100 billion. [Where did it get the money? The answer is -- FROM NOWHERE!] Monetary Supply Expansion: $100 billion 3) This $100 billion FED check then goes to one of the select government bond dealers (such as JP Morgan Chase or Goldman Sachs) in exchange for the $100 billion in Treasuries. Monetary Supply Expansion: $100 billion 4) Then the dealer deposits its $100 billion FED check at a commercial bank. Monetary Supply Expansion: $100 billion 5) Enter the fractional reserve loop. This deposit is very quickly loaned out repeatedly and grows to $100 billion in deposits and $900 billion in loans. Monetary Supply Expansion: $1 Trillion TowneForCongress.com

The FED Causes Depressions (1/4)

"On account of [the Federal Reserve], we ourselves are in the midst of the greatest depression we have ever known. From the Atlantic to the Pacific, our Country has been ravaged and laid waste by the evil practices of the Fed and the interests which control them. At no time in our history, has the general welfare of the people been at a lower level or the minds of the people so full of despair... They are the victims of the Fed. Their children are the new slaves of the auction blocks in the revival of the institution of human slavery." - Congressman Louis T. McFadden, Pennsylvania's 15th District - From the 1934 Congressional Record
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The FED Causes Depressions

"Our nation's monetary policy over the past century is the most despicable hoax ever committed against the American people in our history. If I can help the people of our district understand the utter immorality, the sheer evil, of this system and how it restrains the prosperity of our society, we will and can succeed. With your help, I can help lead the way with actions that can save us and our children. This is not a joke. If our society fails to deal with this, the abject slavery McFadden warned of, and drop in living standards will soon be realized by us all.

(2/4)

Rembrandt's 1626 depiction of Jesus chasing the Money-changers out of the temple

- Jake Towne
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The FED Causes Depressions

(3/4)

Interest rates represent the present time-value of money.

They serve as a check-valve between the deployment of
capital (and the amount of mal-investments!) for economic growth and the savings deferred to the future to pay for the goods and services resulting from the growth.
Interest is the difference in the valuation of present goods and future goods; it is the discount in the valuation of future goods as against that of present goods.
- Ludwig von Mises American Economist and Founder of the modern Austrian School

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The FED Causes Depressions The FED decides on and sets the interest rate.

(3/4)

Unlike most of the 19th Century (without the FED) and the early 20th Century where the different FED regions varied interest rates to account for regional differences (agricultural Midwest, industrial East Coast), the modern FED constrains the economy to the same interest rate. This is similar to the EU's central bank; not only do they all use the Euro, but far more importantly, highly industrialized states like Germany now share the same interest rates as states with very different economies like Greece and Spain.
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve... Regarding the Great Depression: You're right, we did it. We're very sorry. - current FED Chairman Ben Bernanke From his 8 November 2002 remarks

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The FED Causes Depressions

8.0

(4/4)

Source: http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt

Federal Reserve Interest Rate 1995-Apr 2009

Federal Funds Rate % (Monthly Weighted)

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Bust Bust Boom Dot.com's Tech stocks

9/11
Boom Housing
Fall 2007: Financial System Breakdown Begins

Depression Treasury & Dollar Crisis

The FED's interest rate control combined with the money supply changes result in the Boom-Bust cycle. Booms are periods of credit expansion that central bankers mostly created themselves, while busts are credit contractions. Each Boom plants the seeds of the next Bust by creating a multitude of wasteful mal-investments.

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Demand Market Transparency in OTC Dark Derivatives

Derivatives are Weapons of Mass Destruction! - Warren Buffet, 2003

So... what are derivatives? Simplified, the term "derivative" refers to a "derived" wager, or bet, on the price of something. Derivatives are financial contracts whose values are derived from the value of something else, which is termed the "underlying" asset. The main use of derivatives is to reduce risk for one party. Many of today's derivatives are wagering on paper "assets" that have no intrinsic value (like the interest rate of a GE corporate bond) rather than tangible goods like wheat or oil.

For more details, please read my article What the Heck Are Derivatives? at www.nolanchart.com/article5620.html TowneForCongress.com

Demand Market Transparency in OTC Dark Derivatives

Bring Light to Dark Derivatives! - Jake Towne, 2008

Over-the-counter derivatives are very loosely regulated and directly traded between two parties. Quite likely, many OTC derivative contracts are insolvent since corporations cannot cover in the case of one party defaulting. Requiring traders to use an exchange or publish proof of solvency should be required of corporations.
All values in Trillions of USD, circa 2008

Source: www.nolanchart.com/article5620.html
OTC Derivatives

World Equity and Bond Markets

EXD Derivatives

World Real Estate

World GDP

U.S. GDP

The crux of the OTC derivatives issue is its enormous size relative to rest of the financial system.

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Replace the Socialistic Keynesian Government Status Quo with the Austrian Free Market
Keynesian Economics
The Money Power is held by the Government & Bankers Government Commands the Economy Renown for Deficit Spending and Stealing via Currency Debasement Redistributes Wealth to the MilitaryIndustrial Complex, Banking Cartels, Special Interest Groups & Corporations Allows and Rationalizes Government Takeovers of Private Businesses May promote capitalism and the free market in word, but in deed functions as Crony Capitalism, Vulture Capitalism, the Corporatocracy or Disaster Capitalism

In the long run, we are all dead. - Lord John Maynard Keynes British Economist and Central Planner

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Replace the Socialistic Keynesian Government Status Quo with the Austrian Free Market
Austrian Economics
The People own the Money Power Government Plays No Role in Economic Planning Promotes Honest Money & Balanced Budgets Highly Rewards those who Create Wealth and Shares it with All Government Does Not Takeover Private Businesses Promotes Free Market Capitalism and laissez faire, or let them be! economics

All those intent upon sabotaging the evolution towards welfare, peace, freedom and democracy, loathe gold. - Ludwig von Mises Founder of the modern Austrian School

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Source List (1/2)

This is a partial list of the sources used in this work. Place the cursor over the title to access the link. Here is a LINK to a summary of my writings and my semi-bibliography.
Armstrong, Martin. 2009. Financial Panic = Political Change. Bastiat, Frederic. 1848. The Law. Butler, Smedley. 1935. War is a Racket. The Constitution of the United States. 1787-present. Eisenhower, Dwight. 1961. Farewell Address. Federal Reserve Bank of Chicago. 1994. Modern Money Mechanics. Federal Reserve. Federal Funds Rate Data, Monthly 1954-2009. Fekete, Antal. 2009. Open the Mint to Gold! Hazlitt, Henry. 1946. Economics in One Lesson. Jefferson, Thomas. 1801. First Inaugural Address. Marx, Karl. 1848. The Communist Manifesto. See page 21/44 for the planks McFadden, Louis T. 1934. Remarks in Congress on the Federal Reserve. Mises Institute. Money, Banking, and the Federal Reserve. 40-min. Video TowneForCongress.com

Source List (2/2)

Place the cursor over the title to access the link. Here is a LINK to a summary of my writings and my semi-bibliography.
Reagan, Ronald. 1984. Remarks when accepting the presidential nomination. Rothbard, Murray. 1990. What Has the Government Done with Our Money? Towne, Jake. 2009. America's Military Empire. Towne, Jake. 2008. Bernanke's Great Lie The Gold Standardand the Great Depression. Towne, Jake. 2009. Thank You for Paying Your Voluntary Income Tax! Towne, Jake. 2008. The Money Matrix How the FED Works. Towne, Jake. 2008. The Money Matrix What the Heck Are Derivatives? Towne, Jake. 2009. The Money Matrix Bring Light to Dark Derivatives Towne, Jake. 2009. Why Obama's Stimulus Plan Will Fail... and a Better Alternative. Washington, George. 1796. Farewell Speech to the People of the United States. White House Budget FY2009. (FY2010 here.)

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Document Copyright
Copyright Jake Towne, 2009. Any portion of this presentation that could be copyrighted is owned by myself and I hereby released it to the public domain. I grant full permission to use any of the ideas or material within. You may republish this work. Attribution to myself is appreciated but not required.

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