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by TRACE MAYER, J.D.
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 aconspiracy 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 debtdenominated 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.
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