Credit Card and other Debt and Legitimacy
of Bank Loans!
Excellent read if you have not done so before.
About our Credit card and other debt and
legitimacy of bank loans!
We are experiencing the worst Bankruptcy in recent memory, much of
it is due to credit card debt. And in great part because of the outrageous behavior
of banks who have been allowed to play the interest game,
and at our peril. The interest game is
"Open Game on Americans" and their future.
It's a rare American that has not been touched by this dastardly action
much less protected, much less informed of these practices, which have
been allowed to go on un-checked, for close to a century.
"When Dreams Die, So Goes
F.D.R. SPEECH ON BANK HOLIDAY
In previous announcements, we have focused on debt-cancellation
programs. For those who missed the lively exchange, it is now
permanently available from the Freedom Force web site at:
Force International issues.
One of the more interesting aspects of this topic is the realization that,
even though banks create money for loans out of nothing, they actually
provide a valuable service by doing so. That is because the newly created money, which is valueless by itself, takes on value when it is coupled to a
loan contract that pledges tangible assets as collateral. In other words,
loans make it possible to back money, not merely with gold and silver, but
with other types of assets as well, and that is very useful for a dynamic
economy. Our complaint with the banks is not that they “monetize debt,”
as they call it, but that they charge exorbitant service fees for doing so
and get away with it by inaccurately calling it interest.
The reason for touching on this topic again is that I recently came across
a recording of a historic speech (included as an audio file at the end of
this section) that dealt with exactly this aspect of banking. It was delivered
from the White House on March 12, 1933, by President Franklin Delano
Roosevelt. It was broadcast over the NBC radio network and was the
first of what later became known as “fireside chats.” The occasion was to
explain why the nation’s banks had been ordered to close their doors the previous week in
what he called a “bank holiday.” The reason for this move
was to stop a nation-wide run on the banks in which too many depositors
were simultaneously withdrawing their money.
As many of you know – especially those who have read The Creature from Jekyll Island – this occasionally happens because banks keep only a small percentage of their monetary obligations in the vault in the form of cash. The
rest is in circulation either as privately held currency or checkbook money.
So, if more than two or three percent of depositors demand their money in
the form of cash at the same time, the banks will not be able to give it to
them. That would not be a troublesome matter if banks were totally honest
and announced in advance that they reserve the right to deny withdrawals
for a specified waiting period. Such accounts are called time deposits
because they require the passage of time before money can be withdrawn.
Certificates of deposit (CDs) are typical time deposits that may have a
deferred withdrawal of anywhere from seven days to five years. On the
other hand, checking accounts generally are classified as demand-deposits, because they carry the bank’s promise to deliver all the money on demand
any time depositors want it. It wouldn’t make much sense any other way, because a checking account would be useless for paying routine bills if the
bank could take two or three months to clear your checks. It is for this
reason that demand-deposit accounts should always be 100% funded
by money in the vault. There is no other way that banks can make an
unconditional promise to give back all our money on demand.
Furthermore, if coin and currency is in the vault, it must not be used as
reserves for loans of checking account money. Otherwise, there would
be multiple claims against the same currency, and we would be right
back where we started: not enough currency to unconditionally
honor the promise to pay everyone on demand.
Banks, of course, do not do this. They play the averages, knowing that,
most of the time, only a small percentage of depositors will demand their
money at the same time. They routinely make promises to depositors that
they know they cannot keep under extreme circumstances. Since they are
in partnership with the government through the Federal Reserve System,
they know that the Treasury will bail them out by supplying whatever
amount of currency may be needed. On the surface, this may sound like
a perfectly logical and sensible thing to do. In the recording at the end of
this section, you will hear FDR say that this is not fiat money (which means money without
backing, created by government decree). He defends that statement by saying that the newly created currency is backed by sound
assets in the banks. That is true as far as it goes, but there is much more to
it than that. When people withdraw their deposits, they exchange
checkbook money for currency, so no new money is created or
extinguished at that time. It merely changes form.
However, as a consequence of the withdrawal, the money supply does
become smaller. That is because deposits are used by the bank as reserves
for loans. Contrary to popular belief, most money deposited into banks is
not loaned out but is used as reserves upon which to create bookkeeping
entries that become new money, and it is this new money that is loaned out.
Typically, the ratio is nine dollars loaned for every one dollar held in
deposit. (For an explanation of this multiplier effect, see The Creature
from Jekyll Island: A Second Look at the Federal Reserve.) Therefore,
when depositors withdraw their money, the banks must reduce their loans.
Since virtually all the money in our present system is loaned into existence,
reducing loans leads to a reduction of the nation’s money supply.
With this in mind, we can better understand the plight of the banks in 1933. Depositors were asking for their money (FDR called them hoarders), and
the banks were in a pickle. To keep their books in balance, they had to call
in loans, but that was impossible, because most of the loan contracts did not allow for that. Even if they did, very few borrowers could have come up with
the cash. The result would have been massive foreclosures. Foreclosure is a viable option for banks in normal times; but it is of little value when they are facing a liquidity crisis. They don’t need property or other assets which they
then must sell in a tumbling market, they need cash. So, the banks were
facing insolvency and bankruptcy. It was the moment of truth for a
system based on dishonesty, and it was FDR’s job to bail them out.
In the recording, you will hear the President explain that, in the final
analysis, there is no solution possible without public confidence in the system. Unfortunately, he was correct. Ideally, a banking system should be sound whether the public has confidence in it or not. It should work even if people distrust it and want to withdraw their money just to be sure. But our present system does not work that way. It truly is a confidence game. The goal of the monetary and political scientists who run the Federal Reserve is not to build integrity into the system but primarily to build public confidence in it so that it never needs to be put to the test.
In this amazing speech, FDR not only soothed the fears of the American
public about the soundness of the banking industry, he also implied that it
would be unpatriotic not to put money back into the banks when they
opened within the next few days. And that is exactly what happened.
By the end of the week, the panic was ended,
thanks largely to this speech.
The First National Bank in St. Petersburg, Florida, experiences a run on
June 12, 1930. Angry depositors want their money, but the bank cannot
pay them. Even though they were told they could have their money on
demand any time they want it, most of it was loaned out to others.
This scene has been repeated thousands of times throughout history and
in every country. It is the consequence of fractional-reserve banking.
Pragmatists have argued that the emergency measures were justified
because they broke the deadlock and got the wheels of commerce
turning again. They say that most of the new currency eventually was
deposited back into the banks and exchanged for checkbook money again,
so it was merely a temporary measure that did no lasting harm.
Those who place principle above pragmatism are not satisfied with that
answer. They are not content when checking accounts continue to be
based on impossible promises, when periodic failures are inevitable,
when the coercive power of government is needed to make things work,
when the cost of these failures is passed on to taxpayers, and when, in
spite of all this, banks continue to enjoy profits far in excess of what they
could earn without the protection given them by
their partners in government.
FDR’s fireside chats marked the beginning of a new era and a new style
of political oratory in America. The fiery and bombastic style traditionally
used before large gatherings at political rallies was soon to be replaced by
a softer, more personal tone. The 60 million people who listened to that first fireside
chat may not have fully understood what was being said, but they
judged the President for sincerity and competence from the way in which
he said it. Unfortunately, that is still the way it works today.
To hear FDR’s fireside chat on The Banking Holiday, click on this link: www.freedom-force.org/audio/FDRbanks.mp3. It may take a moment
to load, depending on the speed of your Internet connection, but please
be patient. It is worth the wait.
FROM THE REALITY ZONE
The Liberty Dollar Solution to the Federal Reserve
Just imagine: Paper money, 100% backed by silver, not issued by the government. The Liberty Dollar is the first real money to appear in the U.S.
since Federal Reserve Notes were separated from gold and silver in the
1970s. This new currency is rapidly spreading in popularity with literally thousands of merchants proudly advertising that they accept it for payment
and also offer it in change. This book is an anthology of 63 informative
essays by 19 economists and monetary experts explaining how the
system works and why you should be involved.
Each book contains a coupon for one free Silver
Liberty Dollar. (More ...)
American Liberties are in stock. You have to see them to believe them.
This paper currency looks like money should, and the silver and gold pieces
that back them up are true works of art. I guarantee that if you carry them around, your friends will want them. (More ...)
The Creature from Jekyll Island sold out shortly before Christmas.
That was bad planning on our part, but we didn’t anticipate the rush of
orders that came in November. The good news is that the 15th printing
arrived a few days ago, and they are going like hotcakes at boy’s camp.
We have held the price line ever since the first edition in 1994, but inflation
is gaining on us, and it looks like the price will have to be increased with the
next printing. So, if you are planning to purchase additional copies for your friends, this would be a good
time to do it. It will be your last chance
at this low price. (More...)
I am happy to announce that we are in production on a new video
documentary tentatively entitled Invisible Ballots; An Invitation to
Political Corruption. It is about the current drive to install voting machines
that have no provision for being audited. In the name of efficiency and convenience,
the public is being conditioned to accept computerized voting systems that produce no paper
record or any other means to independently
verify their accuracy. Only a few computer technicians will understand how
the process works, and voters will be completely dependent on their honesty
and competence. The fate of future elections will be entirely in the hands
of a technological elite who already are claiming that voters should not be allowed to inspect their software programs
or their hardware.
We are being led into a house of mirrors where election records
will be but reflections of reality and fleeting images. If the collectivists
in power have their way, these machines are in our future –
and a lot sooner than most people realize.
The purpose of this program is to awaken the slumbering electorate
before it is too late. Once the vote-counting process falls into elitist hands,
there will be no way to get it back, because only those who support the
system will be elected. This is a sleeper issue for 2004, and we intend to
play a major role in making it a priority in the national debates.
We have retained the services of William Gazecki as our Executive
Director for this project. He is known to many of you as the man who
produced the award-winning documentary entitled Waco; Rules of
Engagement. Most of our interviews have already been recorded, and
the production is progressing rapidly through the edit stage. By next month,
we should be able to announce a firm release date which we expect to be
in the last week of February.
Another tentative title for this program is Counted Out. I would b
interested to know which title you like best. Some like Invisible Ballots
because it has dignity and also accurately described the program content.
Others like Counted Out because it has more of an editorial message to it
and because it carries a double meaning. Some think that Invisible Ballots
is too bland, while others think that Counted Out is too cute for such a
serious topic. What do you think? Please let us know what your first
choice would be by voting here.
MEDIA AND SPEAKING ENGAGEMENTS
For those who may be interested, here is my current schedule:
Radio interview, Jan. 10, Austin, Texas and Internet:
6:00 to 8:00 PM Central Time, KLBJ radio, 590 on AM dial.
Also Internet broadcast at www.590klbj.com/shows.php
Topic: World without Cancer. Call-in line: 877-590-5525.
Personal presentation, Jan 23, Arlington, Virginia:
11 AM, We The People Conference,
held at the Crystal City Marriott Hotel.
Topic: Freedom Force, The Ultimate Solution.
For more information and reservations,
Personal presentation, Feb 5, Tarzana
(W. Los Angeles area), Calif:
7:30 PM at The Grenada Forum, 5657 Lindley Ave.
Topic: Freedom Force, The Ultimate Solution.
For tickets or information call
(818) 385-4003 or (818) 892-2283.
You can also call us at (800) 595-6596 or
or write us at: Reality Zone, 3541