Monetising the future: Reprisal
Remembering the proud men of the golden age, who behind the squalor and dirt-smeared faces are sinewed lines carved deep, not of hard work but from smiles of boundless undiluted joys; from fair gratitude of their wages earned, from every sweat and bone breaking toil, they are the embodiment of high virtue; They from the honourable age of probity — the proud men of the golden age.
I am drawn to observe the magnificent glimpses of integrity lost in time. In this very moment, at the intersection of West Swan and Roe, I see a horizon devoid of any man or motor, and yet we await the traffic light turn green, regardless. — A cab filled with ethics, rectitude, and morality.
Now to speak of such entity that which have none.
“Now I am become death, the destroyer of worlds.”
A famous line from the Hindu sacred text, the Bhagavad-Gita, yet infamously attributed to the Director of the Manhattan Project, J. Robert Oppenheimer.
Dubbed the “Father of the Atomic Bomb,” Oppenheimer uttered the words upon the success of the Trinity Test on July 16, 1945. It was the antecedent to the terrifying creation of Little Boy, a 4.85-ton warhead carrying a critical mass of Uranium-235 that detonated with an approximate energy of 15 kilotons of TNT.
Little Boy was the instrument responsible for the horrific destruction and devastation of Hiroshima on August 6, 1945.
Oppenheimer’s reiteration of the sacred Hindu text, however, would have similarly described the fraught atmosphere of one dire December evening when Woodrow Wilson, 28th President of the United States, signed into law the Federal Reserve Act of 1913.
The Federal Reserve
Staring at the red light, obedient to the unit mounted on a short pole, a soft yet clear voice speaks in confident baritone:
“A central bank is necessary to maintain economic stability in a country.”
A factual statement indeed, at least on the principles of the institution if not the very purpose of its formation.
Born out of the “panic of 1907”, its establishment is one beset with masterful duplicity and the unmitigated perseverance of its key advocates.
Triggered by a strategic rumour — a speculative hoax on the insolvency of the Knickerbocker Bank and The Trust Company of America, saw prices in the New York Stock Exchange fall to nearly 50%. Within two weeks, the sharp plummet of stock prices resulted in an unprecedented bank run to which the US financial system was brought to its knees.
In the wake of the crisis, however, comes the timely intervention of a heroic few. Who in the most desperate of times brought aid to the nation’s financially enfeebled state. JP Morgan, with the assistance of John D. Rockefeller, coordinated financial strategies through trades and led an economic campaign to induce and revitalise liquidity back into the financial markets, thus saving the US economy from an imminent financial collapse.
Consequently, the chaotic events of that fateful day in 1907 led the American people to unite under a single objective — the demand for economic stability in the safe hands of a central bank.
With this unfolds a nation’s past, brought to the very brink of financial turmoil yet found deliverance in the caring hands of its economic patriots. A remarkable turning point in history.
But history as told by the victors.
Its non-mythical version goes back to the time when a bank’s primary function was for safe-keeping gold and silver. People would deposit these valuables and will take receipt money — backed by gold, which can be exchanged or used for barter.
Banks, however, saw that in the total amount of receipts they have issued, only 7% would come to collect their gold or silver. This notion gave bankers a sinistrous epiphany to which they devised a way to exploit the observed 7%. The scheme was to issue out more receipt money to loan into the economy with interest against gold or silver they don’t have. It was ingenious, perhaps to a capacity that even organised crime syndicates would find impressive. Besides, it was an act where if done outside the doors of the institution, it would be classified as fraud.
From the outset, it was rudimentary at best. Although it has seen some successes to a degree, it was also very disorganised and chaotic. Banks were operating independently in issuing their own form of money called banknotes — which can be good at one place and utterly worthless in another.
For anyone who has spent considerable time speculating the financial markets knows that a rumour is all but enough to cause a snowball effect of uncertainty into a destructive avalanche of economic hysteria. As it transpired, a speculative rumour sparked a bank run that drove the nation into a state of pandemonium, thus creating the crisis of 1907. The American people wanted to put a stop to that, and as so willed, stop it did.
Well, not exactly.
The supposed need for a central bank was to regulate such market instability and extreme volatility. However, this so-called reform was drafted by the very same people who caused it in the first place. Alas, herein lies a towering conflict of interest where the aim to control such fraudulent act was but a clever ruse for a nationwide, centralised expansion.
“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.” — John Kenneth Galbraith
Modern Money Mechanics: The Magic behind Money
“Where does money come from?” I endeavour to understand his concept of this illusive information that governs all forms of society, and as expected from a dignified and personable man he replies:
“It comes from hard work. From getting up early and working the long hours to provide for your loved ones.”
A statement his children would have been proud to hear were they present. I knew I was.
Money, however, as perceived by such virtuous eyes along with the oblivious masses, is in fact a financial instrument that is created out of nothing.
The process begins in the exchange between two key organisations. Initially, the government prints out treasury bonds equivalent to the amount of money they will require. In response, the Federal Reserve prints out federal reserve notes equal to the government’s required amount, which then pays for the treasury bonds. The Federal Reserve notes are then deposited by the government into a bank account, thus creating an expansion of the country’s money supply. This simple process of exchange is how money is added into the system as legal tender.
Now a government bond is essentially a promise to pay periodic interest during the life of the bond and repays the face value on its maturity date. It is fundamentally, an architecture of debt.
Since these bonds were bought by the Federal Reserve with money they created out of thin air, then money is inherently created out of debt for it is loaned into existence.
Due to inflationary forces, an expansion through quantitative easing is implemented. The government injects this supply of new money into the economy to address the inherent inflation. However, without a corresponding change in economic factors such as commodities, goods and services, this created money then devalues the dollar as an effect of its supply, taking its value from the money that is already in circulation which ultimately debases the currency. As a result, prices will rise causing more inflation, calling for more quantitative easing and so goes the cycle, ad infinitum.
In Modern Money Mechanics, a booklet published by the Federal Reserve Bank of Chicago, describes the fundamentals of money creation in a Fractional Money Reserve system. Its core concept, without the smokescreen of its intended complex economic jargon, is rather basic. A quick summation of it is as such:
Say if a person, paid his wage of $1000 and deposits it in a bank, then by Federal Reserve rule the bank is allowed to loan out up to 90% of the money deposited with them — this is called excessive reserve. Banks are able to loan this out legally within the system of money expansion.
In this instance, the bank now has $900 (90% of the previous deposit) to loan out to any individual or business that may require it, and subsequently upon redeposit will create a fresh $810 available to be loaned out. From this will be an available $729 and so it goes. If we were to simulate this using the fractional reserve formula, there will have been $10,000 generated from the initial deposit of $1,000 in which $9000 of it is debt.
In a perfect world scenario, this money expansion system should work fine. However, in likely events such as simultaneous withdrawals of deposits over the reserve of $1000, immediate disaster ensues as there will be no funds available for withdrawal, the rest is just money loaned into existence. Another scenario is if these initial loans were defaulted beyond the reserve amount, it too would culminate a horrific financial meltdown familiar to many of us, think “Subprime” — but more on this later.
If there were no debts in our money system, there wouldn’t be any money — Marriner Eccles, Governor of the Federal Reserve
Now that we have a rather simplified concept of the mechanics of a Fractional Money Reserve system, this cycle of perpetual debt that debases the currency through money expansion, along with the slapping of interest rates, implies that the nation is faced with an ever constant devaluation of their hard earned dollar in which one’s valued frugality may sadly amount to nothing.
According to the Bureau of Labor Statistics CPI (Consumer Price Index), the average US inflation rate is 3.13% per year, which means prices in 2018 are 2,445.34% higher than in 1913 — when the Federal Reserve Act was signed into law. This means that in purchasing power, $100 in 1913 is equivalent to $2,545.34 in 2018, a total difference of $2,445.34 and rising.
Businesses are affected, consumer prices continue to rise as well as unemployment, resulting in a financially struggling nation. But these concerns were made to look alleviated, if not non-existent. A clever masking of such critical issues were done through an expansion of loans — people who are normally considered as high-risk, either due to bad credit rating or disqualifying a credit criteria, were extended mortgage loans throughout the country.
Subprime Mortgage Crisis of 2007
In the wake of the tragic events of 9/11, preceded by the recession brought by the tech bubble of the late 1990’s, the Federal Reserve had initiated a series of rate cuts reducing it to historically low levels. This was a strategic implementation to induce liquidity by encouraging the public to invest and borrow. The slogan of the time was that spending was “patriotic” — propagated from the high office of the government, all the way down to the educational system. It was a nationwide effort to boost consumer confidence and to expand the country’s money supply.
As a natural response from the exploitative nature of the financial sector, banks and loan originators capitalised on the opportunity presented by the extreme rate cuts. They started giving out mortgage loans to anyone who would apply for it regardless of their financial status or credit rating. They even had a name for it, they called it NINJA Loan, which stands for No Income, No Job, No Asset — No problem. It was arrogant as it was dangerous.
As a combined result of the loose-lending, the low-interest rate, the subprime loans, the “AAA” credit rating given by delusive agencies such as Moody’s and Standard and Poor’s, saw the housing market go parabolic. Consequently, as all market bubbles in history, the housing bubble eventually burst that it culminated a staggering number of mortgage delinquencies that set a chain of events subjecting the world into deep global recession.
I look over to my right, and a brewing indignation approximate to the rising taxi speed is quite observable; he shares his thoughts and experiences of the time:
“I remember that time it was around early 2009. All industries were affected, including ours. I used to work half the time for the money I make now. I hope those criminal bankers that went to jail never gets out.”
His foot weighs heavy on the accelerator and yet with a heavier heart I responded:
“Unfortunately, no one went in.”
He glances over with a look of disillusionment. His state, his constitution, is one I had once shared.
They should be tried just like any criminal. — The narrative tainted with frustration and the stench of detritus. An enraged society that built the scaffold and readied the firewood but without anyone to burn at the stake. But who is to blame in such economic tragedy when the system in question is of lawful foundation, licensed, and its operations — fostered and encouraged by its government?
A crippling nation met with derision by the callous actions of the perpetrators. Their movements weighed down not by chains of justice but by the staggering amount of their bonuses — Goldman Sachs record-breaking $16.7bn bonus pot, handed out within a year of receiving bailout funds, who also happened to be the same untouchable institution who created securities they sold to their clients, then shorted them.
“Really? in broad daylight? These bankers are the worst kind of criminals!”
He said with flaming ire, and I agree. At least criminals forge their skills to operate in secrecy, having the decency to organise elaborate heists under the cover of darkness.
“Why didn’t the government do anything then?” He asked.
“You mean Goldman Sachs?” I replied by referring to the government.
“They are one and the same.” I added. For their ubiquity proves it.
The web of network held by Goldman Sachs through its alumni, in both global politics and government is truly confounding. In Congress are Jim Himes, Jon Corzine, and Rahm Emanuel. In the Treasury are Steve Mnuchin, Hank Paulson, Robert Rubin, Larry Summers, and Mark Patterson. In the Federal Reserve are William Dudley, Neel Kashkari, Robert Kaplan and Stephen Friedman — Just to name a few.
They who control the credit of a nation, direct the policy of Governments and hold in the hollow of their hands the destiny of the people. — Reginald McKenna
“But this system only applies to the US right? their economy and government? so how can this be applicable to those who live outside of it?” — A rather valid point he makes.
Essentially, the Federal Reserve is an institution operating outside of the US government. It is cloaked under the guise of a government agency, as well as having the power of government behind it. But in actuality, it is a private institution.
“They’re as Federal as the Federal Express that delivers your parcels!” I brazenly stated.
Its system was designed by a shared monopoly of private banks that dictates control over the monetary policy of the nation, fully independent of the US government.
Alan Greenspan, Federal Reserve Chairman of the US from 1987 to 2006, provides validation to the nature of the Federal Reserve:
The Federal Reserve is an independent agency, and that means there is no other agency of government that can overrule actions that we take.
As for its global significance, the Federal Reserve’s fractional money reserve system serves as template for many other countries. Certain territories may contain slight variations to the FED’s design, yet still adhere to it’s basic structure. Australia for one, its Statutory Reserve Deposit (legally mandated reserve ratio) was abolished in 1988. Yet incorporates “Money Multiplication” as shown below:
“So everybody is affected by it.” His distraught sentiment.
“We all are..” — I could have stopped.
“We are volunteer slaves.”
Sometimes heightened emotions get the best of me. There in the moving confined space, our consciousness momentarily subsumed in deafening silence. We both hated what I said.
“Everyone hates the truth.” I whispered to myself.
In this story, as we descend deeper into the rabbit hole, we unravel the terrifying monstrosity; the mechanism of control used by banking elites — Those who are in their element within the sovereign system of centralisation that warrants their nefarious activities in which global economies lay waste in the aftermath of their greed. Where externalities lead the economy into self-decay, and while the destructive moral hazard of such supremacy is left unquestioned and unchallenged, then the scaffold of the people will remain cold and untouched by fire for as long as the US, and the world, remains a Wall Street government.
“But what can we do about it in our little insignificant lives? Nothing. We are powerless against their control and influence.”
A light of hope fades in him. He looks to me for urgent disagreement and I was not about to abandon him. I managed a quote:
“The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.” — Cassius
There is hope in finding our path with just the faintest of light. I hope to see you in the final installment to this story, Phosphorescence.
