Love for Life

FORBIDDEN KNOWLEDGE
THE NATURE OF MONEY
From Australia

What the Banks do not want you to know

Original Word Doc Attached: http://loveforlife.com.au/files/Created%20Money%20They%20Lied.doc

The truth about money is so simple a child can understand it, yet those who understand and control it have woven so complex a web of lies and deceit around money that make us believe it to be totally different to its true nature. This is to their huge advantage and our financial slavery.

It is the accepted wisdom that “Banks make their profit from lending their depositors funds to borrowers at a higher rate of interest than they pay those depositors”. It is the hardest thing to get people to challenge accepted wisdom. The above statement demonstrable untrue, although we ( nearly) all believe it.

Proof.. If I loaned you $ 1000, you would have $ 1000 more and I would have $ 1000 less. But the total money in circulation would not be changed. The Banks claim to do the same. Now, Banks make loans every business day, so borrowers accounts would be going up, hence depositors accounts should be going down – but they are not.

Have you ever looked at your Bank Statement and noticed, say $ 1000 missing, rang the Bank Manager only to be told “I have loaned it to some one else” ? No, and neither have I or anybody that I have ever talked to. This is all the proof needed to disprove the accepted wisdom of how banks operate.

1. Banks do not loan out depositors funds.
2. Banks do not loan money, they advance credit.
3. Banks do not have to borrow in order to lend.
4. Every Bank Loan occurs without anybody else having less money.
5. Note that we only borrow principle when we take out a loan, we don`t borrow interest.
6. Note also that we repay principal but we only pay interest.

The truth is, unlike the loan between You and I, when banks make a loan, nobodies account goes down, but the account of the borrower goes up, so there is an increase in the money in circulation.

Where did this money come from?

Overseas, as John Howard told me years ago?

Well, a little investigation showed me that the “ money supply” at that time increased in all countries, so that cannot be right. The simple but startling truth (when first heard ) is that the banks create the money they lend. (Create means bring into existence that which did not exist before).

How do they do this ?

Well, what do you get when you get a bank loan?

Numbers added to your account. Banks literally create money at the stroke of a pen ( punch of a computer key ) when numbers are added to the borrowers account. This money costs literally nothing to create, and the banks do not have and responsibility to any depositor because they do not lend their depositors funds as we have seen.

Where did banks get this power to create money?

In a nutshell, from their knowledge and our ignorance of the nature of money. They work overtime to keep up the deception.

For example.......

Why, if banks create the money they lend, do they have term deposits bearing interest?

To keep up the belief (deception) that banks lend depositors funds.

Money on term deposit is a tiny fraction of bank loans.

Do Banks have any moral right to create money?

A resounding NO.

Do Banks have a legal right to create money?

NO – but most politicians do not believe (or so they say) that banks actually create money, so they “ believe” bank operations are above board.

Abraham Lincoln, John Kennedy and Harold Holt all paid the price for trying to take away the power to create money from the people behind the banking system.

We have a ruthless enemy.

Banks not only create the money they put into circulation, they also extinguish money out of circulation. Money in circulation enhances and simplifies the exchange of goods and services. Money is the common medium of exchange that simplifies bartering and allows commerce to flow. However, when a repayment of a loan is paid to a bank of principle and interest, the numbers go out of the borrowers account but do not come back into anybody else`s account. That money has gone out of circulation or has been extinguished. Banks create the principle of a loan, but extinguish the principle and interest of repayments, and here lies the basis for Australia and every other countries economic problems – namely criminal entrapment.

What we have discussed so far is money having a beginning and an end : A creation and extinction. We are not encouraged to think this way, but where does money go to in a depression, and come from in a boom if there is not an extinction and a creation process?

Note : Money is only a representation (shadow) of wealth – goods, services (labour) and assets. It is not wealth, which is the “ real stuff”.

Knowing how money comes into circulation and goes out, is vital to understanding the problem and to see the solution – and indeed there is a solution. You can be a small but important part of that solution. Money can be lent, spent or given into circulation.

Consider the current international bank controlled money system as applied to Australia:

1. 95 % of money is created by banks and lent into circulation as described above. Loans are debts to be repaid with interest ;

2. 4 % of money is created by banks and spent into circulation , mainly on paying wages, building and maintaining property. It costs the bank nothing to employ staff and build buildings etc. – wages and payments end up as money in the form of numbers added to the workers account ( the costs ) , and this costs the bank nothing ( they are created out of thin air ) amazing – no wonder this is forbidden knowledge. From the workers point of view, money created and spent into circulation by banks is earned into circulation by banks is earned into circulation by the workers – it belongs to him – it is debt – free money.

3. 1% of money is created by government , and that is spent into circulation. This happens at the mint. A $2 coin costs about 10 cents – it is only a token – a law makes it valuable. This token will be used to pay public and private debts and taxes to the value of $ 2., hence the term legal tender.

Note: Government cannot say that it only gets money by taxing and charging. Bank notes are not created by Government, but by the Reserve Bank which is under Private control, in spite of the deception of a Reserve Bank Act of federal Parliament. Try getting a Federal Politician to attack or question The Reserve Bank – it is the way to a very short political career.

Bank notes can be exchanged for numbers in accounts and vice versa.

Putting things together:

Spent in or earned money (2) and (3) above 4 % +1 % = 5 % helps to provide a source of money to pay interest on (1), the loan or debt of money – 95 %.

What if interest demanded on the debt money 95% Is greater than the debt – free money 5%.

Putting it simply, the banks would be asking more out of circulation than there is in circulation, and they invariably do. Consequently there is not sufficient money in circulation for everybody to repay their loan with interest.

If you are successful in the system and repay your loans and make a profit, then much of your interest and all of your profit has come out of the principle of other peoples loans. To be successful, others must fail in this evil banking system – but such a shocking situation need not be, fortunately.

Summary:

Banking is a system in which money is created at no cost and (mainly) lent into circulation after mortgages over real property have been taken.

Interest charged exceeds the small amount of debt – free money, so banks have set a trap in which those who cannot repay get foreclosed on and lose the real wealth they have mortgaged. Hence BANKING IS DECEIT, FRAUD AND CRIMINAL ENTRAPMENT.

Comment:

You cannot keep taking, say, $105 out of circulation for every $100 that comes in.

Why does not the system collapse and there be no money in circulation?

This bank debt system is deliberately unstable.

It is kept :

1. making loans bigger and bigger and
2. writing off debt on people on whom they foreclose…

Debt “written off “ remains in circulation as numbers. Is it really debt? Remember the bank created the “money” as numbers at no cost. Debt by deception, and fictitious at that. All economic problems which lead to many social problems can be explained by the above method of bank operation.

1. Liquidity problems: shortage of money in the system means some must not have enough to repay loan, hence liquidity problems;

2. Inflation: liquidity problem forces some to borrow more to keep going. New loan to be repaid with interest forces up cost of production, hence prices for products / services must go up, hence money buys less – which is the meaning of inflation;

3. Boom: banks lower interest rates, make loans easy to get and the money supply increases, whilst unemployment decreases and productivity increases, but prices rise – loans raise cost of production hence inflation;

4. Recession / depression: banks slow or stop lending and raise interest rates. Money supply decreases, unemployment increases, economic activity decreases, prices may fall so money is deflated – it buys more but it is all “owed “ to the bank anyway – “owed“ only in the sense that you accept the creation of money by banks as legal, which it is not:

5. Unemployment: is not caused by a lack of jobs, it is caused by a lack of money in circulation – this shortage is deliberately caused by banks:

6. Bankruptcy: business failure – the cause has been explained above. Truly the blood of thousands who have suicided over debt / bankruptcy and marital and family breakdown through debt is those who run and control banking:

We allow the Banks to create money at no cost to them, give them the privilege to charge us for principle and interest and bank charges etc. ( on a loan ), how more generous can we be ? ( or dumb )

You have just had the best economics lesson you will ever have – it fits the facts and is free. Isn`t it so true that when you see the problem clearly, the solution is at hand.

The Constitutional Money System:

Believe it or not, all the power needed to sort out the money system is in the Australian Constitution Section 51, 12: The power to make the laws regarding money and 51,13:

The power to make the laws regarding banking.

51,12 : Gave the Federal Parliament the power to set up the mint and create money – coins.

Nothing in the Constitution stops government from creating treasury notes ( instead of bank notes and treasury credit- number money instead of bank credit ).

1. The Federal Government must be forced to use the power we gave them to become sole creator of Australia’s money ( 51,12: ) ( Not the privately owned banks ) further;

2. The Federal Government must be forced to use 51,13: to stop banks creating money , Simple – banks to have accounts with treasury – loans made by cheque to be cleared through treasury, then they cannot lend what they do not have , just like you and me – cheques will bounce.

3. Treasury created money at the direction of the parliament is to be ( mainly ) spent into circulation which is the same as being earned into circulation by those who work for it.

4. All constitutionally empowered purposes of Government are to be financed by government created credit and never by taxing to gain money or borrowed at home or abroad. ( IMF or World Bank Loans – debt to them is now over

5. $ 450 billion dollars and climbing)

6. Recommended to the Australian people to amend the Constitution to stop government taxing to gain money or borrowing . This will force the government to use the power the people gave them to create money.

7. Government created money will be backed by the assets produced by those who work for it. Those assets will be produced cost – free to government , so no debt , hence no interest / principle repayments need to be made, hence no need to tax. Bank credit is not backed by anything other than fraud and deceit.

However this is not something for nothing. Those who work for the money Government created have benefited society. Their pay is a power of command over other peoples goods, services and assets. The real reward of those who benefited society is the real wealth others will give them in exchange for the money they earned. Instead of paying tax so the government can achieve, we provide goods and services in exchange for money as the reward for those who did the work for government for the national benefit.

Government will be required to spend sufficient money into circulation to provide for full employment making sure that money is backed by real wealth.

8. User pays will apply to Government services, but with no government debt, these will be much cheaper, and with all income tax and all hidden taxes removed which the government now uses to gain money, people will have six times as much expendable income to decide what services they require

9. Social Security will be solved in the best possible way – jobs for all, except the aged, disabled and mentally ill. Savings for old age will be easy for those who work ten years in the new system.

10. Zero inflation – constant buying power of money is the only fair basis of a money system – impossible in the bank system, but totally possible in the Constitutional system. To achieve this, as an asset of government is worn out - for example, a road – treasury will gather up money from those who use it ( tax on fuel ) and tax it out of circulation. For example, a stretch of road costs $ 20 million and is expected to last 10 years. Then each year $ 2 million is taken out of circulation – so all the $ 20 million is taken out in 10 years . Then with zero inflation, $ 20 million created by treasury will see it rebuilt.

11. Bank assets and wealth gained by fraud will be restored to the people as equitably as possible. Australia will be owned totally by Australians.

12. Top bankers in Australia who have worked this fraud will be jailed for life , and any overseas top bankers who dare show their faces likewise .

I told you that government would have to be forced to use 51, 12 : and 51, 13 : of the Constitution.

Why? They have the power, why won`t they use it ? They are too frightened to use it – and don`t call them cowards until you consider yourself in their position. Those behind the banking system (it is only a tool) have a record of assassination against those who try to take away their assumed power to create money – Lincoln, Kennedy, Holt.

They will even induce war if they cannot – Saddam Hussein and Desert Storm. Sounds a bit risky to do anything, true, but the result of doing nothing will be a New World Order

Where mind control, slavery or death will be your lot.

What can we do – with little risk – to force government to obey we the people instead of the evil hidden government?

1. Educate yourself – learn what other strategies are available to you.

2. Talk – explain and teach others – give them copies of this letter- spread the knowledge fast . Let the politicians know that you now know the truth and what are they going to do about it.

Why will this work? Well, the bankers have said that if the people in large numbers wake up to how we operate , we`ve had it . However, they boast that most people are to dumb to do this .

PROVE THEM WRONG!

Link: www.loveforlife.com.au/node/4539 and http://captainranty.blogspot.com/2009/07/forbidden-knowledge-filthy-lucr...
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DOLLAR DECEPTION: HOW BANKS SECRETLY CREATE MONEY

By Ellen Brown
3rd July 2007

It has been called "the most astounding piece of sleight of hand ever invented." The creation of money has been privatized, usurped from Congress by a private banking cartel. Most people think money is issued by fiat by the government, but that is not the case. Except for coins, which compose only about one one-thousandth of the total U.S. money supply, all of our money is now created by banks. Federal Reserve Notes (dollar bills) are issued by the Federal Reserve, a private banking corporation, and lent to the government.1 Moreover, Federal Reserve Notes and coins together compose less than 3 percent of the money supply. The other 97 percent is created by commercial banks as loans.2

Don't believe banks create the money they lend? Neither did the jury in a landmark Minnesota case, until they heard the evidence. First National Bank of Montgomery vs. Daly (1969) was a courtroom drama worthy of a movie script.3 Defendant Jerome Daly opposed the bank's foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. "Consideration" ("the thing exchanged") is an essential element of a contract. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan. The courtroom proceedings were recorded by Associate Justice Bill Drexler, whose chief role, he said, was to keep order in a highly charged courtroom where the attorneys were threatening a fist fight. Drexler hadn't given much credence to the theory of the defense, until Mr. Morgan, the bank's president, took the stand. To everyone's surprise, Morgan admitted that the bank routinely created money "out of thin air" for its loans, and that this was standard banking practice. "It sounds like fraud to me," intoned Presiding Justice Martin Mahoney amid nods from the jurors. In his court memorandum, Justice Mahoney stated:

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, . . . did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.

The court rejected the bank's claim for foreclosure, and the defendant kept his house. To Daly, the implications were enormous. If bankers were indeed extending credit without consideration – without backing their loans with money they actually had in their vaults and were entitled to lend – a decision declaring their loans void could topple the power base of the world. He wrote in a local news article:

This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all U.S. and State bonds held by the Federal Reserve, National and State banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself . . . to study this decision very carefully . . . for upon it hangs the question of freedom or slavery.

Needless to say, however, the decision failed to change prevailing practice, although it was never overruled. It was heard in a Justice of the Peace Court, an autonomous court system dating back to those frontier days when defendants had trouble traveling to big cities to respond to summonses. In that system (which has now been phased out), judges and courts were pretty much on their own. Justice Mahoney, who was not dependent on campaign financing or hamstrung by precedent, went so far as to threaten to prosecute and expose the bank. He died less than six months after the trial, in a mysterious accident that appeared to involve poisoning.4 Since that time, a number of defendants have attempted to avoid loan defaults using the defense Daly raised; but they have met with only limited success. As one judge said off the record:

If I let you do that – you and everyone else – it would bring the whole system down. . . . I cannot let you go behind the bar of the bank. . . . We are not going behind that curtain!5

From time to time, however, the curtain has been lifted long enough for us to see behind it. A number of reputable authorities have attested to what is going on, including Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s. He declared in an address at the University of Texas in 1927:

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.

Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta in the Great Depression, wrote in 1934:

We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.6

Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged:

Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.7

Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report:

[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.
How did this scheme originate, and how has it been concealed for so many years? To answer those questions, we need to go back to the seventeenth century.

The Shell Game of the Goldsmiths

In seventeenth century Europe, trade was conducted primarily in gold and silver coins. Coins were durable and had value in themselves, but they were hard to transport in bulk and could be stolen if not kept under lock and key. Many people therefore deposited their coins with the goldsmiths, who had the strongest safes in town. The goldsmiths issued convenient paper receipts that could be traded in place of the bulkier coins they represented. These receipts were also used when people who needed coins came to the goldsmiths for loans.

The mischief began when the goldsmiths noticed that only about 10 to 20 percent of their receipts came back to be redeemed in gold at any one time. They could safely "lend" the gold in their strongboxes at interest several times over, as long as they kept 10 to 20 percent of the value of their outstanding loans in gold to meet the demand. They thus created "paper money" (receipts for loans of gold) worth several times the gold they actually held. They typically issued notes and made loans in amounts that were four to five times their actual supply of gold.

At an interest rate of 20 percent, the same gold lent five times over produced a 100 percent return every year, on gold the goldsmiths did not actually own and could not legally lend at all. If they were careful not to overextend this "credit," the goldsmiths could thus become quite wealthy without producing anything of value themselves. Since only the principal was lent into the money supply, more money was eventually owed back in principal and interest than the townspeople as a whole possessed. They had to continually take out loans of new paper money to cover the shortfall, causing the wealth of the town and eventually of the country to be siphoned into the vaults of the goldsmiths-turned-bankers, while the people fell progressively into their debt.8

Following this model, in nineteenth century America, private banks issued their own banknotes in sums up to ten times their actual reserves in gold. This was called "fractional reserve" banking, meaning that only a fraction of the total deposits managed by a bank were kept in "reserve" to meet the demands of depositors. But periodic runs on the banks when the customers all got suspicious and demanded their gold at the same time caused banks to go bankrupt and made the system unstable. In 1913, the private banknote system was therefore consolidated into a national banknote system under the Federal Reserve (or "Fed"), a privately-owned corporation given the right to issue Federal Reserve Notes and lend them to the U.S. government. These notes, which were issued by the Fed basically for the cost of printing them, came to form the basis of the national money supply.

Twenty years later, the country faced massive depression. The money supply shrank, as banks closed their doors and gold fled to Europe. Dollars at that time had to be 40 percent backed by gold, so for every dollar's worth of gold that left the country, 2.5 dollars in credit money also disappeared. To prevent this alarming deflationary spiral from collapsing the money supply completely, in 1933 President Franklin Roosevelt took the dollar off the gold standard. Today the Federal Reserve still operates on the "fractional reserve" system, but its "reserves" consist of nothing but government bonds (I.O.U.s or debts). The government issues bonds, the Federal Reserve issues Federal Reserve Notes, and they basically swap stacks, leaving the government in debt to a private banking corporation for money the government could have issued itself, debt-free.

Theft by Inflation

M3, the broadest measure of the U.S. money supply, shot up from $3.7 trillion in February 1988 to $10.3 trillion 14 years later, when the Fed quit reporting it. Why the Fed quit reporting it in March 2006 is suggested by John Williams in a website called "Shadow Government Statistics" (shadowstats.com), which shows that by the spring of 2007, M3 was growing at the astounding rate of 11.8 percent per year. Best not to publicize such figures too widely! The question posed here, however, is this: where did all this new money come from? The government did not step up its output of coins, and no gold was added to the national money supply, since the government went off the gold standard in 1933. This new money could only have been created privately as "bank credit" advanced as loans.

The problem with inflating the money supply in this way, of course, is that it inflates prices. More money competing for the same goods drives prices up. The dollar buys less, robbing people of the value of their money. This rampant inflation is usually blamed on the government, which is accused of running the dollar printing presses in order to spend and spend without resorting to the politically unpopular expedient of raising taxes. But as noted earlier, the only money the U.S. government actually issues are coins. In countries in which the central bank has been nationalized, paper money may be issued by the government along with coins, but paper money still composes only a very small percentage of the money supply. In England, where the Bank of England was nationalized after World War II, private banks continue to create 97 percent of the money supply as loans.9

Price inflation is only one problem with this system of private money creation. Another is that banks create only the principal but not the interest necessary to pay back their loans. Since virtually the entire money supply is created by banks themselves, new money must continually be borrowed into existence just to pay the interest owed to the bankers. A dollar lent at 5 percent interest becomes 2 dollars in 14 years. That means the money supply has to double every 14 years just to cover the interest owed on the money existing at the beginning of this 14 year cycle. The Federal Reserve's own figures confirm that M3 has doubled or more every 14 years since 1959, when the Fed began reporting it. 10 That means that every 14 years, banks siphon off as much money in interest as there was in the entire economy 14 years earlier. This tribute is paid for lending something the banks never actually had to lend, making it perhaps the greatest scam ever perpetrated, since it now affects the entire global economy. The privatization of money is the underlying cause of poverty, economic slavery, underfunded government, and an oligarchical ruling class that thwarts every attempt to shake it loose from the reins of power.

This problem can only be set right by reversing the process that created it. Congress needs to take back the Constitutional power to issue the nation's money. "Fractional reserve" banking needs to be eliminated, limiting banks to lending only pre-existing funds. If the power to create money were returned to the government, the federal debt could be paid off, taxes could be slashed, and needed government programs could be expanded. Contrary to popular belief, paying off the federal debt with new U.S. Notes would not be dangerously inflationary, because government securities are already included in the widest measure of the money supply. The dollars would just replace the bonds, leaving the total unchanged. If the U.S. federal debt had been paid off in fiscal year 2006, the savings to the government from no longer having to pay interest would have been $406 billion, enough to eliminate the $390 billion budget deficit that year with money to spare. The budget could have been met with taxes, without creating money out of nothing either on a government print press or as accounting entry bank loans. However, some money created on a government printing press could actually be good for the economy. It would be good if it were used for the productive purpose of creating new goods and services, rather than for the non-productive purpose of paying interest on loans. When supply (goods and services) goes up along with demand (money), they remain in balance and prices remain stable. New money could be added without creating price inflation up to the point of full employment. In this way Congress could fund much-needed programs, such as the development of alternative energy sources and the expansion of health coverage, while actually reducing taxes.

___________________

1 Wright Patman, A Primer on Money (Government Printing Office, prepared for the Sub-committee on Domestic Finance, House of Representatives, Committee on Banking and Currency, 88th Congress, 2nd session, 1964).

2 See Federal Reserve Statistical Release H6, "Money Stock Measures," www.federalreserve.gov/releases/H6/20060223 (February 23, 2006); "United States Mint 2004 Annual Report," www.usmint.gov; Ellen Brown, Web of Debt, www.webofdebt.com (2007), chapter 2.

3 "A Landmark Decision," The Daily Eagle (Montgomery, Minnesota: February 7, 1969), reprinted in part in P. Cook, "What Banks Don't Want You to Know," www9.pair.com/xpoez/money/cook (June 3, 1993).

4 See Bill Drexler, "The Mahoney Credit River Decision," www.worldnewsstand.net/money/mahoney-introduction.html.

5 G. Edward Griffin, "Debt-cancellation Programs," www.freedomforceinternational.org (December 18, 2003).

6 In the Foreword to Irving Fisher, 100% Money (1935), reprinted by Pickering and Chatto Ltd. (1996).

7 Quoted in "Someone Has to Print the Nation's Money . . . So Why Not Our Government?", Monetary Reform Online, reprinted from Victoria Times Colonist (October 16, 1996).

8 Chicago Federal Reserve, "Modern Money Mechanics" (1963), originally produced and distributed free by the Public Information Center of the Federal Reserve Bank of Chicago, Chicago, Illinois, now available on the Internet at http://landru.i-link-2.net/monques/mmm2.html; Patrick Carmack, Bill Still, The Money Masters: How International Bankers Gained Control of America (video, 1998), text at http://users.cyberone.com.au/myers/money-masters.html.

9 James Robertson, John Bunzl, Monetary Reform: Making It Happen (2003), www.jamesrobertson.com, page 26.

10 Board of Governors of the Federal Reserve, "M3 Money Stock (discontinued series)," http://research.stlouisfed.org/fred2/data/M3SL.txt.

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Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.

Link to this article: http://www.webofdebt.com/articles/dollar-deception.php

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LESSONS FROM THE WIZARD OF OZ

"The great Oz as spoken! Pay no attention to that man behind the curtain! I am the great and powerful Wizard of Oz!"

In refreshing contrast to the impenetrable writings of economists, the classic fairytale The Wizard of Oz has delighted young and old for over a century. It was first published by L. Frank Baum as The Wonderful Wizard of Oz in 1900. In 1939, it was made into a hit Hollywood movie starring Judy Garland, and later it was made into the popular stage play The Wiz. Few of the millions who have enjoyed this charming tale have suspected that its imagery was drawn from that most obscure and tedious of subjects, banking and finance. Fewer still have suspected that the real-life folk heroes who inspired its plot may have had the answer to the financial crisis facing the country today!

The economic allusions in Baum's tale were first observed in 1964 by a schoolteacher named Henry Littlefield, who called the story "a parable on Populism," referring to the People's Party movement challenging the banking monopoly in the late nineteenth century.1 Other analysts later picked up the theme. Economist Hugh Rockoff, writing in the Journal of Political Economy in 1990, called the story a "monetary allegory."2 Professor Tim Ziaukas, writing in 1998, stated:

"The Wizard of Oz" . . . was written at a time when American society was consumed by the debate over the "financial question," that is, the creation and circulation of money. . . . The characters of "The Wizard of Oz" represented those deeply involved in the debate: the Scarecrow as the farmers, the Tin Woodman as the industrial workers, the Lion as silver advocate William Jennings Bryan and Dorothy as the archetypal American girl.3

The Germans established the national fairytale tradition with Grimm's Fairy Tales, a collection of popular folklore gathered by the Brothers Grimm specifically to reflect German populist traditions and national values.4 Baum's tale did the same thing for the American populist (or people's) tradition. The Wizard of Oz has been called "the first truly American fairytale."5 It was all about people power, manifesting your dreams, finding what you wanted in your own backyard. According to Littlefield, the march of Dorothy and her friends to the Emerald City to petition the Wizard of Oz for help was patterned after the 1894 march from Ohio to Washington of an "Industrial Army" led by Jacob Coxey, urging Congress to return to the Greenback system initiated by Abraham Lincoln. The march of Coxey's Army on Washington began a long tradition of people taking to the streets in peaceful protest when there seemed no other way to voice their appeals. As Lawrence Goodwin, author of The Populist Moment, described the nineteenth century movement to change the money system:

[T]here was once a time in history when people acted. . . . [F]armers were trapped in debt. They were the most oppressed of Americans, they experimented with cooperative purchasing and marketing, they tried to find their own way out of the strangle hold of debt to merchants, but none of this could work if they couldn't get capital. So they had to turn to politics, and they had to organize themselves into a party. . . . [T]he populists didn't just organize a political party, they made a movement. They had picnics and parties and newsletters and classes and courses, and they taught themselves, and they taught each other, and they became a group of people with a sense of purpose, a group of people with courage, a group of people with dignity.6

Like the Populists, Dorothy and her troop discovered that they had the power to solve their own problems and achieve their own dreams. The Scarecrow in search of a brain, the Tin Man in search of a heart, the Lion in search of courage actually had what they wanted all along. When the Wizard's false magic proved powerless, the Wicked Witch was vanquished by a defenseless young girl and her little dog. When the Wizard disappeared in his hot air balloon, the unlettered Scarecrow took over as leader of Oz.

The Wizard of Oz came to embody the American dream and the American national spirit. In the United States, the land of abundance, all you had to do was to realize your potential and manifest it. That was one of the tale's morals, but it also contained a darker one, a message for which its imagery has become a familiar metaphor: that there are invisible puppeteers pulling the strings of the puppets we see on the stage, in a show that is largely illusion.

Money in the Land of Oz

The 1890s were plagued by an economic depression that was nearly as severe as the Great Depression of the 1930s. The farmers lived like serfs to the bankers, having mortgaged their farms, their equipment, and sometimes even the seeds they needed for planting. They were charged so much by a railroad cartel for shipping their products to market that they could have more costs and debts than profits. The farmers were as ignorant as the Scarecrow of banking policies; while in the cities, unemployed factory workers were as frozen as the Tin Woodman from the lack of a free-flowing supply of money to "oil" the wheels of industry. In the early 1890s, unemployment had reached 20 percent. The crime rate soared, families were torn apart, racial tensions boiled. The nation was in chaos. Radical party politics thrived.

In every presidential election between 1872 and 1896, there was a third national party running on a platform of financial reform. Typically organized under the auspices of labor or farmer organizations, these were parties of the people rather than the banks. They included the Populist Party, the Greenback and Greenback Labor Parties, the Labor Reform Party, the Antimonopolist Party, and the Union Labor Party. They advocated expanding the national currency to meet the needs of trade, reform of the banking system, and democratic control of the financial system.7

Money reform advocates today tend to argue that the solution to the country's financial woes is to return to the "gold standard," which required that paper money be backed by a certain weight of gold bullion. But to the farmers and laborers who were suffering under its yoke in the 1890s, the gold standard was the problem. They had been there and done it and knew it didn't work. William Jennings Bryan called the bankers' private gold-based money a "cross of gold." There was simply not enough gold available to finance the needs of an expanding economy. The bankers made loans in notes backed by gold and required repayment in notes backed by gold; but the bankers controlled the gold, and its price was subject to manipulation by speculators. Gold's price had increased over the course of the century, while the prices laborers got for their wares had dropped. People short of gold had to borrow from the bankers, who periodically contracted the money supply by calling in loans and raising interest rates. The result was "tight" money – insufficient money to go around. Like in a game of musical chairs, the people who came up short wound up losing their homes to the banks.

The solution of Jacob Coxey and his Industrial Army of destitute unemployed men was to augment the money supply with government-issued United States Notes. Popularly called "Greenbacks," these federal dollars were first issued by President Lincoln when he was faced with usurious interest rates in the 1860s. Lincoln had foiled the bankers by funding the government with U.S. Notes that did not accrue interest and did not have to be paid back to the banks. The same sort of debt-free paper money had financed a long period of colonial abundance in the eighteenth century, until King George forbade the colonies from issuing their own currency. The money supply had then shrunk, precipitating a depression that led to the American Revolution.

To remedy the tight-money problem that resulted when the Greenbacks were halted after Lincoln's assassination, Coxey proposed that Congress should increase the money supply with a further $500 million in Greenbacks. This new money would be used to redeem the federal debt and to stimulate the economy by putting the unemployed to work on public projects.8 The bankers countered that allowing the government to issue money would be dangerously inflationary. What they failed to reveal was that their own paper banknotes were themselves highly inflationary, since the same gold was "lent" many times over, effectively counterfeiting it; and when the bankers lent their paper money to the government, the government wound up heavily in debt for something it could have created itself. But those facts were buried in confusing rhetoric, and the bankers' "gold standard" won the day.

The Silver Slippers: The Populist Solution to the Money Question

The Greenback Party was later absorbed into the Populist Party, which took up the cause against tight money in the 1890s. Like the Greenbackers, the Populists argued that money should be issued by the government rather than by private banks.

William Jennings Bryan, the Populists' loquacious leader, gave such a stirring speech at the Democratic convention that he won the Democratic nomination for President in 1896. Outgoing President Grover Cleveland was also a Democrat, but he was an agent of J. P. Morgan and the Wall Street banking interests. Cleveland favored money that was issued by the banks, and he backed the bankers' gold standard. Bryan was opposed to both. He argued in his winning nomination speech:

We say in our platform that we believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business. . . . [W]hen we have restored the money of the Constitution, all other necessary reforms will be possible, and . . . until that is done there is no reform that can be accomplished.

He concluded with these famous lines:

You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.9

Since the Greenbackers' push for government-issued paper money had failed, Bryan and the "Silverites" proposed solving the liquidity problem in another way. The money supply could be supplemented with coins made of silver, a precious metal that was cheaper and more readily available than gold. Silver was considered to be "the money of the Constitution" although the Constitution only referred to the "dollar," because the dollar was understood to be a reference to the Spanish milled silver dollar coin then in common use. The slogan of the Silverites was "16 to 1": 16 ounces of silver would be the monetary equivalent of 1 ounce of gold. Ounces is abbreviated oz, hence "Oz." The Wizard of the Gold Ounce (Oz) in Washington was identified by later commentators as Marcus Hanna, the power behind the Republican Party, who controlled the mechanisms of finance in the administration of President William McKinley.10 (Hanna was reportedly admired by Karl Rove, who followed the model as political adviser to President George Bush Jr.11)

Frank Baum, the journalist who turned the politics of his day into The Wonderful Wizard of Oz, marched with the Populist Party in support of Bryan in 1896. He is said to have had a deep distrust of big-city financiers. But when his dry goods business failed, he bought a Republican newspaper, which had to have a Republican message to retain its readership.12 That may have been why the Populist message was so deeply buried in symbolism in his famous fairytale. Like Lewis Carroll, who began his career writing uninspiring tracts about mathematics and politics and wound up satirizing Victorian society in Alice's Adventures in Wonderland, Baum was able to suggest in a children's story what he could not say in his editorials. His book contained many subtle allusions to the political and financial issues of the day. The story's inspirational message was evidently a product of the times as well.

Commentators trace it to the theosophical movement, of which Baum was an active member.13 Newly-imported from India, it held that reality is a construct of the mind. What you want is already yours; you need only to believe it, to "realize" it or "make it real."

Looking at the plot of this familiar fairytale, then, through the lens of the contemporary movements that inspired it . . . .

An Allegory of Money, Politics and Believing in Yourself

The story began on a barren Kansas farm, where Dorothy lived with a very sober aunt and uncle who "never laughed" (the 1890s depression that hit the farmers particularly hard). A cyclone came up, carrying Dorothy and the house into the magical world of Oz (the American dream that might have been). The house landed on the Wicked Witch of the East (the Wall Street bankers and their man Grover Cleveland), who had kept the Munchkins (the farmers and factory workers) in bondage for many years.

For killing the Wicked Witch, Dorothy was awarded magic silver slippers (the Populist silver solution to the money crisis) by the Good Witch of the North (the North was then a Populist stronghold). In the 1939 film, the silver slippers would be transformed into ruby slippers to show off the cinema's new technicolor abilities; but the monetary imagery Baum suggested was lost. The silver shoes had the magic power to solve Dorothy's dilemma, just as the Silverites thought that expanding the money supply with silver coins would solve the problems facing the farmers.

Dorothy wanted to get back to Kansas but was unaware of the power of the slippers on her feet, so she set out to the Emerald City to seek help from the Wizard of Oz (the apparently all-powerful President, whose strings were actually pulled by financiers concealed behind a curtain).
"The road to the City of Emeralds is paved with yellow brick," she was told, "so you cannot miss it." Baum's contemporary audience, wrote Professor Ziaukas, could not miss it either, as an allusion to the gold standard that was then a hot topic of debate.14 Like the Emerald City and the Great and Powerful Oz himself, the yellow brick road would turn out to be an illusion. In the end, what would carry Dorothy home were silver slippers.

On her journey down the yellow brick road, Dorothy was first joined by the Scarecrow in search of a brain (the naive but intelligent farmer kept in the dark about the government's financial policies), then by the Tin Woodman in search of a heart (the factory worker frozen by unemployment and dehumanized by mechanization). Littlefield commented:

The Tin Woodman . . . had been put under a spell by the Witch of the East. Once an independent and hard working human being, the Woodman found that each time he swung his axe it chopped off a different part of his body.

Knowing no other trade he "worked harder than ever," for luckily in Oz tinsmiths can repair such things. Soon the Woodman was all tin. In this way Eastern witchcraft dehumanized a simple laborer so that the faster and better he worked the more quickly he became a kind of machine. Here is a Populist view of evil Eastern influences on honest labor which could hardly be more pointed.

The Eastern witchcraft that had caused the Woodman to chop off parts of his own body reflected the dark magic of the Wall Street bankers, whose "gold standard" allowed less money into the system than was collectively owed to the banks, causing the assets of the laboring classes to be systematically devoured by debt.

The fourth petitioner to join the march on Oz was the Lion in search of courage. According to Littlefield, he represented the orator Bryan himself, whose roar was mighty like the king of the forest but who lacked political power. Bryan was branded a coward by his opponents because he was a pacifist and anti-imperialist at a time of American expansion in Asia. The Lion became entranced and fell asleep in the Witch's poppy field, suggesting Bryan's tendency to get side-tracked with issues of American imperialism stemming from the Opium Wars. Since Bryan led the "Populist" or "People's" Party, the Lion also represented the people, collectively powerful but entranced and unaware of their strength.

In the Emerald City, the people were required to wear green-colored glasses attached by a gold buckle, suggesting green paper money shackled to the gold standard. To get to her room in the Emerald Palace, Dorothy had to go through 7 passages and up 3 flights of stairs, an allusion to the "Crime of '73," the congressional Act that changed the money system from bimetallism (paper notes backed by both gold and silver) to an exclusive gold standard. The Crime of '73 proved to all Populists that Congress and the bankers were in collusion.15

Dorothy and her troop presented their requests to the Wizard, who demanded that they first vanquish the Wicked Witch of the West, representing the McKinley/Rockefeller faction in Ohio (then considered a Western state). The financial powers of the day were the Morgan/Wall Street/Cleveland faction in the East (the Wicked Witch of the East) and this Rockefeller-backed contingent from Ohio, the state of McKinley, Hanna, and Rockefeller's Standard Oil cartel. Hanna was an industrialist who was a high school friend of John D. Rockefeller and had the financial backing of the oil giant.16
Dorothy and her friends learned that the Witch of the West had enslaved the Yellow Winkies and the Winged Monkeys (an allusion to the Chinese immigrants working on the Union-Pacific railroad, the native Americans banished from the northern woods, and the Filipinos denied independence by McKinley). Dorothy destroyed the Witch by melting her with a bucket of water, suggesting the rain that would reverse the drought, and the financial liquidity that the Populist solution would bring to the land. As one nineteenth century commentator put it, "Money and debt are as opposite in nature as fire and water; money extinguishes debt as water extinguishes fire."17

When Dorothy and her troop got lost in the forest, she was told to call the Winged Monkeys by using a Golden Cap she had found in the Witch's cupboard. When the Winged Monkeys came, their leader explained that they were once a free and happy people; but they were now "three times the slaves of the owner of the Golden Cap, whosoever he may be" (the bankers and their gold standard). When the Golden Cap fell into the hands of the Wicked Witch of the West, the Witch had made them enslave the Winkies and drive Oz himself from the Land of the West.
Dorothy used the power of the Cap to have her band of pilgrims flown to the Emerald City, where they discovered that the "Wizard" was only a smoke and mirrors illusion operated by a little man behind a curtain. A dispossessed Nebraska man himself, he admitted to being a "humbug" without real power. "One of my greatest fears was the Witches," he said, "for while I had no magical powers at all I soon found out that the Witches were really able to do wonderful things."

If the Wizard and his puppet were Marcus Hanna and William McKinley, who were the Witches they feared? Behind the Wall Street bankers were powerful British financiers, who funded the Confederates in the Civil War and had been trying to divide and conquer America economically for over a century. Patriotic Americans had regarded the British as the enemy ever since the American Revolution. McKinley was a protectionist who favored high tariffs to keep these marauding British free-traders out. When he was assassinated in 1901, no conspiracy was proved; but some suspicious commentators saw the invisible hand of British high finance at work.18

The Wizard lacked magical powers but was a very good psychologist, who showed the petitioners that they had the power to solve their own problems and manifest their own dreams. The Scarecrow just needed a paper diploma to realize he had a brain. For the Tin Woodman, it was a silk heart; for the Lion, an elixir for courage. The Wizard offered to take Dorothy back to Kansas in his hot air balloon, but the balloon took off before she could get on board. Dorothy and her friends then set out to find Glinda the Good Witch of the South, who they were told could help Dorothy find her way home.

On the way they faced various challenges, including a great spider that ate everything in its path and kept everyone unsafe as long as it was alive. The Lion (the Populist leader Bryan) welcomed this chance to test his new-found courage and prove he was indeed the King of Beasts. He decapitated the mighty spider with his paw, just as Bryan would have toppled the banking cartel if he had won the Presidency.
The group finally reached Glinda, who revealed that Dorothy too had the magic tokens she needed all along: the Silver Shoes on her feet would take her home. But first, said Glinda, Dorothy must give up the Golden Cap (the bankers' restrictive gold standard that had enslaved the people).
The moral also worked for the nation itself.

The economy was deep in depression, but the country's farmlands were still fertile and its factories were ready to roll. Its entranced people merely lacked the paper tokens called "money" that would facilitate production and trade. The people had been deluded into a belief in scarcity by defining their wealth in terms of a scarce commodity, gold. The country's true wealth consisted of its goods and services, its resources and the creativity of its people. Like the Tin Woodman in need of oil, all it needed was a monetary medium that would allow this wealth to flow freely, circulating from the government to the people and back again, without being perpetually drained into the private coffers of the bankers.

Sequel to Oz

The Populists did not achieve their goals, but they did prove that a third party could influence national politics and generate legislation. Although Bryan the Lion failed to stop the bankers, Dorothy's prototype Jacob Coxey was still on the march. In a plot twist that would be considered contrived if it were fiction, he reappeared on the scene in the 1930s to run against Franklin D. Roosevelt for President, at a time when the "money question" had again become a burning issue. In one five-year period, over 2,000 schemes for monetary reform were advanced. Needless to say, Coxey lost the election; but he claimed that his Greenback proposal was the model for the "New Deal," Roosevelt's plan for putting the unemployed to work on government projects to pull the country out of the Depression. The difference was that Coxey's plan would have been funded with debt-free currency issued by the government, on Lincoln's Greenback model. Roosevelt funded the New Deal with borrowed money, indebting the country to a banking cartel that was surreptitiously creating the money out of thin air, just as the government itself would have been doing under Coxey's plan without accruing a crippling debt to the banks.

After World War II, the money question faded into obscurity. Today, writes British economist Michael Rowbotham, "The surest way to ruin a promising career in economics, whether professional or academic, is to venture into the 'cranks and crackpots' world of suggestions for reform of the financial system."19 Yet the claims of these cranks and crackpots have consistently proven to be correct. The U.S. debt burden has mushroomed out of control, until just the interest on the federal debt now threatens to be a greater tax burden than the taxpayers can afford. The gold standard precipitated the problem, but unbuckling the dollar from gold did not solve it. Rather, it caused worse financial ills. Expanding the money supply with increasing amounts of "easy" bank credit just put increasing amounts of money in the bankers' pockets, while consumers sank further into debt. The problem proved to be something more fundamental: it was in who extended the nation's credit. As long as the money supply was created as a debt owed back to private banks with interest, the nation's wealth would continue to be drained off into private vaults, leaving scarcity in its wake.
Today's monetary allegory goes something like this: the dollar is a national resource that belongs to the people. It was an original invention of the early American colonists, a new form of paper currency backed by the "full faith and credit" of the people. But a private banking cartel has taken over its issuance, turning debt into money and demanding that it be paid back with interest.

Taxes and a crushing federal debt have been imposed by a financial ruling class that keeps the people entranced and enslaved. In the happy storybook ending to the tale, the power to create money is returned to the people, and abundance returns to the land. But before we get there, the Yellow Brick Road takes us through the twists and turns of history and the writings and insights of a wealth of key players. We're off to see the Wizard . . . .

Link to this article: http://www.webofdebt.com/excerpts/chapter-1.php

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THE TEQUILA TRAP: THE REAL STORY BEHIND THE ILLEGAL ALIEN INVASION

Waves of immigrants are now pouring over the Mexican border into the United States in search of work, precipitating an illegal alien crisis for Americans. Vigilante border patrols view these immigrants as potential terrorists, but in fact they are refugees from an economic war that has deprived them of their own property and forced them into debt bondage to a private global banking cartel. When Mexico was conquered in 1520, the mighty Aztec empire was ruled by the unsuspecting, hospitable Montezuma. The Spanish General Cortes, propelled by the lure of gold, conquered by warfare, violence and genocide. When Mexico fell again in the twentieth century, it was to a more covert form of aggression, one involving a drastic devaluation of its national currency.

If Montezuma's curse was his copious store of gold, for Mexico in the twentieth century it was the country's copious store of oil. According to William Engdahl, who tells the story in A Century of War, the first Mexican national Constitution vested the government with "direct ownership of all minerals, petroleum and hydro-carbons" in 1917. When British and American oil interests persisted in an intense behind-the-scenes battle for these oil reserves, the Mexican government finally nationalized all its foreign oil holdings. The move led the British and American oil majors to boycott Mexico for the next forty years. When new oil reserves were discovered in Mexico in the 1970s, President Jose Lopez Portillo undertook an impressive modernization and industrialization program, and Mexico became the most rapidly growing economy in the developing world. But according to Engdahl, the prospect of a strong industrial Mexico on the southern border of the United States was intolerable to certain powerful Anglo-American interests, who determined to sabotage Mexico's industrialization by securing rigid repayment of its foreign debt. That was when interest rates were tripled. Third World loans were particularly vulnerable to this manipulation, because they were usually subject to floating or variable interest rates.1

Why did Mexico need to go into debt to foreign lenders? It had its own oil in abundance. It had accepted development loans earlier, but it had largely paid them off. The problem for Mexico was that it was one of those intrepid countries that had declined to let its national currency float. Mexico's dollar reserves were exhausted by speculative raids in the 1980s, forcing it to borrow just to defend the value of the peso.2 According to Henry Liu, writing in The Asia Times, Mexico's mistake was in keeping its currency freely convertible into dollars, requiring it to keep enough dollar reserves to buy back the pesos of anyone wanting to sell. When those reserves ran out, it had to borrow dollars on the international market just to maintain its currency peg.3

In 1982, President Portillo warned of "hidden foreign interests" that were trying to destabilize Mexico through panic rumors, causing capital flight out of the country. Speculators were cashing in their pesos for dollars and depleting the government's dollar reserves in anticipation that the peso would have to be devalued. In an attempt to stem the capital flight, the government cracked under the pressure and did devalue the peso; but while the currency immediately lost 30 percent of its value, the devastating wave of speculation continued. Mexico was characterized as a "high-risk country," leading international lenders to decline to roll over their loans. Caught by peso devaluation, capital flight, and lender refusal to roll over its debt, the country faced economic chaos. At the General Assembly of the United Nations, President Portillo called on the nations of the world to prevent a "regression into the Dark Ages" precipitated by the unbearably high interest rates of the global bankers.

In an attempt to stabilize the situation, the President took the bold move of taking charge of the banks. The Bank of Mexico and the country's private banks were taken over by the government, with compensation to their private owners. It was the sort of move calculated to set off alarm bells for the international banking cartel. A global movement to nationalize the banks could destroy their whole economic empire. They wanted the banks privatized and under their control. The U.S. Secretary of State was then George Shultz, a major player in the 1971 unpegging of the dollar from gold. He responded with a plan to save the Wall Street banking empire by having the IMF act as debt policeman. Henry Kissinger's consultancy firm was called in to design the program. The result, says Engdahl, was "the most concerted organized looting operation in modern history," carrying "the most onerous debt collection terms since the Versailles reparations process of the early 1920s," the debt repayment plan blamed for propelling Germany into World War II.4

Mexico's state-owned banks were returned to private ownership, but they were sold strictly to domestic Mexican purchasers. Not until the North American Free Trade Agreement (NAFTA) was foreign competition even partially allowed. Signed by Canada, Mexico and the United States, NAFTA established a "free-trade" zone in North America to take effect on January 1, 1994. In entering the agreement, Carlos Salinas, the outgoing Mexican President, broke with decades of Mexican policy of high tariffs to protect state-owned industry from competition by U.S. corporations.

By 1994, Mexico had restored its standing with investors. It had a balanced budget, a growth rate of over three percent, and a stock market that was up fivefold. In February 1995, Jane Ingraham wrote in The New American that Mexico's fiscal policy was in some respects "superior and saner than our own wildly spendthrift Washington circus." Mexico received enormous amounts of foreign investment, after being singled out as the most promising and safest of Latin American markets. Investors were therefore shocked and surprised when newly-elected President Ernesto Zedillo suddenly announced a 13 percent devaluation of the peso, since there seemed no valid reason for the move. The following day, Zedillo allowed the formerly managed peso to float freely against the dollar. The peso immediately plunged by 39 percent.5

What was going on? In 1994, the U.S. Congressional Budget Office Report on NAFTA had diagnosed the peso as "overvalued" by 20 percent. The Mexican government was advised to unpeg the currency and let it float, allowing it to fall naturally to its "true" level. The theory was that it would fall by only 20 percent; but that is not what happened. The peso eventually dropped by 300 percent – 15 times the predicted fall.6 Its collapse was blamed on the lack of "investor confidence" due to Mexico's negative trade balance; but as Ingraham observes, investor confidence was quite high immediately before the collapse. If a negative trade balance is what sends a currency into massive devaluation and hyperinflation, the U.S. dollar itself should have been driven there long ago. By 2001, U.S. public and private debt totaled ten times the debt of all Third World countries combined.7

Although the peso's collapse was supposedly unanticipated, over 4 billion U.S. dollars suddenly and mysteriously left Mexico in the 20 days before it occurred. Six months later, this money had twice the Mexican purchasing power it had earlier. Later commentators maintained that lead investors with inside information precipitated the stampede out of the peso.8 These investors were evidently the same parties who profited from the Mexican bailout that followed. When Mexico's banks ran out of dollars to pay off its creditors (which were largely U.S. banks), the U.S. government stepped in with U.S. tax dollars. The Mexican bailout was engineered by Robert Rubin, who headed the investment bank Goldman Sachs before he became U.S. Treasury Secretary. Goldman Sachs was then heavily invested in short-term dollar-denominated Mexican bonds. The bailout was arranged the very day of Rubin's appointment. Needless to say, the money provided by U.S. taxpayers never made it to Mexico. It went straight into the vaults of Goldman Sachs, Morgan Stanley, and other big American lenders whose risky loans were on the line.9

The late Jude Wanniski was a conservative economist who was at one time a Wall Street Journal editor and adviser to President Reagan. He cynically observed of this banker coup:

There was a big party at Morgan Stanley after the Mexican peso devaluation, people from all over Wall Street came, they drank champagne and smoked cigars and congratulated themselves on how they pulled it off and they made a fortune. These people are pirates, international pirates.10
The loot was more than just the profits of gamblers who had bet the right way. The pirates actually got control of Mexico's banks. NAFTA rules had already opened the nationalized Mexican banking system to a number of U.S. banks, with Mexican licenses being granted to 18 big foreign banks and 16 brokers including Goldman Sachs. But these banks could bring in no more than 20 percent of the system's total capital, limiting their market share in loans and securities holdings.11 They wanted the whole enchilada. By 2004, all but one of Mexico's major banks had been sold to foreign banks, which gained total access to the formerly closed Mexican banking market.12

The value of Mexican pesos and Mexican stocks collapsed together, supposedly because there was a stampede to sell and no one around to buy; but buyers with ample funds were sitting on the sidelines, waiting to pick over the devalued stock at bargain basement prices. The result was a direct transfer of wealth from the local economy to international money manipulators. The devaluation also precipitated a wave of privatizations (sales of public assets to private corporations), as the Mexican government tried to meet its spiraling debt crisis. In a February 1996 article called "Militant Capitalism," David Peterson blamed the rout on an assault on the peso by short-sellers. He wrote:

The austerity measures that the U.S. government and the IMF forced on Mexicans in the aftermath of last winter's assault on the peso by short-sellers in the foreign exchange markets have been something to behold. Almost overnight, the Mexican people have had to endure dramatic cuts in government spending; a sharp hike in regressive sales taxes; at least one million layoffs (a conservative estimate); a spike in interest rates so pronounced as to render their debts unserviceable (hence El Barzon, a nation-wide movement of small debtors to resist property seizures and to seek a rescheduling of their debts); a collapse in consumer spending on the order of 25 percent by mid-year; and, in brief, a 10.5 percent contraction in overall economic activity during the second quarter, with more of the same sure to follow.13

By 1995, Mexico's foreign debt was more than twice the country's total debt payment for the previous century and a half. Per-capita income had fallen by almost a third from a year earlier, and Mexican purchasing power had fallen by well over 50 percent.14 Mexico was propelled into a crippling national depression that has lasted for over a decade. As in the U.S. depression of the 1930s, the actual value of Mexican businesses and assets did not change during this speculator-induced crisis. What changed was simply that currency had been sucked out of the economy by investors stampeding to get out of the Mexican stock market, leaving insufficient money in circulation to pay workers, buy raw materials, finance loans, and operate the country. It was further evidence that when short-selling is allowed, currencies are driven into hyperinflation not by the market mechanism of "supply and demand" but by the concerted action of currency speculators. The flipside of this also appears to be true: the U.S. dollar remains strong despite its plunging trade balance, because it has been artificially manipulated up by the Fed. (More on this in Chapter 33.)
Market manipulators, not free market forces, are in control.

International Pirates Prowling in a Sea of Floating Currencies

Countries around the world have been caught in the same trap that captured Mexico. Henry C K Liu calls it the "Tequila Trap." He also calls it "a suicidal policy masked by the giddy expansion typical of the early phase of a Ponzi scheme." The lure in the trap is the promise of massive dollar investment. At first, returns are spectacular. But as with every Ponzi scheme, the returns eventually collapse, leaving the people massively in debt to a foreign banking cartel that will become their new economic masters.15

The former Soviet states, the Tiger economies of Southeast Asia, and the Latin American banana republics all succumbed to these rapacious tactics. Local ineptitude and corrupt politicians are blamed, when the real culprits are international banking speculators armed with tsunami-sized walls of "credit" created on computer screens. Targeted countries are advised that to attract foreign investment, they must make their currencies freely convertible into dollars at prevailing or "floating" exchange rates, and they must keep adequate dollars in reserve for anyone who wants to change from one currency to another. After the trap is set, the speculators move in. Speculation has been known to bring down currencies and national economics in a single day. Michel Chossudovsky, Professor of Economics at the University of Ottawa, writes:

The media tends to identify these currency crises as being the product of some internal mechanism, internal political weaknesses or corruption. The linkages to international finance are downplayed. The fact of the matter is that currency speculation, using speculative instruments, was ultimately the means whereby these central bank reserves were literally confiscated by private speculators.16

While economists debate the fiscal pros and cons of "floating" exchange rates, from a legal standpoint they represent a blatant fraud on the people who depend on a stable medium of exchange. They are as much a fraud as a grocer's scales with a rock on it. If a farmer's peso was worth thirty cents yesterday and is worth only five cents today, his dozen eggs have suddenly shrunk to two eggs, his dozen apples to two apples. The very notion that a country has to "defend" its currency shows that there is something wrong with the system. Inches don't have to defend themselves against millimeters. They peacefully co-exist side by side on the same yardstick. A sovereign government has both the right and the duty to calibrate its medium of exchange so that it is a stable measure of purchasing power for its people. How a stable international currency yardstick might be devised is explored in Section VI.

The Tequila Trap and "Free Trade"

The "Tequila Trap" is the contemporary version of what Henry Carey and the American nationalists warned against in the nineteenth century when they spoke of the dangers of opening a country's borders to "free trade." Carey said sovereign nations should pay their debts in their own currencies, issued Greenback-style by their own govern-ments. Professor Liu also advocates this approach, which he calls "sovereign credit." Carey called it "national credit," something he defined as "a national system based entirely on the credit of the government with the people, not liable to interference from abroad." Carey also called it the "American system" to distinguish it from the "British system" of free trade.

Abraham Lincoln was forging ahead with that revolutionary model when he was assassinated. Carey and his faction, realizing the country was facing the very real threat that the banking interests that had captured England would also capture America, then moved to form a bulwark against this encroaching menace by planting the seeds of the American system abroad. In the twentieth century, the British system did prevail in America; but the American system was quietly taking root overseas . . . .

Link to this article: http://www.webofdebt.com/excerpts/chapter-22.php and http://kandylini.wordpress.com/2008/03/16/the-tequila-trap-the-real-stor...

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See Also:

BANKS DO NOT LEND MONEY ON DEPOSIT - MODERN MONEY MECHANICS - A Workbook On Bank Reserves And Deposit Expansion: http://loveforlife.com.au/node/6904 and go here to download a PDF of this booklet: http://www.loveforlife.com.au/node/5727

Video: BANKS DO NOT LEND MONEY ON DEPOSIT - MODERN MONEY MECHANICS - A Workbook On Bank Reserves And Deposit Expansion:
http://loveforlife.com.au/node/6905

How Money Is Created In Australia by SOS News.org - Simply Explaining How The Australian Monetary System Could Better Serve Aust: http://loveforlife.com.au/node/6903

FORBIDDEN KNOWLEDGE - THE NATURE OF MONEY From Australia - What The Banks Do Not Want You To Know:
http://loveforlife.com.au/node/6906

Truth In Money Book by Theodore R Thoren & Richard F Warner With Further Additions By Doug Harriso:
http://www.loveforlife.com.au/node/5881

STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF OAKLAND
Bank One v HARSHAVARDHAN DAVE and PRATIMA DAVE, jointly and severally,
http://loveforlife.com.au/files/MT-BankOne.pdf or http://loveforlife.com.au/node/6907

Judge Mahoney Credit River Court Case, State of Minnesota, County Scott, United States of America, 9th December 1968:
http://loveforlife.com.au/node/6902

Banks And Money - An Attorney At Law Affidavit Filed By Expert Witness for Defendants - What To Know About Banks And Money: http://loveforlife.com.au/node/6438

Banks and Money - The Mandrake Mechanism: http://loveforlife.com.au/node/643

Video: Modern Money Mechanics Federal Reserve Part 1 - 11 Minutes - A breakdown of "Modern Money Mechanics" which was published by the Federal Reserve Bank of Chicago. Do you want to understand the core concepts(flaws) to the US monetary system and economics? Do you want to know how new US currency is created? Watch this series and you'll soon understand why there is so much debt and why we need change.

Video: Modern Money Mechanics Federal Reserve Part 2 - 8 Minutes 50 Seconds

Video: Modern Money Mechanics Federal Reserve Part 3 - 7 Minutes 56 Seconds

Video: Modern Money Mechanics Federal Reserve Part 4 - 5 Minutes 58 Seconds

Video: Modern Money Mechanics Federal Reserve Part 5 - 10 Minutes 3 Seconds

Video: Modern Money Mechanics Federal Reserve Part 6 - 9 Minutes 58 Seconds

Video: Modern Money Mechanics Federal Reserve Part 7 - 9 Minutes 6 Seconds

Video: Modern Money Mechanics Federal Reserve Part 8 - 2 Minutes 30 Seconds

Play All Videos: http://www.youtube.com/view_play_list?p=8EC12A38EBD3BB06&playnext=1&play...

Produced By MelodicNightmare: http://www.youtube.com/user/MelodicNightmare

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