Friday, November 18, 2011

Occupy Wall Street and Frankenstein's Monster

Dear Members of the Occupy Wall Street Movement,

I write this letter to you out of both admiration and concern. My admiration stems from your willingness to make your voices heard, as is your right (and obligation) as citizens of the country you love, to address the many failings of our modern economy.

The strife of the poor and the relentless brick-by-brick dismantling of the great American middle-class are concerns that I and many others share, as no society can prosper or be truly free when hard-working families can no longer taste the fruits of their labor because of excessive debt and inflation.

Members of OWS and the Tea Party have separately taken valuable time from their busy lives in efforts to shine a light on these issues. Your voices have attracted media attention and served notice to the defenders of the status quo in business and government that change is necessary to restore America to economic greatness.

Not only are the power centers aware of you now, they might even be beginning to fear you. As well they should. The Founding Fathers believed a government should fear its citizenry. As Thomas Jefferson said, "The price of freedom is eternal vigilance." The country and our “leaders” have been asleep at the post lately, but you have been rousting your fellow citizens from a deep slumber and for this you have my heartfelt thanks.

But my concern arises from the fact that the villagers with the torches and the pitchforks have arrived at the gates of the wrong castle.

The monster you seek to slay is but the creation of the true perpetrators of the wanton destruction of the economy. Wall Street is Frankenstein's Monster, and it has indeed been let loose upon the land to trample everything in its path. But without access to cheap credit, the Wall Street Casino pit bosses could never have devised credit default swaps and other derivatives of mass destruction. No, they could not have caused this economic carnage alone. It was monetary and banking policy set by a higher source that fostered the environment for the incubation of the monster. As such, it serves little purpose to kill it as Dr. Frankenstein, the real villain in this story, will merely create a new beast if left unchecked.

Dr. Frankenstein, for the purpose of our analogy, is the Federal Reserve and it is the institution which must be shut down if any real reform is to begin. It is the central power in our country and through the tools at its disposal – the setting of interest rates and the expansion and contraction of the money supply – it can create not only recessions and depressions, booms and busts and income inequality, but ultimately the indentured servitude of the American people.

The Fed, from the moment it came into being, reintroduced to the U.S. a centuries-old fraud called fractional reserve banking which has served to addict the government and the general populace on a powerful narcotic of financial bubbles, debt, inflation and globalism. The mechanics behind this swindling of the citizenry is so vast and complex that it is outside the scope of this letter and only the bullet points are presented here. I heartily recommend everyone read the book “The Creature From Jeckyll Island” by G. Edward Griffin for a definitive account on the subject.

To the uninitiated, fractional reserve banking is the process by which money is effectively created from nothing. To give an example of how this works, you take $100 dollars you earned from your hard labors and deposit it at your bank. So the bank now has that $100 on deposit in real money. Because the bankers know that very few people will withdraw money at any one given time, they are only required by their rules to keep 10% in their coffers which in this case is $10. They lend out the remaining $90 to customers or other banks and charge them interest. Since both the depositor (you) and the subsequent borrower both have claim to that $90, they have in effect created money where there was no money. Now, let’s say your $90 was lent to Bank B. Bank B then keeps $9 in reserve and loans out $81 to another bank or customer who pays them interest and so on and so on.

The bank pays you a nominal interest rate on deposits but charges you a much higher interest rate when you borrow. When banks receive a loan from another bank it is at the prime rate, so the interest they pay will be vastly lower than what you pay if you borrow from them as a customer. The difference in the interest rates minus the amount they pay depositors becomes bank profit. In effect, you give them money nearly interest-free and they profit off usurious interest on money they create, counterfeit really, with a keystroke on a computer, off of your real labor.

Now multiply this scenario by roughly 300 million customers and you can see how the velocity of the money supply expands nearly at the rate of the known Universe. That is inflation and it often runs the gamut from a few percent to double digits in some years. More dollars are chasing a relatively stable amount of goods, which pushes prices higher and eats away at the purchasing power of your dollars and savings. This is often called the “hidden tax” and your piddling 1% interest-bearing savings account doesn’t look so good now.

In essence, the wages you earned for your services in the work place were determined by a very shrewd assessment between you and your employer of your relative worth to each other. The worker and the employer both agree that the service and the wages when weighed on the scales are essentially in equilibrium. But then this "real" money (because its worth is honored by both parties) is then completely corrupted by being thrown into a slush-fund with fiat money that is created by the banks, money that has no correlate in worth, whether as goods or services, because they only exist as an expectation or projection. Hence you have "good money thrown after bad".

The above was merely an example of a small scale transaction between a customer and a local bank. The Federal Reserve, however, does the same thing on a much larger scale, as they are the sole, monopolistic central bank for a much larger customer: Uncle Sam.

Since the government has rarely run a budget surplus since the creation of the Fed in 1913, our deficits have to be financed somehow. This is accomplished by the selling of U.S. debt instruments made by our government (treasury bonds, for example) to the Fed, who then creates money out of thin air - in much the same manner as our earlier scenario - to loan to the government at interest. The Fed then takes the bonds as collateral. Even though the bonds are essentially IOUs, they are treated the same as hard money since they are backed by the full faith and taxing power of the U.S. government which has never defaulted. The Fed then loans out the debt instruments to its member banks who, in turn, do the same 10:1 loan daisy chain we spoke of earlier. The Fed does indeed repatriate the interest payments (after expenses) back to Uncle Sam, but the commercial banks underneath the Fed benefit from fiat money being loaned out to customers for whom interest is NOT repatriated.

All of this equates to the Fed acting as the major creditor to the United States government, and the government is ultimately you and I. You can understand the magnitude of our national debt and subsequent debt enslavement when you fathom that the Federal Reserve is not federal at all, but a private consortium of banking interests. That’s correct: only a small amount of the debt is owed to holders of treasury instruments like your sister or grandfather. The rest is owed to private bankers for whom patriotism is of little consequence. They are loyal mostly to profit. And as with all debts, they must be paid, with either fiat dollars or hard assets. That is where the indentured servitude comes into play.

When a person or the government borrows at interest, it can only be paid one way: with future labor. We can’t create money out of nothing. Only the Federal Reserve can do that as they were given full control of the money supply in the Federal Reserve Act of 1913.

As the debt rises (and is compounded by inflation eroding your dollar’s value), more and more of your toiling goes to paying interest and keeping up with inflation. You are then in the position of getting a second or third job and you have less time to enjoy life and spend time with your friends and family. For the government, it means needing more and more workers to prop up zombie entitlement programs like Social Security and Medicare. As debt spirals out of control, eventually you (or the government) will default and your tangible, hard assets like your home or car will become the possession of the bankers.

They have denied that they want those assets. The mantra we’ve heard is that “we’re not in the real estate business,” and they tagged these houses as “toxic assets.” Homes, however, can never be toxic assets. They are hard assets with actual value that were mispriced because of the Fed’s housing bubble. But honestly, knowing what you now know, if you were a banker would you rather have dollars created out of thin air and backed by nothing or homes built on terra firma that you can sell at higher prices when the next boom-bust cycle comes around?

In every walk of life and in every era of mankind, a debtor is always beholden to and will do the bidding of his creditors, lest they pull the plug and recall that debt. This is the true reason for bank bailouts, TARP, and “too big to fail”. The Fed simply called in its favor to its government debtors and Dr. Frankenstein’s vassals in Congress flipped the switch for the master and made all the bankers problems go away at, you guessed it, your expense. As long as we are in hoc to the Federal Reserve it will not be the last time, either.

G. Edward Griffin succinctly explained the way debt and inflation (as controlled by the Fed) will work in tandem to lead the people to bankruptcy:

“Inflation can be likened to a game of Monopoly in which the game's banker has no limit to the amount of money he can distribute. With each throw of the dice he reaches under the table and brings up another stack of those paper tokens, which all the players must use as money. If the banker is also one of the players – and in our real world that is exactly the case – obviously he is going to end up owning all the property. But, in the meantime, the increasing flood of money swirls out from the banker and engulfs the players. As the quantity of money becomes greater, the relative worth of each token becomes less, and the prices bid for the properties goes up. The game is called Monopoly for a reason. In the end, one person holds all the property and everyone else is bankrupt. But what does it matter? It is only a game."

"Unfortunately, it is not a game in the real world. It is our livelihood, our food, and our shelter. It does make a difference if there is only one winner, and it makes a big difference if that winner obtained his monopoly simply by manufacturing everyone's money.”

What makes this all the more outrageous is how contrary fractional reserve banking and the Fed are to the ideals of the Founding Fathers of our country. They warned us of the evils of usurious bankers controlling the nation’s currency.

George Washington, in a letter to Jabez Bowen wrote, “Paper money has had the effect in your State that it ever will have, to ruin commerce--oppress the honest, and open a door to every species of fraud and injustice.”

In a letter to John Taylor in 1816, Thomas Jefferson wrote, “And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

He also stated to John Wayles Eppes, “Bank-paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.”

How truly wretched that such fervent opponents of fiat currency would have their visages printed upon the Federal Reserve Notes that we today call money.

Only by heeding the words of the wise, past and present, can we hope to prosper again as a nation. If it doesn’t happen soon, the Monopoly game will be over and Dr. Frankenstein’s victory will be complete.

But always remember, capitalism is not the problem. Capitalism, through innovation, industriousness and self-reliance, gave America the standard of living that has been slowly squandered. Corruption of power and cronyism between banks and governmental officials are the real root causes of our maladies. Ignore the zealots in your movement who say otherwise.

There is much to do. Write to your congressmen to demand action. Peacefully and respectfully make your voices heard by putting your best foot forward. Find common ground with the Tea Party. Continue lending a hand to the least amongst us. Steep yourselves in economic theory and join with those, like Ron Paul, who for so long were lone voices in the political wilderness warning America of this economic meltdown.

Removing the undue influence of the Federal Reserve is the most important step Occupy Wall Street can take along the path towards returning the control of the people’s money back to the citizenry as Washington and Jefferson desired.

Thank you very kindly for taking the time to read this.

May the warmest regards keep you strong in the cold, challenging months ahead,

A Fellow Citizen