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"The following system was installed in 1913 with the ratification of the income tax amendment (the sixteenth amendment) and the passage of the Federal Reserve Act. Both of these were spearheaded by Senator Nelson Aldrich, the maternal grandfather of David Rockefeller, under the guidance of the House of Rothschild. The Federal Reserve Act was drafted by Paul Warburg, a Rothschild intimate. In a Thanksgiving 1910 secret meeting on Jekyll Island, Georgia, the establishment's leaders met and agreed to the plan. The system was not fully enabled until the passage of the Banking Act of 1933, the precipitous passage of which was overseen by FDR's treasury secretary William Woodin and an armada of private bankers (more on this shortly). Full fiat central banking was realized in 1971 when President Nixon removed all semblance of a gold standard for Federal Reserve funds.
Money is created by monetary loans from the Federal Reserve System (the Fed) to the United States, and by the fractional reserve banking system. The fractional reserve system works as follows: banks promise delivery of balances to depositors and borrowers many times the amount of money on simultaneous deposit, so that checks and other instruments of bank-account-level monetary transfer in circulation drawn on these accounts, denominated in the same monetary units as the common currency, increase the total amount of money. A bank's minimum ratio of deposits on hand and deliverable (as Federal Reserve Notes, coins, or in some systems, precious metals) to total bank debts embodied in positive account balances, is set by the Federal Reserve, and is called the reserve ratio. Fractional banking is the principal mechanism by which money has been created in the US in the 20th century, and it is a form of institutionalized fraud that puts private bankers in a position to command the economy.
The other mechanism by which money is created is that practiced by the Federal Reserve itself. The US assigns to the Fed bonds (representing the amount borrowed, and earning interest at a rate set by the Fed), the Fed assigns the US a corresponding balance, in what amounts to a bank account from which the government can make withdrawls or draw checks. This is an exchange, and often the bonds are actually purchased from private banks that previously bought them directly or indirectly from the government (loaning money to the government), creating a balance in a Fed account payable to that private bank. Some of this balance is turned into actual paper money when an entity with a Fed account balance (a private bank or the government) requests that some portion of that balance be converted to paper money. The Bureau of Engraving and Printing (part of the government) then cranks the presses, creating Federal Reserve Notes, and the paper money is physically delivered. The money is no more or less real in electronic form than in printed form. Most money is ephemeral, moved around using Electronic Funds Transfer and the like, and EFT money can be turned into paper Federal Reserve Notes at any ATM. EFT and paper money are totally fungible (interchangeable).
The Fed has no significant assets other than its portfolio of US government securities - insofar as they can be considered assets at all; their productivity is all "on paper" hocus pocus. This begs the question. The balance in that bank account is just made up, as directed by the Federal Open Market Committee. The designation of the FOMC's twelve voting members (the seven Presidentially appointed and Senate-confirmed members of the Board of Governors, the president of the New York regional bank, and the presidents of a rotating subset of four other regional banks: currently, the presidents of the Dallas, Philadelphia, Chicago, and Minneapolis Federal Reserve regional banks) is controlled by the President (in modern times, perpetually an instrument of the private bankers, and directly by private (``member'') banks located in the regions covered by each Federal Reserve regional bank, with the influence of each on the election of its region's president proportional to its size. Moreover, the FOMC's operations are not subject to external audit. All of this - excepting, of course, the control of the the Presidency by private bankers - is by statute.
When the FOMC orders money into existence, the value of the money that existed before that order is reduced, as a consequence of the law of supply and demand. The value of a quantum (a unit) falls when M1 (the on-demand liquid money supply) grows (is "inflated"). When this happens, wealth in private hands denominated in the units of the inflated money, whether on paper, in minted coins, or in some electronic form, is quietly redistributed to the people who control the money ordered into existence. The controllers are the private banks and the federal government - evidently, a monolith; there is no clear boundary between them. Even though other forces - improvements in industrial efficiency and productivity, for example - can increase the buying power of a monetary unit, the redistribution of wealth is not thereby made less certain or real, nor less grave in its import.
Since the Fed trades non-interest-earning money for interest-earning bonds, the system tends to inflate the money supply essentially eternally, in a quiet, endless campaign of wealth confiscation from the public, in order that the government can honor the bonds held by the Fed. That the Fed's profits are assigned to the Treasury does not change this, and since the two are just components of a single monolith, it's really just a change of pocket, not a change of pants.
That portion of the mature debt that is not honored through inflation is honored by taxation, mostly by income taxation, which of course is widely recognized as confiscatory prima facie. Income taxation is usually set as high as is politically feasible.
When debts are retired by income taxation, the money supply contracts, increasing the value of a quantum. This is because the Fed throws away money it is paid - which, of course, is no less unreasonable than making up money to pay out. With income taxation, wealth is redistributed from those who pay taxes to those who do not (notably, ``philanthropic'' foundations), without any explicit pay-out. Importantly, the architecture of the system necessarily inflates the money supply whenever debts are retired by means other than taxation, and inflation is no less clearly confiscatory than is explicit income taxation itself. That is, one way or the other, intrinsic to the architecture, wealth is confiscated from the public. Even the presumption of a benevolent FOMC cannot avoid this - only retirement of the entire national debt (over $6 trillion, or about $20000 per human living in the United States), proscription of deficit spending, deprecation of income (and sales and property) taxation, and cessation of so-called Federal Open Market activities, can end the cycle of theft.
The total engine pumps vast wealth from the productive public to the unproductive government/banking monolith, placing that monolith in a position of absolutely dominant power in the economy, and hence in the society. The monolith systematically redistributes wealth from those it disfavors to those it favors, and it favors those people and processes that its members expect to maintain and consolidate the existing power structure. The actual taxation and spending patterns are defined by that lumbering committee known as Congress, and consist principally of capital purchases, salaries, commercial contracts for delivery of products and performance of services, and entitlements.
Several quotes underscore the scam:
``By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens...'' -John Maynard Keynes
``In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.'' -Alan Greenspan, 1967
Keynes is the father of the activist monetary policy that is in practice today in the industrialized world. Greenspan, of course, is the current chairman of the Federal Reserve and of the FOMC.
``The Federal Reserve Banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this Nation is run by the International Bankers.'' -Congressman Louis T. McFadden
``...From now on depressions will be scientifically created.'' -Congressman Charles A. Lindbergh, Sr., 1913, on the Federal Reserve Act
``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.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.'' -Robert H. Hamphill, Atlanta Federal Reserve Bank"
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