What The President Should Know About Money.

[Shooterman]

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"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money." (Daniel Webster)


Definition of terms: Fiat (arbitrary [paper]) money is money that is created out of nothing by banks or central banks and without any work. Because of material misrepresentations and nondisclosure regarding our fiat “dollar,” it is prima facie fraudulent. Commodity money is a physical thing, such as gold or silver. It takes work to create it. There are compelling reasons why gold has been the preferred commodity money since antiquity. (See: “Whither Gold”)

Introduction: The monetary system of the United States is inherently a fraud upon people, both at home and abroad. Essentials of our money are being misrepresented, and crucial information is not being disclosed. The beneficiaries of the fraud are mostly those in the financial sector of the economy, very large corporations, and the politicians they finance. The victims are everybody else, but especially ordinary people who are dependent upon the integrity of our monetary system for their savings, their pensions, and their jobs. Already, fraudulent monetary systems modeled after our own have wiped out the savings, pensions, and jobs of hundreds of millions all over the world, including in Russia, the Philippines, Mexico, Brazil, South Korea, Malaysia, and many other countries.

How the fiat money fraud works: Recently there has been news about a massive insurance fraud by a Mr. Martin Frankel. Through an intermediary with whom he was associated, he acquired control of some small insurance companies and improperly transferred their assets to a company he ran that supposedly invested and managed those assets. However, rather than manage those assets, he stole them and used the proceeds for his own benefit.

The policyholders had no idea what had happened. They, along with the regulators, received statements from Mr. Frankel showing that the assets were intact. Because no money was due the policyholders until years to come, there was the illusion that everything was fine. Of course, had the fraud continued, the policyholders would have come to realize at some point that there was nothing of substance backing up their statements.

The fiat money fraud operates in a similar fashion. In a prosperous society, people save considerable amounts for future needs, believing that they are providing for their retirement. They don’t realize until years later, when they attempt to exchange their “savings” for real wealth (shelter, automobiles, food, clothing, etc.), that it takes many more “dollars” to pay for these things than the savers could possibly have anticipated at the start. They find that their money, as the saying goes, has “melted.” A mysterious villain called "inflation" is cited as the cause of the loss of purchasing power.

In fact, while people are saving potential claims on wealth, those who receive the interest and transaction fees for creating fiat "dollars" are spending them and consuming the real wealth those claims represent.

It takes work to create wealth. “Dollars” are created without any work—how much more work is involved in printing a $100 bill as compared to a $1 bill? Not only are ordinary people at home being deceived, but foreigners who accept and save our “dollars” in exchange for their goods and services are also being cheated.

"I'm only playing by the rules": A few years ago Mr. Joe Jett, an alleged "rogue" trader for Kidder Peabody, then a major brokerage firm owned by General Electric, somehow produced a profit for Kidder of approximately $350 million trading U.S. Government securities. Normally this kind of trading produces much smaller profits for those who engage in it. At the time, Kidder and General Electric proclaimed Mr. Jett a hero. He received a multimillion bonus, his boss received a multimillion-dollar bonus as did his boss' boss. All were ecstatic! Then, it turned out that Mr. Jett had exploited a glitch in Kidder's accounting system and there was no $350 million profit. In fact, there was a loss!

What did Kidder do? Kidder came down on Mr. Jett like a ton of bricks. The firm fired him, defamed him in the press as a cheat, froze his assets, and did all it could to brand him a criminal short of having him arrested. And what was Mr. Jett's reaction? He said that he was just playing by the rules. Further, he pointed out that his bosses knew, or should have known, exactly what he was doing. Besides, they got multimillion-dollar bonuses too—and they didn't have to give them back.

Mr. Martin Mayer, a Resident Scholar at the Brookings Institute has a very clever metaphor to explain Mr. Jett's alleged fraud: One day your eight-year-old kid comes home and says "Mommy, daddy, I just made $1 million at the lemonade stand this afternoon." And what do you say? Well, if you're Joe Jett's boss you say: "Well, that's great, sweetheart. Let's go spend the money." But, if you're any normal parent, you say: "How did you do that?"

7/22/99 8:21 PM

Read in its entirety. It may enlighten you. Keep in mind this was written in '99, but the precepts still hold true.

It may also be noted, based on what was written here in '99, the current credit mess was quite foreseeable.