Generating Power from Stupidity - The Harsh Truths of the World Financial System
06.10.2009 16:34 in money
[Posted 4th Oct 2009 - an extract from a preview of a private publication, with permission to post]
The harsh lessons in monetary, political, and war history that will shatter deeply held world-views starting this autumn stem from the following widespread ignorance:
What is a dollar?
What is the difference between a legal tender dollar and a dollar-liability-of-a-bank?
The liability of your bank to pay you 1 dollar in legal tender cash is not the same as a holding a printed legal tender Federal Reserve note in your pocket.
How did the bulk of the dollar liabilities of your bank come into existence? Answer: Fraudulent Conversion1
The liability of your bank to pay you a dollar is not the liability of the Federal Reserve.
The FDIC is broke. We believe, it was designed to go broke.
The liability of the United States Treasury to pay a dollar in legal tender cash on its treasury bills is independent of the number of banks left standing.
The massive earnings plunge by US S&P 500 corporations will affect the ability of the United States Treasury to collect dollars in taxes to pay its liabilities. With a banking collapse the UST would be severely hampered by the lack of Federal Reserve Notes, whose supply is determined by the assets held by the Federal Reserve. The total amount of Federal Reserve Notes outstanding in March 2009 was only 863 billion. We estimate that the amount in circulation in the US is less than 300 billion.
The financial ostriches:
Foreign governments who think they are “independent”:
The denial of world financial reality is widespread – China, India and Asia included.
The massive glut of USD bank liabilities that paid for goods made abroad resulted in:
Currency Sterilization2 – wholesale intervention of Central Banks who created local currency “backed by USD”. Those central banks hold US Treasuries. Their policies cannot be independent of the US Treasury – Federal Reserve system.
Who owns the shares of such Central Banks?
- This is entrapment, pure and simple.
Sovereign Wealth Funds & Government Treasuries who think they hold “trillions”:
Five people around a table playing monopoly, each with a 100 bucks, cannot bid something up to a 1000. In other words, the quantity of money in circulation determines the maximum price.
USD bank liabilities are not legal tender.
Government treasuries are not legal tender.
As more banks fail, and as more offshore USD liabilities of banks are quarantined:
The USD money supply could retract down to the total issued Federal Reserve Notes!
Prices of assets – land, oil and commodities are already falling as a consequence.
Entire balance sheets will be written off.
Those who look at stock prices and imagine “green shoots”:
Smart people are getting rid of their USD and other fiat liabilities for “real” infrastructure.
The suckers left holding the USD liabilities of banks will bear the loss when the banks fail.
Those who think that the Federal Reserve sets “interest rates”:
The government bond market sets the interest rate – by demand and supply.
The FOMC pronouncements simply take the credit for the power of market forces.
When the market feels that their banks are about to collapse, they are saying that they do not believe that their bank will be able to pay their dollar liabilities in Federal Reserve notes, also know as “cash”.
The clever amongst those who have a lot of USD bank liabilities jump in to buy short term US Treasuries – driving up the price of the bonds and “reducing interest rates”. The USD liabilities of the bank are now in the account of the US Treasury and the T-bills are in the account of those who bought the bonds. Notice the Federal Reserve did not create any new Federal Reserve notes. The US Treasuries may have been made up out of thin air. The US Treasuries are not owned by the Federal Reserve. They cannot print any fresh Federal Reserve notes against it.
We state it again: The liability of the United States Treasury to pay a dollar in legal tender cash on its treasury bills is independent of the number of banks left standing.
Since there is only under $300 billion in Federal Reserve notes available, it is guaranteed that the banks cannot fulfil their obligations. The FDIC has long since run through its “reserves”. A massive sweeping bank failure if people demand cash is all but guaranteed.
There was a massive collapse in corporate and personal earnings in the financial year that ended 2009.
New USD liabilities of banks were not created as they process of fraudulent monetization of retail promissory notes3 called “loans” has been severely curtailed. The amount not created which was “repaid” in good faith by “borrowers” has removed those bank liabilities from circulation.
“I am afraid the ordinary citizen will not like to be told that the banks can, and do, create and destroy money. The amount of finance in existence varies only with the action of the banks in increasing or decreasing deposits and bank purchases. We know how this is effected. Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft, or bank sale destroys a deposit.”
The rapidly shrinking pool of USD bank liabilities means that it is that much more difficult to “make a profit”
Those that had a pile of USD bank liabilities chased commodities – this caused the oil price boom despite rising supply and falling demand. The oil price bust was caused by fundamentals.
Burnt by bust in commodities, those who still have a pile of USD bank liabilities are exchanging it for anything of value – causing the “boom” in the stock market. The bust will follow as P/E ratios approach infinity – fundamentals.
The budget of US government is in massive red ink for the financial year 2010
Congress just passed an interim budget for October 2009.
They likely have little good funds other than the proceeds of sale of government bonds.
The ability of the US government to continue to pay interest on its treasuries will come into question.
It is likely that the US government will go bankrupt – without recourse. [The government agrees, three government reports are analyzed here]
The gold that was in the US treasury is likely gone: “deep storage”.
Interest rates – set by the yield on US treasuries – will therefore rise beyond anything you can likely imagine as the market dumps US T-bills – after first going negative in the upcoming wave of bank failures, unless you have civil war, a New World Order, or World War III. We believe though that an amazing number of people who thought that they were the inside crowd are going to find that they were double-triple-quadrillion crossed4.
If the Federal Reserve is shut down, expect the price of gold to fall through the floor as gold becomes cash settled.
The world's most awesome military that outspends the rest of the world's military forces has been built by the purchasing power stolen by legal plunder.
Further analysis is available by consultation.
What is the Law of the Land?
The Law of the Land is the Natural and Common Law.
The US constitution and all the acts passed by congress are statutes, not laws.
The Common Law is not written down. It emerges from the process known as the Common Law Court of Record. This process is the root of freedom and sovereignty of the people5.
All courts in the USA are supposed to be a Article 3 Common Law Court of Record, but act as a de facto admiralty administrative court run as a for profit corporation whose business is to fool the people and collect fines under the statutes passed by congress.
There is no lawful money in circulation. Lawful money is gold and silver alone.
The US constitution is constructed as a trust and ever since Lincoln bankrupted the treasury of the organic united States of America, the country has been run by a corporation, the UNITED STATES OF AMERICA.
Are you one of the people or are you a citizen?6
If you claim you are a citizen of the United States, then it is strongly implied (though not necessarily true) that you are subject to the laws of the United States. On the other hand, if you are one of the People, then it is legally implied that you are a legal king, with a sovereignty superior to that of the United States, and subject only to the common law of the other kings (your peers). In short: the People are superior to the government, the government is superior to the citizens. That is the hierarchy.
PEOPLE ---> GOVERNMENT ---> CITIZENS
As a king you "are entitled to all the rights which formerly belonged to the King by his prerogative." You can do what you want to do when you want to do it. You have your own property and your own courts. There is no limit as to what you may do other than the natural limits of the universe, and the sovereignty of a fellow sovereign. You should treat the other sovereign in accordance with the Golden Rule, and at the very least must never harm him. Your sovereignty stops where the other sovereignty begins. You are one of the owners of the American government, and it is their promise that they will support your sovereignty (i.e. they have promised to support the Constitution and protect it from all enemies). You have no allegiance to anyone. The government, your only [public] servant, has an allegiance to you.
As a citizen, you are only entitled to whatever your sovereign grants to you. You have no rights. If you wish to do something that would be otherwise illegal, you must apply for a license giving you special permission. If there is no license available, and if there is no specific permission granted in the statutes, then you must apply for special permission or a waiver in order to do it. Your only allegiance is to your sovereign (the government), and that allegiance is mandated by your sovereign's law (the government, though not absolutely sovereign, is sovereign relative to you if you claim to be a citizen of the sovereign).
The above analysis is true for any republic.
Further analysis is available by consultation.
What is Legal Plunder?
It has long been shown that creation of “new money” out of nothing “to balance new wealth” is plunder.
Legal Plunder is the act of a State and its co-conspirators to take through force or deceit the property of individuals – “we the people”.7
“They (the banks) control the credit of the nation, direct the policies of governments, and keep in the palm of their hands the destinies of the peoples.”
Learn your lesson from the markets, or join us and teach the markets a lesson.
1http://www.rayservers.com/blog/fraudulent-finance-for-dummies
http://www.rayservers.com/blog/monopoly-money-and-the-art-of-fraud-theft-and-war
2http://www.imf.org/EXTERNAL/PUBS/FT/ISSUES7/INDEX.HTM
http://www.stratfor.com/analysis/china_mounting_losses_currency_sterilization
3http://www.rayservers.com/blog/fraudulent-finance-for-dummies
http://www.rayservers.com/blog/monopoly-money-and-the-art-of-fraud-theft-and-war
7More information available on the GSF Overview as well as the published AUric article.
On 10/06/09 08:41, The Phoenix Dollar - Net wrote:
Hello Rayservers,
Monday, October 5, 2009, 6:28:46 AM, you wrote:http://www.rayservers.com/blog/generating-power-from-
stupidity---the-harsh-truths-of-the-world-financial-system
I have a question about something here and another point I would like
to add.If the Federal Reserve is shut down, expect the price of gold to fall
through the floor as gold becomes cash settled.
Can you elucidate on this point further? It makes no sense to me. I
would think that if the fed were closed, that congress would then
proceed to issue fiat money (red inked dollars) and the outstanding
FRNs would hyper inflate against everything else including
"official" red ink dollars. I do not see how closing the fed would
cause gold to go down in terms of US bank notes.
I think what you are saying here is that there will be less FRN cash
circulating and therefore gold will be priced less on the market
accordingly.
I disagree with this for a few reasons.
1. In a cash strapped environment ultimately I believe some things
will become competitive including food crops, water, diapers, quality
items and gold/silver. Other things that have no real value such as a
plastic model car or possibly a nice looking glass rose from tiffany's
will lose their value as a luxury and be repriced lower or even fail
to be produced at all.
2. If the fed fails, or is closed, something will replace it. The most
likely would be red ink congress issued fiat notes in the short term,
or possibly SDRs. If that happens gold will maintain short term
stability in terms of the new notes, but instantly hyper inflate with
the old notes or even cease to be priced in them all together which
would be frightening for sure.
3. The gold market is manipulated from the top down. It has once shown
recently the ability to disconnect from this manipulation and be
repriced on the street slightly, but that lasted only about 1-2 months. If it
happened again in a more permanent way then and only then can we get
past the manipulation and obtain a real market price based on buying
and selling of substance rather than the buying and selling of paper
gold which now directly affects physical gold from the top down. SEE
ETFs.
Outside of all this I would like to point out a personal concern that
no one seems to be talking about yet.
Where is all the bailout money?
In my estimation the bailout money is being given to you and I and not
to the banks. Most people are up in arms about it going to the banks.
I contend that yes the banks are drawing from central banks and in
turn the central banks around the world are drawing from the federal
reserve, but why? And where is that money now?
I contend that their is a soft and silent run on all banks worldwide
in progress. The first bailout was nothing more than the fed cashing
up banks so that they can pay out depositors withdrawing funds
slightly above the norm.
A second round is being called into question to keep up with the
increasingly obvious demand for cash by joe q. public.
Once the fed stops supplying central banks with funds to pass down to
all other banks or consolidated banks, the people's cash will dry up.
Once people cannot get cash the bank run will be a snowball of hell fury
and then we will have arrived at:
TEOTWAWKI.
The dollar system is a pyramid, standing on its apex (i.e. upside down. A
spinning top or tornado is a better more evocative description - the tornado
sucks up the underlying and...). That apex is the supply of Federal Reserve
Notes (ignoring gold for a moment). Those notes are printed based upon the
assets the Federal Reserve Owns and pledges to the government printing agent.
If you wish to ask about gold, if you bring an ounce to the Federal Reserve,
they are duty bound to accept it, print up about $42 in FRNs and hand it to you.
It will be added to the 8000 tonnes already so pledged.
There are treasury bills the Fed owns outright. Those are [the bulk of] what is
pledged to the printing agent to get FRNs printed.
The Fed "earns" those UST bills which it owns outright by operating the discount
window, etc.
Lets do a "bailout" or "fund war in X":
1) UST walks up to the window and says: "I promise to pay you 1T in FRNs in 10
years, please give me 1T credit in my checking account".
2) Fed takes that promissory note, puts it on file, prints up an electronic
batch of UST bonds and offers it for sale.
3) X [replace with BoC, King of Saudi Arabia, BoJ, large nervous "safe" money
market fund] walks up to the Window. [As an aside: X is nervous that the bank in
which its account is at [pick Citibank, BoA, whatever] is about to collapse.
This is the feeling based motivation]. X says I want the 1T Tbill. Fed says,
sure, here you go, you can pay by cheque/check. X hand over check, the funds in
X's account at Citibank are debited 1T, UST's checking account credited 1T.
4) UST goes off and spends the 1T - by checks - to do: Bailout, war, whatever.
[Rarely is it something constructive.]
5) "Bailout" may be a special case. It goes like this. US bank comes crying to
big mama UST saying "Nasty European regulator spanked me with a Basil Rod, he
says I do not have [enough] quality assets" - so UST says - "ok, here are some
UST bills - I promise to pay them in the future". Accountant adds UST bills to
sick child bank's balance sheet, it looks all better now. Fed charges commission
for the service, that is what can add to FRN supply. Result - annoyed European
regulator and recent pronouncements by US banks that they are healthier than
their European rivals. Mama sends note appended to the accountants report card
in lunch box to European regulator - be nice to my children now... or I will
send big daddy the Pentagon to talk to you.
At the end of this, what do we have? X has UST bill, UST has bank liabilities
payable in FRN [except in the case of Bailout], Fed has commission of sale,
which it happily accepts in UST bill money, adds that commission to its stash of
T bills, and can take those to the printing agent to get FRN cash.
Did FRN cash increase by 1T? Answer: No. Maximum increase is commission percentage.
If UST goes to the bank and demands 1T in cash will it get it? Answer: No. Bank
will fail before that. Both Bank and UST know this. Hence UST pays "employees"
by check. Does a deduction, and gets a return.
Farmer Bob registers a Nevada Corp for his farm. He applies for and gets a TIN
and a bank account. He is now a sub-entity of the USG. He pays his farm hand by
check. Farm hand Joe is a USG "employee", creates value by milking cows, milk is
real wealth, goes out for sale, Bob gets paid by check, it goes into his
account, he pays Joe, Joe's check has a deduction, he files a return, IRS sweeps
sum of all those returns to UST account, UST pays X "principle and interest" by
check.
With me so far?
Audit the Fed, Dissolve the Fed, crys the mob with the pitchforks. Outstanding
liabilities of Fed are FRN cash. Fed has assets - gold and UST bills. New
currency is going to be, say, Amero [or SDRs or whatever].
You can have either bank liabilities, payable in FRN or FRN itself - distinct
contracts with two different counter-parties.
What happens to bank liabilities:
99% of the people want Ameros - they want to get on with life, milking cows,
etc. UST says, we will create Ameros at ratio 1:NN based on the amount of USD
credits in your bank. All UST bonds payable in dollars will now be payable in
Ameros.
What happens to the FRN?
There is now a market[place] in Gold, T Bills, Ameros and FRN [amongst other
things].
At this point in the game: You cannot send bank wire in dollars any more to buy
gold. If you did, you would send a bank wire in Ameros. You could, if you wanted
to, take your FRN, get Ameros, send a wire in Ameros.
If you had FRN cash in a vault, say in Zurich, then those funds would be "good
clean funds", free of taint from drugs, porn, etc. The market is cash settled in
dollars - in good clean FRN cash only = holders of barn loads in Central America
are stuck with a barn load of [smelly] paper. Quantity of this cash is fraction
of the total circulated by the Fed ever. So less than some 900B. Fed has 8000
tonnes of Gold. [Hypothetically] It is being liquidated in the market. Do the math.
Disclaimer/Note to readers: I am not some banker wizard. I just apply Reason to
Facts. If I have facts wrong, please correct them. There is no "magic", only a
marketplace and contracts and counter-parties. What is a contract? - who owes
what to whom, payable in what.
Also check feeling with Reason. The system is not there to "save the people".
The FRN cash hyperinflation scenario is dead. All the FRN-liabilities necessary
are in place for those, as a distinct unit to evaporate in "hyperinflation" are
in place. UST is not going to "feel like" honouring all the USD liabilities of
banks (third parties). It knows the game. It will just start over with a new
unit, if it could.
What is going on now at this point in the game? Entrapment of third parties.
What will be the result? New World Order. Guaranteed. The trap has been sprung,
the animal is in the cage. Animal is annoyed. Mama has told big daddy to deal
with the animal. Animal threatens to raise a stink...
Cheers,
---Venkat.--
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