@ Ingo Bischoff

"I love the federal government, not the central government we have today, but the federal government the founders created with the original U.S. Constitution. "

Of course you're right about that. It isn't the idea or the ideal, it's the instantiation I have difficulty with and that can change if enough of us step back for a moment and consider what it was our founders accomplished and what we have lost.

Point taken, well said.

@ Zen

"BTW, I don't care much for the Federal Government and I would far prefer it if you were to become the Treasurer of the State of California, or perhaps even just the County of San Francisco."

I love the federal government, not the central government we have today, but the federal government the founders created with the original U.S. Constitution.

We are at cross roads again in the history of the U.S. The age of central banking is coming to an end. We will have a peaceful transition to smaller government, local taxation and "commercial banking" again, if we can keep the central government from involving us in a catastrophic war.

What is going on at this very time between the House and the Senate and POTUS is a fight between the "central bankers" who own the U.S. Senate majority and Obama, and the majority of the American people represented by the House who want smaller government and an end of central banking.

Natural Law demands that the U.S. House and the people prevail. There is no reason to be overly pessimistic about the future of America..

Actually, I acted to heed rather than head those calls. A pox on interactive spell checkers :)

@ Ingo Bischoff

"Let me promise you that Dr. Fekete's call for action is never too late. Never......"

I understand your optimism and I share it to some extent, but the hour is growing late. I've read calls made by yourself and Dr. Fekete in the past, along with alarms sounded by other men and women who are among the great thinkers of our time, and I've acted to the best of my ability to head those calls.

I would rather not have to rise from the ashes of a once great civilization however I fear that is the most likely scenario at this juncture.

BTW, I don't care much for the Federal Government and I would far prefer it if you were to become the Treasurer of the State of California, or perhaps even just the County of San Francisco.

@ Zen

"I would submit that Dr. Fekete's call for action is a day late and a dollar short."


My dear Zen,

Let me promise you that Dr. Fekete's call for action is never too late. Never......

@ Peter Van Coppenolle on 4/8/2011 3:57:55 AM

"I have made reference to Tom Szabo (who has an auditing background) who pointed out in his note 'Lipstick on a pig' that the FED is bankrupt. Needless to say Bernanke had to act fast, and he was probably acting with consent of the Treasury and under pressure from the White House."

There is so much misinformation about the Federal Reserve System floating around, that it would take a book to point it all out.

First, the Federal Reserve System established with the 1913 FRA was until the early 1930s a totally different system than the Central Banking System which emerged with the 1935 Banking Act carrying the name of "Federal Reserve". What I am saying is that the pre 1935 Federal Reserve was a totally different animal than the post 1935 Federal Reserve. This is the ruse people should concentrate upon, instead of condemning the original Federal Reserve System. Because of the common perception and the constant insistence by pundits that the Federal Reserve System from its very inception is just a bunch of private banks run amok, it is very difficult to convince people that it just isn't so. The crux of Dr. Fekete's point is that one has to understand the Federal Reserve System pre 1935 and post 1935 to make sense of our present monetary system.

The original 1913 FRA established a national currency based on "commercial banking" employing the Real Bills Doctrine. The franchise to create the national currency in the form of a redeemable Federal Reserve Note was given to the reserve banking association which called itself the "Federal Reserve". To guard against the awesome power of the NY banks, the U.S. Congress split the Federal Reserve System into twelve coequal regional Federal Reserve Banks.

The Federal Reserve System adhered to the all the provisions of the 1913 FRA until the NY FED under Governor Benjamin Strong started to violate the Federal Reserve Act of 1913 with the conduct of Federal Open Market Operations in the early 1920s. The 1913 FRA authorized the creation of Federal Reserve Notes against gold and Bills of Exchange only. It specifically prohibited the monetization of "Anticipation Bills" and "Acceptance Bills". Governor Benjamin Strong of the NY FED intended to bridge the economic downturn in the early 1920s by monetizing U.S. Treasury debt. His argument to the directors of the Federal Reserve Board was that since U.S. Treasury debt had a guaranteed backing in the form of taxpayers' money, collectable thanks to the ratification of the Income Tax amendment (16th Amendment), the U.S. Treasury paper had value which could be ascertained in a "bond market". Federal Open Market Operations did create a "bond market". U.S. Treasury debt sold in this "bond market" was the basis for the FED to create Federal Reserve Notes in addition to the FRNs created against the gold and Bills of Exchange in the system. As anyone should have expected, these rogue acts by the NY FED had to soon come to an end as long as the FRN was redeemable.

Objection to this violation of the 1913 FRA was not heard from either the directors of the Federal Reserve Board, or from the other Governors of the regional Federal Reserve Banks. The U.S. Congress ignored the violation until it was too late. When the original 1913 Federal Reserve System finally collapsed in the early 1930s, the U.S. Congress did not chastise or prosecute the violators. Instead, it amended the original FRA in 1934 to ex-post-facto legalize the rogue act of the NY FED started in the early 1920s. By legalizing the conduct of past FOMOs, the U.S. Congress itself engaged in an unconstitutional act. Passage of ex-post-facto laws are prohibited by the U.S. Constitution.

The 1935 Banking Act turned the original 1913 FRA on its head, literally. It created a "central banking system" and destroyed the "commercial banking system" which had existed in North America for over 175 years. It is utterly foolish to talk of "commercial banks" with a meaning of the term as it applied before 1935. What are termed "commercial banks" today are merely outlets for the distribution of FED central bank money, the irredeemable USD/FRN. Today's commercial banks are nothing but the carcasses of the "real commercial banks" prior to 1935. Failure to understand this is what Dr. Fekete laments. I am afraid that he didn't make the difference very clear in his open letter to Ron Paul. Let me try a simpler explanation.

When "Bond Houses" like Goldman, Sachs and Morgan Stanley place bids for U.S. Treasury paper at the discount window of the NY FED (FOMOs), the FED thereby establishes the value of specific U.S. Treasury debt. It then monetizes the debt accordingly, and it gives the money to the U.S. Treasury. Now the FED holds U.S. Treasury paper which it must deliver to the bidders, such as Goldman, Sachs and Morgan Stanley. In turn, these "Bond Houses" pay the FED for the U.S. Treasury paper. They get their money back by selling the U.S. Treasury paper to governments, and to people who need to earn an interest on irredeemable Federal Reserve Notes.

How did the governments and individuals come into the possession of irredeemable FRNs in the first place? That is what Dr. Fekete is trying to explain.

The post 1935 FED system took the old "commercial banks" which existed prior to 1935 and turned them into "faux commercial banks" by making them an outlet for the distribution of USD/FRNs. These "faux commercial banks" were authorized by the FED to create a "deposit currency" by issuing mortgages, business loans and personal bank card loans. This "deposit currency" has no value to the "faux commercial banks" until and unless the borrowers pay back the "loans" with actual USD/FRNs (Reserve requirements regulated the amount of "deposit currency" which could be created). The actual USD/FRNs used in repayment of loans come from the programs of the federal government which were created by deficit spending of federal politicians. The repayment of the "loans" to the "faux commercial banks" realizes them a revenue in the form of USD/FRNs which turns the unusable "deposit currency" into usable "FRN currency". This is the process to which Dr. Fekete refers to when he speak of "valid Treasury paper" being converted by the FED "agent".

The whole thing of course breaks down when the Congress runs yearly budget deficits and the interest debt explodes after thirty five years, creating a need for more and more taxes, thereby killing purchasing power, thereby causing defaults on loan payments, thereby causing excessive amounts of "deposit" currency to accumulate, creating dislocation of valuations all over the place, and.......on and on......

Reply from The Daily Bell

We will respond to this at a later date.

@ Dr. Ron Paul

"I haven't yet figured out how the Congress justifies the creation of QE money, but I know that QE money created to "repurchase" U.S. Treasuries is nothing but pure fiat and toxic garbage "money" against which Dr. Fekete tries to warn us."

-- Ingo Bischoff

I stood for your nomination to Chairman of the House Finance Committee and I will stand again to support you as President of the United States should you chose to run again in 2012. I would like to suggest that should you run, and should you win that appointment, you give serious consideration to appointing Mr. Ingo Bischoff to the office of Treasurer of the United States.

While I applaud Dr. Fekete for his forthright call to do something about the US/Fed monetary policy, the irony of the debate on "splitting hairs" simply overwhelmed me in light of the hard fact that the USD has lost nearly 3% of its purchasing power between the time the article was posted on the 6th and the time of this writing.

Since October 2010 the dollar has lost 14% of its purchasing power relative to a basket of currencies comprised of the Australian Dollar, Swedish Krona, Swiss Franc, New Zealand Dollar and Brazilian Real. The rate of USD decline relative to this reference is increasing. Common silver bullion has increased nearly 100% against the dollar during the same period.

I would submit that Dr. Fekete's call for action is a day late and a dollar short.

@ DB

"It is not clear here if Dr. Fekete is speaking of the Fed or a commercial bank when he uses the term "F.R. Bank." If Dr. Fekete is speaking of a bank receiving Fed "money from nothing," he would indeed seem to be splitting hairs, as was noted at the beginning of this thread. What he would seem to be saying is that a bank receiving Fed money-from-nothing needs to go into the open market and purchase U.S. Treasuries. But why make this point? The Fed itself is still creating money "at the push of a button."

One has to understand the Federal Reserve System pre 1935 and post 1935. That is the crux of Dr. Fekete's point.

Because of the common perception and the constant insistence by pundits that the Federal Reserve System from its very inception is just a bunch of private banks run amok, it is difficult to convince people that it isn't so.

The original 1913 FRA established a national currency based on "commercial banking" employing the Real Bills Doctrine. The franchise to create the national currency in the form of a redeemable Federal Reserve Note was given to the reserve banking association which called itself the "Federal Reserve". To guard against the awesome power of the NY banks, the Congress split the Federal Reserve System into twelve coequal regional Federal Reserve Banks.

The Federal Reserve System adhered to the all the provisions of the 1913 FRA until the one and only violation of the Federal Reserve Act of 1913 which occurred with the conduct of Federal Open Market Operations by the NY FED in the early 1920s. The 1913 FRA authorized the creation of Federal Reserve Notes against gold and Bills of Exchange only. It specifically prohibited the monetization of "Anticipation Bills" and "Acceptance Bills". The NY FED under Governor Benjamin Strong intended to bridge the economic downturn in the early 1920s by monetizing U.S. Treasury debt. His argument to the directors of the Federal Reserve Board was that since U.S. Treasury debt had a guaranteed backing in the form of taxpayers' money, collectable due to the ratification of the Income Tax amendment (16th Amendment), the U.S. Treasury paper had value which could be ascertained in a "bond market". The Federal Open Market Operations started by the NY FED was in essence the creation of a "bond market". After the value of the U.S. Treasury debt was established by FOMOs, the FED then used this debt to create Federal Reserve Notes.

Objection to this violation of the 1913 FRA was not heard from either the directors of the Federal Reserve Board, or from the other Governors of the regional Federal Reserve Banks. The U.S. Congress ignored the violation until it was too late. When the 1913 Federal Reserve System collapsed in the early 1930s, the U.S. Congress did not chastise and prosecute the violators of the 1913 FRA. Instead, it amended the original FRA in 1934 to ex-post-facto legalize the rogue act of the NY FED which it started in the early 1920s with the conduct of FOMOs. Thereby, the U.S. Congress itself engaged in an unconstitutional act. Ex-post-facto laws are prohibited by the U.S. Constitution.

The 1935 Banking Act stood the original 1913 FRA on its head, literally. It created a "central banking system" and destroyed a "commercial banking system" which had existed in North America for over 175 years. It is utterly foolish to talk of "commercial banks" in terms of its real meaning after 1935. What are termed "commercial banks" today are merely the outlets for the distribution of FED central bank money. Failure to understand this is what Dr. Fekete laments. I am afraid that he didn't make it very clear in his open letter to Ron Paul. Let me try a simpler explanation.

When "Bond Houses" like Goldman, Sachs and Morgan Stanley place bids for U.S. Treasury paper at the discount window of the NY FED (FOMOs), the FED thereby establishes the value of specific U.S. Treasury debt. It then monetizes the debt accordingly, and it gives the money to the U.S. Treasury. Now the FED holds U.S. Treasury paper which it must deliver to the bidders, such as Goldman, Sachs and Morgan Stanley. In turn, these "Bond Houses" pay the FED for the U.S. Treasury paper. They get their money back by selling the U.S. Treasury paper to governments, and to people who need to earn an interest on irredeemable Federal Reserve Notes.

The big question is, how did the governments and individuals come into the possession of irredeemable FRNs in the first place? That is what Dr. Fekete is trying to explain, and I will give it a shot.

The post 1935 FED system took the old "commercial banks" which existed prior to 1935 and turned them into "faux commercial banks" by making them an outlet for the distribution of FRNs. These "faux commercial banks" were authorized by the FED to create a "deposit currency" by issuing mortgages, business loans and personal bank card loans. This "deposit currency" has no value to the "faux commercial banks" until and unless the borrowers pay back the "loans" with actual FRNs (reserve requirements regulated the amount of "deposit currency" created). The actual FRNs used in repayment of loans come from the programs of the federal government which were created by the deficit spending of federal politicians. This is the process to which Dr. Fekete refers when he speak about "valid Treasury paper". The "faux commercial banks" use the "agent" to turn their unusable "deposit currency" into usable "FRN currency" by presenting the "loan repayments (FRNs) or "Treasuries" to the FED for credit.

That's how it works folks.....and it is all legal, because the U.S. Congress made it so.

The whole thing of course breaks down when the Congress runs yearly budget deficits and the interest debt explodes after thirty five years, creating a need for more and more taxes, thereby killing purchasing power, thereby causing defaults on loan payments, thereby causing excessive amounts of "deposit" currency to accumulate.......on and on......

Then there comes the story of Freddie and Fannie......but that I leave for another time

Reply from The Daily Bell

Thanks. We will respond to this at a later date.

@ Ingo Bischoff

Indeed, sir, Dr. Fekete is warning everyone against shenanigans of these 'institutions.'
I have made reference to Tom Szabo (who has an auditing background) who pointed out in his note 'Lipstick on a pig' that the FED is bankrupt. Needless to say Bernanke had to act fast, and he was probably acting with consent of the Treasury and under pressure from the White House.

The point of Dr. Fekete is that, although we are still in a deflationary spiral (capital destruction, and its complement, labor destruction), hyperinflation was and is still caused by a direct as opposed to an indirect monetisation of government debt. The US and others were only inches away from hyperinflationary collapse.

Of course, impeaching Bernanke is a rethorical call. Replacing him with another Keynesian or Friedmanite is no help either. In fact, the call to impeach Bernanke is a move to publicly expose the PTB. There is the Constitution of the US. And then there are those who say: "do as I say, not as I do". Like the PTB, who have unconstitutionally "saved" the system. Against all laws, regulations, bylaws and rules, which they have made themselves...

Judging from the facts, the PTB consider themselves above the law. Including Bernanke. Power corrupts indeed. So impeach him. And the others too.

Peter Van Coppenolle
www.pintax.eu

@ S.S. McDonald on 4/7/2011 8:40:03 AM

"Dr. Fekete calls for impeachment of Bernacke. This shows his lack of understanding about the machinations of government in the USA. Bernacke is head of a private corporation, set up in 1913 to be overseen by Congress."

I am quite sure that Dr. Fekete's call for the "Impeachment of Bernancke" is rhetorical. Dr. Fekete worked in the office of Representative William Dannemeyer (R) CA for several years during the Reagan Administration, and he knew FED Chairman Paul Volker. Dr. Fekete is certainly familiar with the legal "makeup" of the FED, both pre 1935 and post 1935.

The original Federal Reserve Act of 1913 created a "Federal Reserve Board" with a Board of Directors. This Federal Reserve Board was appointed by the U.S. Congress and it was its "oversight body". The directors' term of service and their salaries were established by the U.S. Congress.

Under the original 1913 FRA, the heads of the established twelve regional Federal Reserve Banks were known as "Governors". They were private employees of the respective twelve regional Federal Reserve Banks. As such, it was the powerful governor of the New York FED, Benjamin Strong, who soon after the creation of the Federal Reserve System manipulated and marginalized the Directors of the Federal Reserve Board.

It was Benjamin Strong and the NY FED who illegally started Federal Open Market Operations (created a bond market) in the 1920s which eventually led to the banking crisis in the 1930s. The Federal Reserve Board, intimidated by Benjamin Strong, did not object to the conduct of the illegal FOMOs by the NY FED, neither did the eleven Governors of the other regional Federal Reserve Banks. This eventually led to the 1929 stock market crash, but by then Benjamin Strong was dead. He died in 1928 of complications brought on by tubercolosis.

In 1934, the U.S. Congress amended the original 1913 FRA to ex-post-facto legalize the illegal Federal Open Market Operations of the NY FED started by Benjamin Strong in the early 1920s. With addition of Paragraph (b) to Section 14 of the original Federal Reserve Act passed in 1934, the U.S. Congress legalized Federal Open Market Operations and thereby effectively created a central bank for the United States.

The Banking Act of 1935 created a "Board of Governors of the Federal Reserve System" in lieu of the original "Board of Directors of the Federal Reserve System". The "Directors" were government employees. The "Governors" on the other hand perform a "public" function, but they are privately paid by the regional Federal Reserve Banks. By the same act, the title of the heads of the regional Federal Reserve Banks was changed from "Governor" to "President". (Confusing, I know.....but to my mind certainly intentional to be that way.)

The 1935 Banking Act stipulated that the President appoint seven members to the "Board of Governors of the Federal Reserve System". The presidential appointments must be confirmed by the U.S. Senate. "Governors" serve for 14 years. Once appointed, Governors may not be removed from office for their policy views. The chairman and vice-chairman are chosen by the U.S. President from among the sitting Governors for four-year terms; these appointments are also subject to Senate confirmation. In practice, the chairman is often re-appointed, but cannot serve longer than one 14-year term as Governor."

I am quite sure that Dr. Fekete is intimately familiar with the history of the FED. He knows that the FRA modified in 1934 only authorizes "monetization" through FOMOs. That is why he closed his letter open letter to Ron Paul with this comment: "Without understanding this fundamental truth (FOMOs and valid Treasury paper), all talk about stabilizing the monetary system and reigning in the runaway budget deficit is an exercise in futility."

It must however be pointed out that in 2008, with the passage of TARP, the Congress strayed from the FOMO policy, and it did authorize the FED to monetize debt of its member banks without receiving valid Treasury paper.

I haven't yet figured out how the Congress justifies the creation of QE money, but I know that QE money created to "repurchase" U.S. Treasuries is nothing but pure fiat and toxic garbage "money" against which Dr. Fekete tries to warn us.

Reply from The Daily Bell

"The F.R. bank seeking to expand credit takes its Treasury paper, owned outright and free from encumbrances, and posts it as collateral with the Federal Reserve agent who will then authorize the issuing of credit. In other words, if the F.R. banks do not have the unencumbered Treasury paper in their possession, then they cannot create additional credit legally."

The point made by a previous feedbacker is a good one. It is not clear here if Dr. Fekete is speaking of the Fed here or a commercial bank when he uses the term "F.R. Bank." If Dr. Fekete is speaking of a bank receiving Fed "money from nothing," he would indeed seem to be splitting hairs, as was noted at the beginning of this thread. What he would seem to be saying is that a bank receiving Fed money-from-nothing needs to go into the open market and purchase Treasuries. But why make this point? The Fed itself is still creating money "at the push of a button."

If Dr. Fekete is arguing that the Fed ITSELF needs to purchase Treasuries before it can expand credit, then Dr. Fekete surely has not explained the process adequately (as it flies in the face of most interpretations of what the Fed currently does) in his brief, though interesting letter.

Justin@

Here is the Quantity Theory of Money by Fekete, to him and to me it is anathema. Click to view link

Reply from The Daily Bell

Dr. Fekete again makes good points about the circulation of money. But at root no matter what the process, additional product beyond what the market can absorb naturally eventually reduces the value of the product. How can one argue otherwise in the long term?

Isn't the jist of Dr Fekete's point that the Fed has moved from debt based money to actual FIAT money which is in violation of its charter? Seems like a simple point that some are overcomplicating. As to The Bernanke, he was appointed by the fiat USA government to head the Feds titular head which is the Oz cutain intended to keep the sheeple from looking behind the curtain and seeing that the NY Fed branch and the City of London residents are really running the show. Impeaching The Bernanke is a good idea politically but would make no technical difference because Oz will still be behind the curtain.

The Congress, like the banksters, the money elite and the unions are an assemblage of crooks. As such, they will not stop until stopped by outside force. Informing the public of the crimes against them is the best chance we have of getting the public to use peaceful political force rather than violence. Kudos to the Bell for providing a forum, but make no mistake, until the general public is informed of the outrageousness of the crimes visited upon them along with a political choice of something better and a vision of just how much better it could be, all of us will remain victims.

Thanks Mr Fekete for your clear and cogent elucidation of
the mechanics of monetization, usually seen as too abstruse
and hence not understood. I found it quite educational.

This letter is an example of legal bs the FR system is buried in. Lets change to KISS. If you dont have it to redeem, you can not loan equal value out, period, no matter what the the name of the entity is.

All good facts are discussed. But what is the root cause of this lapse of internal control? The Unconstitutional Federal Reserve. Our constitution grants the power to create coinage, ie, money, only to Congress. While this Parliment of Whores, except for a few, would be as reckless, at least we would know what is going on.

The Police State has whored itself to a Master called Central Banking on up to the PE. From this decrepit position, it follows in the treasonous mind of those corrupt Officials, that they are the Masters over the Populous. To them it is the natural order of things. One day the Populous will not put up with it any longer and it will come down. The Whores will run to their Masters who won't know them. Then, maybe there will be justice.

The fact that "Debt Money" is used pretty well explains the type of individuals we're dealing with.

Sources?
Search 'barking at dog' to read article at Click to view link if it's still posted.
Search '8 year old pepper sprayed' for tantrum.
Search 'Tasered traffic stop' for refusing to sign a citation.
Search 'Blood test traffic stop' and note they now say it's legal to hold you on the ground to take blood then,,, throw you in jail for refusing a 'law enforcers orders'.

This violates everything the constitution stands for. If this isn't a rogue government I don't know what is.

The continuation of these type of abuses along with the never ending economic intrusion by government, the money printing, our bomb them into eternity foreign policy(of course with UN approval) will likely cause suffering and despair beyond comprehension for everyone except possibly the robber barons who may be able to flee to a safe house somewhere over the rainbow.

History is quite clear on this. Gold/silver may help until they come confiscate it, all legal of course, precedent set by hero Mr. Roosevelt.

Is this paranoia? Most would say yes because they think in our modern age these sort of things can't happen but the dead empires and their tyrannical governments of past say differently.

I'll take history over delusion any day...

"F.R. Credit is the debt of the American people."

I reject that that statement. My only debt is the debt I signed for. If my debt can be whipped up out of thin air, then I am a slave.

"Since all of the banks are in the game with the FED the banks do not want change. How else can these enormous profits taken by Banks exist?"

They do not take profit, they take assets. Which causes them fictitious (monetary) loss, which requires QE and bailouts. Which legitimizes their takings.

"This is basically the same scheme as England has had since around 1694. In the USA, the Fed is made up of 12 regional banks but ONLY the New York Fed has consistently wielded power. The majority shareholders in the New York Fed are Banks whose shareholders consist of the wealthiest families in the world. This has remained relatively static since 1913."

The scheme has been repeated throughout history. The Federal Reserve opened with legitimate operations, but has slowly subverted it over a century. It is not all that far removed from us.

"Ron Paul has little power in affecting any change. Other congressman have tried. I do not recall any senators leading a charge."

Honest politicians have only as much power as we give them. They do not grab power.

"In 1993 Bill Clinton refused to support a more open FED operation on the grounds he wanted to keep politics out of it."

And politics keeps the Market out of it. Clinton was a good Do Boy. We were all rewarded during that boom era.

"After all the dollar has only lost 95% of its value since Click to view link is not a total loss. LOL"

The real loss is our Free Market system.