“It’s good enough that the people of the nation don’t understand our banking and monetary system, because if they did, I reckon there would be a revolution before morning.” – Henry Ford
“our citizens, their property and labor, (are) passive victims of the fraudulent tricks of bankers and bankers.” -Thomas Jefferson
Were Henry Ford and Thomas Jefferson paranoid weirdos? Or maybe they were high quality fake money just more aware than the average person? It’s an important question, not only from a historical perspective, but directly related to your personal wealth and freedom.
Instead, The Average American Lives
Few people understand the true nature of money and finance, and for this very reason few people are able to gain or maintain wealth today. Instead, the average American lives in a state of bondage to mortgages, taxes, and a job. Anything can be taken away at any time unless a constant cash flow is paid. The current situation of the middle class is not very different from that of historical serfs or indentured servants. How did it come about and who is the beneficiary?
Check out the tallest buildings in each city throughout history. They always belong to the ruling class. Today, the skyline of most major cities is dominated by banks. Incredibly, all of this wealth was basically created out of thin air. That’s right, our enormous financial industry, which rules the country economically, has probably never produced a single product of value. Remember, if nothing is created, for every winner there must be a loser. The loser in this case was the average American. Unknowingly, the wealth and freedom of the middle class has been siphoned off to support the financial establishment.
I will try to provide as simple an overview as possible of this intentionally complex system of wealth transfer.
Today we refer to the US Federal Reserve as the “Federal Reserve” because the name central bank had a bad connotation due to the experiences in Europe. The central bank is essentially a quasi-government agency that determines its direction by consensus both within the federal government and the financial industry for which it was created. Regardless of who controls the central bank, its purpose is fairly simple once you cut through the opaque language and theory it uses to masquerade. The primary purpose of the Federal Reserve/Fed is to create ever increasing amounts of currency and inflation.
Creating controlled inflation has proven invaluable to the banking industry and the federal government at the expense of the American people.
First, how does the central bank create currency?
Basically, it just prints (or types into a computer) as much new currency as it wants. This currency is then “borrowed” to the banking industry and the federal government. When these loans are repaid to the central bank, the money is simply lent out again, along with more newly created currency.
A simplified example can help illustrate this intentionally complex process. One day the central bank could create $1,000,000,000 out of nothing. That $1,000,000,000 is then lent to a commercial bank (let’s call it a local bank) at the central bank’s lending rate of say 5% APR on a one year loan. In return, the Local Bank will lend the $1,000,000,000 to companies in the area at an 8% interest rate for one-year loans. Ideally, $1,080,000,000 in business loans will be repaid to the local bank at the end of the year. The local bank must now repay its loan from the central bank, which totals $1,050,000,000 including interest. That leaves Local Bank with a profit of about $30,000,000. Not bad for not producing anything.
This system secures the profit for the local bank
As you can see, this system ensures profit for the local bank regardless of inflation. Imagine a person trying to lend money in competition with the local bank. The wealthy person would lend their $1,000,000,000 at 8% interest and make a profit of around $80,000,000. Next, like the local bank, the wealthy person would deduct taxes for a final win rate of maybe 5%. So far so good right? The problem is when inflation is greater than 5% then the wealthy person loses money. If inflation ever gets extremely high, then the rich will be wiped out and stop lending. The Local Bank, on the other hand, doesn’t have to worry about inflation. The local bank does not use its own money. It just plays with central bank money created out of thin air and then pays it back. After a while, banks that are granted access to central bank money remain the only viable lenders in this system. These banks have a virtual monopoly in the money lending industry.
But that’s only half the story. Part of the genius of the central banking system was that it also helped big governments and the politically allied. This ensured that large governments became dependent on the system and could not change it.
First the government takes over
“Loans” directly from the Federal Reserve Central Bank, but with one key difference. The central bank returns the interest “paid” on the loan. This is a convoluted way for the government to get perpetual interest-free loans — more specifically, free money. As if that weren’t enough, the US Treasury also receives the interest that the Federal Reserve charges commercial banks on the money created out of thin air. This practice of passing central bank interest to the government essentially ensures that all inflation on all the money in hand is shared as profit between the government and the commercial banks. These benefits alone give the government a huge and well-hidden revenue stream.
An easier way for the government to achieve exactly high quality fake money the same result would be for the Treasury to print money for free every year. However, this method would be simpler and citizens would intuitively see that the resulting inflation would rob them of their savings and earning power. Second, this method of printing free government revenue would not allow commercial banks to siphon off their share of the inflationary money supply as well.
The government’s free benefits don’t end there, however. Next, as the currency balloons, the government’s interest-free debt obligation is gradually paid off. This debt is constantly being lengthened and eventually inflated to nothing.
Finally, in another covert way, the government wins tremendously.
Taxes on public savings are based on the imaginary “profit” from inflation. If a person owned a house or gold under a stable currency, the value would remain relatively constant. However, with an inflationary currency, the government is able to tax the “gain” from savings as its cost in dollars increases every year. Essentially, this amounts to a well-hidden tax levied only on Americans who save money. The more you save, the more you are taxed. Is it any wonder that our saving rate is now negative and that the general population looks to government rather than saving during tough times?
Individuals in a central banking system have less money to make large purchases and must borrow for almost everything. The net result is an ever-increasing number of people who need credit instead of savings, and a banking industry with a virtual monopoly on making that credit. This system has fueled the immense profits of the non-production financial industry.
The system of currency inflation created, siphoned off and maintained by banks and governments may seem subtle. Some people don’t realize the damage done. Try to display the simplest form. This process is the same as a counterfeiter who prints money and earns a free living without producing anything. Imagine the simplified economy of a small town with its own currency. Imagine the city has all the normal industries and a counterfeiter who can print as much free money as he wants. Next, the forger buys up all the valuable goods from the town’s producers. But the harder they work and the more they produce, the more the counterfeiter can buy. Ultimately, the forger remains the only person in town with wealth. He will then have ultimate control of the city newspaper and government. It is becoming difficult to enlighten anyone or pass a law against counterfeiting.
So there you have it.
Less than a century under the current incarnation of this central banking system, we now have a heavily indebted middle class, a negative savings rate, a huge but often unproductive government, and a utterly unproductive financial industry. In addition, for the past two generations, our government has faced increasing periods of financial insolvency and is no longer able to honor its earlier promises to redeem currency for gold or valuables.
Escape from theft will only hasten the collapse of a parasitic system. Once you understand how central banking works, you can benefit immensely. There is even no need to win others over to a reform movement. You can simply watch your wealth and freedom grow while you set an example for others to follow.
The first questions I ask any investment (or other) advisor is their track record, education, and experience—so here’s mine. I may have been fortunate in not having a formal education in economics and studying engineering instead. Everything I learned about money was self-taught and based on logic rather than economic theory. In the past five years of investing, I’ve had an average annual return of over 20% and now have a net worth of about $2,000,000. What’s more, I’ve done so without a single day of debt and the anxiety that comes with it.
In short, to get rich, you must first understand how the central bank robs your savings.
Always remember most “news” stories about investing
The next step is to understand and shield yourself from press conditioning. Always remember that most “news” about investing is little more than paid advertisements initiated by members of the press. For example, no one questions claims like “The value of all stocks on the NYSE has increased 10,000% over the past 50 years” or “The value of the Dow Jones Industrial Average has increased 5,000% over the past 50 years.” However, these are meaningless statements, akin to saying, “The value of all houses in America has increased 10,000% in 50 years” or “The value of the 30 largest houses in America is now 5,000% higher than the value of the 30 largest houses in the world Year 1950.” If you bought a particular home 100 years ago, it would probably be worthless rubble today, even though the average home is worth a lot more in inflated dollars. Financial industry hype aside, stock analysis is an extremely complex field with an enormous number of variables. Let’s try to simplify it. The fact is that almost all companies eventually go bust. If the companies didn’t go bust, names like British East India or the Hudson Bay Company dominate the stock markets.
Popular investment “advice” generally leads to taking a player’s perspective. Pundits are pushing investors into one sector or company this year and into another next year — while churning up commissions and giving the impression that investing is a fast-moving and unpredictable field. However, once you learn the basics of value investing and long-term cycles, investing becomes much more of a science while retaining the potential for spectacular gains.
The final step in escaping financial exploitation is to understand the multiple ways brokers make a living from your life savings. You receive little or nothing in return for paying a broker’s commission, so there is a need to learn to minimize commissions and even broker theft whenever possible. After understanding and minimizing this last burden of wealth, you have achieved the basics of financial freedom.