Money, Banking and the Fed

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Senior Member
Money, Banking and the Fed

Originally posted by Grayson@Aug 21 2004, 09:18 AM
Grud on a greenie! I never realised that the problem was so bad.

I can only presume that the resulting economic fall-out will be bad for the rest of us Globally. Duh!

So, what (say) 5 steps can we take to minimise the impact of this personally?

I'm not sure what "grud on a greenie" means but it don't sound too good.

Steps you can take personally to minimize the impact of a deflationary depression.

Get out of debt to whatever extent possible. Debt-free is best, obviously.

Raise cash. Liquidate whatever assets you don't want. Then consider selling those you don't need. Real estate, stocks, bonds, collectibles, commodities all go down in a deflationary depression. These assets need to be reviewed first.

Don't lend money to anyone. Your odds of seeing repayment diminish as the depression unfolds.

Make sure whatever financial institutions you use are sound and will weather a severe financial storm. The generally accepted rating agencies have no clue as to the true soundness of the firms they rate.

Consider having some currency available in a safe place. A bank box is not a safe place. If banks are closed due to a "holiday" you won't be able to get to your cash.

Don't count on the government to save you or the economy. The global imbalances have gone way beyond the control of any govt. The PTB will only be saving themselves.

Read Bob Prechter's book, "Conquer the Crash". This one will be global, and bad.

I've posted most of this in other places on the board, so I don't want to go on and bore the bejezus out of everyone. "There he goes again with all that doom and gloom again." Sorry, but that's where we're headed over the next couple of years.


Judge Bean

Senior Member
Money, Banking and the Fed

"Don't count on the government to save you or the economy. The global imbalances have gone way beyond the control of any govt. The PTB will only be saving themselves." --CaryP

Truer words never written here.


Senior Member
Money, Banking and the Fed

For those of you who are interested in how much and how long the Federal govt. has been lying about economic reports, you might want to read at least the first part of the history of the deception

A Primer on Govt. Economic Reports - Things You've Probably Suspected But Perhaps Were Afraid to Ask!

\"A Primer on Government Economic Reports -- Things You've
Probably Suspected But Were Perhaps Afraid to Ask!\"

\"Employment and Unemployment Reporting\"
(Installment One in a Series)

By Walter J. \"John\" Williams
[email protected]

Series Introducion

In 1996 -- the middle of the Clinton economic miracle -- the Kaiser Foundation conducted a survey of the American public that purported to show how out of touch the electorate was with economic reality. Most Americans thought inflation and unemployment were much higher, and economic growth was much weaker, than reported by the government. The Washington Post bemoaned the economic ignorance of the public. The same results would be found today.

Neither the Kaiser Foundation nor the Post understood that there was and still is good reason for the gap between common perceptions and government reporting: government data are biased in politically correct directions and increasingly have diverged from common experience and reality since the mid-1980s. Inflation and unemployment reports are understated, while employment and other economic data are overstated, deliberately.

For several years, I conducted surveys among business economists as to how they viewed the quality of government economic data. The following were actual comments:

? The senior economist of a major retail company told me, \"Quality varies. The retail sales numbers are terrible, but money supply data are great.\"

? The senior economist at a major bank offered, \"There's a problem with money supply, but I think retail sales are pretty good.\"

The point is that when an economist knows a sector well, he also recognizes the limitations and distortions of related economic reporting. Gathering and reporting accurate information on a timely (one-month) basis for components of the U.S. economy is nearly impossible. Nonetheless, most career government statisticians in Washington work diligently to provide the best information possible within the limits of the existing reporting system. A number of reporting distortions, however, are not accidental.

What follows is brief background on the reporting system and how the numbers can be viewed. Separate installments will address the specifics of employment, inflation, GDP and budget deficit reporting. Other areas will be addressed upon request.

The first regular reporting of now-popular statistics such as gross national/domestic product (GNP/GDP), unemployment and the consumer price index (CPI) began in the decade following World War II. Modern political manipulation of the government's economic data began as soon as practicable thereafter, with revisions to methodology often incorporating positive reporting biases. As a result, investors and most economists, relying on the government's data, often miss underlying economic reality. Consider:

? During the Kennedy administration, unemployment was redefined with the concept of \"discouraged workers\" so as to reduce the popularly followed unemployment rate.

? If Lyndon Johnson didn't like the growth that was going to be reported in the GNP, he sent it back to the Commerce Department, and he kept doing so until Commerce got it right. The Johnson administration also was responsible for gimmicking the accounting that hides most of the federal deficit.

? Richard Nixon had a highly publicized war with the Bureau of Labor Statistics on the unemployment data. Nixon wanted to report the unemployment rate as the lower of the seasonally adjusted or unadjusted number, at any given time, but not specify same to the public. While that approach was unconscionable at the time and never used, basically the same methodology was introduced in 2004 as \"state-of-the-art\" by the current Bush administration.

? The Carter administration was caught deliberately understating inflation.

? Systemic changes were introduced during the Reagan administration to boost reported GNP/GDP growth on a regular basis. The wildest manipulations, however, happened at the time of the 1987 liquidity panic. In addition to intervention in the futures markets by the New York Fed to help prop the stock market after the October 19th crash, direct and heavy manipulation of the trade deficit data, under the direction of the Federal Reserve and U.S. Treasury, was used in conjunction with massive currency intervention to help bottom the dollar and to contain the currency panic at year-end 1987.

? The first Bush Administration began efforts at the systematic reduction of the reported rate of CPI inflation, and worked an outside-the-system GDP manipulation aimed at helping with the failed 1992 reelection bid.

? As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others.

? The current Bush administration has expanded upon the Clinton era initiatives, particularly in setting the stage for the adoption of a new and lower-inflation CPI and in further redefining the GDP and the concept of seasonal adjustment.

As a result of the systemic manipulations, if the GDP methodology of 1980 were applied to today's data, the second quarter's annualized inflation-adjusted GDP growth of 3.0% would be roughly three percent lower (effectively netting to zero percent or below). In like manner, current annual CPI inflation is understated by about 2.7% against the pre-Clinton CPI methodology (would be about 5.7%), and the unemployment rate is understated by about seven percent against its original design and what many people would consider to be actual unemployment (would be about 12.5%).

As to the financial results of federal operations, the application of accrual accounting and generally accepted accounting principles to federal operations shows an actual fiscal year 2003 deficit of $3.7 trillion, as reported by the U.S. Treasury, versus the reported cash-basis $374 billion.

Key Factors to Consider with Any Economic Release

Hearing or reading an economic statistic in the financial media is of little value, unless the context of the reported number is clear, detailing the type of change, any inflation adjustment, seasonal adjustment and revisions.

Seasonal Adjustment -- Widely followed data often are adjusted to remove patterns of distortion that recur regularly, year after year, or that are tied to business or trading days. For example, retail sales are strongest during the holiday season; February 2003 had 28 days, February 2004 had 29 days.

While seasonal adjustment is a legitimate tool for enabling month-to-month or quarter-to-quarter comparisons of data that might otherwise be biased by calendar trends, more often than not, the government has problems with its adjustments. Areas that usually do not adjust well: weekly unemployment claims and employment seasonals related to holidays and the school year.

One way to avoid many seasonality questions is to look at growth on a year-over-year basis, July 2004 versus July 2003, for example. Trends in annual growth are largely free of seasonal distortions.

Seasonal factors typically are calculated annually, based on recent years' patterns of activity. The Bureau of Labor Statistics, however, went to revising and recalculating its employment seasonal factors each month, as of January 2004.

Inflation Adjustment -- If inflation is up 3.0% for the year, and sales are up 2.0% for the year, then sales fell 1.0% after adjustment for inflation. Deflating dollar numbers is a legitimate approach to viewing data with the effects of inflation removed.

Terms that mean data have been adjusted for inflation include real, constant dollars, in 2000 dollars, in chain weighted 2000 dollars. Beyond no inflation reference, terms that mean data have not been adjusted include nominal, and current dollars.

The most popularly followed inflation-adjusted economic statistic is the GDP, which reflects the growth in dollar economic activity minus the growth in inflation. If inflation is understated, which it is, then the resulting real GDP is overstated.

Type of Growth -- Is the reported growth month-to-month, year-to-year or annualized? Most monthly economic releases are reported showing month-to-month change. Quarterly numbers are shown either with quarter-to-quarter growth (i.e., the Employment Cost Index) or at an annualized rate of change (GDP). (SAAR means seasonally adjusted annualized rate.)

As discussed earlier, more meaningful trends usually are seen in year-to-year change, although such patterns rarely get publicized. Year-to-year change (the way most businesses look at their sales -- How am I doing against last year?) usually eliminates seasonal distortions in unadjusted data or residual seasonal distortions in adjusted data.

Revisions -- Most economic series go through regular and often significant revisions, typically for the next several releases and then annually in some form of a benchmark revision, as the government gets better or more complete data. A monthly number can appear to be strong or weak due solely to prior period revisions.

Two series that do not get revised on a not seasonally adjusted basis are the CPI and the unemployment rate, unless a mistake is made or the series is redefined. In such instances, often the new series is not comparable to the old series, but the financial media rarely pay any attention to those details.

Installment One

\"Employment and Unemployment Reporting\"

The Bureau of Labor Statistics (BLS), U.S. Department of Labor, conducts two monthly surveys of U.S. employment and unemployment. Results usually are released on the first Friday of the month following the survey:

Household Survey (also Current Population Survey) -- The household survey generates the unemployment rate from a statistically designed monthly sampling of roughly 60,000 households. Other surveys, such as the annual poverty survey, often are piggybacked on the employment questions. The survey measures the number of people who have jobs.

Payroll Survey (also Establishment or Current Employment Statistics Survey) -- The payroll survey generates an estimate of the number of nonfarm jobs in the U.S. economy, based on a monthly non-random sampling of payroll tax filings of about 160,000 U.S. corporations and government agencies. The survey measures the number of jobs (some individuals hold more than one job).

The household survey is conducted during the week that includes the 12th of the month. The payroll survey is conducted as of the payroll period that includes the 12th of the month. Other than for seasonal factors, the household survey gets revised only with series or population redefinition. The payroll series is revised for two months following the initial release and then again in an annual benchmark revision.

Where the household survey includes farm workers, the self-employed and workers in private homes, the payroll survey does not. The payroll survey counts jobs, making no adjustment for multiple jobholders. Yet, adjusting for all differences, the BLS never has been able to reconcile the two series within one million jobs.

Conventional wisdom in the financial community is that the payroll survey is more accurate, given its larger sampling base. To the contrary, the household is scientifically designed, and the error can be estimated to any degree desired. The payroll data are haphazard at best, and the BLS has no idea of potential reporting error.

The BLS estimates a 90% confidence interval for a change in the unemployment rate of ?0.22%, and a 90% confidence interval for the monthly change in payrolls of ?108,000. The BLS, however, admits the payroll survey's confidence interval is not solid, given built in biases and the lack of randomness in the monthly sample.

The payroll survey used to include a regular monthly bias factor of about +150,000 jobs. Those jobs were added each month for good measure, as an estimate of jobs created by new companies. Companies that went out of business generally were assumed to be employing the same number of people as before they went out of business.

In the last couple of years, the BLS has modeled and seasonally adjusted its bias factor; there is no more guesstimation. Accordingly, new monthly bias factors have ranged from -321,000 to +270,000 during the last year. This, combined with continuous seasonal adjustment revisions, has added to the volatility of recent monthly reporting.

Suggesting that the household survey is more accurate than the payroll survey, however, does not mean household survey accurately depicts unemployment. While its measures have definable statistical accuracy, the accuracy is related only to the underlying questions surveyed and to the universe of people surveyed.

The popularly followed unemployment rate was 5.5% in July 2004, seasonally adjusted. That is known as U-3, one of six unemployment rates published by the BLS. The broadest U-6 measure was 9.5%, including discouraged and marginally attached workers.

Up until the Clinton administration, a discouraged worker was one who was willing, able and ready to work but had given up looking because there were no jobs to be had. The Clinton administration dismissed to the non-reporting netherworld about five million discouraged workers who had been so categorized for more than a year. As of July 2004, the less-than-a-year discouraged workers total 504,000. Adding in the netherworld takes the unemployment rate up to about 12.5%.

The Clinton administration also reduced monthly household sampling from 60,000 to about 50,000, eliminating significant surveying in the inner cities. Despite claims of corrective statistical adjustments, reported unemployment among people of color declined sharply, and the piggybacked poverty survey showed a remarkable reversal in decades of worsening poverty trends.

Somehow, the Clinton administration successfully set into motion reestablishing the full 60,000 survey for the benefit of the current Bush administration's monthly household survey.

While the preceding concentrates on the numbers that tend to move the markets, the household survey also measures employment. The payroll survey also surveys average hourly and weekly earnings and average workweek.

Yeah, that's why I put so much faith in what the govt. keeps telling us about this supposed "recovery" as opposed to disinterested third party reports that say it's a bunch of flim flam. From Kennedy to Bush II, one rolling pack of lies. The government is not here to take care of you. It is here to perpetuate itself, and those that swim in its sewers.



Senior Member
Money, Banking and the Fed

I ran across a reported actual phone call with an employee of the Fed Bank of San Francisco. Interesting that all the allegations of the Fed being owned by a private banking cartel were confirmed by the Fed employee. The phone call was made in 2002, so the bills in circulation and the federal debt numbers are low in comparison to today's numbers. I'm thinking about making a phone call to the Fed myself or maybe contact Dan Benham, author of this article, about his call.

A phone call with the Fed

A Phone Call To The Fed
From Dan Benham
[email protected]
The following is a conversation with Mr. Ron Supinski of the Public Information Department of the San Francisco Federal Reserve Bank. This is an account of that conversation.

CALLER - Mr. Supinski, does my country own the Federal Reserve System?

MR. SUPINSKI - We are an agency of the government.

CALLER - That's not my question. Is it owned by my country?

MR. SUPINSKI - It is an agency of the government created by congress.

CALLER - Is the Federal Reserve a Corporation?


CALLER - Does my government own any of the stock in the Federal Reserve?

MR. SUPINSKI - No, it is owned by the member banks.

CALLER - Are the member banks private corporations?


CALLER - Are Federal Reserve Notes backed by anything?

MR. SUPINSKI-Yes, by the assets of the Federal Reserve but, primarily by the power of congress to lay tax on the people.

CALLER - Did you say, by the power to collect taxes is what backs Federal Reserve Notes?


CALLER - What are the total assets of the Federal Reserve?

MR. SUPINSKI - The San Francisco Bank has $36 Billion in assets.

CALLER - What are these assets composed of?

MR. SUPINSKI - Gold, the Federal Reserve Bank itself and government securities.

CALLER - What value does the Federal Reserve Bank carry gold per oz. on their books?

MR. SUPINSKI - I don't have that information but the San Francisco Bank has $1.6 billion in gold.

CALLER - Are you saying the Federal Reserve Bank of San Francisco has $1.6 billion in gold, the bank itself and the balance of the assets is government securities?


CALLER - Where does the Federal Reserve get Federal Reserve Notes from?

MR. SUPINSKI - They are authorized by the Treasury.

CALLER - How much does the Federal Reserve pay for a $10 Federal Reserve Note?

MR. SUPINSKI - Fifty to seventy cents.

CALLER - How much do they pay for a $100.00 Federal Reserve Note?

MR. SUPINSKI - The same fifty to seventy cents.

CALLER - To pay only fifty cents for a $100.00 is a tremendous gain, isn't it?


CALLER - According to the US Treasury, the Federal Reserve pays $20.60 per 1,000 denomination or a little over two cents for a $100.00 bill, is that correct?

MR. SUPINSKI - That is probably close.

CALLER - Doesn't the Federal Reserve use the Federal Reserve Notes that cost about two cents each to purchase US Bonds from the government?

MR. SUPINSKI - Yes, but there is more to it than that.

CALLER - Basically, that is what happens?

MR. SUPINSKI - Yes, basically you are correct.

CALLER - How many Federal Reserve Notes are in circulation?

MR. SUPINSKI - $263 billion and we can only account for a small percentage.

CALLER - Where did they go?

MR. SUPINSKI - Peoples mattress, buried in their back yards and illegal drug money.

CALLER - Since the debt is payable in Federal Reserve Notes, how can the $4 trillion national debt be paid-off with the total Federal Reserve Notes in circulation?

MR. SUPINSKI - I don't know.

CALLER - If the Federal Government would collect every Federal Reserve Note in circulation would it be mathematically possible to pay the $4 trillion national debt?


CALLER - Am I correct when I say, $1 deposited in a member bank $8 can be lent out through Fractional Reserve Policy?

MR. SUPINSKI - About $7.

CALLER - Correct me if I am wrong but, $7 of additional Federal Reserve Notes were never put in circulation. But, for lack of better words were \"created out of thin air \" in the form of credits and the two cents per denomination were not paid either. In other words, the Federal Reserve Notes were not physically printed but, in reality were created by a journal entry and lent at interest. Is that correct?


CALLER - Is that the reason there are only $263 billion Federal Reserve Notes in circulation?

MR. SUPINSKI - That is part of the reason.

CALLER - Am I mistaking that when the Federal Reserve Act was passed (on Christmas Eve) in 1913, it transferred the power to coin and issue our nation's money and to regulate the value thereof from Congress to a Private corporation. And my country now borrows what should be our own money from the Federal Reserve (a private corporation) plus interest. Is that correct and the debt can never be paid off under the current money system of country?

MR. SUPINSKI - Basically, yes.

CALLER - I smell a rat, do you?

MR. SUPINSKI - I am sorry, I can't answer that, I work here.

CALLER - Has the Federal Reserve ever been independently audited?

MR. SUPINSKI - We are audited.

CALLER - Why is there a current House Resolution 1486 calling for a complete audit of the Federal Reserve by the GAO and why is the Federal Reserve resisting?

MR. SUPINSKI - I don't know.

CALLER - Does the Federal Reserve regulate the value of Federal Reserve Notes and interest rates?


CALLER - Explain how the Federal Reserve System can be Constitutional if, only the Congress of the US, which comprises of the Senate and the House of representatives has the power to coin and issue our money supply and regulate the value thereof? [Article 1 Section 1 and Section 8] Nowhere, in the Constitution does it give Congress the power or authority to transfer any powers granted under the Constitution to a private corporation or, does it?

MR. SUPINSKI - I am not an expert on constitutional law. I can refer you to our legal department.

CALLER - I can tell you I have read the Constitution. It does NOT provide that any power granted can be transferred to a private corporation. Doesn't it specifically state, all other powers not granted are reserved to the States and to the citizens? Does that mean to a private corporation?

MR. SUPINSKI - I don't think so, but we were created by Congress.

CALLER - Would you agree it is our country and it should be our money as provided by our Constitution?

MR. SUPINSKI - I understand what you are saying.

CALLER - Why should we borrow our own money from a private consortium of bankers? Isn't this why we had a revolution, created a separate sovereign nation and a Bill of Rights?

MR. SUPINSKI - (Declined to answer).

CALLER - Has the Federal Reserve ever been declared constitutional by the Supreme Court?

MR. SUPINSKI - I believe there has been court cases on the matter.

CALLER - Have there been Supreme Court Cases?

MR. SUPINSKI - I think so, but I am not sure.

CALLER - Didn't the Supreme Court declare unanimously in A.L.A. Schechter Poultry Corp. vs. US and Carter vs. Carter Coal Co. the corporative-state arrangement an unconstitutional delegation of legislative power? [\"The power conferred is the power to regulate. This is legislative delegation in its most obnoxious form; for it is not even delegation to an official or an official body, presumptively disinterested, but to private persons.\" Carter vs. Carter Coal Co...]

MR. SUPINSKI - I don't know, I can refer you to our legal department.

CALLER - Isn't the current money system a house of cards that must fall because, the debt can mathematically never be paid-off?

MR. SUPINSKI - It appears that way. I can tell you have been looking into this matter and are very knowledgeable. However, we do have a solution.

CALLER - What is the solution?

MR. SUPINSKI - The Debit Card.

CALLER - Do you mean under the EFT Act (Electronic Funds Transfer)? Isn't that very frightening, when one considers the capabilities of computers? It would provide the government and all it's agencies, including the Federal Reserve such information as: You went to the gas station @ 2:30 and bought $10.00 of unleaded gas @ $1.41 per gallon and then you went to the grocery store @ 2:58 and bought bread, lunch meat and milk for $12.32 and then went to the drug store @ 3:30 and bought cold medicine for $5.62. In other words, they would know where we go, when we went, how much we paid, how much the merchant paid and how much profit he made. Under the EFT they will literally know everything about us. Isn't that kind of scary?

MR. SUPINSKI - Yes, it makes you wonder.

CALLER - I smell a GIANT RAT that has overthrown my constitution. Aren't we paying tribute in the form of income taxes to a consortium of private bankers?

MR. SUPINSKI - I can't call it tribute, it is interest.

CALLER - Haven't all elected officials taken an oath of office to preserve and defend the Constitution from enemies both foreign and domestic? Isn't the Federal Reserve a domestic enemy?

MR. SUPINSKI - I can't say that.

CALLER - Our elected officials and members of the Federal Reserve are guilty of aiding and abetting the overthrowing of my Constitution and that is treason. Isn't the punishment of treason death?

MR. SUPINSKI - I believe so.

CALLER - Thank you for your time and information and if I may say so, I think you should take the necessary steps to protect you and your family and withdraw your money from the banks before the collapse, I am.

MR. SUPINSKI - It doesn't look good.

CALLER - May God have mercy on the souls who are behind this unconstitutional and criminal act called the Federal Reserve. When the ALMIGHTY MASS awakens to this giant hoax, they will not take it with a grain of salt. It has been a pleasure talking to you and I thank you for your time. I hope you will take my advice before it does collapse.

MR. SUPINSKI - Unfortunately, it does not look good.

CALLER - Have a good day and thanks for your time.

MR. SUPINSKI - Thanks for calling.

The Fed has not been audited since the 1950's, and is not subject to oversight by anyone or anything. Some clarification followed the transcription of the phone call.

If the reader has any doubts to the validity of this conversation, call your nearest Federal Reserve Bank, YOU KNOW THE QUESTIONS TO ASK! You won't find them listed under the Federal Government. They are in the white pages, along with Federal Express, Federal Deposit Insurance Corp. (FDIC), and any other business. Find out for yourself if all this is true.

And then, go to your local law library and look up the case of Lewis vs. US, case #80-5905, 9th Circuit, June 24, 1982. It reads in part: \"Examining the organization and function of the Federal Reserve Banks and applying the relevant factors, we conclude that the federal reserve are NOT federal instrumentality's . . but are independent and privately owned and controlled corporations - federal reserve banks are listed neither as \"wholly-owned' government corporations [under 31 USC Section 846] nor as 'mixed ownership' corporations [under 31 USC Section 856] . . . 28 USC Sections 1346(B), 2671. '

Federal agency' is defined as: the executive departments, the military departments, independent establishments of the United States, and corporations acting primarily as instrumentality's of the United States, but does not include any contractors with the United States . . . There are no sharp criteria for determining whether an entity is a federal agency within the meaning of the Act, but the critical factor is the existence of the federal government control over the 'detailed physical performance' and 'day to day operations' of that entity.

Other factors courts have considered include whether the entity is an independent corporation . . . whether the government is involved in the entity's finances, . . . and whether the mission of the entity furthers the policy of the United States . . . Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities ...

It is evident from the legislative history of the Federal Reserve Act that Congress did not intend to give the federal government direction over the daily operation of the Reserve Banks . . . The fact that the Federal Reserve Board regulates the Reserve Banks does not make them federal agencies under the Act . . . Unlike typical federal agencies, each bank is empowered to hire and fire employees at will. Bank employees do not participate in the Civil Service Retirement System. They are covered by worker's compensation insurance, purchased by the Bank, rather than the Federal Employees Compensation Act.

Employees traveling on Bank business are not subject to federal travel regulations and do not receive government employee discounts on lodging and services . . . Finally, the Banks are empowered to sue and be sued in their own name. 12 USC Section 341. They carry their own liability insurance and typically process and handle their own claims . . .\" According to the Federal Reserve Bank of Philadelphia, \"When the Federal Reserve was created, its stock was sold to the member banks.\" (\"The Hats The Federal Reserve Wears,\" published by the Federal Reserve Bank of Philadelphia).

The original Stockholders of the Federal Reserve Banks in 1913 were the Rockefeller's, JP Morgan, Rothschild's, Lazard Freres, Schoellkopf, Kuhn-Loeb, Warburgs, Lehman Brothers and Goldman Sachs. The MONEYCHANGERS wanted to be insured they had a monopoly over our money supply, so Congress passed into law Title 12, Section 284 of the United States Code. Section 284 specifically states, \"NO STOCK ALLOWED TO THE US\" *

Monopoly - \"A privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right [or power] to carry on a particular business or trade, manufacture a particular article, or control the sale of the whole supply of a particular commodity, A form of market structure in which only a few firms dominate the total sales of a product or service.

'Monopoly,' as prohibited by Section 2 of the Sherman Antitrust Act, has two elements: possession of a monopoly power in relevant market and willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior power, business acumen, or historical product. A monopoly condemned by the Sherman Act is the power to fix prices, or exclude competition, coupled with policies designed to use and preserve that power.\" (Black's Law Dictionary, 6th Edition) The Federal Reserve Act goes one step farther, \"No Senator or Representative in Congress shall be a member of the Federal Reserve Board or an officer or director of a Federal Reserve Bank.\" They didn't want We The People to have any say in the operation of their monopoly through our elected officials.

So, if this phone call is accurate, you know that Congress and Pres. Wilson gave the assets of the U.S. Treasury (primarily gold and the power to create and regulate money) to the Fed. Reserve, a private corporation, and the "money" we use is not worth the paper it's printed on. One of the things your tax dollars pays for is the interest paid on the federal debt held by the Fed. Reserve. Private banks are making money off of issuing money out of thin air and using that money to buy federal Treasury debt, for which they are paid interest. You are contributing to the profits of an unconstitutional banking cartel. But that's about to change in the not too distant future.

Any thoughts or comments? Anybody outraged yet?



Senior Member
Money, Banking and the Fed

Originally posted by Phoenix@Sep 7 2004, 01:24 AM
Thank you for these valuable resources CaryP.

Valuable resources? Our Treasury has been robbed in broad daylight, the currency we use has the value of monopoly money, we're being fleeced unconstitutionally by a private banking cartel, and life as we know it will probably be over in the next couple of years. Why isn't someone organizing a lynch mob at every Federal Reserve Bank in the country? Where is the outrage, or better put, have we become that complacent? Have we been on the "easy credit and consumerism" drug for that long that we've become a land of stupified and addicted goons, marching to the beat of central bankers? Sadly, it appears so.

The only value I see in my last post is locational directions for the lynch mobs to find Federal Reserve employees when the fractional reserve, fiat money, debt bubble banking system we've been living under goes bust. The federal government knows some hard times are coming. Warnings from Greenspan, Snow and members of the Fed. banks have been coming out for about 18 months now. Of course, few of them get much press. Have you heard about the Justice Depts. orders for libraries to destroy, remove or return federal guidelines and procedures for citizens to reclaim assets confiscated by the federal govt.? The govt. doesn't want the populace to know how to protect their assets or get them back from unlawful seizure. What a coincidence. Just as we're about to see an increasing wave of foreclosures and bankruptcies, the government doesn't want you to know how to protect yourself. Yeah, the land of the free and the home of the brave. Well, it was true once.



Senior Member
Money, Banking and the Fed

An update from Gillespie Research on govt. lies about govt. reports, this time it's about the deficit. We're "broker" than we thought we were. Seems last year's record deficit of $374 billion was really $665 billion without the surplus from SS. According to GAAP (generally accepted accounting principles) our true deficit was about 10 times greater than reported, coming in at $3.7 TRILLION FOR ONE FREAKIN' YEAR!!! Saw a report on CNBC today that updated the next 15 yrs. of deficit on SS and Medicare. The number came in at over $69 FREAKIN' TRILLION, AND THAT'S ON CNBC, THE HAPPY FINANCIAL NEWS CHANNEL. I don't even want to go into the current fiscal year, it boggles the mind. Paul, isn't there someone we can sue or lynch for treason? Why haven't the sheeple been thrown out of their complacent slumber of grazing in the pastures of consumerism into total outrage?! Because the sheeple want the game to continue. But that's about to change - real hard.


Federal Deficit Reality

(Part Two in a Series)

By Walter J. \"John\" Williams
[email protected]


U.S. Treasury Shows Actual 2003 Federal Deficit at $3.7 Trillion

Deficit Moves Beyond Any Possible Tax Remedy

Could U.S. Treasuries Face a Rating Downgrade?

The U.S. government's fiscal ills have spun wildly out of control and no longer are containable within the existing system. As detailed in this article, the actual annual shortfall in U.S. government operations for fiscal year 2003 (September 30) was $3.7 trillion. Put in perspective, that means if the U.S. Treasury had seized all wages and salaries in 2003 with a 100% income tax, there still would have been a deficit! The outlook for fiscal 2004 numbers is even worse.

Considering that the popularly reported 2003 budget deficit was $374 billion, one-tenth the number cited above, this installment on government reporting concentrates on where the incredulous $3.7 trillion number comes from, how and why the Treasury is reporting it, and why the financial press and federal politicians are ignoring it.

Nonetheless, some implications of the current circumstance are touched upon briefly, here, conditioned by the promise of a full and separate analysis at a future date.

As brief background, the $3.7 trillion number is from government financial statements prepared using generally accepted accounting principles (GAAP), and a large portion of the expanded deficit is from the annual increase in the net present value of unfunded Social Security and Medicare obligations.

The impossibility of this circumstance working out happily is why lame-duck Federal Reserve Chairman Alan Greenspan suddenly has urged politicians in Washington to come clean on not being able to deliver promised Social Security and Medicare benefits already under obligation. He suggests, correctly, that there is no chance of economic or productivity growth resolving the matter. The funding shortfall projections already encompass optimistic economic assumptions.

Even if the Administration and Congress heeded Greenspan's advice, the unfolding fiscal disaster faces one of only two very unpleasant general solutions:

? The first solution is draconian spending cuts, particularly in Social Security and Medicare, even if accompanied by massive tax increases. This appears to be a political impossibility, at present.

? In the absence of political action, the second solution is the U.S. government facing some form of insolvency within the next decade or so. Shy of Uncle Sam defaulting on debt, the most likely outcome is the Fed eventually having to monetize U.S. debt heavily, triggering a hyperinflation. U.S. obligations eventually would be paid off in a significantly debased and devalued dollar.

Implications for the United States' sovereign credit rating is discussed more fully in a later section, but the unfolding fiscal crisis also opens the possibility of a credit downgrade for U.S. Treasury securities. This could happen before either of the two broad solutions discussed above comes into play.

Accounting Gimmicks Mask Underlying Reality for Decades

Misleading accounting used by the U.S. government, both in financial and economic reporting, far exceeds the scope of corporate accounting wrongdoing that has received partial credit for recent stock market turbulence. The bad boys of Corporate America, though, still were subject to significant regulatory oversights and the application of GAAP accounting to their books. In contrast, the government's operations and economic reporting have been subject to oversight solely by Congress, America's only \"distinctly native criminal class.\"[1]

Nearly four decades ago, President Lyndon Johnson's political sensitivities led him and the Congress to slough off some of the costs of an escalating Vietnam War through the use of accounting gimmicks. To mask the rapid growth in the federal government's budget deficit, revenues from the surplus being generated by Social Security taxes were added into the general cash fund, without making any accounting allowance for the accompanying and increasing Social Security liabilities. This accounting-gimmicked reporting was dubbed \"unified\" budget accounting.

The government's accounting then, as it is now, was on a cash basis, reflecting cash revenues versus cash expenditures. There were no accruals made for monies owed by or due to the government at some time in the future.

The bogus accounting understated the actual deficit for decades and even allowed for claims of budget surpluses in the years 1998 to 2001. While there were extensive self-congratulatory comments between the President, Congress and the Fed Chairman, at the time, all involved knew there never were any actual budget surpluses. There hasn't been an actual balanced budget, let alone a surplus, since before Johnson and his cronies cooked the bookkeeping.

The doctored fiscal reporting complemented the short-term political interests of both major political parties. Additionally, the ignorance and/or complicity of Pollyannaish analysts on Wall Street and in the financial media-eager to discourage negative market activity-helped to keep the fiscal crisis from arousing significant concern among a dumbed-down U.S. populace.

U.S. Treasury Owns Up to a Financial Nightmare

In the mid-1970s, the then \"Big Ten\" accounting firms proposed setting up for the federal government an accrual accounting and reporting system similar to that used in the business community. Purchases of capital equipment, weapons and buildings would be booked as assets and depreciated, taxes receivable and accounts payable would better reflect near term cash needs. Accrued liabilities, such as Social Security payments due in the future, would reflect longer-term cash-flow needs.

As the project progressed, GAAP accounting was applied to the government's operations and prototype annual statements were published beginning in 1974. The appropriate accounting for Social Security liabilities, however, was discarded during the Reagan administration as being politically untenable.

Under the eventual mandate of Congress, the accounting project culminated in the U.S. Treasury publishing its first formal Financial Report of the United States Government for fiscal year 2000, consistent with GAAP, except for Social Security and similar accounts such as Medicare, Medicaid and the Railroad Retirement Fund.

To the credit of the Bush administration, later reports, published in April 2003 and April 2004 for fiscal years 2002 and 2003, indicated for the first time since the 1980s what the Social Security and related numbers would look like if they were included in the accounting, just as corporations need to account for pension and retiree health benefit liabilities.

The gimmicked accounting standards, as established during the Johnson era, and as used today for official, unified budget reporting, show a 2003 deficit of $374.3 billion. Using GAAP reporting (without Social Security reporting), the official GAAP deficit for 2003 expands to $665.0 billion. Including accounting for Social Security and related areas, the 2003 deficit balloons to $3,702 billion, or $3.7 trillion.[2] The accounting reflects no adjustment for the new, more expensive Medicare program.

As an aside, if you download[3] a copy of the financial statements, the GAO's auditor's letter as to why they won't certify the statements is an expos? of significant financial mismanagement within the federal government.

Beyond the $3.7 trillion deficit in 2003, however, the numbers get even worse, because the shadow deficit has been taking its toll ever since the Johnson era. According to the Treasury's 2003 financial statement, the U.S. government has a negative net worth of $34.8 trillion. That $34.8 trillion reflects $36.2 trillion in financial liabilities offset by $1.4 trillion in assets, of which only $0.4 trillion are liquid.

Part of the underlying reality-the actual operating cash shortfall-is reflected in the growth of the federal debt. During fiscal 2003, for example, gross federal debt increased from $6.2 trillion to $6.8 trillion, or by $600 billion, against the unified $374 billion deficit. As of the end of August 2004, the debt had increased to $7.3 trillion.

While gross federal debt is at a record, relentlessly pushing against borrowing ceilings, the markets, press and politicians generally ignore that portion of the debt borrowed from Social Security and similar programs. So, the September 30, 2003 debt level commonly is reported as only the $3.9 trillion owed to the public, instead of the total $6.8 billion. Again, the more accurate GAAP estimate of total government liabilities is $36.2 trillion.

2004 Results

Results for the official 2004 deficit will be published in the next several months, and the numbers are projected by the Bush administration to be significantly worse than in 2003, $445 billion versus $374 billion, with the actual deficit likely to near $4.3 trillion (my estimate). The 2004 GAAP financial statements on the government will not be published until March/April 2005.

? ? ? ? ? ? ? GAAP-Based ? GAAP-Based
Fiscal ? ?\"Official\" ?Deficit Without ?Deficit With
?Year ? ? Deficit ? Soc. Sec., Etc. Soc. Sec., Etc.
?2004 est. ?$445 Billion ? $800 Billion ? $4.3 Trillion
?2003 ? ?$374 Billion ? $665 Billion ? $3.7 Trillion
?2002 ? ?$158 Billion ? $365 Billion ? $1.5 Trillion

The credit markets were rattled slightly by the early official projections of an increasing shortfall in government finances, but only the surface problems have gained any market recognition. The full magnitude of the difficulties ahead is not recognized by the markets, yet.

With 2003 gross domestic product (GDP) (annual average for the government's fiscal year) at $10.83 trillion, that places the annual budget deficit and total government obligations at respectively 34.2% and 334.3% of GDP, negative extremes never before breached outside the environment of third-world, net-debtor nations.

Is \"AAA\" Rating of U.S. Treasury Debt Sustainable?

The major U.S. credit rating agencies, S&P, Moody's and Fitch, issue credit ratings to sovereign states. The United States enjoys the top \"AAA\" rating, but that could change if the rating agencies apply their sovereign credit rating methodologies to the GAAP U.S. financial statements, instead of the gimmicked accounting accepted for decades.

As an example of part of the ratings approach, Fitch[4] notes in its Sovereign Ratings Rating Methodology:

Sovereign borrowers usually enjoy the very highest credit standing for obligations in their own currency. If they retain the right to print their own money, the question of default is largely an academic one. The risk instead is that a country may service its debt through excessive money creation, effectively eroding the value of its obligations through inflation.

Such risks will come into play in the future article on possible hyperinflation. The question at hand is the top \"AAA\" credit rating held by the United States, home base of the U.S. dollar, the world's primary reserve currency.

In determining a sovereign rating, Fitch reviews, among other factors, \"the orthodox indicators such as ratios of debt to exports and debt to Gross Domestic Product, providing a measure of the current and prospective ability to service debt.\"

The United States is the world's largest net-debtor nation, has the world's largest current account trade balance and has the highest level of debt or financial obligations ever seen, irrespective of relative measure, for any major country, by at least an order of magnitude.[5]

As of August 2004, Fitch gave the \"AAA\" rating to only 15 countries, including the United States. The other 14 are Austria, Canada, Denmark, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland and the United Kingdom. Of those 14, five ran budget surpluses in 2003, including Canada, Denmark, Finland, Norway and Sweden. The worst deficit as a percent of GDP was for France at 4.1%, followed by Germany at 3.5%. In contrast, the not-generally-recognized GAAP U.S. deficit in 2003 was 34.2%.

Similarly, the highest level of debt to GDP seen among the 14 other \"AAA\" countries is at 75.6% for Canada, followed by France at 71.1%, Germany at 65.1% and Austria at 64.9%, versus a GAAP ratio of total financial obligations to GDP of 334.3% for the United States. The low ratio among the \"AAA\" countries is Luxembourg at 4.9%.

Where most of the other \"AAA\" countries have significant unfunded social insurance liabilities that are not included in the debt-to-GDP ratios, consistent 2003 numbers are not available. As a rough estimate, the high ratios mentioned for Canada, France, Germany and Austria would increase by two-to-three times, still well shy of the U.S. extreme. The ratings agencies are well aware of these circumstances and have noted the generally deteriorating credit quality of the major Western economies, particularly the United States. S&P seems comforted by expectations that most countries \"will step up their efforts to more effectively confront the fiscal ramifications of aging ...\"[6]

Of the 15 \"AAA\" countries, all but Austria, Ireland, the United Kingdom and the United States run current account trade surpluses. As a percent of GDP, the Austrian, Irish and U.K. trade deficits are 0.2%, 2.5% and 2.8%, respectively, versus 4.8% for the United States.

At \"AA,\" two credit notches below the U.S. (two notches taking into account the AA+ between AAA and AA), sits Japan. Japan's deficit and debt levels as percentages of of GDP are 8.0% and 157.3%, respectively, worse than the \"AAA\" rated countries but still much better than the U.S. GAAP ratios. Japan also runs a current account surplus.

In searching World Bank data, I couldn't find any nation with a debt-to-GDP ratio worse than the United States' GAAP obligations ratio of 334%. The closest found is for the West African state of Guinea-Bissau at 224%, but Guinea-Bissau is not rated.

The twist here, of course, is the accounting method used in analysis. Based on the gimmicked, instead of GAAP, fiscal numbers, the U.S. deficit and debt ratios are a little high but relatively benign at 4.8% and 62.8%. Further, much more goes into a sovereign debt rating than the discussed ratios. Still, if any country but the U.S. had GAAP deficit and debt ratios of 34% and 334%, its debt most likely would be given junk-bond status by the rating agencies.

Accordingly, a case can be made that the risks of the United States \"servic[ing] debt through excessive money creation\" are high enough so as to be inconsistent with a \"AAA\" rating. Political practicalities, though, likely will forestall any formal downgrade of the U.S. credit rating. Since a downgrade would trigger global financial-market and currency turmoil, action even could be delayed until the last minute.

Nevertheless, Fitch had the United States on a negative rating watch in 1995, and there have been occasional rumblings by S&P and Moody's when Congress has been slow to authorize raising the ceiling on federal borrowing limits. Minimally, a shift to a negative rating outlook by one or more of the major rating agencies is not out of the question.

Irrespective of any credit rating actions, the credit markets usually catch up with underlying reality. That suggests there will develop a long-term higher floor under U.S. interest rates than has been seen previously.


Active Member
Money, Banking and the Fed

If this were true, why has no major media outlet published this? With all the super critics of the US within and without it's borders, why is this still a secret if it is true?


Senior Member
Money, Banking and the Fed

Smuda, you're kidding right? :) How could this not be true?? Don't tell me you don't know that all this info is being strictly ignored by all the papers and news casts specifically because of what a run/panic it would cause were it allowed to hit the fan in a big way. The sheep of america have their eyes and ears tuned and glued to Greenspan who just HAS to be a pawn in place anyway and serves as a red herring juggleing % points of interest (pun intended).

As an aside, I was speaking to a rather elderly professional that lives in Wash. DC and I asked him what he thought about the up coming possible $ crash and his reply "I can not understand how the people in the midwest and west either do not know what is coming or refuse to see the signs of what is coming" he remembers the depression quite well.
Sounds to me like Cary is a God-Send for info in this genere, & it would not be a bad idea to pay a very large modicum of attention in this direction if you get my meaning, nudge, nudge, wink, wink.


Senior Member
Money, Banking and the Fed

Originally posted by Unintentional@Sep 9 2004, 06:17 PM
If this were true, why has no major media outlet published this?? With all the super critics of the US within and without it's borders, why is this still a secret if it is true?


While I like and appreciate your bumper sticker (very cool), I have to respond. I posted this over at the anomalies in response to some interested members there. Tell me I'm full of it. Provide some evidence to the contrary. Just don't try and hand me more Republican, hell federal govt. BS, about how everything is "just swell." It ain't. This thing's getting ready to come apart like a cardboard suitcase in the rain (Cajun expression). Keep smiling and drinking the Kool Aid. It's getting ready to get a lot worse from here. By 2007 you'll be asking, "What the hell happended?" a day late and a dollar short.


Our elected officials, for the most part, are part of the establishment that keeps the system in place. Don't expect any help from our elected officials. The Fed Reserve and its fractional reserve banking system allows for a constantly expanding money supply. A constantly expanding money supply is needed for all of the entitlement programs, big defense budget and foreign wars, big govt. bureaucracies, and all the seemingly endless spending of the US govt. Career politicians have learned that spending a lot of money will get you re-elected. Doesn't the current nightmare federal budget deficits look nothing like what you'd expect of a Republican controlled Congress and White House. Some will blame the spending on the WOT, but in the big scheme of things that ain't the case. The govts.' \"required budget items\" i.e. interest and debt payments, entitlement programs, federal pension payments, (things required by law to be paid) are now over 70% of the govt.'s spending, leaving about 30% up to \"discretionary spending\" i.e. those things Congress feels like spending money on (WOT, pork barrel projects, you name it). Required budget items, in the form of Social Security and Medicare payments, are getting ready to go through the roof with the retiring baby boomers. Congress won't fix the problem until critical mass hits the budget deficit. Problem with this plan is it's been going on since 1913. Since then, the dollar has lost about 95% of its purchasing power (lost virtually none from 1800 to 1910). Dollar expansion got a major boost when Nixon took the dollar totally off of any connection to gold in 1971.

The dollar became the world reserve currency in the late 1940's under the Bretton Woods agreement. The dollar was the only major currency that was supposed to still be backed at least partially by gold. Other countries' central banks began the practice of holding most of their reserves in dollars. The practice continues to this day, even though the dollar is backed by nothing. Nixon \"closed the gold window\" in 1971 because French Pres. DeGaulle - those nasty French again - had been cashing in France's excess dollars for gold from the late 1960's.

With the dollar unencumbered by restraints from having to backed by gold in part, the Federal Reserve was allowed to crank up the printing press for more dollars. The Fed prints dollars, and puts them into circulation by buying Treasury debt through its New York Fed Bank bond desk. The Fed can print \"electronic\" dollars for free now. It doesn't cost them anything, but a few key strokes on a keyboard. The debt they buy in the open market pays this PRIVATE BANKING CARTEL interest - your tax dollars - so it can pay its shareholders - private banks in the US and Europe - dividends. Nice set up, huh? I'd like to be able to legally counterfeit money, use it to buy Treasury debt and get paid interest on it. I'd probably be holding several Trillion dollars of Treasuries. I mean for every $1 Trillion of Treasury debt you'd hold, assuming an interest rate of just 5%, you get paid $50 billion a year in interest. I believe that's tax free income to the Fed. Pretty cool if printing the money is pretty close to free and legal.

So now you have motive on both sides. The Fed keeps the money supply expanding, and gets paid interest on the Treasury debt purchased with currency it gets to create \"out of thin air\" for little to no cost. No audits, no oversight, no Congressional meddling. Congress gets to keep spending money, with most of them becoming career politicians, getting re-elected over and over again. Making friends with the players of the mega corporations and the halls of power along the way. You want to get rich, you retire. Because you're a retired Congressman you get pick from tons of invitations and get on about a dozen or so boards of directors of the mega corps. You get paid handsomely (about $75k per year, per board, plus perks) to show up (or not) at quarterly board meetings. On top of that you can easily land some lucrative lobbying gigs, schmoozing your old pals still in office. The point is to get re-elected long enough to establish a reputation big enough so you can cash out. The Federal Reserve's continually expanding money supply helps you to get re-elected, cause you get to spend money in Congress.

Sorry for the long winded explanation. I thought your question could be better addressed by an explanation of why we don't hear outrage from most of our federally elected officials. They're part of the game, in a nut shell. The explanation above is the \"how and why\" they are.

The only elected official I've heard speak truthfully about the Federal Reserve, IRS, excess govt. spending, etc. has been Ron Paul, MD in the House of Rep. Dr. Paul is from Texas. He has been calling for the end of the Federal Reserve, income taxes and the IRS. He wants to go back to a gold standard, and tells the truth about the Fed issuing currency, but how our \"money\" disappeared a long time ago with the confiscation of gold in the 30's. He's an unusually frank and honest man in a pit of whores, charlatans, thieves and liars we call our federally elected officials. Yes, I'm what you'd call jaded on most politicians. Richard Baker of Louisiana (House member) has also called Greenspan out on the GSE's (Fannie, Freddie, etc.) and wants more control on them. He's also sparred with Greenspan on the derivatives market, but nothing serious like Ron Paul. I'm not saying there aren't more, but I haven't heard of any.


edit: Fixed the quote :)