estb 1776


the constitution is the revolution

Icelanders demand PM resign during violent protests

REYKJAVIK – Thousands of Icelanders demonstrated in Reykjavik on Saturday demanding the resignation of Prime Minister Geir Haarde and Central Bank Governor David Oddsson for failing to stop a financial meltdown in the country.

It was the latest in a series of protests in the capital since the financial meltdown that crippled the island’s economy.

Hordur Torfason, a well-known troubadour in Iceland and the main organiser of the protests, said the protests would continue until the government stepped down.

“They don’t have our trust and they are no longer legitimate,” Torfason said as the crowds gathered in the drizzle before the Althing, the Icelandic parliament.

A separate group of 200-300 people gathered in front of the city’s main police station demanding the release of a young protester being held there, Icelandic media reported.

Police in riot gear used pepper spray to drive back an attempt to free the protester during which several windows at the police station were shattered. The protester was later released after a fine he had been sentenced to pay was paid.

Iceland’s three biggest banks — Kaupthing, Landsbanki and Glitnir — collapsed under the weight of billions of dollars of debts accumulated in an aggressive overseas expansion, shattering the currency and forcing Iceland to seek aid from the International Monetary Fund (IMF).

This week, the North Atlantic island nation of 320,000 secured a package of more than $10 billion in loans from the IMF and several European countries to help it rebuild its shattered financial system.

Despite the loans, Iceland faces a sharp economic contraction and surging unemployment while many Icelanders also risk losing their homes and life savings.

A young man climbed onto the balcony of the Althing building, where the president appears upon inauguration and on Iceland’s national day, and hung a banner reading: “Iceland for Sale – $”, the amount of the loan Iceland is getting from the IMF.

The rally lasted less than one hour and as daylight began to wane, demonstrators drifted away into the nearby coffee shops where the price of a cup of coffee has shot up to 300 kronas in the last few weeks, up by about one third from before the crisis struck, as the currency has tumbled.

Opposition parties tabled a no-confidence motion in the government on Friday over its handling of the crisis, but the motion carries little chance of toppling the ruling coalition which has a solid parliamentary majority.

“I’ve just had enough of this whole thing,” said Gudrun Jonsdottir, a 36-year-old office worker.

“I don’t trust the government, I don’t trust the banks, I don’t trust the political parties, and I don’t trust the IMF. We had a good country here and they’ve ruined it.”
France 24


Filed under: Money, News Articles

Money as Debt

Filed under: Money, Video

The Financial Crisis- Crisis by Design

Fractional Reserve Lending
by Douglas V. Gnazzo
November 29, 2005

“All the perplexities, confusion and distresses in America arise not from defects
in the Constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.” [1]


Ignorantia juris non excusat (ignorance of the law does not excuse) is a well established principle dating back thousands of years. Roman and English law, precursors of the American system of jurisprudence, both recognized the maxim.

Be it not forgotten – justice excuses not the law. The laws of the land are to be made in pursuance of the Constitution. The Constitution has precedent. Any law not in pursuance of the Constitution is null and void, as if it never occurred. So the court has ruled.

“And there is virgin Justice, the daughter of Zeus, who is honored and reverenced among the gods who dwell on Olympus, and whenever anyone hurts her with lying slander, she sits beside her father, Zeus the son of Cronos, and tells him of men’s wicked heart, until the people pay for the mad folly of their princes who, evilly minded, pervert judgement and give sentence crookedly.” [2]

No man is above the law – not even the King. No law is above the Constitution – not even the King’s. All men are created equal. All men are judged accordingly. He without sin cast the first stone.

The ignorance of coin, credit, and circulation is unfortunately, a widespread occurrence – causing perplexities, confusion, and distress, all tearing at the social fabric of our nation. But who is guilty of these defects – who has caused them to be?

Is it the fault of the common man that he cannot understand the complexities of a monetary system that moved Lord Keynes to say that not one man in a million understands money?

No, the common man is not at fault, the blame lies elsewhere: it rests with those who have purposefully made the monetary policy so bizarre that even its keepers have a hard time understanding the delusion they have created.

John Kenneth Galbraith clearly understood the illusionary nature of the elite’s monetary economists when he stated that they:

“use complexity to disguise or to evade the truth, rather than to reveal it.” [3]

Fractional Reserves

The most dishonest monetary illusion is the shadow cast by fractional reserve lending.

“Because of ‘fractional’ reserve system, banks, as a whole, can expand our money supply several times, by making loans and investments.” [4]

Let’s take a closer look at the sword of State the magi use to create their tricks of prestidigitation – the scepter of fractional reserves.

What is meant by fractional reserves? It would seem that reserves are reduced to a fraction, but a fraction of what? Perhaps we should seek the wise counsel of the Federal Reserve, as this is their raison d’etre.

Required Reserve Balances

“Required reserve balances are balances that a depository institution must hold with the Federal Reserve to satisfy its reserve requirement. Reserve requirements are imposed on all depository institutions – which include commercial banks, savings banks, savings and loan associations, and credit unions – as well as U.S. branches and agencies of foreign banks and other domestic banking entities that engage in international transactions.

Since the early 1990s, reserve requirements have been applied only to transaction deposits, which include demand deposits and interest-bearing accounts that offer unlimited checking privileges. An institution’s reserve requirement is a fraction of such deposits; the fraction – the required reserve ratio – is set by the Board of Governors within limits prescribed in the Federal Reserve Act.” [5]

According to the above, the Board of Governors set required reserve balances within limits as prescribed by the Federal Reserve Act that depository institutions must hold on account.

The required reserve ratio is clearly stated to be a fraction of demand deposits and interest-bearing accounts that offer unlimited checking privileges.

Notice the wording “since the early 1990s, reserve requirements have been applied only to transaction deposits”, as such language demonstrates that previous to the early 1990’s reserve requirements were applied to a larger composite – according to the usage of the word “only.”

Which in fact is true, as reserve requirements have been reduced several times since the Fed took control in 1913? A closer look at reserve requirements is in order.

Reserve Requirements

The Federal Reserve has the following to say in regards to reserve requirements:

“Reserve requirements have long been a part of our nation’s banking history. Depository institutions maintain a fraction of certain liabilities in reserve in specified assets. The Federal Reserve can adjust reserve requirements by changing required reserve ratios, the liabilities to which the ratios apply, or both.” [6]

Once again, we see the use of the word “fraction” when discussing reserve requirements, however, we now have the further clarification of reserves in “specified assets.” Obviously, these “specified assets” are critically important, as they are the reserves of our monetary system.

“A depository institution satisfies its reserve requirement by its holdings of vault cash (currency in its vault) and, if vault cash is insufficient to meet the requirement, by the balance maintained directly with a Federal Reserve Bank or indirectly with a pass-through correspondent bank (which in turn hold the balances in its account at the Federal Reserve).” [7]

Now we see that depository institutions satisfy their reserve requirements by holding cash (currency) in their vaults, or if short, they get some help from the Fed or a correspondent bank. The next logical question is: how much cash are they required to have on reserve in their vaults.
From the same Fed publication, we find the following table:

As can be seen from the above chart there isn’t a heck of a lot of reserves on reserve. Three of the five categories listed in the chart have zero (0) reserve requirements. One of the five categories has three (3%) percent reserves, and the remaining category has approximately ten (10%) percent reserve requirements.

So, what are the ramifications of the above listed reserve requirements? From the Fed’s publication, we find the following:

Autonomous Factors

“The supply of balances can vary substantially from day to day because of movements in other items on the Federal Reserve’s balance sheet. These so-called autonomous factors are generally outside the Federal Reserve’s direct day-to-day control.

The largest autonomous factor is Federal Reserve notes. When a depository institution needs currency, it places an order with a Federal Reserve Bank. When the Federal Reserve fills the order, it debits the account of the depository institution at the Federal Reserve, and total Federal Reserve balances decline.

The amount of currency demanded tends to grow over time, in part reflecting increases in nominal spending as the economy grows. Consequently, an increasing volume of balances would be extinguished, and the federal funds rate would rise, if the Federal Reserve did not offset the contraction in balances by purchasing securities. Indeed, the expansion of Federal Reserve notes is the primary reason that the Federal Reserve’s holdings of securities grow over time.” [8]

Federal Reserve notes are those little green pieces of paper we all carry around in our wallet or purse and refer to as cash. A dollar bill is a Federal Reserve note, as are fives, tens, twenties, fifties, and one hundred dollar bills.

From where does the Fed get the Federal Reserve Notes? Good question. Let’s try and find the answer.

Notice in the above quote the last sentence, which reads, “Indeed, the expansion of Federal Reserve notes is the primary reason that the Federal Reserve’s holdings of securities grow over time.”

With the Fed’s holding of securities entering the picture, we now have two questions to answer: Federal Reserve notes come from where; and what securities is the Fed holding due to the expansion of Federal Reserve notes?

The Treasury

The Treasury has a role to play in this monetary game of musical chairs. The Fed has this to say regarding the Treasury:

“Another important factor is the balance in the U.S. Treasury’s account at the Federal Reserve. The Treasury draws on this account to make payments by check or direct deposit for all types of federal spending. When these payments clear, the Treasury’s account is reduced and the account of the depository institution for the person or entity that receives the funds is increased. The Treasury is not a depository institution, so a payment by the Treasury to the public (for example, a Social Security payment) raises the volume of Federal Reserve balances available to depository institutions.” [9]

From this we see that the Treasury has an account at the Federal Reserve, and that the Treasury draws on the account to make payments by check and direct deposit. Where did the Treasury’s account at the Fed come from? Rather than finding answers, we are discovering more questions.

Open Market Operations

“Open market operations are the most powerful and often-used tool for controlling the funds rate. These operations, which are arranged nearly every business day, are designed to bring the supply of Federal Reserve balances in line with the demand for those balances at the FOMC’s target rate.” [10]

The more we look, the greater our task becomes. That is good, as often times its not just the answers that matter, but asking the right questions as well. We are getting warmer by the minute.

“In theory, the Federal Reserve could conduct open market operations by purchasing or selling any type of asset. In practice, however, most assets cannot be traded readily enough to accommodate open market operations. For open market operations to work effectively, the Federal Reserve must be able to buy and sell quickly, at its own convenience, in whatever volume may be needed to keep the federal funds rate at the target level. These conditions require that the instrument it buys or sells be traded in a broad, highly active market that can accommodate the transactions without distortions or disruptions to the market itself. The market for U.S. Treasury securities satisfies these conditions.” [11]

United States Treasury securities are the main market the Fed uses to conduct open market operations. As the money supply continually grows, the buying of Treasury securities by the Fed occurs more often then selling.

Summary To Date

* Fractional Reserves refers to monetary reserves required to be on deposit in banks.
* The reserve requirements go from zero, to 3%, to 10%.
* Federal Reserve notes (cash) are the predominant reserve deposit.
* When banks need cash, they go to the Fed.
* The Fed holds U.S. government securities in its accounts.
* The U.S. Treasury has an account at the Fed.
* The Fed conducts open market operation of buying or selling Treasury securities.

The remaining questions before us are:

* Where does the Fed get the ever-increasing supply of Federal Reserve notes?
* Where did the Treasury account at the Fed come from?

Where The Money Comes From

Trillions of dollars are said to be everywhere. I remember as a kid that a million was a big number. Today billions of dollars are tossed around from computer to computer without the blink of an eye. Trillions are now the topic de jour.

Budgets, deficits, and international money flows are all described using trillions or parts thereof. We have come a long way. The financial wizards circle high above the common man. But perhaps the way so chosen is the wrong way, for the good of all of the people – not just the elite few who control the strings of the purse, and profit thereby.

Let’s go within the Temple of the Wizards of Finance, to see what arts the conjuring is done by, to see what potions and spells are cast within fortune’s cauldron, and what strange brew precipitates there from.

The Beginning

On that fateful day when Federal Reserve Notes were first issued, it is obvious that a huge number of dollar bills had to be printed. Now, the printing press is pretty much obsolete; the only money that actually gets printed is used to replace old and worn Federal Reserve notes already in circulation. In vogue today is electronic money – fast food style.

The process actually begins with the Treasury Department printing a piece of paper called a bond, which is done electronically. Treasury bonds are debt obligations (liability) of the government to repay a loan – with interest.

The Treasury sells bonds to the public. The bonds the public does not buy, the Treasury deposits with the Federal Reserve. When the Fed accepts the bond from the Treasury, it lists the bond on its books as an asset.

The Fed assumes the government will make good on its promise to pay back the loan. This is based on the belief that the government’s power to tax the people is sufficient collateral.

Because the Fed now has an asset that it didn’t have before receiving the Treasury bond, the Fed can now create a liability that is offset by its new asset.

The liability that the Fed creates is a Federal Reserve check. It gives the Treasury the check in payment for the Treasury bond.


The Federal Reserve check is endorsed by the Treasury and is deposited in one of the government’s accounts at the Federal Reserve. The government can use the deposits to write checks against, to pay for government expenses.

This is the first new money flow to enter the system. Various government contractors, vendors, etc. receive these checks as payment for services rendered, and they take the checks and deposit them in their commercial banks.

The Second Step

This is when the wizards of finance perform their greatest feats of magic. The deposits in the commercial banks take on a sort of split personality or dementia, brought on by a preponderance of delusional thinking.

On the one hand, the deposits are the bank’s liabilities, as they owe the total sums to their depositors.

However, because of FRACTIONAL RESERVE lending, the bankers get to lend out 9 times what they have on deposit.

The commercial banks get to list the deposits as RESERVES.

In other words, FRACTIONAL RESERVE lending allows the commercial banks to create 9 times more money then they have on reserve. The banks lend money they don’t have, and:

They get to charge interest on it.

As the newly issued money is put to work by borrowers, they then spend it and the receiver then deposits it in their bank account, and the bank starts the reserve lending policy all over again. This is why the

Money supply must expand by the amount of interest owed on the debt.

If it didn’t, the debt would not be able to be serviced. There is no money created without creating debt, they are one and the same. Wealth is not created by creating money by fiat – only debt. As the Fed has admitted:

“Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower’s IOU.” [12]


Fractional reserve lending invokes the moral hazard of fidelity of contract. Banks have on deposit (reserve) at most 10% of the “money supply.”

This means that if more than 10% of depositors go to the bank at one time to withdraw “our” money – there isn’t any money to withdraw beyond the 10% reserves.

Which means that 90% of the money supply is non-existent, nothing more than a fleeting illusion.

The bank’s solvency stands on the faith that no more than 10% of depositors will want their money at the same time. This means that although

Banks may appear to be solvent – they are without question illiquid.

Fractional reserve lending insures and guarantees that banks cannot possibly be liquid.

Banking is the only type of business that is allowed to function this way. If any other business used a similar modus operandi it would be subject to censor, arrest, court, and possibly imprisonment. Banks cannot fulfill all of their contracts if demand occurred at the same time. Thus, the banks are illiquid.

Why the double standard? Why the dishonesty? Why are they afraid of gold and silver money as the Constitution mandates? Because it would make them tow the line or go bankrupt. Less they forget – be ever mindful – even Zeus cannot deny Destiny.

OCEANIDS: Who then is the steersman of Necessity?
Prometheus: The three-shaped MOERAE and mindful ERINYES.
OCEANIDS: Can it be that Zeus has less power than they do?
Prometheus: Yes, in that even he cannot escape what is foretold. [13]

Coming Soon – Open Letter To Congress
Seeking Redress For The Return To Honest Money

[1] John Adams in a letter to Thomas Jefferson
[2] Hesiod, Works and Days
[3] John Kenneth Galbraith Money: Whence It Came, Where It Went
[4] Federal Reserve Bank, New York The Story of Banks, p.5.
[5] The Federal Reserve System Purposes and Functions The Implementation of Monetary Policy
[6] Same as above
[7] Same
[8] Same
[9] Same
[10] Same
[11] Same
[12] Federal reserve Bank of New York, I Bet You Thought, p.19
[13] Aeschylus, Prometheus Bound 515

© 2005 Douglas V. Gnazzo
Editorial Archive

Filed under: Uncategorized

In Whom Do You Trust?

Thus saith the LORD; Cursed [be] the man that trusteth in man, and maketh flesh his arm, and whose heart departeth from the LORD.

Jeremiah 17:5

Just a little “obscure” Bible verse for your consideration. 

Filed under: Christianity

The GOP v. Ron Paul and GOP Voters

Below are links to two separate stories that discuss the efforts by the GOP to keep Ron Paul’s support silent. The stories are based on firsthand information of the writers; not sources, conspiracy, or conjecture.

For Republican voters, the message is very clear– the party is dedicated to selecting the nominee without interference from the voters. Do Republicans not realize that it is they that are being attacked by their own party?


Filed under: Uncategorized

Neo-Con Values v. American Values

Filed under: Video

Congress Questions Big Oil, Expands Power of the Federal Reserve

Once again, Rome proves no competition for Washington, D.C. when it comes to putting on a circus.

The U.S. Congress wants to question big oil according to this AP story while at the same time expanding the powers of the Federal Reserve according to a plan put forward by the U.S. Treasury Secretary.

Do the members of the U.S. Congress not know that oil is traded in dollars? Thus, any decline in the dollar will result in an increase in the price of oil.

I keep a record of the value of the dollar from 1790 to 2007 on a spreadsheet for quick reference. I see that 1971 was the year the dollar converted to the monopoly money standard; 100% backed by the same thing monopoly money is backed by—nothing. Of course, the dollar was backed by nothing as far as Americans ability to convert after 1968, but Washington, D.C. has been a circus for a long time and non-Americans could convert until 1971 so we use that as our year of reference.

So we have 2007 minus 1971 equals 36 years. 36 glorious years since America adopted the monopoly money standard, with the result that the Federal Reserve gained complete and absolute control over management of the U.S. dollar.

So a few calculations, a little cut and paste and I have the entire history of the U.S. dollar in 36 year increments from 1790 to 2007. Do you want to guess the worst 36 year span of performance? Right, 1971 to 2007. The second worst? Right, 1970 to 2006.

So, of course, the Federal Reserve would be the natural choice to handle the markets, this is a circus.

And Barrack Obama says we are all “Hamiltonians” now. It would appear that Obama is upset that George Bush got dibs on the “we are not in a recession” phrase, and so Obama got creative and came up with another way to say things are going great economically.

Filed under: Uncategorized

The Dollar is the Economy

Bernanke Gets it Backwards

“The rise in retail prices is caused by…the Federal Reserve creating excessive amounts of money and credit. High prices, therefore, are the RESULT of the ridiculous excesses of the Federal Reserve, not the cause.”

by The Mogambo Guru

I tried to watch Ben Bernanke’s question-and-answer appearance before the Senate Banking Committee, but there was Christopher Dodd, chairman of that committee, who is the guy I accuse of being directly responsible for the entire economic mess we are in, as the economic mess we are in is the same kind of economic mess that happens every damned time the banks are allowed to act irresponsibly, and this preening Congressional-doofus was in charge of questioning the head of the Federal Reserve to keep the banks from acting crazy and keeping greedy, corrupt, lying bankers in line. But he blew it, big time, and I shall never forgive Connecticut for electing this bozo.

Almost right off the bat, Bernanke implied that Milton Friedman was wrong, and that the whole Monetarist School of economics was wrong when they said that “inflation in prices is always and everywhere a monetary phenomenon” – which is exactly, exactly right. Instead, Ben “Butthead” Bernanke says that inflation is caused, not by irresponsible over-creation of money and credit, but by rising commodity prices, especially the rising price of oil! Hahaha! What an idiot!

And ol’ Butthead says he is on the lookout for signs that the rising costs that producers of goods and services must pay are not filtering through to retail prices, and if he ever sees any inflation, he will take “action”! Hahaha! I can’t believe I am hearing this! Hahaha!

This Bernanke dim bulb, who apparently knows nothing about economics at all, was the chairman of the economics department of Princeton (which doesn’t say much for Princeton University), and is apparently unaware that Milton Friedman was right; the rise in retail prices is caused by a prior rise in the money supply, which is caused by the Federal Reserve creating excessive amounts of money and credit. High prices, therefore, are the RESULT of the ridiculous excesses of the Federal Reserve, not the cause.

Link to Complete Article

Filed under: Money

Diebold and the 2008 Election

Diebold Accidentally Leaks Results Of 2008 Election Early

Filed under: Video

Gold & Silver Accepted Here


The fact that euros are accepted by many stores in New York City has made the news lately and is well known in gold investor circles. It is yet another symptom of the ongoing demise of the US dollar. The good news for these New York City merchants – and for all others nationwide – is that gold and silver will not be far behind and offer far better advantages as dollar-alternatives.

You may think that honest-to-goodness currency demand for gold and silver is non-existent in the US and that this will remain so until the legal tender laws are repealed (as currently proposed by Representative Ron Paul’s dual HR 42756 and HR 4683 approach) – but that is not necessarily true. Such demand will soon begin to build, regardless of Ron Paul’s efforts in Congress – and it will take off very fast.

Here is why:

Until now, merchants or service providers labored under the quite incorrect assumption that offering their goods for gold and silver would be unprofitable, and a waste of time because of a number of factors.

Factors That Used to Limit the Currency-Use of Gold:

  1. A widespread, but incorrect, application of Gresham’s law to the situation at hand;
  2. A lack of public understanding of the advantages of PMCs by the public;
  3. Legal tender laws prohibiting the issuance and the “utterin” or “passing” of non-official precious metals coins (like 18 USC 486, the law the Liberty Dollar ran up against);
  4. Tax laws that inhibit the free exchange of gold or silver for goods and services by imposing difficult to satisfy accounting burdens;
  5. Insufficient numbers of consumers own spendable gold or silver or are aware of their availability..

Yet, none of these reasons really prevent merchants from profitably offering their wares for gold. (Whenever the word “gold” is used from here on forward, it should be understood to include silver).

The dollar’s rapid decline and the accompanying credit crunch and world economic slowdown are changing the picture for gold-as-currency dramatically. Gold has always been – and will always be “money”, but its actual widespread use as a circulating medium of exchange has been stifled by the above listed factors. Let’s go through them, one by one, to see if they really pose such severe obstacles to the use of gold as a viable currency.

To read the complete article go here.

Filed under: Uncategorized