American Civil Rights

Many people were against the recent slew of bailouts that have been proposed and in some cases, passed.

In order to understand why government bailouts are bad other than “we pay for it”, we have to review some other concepts first and analyze how things should be and how things currently are.

The fundamental problem with government bailouts, is the manipulation of the “free market” system by elected officials. Many people seem to believe we have a free market system in the US. We don’t. The free market is manipulated by politicians and bankers to name a few. This manipulation is what causes the bubble & burst cycle that we have seen since The Great Depression.

In order to understand how the economy actually works in the US, we must first understand how it should work.

In economics, a free market system shouldn’t be entirely free. Some might advocate for complete freedom for corporations, but this is unrealistic. There must be some regulations. In a free market system, as you have probably heard before, it comes down to supply vs. demand. The more someone wants your product or service, the more in demand this product becomes. In relation to this, supply is the amount of the service or product you can offer. Wikipedia describes “Supply and demand” as:

Supply and demand is an economic model describing effects on price and quantity in a market. It predicts that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. The model incorporates other factors changing equilibrium as a shift of demand and/or supply.

Whew, that sounds confusing. It isn’t though; Allowing “free” competition is what the free market is mainly about.

So now that we understand supply & demand, we should look at how a proper monetary(money) policy should act. Firstly, in order for “money” to be worth something, it must be backed by something. If you pull a $1 bill out of your pocket and you analyze it, what is it? Well most would say its paper, but what does it stand for? It is a difficult thing to define, we’ll come back to this in a moment. Lets continue with a quick history lesson on free trade.

Free trade started (as far as I know), with bartering. Bartering is when your neighbor wants some of the wheat you are growing, but in return he must pay you something. Since paper (or even coin) money didn’t exist at the time, your neighbor might have traded his goat for some of your wheat. You were given something of clear value, in trade for something of clear value. This system worked, but had many limitations. Say you didn’t want a whole goats worth of wheat, but only half a goats worth? How do you divide a goat? Well, you can I guess, but it will certainly spoil faster. So a new system was devised. One thing many different people found valuable was gold. Gold didn’t perish, didn’t need to be fed or cleaned up after. Gold coins were minted with inherent value. Gold was always in demand and was the preferred method of trade. So instead of bringing your cow to trade, you sold your cow to someone else who gave you gold coins in return. You took those coins and bought as much wheat as you wanted. Simple & effective. It preserved wealth over time, basically because it wasn’t worthless paper with a number printed on it. The technical term for worthless money is, fiat currency. So if you hear that “brilliant” financial guy on CNN, and you hear him talk about fiat money, you can simply replace “fiat”, with “worthless” and you will understand the meaning.

These things, wheat, goats, gold, silver, etc. are commodities. This means, while money was in the form of gold coins, it was actually a product in itself. This is why ideal money has intrinsic value. Gold is gold. If you could trade in your $1 for 1/100th an ounce of gold, it is being backed by gold and the dollar itself has value because it represents gold.

So whats the difference really? Its not like you ever probably would want to trade in your dollars for gold right? True, you probably wouldn’t, but the difference is key. The difference is, if $1 has a set gold price, the bankers in the US couldn’t print more money without the value being noticeably less. Here’s why, if the Federal Reserve(which isn’t federal by the way, its a private organization of bankers, clever huh?) creates more money each year, the value of the dollar goes down (which it does). If a gold standard(money based on a specific gold value) was in place, this would be impossible without causing serious attention from the public. However, our money isn’t on a gold standard anymore (a big thanks to Nixon, I hope you died a slow death). It started long before him though, with fractional money.

Fractional money is another fraud forced onto this country by its own ignorance. Bankers use fractional money through loans. Not all loans are bad, however, when a banker loans out money he doesn’t actually have, problems can arise. In order for a banker to loan out money they don’t have, they use the money deposited by other customers. For example, say you walk into the bank and deposit $1,000. The bank gives you a receipt for $1,000 and adds it to your account balance. However, in the US, and many other places, banks aren’t required to maintain that $1,000 in their vaults. They are only required to keep 10% of your deposit, or $100 to cover your $1,000. They take the remaining 90% and loan it out to others for interest. You may have heard the term “bank run” before. A bank run is caused by fractional money; money that is only fractionally kept by the bank. A bank run starts when people become worried about their money being kept in a particular bank and the relative safety of doing so. A “run” occurs when many, or most people think a bank is in trouble. They all rush to withdraw their money, which the bank usually is only keeping 10% in reserves. Needless to say, only the first “few” get their money, while the rest are denied because the bank simply doesn’t have it. This is where the FDIC comes into play. You have probably heard of the FDIC or have seen the signs in the bank telling you the FDIC will cover all accounts for $250,000 or less (was $100,000 last year). This is essentially insurance for the banks in case they run into problems in which they can’t pay their depositors. This doesn’t sound too bad so far right? The problem is, by using fractional money, they are in essence, inflating our currency. I’m sure you have heard of inflation before, but I doubt you have heard many people question it. Inflation is largely a by-product of fraud. Excessive inflation happens when the total money supply goes up drastically. As the supply of money goes up, the value of it goes down. If the FDIC comes to the rescue of a bank, that money must come from somewhere. Where does it come from? The Federal Reserve will create new money for them. So the $50 you might have kept in your mattress since 1950 is nearly worthless now, where as before, it was worth more. This is stealing. They print more money, causing the value of ours to go down. It is a hidden tax that most people either don’t realize, or don’t analyze enough. Now they claim the money paid into the FDIC is used in-turn to bailout the failing banks that were irresponsible and save the common person by making sure you are fully covered. Sounds nice? Do they keep the money paid by banks to insure your deposits? No, they don’t. The FDIC keeps roughly 1% of their insured amount on hand. Law dictates that the money the FDIC does keep “on hand” must be kept in the form of Treasury Bonds. Which is basically just a loan to congress. A bond is a government “I owe you” that won’t gain interest each year, but will pay out heavily after a set term. Heavily if there was no such thing as inflation that is..

The problem is, the treasury doesn’t have the many billions it owes to the FDIC for their payments through treasury bonds. It doesn’t exist. It was spent long ago on various congressional projects. No wonder politicians are so silent on this crime. They are literally being paid off to do so by using FDIC payments as their congressional slush fund. If they were to simply raise taxes to accommodate their massive, socialist (in my cases) policies, they would be voted right out of office. Makes you wonder how we were able to build bridges to no where right? So, where does the money come from that the FDIC promises to use when banks fail? It gets it from the Federal Reserve. The Federal Reserve is the private organization of some bankers who have complete control over the printing of our currency. They create new money for the FDIC in such an event. But the fraud doesn’t end here. A bailout is the ultimate prize. If a bank is failing due to their own inability to properly manage their business, what they hope for is a bailout.

A bailout can be (and usually is) extremely profitable for a bank. By lending themselves into insolvency (a fancy word for “broke”), a bank can actually profit. This goes against a free market system where an insolvent business almost always go bankrupt unless purchased or loaned  more money from another business. Bankruptcy won’t happen to the big names around here, JP Morgan, Citibank, Bank of America and a few other large but less known corporations. So whats the problem with the government loaning the money instead of another private company? Well the problem is, the government isn’t loaning anything. We the people are, and it isn’t a loan.

Consider this, congress “loans” the money for the bailout, however, congress doesn’t have money of its own, it gets the money from us through taxation and inflation. Our money is then loaned to banks and a few others, railroads, Lockheed and more. The banks, in turn, to varying degrees, re-loan this money out to american citizens. They loan us our own money and expect us to pay interest. The same interest we don’t get from our “loan” to them. Congress gets it. On top of this, if the bank can convince you to re-deposit some of this money into your account with them, they can shave off 90% of that for a new loan to someone else since they only are required to maintain 10% of deposits. That is certainly making your money “work” for you… If you’re a banker. But, if the banks repay the loan, the money doesn’t come back to us, the american people, it goes back to congress. It isn’t as if this money comes out of circulation once they are “done” with it. This is one cause of inflation.

As if there is no shame in congress and there isn’t, they went one step further by appointing Neel Kashkari as “Bailout Czar”, a fitting term, I must concede. Czar means supreme ruler. Lovely. The real problem though is that Neel was a former executive from Goldman Sachs, one of the companies receiving bailout support. Can anyone say conflict of interest? On top of this, he doesn’t seem especially receptive to questions about the bailout. Imagine that.

This isn’t a red vs. blue thing, they are both equally as responsible and complicit in this fraud.

So what could be done to stop this? Well, that unfortunately will have to be a post for another day, but I’ll give you a hint, revoke “legal tender laws”.

None of the above ideas (I don’t think) are my own unique thoughts. It is mostly a collection from many different sources I have read over the years.

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