CHAPTER 3: PONZI SCHEME

"The Federal Reserve earns interest on the government securities it owns." ("The Hats The Federal Reserve Wears", published by the Federal Reserve Bank of San Francisco)

Here is how this "PONZI SCHEME" works: When the government needs $100 billion, action is taken as follows: (1) The U.S. Treasurer advises the Bureau of printing and engraving to print $100 billion of U.S. Bonds (2) The Treasurer advises the Federal Reserve it will need $100 billion of Federal Reserve Notes (3) The Federal Reserve advises the Bureau of printing and engraving to print $100 billion of Federal Reserve Notes and pays $20.60 per thousand denomination (4) The slight of hand trick takes place when the Federal Reserve Notes are swapped for the U.S. Bonds that pay interest. (See House of Representatives, Banking and Currency Committee hearing of September 30, 1941) It should be pointed out the Federal Reserve does not always exchange Federal Reserve Notes for U.S. Securities. They can simply create the money by a simple bookkeeping journal entry and eliminate the cost of printing and engraving.

Congressman Burkick reconfirmed this when he said, "We want to sell $4 billion worth of U.S. Bonds, and we sell them in New York to those who haven't got a dime, and they don't need any money because they simply enter credit to the government on their books . . . They bundle up the bonds and take them down here to Washington D.C. and get an amount equal in currency. Then they've got the money! But they didn't have the money before the government gave it to them."

Lewis W. Douglas, former director of U.S. Budget said, "When banks buy government bonds they create bookkeeping credit."

OK, let's now apply what we have learned about the Federal Reserve System and we will see beyond a reasonable doubt, the total Public and Private debt can never be paid-off under the current money system. It is mathematically impossible since the money needed to pay off debt does not exist. If we apply the rule of 72, we will discover that money doubles every 10 years at 7.2% interest.

As illustrated, $100 @ 7.2% payable in 70 years is $12,800 and only $100 was created and placed into circulation to pay off the $12,800 debt ($12,700 of interest).

Now let us take a look at how this influences our everyday life. As you will recall, according to Mr. Supinski, under the fractional reserve policy for every $1 deposited $7 can be lent. Now, let us go back to 1913 and assume the first bank was opened under the Federal Reserve with $10 thousand of paid-in capital. The following day Mr. John Q. Public applied for and was granted a $70,000 loan for 30 years @ 7.2% interest. Mr. Public's monthly principal and interest payment is $475.30 and over 30 years he will pay $171,108 Since the loan was made in Federal Reserve Notes, it must be paid back with Federal Reserve Notes. Mr. John Q. Public is the first victim of the PONZI scheme. He is in a Catch 22. He is obligated to pay back $171,108 and the bank only put $70,000 of Federal Reserve Notes in circulation. Remember, all money (except for coins) comes into circulation as a debt. In order for their PONZI SCHEME to continue, they must find another victim, or Mr. Public will catch on that the $101,108 of interest charges was never created and put in circulation, and it would be impossible for him to repay the debt. He would soon realize he has been defrauded and cry wolf.

The PONZI SCHEME doesn't stop there! Let us assume for one minute Mr. John Q. Public's $70,000 loan was for a home. Naturally, the bankster would want Mr. Public to make a 20% down payment of $14,000. Mr. Public was a hard working American until 20 years later, the country was hit with a recession, he lost his job, fell on hard times and the bank foreclosed. WAKE-UP and LOOK WHAT HAPPENS! Let us assume, Mr. Public's home had risen in value to $125,000 and the bank sells the home for what Mr. Public owes on the mortgage, $40,561.50. Not only does the bank keep the money from the sale of the home, they also keep the $114,072 of principal and interest payments and the $14,000 down-payment. Their total gain on $10,000 has now risen to $168,633.50 The Federal Reserve fractional reserve policy is nothing more than thievery, and Mr. Public and his family is out on the streets. The banks can now loan out under fractional reserves of 10% another $1,517,701.50 (one million, five-hundred seventeen thousand seven-hundred one dollars and fifty cents) to the next victim.

Their PONZI SCHEME is revealed in "The Story Of Banks", published by the Federal Reserve Bank of New York, they confess, " with a $5,000 deposit and a fractional reserve of 10% in just three transactions, $12,195 in loans can be made." When we complete the fractional reserve system as outlined in the book, we will discover over $45,000 can be lent from the initial deposit of $5,000. Don't you wish you could wave a magic wand over $5,000 of your own money and presto, have another $40,000 appear "out of thin air"? That is exactly what the Magician at the bank is doing. Nice trick!

Talk about pulling the wool over our eyes. It's a heads they win, tails we lose situation. It seems so senseless as to be unbelievable. The Federal Reserve is nothing more than a "PONZI SCHEME" sucking the blood out of our economy. It is the greatest fiscal fraud that has ever been perpetrated upon the nation. Just how much money are the MONEY-CHANGERS making. On Nov. 15, 1914 the total assets listed by the Federal Reserve was $143 million. According to the Federal Reserve Bulletin of September 9, 1994, the total assets of the Federal Reserve as of June 30, 1994, had grown to $419.61 billion. Who knows if this is a true figure, they never been independently audited. Instead, they audit themselves. Isn't that convenient?

During a telephone conversation with Mr. Bob Mulford, of the Legal Department with the Federal Reserve Bank of San Francisco, Mr. Mulford confessed to the following "COVER-UP":

CALLER - "Has the Federal Reserve ever been audited?"

MR. MULFORD - "Yes."

CALLER - "Internally or externally?"

MR. MULFORD - "What do you mean externally?"

CALLER - "Has the General Accounting Office ever audited you?"

MR. MULFORD - "Oh yes! They are here quite often."

CALLER - "They are?"

MR. MULFORD - "YES!"

CALLER - "Then why does Congressman Gonzales, the current head of the Banking Currency Committee say, the Federal Reserve has never been independently audited, but you are audited by your own internal forces?"

MR. MULFORD - "Well first of all we do have our own auditors. Each Reserve Bank has its own of auditors. They are not auditors, we call them examiners from the Federal Reserve Board itself that comes out and really rakes us over the coals.

Finally, you do have the General Accounting Office. They are authorized to audit most aspects of the Federal Reserve System operations. They are not allowed to audit our money market functions and a couple of other functions, reserves on deposits . . . But the banks do have access to the Federal reserves, what we call the discount window, to `COVER-UP' any temporary shortages in funds, if someone has lent out to much money."

I could not believe my ears when he admitted the GAO was not authorized to audit the money market functions, reserves on deposits, and that the discount window is used as a "COVER-UP". The "discount window" is one of the other functions Mr. Mulford alluded too, that the GAO cannot audit. If they would audit the discount window, they would be able to uncover the "COVER-UP".

More of this incredible and revealing conversation with Mr. Mulford will be in another chapter. But for now, let's dig deeper into how the PONZI SCHEME works, what damages it has done to our Nation, and what the Department of Treasury has said about money and the national debt, etc.

Before the passage of the Federal Reserve Act in 1913, taxes in America were relatively low. The national debt was virtually nonexistent. Inflation was a foreign word to the ears of Americans. Yet, during 8 years of President Reagan's term in office, our national debt increased 3 times the amount of all the preceding presidents combined. That's right! When Reagan and his trickle down economic policies took office, the total national deficit was less than $1 trillion. When he left office the total national debt was over $3 trillion and climbing. On the day this part of the book was written, November 8, 1994 (election day) the U.S. Treasury Department released the following figures: The national debt is $4,723,801,000,000 ($4.723 trillion). Your share of the federal debt is $18,084. Multiply this $18,084 by the average family size and each American family owes $67,091.64. (San Diego Union-Tribune, November 8, 1994)

The Treasury Department also reported the national debt increased in October by $30,829,000,000 ($30.82 billion). Now let us apply some simple basic math to see just how fast the national debt is growing. The $30,829,000,000 increase in debt for October divided by 31 days = $994,483,870.97 divided by 24 hours = $41,436,27.96 divided by 60 minutes = $690,8613.80 divided by 60 seconds = $11,510.23 per second, with no end in sight. At the current rate the national debt will reach $7,043,489,000,000 ($7.04 trillion) by the year 2000. Your share will be aproximately $26,986.55 and the typical family's share will be approximately $97,421.44. How many families do you know of that if they sold everything they own and paid off all of their bills would have enough money left over to pay their fair share of the national debt? It is a house of cards that will eventually collapse and the Great Foreclosure on our nation by the MONEY-CHANGERS will become a reality.

They have stolen America and your hard earned money. All the money, except for our coins and the few remaining U.S. Notes, have been borrowed into circulation as DEBT! Talk about balancing the Federal Budget is just that -- TALK! We are paying the price for our own oppression and enslavement, while, our elected Representatives sit back and do nothing about this senseless atrocity.

In a series of letters written by Byron Dale to the Department of the Treasury provides further evidence of the crimes being perpetrated on our unsuspecting nation. Russell Munk, Assistant General Counsel, International Affairs, Department of the Treasury, responded: "If the money supply is to be increased, money must be created [as debt]. The Federal Reserve Board (or "the Fed" as it is often called) has several ways of allowing money to be created, but the actual creation of money always involves the extension of credit . . . A private commercial bank which has just received extra reserves from the Fed can make roughly six dollars in loans for every one dollar in reserves it obtains from the Fed. How does it get six dollars from one dollar? It simply makes book entries for its loan customers saying `you have a deposit of six dollars with us' . . . You may want to know whether the bank is the one getting the benefit of the new money, since the bank owns the new money while the customer has merely borrowed the money. The bank does indeed get the benefit of the new money."

In another letter, Mr. Munk writes: "Federal Reserve Notes are not redeemable in gold or silver or in any other commodity. They have not been redeemable since 1933. In the sense that they are not redeemable, Federal Reserve Notes have not been backed by anything since 1933 . . . The term `lawful' money, and `lawful money of the United States' shall be held and construed to mean gold or silver coin of the United States."

In a letter dated December 14, 1982 to Byron Dale, M.M. Schneider, Acting Executive Assistant, Department of the Treasury, writes: "Money without backing is worthless."

Talk about self incriminating evidence. They tell us our money has not been backed by anything since 1933 and then they tell us, money without backing is worthless. So why are we using their "worthless" money?

In a letter dated March 16, 1988, Donna Pope, Director of the Mint, Department of the Treasury, wrote: "Federal Reserve Notes are printed by the Bureau of Printing and Engraving, which is also an agency of the Department of the Treasury. The notes are sold to the Federal Reserve at the cost of manufacture, not at face value."

In another letter from Russell Munk, Assistant General Counsel, Department of the Treasury, he writes: "It costs the Bureau of Printing and Engraving a little more than 2 cents to make a Federal Reserve Note, whether the note is for $1, $5 or $10 [$20, $50, $100] . . . I hope this information is useful to you."

This information proves the MONEY-CHANGERS pay about $20.60 for $100,000.00 (1,000 x $100.00 = $100,000.00). Don't you wish you could get that kind of return, plus interest on your money? The MONEY-CHANGERS do!

Jim Benfield, Department of the Treasury, writes: "What gives money its value is merely your faith in the United States government. `Money' is nothing more than articles of faith. My economics professor used to call money `ceremonially blessed dirty rags and mud pies'. The funny thing is, he's right. Kind of scary, isn't it? The answer your more likely to get in an economic's book is that money is `a promise to pay' with future goods and services . . . We've got a lot of work to do!" Yeah, about $5 trillion plus interest of work as economic slaves with no chance of economic freedom.

The saddest part of all, is the $5 trillion national debt can be paid with a SINGLE COIN! It does sound crazy doesn't it? But here is the proof: In a letter dated January 15, 1981, from the Bureau of the Mint, Office of Budget and Finance, Department of the Treasury, they wrote: "Enclosed is a chart giving the weight, metal composition, and metal cost per denomination."

Seigniorage is the difference (profit) between the cost of manufacturing and the actual value. In the case of Federal Reserve Notes the Federal Reserve pays a little over 2 cents for a $1.00 Federal Reserve Note and has a Seiginorage (profit) of $.98 ($99.975 on a $100 bill). In the case of a $1 Susan B. Anthony the cost is .0310 cents and the U.S. government has a seignorage of $.9690. Could it be the Susan B. Anthony was cutting into the profits of the Federal Reserve System on their $1.00 Federal Reserve Notes, and that is the reason the Susan B. Anthony dollar is no longer used?

In a letter dated April 9, 1990 from the Coin Coalition, they wrote: "The government only makes about $500 million a year in seigniorage on quarters, dimes, nickels and pennies. Remember, this is rather like `funny money'. The former chairman of the House Coinage Subcommittee correctly points out that we could pay off the national debt with a single $3 trillion coin. Just mint it and keep the $3 trillion seigniorage."

Unfortunately our leaders represent our enemies and continue to aid and abet in the crime of keeping us as indenture servants. If they truly represented "WE THE PEOPLE", they would mint the coin, pay off the unlawful debt, and free us from the unseen hands of the MONEY-CHANGERS. However, there is a problem using this method, this method would leave the MONEY-CHANGERS with $5 trillion in their pockets.

Fortunately, there are two other solutions to putting an end to this thievery. The first solution is found in Article 30 of the Federal Reserve Act. According to Article 30, Congress can buy-back the Federal Reserve and all their assets for the original paid-in capital of $144 million. Utilizing this clause would leave the stock-holders with what they invested to begin with, a $144 million.

Speaking of the Federal Reserve System, Justice of the Peace, Martin Mahoney said, "The law leaves wrongdoers where it finds them." Article 30 of the Federal Reserve Act does just that!

However, the best solution to putting an end to this giant hoax would be for Congress declare the Federal Reserve unconstitutional and null and void. Such an Act of Congress would return all their ill-gotten gains back to the U.S. Treasury and the MONEY-CHANGERS would be left empty handed. This solution will be given later in the book.

Ladies and gentlemen, the only difference between Federal Reserve Notes and Monopoly Money is, we accept their counterfeit "fiat" money as being legal tender and won't accept Parker Brother's. As the Federal Reserve stated in their book "The Hats The Federal Reserve Wears", "Nearly a hundred trillion dollars are transferred over the Fedwire network yearly . . . Faith in the strength, soundness, and stability of the American economy is the real backing of our [counterfeit] money." As for me, I would rather put my faith in Parker Brothers, they don't charge interest.

The Federal Reserve had this to say about Karl Marx, ". . . despite his appearances, he was a formidable scholar and intellect. `Das Kapital', Marx's famous indictment against capitalism, was accomplished through slow and agonizingly meticulous work." ("Great Economists", by the San Francisco Federal Reserve Bank)

Despite all this fraud and deception, Alan Greenspan, Chairman, Federal Reserve Board of Governors had the audacity to say, "We simply cannot tolerate unfair and illegal activity that puts some of our citizens at a disadvantage." (1993 Annual Report, Federal Reserve Bank of San Francisco) What a HYPOCRITE! He should run for President.