Topic: Debate
Yes, The Federal Reserve Is Based In Fraud And Must Be Abolished

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In this first article of our debate, I present a 10,000 foot view of the fraudulent nature of the Fed and why it is irrational to believe that it can be reformed rather than abolished.

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by Walt Thiessen
(libertarian)
Saturday, October 4, 2008

First, let me give my thanks to Master C for agreeing to this debate. The question before us is whether the Federal Reserve System is fraudulent, and if so how extensive is the damage from that fraud? In other times, general public interest in the Fed has been somewhere between little and none, but the sub-prime mortgage crisis has led to a much larger financial crisis that threatens the survival of the world's largest banks. With those banks demanding that taxpayers and ordinary citizens bail them out of their troubles (as happened once again yesterday), the Fed becomes an issue of paramount interest to everyone.

Let me begin by giving a summary of the argument I will be making in this debate.

The Fed IS Fraudulent

The Federal Reserve System and fractional reserve banking are normally presented to us as a model of sound banking practices that have made America the economic envy of the world. The reality is quite different,  however. Fractional reserve banking is really nothing more than legalized fraud which causes tremendous harm without most people even being aware of that harm! The Federal Reserve System masquerades as a regulatory  controller of banks, but in fact it is a partner with both the biggest banks and the U.S. government against the rest of us.

This partnership is a super-cartel whose goal is to extract huge amounts of wealth from society at large for the purpose of providing gigantic amounts of spendable money for the government without direct taxation and a huge, endless train of interest payments for the banks. Further, the banks are not encouraged by the system to engage in frugal, cautious behavior. Rather, they are encouraged to engage in some of the most reckless, unsound business practices ever conceived in history, with the 100% certain knowledge that the government will bail them out at taxpayer expense whenever the spam hits the fan, as happened yesterday in Washington, DC.

The aim of this partnership is to create and control a fiat money supply to be used in helping the partners create trillions of dollars for their own use at the expense of everyone else. It is the greatest financial fraud ever perpetrated in the history of mankind.

This form of legalized fraud is not limited to the United States. All countries around the world are engaged in similar fraud and build their economies based upon that fraud. What sets the Fed apart is that the money it creates has served as a defacto monetary standard around which all other fiat currencies have rallied over the years.

I'm not saying that all enterprises are therefore fraudulent. Clearly there are billions of private enterprises in the world today that attempt to honestly engage in business, and they are the true backbone of the economy. I'm saying that the money they are forced to use, which is the basis for how their success or failure is measured and accounted, is systematically warped and twisted by the biggest money lenders and the Fed to the detriment of everyone else. The purpose for this warping and twisting is to extract the benefits of economic prosperity from the pockets of all individuals who do an honest day's work for an honest day's pay without those individuals  being aware they're being fleeced. They continue to be fleeced day in and day out, and the fleecing is getting worse and worse as time goes on.

The reason the Fed and the big bankers have gotten away with this fleecing for so long is that so few people really understand how banking works, and they are no more aware of how a fiat monetary system works. Instead, the people are bewitched and deceived by the bankers' magic tricks which befuddle the mind and betray the senses. The game that they have played since the Fed's inception is literally nothing more or less than a game called Bailout, whereby you and I are ultimately expected to give large portions of our hard earned "livings" over to the big banking cartel with as little fuss as possible. It is a game that has been played over and over since the Fed's inception, and the result has always been the same. The bankers have always been bailed out by the taxpayer, over and over again, and it is the super-cartel's fondest wish that you'll never figure out how the trick is done.

Where Has The Fed Taken Us?

Since 1971, when President Nixon took the world off the last tiny remnant of the gold standard (known then as the international gold exchange), the Fed have engaged in an orgy of fraudulent money creation that is threatening to rip our world apart. We literally sit at the doorstep of the worst hyperinflationary period America has ever known in her existence.

Even as I typed the last paragraph, I had to shake my head in disbelief. Who could possibly believe what it says is true? Surely, it must be nothing more than the ravings of a diseased mind. But sadly, it's not. It's real, and it's here, and the sooner we as a society face up to this super-cartel, the sooner we can rid the world of its ugly shadow and the horrible, debilitating effects it has imposed upon us for generations.

I'll get into the specifics of my argument as this debate progresses in my other articles. For the moment, let me just take a moment to touch upon some of the more astonishing facts that we live with today, facts which most of us aren't even aware exist.

Surprising Facts About Fiat Money

One of the most surprising facts about fiat money is that it is not created out of assets (tangible things that have intrinsic value regardless of what kind of money you use).  Rather fiat money is created out of liabilities (or debts). What creators of fiat money do is they create their money by issuing debts. This seems impossible to honest people, but that's what they do.

Now here's another fact that will surprise and amaze many of you. If every debt that was borrowed in fiat money were somehow paid back in one day, by the end of the day there would be no fiat money left anywhere in the world. It would all be gone. The entire fiat money supply would just dry up and disappear!

By now, you're probably thinking that I have completely lost my mind and that the guys in the white coveralls will come along any time now to drag me away to a padded cell. I can't say I blame you for thinking that, but I have to tell you that what I'm saying is true. Further, I'm confident that my opponent in this debate, Master C, will agree and stipulate that this is true, because as a former professor of economics he knows it is true.

In his opening remarks, Master C has already stated, "many people feel that the Federal Reserve is 'fraudulent' that it debauches (corrupts, perverts, defiles, distorts, and devalues) the value of our currency. But, as I will discuss, there may also be reasons why this is GOOD for the economy." I believe that once you've followed this debate, you'll discover that his evaluation is wrong.

The flaws in the Fed are systemic, not superficial. They are caused by the system's design and purpose, not by a flaw in the original design. This is why reform can't fix it. To truly "reform" the Fed we would have to throw out the basic concepts upon which it was founded. Those concepts are fraudulent in nature; therefore the only solution is to abandon the experiment. This is not as difficult as it sounds. It's easy to transition back to a hard money system. All we need is the national will to take the first steps, while also choosing to crack down on fraudulent banking activity rather than rewarding it. The marketplace will take care of the rest of the transition for us.

What's At Stake

We are not merely engaging in an academic exercise with this debate. The residue of  the Fed's and the big bankers' irresponsible and intentionally fraudulent behavior stands directly behind today's headlines, and not just the headlines of financial crisis and bailouts. I'm talking about a significant proportion of all the ugly headlines we see in the news every day.

It's difficult for most of us to realize just how much better off we would be without the super-cartel, because we have never known anything else in our lives. It is no overstatement to say that we would all be more than 10 times better off without it. This seems like one of those wild, crazy, irresponsible claims we hear from politicians or revolutionaries. We all know how much of a struggle it is to work hard to feed our families, keep roofs over our heads, and put food on the table. Some might ask, how could we possibly be better off? Simple. The fraud perpetrated by the super-cartel is how most of the economic value we create is stolen from all of us without us knowing how or why it's happening. It's why we're constantly amazed at how the money we earn just doesn't seem to go as far as we'd expect. In this, I'm not just writing about Americans. I'm writing about all people around the world. Nor am I writing hypothetically. I'm writing about a reality that all of us live with every day, a reality that is created and driven by the super-cartel:

1. The super-cartel is the main reason why so many countries are dominated by corrupt authoritarian "leaders" who prey on their own people.
2. It's why hard-working people everywhere struggle to survive.
3. It's why there is so much more war in the world than there would otherwise be.
4. It's why grinding poverty has proven to be so difficult to uproot.
5. It's why governments in all countries grow at such prodigious rates until they completely dominate their peoples, while those peoples are left staring into a perpetual abyss created by their monster governments.
6. It's why liberty is slowly disappearing from our world, everywhere.
7. It creates and perpetually expands the gap between the superrich and everyone else, and the burden it creates falls hardest on the poor, working, and middle classes.
8. It's why the average American family, despite the fact that nearly all work so hard to get ahead, owed an average of $18,654 in consumer debt in 2003 (not counting mortgages). The debt is built into the fraudulent system created and managed by the super-cartel, and a monetary system that is based on fraud and debt encourages everyone else to go into debt and discourages savings.

How Life Could Be Without The Super-Cartel

Probably the hardest part of this whole discussion is conveying in convincing fashion just how much better our lives and our society would be without the super-cartel's omnipresent influence. Here's a taste.

1. Average people could keep food on the table and a roof over their family's heads without working themselves to death.
2. Mortgages could be paid off in a few years.
3. Automobiles could be paid off in six months.
4. Alternative energy sources would be developed at explosive rates, not by government command but because average people would have the time, money and opportunity to create them that they never had before.
5. Poverty would start to disappear at seemingly miraculous rates by today's standards, rather than continuing to grow worse every day.
6. The need to go into debt in order to have what you think you're earning would be reduced to near zero. Americans would find that they no longer have to go into debt in order to buy that big-screen TV or take that long-needed vacation.
7. College would not be needed in order to survive economically, and the cost of college to those who wanted it anyway would plummet to a small fraction of its current level. The need for tuition assistance would thereby start to disappear.
8. The economy would no longer go through the boom/bust cycle.
9. Unemployment would no longer be a constantly returning feature of the political economy.
10. The size and scope of government would reverse direction and start to reduce rather than continuing to grow.
11. People would be surprised to find new levels of happiness that they had never experienced before.
12. Other Western countries that followed the same lead of overthrowing their own versions of the super-cartel and making illegal the fraud that the super-cartel engages in would experience similar transformations.
13. Third world countries would go through a revolutionary period in which the powers which control their lives today would fall under the weight of their own corruption because they would no longer be propped up by the super-cartel. Then, those third world countries which adopted the same principles of ending fraudulent banking and currency practices would experience the same kind of widespread prosperity that the Western world experiences.
14. The underlying causes of terrorism could finally be addressed directly and successfully. Fear would be reduced, because it always reduces where prosperity reaches all of us and not just a select few.

That's just a taste, and yes it is within our reach. All we need to do is to recognize what the primary, driving cause of our current miseries is. That primary cause is the fraud-driven super-cartel, a partnership of the Federal Reserve System (and other central banks around the world) and the big banking cartel, a super-cartel which feeds on the prosperity of the world to the detriment of all of us.

©2008 Walt Thiessen, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Saturday, October 4, 2008
Last modified: Saturday, October 4, 2008

The views expressed in this article are those of Walt Thiessen only and do not represent the views of Nolan Chart, LLC or its affiliates. Walt Thiessen is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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