Major Frauds of the U.S. Monetary System
Silver Stock Report
by Jason Hommel, Feb 24, 2004
Fraud #1. Paper Money. Originally, a paper dollar was a paper promise, a contract, to pay in gold or silver. The issuers of dollars have defaulted on that promise numerous times in recent history, at a rate of about once per generation. The issuers of paper money defaulted on domestic gold redemption in 1934, defaulted on silver redemption in 1968, and defaulted on international gold redemption in 1971. Those who issue U.S. paper money (Federal Reserve Notes) are in default. The creation of paper money is fraud, and was used to steal away gold and silver from the hands of the people.
Fraud #1 (A). Unchecked Borrowing and Printing of more Paper Money. All paper money is borrowed into existence, and that does not make the excessive creation of paper money right. This fraud is an additional theft upon all people who are already deceived by holding onto the fraudulent dollars, instead of gold and silver. The total amount of money in the U.S. banking system is known as M3, and is almost $9 Trillion as of Jan., 2004. www.federalreserve.gov/releases/h6/Current/
Fraud #2. The Debt of the U.S. Federal Government. Originally, this debt was incurred to a large degree to fight and win World War II, as the debt soared from under $50 billion to over $250 billion by the war's end. This was fraud, however, because at the time, the U.S. was on a gold standard at $35/oz., and the U.S. never borrowed $250 billion worth of gold in the first place, we only borrowed paper money that was created to excess. The debt is primarily used as a means to hide the fact of the excessive creation of paper money. By the end of Feb, 2004, the debt can be rounded up to $7.1 Trillion, and is as fraudulent today as it ever was. See www.publicdebt.treas.gov/opd/opdpenny.htm
Fraud #3. Fractional Reserve Banking. Banks don't even have the fraudulent paper money they say you have in your account. They say you have "on demand" deposits, but they loan deposits out long term, which is fraud, because you cannot demand your deposits when you want. You have to order cash in advance, which your bank will have to order from the Fed, if you take out more than a few thousand dollars, and sometimes they will not even provide such a "service" of giving you your money, but will only give you a cashier's check.
What are the fractional reserve requirements? In June of 2001, it was $37 billion for the entire U.S. banking system. See www.frbsf.org/education/activities/drecon/2001/0108.html
In June of 2001, M3 was $7605 billion. See www.federalreserve.gov/releases/h6/hist/h6hist1.txt
Therefore, in total, the reserve requirement was 37/7605, or .49%, or less than half of 1%.
The reason why it is so low is that for the first $6 million of deposits at a depository (your local branch) the reserve requirement is zero. Then, for the next $6 million to $45 million, the amount is 3%. Then, for amounts larger than $45 million, it is 10%. See www.federalreserve.gov/monetarypolicy/reservereq.htm
Therefore, since the vast majority of deposits are small ones, the effective reserve requirement is close to zero, or that 1/2 of 1%.
Fractional reserve banking is fraud, because those reserves cannot simultaneously be used to pay out to depositors and be used to back up the rest of the deposits at the same time. If more than 1/2 of 1% of people took their money out of the banking system, the system would collapse, unless the banks were willing to go to the Federal Reserve (the lender of last resort) and borrow more paper money.
The system works fine in theory, but works only for paper money. (And in practice, it has only worked for less than 20 years.) But there is no "lender of last resort" for real gold and silver.
Fraud #3 (A). The FDIC, or Federal Deposit Insurance Corporation. www.fdic.gov/ The FDIC, in theory, insures accounts up to $100,000. As inflation continues, the value of this number grows smaller every year. In theory, this insurance is in place in case the bank is insolvent and fails due to a bank run, and insufficient fractional reserve requirements. In practice, it is there to back up banks that fail that the Federal Reserve refuses to bail out. In practice, sometimes depositors have to wait months to be paid this insurance money. In practice, the FDIC does not have the money to back up the accounts, either, which is fraud.
You would need this insurance the most if there was runaway inflation. If there was runaway inflation and a million dollars became nearly worthless, then the effective insurance amount of the FDIC would be close to zero.
In my view, insurance itself is collectivism, and fraud. Why should one depositor in New England who makes a deposit in a small town bank have to pay for the lack of fiscal responsibility of an entirely different bank, in an entirely different company, in an entirely different state such as New Mexico, and ultimately pay to protect those depositors in New Mexico? This transference of responsibility, through the FDIC, is fraud and a crime.
Fraud #4. Central bank gold-leasing. This is the fraud that GATA has been working to expose. The central banks own gold in two forms, real gold in their vaults, and paper promises. They report it all as if it were one category, which is fraud. The official estimates are that 30,000+ tonnes of "gold" are held by the central banks, and of that, 5000 tonnes have been leased out. The GATA research, by three different methods by three different people, shows that the amount leased out is closer to 15,000 tonnes. To say they have gold, when they do not have gold because it has been leased out, is fraud. To lease out the people's gold (that ostensibly backs up the people's currency) without the people's knowledge or consent, is fraud.
U.S. gold is stated to be 261.5 million ounces. See www.fms.treas.gov/gold/index.html (x 32152 oz/tonne, it's also 8407 tonnes.) The U.S. gold has not been audited by any independent third party since the 1960's.
Even if the U.S. government really still has all this gold, and even if they pledged it against all deposits in the U.S. via the FDIC and backed the full $9 Trillion of money in the banks, M3, (and it is purely a fantasy that they would be so honorable) there would be only one ounce of gold for every $34,482. (That's 9,000,000 million (a trillion is a million million) dollars / 261 million oz.)
Fraud #5. Bonds. Bonds are a paper promise to pay more fraudulent paper promises. It is fraud upon fraud. In theory, a bondholder will always receive more paper money than they lent out when they bought the bond in the first place. In practice, that does not matter if inflation rises faster than the rate of return, in which case the bondholder loses value. What does it matter to be paid more money, if the money is worth much less? Or, if bond interest rates rise as inflation increases happen, then the current re-sale value of the bond drops tremendously.
Fraud #5. (A). Inflation indexed bonds. These bonds promise to pay out a variable rate of return, indexed, or matched to the inflation rate. This is fraud upon fraud because they lie about the inflation rate, saying it is lower than it really is. Currently, the government is claiming that the inflation rate is about 1%. In reality, by mid 2003, the inflation rate was closer to 6%. Since mid 2003, many commodities are up about 20% or more, and by the end of 2003, we may be experiencing an annualized inflation rate of 40% in the U.S.! Furthermore, the dollar continues to drop against other currencies, and is down to 85 from a high of about 130, which is a drop of about 35%! Furthermore, what use is it to be paid out in more and more paper money, if the ultimate value of paper money will return to its intrinsic value, which is zero? Also, inflation indexed bonds will help to cause the very inflation that is feared. As more and more money will be needed to pay off the bonds, inflation will be forced to increase more and more!
Therefore, if you own inflation-indexed bonds that are paying you anything less than about 50% per year, then I suppose you have been deceived by this fraud, too.
$33 Trillion, U.S.: The value of the World bond market yr end, '01: http://tinyurl.com/vr7u
$20.2 Trillion, U.S.: The value of the U.S. bond market, yr end, '02: http://tinyurl.com/vr7g
Bonds are used to steal away gold and silver still in the hands of the people who would not be deceived through paper money alone, and who are tempted through the lure of the crime of usury, or receiving an interest rate. If all the U.S. bonds, and M3, were both backed by the U.S. gold hoard, it would mean that there are about $29,000,000 million (a trillion is a million million) / 261 million = $111,111/ per oz. of gold.
Fraud #6. Paper futures contracts, and derivatives, especially when created to excess. The dollar is a derivative, and a paper contract, but that's not the only one. There are also contracts at the COMEX, and on the "over the counter" (OTC) market to deliver gold and silver. At the COMEX, in silver, we regularly see over 100,000 contracts for 5000 ounces, or 500 million ounces. To see how many contracts there are for 5000 ounces, see www.nymex.com/jsp/markets/sil_fut_csf.jsp?
But they have only 52 million ounces of silver in the registered category, ready for delivery. To see how much silver they have now, see www.nymex.com/jsp/markets/sil_fut_wareho.jsp
The value of 52 million oz. of silver, at $6.50/oz. = $338 million.
The frauds here are similar to the fraud of the dollar and the fraud of fractional reserve banking, all in one. They have made too many futures contracts to deliver gold and silver, just as they have printed up too many dollars. And they only have a small portion of real gold and silver to back up their promises to deliver.
If bondholders ($20 trillion) and bank account holders ($9 trillion) ever think to prefer the safety of owning physical silver again, they should know that buying silver is a "first come first served" process. They should know that there is $29,000,000 million (a trillion is a million million) dollars available for the 52 million oz. of silver available in the market, or $557,692/oz.
Fraud #6 (A). Options. As if paper futures contracts were not enough to deceive people through the "magic" and "promise" of leverage, they have options on paper futures contracts, where a person puts down even less money to "control" the silver and "profit" from its price rise. (It's as if the lure of 100,000 fold gains are simply enough for these greedy and deceived people.)
Fraud #7. Position limits on longs. At the COMEX, there are limits upon how much one person or entity can buy. I believe it is a false idea that longs can manipulate the market. It is impossible for longs to manipulate a free market! In a free market, everyone is free to buy and own whatever they wish, and own however much silver they wish. Restrictions on longs or restrictions on ownership is nothing less than communism, theft, and fraud! What good is money if you cannot spend it on whatever you wish? If you cannot buy what you wish, your money is no good! In other words, the entire U.S. monetary system is no good, it's fraudulent from top to bottom.
As a recent example, position limits were reduced for buyers of copper futures in the spot month, from 5000 contracts to 3000 contracts on December 22, 2003. See www.nymex.com/jsp/news/press_releas.jsp?id=pr20031222b
Fraud #8. Delivery delays for COMEX silver (also known as defaults). A default occurs when there was fraud. It is also known as bankruptcy, or a failure to deliver upon an obligation or promise. If a bank cannot honor on-demand deposits, then the bank is insolvent, or bankrupt. Similarly, if someone promises to deliver silver by a certain date, and is unable to do so, they are bankrupt, and in default, and have committed fraud. Since there have already been delivery delays of silver, then the long awaited default at the COMEX has already occurred. This is probably the best explanation for why the price of silver is moving up at this time.
The last major silver defaults were the failure to pay out silver when silver certificates (dollars) were presented for delivery, way back in 1968.
Frauds numbered 6-8 are the frauds that Ted Butler has been working to expose.
Fraud #9. Banking hold times. Why are there such long hold times on checks when you make a deposit in your bank, and hold times on wire transfers? They say it is for my protection, but I think it's for the bank's protection, or profit! A wire transfer can take up to a week. Depositing a check can take from a week to 3-4 weeks before they let you withdraw your money! Outrageous! As bulky and as heavy as silver bullion is, it is quicker and easier to ship silver bullion than to deal with the so-called "convenience" of U.S. paper dollars in the banking system.
Fraud #10. Legal tender laws. To add insult to injury, legal tender laws are laws that treat these frauds as if they were the corner stone of "The American Way". They force people to accept the fraud, in place of real money, gold and silver. And they prevent people from making and contracting for gold and silver, even though the big banks are somehow exempt, and can contract in gold and silver all they want through the "over the counter" derivatives market.
The fraud of legal tender laws is the fraud that www.fame.org/#Strategy has been working to expose.
Fraud #11. Tax on gold and silver purchases. In the U.S., some states collect a sales tax on the purchase of gold and silver coin. It usually ranges from about 5-8%. In some states, such as California, it is only applicable on transactions for less than $1000. In Europe, they have what is called a VAT, or "value added tax". It's also fraud. There can be no tax on a money exchange. When you get two $5 bills for a $10 bill, do you pay tax? Of course not. When you convert money from the Canadian dollar to the U.S. dollar is there a tax? Of course not. Therefore, there should be no tax on other money exchanges.
The fraud of the tax on bullion is a fraud that Franklin Sanders has been working to expose.
Fraud #12, The Income Tax. Prior to 1913 when the Federal Reserve was founded, there never was an income tax, and America got along just fine without it for hundreds of years. Between 1913 and 1945, the income tax was paid only by the extremely wealthy, and it started out as only a tiny percentage of income. The income tax did not become widespread and was not paid by the average person until after World War II, and it was supposed to be "temporary". We've been paying this temporary tax ever since, and with no end in sight. The income tax is fraudulent because it is and unconstitutional on many grounds, but the judges of the nation rule as if they do not care.
Fraud #13, The Social Security Number (SSN). Started by FDR in the depression, the original cards are printed with the phrase, "not to be used for identification purposes." Now, due to the Patriot Act, you cannot get a bank account without one. The social security system is a fraudulent ponzi scheme. It is collectivism. Fortunately, I don't use a SSN, which is a protection from most of the frauds of the entire system.
Conclusions: Fraud is not the American Way. Unfortunately, it is the way of life today -- that we all must face. Anyone who uses paper money is guilty of allowing these frauds to continue. Anyone who saves in terms of paper money in the banks is guilty of allowing themselves to be deceived by these multiple frauds.
It is wrong to participate in, or by deceived by fraud, just because many other people also participate. Stop participating in fraud, and stop allowing yourself to be deceived by fraud.
Which of the above frauds do you think is the greatest fraud of the monetary system in the U.S. today? One of the above, or one I may have left out? I'd like to read what you think. Email firstname.lastname@example.org I may not have time to respond to each letter, but I really do appreciate and read all the feedback.
I believe that the best way to protect yourself from the frauds and excesses of the U.S. monetary system is to own real silver bullion. I also invest in silver stocks, which I think have the potential to continue to provide a greater return on investment than silver bullion. For example, silver is up about 50%, and silver stocks are up about 350% since June of 2003. If you would like to receive my free weekly silver stock report in email, sign up for the free e-book at silverstockreport.com
The beauty of the internet is that it is helping knowledge to increase, and it is a form of communication that those who commit these crimes of monetary fraud upon us cannot control. Please make the most of it, and please forward this on to others.