BY MIKE MALONEY

ONLINE-ONLY CHAPTER
Just before going to press the decision was made to cut two chapters from the
finished book, including this one. I moved these chapters to “online-only”
status to simplify updating and so that I could include some accompanying
explanatory videos to make them easier to digest. As a side benefit of deleting
these two chapters from the book the retail price of the print version was
reduced by $10, thereby enabling me to reach more people with this important
information.

A POTENTIALLY BRIGHT FUTURE

A few decades ago, I decided “I should study money… If I want to get ahead
in life.” I did… And I did. One of the things I feel very strongly about is that
everyone should learn as much as they can about currency, money, and the
monetary system… right now. At this stage in the game, it’s urgent. The impact
of currency creation on our lives is tremendous and cannot be overstated.
Learning about it benefited me tremendously, and I believe it will do the same
for you. But it can also help the entire world. If enough people learn about
this, we can not only prevent a very dark era in history from repeating, but we
can help to steer humanity towards a much brighter future.

Please share this with everyone you can. Email it to your friends and family
or ask them to go to GGSR21.com to download the latest updated version.

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Because this chapter was cut from the print version of my book, I must repeat
this disclaimer.

SLAVERY
My friends and colleagues have advised me not to use the words slave, slavery,
or enslavement.

As a writer I give very serious consideration to my words. Today the terms

slave and slavery have become intertwined with racism. I am not unaware
of the current climate regarding racism, and I do not wish to offend anyone
whose ancestors suffered the evils of slavery.

But economic slavery is evil too. If one person is forced to work for the
benefit of another person, with no compensation whatsoever, that is a form
of enslavement. It’s just that it exists in the shadows—intentionally disguised,
and invisible to most, but through the use of correct language I believe I can
shine a light on it and reveal economic slavery as something very, very real.

My decision to use these words was not taken lightly, but I think it’s the
correct one, simply because we have no other words in the English language
that adequately portray the financial crimes that are being committed against
all of humanity.

(Note) Whenever you see a notation (superscript Roman numerals at the end
of a word or sentence), you can hover your cursor, or double click on it, and it
will take you to a link to the source.
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 CHAPTER 4

THE SCENE OF THE CRIME

Give a man a gun and he can rob a bank,

but give a man a bank, and he can rob the world.

TYRELL WELLICK CHARACTER, MR. ROBOT TV SERIES

SURPRISE, SURPRISE!
In this chapter, I’m going to expose the largest theft in human history. I’ll
show you who the culprits are, how they did it, and the mind-boggling scale
of the heist. We’ll also look at the wealth transfer that has caused the great
acceleration of income inequality and wealth disparity that is tearing our
society apart at the seams.

The evidence I will submit in this chapter comes mostly from the Federal
Reserve and the Bank of England. It lays the foundation for the next two
chapters, and combined with them, it should give us a pretty good glimpse into
the future of the global economy. So, hang on… You’re going to be surprised.

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 A STORY TOLD IN PARTS
I truly believe that the only way for anyone to possibly comprehend the
enormity of what’s coming in the financial world, is by fully understanding
the shaky economic foundation that supports our monetary house of cards.
This chapter will show you that foundation… and you’ll also get a hard look
at some of the gaping cracks.

Chapters 1, 2 and 3 laid out the groundwork that will help guide you through
this chapter, which is technically a lot more difficult. But the reward is that once
you truly comprehend the information in the following pages, understanding
the economy, as well as the rest of the book, will be a whole lot easier.

This is a story told in seven parts. Each part is a topic that is much easier to
understand when considered separately, so take the time to fully digest each
section before moving on. If you don’t understand a section, then re-read it
or join a discussion group at GGSR21.com and ask for help. Because, when
looked at in whole, the sum of the parts makes sense of not only the rest of the
book, but the entire economy.

The Parts:

1. Backed by the Full Faith and Credit of You.

The work you must perform in the future to pay your mortgage, auto
loan, credit cards, and taxes, is what instills faith in the currency…
You give currency its value. YOU Have Been Monetized.

2. IOUSA

The monetary system is based on the future extraction of taxes from

all of us.

3. The $200 Billion Gift You Never Intended to Give.

The Fed has given the banks more than $200 billion, and you’re
paying the bill.
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4. The $7 Trillion Theft.

1/3 of the currency supply was stolen… And guess who they
stole it from?

5. An Economy on Life Support.

For all but a few months, since 2008 the financial markets have been
on artificial life-support… And now the Fed thinks they can just pull
the plug without the patient dying.

6. Reverse Robin Hoods.

How the Federal Reserve steals from the poor and middle-class to give
to the rich… Every second of every day.

7. The New Slavery.

When central banks steal purchasing power from the common man,
he must then work more—not to increase his wealth—but simply to
replace the stolen purchasing power. If you are forced to work for the
benefit of another, with no compensation, that is enslavement.

I’ll delve a lot deeper into each of these topics in just a moment. But first… I
need to set the stage.

WE’VE MORTGAGED OUR FUTURE

Many people confuse debt with deficit, budget deficit, and fiscal deficit. When
the United States runs a budget deficit, it means that our politicians are
planning, in the budget, to purposely spend that much more than our income
for that fiscal year. The terms deficit, real deficit, and fiscal deficit refer to the
amount that we actually spent that exceeded our income. And perhaps not
so surprisingly, the real fiscal deficit almost always turns out to be higher than

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the budget deficit. The real deficit is simply the change in national debt. How
much did we owe last year, vs. how much do we owe this year? If we owe more
this year than we did last year, the difference is the real deficit. If you take all
of the annual real fiscal deficits, and add them together, you have the total debt
that we owe… our national debt.

In 2020 the budget deficit was 19 ½ times higher than in 2007, the year before
the global financial crisisi. As I write, the US national debt is more than $31
trillion. And our politicians keep on making it worse by always adding more
deficit fuel to the debt fire. As long as we have deficit spending the Treasury
must issue increasingly more debt… adding to the national debt.

Every Treasury auction is also the same as a mortgage refinance, but for the
entire country, because every day some of our old national mortgage comes
due (bills, notes, and bonds mature). Thus, every business day they must
refinance our old, low interest rate debt, at potentially higher rates.

At the beginning of 2022, US Treasury yields averaged a little over 1%. By the
beginning of 2023, they averaged just over 4%. A little more than 4% interest
on a little more than $31 trillion of debt is a little more than 1-¼ trillion
dollars… and that’s not a little… it’s a lot.

Now, to be fair, the average maturity of all of the different debt instruments
that make up our national debt is just over five years. That means that, on a
rolling average, the entire national debt must be refinanced every five years,
which means that the really big interest payments have not hit us yet… But
they will.

And the same rolling over and refinancing that applies to our government,
also applies to businesses and individuals as well. If the Fed continues raising
interest rates the economy will slow or contract until people stop buying,
which will then cause countless businesses to fail, unemployment to soar,
families to lose their homes, and many people to file for bankruptcy.

Today the private debt of corporations, small businesses, families, and

individuals, is around $60 trillionii. So when you include the national debt,
our total debt in the US (public plus private) now exceeds $90 trillion.
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4% interest on
$90 trillion is
$3,600,000,000,000…

THREE TRILLION
SIX HUNDRED
BILLION DOLLARS!

This… is the Pit of Debt

I was talking about in
chapter 2.

The higher the cliff… The bigger the fall.

According to the
Federal Reserve, the
broadest measure of
how many dollars
there are¬—how many
dollars exist in the
entire world—is the
M2 currency supply,
which currently stands
at a little under $21.5
trillion.

So, is the Federal Reserve telling us that we owe four times more debt than all
the dollars that exist?

Yes.

I’ve tried my best to think of some sort of solution, but I can’t see any scenario
that has a happy ending.

So how did we get here? What caused all this? Most people would say: out-of-
control government spending. But that’s actually an effect, not a cause. The true

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cause is a currency that can be conjured into existence from nothing. That is
how we can continually spend more than we’ve got.

For some reason, the process of fiat currency creation leading to the $90 trillion
“Pit of Debt” reminds me very much of the Sorcerer’s Apprentice from Disney’s
Fantasia movie. Mickey Mouse works for a sorcerer, bringing buckets of water
from the well to fill the cistern in the sorcerer’s quarters. The sorcerer leaves
the room. Mickey dons the sorcerer’s magic hat, casting a spell on a broom to
do his work for him. All goes well at first, but Mickey soon loses control as he
finds the room flooding. He tries to stop the broom, but he can’t, so he chops
it into pieces. The pieces come back to life and soon there are hundreds of
brooms bringing buckets of water until the room is overflowing and Mickey
is about to drown. Just then the sorcerer arrives, and with a wave of his arms
reverses all the damage done. Mickey is saved.

The financial system is out of control, and we are drowning in debt.

So, it was the sorcerer who saved Mickey… My question is… Who will save us?

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 PART 1:

BACKED BY THE FULL FAITH AND

CREDIT OF YOU

FAITH
It is said that fiat currencies are faith-based. That they only have purchasing
power because of your faith in them. That, because they purchased something
yesterday, we all have faith that they will purchase roughly the same amount
tomorrow.

I actually hope this book shakes your faith to its very foundations. Because faith
in fiat currency is akin to faith in forgery, fabrication, falsehood, and fraud.

In Chapter 1, I said:

Today, the vast majority of currency is created by just typing numbers

into a computer. So now, please ask yourself… How many numbers are
there? What is the limit to currency creation?

One of the key attributes of money, is that it must be a store of value. In my

earlier chapters, I believe I proved, beyond a shadow of a doubt, that no nation
today uses real money. And in closing I said:

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 If somebody disagrees with your stance that national fiat currencies are
not money, and claims that their currency is money, ask them: “Do you
believe money is a store of value?” If they answer yes, then ask them: “Is
there inflation?” If they answer yes, then ask them: “But aren’t those two
things mutually exclusive?”

If there is inflation the currency is not storing value… It’s losing value.
Therefore, it is not money.

Real money does not require faith.

The purchasing power of an ounce of gold or silver is simply the market placing
a value on the rarity, the time, and the effort required to produce it — which
is equal to the time and work you must put in to acquire it — which is equal
to the value of the things you can buy with it.

In other words, if you purchase a house with gold coins it is a fair transaction
because: The time and effort put into prospecting, developing a mine, mining
the ore, refining it, pouring it into bars, and minting it into coins — is equal
to — the time and effort you put into earning enough gold coins to buy a
home — which is also equal to — the value of the time, effort, and materials
required to build that home.

When we transact with currency, it’s fraud. We are trading nothing, for
something of value. When we transact with money it’s a fair trade. We’re
trading something of value, for something of equal value. This is the reason
gold and silver are called honest money.

Money stores value… Currency steals value.

So, even though they do not require faith to have value… I’ve put my faith in
gold and silver.

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 GOING SHOPPING
Imagine you’re in the checkout line at a grocery store and, when it comes time
to pay, you simply whip out a pencil and a blank scrap of paper and scribble
“This is 100 dollars” and hand it to the clerk, who accepts it. If you’ve ever
pulled off such a heist, then you have “the gift.” The gift of fraud. The gift of
theft. The gift of a banking license.

Modern banks are allowed, by law, to perpetrate this con on a routine basis. In
fact, it’s the only thing they do. Central banks and commercial banks justify
this by saying, “now everyone feels richer, so they’ll spend more, and that will
really make them richer!”

Obviously, this is insane. If the goal is to make everyone richer, then why don’t
we just give everyone a hundred dollars directly? Or better yet, a thousand –
or a million. If we just give everyone a bunch of newly created currency, then
we’re all relatively the same amount of “rich” that we were before, because
the prices of everything in the economy will quickly rise to reflect the new
injection of cash. In other words, nothing would change.

FOR RICHER OR POORER

This is basically what our banks (beginning with the Fed) do, EXCEPT, they
don’t spread the new currency around evenly. So, if something does change, it
has to be that some people get relatively richer while other people get relatively
poorer. It doesn’t take a genius to figure out that whoever types the new
currency into existence gets the richest, instantly, and then the next person
to receive it gets the second-most rich, and so on and so forth down the line
as the currency is spent from one person to another. The benefit of the new
currency (its value) declines as it circulates in the economy because the price
of each good and service gradually rises to account for the new currency. It’s
an economic truism: inflation of the currency supply inevitably erodes the
purchasing power of the currency, which then translates into rising prices.

The important point is that whoever doesn’t “touch” the newly created currency
won’t get any of its benefit. In fact, it is these people – those who don’t receive
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the new currency – who pay the cost of the newly-acquired “richness” of those
who do receive it. They pay for it through the tax known as inflation, as prices
increase faster than their wages, causing all the things that they want and need
to be priced ever further from their grasp.

So essentially, we can divide the world into three types of people: (1) those
who create the currency, (2) those who receive its benefits, and (3) those who
pay the price. And since we know that currency-printing is theft, we can
re-characterize those groups as (1) the robbers, (2) the beneficiaries, and (3)
the victims.

Of all the many ways of organizing banking, the worst is the one we
have today.

-MERVYN ALLISTER KING, FORMER DEPUTY GOVERNOR, BANK

O F E N G L A N D iii

THE CURRENCY CONFIDENCE CON JOB

We learned in chapter 1 that there are three forms of currency. Two forms
of base currency (created by central banks), and bank credit (created by
commercial banks).

The first form of base currency is bank reserves (also called narrow money),
which is never seen, touched, or used by the public. It’s a separate monetary
system used only for inter-bank settlement. The second form of base currency
is currency in circulation (the paper notes in your wallet or purse). And the
third form of currency is bank credit.

So, how is currency created? What are bank reserves? What’s in your wallet?
What’s in your bank account?

Well, as it turns out, paper notes are IOUs that central banks just imagine into
existence. Then, to put them into circulation, they buy something with them.

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Your bank account is nothing but digits that remind the bank that it owes you
some of these paper central bank IOUs. In other words, bank credit is IOUs
for IOUs. There are approximately 10 times more bank credit IOUs for IOUs
than paper central bank IOUs. This is because bank credit IOUs for IOUs are
imagined into existence whenever a bank makes a loan.

Bank reserves are part of that completely separate monetary system I was
talking about, where the banks have reserve accounts at the central bank. These
reserve accounts are also filled with central bank IOUs, but it’s a different kind
of IOU that can only be exchanged among banks.

So, if the entire monetary system is just IOUs, what is it that they owe us?

Well, this will never happen, but theoretically… if everyone, including the
public and the banks, were to try to redeem their IOUs from each other,
then: The banks would have to pay the public their deposits (minus any loan
balances owed) in central bank IOUs (paper base currency notes). The public
would then go to the central bank to redeem their paper IOUs. The banks
would also go to the central bank to redeem their bank reserve IOUs.

At the end of the line is the central bank. Since all central bank IOUs are
a liability of the central bank, the central bank would have to pay out its
assets… That’s what backs their IOUs, so that’s what the central bank owes us.

What are the central bank’s assets?

Mostly the sovereign debt of whichever country that central bank issues IOUs
for. In the United States, the Federal Reserve holds mostly US Treasury bills,
notes, and bonds.

What are those Treasury bills, notes, and bonds?

An IOU, which promises to pay the bearer of the IOU YOUR future taxes.

What???!!!

Yes, the entire world monetary system can be summed up in just six letters.
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 IOU YOU
All banks, whether they are central banks or commercial banks, do not lend
anything that already exists. Instead, they just imagine a number… and
then lend it to you… with interest.

Q: What gives cash (like Federal Reserve notes) value? What

backs them?

A: When the Federal Reserve buys an asset like a US Treasury bill,

note, or bond (which is an IOU from the Treasury for revenues from
future taxation), the central bank imagines some IOU numbers that
match the imagined value of the IOUs they are buying from the
Treasury. Since US Treasuries are IOUs for future tax revenues, what
backs the newly imagined Federal Reserve US dollar IOUs… are
the future hours you must work to pay your taxes. Stop paying your
taxes… and you go to jail. This guarantees to the Federal Reserve
that you will work in the future to make good on their IOUs.

Q: How do commercial banks create bank credit IOUs for IOUs?

A: When you take out a loan for a house or a car, the bank imagines
a number that matches the imagined value of the collateral you
are offering, and then types it into your account. That number is a
reminder to the bank that it owes you that amount of central bank
paper IOUs.

Q: What backs the IOUs in your account? What gives them value?

A: The hours you must work in the future to make the payments
on your mortgage or car loan. Your house or your car secures
(guarantees) the value of those IOUs. Stop making payments on
your house or your car… and the bank will take them. This also
guarantees to the bank that you will work in the future to make
good on their IOUs.

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The only thing that gives any national fiat currency value is the extraction of
future work hours from YOU. Therefore, YOU have been monetized.

As I said back in chapter 1… If you are not angry, you’re not paying attention.

GO ASK ALICE
To quote an excerpt from Joshua Maree’s book, Debt by Design:

Readers are encouraged to stop for a minute and contemplate the circular
reasoning that underpins our debt-based monetary system.

• The public believe that deposits have value.

• The value of the deposits is determined by the value of the loans.

• The value of the loans is determined by the ability of the public to

repay their debt.

And there you have the circular argument. Looking at the reasoning
in reverse; the ability of the public to repay their debt determines the
value of the loans, and the value of the loans determines the value of
the deposits.

Consequently, if the public ever tried to determine what it is that instils

value into their deposits, they would end up staring into a mirror. This
epiphany is uncomfortable and bewildering for many.

This circular reasoning is equivalent to the term “literary nonsense” used

to describe Alice in Wonderland.

You don’t believe me? Well, here are some direct quotes from central banks.
(Anything in bold is my own emphasis). If you believe that counterfeiting,
theft, and fraud are crimes, then these quotes are very self-incriminating. But
you know the old saying:

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 GIVE A MAN ENOUGH ROPE, AND………
Before I get into it, I want to send out my thanks to Joshua Maree for his
book, Debt by Design. It’s an easy read, and you can download a free copy at:
fairmoney.info/pdf/.

We’ll start with the Bank of England pamphlet, Money Creation in the Modern
Economy, because the BOE is quite open and honest about the deceptive
practices of banking. You can get a copy at: bankofengland.co.uk/quarterly-
bulletin/2014/q1/money-creation-in-the-modern-economy, or fairmoney.info/
documents.

When they say, “broad money,” they’re talking about any type of currency the
public uses. When they say, “narrow money,” they’re referring to bank reserves.

Broad money is made up of bank deposits — which are essentially IOUs

from commercial banks to households and companies — and currency
- mostly IOUs from the central bank.iv

Reserves are an IOU from the central bank to commercial banks.

Reserves can only be lent between banks, since consumers do not have
access to reserves accounts at the Bank of England.v

Commercial banks create money, in the form of bank deposits, by

making new loans. For this reason, some economists have referred to
bank deposits as ‘fountain pen money’, created at the stroke of bankers’
pens when they approve loans .vi

Bank deposits are simply a record of how much the bank itself owes
its customers.vii

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 PART 2:

IOUSA

IN ANTICIPATION OF TAXATION OF THE POPULATION OF THE NATION

So now we’ve seen a very simplified overview of what the economy is, what
currency is, and how currency is created. But the mechanics of currency
creation are much more complex than that, and it’s really important for you
to know just how they do it, so that you can fully understand the following
sections, and comprehend the impact that fiat currency creation has on the
economy, your standard of living, and your life.

We know that commercial banks imagine currency into existence when they
write a loan against some sort of collateral. But there are restrictions. They
can’t just imagine an infinite number of IOUs into existence. There are rules
and regulations, and every bank has a balance sheet which must remain strong,
or the bank could become insolvent.

Central banks too have rules, regulations, and balance sheets. But their limit
to currency creation is… shall we say… a little more flexible—as we have all
seen with the advent of Quantitative Easing (QE).

All quotes in this section are from the Federal Reserve or the US Department
of the Treasury.

So, how does the Federal Reserve create currency?

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Usually through something called Open Market Operations.

What are Open Market Operations?

…the Open Market Desk at the Federal Reserve Bank of New York (or,
the Desk) permanently or temporarily buys or sells securities issued or
guaranteed by the U.S. Treasury or U.S. government agencies. When the
securities are bought or sold, reserves in the banking system are increased
or decreased, respectively.viii

But I want to dig a little deeper, so let’s take a look at The Federal Reserve
Act of 1913 (periodically amended), Section 14. Open Market Operations,
Subsection (b).

Hint… If you want to know the true meaning read only the red words.

To buy and sell, at home or abroad, bonds and notes of the United
States, bonds issued under the provisions of subsection (c) of section
4 of the Home Owners’ Loan Act of 1933, as amended, and having
maturities from date of purchase of not exceeding six months, and
bills, notes, revenue bonds, and warrants with a maturity from date of
purchase of not exceeding six months, issued in anticipation of the
collection of taxes or in anticipation of the receipt of assured revenues
by any State, county, district, political subdivision, or municipality
in the continental United States, including irrigation, drainage and
reclamation districts, and obligations of, or fully guaranteed as to
principal and interest by, a foreign government or agency thereof,
such purchases to be made in accordance with rules and regulations
prescribed by the Board of Governors of the Federal Reserve System.
Notwithstanding any other provision of this chapter, any bonds, notes,
or other obligations which are direct obligations of the United
States or which are fully guaranteed by the United States as to
the principal and interest may be bought and sold without regard
to maturities but only in the open market.

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So, the Federal Reserve Act allows the Fed to buy and sell US Treasuries (our
national debt) or any other obligation guaranteed by the government, in
anticipation of future extraction of taxes from the population.

From World War II to 2008, the Fed’s purchases and sales pretty much stuck to
US Treasuries. But since the crisis of ’08 they’ve introduced mortgage-backed
securities into the mix. That’s where the term “other obligations” comes in.

A mortgage-backed security (MBS) is basically your mortgage bundled-up

with a bunch of other mortgages, then securitized so it can be publicly traded
on an exchange (like a stock). If the MBS was issued by a GSE (government-
sponsored enterprise), like Fannie Mae, Freddie Mac, or Ginnie Mae, then the
MBS is guaranteed by… Wait for it… Drumroll please… YOU !

If it’s guaranteed by the government, then it’s guaranteed by your taxes.

In 2022, Federal Reserve assets peaked at just under $9 trillion, of which

$5.77 trillion were US Treasuries and $2.74 trillion were mortgage-backed
securities. So, the Federal Reserve is now the world’s largest lienholder on both
real estate and future taxation.ix

OPEN FOR BUSINESS

What does it mean when the regulations specify that the Fed can buy and sell,
“but only in the open market”? You’d think it would mean they are dealing
with a variety of buyers and sellers and using the same exchanges that you and
I can use to purchase stocks and bonds. Wouldn’t you?

So, from whom do they buy?

The Federal Reserve Act specifies that the Federal Reserve may buy and
sell Treasury securities only in the “open market.” The Federal Reserve
meets this statutory requirement by conducting its purchases and sales of
securities chiefly through transactions with a group of major financial
firms--so-called primary dealers--that have an established trading

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 relationship with the Federal Reserve Bank of New York (FRBNY).
-Federal Reserve Bank of New Yorkx

Primary dealers are trading counterparties of the New York Fed in

its implementation of monetary policy. They are also expected to make
markets for the New York Fed on behalf of its official accountholders as
needed, and to bid on a pro-rata basis in all Treasury auctions at
reasonably competitive prices. -US Department of the Treasuryxi

In other words, it’s a completely different “open market” than the one you or
I use. The Fed transacts only with its primary dealers, and then the primary
dealers transact on the open market or directly with the US Treasury .

Primary dealers are some of the largest financial institutions in the world.
At this writing there are 25 of them. They include such notables as: BofA
Securities, Cantor Fitzgerald, Citigroup Global Markets, Goldman Sachs,
HSBC Securities, J.P. Morgan Securities, Morgan Stanley, UBS Securities, and
Wells Fargo Securities, among others.xii

Now, maybe I’m wrong here, but from all of my research and to the best of my
knowledge, none of the primary dealers above are commercial banks. They are
investment banks, bank holding companies, or brokerages, which are non-bank
entities, that do not have reserve accounts with the Federal Reserve. However,
they all must have a corresponding bank that does have a reserve account at
the Fed. For example, Goldman Sachs and Morgan Stanley are bank holding
companies that do not have reserve accounts, but they own banks that do.
JP Morgan Securities, LLC does not have a reserve account, but JP Morgan
Chase does; BofA Securities, Inc. does not have a reserve account, but Bank of
America Corporation does. And so on.

Remember, according to the Federal Reserve act, the Federal Reserve can
buy only in the open market. That means that, unlike the Bank of England
and other central banks (who can deal directly with commercial banks), the
Federal Reserve cannot deal directly with banks. The Federal Reserve act
forbids it. It must transact through its primary dealers, and only its primary
dealers. However, the primary dealer can buy from anyone: pension funds,

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hedge funds, mutual funds, banks, brokerage houses, or even you and me
through our brokerage accounts.

You’ll see just how important this is later, but you need to know that the
primary dealers are private sector, non-bank, financial institutions that do
not have reserve accounts with the central bank.

Here the Federal Reserve spells it out. The private sector counterparties are
the primary dealers:

The Federal Reserve Act requires that the Desk conduct its purchases and
sales in the open market. To do so, the Desk has established relationships
with private-sector counterparties that are active in the market
for U.S. government securities. — The Federal Reserve pays for those
securities by crediting the reserve accounts of the correspondent banks
of the primary dealers. The correspondent banks, in turn, credit
the dealers’ bank accounts. In this way, the open market purchase
leads to an increase in reserve balances.xiii

So how do open market operations work?

A SHELL GAME LIKE NO OTHER

For every $1 billion the Federal
Reserve wants to inject into the
markets to stimulate the economy, the
Federal Reserve simultaneously buys
$1 billion worth of US Treasuries or
government-guaranteed mortgage-
backed securities (MBSs) from one
of its primary dealers. But since the
primary dealer does not have a reserve
account at the Federal Reserve, unless
the Federal Reserve sends an armada of
armored cars packed with $1 billion worth of paper IOUs, the Federal Reserve
cannot pay the primary dealer directly. So, the Fed imagines $1 billion of
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brand new base currency IOU digits and types them into the reserve account
of the primary dealer’s “correspondent” bank, and simultaneously instructs the
bank to imagine $1 billion of brand new bank credit IOU reminder digits into
the primary dealer’s checking account… and Abracadabra, Alakazam, Gort,
Klaatu barada nikto xiv… the Fed has $1 billion in US Treasuries and MBSs,
the bank has $1 billion more central bank IOUs in its reserve account, the
primary dealer has $1 billion worth of reminders that it is owed IOUs in its
checking account, and now the fund can go shopping for more assets with
those reminders… and everyone is happy.

So again, for every $1B asset the Fed purchased, $1B of central bank IOUs were
created as reserves and another $1B of bank credit IOUs entered circulation
through the primary dealer’s checking account.

But do you see the BIG problem here? For every dollar worth of assets purchased
by the Fed: one dollar of base currency is created, AND one dollar worth of
bank credit currency. But since the banks can only use the base currency in
their reserve accounts for inter-bank settlement, reserves get stuck there and
keep on piling up. This is super important, as the gravity of this situation will
be revealed in upcoming sections.

The study of money, above all other fields in economics, is one in which
complexity is used to disguise truth or to evade truth, not to reveal it.

-JOHN KENNETH GALBRAITH

SUPER-SIZE ME!
The Federal Reserve claims that QE is just reducing the number of short-term
Treasuries (bills) it holds, while massively increasing their holdings of longer-
term Treasuries (notes and bonds).

Here’s how the Fed describes QE.

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 …the Federal Reserve greatly expanded its holding of longer-term
securities through open market purchases with the goal of putting
downward pressure on longer-term interest rates and thus supporting
economic activity and job creation by making financial conditions more
accommodative. - Board of Governors of the Federal Reserve Systemxv

If you look behind the curtain, though, you’ll see they’re doing business the
same old way.

QE IS REALLY JUST OPEN MARKET OPERATIONS… BUT A LOT BIGGER

They call them large scale asset purchases. How large? From before the financial
crisis of 2008 to 2022 Federal Reserve holdings of longer-term notes and
bonds rose by a factor of 10.5 times, and total securities held outright (which
also includes both short-term Treasuries and mortgage-backed securities)
rose 10.75 times. But, since bank reserves get stuck in the reserve accounts,
they were up by a factor of more than 400, and excess reserves by roughly
2500 times.

SO, WHY QUANTITATIVE EASING?

The goal: manipulate the bond market using artificially created demand by the
Federal Reserve to raise bond prices, thereby pushing interest rates down (rate
being the inverse of price).

The intention: to stimulate the entire economy by enticing everyone to take on

more debt.

The result: lower interest rates and all of this brand-new currency pumped
directly into the financial sector created massive bubbles in both real estate
and the stock markets.

The knock-on effect: As you’ll learn shortly, Wall Street was enriched at the
expense of Main Street. Wall Street made out… Main Street paid out.

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Why aren’t we all questioning the morality of this? Think of it. Why do we
allow an entity to counterfeit currency into existence and buy assets such as
bonds (cash flow from our future taxes), artificially inflating the price of those
assets, causing massive bubbles and bidding those assets away from private
investors like you? To me this seems so incredibly immoral. It should be
illegal—and, in the US at least, before the Fed arrived in 1913… it was.

QE, FED & BOE

So, we have established that the Federal Reserve Act forbids the Federal Reserve
from purchasing securities directly from commercial banks… they must use
their network of private sector, non-bank entities (the primary dealers) as
the middlemen. The Bank of England, however, can deal directly with the
commercial banks. But with the financial crisis of 2008, the Bank of England
adopted a program of quantitative easing (QE), by doing exactly what the
Federal Reserve has always done, buying from private sector, non-bank
entities. Thus, for purposes of explaining QE, we can treat Fed and BoE
actions as equivalent.

With that in mind, I’m going to go back to the Bank of England for a moment
because, as I said before, they are much more forthcoming in their description
of banking.

Here are a few direct quotes that corroborate all the claims I have made thus far.

Remember, narrow money is the currency they use — broad money is the
currency we use.

What is the point of QE?

QE is intended to boost the amount of money in the economy directly

by purchasing assets, mainly from non-bank financial companies.xvi

Why purchase from non-bank financial companies?

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 …while asset purchases from banks increase the monetary base (or
“narrow money”), purchases from non-banks increase the monetary
base and broad money at the same time – Banks gain both new
reserves and a corresponding new customer deposit when assets are
purchased from non-banks.xvii

How does QE work?

If the Bank of England purchases an asset from a non-bank company, it

pays for the asset via the seller’s bank. It credits the reserve account of
the seller’s bank with the funds, and the bank credits the account
of the seller with a deposit. This means that while asset purchases
from banks increase the monetary base (or ‘narrow money’), purchases
from non-banks increase the monetary base and broad money at
the same time.xviii

But aren’t the extra reserves just free base currency IOUs for the banks?

As a by-product of QE, new central bank reserves are created….

The additional reserves are simply a by-product of this transaction.
It is sometimes argued that, because they are assets held by commercial
banks that earn interest, these reserves represent ‘free money’ for banks.
While banks do earn interest on the newly created reserves, QE also
creates an accompanying liability for the bank in the form of the pension
fund’s deposit, which the bank will itself typically have to pay interest
on. In other words, QE leaves banks with both a new IOU from the
central bank but also a new, equally sized IOU to consumers… xix

But I thought you said that lending creates deposits. Are there any loans here?

QE boosts broad money without directly leading to, or requiring, an

increase in lending … QE works by circumventing the banking
sector, aiming to increase private sector spending directly.xx

If you’re injecting currency directly into the economy, without an offsetting

loan to be repaid, won’t that lead to inflation?

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 This will further boost nominal spending and should ultimately bid
up the prices of goods and services leading to higher inflation.xxi

Well, the thought “Be careful what you wish for” comes to mind.

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 PART 3:

THE $200 BILLION GIFT YOU NEVER

INTENDED TO GIVE

RESERVES NOT REQUIRED

Formerly, banks were required to hold a minimum level of reserves against
their liabilities. Anything above that was referred to as excess reserves .

In this chart, the purple

area is required reserves,
the red area is excess
reserves. In March 2020,
however, the Federal
Reserve reduced reserve
requirements to zero.
That’s right, the banks
are no longer required
to have any reserves
whatsoever… and that includes vault cash. The terms “excess” and “required”
went away; now everything is simply called “reserves.”

By the way, can you squint and see that teensy blip inside the first gray recession
bar? That’s Alan Greenspan’s response to the 9/11 terrorist attacks. That red
monster of excess reserves the size of a mountain range is Ben Bernanke’s

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response to the 2008 global financial crisis and Jerome Powell’s reaction to the
pandemic. These are the additional reserves that are a by-product of QE.
And the way the system is designed they get unintentionally stuck there.

A RESERVE INFLATION CORRELATION BEYOND THE IMAGINATION

During the four years preceding the global financial crisis of 2008, the total
excess reserves of commercial banks typically averaged $1.7 billion (billion
with a B). In September and December of 2021, bank reserves topped $4.27
trillion (that’s trillion with a T). It was an inflation of excess reserve IOUs of
roughly 2500 times.xxii

Notice that in the preceding chart, other than the blip and the monster, you
can hardly see anything that extends above the line for required reserves. That’s
because, before 2008, banks didn’t like excess reserves. Assets like Treasuries
produce an income (yield)… currency does not. So excess reserves just sat
there, not making any profit. No bank wanted that. In fact, for the first 94
years of its operation the Federal Reserve did not pay interest to the banks. But
then the financial crisis arrived, and in October 2008, Ben Bernanke started
paying the commercial banks interest on their base currency IOUs (all of their
reserves), for the first time. It’s no secret:

Beginning in October 2008, the Federal Reserve began paying interest

on required and excess reserve balances… beginning in March 2020,
required reserves were set to zero and all reserve balances began earning
the interest… -Federal Reserve websitexxiii

So, whether it’s the Fed or the BOE, the goal of QE is to pump newly imagined
IOUs into the financial sector, artificially inflating asset prices. The enormous
piles of bank reserves are simply a side effect of QE… a byproduct. Something
the banks never previously wanted. But Ben Bernanke changed all that. The
trillions of dollars of reserves now pay interest, and the banks look upon them
as a gift… A gift that keeps on giving… And I’ll give you one guess as to who
is footing the bill.

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 THEY’VE GOT A HAND IN YOUR POCKET
Here’s the same graph,
but I’ve included the
interest rate paid on
reserves.

And here is a chart of the

cumulative total that has
been given to the banks
since 2008.

In 2022 the Federal

Reserve raised interest
rates 7 times in 9
months. As of this
writing, the Federal
Reserve has paid the
banks more than $200
billion… and now it’s
shooting for the moon!

Payouts are now growing at more than $100 billion per year, and as interest
rates continue to rise, the growth of the payments will only accelerate.

But when I saw this, I had to ask myself “where does the Fed get the currency
to pay the interest?” They can’t just print it… that’s against the rules. The Fed
has a balance sheet, and the balance sheet must always balance. Assets minus
liabilities and capital must always net out to zero.xxiv Since every IOU is a
liability, it means they must always acquire an offsetting asset for every IOU
created. Therefore, central banks can only create currency by acquiring assets.

So once again, where does the Fed get the currency to pay the interest? The
answer is that it has to come from the Fed’s profits. Where does it get profits?
All of the assets that it buys pay interest. What are those assets? Mostly US
Treasuries and mortgage-backed securities. Who pays the principal and interest
on US Treasuries and mortgage-backed securities? YOU!
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When the Treasury issues a bond, it is borrowing currency from the buyer of
the bond and promising to pay the buyer back, plus interest. The funds to pay
the buyer of the bond come from your taxes.

As noted earlier, a mortgage-backed security is just a bunch of mortgages

bundled up together and securitized, then sold to an investor. What gives the
mortgage-backed security its value is your mortgage payments.

As I write this, almost 70% of the Federal Reserve’s assets are US Treasuries,
and 30% of the Fed’s assets are mortgage-backed securities.xxv Therefore,
roughly 70% of the interest that the Fed pays to the banks on their reserves
comes from your taxes, and 30% comes from your mortgage payments. (The
yields on MBSs and US Treasuries vary, so these percentages are not exact.)

At the end of 2022 the Interest on Reserve Balances (IORB) was 4.4%, and
reserves were averaging $3 trillion. Now, I don’t care who you are, 4.4%
interest on $3 trillion is some serious cash. This gift of free currency to the
banks is now $132 billion per year, which is $11 billion per month.xxvi

What?!?!?

$11 Billion Per Month! $11 BILLION PER MONTH!!!... FOR FREE?

What could you do with an extra $11 billion per month?

Who knows how much it will be by the time you read this, but we do know
one thing… it’s all coming out of your pocket. And it’s even worse than that,
because you’re going to be paying for it twice... and so are your children.

According to its charter, the Federal Reserve is supposed to first deduct its
business expenses, then pay dividends to its stockholders (yes, the Federal
Reserve has stockholders, the banks that have accounts there—you’re not
invited), and then turn over all profits to the United States Treasury to reduce
the national debt.xxvii

Here is a chart of the Federal Reserve’s remittances due to the Treasury. Every
week the Fed would pay the treasury a couple billion dollars, but since the
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Interest on Reserve
Balances exceeded 3%
in September 2022, the
Federal Reserve started
experiencing some
significant losses, and
now the losses just keep
piling up.

Because this gift was paid

to the banks and not turned over to the Treasury, it means that our national
debt is higher than it should be by the exact amount that the banks have
received. So not only did we give all those billions to the banks through taxes
due on the bonds that currently exist, but the Treasury had to replace the lost
revenue by issuing that same amount of offsetting bonds that you and your
children will be paying taxes on for many, many years to come.

Again… If you are not angry, you’re not paying attention.

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 PART 4

THE $7 TRILLION THEFT

MYSTERY DEPOSITS
My thanks to John Titus, YouTube channel Best Evidence, for discovering this.
Here is a chart of all deposits at US commercial banks.

As you can see, other

than the flat spots in the
early ’90s, and just after
the 2008 global financial
crisis, the rate of growth
is pretty constant
and predictable…
until 2020. With the
pandemic lockdowns,
the closed businesses,
the loss of jobs, and the highest levels of unemployment since the Great
Depression—with people having to stay at home and being prevented from
earning a living—deposits suddenly soared more than at any time in history…
and by a long shot… (whether measured in dollars, or in percent change).

This was caused by two factors: government stimulus payments directly to

businesses and individuals; and the fact that everyone who still had a job,
had no place to spend their income during the lockdowns. The result was the
post-lockdown retail price inflation. Now they’re planning to beat the inflation
that they caused… by raising interest rates and slowing the economy, which
hurts small businesses, families, and individuals.

LEAVE ME A-LOAN
Here is the same chart
with bank loans and
leases added (some
leases, such as leasing a
brand-new car, create
currency just like loans).
We know that loans and
leases create deposits,
therefore it is the green
line that creates the
blue line. But with the onset of QE in 2008, loans and leases stopped being
the primary way in which deposits are created. You can see the “hole” that
developed. As deposits diverged from loans and leases, something else had to
step into the breach to fill the void. What was it?

Again, from the Bank of England.

QE boosts broad money without directly leading to, or requiring,

an increase in lending … QE works by circumventing the
banking sector

(Please note the data supplied by the Federal Reserve has an error in March 2010.
This is common and is probably due to a change in methodology. It’s either a
data error or somebody actually needed a $443 billion (close to ½ trillion dollar)
loan from a commercial bank in the last week of March 2010. The data error is
high probability, the loan is very, very low probability (if it actually happened, we
would’ve heard about it on the news, because the largest loan in history was $57.1
billion from the IMF to bail out Argentina). Also, unless the borrower took the loan
in cash (which would have amounted to 25% of all the currency in circulation)
and is keeping the $½ trillion in the closet, deposits would have jumped by the same
amount as well, but they
didn’t. So, I have corrected
for the obvious error in
the following charts.)

A HOLE SHAPED LIKE

THE FEDERAL RESERVE
Believe it or not, this
chart is a picture of what
the hole looks like. We
took the deposits, then
deducted the loans and
leases, and this is what
remains… the hole.
Again, when we take
deposits minus loans
and leases, this is what is
left over. The gap between loans and leases and the deposits exceeded 7½
trillion dollars in 2021.

This next chart is all

of the US Treasuries
and mortgage-backed
securities (MBSs) that
the Federal Reserve
owns, minus currency in
circulation. The reason I
have deducted currency
in circulation is because
currency in circulation
is… in circulation… not on deposit. What’s left over are the assets the Fed
purchased to create all of the mystery deposits. You might say this is a picture
of the “shape” of the Fed’s QE-IOUs.
Now I’ve put them both on the same chart. If I was texting this to you, I would
have to say “OMG, it truly is a hole shaped like the Federal Reserve.” Recall
from Chapter 3 that a correlation of -1 means the two items have an opposite
relationship, a correlation of zero means they have no discernible relationship,
and a correlation of 1 means the relationship is so strong that they’re pretty
much the same. Well… the hole and the Fed’s assets have an astounding
correlation of .98867! OMG again! But correlation is not necessarily proof of
causation.

Here’s the last chart in

this series. I’ve taken the
Fed’s securities minus
currency in circulation
and added them to
deposits (yellow line).
The data on the Fed’s
securities starts in 2002,
and as you can see, it
doesn’t add much to
loans and leases until 2008 (dashed yellow line), but then it almost exactly fills
the $7 trillion hole (solid yellow line).

WALL STREET BOOMED, NOW MAIN STREET IS DOOMED

But what does this mean in practical terms? Simple. The green line represents
the real economy. It’s the loans to the businesses and the mortgaged households
of Main Street USA. It’s the restaurants, shops, hotels, dry cleaners, contractors,
and the working homeowners that create the real goods and services of the
economy… the true wealth. The yellow line is currency creation unrelated to
production… It’s fake wealth.

When the green line grows with the blue line, the economy is healthy. But
when there’s a divergence like this, it means the economy is deathly ill. This
divergence shows massive amounts of currency being created and shunted from
Main Street to Wall Street, which has done nothing to earn it… and so Wall
Street thrives while Main Street dives—because the inevitable consequence of
such a transfer is inflation.

Your knee-jerk reaction may be to blame the rich, but you shouldn’t. They
may have been the beneficiaries, but for the most part, they didn’t even know
it was happening. They weren’t the magnificent master magicians of monetary
misdirection. That dubious “honor” belongs solely to the world’s major
central banks.

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 PART 5

AN ECONOMY ON LIFE-SUPPORT
AND NOW THEY’RE PULLING THE PLUG
T-BILL TROUBLES
Before 2008, month after month, like clockwork, the Federal Reserve acquired
an ever-increasing stock of Treasury bills (short-term Treasuries) through open
market operations. This was a big program for the Fed. Before the crisis, T-bills
made up more than 30% of the Fed’s assets.xxviii

But when the ’08 crisis

struck, they suddenly
stopped the program
and reduced their
T-bill holdings to zero.
Then in late 2019 a
bank liquidity crisis in
something called the
“repurchase agreement”
market caused them to
buy T-bills once more, but this time at a panic pace.

These on-again, off-again actions by the Federal Reserve demonstrate that they
do not know what they are doing and they’re getting desperate. Before 2008
they used to slowly Dial programs up and down, sort of fine-tuning their
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manipulations. Now they’re fumbling around in the dark in a panic, flipping
programs off and on like light switches, trying anything they can to keep the
economy from falling off a cliff. It shows that papering over the crisis of ’08
didn’t work, it didn’t end it… it concealed it and magnified it. From 2010
until 2022, we’ve been in the eye of the global financial crisis hurricane… the
calm before the other half of the storm, so to speak… and now it’s getting
really windy again.

FINANCIAL FRAUDULENCE 101

For anyone wondering, “how successful was the Federal Reserve in achieving
its aims of QE?,” look no further than the following series of charts.

Here, instead of using a proxy that shows the performance of the stock market’s
price, I’m going to use an index that measures the value (capitalization) of the
companies traded on the stock market, the Wilshire 5000 Total Market Full
Cap Index (black line).

In this first chart, I’ve

added base currency
(green line). As you’ll
remember, base currency
includes the Fed’s IOUs
that get stuck inside the
reserve accounts of the
corresponding banks
of the primary dealers
when the Fed purchases
assets through them. That means that the green line is sort of a picture of how
many dollars the Federal Reserve pumped into the open market.

I’ve indexed the two data series to the same value starting on the day Bernanke
first announced QE (the first green dot). Once they are indexed, we are
looking at the percent change of the two items from their starting point. Note
that before ’08 there was absolutely no correlation between the stock market
and base currency, but during the 6 years of Quantitative Easing 1, 2, and 3
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the correlation is nearly perfect. Here we find that when the number of base
currency IOUs rose by 10%, the value of the stock market rose by 10%... If
base currency went up by another 20%, then the stock market would also
rise by 20%.

The correlation from the start of QE 1 to the end of QE 3 (the second green
dot) is an astounding .974.xxix

However, like I said, correlation is not necessarily proof of causation.

“But wait, look!” you might say. “After QE ended, the base currency supply
went down, but the stock market kept on going up. That meant the economic
recovery was real.”

Do you recall the $200 billion of interest paid to the banks on reserves? Well,
here’s something we didn’t discuss yet. These are very high-power IOUs. It’s
interest paid on reserves that were a gift. Don’t forget, the excess reserves were
an unintended, and unwanted, byproduct of QE. They only became wanted
when Ben Bernanke decided to pay interest on them, which changed them
from a burden to a free gift to the financial firms, funded by the taxpayer.
Nobody had to work for these IOUs. The banks didn’t need the people, offices,
and all sorts of overheads normally related to earning IOUs by working for
them. It’s pure profit, straight to the bank’s bottom line… For free!

These IOUs are paid to the big banks every month… month after month.
When the Federal Reserve is doing QE, and pumping cash directly into
markets to inflate financial assets, the interest rate on reserves is low. But
when the Federal Reserve stops QE, it also raises interest rates. The higher
the interest rates, the bigger the windfall of free IOUs. During these periods
when the Federal Reserve is talking tough and tightening, it literally rains free
IOUs… free fiat currency… free US dollars… directly on the big banks.

For the first seven years after the onset of QE, 2009–2015, the interest paid
on reserves was only 0.25%. But from 2016 through 2019 the Fed tapered
off their asset purchases and raised interest paid on reserves all the way up to
2.4%. During this period the interest paid to the banks was roughly $170
billion.xxx
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Just like the rise in the monetary base due to QE, the rise in the amount of
interest paid to the banks correlates with the rise in the stock market almost
perfectly.

Now, I have to admit something here… not to trick anyone, but we have
manipulated the data visually only. Because it starts off with interest rates so
low, at 0.25%, the change to 2.4% is huge. Because of this, when it is indexed
to the stock market the interest paid on reserves shoots right off the top of the
chart. Therefore, we have compressed it vertically to make it fit. But none of
this really matters because it’s the correlation that counts, and I’m not the one
who calculates it, the spreadsheet does.

The correlation is an
incredible .944, for a
manipulation success
rate of 94.4%. It was
xxxi

slightly less effective

than QE because the
currency wasn’t being
pumped directly into the
markets. But, making
a gift of $170 billion
to the biggest financial
firms in the world caused their profits to go up… not to mention that they
had $170 billion more currency to play with.

But again, correlation is not proof of causation.

Sidenote: Because the Federal Reserve is raising rates, and thereby

paying the banks more, and more, and more on their reserves, there is a
possibility of a short-term stock market rally after this is published.

And once again the stock market continued to climb after the Fed policy ended.
And just as before, we find another new Fed policy to replace the old one.

In this chart, I’ve added the Federal Reserve’s T-bill purchases.

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Wow! The manipulation continues successfully! Notice that the blue line had
been entirely flat—at zero or darn close —from 2008 to August 2019.

Once again, we had

to visually compress
the line to make it
fit the chart, because
T-bills were at zero in
August 2019 and seven
months later reached
$326 billion. But once
again, it’s the correlation
that counts, and the
spreadsheet doesn’t lie. At .976 this is the highest correlation in the series, so
with this intervention the Fed had a success rate of 97.6%.xxxii

But as you know, correlation is not proof of causation.

In late February of 2020 the stock markets began to slide, and by early March
it had turned into the Covid Crash. By March 23, the Pandemic Plunge was
over, and the stock market had lost 1/3 of its value. This should have been the
beginning of a brutal bear market, but all of the big stock market players have
been well trained by the Fed. Even though most of the world would be closed
for business for the rest of the year. Even though the lockdowns meant that
few were working. Even though most expenditures were for necessities, not
niceties. Even though businesses were suffering, the markets began to rally.
Once again, the Federal Reserve came to the rescue. Fed chairman Jerome
Powell created more currency, and purchased more assets in just two years,
than Ben Bernanke had done in six, and in the next 20 months the stock
market more than doubled.

That big pop in base currency in March 2020 lowers the correlation because
for one month stocks went down while base currency went up, and then for
two months stocks rose while base currency fell. This caused the correlation
for this last market manipulation in the series to be the lowest, at just .929.
However, if you exclude these anomalies and start the measurement from July

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2020, the correlation for
the next two years rises
to .961.xxxiii

What does this all add up

to? Well, regarding the
financial markets and
the Federal Reserve…

CONFLATION OF CORRELATION WITH CAUSATION IS WORTH

CONSIDERATION
Remember, the highest correlation is 1.

The hole between loans/leases and deposits, and Fed assets filling the gap,
correlates to .989.

The rise in base currency during QE1, 2, and 3, and the stock market has a
correlation of .974.

Interest paid on reserve balances has a correlation with the stock market of .944.

From August 2020 to the pandemic, T-bill purchases and the stock market
correlate to .976.

And QE4 and the stock market correlate to .929 or .961… Depending on
how you measure.

So, one last time, as they say… correlation is not proof of causation. Yeah right.

With this many economic manipulations that have such extremely high
correlations with the rise in the stock market… is there any possibility they are
unrelated? As the charts reveal, the rise in the quantity of base currency, plus
interest paid to the banks on their reserves, tracks the rise of the value of the
stock markets nearly perfectly. Do you really think that’s merely a coincidence?

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Of course the stock market soared!

The stock market is a patient that has been on artificial life-support since
2008, courtesy of its personal physician, the Federal Reserve. And now Doc
Fed thinks he can just pull the plug without the patient dying?

Good luck with that.

WALL STREET GOT THE THRILL… MAIN STREET GOT THE BILL
The world’s central banks manipulated the stock markets to create the fantasy of
a healthy recovery so that people would gobble up more SUVs and big-screen
TVs… without considering the debt that would gobble them up later.

The way humans advance is to grow, produce, invent, discover, build, and
assemble new wealth. But instead of waiting, and allowing mankind to do
those things, the world’s central banks decided to trick people into feeling
wealthier. The whole “recovery” after 2008 was FAKE! Nobody worked for
those trillions. No new goods or services were created, and thus no true new
wealth. The Fed has purchased assets equal to almost 37% of GDP,xxxiv gifting
the newly created dollars to the world’s largest banks and brokerage firms
while stealing buying power from all the existing dollars.

But it goes far, far beyond stocks. In 2000 the stock market was in a bubble
and crashed. In 2008 it was stocks and real estate that were in bubbles, and
both crashed. By the beginning of 2022 it was stocks, real estate, and bonds.
It’s the Almost Everything Bubble but, as you’ll see in the next chapter, they’re
actually hyper-bubbles. I’m pretty sure that the Almost Everything Bubble will
eventually lead to the Almost Everything Bust.

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 PART 6

REVERSE ROBIN HOODS

The Bankers own the earth. Take it away from them, but leave them the power
to create deposits, and with the flick of the pen they will create enough deposits to
buy it back again.

-WIDELY ATTRIBUTED TO SIR JOSIAH STAMP, DIRECTOR, BANK OF ENGL AND 1928-1941

The world’s central banks are the biggest buyers of assets on the planet… and
they do it by counterfeiting. They just type new currency into existence and
buy something. But by increasing, and thereby diluting, the global currency
supply, the central banks steal wealth from the poor and middle class and
bestow it upon the wealthiest people on earth. Sort of like a bunch of reverse
Robin Hoods… with the Fraudulent Reserve leading the charge.

Remember when a billionaire was wealthy beyond imagining? Well, 2018 saw
the emergence of the first centi-billionaire (someone whose wealth exceeds
$100 billion): Jeff Bezos, the founder of Amazon. But just four years later
there were 10 centi-billionaires, and 2 duo-centi-billionaires (wealth of $200
billion and above).xxxv From the time quantitative easing started, to the peak
of these companies’ stock prices: Netflix rose by a factor of 238 times, Amazon
95 times, Apple 67 times, Microsoft 23 times, and Alphabet (Google) 22
times.xxxvi (Tesla was not publicly traded when QE started.)

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When it comes to the richest people on the planet, I’m sure that, if quantitative
easing and interest on excess reserves had never happened, both the rise in
their stocks, and thus their wealth, would have been far, far less than half of
what it is today. Jeff and the rest don’t know it, but they, and anyone whose
net worth is tied to the value of the stock markets, are in possession of stolen
property… purchasing power stolen from the poor and middle-class. But it’s
not their fault. To spare you any suspense, the Fed and the other major central
banks are (once again) the villains here.

FED UP YET?
The next series of charts comes from the Federal Reserve, and it’s the checkable
deposits (checking accounts) and currency held by the various wealth
percentiles in the US.

This is the bottom 50%. As you can see, their checking account balances are
up substantially since the crisis of 2008. The total amount in the checking
accounts of the bottom 50% was about $10.5 billion at their low in 2007. As
of this writing, it’s $276 billion… An increase of 26 times.xxxvii

But for the bottom 50%,

the explosion in checking
account balances that
occurred since 2020 was
mostly due to people
receiving pandemic
stimulus checks while
simultaneously cutting
back on expenditures
because of lockdowns
and fear. They didn’t benefit from the QE-induced boom in the stock market.

I’m sure they feel more secure with a few extra IOUs in their accounts.
However, this is also the currency that is driving inflation. If the average person
feels safer and more secure… they’re going to spend some of those IOUs, and

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these are the IOUs that will be spent on groceries and gasoline. They think
they’re better off, but they’re not… and the next chart shows you why.

Believe it or not, this

is the same chart, with
the richest top 1%
cohort added (red line).
The balances in their
checking accounts hit
their low at the same
time as the bottom 50%
did in 2007. Back then,
the top one percent
held approximately
$12 billion in their checking accounts (only $1.5 billion more than the
bottom 50%).xxxviii

Since then, their accounts have grown to $1.331 trillion… A growth factor
of 111 times.xxxix Yes, the bottom 50% feel richer, but they actually got a tiny
little sliver of all of the new currency. The resulting inflation will wipe out any
gains they made, and then some. They don’t know it yet, but even with all of
these new dollars, they’re actually going backwards, losing purchasing power.

The currency in the checking accounts of the top 1% will also drive inflation,
but it will be inflation of a different kind. Even though they may have 111
times more IOUs in their checking accounts, they are not going to buy 111
times more groceries and gasoline.

However, this currency will go somewhere, and if stocks, bonds, real estate,
and the value of their currency are all crashing, then these IOUs are going to
seek anything their holders think is not in a bubble, and stores value. So, what
is the next thing to inflate into a big, gigantic bubble? Well, my guess is that
it’s going to be safe haven assets that are currently undervalued. Assets such as
gold and silver.

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This chart is the
percentage share of
checkable deposits held
by the top 1% and the
bottom 50%. As you can
see, since 1990 the
bottom 50%’s share has
fallen by more than half,
from 14% to 6.4%.
While at the same time
the share owned by the richest 1% went from 7.6% to 31%… Almost 1/3 of
all deposits belong to one percent of the population.xl But that’s just the top
1% and the bottom 50%, what about everyone else?

This chart includes

everyone. The red line is
the richest 1%, and the
blue line is everyone else.

Now, here’s the top 10%

(Red line), and the
bottom 90% (blue line).
It’s interesting that, up
until QE, the bottom
90% was on top (owning
more than 50%), and
the top 10% below
(owning less than 50%).
But since QE they’ve
switched positions, and
now the top 10% own
2/3 of the deposits,
while the bottom 90%
own just the remaining 1/3.xli

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At the beginning of this chapter, I promised to expose the wealth disparity
that appears to be tearing society apart at the seams. Well… That last chart is
a picture of it… Take a good look. I hope, now that you’ve read this chapter,
you know exactly how and why it happened.

Should we blame the rich, as so many vote-grubbing politicians encourage

us to do? No. They didn’t steal anything. In fact, it’s just the opposite. They
are the people who start businesses and make the products and services we
buy. They create jobs and shoulder incredible burdens and pressures running
those businesses. These are the people who create most of the prosperity in
our society. Without them, there wouldn’t be much of an economy, so don’t
demonize them. It’s not their fault… They didn’t do this, the Fed did it.

Ben Bernanke is the one who got us to this point. Read his 2002 speech titled,
Deflation: Making Sure it Doesn’t Happen Here. Everything the Federal Reserve
has done in response to the 2008 global financial crisis and the pandemic was
laid out in that 2002 speech.

I believe that someday in the future, after the next big financial crisis, historians
will look back in both bewilderment and awe, at the irony that the man whose
ideas caused the crash of the global economy, was the same man who won the
Nobel prize in economics—for those same ideas—way back in 2022.

A PICTURE OF ENVY, HATRED, AND INTOLERANCE

The crime I’ve shown you is the root cause of the envy, hatred, intolerance,
and division we have seen explode in America over the past decade. It is the
underlying pressure on society that has unleashed things like civil unrest and a
division between left and right such as I have never seen in my lifetime. And,
ominously, the backlash against this chaos has given rise to the re-emergence
of the most dangerous thing of all. Something that threatens not only your
freedom, but your very survival as well. It’s the growing support for an idea that
has caused more pain, suffering, and death than any other idea in history… It’s
the growth of belief in, and support for, Socialism.

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Ominously, polls show that about half of Gen Z adults in the US (aged 18-34)
have positive views of socialism and negative views of capitalism.

Yet there is a direct, provable relationship between wealth, health, and happiness.
Economic freedom creates economic prosperity (wealth), and prosperity
creates a happier and healthier population. People in the most economically
free countries live almost 15 years longer than those in the least economically
free.xlii Socialist societies, dictatorships, oligarchies, and politically corrupt
societies have all languished economically. Think of the literally billions of
people who lived and died under these oppressive ideologies over the past
century, and whose lives were shortened by 10, 15, or 20 years because of it.

The Federal Reserve, the Bank of England, the European Central Bank, and
the Bank of Japan, have all implemented policies of major quantitative easing.
This chapter has covered only the wealth transfer in the United States, but it
is the same for much of the first world. And it’s all, 100%, the fault of central
banks and the creation of currency from future debt and the enslavement
of the population, which has caused the wealth disparity responsible for the
socialistic backlash.

Thus, the big question is: Will your life, and the lives of your children, be
shortened by the backlash to the economic policies of the world’s major central
banks? If Socialism wins, then according to the data, I can almost guarantee it.
But if individualism, freedom, and liberty win, then your future, and that of
your children, should be very bright.

WHO THE CULPRITS ARE AND THE SCALE OF THE HEIST

To summarize, the culprits are the world’s central banks, pure and simple. As
for the scale of the heist, because Federal Reserve data is so readily available
and easy to come by, I have only analyzed the size of the robbery in the US…
And it’s $7 trillion… about 1/3 the size of the M2 currency supply of the
United States of America. I’ll leave it up to others to analyze the BOE, the
European Central bank (ECB), and the Bank of Japan (BOJ).

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 When plunder becomes a way of life for a group of men in a society, over the
course of time they create for themselves a legal system that authorizes it and a
moral code that glorifies it.
- F R É D É R I C B A S T I A T xliii

As for the beneficiaries? As you’ll see in the next chapter, the ultralow interest
rates set by these central banks have probably pushed residential real estate in
much of the world to levels 50% to 100% higher than they would have been in
a normal interest rate environment. The stimulus and economic manipulation
you’ve seen in this chapter has probably pushed stock markets to multiples of
where they should actually be.

To summarize, central banks (the robbers) have enriched themselves and their
beneficiaries (major stock investors) by stealing from the following victims:

1. Everyone who holds currency in their bank account, wallet,

purse, pocket, or pension.

2. Everyone who pays Federal taxes.

3. Everyone who makes payments on a mortgage, auto loan, or any

other kind of loan.

Are you on the list above? Are you on it more than once?

This entire chapter all leads to a very big quandary. Central bankers are
supposed to be some pretty smart people. They’re a bunch of Ph.D. economists.
If they don’t understand the wealth transfer they are causing, then they are
incompetent and do not belong in their jobs. But if they do understand the
theft, then they are immoral and belong in jail. Which do you think?

The decrease in purchasing power incurred by holders of money, due to inflation,

imparts gains to the issuers of money… .
- S T . L O U I S F E D E R A L R E S E R V E R E V I E W , N O V . 1 9 7 5 T xliv

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 PART 7

THE NEW SLAVERY

…if you want to continue to be slaves of the banks and pay the cost of your own
slavery, then let bankers continue to create money and control credit

-WIDELY ATTRIBUTED TO SIR JOSIAH STAMP, DIRECTOR OF THE BANK OF ENGL AND 1928-1941

This, our modern monetary system, is the source of all the great income
inequality and wealth disparity we see today. It steals from the poor to give to
the rich every second of every day of our lives.

But we don’t need more taxes, laws, rules, regulations, and other Band-Aids
to fix this problem. That assortment of legal complexity and burdens would
just slow the economy even further and make things worse. The way out is
simple: All we need to do is address the root cause… currency creation from
debt. Buying something with something is moral, buying something with
nothing is not.

Both the central banks and the commercial banks are allowed to commit this
immoral act, which transfers wealth from the holders of existing currency to
the creators and first spenders of the new currency.

I’m not saying that debt, per se, is immoral. Loaning something and then
expecting to be paid back something is moral. But loaning nothing and
compelling others to give something back is immoral. Currency creation from

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debt is immoral, it’s fraud, it’s theft, and it enslaves the multitudes to benefit
just the few.

When central banks steal purchasing power from the common man, and
then transfer it to the elites, the common man must then work more—not
to increase his wealth, but simply to replace the stolen purchasing power.
If you are forced to work for the benefit of another, with no compensation,
that is enslavement.

Until we address this root cause… income inequality and wealth disparity will
only accelerate.

Money is a new form of slavery, and distinguishable from the old simply by
the fact that it is impersonal – that there is no human relation between master
and slave.
- L E O T O L S T O Y xlv

If I may, just a small addition, my dear Count Tolstoy. It’s not money that
enslaves, it’s debt-based, fiat currency that enslaves. Real money liberates.

What I’ve tried to do in this chapter is to document beyond doubt the

serious consequences of our misguided monetary policy of the past century—
but especially since 2008. I’ve relied on hard data that is publicly available,
not theory.

Since the past is so often prologue, I cannot help but issue dire warnings about
what will happen in the coming years, yet I remain an incurable optimist who
believes that human ingenuity and creativity can overcome the most difficult
obstacles. We stand on the threshold of technological revolutions that are
poised to transform all of our lives for the better.

One final note: this chapter contains some concepts that are hard to grasp.
But it is super important to understand, so it’s worth re-reading until you
feel you get it. Once you do, the rest of this book will be easy to follow, and
the reasons for the inevitability of the Great Gold and Silver Rush of the

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21st Century—and the pathway to protecting yourself, your wealth and your
family—will become evident.

This is the end of the “online-only” chapters. Check back at GGSR21.com

for updates. Thank you for reading and sharing this chapter, and please,
email it to anyone you can. Thanks.

Next: u
Just like a bug in search of a windshield…
Today we have bubbles in search of a pin.

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 ENDNOTES
i https://fred.stlouisfed.org/series/FYFSD
ii https://fred.stlouisfed.org/series/TCMDO -minus- https://fred.stlouisfed.org/series/ GFDEBTN
iii https://www.bis.org/review/r101028a.pdf
iv Bank of England, quarterly bulletin, Q1 2014, Money Creation in the Modern Economy, P 15.
v Ibid
vi Bank of England, quarterly bulletin, Q1 2014, money creation in the modern economy, P 16
vii Ibid
viii The Fed Explained: What the Central Bank Does, P36 (https://www.federalreserve.gov/
aboutthefed/files/the-fed-explained.pdf )
ix https://www.federalreserve.gov/releases/h41/20220818/default.htm
x https://www.newyorkfed.org/markets/primarydealers.html
xi https://home.treasury.gov/policy-issues/financing-the-government/quarterly-refunding/primary-
dealers
xii Ibid
xiii The Fed Explained: What the Central Bank Does, P37 (https://www.federalreserve.gov/
aboutthefed/files/the-fed-explained.pdf
xiv In the 1951 sci-fi film “The Day the Earth Stood Still”, a peaceful alien named Klaatu (played
by Michael Rennie) instructs Helen Benson (played by Patricia Neal) to go to the robot Gort and say
“Gort, Klaatu barada nikto.” In response Gort does not destroy the Earth.
xv https://www.federalreserve.gov/monetarypolicy/openmarket.htm
xvi Bank of England, Money Creation in the Modern Economy.
xvii Bank of England, Quantitative Easing
xviii Bank of England, quarterly bulletin, Q2 2009
xix Bank of England, quarterly bulletin, Q1 2014, Money Creation in the Modern Economy
xx Ibid
xxi Bank of England, quarterly bulletin, Q2 2009.
xxii https://fred.stlouisfed.org/series/EXCRESNS and https://fred.stlouisfed.org/series/TOTRESNS
xxiii https://www.federalreserve.gov/monetarypolicy/iorb-faqs.htm
xxiv https://www.sdmunicipalleague.org/vertical/Sites/%7B2540DC39-A742-459F-8CAF-
7839ECF21E89%7D/uploads/Basic_Accounting.pdf
xxv https://www.federalreserve.gov/releases/h41/20220818/default.htm
xxvi Ibid
xxvii https://www.federalreserve.gov/aboutthefed/section7.htm
xxviii https://www.federalreserve.gov/releases/h41/20070823/default.htm
xxix https://fred.stlouisfed.org/series/AMBNS, https://fred.stlouisfed.org/series/BOGMBASE,
and https://fred.stlouisfed.org/series/WILL5000INDFC
xxx https://fred.stlouisfed.org/series/IOER, https://fred.stlouisfed.org/series/IORB, https://fred.
stlouisfed.org/series/EXCSRESNW, https://fred.stlouisfed.org/series/TOTRESNS
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xxxi Ibid, and https://fred.stlouisfed.org/series/WILL5000INDFC
xxxii https://fred.stlouisfed.org/series/WSHOBL and https://fred.stlouisfed.org/series/
WILL5000INDFC
xxxiii https://fred.stlouisfed.org/series/AMBNS, https://fred.stlouisfed.org/series/BOGMBASE,
and https://fred.stlouisfed.org/series/WILL5000INDFC
xxxiv https://fred.stlouisfed.org/series/WALCL and https://fred.stlouisfed.org/series/GDP
xxxv https://www.forbes.com/real-time-billionaires/#1c4eee743d78
xxxvi https://stockcharts.com/ (intraday low 11-25-2008 to all-time intraday high)
xxxvii https://fred.stlouisfed.org/series/WFRBLB50086
xxxviii https://fred.stlouisfed.org/series/WFRBLT01005
xxxix Ibid
xl https://fred.stlouisfed.org/series/WFRBLB50086 and https://fred.stlouisfed.org/series/
WFRBLT01005
xli https://fred.stlouisfed.org/series/WFRBLB50086, https://fred.stlouisfed.org/series/
WFRBLN40059, https://fred.stlouisfed.org/series/WFRBLN09032, and https://fred.stlouisfed.
org/series/WFRBLT01005
xlii https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-the-world-2022.
pdf
xliii https://quotepark.com/quotes/1074158-frederic-bastiat-when-plunder-becomes-a-way-
of-life-for-a-group-of/
xliv https://files.stlouisfed.org/files/htdocs/publications/review/75/02/Financing_Feb1975.pdf
- p22
xlv https://yoice.net/en/leo-tolstoy-money-is-a-new-form-of-slavery/

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