Let’s start this with a simple question – do you know how our money is created? Whether you are wealthy or poor, highly educated or not – chances are this question causes you some concern – because you really don’t know the answer. Most people (and I was included) would say that the United States creates our own money through the U.S. Treasury – correct? No. It did until the early 20th Century. It is correct that the U.S. Mint and the Bureau of Engraving and Printing (agencies of the U.S. Government) create the hard currency we use, but the U.S. Treasury is not responsible for creating and managing our money supply. Who then, is responsible for creating and managing our money supply? A private corporation - The Federal Reserve Banking System.
If the U.S. Government needs $20 billion in hard currency (paper and coins), the Federal Reserve creates this $20 billion out of nothing (there is nothing of value that backs our currency), the U.S. Mint and the Bureau of Engraving and Printing creates the paper and coin currency and the U.S. Government gives the Federal Reserve an IOU for $20 billion in exchange. The U.S. Government then pays interest on this $20 billion. On the surface, it may seem to you that this is logical – what’s wrong with the U.S. Government paying a private bank/corporation to print our money? Actually, there is a whole lot wrong with it. This is what I’m going to explain in this post.
We’ve seen how physical currency is created and added to our economy, but physical currency – coins and paper – makes up less than 5% of the overall dollars in circulation in the world. The other 95% is made up of all of the electronic dollars in checking accounts, savings accounts, CD’s, money market accounts, etc. How is this money created? The majority of our money is created by private banks. This is where things get interesting.
If you have purchased a home, then you know that you apply for and receive a mortgage to pay for your home. The question then becomes – where does the bank get the money to pay for your home? If you are like most Americans (and I was certainly included in this group), you assume that this money somehow comes out of the bank’s profits or from deposits made at the bank. It seems logical, but this isn’t what happens. By authority of the bank’s charter, it has the ability to create the dollars needed for your home. In the same manner that the Federal Reserve creates money out of nothing, your bank once again creates money out of nothing and places the dollars needed into your account. The funds are then used to pay for your home. I know what you’re thinking – this is the most ridiculous thing you’ve ever heard, there’s no way this is what happens. You’d be wrong. In our current monetary system (commonly referred to as a Fractional Reserve System), your act of signing for debt - creates money. Every time someone signs for an auto loan, home loan, home equity loan, etc. – money is created. This is how money is created in our system. In our current monetary system, money is not created from value, money is created from debt. It doesn’t matter if our money is created because the U.S. Government needs hard currency or if it is created through bank loans, the only way money is created in our current system is through debt. Get ready - because this leads to some very interesting analysis.
If you’re thinking this through, then you’re beginning to feel very uncomfortable – and you should. Even though it may seem strange to you that our money is created by debt, it might initially seem like this could work – that our economy has – and will continue to – function under this system. There’s one very big problem inherent in this system. If you’ve seen the movie ‘The Matrix’, then you remember that the massive computer simulation in the movie had a flaw in the program – an anomaly that over a long period of time would eventually crash the system. We have the same type of ‘anomaly’ in our current economic system that over time – will have the same result. What is the ‘anomaly’ in our system? Interest. When you take out a loan for $200,000 to pay for your home, is this all you need to pay back? Of course not. You must pay the $200,000 plus interest. The total amount of money you will pay back with interest will be more than $400,000 if you have a 30 year fixed rate (around 6%) and don’t pay it off early. Remember, our money is created from the principle, not the principle plus interest. So, you bought a house for $200,000, and as a result, added $200,000 to our total money supply of dollars. Do you see the problem? If our money is only created from the principle payment, where do we get the money to pay interest? This is where things really start to get interesting.
Let’s look at another example. Let’s say that the total debt (new debt – retired debt) created in a given year in the United States is $1 trillion dollars. Based on our current system, $1 trillion dollars would then be added to our money supply. As I mentioned above, because this is debt, the total actually owed is much higher – let’s say the total debt actually owed is $2 trillion. So, we have created $2 trillion in liabilities that must be repaid, but we’ve only created $1 trillion dollars in the system to pay this debt. Do you see the problem? We never add enough money into our economy to pay for the debt. Our debt continues to rise and our money supply continues to rise – but the money supply can never equal the total amount owed. What this means is that we can never pay off our debt under our current monetary system.
Let’s make it really simple. If you and I each owe $100 and there’s only $150 in currency available to us – one of us isn’t going to have enough to pay our debts. It’s a catch-22 that we cannot get out of. In our current system, there will always be a certain percentage of people and businesses that cannot get enough money to pay their bills, debts, etc. It’s mathematically impossible for everyone to have enough money to pay what they owe. We can talk all day about why certain businesses fail (poor management, supply and demand, changing markets, etc), why businesses and people go bankrupt, but the bottom line is this - if there’s not enough money in our economy to pay for all outstanding debts, it doesn’t matter what we do, how we manage our budgets, we will never pay off our debts as a nation – never. Of course I’m talking about our nation as a whole. Individually, we can make good financial decisions and manage our money in a prudent manner, but on a national level, we are in a never ending cycle of ever increasing debt – personal debt, corporate debt, government debt, etc. If our system never changes, it is mathematically impossible for us to ever pay off our national debt.
I now find it interesting when I hear our President or members of Congress debating ‘fiscal irresponsibility’ or when I hear our leaders talking about reducing our national debt. The truth is that all of us – our Government included – must continue to create debt in order to keep our economy from crashing. The meter is always running on the current interest (which is now enormous). In order to keep creating additional money to pay for our ever increasing debt, we must create more debt to create more money. I know what you’re thinking – this has to be the most ridiculous economic system ever devised. It’s actually quite ingenious – when you realize why it exists. We’ll examine this more later.
Since our money is created from debt, as our debts increase – our money supply increases. The only thing that has prevented this system from collapsing years ago is due to the lag time we have to pay back the interest on our loans. We are not required to immediately pay back the principle plus interest. Although this system seems to have worked for a very long time, we’re going to see that it cannot continue forever. You will see that it’s mathematically impossible for our economic system to continue without eventually collapsing.
If this hasn’t blown your mind yet, consider what would happen if we paid off all of our debt – personal debt (home loans, auto loans, etc), corporate debt and Government debt. Since debt equals money in our system, if there is no debt, there would be no money! I know – it keeps getting more ridiculous. Your mind wants to reject this outright. This is crazy! Unfortunately, it’s the truth. Our entire economy is based on the creation of debt. Without debt, our economy would crash completely. You now know the real reasons why we are all always fighting to get enough money to pay our bills and debts (there’s not enough money in the system for all of us). You now know why we consistently have a steady stream of people and businesses that file for bankruptcy (there’s never enough money in our economy), why inflation has dramatically reduced the buying power of the dollar in the past few decades (our money supply is always increasing – it never stabilizes), why the total volume of dollars in the world economy has sky-rocketed in recent decades (leading to a decline in the value of the dollar – worldwide) and why we’re always being bombarded with loan offers (home, auto, home equity, etc), credit cards, etc. Without debt, we have no economy. How is this possible you ask? Why would anyone allow this to happen? How did this happen? The most important question that you should be asking yourself is this – if we are creating so much debt, who are we indebted to? What you will find later in this post is that this is all very deliberate – it’s not by chance. There is a plan at work here – and it’s evil. The honest truth is that every person in the United States has been placed in financial bondage since 1913 – and most don’t even know it. Have I mentioned how deceptive our spiritual enemy is? Keep reading.
I mentioned earlier that our current banking system is referred to as a Fractional Reserve System. Basically, this means that banks can issue loans for much more money than they have on hand. It depends on the type of account, but as an example, let’s say that the Federal Reserve sets the reserve requirement at 9:1 (or a 10% reserve ratio). The Federal Reserve Board of Governors also has the power to change this ratio within limits set by law. This means that for every dollar that a bank has held in ‘reserve’ at the Federal Reserve, it can lend out 9 times that amount. Let’s say that a new bank holds approximately $1,111 dollars at the Federal Reserve. It can then lend up to $10,000 dollars (9 x $1111 = $10,000). Money on reserve at the Fed is sometimes referred to as ‘super’ money – since the banks get to multiply its volume. The bank then loans this $10,000 to you for a new car. You pay the car seller who then deposits the money in their checking account. Their bank (this is a closed loop system – it doesn’t matter which bank receives the deposit) then takes the $10,000 – adds $1,000 of it to their reserves (the same 9:1 reserve ratio – reversed) – and loans out $9,000 to someone else who then deposits the money in their checking account. Their bank takes the $9,000 – adds $900 to their reserves (9:1 reserve ratio) – and loans out $8,100 to someone else. At this point, the original reserve of $1,111 has generated $27,100 in new money ($10,000 + $9,000 + $8,100). If we do the math and continue to carry this through (and everyone deposits their money in a bank – not in a mattress), then this original reserve of $1,111 generates just under $100,000 of currency in our economy. It’s like a huge game of musical chairs – as long as we’re creating money from debt, the music doesn’t stop playing. Also remember – the original reserve deposit at the Fed ($1,111) was money created by debt – it has no value. Some types of accounts in this system only require a 20:1 or 30:1 reserve ratio and some accounts do not require a reserve at all. Should anyone be surprised that we always have inflation?
What happens when the Federal Reserve changes the reserve ratio? Is this significant? Absolutely. Let’s examine this more closely. If the current ratio is 9:1 and the Fed changes this to 5:1 – what impact does this have? If you’re a bank that has loaned millions of dollars at a ratio of 9:1, and have planned future loans around this ratio, what happens to you if the ratio changes to 5:1 (the reserve requirement increases)? If you don’t have additional reserves to meet the new requirement - you instantly become under-capitalized. Here’s a simple example: if a bank has a reserve of $1,000 and plans to make a loan of $9,000 – it can no longer make the loan if the reserve ratio is reduced to 5:1. At 5:1, the reserve requirement on $9,000 would be $1800. The real world result is – the bank must generate significantly more capital to increase its reserves or stop lending in order to meet the new reserve requirement.
What should we learn from this? Most of us know that the Federal Reserve has the power to raise and lower interest rates and therefore, has the power to raise and lower overall prices within our economy. What most people don’t realize is that they also have the power to raise and lower the total volume of dollars in our economy. If they raise the reserve requirement (requiring banks to have more reserves at the Fed), banks will lend less money and since our money is based on the creation of debt, less money is created. If this happens, the gap between the amount owed within our economy (interest never stops accumulating) and the amount of money to pay the debt – widens. We are often told that this is used to fight inflation – inflation that is caused by this system of money creation through debt. The truth is that an increase in the reserve requirement results in even less money in the overall economy to pay back debt – which could easily lead to a recession or depression. This is the continual game central banks around the world play every day – more money in the economy means economic growth, but higher inflation – reducing the money supply reduces inflation, but will also cause economic growth to slow or contract.
The following chart shows the impact of the reserve ratio on our money supply. It’s easy to see that as the reserve amount required is lowered, the amount of money generated increases significantly. The reverse is also true – as the reserve required by the Fed is raised, the amount of money generated decreases.
What really happens when our money supply contracts? Periods of recession or depression. What we’re consistently told is that periods of economic growth and periods of economic contraction are unavoidable, when the truth tells us something different. The Federal Reserve has the power to create periods of growth (increased money supply coupled with low interest rates) and periods of contraction (reduced money supply coupled with higher interest rates). How are we told to categorize these periods of growth and contraction? This is the ‘business cycle’. While everyday business transactions certainly affect our overall economy – there is nothing that private business or individuals can do that will overcome the debt based economic system we’ve been placed under.
You have also learned why the current credit ‘crunch’ is being referred to as a ‘crisis’. What happens if banks reduce lending and consumers reduce taking on more debt? Less money is created in the system – and a vicious cycle starts. Wall Street refers to this as ‘de-leveraging’. We’re going to explore the real reasons this happens. Before we look closely at what is going on today, let’s examine another problem with our current economic system. We have discussed how our economy must continue to grow in order for debt creation to continue in order to create additional money in order to pay the debt – a never-ending cycle of debt creation. The question becomes – can this continue forever?
If you were to ask people about economic growth, some will know that our economic (GDP – Gross Domestic Product) growth rate typically averages about 3% (annually) in recent years. Most of us assume this is a linear growth rate. A linear growth rate looks like this:
The problem is that our economic growth is not linear. As an example, let’s assume that the current overall value of our economy is $100. If our economy grows 3% this year, then the overall value at the end of this year is $103. If our economy grows an additional 3% next year, will the overall value of our economy be $106 at the end of next year? No. Since we grew our economy 3% this year, next year’s growth will be 3% of $103 and the total value of our economy at the end of next year will be $106.09 ($103*.03 + $103). Our economy does not grow linearly, it grows exponentially. What this means is that 3% growth this year is actually more growth than 3% last year since our growth is compounded annually. This is what exponential growth looks like:
You are probably starting to feel uncomfortable, because you are beginning to see where this is going. In theory, exponential growth remains relatively low for a given period of time – but as you can see, as each year’s growth compounds on the previous year, overall growth begins to accelerate rapidly at a given point in time. A simple example of this phenomenon can be seen in the growth of a company. A company that plans to grow 10% with annual revenues of $10 million only needs to grow $1 million. A company that plans to grow 10% with annual revenues of $10 billion needs to grow $1 billion. As growth compounds upon itself, the system requires ever more resources to grow the same amount (%).
In our current economic system that relies on continual growth to stave off a collapse, we must continually burn through more and more natural resources to keep the system going. In a theoretical world, this exponential curve continues on to infinity. Is this possible in a finite world with finite resources? Of course not. If we take a logical look at our economic system, mathematics tells us one of two things must happen to our current system. The first scenario is that we burn through all of our resources and the system collapses. We can certainly see the beginning of this from a global perspective. As more economies around the world have instituted the same economic system as ours, we are seeing more and more concern that natural resources (oil, forests, water, etc.) are being depleted at an alarming rate – demand is outstripping supply – adding to inflationary pressures. Although this is certainly possible in our distant future, since we are much farther along the exponential curve than other economies in the world, there is a much more likely scenario for the United States.
The second scenario is that our current system collapses under the weight of the debt it has created. If the rate of debt increases much more quickly than the rate of the supply of money in the system, eventually the amount of money in the system will not be able to support the increased debt. There will not be enough money to make interest payments, pay utilities, buy consumer goods and create additional money. As the exponential curve gets steeper and steeper – it will be more and more difficult to grow our economy, while supporting the existing debt in the system. At some point, since we live in the real world, our monetary system will collapse under the weight of its debt – long before we burn through all of our resources.
Before we get too far into this – let’s ask a question. Where are we on this exponential curve? If we look at trends of some of the most widely used economic indicators, can we determine if we should be worried about imminent collapse? As you will see, we have reason to be concerned.
Let’s start by looking at our debt. The following is a graph of our nation’s federal debt:
The following is a different look at our national debt that calculates the debt as a percentage of GDP:
(Source: U.S. White House)
We hear politicians and economists talk about how there’s nothing to worry about since our debt remains in line with past years - as a percentage of GDP. The problem is that they are only focusing on the amount of debt as a % of GDP in a given year and not the effect of our cumulative debt. As we’ll soon see, what is even more important is the ratio of debt to the money supply.
We also have much more debt than just the federal debt. The following chart shows total debt over time (state, federal, personal, corporate). Once again, we see an exponential curve.
(Source: Michael Hodges, Federal Reserve, U.S. Treasury)
What about our money supply? We should expect to see the same trend – and we do.
Hard currency appears to be somewhat linear, but it’s an illusion. If we reduce the scale (since hard currency is such a small percentage of the total money supply), we see the same trend:
Since the Federal Reserve stopped publishing M3 (total amount of dollars in circulation) money supply data in 2006, a couple of economists have worked to re-create it. The next graph was created by John Williams at shadowstats.com. Take note of how the year over year growth of our money supply has steadily increased since early 2005. Also note how the rate of growth is beginning to slow since the beginning of 2008. (I originally wrote this post in early 2008 - I have updated the graph below to show money supply growth through July 2010 - you can see how the current credit 'crisis' is now causing our money supply to contract).
I believe we’re going to see our money supply growth continue to slow since we are now at the point that we cannot create enough new money (through debt) to support the existing debt. If we’re not able to create enough new money (through debt) each year to service the interest on the existing debt – the system begins to collapse (loan defaults & bankruptcies begin to increase). The world tells us that our economy is ‘maturing’, which is why our economy’s growth is slowing. The truth, as you see, is much different. We are beginning to see the very real signs of an economy on the brink of collapse under the weight of its monetary system. We’ll talk about these signs later in this post.
Let’s continue by viewing inflation. Once again, we hear the world tell us that inflation is running at a rate of 3% a year and we all accept this as normal – and we forget that this rate is compounded year after year. If we see our money supply increase at such a fast pace, we should expect to see inflation also rise at an exponential rate – and we do.
(Source: Federal Reserve)
Now you know why cars that once cost $3,000 now cost $30,000 or a loaf of bread that once cost $0.25 now costs $2.50. Prices increase within the system if the volume of money increases at a higher rate than economic activity (goods & services).
More people with more money to spend places upward pressure on prices for everything – cars, fuel, food, natural resources, etc. As money supplies throughout the world increase at an exponential rate, we see inflation skyrocketing across the globe. More on this below.
What about other economic indicators? We see the same trend.
(Source: Mark Wieczorek)
Commercial Bank Credit:
(Source: Federal Reserve)
Total Revolving Credit:
(Source: Federal Reserve)
Total Consumer Credit:
(Source: Federal Reserve)
These are all interesting, but the most important graph will show us the rate of increase of our debt and the rate of increase of our income. If we see a widening gap between the two, then we know that the system is beginning to break down as the rate of increase in debt (new debt – retired debt + interest) is outpacing our ability to service the debt and keep the system from collapsing.
(Source: Michael Hodges, Federal Reserve, U.S. Treasury)
Sobering isn’t it? What you are seeing is a system on the brink of total collapse. With no way to ultimately pay off our debts (since money is created by debt), this was inevitable at some point.
Even though our money supply is also on an exponential curve, it cannot (mathematically) keep up with the runaway debt. We are nearing the end of an inevitable cycle. A cycle that ends with the economic collapse of the United States. As I mentioned earlier, this would not be a surprise to the men who created the system in the U.S. in 1913, nor is it a surprise to the men who are controlling the system today.
What about the rest of the world? Can’t they continue to finance our debt? Won’t this help delay our collapse? What you are about to see is that every major world economy also has a Central Bank – and therefore is on the same exponential curve as us. At some point, the entire world system will be unable to sustain itself unless the entire system changes. We’ll just take a look at money supplies of some of the world’s biggest economies. As you view these graphs, also take note of the total amount of Euros (European Union) in circulation compared to the amount of dollars in circulation. If you consider that there are trillions more dollars in circulation throughout the world compared to pounds and euros and also consider the massive amount of U.S. debt – it shouldn’t surprise anyone that the overall value of the dollar is declining against the world’s major currencies.
Global Money Supply:
In addition, in recent months China’s money supply (M1+M2) has been growing at a 16-18% annualized rate. So, it’s easy to see that the same insane economic/monetary system has been instituted the world over. The question is – why? Before we answer this, let’s take a look at what is going on in the U.S. economy today.
Let’s think about what we would expect to see if the economic system of the United States begins to collapse due to this monetary system. As the amount of total debt continues to increase faster than the money supply, we would expect the number of personal and corporate bankruptcies to continue to increase. As global inflation also continues to increase prices on a broad range of products and commodities (due to increases in money supplies the world over), we would expect this to also negatively affect individuals and corporations in America. We would also expect to see those of us with the lowest cash reserves to be affected first. Are we seeing these things? Absolutely. We see them everyday in our news. The current ‘credit crisis’ began when subprime borrowers began defaulting on their home loans. Now, we see that the number of Alt-A and Prime borrowers falling behind on their mortgages is also increasing. Home prices are now decreasing across the nation as a result. How does this affect the money supply? If a homeowner defaults on a loan, the bank must ‘foreclose’ and take a loss on its books. The bank then must sell the home – but sell it in a depressed housing market. If the home was originally purchased for $100,000; and the bank can only get $75,000 now - based on what we now know about how money is created - you can see how the money supply will begin to be affected in a very big way. As home prices decline, the amount of money generated from the home loans from consumers also declines. As banks tighten credit due to the rising defaults, the vicious cycle continues – fewer loans and lower prices equals less money created (thanks to this debt based monetary system). Less money created means less money to loan and less money to buy things – and the exponential money creation cycle from debt begins to reverse itself. It’s also easy to see that falling housing prices and falling housing sales are not the only problem here – all of the suppliers, subcontractors, etc. are also affected. The rapid increase in the money supply generated by private banks that we’ve seen over the past decade is beginning to slow significantly. But as you know, this isn’t all that’s happening.
You’ve watched as the value of CDO’s (Collateralized Debt Obligations), CLO’s (Collateralized Loan Obligations), SIV’s (Structured Investment Vehicles) and other derivatives are now plunging in value resulting in huge write-offs for banks. As foreclosures have risen, the value of the bonds created from these mortgages have plunged in value – even those bonds based on ‘prime’ mortgages. All of these things are reducing the money supply. If you have an investment that you thought was worth $100, but now is only worth $60 on the open market, your access to money has been substantially reduced. Auction rate securities, once thought as safe as cash, now can’t be sold – there are no buyers. What you are seeing are the cracks beginning to form in the dam.
What is the Federal Reserve doing? Basically, they are trying to plug the holes by injecting money into our economy to delay the inevitable. Money creation through the private banking system is faltering, so someone has to step in or something catastrophic is going to happen. As the process has accelerated, not only are banks slowing their lending to consumers, they have also significantly reduced lending to each other. In order to get the capital they need, many banks are now borrowing more money directly from the Federal Reserve discount window. Remember, the Fed isn’t giving the money away; banks are borrowing this money from a private corporation. We can see the impact from the current credit crisis from the graph below.
We see this problem developing with the money supply, but there is one area of our financial system that has yet to suffer a significant drop in value – the stock market. It’s been very volatile, but has not really suffered a prolonged decrease in value. Think about this – what happens when financial conditions worsen, people can’t pay their bills/debts, all other investments have significantly declined in value and there’s only one remaining large source of wealth remaining? People will sell their stocks to survive. There’s an obvious problem with this – if a large number of people start selling – what happens? Prices drop significantly. Since stocks are one of the most volatile investments in the world, the coming decline in the stock market will, in all probability, be much worse than the current decline in value of CDOs/SIVs, Auction Rate Securities and other bonds. One thing is for certain, it’s not a matter of if, but when this will happen.
Dow Jones Industrial Average (1970 - 2008):
(Source: Wall St. Journal Online)
Take a look at the above graph of the Dow Jones Industrial Average (Share volume is also shown). Look familiar? Once again, we see an exponential curve. The DJIA is shadowing both our debt and our money supply. Why? Think about how the world tells us to invest. We’re constantly told that stocks offer the best long term returns. If you only look at stock returns over the past 30 years – this would appear to be good advice (if you ignore the possibility of something negative happening tomorrow). The problem is that there are two very good reasons why the stock market has continued to increase over this time period – and they have nothing to do with the stock market itself. As money has increased exponentially over the past 30 years – more and more liquidity has been placed in the hands of investors. What is another consequence of this exponential money growth? Inflation has also increased exponentially. We have more and more money in a system where inflation is eroding the value of this money. In this situation, everyone is trying to at least maintain the value of their money – by trying to earn a return higher than the inflation rate. So, we see more and more people investing more and more money into risky investments (stocks, hedge funds, CDO’s, SIV’s, Auction-Rate Securities, etc.) in an attempt to outrun the inflation rate.
There’s also another problem that no one in the mainstream media is discussing. We assume that our inflation rate has been approximately 1%-5% in recent years because this is what our government tells us. The problem is that since the early 1980’s, the government has changed the way it measures inflation. I won’t go into details here (please watch Chris Martenson’s video for further information on how our government has changed how it calculates inflation and other economic data: http://www.chrismartenson.com/fuzzy_numbers). The truth is that the actual annual consumer inflation rate has been between 8%-12% over the past 10 years – which means that you would need to average an annual return of around 10% over the past 10 years just to break even. The current rate of inflation is closer to 13% and increasing - not 5% as we’ve been told (I have updated the graph in 2009 to show how the current crisis is causing deflationary pressures).
If we also consider the impact that the actual inflation rate has on real GDP (inflation is subtracted from nominal GDP to calculate real GDP) – we see why businesses and consumers are telling us that we’re in a recession – while our government tells us that our economy is still growing. The current state of our economy starts to make sense when we see inflation in double digits and negative GDP for several quarters.
Do you know people who have lost their jobs recently? Wonder why it’s difficult to find a job right now? It’s because the current unemployment rate is closer to 13% - not the 5% that we’ve been told (I have updated the graph in 2009 to show the continuing impact of the current recession/depression - real unemployment is now approaching 20%). The government selectively removes ‘discouraged workers’ from total unemployment in order to calculate the lower rate. It’s simply a way for our government to manipulate the data to show more favorable percentages.
What is going to happen to the stock market as our money supply growth continues to slow, GDP continues to contract, inflation continues to increase, housing prices continue to fall and more people lose their jobs? The stock market will, once again, shadow our money supply straight down as the system collapses. We’re beginning to see how this is affecting the stock market today. The market has been extremely volatile as earnings reports from companies seem to contradict government economic data. When it becomes clear to everyone that we’re in serious trouble – we’re going to see a mass exodus from stock markets worldwide.
If you’re wealthy, you may feel somewhat secure that you’ve got a nice nest egg to see this through. Where is your money? It’s most likely in dollar currency in the system – checking/savings accounts, money market funds, stocks, bonds, 401(k)’s, retirement accounts, etc. What happens if it’s not just a segment of the system that collapses, but the entire system? It won’t matter what you have - $5 or $5 million – your wealth will vanish before your eyes. We are facing a far worse scenario than 1929. From 1929 through 1933, our money supply contracted approximately 30% after a period of money supply expansion in the 1920’s. As you can see from the money supply trends in previous charts, we have also been through a period of significant money supply expansion from 1995 until 2007. It appears that 1929 was a trial run for what will happen in the near future to us.
Was wealth destroyed during the Great Depression? No. Wealth was transferred. If you read the biographies of some of the great bankers of that era (J.P. Morgan and others), you will see that the majority of them did not have their money in stocks. Earlier in 1929, they moved their investment holdings to cash and gold. For them, the crash of 1929 was not a catastrophe, it was a buying opportunity. A buying opportunity they created. The price of assets dropped dramatically during this time - and guess who happened to have the cash on hand to buy assets at depressed values?
Until now, you’ve probably thought that we’re all playing by the same rules – we’re not. This really isn’t about money – it’s about power and control of the world. It’s about a ruling elite enslaving humanity on a worldwide scale. A ruling elite given power by the world’s spiritual ruler. Now you know a little more about why the Lord has warned us. He warned us that this beast would be deceptive and would deceive the whole world – and you’re beginning to see why. When God tells us in His Word that something in our future will be deceptive on a worldwide scale – it’s a warning we should heed.
This leads us to why our monetary system exists. In 1913, the battle for the control of the United States banking system was lost – and the Federal Reserve Bank was created. The name of this private corporation should tell us all we need to know – it’s a lie. It’s a bank that is not Federal and there are no reserves. The truth is that this ingenious monetary system was created by some highly intelligent men for one purpose – global power. Whoever controls interest rates and the volume of money in a nation controls the nation (and ultimately the world). In a world focused on money and the pursuit of money, whoever controls our money has the power – absolute power. These men created a monetary system that forever places our nation in debt and one that can be manipulated by them for their purposes. What is going to happen when markets collapse? Guess who, once again, will be there to acquire depressed assets?
As I’ve said before, this was inevitable. If you give a banking system, in our evil world, the ability to control the money supply and the ability to charge interest on the money they create, the bankers will slowly, over time, exchange worthless money (paper and electronic fiat currency) for real assets – gold, silver, land and property. If you view this from a spiritual standpoint, you begin to understand why Jesus told us that building the foundation of your life on the things of this world is not wise. As has happened before, and will happen again, wealthy people of this world will see the foundation of their lives (money) slowly sift away through their fingers. Our wealth is an illusion. Satan has offered wealth and power to many in this nation and they have gladly accepted. They are about to witness what happens when you do a deal with the devil. Take him on by yourself and sooner or later – he’s going to find a way to get his tentacles into you. What happens when wealth is taken away from people who are focused on wealth? It’s not pretty. How do we overcome? As I’ve said before, and will continue to say until I leave this world – you will not overcome this world and its ruler until you humbly ask forgiveness from God. Until you acknowledge your sins and truly believe the Lord’s promise of salvation through His Son, you will never get free of the world. You will always be susceptible to the world’s many disappointments. When you truly repent and are born again, what happens in the world no longer matters because you know the Lord and the Lord stands with you – until the end.
At some point you’ve probably wondered how on earth this monetary system has survived until now. If you read the many quotes throughout recent history from bankers, world leaders, economists and tycoons about central banks – and really pay attention to what they’re saying - it’s no secret that those in power knew what was happening (I have listed many of these quotes on my website). Why hasn’t anyone stopped this madness? It’s not hard to figure out – fear. If you attain a position of power and are told to look the other way or face the consequences – what do you do? Most people in the world will gladly take the money and power….and look the other way. Why place my life at risk when I can continue living this nice lifestyle by not rocking the boat? Yes – I said that by standing against this beast – you place your life at risk. I’m not saying this merely to make a hypothetical point. Take a look at this list. These men had three things in common.
John F. Kennedy
All were Presidents of the United States. Each man spoke out against the issuance of money by anyone other than our Government and made it clear who they were targeting with these comments – and all were assassinated. Lincoln refused to attain loans from the European banks to finance the Civil War (he was offered loans at 24%+ interest) and instead had the U.S. Treasury issue its own money. JFK gave a speech in 1961 about a worldwide ‘monolithic and ruthless conspiracy’ which is ‘a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations’. I have added a link to the speech on my website. (Here’s the link: http://www.youtube.com/watch?v=QeYgLLahHv8) JFK even had the audacity in the summer of 1963 to give the U.S. Government the authority to, once again, create its own money via Executive Order 11110 (based on a Silver standard). The U.S. Treasury actually began to print its own money in 1963….but as we all know, this didn’t last long.
As you read the quotes below, notice carefully what these men are telling us. They didn’t realize it at the time they made these statements, but each one of them learned about and then commented on – one of the beasts of Revelation 13. Some of them paid the ultimate price for doing so. The Lord doesn’t arbitrarily label something a ‘beast’ without reason. He uses the term ‘beast’ to tell us who and what we’re dealing with – an organization that will kill, steal and destroy anyone and anything in its path – anything that opposes it. This beast obeys its father – the father of lies and deceit who walks in complete darkness. There is only one way in this world that you and I can oppose this beast and survive – by standing with and obeying the Lord.
“The very word secrecy is repugnant in a free and open society – and we are, as a people, inherently and historically, opposed to secret societies, to secret oaths and to secret proceedings.” –JFK
“We are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covet means for expanding its sphere of influence – on infiltration instead of invasion – on subversion instead of elections – on intimidation instead of free choice. It is a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine - that combines military, diplomatic, intelligence, economic, scientific and political operations. Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no secret is revealed.” -JFK
“I am asking your help in the tremendous task of informing and alerting the American people.” –JFK referring to the worldwide conspiracy mentioned above
“Whoever controls the volume of money in our country is absolute master of all industry and commerce….and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” -James A. Garfield
“The Government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity.” -Abraham Lincoln
“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected the promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the National auto-determination practiced in past centuries.” –David Rockefeller in an address to Trilateral Commission Meeting, 1991
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that willgrow up around them (around the banks), will deprive the people of their propertyuntil their children will wake up homeless on the continent their fathers conquered." –Thomas Jefferson
"Capital must protect itself in every way... Debts must be collected and loans and mortgages foreclosed as soon as possible. When, through a process of law, the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd." -J.P. Morgan
"We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent." –James Paul Warburg (Chairman of the Council on Foreign Relations, speaking before the U.S. Senate, 1950)
"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president." –Franklin D. Roosevelt
"[The task is to] covertly lower the standard of living, the whole socialstructure, of America so that we can be merged with all other nations." –Rowan Gaither (President of the Ford Foundation, 1954)
“I am myself persuaded, on the basis of extensive study of the historical evidence, that... the severity of each of the contractions - 1920-21, 1929-33, and 1937-38 - is directly attributable to acts of commission and omission by the Reserve authorities and would not have occurred under earlier monetary and banking arrangements.'' –Milton Friedman (Nobel Prize-winning economist, economic advisor to President Ronald Reagan)
"Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it." –Woodrow Wilson
"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom." -Woodrow Wilson
"We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world--no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men." –Woodrow Wilson
"This Act (the Federal Reserve Act, Dec. 23rd 1913) establishes the most gigantic trust on earth. When the President (Woodrow Wilson) signs the Bill, the invisible government of the Monetary Power will be legalized... The worst legislative crime of the ages is perpetrated by this banking and currency Bill." –Charles A. Lindbergh Sr. (Congressman and father of the famous aviator)
"The most wonderful thing of all is that the distinguished Lutheran andCalvinist theologians who belong to our order really believe that they see in it (Illuminati) the true and genuine sense of Christian Religion. Oh mortal man, is there anything you cannot be made to believe?" - Adam Weishophf upon establishing his "Order of the Illuminati", on May 1, 1776
"It is ironical that the only nation which affirmatively expresses a dependence upon and belief in Almighty God in its birth certificate, should now be in mortal combat for its very existence with a godless conspiracy intent upon conquering the world, and reverting human society to the hazards and indignities of the Dark Ages." –Loyd Wright (Former President of the American Bar Association, 1961)
"From the days of Spartacus, Weishophf, Karl Marx, Trotski, Belacoon, Rosa Luxenburg, and Ema Goldman, this world conspiracy has been steadily growing. This conspiracy played a definite recognizable role in the tragedy of the French revolution. It has been the mainspring of every subversive movement during the 19th Century. And now at last this band of extraordinary personalities from the underworld of the great cities of Europe and America have gripped the Russian people by the hair of their head and have become the undisputed masters of that enormous empire." –Winston Churchill, 1920
"The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities, states and nation. At the head is a small group of banking houses generally referred to as 'international bankers.' This little coterie... run our government for their own selfish ends. It operates under cover of a self-created screen...[and] seizes...our executive officers... legislative bodies... schools... courts... newspapers and every agency created for the public protection." –John Hylan (Mayor of New York, 1918-1925)
"The sovereignty fetish is still so strong in the public mind, that there would appear to be little chance of winning popular assent to American membership in anything approaching a super-state organization. Much will depend on the kind of approach which is used in further popular education." (Council on Foreign Relations, 1944)
If you spend some time studying these international bankers who have instituted this debt based monetary system worldwide, you will find that at the top echelon of power there are approximately 300 names. These are the same 300 families who own stock in the Federal Reserve of the United States and all of the other central banks the world over. These are the people who wield the world’s real power from the shadows and provide the wealth and power needed to infiltrate the world’s monetary and political systems. These are the people the Lord describes in Revelation 13 – this ‘beast out of the earth’.
If you continue to study how they have gained this power, you will be led back in time to the early 1690’s to the founding of the Bank of England – the world’s first central bank. And if you continue to search for the truth, you will find that all roads on this journey eventually lead to one name – Rothschild. The world will tell you that the Rothschild’s banking empire has been reduced to a ‘niche’ bank – catering mainly to very wealthy investors. The truth is that they control approximately 70%-80% of the world’s wealth from the shadows. If I had told you this at the beginning of this post, you would have probably rejected this statement outright. Now you know how it’s possible – they print the world’s money and exchange it for the world’s real assets. As I mentioned at the beginning, it’s really an ingenious plan – when you realize why it was created. It’s evil, but ingenious. The Rothschilds and every member of these ‘elite’ families would tell you that this plan was devised by them for their purposes – but we know the truth. The Lord has told us Satan’s plans – they’re simply obeying the one they serve.
We now see how the world’s financial system has been overtaken by a few very powerful men. If we take what we know and think about the ‘mark of the beast’, we realize that control of the world’s financial system isn’t enough to satisfy the prophecies about the ‘mark’. Controlling the world’s financial system is one piece of the puzzle, but something else is needed – enforcement. Everyone throughout the world will be ‘forced’ to accept the mark. These powerful men need a way in which to deceive us into believing that humanity needs protecting – and now we know why the Lord tells us in the book of Revelation about ‘miraculous signs’ used by this beast. The beast creates these ‘signs’ to strike fear among us – fear that will eventually drive humanity to give over its freedom to the beast – and Satan. We’ve seen many of these ‘signs’ already, but they are only the beginning.
When it comes to spiritual deception, you are beginning to see just how blind we really are in this world when we walk away from our Creator. We focus on the things in the world – money, careers, cars, houses, addictions, stuff, etc. – and we forget about the subtle things that are missing from our lives. Some of these things are big picture – How did we come into being? Why are we here? Does God really exist? If He exists, why can’t I see Him? Can I really know God - personally? Where do I go when I die? Am I really alone in this fallen world? How can I get free of this mess? Other questions are smaller picture, but would also lead us to the truth if we would just slow down for awhile and think about what we’re consistently told in this world and compare it to God’s truth – could someone really consolidate the world’s government, world’s religion and world’s financial system within 7 years? If God has allowed His children to experience pain and suffering throughout human history in order to strengthen them in this world, why would He change now? Sometimes it’s a very simple question that leads us to some very important answers – how is our money created? Think about how many times in your life – friends, parents, teachers, professors – someone has explained our monetary system to you. Never? You’re not alone – and there’s a reason it’s being hidden. If I were to ask 1000 Americans today what is the greatest threat to our nation’s sovereignty – how many do you think would respond - ‘the war on terror’? My guess is that 99% of us would agree that ‘the war on terror’ is our greatest threat. Our spiritual enemy has created a perceived threat – while his true ‘beasts’ gain control of the world through deceptive means – subversion, infiltration and intimidation. Again, an ingenious plan – and not of this world. The only way to overcome it is to obey the One spiritual being that Satan cannot deceive, intimidate or overcome – our Father in heaven.
The truth is that never before, in the history of the United States, have we faced a greater threat to our national sovereignty as we do now – never. We are facing an enemy that is much more intelligent and powerful than you and I - an enemy that has not used brute force against us, but works in the shadows to deceive and infiltrate. At times in the past I would think about the book of Revelation and wonder how the people of the world could ever allow themselves to be subjected to an evil world government. I simply didn’t want to believe it was possible and I, like most people today, disregarded the Lord’s warnings about how this beast would deceive the whole world. Now that I’ve humbled myself and know the truth, I listen to this beast talk to us everyday through corporate, governmental, banking and religious leaders – leaders of the United States. It’s no longer a mystery. Their plan has almost come to fruition. At some point, you might think that all hope is lost – that they are too powerful and the plan is too far along. How can we possible stop this? I’m not fearful of these things because I know that God could see this coming since the creation of the world – and I don’t need to figure out what to do on my own. I will simply continue to seek the Lord’s will for me – His plan, not mine. What you are about to see throughout the world is that God is going to go on the offensive – and he’s going to do it with you and me. Now is not the time for weak people with weak ministries to proclaim a weak message. Now is the time to allow ourselves to be strengthened spiritually. Now is the time to stand in the face of overwhelming odds – and succeed.
At different times in your life you have probably felt that something wasn’t quite right. You could ‘sense’ it, but you couldn’t ‘see’ it. You couldn’t really explain it, but you knew that there was something not quite right about the world you live in. The economy is up – the economy is down. Life is good – life is not so good. Chaos seems to rule the world. It’s like we’re walking on very thin ice that is constantly cracking – about to give way. You are now beginning to understand that there is a method to the madness. When the world chose death over life, sin over righteousness – when we chose to believe lies instead of the Truth – this was the inevitable result. What gets the true Christian through all of this is that this isn’t the end – it’s only the beginning – and we’re not alone. The end is glorious for us – end of story.
You’ve seen me reference the movie ‘The Matrix’ and how many aspects of the movie are similar to the spiritual battle being waged in the world. I’m going to end this post with some dialog from the movie because it certainly relates to most of us. The following scene takes place right before Neo learns the truth about his world.
Morpheus: I imagine that right now, you're feeling a bit like Alice. Hmm? Tumbling down the rabbit hole?
Neo: You could say that.
Morpheus: I see it in your eyes. You have the look of a man who accepts what he sees because he is expecting to wake up. Ironically, that's not far from the truth. Do you believe in fate, Neo?
Morpheus: Why not?
Neo: Because I don't like the idea that I'm not in control of my life.
Morpheus: I know *exactly* what you mean. Let me tell you why you're here. You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?
Neo: The Matrix.
Morpheus: Do you want to know what it is?
Morpheus: The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work... when you go to church... when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.
Neo: What truth?
Morpheus: That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.
I finally found a video that does an excellent job of explaining our monetary system in simple terms. I recommend that you watch it to get a better understanding of what I have discussed here. The video was created by Paul Grignon and is only 47 minutes long. Money as Debt I have used a couple of Paul’s examples in this post.