The Creature from Jekyll Island http://www.biblebelievers.org.au/jekyll.htm by G. dward Griffin !

"vailable from: The #eality $one% Chapter &' (hat is the + It,s the most important finan*ial lesson of your lifeTHE MANDRAKE MECHANISM . . . What is it? It is the method by which the Federa Reser!e creates mo"ey o#t o$ "othi"%& the co"ce't o$ #s#ry as the 'ayme"t o$ i"terest o" 'rete"ded oa"s& the tr#e ca#se o$ the hidde" ta( ca ed i"$ atio"& the way i" which the Fed creates boom)b#st cyc es. In the &./'s0 there was a *omi* strip *hara*ter *alled )andrake the )agi*ian. 1is spe*ialty was *reating things out of nothing and0 when appropriate0 to make them disappear ba*k into that same void. It is fitting0 therefore0 that the pro*ess to be des*ribed in this se*tion should be named in his honor. In the previous *hapters0 we e2amined the te*hni3ue developed by the politi*al and monetary s*ientists to *reate money out of nothing for the purpose of lending. This is not an entirely a**urate des*ription be*ause it implies that money is *reated first and then waits for someone to borrow it. 4n the other hand0 te2tbooks on banking often state that money is *reated out of debt. This also is misleading be*ause it implies that debt e2ists first and then is *onverted into money. In truth0 money is not *reated until the instant it is borrowed. It is the a*t of borrowing whi*h *auses it to spring into e2isten*e. "nd0 in*identally0 it is the a*t of paying off the debt that *auses it to vanish. There is no short phrase that perfe*tly des*ribes that pro*ess. 5o0 until one is invented along the way0 we shall *ontinue using the phrase 6*reate money out of nothing6 and o**asionally add 6for the purpose of lending6 where ne*essary to further *larify the meaning. 5o0 let us now . . . see just how far this money/debt7*reation pro*ess has been *arried 77 and how it works. The first fa*t that needs to be *onsidered is that our money today has no gold or silver behind it whatsoever. The fra*tion is not 8/9 nor &89. It is '9. It has traveled the path of all previous fra*tional money in history and already has degenerated into pure fiat money. The fa*t that most of it is in the form of *he*kbook balan*es rather than paper *urren*y is a mere te*hni*ality: and the fa*t that bankers speak about 6reserve ratios6 is eyewash. The so7*alled reserves to whi*h they refer are0 in fa*t0 Treasury bonds and other *ertifi*ates of debt. 4ur money is 6pure fiat6 through and through. The se*ond fa*t that needs to be *learly understood is that0 in spite of the te*hni*al jargon and seemingly *ompli*ated pro*edures0 the a*tual me*hanism by whi*h the ;ederal #eserve *reates money is 3uite simple. They do it e2a*tly the same way the goldsmiths of old did e2*ept0 of *ourse0 the goldsmiths were limited by the need to hold some pre*ious metals in reserve0 whereas the ;ed has no su*h restri*tion. The ;ederal #eserve is *andid. The ;ederal #eserve itself is ama<ingly frank about this pro*ess.

)andrake )e*hanism

" booklet published by the ;ederal #eserve =ank of >ew ?ork tells us: 6Curren*y *annot be redeemed0 or e2*hanged0 for Treasury gold or any other asset used as ba*king. The 3uestion of just what assets ,ba*k, ;ederal #eserve notes has little but bookkeeping signifi*an*e.6 lsewhere in the same publi*ation we are told: 6=anks are *reating money based on a borrower,s promise to pay !the I4@% . . . =anks *reate money by ,moneti<ing, the private debts of businesses and individuals.6 In a booklet entitled )odern )oney )e*hani*s0 the ;ederal #eserve =ank of Chi*ago says: In the @nited 5tates neither paper *urren*y nor deposits have value as *ommodities. Intrinsi*ally0 a dollar bill is just a pie*e of paper. Aeposits are merely book entries. Coins do have some intrinsi* value as metal0 but generally far less than their fa*e amount. (hat0 then0 makes these instruments 77 *he*ks0 paper money0 and *oins 77 a**eptable at fa*e value in payment of all debts and for other monetary uses+ )ainly0 it is the *onfiden*e people have that they will be able to e2*hange su*h money for other finan*ial assets and real goods and servi*es whenever they *hoose to do so. This partly is a matter of law: *urren*y has been designated 6legal tender6 by the government 77 that is0 it must be a**epted. In the fine print of a footnote in a bulletin of the ;ederal #eserve =ank of 5t. Bouis0 we find this surprisingly *andid e2planation: )odern monetary systems have a fiat base 77 literally money by de*ree 77 with depository institutions0 a*ting as fidu*iaries0 *reating obligations against themselves with the fiat base a*ting in part as reserves. The de*ree appears on the *urren*y notes: 6This note is legal tender for all debts0 publi* and private.6 (hile no individual *ould refuse to a**ept su*h money for debt repayment0 e2*hange *ontra*ts *ould easily be *omposed to thwart its use in everyday *ommer*e. 1owever0 a for*eful e2planation as to why money is a**epted is that the federal government re3uires it as payment for ta2 liabilities. "nti*ipation of the need to *lear this debt *reates a demand for the pure fiat dollars. )oney would vanish without debt. It is diffi*ult for "meri*ans to *ome to grips with the fa*t that their total money7supply is ba*ked by nothing but debt0 and it is even more mind boggling to visuali<e that0 if everyone paid ba*k all that was borrowed0 there would be no money left in e2isten*e. That,s right0 there would not be one penny in *ir*ulation 77 all *oins and all paper *urren*y would be returned to bank vaults 77 and there would be not one dollar in any one,s *he*king a**ount. In short0 all money would disappear. )arriner **les was the Governor of the ;ederal #eserve 5ystem in &./&. 4n 5eptember C' of that year0 **les was asked to give testimony before the 1ouse Committee on =anking and Curren*y. The purpose of the hearing was to obtain information regarding the role of the ;ederal #eserve in *reating *onditions that led to the depression of the &.C's. Congressman (right Datman0 who was Chairman of that *ommittee0 asked how the ;ed got the money to pur*hase two billion dollars worth of government bonds in &.CC.

This is the e2*hange that followed. **les: (e *reated it. Datman: 4ut of what+ **les: 4ut of the right to issue *redit money. Datman: "nd there is nothing behind it0 is there0 e2*ept our government,s *redit+ **les: That is what our money system is. If there were no debts in our money system0 there wouldn,t be any money. It must be reali<ed that0 while money may represent an asset to sele*ted individuals0 when it is *onsidered as an aggregate of the total money supply0 it is not an asset at all. " man who borrows E&0''' may think that he has in*reased his finan*ial position by that amount but he has not. 1is E&0''' *ash asset is offset by his E&0''' loan liability0 and his net position is <ero. =ank a**ounts are e2a*tly the same on a larger s*ale. "dd up all the bank a**ounts in the nation0 and it would be easy to assume that all that money represents a giganti* pool of assets whi*h support the e*onomy. ?et0 every bit of this money is owed by someone. 5ome will owe nothing. 4thers will owe many times what they possess. "ll added together0 the national balan*e is <ero. (hat we think is money is but a grand illusion. The reality is debt. #obert 1emphill was the Credit )anager of the ;ederal #eserve =ank in "tlanta. In the foreword to a book by Irving ;isher0 entitled &''9 )oney0 1emphill said this: If all the bank loans were paid0 no one *ould have a bank deposit0 and there would not be a dollar of *oin or *urren*y in *ir*ulation. This is a staggering thought. (e are *ompletely dependent on the *ommer*ial banks. 5omeone has to borrow every dollar we have in *ir*ulation0 *ash0 or *redit. If the banks *reate ample syntheti* money we are prosperous: if not0 we starve. (e are absolutely without a permanent money system. (hen one gets a *omplete grasp of the pi*ture0 the tragi* absurdity of our hopeless situation is almost in*redible 77 but there it is. (ith the knowledge that money in "meri*a is based on debt0 it should not *ome as a surprise to learn that the ;ederal #eserve 5ystem is not the least interested in seeing a redu*tion in debt in this *ountry0 regardless of publi* utteran*es to the *ontrary. 1ere is the bottom line from the 5ystem,s own publi*ations. The ;ederal #eserve =ank of Dhiladelphia says: 6" large and growing number of analysts0 on the other hand0 now regard the national debt as something useful0 if not an a*tual blessing . . . FThey believeG the national debt need not be redu*ed at all.6 The ;ederal #eserve =ank of Chi*ago adds: 6Aebt 77 publi* and private 77 is here to stay. It plays an essential role in e*onomi* pro*esses . . . (hat is re3uired is not the abolition of debt0 but its prudent use and intelligent management.6 (hat,s wrong with a little debt+ There is a kind of fas*inating appeal to this theory. It gives those who e2pound it an aura of intelle*tualism0 the appearan*e of being able to grasp a *omple2 e*onomi* prin*iple that is beyond the *omprehension of mere mortals. "nd0 for the less a*ademi*ally minded0 it offers the *omfort of at least sounding moderate. "fter all0 what,s wrong with a little debt0 prudently used and intelligently managed+ The answer is nothing0 provided the debt is based on an honest transa*tion. There is plenty wrong with it if it is 6based upon fraud6. "n honest transa*tion is one in whi*h a borrower pays an agreed upon sum in return for the

temporary use of a lender,s asset. That asset *ould be anything of tangible value. If it were an automobile0 for e2ample0 then the borrower would pay 6rent.6 If it is money0 then the rent is *alled 6interest.6 ither way0 the *on*ept is the same. (hen we go to a lender 77 either a bank or a private party 77 and re*eive a loan of money0 we are willing to pay interest on the loan in re*ognition of the fa*t that the money we are borrowing is an asset whi*h we want to use. It seems only fair to pay a rental fee for that asset to the person who owns it. It is not easy to a*3uire an automobile0 and it is not easy to a*3uire money 77 real money0 that is. If the money we are borrowing was earned by someone,s labor and talent0 they are fully entitled to re*eive interest on it. =ut what are we to think of money that is *reated by the mere stroke of a pen or the *li*k of a *omputer key+ (hy should anyone *olle*t a rental fee on that+ (hen banks pla*e *redits into your *he*king a**ount0 they are merely pretending to lend you money. In reality0 they have nothing to lend. ven the money that non7indebted depositors have pla*ed with them was originally *reated out of nothing in response to someone else,s loan. 5o what entitles the banks to *olle*t rent on nothing+ It is immaterial that men everywhere are for*ed by law to a**ept these nothing *ertifi*ates in e2*hange for real goods and servi*es. (e are talking here0 not about what is legal0 but what is moral. "s Thomas Jefferson observed at the time of his protra*ted battle against *entral banking in the @nited 5tates0 6>o one has a natural right to the trade of money lender0 but he who has money to lend.6 Third reason to abolish the system. Centuries ago0 usury was defined as any interest *harged for a loan. )odern usage has redefined it as e2*essive interest. Certainly0 any amount of interest *harged for a pretended loan is e2*essive. The di*tionary0 therefore0 needs a new definition. @sury: The *harging of any interest on a loan of fiat money. Bet us0 therefore0 look at debt and interest in this light. Thomas dison summed up the immorality of the system when he said: Deople who will not turn a shovel of dirt on the proje*t F)us*le 5hoalsG nor *ontribute a pound of materials will *olle*t more money . . . than will the people who will supply all the materials and do all the work. Is that an e2aggeration+ Bet us *onsider the pur*hase of a E&''0''' home in whi*h EC'0''' represents the *ost of the land0 ar*hite*t,s fee0 sales *ommissions0 building permits0 and that sort of thing and EH'0''' is the *ost of labor and building materials. If the home buyer puts up EC'0''' as a down payment0 then EH'0''' must be borrowed. If the loan is issued at &&9 over a C'7year period0 the amount of interest paid will be E&IH0J'I. That means the amount paid to those who loan the money is about K &/K times greater than paid to those who provide all the labor and all the materials. It is true that this figure represents the time7value of that money over thirty years and easily *ould be justified on the basis that a lender deserves to be *ompensated for surrendering the use of his *apital for half a lifetime. =ut that assumes the lender a*tually had something to surrender0 that he had earned the *apital0 saved it0 and then loaned it for *onstru*tion of someone else,s house. (hat are we to think0 however0 about a lender who did nothing to earn the money0 had not saved it0 and0 in fa*t0 simply *reated it out of thin air+ (hat is the time7value of nothing+ "s we have already shown0 every dollar that e2ists today0 either in the form of *urren*y0 *he*kbook money0 or even *redit *ard money 77 in other words0 our entire money supply 77 e2ists only be*ause it was borrowed by someone: perhaps not you0 but someone.

That means all the "meri*an dollars in the entire world are earning daily and *ompounding interest for the banks whi*h *reated them. " portion of every business venture0 every investment0 every profit0 every transa*tion whi*h involves money 77 and that even in*ludes losses and the payment of ta2es 77 a portion of all that is earmarked as payment to a bank. "nd what did the banks do to earn this perpetually flowing river of wealth+ Aid they lend out their own *apital obtained through investment of sto*kholders+ Aid they lend out the hard7earned savings of their depositors+ >o0 neither of these were their major sour*e of in*ome. They simply waved the magi* wand *alled fiat money. The flow of su*h unearned wealth under the guise of interest *an only be viewed as usury of the highest magnitude. ven if there were no other reasons to abolish the ;ed0 the fa*t that it is the supreme instrument of usury would be more than suffi*ient by itself. (ho *reates the money to pay the interest+ 4ne of the most perple2ing 3uestions asso*iated with this pro*ess is 6(here does the money *ome from to pay the interest+6 If you borrow E&'0''' from a bank at .90 you owe E&'0.''. =ut the bank only manufa*tures E&'0''' for the loan. It would seem0 therefore0 that there is no way that you 77 and all others with similar loans 77 *an possibly pay off your indebtedness. The amount of money put into *ir*ulation just isn,t enough to *over the total debt0 in*luding interest. This has led some to the *on*lusion that it is ne*essary for you to borrow the E.'' for interest0 and that0 in turn0 leads to still more interest. The assumption is that0 the more we borrow0 the more we have to borrow0 and that debt based on fiat money is a never ending spiral leading ine2orably to more and more debt. This is a partial truth. It is true that there is not enough money *reated to in*lude the interest0 but it is a falla*y that the only way to pay it ba*k is to borrow still more. The assumption fails to take into a**ount the e2*hange value of labor. Bet us assume that you pay ba*k your E&'0''' loan at the rate of appro2imately E.'' per month and that about EJ' of that represents interest. ?ou reali<e you are hard pressed to make your payments so you de*ide to take on a part7time job. The bank0 on the other hand0 is now making EJ' profit ea*h month on your loan. 5in*e this amount is *lassified as 6interest06 it is not e2tinguished as is the larger portion whi*h is a return of the loan itself. 5o this remains as spendable money in the a**ount of the bank. The de*ision then is made to have the bank,s floors wa2ed on*e a week. ?ou respond to the ad in the paper and are hired at EJ' per month to do the job. The result is that you earn the money to pay the interest on your loan0 and 77 this is the point 77 the money you re*eive is the same money whi*h you previously had paid. "s long as you perform labor for the bank ea*h month0 the same dollars go into the bank as interest0 then out of the revolving door as your wages0 and then ba*k into the bank as loan repayment. It is not ne*essary that you work dire*tly for the bank. >o matter where you earn the money0 its origin was a bank and its ultimate destination is a bank. The loop through whi*h it travels *an be large or small0 but the fa*t remains all interest is paid eventually by human effort. "nd the signifi*an*e of that fa*t is even more startling than the assumption that not enough money is *reated to pay ba*k the interest. It is that the total of this human effort ultimately is for the benefit of those who *reate fiat money. It is a form of modern serfdom in whi*h the great mass of so*iety works as indentured servants to a ruling *lass of finan*ial nobility. @nderstanding the Illusion . . . That,s really all one needs to know about the operation of the banking *artel under the prote*tion of the ;ederal #eserve. =ut it would be a shame to stop here without taking a look at the a*tual

*ogs0 mirrors0 and pulleys that make the magi*al me*hanism work. It is a truly fas*inating engine of mystery and de*eption. Bet us0 therefore0 turn our attention to the a*tual pro*ess by whi*h the magi*ians *reate the illusion of modern money. ;irst we shall stand ba*k for a general view to see the overall a*tion. Then we shall move in *loser and e2amine ea*h *omponent in detail. The )andrake )e*hanism: "n 4verview The entire fun*tion of this ma*hine is to *onvert debt into money. It,s just that simple. ;irst0 the ;ed takes all the government bonds whi*h the publi* does not buy and writes a *he*k to Congress in e2*hange for them. !It a*3uires other debt obligations as well0 but government bonds *omprise most of its inventory.% There is no money to ba*k up this *he*k. These fiat dollars are *reated on the spot for that purpose. =y *alling those bonds 6reserves06 the ;ed then uses them as the base for *reating nine !.% additional dollars for every dollar *reated for the bonds themselves. The money *reated for the bonds is spent by the government0 whereas the money *reated on top of those bonds is the sour*e of all the bank loans made to the nation,s businesses and individuals. The result of this pro*ess is the same as *reating money on a printing press0 but the illusion is based on an a**ounting tri*k rather than a printing tri*k. The bottom line is that Congress and the banking *artel have entered into a partnership in whi*h the *artel has the privilege of *olle*ting interest on money whi*h it *reates out of nothing0 a perpetual override on every "meri*an dollar that e2ists in the world. Congress0 on the other hand0 has a**ess to unlimited funding without having to tell the voters their ta2es are being raised through the pro*ess of inflation. If you understand this paragraph0 you understand the ;ederal #eserve 5ystem. >ow for a more detailed view. There are three general ways in whi*h the ;ederal #eserve *reates fiat money out of debt. 4ne is by making loans to the member banks through what is *alled the Ais*ount (indow. The se*ond is by pur*hasing Treasury bonds and other *ertifi*ates of debt through what is *alled the 4pen )arket Committee. The third is by *hanging the so7*alled reserve ratio that member banks are re3uired to hold. a*h method is merely a different path to the same obje*tive: taking I4@s and *onverting them into spendable money. T1 AI5C4@>T (I>A4( The Ais*ount (indow is merely bankers, language for the loan window. (hen banks run short of money0 the ;ederal #eserve stands ready as the 6bankers, bank6 to lend it. There are many reasons for them to need loans. 5in*e they hold 6reserves6 of only about one or two per *ent of their deposits in vault *ash and eight or nine per *ent in se*urities0 their operating margin is e2tremely thin. It is *ommon for them to e2perien*e temporary negative balan*es *aused by unusual *ustomer demand for *ash or unusually large *lusters of *he*ks all *learing through other banks at the same time. 5ometimes they make bad loans and0 when these former 6assets6 are removed from their books0 their 6reserves6 are also de*reased and may0 in fa*t0 be*ome negative. ;inally0 there is the profit motive. (hen banks borrow from the ;ederal #eserve at one interest rate and lend it out at a higher rate0 there is an obvious advantage. =ut that is merely the beginning.

(hen a bank borrows a dollar from the ;ed0 it be*omes a one7dollar reserve. 5in*e the banks are re3uired to keep reserves of only about ten per *ent0 they a*tually *an loan up to nine dollars for ea*h dollar borrowed. Bet,s take a look at the math. "ssume the bank re*eives E& million from the ;ed at a rate of J9. The total annual *ost0 therefore0 is EJ'0''' !.'J L E&0'''0'''%. The bank treats the loan as a *ash deposit0 whi*h means it be*omes the basis for manufa*turing an additional E. million to be lent to its *ustomers. If we assume that it lends that money at &&9 interest0 its gross return would be E..'0''' !.&& L E.0'''0'''%. 5ubtra*t from this the bank,s *ost of EJ'0''' plus an appropriate share of its overhead0 and we have a net return of about E.''0'''. In other words0 the bank borrows a million and *an almost double it in one year. That,s leverage- =ut don,t forget the sour*e of that leverage: the manufa*ture of another E. million whi*h is added to the nation,s money supply. T1 4D > )"#M T 4D #"TI4> The most important method used by the ;ederal #eserve for the *reation of fiat money is the pur*hase and sale of se*urities on the open market. =ut0 before jumping into this0 a word of warning. Aon,t e2pe*t what follows to make any sense. Just be prepared to know that this is how they do it. The tri*k lies in the use of words and phrases whi*h have te*hni*al meanings 3uite different from what they imply to the average *iti<en. 5o keep your eye on the words. They are not meant to e2plain but to de*eive. In spite of first appearan*es0 the pro*ess is not *ompli*ated. It is just absurd. T1 )">A#"M ) C1">I5): " A T"IB A NI ( 5tart with . . . G4N #>) >T A =T The federal government adds ink to a pie*e of paper0 *reates impressive designs around the edges0 and *alls it a bond or Treasury note. It is merely a promise to pay a spe*ified sum at a spe*ified interest on a spe*ified date. "s we shall see in the following steps0 this debt eventually be*omes the foundation for almost the entire nation,s money supply. In reality0 the government has *reated *ash0 but it doesn,t yet look like *ash. To *onvert these I4@s into paper bills and *he*kbook money is the fun*tion of the ;ederal #eserve 5ystem. To bring about that transformation0 the bond is given to the ;ed where it is then *lassified as a . . . 5 C@#ITI 5 "55 T "n instrument of government debt is *onsidered an asset be*ause it is assumed the government will keep its promise to pay. This is based upon its ability to obtain whatever money it needs through ta2ation. Thus0 the strength of this asset is the power to take ba*k that whi*h it gives. 5o the ;ederal #eserve now has an 6asset6 whi*h *an be used to offset a liability. It then *reates this liability by adding ink to yet another pie*e of paper and e2*hanging that with the government in return for the asset. That se*ond pie*e of paper is a . . . ; A #"B # 5 #N C1 CM There is no money in any a**ount to *over this *he*k. "nyone else doing that would be sent to prison. It is legal for the ;ed0 however0 be*ause Congress wants the money0 and this is the easiest way to get it. !To raise ta2es would be politi*al sui*ide: to depend on the publi* to buy all the bonds would not be realisti*0 espe*ially if interest rates are set artifi*ially low: and to print very

large 3uantities of *urren*y would be obvious and *ontroversial.% This way0 the pro*ess is mysteriously wrapped up in the banking system. The end result0 however0 is the same as turning on government printing presses and simply manufa*turing fiat money !money *reated by the order of government with nothing of tangible value ba*king it% to pay government e2penses. ?et0 in a**ounting terms0 the books are said to be 6balan*ed6 be*ause the liability of the money is offset by the 6asset6 of the I4@. The ;ederal #eserve *he*k re*eived by the government then is endorsed and sent ba*k to one of the ;ederal #eserve banks where it now be*omes a . . . G4N #>) >T A D45IT 4n*e the ;ederal #eserve *he*k has been deposited into the government,s a**ount0 it is used to pay government e2penses and0 thus0 is transformed into many . . . G4N #>) >T C1 CM5 These *he*ks be*ome the means by whi*h the first wave of fiat money floods into the e*onomy. #e*ipients now deposit them into their own bank a**ounts where they be*ome . . . C4)) #CI"B =">M A D45IT5 Commer*ial bank deposits immediately take on a split personality. 4n the one hand0 they are liabilities to the bank be*ause they are owed ba*k to the depositors. =ut0 as long as they remain in the bank0 they also are *onsidered as assets be*ause they are on hand. 4n*e again0 the books are balan*ed: the assets offset the liabilities. =ut the pro*ess does not stop there. Through the magi* of fra*tional7reserve banking0 the deposits are made to serve an additional and more lu*rative purpose. To a**omplish this0 the on7hand deposits now be*ome re*lassified in the books and *alled . . . =">M # 5 #N 5 #eserves for what+ "re these for paying off depositors should they want to *lose out of their a**ounts+ >o. That,s the lowly fun*tion they served when they were *lassified as mere assets. >ow that they have been given the name of 6reserves06 they be*ome the magi* wand to materiali<e even larger amounts of fiat money. This is where the real a*tion is: at the level of the *ommer*ial banks. 1ere,s how it works. The banks are permitted by the ;ed to hold as little as &'9 of their deposits in 6reserve.6 That means0 if they re*eive deposits of E& million from the first wave of fiat money *reated by the ;ed0 they have E.''0''' more than they are re3uired to keep on hand !E& million less &'9 reserve%. In bankers, language0 that E.''0''' is *alled . . . LC 55 # 5 #N 5 The word 6e2*ess6 is a tip off that these so7*alled reserves have a spe*ial destiny. >ow that they have been transmuted into an e2*ess0 they are *onsidered as available for lending. "nd so in due *ourse these e2*ess reserves are *onverted into . . . =">M B4">5 =ut wait a minute. 1ow *an this money be loaned out when it is owned by the original depositors who are still free to write *he*ks and spend it any time they wish+ The answer is that0 when the new loans are made0 they are not made with the same money at all. They are made with brand new money *reated out of thin air for that purpose. The nation,s money supply simply in*reases by ninety per *ent of the bank,s deposits. ;urthermore0 this new money is far more interesting to the banks than the old. The old money0 whi*h they re*eived from depositors0 re3uires them to pay out interest or perform servi*es for the privilege of using it. =ut0 with the new money0 the banks *olle*t interest0 instead0 whi*h is not too bad *onsidering it *ost them nothing to make. >or is that

the end of the pro*ess. (hen this se*ond wave of fiat money moves into the e*onomy0 it *omes right ba*k into the banking system0 just as the first wave did0 in the form of . . . )4# C4)) #CI"B =">M A D45IT5 The pro*ess now repeats but with slightly smaller numbers ea*h time around. (hat was a 6loan6 on ;riday *omes ba*k into the bank as a 6deposit6 on )onday. The deposit then is re*lassified as a 6reserve6 and ninety per *ent of that be*omes an 6e2*ess6 reserve whi*h0 on*e again0 is available for a new 6loan.6 Thus0 the E& million of first wave fiat money gives birth to E.''0''' in the se*ond wave0 and that gives birth to EJ&'0''' in the third wave !E.''0''' less &'9 reserve%. It takes about twenty7eight times through the revolving door of deposits be*oming loans be*oming deposits be*oming more loans until the pro*ess plays itself out to the ma2imum effe*t0 whi*h is . . . =">M ;I"T )4> ? O @D T4 . TI) 5 G4N #>) >T A =T The amount of fiat money *reated by the banking *artel is appro2imately nine times the amount of the original government debt whi*h made the entire pro*ess possible. (hen the original debt itself is added to that figure0 we finally have . . . T4T"B ;I"T )4> ? O @D T4 &' TI) 5 G4N #>) >T The total amount of fiat money *reated by the ;ederal #eserve and the *ommer*ial banks together is appro2imately ten times the amount of the underlying government debt. To the degree that this newly *reated money floods into the e*onomy in e2*ess of goods and servi*es0 it *auses the pur*hasing power of all money0 both old and new0 to de*line. Dri*es go up be*ause the relative value of the money has gone down. The result is the same as if that pur*hasing power had been taken from us in ta2es. The reality of this pro*ess0 therefore0 is that it is a . . . 1IAA > T"L O @D T4 &' TI) 5 T1 >"TI4>"B A =T (ithout reali<ing it0 "meri*ans have paid over the years0 in addition to their federal in*ome ta2es and e2*ise ta2es0 a *ompletely hidden ta2 e3ual to many times the national debt- "nd that still is not the end of the pro*ess. 5in*e our money supply is purely an arbitrary entity with nothing behind it e2*ept debt0 its 3uantity *an go down as well as up. (hen people are going deeper into debt0 the nation,s money supply e2pands and pri*es go up0 but when they pay off their debts and refuse to renew0 the money supply *ontra*ts and pri*es tumble. That is e2a*tly what happens in times of e*onomi* or politi*al un*ertainty. This alternation between period of e2pansion and *ontra*tion of the money supply is the underlying *ause of . . . =44)50 =@5T50 ">A A D# 55I4>5 (ho benefits from all of this+ Certainly not the average *iti<en. The only benefi*iaries are the politi*al s*ientists in Congress who enjoy the effe*t of unlimited revenue to perpetuate their power0 and the monetary s*ientists within the banking *artel *alled the ;ederal #eserve 5ystem who have been able to harness the "meri*an people0 without their knowing it0 to the yoke of modern feudalism. # 5 #N #"TI45 The previous figures are based on a 6reserve6 ratio of &'9 !a money7e2pansion ratio of &'7to7&%. It must be remembered0 however0 that this is purely arbitrary. 5in*e the money is fiat with no previous7metal ba*king0 there is no real limitation e2*ept what the politi*ians and money managers de*ide is e2pedient for the moment. "ltering this ratio is the third way in whi*h the ;ederal #eserve *an influen*e the nation,s supply of money. The numbers0 therefore0 must be

*onsidered as transient. "t any time there is a 6need6 for more money0 the ratio *an be in*reased to K'7to7& or 8'7to7&0 or the pretense of a reserve *an be dropped altogether. There is virtually no limit to the amount of fiat money that *an be manufa*tured under the present system. >"TI4>"B A =T >4T > C 55"#? ;4# I>;B"TI4> =e*ause the ;ederal #eserve *an be *ounted on to 6moneti<e6 !*onvert into money% virtually any amount of government debt0 and be*ause this pro*ess of e2panding the money supply is the primary *ause of inflation0 it is tempting to jump to the *on*lusion that federal debt and inflation are but two aspe*ts of the same phenomenon. This0 however0 is not ne*essarily true. It is 3uite possible to have either one without the other. The banking *artel holds a monopoly in the manufa*ture of money. Conse3uently0 money is *reated only when I4@s are 6moneti<ed6 by the ;ed or by *ommer*ial banks. (hen private individuals0 *orporations0 or institutions pur*hase government bonds0 they must use money they have previously earned and saved. In other words0 no new money is *reated0 be*ause they are using funds that are already in e2isten*e. Therefore0 the sale of government bonds to the banking system is inflationary0 but when sold to the private se*tor0 it is not. That is the primary reason the @nited 5tates avoided massive inflation during the &.J's when the federal government was going into debt at a greater rate than ever before in its history. =y keeping interest rates high0 these bonds be*ame attra*tive to private investors0 in*luding those in other *ountries. Nery little new money was *reated0 be*ause most of the bonds were pur*hased with "meri*an dollars already in e2isten*e. This0 of *ourse0 was a temporary fi2 at best. Today0 those bonds are *ontinually maturing and are being repla*ed by still more bonds to in*lude the original debt plus a**umulated interest. ventually this pro*ess must *ome to an end and0 when it does0 the ;ed will have no *hoi*e but to literally buy ba*k all the debt of the ,J's 77 that is0 to repla*e all of the formerly invested private money with newly manufa*tured fiat money 77 plus a great deal more to *over the interest. Then we will understand the meaning of inflation. 4n the other side of the *oin0 the ;ederal #eserve has the option of manufa*turing money even if the federal government does not go deeper into debt. ;or e2ample0 the huge e2pansion of the money supply leading up to the sto*k market *rash in &.K. o**urred at a time when the national debt was being paid off. In every year from &.K' through &.C'0 federal revenue e2*eeded e2penses0 and there were relatively few government bonds being offered. The massive inflation of the money supply was made possible by *onverting *ommer*ial bank loans into 6reserves6 at the ;ed,s dis*ount window and by the ;ed,s pur*hase of banker,s a**eptan*es0 whi*h are *ommer*ial *ontra*ts for the pur*hase of goods. >ow the options are even greater. The )onetary Control "*t of &.J' has made it possible for the Creature to moneti<e virtually any debt instrument0 in*luding I4@s from foreign governments. The apparent purpose of this legislation is to make it possible to bail out those governments whi*h are having trouble paying the interest on their loans from "meri*an banks. (hen the ;ed *reates fiat "meri*an dollars to give foreign governments in e2*hange for their worthless bonds0 the money path is slightly longer and more twisted0 but the effe*t is similar to the pur*hase of @.5. Treasury =onds. The newly *reated dollars go to the foreign governments0 then to the "meri*an banks where they be*ome *ash reserves. ;inally0 they flow ba*k into the @.5 money pool !multiplied by nine% in the form of additional loans. The *ost of the operation on*e again is born by the "meri*an *iti<en through the loss of pur*hasing power. 2pansion of the money supply0 therefore0 and the inflation that follows0 no longer even re3uire federal defi*its. "s long as someone is willing to borrow "meri*an dollars0 the *artel will have the option of *reating those dollars spe*ifi*ally to pur*hase their bonds and0 by so doing0 *ontinue to e2pand the money supply. (e must not forget0 however0 that one of the reasons the ;ed was *reated in the first pla*e was to

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make it possible for Congress to spend without the publi* knowing it was being ta2ed. "meri*ans have shown an ama<ing indifferen*e to this flee*ing0 e2plained undoubtedly by their la*k of understanding of how the )andrake )e*hanism works. Conse3uently0 at the present time0 this *o<y *ontra*t between the banking *artel and the politi*ians is in little danger of being altered. "s a pra*ti*al matter0 therefore0 even though the ;ed may also *reate fiat money in e2*hange for *ommer*ial debt and for bonds of foreign governments0 its major *on*ern likely will be to *ontinue supplying Congress. The impli*ations of this fa*t are mind boggling. 5in*e our money supply0 at present at least0 is tied to the national debt0 to pay off that debt would *ause money to disappear. ven to seriously redu*e it would *ripple the e*onomy. Therefore0 as long as the ;ederal #eserve e2ists0 "meri*a will be0 must be0 in debt. The pur*hase of bonds from other governments is a**elerating in the present politi*al *limate of internationalism. 4ur own money supply in*reasingly is based upon their debt as well as ours0 and they0 too0 will not be allowed to pay it off even if they are able. LD">5I4> B "A5 T4 C4>T#"CTI4> (hile it is true that the )andrake )e*hanism is responsible for the e2pansion of the money supply0 the pro*ess also works in reverse. Just as money is *reated when the ;ederal #eserve pur*hases bonds or other debt instruments0 it is e2tinguished by the sale of those same items. (hen they are sold0 the money is given ba*k to the 5ystem and disappears into the inkwell or *omputer *hip from whi*h it *ame. Then0 the same se*ondary ripple effe*t that *reated money through the *ommer*ial banking system *auses it to be withdrawn from the e*onomy. ;urthermore0 even if the ;ederal #eserve does not deliberately *ontra*t the money supply0 the same result *an and often does o**ur when the publi* de*ides to resist the availability of *redit and redu*e its debt. " man *an only be tempted to borrow0 he *annot be for*ed to do so. There are many psy*hologi*al fa*tors involved in a de*ision to go into debt that *an offset the easy availability of money and a low interest rate: " downturn in the e*onomy0 the threat of *ivil disorder0 the fear of pending war0 an un*ertain politi*al *limate0 to name just a few. ven though the ;ed may try to pump money into the e*onomy by making it abundantly available0 the publi* *an thwart that move simply by saying no0 thank you. (hen this happens0 the old debts that are being paid off are not repla*ed by new ones to take their pla*e0 and the entire amount of *onsumer and business debt will shrink. That means the money supply also will shrink0 be*ause0 in modern "meri*a0 debt is money. "nd it is this very e2pansion and *ontra*tion of the monetary pool 77 a phenomenon that *ould not o**ur if based upon the laws of supply and demand 77 that is at the very *ore of pra*ti*ally every boom and bust that has plagued mankind throughout history. In *on*lusion0 it *an be said that modern money is a grand illusion *onjured by the magi*ians of finan*e in politi*s. (e are living in an age of fiat money0 and it is sobering to reali<e that every previous nation in history that has adopted su*h money eventually was e*onomi*ally destroyed by it. ;urthermore0 there is nothing in our present monetary stru*ture that offers any assuran*es that we may be e2empted from that morbid roll *all. Corre*tion. There is one. It is still within the power of Congress to abolish the ;ederal #eserve 5ystem. 5@))"#? The "meri*an dollar has no intrinsi* value. It is a *lassi* e2ample of fiat money with no limit to the 3uantity that *an be produ*ed. Its primary value lies in the willingness of people to a**ept it and0 to that end0 legal tender laws re3uire them to do so. It is true that our money is *reated out of nothing0 but it is more a**urate to say that it is based upon debt. In one sense0 therefore0 our money is *reated out of less than nothing. The entire

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money supply would vanish into the bank vaults and *omputer *hips if all debts were repaid. @nder the present 5ystem0 therefore0 our leaders *annot allow a serious redu*tion in either the national or *onsumer debt. Charging interest on pretended loans is usury0 and that has be*ome institutionali<ed under the ;ederal #eserve 5ystem. The )andrake )e*hanism by whi*h the ;ed *onverts debt into money may seem *ompli*ated at first0 but it is simple if one remembers that the pro*ess is not intended to be logi*al but to *onfuse and de*eive. The end produ*t of the )e*hanism is artifi*ial e2pansion of the money supply0 whi*h is the root *ause of the hidden ta2 *alled inflation. This e2pansion then leads to *ontra*tion and0 together0 they produ*e the destru*tive boom7bust *y*le that has plagued mankind throughout history wherever fiat money has e2isted. jekyll.htm 'The Creature from Jekyll Island' is available from: The #eality $one "AAITI4>"B # 54@#C 5: 5 C# T 1I5T4#? 4; T1 C# AIT C"#A: D@=BIC ";;"I#5 NIA 4 http://www.pbs.org/wgbh/pages/frontline/video/flv/generi*.html+sOfrol'Ks/bd3HaP*ontinuousO& C4>; 55I4>5 4; C4>4)IC 1IT ) > http://brass*he*ktv.*om/page/C&H.html *itt e +a",i"% Secrets- READIN.

http://www.scribd.com/doc/7871832/Great-Readin -!itt"e-#an$in -%ecrets-and-&ontro"

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