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