"Thin air thou art, and unto thin air thou shalt return"

Reviewing the Federal Reserve System

jwr47

Waiting for a Butterfly to topple a Sack of Rice...1

In Mai 2011 I found my father's report on the Federal Reserve, commented by his handwriting in blue in !!! "e must have studied the wor and updated a percentage for the demand deposits for #entral reserve city ban s! $pdating 20% instead of 22% he also dated his comment at the 1 st of &ugust 1'()! "e must have received and immediately studied the issue of 1'()! *robably he had needed this issue for his administrative wor ! +ther remar s had been rare in this wor and in his first review 1'() my father must have been satisfied with the system! &nd indeed, in its raw structure the Federal Reserve ,ystem had been designed as a sound concept, basically secured by collateral bac ups and well-designed regulations! .oday's problems initially had been caused by deregulation to be followed by e/cessive frauds respectively corruption! I did my own analysis much later, in 0une 2011 at a gold-price of 11002! Much has been changing since that date and a review seemed to be necessary! 3hat is to be said for the monetary base for individual citi4ens5 In contradiction to what the Fed is claiming gold is the temporarily suspended Base of the Dollar. I don't really care what the ban ers are saying! &s long as gold may be bought and sold the base if the monetary system is intact! &nd even if the base is being manipulated it's basic function has not been changed! For the individual citi4en the current base of the monetary system is acceptable! .he greatest ris today is not the value of long-term-savings as individual savers can simple convert fiat money to gold and silver! .he real problem is the systemic ris of destabili4ation! Removing safety valves may improve operations and ma e a plant more profitable! .he ris s of deregulation however will not be mad visible until the e/plosion devastates investments! From time to time I inspect the progress of the Fu ushima clean-up activities, where it really must be a hard 6ob to re-install safety-valves into a bro en plant!!! In the meantime I am 6ust sitting here, waiting for the derivatives and stoc mar ets to e/plode! I am not sure when this is going to happen! Maybe it all depends on the sac of rice or a butterfly's wings!!! The flap of a butterflys wings in Brazil may topple a sack of rice in Shanghai, which in turn dematerializes the dollar to thin air. It sounds li e a self-fulfilling 7iblical prophecy in the metaphor 8.hin &ir to .hin &ir9 2: ;.hin air thou art, and unto thin air thou shalt return; <

1 7oth the butterfly's wings and the sac of rice have been used as unimpressive symptoms for relevant impacts! .he image of the sack of rice toppling over in China is used as a symbol for everything too far away or too unimportant to be of interest to us! oes the flap of a butterflys wings in Brazil set off a tornado in Te!as" has been based on the idea that a butterfly's wings might create tiny changes in the atmosphere that may ultimately alter the path of a tornado 2 ;&shes to ashes, dust to dust; < ;=ust thou art, and unto dust thou shalt return; >?enesis <:1'@, and >for ;&shes to ashes, dust to dust;@ ;I will bring thee to ashes upon the earth in the sight of all them that behold thee; >A4e iel 2B:1B@!

The Federal Reserve System

I started with studying my father's copy of .he Federal Reserve ,ystem, published by the 7oard of ?overnors of the Fed >1'()@! .he 20B page long copy I found in my father's library had been printed 1'() and belonged to the third edition)! .he first edition had been dated 1'<'! In my first study, well before the real depression started, I already had uttered the Cuestion: 3hat happens if a probably poorly paid designer discovers a fine, but un nown and hardly discoverable method to earn a fantastic amount of dollars by tilting the system! 3ould he report his detected error to his boss or would he sell his invention to a criminal person5 I said to myself: if systemic errors are to be found, human nature is wea enough to e/ploit the problematic spot and suc as much advantage as possible from the gift! .hat would be nature's reaction! .here is no thing li e honesty in financial or monetary business! In the issue of 1'() I identified a couple of deficiencies as I had described 0une 2011 (! Aach chapter had its own violations: 1! >chapter I-purpose@ .he purpose of the Fed is to improve supervision of banking, and to provide conditions for high employment, stable values, growth of the country and a rising level of consumption. In the course of three years >2011-201)@ these assumptions simply have been proven as false! 2! >chapter II-#redit D ,ecurities@ Eobody inside and outside the Fed seems to have foreseen a sudden global breakdown in the supply-chain of low-risk investment securities ! .hey have been replaced by high-ris securities! <! >chapter III-#hec s for 8undue use9 D speculation@ In the 1'()-version of the system the nation's gold reserves had been defined as 8 the base of its monetary system 9! .he Reserve 7an s must hold !" reserve in gold certificates against their liabilities for deposits and notes!8 In the Ei/on-shoc 1'11 however the system had been 8debased9 and defaulted on the spot! )! >chapter IF-,peculation@ .he Federal Reserve authorities are en6oined by law to restrain the use of bank credit for speculation! .his law obviously has not been considered worthwhile! In fact speculation is today's game of the day and the only possibility to earn a fast buc ! (! >chapter FII-?old@ .he standard dollar had been defined as the weight of gold! ?old is the reserve money of the Federal Reserve banks! .he chapter FII >titled gold@ however simply had been s ipped! G! >chapter IH-=ebts@ Federal Reserve influence on the flow of credit and money effects the volume of lending, spending and saving has been restricted to piling up debt! .here is no real saving at 0% effective interest rate! #learly the Federal Reserve ,ystem had been overthrown at the Ei/on-shoc 1'11! .he monetary system had been debased in the sense that it had 8lost its foundation9! .he e/plosive forces of monetary e/pansion spo e for themselves! Aven as long as the containment had been ept intact the increasing pressure was to produce fissures in a system, in which virtually all regulators and safety-valves had been removed!

) $nder the Iibrary of #ongress #atalog #ard Eumber <'-2G11' I found a newer version from 1'B) : .he Federal Reserve ,ystem: purpose and functions: 7and 1 ( documented in ,elected Footnotes - .he #oncentrated reading pro6ect

=eregulation is an ongoing process and safety-valves are being removed year after year! ,ome of the deregulation actions have been listed in 3i ipedia's entry eregulation # $inance! $ncontrolled deregulation behaves li e removing control valves from a nuclear reactor in which the core's activity is e/panding till is melts and finally e/plodes! For e/ample: in the savings and loan industry thousands of criminal complaints led to over a thousand felony convictions, but 8the elite's financial fraud has effectively been decriminali4ed9! =ecriminali4ation of monetary e/plosions signals 8no harm has been done to anybody9! ,avers are not allowed to signal the pain of losses! &ll we lost will be compensated by new printing!

Gold is the temporarily suspended Base of the Dollar System

3hatever it too J Ei/on merely temporarily switched off the redemption of gold G! .his has been said in his television announcement: 8I have directed ,ecretary #onnally to suspend temporarily the convertibility of the dollar into gold!!9 K 8.he effect of this action, in other words, will be to stabili4e the dollar!9L10M .he current Fed claims gold does not even e/ist any more as a base J forever! &nd of course the dollar has not been stabili4ed J it's status is declining from day to day, which may be followed in the news!!! For ordinary people there is no obligation to redeem dollars in gold! 7ut what had they recently been doing in dealing with the #hinese5 ,ince 2012 they freely deliver gold in e/change for dollars at a very low rate of ca! 12002! +bviously gold is still to be considered as a 8 the base of its monetary system 9, although there is no obligation to redeem the fiat money! ?old may be 8bought at an acceptable price9 and 8as long as it is available9!

My personal monetary system

.hat's +N for individual citi4ens! "ere it is: my personal monetary system: ?old is base money to each citi4en's own long-term monetary system and it may be e/changed at a spot price to dollars, vice versa! &s long as this monetary principle is intact individual citi4ens do not care what the ban s around them are doing!

Distrust
?old now permanently is in bac wardation, which is defined in the range of negative ?ofo-values 1, implying that physical gold in hand is worth more than the promise to deliver physical gold in the near futureB! It's the distrust in the redeeming of real value for fiat paper!

G %i!on Shock J 3i ipedia - Ei/on, Richard! ;&ddress to the Eation +utlining a Eew Aconomic *olicy: ;.he #hallenge of *eace;;! 1 I7M& - *ricing and ,tatistics B "istoric bac wardation in the gold bullion mar et

Appendix: The Federal Reserve System - by the Board of Governors of the Fed (19 !"9 #
,ubtitle: *urposes and Functions *ublished: First Adition 1'<', third edition: 1'() Aditor: the 7oard of ?overnors of the Federal Reserve ,ystem ,i4e: 20B pages category: +verview and e/planation of the $,-monetary system

Chapter I - The Federal Reserve Act ( ! "#

.he Federal Reserve &ct had been signed =ecember 1'1< by *resident 3oodrow 3ilson! Its original purposes were to: 8to give the country an elastic currency, to provide facilities for discounting commercial paper and to improve the supervision of banking#$9 8to create conditions to sustained high employment, stable values, growth of the country and a rising level of consumption!9 ,ome of these goals really were to be successful for nearly a century J from 1'1< up to 2011, but at the very moment >at the end of 2011@ the system seems to be very near to a brea down! Amployment is at low levels, values are unstable and growth is e/tremely low! #onsumption traditionally is being financed by growing debts! ,omething strange has been happening to the Federal Reserve ,ystem! For these reasons I decided to invest some time to study this old boo let! +f course the Federal Reserve indirectly affects every phase of %merican enterprise and virtually every person inside &and outside' the &nited States! .hat's why anybody should consider her- or himself as involved! .he bac ground of the Federal Reserve ,ystem started in smaller cities and rural (S) regions! Aach year credit demand was tight up to problematic during the crop-moving season, resulting in sharply rising interest rates! Avery few years difficulties used to provo e a monetary crisis##! 3hen credit becomes scarce and hard to get or costs too much the companies may curtail operations, eventually resulting in a serious depression, unemployment and distress! 3hen in contrast credit becomes abundant and cheap the reverse development results in inflation! Rising prices may be followed by higher wages, but eventually a downward spiral may develop! .hese effects had been identified as serious problems to be avoided# ! .o operate under safe conditions ban s are reCuired by law to hold reserves eCual to a designated percentage of their deposits! I was astonished to identify the high rates, which as a safe margin had been prescribed in 1'()#': #entral reserve city ban s were obliged to hold a reserve of ", reserve city ban s needed #(" and other member ban s #'"!

' 10 11 12 1<

from ,elected Footnotes - .he #oncentrated reading pro6ect page 1 page < page B-' page 1)

In simple sample calculations the boo let now e/plains how a ban deposit of 10 billion dollars of reserve money with the member ban results in a growth of )0 billion in loans and investments and of (0 billion in demand deposits #)! .his invention provides the powerful basis for an !-fold increase of the monetary reserve's amount in the money supply! It is shown that Reserve Money provides multiplying capacities in bank transactions! $p to a certain limit Federal Reserve dollars really may be considered as 8high-powered9 dollars as compared to ordinary deposit dollars! 7ut right now, we now something went wrong! =id the designers oversee an important parameter5 Oes they must! +therwise the system would not have ended up in a desolate shape as it is! From my technical studies, which merely provided me with rudimentary nowledge of economics I assumed that these constructs did hide some dangerous potential behind the glamorous facades, which may have been *otem in's constructs! #ompared to analogical technical designs these inventions simply must reveal a drawbac , which may only be unveiling itself in uncommon situations under abnormal conditions! +f course these uncommon conditions are today's standard conditions! & good designer will foresee such uncommon conditions or chec his designs for all thin able possible uncommon conditions! 7ut what happens if a probably poorly paid designer discovers a fine, but un nown and hardly discoverable method to earn a fantastic amount of dollars by tilting the system! 3ould he report his detected error to his boss or would he sell his invention to a criminal person5 3e do not need too much psychological studies to find an answer to this Cuestion! +f course this idea merely arose from my fantasy J even if it will be proven to be true!!!

Chapter II - An unpro$essional and un%uali$ied desi&n ( !'4#

I decided to analy4e the concept in the manuscript's version of 1'()! ,ome important conditions for a successful monetary e/pansion have been described in chapter II#!: .he reCuired series of monetary transactions for monetary e/pansion needs time and causes delays, which may cause problems in very fast transactions! For monetary e/pansion there must be a demand for bank credit by credit-worthy borrowers &E=P+R an available supply of low-ris investment securities, which had to be appropriate for ban s to purchase! Eormally these conditions prevail, but sometimes demand is slac and securities are in short supply! =elays may cause problems in very fast transactions! In 1'() hardly anybody was supposed to foresee the ultra-fast switching technology of modern computer systems, which are performing today's monetary transactions! =elays may be essential for stabili4ing these boo ings, but on the other hand criminals may use delays for their advantage! .he series of monetary transactions loo simple, but they involve different ban s! .hey may even involve globally spread networ s! +f course the problem of worst case delays needs to be analy4ed before introducing new networ s! .he second condition, prescribing low-ris investment securities li e the bonds, obviously did not meet the need for low-risk investment re*uirements in 2011, which did lead to the catastrophic global brea down of ban ing business! .he panics resulted in bad ratings for virtually all bonds! Eobody seems to have foreseen a sudden global breakdown in the supply)chain of low)risk investment securities! .his is a serious problem, which in a Cualified system should have been noticed! For this reason both the design of the $ederal *eserve System and the design team of the modern concept must be considered as unprofessional, respectively un*ualified! .he original concept of 1'() at least had been provided with some metallic core of precious gold! I decided to investigate the function of gold in stabili4ing the system! 3ould a gold standard have
1) page 1) 1( #hapter II, page 2G

been able to protect the system5

Chapter III - Chec(s $or )undue use* and speculation

.he first two decades the Federal 7an 's authority to e/tend credit was limited to 8eligible paper9, which was meant to bra e 8over-e/pansive9 credit and money! *rime Cuality papers were short-term ?overnment securities#+! 3hen a member ban applies for accommodation a Federal Reserve ban is under no automatic obligation to grant the credit! .hey must check for ,undue use- in speculation, etc! .hese chec s for 8undue use9 in speculation, etc! seem to have failed in 2011, leading to unlimited speculation with the aid of the $ederal *eserve system! Remembering the vast impact of widespread corruption in $,-economy as described in +ustavus ,yers- .istory of the +reat /merican $ortunes11 we must even fear the infection of the famous economic education systems, in which gigantic contributions regulated a smooth flow of information and the installation of Cualified 8e/perts9 at ey-positions in the monetary circuits! .hese practices have been illustrated in BBC .wo - The 0arty-s 1ver: "ow the 3est 3ent 7ust, in which Robert *eston interviews ban ers, politicians and economists, and concludes 8that the boom we en6oyed before the crash was based on an illusion, and that the world's economy is now so unbalanced that in the 3est we face a sobering wa e-up call!9
Gold Reserves and $ebt

In some periods the inflow of gold from abroad gave member ban s additional reserves without recourse to borrowing from the Reserve ban s! .hese inflows of e/tra reserves disturbed the central control of operations! Aspecially the ,econd 3orld 3ar and the actions in financing the economic recovery resulted in a great growth of the Federal ?overnment's debt! In the 1'()-version of the system the nation's gold reserves had been defined as 8 the base of its monetary system91B! .he limits on Federal Reserve lending power were 8set by the reCuirement that the Reserve 7an s must hold !" reserve in gold certificates against their liabilities for deposits and notes!8 .he 7oard of ?overnors could suspend this reCuirement, sub6ect to penalty, for ,short periods-. Iuc ily they forgot to specify the 8short periods9, which of course may be interpreted as 100 years as well! .he fundamental concept of gold has been forgotten or lost in later years! It probably has been replaced with gold-certificates, which intrinsically are worth as much as the printed paper J that is a few cents! In summary, Federal Reserve lending power arises from the authority given by law to create money, limited by the reCuirement that aggregate liabilities on deposits and notes must not be in e.cess of ) . Federal reserves of gold certificates >prior to 1'<) holdings of gold@! Federal reserve lending power is not used for profit, but for the purpose of influencing the flow of credit and money in the interest of economic stability!

1G #hapter III, page << 11 .istory of the +reat /merican $ortunes. Folume 1Q Folume 2Q Folume <! #hicago: #harles "! Nerr D #o!, 1'0'J 1'10 Q ,ingle volume edition, Eew Oor , 1'<G! 1B #hapter III, *age ()

*ower - Eot used for profit5 +f course the power has been used to accumulate profit! .his has been noticed for decades of years!!! &t mid-1'() the actual amount of Federal Reserve deposits and notes outstanding was only 2!2 times the system's reserve of gold certificates! .he system blossomed and seemed to be a great success! .his however was not a lasting effect! .he downfall seems to have been caused by tolerating and ignoring or even protecting speculation!

Chapter I+ , -peculation
.he ris s of Stock market credits and real estate speculations had been foreseen 1'()1': 8.he Federal Reserve authorities are en6oined by law to restrain the use of ban credit for speculation! .hey are to keep themselves informed, in the language of the law, as to whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate or commodities, and they are authori4ed to ta e restrictive action to prevent undue use of credits in these fields!9 +f course no action has been ta en, but why 5 - if the concept clearly warns for these effects!!! #ould it be foreseen that someone corrupted monetary authorities to adapt the system to speculative 8investments95 *robably it couldn't! &s soon as the money involved surpassed a critical J let's say an 8irresistible9 level speculation was allowed to develop a booming phase! &nd in modern global systems the laws may be surpassed anyway: by simply moving your financial transactions to another location, beyond the critical borders!!!

Chapter +II , .old

8/old and Federal Reserve credit are the principal sources of member bank reserves ! ?old inflows reduce reliance of ban s on Federal Reserve credit and gold outflows increase it! #hanges in the country's monetary gold stoc are reflected in Federal Reserve holdings of gold certificates! 8 ?old movements are an important factor in member ban use of Federal reserve credit! .his may have been a good reason to manipulate the gold-price and at least try to remove any other influence of gold from the monetary system! In the &merican monetary system the standard dollar had been defined as the weight of gold! ?old is the reserve money of the Federal Reserve banks ! $nder the ?old Reserve &ct of 1'<) private persons were not permitted to hold >in the $,&@ any gold in monetary form 20! ?old had to be handed out at a standard price of 2<( an ounce! In 1'() the gold certificates are held as reserves of the Reserve 7an s, are not permitted to circulate outside the Reserve 7an s and may not be used for other purposes! In 1'() movements of gold from one country to another were the ultimate means by which international balances used to be settled21! 7y 2011 the generated amount of money has been overwhelming the total amount of gold! &t the current mar et price >1100 2 for an ounce@ gold merely plays a subordinate role in the monetary system! ,till gold may have returned to the system because today (tah law treats gold and silver coins as legal tender 2 dated ,ar. 34, 3566.
1' #hapter IF, *age (1 20 #hapter FII, page '' 21 #hapter FII, page 10<

.he large-scale loss of confidence in fiat money leads to considering gold as investments! ?old may also protect assets against hyper-inflation! .he remar able legal change in $tah is that the state ta/ code now treats gold and silver coins -- issued by the $!,! Mint -- as currency rather than an asset! .hat means no capital gains or other state ta/es will be levied when the coins are e/changed! If the precious metal in your 2(0 coin has a mar et value of 21,100, it still only has 2(0 dollars worth of purchasing power! .o stabili4e an efficient monetary control the need for gold movements between countries needs to be reduced! 7efore the ,econd 3orld 3ar a huge inflow of gold has been diagnosed! &fter the $nited ,tates entered the the gold inflow stopped! ?old outflow had been directed to south &merica to purchase goods! "igh values of gold may influence the mar et and the Federal Reserve's control system! .o guarantee the system's stability it may be necessary to forbid free gold trading activities! .his probably did lead to the order to manipulate the gold-price, which needs to be ept at a negligible level against the leading currencies! & return of high-priced gold may eventually supersede the ineffective inflated fiat money! 7an s might create accounts bac ed by gold and silver coins! .he new law attac s the Federal Reserve, protesting against the central ban has permanently damaged the value of the dollar by pumping trillions into the economy, drawing down the greenbac 's buying power! .he .ea-party obviously is to be considered as the main force against the inflationary death of the dying dollar! .his is 6ust the beginning! & few other states are already considering similar bills! If the $!,! dollar continues its downward spiral, more states will begin ma ing alternative plans to safeguard their economies!

Chapter I/ , 0ebts
Federal Reserve influence on the flow of credit and money effects the volume of lending, spending and saving in the economy generally! Reserve ban ing policy is said to have contributed to stable economic progress22! In retrospect however saving has been neglected against the aggressive efforts to promote lending and spending J leading the country into a deathly debt-spiral!

Chapter / , Interest Rates

Interest rates are the prices paid for credit! In 1'2B and 1'2' for e/ample, speculation in the stoc mar et had raised stoc prices so high that eCuity capital was available to corporations on more attractive terms than debt capital! .he cost of debt financing was increasing, but a corporation could sell stoc on such favorable terms that this became the favored method of financing! Interest rates of '% or more in this mar et did not prevent a large volume of borrowing for speculation in stocks2<! In the stoc mar et boom the Federal Reserve control system lost control.!! Eobody even foresaw speculation in 1'2B! .hey 6ust let it happen as if it were an %ct of /od! .he systemic protection to prevent a repetition of this problem had to be added in 1'2' as the 8 margin re7uirements82)!

22 #hapter IH, page 120 2< #hapter H, page 1)B 2) #hapter H, page 1)'

Chapter /II , -upervision

7y eeping individual ban s strong, bank supervision helps to maintain an adeCuate and responsive ban ing system and thus contributes to the smooth functioning of economic processes2(! .his statement may have been valid in 1'() but certainly has been invalid since 200B at the greatest &S-bankruptcy of all times +, in which virtually no supervision has been practiced! Failure of ban s to meet their liabilities can reach far beyond depositors and borrowers and the immediate territory that the ban s serve! .hat's why you would badly need a *ualified foreseeing supervision! 3hy didn't supervisors design professional models for the monetary mar ets in which strategies for protective measures could be studied! Eone of these measures have been studied at all! .he elementary economic study concentrated on making profit by destabili0ing the monetary system! 8Banking supervision began in the &S% more than a century ago219 Oes, fine! It is not the Cuestion when it began, but when it ended!!!!

Chapter /III , .old,in$low into the 1-A

.he increase in the amount of gold certificates from 1'20 to 1'() reflects the enormous increase of monetary gold between 1'<0 and 1')0! 7y far the greatest factor was the flow of foreign gold, reflecting the pulling power of the $,& in a global depression 2B! 7etween 1'<) and the end of 1')0 imports of gold e/ceeded e/ports by almost 1G billion dollars! &fter gathering almost all available gold there was no need to gather more of this material! .he gold standard was to be abandoned in e/change to certified paperwork, named 8certificates9! &bandoning the gold standard effectively prevented any outflow of gold from the $,&! Iow prices effectively prevented any speculation in gold J eeping the precious treasure safely inside Fort Nno/! .he ?old-stoc stored at the $,-treasuries is to be considered as a bac up value for restarts with new currencies, in which no alternative values are available! .his J it must be said J is the only responsible measure that has been left from the original Federal Reserve concept! It doesn't matter who owns the gold! It belongs to the store eeper, who is in charge at the time of the crash!

2( 2G 21 2B

#hapter HII, page 1G( .he $,-economy suffered a ma6or blow at ,eptember 1(, 200B in the largest ban ruptcy in $!,! "istory! #hapter HII, page 1G( #hapter HIII, page 1B(

Chapter /I+ , -u22ar3

8A/perience over four decades shows that reserve banking is of vital importance to the national economy! *rovision of ban reserve has come to be the ma6or Federal Reserve function2'!9 In contrast irresponsible reserve banking is of catastrophic importance to the national and global economy! .he 77#-documentary BBC .wo - The 0arty-s 1ver: "ow the 3est 3ent 7ust suggests the manipulations of the formerly optimi4ed system have been corrupted by professional criminals who have been educated in the appropriate 8systemic economics9 at the highest universities of the world! .hese universities e/plain how to ma e money by speculative manipulations of the systemic wea nesses in the Federal Reserve and other ban ing systems! .he study involves the study of wea nesses, the modification of wea ness to hide the purpose of robbing and plundering the nation's reserves! It will ta e decades to reprogram the available economists to responsible ban ers, who commit themselves to decent work without modern, but terrorizing speculations! 8.oday the currency function of the Federal Reserve ,ystem is a matter of routine, virtually free from uncertainties or administrative difficulties<0!9 .his is a rather cool assumption as only a few years later >1'(B@ most of the system's wea nesses were already well- nown<1 and being studied to be manipulated for the greatest robbery of all times! *robably most wor ers >e/cept of course the 8 e!perts9@ at the financial departments and most citi4ens are still praying this Cuotation every night before going to bed! It will not help very much though! &s long as the dollar is being eroded they will suffer from a severe inflation! .he Federal Reserve ,ystem badly needs a redesign preventing offensive and aggressive speculation! & parallel currency of gold for non-speculative trading may be a solution for ''% of the population, who does not want to be involved in speculations! .he remaining 1% may satisfy themselves with monopoly money and their self)created 9certificates8!

Conclusion
From a technical viewpoint the $ederal *eserve System has to be considered as a horribly bad design! .he Iegali4ed #rime of 7an ing documents the early insight in the erroneous concept, leading to a global catastrophe! Improvement of supervision of banking activities, high employment numbers and stable values have disappeared! .hey have been lost as soon as the system had been intruded by violent speculants! Eobody seems to have foreseen a failure in the sudden global brea down in the supply-chain of low-ris investment securities! .his is a serious problem, which in a Cualified system should have been foreseen! For this reason both the design of the Federal Reserve ,ystem and the design team of the concept must be considered as unprofessional and unCualified! &dditionally implemented chec s for 8undue use9 in speculation, etc! seem to have failed in 2011, leading to unlimited speculation with the aid of the $ederal *eserve system! Remembering the vast impact of widespread corruption in $,-economy as described in +ustavus ,yers- .istory of the +reat /merican $ortunes<2 we must even fear the infection of the famous economic education systems, in which gigantic contributions regulated a smooth flow of information and the installation of 7ualified 9e!perts8 at key)positions in the monetary circuits! .hese practices have been illustrated in BBC .wo - The 0arty-s 1ver: "ow the 3est 3ent 7ust, in which Robert *eston
2' <0 <1 <2 #hapter HIF, page 1'1 #hapter HIF, page 1'2 .he Iegali4ed #rime of 7an ing and a #onstitutional Remedy >1'(B@ - ,ilas 3alter &dams .istory of the +reat /merican $ortunes. Folume 1Q Folume 2Q Folume <! #hicago: #harles "! Nerr D #o!, 1'0'J 1'10 Q ,ingle volume edition, Eew Oor , 1'<G!

interviews ban ers, politicians and economists, and concludes that the boom we en:oyed before the crash was based on an illusion , and that the world's economy is now so unbalanced that in the 3est we face a sobering wake)up call! In the 1'()-version of the Federal Reserve system the nation's gold reserves had been defined as 8the base of its monetary system9<<! .he limits on Federal Reserve lending power were 8set by the reCuirement that the Reserve 7an s must hold 2(% reserve in gold certificates against their liabilities for deposits and notes!8 .he 7oard of ?overnors could suspend this reCuirement, sub6ect to penalty, for 8short periods9, which have been e/tended to decades! In the end they replaced gold by paper versions of gold, worth nothing but a few cents! In 1'() movements of gold from one country to another were the ultimate means by which international balances used to be settled<)! 7y 2011 the generated amount of money has been overwhelming the total amount of gold! &t the current mar et price >1100 2 for an ounce@ gold merely plays a subordinate role in the monetary system! ?old has been replaced by the dollar! ,till gold may now replace the dollar because today (tah law treats gold and silver coins as legal tender - Mar! 2', 2011! .he large-scale loss of confidence in fiat money leads to considering gold as investments! ?old may also protect assets against hyper-inflation! .he Mormons seem to be the only wise &mericans, protecting themselves against the agoni4ing currency! .he dying dollar mar s the end of the /merican dream of unlimited monetary e!pansion by the 8helicopter pilot9 Mr! 7ernan e, who is flooding the globe with cheap paperwor ! Failure of ban s to meet their liabilities can reach far beyond depositors and borrowers and the immediate territory that the ban s serve! .hat's why we badly need a Cualified foreseeing supervision! 3hy didn't supervisors design professional models for the monetary mar ets in which strategies for protective measures could be studied! Eone of these measures have ever been studied! .he elementary economic study concentrated on making profit by destabilizing the monetary system! .o rescue the global system from the deadly inflation spiral with negative interest rates the road towards stabili4ing currencies such as gold may be helpful! Instead the system practices a manipulation of the gold-price towards lower levels, which are needed to veil the permanently degradation of the dollar! .his spiral will lead us towards a new currency of real value, which needs some intrinsic protection against criminal operations li e unlimited printing! I don't feel well in wor ing with Auros, but I feel worse for a leading economy wor ing with deteriorating dollars! In fact the Auro's fate does not really matter! .he globally leading currency will overwhelm all other currencies! .he Auro's concept has been based on stability, which is missing in the dollar's philosophy! If it has to end up in chaos, I would prefer a Cuic end in turmoil and a restart in a redesigned, global Federal Reserve ,ystems within a month or so! In a restart the basic value will be guaranteed by physical gold,which is owned by K! >6ust fill in whatever you li e@! 7y the way: Isn't it funny that the $,-treasury owns most of the globally available monetary gold and always refused to sell any of the 8rather cheap and obsolete reserve currency9 to compensate for their national debts5 I am sure they have a 0lan B for the days coming! I am glad they eep the price at a low level to let me change as much as I can into precious metals! &nd yes, I am praying for this successful restart every day J before going to bed!!!!

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