Published by: World Currency Watch Currency Capitalist 98 S.E.

6th Avenue, Suite 2, Delray Beach, FL 33483 USA USA Toll Free Tel: 800-818-6934 Email: info@currencycapitalist.com Web site: www.worldcurrencywatch.com Copyright 2011 by Currency Capitalist. All international and domestic rights reserved. No part of this publication may be reproduced in any form, printed or electronic, without prior written permission from the publisher, Currency Capitalist. Notice: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold and distributed with the understanding that the authors, publisher and sellers are not engaged in rendering legal, accounting or other professional advice or service. If legal or other expert assistance is required, the services of a competent professional advisor should be sought. The information and recommendations contained in this brochure have been compiled from sources considered reliable. Employees, officers, and directors of Currency Capitalist do not receive fees or commissions for any recommendations of services or products in this brochure. Investment and other recommendations carry inherent risks. As no investment recommendation can be guaranteed, Currency Capitalist takes no responsibility for any loss or inconvenience if one chooses to accept them. Any information or statements contained in this publication are not to be considered by the reader as personalized investment advice. The authors and any agents of Currency Capitalist are not licensed under U.S. or other securities laws to address particular investment situations and nothing herein should be deemed as personalized investment advice.

The Plot Against the Dollar

The Shocking Truth Behind the Demise of the Dollar

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.  Thomas Jefferson Some truths are stranger than fiction. This is one of them. It is the truth behind the undoing of the U.S. dollar. About a conspiracy so vast, with so much at stake it took 16 years to accomplish and brought together two of the fiercest rivals on Wall Street. It is the story of the creation of an unregulated, unaccountable, privately held power that would wield total fiat control over the currency of a nation. And bring about its demise. What happened to cause this spiral into worthlessness? Lets have a look The Original Money During the 19th century, the U.S. currency was backed by gold. One U.S. dollar was defined as 1/20th of an ounce of gold. In purchasing goods and services individuals either used gold coins, or deposited their coins in banks, and were given banknotes that were redeemable in gold. Paper currency was simply the IOU of an individual bank or, in some cases, of businesses. A promise to pay gold. A typical dollar banknote would carry the legend, The Bank of XYZ will pay to the bearer on demand One Dollar. As long as the issuer had enough gold to back up the notes it had issued, the dollar was as good as gold. Loans made by banks to businesses or the government were essentially claims on gold. Gold held the banks vault. The prudent banker kept enough gold in reserve in the vault to meet normal withdrawals by depositors. If a banker kept too little in reserve and depositors tried to withdraw more gold than the bank had in the vault, the banker had to call in sufficient loans to meet withdrawals. If he couldnt, or if he couldnt borrow enough from other banks or shareholders, his bank went bankrupt. As there was no government guarantee behind bank deposits, depositors were cautious about trusting their local bank. They kept a wary eye on the banker. And if it was suspected a banker was making risky loans, word got around. Some depositors would withdraw their deposits. As for the notes, as word spread, the outstanding notes of the bank began to be discounted in the marketplace. That is, they traded for less than the face value. Rating services sprung up that would publish lists of banknotes and the discount at which they were being traded. 1

Prudent bankers avoided problems by carefully scrutinizing borrowers, and always keeping ample gold in reserve. With so many eyes watching the bankers, it was normal for the more conservative banks to keep 50% of their deposits in gold in the vault to cover withdrawals. The important point is that with gold as money, credit expansion beyond minimal levels was absolutely constrained by the ability of individuals to demand gold for their banknotes. This was the shield that kept credit bubbles from starting. Neither the bankers who wanted to make more loans, nor the politicians that wanted borrow were able to get around the publics ability to run the bank. Gold provided checks and balances on all monetary expansion. It also provided a severe limit to the profitability of banks and more importantly the bankers who ran them. A Plan for Liberating the Currency From Its Golden Straight Jacket Since the inception of our country, the powers within government have debated the merits of a central bank. It was the topic of fierce debate between the early liberal republican followers of Alexander Hamilton and the hard money democrats led by Andrew Jackson. It continued throughout the years. The founding fathers were all too aware of the significance of controlling a countrys currency. As were a group of financial giants who saw the concept as the key to securing their wealth forever. Many people believe that the United States central bank was set up in response to the panic of 1907. In fact, nothing could be further from the truth. The push to monopolize monetary creation began years earlier. An earlier attempt was made with the National Banking System Acts of 1863 1864 and 1865. A system was set up to give a network of federally chartered national banks sole power to issue bank notes. The idea was to centralize the power to issue currency behind Wall Street banks so they could be bailed out when they made bad or over-loaned money. The results, however, did not go quite as planned. State, savings and private banks all recouped their losses by simply expanding demand deposits on their books. Further, they competed more fiercely with Wall Street banks for financial business. By 1896, these banks comprised fully 54% of all banks resources. And that was enough for Wall Street. In those days, Wall Street finance was dominated by two fierce rivals J.P. Morgan and John D. Rockefeller. Virtually the entire Wall Street banking community at the time fell into line behind one of these giants. But such was the importance of gaining ultimate control over the issue of money, these two rivals laid aside their differences and joined forces to push for the creation of a central bank. But, they could not do it openly
2

J.P. Morgan

John D. Rockefeller

In 1896, yet another push was undertaken to centralize the issue of currency. This time, however, the powers that were had a much better idea of what had to be done. First, a new monetarist threat led by populist William Jennings Bryan had to be dealt with. The Bryan camp was in favor of inflating money by doing away with the gold standard in favor of a more plentiful silver standard. Increasing the amount of backing for a currency would expand the money supply while keeping hard money checks in place. This heresy would have to be put down. This was accomplished by the consortium of banks by their support for and with the election of William McKinley a fierce gold standard proponent. But more importantly, an advocate of the progressive era a reformist movement favoring the common man. This second factor would provide them an angle for accomplishing their second task. That task promised to be far more difficult. Convincing both the public and legislature who were both vehemently anti-monopoly that a central bank was actually good for the economy and main street.

William McKinley

Their idea: they would put forward the proposition that a central banking power was in the best interests of banks, the currency and the common man by reigning in the potential free market power abuses the financial markets supposedly faced at the time. The Wall Street powers-that-be would embrace it as a morally necessary thing to do even at their own expense. And all would be right in the world. (The reasoning put forward is still the biggest lie trumpeted by the Fed and its supporters today. In a 2008 article, Bloomberg reported that Fed Chairman Ben Bernanke told Senator Evan Bayh in an April hearing on the Bear Stearns bailout, the truth is that the beneficiaries of our actions were not Bear Stearns and were not even principally Wall Street. It was Main Street.) They set out to accomplish this by undertaking (completely covertly) a grassroots movement for currency reform on the part of businesses in the heartland. It was key to keep Wall Street interest as far from the limelight as possible. The movement was officially launched by Hugh Hanna, President of the Atlas Engine Works in Indianapolis (a more Midwestern company could not have been selected) and fierce proponent of the gold standard. In 1896 he sent a memorandum to the Indiana Board of Trade suggesting that Indiana take the lead in a currency reform movement. This suggestion was quickly embraced by the IBT and lead to the formation of the Indianapolis Monetary Commission who sent a resolution to President McKinley urging him to 1) continue to maintain the gold standard and 2) form a commission to investigate creating a more elastic currency. Naturally McKinley endorsed the commissions recommendation and forwarded this idea of a monetary commission to congress. It failed, however, to pass in the Senate. Undeterred, the Indianapolis Monetary Commission took matters into its own hands. It set up shop in Washington and began a public relations campaign that was second to none at the time. They began employing all manner of opinion shaping resources. From media and journalists to economists and academics to business professionals. Questionnaires were sent out, with predictable results, and the conclusions were published throughout the media.
3

Before long the commission had gained enough support to pass the Gold Standard Act of 1900. Unknown to nearly everyone, however, this act contained buried language favoring increasing the elasticity of the money supply. This conspiratorial assault continued with secret participation from the highest echelons of financial banking until the political landscape could be shaped just so as to allow the passage to the necessary legislation. And by 1908 that landscape was in place. The banking industry had put in place enough support to form a new National Monetary Commission under the auspices of Senator Nelson Aldrich the head of the Senate Finance Committee (and father-in-law of J.D. Rockefeller.) Currency reform legislation began being drafted and finally on a frigid November night in 1910 a group of seven men boarded a rail car at the New Jersey railway station bound for a retreat at a private resort on Jekyll Island. Going only by their first names (and in some cases pseudonyms) the travelers included a virtual whos who of banking and political elite at the time: Nelson Aldrich Chairman of the Senate Finance Committee, Morgan business associate and in-law to Rockefeller A. Piatt Andrew Assistant Secretary of the U.S. Treasury Frank Vanderlin President of the National City Bank of New York and Rockefeller Associate Henry Davison Senior partner of the J.P. Morgan Company Charles Norton President of JP Morgans First National Bank of New York Benjamin Strong head of JP Morgans Bankers Trust Corp Paul Warburg Partner in Kuhn Loeb & Company, representative of the Rothschild banking dynasty in England and associate of JD Rockefeller. For ten days they labored, hammering out the framework for what would become the Federal Reserve Act. But even upon its completion, this precious legislation was held back. Threatened by a Democratic surge in Congress in 1910 and the uncertainty of the presidential election in 1912 they could not risk having the bill shot down. With the election of Woodrow Wilson a leading proponent of progressive era politics advanced by Morgan and Rockefeller for their own ends in 1912, they finally had the final key they needed. Renaming the act for Virginia Representative Carter Glass (to remove any partisan appearances) the bill was passed into law in December 1913. And the course of American monetary policy was changed forever A Quick Look at the Nature of Money Lets consider, for just a moment, the concept of money.
Woodrow Wilson

Money is nothing more than a medium for exchanging goods and services. In the early days of civilization, bartering was an accepted form of transacting business. Exchanging goods for other goods of relative value. Under this system, there were no standardized prices per se, but rather things were valued based
4

on the need for them and their supply. And in general it worked relatively well. But the barter system had some practical limitations. First, when bartering, dividing payment was often difficult if not impossible. If I take a cow to the market and trade it for ten bushels of grain from the local elevator, thats fine. If, however, I took my cow to market and wanted to buy two bushels of grain, and a few bolts of cloth and some tools I had a problem. There was effectively no way to make change for my cow. It also created a problem on the business side. Especially where accounting was concerned. It became virtually impossible to figure one periods profits against another. If I earned two cows in one month versus a hog, 4 wagon wheels and 100 yards of rope in another, how was I doing? These limitations posed serious problems where the issues of exchange were concerned and eventually gave way to the need to standardize money. Originally, a medium of exchange a currency was thought to require its own inherent value. Something of value on its own. For centuries even millennia precious metals were the commodity used in this capacity. They were ideal for the purpose. First, they were considered valuable on their own. But at the same time they werent so rare as to make them limited access. Second, they were portable and easily divisible which meant you could carry an amount around with you wherever you went. And you could buy whatever you needed in the quantities you desired. Finally, they were homogeneous and durable. They could be minted into identical coins and would last a long time. All the ideal traits for a form of currency. And gold as a commodity was deemed perfectly suited to this task. Creating Money Without Value Everything in the world has inherent value. A value in and of itself based on what it provides you. Your car gets you to and from work. The food you buy at the store feeds your family. Tools you may have in your garage help you fix things up around the house. And the value of everything is determined by its supply relative to the demand for it. Except, that is, for money today. The Federal Reserve has seen to that. By creating a central bank, they also created a central depository for hard money deposits. They would hold all banks gold and issue them credits based upon their holdings. Essentially the Fed could issue currency credits as they saw fit. This effectively took the gold standard out of play even though it was still technically in force. (After 1971, however, the gold standard was officially abolished and fiat money Federal Reserve notes backed by the full faith of the government became the de facto currency.) Now the value of money is based solely on what someone will give you in exchange for it. Period. And it could be produced virtually at will. That is, in fact, the great irony the very currency we use as a medium of exchange has absolutely no intrinsic value. How much is a dollar worth? Today its worth about a pack of gum. Maybe a bottle of pop. A few years back, however, it might have bought you two packs of gum. People will say the price of gum
5

has gone up which is true. But what has also happened is the value of your dollar (in terms of gum or pop) has gone down. Why is that? Well the supply of fiat money works in the exact opposite manner to anything that it values. Economists often talk about an optimal supply of money. You rarely hear them talk about an optimal supply of anything else. The fact is, all goods are scarce in relation to consumer wants. So all things being equal the greater the supply of anything, like crude oil or corn, the cheaper that good becomes and the better off everyone is. The higher your standard of living. Money cant be consumed or used up like any other physical commodity. Money is only a medium of exchange. All it does is facilitate the transfer of goods and services. You can think about it another way. If the supply of a commodity rises above the amount that a society will consume for whatever reasons, its price comes down until demand picks back up. Money on the other hand, is a tool of DEMAND. The greater the supply of money in circulation, generally the greater potential demand for everything else. Driving real asset prices higher and higher. In effect devaluing its own purchasing power. Interesting twist isnt it? Money also has another interesting characteristic. It is fungible which means that its homogeneous - interchangeable. This brings up the crucial issue of how its supply can be so easily manipulated. Depositing, Borrowing, and Lending Now think about a deposit for just a moment. Lets say that you go to a local storage facility and hand over your home entertainment center for safe keeping while your living room is being remodeled. You get a claim check when you drop it off. When the remodeling work is done, you go back with your ticket and get all your electronics back. If the proprietor of the storage place tried to pawn off someone elses goods on you, youd be on the phone to the police in a minute. Thats because your goods that you left were clearly identifiable. This isnt the same with things that are homogeneous or fungible. Standardized things like commodities ormoney. Say you take 5000 bushels of Grade XYZ grain to the local elevator to store. When you need it to take to market you go back to the elevator to claim your grain. Do you necessarily want your 5000 bushels back? No. All you want is 5000 bushels of Grade XYZ grain.
6

This has significant implications for the elevator operator. As long as he keeps enough grain on hand to satisfy redemption demands, he can pretty much do whatever he would like with the rest of his inventory. This is what is called a fractional reserve system. It means that I only need to keep a portion of my deposits on hand to satisfy demands. Now think of this in terms of money As a banker, I can lend out any amount of my assets as long as demands for actual cash do not exceed what I have on hand. Demands from depositors are rarely a problem. Where I do run into a problem are demands from other banks. Say I have $1,000,000 on deposit. If I make $500,000 in loans and those loans are deposited at other banks, theyll demand a transfer of cash. Now I have $500,000 on deposit. If for any reason my lending exceeds my ability to meet those demands, I go bankrupt. The threat of this bankruptcy creates a check on my fiscal responsibility, even in a system of fiat money. It also throws a wrench in my profitability. Because the more I can lend and finance, the more money I can make. Excessive lending is no problem if Im the only bank in business. But the problem becomes significant when you have multiple banks competing toward the same end. The only way to solve this problem is to control expansion or lending among banks at an equal rate. Enter the Central Bank Making a Dime Worth a Dollar This is the very end the Federal Reserve was created to achieve. A monopolized growth in the money supply. Take a look at how it works As youve seen, multiple banks all lending against reserves on hand forces fiscal responsibility. But now what happens when you put a central bank in the middle of all of this? A centralized accounting system that doubles as the lender of last resort. You get a central set of books through which the Fed can maintain a balanced growth of credit and come to the rescue of any member banks who get into trouble. They accept deposits, whether it be cash, financial or physical assets at 1/10th value. So if a bank deposits reserves of $100,000 on the books at the Fed, as far as theyre concerned the bank can lend out 10 times that or $1,000,000! Demand deposits exchange hands and banks that receive credits from depositors are then placed as reserves on the books of the Fed and their balance sheets expand by a factor of ten! This model of creating cash has spiraled all the way down to consumers. Those who carry balances on their credit cards are effectively doing the same thing as the banks. Maybe they have $2,000 in savings but are carrying a $10,000 balance on their cards. Theyve spent 5 times the money they have and have increased the money supply by as much. The fractional reserve system of the banking industry has unleashed an uncontrollable monster of inflation. Since the creation of the Fed in 1913, the value of our currency has collapsed. What was worth $1 back then is only worth 4.8 cents today! Thats a 95% devaluation of your money. And there is no bottom to the devaluation. Just think about it for a minute. If you take $1,000 and devalue it by 90% you have $100. Devalue that by 90% and youre left with $10. Take away
7

another 90% and you have $1. Another 90% and youre down to a dime. Then a penny. Then fractions of a cent. How is this possible? Call it inflation. What you could have bought for only $1 in 1980 now costs you $20 And in another 5 or 10 years itll cost you even more. This is the ugly reality of the Federal Reserve and its fractional reserve system. Expanding the supply of credit and doling out money to its member banks as needed to keep them solvent has been the Feds sole raison dtre. All the while devaluing the currency. And all in the name of protecting the common man from the potential abuses of the free market. Ironic isnt it? So Where Are We Now? So what have the actions of the Fed and the banking system achieved? Near total devaluation of our currency. They have created a pyramid of lending by which they have consistently expanded the money supply for nearly 100 years. The bubbles that have exploded today are the result of nothing more than too much money in the system. And when one bubble pops, the only politically acceptable way the Fed can come to the rescue is by adding more liquidity more cash to the system and inflating everything even more. The current credit cycle has been going on for the nearly the last 30 years. The last Fed chairman who showed any fiscal responsibility was Paul Volcker. When he reigned in the money supply back in the late 70s, interest rates soared to over 21% and everyone, everywhere felt the pinch. Prices soared. Spending was dampened. And inflation came back into line. Today there is little hope of anyone ever doing something like that again. It is simply far too easy to keep throwing money at problems and creating ever more and worse bubbles. At some point, however, the cycle has to end. It simply cant be sustained forever without unthinkable consequences. To continue to inflate at such outrageous rates threatens to throw the economy into a state of hyper-inflation. The only course of action that investors have today is to take matters into their own hands. And youve taken the first step by reading this brief expos of the Federal Reserve. By understanding the true nature of the beast and what they are inflicting on the economy, the dollar and investors throughout the country. Keep reading the other Currency Capitalist premiums to discover all the options and opportunities that are available to you. They will let you free yourself from this plot against the dollar.
8