Jake Towne - End The FED Pittsburgh NOV 2010

“An invasion of armies can be resisted, but not an idea whose time has come.
” - Victor Hugo
November 2010 TowneForCongress.com

What IS Money?
$$$
TowneForCongress.com
Money is an invention of mankind.
• Medium of Exchange
– “Unit of Account” and “Store of
Value”
• Money is Indirect Exchange
– Evolved from Direct Exchange
Courtesy Walter J. Pilsak
Types of Money
1. Commodity Money
2. Receipt Money
3. Fractional (Commodity) Money
4. Fiat Money
FIAT = by decree TowneForCongress.com

Sound Money Requirements
1. Durable
2. Portable
3. Easily Divisible
4. Recognizable and Uniform
5. Stable Purchasing Power
6. Scarcity
7. Reproducible
John Trumbull, 1786 “The Death of General Warren at Bunker Hill”
“Worth Less Than A Continental”
The Three Key Monetary Clauses
The Congress shall have Power to borrow
Money on the credit of the United States
– Article I, Section 8, Clause 2
The Congress shall have Power to coin

Money, regulate the Value thereof, and of
foreign Coin, and fix the Standard of
Weights and Measures
No State shall... coin Money; emit Bills of

Credit; make any Thing but gold and
silver Coin a Tender in Payment of Debts
The Coinage Act of 1792
The Coinage Act of 1792 defined the
constitutional dollar as 24 grams of silver
Pegged the silver dollar to gold grams
Altering with the weight or fineness of

the coins “shall be punishable by death”
The penny (and later nickels) were

forms of copper-based fractional money,
ie were redeemable for silver and gold
coin
Money = Mass of Silver or Gold!!!
“... Tax or duty may be imposed on such

Importation, not exceeding ten dollars for
each Person.”
“In suits of common law, where the value

in controversy shall exceed twenty
dollars...”
– The Seventh Amendment, ratified December 1791
Classical Gold Standard 1913-1933
• Fractional Commodity Money
• Federal Reserve Act passed in 1913
• Europe leaves the standard due to WWI
• FDR Gold Confiscation in 1933
DOLLAR SUPPLY
FED Creates Dollars
Gold Bullion Standard 1933-1971
• Fiat Money Standard
• Nixon Closes Gold Window 1971
• Private gold purchases outlawed until 1975
DOLLAR SUPPLY
FED Creates Dollars
Only large foreign transactions settled in gold

Private citizens are barred from possessing non-jewelry gold
Fractional Reserve 1971 to ~2000
• No backing whatsoever – pure fiat
DOLLAR SUPPLY
FED Creates Dollars
Dishonest Money
How to Create $900 from $100
The banking system creates dishonest “money” each
time you deposit money. Here's how it is done, using the
current approximate fractional reserve ratio of 10%.
Step 1)
1000
A depositor deposits $100 at a bank.
Total Reserves: $100 800

Total Loans: $0
Total Money Supply: $100 600
"Give me control of a nation's money 400

and I care not who makes its laws."
200
- Mayer Amschel Rothschild, 1744 -1812,
Leader of the Rothschild Banking Cartel of
0
Europe Total Deposits Total Loans Total Money Supply
Dishonest Money
Step 2)
The bank holds $10 for its reserves and loans out the other $90 to others.
Total Reserves: $10

Total Loans: $90 1000
Total Money Supply: $100

800
"It is well enough that people of the nation do
not understand our banking and monetary
system, for if they did, I believe there would 600
be a revolution before tomorrow morning."
- Henry Ford 400
200
0
Total Loans
Total Deposits Total Money Supply
Dishonest Money
Step 3)
This $90 is deposited elsewhere. Next, this second bank takes the $90 in
deposits, holds $9 for its reserves, and loans out the other $81.
Total Reserves: $19

800
"When an assembly undertakes to issue

paper as money, the whole system of safety 600
and certainty is overturned, and property set
afloat. Paper notes given and taken between
individuals as a promise of payment is one 400
thing, but paper issued by an assembly as
money is another thing. It is like putting an 200
apparition in the place of a man; it vanishes
with looking at it, and nothing remains but the
air." 0
Total Deposits Total Loans Total Money Supply
- Thomas Paine, “Dissertations on Gov't”
Dishonest Money
Step 4)
Step 3 repeats. The third bank takes the $81 as a deposit, holds $8.10 for its
reserves, and then loans out $72.90.
Total Reserves: $27.10

Total Loans: $243.90 1000.00
800.00
“The few who understand the system, will 600.00

either be so interested in its profits, or so
dependent on its favors, that there will be no
400.00
opposition from that class. The great body of
people, mentally incapable of comprehending
the tremendous advantages, will bear its 200.00
burden without complaint."
0.00
- Lord Rothschild Total Loans
Total Deposits Total Money Supply
Dishonest Money
Step 5)
The process keeps repeating. The bulk of the money creation is done after 15
repeats, but what is eventually left after 40 or 50 repeats is pretty much:
Total Reserves: $100

800
So within a short period of time, banks
transferring to other banks within the 600
system can CREATE $900 from the initial
$100 deposit.
400
For those hearing the above for the first

time, this process is such NONSENSE that 200
it is a little hard to grasp.

0
 Source: Federal Reserve Bank of Chicago, “Modern Total Loans
Money Mechanics” (1994) Total Deposits Total Money Supply
Dishonest Money
FED Open Market Operations
The FED itself also creates or destroys dollars, but they
do not even require deposits.
The Federal Reserve conducts open market operations
by purchasing or selling any type of asset.
In the past the FED mostly bought Treasuries. In the
past several years, the FED has mostly bought company
assets or bad debt, such as AIG's.
"Bankers own the earth. Take it away from

them, but leave them the power to create
money and control credit, and with a flick of a
pen they will create enough to buy it back."
- Josiah Stamp, former President of the Bank

of England
Dishonest Money
FED Open Market Operations
Here’s what happens when the FED buys Treasuries or other assets
1) The FED’s Open Market Committee (FOMC) decides to expand the nation’s
money supply. They purchase, for example, $100 billion in Treasury bonds.
2) The FED writes a check on itself for $100 billion. [Where did it get the money?
The answer is -- FROM NOWHERE!]
Monetary Supply Expansion: $100 billion
3) This $100 billion FED check then goes to one of the select government bond
dealers (such as JP Morgan Chase or Goldman Sachs) in exchange for the $100
billion in Treasuries.
4) Then the dealer deposits its $100 billion FED check at a commercial bank.
5) Enter the fractional reserve loop. This deposit is very quickly loaned out
repeatedly and grows to $100 billion in deposits and $900 billion in loans.
Monetary Supply Expansion: $1 Trillion
“Ticket Printing” ~2000 to present
• “Deposit Reclassification” of checking

accounts into sub-accounts
http://towneforcongress.com/economy/fractional-reserve-banking-is-dead-part-22/
“Ticket Printing” ~2000 to present
The FED Causes Depressions (4/4)
Federal Reserve Interest Rate 1995-Apr 2009
Source: http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt
8.0
Bust
Federal Funds Rate % (Monthly Weighted)
7.0
6.0 Bust
5.0
9/11
4.0
Boom
Dot.com's
3.0
Tech stocks Boom Fall 2007:
2.0 Housing Financial Depression
System
1.0
Breakdown
Treasury &
Begins Dollar Crisis
0.0
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
The FED's interest rate control combined with the money supply
changes result in the Boom-Bust cycle.

Booms are periods of credit expansion that central bankers
mostly created themselves, while busts are credit contractions.

Each “Boom” plants the seeds of the next “Bust” by creating a
multitude of wasteful mal-investments.
Restore Honest Money
“The Congress shall have Power to coin Money, regulate the Value thereof, and
of foreign Coin, and fix the Standard of Weights and Measures... No State
shall... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin
a Tender in Payment of Debts.” - The United States Constitution, 1787 - present
Open the Mint to free Coinage of Gold & Silver

Remove all taxes on the exchange of Gold & Silver
Revoke and Forbid Legal Tender Laws
Help drive the debate on a new Monetary System
Note: I do not advocate a return to the 1930s era classical

gold standard, which was based on fractional reserves.
End the FED Philly Talk from 2009

http://towneforcongress.com/economy/end-the-fed-then-what-the-transition-to-sound-money-1/
Replace the Socialistic Keynesian Government
Status Quo with the Austrian Free Market
Keynesian Economics
The “Money Power” is held by the
Government & Bankers
Government Commands the Economy
Renown for Deficit Spending and
Stealing via Currency Debasement
Redistributes Wealth to the Military-
Industrial Complex, Banking Cartels,
Special Interest Groups & Corporations
Allows and Rationalizes Government
Takeovers of Private Businesses “In the long run, we are all
May promote “capitalism” and the “free dead.”
market” in word, but in deed functions as - Lord John Maynard Keynes
“Crony Capitalism,” “Vulture Capitalism,” the British Economist and
Central Planner
“Corporatocracy” or “Disaster Capitalism”
Replace the Socialistic Keynesian Government
Status Quo with the Austrian Free Market
Austrian Economics
The People own the “Money Power”
Government Plays No Role in
Economic Planning
Promotes Honest Money & Balanced
Budgets
Highly Rewards those who Create
Wealth and Shares it with All
“All those intent upon Government Does Not Takeover
sabotaging the evolution
towards welfare, peace, Private Businesses
freedom and democracy, Promotes Free Market Capitalism
loathe gold.”
and laissez faire, or “let them be!”
- Ludwig von Mises
Founder of the modern economics
Austrian School
GOLD and SILVER
Face it – your country is broke.
Source List
This is a partial list of the sources used in this work. Place the cursor over
the title to access the link. Here is a LINK to a summary of my writings and
my semi-bibliography.
The Constitution of the United States. 1787-present.

The Coinage Act of 1792.
Federal Reserve Bank of Chicago. 1994. Modern Money Mechanics.
Mises Institute. Money, Banking, and the Federal Reserve. 40-min. Video
Rothbard, Murray. 1990. What Has the Government Done with Our Money?
Towne, Jake. 2008. “Bernanke's Great Lie – The “Gold Standard”and the
Great Depression.”
Towne, Jake. 2008. “The Money Matrix – How the FED Works.”
Towne, Jake. 2008. “The Money Matrix – What Makes Money Money?”
Towne, Jake. 2008. “The Money Matrix – What Is Honest Money?”
Backup Slides
The Coinage Act of 1792
• Section 19. And be it further enacted, That if any of the
gold or silver coins which shall be struck or coined
at the said mint shall be debased or made worse as
to the proportion of the fine gold or fine silver
therein contained, or shall be of less weight or value
than the same out to be pursuant to the directions of
this act, through the default or with the connivance of
any of the officers or persons who shall be employed at
the said mint, for the purpose of profit or gain, or
otherwise with a fraudulent intent, and if any of the
said officers or persons shall embezzle any of the
metals which shall at any time be committed to their
charge for the purpose of being coined, or any of the
coins which shall be struck or coined at the said mint,
every such officer or person who shall commit any
or either of the said offenses, shall be deemed
guilty of felony, and shall suffer death.
Dishonest Money: The Fall of the Dollar
The purchasing power of the dollar has lost >94% since FDR took America off
the classical gold standard in 1933 through monetary inflation.
The monetary inflation was caused by the FED. They debased the dollar by
creating more and more irredeemable paper dollars.
The Gold Market
When mining gold, a typical yield is 1 gram per metric ton (1,000,000 grams).
“Gold is Money, and Nothing Else.”
- JP Morgan, Banker, before Congress in 1913. He was lying – silver is as well.
The earth's aboveground gold stock could be placed into a cube 20 meters per side.
The Real Interest Rate
Source: http://towneforcongress.com/economy/unlocking-the-money-matrix-the-real-interest-rate-part-1215
"On account of [the Federal Reserve],

we ourselves are in the midst of the
greatest depression we have ever
known. From the Atlantic to the Pacific,
our Country has been ravaged and laid
waste by the evil practices of the Fed and
the interests which control them. At no
time in our history, has the general welfare
of the people been at a lower level or the
minds of the people so full of despair...
They are the victims of the Fed. Their
children are the new slaves of the
auction blocks in the revival of the
institution of human slavery."
- Congressman Louis T. McFadden, Pennsylvania's 15th District
- From the 1934 Congressional Record
"Our nation's monetary policy over the past

century is the most despicable hoax ever
committed against the American people
in our history. If I can help the people of
our district understand the utter immorality,
the sheer evil, of this system and how it
restrains the prosperity of our society, we
will and can succeed. With your help, I can
help lead the way with actions that can
save us and our children. This is not a
joke. If our society fails to deal with this,
the abject slavery McFadden warned of,
and drop in living standards will soon be Rembrandt's 1626 depiction of
realized by us all.” Jesus chasing the Money-
changers out of the temple
- Jake Towne
 Interest rates represent the present time-value of money.

 They serve as a check-valve between the deployment of
capital (and the amount of mal-investments!) for economic
growth and the savings deferred to the future to pay for the
goods and services resulting from the growth.
“Interest is the difference in the

valuation of present goods and
future goods; it is the discount in the
valuation of future goods as against
that of present goods.”
- Ludwig von Mises

American Economist and
Founder of the modern Austrian School
 The FED decides on and sets the interest rate.


Unlike most of the 19th Century (without the FED) and the early 20th
Century where the different FED regions varied interest rates to
account for regional differences (agricultural Midwest, industrial East
Coast), the modern FED constrains the economy to the same interest
rate.

This is similar to the EU's central bank; not only do they all use the
Euro, but far more importantly, highly industrialized states like
Germany now share the same interest rates as states with very
different economies like Greece and Spain.
"Let me end my talk by abusing slightly my status as

an official representative of the Federal Reserve...
Regarding the Great Depression: You're right, we did
it. We're very sorry.”
- current FED Chairman Ben Bernanke

From his 8 November 2002 remarks
Demand Market Transparency in OTC
“Dark” Derivatives
“Derivatives are Weapons of Mass Destruction!” - Warren Buffet, 2003
So... what are derivatives?
Simplified, the term "derivative" refers to a "derived"
wager, or bet, on the price of something.
Derivatives are financial contracts whose values are
derived from the value of something else, which is termed
the "underlying" asset. The main use of derivatives is to
reduce risk for one party.
Many of today's derivatives are wagering on paper
"assets" that have no intrinsic value (like the interest rate of
a GE corporate bond) rather than tangible goods like wheat
or oil.
 For more details, please read my article “What the Heck Are Derivatives?”
at www.nolanchart.com/article5620.html
Demand Market Transparency in OTC
“Dark” Derivatives
“Bring Light to Dark Derivatives!” - Jake Towne, 2008
Over-the-counter derivatives are very loosely regulated

and directly traded between two parties.
All values in Trillions of USD, circa 2008
Quite likely, many OTC Source: www.nolanchart.com/article5620.html
derivative contracts are OTC Derivatives
insolvent since corporations
cannot cover in the case of World Equity and Bond Markets
one party defaulting. EXD Derivatives
The crux of the OTC

World Real Estate derivatives issue is its
enormous size relative
Requiring traders to use an World GDP
to rest of the financial
exchange or publish proof of U.S. GDP
system.
solvency should be required of U.S. M2 Money Supply
corporations. 0 100 200 300 400 500 600 700
Source List (1/2)
This is a partial list of the sources used in this work. Place the cursor over
the title to access the link. Here is a LINK to a summary of my writings and
my semi-bibliography.
Armstrong, Martin. 2009. “Financial Panic = Political Change.”

Bastiat, Frederic. 1848. The Law.
Butler, Smedley. 1935. “War is a Racket.”
The Constitution of the United States. 1787-present.
Eisenhower, Dwight. 1961. Farewell Address.
Federal Reserve Bank of Chicago. 1994. Modern Money Mechanics.
Federal Reserve. Federal Funds Rate Data, Monthly 1954-2009.
Fekete, Antal. 2009. “Open the Mint to Gold!”
Hazlitt, Henry. 1946. Economics in One Lesson.
Jefferson, Thomas. 1801. First Inaugural Address.
Marx, Karl. 1848. The Communist Manifesto. See page 21/44 for the planks
McFadden, Louis T. 1934. Remarks in Congress on the Federal Reserve.
Mises Institute. Money, Banking, and the Federal Reserve. 40-min. Video
Source List (2/2)
Place the cursor over the title to access the link. Here is a LINK to a
summary of my writings and my semi-bibliography.
Reagan, Ronald. 1984. Remarks when accepting the presidential nomination.
Rothbard, Murray. 1990. What Has the Government Done with Our Money?
Towne, Jake. 2009. “America's Military Empire.”
Towne, Jake. 2008. “Bernanke's Great Lie – The “Gold Standard”and the
Great Depression.”
Towne, Jake. 2009. “Thank You for Paying Your Voluntary Income Tax!”
Towne, Jake. 2008. “The Money Matrix – How the FED Works.”
Towne, Jake. 2008. “The Money Matrix – What the Heck Are Derivatives?”
Towne, Jake. 2009. “The Money Matrix – Bring Light to Dark Derivatives”
Towne, Jake. 2009. “Why Obama's Stimulus Plan Will Fail... and a Better
Alternative.”
Washington, George. 1796. Farewell Speech to the People of the United States.
White House Budget FY2009. (FY2010 here.)
Document Copyright
Copyright © Jake Towne, 2009. Any portion of this presentation that could be
copyrighted is owned by myself and I hereby released it to the public domain. I
grant full permission to use any of the ideas or material within. You may republish
this work. Attribution to myself is appreciated but not required.

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“An invasion of armies can be resisted, but not an idea whose time has come.

November 2010 TowneForCongress.com

Courtesy Walter J. Pilsak

FIAT = by decree TowneForCongress.com

The Congress shall have Power to coin

No State shall... coin Money; emit Bills of

Pegged the silver dollar to gold grams

Altering with the weight or fineness of

The penny (and later nickels) were

“... Tax or duty may be imposed on such

“In suits of common law, where the value

Only large foreign transactions settled in gold

• No backing whatsoever – pure fiat

Total Reserves: $100 800

"Give me control of a nation's money 400

Total Reserves: $10

Total Money Supply: $100

- Henry Ford 400

Total Reserves: $19

"When an assembly undertakes to issue

Total Reserves: $27.10

“The few who understand the system, will 600.00

Total Reserves: $100

For those hearing the above for the first

it is a little hard to grasp.

"Bankers own the earth. Take it away from

- Josiah Stamp, former President of the Bank

• “Deposit Reclassification” of checking

Open the Mint to free Coinage of Gold & Silver

Note: I do not advocate a return to the 1930s era classical

End the FED Philly Talk from 2009

The Constitution of the United States. 1787-present.

"On account of [the Federal Reserve],

"Our nation's monetary policy over the past

 Interest rates represent the present time-value of money.

“Interest is the difference in the

- Ludwig von Mises

 The FED decides on and sets the interest rate.

"Let me end my talk by abusing slightly my status as

- current FED Chairman Ben Bernanke

Over-the-counter derivatives are very loosely regulated

one party defaulting. EXD Derivatives

The crux of the OTC

corporations. 0 100 200 300 400 500 600 700

Armstrong, Martin. 2009. “Financial Panic = Political Change.”

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