If you are a Christian and have had discussions on the ‘mark of the beast’ and how only those with the ‘mark’ will be able to buy and sell at some point in the future, you have probably wondered how this could happen.  How could anyone really gain financial control of the entire world?  If you are not a Christian, chances are that you have heard about this ‘mark’ and its control over the world’s financial system and have rejected this as being completely ridiculous – how could anyone control the world’s financial system?  If you throw in the popular Christian interpretations of end time prophecies – that one future ruler of the world will somehow unite the world’s government, the world’s religion and the world’s financial system – all within a period of 7 years – it becomes almost unbelievable.  How could someone – anyone – do all of this within a 7 year time period?  If I were not a Christian and had never heard about these things and someone told me that all of these things will happen within 7 years – I would find it very difficult to believe – if not impossible – the world simply does not cooperate this easily.  As you’ve seen in previous posts, Satan’s control of the world’s government and religion is not taking place during 7 years – and financial control of the world is no different. What you will find as you read this post, is that a few men have already gained worldwide financial control – and they did it before you and I were born.  It didn’t take 7 years – it took hundreds of years.  You and I rely on an economic system that has placed us in financial bondage – and most of us don’t even know it.  What you will find, once again, is that our spiritual enemy is much more cunning and deceptive than you have been led to believe.

 

Let’s start this with a simple question – do you know how our money is created?  Whether you are wealthy or poor, highly educated or not – chances are this question causes you some concern – because you really don’t know the answer.  Most people (and I was included) would say that the United States creates our own money through the U.S. Treasury – correct?  No.  It did until the early 20^th Century.  It is correct that the U.S. Mint and the Bureau of Engraving and Printing (agencies of the U.S. Government) create the hard currency we use, but the U.S. Treasury is not responsible for creating and managing our money supply.  Who then, is responsible for creating and managing our money supply?  A private corporation - The Federal Reserve Banking System.

 

If the U.S. Government needs $20 billion in hard currency (paper and coins), the Federal Reserve creates this $20 billion out of nothing (there is nothing of value that backs our currency), the U.S. Mint and the Bureau of Engraving and Printing creates the paper and coin currency and the U.S. Government gives the Federal Reserve an IOU for $20 billion in exchange.  The U.S. Government then pays interest on this $20 billion.  On the surface, it may seem to you that this is logical – what’s wrong with the U.S. Government paying a private bank/corporation to print our money?  Actually, there is a whole lot wrong with it.  This is what I’m going to explain in this post. 

 

We’ve seen how physical currency is created and added to our economy, but physical currency – coins and paper – makes up less than 5% of the overall dollars in circulation in the world.  The other 95% is made up of all of the electronic dollars in checking accounts, savings accounts, CD’s, money market accounts, etc.  How is this money created?  The majority of our money is created by private banks.  This is where things get interesting.

 

If you have purchased a home, then you know that you apply for and receive a mortgage to pay for your home.  The question then becomes – where does the bank get the money to pay for your home?  If you are like most Americans (and I was certainly included in this group), you assume that this money somehow comes out of the bank’s profits or from deposits made at the bank.  It seems logical, but this isn’t what happens.  By authority of the bank’s charter, it has the ability to create the dollars needed for your home.  In the same manner that the Federal Reserve creates money out of nothing, your bank once again creates money out of nothing and places the dollars needed into your account.  The funds are then used to pay for your home.  I know what you’re thinking – this is the most ridiculous thing you’ve ever heard, there’s no way this is what happens.  You’d be wrong.  In our current monetary system (commonly referred to as a Fractional Reserve System), your act of signing for debt - creates money.  Every time someone signs for an auto loan, home loan, home equity loan, etc. – money is created.  This is how money is created in our system.  In our current monetary system, money is not created from value, money is created from debt.  It doesn’t matter if our money is created because the U.S. Government needs hard currency or if it is created through bank loans, the only way money is created in our current system is through debt.  Get ready - because this leads to some very interesting analysis.

 

If you’re thinking this through, then you’re beginning to feel very uncomfortable – and you should.  Even though it may seem strange to you that our money is created by debt, it might initially seem like this could work – that our economy has – and will continue to – function under this system.  There’s one very big problem inherent in this system.  If you’ve seen the movie ‘The Matrix’, then you remember that the massive computer simulation in the movie had a flaw in the program – an anomaly that over a long period of time would eventually crash the system.  We have the same type of ‘anomaly’ in our current economic system that over time – will have the same result.  What is the ‘anomaly’ in our system?  Interest.  When you take out a loan for $200,000 to pay for your home, is this all you need to pay back?  Of course not.  You must pay the $200,000 plus interest.  The total amount of money you will pay back with interest will be more than $400,000 if you have a 30 year fixed rate (around 6%) and don’t pay it off early.  Remember, our money is created from the principle, not the principle plus interest.  So, you bought a house for $200,000, and as a result, added $200,000 to our total money supply of dollars.  Do you see the problem?  If our money is only created from the principle payment, where do we get the money to pay interest?  This is where things really start to get interesting.

 

Let’s look at another example. Let’s say that the total debt (new debt – retired debt) created in a given year in the United States is $1 trillion dollars.  Based on our current system, $1 trillion dollars would then be added to our money supply.  As I mentioned above, because this is debt, the total actually owed is much higher – let’s say the total debt actually owed is $2 trillion.  So, we have created $2 trillion in liabilities that must be repaid, but we’ve only created $1 trillion dollars in the system to pay this debt.  Do you see the problem?  We never add enough money into our economy to pay for the debt. Our debt continues to rise and our money supply continues to rise – but the money supply can never equal the total amount owed.  What this means is that we can never pay off our debt under our current monetary system.

 

Let’s make it really simple.  If you and I each owe $100 and there’s only $150 in currency available to us – one of us isn’t going to have enough to pay our debts.  It’s a catch-22 that we cannot get out of.  In our current system, there will always be a certain percentage of people and businesses that cannot get enough money to pay their bills, debts, etc.  It’s mathematically impossible for everyone to have enough money to pay what they owe.  We can talk all day about why certain businesses fail (poor management, supply and demand, changing markets, etc), why businesses and people go bankrupt, but the bottom line is this - if there’s not enough money in our economy to pay for all outstanding debts, it doesn’t matter what we do, how we manage our budgets, we will never pay off our debts as a nation – never.  Of course I’m talking about our nation as a whole.  Individually, we can make good financial decisions and manage our money in a prudent manner, but on a national level, we are in a never ending cycle of ever increasing debt – personal debt, corporate debt, government debt, etc.  If our system never changes, it is mathematically impossible for us to ever pay off our national debt. 

 

I now find it interesting when I hear our President or members of Congress debating ‘fiscal irresponsibility’ or when I hear our leaders talking about reducing our national debt.  The truth is that all of us – our Government included – must continue to create debt in order to keep our economy from crashing.  The meter is always running on the current interest (which is now enormous). In order to keep creating additional money to pay for our ever increasing debt, we must create more debt to create more money.  I know what you’re thinking – this has to be the most ridiculous economic system ever devised.  It’s actually quite ingenious – when you realize why it exists.  We’ll examine this more later.

 

Since our money is created from debt, as our debts increase – our money supply increases.  The only thing that has prevented this system from collapsing years ago is due to the lag time we have to pay back the interest on our loans.  We are not required to immediately pay back the principle plus interest.  Although this system seems to have worked for a very long time, we’re going to see that it cannot continue forever.  You will see that it’s mathematically impossible for our economic system to continue without eventually collapsing.

 

If this hasn’t blown your mind yet, consider what would happen if we paid off all of our debt – personal debt (home loans, auto loans, etc), corporate debt and Government debt.  Since debt equals money in our system, if there is no debt, there would be no money!  I know – it keeps getting more ridiculous.  Your mind wants to reject this outright.  This is crazy!  Unfortunately, it’s the truth.  Our entire economy is based on the creation of debt.  Without debt, our economy would crash completely.  You now know the real reasons why we are all always fighting to get enough money to pay our bills and debts (there’s not enough money in the system for all of us).  You now know why we consistently have a steady stream of people and businesses that file for bankruptcy (there’s never enough money in our economy), why inflation has dramatically reduced the buying power of the dollar in the past few decades (our money supply is always increasing – it never stabilizes), why the total volume of dollars in the world economy has sky-rocketed in recent decades (leading to a decline in the value of the dollar – worldwide) and why we’re always being bombarded with loan offers (home, auto, home equity, etc), credit cards, etc.  Without debt, we have no economy.  How is this possible you ask?  Why would anyone allow this to happen?  How did this happen?  The most important question that you should be asking yourself is this – if we are creating so much debt, who are we indebted to?  What you will find later in this post is that this is all very deliberate – it’s not by chance.  There is a plan at work here – and it’s evil.  The honest truth is that every person in the United States has been placed in financial bondage since 1913 – and most don’t even know it.  Have I mentioned how deceptive our spiritual enemy is?  Keep reading.

 

I mentioned earlier that our current banking system is referred to as a Fractional Reserve System.  Basically, this means that banks can issue loans for much more money than they have on hand.  It depends on the type of account, but as an example, let’s say that the Federal Reserve sets the reserve requirement at 9:1 (or a 10% reserve ratio).  The Federal Reserve Board of Governors also has the power to change this ratio within limits set by law.  This means that for every dollar that a bank has held in ‘reserve’ at the Federal Reserve, it can lend out 9 times that amount.  Let’s say that a new bank holds approximately $1,111 dollars at the Federal Reserve.  It can then lend up to $10,000 dollars (9 x $1111 = $10,000). Money on reserve at the Fed is sometimes referred to as ‘super’ money – since the banks get to multiply its volume. The bank then loans this $10,000 to you for a new car.  You pay the car seller who then deposits the money in their checking account.  Their bank (this is a closed loop system – it doesn’t matter which bank receives the deposit) then takes the $10,000 – adds $1,000 of it to their reserves (the same 9:1 reserve ratio – reversed) – and loans out $9,000 to someone else who then deposits the money in their checking account.  Their bank takes the $9,000 – adds $900 to their reserves (9:1 reserve ratio) – and loans out $8,100 to someone else.  At this point, the original reserve of $1,111 has generated $27,100 in new money ($10,000 + $9,000 + $8,100).  If we do the math and continue to carry this through (and everyone deposits their money in a bank – not in a mattress), then this original reserve of $1,111 generates just under $100,000 of currency in our economy.  It’s like a huge game of musical chairs – as long as we’re creating money from debt, the music doesn’t stop playing.  Also remember – the original reserve deposit at the Fed ($1,111) was money created by debt – it has no value.  Some types of accounts in this system only require a 20:1 or 30:1 reserve ratio and some accounts do not require a reserve at all.  Should anyone be surprised that we always have inflation? 

 

What happens when the Federal Reserve changes the reserve ratio?  Is this significant?  Absolutely.  Let’s examine this more closely.  If the current ratio is 9:1 and the Fed changes this to 5:1 – what impact does this have?  If you’re a bank that has loaned millions of dollars at a ratio of 9:1, and have planned future loans around this ratio, what happens to you if the ratio changes to 5:1 (the reserve requirement increases)?  If you don’t have additional reserves to meet the new requirement - you instantly become under-capitalized.  Here’s a simple example: if a bank has a reserve of $1,000 and plans to make a loan of $9,000 – it can no longer make the loan if the reserve ratio is reduced to 5:1.  At 5:1, the reserve requirement on $9,000 would be $1800.  The real world result is – the bank must generate significantly more capital to increase its reserves or stop lending in order to meet the new reserve requirement. 

 

What should we learn from this?  Most of us know that the Federal Reserve has the power to raise and lower interest rates and therefore, has the power to raise and lower overall prices within our economy.  What most people don’t realize is that they also have the power to raise and lower the total volume of dollars in our economy.  If they raise the reserve requirement (requiring banks to have more reserves at the Fed), banks will lend less money and since our money is based on the creation of debt, less money is created.  If this happens, the gap between the amount owed within our economy (interest never stops accumulating) and the amount of money to pay the debt – widens.  We are often told that this is used to fight inflation – inflation that is caused by this system of money creation through debt.  The truth is that an increase in the reserve requirement results in even less money in the overall economy to pay back debt – which could easily lead to a recession or depression.  This is the continual game central banks around the world play every day – more money in the economy means economic growth, but higher inflation – reducing the money supply reduces inflation, but will also cause economic growth to slow or contract. 

 

The following chart shows the impact of the reserve ratio on our money supply.  It’s easy to see that as the reserve amount required is lowered, the amount of money generated increases significantly.  The reverse is also true – as the reserve required by the Fed is raised, the amount of money generated decreases.

 

 

 

What really happens when our money supply contracts?  Periods of recession or depression.  What we’re consistently told is that periods of economic growth and periods of economic contraction are unavoidable, when the truth tells us something different.  The Federal Reserve has the power to create periods of growth (increased money supply coupled with low interest rates) and periods of contraction (reduced money supply coupled with higher interest rates).  How are we told to categorize these periods of growth and contraction?  This is the ‘business cycle’.  While everyday business transactions certainly affect our overall economy – there is nothing that private business or individuals can do that will overcome the debt based economic system we’ve been placed under. 

 

You have also learned why the current credit ‘crunch’ is being referred to as a ‘crisis’.  What happens if banks reduce lending and consumers reduce taking on more debt?  Less money is created in the system – and a vicious cycle starts.  Wall Street refers to this as ‘de-leveraging’.  We’re going to explore the real reasons this happens.  Before we look closely at what is going on today, let’s examine another problem with our current economic system.  We have discussed how our economy must continue to grow in order for debt creation to continue in order to create additional money in order to pay the debt – a never-ending cycle of debt creation.  The question becomes – can this continue forever?

 

If you were to ask people about economic growth, some will know that our economic (GDP – Gross Domestic Product) growth rate typically averages about 3% (annually) in recent years.  Most of us assume this is a linear growth rate.  A linear growth rate looks like this:

 

 

 

The problem is that our economic growth rate is not linear.  As an example, let’s assume that the current overall value of our economy is $100.  If our economy grows 3% this year, then the overall value at the end of this year is $103.  If our economy grows an additional 3% next year, will the overall value of our economy be $106 at the end of next year?  No.  Since we grew our economy 3% this year, next year’s growth will be 3% of $103 and the total value of our economy at the end of next year will be $106.09 ($103*.03 + $103).  Our economy does not grow linearly, it grows exponentially.  What this means is that 3% growth this year is actually more growth than 3% last year since our growth is compounded annually.  This is what exponential growth looks like:

 

 

You are probably starting to feel uncomfortable, because you are beginning to see where this is going.  In theory, this growth rate remains relatively low for a given period of time – but as you can see, as each year’s growth compounds on the previous year, overall growth begins to accelerate rapidly at a given point in time.  A simple example of this phenomenon can be seen in the growth of a company.  A company that plans to grow 10% with annual revenues of $10 million only needs to grow $1 million.  A company that plans to grow 10% with annual revenues of $10 billion needs to grow $1 billion.  As growth compounds upon itself, the system requires ever more resources to grow the same amount (%).

 

In our current economic system that relies on continual growth to stave off a collapse, we must continually burn through more and more natural resources to keep the system going.  In a theoretical world, this exponential curve continues on to infinity.  Is this possible in a finite world with finite resources?  Of course not.  If we take a logical look at our economic system, mathematics tells us one of two things must happen to our current system.  The first scenario is that we burn through all of our resources and the system collapses.  We can certainly see the beginning of this from a global perspective.  As more economies around the world have instituted the same economic system as ours, we are seeing more and more concern that natural resources (oil, forests, water, etc.) are being depleted at an alarming rate – demand is outstripping supply – adding to inflationary pressures.  Although this is certainly possible in our distant future, since we are much farther along the exponential curve than other economies in the world, there is a much more likely scenario for the United States. 

 

The second scenario is that our current system collapses under the weight of the debt it has created.  If the rate of debt increases much more quickly than the rate of the supply of money in the system, eventually the amount of money in the system will not be able to support the increased debt.  There will not be enough money to make interest payments, pay utilities, buy consumer goods and create additional money.  As the exponential curve gets steeper and steeper – it will be more and more difficult to grow our economy, while supporting the existing debt in the system.  At some point, since we live in the real world, our monetary system will collapse under the weight of its debt – long before we burn through all of our resources. 

 

Before we get too far into this – let’s ask a question.  Where are we on this exponential curve?  If we look at trends of some of the most widely used economic indicators, can we determine if we should be worried about imminent collapse?   As you will see, we have reason to be concerned.

 

Let’s start by looking at our debt.  The following is a graph of our nation’s federal debt:

 

 

 

Does this look linear or exponential?  You don’t have to be a mathematician to see the answer.

 

The following is a different look at our national debt that calculates the debt as a percentage of GDP:

 

 

We hear politicians and economists talk about how there’s nothing to worry about since our debt remains in line with past years - as a percentage of GDP.  The problem is that they are only focusing on the amount of debt as a % of GDP in a given year and not the effect of our cumulative debt. As we’ll soon see, what is even more important is the ratio of debt to the money supply.

 

We also have much more debt than just the federal debt.  The following chart shows total debt over time (state, federal, personal, corporate).  Once again, we see an exponential curve.

 

 

What about our money supply?  We should expect to see the same trend – and we do.

 

 

 

 

 

Hard currency appears to be somewhat linear, but it’s an illusion.  If we reduce the scale (since hard currency is such a small percentage of the total money supply), we see the same trend:

 

 

Since the Federal Reserve stopped publishing M3 (total amount of dollars in circulation) money supply data in 2006, a couple of economists have worked to re-create it.  The next graph was created by John Williams at shadowstats.com.  Take note of how the year over year growth of our money supply has steadily increased since early 2005.  Also note how the rate of growth is beginning to slow since the beginning of 2008. (I originally wrote this post in early 2008 - I have updated the graph below to show money supply growth through the first few months of 2009 - you can see how the current credit 'crisis' is affecting money supply growth).

 

 

I believe we’re going to see our money supply growth continue to slow since we are now at the point that we cannot create enough new money (through debt) to support the existing debt. If we’re not able to create enough new money (through debt) each year to service the interest on the existing debt – the system begins to collapse (loan defaults & bankruptcies begin to increase).  The world tells us that our economy is ‘maturing’, which is why our economy’s growth is slowing.  The truth, as you see, is much different.  We are beginning to see the very real signs of an economy on the brink of collapse under the weight of its monetary system.  We’ll talk about these signs later in this post.

 

Let’s continue by viewing inflation.  Once again, we hear the world tell us that inflation is running at a rate of 3% a year and we all accept this as normal – and we forget that this rate is compounded year after year.  If we see our money supply increase at such a fast pace, we should expect to see inflation also rise at an exponential rate – and we do.

 

 

Now you know why cars that once cost $3,000 now cost $30,000 or a loaf of bread that once cost $0.25 now costs $2.50.  Prices increase as the volume of money in the system increases.  More people with more money to spend places upward pressure on prices for everything – cars, fuel, food, natural resources, etc.  As money supplies throughout the world increase at an exponential rate, we see inflation skyrocketing across the globe.  More on this below.

 

What about other economic indicators?  We see the same trend.

 

Government Spending:

 

Government Revenues:

 

 

 

Commercial Bank Credit:

 

 

 

 

Total Revolving Credit:

 

 

Total Consumer Credit:

 

 

These are all interesting, but the most important graph will show us the rate of increase of our debt and the rate of increase of our money supply.  If we see a widening gap between the two, then we know that the system is beginning to break down as the rate of increase in debt (new debt – retired debt + interest) is outpacing the money supply used to create and service the debt.

 

 

 

 Sobering isn’t it?  What you are seeing is a system on the brink of total collapse.  With no way to pay our debts (since money is created by debt), this was inevitable at some point.  Even though our money supply is also on an exponential curve, it cannot (mathematically) keep up with the runaway debt.  We are nearing the end of an inevitable cycle.  A cycle that ends with the economic collapse of the United States.  As I mentioned earlier, this would not be a surprise to the men who created the system in the U.S. in 1913, nor is it a surprise to the men who are controlling the system today.

 

What about the rest of the world?  Can’t they continue to finance our debt?  Won’t this help delay our collapse?  What you are about to see is that every major world economy also has a Central Bank – and therefore is on the same exponential curve as us.  At some point, the entire world system will be unable to sustain itself unless the entire system changes.  We’ll just take a look at money supplies of some of the world’s biggest economies.  As you view these graphs, also take note of the total amount of Euros (European Union) in circulation compared to the amount of dollars in circulation.  If you consider that there are trillions more dollars in circulation throughout the world compared to pounds and euros and also consider the massive amount of U.S. debt – it shouldn’t surprise anyone that the overall value of the dollar is declining against the world’s major currencies.

 

Global Money Supply:

 

 

 

European Union:

 

 

Australia:

 

 

New Zealand:

 

 

India:

 

 

In addition, in recent months China’s money supply (M1+M2) has been growing at a 16-18% annualized rate.  So, it’s easy to see that the same insane economic/monetary system has been instituted the world over.  The question is – why?  Before we answer this, let’s take a look at what is going on in the U.S. economy today.

 

Let’s think about what we would expect to see if the economic system of the United States begins to collapse due to this monetary system.  As the amount of total debt continues to increase faster than the money supply, we would expect the number of personal and corporate bankruptcies to continue to increase.  As global inflation also continues to increase prices on a broad range of products and commodities (due to increases in money supplies the world over), we would expect this to also negatively affect individuals and corporations in America.  We would also expect to see those of us with the lowest cash reserves to be affected first.  Are we seeing these things?  Absolutely.  We see them everyday in our news.  The current ‘credit crisis’ began when subprime borrowers began defaulting on their home loans.  Now, we see that the number of Alt-A and Prime borrowers falling behind on their mortgages is also increasing.  Home prices are now decreasing across the nation as a result.  How does this affect the money supply?  If a homeowner defaults on a loan, the bank must ‘foreclose’ and take a loss on its books.  The bank then must sell the home – but sell it in a depressed housing market.  If the home was originally purchased for $100,000; and the bank can only get $75,000 now - based on what we now know about how money is created - you can see how the money supply will begin to be affected in a very big way.  As home prices decline, the amount of money generated from the home loans from consumers also declines.  As banks tighten credit due to the rising defaults, the vicious cycle continues – fewer loans and lower prices equals less money created (thanks to this debt based monetary system).  Less money created means less money to loan and less money to buy things – and the exponential money creation cycle from debt begins to reverse itself. It’s also easy to see that falling housing prices and falling housing sales are not the only problem here – all of the suppliers, subcontractors, etc. are also affected.  The rapid increase in the money supply generated by private banks that we’ve seen over the past decade is beginning to slow significantly.  But as you know, this isn’t all that’s happening.

 

You’ve watched as the value of CDO’s (Collateralized Debt Obligations), CLO’s (Collateralized Loan Obligations), SIV’s (Structured Investment Vehicles) and other derivatives are now plunging in value resulting in huge write-offs for banks.  As foreclosures have risen, the value of the bonds created from these mortgages have plunged in value – even those bonds based on ‘prime’ mortgages.  All of these things are reducing the money supply.  If you have an investment that you thought was worth $100, but now is only worth $60 on the open market, your access to money has been substantially reduced.  Auction rate securities, once thought as safe as cash, now can’t be sold – there are no buyers.  What you are seeing are the cracks beginning to form in the dam. 

 

What is the Federal Reserve doing?  Basically, they are trying to plug the holes by injecting money into our economy to delay the inevitable.  Money creation through the private banking system is faltering, so someone has to step in or something catastrophic is going to happen.  As the process has accelerated, not only are banks slowing their lending to consumers, they have also significantly reduced lending to each other.  In order to get the capital they need, many banks are now borrowing more money directly from the Federal Reserve discount window.  Remember, the Fed isn’t giving the money away; banks are borrowing this money from a private corporation.  We can see the impact from the current credit crisis from the graph below.

 

 

(Courtesy of Bloomberg)

 

We see this problem developing with the money supply, but there is one area of our financial system that has yet to suffer a significant drop in value – the stock market.  It’s been very volatile, but has not really suffered a prolonged decrease in value.  Think about this – what happens when financial conditions worsen, people can’t pay their bills/debts, all other investments have significantly declined in value and there’s only one remaining large source of wealth remaining?  People will sell their stocks to survive.  There’s an obvious problem with this – if a large number of people start selling – what happens?  Prices drop significantly.  Since stocks are one of the most volatile investments in the world, the coming decline in the stock market will, in all probability, be much worse than the current decline in value of CDOs/SIVs, Auction Rate Securities and other bonds.  One thing is for certain, it’s not a matter of if, but when this will happen.

 

 

 

 

Take a look at the above graph of the Dow Jones Industrial Average (Share volume is also shown).  Look familiar?  Once again, we see an exponential curve.  The DJIA is shadowing both our debt and our money supply.  Why?  Think about how the world tells us to invest.  We’re constantly told that stocks offer the best long term returns.  If you only look at stock returns over the past 30 years – this would appear to be good advice (if you ignore the possibility of something negative happening tomorrow).  The problem is that there are two very good reasons why the stock market has continued to increase over this time period – and they have nothing to do with the stock market itself.  As money has increased exponentially over the past 30 years – more and more liquidity has been placed in the hands of investors.  What is another consequence of this exponential money growth?  Inflation has also increased exponentially.  We have more and more money in a system where inflation is eroding the value of this money.  In this situation, everyone is trying to at least maintain the value of their money – by trying to earn a return higher than the inflation rate.  So, we see more and more people investing more and more money into risky investments (stocks, hedge funds, CDO’s, SIV’s, Auction-Rate Securities, etc.) in an attempt to outrun the inflation rate. 

 

There’s also another problem that no one in the mainstream media is discussing.  We assume that our inflation rate has been approximately 1%-5% in recent years because this is what our government tells us.  The problem is that since the early 1980’s, the government has changed the way it measures inflation.  I won’t go into details here (please watch Chris Martenson’s video for further information on how our government has changed how it calculates inflation and other economic data:  http://www.chrismartenson.com/fuzzy_numbers).  The truth is that the actual annual consumer inflation rate has been between 8%-12% over the past 10 years – which means that you would need to average an annual return of around 10% over the past 10 years just to break even.  The current rate of inflation is closer to 13% and increasing - not 5% as we’ve been told (I have updated the graph in 2009 to show how the current crisis is causing deflationary pressures).

 

 

 

If we also consider the impact that the actual inflation rate has on real GDP (inflation is subtracted from nominal GDP to calculate real GDP) – we see why businesses and consumers are telling us that we’re in a recession – while our government tells us that our economy is still growing.  The current state of our economy starts to make sense when we see inflation in double digits and negative GDP for several quarters.

 

 

Do you know people who have lost their jobs recently?  Wonder why it’s difficult to find a job right now?  It’s because the current unemployment rate is closer to 13% - not the 5% that we’ve been told (I have updated the graph in 2009 to show the continuing impact of the current recession/depression - real unemployment is now approaching 20%).   The government selectively removes ‘discouraged workers’ from total unemployment in order to calculate the lower rate.  It’s simply a way for our government to manipulate the data to show more favorable percentages.

 

 

 

What is going to happen to the stock market as our money supply growth continues to slow, GDP continues to contract, inflation continues to increase, housing prices continue to fall and more people lose their jobs?  The stock market will, once again, shadow our money supply straight down as the system collapses.  We’re beginning to see how this is affecting the stock market today.  The market has been extremely volatile as earnings reports from companies seem to contradict government economic data.  When it becomes clear to everyone that we’re in serious trouble – we’re going to see a mass exodus from stock markets worldwide.

 

If you’re wealthy, you may feel somewhat secure that you’ve got a nice nest egg to see this through.  Where is your money?  It’s most likely in dollar currency in the system – checking/savings accounts, money market funds, stocks, bonds, 401(k)’s, retirement accounts, etc.  What happens if it’s not just a segment of the system that collapses, but the entire system?  It won’t matter what you have - $5 or $5 million – your wealth will vanish before your eyes.  We are facing a far worse scenario than 1929.  From 1929 through 1933, our money supply contracted approximately 30% after a period of money supply expansion in the 1920’s.  As you can see from the money supply trends in previous charts, we have also been through a period of significant money supply expansion from 1995 until 2007.  It appears that 1929 was a trial run for what will happen in the near future to us. 

 

Was wealth destroyed during the Great Depression?  No.  Wealth was transferred.  If you read the biographies of some of the great bankers of that era (J.P. Morgan and others), you will see that the majority of them did not have their money in stocks.  Earlier in 1929, they moved their investment holdings to cash and gold.  For them, the crash of 1929 was not a catastrophe, it was a buying opportunity. A buying opportunity they created.  The price of assets dropped dramatically during this time - and guess who happened to have the cash on hand to buy assets at depressed values? 

 

Until now, you’ve probably thought that we’re all playing by the same rules – we’re not.  This really isn’t about money – it’s about power and control of the world.  It’s about a ruling elite enslaving humanity on a worldwide scale.  A ruling elite given power by the world’s spiritual ruler.  Now you know a little more about why the Lord has warned us.  He warned us that this beast would be deceptive and would deceive the whole world – and you’re beginning to see why.  When God tells us in His Word that something in our future will be deceptive on a worldwide scale – it’s a warning we should heed.

 

This leads us to why our monetary system exists.  In 1913, the battle for the control of the United States banking system was lost – and the Federal Reserve Bank was created.  The name of this private corporation should tell us all we need to know – it’s a lie.  It’s a bank that is not Federal and there are no reserves.    The truth is that this ingenious monetary system was created by some highly intelligent men for one purpose – global power.  Whoever controls interest rates and the volume of money in a nation controls the nation (and ultimately the world).  In a world focused on money and the pursuit of money, whoever controls our money has the power – absolute power.  These men created a monetary system that forever places our nation in debt and one that can be manipulated by them for their purposes.  What is going to happen when markets collapse? Guess who, once again, will be there to acquire depressed assets? 

 

As I’ve said before, this was inevitable.  If you give a banking system, in our evil world, the ability to control the money supply and the ability to charge interest on the money they create, the bankers will slowly, over time, exchange worthless money (paper and electronic fiat currency) for real assets – gold, silver, land and property.  If you view this from a spiritual standpoint, you begin to understand why Jesus told us that building the foundation of your life on the things of this world is not wise.  As has happened before, and will happen again, wealthy people of this world will see the foundation of their lives (money) slowly sift away through their fingers.  Our wealth is an illusion.  Satan has offered wealth and power to many in this nation and they have gladly accepted.  They are about to witness what happens when you do a deal with the devil.  Take him on by yourself and sooner or later – he’s going to find a way to get his tentacles into you.  What happens when wealth is taken away from people who are focused on wealth?  It’s not pretty.  How do we overcome?  As I’ve said before, and will continue to say until I leave this world – you will not overcome this world and its ruler until you humbly ask forgiveness from God.  Until you acknowledge your sins and truly believe the Lord’s promise of salvation through His Son, you will never get free of the world.  You will always be susceptible to the world’s many disappointments.  When you truly repent and are born again, what happens in the world no longer matters because you know the Lord and the Lord stands with you – until the end.

 

At some point you’ve probably wondered how on earth this monetary system has survived until now.  If you read the many quotes throughout recent history from bankers, world leaders, economists and tycoons about central banks – and really pay attention to what they’re saying - it’s no secret that those in power knew what was happening (I have listed many of these quotes on my website).  Why hasn’t anyone stopped this madness?  It’s not hard to figure out – fear.  If you attain a position of power and are told to look the other way or face the consequences – what do you do?  Most people in the world will gladly take the money and power….and look the other way.  Why place my life at risk when I can continue living this nice lifestyle by not rocking the boat?  Yes – I said that by standing against this beast – you place your life at risk.  I’m not saying this merely to make a hypothetical point.  Take a look at this list.  These men had three things in common.

 

Abraham Lincoln

James Garfield

John F. Kennedy

 

All were Presidents of the United States.  Each man spoke out against the issuance of money by anyone other than our Government and made it clear who they were targeting with these comments – and all were assassinated.  Lincoln refused to attain loans from the European banks to finance the Civil War (he was offered loans at 24%+ interest) and instead had the U.S. Treasury issue its own money.  JFK gave a speech in 1961 about a worldwide ‘monolithic and ruthless conspiracy’ which is ‘a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations’.  I have added a link to the speech on my website. (Here’s the link:  http://www.youtube.com/watch?v=C4cqSXtj9ak)  JFK even had the audacity in the summer of 1963 to give the U.S. Government the authority to, once again, create its own money via Executive Order 11110 (based on a Silver standard).  The U.S. Treasury actually began to print its own money in 1963….but as we all know, this didn’t last long. 

 

As you read the quotes below, notice carefully what these men are telling us.  They didn’t realize it at the time they made these statements, but each one of them learned about and then commented on – one of the beasts of Revelation 13.  Some of them paid the ultimate price for doing so.  The Lord doesn’t arbitrarily label something a ‘beast’ without reason.  He uses the term ‘beast’ to tell us who and what we’re dealing with – an organization that will kill, steal and destroy anyone and anything in its path – anything that opposes it.  This beast obeys its father – the father of lies and deceit who walks in complete darkness.  There is only one way in this world that you and I can oppose this beast and survive – by standing with and obeying the Lord. 

 

“The very word secrecy is repugnant in a free and open society – and we are, as a people, inherently and historically, opposed to secret societies, to secret oaths and to secret proceedings.” –JFK

 

 

“We are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covet means for expanding its sphere of influence – on infiltration instead of invasion – on subversion instead of elections – on intimidation instead of free choice.  It is a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine - that combines military, diplomatic, intelligence, economic, scientific and political operations. Its preparations are concealed, not published.  Its mistakes are buried, not headlined.  Its dissenters are silenced, not praised.  No expenditure is questioned, no secret is revealed.”  -JFK

 

“I am asking your help in the tremendous task of informing and alerting the American people.” –JFK referring to the worldwide conspiracy mentioned above

 

“Whoever controls the volume of money in our country is absolute master of all industry and commerce….and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”  -James A. Garfield

 

“The Government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers.  By the adoption of these principles, the taxpayers will be saved immense sums of interest.  The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity.” -Abraham Lincoln

 

“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected the promises of discretion for almost forty years.  It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years.  But, the world is now more sophisticated and prepared to march towards a world government.  The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the National auto-determination practiced in past centuries.” –David Rockefeller in an address to Trilateral Commission Meeting, 1991

 

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will
grow up around them (around the banks), will deprive the people of their property
until their children will wake up homeless on the continent their fathers conquered." –Thomas Jefferson

 

"Capital must protect itself in every way... Debts must be collected and loans and mortgages foreclosed as soon as possible. When, through a process of law, the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd." -J.P. Morgan

 

"We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent." –James Paul Warburg (Chairman of the Council on Foreign Relations, speaking before the U.S. Senate, 1950)

 

"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president." –Franklin D. Roosevelt

 

"[The task is to] covertly lower the standard of living, the whole social
structure, of America so that we can be merged with all other nations." –Rowan Gaither (President of the Ford Foundation, 1954)

 

“I am myself persuaded, on the basis of extensive study of the historical evidence, that... the severity of each of the contractions - 1920-21, 1929-33, and 1937-38 - is directly attributable to acts of commission and omission by the Reserve authorities and would not have occurred under earlier monetary and banking arrangements.'' –Milton Friedman (Nobel Prize-winning economist, economic advisor to President Ronald Reagan)

 

"Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it." –Woodrow Wilson

 

"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom."  -Woodrow Wilson

 

"We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world--no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men." –Woodrow Wilson

 

"This Act (the Federal Reserve Act, Dec. 23rd 1913) establishes the most gigantic trust on earth. When the President (Woodrow Wilson) signs the Bill, the invisible government of the Monetary Power will be legalized... The worst legislative crime of the ages is perpetrated by this banking and currency Bill." –Charles A. Lindbergh Sr. (Congressman and father of the famous aviator)

 

"The most wonderful thing of all is that the distinguished Lutheran and
Calvinist theologians who belong to our order really believe that they see in it (Illuminati) the true and genuine sense of Christian Religion. Oh mortal man, is there anything you cannot be made to believe?" - Adam Weishophf upon establishing his "Order of the Illuminati", on May 1, 1776

 

"It is ironical that the only nation which affirmatively expresses a dependence upon and belief in Almighty God in its birth certificate, should now be in mortal combat for its very existence with a godless conspiracy intent upon conquering the world, and reverting human society to the hazards and indignities of the Dark Ages." –Loyd Wright (Former President of the American Bar Association, 1961)

 

"From the days of Spartacus, Weishophf, Karl Marx, Trotski, Belacoon, Rosa Luxenburg, and Ema Goldman, this world conspiracy has been steadily growing. This conspiracy played a definite recognizable role in the tragedy of the French revolution. It has been the mainspring of every subversive movement during the 19th Century. And now at last this band of extraordinary personalities from the underworld of the great cities of Europe and America have gripped the Russian people by the hair of their head and have become the undisputed masters of that enormous empire." –Winston Churchill, 1920

 

"The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities, states and nation. At the head is a small group of banking houses generally referred to as 'international bankers.' This little coterie... run our government for their own selfish ends. It operates under cover of a self-created screen...[and] seizes...our executive officers... legislative bodies... schools... courts... newspapers and every agency created for the public protection." –John Hylan (Mayor of New York, 1918-1925)

 

"The sovereignty fetish is still so strong in the public mind, that there would appear to be little chance of winning popular assent to American membership in anything approaching a super-state organization. Much will depend on the kind of approach which is used in further popular education." (Council on Foreign Relations, 1944)

 

If you spend some time studying these international bankers who have instituted this debt based monetary system worldwide, you will find that at the top echelon of power there are approximately 300 names.  These are the same 300 families who own stock in the Federal Reserve of the United States and all of the other central banks the world over. These are the people who wield the world’s real power from the shadows and provide the wealth and power needed to infiltrate the world’s monetary and political systems.  These are the people the Lord describes in Revelation 13 – this ‘beast out of the earth’.   

 

If you continue to study how they have gained this power, you will be led back in time to the early 1690’s to the founding of the Bank of England – the world’s first central bank.  And if you continue to search for the truth, you will find that all roads on this journey eventually lead to one name – Rothschild.  The world will tell you that the Rothschild’s banking empire has been reduced to a ‘niche’ bank – catering mainly to very wealthy investors.  The truth is that they control approximately 70%-80% of the world’s wealth from the shadows.  If I had told you this at the beginning of this post, you would have probably rejected this statement outright.  Now you know how it’s possible – they print the world’s money and exchange it for the world’s real assets.  As I mentioned at the beginning, it’s really an ingenious plan – when you realize why it was created.  It’s evil, but ingenious.  The Rothschilds and every member of these ‘elite’ families would tell you that this plan was devised by them for their purposes – but we know the truth.  The Lord has told us Satan’s plans – they’re simply obeying the one they serve.

 

We now see how the world’s financial system has been overtaken by a few very powerful men.  If we take what we know and think about the ‘mark of the beast’, we realize that control of the world’s financial system isn’t enough to satisfy the prophecies about the ‘mark’.  Controlling the world’s financial system is one piece of the puzzle, but something else is needed – enforcement.  Everyone throughout the world will be ‘forced’ to accept the mark. These powerful men need a way in which to deceive us into believing that humanity needs protecting – and now we know why the Lord tells us in the book of Revelation about ‘miraculous signs’ used by this beast.  The beast creates these ‘signs’ to strike fear among us – fear that will eventually drive humanity to give over its freedom to the beast – and Satan.  We’ve seen many of these ‘signs’ already, but they are only the beginning.

 

When it comes to spiritual deception, you are beginning to see just how blind we really are in this world when we walk away from our Creator.  We focus on the things in the world – money, careers, cars, houses, addictions, stuff, etc. – and we forget about the subtle things that are missing from our lives.  Some of these things are big picture – How did we come into being?  Why are we here?  Does God really exist?  If He exists, why can’t I see Him?  Can I really know God - personally?  Where do I go when I die?  Am I really alone in this fallen world?  How can I get free of this mess?  Other questions are smaller picture, but would also lead us to the truth if we would just slow down for awhile and think about what we’re consistently told in this world and compare it to God’s truth – could someone really consolidate the world’s government, world’s religion and world’s financial system within 7 years?  If God has allowed His children to experience pain and suffering throughout human history in order to strengthen them in this world, why would He change now? Sometimes it’s a very simple question that leads us to some very important answers – how is our money created?  Think about how many times in your life – friends, parents, teachers, professors – someone has explained our monetary system to you.  Never?  You’re not alone – and there’s a reason it’s being hidden.  If I were to ask 1000 Americans today what is the greatest threat to our nation’s sovereignty – how many do you think would respond - ‘the war on terror’?  My guess is that 99% of us would agree that ‘the war on terror’ is our greatest threat.  Our spiritual enemy has created a perceived threat – while his true ‘beasts’ gain control of the world through deceptive means – subversion, infiltration and intimidation.  Again, an ingenious plan – and not of this world.  The only way to overcome it is to obey the One spiritual being that Satan cannot deceive, intimidate or overcome – our Father in heaven. 

 

The truth is that never before, in the history of the United States, have we faced a greater threat to our national sovereignty as we do now – never.  We are facing an enemy that is much more intelligent and powerful than you and I - an enemy that has not used brute force against us, but works in the shadows to deceive and infiltrate.  At times in the past I would think about the book of Revelation and wonder how the people of the world could ever allow themselves to be subjected to an evil world government.  I simply didn’t want to believe it was possible and I, like most people today, disregarded the Lord’s warnings about how this beast would deceive the whole world.  Now that I’ve humbled myself and know the truth, I listen to this beast talk to us everyday through corporate, governmental, banking and religious leaders – leaders of the United States.  It’s no longer a mystery.  Their plan has almost come to fruition.  At some point, you might think that all hope is lost – that they are too powerful and the plan is too far along.  How can we possible stop this?  I’m not fearful of these things because I know that God could see this coming since the creation of the world – and I don’t need to figure out what to do on my own.  I will simply continue to seek the Lord’s will for me – His plan, not mine.  What you are about to see throughout the world is that God is going to go on the offensive – and he’s going to do it with you and me.  Now is not the time for weak people with weak ministries to proclaim a weak message.  Now is the time to allow ourselves to be strengthened spiritually.  Now is the time to stand in the face of overwhelming odds – and succeed. 

 

At different times in your life you have probably felt that something wasn’t quite right.  You could ‘sense’ it, but you couldn’t ‘see’ it.  You couldn’t really explain it, but you knew that there was something not quite right about the world you live in.  The economy is up – the economy is down.  Life is good – life is not so good.  Chaos seems to rule the world.  It’s like we’re walking on very thin ice that is constantly cracking – about to give way.  You are now beginning to understand that there is a method to the madness.  When the world chose death over life, sin over righteousness – when we chose to believe lies instead of the Truth – this was the inevitable result.  What gets the true Christian through all of this is that this isn’t the end – it’s only the beginning – and we’re not alone.  The end is glorious for us – end of story.

 

You’ve seen me reference the movie ‘The Matrix’ and how many aspects of the movie are similar to the spiritual battle being waged in the world.  I’m going to end this post with some dialog from the movie because it certainly relates to most of us.  The following scene takes place right before Neo learns the truth about his world.

 

Morpheus: I imagine that right now, you're feeling a bit like Alice. Hmm? Tumbling  

down the rabbit hole?
Neo: You could say that.
Morpheus: I see it in your eyes. You have the look of a man who accepts what he sees because he is expecting to wake up. Ironically, that's not far from the truth. Do you believe in fate, Neo?
Neo: No.
Morpheus: Why not?
Neo: Because I don't like the idea that I'm not in control of my life.
Morpheus: I know *exactly* what you mean. Let me tell you why you're here. You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?
Neo: The Matrix.
Morpheus: Do you want to know what it is?
Neo: Yes.
Morpheus: The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work... when you go to church... when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.
Neo: What truth?
Morpheus: That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.

 

I finally found a video that does an excellent job of explaining our monetary system in simple terms.  I recommend that you watch it to get a better understanding of what I have discussed here.  The video was created by Paul Grignon and is only 47 minutes long.  It’s available on Google Video at:  http://video.google.com/videoplay?docid=-9050474362583451279&q=paul+grignon&ei=kmAsSL70C5CUrgL0r72aCg .  I have used a couple of Paul’s examples in this post.

 

http://johngilmore.org/

It’s been about eight months since I wrote the post on our monetary system (Our Monetary System – How Central Banks Control the World’s Economy).  Obviously, a lot has happened since that first article.  Over the past two months (September and October), we’ve seen the U.S. economy begin to contract and we’ve also seen extreme volatility in stock markets around the world.  In this post, we’re going to review how our monetary system is currently impacting the world’s financial system and why we are seeing such extreme volatility in the world’s markets.

 

Let’s start by reviewing the Chicago Board Options Exchange Volatility Index (VIX).  This is a widely used measure of stock market volatility.  It is a measure of the implied volatility of S&P 500 index options. A higher VIX value reflects more volatility in the market.  As a baseline to what we’re seeing today – the VIX index briefly moved above 40 a couple of times in 2001 and 2002 during the dot com bust – reflecting high volatility as technology stocks declined.  From 2003 through 2007, a value of 30 indicated a fairly volatile market – it typically moved in a range between 10 and 20.  High volatility typically corresponds with stocks moving significantly lower as many investors issue sell orders.  As you can see from the chart below, the index has not moved below 30 since the middle of September (2008) and briefly moved above 80 around October 27^th.  Obviously, it’s not hard to see that stock markets have been extremely volatile.  It hasn’t been uncommon for the Dow Jones Industrial Average to swing 500, 600, 700 – even 1000 points in one day.  I’m guessing that there are stock traders around the world eating a lot of antacid these days.

 

So, the 64,000 dollar question is – what is causing this volatility?  Is it just the economy showing signs of weakness or is something more ominous at work here?  Before we answer this question, let’s take a look at a couple of other things happening within the world’s financial system.

 

VIX: 6 Months

 

 

As in previous years where volatility has been high, we again see that stocks are also showing significant declines.  As we see from the chart below – the Dow Jones Industrial Average (DJIA) has declined as volatility has increased.  This really shouldn’t be surprising – as prices become more volatile, people begin to lose confidence that their investments are stable/safe – so they move more of their money into investments that are perceived to be safer and less volatile – leading stocks lower.  As we’re going to see – what the world perceives as ‘stable’ or ‘safe’ – isn’t safe at all.  Take note of what the DJIA chart of the past 2 months looks like (below) – because you’re going to see the same pattern again and again. 

 

Also note that the DJIA tracks 30 ‘blue-chip’ stocks – large companies like American Express and Bank of America (Banking & Finance), IBM and Intel (Technology) and Chevron and ExxonMobil (Energy) – a wide range of companies and industries.

 

DJIA – 2 Months (includes Volume & Volatility)

 

 

Let’s now look at the NASDAQ composite index.  This is an index of all the stocks listed on the NASDAQ stock market. These are typically technology companies - companies like Apple Computer, Microsoft and Oracle.  As you view the graph below – notice anything similar to the DJIA graph above?  Although the values are different – they are both moving in the same direction, by approximately the same percentage - at the same time.  So, an index that encompasses a wide range of large companies in many different industries (DJIA) is moving in tandem with an index (NASDAQ Composite) that is comprised of almost 3,000 technology companies.  Is this a coincidence or will we see the same pattern continue across other stock markets?

 

NASDAQ Composite – 2 Months (includes Volatility)

 

 

Let’s take a look at the S&P 500 stock index.  The S&P 500 includes 500 large cap U.S. stocks – and like the DJIA – includes companies across many different industries.  3M, AllState, Amazon, Monsanto are a few of the companies included in the S&P 500. 

 

S&P 500 Index – 2 Months (includes Volatility)

 

At first glance, it appears that I’ve copied either the DJIA or NASDAQ graph above – because all three look almost exactly the same.  The values of each index are different (reflecting the different overall dollar values of each index), but they are all moving in the same direction, by the same percentage – at the same time.  You’ve probably noticed this yourself at times, but didn’t think much about it.  We should pay close attention – because this is indicating another fundamental flaw inherent in the world’s financial system.  We’ll get to this after a few more graphs.

 

Let’s look at the NIKKEI Index – an index that tracks the Tokyo Stock Exchange.  Once again we see that although the values are different – Japanese stocks are moving in the same direction, by approximately the same percentage – at the same time as their American counterparts.

 

NIKKEI Index – 2 Months (includes Volatility)

 

 

We see the same trends in European stocks.  The following is a Dow Jones stock index for European companies.

 

DJ Stoxx 50 – 2 Months (Europe – includes Volatility)

 

 

….and the same trends in Australia.

 

Australia ASX Index – 2 Months (includes Volatility)

 

The Dow Jones World Index (a composite of the world’s stock markets) looks almost identical to all of the stock indexes above.  What do these graphs show you?  Are you diversifying your portfolio by investing in different stock markets around the world?  No – you’re not.  The world’s financial system is now so closely interconnected – that all of the world’s stock exchanges are moving in tandem - acting like one big stock exchange.  Stocks around the world are moving up together and moving down together - and are all very volatile and declining in value.  Is stock market volatility a good thing?  Absolutely not.  Stocks are the most volatile investments on the planet and continued volatility can cause panics – which we’ve already seen in October.  When the stampede out of stocks begins sometime in the near future – it’s going to be a worldwide stampede. 

 

DJ World Index – 2 Months (includes Volatility)

 

If stocks are going to significantly decline in value, where do we invest our money?  The next investment option is usually bonds.  Bonds are less volatile – right?  Not in this current crisis.  Let’s look at one of the most widely purchased bonds – the 10 year U.S. Treasury bond.

 

The graph below shows the yield on the 10 year T-bill over the past 2 months.

 

10 Year Treasury Yield – 2 Months

 

Stock market volatility is spilling over into bonds (even bonds considered safe – U.S. T-bills) because investors have gotten into and out of bonds as stock markets have gone on a rollercoaster ride.  When stock market volatility rises – investors will tend to move to ‘safer’ investments – which is why you see the swings in the 10 year t-bill above.  Prices for T-bills have also been volatile – they move inversely to yields.

 

10 year Treasury Yields over the past year look just as volatile.

 

10 Year Treasury Yield – 1 Year

 

Look at the 3 month Treasury yield below.  When stock market volatility began to rise significantly in September, investors fled to T-bills – driving the yields to almost nothing.  This means that investors were willing to buy t-bills with no yield in exchange for safety.  Investors were investing their money in something that paid them nothing in return.  This would be like parking all of your money in a checking account with no interest – simply because you trust the bank and fear any of the alternatives.  What would cause the world’s investors to do such a thing?  One word – fear.  Not a good thing for financial/stock markets.

 

3 Month Treasury Yield – 3 Months

 

The index below tracks municipal bond prices (comprised of 40 municipal bonds rated A or better). Once again, we see more volatility.

 

Bond Buyer Muni Index – 3 Months

 

The Dow Jones Corporate Bond Index is an equally weighted basket of 96 investment grade corporate bonds.  Do you see any stability here?  Nope.

 

DJ Corporate Bond – 3 Months

 

The Dow Jones Chicago Board of Trade Treasury Index (DJ CBOT) is made up of CBOT 5-year, 10-year and bond futures contracts.  See any stability here?  Again, the answer is no. 

 

DJ CBOT Corporate Treasury – 3 Months

 

What about the convertible bond market?  You may have heard about convertible bonds recently in the news – corporations and hedge funds often use this market for short term financing needs.  What is a convertible bond?  As stated by the Wall St. Journal:

“Convertible bonds are part stocks, part bonds. They act like bonds and usually pay interest. But, as an added kicker, they give holders the right to convert the securities into stocks at a certain price. The market is normally less volatile than stocks, but the securities can have the same upside if a company rebounds.”

How has this market fared this year?  The following excerpt from the Wall St. Journal says it all.

“Overall, the $200 billion convertible-bond market has lost 36% so far this year, a bit more than the stock market, according to Merrill Lynch. But the average convertible-bond hedge fund has lost about 50% in that time, including a 35% plunge in October, according to Hedge Fund Research Inc.”

 

We see more volatility and more wealth evaporating.

 

So, we now see that both stocks and bonds have been extremely volatile and we see both stocks and bonds declining significantly in value.  If you add up the declines in the graphs above – you see trillions of dollars vanishing.

 

Until the recent crisis – money market funds have been considered as safe as cash.  Not now – the following excerpt from an article on CNN sums up the risks with money market funds:

“A soured investment in Lehman Brothers Holdings Inc. debt slashed two-thirds of the asset value of the oldest money-market fund in the United States, exposing clients to losses despite investments in a financial product seen as a safe haven even in volatile markets.

The sudden setback at the Reserve Primary Fund caused it to "break the buck" -- leaving investors unlikely to get back all the cash they put in because the fund failed to maintain assets of at least $1 for every dollar invested.”

In a previous post I discussed how the market for Auction Rate securities has also collapsed – commercial and investment banks have recently agreed to pay billions to investors who felt they were misled into believing these securities were as safe as cash.

If we also consider that banks are struggling with rising loan defaults (17 U.S. banks have failed to date this year), it is becoming clear that even our checking and savings accounts are at risk.  You may think that the FDIC will insure your deposits – but the FDIC has funding for approximately 1% of current bank deposits.  Not exactly reassuring.

It is becoming increasingly clear that there are no safe havens in the world’s financial system – except maybe your mattress – and it’s not really part of the financial system.

The next stop on this journey is commodities.  Let’s take a look at prices of some of the most widely traded commodities.  Let’s start with oil.  The following shows the price of oil over the past 3 months.  After climbing above $140 a barrel this summer, the price has now dropped rapidly below $70.  In approximately two weeks, the price of a gallon of gasoline in Atlanta has dropped from $4 to $2.  It’s easy to cheer such a drop in gas prices – until you study why it’s dropping so dramatically.

 

Crude Oil – 3 Months

 

 

It’s easy to see that market volatility is not isolated to stocks, bonds and financial derivatives – it’s also present within commodity prices.  We’re going to see that this volatility and price deflation present in oil also exists across all types of commodities.   The question we’re going to explore is – why?

Let’s take a look at metals.  Copper prices have dropped over 40% in three months as demand has declined dramatically.

 

Copper – 3 Months

 

Even gold has been volatile – as investors buy and sell gold to cover margins in other investments and diversify their holdings.  I believe that although gold has been somewhat volatile – it’s still the best investment in an uncertain financial system since its value is not tied to interest rates and it can always be used as money.  Try buying some actual gold – it’s hard to find.  The U.S. mint has even stopped minting certain gold coins since demand is far exceeding supply.

 

Gold – 3 months

 

What about agriculture?  We see the same trends.  Corn prices have declined over 30% in three months.

 

Corn – 3 Months

 

Same situation with Soybeans – prices have declined over 30% in three months.

 

Soybeans – 3 Months

 

Wheat prices are down almost 40% in three months.

 

Wheat – 3 Months

 

What about livestock?  The same trends are present everywhere.  Hog prices are down over 25% in three months.

 

Lean Hogs – 3 Months

 

 

Cattle prices are down over 15% in three months.

 

Live Cattle – 3 Months

 

 

The obvious question is – why are we seeing such widespread price deflation in the world’s financial markets?  If you read my first article on our monetary system, then you know that I initially believed we would probably see some type of hyper-inflation as Central Banks pumped more and more money into the system.  If you’ve been following the crisis – then you know that inflation has been a concern for Central Banks for some time as prices increased dramatically for a wide range of products and services.  We can see this in the chart below.  If we measure inflation using the standard measure used by our government until the early 80’s – we see inflation approached almost 14% before beginning to decline recently.

 

 

 

So, what is happening to tame inflation?  Why are prices declining at such a rapid pace?  The biggest pieces of the puzzle are (once again) our money supply and debt.  Take a look at our money supply growth rates.

 

 

We are seeing money supply growth slow considerably.  Why is this happening?  Because the world’s private banking system is failing.  Banks have dramatically reduced lending due to rising defaults and borrowers have dramatically reduced taking on more debt – because their debt levels are already at unmanageable levels.  The current debt of governments, corporations and individuals is crushing the world’s economy.  Central banks are now attempting to revive the world’s economy by lowering interest rates (again), lowering reserve requirements and recommending that governments continue with economic ‘stimulus’ packages.  Someone must continue creating debt (and therefore – money) or the system will begin a freefall collapse.  As I’ve said before – they are only delaying the inevitable.  You can only service debt at these levels for so long – before something catastrophic happens.

 

US_Federal_Debt

 

What happens when a debt-based monetary system begins to collapse?  You’re watching it happen everyday now – extreme volatility ripples throughout the financial system as the entire system shudders under the weight of the debt it has created.  The world simply can’t sustain the debt creation necessary to keep the system going.  Very few people understand what is happening – so we’re seeing wild swings in prices and volumes as people are blindly looking to somehow save their money from vanishing.

 

Prices for everything are now rapidly declining because we don’t have the money – or access to needed credit - to buy things.  Our economy actually began contracting in 2004 (when viewing real data) – but as you can see – it appears that we are now falling off the cliff.

 

 

This is why auto-makers the world over are now reporting drastically reduced sales numbers (and financial results) and why 3^rd quarter earnings from all kinds of companies in all kinds of industries around the world are showing serious declines and/or issuing guidance warnings.  We simply don’t have the money and/or access to credit to keep the system running.

 

This is why we see abysmal economic data like this:

 

 

 

 

 

 

 

We hear economists talk a lot about ‘bubbles’ – asset bubbles, stock bubbles, housing bubbles, etc.  As you will see below – the world’s financial system has created one, very big bubble across the entire system – and it’s about to pop.

 

It’s easy to see that stocks are on the way down from the top of the mountain.

 

World Stock Index (DJ World Index):

 

U.S. Stocks (DJIA):

 

European Stocks (DJ Stoxx 50) :

 

 

Japanese Stocks (NIKKEI):

 

 

 

Latin America (DJ Americas):

 

 

Much of the blame for the current crisis has been placed on the U.S. and U.K. housing market collapse.  A housing bubble has certainly been created in both countries, but as you will see – this is a worldwide problem.

 

 U.S. Housing Prices:

 UK Housing Prices:

 

The following excerpt is taken from the Economist.com website:

 

 

“WHERE are house prices most overvalued? As the rest of the world watches the bursting of America's housing bubble, that question should be at the top of everyone's mind. The answer is not comforting: many countries have had far hotter housing markets than America and are also suffering from tightening lending conditions thanks to the credit crisis.

 

In the latest World Economic Outlook, Roberto Cardarelli of the IMF calculates the share of the increase in real house prices between 1997 and 2007 that cannot be accounted for by fundamental factors such as lower interest rates and rising incomes. This “house-price gap” is greatest for Ireland, the Netherlands and Britain, where prices are about 30% higher than can be justified by fundamentals. France, Australia and Spain have house-price gaps of around 20%. In America, where prices were already falling in 2007, the gap is just over 10%.” –Economist.com

 

Energy prices have certainly been through a bubble:

 

Crude Oil:

 

Natural Gas Henry Hub Pit (Nymex):

 

Food prices across the board have gone through a bubble:

 

Corn:

 

Wheat:

 

 

Cattle:

 

 

 

Let’s look again at what is behind all of this: our money supply.

 

 

Our total money supply (M3 - dollars) is now approximately $14 trillion, but the rate of growth is now slowing.  If we see a dramatic decrease in lending from banks, what is sustaining the money supply growth?  Here’s the answer:

 

 

 

The total amount of money (dollars) controlled by the Fed & Treasury has now grown over the past year to approximately $8 trillion dollars.  As I’ve said before – someone has to keep the supply of money growing – which is why we see Central Banks pumping billions of dollars into the system and telling governments to provide additional economic stimulus packages.

 

Is there anything else that has contributed to these bubbles and all of this volatility?  The Federal Reserve (and mainstream media) tells us that they adjust the Fed Funds Rate in response to economic conditions.  The truth is that the Fed drives the economy (and behavior) with interest rates (coupled with reserve requirements).  The Fed isn’t responding to a rollercoaster ride – it created the rollercoaster. 

 

 

What happens when volatility finally cause the bubbles to burst completely?  We’ll need a new, heavily regulated, worldwide financial system. 

 

If you were wondering if the Fed really does own a large portion of our debt – this pie chart should answer the question.  The Federal Reserve owns over 50% of the U.S. Federal debt.  Remember – this is a cartel of private international bankers. I wonder why we never hear this on the nightly news? 

 

What does the Bible say about the relationship between a lender and a borrower?

 

‘the borrower is servant to the lender’ (Proverbs 22:7)

 

“Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.”  (Proverbs 22:26-27)

 

And here we see the impact on the Fed’s balance sheet from all the recent ‘bailout’ activity.  Notice that their ‘assets’ are increasing substantially.

 

The Lord has warned humanity for thousands of years about the very thing happening to us today – and our nation has joined a growing list of nations throughout history - that have ignored His warnings. 

 

Here’s a good analogy to summarize what is happening. Our Father tells us that He will build us a nice house – not too big, not too fancy – but it will shelter us and provide us all that we need – a good, stable house that will last.  It won’t cost us anything – we only need to believe that He will provide for us and to trust Him.  Our Father also warns us about other builders in the world.  While we’re thinking about this, another builder makes us an offer.  We don’t know this builder – but He promises to build us the nicest house the world has ever seen.  It will require a little bit of debt, but it will be far nicer than the home our Father said He would build for us.  We begin thinking about how nice it would be to have the nicest house in the world – so we reject our Father’s offer, we choose not to heed His warnings - and we hire the builder. We think this new mansion is complete with everything we could ever ask for – built with the finest fixtures, the finest furniture, the most beautiful lawn – the nicest looking house in the world.  The world envies our home because it’s so big and beautiful.  There’s only one problem – we didn’t lay a good foundation for our house.  Unbeknownst to us – the builder of our home built it on sand – because he is devious and we weren’t paying attention.  We noticed after moving in – that every once in awhile – the whole house shakes.  We pause – wondering what is causing the problem – but the shaking subsides and we don’t take the time to find out what is causing the problem – we’re too enamored with the beauty of our home.  Eventually, one day the whole house comes crashing down – and we all look around – wondering what could have caused such a thing.  Now – we don’t even have a roof over our head.  Now - we no longer care about how beautiful our home is – we just want some shelter.  The same devious builder then tells us that he’ll build us a better, more secure house this time – just trust him.  It will only cost us a little bit more than the first home.  Even though we rejected our Father the first time – He comes to us again – and again offers to build us a house with a solid foundation that is not too big, not too fancy – but will last our entire lives.  He only asks that we humble ourselves, ask for forgiveness for following the world – and to trust Him.  Who will we choose to build our next house?

What does all of this mean?  It means we better not put our faith and hope in the world – because the world is lying to us.

 

 

Tuesday, October 28, 2008, 3:06 pm, by cmartenson

 

Below, I've liberally excerpted from an article I read a couple years back that always stuck with me.

Since our challenge today is to know whom to trust and which story to believe, I thought I'd bring this one back to the forefront, because the parallels are so striking between the late 1920's and now.

Below is a graph of the Dow Jones during the years of the 1920's bubble, the stock market crash of 1929, and the onset of the Great Depression. The numbers in bubbles indicate when one or more quotes from a famous expert were captured.

I happen to believe that we are somewhere between points #8 and #18.

I get chills every time I re-read them...

Link to original article at Gold-Eagle.com

 

Number 7:

"The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin." - Stuart Chase , NY Herald Tribune, November 1, 1929 "Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929

"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."

- Business Week, November 2, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929

Number 8:

"... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929

"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929

"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (Pres. of the Block newspaper chain), editorial, November 15, 1929

"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

Number 9:

"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929

"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929

Number 10:

"For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930

Number 11:

"...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930

Number 12:

"There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930

Number 13:  

"The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"... the outlook continues favorable..."
- HES Mar 29, 1930

Number 14: 

"... the outlook is favorable..."
- HES Apr 19, 1930

Number 15: 

"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930

"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930

"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

Number 16:  

"... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930

Number 17:  

"... the present depression has about spent its force..."
- HES, Aug 30, 1930

Number 18:  

"We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930

Number 19:  

"Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931

Number 20:   

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933

 

Households pay down debts for first time

Thursday, December 11, 2008, 4:03 pm, by cmartenson

Chris Martenson

 

Mayday! Mayday!

This next story outlines a dire condition for a debt-based monetary system:

WASHINGTON (MarketWatch) - Stung by the loss of $2.81 trillion in their net wealth, U.S. households paid down their debts in the third quarter for the first time since at least 1952, the Federal Reserve reported Thursday.

As of Sept. 30, households' total outstanding debt shrank at an annual rate of 0.8% from $13.94 trillion to $13.91 trillion, the Fed said in its quarterly flow of funds report. It's the first decline in household debt ever recorded in the report.

Consumer debt actually reversed.   This strange behavior has never before been observed in this data series and it goes back to 1952.

Whether we use an "outside-in" empirical approach to observe that debt and money have been created in exponential amounts over the past six decades, or an "inside-out" approach to demonstrate a mathematical requirement for the exponential creation of money/debt, we come to the same conclusion:   We live in an exponential money system.

For this reason, the failure of consumer debt to expand at the required rate is very big news.   What's "the required rate"?  Roughly the aggregate rate of interest on all outstanding debts.

It seems that the hit came from the first ever recorded drop in mortgage debt:

Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion. Other consumer debts, such as credit cards and auto loans, increased at a 1.2% annual rate in the quarter to $2.6 trillion.

I am not certain if the mortgages were paid down or defaulted upon, but the article implies that they were paid down.  I am less sure of that given the massive foreclosure rates that are plastered all over the news.

Given that consumers are not pulling their weight, how is the system being held together?  Readers of the last two Martenson Reports will not be surprised by the answer:

Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government.

You can try and understand all the confusing alphabet soup lending facilities offered by the Fed, and try to track details of all the new borrowing by the government, but it is all really very simple to understand if we back up a bit. 

New borrowing and lending is being undertaken by the Fed-government axis at a rate sufficient to equal all the outstanding interest payments on prior debts.  

Without this new money creation defaults by somebody somewhere in the system is guaranteed.

Compounding the difficulties of the monetary and fiscal authorities is the fact that debts are already defaulting at a horrific clip.

All in all this leads me to conclude that when it comes to borrowing and new money creation, we haven't seen anything yet.

And still, even in the face of overwhelming evidence that there is an illness that lurks within the very design of the money system itself, there is precious little commentary on that subject in main stream media or the dominant political parties.

DECEMBER 12, 2008

Debt Shows First Drop as Slump Squeezes Consumers

By PHIL IZZO, BRENDA CRONIN and SUDEEP REDDY

Wall St. Journal

The U.S. economy is deteriorating more rapidly than expected just weeks ago, indicating the recession will be deeper and longer than feared as households and businesses struggle with the most stress they have faced in decades.

New Federal Reserve data revealed that U.S. households paid down debt for the first time since the central bank started collecting the information in 1952. While a positive longer-term trend, the higher savings rate means that consumers are spending less. That is a punishing turn for an economy in which consumer spending accounts for 70% of gross domestic product.

The Commerce Department said exports, which had helped sustain the economy through midyear, fell 2.2% in October from a month earlier as foreign demand for U.S. goods continued to fall. The nation's trade deficit rose in October to $57.2 billion from $56.6 billion in September, despite a considerable drop in oil prices during the month.

WSJ's Phil Izzo talks with Kelsey Hubbard about the results of the latest survey showing economists believe the current recession will last into June 2009, making it the longest since the Great Depression.

Another government report indicated that initial unemployment claims in the first week of December surged 58,000 from a week earlier to 573,000, a 26-year high, as companies slash payrolls before the end of the year. The number of workers continuing to collect jobless benefits jumped 338,000 to 4.43 million in the week ending Nov. 29 from the prior week -- matching the largest weekly increase on record, in November 1974 -- with little relief in sight as businesses brace for a lengthy downturn.

The government data spurred forecasters to update their expectations for the depth of the contraction, which is now expected to continue through the first half of next year. The increasingly grim news is likely to give a push to President-elect Barack Obama's plans for massive government spending to jolt the economy.

Citing the weak trade figures and other signs of a business slowdown, the forecasting firm Macroeconomic Advisers downgraded its estimate of GDP in the current quarter by a full percentage point on Thursday, to a 6.6% annualized decline. If that comes to pass, the quarter would rival the two worst periods in the recessions of the early 1980s. The economy declined by 7.8% in the second quarter of 1980 and 6.4% in the first quarter of 1982.

The final GDP number could turn out to be less dire, of course. Some economic consulting firms continue to estimate a slightly smaller 5% GDP decline this quarter followed by a 4% contraction in the first three months of next year.

Economists in the latest Wall Street Journal forecasting survey projected, on average, that the decline in GDP, which started in July, would continue through the first two quarters of 2009. If those predictions bear out, it would mark the first time GDP has contracted in four consecutive quarters during the postwar period.

On average, economists expect June 2009 to mark the end of the recession, which began in December 2007. That would put the downturn at 18 months, the longest period of decline since the Great Depression. The recessions of 1973-75 and 1981-82 each lasted 16 months.

The 54 economists in the latest Wall Street Journal survey predicted, on average, that GDP would contract at an annual rate of 4.3% in the fourth quarter of 2008, and 2.5% and 0.5% in the first two quarters of 2009. The Commerce Department's preliminary estimate showed a 0.5% decline in quarterly GDP for the third quarter of 2008. The economists were surveyed Dec. 5-8.

The expansion of the U.S. trade gap in October came as the plunging cost of oil imports was more than offset by a surge in the volume of oil that was imported. September's hurricanes, which disrupted activities at the port of Houston, partly caused the October import surge.

Exports of goods and services fell to $151.7 billion in October from $155.1 billion the prior month, as trading partners felt the effects of the worsening slowdown -- and a strengthening U.S. dollar. Total imports edged down to $208.9 billion from $211.6 billion, largely because of the drop in oil prices.

The broad-based decline in exports showed how a key engine of GDP growth earlier this year is sputtering. Trade represented as much as 2.9 percentage points of GDP growth in the second quarter, and 1.1 percentage points of growth in the third.

Through much of the first half of 2008, "the only thing that was keeping the economy from technically showing a reduction in GDP was trade," said IHS Global Insight economist Brian Bethune. "Even though we saw weak growth, it was strong enough to more or less keep factories busy and help absorb the shock of a weak domestic economy."

Now, "there's probably going to be little or no contribution from those exports," Mr. Bethune said.

The financial turmoil over the past year has taken a deep toll on consumers and businesses. The Federal Reserve said Thursday that U.S. household net worth fell 4.7% to $56.5 trillion in the third quarter, marking the fourth-straight quarterly decline, as home values, stocks and other assets lost value. Household net worth was down 11% from a year earlier.

 

The Fed's quarterly flow-of-funds report, the most comprehensive snapshot of the household sector available, showed that household debt contracted at a 0.8% rate, the first drop on record. Growth in consumer credit slowed to 1.2% at an annual rate in the July-September period, the Fed said, far lower than the 3.9% pace in the prior quarter. Borrowing for home mortgages fell at a 2.4% annual rate, the largest decline since the Fed began keeping the figure.

Consumers are being hit by falling home prices and job losses. The economists in the Journal survey on average said the unemployment rate will peak at 8.4% next year. While that rate was surpassed in both the 1970s and 1980s, it would mark a four-percentage-point increase from the low of 4.4% in March 2007. Only the 1973-75 recession, with a 4.1 percentage-point increase, had a larger jump in the postwar period.

Adding to consumers' pain: The end of the recession isn't likely to mark the end of job losses. In past recessions, labor-market contraction has continued for months after a downturn's official end. The economists surveyed, on average, forecast just an 8.1% rate for December 2009 as job cuts continue into 2010.

"The job market is ugly and is going to stay that way," said Allen Sinai at Decision Economics. "The economy is going through the heart of reductions in the work force now."

Many economists in the Wall Street Journal poll cited a major expected fiscal stimulus package as the key to pulling the U.S. out of recession, even though the structure of the package remains uncertain.

Write to Phil Izzo at philip.izzo@wsj.com, Brenda Cronin at brenda.cronin@wsj.com and Sudeep Reddy at sudeep.reddy@wsj.com

You've probably wondered at some point after receiving these emails from me - is anyone else looking into this stuff besides Gilmore?  Actually, there are many people who are now researching our monetary system - you just won't hear them on CNN or Fox News.  It's very rare to hear anyone in mainstream media tell us the truth.

 

The article below was published recently and does a great job of briefly explaining the history of the Fed.  If you haven't taken the time to research the Fed and our monetary system - now is the time to do so.  This should be at the top of your list of priorities - it's that important.  Why?  Because sooner - rather than later - the Fed (and the world's central banking system) is going to lead us into the worst depression in the history of our nation.  I hope this gets your attention - because it's the truth.  You are watching it happen on the news everyday now.

 

If I were to point to one piece of information in the article below to focus on - it would be the following quote from the Rothschilds. 

 

"Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on it favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear it burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."  -Rothschild’s Bros. of London

 

What are they telling you?  They are telling you that when it comes to this monetary system they created - there are two types of people in the world - and they are not worried about either of them.  They are telling you that there are very few people who have the mental ability to understand the system.  Are they worried about this minority?  No.  Why?  Because this minority will be so enamored with the wealth and power that the system brings them - they will do nothing to stop it.  They will ignore the danger it presents because their focus is on the money, power and prestige the system gives to them.  Do you think this might apply to all of the intelligent people on Wall Street today?  Even now - the vast majority of the people at the financial epicenter of the world - cannot see the danger.

 

The quote above also tells us that the Rothschilds believe the vast majority of us do not have the mental ability to understand the system - and therefore will be slaves to the system without knowing it.  While most of us are burdened by the system without knowing it (struggling to earn enough to pay our bills, fighting to stay ahead of inflation, paying interest on everything, etc.), I believe that many people can understand the system once it's explained to them.  It's actually a relatively simple system when you focus on the basics of how the system works - the problem is all of the deception surrounding it.  You will not hear how our monetary system works on CNN, Fox News, CBS, NBC, ABC, etc.  Our President is not going to inform you about the dangers of our monetary system during a primetime address.  You will not find many (if any) college courses that accurately explain how the Federal Reserve System works.  Did you study the history of the Fed at any point in high school?  Did your high school economics teacher review the details of our monetary system with you?  Did your high school economics text book have a chapter on our monetary system and how our money is created by debt?  Did your high school math teacher use our money supply and debt as examples of exponential growth?  You get the picture.  There is a determined effort to keep the secrets of the system hidden. 

 

Imagine what would happen tomorrow if someone was able to explain this system to every American.  What would happen if every American woke up tomorrow morning and instead of watching 'Regis and Kelly' or 'American Idol' highlights - they instead watched a program explaining how the Fed is causing our economy and the financial system to collapse.  What if their motives were exposed?  What if every American began to ask some very hard questions like - why is our government allowing this to happen?  The answers would lead to a very angry population.  Ladies and gentlemen, this is the stuff of revolutions.  I wish that none of this were true - but the truth is the truth.  You either accept it and do something about it - or you do what most people in our nation are doing - and keep your head in the sand.  Each of us chooses the path we will take.  Each of us chooses who we will follow.  Each of us chooses whether to take a stand against evil or succumb to it. 

 

If you've studied what God has to say about the pursuit of money and applied this knowledge to our monetary system - then you've probably got alarms going off in your mind.  Our spiritual enemy is very skilled at offering short term gains that deliver long term misery and destruction.  Some of us recognize these tactics within our lives and protect ourselves accordingly.  If you are a Christian - then you understand what I'm telling you.  We are not unaware of the devil's schemes against us personally.  The problem is that almost all of us never think about this from a corporate standpoint.  Our nation has done a deal with our enemy - and I assure you - this deal will turn out like all the rest.  We have experienced relatively short term gains - and now we're about to see the long term consequences.

 

Take Care,

 

John

 

 

The Grand Illusion – The Federal Reserve

 

The whole world is in a state of complete confusion. Americans are coming to the realization that their lives have been a grand illusion. You thought your neighbor had it made. They were driving a Mercedes, spent $40,000 on a new kitchen with granite countertops and stainless steel appliances, sent their kids to private school, had a second home at the shore, and took exotic vacations all over the world. Now their house is in foreclosure and you are paying to bail them out. The anger and outrage in the country is at the highest level since the Vietnam War. The American public is being misled by government officials, politicians, and the Federal Reserve regarding the causes of this crisis and the solutions needed to solve our economic tribulations.

 

 The average American does not know much about the Federal Reserve. The government and the Federal Reserve prefer to operate in the shadows. If the American public understood what their policies have done to their lives, they would be rioting in the streets. Henry Ford had a similar opinion:

 

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

 

Most Americans believe that the Federal Reserve is part of the government. They are wrong. It is a privately held corporation owned by stockholders. The Federal Reserve System is owned by the largest banks in the United States. There are Class A, B, and C shareholders. The owner banks and their shares in the Federal Reserve are a secret. Why is this a secret? It is likely that the biggest banks in the country are the major shareholders. Does this explain why Citicorp, Bank of America and JP Morgan, despite being insolvent, are being propped up by Ben Bernanke and Timothy Geithner?

 

 

The history of National Banks in the United States has been controversial since the Founding Fathers signed the Declaration of Independence. The Constitution of the United States unequivocally states that only Congress has the authority to coin money, not an independent bank owned by unknown bankers.

 

The Congress shall have Power to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

 

Article 1, Section 8 – US Constitution

 

Our most recent horrifying experience with an all powerful central bank has led to the current worldwide financial crisis. In less than one century the Federal Reserve Bank of the United States has destroyed our currency and has allowed bankers to gain unwarranted power over the country. They had the ability and opportunity to bring down the worldwide financial system.

 

Then the average American is told that the dollar has lost 95% of its purchasing power since the inception of the Federal Reserve in 1913, they look at you with a blank stare and start wondering whether American Idol is on TV tonight. The systematic inflation purposely created by the Federal Reserve silently robs the average American of their standard of living. The CPI figures published by the US government tell the story.

 

Year	Annual Average	Annual Percent Change (rate of inflation)
1913	9.9	--
1914	10.0	1.0
1915	10.1	1.0
1916	10.9	7.9
1917	12.8	17.4
1918	15.1	18.0
1919	17.3	14.6
1920	20.0	15.6
1971	40.5	4.4
1972	41.8	3.2
1973	44.4	6.2
1974	49.3	11.0
1975	53.8	9.1
1976	56.9	5.8
1977	60.6	6.5
1978	65.2	7.6
1979	72.6	11.3
1980	82.4	13.5
1981	90.9	10.3
1982	96.5	6.2
2000	172.2	3.4
2001	177.0	2.8
2002	179.9	1.6
2003	184.0	2.3
2004	188.9	2.7
2005	195.3	3.4
2006	201.6	3.2
2007	207.3	2.9
2008	215.2	3.8
2009*	218.4	1.5

Source: BLS

 

The government began keeping official track of inflation in 1913, the year the Federal Reserve was created. The CPI on January 1, 1914 was 10.0. The CPI on January 1, 2009 was 211.1. This means that a man’s suit that cost $10 in 1913 would cost $211 today, a 2,111% increase in 96 years. This is a 95% loss in purchasing power of the dollar. For some further perspective here are the prices of some other common items in 1913 per the Morristown Daily Record:

 Boy's shoes for school, .98/pair                              Women's shoes, 2.00-8.00/pair

Bread, .10/3 loaves                                                  Butter, fancy, .30/lb

Cereal, Kellogg's Corn Flakes, .09/box                 Eggs, Fresh Western, .27/dozen

Peanut butter, .09/jar                                                Toilet paper, .26/6 rolls

Daily Record [Morristown NJ], .01/daily paper    

 

Notable on the CPI chart is that in the years following the creation of the Federal Reserve, inflation ran at double digit rates to finance Woodrow Wilson’s foreign intervention into World War I. The other notable period was in the years following President Nixon’s closing of the gold window in 1971. This led to rampant inflation that wasn’t tamed until the early 1980’s by Paul Volcker, the only independent courageous Federal Reserve Chairman in its history. The figures so far in the 21st Century seem modest. This is due partly to the methodical downward manipulation of the calculation by government bureaucrats. The period from 2010 to 2020 will show a dramatic jump caused by all of the money printing and reckless spending that is occurring today. Book it Dano.

 The average American might just conclude that prices always go up, so what’s the big deal about inflation. This is where the Federal Reserve and politicians have pulled the wool over your eyes. The CPI was 30.9 in 1964. Today, it is 211.1. This means that prices have risen 683% since 1964. The only problem is that your wages have not risen at the same rate, even using the government manipulated CPI. Using a true CPI figure, average weekly earnings are 64% below what they were in 1964. This explains why a family of five could live well with one parent working in 1964, but even with both parents working and using debt in prodigious amounts, the average family does not live as well today.

 

 

 

Don’t Know Much About History

The First Bank of the United States was created in 1791. Alexander Hamilton, the 1st Secretary of the Treasury, proposed this bank and convinced a hesitant President Washington to agree. John Adams and Thomas Jefferson were against the concept. It favored the moneyed classes of the North versus the agrarian South. The bank was given a 20 year charter and President James Madison let it expire in 1811. He then renewed the charter in 1816. The wise men who took unprecedented risks in declaring independence from England’s tyranny, feared the tyranny of bankers equally:

"All the perplexities, confusion and distress in America rise, not from defects in the Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation."

 

John Adams, in a letter to Thomas Jefferson, 1787

 

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."

Thomas Jefferson, U.S. President -1802

 

[The] Bank of the United States... is one of the most deadly hostility existing, against the principles and form of our Constitution... An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. What an obstruction could not this bank of the United States, with all its branch banks, be in time of war! It might dictate to us the peace we should accept, or withdraw its aids. Ought we then to give further growth to an institution so powerful, so hostile?

 

                                                Thomas Jefferson, U.S. President -1803

 

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance".

James Madison, U.S. President

 

President Andrew Jackson was the first and only President in the history to pay off the National Debt. He worked tirelessly to rescind the charter of the Second Bank of the United States. His reasons for abolishing the bank were:

·        It concentrated the nation's financial strength in a single institution.

·        It exposed the government to control by foreign interests.

·        It served mainly to make the rich richer.

·        It exercised too much control over members of Congress.

·        It favored northeastern states over southern and western states.

President Jackson believed that only Congress should be responsible for the issuance and control of the currency. Delegating that duty to powerful New York bankers was distasteful to him.

"If Congress has the right to issue paper money, it was given to them to be used ... and not to be delegated to individuals or corporations"

 

 President Andrew Jackson, Vetoed Bank Bill of 1836

 

President Jackson, shown here "driving out the devils and money changers"
with his order to withdraw public money from the central bank
-Edward Clay lithograph, published 1833

 President Jackson’s honesty and anger at the bankers should resonate today, as bankers have again brought our country to its knees.

 “Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out.”

 

 A President with Jackson’s strength of character would put the blame where it belongs today. He would rout out these criminal bankers, rather than give them more taxpayer money to squander. A President with a moral backbone would put an end to the disastrous 96 year experiment of the Federal Reserve. Instead our last two spineless Presidents have put Goldman Sachs bankers in charge of our national Treasury. An examination of inflation throughout the history of the United States proves that from the beginning of our nation through wars and the Industrial Revolution, the country experienced virtually no inflation as our currency was backed by gold.  The creation of the Federal Reserve in 1913 and the closing of the gold window in 1971 unleashed a tsunami of inflation that continues today.

 

 

Source: Chartingstocks.net

 

1913 – A Bad Year for America

 Karl Marx published his Communist Manifesto in 1848. It included 10 planks. Two of the ten planks were as follows:

•          A heavy progressive or graduated income tax.
•         Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive   monopoly.

 The dates February 3, 1913 and December 24, 1913 framed a year which placed our country on a downward fiscal spiral. The United States had tinkered with an income tax during the Civil War and the 1890’s, but the Supreme Court declared it unconstitutional. Until 1913, the U.S. government was restrained from overspending because it was completely reliant on tariffs and duties to generate revenue. The Sixteenth Amendment changed the game forever.

 

 “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

 

 When you give a Congressman a dollar, he’ll take a hundred billion. The initial tax rates of 1% to 7% were rather modest. That did not last long. The top tax rate reached 92% during the 1950s and today rates are still 500% to 1,000% higher than they were in 1913. The government is addicted to tax revenue. In 2007, they absconded $1.2 trillion in taxes from American individuals. Does anyone think that the bloated government bureaucracy spent these funds more efficiently or for a more beneficial purpose than its citizens could have?

 

Partial History of U.S. Federal Income Tax Rates Since 1913
Applicable Year	Income brackets	First bracket	Top bracket	Source
1913-1915	-	1%	7%	IRS
2003-2009	6 brackets	10%	35%	Tax Foundation

Source: Wikipedia

 

Without $1.2 trillion in individual tax revenue, Congressmen would not be able to add 9,200 earmarks to the current $400 billion Federal spending bill every year. This is how they waste your money:

 

·        $1.8 million to research “swine odor and manure management” in Ames, Iowa.

·        $41.5 million to upgrade presidential libraries of Franklin D. Roosevelt, Lyndon B. Johnson, and John F. Kennedy, according to the Heritage Foundation.

·        $2.9 million to study how to breed and raise shrimp on “shrimp farms.” Citizens Against Government Waste (CAGW) reports that since 1985 the federal government has allocated $71 million to the study of shrimp science.

·        $209,000 to improve blueberry production in Georgia, according to CAGW.

·        $200,000 for a tattoo removal program in Mission Hills, Calif.

·        $5.8 million for the Edward M. Kennedy Institute for the Senate in Boston, according to the Heritage Foundation.

·        $6.6 million for Formosan subterranean termites, also according to Heritage.

 

 

Rothschild, J.P. Morgan & the Federal Reserve       

 

"Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on it favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear it burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."

 

Rothschild’s Bros. of London

 

The House of Rothschild had been the dominant banking family in Europe for two centuries. They were known for making fortunes during Panics and War. Some claimed that they would cause Panics in order to take advantage of those who panicked. The Panic of 1907 was the used as the reason for creating the Federal Reserve. The Federal Reserve Bank of Minneapolis attributed the causes of the Panic of 1907 to financial manipulation from the existing banking establishment.

"If Knickerbocker Trust would falter, then Congress and the public would lose faith in all trust companies and banks would stand to gain, the bankers reasoned."

In 1906, Frank Vanderlip Vice President of the Rockefeller owned National City Bank convinced many of New York's banking establishment that they needed a banker-controlled central bank that could serve the nation's financial system. Up to that time, the House of Morgan had filled that role. JP Morgan had initiated previous panics in order to initiate stronger control over the banking system. (Picture slimy Mr. Potter offering the members of the Bailey Building & Loan, 50 cents on the dollar for their shares during a bank panic in the classic movie Its A Wonderful Life). Morgan initiated the Panic of 1907 by circulating rumors that the Knickerbocker Bank and Trust Co. of America was going broke, there was a run on the banks creating a financial crisis which began to solidify support for a central banking system. During this panic Paul Warburg, a Rothschild associate, wrote an essay called "A Plan for a Modified Central Bank" which called for a Central Bank in which 50% would be owned by the government and 50% by the nation's banks.

 In November 1910 a secret conference took place on Jekyll Island off the coast of Georgia. Those in attendance were: JP Morgan, Paul Warburg, John D. Rockefeller, Bernard Baruch, Senator Nelson Aldrich, Colonel House, Frank Vanderlip, Benjamin Strong, Charles Norton, Jacob Schiff, and Henry Davison. Out of this meeting of the most powerful bankers and politicians in the country came the plan for a Central Bank. This conference was unknown until 1933.  In 1935, Frank Vanderlip wrote in the Saturday Evening Post: "I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System."

 

Behind the scenes these powerful men were formulating the plan for a Federal Reserve System. There was no outcry from the public to implement this plan. The public knew nothing of this. The Aldrich Plan was renamed the Federal Reserve Act and pushed forward by Paul Warburg and Colonel House. Warburg essentially wrote the Act and pressured Congressmen to see his way or lose the next election. Colonel House, who had socialist leanings, was the top advisor to President Wilson.

The Glass Bill (the House version of the final Federal Reserve Act) had passed the House on September 18, 1913 by 287 to 85. On December 19, 1913, the Senate passed their version by a vote of 54-34. More than forty important differences in the House and Senate versions remained to be settled, and the opponents of the bill in both houses of Congress were led to believe that many weeks would elapse before the Conference bill would be taken up. The Congressmen prepared to leave Washington for the annual Christmas recess, assured that the Conference bill would not be brought up until the following year. The creators of the bill then pulled the ultimate scam on the American public. In a single day, they ironed out all forty of the disputed passages in the bill and quickly brought it to a vote. On Monday, December 22, 1913, the bill was passed by the House 282-60 and the Senate 43-23. This meant that the single most important piece of legislation ever passed by the Senate was missing the votes of 26 Senators because it was passed during the Christmas recess. President Wilson, at the urging of Bernard Baruch, signed the bill on December 23, 1913. A few years later, President Wilson had second thoughts:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world--no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men."

There were some brave Americans who did oppose this legislation and foresaw the devastation that it would lead to.

“Throughout my public life I have supported all measures designed to take the Government out of the banking business. This bill puts the Government into the banking business as never before in our history. The powers vested in the Federal Reserve Board seen to me highly dangerous especially where there is political control of the Board. I should be sorry to hold stock in a bank subject to such dominations. The bill as it stands seems to me to open the way to a vast inflation of the currency. I had hoped to support this bill, but I cannot vote for it cause it seems to me to contain features and to rest upon principles in the highest degree menacing to our prosperity, to stability in business, and to the general welfare of the people of the United States.”

                                                            Senator Henry Cabot Lodge – Dec 17, 1913

“From now on, depressions will be scientifically created.”

 

Congressman Charles A. Lindbergh Sr. - 1913

 

John Maynard Keynes, the current hero of the Obama administration and Paul Krugman, had this to say about the Federal Reserve in 1920.

“Should government refrain from regulation (taxation), the worthlessness of the money become apparent and the fraud can no longer be concealed. By this means government may secretly and unobserved, confiscate the wealth of the people and not one man in a million will detect the theft."

Mandate from Hell

According to the Federal Reserve’s own website, their duties fall into four general areas:

1. Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
3. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
4. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system

The American public was told that the Federal Reserve would eliminate any future bank panics. From 1913 through 1920, inflation increased at more than 10% per year as Wilson spent vast sums during World War I and its aftermath. From the early 1920s to 1929, the monetary supply expanded at a rapid pace and the nation experienced tremendous economic growth. Benjamin Strong, one of the participants at the secret conference on Jekyll Island, was the Federal Reserve head. By the end of the 1920s, speculation and loose money had propelled asset and equity prices to unsustainable levels.  The stock market crashed in 1929, and as the banks struggled with liquidity problems, the Federal Reserve cut the money supply.  This was the greatest financial panic and economic collapse in American history so far - and it never could have happened  without the Fed's intervention.  The Fed caused the bubble with loose monetary policy. The Depression did not become Great until the Smoot Hawley Act in 1930 destroyed world trade and the raising of the top income tax rates from 25% to 63% in 1932 destroyed the incentive to earn money. Over 9,000 banks failed and a few of the old robber barons' banks managed to swoop in and grab up thousands of competitors for pennies on the dollar.