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"Because of the fractional
reserve system, banks, as a
whole, can expand our
money supply several times, by making
loans and
investments."
Abstract
The following paper is the second
installment of the three part series: Is America Broke . The first
article discussed the main issues of the financial crisis. It was suggested
that the root cause of the systemic failure is the monetary system itself: paper
fiat debt-money – Federal Reserve Notes or dollar bills.
Evidence that a dollar a bill
(Federal Reserve Note) is not the dollar of the Constitution was provided. The
first is a promise to pay. The second is an honest weight of silver: 371.25
grains of fine silver – the silver dollar.
This distinction lies at the
heart of why the financial system is falling apart. A system of paper fiat
debt-money is destined to fail. It can be no other way. Paper money is created
out of thin air. Excess credit creation fuels booms that eventually go bust.
The Constitution states that only
gold and silver coin is legal tender in payment of debt. Our Founding Fathers
were fully aware of the destruction that paper money breeds. The Revolutionary
War and the Continental paper money used to finance it had left deep
impressions. Inflation rates of over 1200% caused hardships not easily
forgotten.
Runaway inflation turned into hyper-inflation
that destroyed the currency. This is where the phrase: “not worth a
Continental” comes from. The authors of the Constitution wanted nothing to do
with paper money. Bills of credit were forbidden. Only gold and silver coin was
allowed to circulate as legal tender.
Today’s bailout plans will save
nothing. They are simply creating more debt to exchange for existing debt. Debt
cannot pay off debt. This simply erodes the purchasing power of the dollar and
quickens its inevitable demise. If excess credit continues unabated, the saying
“not worth a Continental” may once again become the topic de jour.
Several questions were asked in
the first article. The following paper expands on these issues, setting the
stage for the final article in the series that offers a solution to the present
financial crisis: a monetary system of gold and silver coin, as mandated by the
Constitution.
For the
week stocks were basically unchanged, down ever so slightly. The chart below
shows the Dow Industrials above its 50 day moving average (8405.91) and testing
its 200 dma just above (8494.32).
Notice the
two moving averages are converging and may be setting up to make a crossover.
If the crossover occurs and is confirmed, it would suggest higher prices longer
term. Also, note that the 200 dma is falling. A 50/200 ma cross is a more robust signal when the 200 dma is rising
– not falling, as presently is the case.
The Dow
chart is still under the influence of the negative MACD crossover, which is
beginning to flatten out. A sustainable rally will not occur until MACD can
curl up and make a positive crossover. The industrials are locked in a trading
range highlighted in yellow. A possible head & shoulder top is developing
as well.
Which way
they break out of the range will give the direction of the next major move. The
weight of the evidence leans to the downside, but much less so than a couple of
weeks ago.
The chart
below of the Dow Transports show that they are in a trading range as well.
There is a negative divergence
between the transports and the industrials – the former did not confirm the new
high the industrials made in June from May.
In other
words, the transports made a lower
high. If both indices break below their May lows a Dow Theory sell signal will occur.
"The time is near at hand which must
determine whether
Americans are to be free men or
slaves."
Top to Bottom
The United States used to be the
largest creditor nation. Now we are the largest debtor nation. One bread winner
used to earn enough to support the entire family. This is no longer the case
for most American households. It now takes two. Why?
The savings of the American people
is at all time lows, less than one half of one percent. Debt levels are at
historic highs. Our government is running deficits of unprecedented proportions.
What has happened in the past few decades to cause such drastic changes in our
standard of living and way of life?
Something is going on, and whatever
it is, it isn’t good. The goal of this work is to ferret out what is wrong with
our monetary system, and to offer a possible solution before it is too late.
Not so much for ourselves, as for our children and their children to come. Time
is of the essence.
Money is not easily understood, at
least not in the way it has been presented by the international bankers and the
elite establishment. But why would anyone make it appear different than it is?
“The study of money, above all other
fields in economics, is one in which complexity is used to disguise truth or to
evade truth, not to reveal it.”
This raises the questions: by whom
and towards what end? Cui Bono?
Before
examining the language of the Constitution, in regard to Slavery, let us obtain
a view of the principles, by virtue of which law arises out of those
constitutions and compacts, by which people agree to establish government.
To do this it is necessary to define
the term law. Popular opinions are
very loose and indefinite, both as to the true definition of law, and also as
to the principle, by virtue of which law results from the compacts or contracts
of mankind with each other.
What then is
LAW? That law, I mean, which, and which only, judicial tribunals are morally
bound, under all circumstances, to declare and sustain?
In answering
this question, I shall attempt to show that law is an intelligible principle of
right, necessarily resulting from the nature of man; and not an arbitrary rule,
that can be established by mere will, numbers or power.
To determine
whether this proposition be correct, we must look at the generallaw. signification of the term.
![[Gold & Silver Coins Slideshow]](images/coinShow.gif)
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