Ten FALSE Patriot Myths Regarding Paper Money v. Gold Plus Dr. Edwin Vieira's Error Laced Adversarial Memorandum Which Is Totally Rebutted by Eric WhoRU Statement of Eric WhoRU in regard to Mr. Vieira's "MEMORANDUM" castigating my paper on the Federal Reserve by Mr. Vieira's totally misrepresentation of what I actually wrote and what my positions are. Mr. Vieira even went so far as to make up totally silly issues I did not write and then Mr. Vieira proceeded to castigate me for the silliness that Mr. Vieira concocted: The purpose of my paper on the Federal Reserve was/is to conduct an unbiased examination of our present monetary system including the means by which we fund our government (armed robbery sanctified by euphemistically calling it "taxation"); and to design and present an unbiased solution which is actually achievable in 2007, which will, when implemented, totally eliminate all taxation in the entire Federation and also totally eliminate all economic problems caused by the private ownership of the closed ended Federal Reserve System. In arriving at the solution I present I have examined all realistic alternatives to what we presently are subjected to and endure, including the impossibility and inadvisability of returning to a Constitutional gold and silver money system. Having stated the foregoing I must quickly add that I most certainly not in any slight way a friend of the privately owned closed end Federal Reserve System with which we are currently saddled. In evaluating and designing a solution to our financial ills it is of the utmost importance that the solution be one which would cause the least amount of economic chaos and disruption; the solution must be one that takes into account and is based on where we are today, in 2007, and not where we might have been if things had been done differently in the past. The "we" referred to herein must, of necessity, include the entire internationally commercial system that we actually live in - whether we like it or not, that happens to be the real world in which we now live. The solution I have designed will eliminate all taxation in the entire Federation; it will end the roller coaster economic boom and bust cycles with their inevitable foreclosures that we have been enduring for the past 70 years and it will fund the government entirely from interest charged on loans to private sector borrowers. I have had this solution under development for the past 15 years and have discussed it with "hundreds" of people through exposure on the Internet. I have had no one yet find any problem with what I present, including Mr. Vieira's instant writing!! What Mr. Vieira offers is nothing more than a sincere attempt to stroke his own ego!! What Mr. Vieira does here is raise many Strawmen, using short "sound bites" many of which require several pages to rebut. Mr. Vieira's personal attacks on me, laced continually throughout his presentment, indicate his actual inability to refute the Solution I offer on its own deficiencies, of which, I maintain, there are none!! As a key to the format below, in addressing each of the Ten Myths, you will first find Mr. Vieira's entire comment on that myth, then what I had written in regard to that myth,, and, finally, my phrase by phrase explanation of the subject matter and my rebuttal of Mr. Vieira's misinterpretations. ***************************************************************** Here is Mr. Vieira's MEMORANDUM, with my rebuttal commentaries interleaved, appropriately therein: Edwin Vieira, Jr. 13877 Napa Drive Manassas, Virginia 20112 Telephone: 703-791-6780 e-mail: edwinvieira@megapipe.net 07 December 2006 MEMORANDUM FROM; Mr. Edwin Vieira, Jr. TO: WhoRU Yahoo Group Member RE: Paper by Eric WhoRU Mr. Vieira's preliminary comment: [Written in response to a comment made by the person who sent my Ten Myth Essay to Vieira] I do not know what "nail" you imagine Mr. WhoRU has "hit on the head". But I should not award his paper a very high grade for coherence. Although I have neither the list nor leisure to go through it line by line, I can offer---once and for all-a few suggestions as to its weaker points. (My reference numbers are to Mr. WhoRU' various "'myths'.) Mr. WhoRU's response to the above: In his comment above, it may appear that Mr. Vieira is claiming that he did not have the entire essay written by me at his disposal (he states that he did not have the list…), for reference – rest assured, Mr. Vieira had my entire essay, word for word, just as it is posted on my WhoRU Yahoo group, as message number 112, and as it is included herein below, in its entirety. FALSE Myth # ONE - The Fed creates money out of thin air What Mr. WhoRU wrote that Mr. Vieira purports to comment on. [1] It is certainly true that the Fed does create money - but out of this air - not hardly. The only time the Fed creates money is when a qualified borrower applies for a loan, and then the Fed creates the principal to fund the loan. The principal is created based on the borrowers proven ability to repay the loan - this "proven ability" is called the borrowers credit rating. The basic fundamental purpose of money in the first place is to lubricate commerce - how better to lubricate commerce than to "kick start" it by monetizing the future income of the borrower? [2] The Fed is totally incapable of creating money, that is, to enable money to enter circulation, without a qualified borrower making an application for an advance on his future production. End of Mr. WhoRU's Myth One. Mr. Vieira's Commentary on what Mr. WhoRU wrote: FALSE Myth # ONE - The Fed creates money out of thin air [Mr. WhoRU's comment: The un-bracketed number "1" immediately below is the Myth number as identified by Mr. Vieira; the bracketed numbers [ ] were added by me to identify Mr. Vieira's paragraphs, to serve as reverence points.] Mr. Vieira wrote: 1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse. [2] At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -:And, if the latter, will not the banks likelihood to make loans be inversely proportional to the borrowers credit rating", in which case the debts that "back" FRNs will be of low quality? [3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races? Mr. WhoRU' rebuttal to Mr. Vieira's out of context Strawman commentary: In his commentary above Mr. Vieira states in the first paragraph thereof: 1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse. Mr. WhoRU's response: [1] Mr. Vieira unequivocally and quite emphatically states that no one that he knows argues that the Federal Reserve creates money (FRNs) out of this air - if that be true then it is quite obvious that Mr. Vieira lives in a world populated by persons quite far removed from the reality of the real world where most of us live, as the contention that FRNs are created out of thin air is quite vehemently argued by almost everyone that thinks they know anything at all about the Federal Reserve. In fact, the contention that FRNs are created out of thin air is one of the major contentions put forward by Aaron Russo in his movie, "America: Freedom to Fascism". And in that regard, my purpose in mentioning how FRNs get into circulation was to clarify that the insinuation inherent in the term "created out of thin air" is misleading to those who are new to any information regarding how FRNs originate into circulation and, as the term, "created out of thin air" implies that FRNs have no backing whatsoever, to demonstrate that this implication is not entirely true, and in that regard, it is my purpose to explain that when the FRNs are created to fund loans made to private sector borrowers, that such FRNs are indeed backed by the promise of the borrower to create goods and -services equal to the quantity of FRNs created to fund the loan, plus to create an additional amount of goods and services equal to the interest charged on the loan. In his commentary above Mr. Vieira states in the second paragraph thereof: Claiming my position is self-contradictory, stating (in relevant part): [2] "At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -: And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating ", in which case the debts that "back" FRNs will be of low quality? " Mr. WhoRU's response: In the first place, just to be technically correct, as the paper to which Mr. Vieira is responding is a written document, I did not "say" anything therein as the content of a writing is not properly referred to as "he says", but then I was assigned a "D" in English so what could I possibly know. In his strained and studied effort to discredit my impeccable and flawless analysis Mr. Vieira creates a Strawman by combining the evaluation of two unrelated aspects of lending. He does this in order to create a non-existent contradiction in my writing; (1) a borrower's deterioration of his initially good credit rating has absolutely nothing whatsoever to do with (2), establishing the means by which a lender takes a profit. Quite to the contrary actually, as the borrowers reduced credit rating is actually caused by the charging of interest on loans, and not by any moral deficiency inherent in the borrower, as is implied by Mr. Vieira. It is the charging of interest that sets the economy up for the profit taking foreclosures inherent in the inevitable "bust" cycles, however the charging of interest does not in any way cause the portion of loan payments designated as interest to be the actual source of the lenders' profits - which happens to be through the sale of collateral foreclosed upon and taken from insolvent borrowers. That interest is not and cannot be the actual source of lender's profits is due to what I call, "The Single Source Doctrine", that is, a single source of an item cannot receive back more of the item than the single source caused to enter into circulation; this is not opinion, this is axiomatic!! The means (1) by which a lender takes a profit and (2) the level or amount of the profit are two totally separate issues. (I have repeatedly proven that it is totally, mathematically and physically impossible for the lender to take a profit called interest!! - The Single Source Doctrine). As an example (taking as a given the economic conditions being as they would be toward the end of a boom cycle), as the "supply" of qualified borrowers would then have been naturally diminished (because such borrowers have already taken out loans), therefore new money from new loans would have stopped entering circulation. As loan payments are then continually made each month thereafter, the circulating supply of money will, of course, be diminished. However this reduction of the circulating supply of money will be at a greater rate than will be the corresponding reduction of all of the borrowers' total obligations to the lenders; this is because, with the added interest charge, the borrowers, individually and as a group, are paying back more than they borrowed, which also, happens to mean that the borrowers, both individually and as a group, agreed to pay back more money than ever existed (again, this is a manifestation of another axiom, "The Impossible Contract Doctrine", coupled with the Single Source Doctrine), making it totally mathematically and physically impossible for all of the borrowers, as a class, to pay off their total combined obligations, of both principal and interest, to the lenders. The inevitable and unavoidable result of this imbalanced shrinking of the circulating money supply, is that there will be profit taking foreclosures, and this inevitable result is an inherent aspect of a privately owned closed end central bank lending system. The resulting foreclosures are the only way the lenders can take a profit because it is totally impossible for the lenders to receive back from the borrowers more money than the lenders provided to the borrowers when the lenders funded the loans back on day one (The Single Source Doctrine). Where would the additional money to pay the interest come from?? No doubt, Mr. Vieira's imagination will graciously supply that money. If you made a contract with a pint jar, that is, if the pint jar was thirsty, and you agreed to fill the pint jar with water, to the top, on condition that the pint jar would, at a later fixed time, give you back all the water that you put in the pint jar, plus 10 additional ounces, and if the pint jar failed, you would then own the pint jar. Where would the pint jar get the ten additional ounces of water to give to you?? What if the agreement was for only one additional ounce - would the results be any different?? Be careful with your answer because I guarantee you, that it is a trick question!! Additionally, is it not clear that, in reality, you owned the pint jar from day one - all that was necessary for you to officially take ownership was for the agreed upon time to pass - that is always the case in a closed end money lending system and it would not make any difference if the money lent was pure gold coin!! This is why the Bible condemns usury - usury is, by reasonable analysis and deductive definition, a privately owned closed end money lending system - it is closed end because it is privately owned!! As I wrote six paragraphs above, "... the borrowers reduced credit rating is actually caused by the charging of interest, and not by any moral deficiency inherent in the borrower..." The borrowers inability to pay (failed credit rating), is not the actual cause of the foreclosures, the borrowers' failed credit rating (inability to pay) is the result of interest charged on loans in a privately owned closed end central bank lending system. In the latter portion of his second paragraph of his commentary above, Mr. Vieira also states the following: "And, if the latter, [the lenders taking profits through foreclosures rather than through interest] will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating", in which case the debts that "back" FRNs will be of low quality? " Taking a portion of Mr. Vieira's instant paragraph, in relevant part, Mr. Vieira wrote: "And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating" Mr. WhoRU's response: If my understanding of, "inversely proportional" is correct, what Mr. Vieira wrote means that as the borrowers' credit ratings deteriorate the lenders would be more inclined to grant them loans, because that would more likely result in more profit taking foreclosures and as the borrowers' credit ratings improved the lenders would be more inclined to deny them loans because borrowers with good credit ratings would not be as likely to wind up in profit enabling foreclosures - that does seem to be what Mr. Vieira clearly wrote, does it not? But be that as it may, addressing the latter, somewhat more coherent portion of this snip, in which Mr. Vieira wrote: "...in which case the debts that "back" FRNs will be of low quality". It is my understanding that what Mr. Vieira is (correctly) contending here is that as the value of the FRNs created to fund the loans is originally based upon the borrowers promise to thereafter, in the future, create goods and services equal to the value of the FRNs created to fund the loan, that because the borrower has thereafter defaulted and is not going to be paying what the borrower agreed to pay, that the promise of the borrower to create goods and services sufficient to imbue the money created to fund the loan with value, that therefore that money will have no value - that is a good point to examine- however, once again, Mr. Vieira vainly attempts to raise a self serving Strawman!! Remember, back when the loan was originally funded, the borrower promised to pay the lender both principal plus interest, and the borrower agreed to create goods and services to imbue all of that money (both principal and interest) with value, that is, let's presume, that the borrower applied for a loan of $1,000.00 with a total interest surcharge of 10%, for a total obligation to the lender of $1,100.00. So the borrower did indeed promise to create goods and services equal to $1,100.00, but remember, the lender only created $1,000.00 - the extra $100.00 the borrower agreed to imbue with value does not exist and never did exist and never ever will exist; so then the borrower went to work and did indeed create goods and services equal to $1,000.00, and the borrower made payments on the loan for as long as the borrower was physically able - that is the borrower made payments as long as any of the $1,000.00 originally created by the lender remained in circulation - so the borrower did indeed create goods and services to imbue the $1,000.00 the borrower actually received from the lender with the agreed upon value but as there were no more FRNs in circulation than the original $1,000.00, it would not matter whether or not the borrower worked 24/7/365, creating all kinds of goods and services, there would still be no way the borrower's substantial productivity could ever imbue any value into any FRNs because there were no more FRNs in circulation, so no matter that the borrower defaulted on the loan (as to the $100.00 interest), and no matter that the lender foreclosed and took the borrower's pledged assets, the borrower had, indeed, none the less fully performed to the maximum physically possible and every single one of the $1,000.00 FRNs that was created to fund the $1,000.00 loan was, indeed, imbued with value! Sorry Mr. Vieira, but I am not stupid. In his commentary, Mr. Vieira also castigates and ridicules my explanation as to how banks actually make a profit. Here, and later in his instant paper, Mr. Vieira erroneously asserts and insists that banks do indeed make an interest profit on loans. What Mr. Vieira asserts constitutes a mathematical and physical impossibility - It is clear that Mr. Vieira would benefit substantially from a course in physical and mathematical reality; Mr. Vieira simply is unable to comprehend, the axiomatic nature of the Single Source Doctrine. What Mr. Vieira fails, refuses and is intellectually unable to acknowledge, is that it is mathematically and physically impossible for a single source of any item to receive back more of the item than the single source created and issued, sold or loaned into circulation. The "Single Source Doctrine" is axiomatic! This axiomatic doctrine clearly and irrefutably establishes that it is totally and irrefutably impossible for the creator of FRNs (the lending banks), to receive back more FRNs than the creator of the FRNs created and loaned into circulation. The privately owned banks that create and loan FRNs into circulation do not provide a secondary source of FRNs for borrowers which borrowers could acquire to use to pay the interest obligation on their loans. This makes it totally impossible for the creating lender to make a profit called interest, because, in order for the originating lender to make an interest profit the originating lender would have to receive back more FRNs than the originating lender created to fund the loan; I am sorry Mr. Vieira, but whether you like it or not; whether you know it or not; or whether you admit it or not, interest as profit, happens to be and is irrefutably, a mathematical and physical impossibility to the creator of the FRNs!! Then Mr. Vieira ridicules my contention that banks cannot make an interest profit by raising an issue in regard to the druthers of banks, in that regard, Mr. Vieira wrote: "Well, which is it? Do the banks want the borrowers to pay off their loans, in which case the banks make no profit at all (because, according to Mr. WhoRU "interest" is not profit), or do the banks want the borrowers to default, so they can foreclose and thereby make profits? " Mr. WhoRU's response: The answer to Mr. Vieira's question is that the manner of how the banks will profit from their loans has nothing to do with the banks' druthers, as the means of the bank's profits, as afore stated herein above, is inherent in the fact that it is totally impossible for the bank to make a profit called interest; because in order for the banks to make an interest profit the banks would have to receive back from the borrowers more FRNs than the banks created to fund the loans. The facts are, that it is physically and mathematically impossible for all of the borrowers to pay their total combined obligation(s) (principal plus interest), dictates that the only way that it is possible for the banks to make a profit is through the foreclosure on pledged assets, and the subsequent sale thereof. In his eagerness to ridicule me personally rather than to properly examine the manner in which banks actually take their profits Mr. Vieira lumps all borrowers together. A proper examination will reveal that some borrowers will indeed pay off their loans; however in order to do so those borrowers will have to pay back more to the bank than they borrowed - so where do these borrowers get the extra FRNs necessary to pay back more than they borrowed - why they use some of the FRNs created as principal to fund other borrowers loans - this makes it mathematically and physically impossible for the latter borrowers to pay even the principal portion of their obligations. As to the borrowers that did pay off their loans - the books of the lender will indeed (falsely), indicate the lender did take a profit as to those borrowers, however, what Mr. Vieira misses, in his eagerness to ridicule me, is the fact that the account books of the lender will show a loss on the loans to the defaulting borrowers, so, at the bottom line, the most money that the lender could possibly physically received back from all of the borrowers will be no more than the lender created to fund all of the loans. That fact reveals that the only possible true source of profit to the lender will be from the sale of collateral pledged by the defaulting borrowers. It is certainly true that the lender will designate the interest collected as profit but calling it a profit cannot make it to be a profit, due to The Single Source Doctrine!! And all of this is true no matter if the "money" lent is unbacked paper or pure gold coins!! (Except, of course, when gold is used the lender will not create the gold, but everything else applies equally to both gold and paper money). In his commentary above Mr. Vieira states in the third paragraph thereof: [3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races? Mr. WhoRU's response: What Mr. Vieira totally misses it that the reason there is a bust cycle is because the lending banksters have already received back a very substantial portion of the FRNs created as loan principal – that is why there is a bust cycle!!! The bust cycle is caused by the circulating imbalance caused by loan payments. The fact that at the time the foreclosures happen the economy is in a "bust" cycle does not mean the bank has to sell the property at that time - the bank can keep the property until the economy improves; moreover, everything the bank gets from the sale of the house will be a profit to the bank because the FRNs that the bank created did not exist prior to the loan being funded but were in fact created at the time the loan was funded; the point here is that the creation of the FRNs to fund the loan did not constitute any investment of any assets owned by the lending bank, so no matter that the lender did not receive back all that the lender created it is still totally impossible for the lender to suffer any loss and everything the lender receives above the amount lent will still be a profit to the lender. That is, if the lender did not receive back an amount equal to that created, the lender would not be able to claim a profit but no matter the amount of the shortfall, the lender would still not suffer any loss, because the lender never lent any of the lender's own assets in the first place - the loans were funded by writing numbers on a check or entering numbers in a computer data file, based on the promise of the borrower to create goods and services equal to the loan obligation. The general population has been conditioned to believe that the interest they pay on their loans constitutes a profit to the lender. This is true in regard to loans made by pawn brokers and credit unions and other lenders where the lenders were not the entity that created the FRNs such lenders loan to borrowers. The FRNs loaned out by such lenders as are referred to in this instant paragraph, had already originated into circulation through a loan previously originating in a Federal Reserve branch bank. Such lenders as these (pawn brokers and/or credit unions) do indeed make an interest profit on the FRNs they lend out - provided the borrowers pay back the principal plus the interest, however, if the economy is in a bust cycle even these loans are subject to default and, in the case of a pawn broker, he will be left with the pledged collateral, but this does not change the fact that as the pawn broker did not create the FRNs he used to fund his loans, therefore he can indeed receive back more FRNs than he loaned out. This also applies to credit unions. At least for as long as there are sufficient FRNs in circulation. However, one additional point, as mentioned by Mr. Vieira, it is possible that the foreclosing banks will not be able to sell the foreclosed properties for an amount to cover the unpaid principal - if a bank has too many of these "losses" the Federal Reserve will declare such bank to be insolvent and the Fed itself will itself then foreclose on such banks. Then the Fed will offer the loan portfolio of such insolvent banks for sale to other banks but if no other bank volunteers to buy such insolvent banks' loan portfolios, then the Fed will require the other banks in the neighborhood to take the portfolio of the insolvent banks and absorb the losses of such banks, in order to cover up their scam. 22222222222222222222222222222222222222222222222 FALSE Myth # TWO - The paper money the Fed creates has no backing. What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is true that the Fed does purport to charge interest and it is also true that borrowers pay interest - it is a mathematical impossibility for this designation of interest to constitute a profit to the Fed. [2] The reason this is true is because the only way any Federal Reserve Notes can ever enter circulation is as the principal created by the Fed to fund borrowers' loans - that is - the maximum number of FRNs in circulation could never be more than the total created by the Fed to fund loans, so it therefore reasonably and logically follows, that the maximum number of FRNs that the Fed could ever receive back would be no more that the Fed created in the first place - as loan principal - so no matter what the borrowers or the Fed might designate the payments to be - principal or interest - as far as the profit to the Fed is concerned it would be a mathematical and/or a physical impossibility for the Fed to take a profit called interest. [3] So then, how does the Fed take a profit? Quite simple - through foreclosing on pledged assets End of Mr. WhoRU's Myth Two. Mr. Vieira's Commentary on what Mr. WhoRU wrote: FALSE Myth # TWO - The paper money the Fed creates has no backing. Mr. Vieira wrote: [1] 2. If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax collectors, and everyone else concerned with finance. Surely, too, such a proof would stand him in good stead for a professorship at Harvard, or even the Nobel Prize in economics. [2] Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit". [3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"? Mr. WhoRU's rebuttal to Mr. Vieira's continuing out of context Strawman commentary: In his commentary above Mr. Vieira wrote in the first paragraph thereof: [1] "If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance." Mr. WhoRU's response: I Contend that I have more than proven that it is impossible for the creating lender of FRNs to take a profit called interest but please note here that Mr. Vieira challenges me to prove that interest paid on a loan is not, in principle, a profit..." "...in principle..."?? What can be Mr. Vieira's meaning and or intent here, by his use of the qualifying term, "...in principle..."? What does Mr. Vieira have in mind here?? "...in principle..."? I have to admit that I cannot come up with anything concrete as to what Mr. Vieira has in mind, other than obfuscation. I freely acknowledge that the term "interest" is used in many ways by economists, accountants, tax advisors, tax-collectors, and everyone else concerned with finance, to describe the surcharge paid by borrowers on loans. I have never ever in any way or at any time contended that borrowers do not pay interest on loans nor have I ever likewise contended that lenders do not purport to collect interest on the loans they make - what I have contended, and continue to contend - and as I have irrefutably proven time and time again - is that it is mathematically and physically impossible for that which is designated as interest to actually, in reality, to in any way whatsoever, constitute a profit to the creating lender!! To present a simple example: If the total FRNs created to fund many loans was ten millions, at 10% interest, the total obligation of all the borrowers together would be eleven millions. As the lender only created ten millions - where could the borrowers, taken as a group, obtain the additional one million to pay the interest? From nowhere, as there is no source other than as loan principal! It is as simple as that, Mr. Vieira!! As it would be impossible for the lender to receive back from the all of the borrowers more than the ten millions created to fund all of the loans, it would be mathematically and physically impossible for the lender to take a profit called interest. Yes, some of the individual borrowers could indeed pay off their individual loans, but in paying the interest on their loans they would have had to use some of the ten millions of FRNs created to fund all of the loans - this would reduce the circulating supply making it totally physically impossible for some of the remaining borrowers to even repay the principal created to fund their loans and these borrowers would go into foreclosure, and that is where the lender would derive its profit! And it is additionally true that the lender's account books would indicate that the lender had made a profit on those loans that had been paid in full, but if all of the borrowers repaid the entire ten millions created to fund all of the loans - then there would be no more FRNs in circulation and the account books of the lender would have to show a loss on the loans that were not paid in full, and overall, on all of the loans made in regard to the ten millions created and loaned, the account books of the lender could, at best, only indicate that the lender had broken even if the evaluation was limited only to the money received from the borrowers, but when the money received from the sale of the foreclosed assets was factored in - then the books of the lender would indicate a profit - taken from the foreclosures!! So, Mr. Vieira, where is your interest profit, "in principle"? So now, Mr. Vieira, I contend that I have once again more than proven that "interest" paid on a loan is not, "in principle", a profit to the lender, therefore, Mr. Vieira, I contend that at the very minimum you owe me a very public apology!! And you, Mr. Vieira, as you postulated in the closing portion of your first paragraph, should now open a school in which to re-educate not only yourself, but economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance who maintain that lenders can take a profit from interest charged on loans. In his commentary above Mr. Vieira wrote in the second paragraph thereof: [2] "Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit"" Mr. WhoRU's response: Mr. Vieira is just a little bit more than disingenuous here as he totally misrepresents what I define as a closed end money system. My explanation of a closed end money system has absolutely nothing whatsoever to do with how many loans are made, or to whom or when made. A closed end money system exists when the central banking system is privately owned so that the portion of the borrowers payments that are designated as interest is credited to the private accounts of the lenders who happen to be the private owners of the bank (Federal Reserve). On the other hand, an open ended money system would exist when the central banking system is owned by the people of the Federation so that the portion of the borrowers payments that are designated as interest is credited to the Federal Treasury and then re-cycled into circulation by the government as the government pays its obligations, thus replenishing the circulating supply of money, thus eliminating the down cycles and the foreclosures inherent therein. The fact, as Mr. Vieira points out, that accountants designate interest as profits can not in any way make interest to be an actual profit. The books of a lending bank will show the interest as a profit, and will show the defaulted loans as a loss, and will show the foreclosed on collateral as an asset, with the proceeds from the sale thereof as a profit, thus, at the bottom line, the bank will show an overall profit, but an honest evaluation will acknowledge that what the account books do is simply cover up the fact that if it were not for the sale of foreclosed upon collateral, the lender would not have, could not have, made a profit. In fact, a careful reading of Mr. Vieira's own words in his paragraph [2] above, will reveal that although the infusion of additional money into circulation as loan principal will temporarily enable existing borrowers to make additional loan payments, in due time such infusions will inevitably make the circulating imbalance even worse, because the more principal that is introduced into circulation, the more interest will be required. In his commentary above Mr. Vieira wrote in the third paragraph thereof: [3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"? Mr. WhoRU's response: The proper question to be asked here, as Mr. Vieira well knows, is, "What is profit?" It doesn't make any difference what the product might be or how many billions a business may gross,, a profit only occurs when the business income exceeds its outgo. Almost everyone is familiar with the term, "loss leader", like when the super market advertises bananas at 33 cents a pound while the super-market paid 50 cents wholesale. If all the grocer sold was bananas the grocer would go out of business fairly quickly, but customers buy lots of other items that the grocer makes plenty on, so at the bottom line, overall, the grocer makes a profit. This principle works the same way with interest and there can be no doubt whatsoever that Mr. Vieira is fully aware of this basic fact. For Mr. Vieira to make the arguments he does clearly reveals that Mr. Vieira is not at all who he purports to be – Mr. Vieira's phony arguments indicate he is a shill for the Federal Reserve. But to directly answer Mr. Vieira's question; if a person deposits $100.00 in a bank savings account at 3% interest, then draws it all out a year later, the depositor will receive back $103.00 and the numbers will clearly depositor received an increase of $3.00 and if there was no inflation to account for, then the depositor would, indeed, show an interest profit of $3.00. However, the savings account depositor was not the original source of the $100.00 in circulation, the $100.00 originated into circulation as the principal of a loan originally funded by a local branch bank of the Federal Reserve. This presentation of myths has absolutely nothing to do with interest profits earned on any transaction other than those pertaining to the original creator of the paper money – in every single instance that will always be the Federal Reserve. As it will always be totally mathematically and physically impossible for the Fed to receive back more FRNs than it created as loan principal, it will therefore, always be totally impossible for the Fed to take a profit called interest, so yes, Mr. Vieira, when the "capital" was "invested" by the Fed, the portion of loan payments received that is designated as interest, is, in reality, to use Mr. Vieira's words, "Return of capital"!! (Although I would argue that this is a miss-application of the word "capital"). The next question that need be answered is, "What is it that constitutes `money in circulation'?" If your aunt Martha has $10,000.00 hidden in her bedroom under her mattress that $10K is "in circulation", even if she had the $10K hid there for 50 years. The $100.00 deposited in the savings account in my example above would be considered to be "in circulation". All of the millions and millions of FRNs held by Russians in Russia are deemed to be "in circulation". Each and every FRN that has been issued by the Fed as loan principle constitutes part of what is deemed to be "in circulation" (the one and only way FRNs enter circulation is when the Fed loans them to a borrower as loan principal and for the purpose of this evaluation, FRNs advanced by the Fed to "purchase" US Treasury instruments are included as loans) 3333333333333333333333333333333333333333333333 FALSE Myth # THREE - The paper money the Fed creates has no backing. What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is certainly true that there is no gold or silver backing that does not mean there is no backing for FRNs. Federal Reserve Notes are nothing but a piece of paper, with so much ink printed on both sides it is difficult to find room to write a phone number thereon - but never the less millions and millions of these paper notes are used every day by millions and millions of people to purchase every variety of commodity imaginable, with never a concern that the paper notes themselves are worthless. [2] The notes have value because the notes are backed by the promises of the borrowers, made at the time the loans were funded, to produce goods and services equal, not only to the principal borrowed, but also equal to the added interest charged on the loan principal. What better backing could be desired? Even gold would not be as good - what does gold do? Why is gold perceived to have value? Is it not because humans are willing to produce goods and services equal to the perceived value of the gold? So what is the actual difference between gold and paper in a healthy money system? (A healthy money system would be an open ended publicly owned money system). End of Mr. WhoRU's Myth Three. Mr. Vieira's critical commentary on Myth Three: FALSE Myth # THREE - The paper money the Fed creates has no backing. Mr. Vieira wrote [2] Anyone who cannot understand, from several centuries of financial history, why silver and gold are far move stable as "money" than any form of paper, no matter how the paper is 'backed", is rather myopic. I suggest Mr. WhoRU start by studying Ludwig von Mises, The Theory of Money and Credit. But the basic answer to Mr. WhoRU question,-"So what is the actual difference between gold and paper?" — is that gold is an actual commodity with the necessary physical properties to function well as "money"; whereas paper is almost invariably a debt (or even a series of debts) that can function as "money "only when its conversion into commodities without market-induced losses is assured (which has never been the case). Mr. WhoRU's rebuttal to Mr. Vieira's commentary: I have no disagreement with what Mr. Vieira states in his first paragraph above in regard to what paper notes are, however it is interesting to note that what Mr. Vieira writes in this regard is not his own intellectual product but rather the work of others, on the other hand everything I write is the product of my own intellect! I must add, however, that as this information is quite widely known and accepted, that Mr. Vieira is, to use his own words, here merely beating a dead horse. That being stated, I do have some significant disagreement with this snip from the latter portion of Mr. Vieira's first paragraph above: Mr. Vieira wrote: "A silver or gold coin, to the contrary, is the medium of payment itself. There is nothing contingent or problematic about it. A person who owns a silver or gold coin owns actual wealth. A person who owns a debt-based currency such as FRNs owns a possible claim to wealth—but a claim that might possibly prove ineffective. " Mr. WhoRU's response: Although what Mr. Vieira wrote above is so widely accepted that all it really does is provide another vehicle for Mr. Vieira to further indulge himself in favorite pastime, his dead horse beating fetish. But be that as it may, it always stymies me when seemingly intelligent people fail to think! Why is it that paper money is always characterized as "debt based currency", like that fact somehow imbues it with immorality - much as an "illegitimate" child is tainted for life as a "bastard" because his mother was unwed. Why? Why, indeed, when an unbiased (Heaven forbid, Mr. Vieira), examination of the evils arising from and, if historical repercussions are of significance, seemingly inherent in whatever has been used as money over the centuries, paper or gold; an unbiased examination will reveal that evil will manifest itself no matter whether the medium used as money was paper or gold because in any honest examination it will always be found that the evil was in the humans involved rather than whether or not the medium was paper or gold; and, most often, the humans who caused the monetary debauchery were those operating the government – not those subject to it!! As gold and silver seem to be Mr. Vieira's mantra for morality, let's make a quick evaluation of gold as money, to determine if the use of gold as money does not reveal the same inherent problems as does the paper money Mr. Vieira castigates so intently. As I have previously demonstrated in this writing, a single source of any item cannot receive back more than the single source initially provides, I contend that this same impossibility exists with the lending of gold as it does with the issuance any and every other item, that is, that when gold is lent at interest by private lenders, the private lenders of gold will ultimately become the owners of everything and everyone - no matter that the money used by everyone was pure, 24 carat gold. Where can the borrowers of gold get the additional gold to pay the interest as the additional interest must also be paid in gold? This clearly demonstrates, that, all things considered, gold actually serves no better as money than does paper. The next problem with gold as money, also proven by history, which Mr. Vieira is so insistent on referring to, is that every time the United States government has gone back to a gold money system the private banksters have worked behind the scenes to manipulate themselves back into control of some new version of their privately owned central bank closed end paper money system. However, while the banksters are working to re-instill their paper money system the same banksters are at the very same time functioning as the lenders of money – GOLD MONEY – at interest, so while they are scheming to re-instill their privately owned closed end paper money system they are, by collecting gold interest on their gold loans to both the government and private sector borrowers, causing the imbalance in the circulating gold money supply that will, inevitably, result in boom and bust foreclosure cycles that will set the economy up for a return to the banksters privately owned closed end paper money central bank. The banksters are able to succeed in their scheme to re-instill their privately owned closed end paper money system because when gold and silver coins are used as money, with interest charged on loans of gold, gold and silver coins perform not one whit differently than does paper money, The Single Source Doctrine will enforce itself no matter what is used as money. When are we going to learn to stop setting ourselves up for such consistent predictable repeated monetary debauchery?? And neither are silver coins or gold coins true wealth; true wealth is that which silver and gold coins can be exchanged for, food, clothing, housing, etc., including gold jewelry, but it is the artistry in the jewelry that actually constitutes it's true qualification to be characterized as wealth. If gold actually constitutes true wealth then why do people trade gold for other things? And lastly, as to the problems with a gold money system, putting aside the emotional aspects of gold - is gold really all that valuable - yes gold is obviously a commodity - but that is all that it is - nothing more than a more or less rare metal, gold is not in any way nearly as useful as any other metal - and not even close to being as useful as paper - gold cannot be eaten, worn as warm clothing, used to transport anyone or anything, cannot be used to warm or house anyone - so - when putting aside gold's emotional attraction - where is its actual value?? Gold, used as money, is actually no different than paper - like paper money the actual value in gold is in what the holder can get in exchange for it. My purpose here, as I stated in my opening statement back on page one hereof, is to conduct an honest evaluation of where we are, economically, and what we can do to correct the mess we are in. A very important part of that mess is in how we fund our government. Why is it that all of the opposition I get to my solution, where I present a means of totally eliminating all taxation, no one - that is no one – including Mr. Vieira, is in any way interested in addressing the issue of government funding through armed robbery, euphemistically called "taxation"?? Every time I hear someone advocate the elimination of the Federal Reserve and a return to a Constitutional gold and silver money system I reply, "Great - I am 100% in favor of that - please tell me your plan for accomplishing this marvelous idea!!" I am still waiting for a coherent response - from anyone!! There is no response because it is totally impossible to devise a way to do this in 2007!! Let's face it, in the year 2007 there is no realistic way the United States could possibly return to a gold based money system and even if we could we would not be any better off - we would actually be worse off and we would still have taxation (armed robbery) as the means by which we fund our government! In the last portion of his second paragraph above, Mr. Vieira states: "... Whereas paper is almost invariably a debt (or even a series of debts) that can function as "money" only when its conversion into commodities without market-induced losses is assured (which has never been the case)." Mr. WhoRU's response: Not withstanding the fact that paper money enters circulation as evidence of debt (not necessarily a bad thing in and of itself, as the funding of many industries and the creation of millions of jobs has been because of the ability of the borrowers of paper money to monazite their future income), but addressing the latter portion of Mr. Vieira's statement, it is certainly true that the purchasing power of paper money can be debased - but by "market induced losses"? What is it Mr. Vieira that constitutes "market induced losses"? As I understand the word "induced" it means to cause something, so putting the word "market " in front must mean that something that is taking place in the market is in some way doing the inducing of loses of the value of paper money – gee – I agree – but this still calls for an examination as to "how"!! As I understand Mr. Vieira's concerns with paper money – Mr. Vieira is concerned that in the event that the paper money would become recognized as worthless (due to rampant increases in commodity prices), that, as the paper is not redeemable for gold or silver coins, holders of paper money would suffer substantial losses – I fully agree – however that is akin to my agreeing that it is possible for Mr. Vieira to understand that it is impossible for the Fed to make a profit called interest. The likelihood of that happening is, unfortunately, fairly slim, but so are the odds of the paper money system failing when the true cause is understood and negated. The cause of market induced losses is always the same – rampant government inflation of the circulating money supply enabled by Congressional control of and access to the central bank. When the government prints and spends money into circulation market induced losses are inevitable as the money that the government spends into circulation is not guaranteed by anything other than the government's purported ability to assess a tax upon the people, which the government cannot actually do as the government cannot extract more from the people than the people actually have. The reason paper money becomes debauched is because the value of the paper money borrowed into circulation by private sector borrowers is diluted (debauched) by the free wheel spending of the government – it is not caused by the paper money – it is caused by the corruption of the humans operating the government, but no matter how the system is set up – there will always be a way corrupt humans in government can steal the value of the production of the common people. It is always either by stealing the money through armed robbery ("taxation") or by stealing the money through inflating the money supply, so no matter what we do we will have these problems to contend with. What I propose will minimize our exposure to these classic means of corruption. So, Mr. Vieira, aren't you being just a little bit disingenuous - blaming the private sector market for the erosion of the buying power of our FRNs cause by the government?? Wouldn't it be just a bit more forthright were you to place the blame squarely where it belongs, on unbridled government spending of trillions of dollars created by the Federal Reserve on the whim of Congress, rather than by sugar coating it by referring to it as "market induced losses, suggesting that it is the common private sector people who are to blame"? 444444444444444444444444444444444444444444444444 FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessions What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is certainly true that the Fed manipulates the circulating supply of money, the Fed does not do so in order to cause recessions - quite to the contrary - as recessions are an inherent aspect of a closed end privately owned money system the Fed does not have to manipulate anything in order to cause recessions - to the contrary - although it is certainly true that the Fed manipulates the money supply, by raising and lowering the interest rate - in order to discourage or encourage borrowing - but this manipulation is not to cause recessions but rather, to lessen the negative impact of the inevitable recessions inherent in their closed end money system, in order to insure that there will be another boom cycle - what the Fed does is not unlike a farmer saving back seed corn to plant the next seasons crops. [2] Although recessions may very well be influenced and manipulated by interest rate adjustments the recessions are not in any way CAUSED BY the manipulation of interest rates. The recessions will occur no matter what the Fed might do with interest rates - the recessions are an inherent aspect of and are inevitable in a closed end money system where interest is purportedly charged on principal created to fund loans. [3] "Interest is purportedly charged"? That is correct - "purportedly charged"! What is interest? [4] Interest must be defined from two different points of view, (1) from the point of view of the borrower and, (2) from the point of view of the Federal Reserve lender. This is generally commonly understood as follows: (1) For the borrower, interest is an additional amount added to the principal borrowed, that the borrower must pay, as a fee, for using the Federal Reserve lender's money; (2) For the Federal Reserve lender, interest is the fee added to the principal lent to the borrower, which the borrower must pay, for using the Federal Reserve lender's money; so as the two are described as being the same - what then is the difference? [5] So what is wrong with this picture?? The general public will not understand the error in this explanation above because the explanation seems to cover everything relative to explaining what interest is and, at the same time the general public will presume that the interest paid to the Federal Reserve lender by the borrower will, in and of itself, constitute a profit to the Federal Reserve lender - WRONG!! [7] It is totally, absolutely, completely, 100% physically and mathematically impossible for the interest paid to the Federal Reserve lender by the borrower to in any way constitute a profit to the Federal Reserve lender!! It would not matter one iota, if the interest rate were 100% - the interest could still not be a profit to the Federal Reserve lender!! And, ultimately, it would make no difference if the money loaned were paper Federal Reserve Notes loaned by the privately owned Federal Reserve or were 100% pure gold coins, loaned into circulation by the private owners of gold!! Interest on loans is not the ultimate true actual source of the lender's profit! So why would the Fed loan money if the Fed was not going to take a profit (please take note of my use of the word "take" as opposed to "make" or "earn"). [9 Before I explain how the Fed actually takes its profits I am first going to explain why and how it is totally impossible for interest on loans to constitute a profit to the Fed. The reason is because of what I call the "Single Source Doctrine"; The single source of any item cannot receive back any more of the item than the single source creates and causes to enter circulation. [10] For example: Everyone knows that the single source of all Chevrolet automobiles is from General Motors - neither Ford, Chrysler, BMW, Volvo or any other automobile manufacturer makes Chevrolets - the single source of all Chevrolets is General Motors. If General Motors were to do a general recall of all Chevrolets - how many Chevrolets could GM possibly receive back? There is no way to know the actual total possible number but it is clear that GM, being the single source of all Chevrolets, could not possibly receive back even one more Chevrolet than was manufactured in all of GM's Chevrolet plants - that is a fact and is totally irrefutable! [11] Apply the exact same logic to any item that issues from a single source and the results will be the same - no single source of any item can receive back more of the item than the single source issued out in the first place. [12] The Single Source Doctrine applies to the single source of any and every item that issues from a single source and the Federal Reserve is no exception!! Every single GE refrigerator comes from GE; every single Kenmore washer comes from Sears; every single RayOVac battery comes from RayOVac; Every single Federal Reserve Note in circulation entered circulation from the Federal Reserve itself or through one of the local branches of the Federal Reserve (every local bank in the United States is a branch of the Federal Reserve - no exception). [13] The next very important point here in understanding the impossibility of the Fed taking a profit called interest is to understand that every single Federal Reserve Note in circulation entered into circulation as the principal created by the Fed to fund a loan applied for by some borrower. [14] Now, how many Federal Reserve Notes do you suppose the Fed would create to fund a loan of $1,000.00?? As the borrower only applied for a loan of $1.000.00. Is it not most logical to assume that the Fed would create only $1,000.00?? Why would the Fed create more than $1,000.00? The borrower of $1,000.00 would expect to receive only $1,000.00, right? If the Fed gave the borrower more than $1,000.00 would the borrower be surprised?? Has this ever happened?? Can you imagine it ever happening?? [15] Now, when the borrower borrowed the $1,000.00, the borrower agreed to pay back the $1,000.00 plus interest - say of 10% - for a total obligation to pay $1,100.00 to the Fed - but the Fed only created $1,000.00 so how much could the borrower possibly pay to the Fed?? According to the Single Source Doctrine the maximum the borrower could repay would be the total issued out by the Fed - or $1,000.00 - MAX!! So how could the Fed ever take a profit on this loan?? - NEVER!! [16] Oh, but that is not the way it actually works - well that is exactly the way that it works but it is just not that obvious because there is not just one loan of $1,000.00 - there are literally millions and millions of loans spread out all over the United States so what actually happens is as follows: [17] Because the Federal Reserve did not become the single source of all money in the United States at any single point in history, but was imposed gradually over many years, the facts as to how the Fed actually operates and takes its profits have been obfuscated. [18] With millions of loans in place many borrowers are able to make payments including both principal and interest and many borrowers do actually pay off their entire loan obligation including both principal and interest but in order for those borrowers to pay the interest portion of their loans they must pay back more than they borrowed; they must pay back more than was created by the Fed to fund their individual loans, so where do these borrowers get the additional Federal Reserve Notes they must have in order to pay back more than was created to fund their loans? [19] As the only source of Federal Reserve Notes in circulation is from those created as loan principal to fund loans - there is only one source borrowers can draw upon in order to pay their total obligation - the borrowers must obtain possession of Federal Reserve Notes created as principal to fund other borrowers loans. This causes the total circulating supply of Federal Reserve Notes to shrink faster than the total obligation of all borrowers; this is known as "imbalance" of the circulating supply. [20] Suppose there were 1,000 borrowers who wanted to finance their purchase of a new home and the prices of all the homes were $100,000.00 each; that would mean the Fed would create $100,000,000.00 (one hundred million). If the interest were 10% the borrowers total obligation would be $110,000,000.00 (one hundred ten million), Most people would understand this to constitute a ten million dollar profit to the Federal Reserve but where does the extra ten million come from when the only source of FRNs in circulation is from the Fed, as principal to fund loans? In this example, one hundred millions - total. [21] Most people would never ever think about this as an impossibility because all of the 1,000 borrowers will be able to make payments - for a while - actually, even for many years, because when the loans were all funded the Fed would have created one hundred million and the entire one hundred million would have entered circulation. If the mortgages were all for ten years at simple interest (instead of the common much higher compound interest), the monthly payments for each borrower would be $916.67, so each month the original one hundred million dollar circulating supply of money would shrink by 1,000 borrowers times $916.67 each, for a total monthly amount of $916,670.00, for a total yearly amount of $11,000,040.00 (eleven million 40 dollars) shrinkage of the circulating money supply. After nine years the circulating supply of money would only be $999,640.00, but the borrowers, as a group, would still have a total unpaid obligation to the Fed of $10,999,640.00. [22] So all of the 1,000 borrowers could make one more monthly payment each which would reduce the circulating supply of dollars to $82,970.00, so the following month only 90 of the 1000 original borrowers could make their monthly payments so 910 borrowers would be foreclosed on and the following month the other 90 would also be foreclosed on and the Fed would become the owner of all of the 1,000 homes and that is how the Fed TAKES its profit! [23] But that is NOT how it actually works in the real world because all borrowers do not take out their loans on the same day and many borrowers make more money each month than others so some borrowers are able to pay off their loans more quickly so these more fortunate borrowers are not foreclosed on - many borrowers do actually paying off their entire loan obligation but when they do they reduce the circulating supply of money which results in some borrowers being foreclosed upon much sooner than nine years (most home loans are 30 year contracts and the total interest amount obligated (due to compounding of interest), would be about $300,000.00 on a $100,000.00 home. This could all be resolved with public ownership -of the Federal Reserve that would make the Fed into an open-ended money system so that the boom-bust cycles and foreclosures caused by the closed end system would not occur. [24] Also, when borrowers are foreclosed on those borrowers are no longer making payments so the money originally brought into circulation to fund these loans is still out there for other borrowers to use to make the interest portion of their loan payments. [25] The Fed does adjust the interest rates to manipulate borrowing. The Fed will raise interest rate to discourage borrowing, especially when the number of qualified borrowers has been diminished because most of them took out loans - the purpose of this is to delay these remaining qualified borrowers from going into debt at a time when the economy is entering or is in the beginning of a down cycle, entering a recession, so that later, when there is a sufficient number of new qualified borrowers to pull the economy back up out of a recession, these qualified but unfunded borrowers who were discouraged from borrowing at the beginning of the previous down cycle by increased interest rates will still be there to help create the boom cycle. When this occurs, the Fed will lower the interest rate to encourage borrowing. [26] During the bottom of the bust cycle is when the Fed TAKES its profits - by foreclosing on pledged assets - not in any way through the collection of interest! The purported collection of interest certainly does play a critically important part in creating the down cycle so the foreclosures will take place but there is no possible way that the interest itself can constitute any part of the Fed's actual profits whatsoever. End of Mr. WhoRU's Myth Four. Mr. Vieira's critical commentary on Myth Four: FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessions Mr. Vieira wrote: 4. [1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly). [2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, If they profited exclusively from foreclosures (as Mr. WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s. I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating money supply to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! [3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system" and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know. [4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all. [5] The amazing statement he makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure,) Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency? In his commentary above, Mr. Vieira states in the first paragraph thereof, in relevant part: "[1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly)." Mr. WhoRU's response: In the first place, that which has been proven and which can be and has been readily demonstrated is no longer a "theory!! However, in regard to Mr. Vieira's totally ridiculous assessment immediately above, as I have already proven herein above that the Federal Reserve can only take its profits through foreclosures, so then why does the Fed not do as Mr. Riviera suggests? I could merely respond by stating that the reason is because the owners of the Fed and the Fed's Board of Governors are not as stupid as Mr. Vieira, because any person with as much knowledge of the Fed as Mr. Riviera has must already know the answer to his own stupid question, however I will respond in some depth; there are several reasons: Reason 1 Reason 2. The Federal Reserve works the same way - too frequent and too deep recessions would so discourage the governed that the governed would either quit or take a closer look at how those in charge of the economy are screwing them - as is now sweeping the country by means of Aaron Russo's movie and my essay in support thereof, in which I set forth the solution to the problems so ably exposed by Mr. Russo's movie. The Federal Reserve has agents infiltrated among the patriot population to neutralize the exposure of the Fed's scam, such agents as Mr. Vieira!! Reason 3. This strategy introduces billions and billions into international circulation, which then work their way back to the U.S. to replenish the circulating supply in "the Homeland". Reason 4. In his commentary above, Mr. Vieira states in the second paragraph thereof, in relevant part: "[2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, " Mr. WhoRU's response: If it were not for his continual trumpeting of his ridiculous claims that loan interest constitutes actual bank profits, Mr. Vieira would have no argument whatsoever!! Let it be clear - I have never stated that borrowers do not pay interest nor that banks do not collect interest - my statements (which I have proven many times), are that the interest does not and can not in any way constitute a profit to the lending bank. It is true that banks do indeed purport to take profits because of interest charged on loans but that designation of receipts, as interest does not in any way cause the interest to itself constitute a profit to the banks. The interest is similar to a loss leader at the super-market. All of the FRNs in circulation arrived into circulation as loan principal; that is, every single FRN in circulation was borrowed into circulation by some borrower as loan principal. If all of the borrowed FRNs created as loan principal were paid back to the originating lending banks before any interest FRNs were paid – then there would be a total of ZERO loan principal FRNs left in circulation and not even one FRN would have been collected as interest and then where, Mr. Vieira, would the borrowers be able to get any FRNs to pay the unpaid interest on their borrowed FRNs?? There would be no such source and the banksters would not be able to take a profit called interest!!. Why do you suppose the banksters insist on indicating on borrowers loan payment receipts that the interest is paid first?? As the total obligation of the borrower includes both principal and interest, how can it actually make any profit creating difference which is designated first?? Why do you suppose the banksters want to collect the interest on loans first?? The reason is so that when the circulating money runs low, the lender's account books will indicate that it is loan principal that remains unpaid – so that the borrowers will perceive that they have not paid back what they borrowed – it serves to make the borrowers look bad - it is known as "smoke and mirrors". For example, on a loan of $100.00 at 10% interest the borrower would owe $110.00 and the lender would likewise have an account receivable of $110.00. Until the lender has received back at least the $100.00 lent, it will be and is totally impossible for the lender to have made a profit. As the word "interest" is not in any way a special magical word, the lenders calling the first $10.00 received "interest" will not magically make that $10.00 into profit, to postulate that it does is sheer lunacy, Mr. Vieira!! It will be impossible for the lender to properly and honestly claim to have made a profit until the lender has received back more than the lender lent to the borrower and it is absolutely mathematically and physically impossible for the single source of an item to receive back more than the single source issued out!! Show me where this is not so, Mr. Vieira!! Please. Mr. Vieira's further comments in the second paragraph, in relevant part: "…If they [the banksters] profited exclusively from foreclosures (as Mr., WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s." Mr. WhoRU's response: When borrowers use FRNs originating into circulation as loan principal to pay the interest portion of their monthly payments those interest payments reduce the circulating supply of principal money to a level below the total obligation owed by all of the borrowers, this using of principal money to pay interest lays the foundation for and is the cause of the subsequent bust cycle and the inevitable profit taking through foreclosures on pledged assets!! As the reduction of the circulating supply of FRNs is an inherent aspect of a closed end money system, just as wetness is an inherent aspect of water, the Fed need not take any overt action to cause recessions. When the supply of qualified borrowers is "used up" (loaned out to their max), the economy will, of its own accord, without any overt manipulation of the Fed, slide into a recession, and profit taking foreclosures will "naturally" occur. The Fed does quite often adjust the interest rates to either encourage or discourage borrowing but it is not the amount of the interest that causes the bust cycles, the bust cycles are inevitable when interest of any percentage is charged on loans made in a closed end lending system. Mr. Vieira's further comments in the second paragraph, in relevant part: "I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating supply of money to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! " Mr. WhoRU's response: What Mr. Vieira strives diligently to avoid acknowledging is that there must be a boom cycle before there can be a bust cycle; just as a farmer must plant and nurture his crops prior to harvesting, so too, must the banksters prime the economy with loans to qualified borrowers, in order to enable actual wealth creating boom cycles to occur as a result of the banksters infusion of FRNs into circulation, by extending loans to qualified borrowers, so that there will be something physically substantial for the banksters to foreclose upon during their profit taking bust cycles. Additionally, as any honest student of the Great Depression is aware, the root cause thereof was in the farmers of the United States over extending themselves with farm equipment loans during WWI, during which the farmers of Europe were totally shut down, which was, of course, a totally manipulated war, as all are. In his commentary above, Mr. Vieira states in the third paragraph thereof, in relevant part "[3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system", and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know." Mr. WhoRU's response: In his commentary above, Mr. Vieira states in the fourth paragraph thereof, in relevant part "[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all." Mr. WhoRU's response: Never once have I ever conceded that there was sufficient money in circulation for all interest and principal to be paid, there never has been and there never will be as such is a mathematical and physical impossibility, as even in the deepest depths of the worse bust, there will still be new loans made with an interest surcharge attached, where there will be insufficient FRNs in circulation to equal the total obligation of all the outstanding loans. Moreover, even if I were to state such, that would not make it true because it is a mathematical and physical impossibility governed by the natural laws of mathematics and physics over which I have no control, so my acknowledgment would not make such to be true any more than would my assertion that Mr. Vieira is an honest man make that to be true! However, rest assured, if Mr. Vieira could find anything further in my Fourth Myth on the Federal Reserve to castigate me for, Mr. Vieira would not miss the opportunity!! In his above comment, Mr. Vieira states and contends: "...due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, [Mr. WhoRU admits that] enough currency does exist, after all." " Total poppycock!! Mr. Vieira's contention here is like claiming that as long as you keep a bucket with a hole in the bottom full by continuing to pour in more water that there is no hole or that the hole is of no effect, or that if you glue the needle of your car's fuel gage to the full position you will never run out of fuel, no matter how far you travel in the car. Mr. Vieira states in the fifth paragraph of his commentary, in relevant part "[5] The amazing statement he [Mr. WhoRU] makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure). Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?" Mr. WhoRU's response: If Mr. Vieira was not so intent on proving me wrong just for the sake of proving me wrong he would know that what he has set forth here is totally untrue as I have explained time and time again, in considerable detail, how the solution I offer would be implemented and operated, if it was not included in the rather short article that Mr. Vieira has taken such great pains to thoroughly and wrongly trash (albeit unsuccessfully), and if Mr. Vieira had made an honest effort to inquire, he would have found that I have indeed provided all of the details, many times. This article of mine that Mr. Vieira has been attempting to trash was posted to my WhoRU Yahoo group, to my 626 members thereof, whom have previously had the opportunity to be informed of all that Mr. Vieira postulates about - this instant writing on the Myths of the Federal reserve was headed (preceded) with a request that my group members present it to Mt Aaron Russo, as a solution to the problems Mr. Russo exposes in his movie, "America: Freedom to Fascism". In response to Mr. Vieira's silly postulations, under my plan the Federal Government would not have any direct control or exercise any authority whatsoever over the Board of Governors of the Fed. The Board of Governors would be selected and appointed by the Governors of the several state, or by the legislatures thereof. The Federal government will not be making any loans to itself or to anyone - all private sector loans will be applied for and approved in the same manner as they are currently. The Federal government would be prohibited from borrowing from the central bank. The Federal government would be funded from interest charged on loans made to private sector borrowers, and in this regard, all taxation would be terminated (phased out over a period of months up to a year or two). Under ownership by the people, with all interest on loans credited to the governments' accounts, the money system would be open ended because all interest payment would be spent back into circulation to replenish the circulating supply, so that the bust cycles inherent in the current closed end system would cease as would the foreclosures caused thereunder. End of PART ONE of THREE PARTS
Plus Dr. Edwin Vieira's Error Laced Adversarial Memorandum
Which Is Totally Rebutted by Eric WhoRU
Statement of Eric WhoRU in regard to Mr. Vieira's "MEMORANDUM" castigating my paper on the Federal Reserve by Mr. Vieira's totally misrepresentation of what I actually wrote and what my positions are. Mr. Vieira even went so far as to make up totally silly issues I did not write and then Mr. Vieira proceeded to castigate me for the silliness that Mr. Vieira concocted:
The purpose of my paper on the Federal Reserve was/is to conduct an unbiased examination of our present monetary system including the means by which we fund our government (armed robbery sanctified by euphemistically calling it "taxation"); and to design and present an unbiased solution which is actually achievable in 2007, which will, when implemented, totally eliminate all taxation in the entire Federation and also totally eliminate all economic problems caused by the private ownership of the closed ended Federal Reserve System.
In arriving at the solution I present I have examined all realistic alternatives to what we presently are subjected to and endure, including the impossibility and inadvisability of returning to a Constitutional gold and silver money system.
Having stated the foregoing I must quickly add that I most certainly not in any slight way a friend of the privately owned closed end Federal Reserve System with which we are currently saddled.
In evaluating and designing a solution to our financial ills it is of the utmost importance that the solution be one which would cause the least amount of economic chaos and disruption; the solution must be one that takes into account and is based on where we are today, in 2007, and not where we might have been if things had been done differently in the past. The "we" referred to herein must, of necessity, include the entire internationally commercial system that we actually live in - whether we like it or not, that happens to be the real world in which we now live.
The solution I have designed will eliminate all taxation in the entire Federation; it will end the roller coaster economic boom and bust cycles with their inevitable foreclosures that we have been enduring for the past 70 years and it will fund the government entirely from interest charged on loans to private sector borrowers. I have had this solution under development for the past 15 years and have discussed it with "hundreds" of people through exposure on the Internet. I have had no one yet find any problem with what I present, including Mr. Vieira's instant writing!!
What Mr. Vieira offers is nothing more than a sincere attempt to stroke his own ego!! What Mr. Vieira does here is raise many Strawmen, using short "sound bites" many of which require several pages to rebut. Mr. Vieira's personal attacks on me, laced continually throughout his presentment, indicate his actual inability to refute the Solution I offer on its own deficiencies, of which, I maintain, there are none!!
As a key to the format below, in addressing each of the Ten Myths, you will first find Mr. Vieira's entire comment on that myth, then what I had written in regard to that myth,, and, finally, my phrase by phrase explanation of the subject matter and my rebuttal of Mr. Vieira's misinterpretations.
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Here is Mr. Vieira's MEMORANDUM, with my rebuttal commentaries interleaved, appropriately therein:
Edwin Vieira, Jr.
13877 Napa Drive
Manassas, Virginia 20112
Telephone: 703-791-6780
e-mail: edwinvieira@megapipe.net
07 December 2006
MEMORANDUM FROM;
Mr. Edwin Vieira, Jr.
TO: WhoRU Yahoo Group Member
RE: Paper by Eric WhoRU
Mr. Vieira's preliminary comment:
[Written in response to a comment made by the person who sent my Ten Myth Essay to Vieira]
I do not know what "nail" you imagine Mr. WhoRU has "hit on the head". But I should not award his paper a very high grade for coherence. Although I have neither the list nor leisure to go through it line by line, I can offer---once and for all-a few suggestions as to its weaker points. (My reference numbers are to Mr. WhoRU' various "'myths'.)
Mr. WhoRU's response to the above:
In his comment above, it may appear that Mr. Vieira is claiming that he did not have the entire essay written by me at his disposal (he states that he did not have the list…), for reference – rest assured, Mr. Vieira had my entire essay, word for word, just as it is posted on my WhoRU Yahoo group, as message number 112, and as it is included herein below, in its entirety.
FALSE Myth # ONE -
The Fed creates money out of thin air
What Mr. WhoRU wrote that Mr. Vieira purports to comment on.
[1] It is certainly true that the Fed does create money - but out of this air - not hardly. The only time the Fed creates money is when a qualified borrower applies for a loan, and then the Fed creates the principal to fund the loan. The principal is created based on the borrowers proven ability to repay the loan - this "proven ability" is called the borrowers credit rating. The basic fundamental purpose of money in the first place is to lubricate commerce - how better to lubricate commerce than to "kick start" it by monetizing the future income of the borrower?
[2] The Fed is totally incapable of creating money, that is, to enable money to enter circulation, without a qualified borrower making an application for an advance on his future production.
End of Mr. WhoRU's Myth One.
Mr. Vieira's Commentary on what Mr. WhoRU wrote: FALSE Myth # ONE - The Fed creates money out of thin air [Mr. WhoRU's comment: The un-bracketed number "1" immediately below is the Myth number as identified by Mr. Vieira; the bracketed numbers [ ] were added by me to identify Mr. Vieira's paragraphs, to serve as reverence points.] Mr. Vieira wrote: 1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse. [2] At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -:And, if the latter, will not the banks likelihood to make loans be inversely proportional to the borrowers credit rating", in which case the debts that "back" FRNs will be of low quality? [3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races? Mr. WhoRU' rebuttal to Mr. Vieira's out of context Strawman commentary: In his commentary above Mr. Vieira states in the first paragraph thereof: 1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse. Mr. WhoRU's response: [1] Mr. Vieira unequivocally and quite emphatically states that no one that he knows argues that the Federal Reserve creates money (FRNs) out of this air - if that be true then it is quite obvious that Mr. Vieira lives in a world populated by persons quite far removed from the reality of the real world where most of us live, as the contention that FRNs are created out of thin air is quite vehemently argued by almost everyone that thinks they know anything at all about the Federal Reserve. In fact, the contention that FRNs are created out of thin air is one of the major contentions put forward by Aaron Russo in his movie, "America: Freedom to Fascism". And in that regard, my purpose in mentioning how FRNs get into circulation was to clarify that the insinuation inherent in the term "created out of thin air" is misleading to those who are new to any information regarding how FRNs originate into circulation and, as the term, "created out of thin air" implies that FRNs have no backing whatsoever, to demonstrate that this implication is not entirely true, and in that regard, it is my purpose to explain that when the FRNs are created to fund loans made to private sector borrowers, that such FRNs are indeed backed by the promise of the borrower to create goods and -services equal to the quantity of FRNs created to fund the loan, plus to create an additional amount of goods and services equal to the interest charged on the loan. In his commentary above Mr. Vieira states in the second paragraph thereof: Claiming my position is self-contradictory, stating (in relevant part): [2] "At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -: And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating ", in which case the debts that "back" FRNs will be of low quality? " Mr. WhoRU's response: In the first place, just to be technically correct, as the paper to which Mr. Vieira is responding is a written document, I did not "say" anything therein as the content of a writing is not properly referred to as "he says", but then I was assigned a "D" in English so what could I possibly know. In his strained and studied effort to discredit my impeccable and flawless analysis Mr. Vieira creates a Strawman by combining the evaluation of two unrelated aspects of lending. He does this in order to create a non-existent contradiction in my writing; (1) a borrower's deterioration of his initially good credit rating has absolutely nothing whatsoever to do with (2), establishing the means by which a lender takes a profit. Quite to the contrary actually, as the borrowers reduced credit rating is actually caused by the charging of interest on loans, and not by any moral deficiency inherent in the borrower, as is implied by Mr. Vieira. It is the charging of interest that sets the economy up for the profit taking foreclosures inherent in the inevitable "bust" cycles, however the charging of interest does not in any way cause the portion of loan payments designated as interest to be the actual source of the lenders' profits - which happens to be through the sale of collateral foreclosed upon and taken from insolvent borrowers. That interest is not and cannot be the actual source of lender's profits is due to what I call, "The Single Source Doctrine", that is, a single source of an item cannot receive back more of the item than the single source caused to enter into circulation; this is not opinion, this is axiomatic!! The means (1) by which a lender takes a profit and (2) the level or amount of the profit are two totally separate issues. (I have repeatedly proven that it is totally, mathematically and physically impossible for the lender to take a profit called interest!! - The Single Source Doctrine). As an example (taking as a given the economic conditions being as they would be toward the end of a boom cycle), as the "supply" of qualified borrowers would then have been naturally diminished (because such borrowers have already taken out loans), therefore new money from new loans would have stopped entering circulation. As loan payments are then continually made each month thereafter, the circulating supply of money will, of course, be diminished. However this reduction of the circulating supply of money will be at a greater rate than will be the corresponding reduction of all of the borrowers' total obligations to the lenders; this is because, with the added interest charge, the borrowers, individually and as a group, are paying back more than they borrowed, which also, happens to mean that the borrowers, both individually and as a group, agreed to pay back more money than ever existed (again, this is a manifestation of another axiom, "The Impossible Contract Doctrine", coupled with the Single Source Doctrine), making it totally mathematically and physically impossible for all of the borrowers, as a class, to pay off their total combined obligations, of both principal and interest, to the lenders. The inevitable and unavoidable result of this imbalanced shrinking of the circulating money supply, is that there will be profit taking foreclosures, and this inevitable result is an inherent aspect of a privately owned closed end central bank lending system. The resulting foreclosures are the only way the lenders can take a profit because it is totally impossible for the lenders to receive back from the borrowers more money than the lenders provided to the borrowers when the lenders funded the loans back on day one (The Single Source Doctrine). Where would the additional money to pay the interest come from?? No doubt, Mr. Vieira's imagination will graciously supply that money. If you made a contract with a pint jar, that is, if the pint jar was thirsty, and you agreed to fill the pint jar with water, to the top, on condition that the pint jar would, at a later fixed time, give you back all the water that you put in the pint jar, plus 10 additional ounces, and if the pint jar failed, you would then own the pint jar. Where would the pint jar get the ten additional ounces of water to give to you?? What if the agreement was for only one additional ounce - would the results be any different?? Be careful with your answer because I guarantee you, that it is a trick question!! Additionally, is it not clear that, in reality, you owned the pint jar from day one - all that was necessary for you to officially take ownership was for the agreed upon time to pass - that is always the case in a closed end money lending system and it would not make any difference if the money lent was pure gold coin!! This is why the Bible condemns usury - usury is, by reasonable analysis and deductive definition, a privately owned closed end money lending system - it is closed end because it is privately owned!! As I wrote six paragraphs above, "... the borrowers reduced credit rating is actually caused by the charging of interest, and not by any moral deficiency inherent in the borrower..." The borrowers inability to pay (failed credit rating), is not the actual cause of the foreclosures, the borrowers' failed credit rating (inability to pay) is the result of interest charged on loans in a privately owned closed end central bank lending system. In the latter portion of his second paragraph of his commentary above, Mr. Vieira also states the following: "And, if the latter, [the lenders taking profits through foreclosures rather than through interest] will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating", in which case the debts that "back" FRNs will be of low quality? " Taking a portion of Mr. Vieira's instant paragraph, in relevant part, Mr. Vieira wrote: "And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating" Mr. WhoRU's response: If my understanding of, "inversely proportional" is correct, what Mr. Vieira wrote means that as the borrowers' credit ratings deteriorate the lenders would be more inclined to grant them loans, because that would more likely result in more profit taking foreclosures and as the borrowers' credit ratings improved the lenders would be more inclined to deny them loans because borrowers with good credit ratings would not be as likely to wind up in profit enabling foreclosures - that does seem to be what Mr. Vieira clearly wrote, does it not? But be that as it may, addressing the latter, somewhat more coherent portion of this snip, in which Mr. Vieira wrote: "...in which case the debts that "back" FRNs will be of low quality". It is my understanding that what Mr. Vieira is (correctly) contending here is that as the value of the FRNs created to fund the loans is originally based upon the borrowers promise to thereafter, in the future, create goods and services equal to the value of the FRNs created to fund the loan, that because the borrower has thereafter defaulted and is not going to be paying what the borrower agreed to pay, that the promise of the borrower to create goods and services sufficient to imbue the money created to fund the loan with value, that therefore that money will have no value - that is a good point to examine- however, once again, Mr. Vieira vainly attempts to raise a self serving Strawman!! Remember, back when the loan was originally funded, the borrower promised to pay the lender both principal plus interest, and the borrower agreed to create goods and services to imbue all of that money (both principal and interest) with value, that is, let's presume, that the borrower applied for a loan of $1,000.00 with a total interest surcharge of 10%, for a total obligation to the lender of $1,100.00. So the borrower did indeed promise to create goods and services equal to $1,100.00, but remember, the lender only created $1,000.00 - the extra $100.00 the borrower agreed to imbue with value does not exist and never did exist and never ever will exist; so then the borrower went to work and did indeed create goods and services equal to $1,000.00, and the borrower made payments on the loan for as long as the borrower was physically able - that is the borrower made payments as long as any of the $1,000.00 originally created by the lender remained in circulation - so the borrower did indeed create goods and services to imbue the $1,000.00 the borrower actually received from the lender with the agreed upon value but as there were no more FRNs in circulation than the original $1,000.00, it would not matter whether or not the borrower worked 24/7/365, creating all kinds of goods and services, there would still be no way the borrower's substantial productivity could ever imbue any value into any FRNs because there were no more FRNs in circulation, so no matter that the borrower defaulted on the loan (as to the $100.00 interest), and no matter that the lender foreclosed and took the borrower's pledged assets, the borrower had, indeed, none the less fully performed to the maximum physically possible and every single one of the $1,000.00 FRNs that was created to fund the $1,000.00 loan was, indeed, imbued with value! Sorry Mr. Vieira, but I am not stupid. In his commentary, Mr. Vieira also castigates and ridicules my explanation as to how banks actually make a profit. Here, and later in his instant paper, Mr. Vieira erroneously asserts and insists that banks do indeed make an interest profit on loans. What Mr. Vieira asserts constitutes a mathematical and physical impossibility - It is clear that Mr. Vieira would benefit substantially from a course in physical and mathematical reality; Mr. Vieira simply is unable to comprehend, the axiomatic nature of the Single Source Doctrine. What Mr. Vieira fails, refuses and is intellectually unable to acknowledge, is that it is mathematically and physically impossible for a single source of any item to receive back more of the item than the single source created and issued, sold or loaned into circulation. The "Single Source Doctrine" is axiomatic! This axiomatic doctrine clearly and irrefutably establishes that it is totally and irrefutably impossible for the creator of FRNs (the lending banks), to receive back more FRNs than the creator of the FRNs created and loaned into circulation. The privately owned banks that create and loan FRNs into circulation do not provide a secondary source of FRNs for borrowers which borrowers could acquire to use to pay the interest obligation on their loans. This makes it totally impossible for the creating lender to make a profit called interest, because, in order for the originating lender to make an interest profit the originating lender would have to receive back more FRNs than the originating lender created to fund the loan; I am sorry Mr. Vieira, but whether you like it or not; whether you know it or not; or whether you admit it or not, interest as profit, happens to be and is irrefutably, a mathematical and physical impossibility to the creator of the FRNs!! Then Mr. Vieira ridicules my contention that banks cannot make an interest profit by raising an issue in regard to the druthers of banks, in that regard, Mr. Vieira wrote: "Well, which is it? Do the banks want the borrowers to pay off their loans, in which case the banks make no profit at all (because, according to Mr. WhoRU "interest" is not profit), or do the banks want the borrowers to default, so they can foreclose and thereby make profits? " Mr. WhoRU's response: The answer to Mr. Vieira's question is that the manner of how the banks will profit from their loans has nothing to do with the banks' druthers, as the means of the bank's profits, as afore stated herein above, is inherent in the fact that it is totally impossible for the bank to make a profit called interest; because in order for the banks to make an interest profit the banks would have to receive back from the borrowers more FRNs than the banks created to fund the loans. The facts are, that it is physically and mathematically impossible for all of the borrowers to pay their total combined obligation(s) (principal plus interest), dictates that the only way that it is possible for the banks to make a profit is through the foreclosure on pledged assets, and the subsequent sale thereof. In his eagerness to ridicule me personally rather than to properly examine the manner in which banks actually take their profits Mr. Vieira lumps all borrowers together. A proper examination will reveal that some borrowers will indeed pay off their loans; however in order to do so those borrowers will have to pay back more to the bank than they borrowed - so where do these borrowers get the extra FRNs necessary to pay back more than they borrowed - why they use some of the FRNs created as principal to fund other borrowers loans - this makes it mathematically and physically impossible for the latter borrowers to pay even the principal portion of their obligations. As to the borrowers that did pay off their loans - the books of the lender will indeed (falsely), indicate the lender did take a profit as to those borrowers, however, what Mr. Vieira misses, in his eagerness to ridicule me, is the fact that the account books of the lender will show a loss on the loans to the defaulting borrowers, so, at the bottom line, the most money that the lender could possibly physically received back from all of the borrowers will be no more than the lender created to fund all of the loans. That fact reveals that the only possible true source of profit to the lender will be from the sale of collateral pledged by the defaulting borrowers. It is certainly true that the lender will designate the interest collected as profit but calling it a profit cannot make it to be a profit, due to The Single Source Doctrine!! And all of this is true no matter if the "money" lent is unbacked paper or pure gold coins!! (Except, of course, when gold is used the lender will not create the gold, but everything else applies equally to both gold and paper money). In his commentary above Mr. Vieira states in the third paragraph thereof: [3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races? Mr. WhoRU's response: What Mr. Vieira totally misses it that the reason there is a bust cycle is because the lending banksters have already received back a very substantial portion of the FRNs created as loan principal – that is why there is a bust cycle!!! The bust cycle is caused by the circulating imbalance caused by loan payments. The fact that at the time the foreclosures happen the economy is in a "bust" cycle does not mean the bank has to sell the property at that time - the bank can keep the property until the economy improves; moreover, everything the bank gets from the sale of the house will be a profit to the bank because the FRNs that the bank created did not exist prior to the loan being funded but were in fact created at the time the loan was funded; the point here is that the creation of the FRNs to fund the loan did not constitute any investment of any assets owned by the lending bank, so no matter that the lender did not receive back all that the lender created it is still totally impossible for the lender to suffer any loss and everything the lender receives above the amount lent will still be a profit to the lender. That is, if the lender did not receive back an amount equal to that created, the lender would not be able to claim a profit but no matter the amount of the shortfall, the lender would still not suffer any loss, because the lender never lent any of the lender's own assets in the first place - the loans were funded by writing numbers on a check or entering numbers in a computer data file, based on the promise of the borrower to create goods and services equal to the loan obligation. The general population has been conditioned to believe that the interest they pay on their loans constitutes a profit to the lender. This is true in regard to loans made by pawn brokers and credit unions and other lenders where the lenders were not the entity that created the FRNs such lenders loan to borrowers. The FRNs loaned out by such lenders as are referred to in this instant paragraph, had already originated into circulation through a loan previously originating in a Federal Reserve branch bank. Such lenders as these (pawn brokers and/or credit unions) do indeed make an interest profit on the FRNs they lend out - provided the borrowers pay back the principal plus the interest, however, if the economy is in a bust cycle even these loans are subject to default and, in the case of a pawn broker, he will be left with the pledged collateral, but this does not change the fact that as the pawn broker did not create the FRNs he used to fund his loans, therefore he can indeed receive back more FRNs than he loaned out. This also applies to credit unions. At least for as long as there are sufficient FRNs in circulation. However, one additional point, as mentioned by Mr. Vieira, it is possible that the foreclosing banks will not be able to sell the foreclosed properties for an amount to cover the unpaid principal - if a bank has too many of these "losses" the Federal Reserve will declare such bank to be insolvent and the Fed itself will itself then foreclose on such banks. Then the Fed will offer the loan portfolio of such insolvent banks for sale to other banks but if no other bank volunteers to buy such insolvent banks' loan portfolios, then the Fed will require the other banks in the neighborhood to take the portfolio of the insolvent banks and absorb the losses of such banks, in order to cover up their scam. 22222222222222222222222222222222222222222222222 FALSE Myth # TWO - The paper money the Fed creates has no backing. What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is true that the Fed does purport to charge interest and it is also true that borrowers pay interest - it is a mathematical impossibility for this designation of interest to constitute a profit to the Fed. [2] The reason this is true is because the only way any Federal Reserve Notes can ever enter circulation is as the principal created by the Fed to fund borrowers' loans - that is - the maximum number of FRNs in circulation could never be more than the total created by the Fed to fund loans, so it therefore reasonably and logically follows, that the maximum number of FRNs that the Fed could ever receive back would be no more that the Fed created in the first place - as loan principal - so no matter what the borrowers or the Fed might designate the payments to be - principal or interest - as far as the profit to the Fed is concerned it would be a mathematical and/or a physical impossibility for the Fed to take a profit called interest. [3] So then, how does the Fed take a profit? Quite simple - through foreclosing on pledged assets End of Mr. WhoRU's Myth Two. Mr. Vieira's Commentary on what Mr. WhoRU wrote: FALSE Myth # TWO - The paper money the Fed creates has no backing. Mr. Vieira wrote: [1] 2. If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax collectors, and everyone else concerned with finance. Surely, too, such a proof would stand him in good stead for a professorship at Harvard, or even the Nobel Prize in economics. [2] Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit". [3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"? Mr. WhoRU's rebuttal to Mr. Vieira's continuing out of context Strawman commentary: In his commentary above Mr. Vieira wrote in the first paragraph thereof: [1] "If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance." Mr. WhoRU's response: I Contend that I have more than proven that it is impossible for the creating lender of FRNs to take a profit called interest but please note here that Mr. Vieira challenges me to prove that interest paid on a loan is not, in principle, a profit..." "...in principle..."?? What can be Mr. Vieira's meaning and or intent here, by his use of the qualifying term, "...in principle..."? What does Mr. Vieira have in mind here?? "...in principle..."? I have to admit that I cannot come up with anything concrete as to what Mr. Vieira has in mind, other than obfuscation. I freely acknowledge that the term "interest" is used in many ways by economists, accountants, tax advisors, tax-collectors, and everyone else concerned with finance, to describe the surcharge paid by borrowers on loans. I have never ever in any way or at any time contended that borrowers do not pay interest on loans nor have I ever likewise contended that lenders do not purport to collect interest on the loans they make - what I have contended, and continue to contend - and as I have irrefutably proven time and time again - is that it is mathematically and physically impossible for that which is designated as interest to actually, in reality, to in any way whatsoever, constitute a profit to the creating lender!! To present a simple example: If the total FRNs created to fund many loans was ten millions, at 10% interest, the total obligation of all the borrowers together would be eleven millions. As the lender only created ten millions - where could the borrowers, taken as a group, obtain the additional one million to pay the interest? From nowhere, as there is no source other than as loan principal! It is as simple as that, Mr. Vieira!! As it would be impossible for the lender to receive back from the all of the borrowers more than the ten millions created to fund all of the loans, it would be mathematically and physically impossible for the lender to take a profit called interest. Yes, some of the individual borrowers could indeed pay off their individual loans, but in paying the interest on their loans they would have had to use some of the ten millions of FRNs created to fund all of the loans - this would reduce the circulating supply making it totally physically impossible for some of the remaining borrowers to even repay the principal created to fund their loans and these borrowers would go into foreclosure, and that is where the lender would derive its profit! And it is additionally true that the lender's account books would indicate that the lender had made a profit on those loans that had been paid in full, but if all of the borrowers repaid the entire ten millions created to fund all of the loans - then there would be no more FRNs in circulation and the account books of the lender would have to show a loss on the loans that were not paid in full, and overall, on all of the loans made in regard to the ten millions created and loaned, the account books of the lender could, at best, only indicate that the lender had broken even if the evaluation was limited only to the money received from the borrowers, but when the money received from the sale of the foreclosed assets was factored in - then the books of the lender would indicate a profit - taken from the foreclosures!! So, Mr. Vieira, where is your interest profit, "in principle"? So now, Mr. Vieira, I contend that I have once again more than proven that "interest" paid on a loan is not, "in principle", a profit to the lender, therefore, Mr. Vieira, I contend that at the very minimum you owe me a very public apology!! And you, Mr. Vieira, as you postulated in the closing portion of your first paragraph, should now open a school in which to re-educate not only yourself, but economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance who maintain that lenders can take a profit from interest charged on loans. In his commentary above Mr. Vieira wrote in the second paragraph thereof: [2] "Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit"" Mr. WhoRU's response: Mr. Vieira is just a little bit more than disingenuous here as he totally misrepresents what I define as a closed end money system. My explanation of a closed end money system has absolutely nothing whatsoever to do with how many loans are made, or to whom or when made. A closed end money system exists when the central banking system is privately owned so that the portion of the borrowers payments that are designated as interest is credited to the private accounts of the lenders who happen to be the private owners of the bank (Federal Reserve). On the other hand, an open ended money system would exist when the central banking system is owned by the people of the Federation so that the portion of the borrowers payments that are designated as interest is credited to the Federal Treasury and then re-cycled into circulation by the government as the government pays its obligations, thus replenishing the circulating supply of money, thus eliminating the down cycles and the foreclosures inherent therein. The fact, as Mr. Vieira points out, that accountants designate interest as profits can not in any way make interest to be an actual profit. The books of a lending bank will show the interest as a profit, and will show the defaulted loans as a loss, and will show the foreclosed on collateral as an asset, with the proceeds from the sale thereof as a profit, thus, at the bottom line, the bank will show an overall profit, but an honest evaluation will acknowledge that what the account books do is simply cover up the fact that if it were not for the sale of foreclosed upon collateral, the lender would not have, could not have, made a profit. In fact, a careful reading of Mr. Vieira's own words in his paragraph [2] above, will reveal that although the infusion of additional money into circulation as loan principal will temporarily enable existing borrowers to make additional loan payments, in due time such infusions will inevitably make the circulating imbalance even worse, because the more principal that is introduced into circulation, the more interest will be required. In his commentary above Mr. Vieira wrote in the third paragraph thereof: [3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"? Mr. WhoRU's response: The proper question to be asked here, as Mr. Vieira well knows, is, "What is profit?" It doesn't make any difference what the product might be or how many billions a business may gross,, a profit only occurs when the business income exceeds its outgo. Almost everyone is familiar with the term, "loss leader", like when the super market advertises bananas at 33 cents a pound while the super-market paid 50 cents wholesale. If all the grocer sold was bananas the grocer would go out of business fairly quickly, but customers buy lots of other items that the grocer makes plenty on, so at the bottom line, overall, the grocer makes a profit. This principle works the same way with interest and there can be no doubt whatsoever that Mr. Vieira is fully aware of this basic fact. For Mr. Vieira to make the arguments he does clearly reveals that Mr. Vieira is not at all who he purports to be – Mr. Vieira's phony arguments indicate he is a shill for the Federal Reserve. But to directly answer Mr. Vieira's question; if a person deposits $100.00 in a bank savings account at 3% interest, then draws it all out a year later, the depositor will receive back $103.00 and the numbers will clearly depositor received an increase of $3.00 and if there was no inflation to account for, then the depositor would, indeed, show an interest profit of $3.00. However, the savings account depositor was not the original source of the $100.00 in circulation, the $100.00 originated into circulation as the principal of a loan originally funded by a local branch bank of the Federal Reserve. This presentation of myths has absolutely nothing to do with interest profits earned on any transaction other than those pertaining to the original creator of the paper money – in every single instance that will always be the Federal Reserve. As it will always be totally mathematically and physically impossible for the Fed to receive back more FRNs than it created as loan principal, it will therefore, always be totally impossible for the Fed to take a profit called interest, so yes, Mr. Vieira, when the "capital" was "invested" by the Fed, the portion of loan payments received that is designated as interest, is, in reality, to use Mr. Vieira's words, "Return of capital"!! (Although I would argue that this is a miss-application of the word "capital"). The next question that need be answered is, "What is it that constitutes `money in circulation'?" If your aunt Martha has $10,000.00 hidden in her bedroom under her mattress that $10K is "in circulation", even if she had the $10K hid there for 50 years. The $100.00 deposited in the savings account in my example above would be considered to be "in circulation". All of the millions and millions of FRNs held by Russians in Russia are deemed to be "in circulation". Each and every FRN that has been issued by the Fed as loan principle constitutes part of what is deemed to be "in circulation" (the one and only way FRNs enter circulation is when the Fed loans them to a borrower as loan principal and for the purpose of this evaluation, FRNs advanced by the Fed to "purchase" US Treasury instruments are included as loans) 3333333333333333333333333333333333333333333333 FALSE Myth # THREE - The paper money the Fed creates has no backing. What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is certainly true that there is no gold or silver backing that does not mean there is no backing for FRNs. Federal Reserve Notes are nothing but a piece of paper, with so much ink printed on both sides it is difficult to find room to write a phone number thereon - but never the less millions and millions of these paper notes are used every day by millions and millions of people to purchase every variety of commodity imaginable, with never a concern that the paper notes themselves are worthless. [2] The notes have value because the notes are backed by the promises of the borrowers, made at the time the loans were funded, to produce goods and services equal, not only to the principal borrowed, but also equal to the added interest charged on the loan principal. What better backing could be desired? Even gold would not be as good - what does gold do? Why is gold perceived to have value? Is it not because humans are willing to produce goods and services equal to the perceived value of the gold? So what is the actual difference between gold and paper in a healthy money system? (A healthy money system would be an open ended publicly owned money system). End of Mr. WhoRU's Myth Three. Mr. Vieira's critical commentary on Myth Three: FALSE Myth # THREE - The paper money the Fed creates has no backing. Mr. Vieira wrote [2] Anyone who cannot understand, from several centuries of financial history, why silver and gold are far move stable as "money" than any form of paper, no matter how the paper is 'backed", is rather myopic. I suggest Mr. WhoRU start by studying Ludwig von Mises, The Theory of Money and Credit. But the basic answer to Mr. WhoRU question,-"So what is the actual difference between gold and paper?" — is that gold is an actual commodity with the necessary physical properties to function well as "money"; whereas paper is almost invariably a debt (or even a series of debts) that can function as "money "only when its conversion into commodities without market-induced losses is assured (which has never been the case). Mr. WhoRU's rebuttal to Mr. Vieira's commentary: I have no disagreement with what Mr. Vieira states in his first paragraph above in regard to what paper notes are, however it is interesting to note that what Mr. Vieira writes in this regard is not his own intellectual product but rather the work of others, on the other hand everything I write is the product of my own intellect! I must add, however, that as this information is quite widely known and accepted, that Mr. Vieira is, to use his own words, here merely beating a dead horse. That being stated, I do have some significant disagreement with this snip from the latter portion of Mr. Vieira's first paragraph above: Mr. Vieira wrote: "A silver or gold coin, to the contrary, is the medium of payment itself. There is nothing contingent or problematic about it. A person who owns a silver or gold coin owns actual wealth. A person who owns a debt-based currency such as FRNs owns a possible claim to wealth—but a claim that might possibly prove ineffective. " Mr. WhoRU's response: Although what Mr. Vieira wrote above is so widely accepted that all it really does is provide another vehicle for Mr. Vieira to further indulge himself in favorite pastime, his dead horse beating fetish. But be that as it may, it always stymies me when seemingly intelligent people fail to think! Why is it that paper money is always characterized as "debt based currency", like that fact somehow imbues it with immorality - much as an "illegitimate" child is tainted for life as a "bastard" because his mother was unwed. Why? Why, indeed, when an unbiased (Heaven forbid, Mr. Vieira), examination of the evils arising from and, if historical repercussions are of significance, seemingly inherent in whatever has been used as money over the centuries, paper or gold; an unbiased examination will reveal that evil will manifest itself no matter whether the medium used as money was paper or gold because in any honest examination it will always be found that the evil was in the humans involved rather than whether or not the medium was paper or gold; and, most often, the humans who caused the monetary debauchery were those operating the government – not those subject to it!! As gold and silver seem to be Mr. Vieira's mantra for morality, let's make a quick evaluation of gold as money, to determine if the use of gold as money does not reveal the same inherent problems as does the paper money Mr. Vieira castigates so intently. As I have previously demonstrated in this writing, a single source of any item cannot receive back more than the single source initially provides, I contend that this same impossibility exists with the lending of gold as it does with the issuance any and every other item, that is, that when gold is lent at interest by private lenders, the private lenders of gold will ultimately become the owners of everything and everyone - no matter that the money used by everyone was pure, 24 carat gold. Where can the borrowers of gold get the additional gold to pay the interest as the additional interest must also be paid in gold? This clearly demonstrates, that, all things considered, gold actually serves no better as money than does paper. The next problem with gold as money, also proven by history, which Mr. Vieira is so insistent on referring to, is that every time the United States government has gone back to a gold money system the private banksters have worked behind the scenes to manipulate themselves back into control of some new version of their privately owned central bank closed end paper money system. However, while the banksters are working to re-instill their paper money system the same banksters are at the very same time functioning as the lenders of money – GOLD MONEY – at interest, so while they are scheming to re-instill their privately owned closed end paper money system they are, by collecting gold interest on their gold loans to both the government and private sector borrowers, causing the imbalance in the circulating gold money supply that will, inevitably, result in boom and bust foreclosure cycles that will set the economy up for a return to the banksters privately owned closed end paper money central bank. The banksters are able to succeed in their scheme to re-instill their privately owned closed end paper money system because when gold and silver coins are used as money, with interest charged on loans of gold, gold and silver coins perform not one whit differently than does paper money, The Single Source Doctrine will enforce itself no matter what is used as money. When are we going to learn to stop setting ourselves up for such consistent predictable repeated monetary debauchery?? And neither are silver coins or gold coins true wealth; true wealth is that which silver and gold coins can be exchanged for, food, clothing, housing, etc., including gold jewelry, but it is the artistry in the jewelry that actually constitutes it's true qualification to be characterized as wealth. If gold actually constitutes true wealth then why do people trade gold for other things? And lastly, as to the problems with a gold money system, putting aside the emotional aspects of gold - is gold really all that valuable - yes gold is obviously a commodity - but that is all that it is - nothing more than a more or less rare metal, gold is not in any way nearly as useful as any other metal - and not even close to being as useful as paper - gold cannot be eaten, worn as warm clothing, used to transport anyone or anything, cannot be used to warm or house anyone - so - when putting aside gold's emotional attraction - where is its actual value?? Gold, used as money, is actually no different than paper - like paper money the actual value in gold is in what the holder can get in exchange for it. My purpose here, as I stated in my opening statement back on page one hereof, is to conduct an honest evaluation of where we are, economically, and what we can do to correct the mess we are in. A very important part of that mess is in how we fund our government. Why is it that all of the opposition I get to my solution, where I present a means of totally eliminating all taxation, no one - that is no one – including Mr. Vieira, is in any way interested in addressing the issue of government funding through armed robbery, euphemistically called "taxation"?? Every time I hear someone advocate the elimination of the Federal Reserve and a return to a Constitutional gold and silver money system I reply, "Great - I am 100% in favor of that - please tell me your plan for accomplishing this marvelous idea!!" I am still waiting for a coherent response - from anyone!! There is no response because it is totally impossible to devise a way to do this in 2007!! Let's face it, in the year 2007 there is no realistic way the United States could possibly return to a gold based money system and even if we could we would not be any better off - we would actually be worse off and we would still have taxation (armed robbery) as the means by which we fund our government! In the last portion of his second paragraph above, Mr. Vieira states: "... Whereas paper is almost invariably a debt (or even a series of debts) that can function as "money" only when its conversion into commodities without market-induced losses is assured (which has never been the case)." Mr. WhoRU's response: Not withstanding the fact that paper money enters circulation as evidence of debt (not necessarily a bad thing in and of itself, as the funding of many industries and the creation of millions of jobs has been because of the ability of the borrowers of paper money to monazite their future income), but addressing the latter portion of Mr. Vieira's statement, it is certainly true that the purchasing power of paper money can be debased - but by "market induced losses"? What is it Mr. Vieira that constitutes "market induced losses"? As I understand the word "induced" it means to cause something, so putting the word "market " in front must mean that something that is taking place in the market is in some way doing the inducing of loses of the value of paper money – gee – I agree – but this still calls for an examination as to "how"!! As I understand Mr. Vieira's concerns with paper money – Mr. Vieira is concerned that in the event that the paper money would become recognized as worthless (due to rampant increases in commodity prices), that, as the paper is not redeemable for gold or silver coins, holders of paper money would suffer substantial losses – I fully agree – however that is akin to my agreeing that it is possible for Mr. Vieira to understand that it is impossible for the Fed to make a profit called interest. The likelihood of that happening is, unfortunately, fairly slim, but so are the odds of the paper money system failing when the true cause is understood and negated. The cause of market induced losses is always the same – rampant government inflation of the circulating money supply enabled by Congressional control of and access to the central bank. When the government prints and spends money into circulation market induced losses are inevitable as the money that the government spends into circulation is not guaranteed by anything other than the government's purported ability to assess a tax upon the people, which the government cannot actually do as the government cannot extract more from the people than the people actually have. The reason paper money becomes debauched is because the value of the paper money borrowed into circulation by private sector borrowers is diluted (debauched) by the free wheel spending of the government – it is not caused by the paper money – it is caused by the corruption of the humans operating the government, but no matter how the system is set up – there will always be a way corrupt humans in government can steal the value of the production of the common people. It is always either by stealing the money through armed robbery ("taxation") or by stealing the money through inflating the money supply, so no matter what we do we will have these problems to contend with. What I propose will minimize our exposure to these classic means of corruption. So, Mr. Vieira, aren't you being just a little bit disingenuous - blaming the private sector market for the erosion of the buying power of our FRNs cause by the government?? Wouldn't it be just a bit more forthright were you to place the blame squarely where it belongs, on unbridled government spending of trillions of dollars created by the Federal Reserve on the whim of Congress, rather than by sugar coating it by referring to it as "market induced losses, suggesting that it is the common private sector people who are to blame"? 444444444444444444444444444444444444444444444444 FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessions What Mr. WhoRU wrote that Mr. Vieira purports to comment on: [1] Although it is certainly true that the Fed manipulates the circulating supply of money, the Fed does not do so in order to cause recessions - quite to the contrary - as recessions are an inherent aspect of a closed end privately owned money system the Fed does not have to manipulate anything in order to cause recessions - to the contrary - although it is certainly true that the Fed manipulates the money supply, by raising and lowering the interest rate - in order to discourage or encourage borrowing - but this manipulation is not to cause recessions but rather, to lessen the negative impact of the inevitable recessions inherent in their closed end money system, in order to insure that there will be another boom cycle - what the Fed does is not unlike a farmer saving back seed corn to plant the next seasons crops. [2] Although recessions may very well be influenced and manipulated by interest rate adjustments the recessions are not in any way CAUSED BY the manipulation of interest rates. The recessions will occur no matter what the Fed might do with interest rates - the recessions are an inherent aspect of and are inevitable in a closed end money system where interest is purportedly charged on principal created to fund loans. [3] "Interest is purportedly charged"? That is correct - "purportedly charged"! What is interest? [4] Interest must be defined from two different points of view, (1) from the point of view of the borrower and, (2) from the point of view of the Federal Reserve lender. This is generally commonly understood as follows: (1) For the borrower, interest is an additional amount added to the principal borrowed, that the borrower must pay, as a fee, for using the Federal Reserve lender's money; (2) For the Federal Reserve lender, interest is the fee added to the principal lent to the borrower, which the borrower must pay, for using the Federal Reserve lender's money; so as the two are described as being the same - what then is the difference? [5] So what is wrong with this picture?? The general public will not understand the error in this explanation above because the explanation seems to cover everything relative to explaining what interest is and, at the same time the general public will presume that the interest paid to the Federal Reserve lender by the borrower will, in and of itself, constitute a profit to the Federal Reserve lender - WRONG!! [7] It is totally, absolutely, completely, 100% physically and mathematically impossible for the interest paid to the Federal Reserve lender by the borrower to in any way constitute a profit to the Federal Reserve lender!! It would not matter one iota, if the interest rate were 100% - the interest could still not be a profit to the Federal Reserve lender!! And, ultimately, it would make no difference if the money loaned were paper Federal Reserve Notes loaned by the privately owned Federal Reserve or were 100% pure gold coins, loaned into circulation by the private owners of gold!! Interest on loans is not the ultimate true actual source of the lender's profit! So why would the Fed loan money if the Fed was not going to take a profit (please take note of my use of the word "take" as opposed to "make" or "earn"). [9 Before I explain how the Fed actually takes its profits I am first going to explain why and how it is totally impossible for interest on loans to constitute a profit to the Fed. The reason is because of what I call the "Single Source Doctrine"; The single source of any item cannot receive back any more of the item than the single source creates and causes to enter circulation. [10] For example: Everyone knows that the single source of all Chevrolet automobiles is from General Motors - neither Ford, Chrysler, BMW, Volvo or any other automobile manufacturer makes Chevrolets - the single source of all Chevrolets is General Motors. If General Motors were to do a general recall of all Chevrolets - how many Chevrolets could GM possibly receive back? There is no way to know the actual total possible number but it is clear that GM, being the single source of all Chevrolets, could not possibly receive back even one more Chevrolet than was manufactured in all of GM's Chevrolet plants - that is a fact and is totally irrefutable! [11] Apply the exact same logic to any item that issues from a single source and the results will be the same - no single source of any item can receive back more of the item than the single source issued out in the first place. [12] The Single Source Doctrine applies to the single source of any and every item that issues from a single source and the Federal Reserve is no exception!! Every single GE refrigerator comes from GE; every single Kenmore washer comes from Sears; every single RayOVac battery comes from RayOVac; Every single Federal Reserve Note in circulation entered circulation from the Federal Reserve itself or through one of the local branches of the Federal Reserve (every local bank in the United States is a branch of the Federal Reserve - no exception). [13] The next very important point here in understanding the impossibility of the Fed taking a profit called interest is to understand that every single Federal Reserve Note in circulation entered into circulation as the principal created by the Fed to fund a loan applied for by some borrower. [14] Now, how many Federal Reserve Notes do you suppose the Fed would create to fund a loan of $1,000.00?? As the borrower only applied for a loan of $1.000.00. Is it not most logical to assume that the Fed would create only $1,000.00?? Why would the Fed create more than $1,000.00? The borrower of $1,000.00 would expect to receive only $1,000.00, right? If the Fed gave the borrower more than $1,000.00 would the borrower be surprised?? Has this ever happened?? Can you imagine it ever happening?? [15] Now, when the borrower borrowed the $1,000.00, the borrower agreed to pay back the $1,000.00 plus interest - say of 10% - for a total obligation to pay $1,100.00 to the Fed - but the Fed only created $1,000.00 so how much could the borrower possibly pay to the Fed?? According to the Single Source Doctrine the maximum the borrower could repay would be the total issued out by the Fed - or $1,000.00 - MAX!! So how could the Fed ever take a profit on this loan?? - NEVER!! [16] Oh, but that is not the way it actually works - well that is exactly the way that it works but it is just not that obvious because there is not just one loan of $1,000.00 - there are literally millions and millions of loans spread out all over the United States so what actually happens is as follows: [17] Because the Federal Reserve did not become the single source of all money in the United States at any single point in history, but was imposed gradually over many years, the facts as to how the Fed actually operates and takes its profits have been obfuscated. [18] With millions of loans in place many borrowers are able to make payments including both principal and interest and many borrowers do actually pay off their entire loan obligation including both principal and interest but in order for those borrowers to pay the interest portion of their loans they must pay back more than they borrowed; they must pay back more than was created by the Fed to fund their individual loans, so where do these borrowers get the additional Federal Reserve Notes they must have in order to pay back more than was created to fund their loans? [19] As the only source of Federal Reserve Notes in circulation is from those created as loan principal to fund loans - there is only one source borrowers can draw upon in order to pay their total obligation - the borrowers must obtain possession of Federal Reserve Notes created as principal to fund other borrowers loans. This causes the total circulating supply of Federal Reserve Notes to shrink faster than the total obligation of all borrowers; this is known as "imbalance" of the circulating supply. [20] Suppose there were 1,000 borrowers who wanted to finance their purchase of a new home and the prices of all the homes were $100,000.00 each; that would mean the Fed would create $100,000,000.00 (one hundred million). If the interest were 10% the borrowers total obligation would be $110,000,000.00 (one hundred ten million), Most people would understand this to constitute a ten million dollar profit to the Federal Reserve but where does the extra ten million come from when the only source of FRNs in circulation is from the Fed, as principal to fund loans? In this example, one hundred millions - total. [21] Most people would never ever think about this as an impossibility because all of the 1,000 borrowers will be able to make payments - for a while - actually, even for many years, because when the loans were all funded the Fed would have created one hundred million and the entire one hundred million would have entered circulation. If the mortgages were all for ten years at simple interest (instead of the common much higher compound interest), the monthly payments for each borrower would be $916.67, so each month the original one hundred million dollar circulating supply of money would shrink by 1,000 borrowers times $916.67 each, for a total monthly amount of $916,670.00, for a total yearly amount of $11,000,040.00 (eleven million 40 dollars) shrinkage of the circulating money supply. After nine years the circulating supply of money would only be $999,640.00, but the borrowers, as a group, would still have a total unpaid obligation to the Fed of $10,999,640.00. [22] So all of the 1,000 borrowers could make one more monthly payment each which would reduce the circulating supply of dollars to $82,970.00, so the following month only 90 of the 1000 original borrowers could make their monthly payments so 910 borrowers would be foreclosed on and the following month the other 90 would also be foreclosed on and the Fed would become the owner of all of the 1,000 homes and that is how the Fed TAKES its profit! [23] But that is NOT how it actually works in the real world because all borrowers do not take out their loans on the same day and many borrowers make more money each month than others so some borrowers are able to pay off their loans more quickly so these more fortunate borrowers are not foreclosed on - many borrowers do actually paying off their entire loan obligation but when they do they reduce the circulating supply of money which results in some borrowers being foreclosed upon much sooner than nine years (most home loans are 30 year contracts and the total interest amount obligated (due to compounding of interest), would be about $300,000.00 on a $100,000.00 home. This could all be resolved with public ownership -of the Federal Reserve that would make the Fed into an open-ended money system so that the boom-bust cycles and foreclosures caused by the closed end system would not occur. [24] Also, when borrowers are foreclosed on those borrowers are no longer making payments so the money originally brought into circulation to fund these loans is still out there for other borrowers to use to make the interest portion of their loan payments. [25] The Fed does adjust the interest rates to manipulate borrowing. The Fed will raise interest rate to discourage borrowing, especially when the number of qualified borrowers has been diminished because most of them took out loans - the purpose of this is to delay these remaining qualified borrowers from going into debt at a time when the economy is entering or is in the beginning of a down cycle, entering a recession, so that later, when there is a sufficient number of new qualified borrowers to pull the economy back up out of a recession, these qualified but unfunded borrowers who were discouraged from borrowing at the beginning of the previous down cycle by increased interest rates will still be there to help create the boom cycle. When this occurs, the Fed will lower the interest rate to encourage borrowing. [26] During the bottom of the bust cycle is when the Fed TAKES its profits - by foreclosing on pledged assets - not in any way through the collection of interest! The purported collection of interest certainly does play a critically important part in creating the down cycle so the foreclosures will take place but there is no possible way that the interest itself can constitute any part of the Fed's actual profits whatsoever. End of Mr. WhoRU's Myth Four. Mr. Vieira's critical commentary on Myth Four: FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessions Mr. Vieira wrote: 4. [1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly). [2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, If they profited exclusively from foreclosures (as Mr. WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s. I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating money supply to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! [3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system" and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know. [4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all. [5] The amazing statement he makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure,) Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency? In his commentary above, Mr. Vieira states in the first paragraph thereof, in relevant part: "[1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly)." Mr. WhoRU's response: In the first place, that which has been proven and which can be and has been readily demonstrated is no longer a "theory!! However, in regard to Mr. Vieira's totally ridiculous assessment immediately above, as I have already proven herein above that the Federal Reserve can only take its profits through foreclosures, so then why does the Fed not do as Mr. Riviera suggests? I could merely respond by stating that the reason is because the owners of the Fed and the Fed's Board of Governors are not as stupid as Mr. Vieira, because any person with as much knowledge of the Fed as Mr. Riviera has must already know the answer to his own stupid question, however I will respond in some depth; there are several reasons: Reason 1 Reason 2. The Federal Reserve works the same way - too frequent and too deep recessions would so discourage the governed that the governed would either quit or take a closer look at how those in charge of the economy are screwing them - as is now sweeping the country by means of Aaron Russo's movie and my essay in support thereof, in which I set forth the solution to the problems so ably exposed by Mr. Russo's movie. The Federal Reserve has agents infiltrated among the patriot population to neutralize the exposure of the Fed's scam, such agents as Mr. Vieira!! Reason 3. This strategy introduces billions and billions into international circulation, which then work their way back to the U.S. to replenish the circulating supply in "the Homeland". Reason 4. In his commentary above, Mr. Vieira states in the second paragraph thereof, in relevant part: "[2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, " Mr. WhoRU's response: If it were not for his continual trumpeting of his ridiculous claims that loan interest constitutes actual bank profits, Mr. Vieira would have no argument whatsoever!! Let it be clear - I have never stated that borrowers do not pay interest nor that banks do not collect interest - my statements (which I have proven many times), are that the interest does not and can not in any way constitute a profit to the lending bank. It is true that banks do indeed purport to take profits because of interest charged on loans but that designation of receipts, as interest does not in any way cause the interest to itself constitute a profit to the banks. The interest is similar to a loss leader at the super-market. All of the FRNs in circulation arrived into circulation as loan principal; that is, every single FRN in circulation was borrowed into circulation by some borrower as loan principal. If all of the borrowed FRNs created as loan principal were paid back to the originating lending banks before any interest FRNs were paid – then there would be a total of ZERO loan principal FRNs left in circulation and not even one FRN would have been collected as interest and then where, Mr. Vieira, would the borrowers be able to get any FRNs to pay the unpaid interest on their borrowed FRNs?? There would be no such source and the banksters would not be able to take a profit called interest!!. Why do you suppose the banksters insist on indicating on borrowers loan payment receipts that the interest is paid first?? As the total obligation of the borrower includes both principal and interest, how can it actually make any profit creating difference which is designated first?? Why do you suppose the banksters want to collect the interest on loans first?? The reason is so that when the circulating money runs low, the lender's account books will indicate that it is loan principal that remains unpaid – so that the borrowers will perceive that they have not paid back what they borrowed – it serves to make the borrowers look bad - it is known as "smoke and mirrors". For example, on a loan of $100.00 at 10% interest the borrower would owe $110.00 and the lender would likewise have an account receivable of $110.00. Until the lender has received back at least the $100.00 lent, it will be and is totally impossible for the lender to have made a profit. As the word "interest" is not in any way a special magical word, the lenders calling the first $10.00 received "interest" will not magically make that $10.00 into profit, to postulate that it does is sheer lunacy, Mr. Vieira!! It will be impossible for the lender to properly and honestly claim to have made a profit until the lender has received back more than the lender lent to the borrower and it is absolutely mathematically and physically impossible for the single source of an item to receive back more than the single source issued out!! Show me where this is not so, Mr. Vieira!! Please. Mr. Vieira's further comments in the second paragraph, in relevant part: "…If they [the banksters] profited exclusively from foreclosures (as Mr., WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s." Mr. WhoRU's response: When borrowers use FRNs originating into circulation as loan principal to pay the interest portion of their monthly payments those interest payments reduce the circulating supply of principal money to a level below the total obligation owed by all of the borrowers, this using of principal money to pay interest lays the foundation for and is the cause of the subsequent bust cycle and the inevitable profit taking through foreclosures on pledged assets!! As the reduction of the circulating supply of FRNs is an inherent aspect of a closed end money system, just as wetness is an inherent aspect of water, the Fed need not take any overt action to cause recessions. When the supply of qualified borrowers is "used up" (loaned out to their max), the economy will, of its own accord, without any overt manipulation of the Fed, slide into a recession, and profit taking foreclosures will "naturally" occur. The Fed does quite often adjust the interest rates to either encourage or discourage borrowing but it is not the amount of the interest that causes the bust cycles, the bust cycles are inevitable when interest of any percentage is charged on loans made in a closed end lending system. Mr. Vieira's further comments in the second paragraph, in relevant part: "I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating supply of money to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! " Mr. WhoRU's response: What Mr. Vieira strives diligently to avoid acknowledging is that there must be a boom cycle before there can be a bust cycle; just as a farmer must plant and nurture his crops prior to harvesting, so too, must the banksters prime the economy with loans to qualified borrowers, in order to enable actual wealth creating boom cycles to occur as a result of the banksters infusion of FRNs into circulation, by extending loans to qualified borrowers, so that there will be something physically substantial for the banksters to foreclose upon during their profit taking bust cycles. Additionally, as any honest student of the Great Depression is aware, the root cause thereof was in the farmers of the United States over extending themselves with farm equipment loans during WWI, during which the farmers of Europe were totally shut down, which was, of course, a totally manipulated war, as all are. In his commentary above, Mr. Vieira states in the third paragraph thereof, in relevant part "[3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system", and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know." Mr. WhoRU's response: In his commentary above, Mr. Vieira states in the fourth paragraph thereof, in relevant part "[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all." Mr. WhoRU's response: Never once have I ever conceded that there was sufficient money in circulation for all interest and principal to be paid, there never has been and there never will be as such is a mathematical and physical impossibility, as even in the deepest depths of the worse bust, there will still be new loans made with an interest surcharge attached, where there will be insufficient FRNs in circulation to equal the total obligation of all the outstanding loans. Moreover, even if I were to state such, that would not make it true because it is a mathematical and physical impossibility governed by the natural laws of mathematics and physics over which I have no control, so my acknowledgment would not make such to be true any more than would my assertion that Mr. Vieira is an honest man make that to be true! However, rest assured, if Mr. Vieira could find anything further in my Fourth Myth on the Federal Reserve to castigate me for, Mr. Vieira would not miss the opportunity!! In his above comment, Mr. Vieira states and contends: "...due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, [Mr. WhoRU admits that] enough currency does exist, after all." " Total poppycock!! Mr. Vieira's contention here is like claiming that as long as you keep a bucket with a hole in the bottom full by continuing to pour in more water that there is no hole or that the hole is of no effect, or that if you glue the needle of your car's fuel gage to the full position you will never run out of fuel, no matter how far you travel in the car. Mr. Vieira states in the fifth paragraph of his commentary, in relevant part "[5] The amazing statement he [Mr. WhoRU] makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure). Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?" Mr. WhoRU's response: If Mr. Vieira was not so intent on proving me wrong just for the sake of proving me wrong he would know that what he has set forth here is totally untrue as I have explained time and time again, in considerable detail, how the solution I offer would be implemented and operated, if it was not included in the rather short article that Mr. Vieira has taken such great pains to thoroughly and wrongly trash (albeit unsuccessfully), and if Mr. Vieira had made an honest effort to inquire, he would have found that I have indeed provided all of the details, many times. This article of mine that Mr. Vieira has been attempting to trash was posted to my WhoRU Yahoo group, to my 626 members thereof, whom have previously had the opportunity to be informed of all that Mr. Vieira postulates about - this instant writing on the Myths of the Federal reserve was headed (preceded) with a request that my group members present it to Mt Aaron Russo, as a solution to the problems Mr. Russo exposes in his movie, "America: Freedom to Fascism". In response to Mr. Vieira's silly postulations, under my plan the Federal Government would not have any direct control or exercise any authority whatsoever over the Board of Governors of the Fed. The Board of Governors would be selected and appointed by the Governors of the several state, or by the legislatures thereof. The Federal government will not be making any loans to itself or to anyone - all private sector loans will be applied for and approved in the same manner as they are currently. The Federal government would be prohibited from borrowing from the central bank. The Federal government would be funded from interest charged on loans made to private sector borrowers, and in this regard, all taxation would be terminated (phased out over a period of months up to a year or two). Under ownership by the people, with all interest on loans credited to the governments' accounts, the money system would be open ended because all interest payment would be spent back into circulation to replenish the circulating supply, so that the bust cycles inherent in the current closed end system would cease as would the foreclosures caused thereunder. End of PART ONE of THREE PARTS
[Mr. WhoRU's comment: The un-bracketed number "1" immediately below is the Myth number as identified by Mr. Vieira; the bracketed numbers [ ] were added by me to identify Mr. Vieira's paragraphs, to serve as reverence points.]
Mr. Vieira wrote:
1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse.
[2] At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -:And, if the latter, will not the banks likelihood to make loans be inversely proportional to the borrowers credit rating", in which case the debts that "back" FRNs will be of low quality?
[3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races?
Mr. WhoRU' rebuttal to Mr. Vieira's out of context Strawman commentary:
In his commentary above Mr. Vieira states in the first paragraph thereof:
Mr. WhoRU's response:
[1] Mr. Vieira unequivocally and quite emphatically states that no one that he knows argues that the Federal Reserve creates money (FRNs) out of this air - if that be true then it is quite obvious that Mr. Vieira lives in a world populated by persons quite far removed from the reality of the real world where most of us live, as the contention that FRNs are created out of thin air is quite vehemently argued by almost everyone that thinks they know anything at all about the Federal Reserve. In fact, the contention that FRNs are created out of thin air is one of the major contentions put forward by Aaron Russo in his movie, "America: Freedom to Fascism".
And in that regard, my purpose in mentioning how FRNs get into circulation was to clarify that the insinuation inherent in the term "created out of thin air" is misleading to those who are new to any information regarding how FRNs originate into circulation and, as the term, "created out of thin air" implies that FRNs have no backing whatsoever, to demonstrate that this implication is not entirely true, and in that regard, it is my purpose to explain that when the FRNs are created to fund loans made to private sector borrowers, that such FRNs are indeed backed by the promise of the borrower to create goods and -services equal to the quantity of FRNs created to fund the loan, plus to create an additional amount of goods and services equal to the interest charged on the loan.
In his commentary above Mr. Vieira states in the second paragraph thereof:
Claiming my position is self-contradictory, stating (in relevant part):
[2] "At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -: And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating ", in which case the debts that "back" FRNs will be of low quality? "
In the first place, just to be technically correct, as the paper to which Mr. Vieira is responding is a written document, I did not "say" anything therein as the content of a writing is not properly referred to as "he says", but then I was assigned a "D" in English so what could I possibly know.
In his strained and studied effort to discredit my impeccable and flawless analysis Mr. Vieira creates a Strawman by combining the evaluation of two unrelated aspects of lending. He does this in order to create a non-existent contradiction in my writing; (1) a borrower's deterioration of his initially good credit rating has absolutely nothing whatsoever to do with (2), establishing the means by which a lender takes a profit.
Quite to the contrary actually, as the borrowers reduced credit rating is actually caused by the charging of interest on loans, and not by any moral deficiency inherent in the borrower, as is implied by Mr. Vieira. It is the charging of interest that sets the economy up for the profit taking foreclosures inherent in the inevitable "bust" cycles, however the charging of interest does not in any way cause the portion of loan payments designated as interest to be the actual source of the lenders' profits - which happens to be through the sale of collateral foreclosed upon and taken from insolvent borrowers.
That interest is not and cannot be the actual source of lender's profits is due to what I call, "The Single Source Doctrine", that is, a single source of an item cannot receive back more of the item than the single source caused to enter into circulation; this is not opinion, this is axiomatic!!
The means (1) by which a lender takes a profit and (2) the level or amount of the profit are two totally separate issues. (I have repeatedly proven that it is totally, mathematically and physically impossible for the lender to take a profit called interest!! - The Single Source Doctrine).
As an example (taking as a given the economic conditions being as they would be toward the end of a boom cycle), as the "supply" of qualified borrowers would then have been naturally diminished (because such borrowers have already taken out loans), therefore new money from new loans would have stopped entering circulation. As loan payments are then continually made each month thereafter, the circulating supply of money will, of course, be diminished. However this reduction of the circulating supply of money will be at a greater rate than will be the corresponding reduction of all of the borrowers' total obligations to the lenders; this is because, with the added interest charge, the borrowers, individually and as a group, are paying back more than they borrowed, which also, happens to mean that the borrowers, both individually and as a group, agreed to pay back more money than ever existed (again, this is a manifestation of another axiom, "The Impossible Contract Doctrine", coupled with the Single Source Doctrine), making it totally mathematically and physically impossible for all of the borrowers, as a class, to pay off their total combined obligations, of both principal and interest, to the lenders.
The inevitable and unavoidable result of this imbalanced shrinking of the circulating money supply, is that there will be profit taking foreclosures, and this inevitable result is an inherent aspect of a privately owned closed end central bank lending system. The resulting foreclosures are the only way the lenders can take a profit because it is totally impossible for the lenders to receive back from the borrowers more money than the lenders provided to the borrowers when the lenders funded the loans back on day one (The Single Source Doctrine). Where would the additional money to pay the interest come from?? No doubt, Mr. Vieira's imagination will graciously supply that money.
If you made a contract with a pint jar, that is, if the pint jar was thirsty, and you agreed to fill the pint jar with water, to the top, on condition that the pint jar would, at a later fixed time, give you back all the water that you put in the pint jar, plus 10 additional ounces, and if the pint jar failed, you would then own the pint jar. Where would the pint jar get the ten additional ounces of water to give to you?? What if the agreement was for only one additional ounce - would the results be any different?? Be careful with your answer because I guarantee you, that it is a trick question!! Additionally, is it not clear that, in reality, you owned the pint jar from day one - all that was necessary for you to officially take ownership was for the agreed upon time to pass - that is always the case in a closed end money lending system and it would not make any difference if the money lent was pure gold coin!! This is why the Bible condemns usury - usury is, by reasonable analysis and deductive definition, a privately owned closed end money lending system - it is closed end because it is privately owned!!
As I wrote six paragraphs above, "... the borrowers reduced credit rating is actually caused by the charging of interest, and not by any moral deficiency inherent in the borrower..." The borrowers inability to pay (failed credit rating), is not the actual cause of the foreclosures, the borrowers' failed credit rating (inability to pay) is the result of interest charged on loans in a privately owned closed end central bank lending system.
In the latter portion of his second paragraph of his commentary above,
Mr. Vieira also states the following:
"And, if the latter, [the lenders taking profits through foreclosures rather than through interest] will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating", in which case the debts that "back" FRNs will be of low quality? "
Taking a portion of Mr. Vieira's instant paragraph, in relevant part,
"And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating"
If my understanding of, "inversely proportional" is correct, what Mr. Vieira wrote means that as the borrowers' credit ratings deteriorate the lenders would be more inclined to grant them loans, because that would more likely result in more profit taking foreclosures and as the borrowers' credit ratings improved the lenders would be more inclined to deny them loans because borrowers with good credit ratings would not be as likely to wind up in profit enabling foreclosures - that does seem to be what Mr. Vieira clearly wrote, does it not?
But be that as it may, addressing the latter, somewhat more coherent portion of this snip, in which Mr. Vieira wrote: "...in which case the debts that "back" FRNs will be of low quality".
It is my understanding that what Mr. Vieira is (correctly) contending here is that as the value of the FRNs created to fund the loans is originally based upon the borrowers promise to thereafter, in the future, create goods and services equal to the value of the FRNs created to fund the loan, that because the borrower has thereafter defaulted and is not going to be paying what the borrower agreed to pay, that the promise of the borrower to create goods and services sufficient to imbue the money created to fund the loan with value, that therefore that money will have no value - that is a good point to examine- however, once again, Mr. Vieira vainly attempts to raise a self serving Strawman!!
Remember, back when the loan was originally funded, the borrower promised to pay the lender both principal plus interest, and the borrower agreed to create goods and services to imbue all of that money (both principal and interest) with value, that is, let's presume, that the borrower applied for a loan of $1,000.00 with a total interest surcharge of 10%, for a total obligation to the lender of $1,100.00. So the borrower did indeed promise to create goods and services equal to $1,100.00, but remember, the lender only created $1,000.00 - the extra $100.00 the borrower agreed to imbue with value does not exist and never did exist and never ever will exist; so then the borrower went to work and did indeed create goods and services equal to $1,000.00, and the borrower made payments on the loan for as long as the borrower was physically able - that is the borrower made payments as long as any of the $1,000.00 originally created by the lender remained in circulation - so the borrower did indeed create goods and services to imbue the $1,000.00 the borrower actually received from the lender with the agreed upon value but as there were no more FRNs in circulation than the original $1,000.00, it would not matter whether or not the borrower worked 24/7/365, creating all kinds of goods and services, there would still be no way the borrower's substantial productivity could ever imbue any value into any FRNs because there were no more FRNs in circulation, so no matter that the borrower defaulted on the loan (as to the $100.00 interest), and no matter that the lender foreclosed and took the borrower's pledged assets, the borrower had, indeed, none the less fully performed to the maximum physically possible and every single one of the $1,000.00 FRNs that was created to fund the $1,000.00 loan was, indeed, imbued with value!
Sorry Mr. Vieira, but I am not stupid.
In his commentary, Mr. Vieira also castigates and ridicules my explanation as to how banks actually make a profit. Here, and later in his instant paper, Mr. Vieira erroneously asserts and insists that banks do indeed make an interest profit on loans. What Mr. Vieira asserts constitutes a mathematical and physical impossibility - It is clear that Mr. Vieira would benefit substantially from a course in physical and mathematical reality; Mr. Vieira simply is unable to comprehend, the axiomatic nature of the Single Source Doctrine. What Mr. Vieira fails, refuses and is intellectually unable to acknowledge, is that it is mathematically and physically impossible for a single source of any item to receive back more of the item than the single source created and issued, sold or loaned into circulation.
The "Single Source Doctrine" is axiomatic! This axiomatic doctrine clearly and irrefutably establishes that it is totally and irrefutably impossible for the creator of FRNs (the lending banks), to receive back more FRNs than the creator of the FRNs created and loaned into circulation. The privately owned banks that create and loan FRNs into circulation do not provide a secondary source of FRNs for borrowers which borrowers could acquire to use to pay the interest obligation on their loans. This makes it totally impossible for the creating lender to make a profit called interest, because, in order for the originating lender to make an interest profit the originating lender would have to receive back more FRNs than the originating lender created to fund the loan; I am sorry Mr. Vieira, but whether you like it or not; whether you know it or not; or whether you admit it or not, interest as profit, happens to be and is irrefutably, a mathematical and physical impossibility to the creator of the FRNs!!
Then Mr. Vieira ridicules my contention that banks cannot make an interest profit by raising an issue in regard to the druthers of banks, in that regard,
"Well, which is it? Do the banks want the borrowers to pay off their loans, in which case the banks make no profit at all (because, according to Mr. WhoRU "interest" is not profit), or do the banks want the borrowers to default, so they can foreclose and thereby make profits? "
The answer to Mr. Vieira's question is that the manner of how the banks will profit from their loans has nothing to do with the banks' druthers, as the means of the bank's profits, as afore stated herein above, is inherent in the fact that it is totally impossible for the bank to make a profit called interest; because in order for the banks to make an interest profit the banks would have to receive back from the borrowers more FRNs than the banks created to fund the loans.
The facts are, that it is physically and mathematically impossible for all of the borrowers to pay their total combined obligation(s) (principal plus interest), dictates that the only way that it is possible for the banks to make a profit is through the foreclosure on pledged assets, and the subsequent sale thereof.
In his eagerness to ridicule me personally rather than to properly examine the manner in which banks actually take their profits Mr. Vieira lumps all borrowers together. A proper examination will reveal that some borrowers will indeed pay off their loans; however in order to do so those borrowers will have to pay back more to the bank than they borrowed - so where do these borrowers get the extra FRNs necessary to pay back more than they borrowed - why they use some of the FRNs created as principal to fund other borrowers loans - this makes it mathematically and physically impossible for the latter borrowers to pay even the principal portion of their obligations.
As to the borrowers that did pay off their loans - the books of the lender will indeed (falsely), indicate the lender did take a profit as to those borrowers, however, what Mr. Vieira misses, in his eagerness to ridicule me, is the fact that the account books of the lender will show a loss on the loans to the defaulting borrowers, so, at the bottom line, the most money that the lender could possibly physically received back from all of the borrowers will be no more than the lender created to fund all of the loans. That fact reveals that the only possible true source of profit to the lender will be from the sale of collateral pledged by the defaulting borrowers.
It is certainly true that the lender will designate the interest collected as profit but calling it a profit cannot make it to be a profit, due to The Single Source Doctrine!! And all of this is true no matter if the "money" lent is unbacked paper or pure gold coins!! (Except, of course, when gold is used the lender will not create the gold, but everything else applies equally to both gold and paper money).
In his commentary above Mr. Vieira states in the third paragraph thereof:
What Mr. Vieira totally misses it that the reason there is a bust cycle is because the lending banksters have already received back a very substantial portion of the FRNs created as loan principal – that is why there is a bust cycle!!! The bust cycle is caused by the circulating imbalance caused by loan payments.
The fact that at the time the foreclosures happen the economy is in a "bust" cycle does not mean the bank has to sell the property at that time - the bank can keep the property until the economy improves; moreover, everything the bank gets from the sale of the house will be a profit to the bank because the FRNs that the bank created did not exist prior to the loan being funded but were in fact created at the time the loan was funded; the point here is that the creation of the FRNs to fund the loan did not constitute any investment of any assets owned by the lending bank, so no matter that the lender did not receive back all that the lender created it is still totally impossible for the lender to suffer any loss and everything the lender receives above the amount lent will still be a profit to the lender. That is, if the lender did not receive back an amount equal to that created, the lender would not be able to claim a profit but no matter the amount of the shortfall, the lender would still not suffer any loss, because the lender never lent any of the lender's own assets in the first place - the loans were funded by writing numbers on a check or entering numbers in a computer data file, based on the promise of the borrower to create goods and services equal to the loan obligation.
The general population has been conditioned to believe that the interest they pay on their loans constitutes a profit to the lender. This is true in regard to loans made by pawn brokers and credit unions and other lenders where the lenders were not the entity that created the FRNs such lenders loan to borrowers. The FRNs loaned out by such lenders as are referred to in this instant paragraph, had already originated into circulation through a loan previously originating in a Federal Reserve branch bank.
Such lenders as these (pawn brokers and/or credit unions) do indeed make an interest profit on the FRNs they lend out - provided the borrowers pay back the principal plus the interest, however, if the economy is in a bust cycle even these loans are subject to default and, in the case of a pawn broker, he will be left with the pledged collateral, but this does not change the fact that as the pawn broker did not create the FRNs he used to fund his loans, therefore he can indeed receive back more FRNs than he loaned out. This also applies to credit unions. At least for as long as there are sufficient FRNs in circulation.
However, one additional point, as mentioned by Mr. Vieira, it is possible that the foreclosing banks will not be able to sell the foreclosed properties for an amount to cover the unpaid principal - if a bank has too many of these "losses" the Federal Reserve will declare such bank to be insolvent and the Fed itself will itself then foreclose on such banks. Then the Fed will offer the loan portfolio of such insolvent banks for sale to other banks but if no other bank volunteers to buy such insolvent banks' loan portfolios, then the Fed will require the other banks in the neighborhood to take the portfolio of the insolvent banks and absorb the losses of such banks, in order to cover up their scam.
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FALSE Myth # TWO -
The paper money the Fed creates has no backing.
What Mr. WhoRU wrote that Mr. Vieira purports to comment on:
[1] Although it is true that the Fed does purport to charge interest and it is also true that borrowers pay interest - it is a mathematical impossibility for this designation of interest to constitute a profit to the Fed.
[2] The reason this is true is because the only way any Federal Reserve Notes can ever enter circulation is as the principal created by the Fed to fund borrowers' loans - that is - the maximum number of FRNs in circulation could never be more than the total created by the Fed to fund loans, so it therefore reasonably and logically follows, that the maximum number of FRNs that the Fed could ever receive back would be no more that the Fed created in the first place - as loan principal - so no matter what the borrowers or the Fed might designate the payments to be - principal or interest - as far as the profit to the Fed is concerned it would be a mathematical and/or a physical impossibility for the Fed to take a profit called interest.
[3] So then, how does the Fed take a profit? Quite simple - through foreclosing on pledged assets
End of Mr. WhoRU's Myth Two.
Mr. Vieira's Commentary on what Mr. WhoRU wrote:
[1] 2. If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax collectors, and everyone else concerned with finance. Surely, too, such a proof would stand him in good stead for a professorship at Harvard, or even the Nobel Prize in economics.
[2] Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit".
[3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"?
Mr. WhoRU's rebuttal to Mr. Vieira's continuing out of context Strawman commentary:
In his commentary above Mr. Vieira wrote in the first paragraph thereof:
[1] "If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance."
I Contend that I have more than proven that it is impossible for the creating lender of FRNs to take a profit called interest but please note here that Mr. Vieira challenges me to prove that interest paid on a loan is not, in principle, a profit..." "...in principle..."?? What can be Mr. Vieira's meaning and or intent here, by his use of the qualifying term, "...in principle..."?
What does Mr. Vieira have in mind here?? "...in principle..."? I have to admit that I cannot come up with anything concrete as to what Mr. Vieira has in mind, other than obfuscation.
I freely acknowledge that the term "interest" is used in many ways by economists, accountants, tax advisors, tax-collectors, and everyone else concerned with finance, to describe the surcharge paid by borrowers on loans. I have never ever in any way or at any time contended that borrowers do not pay interest on loans nor have I ever likewise contended that lenders do not purport to collect interest on the loans they make - what I have contended, and continue to contend - and as I have irrefutably proven time and time again - is that it is mathematically and physically impossible for that which is designated as interest to actually, in reality, to in any way whatsoever, constitute a profit to the creating lender!!
To present a simple example: If the total FRNs created to fund many loans was ten millions, at 10% interest, the total obligation of all the borrowers together would be eleven millions. As the lender only created ten millions - where could the borrowers, taken as a group, obtain the additional one million to pay the interest? From nowhere, as there is no source other than as loan principal! It is as simple as that, Mr. Vieira!!
As it would be impossible for the lender to receive back from the all of the borrowers more than the ten millions created to fund all of the loans, it would be mathematically and physically impossible for the lender to take a profit called interest.
Yes, some of the individual borrowers could indeed pay off their individual loans, but in paying the interest on their loans they would have had to use some of the ten millions of FRNs created to fund all of the loans - this would reduce the circulating supply making it totally physically impossible for some of the remaining borrowers to even repay the principal created to fund their loans and these borrowers would go into foreclosure, and that is where the lender would derive its profit!
And it is additionally true that the lender's account books would indicate that the lender had made a profit on those loans that had been paid in full, but if all of the borrowers repaid the entire ten millions created to fund all of the loans - then there would be no more FRNs in circulation and the account books of the lender would have to show a loss on the loans that were not paid in full, and overall, on all of the loans made in regard to the ten millions created and loaned, the account books of the lender could, at best, only indicate that the lender had broken even if the evaluation was limited only to the money received from the borrowers, but when the money received from the sale of the foreclosed assets was factored in - then the books of the lender would indicate a profit - taken from the foreclosures!!
So, Mr. Vieira, where is your interest profit, "in principle"?
So now, Mr. Vieira, I contend that I have once again more than proven that "interest" paid on a loan is not, "in principle", a profit to the lender, therefore, Mr. Vieira, I contend that at the very minimum you owe me a very public apology!! And you, Mr. Vieira, as you postulated in the closing portion of your first paragraph, should now open a school in which to re-educate not only yourself, but economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance who maintain that lenders can take a profit from interest charged on loans.
In his commentary above Mr. Vieira wrote in the second paragraph thereof:
[2] "Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit""
Mr. Vieira is just a little bit more than disingenuous here as he totally misrepresents what I define as a closed end money system. My explanation of a closed end money system has absolutely nothing whatsoever to do with how many loans are made, or to whom or when made.
A closed end money system exists when the central banking system is privately owned so that the portion of the borrowers payments that are designated as interest is credited to the private accounts of the lenders who happen to be the private owners of the bank (Federal Reserve).
On the other hand, an open ended money system would exist when the central banking system is owned by the people of the Federation so that the portion of the borrowers payments that are designated as interest is credited to the Federal Treasury and then re-cycled into circulation by the government as the government pays its obligations, thus replenishing the circulating supply of money, thus eliminating the down cycles and the foreclosures inherent therein.
The fact, as Mr. Vieira points out, that accountants designate interest as profits can not in any way make interest to be an actual profit.
The books of a lending bank will show the interest as a profit, and will show the defaulted loans as a loss, and will show the foreclosed on collateral as an asset, with the proceeds from the sale thereof as a profit, thus, at the bottom line, the bank will show an overall profit, but an honest evaluation will acknowledge that what the account books do is simply cover up the fact that if it were not for the sale of foreclosed upon collateral, the lender would not have, could not have, made a profit.
In fact, a careful reading of Mr. Vieira's own words in his paragraph [2] above, will reveal that although the infusion of additional money into circulation as loan principal will temporarily enable existing borrowers to make additional loan payments, in due time such infusions will inevitably make the circulating imbalance even worse, because the more principal that is introduced into circulation, the more interest will be required.
In his commentary above Mr. Vieira wrote in the third paragraph thereof:
The proper question to be asked here, as Mr. Vieira well knows, is, "What is profit?" It doesn't make any difference what the product might be or how many billions a business may gross,, a profit only occurs when the business income exceeds its outgo. Almost everyone is familiar with the term, "loss leader", like when the super market advertises bananas at 33 cents a pound while the super-market paid 50 cents wholesale. If all the grocer sold was bananas the grocer would go out of business fairly quickly, but customers buy lots of other items that the grocer makes plenty on, so at the bottom line, overall, the grocer makes a profit.
This principle works the same way with interest and there can be no doubt whatsoever that Mr. Vieira is fully aware of this basic fact. For Mr. Vieira to make the arguments he does clearly reveals that Mr. Vieira is not at all who he purports to be – Mr. Vieira's phony arguments indicate he is a shill for the Federal Reserve.
But to directly answer Mr. Vieira's question; if a person deposits $100.00 in a bank savings account at 3% interest, then draws it all out a year later, the depositor will receive back $103.00 and the numbers will clearly depositor received an increase of $3.00 and if there was no inflation to account for, then the depositor would, indeed, show an interest profit of $3.00. However, the savings account depositor was not the original source of the $100.00 in circulation, the $100.00 originated into circulation as the principal of a loan originally funded by a local branch bank of the Federal Reserve.
This presentation of myths has absolutely nothing to do with interest profits earned on any transaction other than those pertaining to the original creator of the paper money – in every single instance that will always be the Federal Reserve. As it will always be totally mathematically and physically impossible for the Fed to receive back more FRNs than it created as loan principal, it will therefore, always be totally impossible for the Fed to take a profit called interest, so yes, Mr. Vieira, when the "capital" was "invested" by the Fed, the portion of loan payments received that is designated as interest, is, in reality, to use Mr. Vieira's words, "Return of capital"!! (Although I would argue that this is a miss-application of the word "capital").
The next question that need be answered is, "What is it that constitutes `money in circulation'?" If your aunt Martha has $10,000.00 hidden in her bedroom under her mattress that $10K is "in circulation", even if she had the $10K hid there for 50 years. The $100.00 deposited in the savings account in my example above would be considered to be "in circulation". All of the millions and millions of FRNs held by Russians in Russia are deemed to be "in circulation". Each and every FRN that has been issued by the Fed as loan principle constitutes part of what is deemed to be "in circulation" (the one and only way FRNs enter circulation is when the Fed loans them to a borrower as loan principal and for the purpose of this evaluation, FRNs advanced by the Fed to "purchase" US Treasury instruments are included as loans)
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FALSE Myth # THREE -
[1] Although it is certainly true that there is no gold or silver backing that does not mean there is no backing for FRNs. Federal Reserve Notes are nothing but a piece of paper, with so much ink printed on both sides it is difficult to find room to write a phone number thereon - but never the less millions and millions of these paper notes are used every day by millions and millions of people to purchase every variety of commodity imaginable, with never a concern that the paper notes themselves are worthless.
[2] The notes have value because the notes are backed by the promises of the borrowers, made at the time the loans were funded, to produce goods and services equal, not only to the principal borrowed, but also equal to the added interest charged on the loan principal. What better backing could be desired? Even gold would not be as good - what does gold do? Why is gold perceived to have value? Is it not because humans are willing to produce goods and services equal to the perceived value of the gold? So what is the actual difference between gold and paper in a healthy money system? (A healthy money system would be an open ended publicly owned money system).
End of Mr. WhoRU's Myth Three.
Mr. Vieira's critical commentary on Myth Three:
Mr. Vieira wrote
[2] Anyone who cannot understand, from several centuries of financial history, why silver and gold are far move stable as "money" than any form of paper, no matter how the paper is 'backed", is rather myopic. I suggest Mr. WhoRU start by studying Ludwig von Mises, The Theory of Money and Credit. But the basic answer to Mr. WhoRU question,-"So what is the actual difference between gold and paper?" — is that gold is an actual commodity with the necessary physical properties to function well as "money"; whereas paper is almost invariably a debt (or even a series of debts) that can function as "money "only when its conversion into commodities without market-induced losses is assured (which has never been the case).
Mr. WhoRU's rebuttal to Mr. Vieira's commentary:
I have no disagreement with what Mr. Vieira states in his first paragraph above in regard to what paper notes are, however it is interesting to note that what Mr. Vieira writes in this regard is not his own intellectual product but rather the work of others, on the other hand everything I write is the product of my own intellect! I must add, however, that as this information is quite widely known and accepted, that Mr. Vieira is, to use his own words, here merely beating a dead horse.
That being stated, I do have some significant disagreement with this snip from the latter portion of Mr. Vieira's first paragraph above:
"A silver or gold coin, to the contrary, is the medium of payment itself. There is nothing contingent or problematic about it. A person who owns a silver or gold coin owns actual wealth. A person who owns a debt-based currency such as FRNs owns a possible claim to wealth—but a claim that might possibly prove ineffective. "
Although what Mr. Vieira wrote above is so widely accepted that all it really does is provide another vehicle for Mr. Vieira to further indulge himself in favorite pastime, his dead horse beating fetish. But be that as it may, it always stymies me when seemingly intelligent people fail to think! Why is it that paper money is always characterized as "debt based currency", like that fact somehow imbues it with immorality - much as an "illegitimate" child is tainted for life as a "bastard" because his mother was unwed.
Why?
Why, indeed, when an unbiased (Heaven forbid, Mr. Vieira), examination of the evils arising from and, if historical repercussions are of significance, seemingly inherent in whatever has been used as money over the centuries, paper or gold; an unbiased examination will reveal that evil will manifest itself no matter whether the medium used as money was paper or gold because in any honest examination it will always be found that the evil was in the humans involved rather than whether or not the medium was paper or gold; and, most often, the humans who caused the monetary debauchery were those operating the government – not those subject to it!!
As gold and silver seem to be Mr. Vieira's mantra for morality, let's make a quick evaluation of gold as money, to determine if the use of gold as money does not reveal the same inherent problems as does the paper money Mr. Vieira castigates so intently.
As I have previously demonstrated in this writing, a single source of any item cannot receive back more than the single source initially provides, I contend that this same impossibility exists with the lending of gold as it does with the issuance any and every other item, that is, that when gold is lent at interest by private lenders, the private lenders of gold will ultimately become the owners of everything and everyone - no matter that the money used by everyone was pure, 24 carat gold. Where can the borrowers of gold get the additional gold to pay the interest as the additional interest must also be paid in gold? This clearly demonstrates, that, all things considered, gold actually serves no better as money than does paper.
The next problem with gold as money, also proven by history, which Mr. Vieira is so insistent on referring to, is that every time the United States government has gone back to a gold money system the private banksters have worked behind the scenes to manipulate themselves back into control of some new version of their privately owned central bank closed end paper money system.
However, while the banksters are working to re-instill their paper money system the same banksters are at the very same time functioning as the lenders of money – GOLD MONEY – at interest, so while they are scheming to re-instill their privately owned closed end paper money system they are, by collecting gold interest on their gold loans to both the government and private sector borrowers, causing the imbalance in the circulating gold money supply that will, inevitably, result in boom and bust foreclosure cycles that will set the economy up for a return to the banksters privately owned closed end paper money central bank.
The banksters are able to succeed in their scheme to re-instill their privately owned closed end paper money system because when gold and silver coins are used as money, with interest charged on loans of gold, gold and silver coins perform not one whit differently than does paper money, The Single Source Doctrine will enforce itself no matter what is used as money. When are we going to learn to stop setting ourselves up for such consistent predictable repeated monetary debauchery??
And neither are silver coins or gold coins true wealth; true wealth is that which silver and gold coins can be exchanged for, food, clothing, housing, etc., including gold jewelry, but it is the artistry in the jewelry that actually constitutes it's true qualification to be characterized as wealth. If gold actually constitutes true wealth then why do people trade gold for other things?
And lastly, as to the problems with a gold money system, putting aside the emotional aspects of gold - is gold really all that valuable - yes gold is obviously a commodity - but that is all that it is - nothing more than a more or less rare metal, gold is not in any way nearly as useful as any other metal - and not even close to being as useful as paper - gold cannot be eaten, worn as warm clothing, used to transport anyone or anything, cannot be used to warm or house anyone - so - when putting aside gold's emotional attraction - where is its actual value?? Gold, used as money, is actually no different than paper - like paper money the actual value in gold is in what the holder can get in exchange for it.
My purpose here, as I stated in my opening statement back on page one hereof, is to conduct an honest evaluation of where we are, economically, and what we can do to correct the mess we are in. A very important part of that mess is in how we fund our government. Why is it that all of the opposition I get to my solution, where I present a means of totally eliminating all taxation, no one - that is no one – including Mr. Vieira, is in any way interested in addressing the issue of government funding through armed robbery, euphemistically called "taxation"??
Every time I hear someone advocate the elimination of the Federal Reserve and a return to a Constitutional gold and silver money system I reply, "Great - I am 100% in favor of that - please tell me your plan for accomplishing this marvelous idea!!" I am still waiting for a coherent response - from anyone!! There is no response because it is totally impossible to devise a way to do this in 2007!!
Let's face it, in the year 2007 there is no realistic way the United States could possibly return to a gold based money system and even if we could we would not be any better off - we would actually be worse off and we would still have taxation (armed robbery) as the means by which we fund our government!
In the last portion of his second paragraph above, Mr. Vieira states:
"... Whereas paper is almost invariably a debt (or even a series of debts) that can function as "money" only when its conversion into commodities without market-induced losses is assured (which has never been the case)."
Not withstanding the fact that paper money enters circulation as evidence of debt (not necessarily a bad thing in and of itself, as the funding of many industries and the creation of millions of jobs has been because of the ability of the borrowers of paper money to monazite their future income), but addressing the latter portion of Mr. Vieira's statement, it is certainly true that the purchasing power of paper money can be debased - but by "market induced losses"?
What is it Mr. Vieira that constitutes "market induced losses"?
As I understand the word "induced" it means to cause something, so putting the word "market " in front must mean that something that is taking place in the market is in some way doing the inducing of loses of the value of paper money – gee – I agree – but this still calls for an examination as to "how"!!
As I understand Mr. Vieira's concerns with paper money – Mr. Vieira is concerned that in the event that the paper money would become recognized as worthless (due to rampant increases in commodity prices), that, as the paper is not redeemable for gold or silver coins, holders of paper money would suffer substantial losses – I fully agree – however that is akin to my agreeing that it is possible for Mr. Vieira to understand that it is impossible for the Fed to make a profit called interest. The likelihood of that happening is, unfortunately, fairly slim, but so are the odds of the paper money system failing when the true cause is understood and negated.
The cause of market induced losses is always the same – rampant government inflation of the circulating money supply enabled by Congressional control of and access to the central bank. When the government prints and spends money into circulation market induced losses are inevitable as the money that the government spends into circulation is not guaranteed by anything other than the government's purported ability to assess a tax upon the people, which the government cannot actually do as the government cannot extract more from the people than the people actually have.
The reason paper money becomes debauched is because the value of the paper money borrowed into circulation by private sector borrowers is diluted (debauched) by the free wheel spending of the government – it is not caused by the paper money – it is caused by the corruption of the humans operating the government, but no matter how the system is set up – there will always be a way corrupt humans in government can steal the value of the production of the common people. It is always either by stealing the money through armed robbery ("taxation") or by stealing the money through inflating the money supply, so no matter what we do we will have these problems to contend with.
What I propose will minimize our exposure to these classic means of corruption.
So, Mr. Vieira, aren't you being just a little bit disingenuous - blaming the private sector market for the erosion of the buying power of our FRNs cause by the government?? Wouldn't it be just a bit more forthright were you to place the blame squarely where it belongs, on unbridled government spending of trillions of dollars created by the Federal Reserve on the whim of Congress, rather than by sugar coating it by referring to it as "market induced losses, suggesting that it is the common private sector people who are to blame"?
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FALSE Myth # FOUR -
The Fed manipulates the circulating supply of money to cause recessions
[1] Although it is certainly true that the Fed manipulates the circulating supply of money, the Fed does not do so in order to cause recessions - quite to the contrary - as recessions are an inherent aspect of a closed end privately owned money system the Fed does not have to manipulate anything in order to cause recessions - to the contrary - although it is certainly true that the Fed manipulates the money supply, by raising and lowering the interest rate - in order to discourage or encourage borrowing - but this manipulation is not to cause recessions but rather, to lessen the negative impact of the inevitable recessions inherent in their closed end money system, in order to insure that there will be another boom cycle - what the Fed does is not unlike a farmer saving back seed corn to plant the next seasons crops.
[2] Although recessions may very well be influenced and manipulated by interest rate adjustments the recessions are not in any way CAUSED BY the manipulation of interest rates. The recessions will occur no matter what the Fed might do with interest rates - the recessions are an inherent aspect of and are inevitable in a closed end money system where interest is purportedly charged on principal created to fund loans.
[3] "Interest is purportedly charged"? That is correct - "purportedly charged"! What is interest?
[4] Interest must be defined from two different points of view, (1) from the point of view of the borrower and, (2) from the point of view of the Federal Reserve lender. This is generally commonly understood as follows: (1) For the borrower, interest is an additional amount added to the principal borrowed, that the borrower must pay, as a fee, for using the Federal Reserve lender's money; (2) For the Federal Reserve lender, interest is the fee added to the principal lent to the borrower, which the borrower must pay, for using the Federal Reserve lender's money; so as the two are described as being the same - what then is the difference?
[5] So what is wrong with this picture??
The general public will not understand the error in this explanation above because the explanation seems to cover everything relative to explaining what interest is and, at the same time the general public will presume that the interest paid to the Federal Reserve lender by the borrower will, in and of itself, constitute a profit to the Federal Reserve lender - WRONG!!
[7] It is totally, absolutely, completely, 100% physically and mathematically impossible for the interest paid to the Federal Reserve lender by the borrower to in any way constitute a profit to the Federal Reserve lender!! It would not matter one iota, if the interest rate were 100% - the interest could still not be a profit to the Federal Reserve lender!! And, ultimately, it would make no difference if the money loaned were paper Federal Reserve Notes loaned by the privately owned Federal Reserve or were 100% pure gold coins, loaned into circulation by the private owners of gold!! Interest on loans is not the ultimate true actual source of the lender's profit!
So why would the Fed loan money if the Fed was not going to take a profit (please take note of my use of the word "take" as opposed to "make" or "earn").
[9 Before I explain how the Fed actually takes its profits I am first going to explain why and how it is totally impossible for interest on loans to constitute a profit to the Fed. The reason is because of what I call the "Single Source Doctrine"; The single source of any item cannot receive back any more of the item than the single source creates and causes to enter circulation.
[10] For example: Everyone knows that the single source of all Chevrolet automobiles is from General Motors - neither Ford, Chrysler, BMW, Volvo or any other automobile manufacturer makes Chevrolets - the single source of all Chevrolets is General Motors. If General Motors were to do a general recall of all Chevrolets - how many Chevrolets could GM possibly receive back? There is no way to know the actual total possible number but it is clear that GM, being the single source of all Chevrolets, could not possibly receive back even one more Chevrolet than was manufactured in all of GM's Chevrolet plants - that is a fact and is totally irrefutable!
[11] Apply the exact same logic to any item that issues from a single source and the results will be the same - no single source of any item can receive back more of the item than the single source issued out in the first place.
[12] The Single Source Doctrine applies to the single source of any and every item that issues from a single source and the Federal Reserve is no exception!! Every single GE refrigerator comes from GE; every single Kenmore washer comes from Sears; every single RayOVac battery comes from RayOVac; Every single Federal Reserve Note in circulation entered circulation from the Federal Reserve itself or through one of the local branches of the Federal Reserve (every local bank in the United States is a branch of the Federal Reserve - no exception).
[13] The next very important point here in understanding the impossibility of the Fed taking a profit called interest is to understand that every single Federal Reserve Note in circulation entered into circulation as the principal created by the Fed to fund a loan applied for by some borrower.
[14] Now, how many Federal Reserve Notes do you suppose the Fed would create to fund a loan of $1,000.00?? As the borrower only applied for a loan of $1.000.00. Is it not most logical to assume that the Fed would create only $1,000.00?? Why would the Fed create more than $1,000.00? The borrower of $1,000.00 would expect to receive only $1,000.00, right? If the Fed gave the borrower more than $1,000.00 would the borrower be surprised?? Has this ever happened?? Can you imagine it ever happening??
[15] Now, when the borrower borrowed the $1,000.00, the borrower agreed to pay back the $1,000.00 plus interest - say of 10% - for a total obligation to pay $1,100.00 to the Fed - but the Fed only created $1,000.00 so how much could the borrower possibly pay to the Fed?? According to the Single Source Doctrine the maximum the borrower could repay would be the total issued out by the Fed - or $1,000.00 - MAX!! So how could the Fed ever take a profit on this loan?? - NEVER!!
[16] Oh, but that is not the way it actually works - well that is exactly the way that it works but it is just not that obvious because there is not just one loan of $1,000.00 - there are literally millions and millions of loans spread out all over the United States so what actually happens is as follows:
[17] Because the Federal Reserve did not become the single source of all money in the United States at any single point in history, but was imposed gradually over many years, the facts as to how the Fed actually operates and takes its profits have been obfuscated.
[18] With millions of loans in place many borrowers are able to make payments including both principal and interest and many borrowers do actually pay off their entire loan obligation including both principal and interest but in order for those borrowers to pay the interest portion of their loans they must pay back more than they borrowed; they must pay back more than was created by the Fed to fund their individual loans, so where do these borrowers get the additional Federal Reserve Notes they must have in order to pay back more than was created to fund their loans?
[19] As the only source of Federal Reserve Notes in circulation is from those created as loan principal to fund loans - there is only one source borrowers can draw upon in order to pay their total obligation - the borrowers must obtain possession of Federal Reserve Notes created as principal to fund other borrowers loans. This causes the total circulating supply of Federal Reserve Notes to shrink faster than the total obligation of all borrowers; this is known as "imbalance" of the circulating supply.
[20] Suppose there were 1,000 borrowers who wanted to finance their purchase of a new home and the prices of all the homes were $100,000.00 each; that would mean the Fed would create $100,000,000.00 (one hundred million). If the interest were 10% the borrowers total obligation would be $110,000,000.00 (one hundred ten million), Most people would understand this to constitute a ten million dollar profit to the Federal Reserve but where does the extra ten million come from when the only source of FRNs in circulation is from the Fed, as principal to fund loans? In this example, one hundred millions - total.
[21] Most people would never ever think about this as an impossibility because all of the 1,000 borrowers will be able to make payments - for a while - actually, even for many years, because when the loans were all funded the Fed would have created one hundred million and the entire one hundred million would have entered circulation. If the mortgages were all for ten years at simple interest (instead of the common much higher compound interest), the monthly payments for each borrower would be $916.67, so each month the original one hundred million dollar circulating supply of money would shrink by 1,000 borrowers times $916.67 each, for a total monthly amount of $916,670.00, for a total yearly amount of $11,000,040.00 (eleven million 40 dollars) shrinkage of the circulating money supply. After nine years the circulating supply of money would only be $999,640.00, but the borrowers, as a group, would still have a total unpaid obligation to the Fed of $10,999,640.00.
[22] So all of the 1,000 borrowers could make one more monthly payment each which would reduce the circulating supply of dollars to $82,970.00, so the following month only 90 of the 1000 original borrowers could make their monthly payments so 910 borrowers would be foreclosed on and the following month the other 90 would also be foreclosed on and the Fed would become the owner of all of the 1,000 homes and that is how the Fed TAKES its profit!
[23] But that is NOT how it actually works in the real world because all borrowers do not take out their loans on the same day and many borrowers make more money each month than others so some borrowers are able to pay off their loans more quickly so these more fortunate borrowers are not foreclosed on - many borrowers do actually paying off their entire loan obligation but when they do they reduce the circulating supply of money which results in some borrowers being foreclosed upon much sooner than nine years (most home loans are 30 year contracts and the total interest amount obligated (due to compounding of interest), would be about $300,000.00 on a $100,000.00 home. This could all be resolved with public ownership -of the Federal Reserve that would make the Fed into an open-ended money system so that the boom-bust cycles and foreclosures caused by the closed end system would not occur.
[24] Also, when borrowers are foreclosed on those borrowers are no longer making payments so the money originally brought into circulation to fund these loans is still out there for other borrowers to use to make the interest portion of their loan payments.
[25] The Fed does adjust the interest rates to manipulate borrowing. The Fed will raise interest rate to discourage borrowing, especially when the number of qualified borrowers has been diminished because most of them took out loans - the purpose of this is to delay these remaining qualified borrowers from going into debt at a time when the economy is entering or is in the beginning of a down cycle, entering a recession, so that later, when there is a sufficient number of new qualified borrowers to pull the economy back up out of a recession, these qualified but unfunded borrowers who were discouraged from borrowing at the beginning of the previous down cycle by increased interest rates will still be there to help create the boom cycle. When this occurs, the Fed will lower the interest rate to encourage borrowing.
[26] During the bottom of the bust cycle is when the Fed TAKES its profits - by foreclosing on pledged assets - not in any way through the collection of interest! The purported collection of interest certainly does play a critically important part in creating the down cycle so the foreclosures will take place but there is no possible way that the interest itself can constitute any part of the Fed's actual profits whatsoever.
End of Mr. WhoRU's Myth Four.
Mr. Vieira's critical commentary on Myth Four:
4. [1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly).
[2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, If they profited exclusively from foreclosures (as Mr. WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s. I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating money supply to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you!
[3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system" and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions".
After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know.
[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all.
[5] The amazing statement he makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower.
Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure,) Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?
In his commentary above, Mr. Vieira states in the first paragraph thereof, in relevant part:
"[1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly)."
In the first place, that which has been proven and which can be and has been readily demonstrated is no longer a "theory!! However, in regard to Mr. Vieira's totally ridiculous assessment immediately above, as I have already proven herein above that the Federal Reserve can only take its profits through foreclosures, so then why does the Fed not do as Mr. Riviera suggests? I could merely respond by stating that the reason is because the owners of the Fed and the Fed's Board of Governors are not as stupid as Mr. Vieira, because any person with as much knowledge of the Fed as Mr. Riviera has must already know the answer to his own stupid question, however I will respond in some depth; there are several reasons:
Reason 1
Reason 2.
The Federal Reserve works the same way - too frequent and too deep recessions would so discourage the governed that the governed would either quit or take a closer look at how those in charge of the economy are screwing them - as is now sweeping the country by means of Aaron Russo's movie and my essay in support thereof, in which I set forth the solution to the problems so ably exposed by Mr. Russo's movie. The Federal Reserve has agents infiltrated among the patriot population to neutralize the exposure of the Fed's scam, such agents as Mr. Vieira!!
Reason 3.
This strategy introduces billions and billions into international circulation, which then work their way back to the U.S. to replenish the circulating supply in "the Homeland".
Reason 4.
In his commentary above, Mr. Vieira states in the second paragraph thereof, in relevant part:
"[2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, "
If it were not for his continual trumpeting of his ridiculous claims that loan interest constitutes actual bank profits, Mr. Vieira would have no argument whatsoever!! Let it be clear - I have never stated that borrowers do not pay interest nor that banks do not collect interest - my statements (which I have proven many times), are that the interest does not and can not in any way constitute a profit to the lending bank. It is true that banks do indeed purport to take profits because of interest charged on loans but that designation of receipts, as interest does not in any way cause the interest to itself constitute a profit to the banks. The interest is similar to a loss leader at the super-market.
All of the FRNs in circulation arrived into circulation as loan principal; that is, every single FRN in circulation was borrowed into circulation by some borrower as loan principal. If all of the borrowed FRNs created as loan principal were paid back to the originating lending banks before any interest FRNs were paid – then there would be a total of ZERO loan principal FRNs left in circulation and not even one FRN would have been collected as interest and then where, Mr. Vieira, would the borrowers be able to get any FRNs to pay the unpaid interest on their borrowed FRNs?? There would be no such source and the banksters would not be able to take a profit called interest!!.
Why do you suppose the banksters insist on indicating on borrowers loan payment receipts that the interest is paid first?? As the total obligation of the borrower includes both principal and interest, how can it actually make any profit creating difference which is designated first??
Why do you suppose the banksters want to collect the interest on loans first?? The reason is so that when the circulating money runs low, the lender's account books will indicate that it is loan principal that remains unpaid – so that the borrowers will perceive that they have not paid back what they borrowed – it serves to make the borrowers look bad - it is known as "smoke and mirrors".
For example, on a loan of $100.00 at 10% interest the borrower would owe $110.00 and the lender would likewise have an account receivable of $110.00. Until the lender has received back at least the $100.00 lent, it will be and is totally impossible for the lender to have made a profit. As the word "interest" is not in any way a special magical word, the lenders calling the first $10.00 received "interest" will not magically make that $10.00 into profit, to postulate that it does is sheer lunacy, Mr. Vieira!! It will be impossible for the lender to properly and honestly claim to have made a profit until the lender has received back more than the lender lent to the borrower and it is absolutely mathematically and physically impossible for the single source of an item to receive back more than the single source issued out!! Show me where this is not so, Mr. Vieira!! Please.
Mr. Vieira's further comments in the second paragraph, in relevant part:
"…If they [the banksters] profited exclusively from foreclosures (as Mr., WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s."
When borrowers use FRNs originating into circulation as loan principal to pay the interest portion of their monthly payments those interest payments reduce the circulating supply of principal money to a level below the total obligation owed by all of the borrowers, this using of principal money to pay interest lays the foundation for and is the cause of the subsequent bust cycle and the inevitable profit taking through foreclosures on pledged assets!!
As the reduction of the circulating supply of FRNs is an inherent aspect of a closed end money system, just as wetness is an inherent aspect of water, the Fed need not take any overt action to cause recessions. When the supply of qualified borrowers is "used up" (loaned out to their max), the economy will, of its own accord, without any overt manipulation of the Fed, slide into a recession, and profit taking foreclosures will "naturally" occur. The Fed does quite often adjust the interest rates to either encourage or discourage borrowing but it is not the amount of the interest that causes the bust cycles, the bust cycles are inevitable when interest of any percentage is charged on loans made in a closed end lending system.
"I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that
What Mr. Vieira strives diligently to avoid acknowledging is that there must be a boom cycle before there can be a bust cycle; just as a farmer must plant and nurture his crops prior to harvesting, so too, must the banksters prime the economy with loans to qualified borrowers, in order to enable actual wealth creating boom cycles to occur as a result of the banksters infusion of FRNs into circulation, by extending loans to qualified borrowers, so that there will be something physically substantial for the banksters to foreclose upon during their profit taking bust cycles.
Additionally, as any honest student of the Great Depression is aware, the root cause thereof was in the farmers of the United States over extending themselves with farm equipment loans during WWI, during which the farmers of Europe were totally shut down, which was, of course, a totally manipulated war, as all are.
In his commentary above, Mr. Vieira states in the third paragraph thereof, in relevant part
"[3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system", and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know."
In his commentary above, Mr. Vieira states in the fourth paragraph thereof, in relevant part
"[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all."
Never once have I ever conceded that there was sufficient money in circulation for all interest and principal to be paid, there never has been and there never will be as such is a mathematical and physical impossibility, as even in the deepest depths of the worse bust, there will still be new loans made with an interest surcharge attached, where there will be insufficient FRNs in circulation to equal the total obligation of all the outstanding loans.
Moreover, even if I were to state such, that would not make it true because it is a mathematical and physical impossibility governed by the natural laws of mathematics and physics over which I have no control, so my acknowledgment would not make such to be true any more than would my assertion that Mr. Vieira is an honest man make that to be true!
However, rest assured, if Mr. Vieira could find anything further in my Fourth Myth on the Federal Reserve to castigate me for, Mr. Vieira would not miss the opportunity!!
In his above comment, Mr. Vieira states and contends: "...due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, [Mr. WhoRU admits that] enough currency does exist, after all." "
Total poppycock!! Mr. Vieira's contention here is like claiming that as long as you keep a bucket with a hole in the bottom full by continuing to pour in more water that there is no hole or that the hole is of no effect, or that if you glue the needle of your car's fuel gage to the full position you will never run out of fuel, no matter how far you travel in the car.
Mr. Vieira states in the fifth paragraph of his commentary, in relevant part
"[5] The amazing statement he [Mr. WhoRU] makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure). Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?"
If Mr. Vieira was not so intent on proving me wrong just for the sake of proving me wrong he would know that what he has set forth here is totally untrue as I have explained time and time again, in considerable detail, how the solution I offer would be implemented and operated, if it was not included in the rather short article that Mr. Vieira has taken such great pains to thoroughly and wrongly trash (albeit unsuccessfully), and if Mr. Vieira had made an honest effort to inquire, he would have found that I have indeed provided all of the details, many times.
This article of mine that Mr. Vieira has been attempting to trash was posted to my WhoRU Yahoo group, to my 626 members thereof, whom have previously had the opportunity to be informed of all that Mr. Vieira postulates about - this instant writing on the Myths of the Federal reserve was headed (preceded) with a request that my group members present it to Mt Aaron Russo, as a solution to the problems Mr. Russo exposes in his movie, "America: Freedom to Fascism".
In response to Mr. Vieira's silly postulations, under my plan the Federal Government would not have any direct control or exercise any authority whatsoever over the Board of Governors of the Fed. The Board of Governors would be selected and appointed by the Governors of the several state, or by the legislatures thereof. The Federal government will not be making any loans to itself or to anyone - all private sector loans will be applied for and approved in the same manner as they are currently. The Federal government would be prohibited from borrowing from the central bank. The Federal government would be funded from interest charged on loans made to private sector borrowers, and in this regard, all taxation would be terminated (phased out over a period of months up to a year or two).
Under ownership by the people, with all interest on loans credited to the governments' accounts, the money system would be open ended because all interest payment would be spent back into circulation to replenish the circulating supply, so that the bust cycles inherent in the current closed end system would cease as would the foreclosures caused thereunder.
End of PART ONE of THREE PARTS
EricWhoRU Teaches Fundamental Principles
people are more likely to read some sentances of this if you strip the italics, and have the font size closer to the standard used in other current live threads on the board.
free advice. (aside from your cost of reading it)
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I had to quit.. It needs a different structure
If anyone can confirm this isn't spam, I might bother playing editor & sentence adder (I mean really, there are entire walls of texts without so much as a break) & post a more readable copy of the post.
"Look at me, I'm quoting another user to show how wrong I think they are, out of arrogance of my own position. Wait, this is my own quote, oh shi-" ~ Nitroadict
This isn't spam. I posted three parts but couldn't seem to get the format refined. Sorry. If you can fix please help
Thank you
I tried.
Ten FALSE Patriot Myths Regarding Paper Money v. Gold Plus Dr. Edwin Vieira's Error Laced Adversarial Memorandum Which Is Totally Rebutted by Eric WhoRUStatement of Eric WhoRU in regard to Mr. Vieira's "MEMORANDUM" castigating my paper on the Federal Reserve by Mr. Vieira's totally misrepresentation of what I actually wrote and what my positions are. Mr. Vieira even went so far as to make up totally silly issues I did not write and then Mr. Vieira proceeded to castigate me for the silliness that Mr. Vieira concocted:The purpose of my paper on the Federal Reserve was/is to conduct an unbiased examination of our present monetary system including the means by which we fund our government (armed robbery sanctified by euphemistically calling it "taxation"); and to design and present an unbiased solution which is actually achievable in 2007, which will, when implemented, totally eliminate all taxation in the entire Federation and also totally eliminate all economic problems caused by the private ownership of the closed ended Federal Reserve System. In arriving at the solution I present I have examined all realistic alternatives to what we presently are subjected to and endure, including the impossibility and inadvisability of returning to a Constitutional gold and silver money system. Having stated the foregoing I must quickly add that I most certainly not in any slight way a friend of the privately owned closed end Federal Reserve System with which we are currently saddled.In evaluating and designing a solution to our financial ills it is of the utmost importance that the solution be one which would cause the least amount of economic chaos and disruption; the solution must be one that takes into account and is based on where we are today, in 2007, and not where we might have been if things had been done differently in the past. The "we" referred to herein must, of necessity, include the entire internationally commercial system that we actually live in - whether we like it or not, that happens to be the real world in which we now live.The solution I have designed will eliminate all taxation in the entire Federation; it will end the roller coaster economic boom and bust cycles with their inevitable foreclosures that we have been enduring for the past 70 years and it will fund the government entirely from interest charged on loans to private sector borrowers. I have had this solution under development for the past 15 years and have discussed it with "hundreds" of people through exposure on the Internet. I have had no one yet find any problem with what I present, including Mr. Vieira's instant writing!!What Mr. Vieira offers is nothing more than a sincere attempt to stroke his own ego!! What Mr. Vieira does here is raise many Strawmen, using short "sound bites" many of which require several pages to rebut. Mr. Vieira's personal attacks on me, laced continually throughout his presentment, indicate his actual inability to refute the Solution I offer on its own deficiencies, of which, I maintain, there are none!! As a key to the format below, in addressing each of the Ten Myths, you will first find Mr. Vieira's entire comment on that myth, then what I had written in regard to that myth,, and, finally, my phrase by phrase explanation of the subject matter and my rebuttal of Mr. Vieira's misinterpretations. *****************************************************************Here is Mr. Vieira's MEMORANDUM, with my rebuttal commentaries interleaved, appropriately therein:Edwin Vieira, Jr. 13877 Napa DriveManassas, Virginia 20112Telephone: 703-791-6780e-mail: edwinvieira@megapipe.net07 December 2006MEMORANDUM FROM; Mr. Edwin Vieira, Jr.TO: WhoRU Yahoo Group Member RE: Paper by Eric WhoRUMr. Vieira's preliminary comment:[Written in response to a comment made by the person who sent my Ten Myth Essay to Vieira]I do not know what "nail" you imagine Mr. WhoRU has "hit on the head". But I should not award his paper a very high grade for coherence. Although I have neither the list nor leisure to go through it line by line, I can offer---once and for all-a few suggestions as to its weaker points. (My reference numbers are to Mr. WhoRU' various "'myths'.) Mr. WhoRU's response to the above:In his comment above, it may appear that Mr. Vieira is claiming that he did not have the entire essay written by me at his disposal (he states that he did not have the list…), for reference – rest assured, Mr. Vieira had my entire essay, word for word, just as it is posted on my WhoRU Yahoo group, as message number 112, and as it is included herein below, in its entirety. FALSE Myth # ONE -The Fed creates money out of thin airWhat Mr. WhoRU wrote that Mr. Vieira purports to comment on.[1] It is certainly true that the Fed does create money - but out of this air - not hardly. The only time the Fed creates money is when a qualified borrower applies for a loan, and then the Fed creates the principal to fund the loan. The principal is created based on the borrowers proven ability to repay the loan - this "proven ability" is called the borrowers credit rating. The basic fundamental purpose of money in the first place is to lubricate commerce - how better to lubricate commerce than to "kick start" it by monetizing the future income of the borrower? [2] The Fed is totally incapable of creating money, that is, to enable money to enter circulation, without a qualified borrower making an application for an advance on his future production.End of Mr. WhoRU's Myth One.Mr. Vieira's Commentary on what Mr. WhoRU wrote: FALSE Myth # ONE -The Fed creates money out of thin air[Mr. WhoRU's comment: The un-bracketed number "1" immediately below is the Myth number as identified by Mr. Vieira; the bracketed numbers [ ] were added by me to identify Mr. Vieira's paragraphs, to serve as reverence points.]Mr. Vieira wrote:1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse.[2] At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -:And, if the latter, will not the banks likelihood to make loans be inversely proportional to the borrowers credit rating", in which case the debts that "back" FRNs will be of low quality? [3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races? Mr. WhoRU' rebuttal to Mr. Vieira's out of context Strawman commentary:1. [1] No one I know argues that the Federal Reserve System---or, more accurately, the Federal Reserve regional banks and the thousands of commercial and savings "member banks and other "depositary institutions" in the System---create 'money" (i.e., Federal Reserve Note currency or "FRNs") "out of thin air". Everyone with any knowledge of the System is aware of 12 U.S.C. ºº 411 and 412 (primarily), which set out the requirements for emission of FRNs on the basis of various forms of "collateral". So, here Mr. WhoRU is beating a dead horse.[1] Mr. Vieira unequivocally and quite emphatically states that no one that he knows argues that the Federal Reserve creates money (FRNs) out of this air - if that be true then it is quite obvious that Mr. Vieira lives in a world populated by persons quite far removed from the reality of the real world where most of us live, as the contention that FRNs are created out of thin air is quite vehemently argued by almost everyone that thinks they know anything at all about the Federal Reserve. In fact, the contention that FRNs are created out of thin air is one of the major contentions put forward by Aaron Russo in his movie, "America: Freedom to Fascism".And in that regard, my purpose in mentioning how FRNs get into circulation was to clarify that the insinuation inherent in the term "created out of thin air" is misleading to those who are new to any information regarding how FRNs originate into circulation and, as the term, "created out of thin air" implies that FRNs have no backing whatsoever, to demonstrate that this implication is not entirely true, and in that regard, it is my purpose to explain that when the FRNs are created to fund loans made to private sector borrowers, that such FRNs are indeed backed by the promise of the borrower to create goods and -services equal to the quantity of FRNs created to fund the loan, plus to create an additional amount of goods and services equal to the interest charged on the loan.Claiming my position is self-contradictory, stating (in relevant part):[2] "At this point, though, Mr. WhoRU first introduces what appears throughout his paper as a self- contradiction: On the one hand, he says that " [t]he principal [of a new loan] is created [presumably, in new currency] based on the borrowers['] credit rating. On the other hand, later he argues that the banks profit, not from- the collection of interest (which would come from borrowers with good credit paying off the loans) but from foreclosures (which would arise from borrowers proving to be bad credit risks, after all) -: And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating ", in which case the debts that "back" FRNs will be of low quality? "In the first place, just to be technically correct, as the paper to which Mr. Vieira is responding is a written document, I did not "say" anything therein as the content of a writing is not properly referred to as "he says", but then I was assigned a "D" in English so what could I possibly know.In his strained and studied effort to discredit my impeccable and flawless analysis Mr. Vieira creates a Strawman by combining the evaluation of two unrelated aspects of lending. He does this in order to create a non-existent contradiction in my writing; (1) a borrower's deterioration of his initially good credit rating has absolutely nothing whatsoever to do with (2), establishing the means by which a lender takes a profit. Quite to the contrary actually, as the borrowers reduced credit rating is actually caused by the charging of interest on loans, and not by any moral deficiency inherent in the borrower, as is implied by Mr. Vieira. It is the charging of interest that sets the economy up for the profit taking foreclosures inherent in the inevitable "bust" cycles, however the charging of interest does not in any way cause the portion of loan payments designated as interest to be the actual source of the lenders' profits - which happens to be through the sale of collateral foreclosed upon and taken from insolvent borrowers.That interest is not and cannot be the actual source of lender's profits is due to what I call, "The Single Source Doctrine", that is, a single source of an item cannot receive back more of the item than the single source caused to enter into circulation; this is not opinion, this is axiomatic!!The means (1) by which a lender takes a profit and (2) the level or amount of the profit are two totally separate issues. (I have repeatedly proven that it is totally, mathematically and physically impossible for the lender to take a profit called interest!! - The Single Source Doctrine). As an example (taking as a given the economic conditions being as they would be toward the end of a boom cycle), as the "supply" of qualified borrowers would then have been naturally diminished (because such borrowers have already taken out loans), therefore new money from new loans would have stopped entering circulation. As loan payments are then continually made each month thereafter, the circulating supply of money will, of course, be diminished. However this reduction of the circulating supply of money will be at a greater rate than will be the corresponding reduction of all of the borrowers' total obligations to the lenders; this is because, with the added interest charge, the borrowers, individually and as a group, are paying back more than they borrowed, which also, happens to mean that the borrowers, both individually and as a group, agreed to pay back more money than ever existed (again, this is a manifestation of another axiom, "The Impossible Contract Doctrine", coupled with the Single Source Doctrine), making it totally mathematically and physically impossible for all of the borrowers, as a class, to pay off their total combined obligations, of both principal and interest, to the lenders. The inevitable and unavoidable result of this imbalanced shrinking of the circulating money supply, is that there will be profit taking foreclosures, and this inevitable result is an inherent aspect of a privately owned closed end central bank lending system. The resulting foreclosures are the only way the lenders can take a profit because it is totally impossible for the lenders to receive back from the borrowers more money than the lenders provided to the borrowers when the lenders funded the loans back on day one (The Single Source Doctrine). Where would the additional money to pay the interest come from?? No doubt, Mr. Vieira's imagination will graciously supply that money.If you made a contract with a pint jar, that is, if the pint jar was thirsty, and you agreed to fill the pint jar with water, to the top, on condition that the pint jar would, at a later fixed time, give you back all the water that you put in the pint jar, plus 10 additional ounces, and if the pint jar failed, you would then own the pint jar. Where would the pint jar get the ten additional ounces of water to give to you?? What if the agreement was for only one additional ounce - would the results be any different?? Be careful with your answer because I guarantee you, that it is a trick question!! Additionally, is it not clear that, in reality, you owned the pint jar from day one - all that was necessary for you to officially take ownership was for the agreed upon time to pass - that is always the case in a closed end money lending system and it would not make any difference if the money lent was pure gold coin!! This is why the Bible condemns usury - usury is, by reasonable analysis and deductive definition, a privately owned closed end money lending system - it is closed end because it is privately owned!!As I wrote six paragraphs above, "... the borrowers reduced credit rating is actually caused by the charging of interest, and not by any moral deficiency inherent in the borrower..." The borrowers inability to pay (failed credit rating), is not the actual cause of the foreclosures, the borrowers' failed credit rating (inability to pay) is the result of interest charged on loans in a privately owned closed end central bank lending system.In the latter portion of his second paragraph of his commentary above, Mr. Vieira also states the following:"And, if the latter, [the lenders taking profits through foreclosures rather than through interest] will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating", in which case the debts that "back" FRNs will be of low quality? "Taking a portion of Mr. Vieira's instant paragraph, in relevant part, Mr. Vieira wrote:"And, if the latter, will not the banks' likelihood to make loans be inversely proportional to the borrowers "credit rating"Mr. WhoRU's response:If my understanding of, "inversely proportional" is correct, what Mr. Vieira wrote means that as the borrowers' credit ratings deteriorate the lenders would be more inclined to grant them loans, because that would more likely result in more profit taking foreclosures and as the borrowers' credit ratings improved the lenders would be more inclined to deny them loans because borrowers with good credit ratings would not be as likely to wind up in profit enabling foreclosures - that does seem to be what Mr. Vieira clearly wrote, does it not?But be that as it may, addressing the latter, somewhat more coherent portion of this snip, in which Mr. Vieira wrote: "...in which case the debts that "back" FRNs will be of low quality".It is my understanding that what Mr. Vieira is (correctly) contending here is that as the value of the FRNs created to fund the loans is originally based upon the borrowers promise to thereafter, in the future, create goods and services equal to the value of the FRNs created to fund the loan, that because the borrower has thereafter defaulted and is not going to be paying what the borrower agreed to pay, that the promise of the borrower to create goods and services sufficient to imbue the money created to fund the loan with value, that therefore that money will have no value - that is a good point to examine- however, once again, Mr. Vieira vainly attempts to raise a self serving Strawman!!Remember, back when the loan was originally funded, the borrower promised to pay the lender both principal plus interest, and the borrower agreed to create goods and services to imbue all of that money (both principal and interest) with value, that is, let's presume, that the borrower applied for a loan of $1,000.00 with a total interest surcharge of 10%, for a total obligation to the lender of $1,100.00. So the borrower did indeed promise to create goods and services equal to $1,100.00, but remember, the lender only created $1,000.00 - the extra $100.00 the borrower agreed to imbue with value does not exist and never did exist and never ever will exist; so then the borrower went to work and did indeed create goods and services equal to $1,000.00, and the borrower made payments on the loan for as long as the borrower was physically able - that is the borrower made payments as long as any of the $1,000.00 originally created by the lender remained in circulation - so the borrower did indeed create goods and services to imbue the $1,000.00 the borrower actually received from the lender with the agreed upon value but as there were no more FRNs in circulation than the original $1,000.00, it would not matter whether or not the borrower worked 24/7/365, creating all kinds of goods and services, there would still be no way the borrower's substantial productivity could ever imbue any value into any FRNs because there were no more FRNs in circulation, so no matter that the borrower defaulted on the loan (as to the $100.00 interest), and no matter that the lender foreclosed and took the borrower's pledged assets, the borrower had, indeed, none the less fully performed to the maximum physically possible and every single one of the $1,000.00 FRNs that was created to fund the $1,000.00 loan was, indeed, imbued with value! Sorry Mr. Vieira, but I am not stupid.In his commentary, Mr. Vieira also castigates and ridicules my explanation as to how banks actually make a profit. Here, and later in his instant paper, Mr. Vieira erroneously asserts and insists that banks do indeed make an interest profit on loans. What Mr. Vieira asserts constitutes a mathematical and physical impossibility - It is clear that Mr. Vieira would benefit substantially from a course in physical and mathematical reality; Mr. Vieira simply is unable to comprehend, the axiomatic nature of the Single Source Doctrine. What Mr. Vieira fails, refuses and is intellectually unable to acknowledge, is that it is mathematically and physically impossible for a single source of any item to receive back more of the item than the single source created and issued, sold or loaned into circulation. The "Single Source Doctrine" is axiomatic! This axiomatic doctrine clearly and irrefutably establishes that it is totally and irrefutably impossible for the creator of FRNs (the lending banks), to receive back more FRNs than the creator of the FRNs created and loaned into circulation. The privately owned banks that create and loan FRNs into circulation do not provide a secondary source of FRNs for borrowers which borrowers could acquire to use to pay the interest obligation on their loans. This makes it totally impossible for the creating lender to make a profit called interest, because, in order for the originating lender to make an interest profit the originating lender would have to receive back more FRNs than the originating lender created to fund the loan; I am sorry Mr. Vieira, but whether you like it or not; whether you know it or not; or whether you admit it or not, interest as profit, happens to be and is irrefutably, a mathematical and physical impossibility to the creator of the FRNs!!Then Mr. Vieira ridicules my contention that banks cannot make an interest profit by raising an issue in regard to the druthers of banks, in that regard,Mr. Vieira wrote: "Well, which is it? Do the banks want the borrowers to pay off their loans, in which case the banks make no profit at all (because, according to Mr. WhoRU "interest" is not profit), or do the banks want the borrowers to default, so they can foreclose and thereby make profits? " Mr. WhoRU's response:The answer to Mr. Vieira's question is that the manner of how the banks will profit from their loans has nothing to do with the banks' druthers, as the means of the bank's profits, as afore stated herein above, is inherent in the fact that it is totally impossible for the bank to make a profit called interest; because in order for the banks to make an interest profit the banks would have to receive back from the borrowers more FRNs than the banks created to fund the loans. The facts are, that it is physically and mathematically impossible for all of the borrowers to pay their total combined obligation(s) (principal plus interest), dictates that the only way that it is possible for the banks to make a profit is through the foreclosure on pledged assets, and the subsequent sale thereof. In his eagerness to ridicule me personally rather than to properly examine the manner in which banks actually take their profits Mr. Vieira lumps all borrowers together. A proper examination will reveal that some borrowers will indeed pay off their loans; however in order to do so those borrowers will have to pay back more to the bank than they borrowed - so where do these borrowers get the extra FRNs necessary to pay back more than they borrowed - why they use some of the FRNs created as principal to fund other borrowers loans - this makes it mathematically and physically impossible for the latter borrowers to pay even the principal portion of their obligations. As to the borrowers that did pay off their loans - the books of the lender will indeed (falsely), indicate the lender did take a profit as to those borrowers, however, what Mr. Vieira misses, in his eagerness to ridicule me, is the fact that the account books of the lender will show a loss on the loans to the defaulting borrowers, so, at the bottom line, the most money that the lender could possibly physically received back from all of the borrowers will be no more than the lender created to fund all of the loans. That fact reveals that the only possible true source of profit to the lender will be from the sale of collateral pledged by the defaulting borrowers. It is certainly true that the lender will designate the interest collected as profit but calling it a profit cannot make it to be a profit, due to The Single Source Doctrine!! And all of this is true no matter if the "money" lent is unbacked paper or pure gold coins!! (Except, of course, when gold is used the lender will not create the gold, but everything else applies equally to both gold and paper money). In his commentary above Mr. Vieira states in the third paragraph thereof:[3] Also, how can the banks predict, let alone assure, that a foreclosure on a defaulted loan will actually result in a profit? For example, a defaulted mortgage leaves the lending bank in possession of a house, which the bank typically will have to sell to realize anything, But if the reason for the default is a contraction in the local economy, the prices of houses may have fallen to such an extent that whatever the bank realizes may not even repay the loan let alone provide a profit. How can the bank foretell whether this will happen or not? Does Mr. WhoRU really believe that bankers as a class are more reckless speculators than people who bet on horse races?Mr. WhoRU's response:What Mr. Vieira totally misses it that the reason there is a bust cycle is because the lending banksters have already received back a very substantial portion of the FRNs created as loan principal – that is why there is a bust cycle!!! The bust cycle is caused by the circulating imbalance caused by loan payments.The fact that at the time the foreclosures happen the economy is in a "bust" cycle does not mean the bank has to sell the property at that time - the bank can keep the property until the economy improves; moreover, everything the bank gets from the sale of the house will be a profit to the bank because the FRNs that the bank created did not exist prior to the loan being funded but were in fact created at the time the loan was funded; the point here is that the creation of the FRNs to fund the loan did not constitute any investment of any assets owned by the lending bank, so no matter that the lender did not receive back all that the lender created it is still totally impossible for the lender to suffer any loss and everything the lender receives above the amount lent will still be a profit to the lender. That is, if the lender did not receive back an amount equal to that created, the lender would not be able to claim a profit but no matter the amount of the shortfall, the lender would still not suffer any loss, because the lender never lent any of the lender's own assets in the first place - the loans were funded by writing numbers on a check or entering numbers in a computer data file, based on the promise of the borrower to create goods and services equal to the loan obligation.The general population has been conditioned to believe that the interest they pay on their loans constitutes a profit to the lender. This is true in regard to loans made by pawn brokers and credit unions and other lenders where the lenders were not the entity that created the FRNs such lenders loan to borrowers. The FRNs loaned out by such lenders as are referred to in this instant paragraph, had already originated into circulation through a loan previously originating in a Federal Reserve branch bank. Such lenders as these (pawn brokers and/or credit unions) do indeed make an interest profit on the FRNs they lend out - provided the borrowers pay back the principal plus the interest, however, if the economy is in a bust cycle even these loans are subject to default and, in the case of a pawn broker, he will be left with the pledged collateral, but this does not change the fact that as the pawn broker did not create the FRNs he used to fund his loans, therefore he can indeed receive back more FRNs than he loaned out. This also applies to credit unions. At least for as long as there are sufficient FRNs in circulation.However, one additional point, as mentioned by Mr. Vieira, it is possible that the foreclosing banks will not be able to sell the foreclosed properties for an amount to cover the unpaid principal - if a bank has too many of these "losses" the Federal Reserve will declare such bank to be insolvent and the Fed itself will itself then foreclose on such banks. Then the Fed will offer the loan portfolio of such insolvent banks for sale to other banks but if no other bank volunteers to buy such insolvent banks' loan portfolios, then the Fed will require the other banks in the neighborhood to take the portfolio of the insolvent banks and absorb the losses of such banks, in order to cover up their scam.22222222222222222222222222222222222222222222222FALSE Myth # TWO -The paper money the Fed creates has no backing.What Mr. WhoRU wrote that Mr. Vieira purports to comment on:[1] Although it is true that the Fed does purport to charge interest and it is also true that borrowers pay interest - it is a mathematical impossibility for this designation of interest to constitute a profit to the Fed. [2] The reason this is true is because the only way any Federal Reserve Notes can ever enter circulation is as the principal created by the Fed to fund borrowers' loans - that is - the maximum number of FRNs in circulation could never be more than the total created by the Fed to fund loans, so it therefore reasonably and logically follows, that the maximum number of FRNs that the Fed could ever receive back would be no more that the Fed created in the first place - as loan principal - so no matter what the borrowers or the Fed might designate the payments to be - principal or interest - as far as the profit to the Fed is concerned it would be a mathematical and/or a physical impossibility for the Fed to take a profit called interest.[3] So then, how does the Fed take a profit? Quite simple - through foreclosing on pledged assetsEnd of Mr. WhoRU's Myth Two.Mr. Vieira's Commentary on what Mr. WhoRU wrote:FALSE Myth # TWO -The paper money the Fed creates has no backing.Mr. Vieira wrote:[1] 2. If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax collectors, and everyone else concerned with finance. Surely, too, such a proof would stand him in good stead for a professorship at Harvard, or even the Nobel Prize in economics. [2] Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit".[3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"? Mr. WhoRU's rebuttal to Mr. Vieira's continuing out of context Strawman commentary:In his commentary above Mr. Vieira wrote in the first paragraph thereof: [1] "If Mr. WhoRU can prove that "interest" paid on a loan is not, in principle, a profit to the lender, then he should open a school in which to re-educate economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance."Mr. WhoRU's response:I Contend that I have more than proven that it is impossible for the creating lender of FRNs to take a profit called interest but please note here that Mr. Vieira challenges me to prove that interest paid on a loan is not, in principle, a profit..." "...in principle..."?? What can be Mr. Vieira's meaning and or intent here, by his use of the qualifying term, "...in principle..."?What does Mr. Vieira have in mind here?? "...in principle..."? I have to admit that I cannot come up with anything concrete as to what Mr. Vieira has in mind, other than obfuscation.I freely acknowledge that the term "interest" is used in many ways by economists, accountants, tax advisors, tax-collectors, and everyone else concerned with finance, to describe the surcharge paid by borrowers on loans. I have never ever in any way or at any time contended that borrowers do not pay interest on loans nor have I ever likewise contended that lenders do not purport to collect interest on the loans they make - what I have contended, and continue to contend - and as I have irrefutably proven time and time again - is that it is mathematically and physically impossible for that which is designated as interest to actually, in reality, to in any way whatsoever, constitute a profit to the creating lender!!To present a simple example: If the total FRNs created to fund many loans was ten millions, at 10% interest, the total obligation of all the borrowers together would be eleven millions. As the lender only created ten millions - where could the borrowers, taken as a group, obtain the additional one million to pay the interest? From nowhere, as there is no source other than as loan principal! It is as simple as that, Mr. Vieira!! As it would be impossible for the lender to receive back from the all of the borrowers more than the ten millions created to fund all of the loans, it would be mathematically and physically impossible for the lender to take a profit called interest. Yes, some of the individual borrowers could indeed pay off their individual loans, but in paying the interest on their loans they would have had to use some of the ten millions of FRNs created to fund all of the loans - this would reduce the circulating supply making it totally physically impossible for some of the remaining borrowers to even repay the principal created to fund their loans and these borrowers would go into foreclosure, and that is where the lender would derive its profit!And it is additionally true that the lender's account books would indicate that the lender had made a profit on those loans that had been paid in full, but if all of the borrowers repaid the entire ten millions created to fund all of the loans - then there would be no more FRNs in circulation and the account books of the lender would have to show a loss on the loans that were not paid in full, and overall, on all of the loans made in regard to the ten millions created and loaned, the account books of the lender could, at best, only indicate that the lender had broken even if the evaluation was limited only to the money received from the borrowers, but when the money received from the sale of the foreclosed assets was factored in - then the books of the lender would indicate a profit - taken from the foreclosures!!So, Mr. Vieira, where is your interest profit, "in principle"?So now, Mr. Vieira, I contend that I have once again more than proven that "interest" paid on a loan is not, "in principle", a profit to the lender, therefore, Mr. Vieira, I contend that at the very minimum you owe me a very public apology!! And you, Mr. Vieira, as you postulated in the closing portion of your first paragraph, should now open a school in which to re-educate not only yourself, but economists, accountants, tax-advisors and tax-collectors, and everyone else concerned with finance who maintain that lenders can take a profit from interest charged on loans. In his commentary above Mr. Vieira wrote in the second paragraph thereof:[2] "Mr. WhoRU makes his deduction based on the theory that, in a perfectly closed monetary and banking system, there will never be enough currency to pay both the principal and the interest on all outstanding loans, yet, later on (at the end of Myth No. 4), he admits that the present system is not perfectly closed, but involves a continuum of new loans being made that constantly inject new currency into the system, and foreclosures that enable old currency to remain in the system, thus enabling "many borrowers" to earn enough currency to repay their loan as to both principal and interest. If that is the case, it is certainly not "a mathematical and/or a physical impossibility" for "interest" to amount-as every accountant I have every run across treats it-as "profit""Mr. WhoRU's response:Mr. Vieira is just a little bit more than disingenuous here as he totally misrepresents what I define as a closed end money system. My explanation of a closed end money system has absolutely nothing whatsoever to do with how many loans are made, or to whom or when made. A closed end money system exists when the central banking system is privately owned so that the portion of the borrowers payments that are designated as interest is credited to the private accounts of the lenders who happen to be the private owners of the bank (Federal Reserve).On the other hand, an open ended money system would exist when the central banking system is owned by the people of the Federation so that the portion of the borrowers payments that are designated as interest is credited to the Federal Treasury and then re-cycled into circulation by the government as the government pays its obligations, thus replenishing the circulating supply of money, thus eliminating the down cycles and the foreclosures inherent therein.The fact, as Mr. Vieira points out, that accountants designate interest as profits can not in any way make interest to be an actual profit.The books of a lending bank will show the interest as a profit, and will show the defaulted loans as a loss, and will show the foreclosed on collateral as an asset, with the proceeds from the sale thereof as a profit, thus, at the bottom line, the bank will show an overall profit, but an honest evaluation will acknowledge that what the account books do is simply cover up the fact that if it were not for the sale of foreclosed upon collateral, the lender would not have, could not have, made a profit.In fact, a careful reading of Mr. Vieira's own words in his paragraph [2] above, will reveal that although the infusion of additional money into circulation as loan principal will temporarily enable existing borrowers to make additional loan payments, in due time such infusions will inevitably make the circulating imbalance even worse, because the more principal that is introduced into circulation, the more interest will be required.In his commentary above Mr. Vieira wrote in the third paragraph thereof:[3] By the way, if "interest" is not "profit", then what is it, "Return of capital"? And if it is "a mathematical and/or physical impossibility" for both principal and interest to be repaid in the system Mr. WhoRU posits, then does every bank loan that does not conclude in foreclosure result in nothing more than a return of "capital"?Mr. WhoRU's response:The proper question to be asked here, as Mr. Vieira well knows, is, "What is profit?" It doesn't make any difference what the product might be or how many billions a business may gross,, a profit only occurs when the business income exceeds its outgo. Almost everyone is familiar with the term, "loss leader", like when the super market advertises bananas at 33 cents a pound while the super-market paid 50 cents wholesale. If all the grocer sold was bananas the grocer would go out of business fairly quickly, but customers buy lots of other items that the grocer makes plenty on, so at the bottom line, overall, the grocer makes a profit.This principle works the same way with interest and there can be no doubt whatsoever that Mr. Vieira is fully aware of this basic fact. For Mr. Vieira to make the arguments he does clearly reveals that Mr. Vieira is not at all who he purports to be – Mr. Vieira's phony arguments indicate he is a shill for the Federal Reserve.But to directly answer Mr. Vieira's question; if a person deposits $100.00 in a bank savings account at 3% interest, then draws it all out a year later, the depositor will receive back $103.00 and the numbers will clearly depositor received an increase of $3.00 and if there was no inflation to account for, then the depositor would, indeed, show an interest profit of $3.00. However, the savings account depositor was not the original source of the $100.00 in circulation, the $100.00 originated into circulation as the principal of a loan originally funded by a local branch bank of the Federal Reserve.This presentation of myths has absolutely nothing to do with interest profits earned on any transaction other than those pertaining to the original creator of the paper money – in every single instance that will always be the Federal Reserve. As it will always be totally mathematically and physically impossible for the Fed to receive back more FRNs than it created as loan principal, it will therefore, always be totally impossible for the Fed to take a profit called interest, so yes, Mr. Vieira, when the "capital" was "invested" by the Fed, the portion of loan payments received that is designated as interest, is, in reality, to use Mr. Vieira's words, "Return of capital"!! (Although I would argue that this is a miss-application of the word "capital").The next question that need be answered is, "What is it that constitutes `money in circulation'?" If your aunt Martha has $10,000.00 hidden in her bedroom under her mattress that $10K is "in circulation", even if she had the $10K hid there for 50 years. The $100.00 deposited in the savings account in my example above would be considered to be "in circulation". All of the millions and millions of FRNs held by Russians in Russia are deemed to be "in circulation". Each and every FRN that has been issued by the Fed as loan principle constitutes part of what is deemed to be "in circulation" (the one and only way FRNs enter circulation is when the Fed loans them to a borrower as loan principal and for the purpose of this evaluation, FRNs advanced by the Fed to "purchase" US Treasury instruments are included as loans)3333333333333333333333333333333333333333333333FALSE Myth # THREE - The paper money the Fed creates has no backing.What Mr. WhoRU wrote that Mr. Vieira purports to comment on:[1] Although it is certainly true that there is no gold or silver backing that does not mean there is no backing for FRNs. Federal Reserve Notes are nothing but a piece of paper, with so much ink printed on both sides it is difficult to find room to write a phone number thereon - but never the less millions and millions of these paper notes are used every day by millions and millions of people to purchase every variety of commodity imaginable, with never a concern that the paper notes themselves are worthless. [2] The notes have value because the notes are backed by the promises of the borrowers, made at the time the loans were funded, to produce goods and services equal, not only to the principal borrowed, but also equal to the added interest charged on the loan principal. What better backing could be desired? Even gold would not be as good - what does gold do? Why is gold perceived to have value? Is it not because humans are willing to produce goods and services equal to the perceived value of the gold? So what is the actual difference between gold and paper in a healthy money system? (A healthy money system would be an open ended publicly owned money system).End of Mr. WhoRU's Myth Three.Mr. Vieira's critical commentary on Myth Three:FALSE Myth # THREE - The paper money the Fed creates has no backing.Mr. Vieira wrote [2] Anyone who cannot understand, from several centuries of financial history, why silver and gold are far move stable as "money" than any form of paper, no matter how the paper is 'backed", is rather myopic. I suggest Mr. WhoRU start by studying Ludwig von Mises, The Theory of Money and Credit. But the basic answer to Mr. WhoRU question,-"So what is the actual difference between gold and paper?" — is that gold is an actual commodity with the necessary physical properties to function well as "money"; whereas paper is almost invariably a debt (or even a series of debts) that can function as "money "only when its conversion into commodities without market-induced losses is assured (which has never been the case).Mr. WhoRU's rebuttal to Mr. Vieira's commentary:I have no disagreement with what Mr. Vieira states in his first paragraph above in regard to what paper notes are, however it is interesting to note that what Mr. Vieira writes in this regard is not his own intellectual product but rather the work of others, on the other hand everything I write is the product of my own intellect! I must add, however, that as this information is quite widely known and accepted, that Mr. Vieira is, to use his own words, here merely beating a dead horse.That being stated, I do have some significant disagreement with this snip from the latter portion of Mr. Vieira's first paragraph above:Mr. Vieira wrote:"A silver or gold coin, to the contrary, is the medium of payment itself. There is nothing contingent or problematic about it. A person who owns a silver or gold coin owns actual wealth. A person who owns a debt-based currency such as FRNs owns a possible claim to wealth—but a claim that might possibly prove ineffective. "Mr. WhoRU's response:Although what Mr. Vieira wrote above is so widely accepted that all it really does is provide another vehicle for Mr. Vieira to further indulge himself in favorite pastime, his dead horse beating fetish. But be that as it may, it always stymies me when seemingly intelligent people fail to think! Why is it that paper money is always characterized as "debt based currency", like that fact somehow imbues it with immorality - much as an "illegitimate" child is tainted for life as a "bastard" because his mother was unwed. Why? Why, indeed, when an unbiased (Heaven forbid, Mr. Vieira), examination of the evils arising from and, if historical repercussions are of significance, seemingly inherent in whatever has been used as money over the centuries, paper or gold; an unbiased examination will reveal that evil will manifest itself no matter whether the medium used as money was paper or gold because in any honest examination it will always be found that the evil was in the humans involved rather than whether or not the medium was paper or gold; and, most often, the humans who caused the monetary debauchery were those operating the government – not those subject to it!!As gold and silver seem to be Mr. Vieira's mantra for morality, let's make a quick evaluation of gold as money, to determine if the use of gold as money does not reveal the same inherent problems as does the paper money Mr. Vieira castigates so intently. As I have previously demonstrated in this writing, a single source of any item cannot receive back more than the single source initially provides, I contend that this same impossibility exists with the lending of gold as it does with the issuance any and every other item, that is, that when gold is lent at interest by private lenders, the private lenders of gold will ultimately become the owners of everything and everyone - no matter that the money used by everyone was pure, 24 carat gold. Where can the borrowers of gold get the additional gold to pay the interest as the additional interest must also be paid in gold? This clearly demonstrates, that, all things considered, gold actually serves no better as money than does paper.The next problem with gold as money, also proven by history, which Mr. Vieira is so insistent on referring to, is that every time the United States government has gone back to a gold money system the private banksters have worked behind the scenes to manipulate themselves back into control of some new version of their privately owned central bank closed end paper money system. However, while the banksters are working to re-instill their paper money system the same banksters are at the very same time functioning as the lenders of money – GOLD MONEY – at interest, so while they are scheming to re-instill their privately owned closed end paper money system they are, by collecting gold interest on their gold loans to both the government and private sector borrowers, causing the imbalance in the circulating gold money supply that will, inevitably, result in boom and bust foreclosure cycles that will set the economy up for a return to the banksters privately owned closed end paper money central bank.The banksters are able to succeed in their scheme to re-instill their privately owned closed end paper money system because when gold and silver coins are used as money, with interest charged on loans of gold, gold and silver coins perform not one whit differently than does paper money, The Single Source Doctrine will enforce itself no matter what is used as money. When are we going to learn to stop setting ourselves up for such consistent predictable repeated monetary debauchery??And neither are silver coins or gold coins true wealth; true wealth is that which silver and gold coins can be exchanged for, food, clothing, housing, etc., including gold jewelry, but it is the artistry in the jewelry that actually constitutes it's true qualification to be characterized as wealth. If gold actually constitutes true wealth then why do people trade gold for other things?And lastly, as to the problems with a gold money system, putting aside the emotional aspects of gold - is gold really all that valuable - yes gold is obviously a commodity - but that is all that it is - nothing more than a more or less rare metal, gold is not in any way nearly as useful as any other metal - and not even close to being as useful as paper - gold cannot be eaten, worn as warm clothing, used to transport anyone or anything, cannot be used to warm or house anyone - so - when putting aside gold's emotional attraction - where is its actual value?? Gold, used as money, is actually no different than paper - like paper money the actual value in gold is in what the holder can get in exchange for it.My purpose here, as I stated in my opening statement back on page one hereof, is to conduct an honest evaluation of where we are, economically, and what we can do to correct the mess we are in. A very important part of that mess is in how we fund our government. Why is it that all of the opposition I get to my solution, where I present a means of totally eliminating all taxation, no one - that is no one – including Mr. Vieira, is in any way interested in addressing the issue of government funding through armed robbery, euphemistically called "taxation"??Every time I hear someone advocate the elimination of the Federal Reserve and a return to a Constitutional gold and silver money system I reply, "Great - I am 100% in favor of that - please tell me your plan for accomplishing this marvelous idea!!" I am still waiting for a coherent response - from anyone!! There is no response because it is totally impossible to devise a way to do this in 2007!!Let's face it, in the year 2007 there is no realistic way the United States could possibly return to a gold based money system and even if we could we would not be any better off - we would actually be worse off and we would still have taxation (armed robbery) as the means by which we fund our government!In the last portion of his second paragraph above, Mr. Vieira states:"... Whereas paper is almost invariably a debt (or even a series of debts) that can function as "money" only when its conversion into commodities without market-induced losses is assured (which has never been the case)."Mr. WhoRU's response:Not withstanding the fact that paper money enters circulation as evidence of debt (not necessarily a bad thing in and of itself, as the funding of many industries and the creation of millions of jobs has been because of the ability of the borrowers of paper money to monazite their future income), but addressing the latter portion of Mr. Vieira's statement, it is certainly true that the purchasing power of paper money can be debased - but by "market induced losses"?What is it Mr. Vieira that constitutes "market induced losses"?As I understand the word "induced" it means to cause something, so putting the word "market " in front must mean that something that is taking place in the market is in some way doing the inducing of loses of the value of paper money – gee – I agree – but this still calls for an examination as to "how"!! As I understand Mr. Vieira's concerns with paper money – Mr. Vieira is concerned that in the event that the paper money would become recognized as worthless (due to rampant increases in commodity prices), that, as the paper is not redeemable for gold or silver coins, holders of paper money would suffer substantial losses – I fully agree – however that is akin to my agreeing that it is possible for Mr. Vieira to understand that it is impossible for the Fed to make a profit called interest. The likelihood of that happening is, unfortunately, fairly slim, but so are the odds of the paper money system failing when the true cause is understood and negated.The cause of market induced losses is always the same – rampant government inflation of the circulating money supply enabled by Congressional control of and access to the central bank. When the government prints and spends money into circulation market induced losses are inevitable as the money that the government spends into circulation is not guaranteed by anything other than the government's purported ability to assess a tax upon the people, which the government cannot actually do as the government cannot extract more from the people than the people actually have.The reason paper money becomes debauched is because the value of the paper money borrowed into circulation by private sector borrowers is diluted (debauched) by the free wheel spending of the government – it is not caused by the paper money – it is caused by the corruption of the humans operating the government, but no matter how the system is set up – there will always be a way corrupt humans in government can steal the value of the production of the common people. It is always either by stealing the money through armed robbery ("taxation") or by stealing the money through inflating the money supply, so no matter what we do we will have these problems to contend with.What I propose will minimize our exposure to these classic means of corruption. So, Mr. Vieira, aren't you being just a little bit disingenuous - blaming the private sector market for the erosion of the buying power of our FRNs cause by the government?? Wouldn't it be just a bit more forthright were you to place the blame squarely where it belongs, on unbridled government spending of trillions of dollars created by the Federal Reserve on the whim of Congress, rather than by sugar coating it by referring to it as "market induced losses, suggesting that it is the common private sector people who are to blame"?444444444444444444444444444444444444444444444444FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessionsWhat Mr. WhoRU wrote that Mr. Vieira purports to comment on:[1] Although it is certainly true that the Fed manipulates the circulating supply of money, the Fed does not do so in order to cause recessions - quite to the contrary - as recessions are an inherent aspect of a closed end privately owned money system the Fed does not have to manipulate anything in order to cause recessions - to the contrary - although it is certainly true that the Fed manipulates the money supply, by raising and lowering the interest rate - in order to discourage or encourage borrowing - but this manipulation is not to cause recessions but rather, to lessen the negative impact of the inevitable recessions inherent in their closed end money system, in order to insure that there will be another boom cycle - what the Fed does is not unlike a farmer saving back seed corn to plant the next seasons crops.[2] Although recessions may very well be influenced and manipulated by interest rate adjustments the recessions are not in any way CAUSED BY the manipulation of interest rates. The recessions will occur no matter what the Fed might do with interest rates - the recessions are an inherent aspect of and are inevitable in a closed end money system where interest is purportedly charged on principal created to fund loans. [3] "Interest is purportedly charged"? That is correct - "purportedly charged"! What is interest? [4] Interest must be defined from two different points of view, (1) from the point of view of the borrower and, (2) from the point of view of the Federal Reserve lender. This is generally commonly understood as follows: (1) For the borrower, interest is an additional amount added to the principal borrowed, that the borrower must pay, as a fee, for using the Federal Reserve lender's money; (2) For the Federal Reserve lender, interest is the fee added to the principal lent to the borrower, which the borrower must pay, for using the Federal Reserve lender's money; so as the two are described as being the same - what then is the difference? [5] So what is wrong with this picture?? The general public will not understand the error in this explanation above because the explanation seems to cover everything relative to explaining what interest is and, at the same time the general public will presume that the interest paid to the Federal Reserve lender by the borrower will, in and of itself, constitute a profit to the Federal Reserve lender - WRONG!! [7] It is totally, absolutely, completely, 100% physically and mathematically impossible for the interest paid to the Federal Reserve lender by the borrower to in any way constitute a profit to the Federal Reserve lender!! It would not matter one iota, if the interest rate were 100% - the interest could still not be a profit to the Federal Reserve lender!! And, ultimately, it would make no difference if the money loaned were paper Federal Reserve Notes loaned by the privately owned Federal Reserve or were 100% pure gold coins, loaned into circulation by the private owners of gold!! Interest on loans is not the ultimate true actual source of the lender's profit! So why would the Fed loan money if the Fed was not going to take a profit (please take note of my use of the word "take" as opposed to "make" or "earn").[9 Before I explain how the Fed actually takes its profits I am first going to explain why and how it is totally impossible for interest on loans to constitute a profit to the Fed. The reason is because of what I call the "Single Source Doctrine"; The single source of any item cannot receive back any more of the item than the single source creates and causes to enter circulation.[10] For example: Everyone knows that the single source of all Chevrolet automobiles is from General Motors - neither Ford, Chrysler, BMW, Volvo or any other automobile manufacturer makes Chevrolets - the single source of all Chevrolets is General Motors. If General Motors were to do a general recall of all Chevrolets - how many Chevrolets could GM possibly receive back? There is no way to know the actual total possible number but it is clear that GM, being the single source of all Chevrolets, could not possibly receive back even one more Chevrolet than was manufactured in all of GM's Chevrolet plants - that is a fact and is totally irrefutable![11] Apply the exact same logic to any item that issues from a single source and the results will be the same - no single source of any item can receive back more of the item than the single source issued out in the first place. [12] The Single Source Doctrine applies to the single source of any and every item that issues from a single source and the Federal Reserve is no exception!! Every single GE refrigerator comes from GE; every single Kenmore washer comes from Sears; every single RayOVac battery comes from RayOVac; Every single Federal Reserve Note in circulation entered circulation from the Federal Reserve itself or through one of the local branches of the Federal Reserve (every local bank in the United States is a branch of the Federal Reserve - no exception).[13] The next very important point here in understanding the impossibility of the Fed taking a profit called interest is to understand that every single Federal Reserve Note in circulation entered into circulation as the principal created by the Fed to fund a loan applied for by some borrower.[14] Now, how many Federal Reserve Notes do you suppose the Fed would create to fund a loan of $1,000.00?? As the borrower only applied for a loan of $1.000.00. Is it not most logical to assume that the Fed would create only $1,000.00?? Why would the Fed create more than $1,000.00? The borrower of $1,000.00 would expect to receive only $1,000.00, right? If the Fed gave the borrower more than $1,000.00 would the borrower be surprised?? Has this ever happened?? Can you imagine it ever happening?? [15] Now, when the borrower borrowed the $1,000.00, the borrower agreed to pay back the $1,000.00 plus interest - say of 10% - for a total obligation to pay $1,100.00 to the Fed - but the Fed only created $1,000.00 so how much could the borrower possibly pay to the Fed?? According to the Single Source Doctrine the maximum the borrower could repay would be the total issued out by the Fed - or $1,000.00 - MAX!! So how could the Fed ever take a profit on this loan?? - NEVER!![16] Oh, but that is not the way it actually works - well that is exactly the way that it works but it is just not that obvious because there is not just one loan of $1,000.00 - there are literally millions and millions of loans spread out all over the United States so what actually happens is as follows:[17] Because the Federal Reserve did not become the single source of all money in the United States at any single point in history, but was imposed gradually over many years, the facts as to how the Fed actually operates and takes its profits have been obfuscated. [18] With millions of loans in place many borrowers are able to make payments including both principal and interest and many borrowers do actually pay off their entire loan obligation including both principal and interest but in order for those borrowers to pay the interest portion of their loans they must pay back more than they borrowed; they must pay back more than was created by the Fed to fund their individual loans, so where do these borrowers get the additional Federal Reserve Notes they must have in order to pay back more than was created to fund their loans?[19] As the only source of Federal Reserve Notes in circulation is from those created as loan principal to fund loans - there is only one source borrowers can draw upon in order to pay their total obligation - the borrowers must obtain possession of Federal Reserve Notes created as principal to fund other borrowers loans. This causes the total circulating supply of Federal Reserve Notes to shrink faster than the total obligation of all borrowers; this is known as "imbalance" of the circulating supply.[20] Suppose there were 1,000 borrowers who wanted to finance their purchase of a new home and the prices of all the homes were $100,000.00 each; that would mean the Fed would create $100,000,000.00 (one hundred million). If the interest were 10% the borrowers total obligation would be $110,000,000.00 (one hundred ten million), Most people would understand this to constitute a ten million dollar profit to the Federal Reserve but where does the extra ten million come from when the only source of FRNs in circulation is from the Fed, as principal to fund loans? In this example, one hundred millions - total.[21] Most people would never ever think about this as an impossibility because all of the 1,000 borrowers will be able to make payments - for a while - actually, even for many years, because when the loans were all funded the Fed would have created one hundred million and the entire one hundred million would have entered circulation. If the mortgages were all for ten years at simple interest (instead of the common much higher compound interest), the monthly payments for each borrower would be $916.67, so each month the original one hundred million dollar circulating supply of money would shrink by 1,000 borrowers times $916.67 each, for a total monthly amount of $916,670.00, for a total yearly amount of $11,000,040.00 (eleven million 40 dollars) shrinkage of the circulating money supply. After nine years the circulating supply of money would only be $999,640.00, but the borrowers, as a group, would still have a total unpaid obligation to the Fed of $10,999,640.00.[22] So all of the 1,000 borrowers could make one more monthly payment each which would reduce the circulating supply of dollars to $82,970.00, so the following month only 90 of the 1000 original borrowers could make their monthly payments so 910 borrowers would be foreclosed on and the following month the other 90 would also be foreclosed on and the Fed would become the owner of all of the 1,000 homes and that is how the Fed TAKES its profit![23] But that is NOT how it actually works in the real world because all borrowers do not take out their loans on the same day and many borrowers make more money each month than others so some borrowers are able to pay off their loans more quickly so these more fortunate borrowers are not foreclosed on - many borrowers do actually paying off their entire loan obligation but when they do they reduce the circulating supply of money which results in some borrowers being foreclosed upon much sooner than nine years (most home loans are 30 year contracts and the total interest amount obligated (due to compounding of interest), would be about $300,000.00 on a $100,000.00 home. This could all be resolved with public ownership -of the Federal Reserve that would make the Fed into an open-ended money system so that the boom-bust cycles and foreclosures caused by the closed end system would not occur.[24] Also, when borrowers are foreclosed on those borrowers are no longer making payments so the money originally brought into circulation to fund these loans is still out there for other borrowers to use to make the interest portion of their loan payments.[25] The Fed does adjust the interest rates to manipulate borrowing. The Fed will raise interest rate to discourage borrowing, especially when the number of qualified borrowers has been diminished because most of them took out loans - the purpose of this is to delay these remaining qualified borrowers from going into debt at a time when the economy is entering or is in the beginning of a down cycle, entering a recession, so that later, when there is a sufficient number of new qualified borrowers to pull the economy back up out of a recession, these qualified but unfunded borrowers who were discouraged from borrowing at the beginning of the previous down cycle by increased interest rates will still be there to help create the boom cycle. When this occurs, the Fed will lower the interest rate to encourage borrowing.[26] During the bottom of the bust cycle is when the Fed TAKES its profits - by foreclosing on pledged assets - not in any way through the collection of interest! The purported collection of interest certainly does play a critically important part in creating the down cycle so the foreclosures will take place but there is no possible way that the interest itself can constitute any part of the Fed's actual profits whatsoever.End of Mr. WhoRU's Myth Four.Mr. Vieira's critical commentary on Myth Four:FALSE Myth # FOUR - The Fed manipulates the circulating supply of money to cause recessionsMr. Vieira wrote:4. [1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly). [2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, If they profited exclusively from foreclosures (as Mr. WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s. I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that "[t]he Fed manipulates the circulating money supply to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! [3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system" and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions".After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know.[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all. [5] The amazing statement he makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure,) Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?In his commentary above, Mr. Vieira states in the first paragraph thereof, in relevant part:"[1] Given Mr. WhoRU's theory that the banks profit only from foreclosures, it would hardly be surprising if they followed a strategy of causing recessions---because with recessions come business and personal failures that result in foreclosures. Thus, recessions are profit making opportunities for the bankers; and, on a business basis, should be precisely what the bankers want to bring about whenever they desire to amass profits (which, one might presume, is constantly)."Mr. WhoRU's response:In the first place, that which has been proven and which can be and has been readily demonstrated is no longer a "theory!! However, in regard to Mr. Vieira's totally ridiculous assessment immediately above, as I have already proven herein above that the Federal Reserve can only take its profits through foreclosures, so then why does the Fed not do as Mr. Riviera suggests? I could merely respond by stating that the reason is because the owners of the Fed and the Fed's Board of Governors are not as stupid as Mr. Vieira, because any person with as much knowledge of the Fed as Mr. Riviera has must already know the answer to his own stupid question, however I will respond in some depth; there are several reasons:Reason 1Reason 2.The Federal Reserve works the same way - too frequent and too deep recessions would so discourage the governed that the governed would either quit or take a closer look at how those in charge of the economy are screwing them - as is now sweeping the country by means of Aaron Russo's movie and my essay in support thereof, in which I set forth the solution to the problems so ably exposed by Mr. Russo's movie. The Federal Reserve has agents infiltrated among the patriot population to neutralize the exposure of the Fed's scam, such agents as Mr. Vieira!! Reason 3.This strategy introduces billions and billions into international circulation, which then work their way back to the U.S. to replenish the circulating supply in "the Homeland".Reason 4.In his commentary above, Mr. Vieira states in the second paragraph thereof, in relevant part:"[2] Mr. WhoRU is correct that one strategy of the banks is to promote economic "booms" by increasing the supply of paper currency through expanded lending. But, contrary to his theory, this is because banks profit from the "interest" earned in "boom" conditions, "Mr. WhoRU's response:If it were not for his continual trumpeting of his ridiculous claims that loan interest constitutes actual bank profits, Mr. Vieira would have no argument whatsoever!! Let it be clear - I have never stated that borrowers do not pay interest nor that banks do not collect interest - my statements (which I have proven many times), are that the interest does not and can not in any way constitute a profit to the lending bank. It is true that banks do indeed purport to take profits because of interest charged on loans but that designation of receipts, as interest does not in any way cause the interest to itself constitute a profit to the banks. The interest is similar to a loss leader at the super-market.All of the FRNs in circulation arrived into circulation as loan principal; that is, every single FRN in circulation was borrowed into circulation by some borrower as loan principal. If all of the borrowed FRNs created as loan principal were paid back to the originating lending banks before any interest FRNs were paid – then there would be a total of ZERO loan principal FRNs left in circulation and not even one FRN would have been collected as interest and then where, Mr. Vieira, would the borrowers be able to get any FRNs to pay the unpaid interest on their borrowed FRNs?? There would be no such source and the banksters would not be able to take a profit called interest!!. Why do you suppose the banksters insist on indicating on borrowers loan payment receipts that the interest is paid first?? As the total obligation of the borrower includes both principal and interest, how can it actually make any profit creating difference which is designated first??Why do you suppose the banksters want to collect the interest on loans first?? The reason is so that when the circulating money runs low, the lender's account books will indicate that it is loan principal that remains unpaid – so that the borrowers will perceive that they have not paid back what they borrowed – it serves to make the borrowers look bad - it is known as "smoke and mirrors".For example, on a loan of $100.00 at 10% interest the borrower would owe $110.00 and the lender would likewise have an account receivable of $110.00. Until the lender has received back at least the $100.00 lent, it will be and is totally impossible for the lender to have made a profit. As the word "interest" is not in any way a special magical word, the lenders calling the first $10.00 received "interest" will not magically make that $10.00 into profit, to postulate that it does is sheer lunacy, Mr. Vieira!! It will be impossible for the lender to properly and honestly claim to have made a profit until the lender has received back more than the lender lent to the borrower and it is absolutely mathematically and physically impossible for the single source of an item to receive back more than the single source issued out!! Show me where this is not so, Mr. Vieira!! Please.Mr. Vieira's further comments in the second paragraph, in relevant part:"…If they [the banksters] profited exclusively from foreclosures (as Mr., WhoRU posits), they would be doing everything possible to prevent "booms", and to promote "busts', or at least to stage major "busts" after every "boom", in some sort of rational sequential fashion that would assure them a steady flow of profits. In that case, life would be a series of "boom" eras, such as the late 1920s, followed by horrendous depressions, such as the 1930s."Mr. WhoRU's response:When borrowers use FRNs originating into circulation as loan principal to pay the interest portion of their monthly payments those interest payments reduce the circulating supply of principal money to a level below the total obligation owed by all of the borrowers, this using of principal money to pay interest lays the foundation for and is the cause of the subsequent bust cycle and the inevitable profit taking through foreclosures on pledged assets!!As the reduction of the circulating supply of FRNs is an inherent aspect of a closed end money system, just as wetness is an inherent aspect of water, the Fed need not take any overt action to cause recessions. When the supply of qualified borrowers is "used up" (loaned out to their max), the economy will, of its own accord, without any overt manipulation of the Fed, slide into a recession, and profit taking foreclosures will "naturally" occur. The Fed does quite often adjust the interest rates to either encourage or discourage borrowing but it is not the amount of the interest that causes the bust cycles, the bust cycles are inevitable when interest of any percentage is charged on loans made in a closed end lending system.Mr. Vieira's further comments in the second paragraph, in relevant part:"I have no doubt that the bankers of the 1920s were responsible for both the "boom" of that decade and the "bust" of the next. And it may have been because they wanted first to intoxicate the sheep and then sheer them. But if Mr. WhoRU accepts that explanation of the Roaring Twenties and the Great Depression, then he cannot deny (as he does) that"[t]he Fed manipulates the circulating supply of money to cause recessions". It may not do it often on the scale of the 1920s and 1930s. But, to anyone who went through the 1930s (and to all Americans as a result of the political consequences of that era even today), Once was quite enough, thank you! " Mr. WhoRU's response:What Mr. Vieira strives diligently to avoid acknowledging is that there must be a boom cycle before there can be a bust cycle; just as a farmer must plant and nurture his crops prior to harvesting, so too, must the banksters prime the economy with loans to qualified borrowers, in order to enable actual wealth creating boom cycles to occur as a result of the banksters infusion of FRNs into circulation, by extending loans to qualified borrowers, so that there will be something physically substantial for the banksters to foreclose upon during their profit taking bust cycles.Additionally, as any honest student of the Great Depression is aware, the root cause thereof was in the farmers of the United States over extending themselves with farm equipment loans during WWI, during which the farmers of Europe were totally shut down, which was, of course, a totally manipulated war, as all are.In his commentary above, Mr. Vieira states in the third paragraph thereof, in relevant part"[3] On the other hand, if (as Mr.. WhoRU himself contends) "recessions are an inherent aspect of a closed end privately owned money system", and the bankers know this (for certainly they are as astute as Mr. WhoRU), then simply by operating such a system, with such "an inherent aspect", they are "manipulating the circulating supply of money * * * in order to cause recessions". After all, a person intends the natural and unavoidable consequences of those of his actions of which he knows or should know." Mr. WhoRU's response: In his commentary above, Mr. Vieira states in the fourth paragraph thereof, in relevant part"[4] No point would be served by going seriatim through all the points Mr. WhoRU makes about there being supposedly not enough currency to pay off all loans, principal and interest, because Mr. WhoRU finally does admit that, due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, enough currency does exist, after all."Mr. WhoRU's response:Never once have I ever conceded that there was sufficient money in circulation for all interest and principal to be paid, there never has been and there never will be as such is a mathematical and physical impossibility, as even in the deepest depths of the worse bust, there will still be new loans made with an interest surcharge attached, where there will be insufficient FRNs in circulation to equal the total obligation of all the outstanding loans.Moreover, even if I were to state such, that would not make it true because it is a mathematical and physical impossibility governed by the natural laws of mathematics and physics over which I have no control, so my acknowledgment would not make such to be true any more than would my assertion that Mr. Vieira is an honest man make that to be true!However, rest assured, if Mr. Vieira could find anything further in my Fourth Myth on the Federal Reserve to castigate me for, Mr. Vieira would not miss the opportunity!!In his above comment, Mr. Vieira states and contends: "...due to the continuum of borrowing that actually takes place in a dynamic economy, together with foreclosures, [Mr. WhoRU admits that] enough currency does exist, after all." " Total poppycock!! Mr. Vieira's contention here is like claiming that as long as you keep a bucket with a hole in the bottom full by continuing to pour in more water that there is no hole or that the hole is of no effect, or that if you glue the needle of your car's fuel gage to the full position you will never run out of fuel, no matter how far you travel in the car.Mr. Vieira states in the fifth paragraph of his commentary, in relevant part"[5] The amazing statement he [Mr. WhoRU] makes, though, is that [t]his (problem] could be resolved with public ownership-of the Federal Reserve which would make the Fed into an open ended money system", How this resolution would occur, he does not explain---though, given the surety with which he states his various position, he ought to be able to do so. Will the government make more loans than the banks? Presumably, the banks now lend to every credit-worthy borrower. Will the government lend simply to anyone, the borrower's credit-worthiness be damned? Will the government not collect "interest"? Will the government never foreclose on anyone? (I presume that would be the case, if the government lent to just anyone, as then the defaulting borrowers could simply "roll over" their old loans into new ones, and never face foreclosure). Also, will the government lend extensively to itself, just as the banks do now? If so, will it have to "repay" these "loans", or will they simply amount to direct emissions of Treasury currency?"Mr. WhoRU's response:If Mr. Vieira was not so intent on proving me wrong just for the sake of proving me wrong he would know that what he has set forth here is totally untrue as I have explained time and time again, in considerable detail, how the solution I offer would be implemented and operated, if it was not included in the rather short article that Mr. Vieira has taken such great pains to thoroughly and wrongly trash (albeit unsuccessfully), and if Mr. Vieira had made an honest effort to inquire, he would have found that I have indeed provided all of the details, many times. This article of mine that Mr. Vieira has been attempting to trash was posted to my WhoRU Yahoo group, to my 626 members thereof, whom have previously had the opportunity to be informed of all that Mr. Vieira postulates about - this instant writing on the Myths of the Federal reserve was headed (preceded) with a request that my group members present it to Mt Aaron Russo, as a solution to the problems Mr. Russo exposes in his movie, "America: Freedom to Fascism".In response to Mr. Vieira's silly postulations, under my plan the Federal Government would not have any direct control or exercise any authority whatsoever over the Board of Governors of the Fed. The Board of Governors would be selected and appointed by the Governors of the several state, or by the legislatures thereof. The Federal government will not be making any loans to itself or to anyone - all private sector loans will be applied for and approved in the same manner as they are currently. The Federal government would be prohibited from borrowing from the central bank. The Federal government would be funded from interest charged on loans made to private sector borrowers, and in this regard, all taxation would be terminated (phased out over a period of months up to a year or two).Under ownership by the people, with all interest on loans credited to the governments' accounts, the money system would be open ended because all interest payment would be spent back into circulation to replenish the circulating supply, so that the bust cycles inherent in the current closed end system would cease as would the foreclosures caused thereunder.End of PART ONE of THREE PARTSIn his commentary above Mr. Vieira states in the first paragraph thereof:Mr. WhoRU's response:In his commentary above Mr. Vieira states in the second paragraph thereof:Mr. WhoRU's response:
Check my blog, if you're a loser
What's the relevance of all this ? Who is "Vieira"? Sounds like crackpot nonsense.
Freedom of markets is positively correlated with the degree of evolution in any society...