Counterparties… counterparties… counterparties.

Who collateralizes Federal Reserve Notes?

Natural-law copyright by Anthony Hargis

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Examine one of those scrips you carry in your pocket.  Some people call them Federal Reserve Notes.  Well, they are: “FEDERAL RESERVE NOTE” is actually printed across its top.  It is, in other words, nothing more than a particular kind of promissory note.  A promissory note is a kind of contract; and, on each side of the contract there is a party (or parties).  If you are one of those parties, the person on the other side is a counterparty.

So, who is the counterparty relative to the Federal Reserve note?

Relative to man’s survival, nothing is more vital to its success than a dependable unit of value for trade and for wealth preservation.  And no one thinks to examine the most basic factor of all.

When I was in the Navy, I was the lead electronic technician (ET) for a task force of 8 ships; when ET’s on other ships couldn’t fix gear, they’d call me.  Most of the problems were too simple for them to see.  For example, who would think to check the AC plug?  It’s the simplest thing that could go wrong, and yet, nothing happens without secure connections to power.  It would usually take me about 15 minutes to find this problem (more than once); and I never told them what I did; didn’t want to embarrass them.

We have the same problem today: people fail to consider the most basic of factors needed to secure capital: namely, our currency unit.

The most basic factor relative to all economic activity is a currency unit.  Without a stable or functioning currency unit, barter is the alternative – or will be the alternative when a baseless currency unit ultimately fails.  When that happens, fully 95% of all economic activity will cease.  It would lead to… well, let your imagination run wild.

Is the dollar a baseless currency unit?

We derive the answer by examining how dollars (and American bank reserves) come into economic existence.  They do so IN EXCHANGE for US Treasuries (directly or indirectly).  When banks need extra currency or reserves, they deliver US Treasury securities to the FR and receive IN EXCHANGE new currency or reserves equal to the face amount of such securities.

And what gives US Treasuries value?  Wishful thinking… nothing more.  They have value only because people worldwide believe the US Treasury can collect confiscatory taxes from following generations of American tax payers.  Government debt, thus, is a form of financial cannibalism.  The problem here is that, such taxes can neither be practically nor constitutionally collected.  For, you see, a man, or a generation of men, will not voluntarily cannibalize himself.  Hence, if such taxes are to be collected, it must happen BEFORE power passes from the hands of the cannibalizing generation.  And the time for this is long past; for, this type of cannibalism began some 150 years ago (with the National Banking Act of 1863; the Federal Reserve Act of 1913 is merely a reform of the NBA).

Unfortunately, owing to the mandate of Congress (thru the FR Act and debt authorizations), bureaucrats of the FR and Treasury are pursuing policies that can only end with the total destruction of the dollar and, owing to its status of reserve currency for the world, a few dozen banking systems that use the dollar as a reserve currency (Yen, yuan, Euro, English pound, Canadian and Australian dollars, among others) will also be destroyed.  (Bad News…; and Anat., part two)

Chances of survival are very slim for those 95% who fail to prepare for those storms now looming on the horizon.

What are preparations most essential for survival?

There are at least two: and each requires a comprehensive network of sub-factors: one) establishment of an alternative and functioning currency and two) the collection of power (thru First-Amendment assemblies) needed to protect your person and company from those who failed to prepare.  (What Price Gold…; and Failure of Power)

Physical gold, of course, is the only historically-proven stable currency.

The problem here is that, if you deal with fairly large “cash equivalents” or dollar-denominated investments (bank notes, bank reserves, debt instruments, Mortgage Backed Securities (MBS) serving as “cash equivalents” (see What Price Gold…), you’ve just about run out of time to convert to physical gold.

Twenty years ago, while I was operating my gold-based banking service, I learned that an order for $500,000 to $1 million (that is, $0.0005 to $0.001 trillion) worth of physical gold would seize up the physical gold market 4-6 weeks.

I need to stress the enormous disparity between “cash equivalents” and assets supposedly collateralizing (backing) them; as gold used to be backing (or collateral) for issued currency and bank reserves.

By “cash equivalents”, I mean, 1) all paper currency; 2) all bank reserves; 3) Mortgage Backed Securities (MBS) owned by central banks (now and future); 4) all $ instruments owned by foreign institutions; 5) all US Treasuries; 6) plus a large variety of flimsy paper (student loans, car-lot loans, SBA loans, credit-card loans et cetera (see Anat., part one)) owned by the Federal Reserve.  By my estimate, there are something like $10 to $15 trillion such “cash equivalents” around the world that owners of such believe are instantly convertible into actual cash.  With an order of $0.001 trillion capable of seizing up the physical gold market for 4-6 weeks, there’s not much hope for most or those $10 to $15 trillion.

(As you realize that the FR now collateralizes dollars and American bank reserves with such fuzzy paper as SBA and student loans, you will begin to wonder, ‘When did idiots and bandits seize control of the Federal Reserve?’)

All these “cash equivalents” are collateralized by a scrap of paper listed as “gold certificate” on the FR’s asset statement, which, in turn, is collateralized by a scrap of paper listed as “gold or gold swaps” on the Treasury’s asset statement.  This last should tell you that there may not be any physical gold at Fort Knox.

Now, what is the price of gold necessary to make the following formula an equality?

“gold or gold swaps” = all those “cash equivalents” listed above.

Remember, we are dealing with a situation where 90% of the world’s banking systems (by volume) are built (at least partly) on top of the dollar.

What is the price… $7,000… $70,000… infinity?

What will the Piper demand when he finally presents his invoice to the town council?

What will people do when they can no longer cannibalize their children (see Bad News…)… on a world-wide scale?

Please, let your lawyers and accountants examine my work; and then act accordingly.

Comments, Notice

Please take notice that all Comments will be moderated. Normally, I check in with this website once every 4-5 days. Currently, however, I’m dealing with two or three major issues that may cause my response time to take up to two weeks. In the meantime, please be patient. Thanks for visiting, ALH


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