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By Truth Seeker (from 26/01/2014 @ 06:02:44, in en - Science and Society, read 4904 times)


If the Fed holds the security until maturity, as in the example, the government must redeem it at maturity. The government has no money (it spent the fiat money created upon issuance of the security) so it gives the Fed another security (it rolls it over). The Fed can then sell the new security and has the redeemed value as profit. In actual practice, the Fed can sell the initial security and the two steps have merged into one. The waiting period to receive the profit has been eliminated.

If a security is sold at auction, as approximately ninety percent of them are, the Fed receives the value of the security from the Primary Dealer and the ultimate purchaser is eventually reimbursed by the Treasury at maturity. The U.S. Treasury is authorized by 31 USC #3111 to issue an “obligation” to buy or redeem maturing debt. Whether auctioned or not, the Fed receives the value of the security. The value of all T-securities held by the Fed until redemption is a clear profit for the Fed, as is the value of all securities sold to and held by Primary Dealers, funds, nations, states, or financial institutes that create inflation.

Low interest rates will reduce gain for security investors but will provide cheap money for commercial banks to loan. Much of the interest from T-securities held by the Fed must be returned to the government as a result of 1970’s legislation, so the Fed has little motivation to raise rates to make more money--they receive the value of the security.

The total value of auctions in 2010 was $8.4 trillion. Approximately $6 trillion of the securities sold matured in less than one year. ; .

The handling of auction funds is the responsibility of the FRBNY. Ref. GAO FINANCIAL REPORT TO SECRETARY OF TREASURY, Nov 2010, page 17 of net; p14 of hardcopy. Confirmation of the practice is in ACCOUNTING FOR TREASURY SECURITIES AT THE FEDERAL RESERVE BANK OF NEW YORK , GAO /AFMD-84-10, May 2, 1984, page 9 of 30, Additional confirmation is found in the Fed’s ANNUAL REPORT: BUDGET REVIEW 2010, “The Reserve Banks auction, issue, maintain and redeem securities…(and handle) paper U.S. savings bonds and book-entry marketable Treasury securities.” p 5. This writer concludes the sales are credited to an account of the Fed and not to an account of the Treasury. There is no inflation if it is otherwise.

The $8.4 trillion in income does not reveal itself in the ANNUAL REPORT TO CONGRESS; Ref. Tables 10 and 11, pages 454 to 462 REPORT for 2009. Id. (Auctions are not Open Market transactions. Securities that are not sold are assigned to SOMC.) This $8.4 trillion is concealed from Congress and the public.

“Aha!” exclaims a disciple of the Fed. “The above analyze proves the integrity of the Fed. The $8.4 trillion is obviously being used to pay the redeemed securities and the sale and redemptions are off-setting.” And thus would the Fed beguile the naďve. Indeed, the Treasury’s receiving the value from auctions for that purpose is widely proclaimed in media publications. Treasury financial statements claim “borrowing from the public” finances government operations. However, direct transfer of money from the public cannot, in any way, expand the monetary system or result in the creation of fiat money (i.e., inflation) any more than can the payment of taxes by a private entity. The label is deliberately misleading.

The $8.4 trillion is concluded to pay the $7 trillion redeemed securities with $1.4 trillion being available from the securities for deficit spending by Congress. The T-securities possessed as an asset by the Fed are sold at auction and the $1.4 trillion is retained by the Fed while Congress spends the book entry credits. Where the $1.4 value from the auctions is entered into the books of the Fed, and to where the $1.4 trillion goes, is not available information. This is how the fiat money of inflation is created as detailed earlier.

The $7 trillion for the rollover of redeemed securities does not produce inflation or add to the national debt. The auctioning of deficit funding securities increases the amount of credit in existence and adds to inflation. It also increases the national debt. By merging the two different groups of auction funds, receipts and payments for redeemed securities (by PDs) can be concealed with receipts of debt securities and payments to owners (PDs). The national debt has increased $7 trillion during the past 6 years and is considered hidden profit by the Fed.

It is assumed the IRS knows nothing of this income or profit. Whether Title 12 section 531 or some other provision excludes such income for the corporate Fed from taxation is for Congress to determine. However, taxation of the Fed is completely different from taxation of (unknown) shareholders of the BOG..

The deficit spending of $1.4 trillion required Congressional approval. The $7 trillion roll-over required no Congressional action but occurred pursuant to 31 USC #3111. With the national debt at approximately $15 trillion, the average maturity of Treasury securities is about one year.

The gain from the debt securities is laundered with auction receipts of rollover securities and the profit is distributed to the owners/PDs mingled with payments for redeemed securities. Rollover securities, sold to the public with an average maturity of approximately one year, do not add any additional inflation nor do they increase the national debt. If debt securities were handled in the same manner, there would be no national debt nor any inflation.

Every dollar of inflation is profit for the Fed yet it does not show up on any income statement or balance sheet of the Fed. Profit of the Fed has been identified by the courts and legislation as belonging to the government. Title 12 section 247 imposes upon the BOG a responsibility to make a “full report“ to congress. The law also provides “Whoever embezzles, steals, purloins…money or thing of value of the U.S…” is guilty of a crime. Ref. 18 USC 641. Anyone who knowingly “covers up by any trick, scheme, or device a material fact” of a fraud against the United States can be imprisoned for not more than five years. Ref. 18 USC 1001. In addition, if two or more individuals “conspire…to defraud the U.S. (and) effect the object of the conspiracy” they are each punishable by incarceration. Ref. 18 USC 371. Anyone knowing of such an offense who “relieves, comforts or assists the offender…to prevent his apprehension, trial or punishment, is an accessory after the fact.” Ref. 18 USC section 3, see also 656, 657, 1005, 1341, 1344. Each of the approximate 500 auctions annually could be a separate indictment count.

Does “accessory” include any congress-critter who, after being informed of this scheme, does not expose and prosecute the perfidy of the Fed?


Similar historic banking operations declared they loaned value to the king and therefore they should receive interest from the loan. The pretense is a sham. Congress and the Fed have agreed they are going to rip-off the public by devaluating the currency. Each party acquires purchasing power from the scheme. Congress gives a promise to pay (a security or collateral) which is given to the Fed and the Fed gives a promise to honor the government’s checks with fiat book-entry money (printing press money, i.e., FRN‘s, a legal tender--a debt of the Fed). A “legal tender” is a commodity that is required by law to be accepted for a contract stipulating another commodity (i.e., the original contract is for dollars; you must accept FRN denominated in dollars). It is an acknowledgement of debt that can never be paid because there is no lawful money available. Title 12 section 411 clearly stipulates “(Federal Reserve notes) shall be redeemed in lawful money on demand at the Treasury Department of the United States… or at any Federal Reserve bank.” Good luck with that. You will only receive more debt of an under-capitalized federal corporation created by Wall Street bankers during a week-long retreat on Jekyll Island and blessed by a rump session of Congress.

To get the scheme started and the con game financed by third parties, it must have the appearance that interest is their source of profit and a gain must be made from the brokerage difference. A prime concern for the Fed under these conditions would be the difference in the value credited to the Treasury account and the value received from the auction. If the value of securities purchased by the public is transmitted directly to the Treasury, there cannot be any inflation, but then there is no gain to the Fed from book-entry money. The percentage taken by the Fed from the auctions for profit can even be variable but is hidden without an audit.

If the Fed projected a guise of a brokerage firm selling government bonds to the public, it would be a simple arrangement with minimal investment or risk. The currency in circulation in 1913 was non-interest bearing U.S. Notes. After the operation was set up and the New York Federal Bank was handling the accounting, it would be a simple shift of accounting procedures to have the securities accepted by the bank as owner instead of as a broker. The difference allows the bank to create fiat money (inflation or Federal Reserve Notes) as a profit for the bank. Whether this falls within the parameters of embezzlement or other crimes depends upon many conditions.

The courts have repeatedly concluded the profits of the Fed belong to the United States. Ref. Scott v FRB of Kansas City, 405 F3d 532, 535; In Re Hoag Ranches, 846 F2d 1227. The fact that the income is not reported is suggestive of subterfuge.

But the courts are merely upholding legislated provisions. The disposition of the Fed’s profit was established by the Federal Reserve legislation of 1913: “[A]ll the net earnings (of Federal reserve banks] shall be paid to the United States as a franchise tax…(and) be applied to the reduction of the outstanding bonded indebtedness of the United States…” Section 7, paragraphs 1,2. Any reduction of the “bonded indebtedness” (nation debt) is unknown; any net profit received from the Fed may has been pooled with general revenue. The residual of a Fed bank’s assets after dissolution or liquidation “shall be paid to and become the property of the United States.” id. Ref. 12 USC section 289, 290.

The Fed claims exemption from unrestricted audit by the GAO. However, the Accounting and Auditing Act of 1950 clearly established authority for the GAO to verify “all essential facts regarding the bonded and other indebtedness of the Government…” There is no exception for, or even mention of, the Federal Reserve. The Federal Banking Agency Audit Act of 1978 amended the above Act and exempted the Fed from audits of FOMC transactions, of certain foreign transactions, and of policy matters. The above Acts are now codified as Title 31 section 714. The Fed additionally claims that since it does not receive funds from the government or handle government money it is not subject to audit by the GAO. (The non-receiving of government funds is but one facet inconsistent with the parameters of a government agency.)

None of the above claims appear to exempt the auction accounts from audit by the GAO.

First off, the Fed DOES handle government funds. The auction transactions, and the IRS collection accounts, are both government funds. The accounts are clearly subject to review by the GAO to assure efficient and correct handling of government finances and to prevent theft or unacceptable accounting. Secondly, the exclusions of section 714 do not prohibit review of the auction accounts. It appears Congress can instruct the GAO to make such an audit at any time, even without the necessity of additional legislation.

The Fed's claim of exemption from GAO audit is inane. The Fed is mandated by 12 USC 247 to "make a full report to Congress." And the Fed believes the government is prevented from verifying compliance with that requirement? In addition, the Federal Reserve Act of 1913 clearly identified all profit of the Fed belongs to the government. And the government is supposed to be prevented from accounting for the profit from the auctions that is confiscated by the (unknown) owners of the Board of Governors? Such a claim defies logic.

It is a source of amazement that Bloomberg news took Freedom of Information Act requests to the Court of Appeals to discover the Fed had loaned $7.7 trillion to the TBTF and international banks (Are these the owners of the Fed? Where did the funds come from?) after the Fed had successfully hidden the information from the government. Perhaps a FOIA request should be made for records of the Treasury auctions. The government deemed specific legislation was necessary to obtain similar information. Ref. Report GAO-11-696.

To put $8.4 trillion in perspective, the 2010 operation of the U.S. government involved $3.4 trillion and that includes the $1.3 trillion deficit. The entire amount of taxes collected by the U.S. government was only $2.1 trillion.

If asked “Who owns the T-securities that are sold at the auctions--the Fed or the U.S. government?” a Fed representative will respond “The securities are a liability of the government.” An astute observer will note the inquiry was avoided; it was not answered.

A newspaper article a couple of years ago informed us the annual increase in interest to be 15 percent while the budget only grew 7 percent. That reflects the exponential growth of interest. More recently the deficit has been increasing much faster to rescue financial institutes from default. Professor Bob Blain, Southern Illinois University, Edwardsville has graphed the exponential growth in debt from 1915 to be irregular only during the 1930’s.

In 1790 during congressional consideration of Alexander Hamilton’s proposal to pay the national debt with usury based obligation placed upon the citizens, congressman James Jackson, after lengthy reflection on the devastation similar plans had imposed on European countries and cities, included the following observation to Congress:

“Let us take warning by the errors of Europe, and guard against the introduction of a system followed by calamities so universal…The funding of the debt will occasion enormous taxes for the payment of the interest…(such a system) must hereafter settle upon our posterity a burthen (sic) which they can neither bear nor relieve themselves from.” Ref. ANNALS OF CONGRESS, Vol. 1, 1790, pp. 1141-2.

In actual practice within the United States, a collection of taxes for part of the government spending is well known. Payment of part of the government expenses by taxation does not alter the government’s usury program; for analytical analysis they can stand alone. The ninety year pattern of increasingly larger deficit spending is the escalation as the climax of chaos beyond description approaches.

The end result of economic exploitation by usury is becoming transparent in Europe. As various nations become indebted to “financiers,” the demand to satisfy the debt includes the selling of national heirlooms and infrastructure to the creditors. Airports, roads, government buildings, and all resources are fair game. It will not be the Chinese or Japanese that acquire property. Market securities will be purchased at reduced prices by the Fed, and then the Fed will acquire assets at fire-sale prices. It will be the unknown shareholders of the BOG that acquire title. Ownership of land and resources by a financial oligarchy is but one example of feudalism—the government becomes a mere facade.

The outstanding funded debt that is even now overhanging the citizens of the United States, currently $48,000 per individual, is more than enough to impose slavery if the people submit. The unfunded debt is in the neighborhood of $160,000 per individual. If the people can be conditioned to believe they must pay the debt, the income tax (if it exists) can be used to confiscate 100 percent of their income and the masses must subsist on government largess. The courts continue to uphold income tax indictments that rely upon statutes applicable to all taxes as identifying a “known legal duty” for income taxes (i.e., 7201 -7215) so the make-be-leave statute that imposes an income tax will not be submitted to contestation with the burden of proof upon the government. The pursuit of a livelihood, long secured as a Constitutional Right by the clause of Liberty, cannot be a proper object for a revenue tax. The Republic of sovereign citizens has been degraded to a totalitarian nation of obsequious vassals. The hallmark of every Great Society has been the confidence that each individual has been able to retain and enjoy the fruits of his labor, and that is being destroyed in the United States.

Benjamin Ginsberg documents in FATAL EMBRACE numerous times when societies have revolted against oppression involving “financiers.” One interesting revelation by Ben involved Barons revolting after financiers induced King John to invade Normandy. The Barons would have had to pay for the campaign and it lead to the Magna Carta. Ben laments the financiers subsequently had their estates confiscated and were exiled. War-mongering has been a consistent money-maker for financiers. What the people of the U.S. will tolerate remains to be seen.

For decades, the economic exploitation of other nations, including orchestrated coups of elected non-compliant governments as formulated by Kermit Roosevelt, without any regard for laws whether domestic or international, has been the modus operand of the CIA, IMF, and World Bank. Ref. CONFESSIONS OF AN ECONOMIC HIT MAN by John Perkins; KILLING HOPE by William Blum; Google CIA; ROGUE AGENCY RUN AMUCK. It should be apparent the economic objective has been for the greed of financiers on Wall Street even when financed by, implemented with, and overseen by government bureaucracy including the U.S. military. The U.S. government gains nothing from Empire building. The U.S. and European financiers have consorted to plunder the world. Ref. TRAGEDY AND HOPE by Carroll Quigley. Now, as humongous deficits are demanded to give fiat funds to the Fed and rescue financial institutes from their fraudulent scams even after TARP, Maiden Lane, QE1 and QE2 have depleted its coffers and international bankruptcy still looms, and after military facilities/actions throughout the world to protect their international economic exploitation have bankrupt the Nation, the chickens are coming home to roost.


[FN: Much has been made over the Federal Reserve banks being privately owned as distinguished from a government agency. The confusion is fueled by names and definitions.

The twelve FR Banks (incorporated, and franchisees ?) have been identified by courts as privately owned by the commercial banks (shareholders) each with a nine member board of directors---for the issues before the courts. FDIC is another FR corporation statutorily identified as a government agency. The FR Board of Governors is separately incorporated with shareholders alleged to be foreign and NY bankers. The BOG has complete administrative and supervisory control of the FR Banks---they can remove a director without cause or they can rescind a policy. The BOG has assumed the guise of a government agency but does not comport with the parameters of an agency as established by the courts nor with the legislated definition of an agency.

The FR system juggle adjudication and FOIA actions to obtain the best position of a private versus agency status. This conclusion is confirmed, but may not be continued, after Fox News Network v BOG of FR, 601 F3d 158 (2010, 2nd Cir).



Dr. Bob Blain, Emeritus Professor of Sociology at Southern Illinois University, Edwardsville, in a published paper “Revisiting U.S. Public and Private Debt” released in 2008 observes the exponential increase in national debt from 1915 and the destruction inflicted upon historic societies by usury based monetary systems.

FATAL EMBRACE by Benjamin Ginsberg documents historic occasions in which a usury debt based economic system (but not so identified) resulted in the “financiers” facing public fury including deportation, confiscation of estates, and physical abuse of the individuals involved.

GREENSPAN’S BUBBLES; THE AGE OF IGNORANCE AT THE FEDERAL RESERVE by Bill Fleckenstein reveals how the Fed suppressed Federal Fund interest rates to create a false prosperity that devastated the economy for 20 years and destroyed the home construction industry.

THIS TIME IS DIFFERENT; EIGHT CENTURIES OF FINANCIAL FOLLY by Carmen Reinhart & Ken Rogoff reviews sovereign defaults as seen by an economist speaking to the International Monetary Fund/World Bank. It is the nature of governments to steal from the people.

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