Ponzi scheme – a fraudulent investment operation that returns assets to the defrauded from assets they previously loaned to the scheme’s operators or assets paid by subsequent newer “investors” rather than from any actual profit earned

While it is (comparatively) well-known that the US dollar, while a currency, is a solely an instrument of credit issued by the Federal Reserve. All holders of dollars – including myself and most readers of this article – are in debt to the Federal Reserve. Now, this debt is really phantom debt, but the key really is printed on each dollar, more properly known as a Federal Reserve Note: “This note is legal tender for all debts, public and private.” (1)

The total federal debt issued was $11.933 trillion dollars at the end of fiscal year 2009 in September per the Treasury Department, an increase of $1.9 trillion from 2008. (page 37/123) This debt will continue to increase every year until the monetary system collapses due (just in part) to the compounding “miracle” of interest rates. Federal debt is bought at auction by primary dealers (Goldman Sachs, JP Morgan Chase, etc.) and “resold” to the FED, which then inflates the money supply by creating new dollars, or “injecting liquidity.” The FED can also “inject liquidity” by purchasing assets, such as toxic mortgage debt or even company stock like AIG or GM. Individual community banks, whether Citibank, Bank of America, or small local banks and credit unions, can also create new dollars with the fractional reserve system, which is can be viewed graphically here. However, a proof I wrote demonstrates that fractional reserve banking broke down years ago, and can be more aptly named as the “no-reserve lending” system.
(more…)