Back to Quack Off
U.S. Federal Reserve Note: America’s Pulp Fiction
Once you change the contractual concept of paper money from a redeemable,
exchangeable promissory note to an irredeemable exchange-only note, you will
have established a precedent for the destruction of all future economic
America’s “bundled” subprime mortgage slime and every nation’s Sovereign
Wealth Funds are direct results of America’s new Pulp Fiction: the Federal
DC – What’s the difference between today’s Federal Reserve Note (our U.S.
Dollar), “bundled” subprime SIVs (Structured Investment Vehicles), and
Sovereign Wealth Funds?
rest upon the ridiculous concept that pieces of paper, in and of themselves,
obtain value by virtue of the fact that they’re printed up by a government.
The pieces of paper may say the words U.S.
Federal Reserve Note
Bear Stearns Lucky Ducky SIV Fund or China Sovereign Wealth Fund
but they all have one thing in common: they are non-collateralized
contracts created out of thin air whose legal contract is one of
exchange-only, not redemption AND exchange.
diff and how did this happen?
today’s economists and central bankers have done over the last 75 years is
to slowly change the contractual nature of paper money from a contract of a
redeemable and exchangeable promissory note to a contract of an irredeemable
exchange-only note. While our parents and grandparents were apparently
asleep at the political wheel, the central bankers, the Federal Reserve,
changed the contractual definition of our U.S. paper money and stole our
Historically, paper money has always been a legal receipt for redemption of
a hard commodity, such as gold or silver. It was a mercantile receipt, a
legal contract for redemption of a stored good at a warehouse. A monetary
warehouse is simply a bank. As such,
mercantile receipts were exchangeable in the market and served as paper
money ONLY BECAUSE they were redeemable.
Today, paper money is now an irredeemable piece of paper used for forced
official exchange only. The U.S. Dollar, or Federal Reserve Note, is not a
contract for redemption and exchange; it is an exchange-only contract.
There is a
big difference between a redeemable, exchangeable contract and an
exchange-only contract. The first is true paper money; the second is fiat
government currency. To not understand this important difference is to not
understand basic economics.
words, the important difference between a legal monetary contract of
redemption AND exchange is the fact of redemption.
Otherwise, the contract, the legal piece of
paper, without redemption, has no reason to exchange. In short,
legal contracts that purport to represent fiduciary media, or legal pieces
of paper money without the ability for redemption AND exchange, cannot
really serve as a medium of economic exchange since, without redemption,
they have no value per se. They are only pieces of paper. Circulating tons
and tons of irredeemable paper serves no economic purpose whatsoever, except
to temporarily trick the people. (Note: This is not an assertion in
economic theory that gold and silver are tradable because they have inherent
value. Gold and silver do not contain inherent value per se. Gold and
silver simply serve as a temporary store of value as subjectively determined
by the consumer who anticipates a future
service rendered by using these metals as money or redeemable paper
contracts for gold or silver paper money. While you can trick the public
into anticipating a future service rendered by using non-redeemable paper
money, they will revolt as soon as they discover the true nature of this scam.
Remove the parameter of redemption and paper
money is not true paper money; it is fiat or “forced” government paper.)
subtle difference between contractual redemption AND exchange, as opposed to
exchange-only, in the definition of paper money, is extremely important at
its fundamental philosophical level. The former – redemption AND exchange
-- is an expression of individual rights and is the basis for a true free
market economy with a limited government whose only role is to enforce an
objective judicial system and provide national defense, while the latter –
exchange-only -- is the expression of state collectivism or a dictatorial
government that continually intervenes into everybody’s freedoms, leading to
many disastrous and unintended consequences in the economy.
the economic ramifications of redefining the U.S. Dollar, the Federal
Reserve Note, from a contractual obligation of redemption AND
exchangeability to a contract of exchange-only?
dumping the redemption part of the legal definition of paper money, the
Federal Reserve central bankers get to keep the gold and silver for
themselves. Second, by proclaiming paper money as an exchange-only
contract, the Federal Reserve central bankers get to print up as much paper
money as they, or Congress, or the President, or the CIA Shadow Government
want without having to tax or be accountable to the public. Third, dumping
the concept of redemption for paper money will lead to
the future creation of similar paper monetary
instruments in all segments of the economy which will cause all sorts
of unintended consequences when prices rise or fall, defaults occur, and
nobody can trace any type of collateral or redemption value for the new
investment or monetary instruments. Welcome to the current “bundled”
subprime mortgage slime. We’re already there on all three counts.
of point number one: After removing the redemption parameter of the U.S.
Dollar, America’s gold bullion -- cleverly confiscated by President Franklin
D. Roosevelt in 1933 under penalty of a criminal offense -- is allegedly
sitting in the airtight, watertight basement vaults of the Federal Reserve
in New York. The Federal Reserve, which by law has never been audited, has
purchased and sold much of America’s gold bullion to themselves and others
at artificially low prices.
of point number two: Congress runs huge deficits and future entitlements
totaling hundreds of trillions of dollars, and the CIA expends billions of
undisclosed, non-audited dollars for nefarious purposes all over the world
not authorized by the U.S. Congress or the people of America. Congress
annually inserts over 12,000 Pork Barrel Earmarks into all appropriations
bills for local pet projects as bribes to keep themselves in power. They
get away with this because America’s paper money is an exchange-only
contract and has no redemption parameter. Without a redemption parameter,
the U.S. Dollar can be inflated to the Moon and back. If Dollars were
redeemable in gold, Americans would have redeemed their paper money for gold
a long time ago and refused to pay taxes for Congress’ Giant Welfare State,
thus asserting fiscal control over our out-of-control government spending.
But since the U.S. Dollar is not a redeemable instrument, Americans have
lost total control of their own money supply and, therefore, lost control of
their government. The people cannot threaten government spending by
withholding tax money because the Feds can now simply print up as much as
As to the
third point, if our basic pieces of economic paper in the U.S., the Dollar
or Federal Reserve Note, are not redeemable or backed by anything and exist
for exchange-only, then why not extend this same concept to the mortgage,
stock, and investment markets? Guess what? That is exactly what has
happened in our current subprime mortgage slime. The same definition for
the Federal Reserve Note, exchange-only, has now morphed over to the housing
and stock markets where investment funds require no collateral, or grossly
over-valued pretended collateral, or are “bundled” – i.e., intermingled --
with other non-redeemable pieces of paper and sold as hedge funds. The
result is that banks and Wall Street financial institutions – all members of
the Federal Reserve -- have turned into Pulp Fiction gambling houses with
everybody betting on made up pieces of non-collateralized paper backing
other non-collateralized paper all stacked up like dominoes ready to implode
into each other. That is, in fact, what you are witnessing in America and
the world economies today.
America’s investment bankers have taken their conceptual cue from our
irredeemable Federal Reserve Note, a redefined concept of paper money as
exchange-only, and created “bundled” (1) subprime mortgages of irredeemable,
exchange-only pieces of paper intermingled with (2) highly leveraged,
borrowed amounts of irredeemable exchange-only Federal Reserve Notes, called
them Structured Investment Vehicles (SIVs) and sold them to unsuspecting
investors who know zippo about the true nature of money and credit. Not
only did the investment bankers adopt the new definition of investment
vehicles as irredeemable exchange-only contracts – just like the U.S. Dollar
-- they further compounded the problem by erroneously mathematically adding
investment “apples” and “oranges,” that is, the presumed values of different
types of irredeemable, exchange-only contracts (subprime mortgages plus
borrowed dollars plus other debt obligations) to create their “bundled” SIVs.
one change in the definition of paper money – removing redemption -- leads
to future compounded errors in economics.
investment wizards on Wall Street did not include the concept of
“redemption” in their new definition of commercial paper – why should they,
everybody learned at university that U.S. Dollars are for exchange-only, not
redemption -- they mistakenly added up the values of all their “apples” and
“oranges” (dissimilar monetary contracts) and then sliced and diced the
total into separate investment vehicles that did not track individual
mortgages or borrowed globs of Federal Reserve Notes – borrowed on highly
leveraged margin from the Fed Reserve central bankers, I might add – and
thus when the housing market crashed, nobody could trace which subprime
mortgage, or fraction of a mortgage, or which borrowed fraction of FRNs,
should be marked down as having defaulted.
led to legal contract problems. Since the concept of unit redemption was
non-existent – just like in our U.S. Dollar – and Wall Street bankers mixed
“apples” with “oranges,” neither the investment bankers selling their SIVs,
or the investors themselves, could evaluate the defaulting market value of,
or assign ownership to, the pieces of paper they were holding as
investments. Therefore, bankruptcy courts could not declare who held whose
defaulting mortgage paper and assign responsibility because
that legal concept requires the concepts of
traceability and redemption, which – just like the U.S. Dollar -- are
As stated above, once you change the contractual concept of paper money
from a redeemable, exchangeable promissory note to an irredeemable
exchange-only note, you will have established a precedent for the
destruction of all future economic contracts. That is exactly what we have
done in the U.S. and global economies. And this one conceptual change in
the contractual definition of paper money is the root cause of our current
global recession. Not understanding this important point, the Federal
Reserve’s injection of trillions and trillions of more exchange-only paper
money into the U.S. economy is not only NOT the solution, it will compound
the current recession since exchange-only paper is not true “capital.” True
capital money contains the parameters of redemption AND exchange because
redemption means redemption for the stored value of an existing commodity
such as gold.
words about the difference between today’s irredeemable paper money and true
U.S. Dollar was both redeemable (in gold) AND exchangeable, then spending
the gold money by free market entrepreneurs was good for the economy since
they were expending real capital. It is a serious mistake, however, for
government economists or the central bankers at the Federal Reserve to
assume that simply injecting and spending trillions of dollars of
irredeemable, exchange-only paper money is equivalent to private
entrepreneurs expending redeemable, exchangeable paper money backed by gold
or other capital. Injecting tons of exchange-only paper money into the
economy is simply hyper-inflation of the paper money supply, which will
produce nothing but hyper-inflation of the prices of all goods and services.
producing a recession with interventionist monetary regulations, the typical
government solution of freezing wages and prices while injecting tons of
irredeemable paper will push America’s recession into a prolonged depression
requiring martial law, rationing, and the loss of most individual freedoms.
In fact, as a reductio ad absurdum, it can be shown that the loss of
individuals freely choosing their own private money and paper money is the
basis for the loss of all other freedoms. The freedom of voluntary trade is
one of our basic inherent freedoms. Lose that and you have lost everything
else. Freedom of trade has unfortunately been usurped by the redefinition
of our national Pulp Fiction, the U.S. Dollar, from a redemption AND
exchange currency to an exchange-only currency. And it was done on purpose
by those who want to control the economy to gain advantages for themselves.
In the long run, however, they will have destroyed the global economy for
everybody. In effect, they are committing economic murder of the population
and economic suicide for themselves.
the worst that can happen?
that can happen is to expand the concept of exchange-only fake money to an
even bigger fiasco. Such as…
the creation of Sovereign Wealth Funds, government-held investment money
created out of thin air that each interventionist nation can “invest” into
their own and other nation’s private companies? This is the ultimate in
state collectivism, Big Brother printing up as much irredeemable paper money
as it wants to compete with business in the global market. This is simply
an extension of the same concept of printing up irredeemable paper money for
use by the people but now the governments which are supposed to objectively
adjudicate free trade in the market get to compete in the game itself.
That’s like football referees jumping into the Super Bowl in the third
quarter to play positions of quarter back or tight end while still
officiating the game. The result would be a joke and would encourage
everybody to just dump all the rules and cheat. Sound familiar in today’s
the result of Sovereign Wealth Funds – nations competing in what’s left of
the free market -- will produce economic disaster and is tantamount to an
international monetary Print Off Contest (since nations can print up their
own irredeemable money at will). The concept of Sovereign Wealth Funds,
irredeemable paper money invested by nations into the market, is the
ultimate absurdity in our Global Pulp Fiction Contest. Eventually, every
nation will renege on other nation’s Sovereign Wealth Funds invested within
its borders for real or imagined national security reasons and the current
global recession will worsen, turning into trade protectionist wars that may
ultimately morph into military wars.
the world’s “bundled” subprime mortgage slime and every nation’s Sovereign
Wealth Funds are direct results of America’s new Pulp Fiction: the
irredeemable Federal Reserve Note.
The solution is to go back to the legal
definition of paper money as a redeemable, exchangeable contract, not an
exchange-only contract. Redemption
should be a 100% gold backed, private monetary standard with no fractional
reserve banking. Fractional reserve banking is the illegal practice of
issuing more paper receipts than the stated amount of gold in the bank,
commonly referred to as fraud. Same reason why it’s illegal to counterfeit
a million copies of the pink slip to your ’57 Chevy and sell those copies to
everybody in the hood, dude. A million people would think they’re holding
the pink slip to a ’57 Chevy while, in fact, they’re only holding paper.
Look in your wallet. It has already happened. You’re only holding paper,
not real money. Not the ’57 Chevy and not gold.
Time to get rid of our current exchange-only U.S. Dollar that essentially
says, “Hi, I’m Mickey Mouse, America’s Pulp Fiction.” – FM Duck
back to top...