Mr. Jefferson taught high school economics. The class was studying recessions and learned that banks create recessions to increase their profits, that recessions and bank loans were directly related. Mr. Jefferson taught from the Federal Reserve Bank publications. After he taught the class about bank loans, he gave a pop quiz. Mr. Jefferson ordered his class to clear their desks and take out a piece of paper and a pen. He gave the class one essay problem: Using everyday language, explain the economic effect of a $100,000 bank loan.

The first student wrote, "There are two banking systems. Under the U.S. Constitution, everyone has equal protection

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under the law. There is no economic effect of stealing or counterfeiting. The banks loan out other depositors' money to borrowers. We fought the Revolutionary War to stop the European banking system because it denies us equal protection. Under the European banking system, the banks do not loan other depositors' money. The banks create the money like a counterfeiter and loan out the newly created money. Counterfeiting and stealing have the same economic effect because the bank ends up with nearly all the property for free. If a counterfeiter could create all the money he wanted, he would create money and loan it out. Soon the counterfeiter would own the promissory notes (bank loan agreement promising to repay the loan) and the liens (a creditor's claim against your house or car to insure repayment on the loan) on nearly every house, car, farm, and business in the nation. It is like printing money to buy all the property and renting it back to the citizens. The lender (counterfeiter) owns the liens and collects the interest for free, just like buying the property and collecting rent. It is like stealing the property and renting it back to the victim of the theft. Counterfeiting is more sinister than stealing; people can easily see an out and out theft and use their vote to stop it. Counterfeiting is not as easily seen. People think they are loaned other depositors' money, but the lender knows it is new money that was created as if by a counterfeiter. Modem day bankers know better than to counterfeit cash and go to jail, so they create checkbook money. They know your labor produces a payroll check. Your labor is worth money. American bankers merely shift the value of your future payroll checks to their pocket for free under the guise of a loan. Thus, they receive the liens on the nation's assets for free and charge the citizens interest on what was taken. Counterfeiting creates inflation and devalues money, destroying the property of other citizens.

People are fooled into thinking that the banks give depositors' interest so they can loan the money out. The truth is, the banks agree to only create new money in relation to money on deposit. Example: if the bank has $1,000 on deposit, it can create $900 in new money (which people call checkbook money). They loan out the $900 of checkbook money knowing few

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people use cash. People use cash for small purchases and checks for larger purchases.

Under the Constitutional banking system, the people own their homes, cars, farms, and businesses with very little debt compared to the European banking system. For every dollar counterfeited and loaned, at the moment the loan papers are signed one dollar of wealth is immediately transferred from the citizen's pocket to the banker's pocket for free. Just before the American Revolutionary War, the Colonists used Colonial Scrip (money) under a Constitutional banking system. In a sinister plot to obtain the Colonists' property for free, King George of England forced the citizens into a European banking system, thereby allowing the banks to obtain nearly all the colonists' property for free and forcing them to pay interest on what was taken. According to Founding Father Benjamin Franklin, this was one of the primary reasons for the Revolutionary War. The Constitution prohibits the European banking system by requiring gold and silver money and equal protection. Imagine Congress forced the citizens to surrender their assets to the bankers for free. Then the bankers returned the value of the assets back to the citizens as loans from the bankers to the citizens. Imagine Congress allowing bankers to legally steal or counterfeit."

Mr. Jefferson was amazed to see how well this student understood the two banking systems and gave him an "A."

The next student wrote, "Think of the United States as a big casino. One can use cash to buy dinner or cigarettes. If you wish to play the slot machines, however, you must use casino tokens. There are two kinds of money, cash and tokens. Tokens are the private money used within the casino. Players trade $100 cash for 100 tokens. The law requires the casino to have one dollar of cash or cash equivalent (an asset that can be sold for cash) on hand for every token the casino issues. If you have 25 tokens left at the end of the day, you may exchange them for $25 cash. Nearly everyone uses tokens because they are more convenient than cash. Merchants outside the casino accept them as money because their value is equal to cash. The casino bank

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offers loans of 100,000 tokens if the borrower signs a $100,000 promissory note agreeing to repay the tokens. The $100,000 promissory note can be sold for $100,000 cash, so the promissory note meets the legal requirements to be a cash equivalent. The casino uses the promissory note to issue and fund 100,000 newly created tokens. The casino received $100,000 value from the alleged borrower for free, used it to create new tokens, and returned the same $100,000 back to the alleged borrower as a loan. Receiving the promissory note for free is like receiving stolen property. Nothing of value was loaned to obtain it. The new tokens are like new money, like counterfeit money. It is like stealing and counterfeiting rolled into one transaction under the appearance of a legal transaction. The agreement only agreed to using the promissory note to repay a loan, not finance new tokens given back as a loan. The tokens are not legal if the promissory note did not fund the value of the tokens. If the note funded the value of the tokens, the bank loaned nothing of value to the borrower. It is like depositing $150, with the bank returning the $150 back to the depositor as a bank loan. The bank loaned nothing to own the $150 deposit. The bank does not legally own the promissory note until the bank fulfills the agreement and first loans $100,000 of actual cash value to the borrower. The borrower expected tokens to be backed by other depositors first depositing cash, not the casino owner using the 'value of the promissory note to fund the newly issued tokens. If the bank received the promissory note for free, it is the same as a thief getting your future payroll checks for free when they are used to make the loan payments. Stealing future payroll checks, or stealing a car and selling it for cash, and depositing the payroll checks, or cash from the car sale, and then returning the money back to the victim as a loan is really stealing, not a true loan. Bankers know no one in their right mind would agree to this, so the written agreement conceals the fact that the bank does not loan other depositors' money, and the bank gets the money from the borrower for free and returns it to the victim as a loan. If you replace the word token with the words checkbook money, you just described American banking."

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Mr. Jefferson was amazed at the student's insight and gave him an "A+".

Another student wrote, "The bank acts like a money changer and charges you a fee as if there was a loan. You loan the bank a $100,000 promissory note that can be sold for $100,000 cash. The bank invests nothing and records receiving the $100,000 promissory note as a loan from you to the bank, thus funding the loan from the bank back to you. A $100,000 loan from you to the bank was exchanged for a $100,000 loan from the bank back to you. It is like exchanging a newly created IOU for another newly created IOU. The bank demands we use the bank IOU as new money (counterfeit) and the bank never pays their IOU. Then we must work to earn the bank IOU (money) to repay the principal and interest on the loan from the bank to us. The bank even got the people to call the bank IOU checkbook money. When people use checks, they use the IOU as if it was money. It is like exchanging $100,000 of American money for the same value of German money and then having the bank charge a $100,000 fee, plus interest, for the transaction. It is like depositing $100,000 of future payroll checks at the bank and withdrawing the money as a loan from the bank to you."

The teacher gave him an "A."

The next student proposed that it was like the old goldsmiths of several hundred years ago. Everyone deposited their gold at the goldsmith for safekeeping. The goldsmith gave the depositors a gold receipt showing the amount of gold coins deposited. The merchants used the gold receipts like money, knowing they could exchange the receipts for gold coins. Soon there were few people using the gold coins. Instead, they were using the receipts as money. The goldsmiths realized they could create gold receipts without actually having the gold to back it, because few people ever asked to exchange the receipts for gold. The goldsmiths advertised that they could loan money at 10% interest. People flocked to the goldsmiths. Farmers agreed to lien their farms and sign promissory notes. The goldsmiths cre-

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ated new gold receipts (promissory notes agreeing to pay gold coins), because people used them as money instead of the gold coins. Instead of loaning $100,000 of gold, the goldsmith received $100,000 in actual value of gold for free (he received the borrower's promissory note for free and could sell it for gold). The goldsmith created new money like a counterfeiter when he created new gold receipts (tokens) and loaned them out. If you replace the word gold receipt with checkbook money, you just described today's banking system.

Mr. Jefferson gave him an "A+." He congratulated the student, saying that using the example of gold receipts was an excellent way to explain the banking system.

We will use this illustrative pop quiz as a building block and add to this concept as we go along.

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