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bubble are showing clear signs of imploding; and when they do, banks
considered too big to fail will expect to be bailed out from the conse-
quences of their risky ventures just as they have been in the past . . . .

Waking Up in Kansas

It is at this point in our story, if it is to have a happy ending, that
we the people must snap ourselves awake, stand up, and say “Enough!”
The bankers™ extremity is our opportunity. We can be kept indebted
and enslaved only if we continue to underwrite bank profligacy. As
Mike Whitney wrote in March 2007, “The Federal Reserve will keep
greasing the printing presses and diddling the interest rates until
someone takes away the punch bowl and the party comes to an end.”3
It is up to us, an awakened and informed populace, to take away the
punch bowl. Private commercial banking as we know it is obsolete,
and the vulture capitalist investment banking that has come to
dominate the banking business is a parasite on productivity, serving
its own interests at the expense of the public™s. Rather than propping
up a bankrupt banking system, Congress could and should put
insolvent banks into receivership, claim them as public assets, and
operate them as agencies serving the depository and credit needs of
the people.
Besides the imploding banking system, a second tower is now
poised to fall. The U.S. federal debt is approaching the point at which
just the interest on it will be more than the taxpayers can afford to

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pay; and just when foreign investors are most needed to support this
debt, China and other creditors are threatening to demand not only
the interest but the principal back on their hefty loans. The Ponzi
scheme has reached its mathematical limits, forcing another paradigm
shift if the economy is to survive. Will the collapse of the debt-based
house of cards be the end of the world as we know it? Or will it be the
way through the looking glass, a clarion call for change? We can step
out of the tornado into debtors™ prison, or we can step into the
technicolor cornucopia of a money system based on the ingenuity and
productivity that are the true wealth of a nation and its people.

Home at Last

In the happy ending to our modern monetary fairytale, Congress
takes back the power to create money in all its forms, including the
money created with accounting entries by private banks. Highlights
of this satisfying ending include:
Elimination of personal income taxes, allowing workers to keep
their wages, putting spending money in people™s pockets, stimulating
economic growth.
Elimination of a mounting federal debt that must otherwise
burden and bind future generations.
The availability of funds for a whole range of government
services that have always been needed but could not be afforded under
the “fractional reserve” system, including improved education,
environmental cleanup and preservation, universal health care,
restoration of infrastructure, independent medical research, and
development of alternative energy sources.
A social security system that is sufficiently funded to support
retirees, replacing private pensions that keep workers chained to
unfulfilling jobs and keep employers unable to compete in interna-
tional markets.
Elimination of the depressions of the “business cycle” that have
resulted when interest rates and reserve requirements have been
manipulated by the Fed to rein in out-of-control debt bubbles.
The availability of loans at interest rates that are not subject to
unpredictable manipulation by a private central bank but remain
modest and fixed, something borrowers can rely on in making their

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business decisions and in calculating their risks.
Elimination of the aggressive currency devaluations and
economic warfare necessary to sustain a money supply built on debt.
Exchange rates become stable, the U.S. dollar becomes self-sustaining,
and the United States and other countries become self-reliant, trading
freely with their neighbors without being dependent on foreign
creditors or having to dominate and control other countries and
markets.
This happy ending is well within the realm of possibility, but it
won™t happen unless we the people get our boots on and start
marching. We have become conditioned by our television sets to expect
some hero politician to save the day, but the hero never appears,
because both sides dominating the debate are controlled by the
banking/industrial cartel. Nothing will happen until we wake up,
get organized, and form a plan. What sort of plan? The platform of a
revamped Populist/Greenback/American Nationalist/Whig Party
might include:
1. A bill to update the Constitutional provision that “Congress shall
have the power to coin money” so that it reads, “Congress shall
have the power to create the national currency in all its forms,
including not only coins and paper dollars but the nation™s credit
issued as commercial loans.”
2. A call for an independent audit of the Federal Reserve and the
giant banks that own it, including an investigation of:
The creation of money through “open market operations,”
The market manipulations of the Plunge Protection Team
and the CRMPG,
The massive derivatives positions of a small handful of
mega-banks and their use to rig markets, and
The use of “creative accounting” to mask bank insolvency.
Any banks found to be insolvent would be delivered into FDIC
receivership and to the disposal of Congress.
3. Repeal of the Sixteenth Amendment to the Constitution, construed
as authorizing a federal income tax.
4. Either repeal of the Federal Reserve Act as in violation of the Con-
stitution, or amendment of the Act to make the Federal Reserve a
truly federal agency, administered by the U.S. Treasury.

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5. Public acquisition of a network of banks to serve as local bank
branches of the newly-federalized banking system, either by FDIC
takeover of insolvent banks or by the purchase of viable banks
with newly-issued U.S. currency. Besides serving depository bank-
ing functions, these national banks would be authorized to service
the credit needs of the public by advancing the “full faith and
credit of the United States” as loans. Any interest charged on
advances of the national credit would be returned to the Treasury,
to be used in place of taxes.
6. Elimination of money creation by private “fractional reserve”
lending. Private lending would be limited either to recycling
existing funds or to lending new funds borrowed from the newly-
federalized Federal Reserve.
7. Authorization for the Treasury to buy back and retire all of its
outstanding federal debt, using newly-issued U.S. Notes or Fed-
eral Reserve Notes. This could be done gradually over a period of
years as the securities came due. In most cases it could be done
online, without physical paper transfers.
8. Advances of interest-free credit to state and local governments for
rebuilding infrastructure and other public projects. Congress might
also consider authorizing interest-free credit to private parties for
properly monitored purposes involving the production of real goods
and services (no speculation or shorting).
9. Authorization for Congress, acting through the Treasury, to issue
new currency annually to be spent on programs that promoted
the general welfare. To prevent inflation, the new currency could
be spent only on programs that contributed new goods and services
to the economy, keeping supply in balance with demand; and issues
of new currency would be capped by some ceiling -- the unused
productive capacity of the national work force, or the difference
between the Gross Domestic Product and the nation™s purchasing
power (wages and spendable income). Computer models might
be run first to determine how rapidly the new money could safely
be infused into the economy.
10. Authorization for Congress to fund programs that would return
money to the Treasury in place of taxes, including the develop-
ment of cheap effective energy alternatives (wind, solar, ocean
wave, etc.) that could be sold to the public for a fee, and affordable
public housing that returned rents to the government.

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Web of Debt

11. Regulation and control of the exploding derivatives crisis, either
by imposing a modest .25 percent tax on all derivative trades in
order to track and regulate them, or by imposing an outright ban
on derivatives trading. If the handful of banks responsible for 97
percent of all derivative trades were found after audit to be
insolvent, they could be put into receivership and their derivative
trades could be unwound by the FDIC as receiver.
12. Initiation of a new round of international agreements modeled on
the Bretton Woods Accords, addressing the following monetary
issues, among others:
The pegging of national currency exchange rates to the value
either of an agreed-upon standardized price index or an agreed-
upon “basket” of commodities;
International regulation of, or elimination of, speculation in
derivatives, short sales, and other forms of trading that are
used to manipulate markets;
Interest-free loans of a global currency issued Greenback-style
by a truly democratic international congress, on the model of
the Special Drawing Rights of the IMF; and
The elimination of burdensome and unfair international debts.
This could be done by simply writing the debts off the books of
the issuing banks, reversing the sleight of hand by which the
loan money was created in the first place.
13. Other domestic reforms that might be addressed include publicly-
financed elections, verifiable paper trails for all voting machines,
media reform to break up monopoly ownership, lobby reform,
sustainable energy development, basic universal health coverage,
reinstating farm parity pricing, and reinstating and strengthening
the securities laws.
Like the earlier Greenback and Populist Parties, this grassroots
political party might not win any major elections; but it could raise
awareness, and when the deluge hit, it could provide an ark. We
need to spark a revolution in the popular understanding of money
and banking while free speech is still available on the Internet, in
independent media and in books. New ideas and alternatives need to
be communicated and put into action before the door to our debtors™
prison slams shut. The place to begin is in the neighborhood, with
brainstorming sessions in living rooms in the Populist tradition. The

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Populists were the people, and what they sought was a people™s
currency. Reviving the “American system” of government-issued
money would not represent a radical departure from the American
tradition. It would represent a radical return. Like Dorothy, we the
people would finally have come home.




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Afterword
THE COLLAPSE OF A
300 YEAR PONZI SCHEME


“Buckle your seatbelt Dorothy, cuz Kansas is going bye bye.”

-- Cypher to Neo, The Matrix




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Postscript
February 2008
THE BUBBLE BURSTS


It was very dark, and the wind howled horribly around her . . . .
At first she wondered if she would be dashed to pieces when the house
fell again; but as the hours passed and nothing terrible happened, she
stopped worrying and resolved to wait calmly and see what the future
would bring.

-- The Wonderful Wizard of Oz, “The Cyclone”




The wheels started flying off the bankers™ money machine in July
2007, just after this book was first published. The Fed and the Plunge
Protection Team did their best to keep the curtain drawn while they
frantically patched together bailout schemes, but the choking and
sputtering of the broken machine was too much to conceal. Sudden
dramatic declines in the stock market, the housing market, and the
credit market were all quite frightening to the residents of Oz huddled
in their vulnerable thatched-roof houses; but there wasn™t much they
could do about it, so like Dorothy they resolved to wait and see what
the future would bring. They had long known that things were not as
they seemed in the Emerald City, and the old facade had to come
down before the real Emerald Isle could appear.
The bubble burst and the meltdown began in earnest when invest-
ment bank Bear Stearns had to close two of its hedge funds in June of
2007. The hedge funds were trading in collateralized debt obligations
(CDOs) -- loans that had been sliced up, bundled with less risky loans,
and sold as securities to investors. To induce rating agencies to give
them triple-A ratings, these “financial products” had then been in-
sured against loss with derivative bets. The alarm bells went off when

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