Congress could do away with the fed, liquidate the gold, pay off the liabilities, and let every bank stand by itself

1. Lets start with some simple logic to describe fair banking. Suppose, a warehouse will allow you to store a chair for a fee in its facility. The warehouse gives you a receipt and takes your chair then at some future time, you return for surrender of the chair. You present the receipt plus some cash to pay the storage fee. The chair is returned with the same quality and dimensional proportions at the time of submission. You satisfied the transaction was fair. If the chair was not return in the same quality and proportions then you demand a refund plus payment for damages.

2. Now, suppose, your storing grain, a fungible product at the warehouse. You deposit your grain, agree to storage terms, and premium payment for storage. The grain is indistinguishable when poured into the grain bin. Upon return you submit your receipt, pay the premium, and accept transfer of the grain. The grain received will have certain quality and quantity that has been agreed upon. Upon inspection of the grain, you are satisfied the quality is good. If the grain were moldy or less weight than agreed upon than you would cry foul play.

3. Here is the great revelation about inflation, it is a derivative, meaning there is a winner and a loser. The winner is the warehouse and the loser person holding the receipt. The receipt no long returns the same quantity and quality agreed upon. The Fed issues new money through fiscal policy. The fed and central bank's loan money to commercial banks. The increased buying of bonds causes an asset bubble with the new money causes an asset bubble. The commercial banks prosper short term as the asset price increases, but eventually the price corrects and central banks call in their loans. Collateral by the commercial banks must be liquidated to pay back their loan. Central Banks begin to hold more assets as wealth transfers. The fed has $2.325 trillion in treasury bonds and mortgage debt. ARM shares have declined resulting from Fed buying. ARMs surge during strong housing markets.

4. It is doubt that the lower interest rates will matter much for home refinances because of the high levels of unemployment. It is more likely that low interest will benefit big banks, local and state governments get cheap long term credit. The municipal meltdown is underway. The Fed may use fiscal policy to help other big banks and governments giving almost no relief to the market. In a operation of twist, the fed could shed it short term securities and buy long term securities driving down the yield of the bonds for long term securities. Big banks and governments then could acquire near zero long term loans anticipating a change in the bond market, as deflation sets in. Inflation is the derivative that transfers money to the top.

5. The fed policy of new zero interest rates narrows the gap between short term and long term bond rates. The Banks profit margins decrease to less than 1 percent. Fear of default increases from the intense demand by shareholder for earnings. Dollar carry trade occurs when bond yields become extremely low, bond prices go up on borrowing by speculators. The speculators borrow dollars to invest in Australia, South Africa, and Japan. The dollar index declines from lack of foreign demand. The buying power of the dollar is less and imports cost more money. More money is financed from foreign countries. Speculator take short term profits by shorting the dollar betting on its further decline due to increase deficit spending and rising inflation and taxes. Manufacturing production declines during periods of high interest and taxation shifting more jobs overseas to capture profits.

6. A declining dollar causes commodity price to increase. The late comers to inflation attempt to adjust price to account for the decline in buying power. Manufacturers become more efficient in production and push for growth, however, as real buying power decreases, the increase in efficient reducing operation costs can not offset the rise in labor and commodity prices.

7. The manufacturer of his product must increase price because demand for the product has declined due to price resistance. Price support or fixing by the government escalates the problem because it creates scarcity. Deflation economics begin to set in: bond yield rise, interest rates rise, taxes rise, and savings start to increase. Growth based on manufacturing and consumer credit begins to slow.

8. Savings is the healing process. Keynesian economics proves to be false. Milton Friedman monetary policy of liquidity injection proves to have not positive benefit on the US economy. The fed credibility collapses. The return to conservative bank loan and the outlawing of derivatives heals the market. Without the evil derivatives speculation will stop. Banks will contract fairness with their customers. Leveraging, speculation, and fractional reserves will not practice because of their immoral principles. Financial redemption is in sight. Money became backed by Gold. Currency gains strength and prosperity is in site. The cry goes out, "Bring your money to Zion, for Zion prospers". Why? Because it is based on fair and moral play similar to the warehouse.

9. The Constitution does not mandate that Congress maintain a balanced budget. The Constitution does allow Congress the power to print money and produce coin. It is my believe that the founders described a central government of limited power, limited spending, and reserved most of the power for the states. States would be responsible to balance their budgets. The federalist have advanced a central government of power, $16 trillion in deficit spending, and threaten states powers.

10. Ideal: Money deposited in the money warehouse can never be put in the asset column on a balance sheet. Money is stored for safe keeping.

11. Carr vs Carr : Money given to banks was a loan and not a bailment because the money was not earmarked in a sealed bag.

12. Devaynes vs Nobles: a banker is a bailee of his customers funds

13. Foley vs Hill: The money placed in the custody of a banker is, for all intents and purposes is money for the banker to do as he pleases; the banker is "not answerable to the principal if he puts it into jeopardy"; the banker is responsible "to the amount". The banker contracts for the amount and not to "keep the money onhand".

14. People's bank vs Legrand: "depositors money is always payable upon demand". If the bank violates his contract he can face insolvency. "If the customer loses confidence and cashes in their deposits", the bank will not be able to honor all its contracts.

15. A bank run occurs when the public believes they have been duped and demand their right to their money. Banks have less than 10 percent of their money on hand. The money warehouse receipts have increased but the receipts are not totally backed by cash. The increase in receipts redistributes wealth to the early receivers of assets and punishes the late comers with rising prices of goods and services. The more fake receipts the bank creates the greater its danger of insolvency.

16. If another bank demands transfer of funds, the bank will not have enough funds facing insolvency.

17. Banks are insolvent entities underneath their exterior of stability projected to the market. Cartels raise prices uniformly. Every player is seeking strategy to optimize their profits. If profit margins are strong more competition enters the market. If profits are weak competitors exit. If equilibrium occurs due to uniform agreement then profits go to zero and a crash occurs. Cartels fail long term because the eliminate competition causing price to inflate and profits to move towards zero' The fed increase money supply by writing a check to a commercial bank to buy a fixed amount of US Treasuries. The commercial bank buys the US security and then fractional creates 10 times as many money receipts against the access based on the principals of fractional reserves. The commercial bank then loans the fiat money. The bank cartel will expand globally and there will less banks over time to remove competition then equilibrium drop profit margins to zero and the system will collapse systematically. The FDIC can not manage unpredictable risk. Banks are being asked to increase reserves. The FDIC only secures 2% of the money. It can take a loan from the treasury but if it did so, this would be an extremely bad situation. To me the FDIC does not manage risk appropriately and should require banks to pay a higher premium to secure a larger percent of debt. As more banks are forced to shutdown due to FDIC regulation the banking cartel control tightens. The FDIC helps the fed accomplish its objectives of a single world currency.