: THE CENTRAL BANK AND POVERTY

PART 3 : THE CENTRAL BANK AND POVERTY

and therefore it cannot be a correct system for our In this section we show that the central bank (CB) is

3.1 Introduction

society. We have also shown that the MLE is the ideal the root cause of poverty. Since CB is controlling the

alternative economic system. In this part we analyze entire world using the same money it is printing, CB

the practical aspect of present economy to show how it must be held accountable. Just like the CEO of a

generates poverty. To do so we compare the role and corporation is responsible for all the good and bad

practice of CB with these laws of nature and the things of the corporation, similarly the CB is

design of MLE.

responsible for the poverty that capitalism, headed by Profiting, interest charging, giving higher salary, the CB, is creating. We show that government, people,

printing money, creating planned recessions which in corruption, and even capitalism are not accountable

turn create unemployment and foreclosures, are all the for poverty, because they do not control money, CB

tools that CB is using to run the economy. We show in does. Nobel Laureate in economics Milton Friedman

this part, all of these methods create transfer of wealth therefore very justifiably said [Levy, 1992], “One

thereby generating poverty. IMF implements similar unsolved economic problem of the day is how to get

methods in foreign countries to transfer wealth. Thus rid of the Federal Reserve”. Note that it is very

to eliminate poverty and to avoid catastrophe we must important to identify the correct target, without any

remove CB and its money power. In this part, we vagueness, so that we can fix the problem.

provide logic, theory, numeric data, and information In previous two parts we have discussed how

from public research to establish that the above tools capitalism is violating the fundamental laws of nature

indeed generate the poverty and therefore CB is

has done a great job in hiding its identity and its role. made by CB.

It is a very secret institution; and its actions are not transparent [King, 2010].

During 2012 republican party presidential primary Unless the intellectual community begins to realize

3.2 Money Power

elections [ABC, 2011] in USA, it was brought out by that the money is not needed to run the economy, the

live television broadcast, that one of the presidential money power cannot be removed, MLE cannot be

candidates, Rick Perry, did not know about the role of implemented, and poverty and economic inequality

central bank. Rick Perry is the present governor of a cannot be eliminated, even from USA. Most curiously,

very large state of USA, Texas, for more than 10 majority of the population also think that money is

years. Texas has an economy of $1.3 trillion, which is necessary. Money is controlling all activities of the

more than double of countries like Iran. Thus you can world for more than two thousand years. Clearly the

imagine a governor does not know where the money CB is the source of this money power now. As

comes from. CB has indeed done a very good job in mentioned before, CB is privately owned and cannot

hiding the truth, its identity and purpose.

be controlled by government [Greenspan, 2009]. On International organizations, like IMF and the the other hand using the money power, the CB

World Bank (WB), are also financed by CB. The IMF controls all activities of the society including

policies of austerity, education and religion. It controls all private and

privatization, elimination of labor organizations, government organizations, CIA, FBI, including

reduction of government expenditures for public etc. military and police force of every country. Thus CB is

These policies transfer wealth and thus lower the the real global king of our time.

economic status of vast majority of population. What Carroll Quigley (1910-1977) was a professor of

IMF openly does, CB does that secretly. This history at Georgetown University, and a mentor of US

exposure of IMF policies has created significant President Bill Clinton. He pointed out that Britain has

opposition to international financial organizations. In two groups: classes and masses. In his book [Quigley,

this sense IMF has done great damage to the p. 465], he said education for classes has three

reputation of CB.

negatives and one of them is that it must not find the truth. It appears that the same philosophy has now

3.4 No Win-Win Possible

spread all over the world for all groups. Nobody Let us also state the fact that there is no win-win should find the truth in any field of study, because if

situation possible. It is always a win-lose case. If we they do, then someone will eventually find the truth

find that two persons are in a transaction where about CB and about the money power also, which is

apparently both are wining, then if we investigate not desirable for the CB.

carefully, you will always find that there is a third person who is losing. It is just like the sand on my

driveway example, mentioned earlier. Win-win idea In every country, people think that the government

3.3 Information Hiding

violates the law of conservation. Win-win is not just controls the economy. When economy goes bad

for the present time, it must be considered as a long people blame president or prime minister and they

term phenomenon. The second party who is wining change them in the next election cycle. Although some

now can and most likely will lose eventually in the people know, but the general public does not know,

long run also.

that money is provided by the Central Bank (CB), and Thus to measure the performance of the economy, it controls its supply and interest rate independent of

the quality of life for bottom fifth should be measured. any market condition. Thus in reality by controlling

That is because they suffer the most, they are forced to the supply of money the CB controls the government

lose in almost all transactions. Their employment, and the economy. The government does not and

salary, and their share of the GDP should be measured cannot control the economy.

to indicate the strength and goodwill of the economy The policies of CB remain hidden behind the doors

of any nation.

of CB. Even very few students of economics know It should be recognized that the bottom fifth is the how money is supplied and controlled in a nation.

real producer of all goods and services of the economy Most modern macroeconomics textbooks do not

and not the CEOs, the stock market, or any other mention that the CB is a private organization and is

financial institutions. In fact, we show that these not accountable and responsible to government. There

institutions are not at all necessary in modern are many employees of CB who do not also know that

economy, equipped with network based computer CB is a private corporation. Similarly, it may be safely

technology, and also because money is free. predicted that most of the politicians in Washington

Observe that giving higher salary to a specific If money is free for CB and not for anyone else, then

3.5 No Free Market

community, charging interest, and allowing profit are there is no free market. You and I cannot print money.

also doing the same damage. These methods are Therefore there is no free market for us. Government

helping to concentrate the money in a smaller group of also cannot print money. The free market exists only

people creating inflation. All these methods make for the CB.

99% of the population poor.

So CB is controlling everybody, and therefore the However, if we increase the size of the pot of gold market, by capturing the money printing power. CB

at the same time, along with the bag, then inflation has placed key personnel with high salary to control

will not happen. This is the law of conservation. The government, like finance minister or treasury

bag and the pot must grow in strict one-to-one secretary. In the same way it has essentially

relation. Thus if CB supplies money as much as purchased, by giving free money, intelligence

required by any country to increase its material services, like CIA and FBI, to control and monitor

production or GDP then there will be no inflation and government and people. CB has also captured the

the country will prosper. There will be no poverty, military and police force of every government. Now

anywhere, in the entire world.

no one can take that money printing power away from Thus the money supply must be tied to the GDP the central bank. We cannot have any kind of free

growth. No money should be printed unless GDP market any more.

increases. Note that the inflation is part of capitalism One interesting concept about free market is that

by design. Printing extra money, giving higher salary, the government is not allowed to create jobs. No

making profit, interest charging are all features of government can start manufacturing or service sector

capitalism that cause inflation and therefore poverty. jobs and provide employment. Government provides

Thus if IMF really wants to improve the economic jobs in the education but CB is constantly trying to cut

condition of a poor country all it has to do is supply public employment and education budget. We can see

money as much as the country needs, but make sure that CB and the IMF both are trying to eliminate

nothing is given to anyone unless GDP is increased. public sector employment and thus restricting the free

Every 1% increase in GDP will bring 1% money from market concepts.

IMF. Money should be tied to GDP and not to gold. However inflation will still happen because of higher

salary and profiting. But that can be low compared to Consider the pot of gold and the bag of dollar bills

3.6 Creating Inflation

untied supply of money.

example, discussed before, as representing our Keynes [Keynes, 1920, p. 235-236], a father of economy. Assume that the CB prints another bag of

economic theories, said – “By a continuing process of dollar bills. We know that CB can do that, it has done

inflation, governments can confiscate, secretly and that in the past. It is the only body that can secretly

unobserved, an important part of the wealth of their print money and allocate to anyone it wishes.

citizens. By this method they not only confiscate, but Thus the price of pot of gold has become double

they confiscate arbitrarily; and while the process now. The extra bag created 100% inflation. However

impoverishes many, it actually enriches some. … The this inflation will not be harmful, if this extra bag is

process engages all the hidden forces of economic law evenly distributed to all the people. This is because the

on the side of destruction and it does it in a manner purchasing power of every one will remain same. On

which not one man in a million is able t o diagnose”. the other hand if this extra bag is given to the top 1%

We should recognize that the government is controlled of the population of the economy, then a severe

by the central bank. The government is not an damage will be done to the remaining 99% of the

independent body; it cannot function without money population.

supply, which is controlled by the CB. Observe the Thus printing money and giving it to a specific

phrase “one man in a million”, this is the secret of community is the root cause of inflationary damage.

information hiding. This is how CB misleads people Since CB is a private company, and government does

and hides the truth.

not have any power over it, the CB can give this extra

3.7 Transfer of wealth

bag to anyone it wants to. The Bloomberg News [Pittman, 2009] confirms this assertion.

Fig.1 – Income of bottom fifth and Recession Fig.2 – Income of top fifth and Recession Consider that pot of gold example again. If we print

taken the income data from US Census Bureau another bag of dollar bills and give it to top 1% of the

[USCB, 2010]. The Figure 1 shows the income of the population then the money share will change. Top 1%

bottom fifth of the population. The graph clearly will have one bag and remaining 99% will have

shows that their income is consistently going another bag. Thus 50% of the pot of gold can be

downwards since 1976. The graph occasionally went purchased by top 1% and remaining 50% will be

up for short period of time, like in 1967, ’73, ’94 etc. shared by 99% of the population. Before printing the

But it has an overall downward trend and every other bag, 99% population had 99% of the gold; but

recession has a visible downward impact on the now they got only 50% of the gold. In reality it will be

income.

lower than 50%, we just made some simplifying The next graph, Figure 2, shows the income of the assumptions for illustration. This transfer of wealth

top fifth of the population. It is clear that despite the has happened because CB violated the law of

recessions their income is growing persistently over conservation by printing money but not increasing the

all the years. Thus there is a truth in the statement that pot of gold, that is, GDP. Thus CB is directly

the rich is getting richer and the poor is getting poorer. responsible for this transfer of wealth, because it gave

The graphs are superimposed on the recession bands. the extra bag to top 1%. This way the CB is generating

The width of the bands defines the length of the poverty in all countries. Accumulation of dollar bills

recession period. This recession data was collected to top 1% means reduction of GDP share by remaining

from [NBER, 2010].

99% of population. This process can be continued year It is quite natural that when someone loses after year increasing the size of people in poverty.

someone else will win, because of the law of Thus giving money to a smaller group, that is 1%

conservation. These two graphs validate this law in of the population, in our society causes poverty in two

economics. They also prove the common practice of different ways. First it creates inflation. That means

CB of transferring wealth by creating frequent price of each item increases. So we cannot buy things

recessions. More details of these figures can be found anymore and become poor. Second, the amount of

in [Das, 2011].

goods available also decreases causing scarcity. This happens because the smaller group has more money,

3.8 CB and Poverty

they will buy all the things, and we will have very We have seen from the data that the CB is responsible little left to share among the 99% of the population.

for transfer of wealth. It is not government or Thus poverty is increasing because the way CB is

capitalism that is doing the wealth transfer, because manipulating the supply of free money.

CB is in charge here.

Recession is another method of transferring On one hand CB talks about economic growth and wealth. In recession large number of people becomes

on the other hand its actions create inflation, profiting, unemployed. These people will lose their homes by

interest charging, printing free money, and recessions, foreclosure. But by law of conservation, this property

which are all designed for transferring wealth and will not vanish; it will be purchased by some rich

creating poverty.

people [Bates, 2003] at very low cost. Thus rich men In reality the CB is showing the paths and got the opportunity to transfer large volume of gold

everybody is following them. FFR (Federal Funds from the pot at very low amount of dollar bills from

Rate) is an interest rate that CB is charging on free the bag. Recession is a method of bulk transfer of

money that it is printing. So everybody is also wealth. We show later how CB creates recessions.

charging interest on money lent. CB is creating We now show how the incomes of bottom and top

recessions for transfer of wealth, so all corporations fifth have changed over the years due to all of the

are doing the same. CEOs are taking large bonus above method that CB uses to create poverty. We have

packages after laying off thousands of people, causing

Red Unemp loy ment, Green Fund Rate

Fig.3 – Funds rate and Unemployment Fig.4 – Funds rate and Recession bands 1955-2009 transfer of wealth. So CB should be held responsible

unemployment and is serving the control mechanism for all these actions.

of the central bank. Again, it is quite surprising that If CB cannot produce economic well being of the

this relationship, in Figure 3, was never explicitly vast majority of people then CB should give its power

pointed out, as far as we know, by any publications. back to the government.

The FFR is an independent input (exogenous) variable to the economic system. The target value of

this FFR is decided by the Federal Open Market It is easy to create unemployment in an economy, but

3.9 Creating Unemployment

Committee (FOMC) of the Fed. The minutes of it is very difficult to reverse it. Reduce the supply of

FOMC [FOMC, 2010] confirms that. In the paper money and increase the borrowing interest, then the

[Bernanke, 1992] the authors claim “In all cases we businesses will be forced to lay-off people. This is

obtain plausible results which suggest that the Fed was what precisely the CB is doing and IMF is also

purposefully manipulating the funds rate during the recommending to nations.

pre-1979 period – an observation that is consistent In this subsection we show with the data and their

with what the Fed claims to have been doing.” Thus graphs that the central bank of USA, that is the Fed, is

we can see that the capitalism, at its core, was never a systematically creating unemployment at any time it

free market economy, the FFR is not a market wants. The unemployment data is taken from Bureau

variable; it is set by the Fed.

of labor statistics of the US department of labor [DOL, Thus FFR is completely controlled by the Fed. 2010]. The details of this data are given in the

Therefore it is an input to the economy. The output is document [DOL, 2009]. The Federal Funds Rate

the unemployment. Since these two are clearly (FFR) data is taken from the Fed database [Fed, 2010].

matched, as seen in Figure 3, then we can claim that We have used the correlation [Taghizadeh, 2000]

the Fed is controlling the unemployment and creating as a measure to determine the relationship between

recessions to transfer wealth.

two time functions. The following (6) correlation The Fed can destroy an economy very quickly and formula is used:

create large unemployment and transfer huge amount of wealth. But it cannot reverse the process to build the economy again within that same period. That is

because the Fed is not involved in GDP creation. It can only supply the money and money alone cannot make the product, particularly after recessions. Lot of

In the formula {f i } and {g i } are two time series data engineering, organizational effort, confidence, and arrays. The above formula (6) shows that the absolute

moral are required for building the economy back. value of the correlation number, cor, cannot be greater

Thus the recession process and the subsequent than 1. It is also clear that if f and g are same then the

destruction of economy can cause severe suffering for correlation number will be 1. Thus closer the value to

the people. It is very much like destroying a city by number one, better is the similarity between the two

earthquake or a bomb, in a very short time like in time functions. This is only a numerical measure; a

minutes, but it takes a decade to rebuild the city. visual examination gives much better relationship

Under this kind of situation it is significantly better between the two graphs as shown in Figure 3.

for government to provide employment. Putting all We found that a left shift of three years for the

eggs in one basket, the private corporations, is not safe unemployment data is ideal for these graphs, which

for a country. Government should also have gives a correlation coefficient of 0.92701. The

significant volume of manufacturing industries under structure of the two graphs in Figure 3 is sufficient

its direct control to avoid creation of catastrophic however, to show how the funds rate is affecting the

failure like 2008 recession in the world. For a quick

are precisely controlled, monitored, and can be hire and expand. Once we understand the notion that

predicted. We have explained that theory using Figure money is free then economy can be very dynamically

4. The company [ECRI, 2004] has mastered the modified, designed, and managed easily. However, as

prediction method of business cycles. Many world we can see there is nothing better than MLE, because

governments consult ECRI to create their indices for CB will block all other approaches to manage the

predications of their recessions. ECRI can do so with economy by using its own money power.

long and short time accuracies. Figure 4 is a way to show the relationship of the

federal funds rate (FFR) and the recessions. Here we As we have mentioned recession is the best way to

3.10 Creating Recessions

superimposed the variations in the FFR over the bulk transfer wealth from the bottom fifth of the

recession bands. The graphs show that every recession economy to the upper layers. It helps to destroy the

is created at the peak of the FFR values. That is, the economy and government; it enforces privatization,

Fed keeps on increasing the funds rate until the and elimination of rules and regulations against

recession begins. In [Dimitrov, 2006] the authors capitalism. It is a method of restoring the economy

presented a graph similar to Figure 4 and confirmed back to its primitive form. It helps to reestablish the

that the funds rate shows onset of two recessions ideology of the CB.

during 1979-82. In [Belonga, nd] the authors comment Recessions are not natural phenomenon of

that the conventional wisdom is that funds rate goes capitalism. It is a policy and objective of CB to

up before recession and goes down after, with data manipulate economy by controlling the supply of

between 1985 and 2009. Bernanke (1992) was the first money. We show from the data that this is indeed the

to show graphs like Figure 4. More details of these case. Since everything happens because of the

graphs can be found in [Das, 2011]. Thus the data in simultaneity law, many people become known about

Figure 4 and other publications mentioned above show the plan for this future event. Larry Bates, a banker

that CB is creating poverty by creating recessions.