this money; let’s say it is a deposit of one hundred dollars. The local bank is very happy because that one-hundred-dollar deposit will allow it to lend out nine hundred dollars.
Surprising? Not at all, as banks are only required to have 10 percent of their debts on deposit at any given time. This is called “fractional reserve banking” and is practiced in order to hide the fact that banks spend their clients’ money; they don’t actually “save” it for them. So the bank is happy as well. Even though this “money” came from nowhere and did not exist until the moment that the Federal Reserve issued a check, it is still valid and legal money that can be spent. This is all valid and legal, but illusory, and in direct contravention to the Constitution.
Finally the Perfect Tax: Infinite and Invisible
It was a very hot Las Vegas day in May 2003, and Robert Kahre had the air-conditioning on full blast when the door to his office swung open and he was confronted with a gun pointed directly at his head. Before he had time to question, he and more than twenty of his workers were handcuffed and held in the sweltering sun without water, while IRS agents swarmed inside, paving a path of disarray. To anyone observing, the situation looked as though Mr. Kahre and his workers had committed multiple felonies. But no, all Mr. Kahre had done was pay his workers, and they chose to accept his payment.
What the IRS was unhappy about was that the form of payment was U.S. government-minted gold coins. The coins had a face value of 50 dollars but the gold in them was actually worth 806 Federal Reserve dollars. Because there were no tax code regulations
that distinguished between coin and paper money, Kahre and his workers paid taxes on the face value of the coins. So in essence, if a worker earns one gold coin a week, his annual salary is only 2,600 dollars, and therefore he is not required to pay taxes. And everyone knows that the federal government is never happy when it does not get taxes, especially from someone like Mr. Kahre. The government charged Kahre with 109 counts of tax-related crimes, including tax evasion, willful failure to file, and conspiracy to evade taxes. 20 The government brought fifty-two total charges against the other defendants combined. 21
Fortunately for Kahre and his employees, the jury did not agree with the government, and all those charged were either acquitted or released after a hung jury. 22 The government has not yet decided whether it will retry him, 23 but considering the results already obtained, one can hope that the Constitution will prevail this time around, and the government will stop scamming us by pretending that any crime was committed.
Kahre’s story illustrates the worst part of the Federal Reserve— that it is in essence imposing a secret tax on each and every one of us, a tax that most will not complain about because we do not realize it exists. Most of us do not know how the system works, so we do not complain and live in not-so-blissful ignorance, not entirely blissful because we are still paying for the inflationary money tricks that the Federal Reserve is allowed to play. This is why a family in the 1950s was easily able to survive happily on one income, whereas now it takes two working people to retain that same standard of living. Even if we attempt to save for our retirement, the more we save, the higher this invisible tax will be on us. But the worst effects are usually on the poorest of us, those living on a fixed income, such as the retired or disabled, who are receiving a specific monthly amount. When the value of the dollar falls, then the price of goods adjusts to that, and the buying power of those on a fixed income dwindles. The secret tax is called inflation, and it is the Fed’s most lethal weapon.
But why would the government constantly expound private banking and allow the Federal Reserve to grow to its size without any regulatory control? If there was no