The below analogy and page can be found at

http://www.gold-eagle.com/editorials_99/hannigan092099.html

The above link and below allegory are not my  work but it does a great job of illustrating what is going on with our current monetary system and the misapplication of taxes that help hide the truth of it's operation. I have reproduced the allegory below along with comments immediately below in order to show how this link ties into the TaxTruth4U site.

Until you understand the truth behind the present misapplication of income tax laws you will not understand why it is being misapplied and has been since 1913. In that same year three major pieces of legislation were passed in the following order:

1. The 16th Amendment (which supposedly authorized the "income tax" as we know it today. This amendment was later ruled on in two separate Supreme Court decisions that it do not change the taxing clauses of the Constitution and therefore did not authorize the "income tax" as it is being applied today).

2. The Income Tax Act (based on the newly passed 16th Amendment. This Act put in place the current taxing system in its earliest form which we now operate under to this day).

3.The Federal Reserve Act (passed Dec. 23, when all the opposition had already gone home for the holiday. Remember there was no wide use of cars, much less planes in those days. This Act took the power to coin money and regulate the value thereof, out of the hands of Congress, where the founders put it, and into the hands of private bankers, or banksters, as I prefer to call them. The founders in their wisdom clearly warned against doing so).

Was the passing of these 3 major pieces of legislation in sequence and in the same year a coincidence?

Hardly?! If you continue to do your homework and study these things, allowing the facts to speak for themselves, you will discover this for yourself.

What happened to our current monetary system began in 1913 when the above three pieces of legislation were put in place. Prior to that we had no "income tax", no Federal Reserve, no deficit, and no inflation in our country. Not to mention having a healthy and thriving economy up until that time. (The only exceptions have been deficits during war time, such as the civil war) In fact our government actually had a surplus in the treasury when the first "income tax" was passed in 1894, later to be struck down by the Supreme Court as unconstitutional. If that is a shock to you, I recommend you do your own research and check for yourself. The bill was the "Wilson Tariff Act" and the subsequent case was Pollock v. Farmer's Loan & Trust Co., 157 US 429 [1895].

When I share this with others, many often ask me if we were to apply the tax laws as they are actually written (i.e. that the vast majority of citizens that work in one of the 50 states are not liable for the "1040" income tax) how would this country have the funds to operate? Well, we must first understand and ask how this county and our government operated before 1913 when there was no income tax or Federal Reserve. Until we answer that question, we won't understand how far off the mark we are in our present understanding of things. To ask how our country will function without the tax only indicates how far we have bought into the lie that an income tax is essential to the operation of our government. The very chairman of the Federal Reserve admitted as far back as 1946 that an income tax was not needed or used to fund the government’s expenses but rather taxes were needed only to keep inflation in check because of the fiat currency we were now under and have operated under since 1913. (Click here for more info) My reply to the above question is the very reason our country is in the economic mess we are in is because of the money system we are currently under and the subsequent misapplication of law regarding the income tax. In other words, it is in fact the very opposite of what we have been told all our lives. If the law was being properly applied (i.e. limited taxes as laid out in the Constitution), and we had real money, we would be exactly where we were before bad legislation was put into play in 1913. i.e. NO INFLATION AND NO FEDERAL DEFICIT and a thriving economy! Doesn't sound bad to me. How about you?

But you may be thinking that inflation is not that bad. However what we need to understand is inflation does not have to exist at all.  If you are like I was, I used to think inflation was a product of greed and people wanting more and more for their products or services. But in fact inflation comes from "money" being created out of nothing and backed by nothing and then pumped into our economy, thereby reducing the purchasing power of the money already in circulation. Therefore what shows up as increasing prices is in fact a decreasing or a dilution (or you could say delusion) of the “dollars” currently in circulation. If this is all very foreign to you, the allegory you are about to read following these comments will give you a better understanding of how things really work, and not how you have been lead to believe they work.

Have you ever wondered why the dollar keeps dropping in value against other currencies? Did you know that the federal reserve has printed more "money", aka federal reserve notes, in the last year then all the "stagflation" years of the Carter administration. If you are too young to remember, inflation was running close to 20% coupled with no economic growth at that time. Do you think there might be a connection between the printing of money and the dropping of the dollars value?  When you start to understand how things work, you will realize it isn't inflation of prices we experience but the devaluation of the dollar.

The fact is that in the normal course of economic developments prices usually go down. As providers become more proficient in producing goods and services, coupled with increasing competition and increasing supply, prices actually drop. The current high tech industry is a perfect example of how things normally work. Who hasn't bought a computer years ago that cost more then a machine far more powerful today. The reason it is so apparent in the high tech industry and not in other industries is that the accelerated development of the tech industry and its products over against most others has outpaced increasing prices due to printing of the bogus fiat currency we currently operate under. 

What is absolutely critical to understand and why I have reproduced the below allegory is our economy can not continue as is and is doomed for failure and collapse. Historically, all fiat currencies and the economies based on them eventually crash due to hyperinflation from over-issuance of currency. Every society to date that went to a fiat currency has collapsed. Just a case in point is the current derivative market. All major banks have derivatives many times greater then the actual value of their assets. The largest bank in our country being the biggest debtor both in percentage and amount. The primary reason our economy is still going is almost everyone still believes the paper they carry around in their pockets called "dollars" has some intrinsic value. It's a simply a confidence game. (For what it's worth, a confidence game is were we get the phrase "con job"). But confidence in the dollar/system alone will not keep it going indefinitely. And if you have been paying any attention many in other countries, if not here, are starting to figure it out as the dollar continues to "drop in value" on the world market. (30% against the Euro in the last two years as of this writing, May 2004).  More and more countries are realizing the mess we are in and are changing over to Euro's as the currency standard. Some are even looking to gold. This isn't simply a polictical reaction. What do these other countires know that we don't? Maybe we should be paying closer attention.

If you feel what I am saying is absurd or outrageous, just make note and remember this site when things go down the proverbial toilet. I will even go out on a limb and say there will be a major downturn in our economy in the not to distant future. Things have already begun as of this writing ( May 2004 ) and it will only accelerate after the election with a real and likely possibility of developing into the 2nd great depression within 2 to 3 years after the election. But I would guess this will be preceded by a major "terrorist event." The event won't cause a downturn, though it will likely to be the scape goat for an economic downfall. The event will simply trigger a downturn (just like a major bomb dropped on the San Andrea's Fault might trigger an earth quake) as all the right conditions must be in place for an economic collapse, regardless of the event that gets the ball rolling. Just like the next great earthquake predicted along the San Andrea's Fault, a collapse isn't a matter of if  but when. And the longer it goes without an adjustment the greater the earthquake will be, when it occurs.

Why do I say this? Do I have a crystal ball or some special "inside information?" No. I simply watch and listen to information not covered in the main stream news. Just one piece of information should suffice to get your attention which you can check for yourself. The only other time in our history that the debt to GNP ratio was this high was right before the "Great Depression." In fact the debt ratio is higher by around 70% then it was then. This is documented fact, whether the talking heads bring it up or not. Couple that with the fact that we are spending around 5 billion a month on the conflicts we are engaged in presently worldwide as of this writing and it doesn't take a rocket scientist to start putting it together. Not to mention the steady decline of the "dollar" and the overall rise of gold and silver in the past couple of years, just to name a few things. Also the fact that Warren Buffet has not held any stocks for many months as of this writing and now holds several hundred tons in silver and gold and over 30 some billion in cash should not be ignored. Why so much metals? Why so much cash? Could it be he anticipates things "going on sale" and is staying as liquid as possible to scoop up anticipated "blue light specials!" Warren Buffet is considered one of, if not the wisest financial investor in our history, going from nothing to a multibillionaire (no, the b is not a typo) in his lifetime. All of the things I have mentioned are signals telling us something is afoot and we would do well to pay attention.

Thomas Jefferson was concise and dead on in my opinion in his early warning to the American nation, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." Once you understand our monetary system as it really is, you will see just how prophetic Jefferson's words were.

So with that said, I present the following allegory. One that should help you begin to understand the truth behind the income tax. If you prefer, for your convenience I also have the link to the original page immediately below as well as reproducing it below.

http://www.gold-eagle.com/editorials_99/hannigan092099.html

Also, for a great video clip on the history behind our current monetary system

click here

I Want The Earth Plus 5%

	Fabian was excited as he once more rehearsed his speech for the crowd certain to turn up tomorrow. He had always wanted prestige and power and now his dreams were going to come true. He was a craftsman working with silver and gold, making jewelry and ornaments, but he became dissatisfied with working for a living. He needed excitement, a challenge, and now his plan was ready to begin.

	For generations the people used the barter system. A man supported his own family by providing all their needs or else he specialised in a particular trade. Whatever surpluses he might have from his own production, he exchanged or swapped for the surplus of others.

	Market day was always noise and dusty, yet people looked forward to the shouting and waving, and especially the companionship. It used to be a happy place, but now there were too many people, too much arguing. There was no time for chatting - a better system was needed. Generally, the people had been happy, and enjoyed the fruits of their work. In each community a simple Government had been formed to make sure that each person's freedoms and rights were protected and that no man was forced to do anything against his will by any other man, or any group of men.
	This was the Government's one and only purpose and each Governor was voluntarily supported by the local community who elected him. However, market day was the one problem they could not solve. Was a knife worth one or two baskets of corn? Was a cow worth more than a wagon … and so on. No one could think of a better system. Fabian had advertised, "I have the solution to our bartering problems, and I invite everyone to a public meeting tomorrow."
	The next day there was a great assembly in the town square and Fabian explained all about the new system which he called "money". It sounded good. "How are we to start?" the people asked. "The gold which I fashion into ornaments and jewelry is an excellent metal. It does not tarnish or rust, and will last a long time. I will make some gold into coins and we shall call each coin a dollar."

He explained how values would work, and that "money" would be really a medium for exchange - a much better system than bartering. One of the Governors questioned, "Some people can dig gold and make coins for themselves", he said. "This would be most unfair", Fabian was ready with the answer. "Only those coins approved by the Government can be used, and these will have special marking stamped on them." This seemed reasonable and it was proposed that each man be given an equal number. "But I deserve the most," said the candle-maker. "Everyone uses my candles." "No", said the farmer, "without food there is no life, surely we should get the most." And so the bickering continued. Fabian let them argue for a while and finally he said, "Since none of you can agree, I suggest you obtain the number you require from me. There will be no limit, except for your ability to repay. The more you obtain, the more you must repay in one year's time. "And what will you receive?" the people asked. "Since I am providing a service, that is, the money supply, I am entitled to payment for my work. Let us say that for every 100 pieces you obtain, you repay me 105 for every year that you owe the debt. The 5 will be my charge, and I shall call this charge interest." There seemed to be no other way, and besides, 5% seemed little enough charge. "Come back next Friday and we will begin."

Fabian wasted no time. He made coins day and night, and at the end of the week he was ready. The people were queued up at his shop, and after the coins were inspected and approved by the Governors the system commenced. Some borrowed only a few and they went off to try the new system. They found money to be marvelous, and they soon valued everything in gold coins or dollars. The value they placed on everything was called a "price", and the price mainly depended on the amount of work required to produce it. If it took a lot of work the price was high, but if it was produced with little effort it was quite inexpensive. In one town lived Alan, who was the only watchmaker. His prices were high because the customers were willing to pay just to own one of his watches. Then another man began making watches and offered them at a lower price in order to get sales. Alan was forced to lower his prices, and in no time at all prices came down, so that both men were striving to give the best quality at the lowest price. This was genuine free competition.

It was the same with builders, transport operators, accountants, farmers, in fact, in every endeavour. The customers always chose what they felt was the best deal - they had freedom of choice. There was no artificial protection such as licences or tariffs to prevent other people from going into business. The standard of living rose, and before long the people wondered how they had ever done without money.

	At the end of the year, Fabian left his shop and visited all the people who owed him money. Some had more than they borrowed, but this meant that others had less, since there were only a certain number of coins issued in the first place. Those who had more than they borrowed paid back each 100 plus the extra 5, but still had to borrow again to carry on.

The others discovered for the first time that they had a debt. Before he would lend them more money, Fabian took a mortgage over some of their assets, and everyone went away once moreto try and get those extra 5 coins whichalways seemed so hard to find. No one realised that as a whole, the country could never get out of debt until all the coins were repaid, but even then, there were those extra 5 on each 100 which had never been lent out at all. No one but Fabian could see that it was impossible to pay the interest - the extra money had never been issued, therefore someone had to miss out. It was true that Fabian spent some coins, but he couldn't possibly spend anything like 5% of the total economy on himself. There were thousands of people and Fabian was only one. Besides, he was still a goldsmith making a comfortable living.

	At the back of his shop Fabian had a strongroom and people found it convenient to leave some of their coins with him for safekeeping. He charged a small fee depending on the amount of money, and the time it was left with him. He would give the owner receipts for the deposit. When a person went shopping, he did not normally carry a lot of gold coins. He would give the shopkeeper one of the receipts to the value of the goods he wanted to buy.
	Shopkeepers recognised the receipt as being genuine and accepted it with the idea of taking it to Fabian and collecting the appropriate amount in coins. The receipts passed from hand to hand instead of the gold itself being transferred. The people had great faith in the receipts - they accepted them as being as good as coins.

Before long, Fabian noticed that it was quite unusual for anyone to actually call for their gold coins. He thought to himself, "Here I am in possession of all this gold and I am still a hard working craftsman. It doesn't make sense. Why there are dozens of people who would be glad to pay me interest for the use of this gold which is lying here and rarely called for. It is true, the gold is not mine - but it is in my possession, which is all that matters. I hardly need to make any coins at all, I can use some of the coins stored in the vault." At first he was very cautious, only loaning a few at a time, and then only on tremendous security. But gradually he became bolder, and larger amounts were loaned. One day, a large loan was requested. Fabian suggested, "Instead of carrying all these coins we can make a deposit in your name, and then I shall give you several receipts to the value of the coins." The borrower agreed, and off he went with a bunch of receipts. He had obtained a loan, yet the gold remained in the strong-room. After the client left, Fabian smiled. He could have his cake and eat it too. He could "lend" gold and still keep it in his possession. Friends, strangers and even enemies needed funds to carry out their businesses - and so long as they could produce security, they could borrow as much as they needed. By simply writing out receipts Fabian was able to "lend" money to several times the value of gold in his strong-room, and he was not even the owner of it. Everything was safe so long as the real owners didn't call for their gold and the confidence of the people was maintained.

	He kept a book showing the debits and credits for each person.  The lending business was proving to be very lucrative indeed.

	His social standing in the community was increasing almost as fast as his wealth. He was becoming a man of importance, he commanded respect. In matters of finance, his very word was like a sacred pronouncement.

	Goldsmiths from other towns became curious about his activities and one day they called to see him. He told them what he was doing, but was very careful to emphasize the need for secrecy. If their plan was exposed, the scheme would fail, so they agreed to form their own secret alliance.

Each returned to his own town and began to operate as Fabian had taught. People now accepted the receipts as being as good as gold itself, and many receipts were deposited for safe keeping in the same way as coins. When a merchant wished to pay another for goods, he simply wrote a short note instructing Fabian to transfer money from his account to that of the second merchant. It took Fabian only a few minutes to adjust the figures. This new system became very popular, and the instruction notes were called "checks". Late one night, the goldsmiths had another secret meeting and Fabian revealed a new plan. The next day they called a meeting with all the Governors, and Fabian began. "The receipts we issue have become very popular. No doubt, most of you Governors are using them and you find them very convenient." They nodded in agreement and wondered what the problem was. "Well", he continued, "some receipts are being copied by counterfeiters. This practice must be stopped." The Governors became alarmed. "What can we do?" they asked. Fabian replied, "My suggestion is this - first of all, let it be the Government's job to print new notes on a special paper with very intricate designs, and then each note to be signed by the chief Governor. We goldsmiths will be happy to pay the printing costs, as it will save us a lot of time writing out receipts". The Governors reasoned, "Well, it is our job to protect the people against counterfeiters and the advice certainly seems like a good idea." So they agreed to print the notes.

"Secondly," Fabian said, "some people have gone prospecting and are making their own gold coins. I suggest that you pass a law so that any person who finds gold nuggets must hand them in. Of course, they will be reimbursed with notes and coins." The idea sounded good and without too much thought about it, they printed a large number of crisp new notes. Each note had a value printed on it - $1, $2, $5, $10 etc. The small printing costs were paid by the goldsmiths.

The notes were much easier to carry and they soon became accepted by the people. Despite their popularity however, these new notes and coins were used for only 10% of transactions. The records showed that the check system accounted for 90% of all business. The next part of his plan commenced. Until now, people were paying Fabian to guard their money. In order to attract more money into the vault Fabian offered to pay depositors 3% interest on their money.

	Most people believed that he was re-lending their money out to borrowers at 5%, and his profit was the 2% difference. Besides, the people didn't question him as getting 3% was far better than paying to have the money guarded.

The volume of savings grew and with the additional money in the vaults, Fabian was able to lend $200, $300, $400 sometimes up to $900 for every $100 in notes and coins that he held in deposit. He had to be careful not to exceed this nine to one ratio, because one person in ten did require the notes and coins for use. If there was not enough money available when required, people would become suspicious, especially as their deposit books showed how much they had deposited. Nevertheless, on the $900 in book figures that Fabian loaned out by writing checks himself, he was able to demand up to $45 in interest, i.e. 5% on $900. When the loan plus interest was repaid, i.e. $945, the $900 was cancelled out in the debit column and Fabian kept the $45 interest. He was therefore quite happy to pay $3 interest on the original $100 deposited which had never left the vaults at all. This meant that for every $100 he held in deposits, it was possible to make 42% profit, most people believing he was only making 2%. The other goldsmiths were doing the same thing. They created money out of nothing at the stroke of a pen, and then charged interest on top of it. True, they didn't coin money, the Government actually printed the notes and coins and gave it to the goldsmiths to distribute. Fabian's only expense was the small printing fee. Still, they were creating credit money out of nothing and charging interest on top of it. Most people believed that the money supply was a Government operation. They also believed that Fabian was lending them the money that someone else had deposited, but it was very strange that no one's deposits ever decreased when a loan was advanced. If everyone had tried to withdraw their deposits at once, the fraud would have been exposed. When a loan was requested in notes or coins, it presented no problem. Fabian merely explained to the Government that the increase in population and production required more notes, and these he obtained for the small printing fee. One day a thoughtful man went to see Fabian. "This interest charge is wrong", he said. "For every $100 you issue, you are asking $105 in return. The extra $5 can never be paid since it doesn't exist. Farmers produce food, industry manufacturers goods, and so on, but only you produce money. Suppose there are only two businessmen in the whole country and we employ everyone else. We borrow $100 each, we pay $90 out in wages and expenses and allow $10 profit (our wage). That means the total purchasing power is $90 + $10 twice, i.e. $200. Yet to pay you we must sell all our produce for $210. If one of us succeeds and sells all his produce for $105, the other man can only hope to get $95. Also, part of his goods cannot be sold, as there is no money left to buy them. He will still owe you $10 and can only repay this by borrowing more. The system is impossible."

The man continued, "Surely you should issue 105, i.e. 100 to me and 5 to you to spend. This way there would be 105 in circulation, and the debt can be repaid." Fabian listened quietly and finally said, "Financial economics is a deep subject, my boy, it takes years of study. Let me worry about these matters, and you look after yours. You must become more efficient, increase your production, cut down on your expenses and become a better businessman. I am always willing to help in these matters."

	The man went away still unconvinced. There was something wrong with Fabian's operations and he felt that his questions had been avoided.  Yet, most people respected Fabian's word - "He is the expert, the others must be wrong. Look how the country has developed, how our production has increased - we must be better off."

	To cover the interest on the money they had borrowed, merchants were forced to raise their prices. Wage earners complained that wages were too low. Employers refused to pay higher wages, claiming that they would be ruined. Farmers could not get a fair price for their produce. Housewives complained that food was getting too dear.

And finally some people went on strike, a thing previously unheard of. Others had become poverty stricken and their friends and relatives could not afford to help them. Most had forgotten the real wealth all around - the fertile soils, the great forests, the minerals and cattle. They could think only of the money which always seemed so scarce. But they never questioned the system. They believed the Government was running it. A few had pooled their excess money and formed "lending" or "finance" companies. They could get 6% or more this way, which was better than the 3% Fabian paid, but they could only lend out money they owned - they did not have this strange power of being able to create money out of nothing by merely writing figures in books. These finance companies worried Fabian and his friends somewhat, so they quickly set up a few companies of their own. Mostly, they bought the others out before they got going. In no time, all the finance companies were owned by them, or under their control. The economic situation got worse. The wage earners were convinced that the bosses were making too much profit. The bosses said that their workers were too lazy and weren't doing an honest day's work, and everyone was blaming everyone else.The Governors could not come up with an answer and besides, the immediate problem seemed to be to help the poverty stricken.

	They started up welfare schemes and made laws forcing people to contribute to them. This made many people angry - they believed in the old-fashioned idea of helping one's neighbour by voluntary effort. "These laws are nothing more than legalised robbery. To take something off a person against his will, regardless of the purpose for which it is to be used, is no different from stealing."

But each man felt helpless and was afraid of the jail sentence which was threatened for failing to pay. These welfare schemes gave some relief, but before long the problem was back and more money was needed to cope. The cost of these schemes rose higher and higher and the size of the Government grew. Most of the Governors were sincere men trying to do their best. They didn't like asking for more money from their people and finally, they had no choice but to borrow money from Fabian and his friends. They had no idea how they were going to repay. Parents could no longer afford to pay teachers for their children. They couldn't pay doctors. And transport operators were going out of business. One by one the government was forced to take these operations over. Teachers, doctors and many others became public servants. Few obtained satisfaction in their work. They were given a reasonable wage, but they lost their identity. They became small cogs in a giant machine. There was no room for personal initiative, little recognition for effort, their income was fixed and advancement came only when a superior retired or died.

In desperation, the governors decided to seek Fabian's advice. They considered him very wise and he seemed to know how to solve money matters. He listened to them explain all their problems, and finally he answered, "Many people cannot solve their own problems - they need someone to do it for them. Surely you agree that most people have the right to be happy and to be provided with the essentials of life. One of our great sayings is "all men are equal" - is it not?"

Well, the only way to balance things up is to take the excess wealth from the rich and give it to the poor. Introduce a system of taxation. The more a man has, the more he must pay. Collect taxes from each person according to his ability, and give to each according to his need. Schools and hospitals should be free for those who cannot afford them …" He gave them a long talk on high sounding ideals and finished up with, "Oh, by the way, don't forget you owe me money. You've been borrowing now for quite some time. The least I can do to help, is for you to just to pay me the interest. We'll leave the capital debt owing, just pay me the interest." They went away, and without giving Fabian's philosophies any real thought, they introduced the graduated income tax - the more you earn, the higher your tax rate. No one liked this, but they either paid the taxes or went to jail.

	Merchants were forced once again to raise their prices. Wage earners demanded higher wages forcing many employers out of business, or to replace men with machinery. This caused additional unemployment and forced the Government to introduce further welfare and handout schemes.

Tariffs and other protection devices were introduced to keep some industries going just to provide employment. A few people wondered if the purpose of the production was to produce goods or merely to provide employment. As things got worse, they tried wage control, price control, and all sorts of controls. The Government tried to get more money through sales tax, payroll tax and all sorts of taxes. Someone noted that from the wheat farmer right through to the housewife, there were over 50 taxes on a loaf of bread. "Experts" arose and some were elected to Government, but after each yearly meeting they came back with almost nothing achieved, except for the news that taxes were to be "restructured", but overall the total tax always increased. Fabian began to demand his interest payments, and a larger and larger portion of the tax money was being needed to pay him.

	Then came party politics - the people started arguing about which group of Governors could best solve the problems. They argued about personalities, idealism, party labels, everything except the real problem. The councils were getting into trouble.

In one town the interest on the debt exceeded the amount of rates which were collected in a year. Throughout the land the unpaid interest kept increasing - interest was charged on unpaid interest. Gradually much of the real wealth of the country came to be owned or controlled by Fabian and his friends and with it came greater control over people. However, the control was not yet complete. They knew that the situation would not be secure until every pe