t is the
early 1940's. The Second World War is
raging. Patriotism is in high pitch in
the U.S. There is an Internal Revenue
Service somewhere, but few people know
or care about it. A few years back the
government "purchased" almost all the
gold owned by the people of the U.S.
Your grandfathers sold their gold to the
government in order to avoid going to
prison. The currency is still gold
backed, sort of, but there are wrenching
problems in the banking industry. How to
scrape together enough money to support
the war is a big issue. At least, that's
the way the public saw the issue. A more
serious problem for the owners of the
twelve Federal Reserve banks was that
they had promised their new system would
provide a flexible currency -- and they
promised the value of our money would
not decrease. How could they keep their
promise to protect the value of the U.S.
dollar but not lose control of their
newfound way to increase their personal
wealth? The U.S. Constitution could not
force a mandatory income tax on people
without violating the Fourth and Fifth
Amendments. People could not both be
"secure in their papers and property"
and also be required to report their
income. -Further, any report could turn
out to be self-incriminating. It was a
tough nut to crack.
how that problem was solved ...
the conversation that follows was never
held, of course; but the events
described below are affecting your life
in a very real and direct way in an
on-going basis. You know who Uncle Sam
is. Feddy R. Banks is one of the owners
of the twelve privately- owned,
decidedly NON-Federal, Federal Reserve
Banks. Feddy's middle name (of course)
Banks: Uncle Sam, you know we can't do
this Federal Reserve thing for you for
nothing. We don't mind helping you, but
you have to help us too.
You can create "money" at will. What
else do you want??
Banks: I don't have to tell you that if
we just keep doing that, the day will
come when the dollar will have no value
at all. We have to match the creation of
money to the creation of goods and
services. Otherwise, you know the
routine: "Too many units of currency
chasing too few goods means inflation."
Money may be easy to create, and that's
good. But to prevent price inflation we
have to sop up some of the surplus.
I am not a grade school student. I
understand economics. Tell me what you
have in mind.
Banks: We want you to collect an income
tax and use it to feed back to our
Federal Reserve System the money we will
charge you for interest on the money we
create for you and lend to you.
Let me get this straight. -You are going
to use MY printing press to create
dollar bills and you will pay me a
couple pennies for the printing costs.
Then you will allow my Treasury
Department to print thousands of checks
on our government accounts. Those
dollars will be chalked up as loans from
you to my government and you will charge
me the current interest rate for my use
of my own money. Then, you want my
people to pay a tax on their "income" in
order to pay you interest on money that
was mine in the FIRST place ... -Is THAT
what you want?
Banks: Exactly. I think you understand.
I know how powerful you are. Power goes
where money flows ... . But how can I
justify charging "income tax"? Have you
ever READ the Fourth Amendment to my
Banks: You mean the part about (chuckle)
people being able to hide their
paperwork, so-called being "secure in
That's not a laughing matter. That
Constitution was intended to be an
Banks: Well, maybe ... but, that's
really not a problem.
Well, before you tell me why it is not a
problem, let me just mention the Fifth
Article to the Amendments of the
Banks: I knew you would say that. Your
problem is that in order to collect
income tax you have to know how much
income a person earned. Right? And they
would have to tell you. Right? And if
they told you and made a mistake, they
would be committing a crime. Right? And
if you have a document from them signed
under perjury that means they
testified against themselves. Right?
Yes, and in order to be able to have
confidence in the information reported
we will have to collect it under penalty
of perjury. Anybody who signed a report
like that would be testifying against
himself even if he told the truth,
because the result would mean he would
have to pay a tax all acts prohibited
by the US Constitution. That's exactly
why Congress has never been able to
write a law demanding that our people
send in information about their income.
We have to use other devices.
Banks: Sam, you have been living in the
clouds too long. I have just the device
to solve all your problems. The
Constitution established three branches
of government. Right?
You keep doing that. I am not a school
kid. Yes, we have the Executive, the
Legislative and the Judicial branches.
They balance each other. That's the way
the Constitution structured my
Banks: Exactly. Under Justice Marshall
wasn't it made clear that the court
system has the authority to tell us what
the law is?
Well, yes, but that doesn't solve the
problem with the Constitution.
Banks: Yes, it does. It's easy. You just
dodge the whole issue. You can't allow
Congress to pass a law that says, "Show
me your papers." That would violate the
Constitution. I agree. Congress can't do
that. You also cannot have Congress pass
a law that says, "People must testify
under oath about the accuracy of some
elusive mathematical calculations
involving their income and expenses."
So, you dodge those issues.
Dodge the issue? I don't get it. You
have defined the issue very well. How
would I possibly get around it?
Banks: Have you ever heard of Walt
Banks: Good. Here's my idea. What is
distasteful about the idea of the income
Obviously, people don't want to give up
money they had to work hard to earn.
Banks: Of course. What if the income tax
meant that people would GET MONEY
instead of giving it up?
Now that is just plain crazy talk. You'd
better explain yourself.
Banks: Crazy stuff is Walt Disney's
business. It is what he does for a
living. So, have Disney studios produce
a brief cartoon featuring that crazy
Donald Duck. You could call the movie,
"The New Spirit." It would tell people
that you are going to set up a plan that
will allow them to get a big wonderful
surprise in the mail each year. It will
be a tax refund.
Tax refund? How does that put money in
Banks: Easy. Here's how it works. You
require businesses to send to your
Treasury Department a slice of every
employee's paycheck. Then, tell the
people how they should fill out a report
every year that will help them get back
some of that money. Some of it. Chuckle.
Not all. Most of it will be paid to our
Twelve Federal Reserve Banks.
I get it. The boss takes money out of
their check money they won't miss
because they never see it. Then once a
year they can get a bonus from the
government. Great idea. The boss is not
paying an income tax for the employee.
He is just sending in a deposit. The
employee will want that yearly bonus, so
he will be glad to volunteer to fill out
our tax forms, even though the law does
not require him to do it. What a genius
you are! We will do it. But there is
still a problem.
Banks: What's that?
It won't be Constitutional and it won't
Banks: Not to worry. Haven't you noticed
how the courts have been making
decisions lately? The law is irrelevant
in court. Instead, judges make decisions
based on two broad concepts; "The
interest of justice," and "Public
Policy." In a short while, what began as
a refund celebration will be enforced by
the courts as a mandatory obligation.
You just watch. I know what I'm talking
about. Throughout history fashion and
tradition have always had more power
You are a genius. You are right. Nobody
will look for the law, anyhow. -They
will be too busy keeping their books
straight so they can get that annual
* * *
research the life of that great
entertainer Walt Disney, you will find
that just after he produced that Donald
Duck cartoon that played repeatedly in
the theaters in the 1940's he developed
a dream. He wanted to buy a large parcel
of land in Anaheim, California, and
construct a very expensive entertainment
park. We know it as Disneyland. Disney's
biographies make it clear that the task
was difficult. I have spoken personally
with one of the original animation
artists who worked with Disney. She
makes it clear that the financial
challenges were immense. Disney even
secured a second mortgage on his home.
However, a recent biography opens a new
door of understanding. A major banker, a
man who could have been the hypothetical
banker talking to Uncle Sam, then served
on the Board of Directors of ABC. That
banker arranged for ABC to provide
critical major funding for Disneyland.
Ironically, Walt Disney's genius has now
overwhelmed that benefactor. Disney now
is that the Federal Reserve was granted
the greatest gift of free capital in the
world's history through the artistry of
Walt Disney. Disney's Donald Duck
cartoon opened the minds of the US
public to the joys of the withholding
tax. Disneyland is a monument to the
Master Bankers' warm-hearted gratitude
for Walt Disney's artistic salesmanship.
Today Disneyland is a memorial to the
acceptance by the U.S. public of the
need to file an annual 1040 form.
only the benefit of the refund. That
benefit was sold to your fathers by none
other than Donald Duck in the propaganda
movie "The New Spirit," produced to sell
the "merits" of the 1943 Congressional
Act called "The Current Tax Payment
Act." That law is a mandate to
employers, not to ordinary people. The
law demanding the filing of a tax return
remains missing. Think about the word
"Return." The 1040 is a "Tax Return."
The form is saying, "I paid a tax.
Please return some of it to me.
ruled by a Donald Duck "Mickey Mouse"
system. Like it?
thousands of people are asking the IRS
and their Congress members to "show the
law" demanding that we file 1040's.
There can be no law. Such a law would
violate the US Constitution. Instead of
a law, we have "mandatory voluntary
Donald and Mickey are crazy. Their
little minds are capable of any stretch
of imagination possible to the artist's
pen. He structured a volunteer job that
we are forced to do. Happy April 15.
first posting this material we have
learned that the day after Pearl Harbor
was bombed, December 8, 1941, the U.S.
Military took control of the Walt Disney
additional reading has also taught us
that the man Walt Disney disdained
bankers. He "never had any reverence for
them" when expressing his "profound
distaste" for that field of endeavor. A
writer commenting on the Disney
phenomenon states, "struggling to
negotiate a contract, he assured his
brother Roy that 'none of our profits
[are] going to some leech sitting at a
big mahogany desk telling us what to
do.'" A short time later, Walt denouced
the whole finance 'game' as "the damnest
mixed-up affiar I have ever heard of ...
I'm not interested in money, except for
what I can do with it to advance my
work." He made those statements to an
interviewer in 1933. Disney is
characterized as describing his
encounters with government as "extremely
frustrating." For example Henry
Morgenthau, Jr, Secretary of Treasury,
criticized Disney for using Donald Duck
in the 1942 cartoon designed to sell the
withholding tax. Disney replied in what
is described as a "tight- lipped" retort
by telling the Secretary, "At our
studio, this was the equivalent of
giving you Clark Gable out of the MGM
recognized the extent to which his
revenues had been damaged by losing the
overseas market during the war. He is
characterized as being "debt-ridden,
suffering a loss of direction, and
politically frustrated." He "began to
adopt what associates would call his
'wounded bear' persona." (Steven Watts,
Walt Disney: Art and Politics in the
American Century in The Journal of
American History, Vol 82, No. 1. (June
1995, pp. 84-110).
what we have written into this context,
we must recognize that there were forces
at work that could have overwhelmed the
man Walt Disney. The Donald Duck "New
Spirit" cartoon may have been more a
creation of the Department of Treasury
than of Disney himself. However,
whatever cooperation Disney lent to that
effort, he was well repaid. We believe
that Disneyland would not exist today
were it not for Disney later calling
upon those bankers he disdained to help
him bring reality to his dream.
with questions or comments about this