By Nick Giambruno - November 12, 2025

1913 was a terrible year for America and human freedom.

It was the year Congress passed the Federal Reserve Act and ratified the 16th Amendment to the US Constitution, which authorized a federal income tax.

At first glance, these two unfortunate developments may seem unrelated. Yet what are the odds that the US would adopt both a central bank and an income tax in the very same year?

It seems implausible that this was the result of mere chance.

In fact, upon closer examination, the Federal Reserve system depends on an income tax to function as it does.

Let me put it into the simplest and most concise terms.

1. Central banks create fake money out of thin air.

2. They then loan this “money” to governments at interest by purchasing government bonds with it.

3. The primary asset held by the Fed is government debt. However, what secures and collateralizes this debt? The government’s ability to tax its citizens.

4. Governments use violence and threats of violence to extract taxes from average citizens to pay the interest and service the debt owed to the central bank, which created the money it loaned to the government out of thin air.

It was no coincidence that the federal income tax was imposed on the American people shortly before the establishment of the Federal Reserve in 1913. Here’s why.

What is the primary asset central banks own?

Government bonds.

What secures the value of government bonds?

The ability of the government to extract taxes from its citizens.

The income tax is what gives the US government access to a huge funding source, effectively a permanent and uncapped claim on the productivity of all citizens. Without it, US government debt would be far less attractive to own, and the central banking scam wouldn’t work.

In short, you and your productivity are the collateral for your government’s debts to the central bank. Your labor is what secures their loan—which they made with money they created out of nothing—to your government.

That’s the unvarnished truth about central banking.

In short, it’s the business of usury and tax farming.

(To me, a more practical modern meaning of usury is “enslaving people with financial trickery.” Central banking clearly fits the bill.)

Outpacing Debasement

The central bank is a powerful wealth transfer mechanism that enables governments to harvest the productive efforts of their citizens efficiently and surreptitiously.

The central bank’s currency debasement transfers wealth from savers to those closest to the money printer, namely governments and their cronies.

The central bank’s real mandate is to transfer as much wealth as possible via currency debasement to the political class without causing alarm among the plebs. Ideally, it happens gradually so nobody notices, like a child taking only a little money out of his mother’s purse each day so she doesn’t notice.

However, sometimes their theft spirals out of control, and it’s impossible for the plebs not to notice.

Consider this . . .

[SNIP]