Author Topic: ATTENTION AUSTRIAN SCHOOLERS: STOP CONNING PEOPLE INTO WORSHIPPING DEFLATION!  (Read 15765 times)

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Offline Geolibertarian

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As most of you know, the let-everything-collapse Austrian School has been insisting for years that “inflation” is the root cause of America’s financial crisis, and that “unbacked paper money” (as opposed to unpayable, ever-expanding interest debt) is, in turn, the root cause of inflation.

However, contrary to what countless newcomers have undoubtedly been led to falsely assume as a result of this propaganda, there was actually a time when Federal Reserve Notes were literally "redeemable" in -- and hence "backed" by -- gold. Let's pause now while the monetary flat-earthers from the Austrian School hurriedly race to the bathroom to jerk off …. [ten minutes later] .… Finished? Ok, let's continue.

Within this window of time, there was a point at which the gold-backed Federal Reserve Note was 20% higher in value than it was four years beforehand. Yes, you heard me correctly: 20% higher, not lower, than it was four years beforehand. And that, of course, is the literal opposite of the “inflation” we’ve all been propagandized to fear more than death itself.

Now, if you agree with everthing you hear from the precious metal-obsessed Austrian School, then you’ve already concluded that the average Amerian worker had to have been better off than he was before this 20% increase in value. Just had to have been!

Yet, in reality, not only was he not better off than before, he was dramatically worse off, because the four-year time period to which I refer is 1928-1932:

       http://www.youtube.com/watch?v=MxYOzUjY5iY (The Money Masters - part 15 of 22)
       http://www.youtube.com/watch?v=AoG8R1s59Po (The Money Masters - part 16 of 22)

If that’s a surprise to anyone, then perhaps it’s time to stop parroting Austrian School dogma (even when it’s been wrapped in the American flag or in the flag of “liberty”) and start questioning it for change!

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"[Andrew] Jackson and Van Buren removed the monetary power from the private bankers but did not re-establish it in the hands of the nation. Instead, Van Buren organized the Independent Treasury System, establishing 15 sub branches of the Treasury to handle government moneys in 1840. From December 1836 the government moved toward making and receiving all payments in coinage, or truly convertible bank notes....Once the state bank notes were no longer accepted by the government, their circulation was cut back dramatically.

"This was the closest our nation has ever come to implementing a real gold/silver standard. Operating under the commodity theory of money, Van Buren, who truly cared for the Republic, helped bring on the worst depression the Nation had ever seen, starting in 1837. It was reportedly even worse than that caused by the 2nd Bank of the U.S. in 1819. Bad as the state bank notes were, they had still been functioning as money!

"Those who proclaim that no gold and silver money system has ever failed should consider that whether you are a laborer, farmer, or industrialist, the money system's success or failure is not measured by the value of a piece of metal. When your job, your farm, or factory has disappeared in a monetarily created depression, the system has failed! [Emphasis added]

-- Stephen Zarlenga, The Lost Science of Money, p. 426

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"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline Geolibertarian

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ATTENTION AUSTRIAN SCHOOLERS: STOP TELLING PEOPLE MONEY IS "PRINTED"
« Reply #1 on: February 23, 2011, 02:46:47 pm »
How many times have you heard a conservative or right-leaning libertarian parrot the Austrian School talking point about how our financial crisis is the result of too much money being “printed,” implying thereby that the “solution” to this crisis is to simply shut off the printing press?

Chances are you’ve lost count just as I have.

Yet this mantra about money being "printed" is misleading at best. Why? Two reasons. First, because the bulk of our money supply isn’t even paper, but mere numeric entries on the books of some bank.

Second, because the U.S. Treasury could "print" literally trillions of Federal Reserve Notes, yet the money supply would not increase one iota. Why wouldn’t it increase? Because under the current system, those notes do not become "money" (legal tender) until they've been issued by the private banking system.

And how do private banks issue them?

By loaning them into circulation at interest! No loans, no money.

Why, then, do Austrian School propagandists obsessively use the word "print" anyway?

Because they want desperately for everyone to blindly assume that it's the "fiat" or "paper" aspect of the current money system that is causing all this financial chaos and economic destruction, lest the misinformed masses realize the truth: that it's actually the DEBT aspect that's causing it all, and that the "Greenback" system advocated by such monetary reformers as Ellen Brown, Richard C. Cook, Byron Dale, Bill Still and Stephen Zarlenga would therefore solve this problem by delinking the “issuance” of money from the “lending” of it. And nothing terrifies Austrian Schoolers more than a mass awakening to this truth, because the success of their propaganda campaign depends on everyone falsely assuming that the only alternative to the inflationary debt-based money system we have now is a horribly deflationary system in which our entire money supply is restricted to the physical supply of gold or precious metals -- even though such a system has proven disastrous every time it’s been tried (see The Lost Science of Money, Web of Debt and The Money Masters).

So remember: the next time you hear the word "print" in reference to monetary policy, that's Austrian School code for...

       "Pay no attention to that usury behind the curtain! PAPER is the source of all monetary evils!"  ::)
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline Geolibertarian

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Austrian Schoolers are fond of saying that part of the solution to our debt-caused economic crisis is to "liquidate the debt," yet they never explain what this means. As Webster Tarpley explains in the following excerpt, it means liquidating not just the debt itself, but all of the physical assets which back that debt; and that, of course, means allowing the very bankers who created this mess in the first place to foreclose on everyone and buy up the entire country, practically, for mere pennies on the dollar, even though they (the bankers) gave no "lawful consideration" for any of the collateral-backed IOUs they accepted in exchange for the non-existent "money" they loaned.

------------------------------

As the German economist Wilhelm Lautenbach (himself a supporter of the American System of political economy, as discussed below) told a meeting of the Friedrich List Society in Berlin in September 1931 called to discuss ways of ending the depression and preventing Hitler’s seizure of power, there are basically four policy courses which are open to a nation state in a time of acute economic breakdown crisis. These policy options essentially exhaust the available choices for a modern economy and banking system. Whatever we think we may be choosing in the current depression, it is almost certain that we will in fact be choosing one of these four courses. Therefore, let us examine each one carefully, with all the diligence of a life and death decision.

Deflation and budget cutting, liquidationism.  The first policy option consists of letting the depression take its course, with minimal government intervention. Since this means letting the entire banking system sink into insolvency, and letting the supply of credit dry up completely, this approach leads to massive deflation of the type experienced in the US between 1929 and 1933, with astronomical rates of unemployment, widespread bankruptcy of small business, factory closings, and general immiseration, including widespread death by malnutrition and starvation. Deflationary policies are often accompanied by budget cuts and austerity, explained by the alleged need to balance the budget. Special targets of these austerity measures are social programs like unemployment insurance, food stamps, old-age pensions, government health care programs, and the like. This entire package is often justified by propaganda about doing away with the excesses of the speculative boom, punishing incompetent management, teaching the population to live within its means, and generally purging excesses from the system. In reality, deflation and budget cutting represent a policy which appeals to wealthy plutocrats of the criminal type. These are people who have money, and who believe that they will continue to have money, no matter what happens to the rest of the economy. Because of their inhuman cruelty and greed, they imagine that they will be able to buy up valuable distressed assets for pennies on the dollar, and that they will be able to employ skilled labor for coolie wages. These wealthy sociopaths are especially keen to target government run unemployment, food, and health programs so that starving and desperate workers can be forced to work for almost nothing to avoid starvation. For such plutocrats, every depression is an opportunity to institutionalize the low-wage, sweatshop economy.

The high priest of liquidationism was the sinister Andrew Mellon, the ultra-reactionary Secretary of the Treasury who dictated many aspects of financial and economic policy in the interests of a tiny cabal in Wall Street to Presidents Harding, Coolidge, and Hoover during the 1920s. Andrew Mellon is almost identical with today’s monetarists of the Austrian, Chicago, or supply side persuasion. Mellon’s favorite litany was: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate … It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people ….” Mellon demanded that the full fury of the world economic depression be visited upon a virtually defenseless US population. Don’t interfere with the depression, Mellon argued, and the crisis would turn out to represent nothing more than “a bad quarter of an hour.” Naturally, this approach gives no thought to the large numbers of persons who may lose their lives or their health during the crisis, nor to a generation of young people and working people who may be crushed into permanent despair by disastrous economic conditions. Indeed, liquidationists aim at the permanent lowering of the standard of living of the entire population as a positive good. Liquidationism is also prominent among the possible interpretations of the “creative destruction” slogan of another reactionary economist, Joseph Schumpeter. “Creative destruction” has generally been touted by those who did not expect to be destroyed.

Implicit in the demand by Austrians, Chicago Boys, and supply-siders that the depression be given free reign to do its disruptive work is a mystical notion of the so-called business cycle. For example, the Wall Street propagandist Miss Calamity Shlaes of the Council on Foreign Relations has developed a spurious argument, religiously repeated by right wing radical radio talk show hosts, to the effect that the Roosevelt New Deal “prolonged” the depression of the 1930s. Prolonged it in comparison to what? The Calamity Shlaes argument is evidently that the Great Depression of the 1930s would have ended automatically on its own at some point before the end of the decade if nothing whatever had been done to mitigate its devastating effects. It is notable first of all that Miss Shlaes does not ask anything about the human toll in terms of morbidity, mortality, ruined lives, despair or the permanent lowering of the living standard which her recipe of benign neglect would have entailed. She thinks that depressions are part of the business cycle and that they end up more or less automatically. In reality, there is no guarantee whatsoever that the descent into the trough of an economic depression will be followed by any kind of upswing or rebound. Quite the contrary. If we look at the 1930s, we see immediately the root cause of the collapse of world trade was the bankruptcy and default of the Bank of England on gold payments for the British pound in September 1931. This was a moment not just of collapse but true disintegration, meaning that the only world monetary system for financing trade which the world possessed at that time had been totally destroyed. World trade could not and did not revive until a new world monetary system was created under New Deal auspices at the Bretton Woods conference in New Hampshire in 1944. In order for that new world monetary system to be created, the Axis powers had to be defeated, and resistance from Great Britain and her satellites had to be drastically reduced by the de facto bankruptcy of the city of London. The new Bretton Woods monetary system, certainly not perfect but the most effective in human history up to that point, was in fact the indispensable prerequisite for a world economic recovery. If the very reactionary Miss Shlaes wanted to prove an automatic laissez-faire recovery from world depression, she would have to cite some country where Austrian school monetarist methods of opening the door wide to depression had in fact brought about a recovery before the middle of 1941. In fact, no such country existed.

Miss Shlaes and her co-thinkers also argue that the Great Depression was not ended by the government spending involved in the New Deal, but rather by the outbreak of World War II. We should point out that unemployment in the United States had virtually disappeared before Pearl Harbor as a direct result of Roosevelt’s Lend-Lease program of financially harnessing the credit resources of the Federal Reserve and the banking system for defense production, with first Great Britain and then the Soviet Union as the main beneficiaries of Lend-Lease deliveries. The reactionary argument against the New Deal is like saying that the depression was not ended by government spending, but rather by government spending. What the reactionaries are trying to say is that the depression was not ended by federal emergency relief for wage earners and other individuals, nor by infrastructure investments like the Tennessee Valley Authority (all of which they opposed tooth and nail), but rather by military expenditure. The entire position of these reactionaries is hopelessly dishonest, or garbled, and contradictory, and the fact is that liquidationism by itself has never led to an economic recovery, although it has inflicted untold damage on numerous societies. In the real world, you do not get out of a world economic depression through the mystical operations of some yin and yang cycle. You get out of the depression by producing your way out of it. For this to happen, it is generally necessary for the government to implement an adequate economic recovery program, since in a depression the private banking and financial sector by definition has completely struck out.

These monetarists and liquidationists demand today that the American people capitulate and surrender to the forces of economic and financial depression without any attempt at self defense. It is a doctrine of astounding impotence, callousness, and pessimism, and one which clashes most sharply with any traditional definition of American culture, which has always been founded on optimism and can-do spirit. We need to remember that, no matter how bad the economic policies of Herbert Hoover were in fact, Hoover never completely capitulated to the depression in the way that some Austrian monetarists are demanding today. During the depression, the Austrian monetarist Friedrich von Hayek produced articles demanding that all interference with the depression must immediately cease, while government spending should be cut. Hoover, despite the demands of some Republicans like Andrew Mellon, refused to fully embrace this course. As Hoover pointed out in his acceptance speech for the Republican presidential nomination in Washington, DC on August 11, 1932, he had tried to fight the depression. Hoover claimed that if he had followed the ultra-reactionary advice, “we might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to the Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put that program into action.” At a speech at Des Moines, Iowa on October 4, 1932, Hoover pointed out that “some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom.” But Hoover stressed that his administration had “determined that we would not follow the advice of the bitter end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.” Deflation, budget cutting, and overall liquidationism in the spirit of Andrew Mellon lives on today among the followers of Milton Friedman and his Chicago school, von Hayek and von Mises of the Austrian school, and the various stripes of supply side doctrine. Liquidationism has generally been professed by the reactionary right wing of the Republican Party, especially when out of power, including such figures as Robert Taft, Barry Goldwater, Ronald Reagan, and Ron Paul today. This is the approach of Limbaugh, Hannity, Glenn Beck, and the other reactionary radio talk show hosts of our own time. One advantage of this form of argument is that it can be based on folksy comparisons to the kitchen-table discussion of the household budget, references to belt-tightening, thrift, and the like. This permits the blurring of certain dramatic differences between the situation of an individual household and that of a national government with resources including credit, currency, and sovereignty.

Historically, a notable exercise in the sustained and ruthless application of budget cuts was the regime of German Chancellor Heinrich Bruning. As German chancellor between March 1930 and May 1932, Bruning was unable to muster a majority of the parliament and therefore used presidential decree-laws signed by President von Hindenburg to reduce wages, reduce worker benefits, cut social welfare payments, and rob workers of the unemployment insurance which was due them. Taxes were increased, and the German living standard declined sharply. Unemployment increased disastrously from 5 million in the winter of 1930-31 to 6 million in the winter of 1931-32, which represented more than 20% and was the worst in Europe by far. By the time Bruning left office, Hitler’s seizure of power was little more than a half year in the future. The application of Austrian-school monetarism under Bruning was a catastrophic failure in economic terms, and politically opened the door for fascist dictatorship. How strange that today persons calling themselves libertarians should recommend similar policies.

-- Webster Tarpley, Surviving the Cataclysm, 2nd ed., pp. 10-13



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This is why I get so disgusted when these same liquidate-everything Austrian Schoolers wrap themselves in the American flag and prance around proudly proclaiming how much they believe in "freedom," because it's obvious to anyone who looks beneath the surface of their euphemism-coated economic agenda that "freedom" means two different things, depending on who you are. If you're an overprivileged plutocrat, it means being free to economically ass-rape the masses under the ridiculously false pretense of "property rights" and the "free market"; if you're anyone else, it means being free to sheepishly lie there and take it. But then is this Orwellian concept of "freedom" really so surprising, particulary in view of who financed the Austrian School out of obscurity in the U.S.?

Time to wake up and smell the ruling class Kool-Aid you've been drinking all this time, tea partiers!
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline Geolibertarian

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INFLATION FEARS: REAL OR HYSTERIA?
« Reply #3 on: May 12, 2011, 10:55:22 am »
INFLATION FEARS: REAL OR HYSTERIA?

Ellen Brown
May 10th, 2011
www.webofdebt.com/articles/inflation_fears.php

Debate continues to rage between the inflationists who say the money supply is increasing, dangerously devaluing the currency, and the deflationists who say we need more money in the economy to stimulate productivity. The debate is not just an academic one, since the Fed’s monetary policy turns on it and so does Congressional budget policy.

Inflation fears have been fueled ever since 2009, when the Fed began its policy of “quantitative easing” (effectively “money printing”). The inflationists point to commodity prices that have shot up. The deflationists, in turn, point to the housing market, which has collapsed and taken prices down with it. Prices of consumer products other than food and fuel are also down. Wages have remained stagnant, so higher food and gas prices mean people have less money to spend on consumer goods. The bubble in commodities, say the deflationists, has been triggered by the fear of inflation. Commodities are considered a safe haven, attracting a flood of “hot money” -- investment money racing from one hot investment to another.

To resolve this debate, we need the actual money supply figures. Unfortunately, the Fed quit reporting M3, the largest measure of the money supply, in 2006.

Fortunately, figures are still available for the individual components of M3. Here is a graph that is worth a thousand words. It comes from ShadowStats.com (Shadow Government Statistics or SGS) and is reconstructed from the available data on those components. The red line is the M3 money supply reported by the Fed until 2006. The blue line is M3 after 2006.


The chart shows that the overall U.S. money supply is shrinking, despite the Fed’s determination to inflate it with quantitative easing. Like Japan, which has been doing quantitative easing (QE) for a decade, the U.S. is still fighting deflation.

Here is another telling chart – the M1 Money Multiplier from the Federal Reserve Bank of St. Louis:


Barry Ritholtz comments, “All that heavy breathing about the flood of liquidity that was going to pour into the system. Hyper-inflation! Except not so much, apparently.” He quotes David Rosenberg: “Fully 100% of both QEs by the Fed merely was new money printing that ended up sitting idly on commercial bank balance sheets. Money velocity and money multiplier are stagnant at best.” If QE1 and QE2 are sitting in bank reserve accounts, they’re not driving up the price of gold, silver, oil and food; and they’re not being multiplied into loans, which are still contracting.

The part of M3 that collapsed in 2008 was the “shadow banking system,” including money market funds and repos. This is the non-bank system in which large institutional investors that have substantially more to deposit than $250,000 (the FDIC insurance limit) park their money overnight. Economist Gary Gorton explains [.pdf]:

    The financial crisis . . . was due to a banking panic in which institutional investors and firms refused to renew sale and repurchase agreements (repo) – short-term, collateralized, agreements that the Fed rightly used to count as money. Collateral for repo was, to a large extent, securitized bonds. Firms were forced to sell assets as a result of the banking panic, reducing bond prices and creating losses. There is nothing mysterious or irrational about the panic. There were genuine fears about the locations of subprime risk concentrations among counterparties. This banking system (the “shadow” or “parallel” banking system)-- repo based on securitization -- is a genuine banking system, as large as the traditional, regulated banking system. It is of critical importance to the economy because it is the funding basis for the traditional banking system. Without it, traditional banks will not lend, and credit, which is essential for job creation, will not be created.

Before the banking crisis, the shadow banking system composed about half the money supply; and it still hasn’t been restored. Without the shadow banking system to fund bank loans, banks will not lend; and without credit, there is insufficient money to fund businesses, buy products, or pay salaries or taxes. Neither raising taxes nor slashing services will fix the problem. It needs to be addressed at its source, which means getting more credit (or debt) flowing in the local economy.

When private debt falls off, public debt must increase to fill the void. Public debt is not the same as household debt, which debtors must pay off or face bankruptcy. The U.S. federal debt has not been paid off since 1835. Indeed, it has grown continuously since then, and the economy has grown and flourished along with it.

As explained in an earlier article, the public debt is the people’s money. The government pays for goods and services by writing a check on the national bank account. Whether this payment is called a “bond” or a “dollar,” it is simply a debit against the credit of the nation. As Thomas Edison said in the 1920s:

    If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. . . . It is absurd to say our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.

That is true, but Congress no longer seems to have the option of issuing dollars, a privilege it has delegated to the Federal Reserve. Congress can, however, issue debt, which as Edison says amounts to the same thing. A bond can be cashed in quickly at face value. A bond is money, just as a dollar is.

An accumulating public debt owed to the IMF or to foreign banks is to be avoided, but compounding interest charges can be eliminated by financing state and federal deficits through state- and federally-owned banks. Since the government would own the bank, the debt would effectively be interest-free. More important, it would be free of the demands of private creditors, including austerity measures and privatization of public assets.

[Continued...]
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline Geolibertarian

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As much as I like and admire Bob Chapman, I'm afraid he does his readers a terrible disservice when he repeats the following propaganda line of the Austrian School:

    "World debt is unpayable, especially that of the US, UK and the euro zone. The only solution is collapse."


As I explain here, one of the primary reasons why I have such strong reservations about the Austrian School is that its adherents have a tendency to suggest or imply that a collapse of the entire U.S. economy (and hence of America itself) is not only inevitable, but desirable; and that any governmental policy or program that interferes with this collapse -- an example of such interference being Webster Tarpley’s proposal to “stop all foreclosures on primary residences, businesses, and farms for five years or the duration of the depression” -- is therefore a bad thing, not a good thing.

Why is it a "bad" thing?

Simple. Because, just as socialists perceive "the State" as a mystical, God-like entity existing independently of the people who compose it, Austrian Schoolers have a similar conception of the "free market," as evidenced by this quasi-religious notion they incessantly promote that, following said collapse, a mystical, God-like entity euphemistically called the "free market" will magically rise like a phoenix from the ashes of our destroyed nation, give birth to a “sound” (read: gold-based) money system, and all will be well with the world.

In that sense, these do-nothing/let-everything-collapse Austrian Schoolers are eerily similar to “rapture” cultists:

       http://globalgulag.freesmfhosting.com/index.php/topic,519.0.html

Bottom line: just as the NWO promotes "order" out of chaos, the Austrian School promotes economic revival and stability out of chaos. Either way you're dealing with a glorified cult that tries to sell people on the insane idea that "chaos" is a legitimate and effective means of achieving a desirable socioeconomic goal.

It is for this reason that I respectfully call once again on all thinking members of the anti-NWO/pro-America movement to stop letting Austrian Schoolers portray themselves as the divine gatekeepers of any and all things having to do with "liberty," "property" and "free enterprise."

Just as we must defend America from those who would destroy it in the name of the NWO, we must defend it against those who would -- by deliberate act of omission, and in the name of “liberty” and the "free market" -- knowingly allow America to be destroyed by an otherwise solvable economic and political crisis.

Note: For anyone who disputes that the current monetary crisis can't be solved without first letting the debt-based money supply contract far beyond what it did between 1929-1933 (in other words, for those who think the only way to roast the pig is to burn down the house), see the following excerpts:

---------------------------------

"There are those who believe that once bank credit has been allowed to expand, nothing can be done to prevent a collapse (that is, nothing economically sound and consistent with a free economic system). The Austrian school -- best represented by the writings of Ludwig von Mises -- takes this stand as evidenced in the following statement: 'There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.' (Human Action, p. 570).

"Dr. von Mises believes that the expansion of bank credit causes malinvestment and squandering of scarce factors of production that will inevitably lead to a crash and ensuing depression. But a more plausible theory is that all economic activity is continually reaching a new equilibrium between the total circulating medium of exchange and the goods and services being offered for it. In other words, an expansion of bank credit leads to a collapse not because of mis-directions in production but rather because of the operation of Gresham's Law. The use of bank credit as a medium of exchange gives us what Bishop Berkeley called a 'double money.' Even though bank credit is supposedly convertible into money on demand, nevertheless it is not as good as money. It is a short sale of money. And as the volume of these shortsales increases it is inevitable that Gresham's Law will eventually operate, i.e., the undervalued money (gold or legal tender 'fiat' money) will be exported or hoarded -- thus causing a collapse of bank credit.

"According to this theory, it is possible to avoid a collapse following a period of credit expansion simply by converting the existing volume of bank credit into actual money having an existence independent of debt, and at the same time take away the banking system's privilege of creating any more credit, i.e., force banks to confine their lending operations to the lending of existing funds." [Boldface emphasis added]

-- Robert De Fremery, Rights vs. Privileges, pp. 49-50


"There are some people who look with distrust upon 'printing press' or 'fiat' money. But they overlook one of the basic facts about money. It is true that we need a 'hard' money. But we should not make the mistake of associating 'hardness' with convertibility into gold. The essence of a hard money is not determined by the material of which it is composed -- or the material into which it is convertible. The essence of a hard money is that its supply is fairly stable and there are precise limits to it. In other words, gold itself is a comparatively hard money because the supply of gold is inelastic. Bank credit convertible into gold is a very soft money because it is elastic and there are no precise limits to its supply, i.e., it expands and contracts. And a purely paper or 'fiat' money can be a hard money if we set precise limits to its supply, or it can be a soft money if we set no limits to its supply."

-- Robert De Fremery, Rights vs. Privileges, pp. 54-5


"Soothing words about the effectiveness of 'government mechanisms' to deal with a liquidity crisis will not allay the fears of those who know its cause. There is only one thing that will allay those fears and that is to put our depository intermediaries on a sound basis. To do this we must convert the existing volume of bank credit into actual money and require banks to stop the unsound practice of borrowing short to lend long.

"Under this stabalized system banks would have two sections: a deposit or checking-account system and a savings-and-loan section. The deposit section would merely be a warehouse for money. All demand deposits would be backed dollar for dollar by actual currency in the vaults of the bank. The savings-and-loan section would sell Certificates of Deposit (CDs) of varying maturities—from 30 days to 20 years—to obtain funds that could be safely loaned for comparable periods of time. Thus money obtained by the sale of 30-day, one-year and five-year CDs, etc., could be loaned for 30 days, one year and five years respectively—not longer. Banks would then be fully liquid at all times and never again need fear a liquidity crisis."

-- Robert De Fremery, Rights vs. Privileges, pp. 84-5


"Since the objective is to have a 100% cash reserve (legal tender) behind all demand deposits, the U.S. Treasury would be ordered by Congress to have printed and then loaned to the banks sufficient new currency to fulfill that objective. In determining the amount to be borrowed, banks would treat their legal reserves at their local Federal Reserve Bank as cash. Those reserves will become actual cash as explained later.

"The debt incurred by each commercial bank to the Treasury could be immediately reduced by the amount of U.S. securities each bank held—simply a cancellation of mutual indebtedness. Henceforth the commercial banks would be prohibited from using the cash reserves behind their demand deposits for their own interest and profit. Those cash reserves belong to the depositors. They are funds against which the depositors wish to draw checks.

"On the day the cash reserves of banks are brought up to 100% of their demand liabilities, they would have outstanding loans which I shall call 'old loans' as distinguished from the new loans that will be made in the future. As these old loans are paid off, each bank would be required to use these funds to pay off their savings and time depositors, and offer them, as an alternative, negotiable CDs. There would be no restriction of any sort on the issuance of such CDs. The maturity dates, the amounts, and the rate of interest would be set by each bank. But banks would not be allowed to lend the funds so obtained for a longer period of time than those funds were available to them; i.e., they would be required to maintain the back-to-back relation suggested by George Moore.

"After each bank had paid off its time depositors, it would still have a sizable amount of 'old' loans outstanding. As the rest of these old loans were paid off, these funds would be used to further reduce the banks’ indebtedness to the Treasury. The treasury, in turn, would be required to use these funds to retire U.S. obligations held by investors outside the banking system. And as the Treasury did this, these investors would presumably buy negotiable CDs offered by the banks.

"Any remaining indebtedness of the banks to the Treasury could be paid off with funds derived from the sale of their 'Other Securities.' Indeed, a good argument can be made for having the Treasury figure in advance how much of each bank’s securities are going to have to be sold and require them to start selling those securities gradually, the day the changeover is made.

"As for the Federal Reserve Banks, they too should borrow from the Treasury sufficient new currency to bring their cash reserves up to 100% of their demand deposits (funds deposited by their member banks for safekeeping plus all government funds against which checks are being drawn by the government). The indebtedness of the Federal Reserve Banks to the Treasury could immediately be canceled by a mutual cancellation of indebtedness as was done by the commercial banks, i.e. by canceling an equivalent amount of U.S. obligations held by the Federal Reserve Banks. The remaining U.S. obligations held by the Federal Reserve Banks should also be canceled in view of the fact that they had originally been bought by the mere creation of bookkeeping entries. That practice would be abolished.

"The supply of money would now consist of the total coin and currency in existence, i.e., the amount previously existing plus the amount newly printed and loaned to the commercial banks and the Federal Reserve Banks. There would no longer be any confusion about what was meant by the supply of money. And the money supply would no longer be altered by such things as the lending activities of banks, or the decisions of individuals to switch funds from a checking account to CDs, or the payment of taxes to the U.S. Treasury, or the disbursement of funds by the Treasury, etc. Whenever an increase in the money supply was needed according to whatever rule of law was adopted (a strong case can be made for a 'population dollar', i.e., a constant per capita supply of dollars), the increase could be made with absolute precision by simply retiring that much of the remaining National Debt with the new money.

"S&Ls and MSBs [money services businesses] should be made to operate as they were originally intended, i.e., those who place their funds in such institutions must be reminded that they are shareholders and that they can draw their funds out only when those funds are available for withdrawal. A run on such institutions would no longer be a threat to the banking world. Nor would the failure of bankruptcy of any large bank, corporation, or municipality be the threat to the banking world that it is today. Any such poorly managed entity could, and should, be allowed to go through bankruptcy. There would be no danger of precipitating the type of financial stringency or credit crisis that is feared so much under our present financial system, and justifiably so.

"The multitude of governmental lending agencies that have arisen since the early ‘30s should be dismantled. The lending of money is not a proper function of government. It has been sanctioned so far because banks operated in such a way as to imperil a continuous flow of funds to areas that needed it. With banks now operating on a sound basis, free market forces should be relied upon to keep money flowing in the most healthful manner for all.

"Having corrected the destabilizing element of our monetary system, we should reject the concept of deficit financing and a compensatory budget. Those concepts arose under the old system because when the business and investment world lost confidence—thus leading to a contraction in the supply and/or velocity of money—the government was forced to indulge in deficit financing to try to keep the supply and/or velocity of money from contracting too far. Under the new system the supply of money is non-collapsible and therefore changes in the velocity of money (caused by changes in liquidity preference) would be minimal and self-regulating.

"Government supervision or regulation of banks would now be greatly simplified. In place of all the governmental agencies with overlapping functions that are busily engaged in regulating various activities of banks, we need have only one agency. Its sole function would be to make certain each bank is keeping its cash reserves at 100% of its demand deposits, and that the maturity profile of its outstanding CDs meshes with the maturity profile of its loan portfolio. Except for these restrictions, banks would be free to set the amounts, the maturity dates, and the rates of interest on the CDs they issued. They would also be free to make loans for any purpose they pleased, secured by any collateral they deemed adequate."

-- Robert De Fremery, Rights vs. Privileges, pp. 117-121

---------------------------------
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline africknamerican

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From Tragedy and Hope:

In time the [banker families] brought into their banking network the provincial banking centers, organized as commercial banks and savings banks, as well as insurance companies, to form all of these into a single financial system on an international scale which manipulated the quantity and flow of money so that they were able to influence, if not control, governments on one side and industries on the other. ...

They remained different from ordinary bankers in distinctive ways:

(1) they were cosmopolitan and international;

(2)they were close to governments and were particularly concerned with questions of government debts . . .

(3) their interests were almost exclusively in bonds and very rarely in goods...

(4) they were, accordingly, fanatical devotees of deflation . . .

(5) they were almost equally devoted to secrecy and the secret use of financial influence in political life.  

Offline Dig

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As most of you know, the let-everything-collapse Austrian School has been insisting for years that “inflation” is the root cause of America’s financial crisis, and that “unbacked paper money” (as opposed to unpayable, ever-expanding interest debt) is, in turn, the root cause of inflation.

However, contrary to what countless newcomers have undoubtedly been led to falsely assume as a result of this propaganda, there was actually a time when Federal Reserve Notes were literally "redeemable" in -- and hence "backed" by -- gold. Let's pause now while the monetary flat-earthers from the Austrian School hurriedly race to the bathroom to jerk off …. [ten minutes later] .… Finished? Ok, let's continue.

Within this window of time, there was a point at which the gold-backed Federal Reserve Note was 20% higher in value than it was four years beforehand. Yes, you heard me correctly: 20% higher, not lower, than it was four years beforehand. And that, of course, is the literal opposite of the “inflation” we’ve all been propagandized to fear more than death itself.

Now, if you agree with everthing you hear from the precious metal-obsessed Austrian School, then you’ve already concluded that the average Amerian worker had to have been better off than he was before this 20% increase in value. Just had to have been!

Yet, in reality, not only was he not better off than before, he was dramatically worse off, because the four-year time period to which I refer is 1928-1932:

       http://www.youtube.com/watch?v=MxYOzUjY5iY (The Money Masters - part 15 of 22)
       http://www.youtube.com/watch?v=AoG8R1s59Po (The Money Masters - part 16 of 22)

If that’s a surprise to anyone, then perhaps it’s time to stop parroting Austrian School dogma (even when it’s been wrapped in the American flag or in the flag of “liberty”) and start questioning it for change!

-------------------------------

"[Andrew] Jackson and Van Buren removed the monetary power from the private bankers but did not re-establish it in the hands of the nation. Instead, Van Buren organized the Independent Treasury System, establishing 15 sub branches of the Treasury to handle government moneys in 1840. From December 1836 the government moved toward making and receiving all payments in coinage, or truly convertible bank notes....Once the state bank notes were no longer accepted by the government, their circulation was cut back dramatically.

"This was the closest our nation has ever come to implementing a real gold/silver standard. Operating under the commodity theory of money, Van Buren, who truly cared for the Republic, helped bring on the worst depression the Nation had ever seen, starting in 1837. It was reportedly even worse than that caused by the 2nd Bank of the U.S. in 1819. Bad as the state bank notes were, they had still been functioning as money!

"Those who proclaim that no gold and silver money system has ever failed should consider that whether you are a laborer, farmer, or industrialist, the money system's success or failure is not measured by the value of a piece of metal. When your job, your farm, or factory has disappeared in a monetarily created depression, the system has failed! [Emphasis added]

-- Stephen Zarlenga, The Lost Science of Money, p. 426

-------------------------------

All that is kind of ridiculous because the Federal Reserve is exposed as stealing over $15 Trillion dollars.

Our current debt liability is $15 Trillion. Sounds to me like all the debt is fraud. Declare it fraud, establish constitutionally sanctioned competing currencies and if the less than 10,000 bankster scumbags do not like it, let them engage in constitutionally protected redress of grievences.

Inflation and deflation cause turmoil, especially those most in need. Deflation has allowed Rockefeller and other scumbags to destroy our farming industry. Inflation has caused debt slavery with fixed income recipients.

For stability in the monetary system to be achieved, the private federal reserve needs to go.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

Offline Geolibertarian

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Don't just "end" the Fed - REPLACE it with a debt-free Greenback system
« Reply #7 on: October 15, 2011, 09:30:44 am »
All that is kind of ridiculous because the Federal Reserve is exposed as stealing over $15 Trillion dollars.

Yes, but the post you quoted wasn't about whether the Fed is good or bad (I've been advocating replacing our entire debt-based money system with a debt-free money system for years), but whether deflation is good or bad for the average worker. The problem I'm attempting to draw attention to is that, as a result of Austrian School propaganda, many who rightly oppose the Fed wrongly assume that deflation either wouldn't hurt the economy or, even more ridicuous, would actually be good for the economy.

Quote
Our current debt liability is $15 Trillion. Sounds to me like all the debt is fraud. Declare it fraud,

Yes, but in our eagerness to eliminate that fraudulent debt, we must not make the fatal mistake of "burning down the house to roast the pig," and that's exactly what the deflationary approach of the Austrian School would do. To understand why, please read both the excerpt I posted above from Tarpley's book and the following post:

       http://forum.prisonplanet.com/index.php?topic=98465.msg1232275#msg1232275

Quote
establish constitutionally sanctioned competing currencies

"Competing currencies" is an Austrian School euphemism for making money creation even more privatized than it already is, yet you know as well as I do (having seen both "The Money Masters" and "The Secret of Oz") that private control over the issuance of money is precisely what got us into this debt crisis in the first place.

As I've explained elsewhere, the critical flaw with the whole notion of "competing currencies" is that once the government declares commodity-backed currencies A, B and C good for the payment of taxes and commodity-backed currencies X, Y and Z not good for such payment (or not as good), from that moment on the value that the former three have relative to the latter is determined more by government "fiat" than by the forces of free market "competition" -- at which point they cease to be "competing currencies" in any meaningful sense of the term.

Nevertheless, as I've also explained elsewhere, once fractional reserve banking has been outlawed and the current debt-based money system completely replaced with a debt-free "Greenback" system, I would at least be open (particularly if certain election reforms remained unimplemented) to reforming the legal tender law so that U.S. currency is good merely for the payment of all public debts (as opposed to both public and private), since this would allow for an assortment of competing private currencies to rise up alongside the national currency, thereby keeping those in charge of the latter in check.

In the mean time, however, the first order of business is to completely replace our debt-based money supply with a debt-free money supply, and to do so in a way that is neither inflationary nor deflationary. Hence the excerpts I posted above from Robert De Fremery's book, Rights vs. Privileges.

Quote
For stability in the monetary system to be achieved, the private federal reserve needs to go.

Of course it does, but as I've been trying to explain in other threads, this is a case where a half truth is even more dangerous than an outright falsehood, because fractional reserve banking was around long before the Fed, and was the very reason why the rich and powerful bankers who created the Fed had already become so rich and powerful in the first place. Thus, "ending" the latter doesn't necessarily mean "ending" the former. And if we don't end the former (i.e., fractional reserve banking), then super-rich bankers will simply use their wealth and power to fill the power vacuum created by the Fed's abolishment with something even worse -- only this time on a global scale.

Hence the point I've been making that chanting "end the Fed" all day is the logical equivalent of saying over and over again: "Cut the weed off at ground-level! Cut the weed off at ground-level!"

We obviously have the same overall goal, I just want people to realize that even the international bankers want to "end the Fed" -- but the reason they want to end it is so they can replace it with a global debt-based money system.

That's why I think it's so unwise to continually utter slogans that "beg" the question of what we should replace the Fed with but never address it. I realize you and other veterans of the monetary reform movement already have a clear idea of what you want to replace it with, but the far greater number of people who are hearing these slogans for the first time do not, so if that's all they hear, they're vulnerable to being misled into embracing a false solution (e.g., "crucifying mankind upon a cross of gold"). As the old saying goes, the "devil" (or lack thereof) is in the "details."

Hope that clarifies my position.
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
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Offline jerryweaver

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http://e-lobbyist.com/gaits/text/231567

California is considering a state owned bank.


BILL NUMBER: AB 750   AMENDED
   BILL TEXT

   AMENDED IN ASSEMBLY  MARCH 31, 2011

INTRODUCED BY   Assembly Member Hueso

                        FEBRUARY 17, 2011

    An act to amend Section 42872 of the Public Resources
Code, relating to solid waste.   An act to add and
repeal Division 5 (commencing with Section 64160) of Title 6.7 of the
Government Code, relating to finance.


   LEGISLATIVE COUNSEL'S DIGEST


   AB 750, as amended, Hueso.  Solid waste: waste tires.
  Finance: investment trust blue ribbon task force.
 
   The California Constitution provides for the election by the
people of the Treasurer and the Controller. Existing law requires the
Treasurer to receive and keep in the vaults of the treasury or to
deposit in banks or credit unions all moneys belonging to the state,
as specified. Existing law requires the Controller to superintend the
fiscal concerns of the state. Existing law requires the Controller
to audit all claims against the state, and authorizes the Controller
to audit the disbursement of any state money, for correctness,
legality, and for sufficient provisions of law for payment.

   This bill would establish the investment trust blue ribbon task
force to consider the viability of establishing the California
Investment Trust, which would be a state bank receiving deposits of
all state funds. The trust would support economic development,
provide financing for housing development, public works and
educational infrastructure, provide stability to the financial
sector, provide state government banking services, lend capital to
specified financial institutions, and provide for excess earnings of
the trust to be used for state General Fund purposes. The bill would
establish the membership of the task force, which would include
designated Members of the Legislature and designees of the Governor,
Controller, and Treasurer, and would require the expenses of the task
force to be paid by the Senate and Assembly. The bill would require
the task force to report to the Legislature by December 1, 2012, on
its finding and recommendations relating to the viability of
establishing the California Investment Trust, as specified.

Offline africknamerican

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Re: Don't just "end" the Fed - REPLACE it with a debt-free Greenback system
« Reply #9 on: October 16, 2011, 04:18:23 pm »
Dig, 

I like the idea of being free enough to have competing currencies, but here's the reality. Almost by definition, a currency has to be standardized in value and widely accepted. The extent to which it has a standard value and wide acceptance is the extent to which you can trade with it and have free markets, specialization, and overall efficiency in the economy. The currency is like a road system -- it is economic infrastructure. If you underbuild roads, or if they are of uncertain quality and standards from one location to another, then commerce is slowed or stopped, and people will be poorer for it. If you overbuild  -- duplicating routes, building highways and bridges to nowhere -- then you have wasted capital and labor, which also makes society generally poorer. You have to have just enough to meet the demand at any given time. Same with money.

Also, freedom depends on public control of the money system. Just as you can build and maintain private roads on your private land, people should be free to have their own forms of money (including metallic) or credit within private circles. However, if you want universal freedom of travel, roads must be commonly controlled, and if you want universal freedom of trade within an economy, there has to exist at least one currency that is commonly controlled.

I might like to see a system that would would combine a national greenback currency with local currencies (and credit denominated in those currencies). The local rent payments and user fees would be payable in one of these currencies. For private transaction, people could use gold, silver, cigarettes, wampum, liquor, ganja leaves, or whatever they like.



Offline hardrain77

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Re: ATTENTION AUSTRIAN SCHOOLERS: STOP CONNING PEOPLE INTO WORSHIPPING DEFLATION!
« Reply #10 on: September 02, 2012, 04:11:17 pm »
Why does Geo continually bash Austrians? No Austrian has ever been in a position of influence to write monetary policy, nor has there ever been a country run on Austrian policy. You spend your entire time hating on a hypothesis.
"Some of the biggest men in the United States, in the field of commerce and manufacturing, are afraid of something. They know there is a power somewhere, so organized, so subtle, so watchful, so interlocked, so pervasive, they had better not speak above their breath."

Woodrow Wilson

Offline Geolibertarian

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Re: ATTENTION AUSTRIAN SCHOOLERS: STOP CONNING PEOPLE INTO WORSHIPPING DEFLATION!
« Reply #11 on: September 02, 2012, 05:04:05 pm »
Why does Geo continually bash Austrians?

Why does hardrain77 ignore threads in which I do precisely the opposite?

     http://forum.prisonplanet.com/index.php?topic=208525.0

Quote
No Austrian has ever been in a position of influence to write monetary policy, nor has there ever been a country run on Austrian policy.

Most Austrians advocate returning to a gold standard, and there are multiple examples of what happens when this policy is implemented.

Quote
You spend your entire time hating on a hypothesis.

You accuse me of "bashing" Austrians, yet here you are "bashing" your own straw man. If I spent even half my time "hating" on Austrianism, this thread would be well over a hundred pages long by now. If you want to disagree with me, fine, but please spare me the theatrics.
"Abolish all taxation save that upon land values." -- Henry George

"If our nation can issue a dollar bond, it can issue a dollar bill." -- Thomas Edison

http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0