Monetary Reform!

[Geolibertarian]

There are quite a number of important political issues that are virtually screaming out for true reform, but if I had to pick the two most important, they would be (a) election reform, and (b) the subject of this thread -- monetary reform.

If I had the power, I would simultaneously

• wipe out all derivatives;
• liquidate all of the ill-gotten assets of criminal scam artists like Henry Paulson and Bernard Madoff, and use the resultant proceeds to help replenish whatever retirement funds they raided; and
• replace our current debt-based money system with a debt-free money system, whereby all new money -- instead of being loaned into circulation at interest -- is spent into circulation interest-free to fund the production of public goods everyone can see and benefit from (e.g., roads and bridges), and at a rate pegged by law to objective criteria such as population growth and the general price level.

Now, since derivatives are just glorified gambling bets, and since the derivatives bubble dwarfs not only the most liberal estimate of the U.S. money suppply, but the annual productive output of the entire planet, I think it's important to stress that the monetary issue is actually composed of two logically distinct sub-issues: (a) derivatives, and (b) fractional reserve banking.

In the following posts I'll address each of those sub-issues in turn.

[Geolibertarian]

Of all the artricles I've read concerning derivatives, I've yet to see one in which the issue of "consideration" is specifically addressed.

For those unfamiliar with the concept of "consideration" as it relates to finance, allow me to provide a brief introduction.

First there's the following clip:

       http://youtube.com/watch?v=hRzHDwQUJa0

Then there's the following written explanation (which, although excerpted from a web site based in India, is nevertheless the most straightforward explanation I've seen yet):

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http://business.gov.in/manage_business/contracts_elements.php

Essential Elements of a Contract

Minimum two parties:  At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree' and the person who accepts the offer is called the 'acceptor'....

Lawful consideration:  A contract is basically a bargain between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party. This consideration may be past, present or future, but it must be lawful....

Lawful object:  The object of the agreement must be lawful. An agreement is unlawful, if it is: (i) illegal (ii) immoral (iii) fraudulent (iv) of a nature that, if permitted, it would defeat the provisions of any law (v) causes injury to the person or property of another (vi) opposed to public policy.
 
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As some of you may already know, an airtight case could be made for invalidating virtually all bank loans on the ground that no "lawful consideration" was made on the part of the banks, since the "money" they offer as consideration for the borrower's promise to repay doesn't really exist. (Ellen Brown explains this more thoroughly here.)

I oppose invalidating traditional bank loans, however, because doing so would cause the entire money supply to collapse and the economy along with it. That's where "converting the existing volume of bank credit into actual money having an existence independent of debt" (while simultaneously abolishing fractional reserve banking) comes in.

Derivatives, however, are another story. Allow me to explain, as best I can, why derivatives contracts are more fraudulent -- and many times more parasitic and destructive -- than even fractional reserve lending, and why they should be invalidated accordingly.

When a regular bank loan is made, the collateral-backed IOU offered by the borrower becomes an "asset" of the bank, while the money offered by the bank becomes an "asset" of the borrower.  Granted, the so-called "money" offered by the bank doesn't even exist until the very moment the loan is extended, and even then exists only as a bookkeeping entry; but at least each party is going through the pretense of offering one legitimate financial asset as "lawful consideration" for another.

Such is not the case with derivatives, because these are mere bets as to whether a given asset will go up in market value.

Ellen Brown explains it this way (all emphasis original):

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In a 1998 interview, John Hoefle, the banking columnist for EIR [Executive Intelligence Review], clarified the derivatives phenomenon using another colorful analogy. He said:

During the 1980s, you had the creation of a huge financial bubble....You could look at that as fleas who set up a trading empire on a dog....They start pumping more and more blood out of the dog to support their trading, and then at a certain point, the amount of blood that they're trading exceeds what they can pump from the dog, without killing the dog. The dog begins to get very sick. So being clever little critters, what they do, is they switch to trading in blood futures. And since there's no connection -- they break the connection between the blood available and the amount you can trade, then you can have a real explosion of trading, and that's what the derivatives market represents. And so now you've had this explosion of trading in blood futures which is going right up to the point that now the dog is on the verge of dying. And that's essentially what the derivatives market is. It's the last gasp of a financial bubble.

What has broken the connection between "the blood available and the amount you can trade" is that derivatives are not assets. They are just bets on what the asset will do, and the bet can be placed with very little "real" money down. Most of the money is borrowed from banks that create it on a computer screen as it is lent. The connection with reality has been severed so completely that the market for over-the-counter derivatives has now reached many times the money supply of the world. Since these private bets are unreported and unregulated, nobody knows exactly how much money is riding on them; but the Bank for International Settlements reported that in the first half of 2006, their "notional value" had soared to a record $370 trillion. The notional value of a derivative is a hypothetical number described as "the number of units of an asset underlying the contract, multiplied by the spot price of the asset."  Synonyms for "notional" include "fanciful, not based on fact, dubious, imaginary." Just how fanciful these values actually are is evident in the numbers: $370 trillion is 28 times the $13 trillion annual output of the entire U.S. economy. In 2005, the total annual productive output of the world was only $44.4 trillion....

How are these astronomical derivative sums even possible? The answer, again, is that derivatives are just bets, and gamblers can bet any amount of money they want. Gary Novak is a scientist with a website devoted to simplifying complex issues. He writes, "It's like two persons flipping a coin for a trillion dollars, and afterwards someone owes a trillion dollars which never existed." He calls it "funny money." Like the Mississippi Bubble, the derivatives bubble is built on something that doesn't really exist; and when the losers cannot afford to pay up on their futures bets, the scheme must collapse. Either that, or the taxpayers will be saddled with the bill for the largest bailout in history.

-- Web of Debt, pp. 195-97

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(Note the last setence in the above excerpt -- in which Ellen Brown refers to the "largest bailout in history" -- and consider the fact that her book was published in 2007!)

In light of the above, may I correctly assume that the person reading this will agree with me when I say that author Webster Tarpley was absolutely spot on when he wrote the following?

FOR RECOVERY, WIPE OUT, SHRED, DELETE ALL DERIVATIVES
 
J.P. Morgan Chase, therefore, performs no useful or productive social function, and there is absolutely no reason in the world why the people of the United States should want to bail out this pernicious and socially destructive institution. It has probably been several decades since J.P. Morgan Chase created a single modern productive job. J.P. Morgan Chase's strategic commitment in favor of the derivatives bubble means essentially that we can easily dispense with most of the functions of this self-styled "bank," really a casino. Instead of being bailed out, J.P. Morgan Chase ought therefore to be seized by the Federal Deposit Insurance Corporation, and put through chapter 11 bankruptcy. In the course of that bankruptcy reorganization, the entire derivatives book of J.P. Morgan Chase must be deleted, shredded, used as a Yule log, or employed to stoke a festive bonfire of the derivatives. The world did much better when there were no derivatives, and will get along just fine without them.

[Geolibertarian]

For those who haven't already done so, please take 47 minutes of your time and watch the documentary film, Money As Debt:

       http://www.youtube.com/view_play_list?p=7D23E545D9757F94
       http://video.google.com/videoplay?docid=2464321382114136843

Since it's possible that, by the time you read this, the Money As Debt documentary will no longer be viewable at either of the above two links (videos get taken down all the time), I will now – for the benefit of any relative newcomers who may be learning about all this for the first time -- attempt to explain in my own words how our debt-based money system actually works.

Under the current system, all money is created out of nothing by a private banking cartel and then loaned into circulation at interest -- first by the Federal Reserve, via its purchase of government bonds; and second by commercial banks, via fractional reserve lending.

There are two critical problems with this process.

First, when banks loan (and thereby create) money, they create only the principal, not the interest. This is why the overall indebtedness of the economy is always many times greater than even the most liberal estimate of the money supply. Granted, if no one borrowed, there would be no interest to pay; but there would also be no money supply, and thus no economy.

Second, because all money is created as a loan, whenever the principal of a loan is paid back, the money supply is reduced by that amount.

Allow me to clarify with an example. For the sake of simplicity, let's assume the money supply is currently zero, and that there are only two people in the economy -- Person A and Person B.

Next, let's assume that a newly chartered local bank -- which I'll call Bank X -- has $200 in "excess reserves" (presumably loaned to it by a central bank through a "discount window").

If Bank X loans Persons A & B $100 each and charges them 10% interest, then the money supply increases to $200, total indebtedness increases to $220, and Bank X's excess reserves are exhausted (meaning it can't create additional money by monetizing debt).

Now, if you're Person A, the question arises: since you owe Bank X $110, yet have only $100 to your name, how can you get the extra $10 you need to get out of debt?

Not by going to work for the bank, because Bank X hasn't even received its first interest payment yet, and so has no interest to spend back into the economy.

Thus, the only way you can obtain the $10 you need is by producing a good or service with your labor and offering it to Person B for that very amount. In this way, you "capture" -- through the process of production-and-exchange -- the necessary portion of Person B's loan principal to pay the interest you owe.

Even though money has "circulated" as a result of this transaction, the money supply is still $200. The only thing that has changed is the distribution of that supply, because you now have $110, while Person B has only $90.

Now, here is where we get to the heart of the matter.

When you go to Bank X and pay the $110 you owe, the principal portion of that loan -- $100 -- vanishes back into the nothing from which it was created, while your $10 interest payment goes into Bank X's capital assets. Thus, the most that Bank X can spend back into the economy is $10. Let's assume it does so by paying Person B $10 to wax its floors.

This brings the money supply back up to $100, thereby leaving Person B with $10 of unpayable interest debt –- a debt that will now proceed to compound over time (see http://www.wealthmoney.org/wonder.html).

Since the average reader usually concludes at this point of the illustration that the interest debt generated by fractional reserve lending is, by definition, "unpayable" -- and that there is thus a built-in shortgage of money -- it is at this same point that debt-money apologists attempt to impress everyone with their knowledge of mathematics.

They do so by asserting that the interest income received by Bank X can be recirculated over and over again -- via "amortization" -- until only a tiny fraction (less than one-half of one percent) of outstanding interest debt remains.

Now, in a purely abstract construct, Person B can, indeed, pay back all but a tiny fraction of the interest he owes, if...

(a) he pays it back a little at a time over the course of, say, five years, with one part of each payment going to pay down the principal, and the other part going to pay down the interest;

(b) Bank X automatically spends all (rather than some) of the interest income it receives from Person B back into the economy; and

(c) this recirculated interest always winds up in Person B's hands and not someone else's.

Thus, if Person B's first payment (assuming a five-year payment plan) is $2.12, $.83 of that goes toward paying off the interest, while the other $1.29 goes towards paying off the principal. Bank X then pays its teller $.83 as wages. Person B mows the bank teller's lawn for $.83, thereby "recapturing" the interest portion paid so far. Person B now possesses $98.71.

In the second payment, Person B pays $2.12 as before, only this time $.82 goes toward paying off the interest, while $1.30 goes toward paying off the principal. Thus, the most Bank X can pay its teller this time around is $.82, which means that, no matter how hard Person B works, the most he can recapture from the bank teller is $.82. Let's assume he does so by mowing her lawn again. Person B now possesses $98.41.

You see how it works? The reason Person B must accept increasingly lower wages for the same work is that, after each payment, there is literally that much less recirculated interest in the economy for him to recapture through production-and-exchange.

That's how it works in a purely abstract construct.

In a real-world construct, however, this theory of Person B paying off his interest debt through amortized payments simply doesn’t work, because real-world constraints have to be assumed out of existence.

There's an old economics joke that goes:

"How many economists does it take to change a light bulb?

"Two -- one to change the bulb, another to 'assume' a ladder."

What is being falsely "assumed" in this case are two things:

Assumption 1: as Person B’s wages decrease (not because his labor is “valued” less, but because there is literally less money in existence with which to pay him for that labor), his basic cost of living will decrease right along with them – i.e., grocery store owners will conveniently ask for less money in exchange for the same food; clothing store owners will conveniently ask for less money in exchange for the same clothes; and apartment building owners will conveniently ask for less money exchange for the same apartments.

Assumption 2: as the money supply contracts, employment opportunities (the very thing Person B relies upon to recapture recirculated interest) will remain constant.

The first assumption is absurd, because as any experienced businessman will tell you, there’s a break-even point (between operating costs and sales revenue) below which business owners simply cannot lower prices without bankrupting themselves in the process. 

The second assumption is even more absurd, because history has shown over and over again that money supply contractions not only cause unemployment, but severe unemployment -- the most obvious case in point being the depression-inducing contraction of the early 1930s.

It therefore follows that amortization does not solve the money-shortage problem, because there are simply too many critical aspects of daily reality that must be assumed out of existence in order for it to work.

So, to summarize, under the current debt-based money system there is a built-in shortage of money, due to

• the fact that money is "uncreated" whenever the principal of a bank loan is repaid; and
• the fact that the money needed to pay the interest on that loan is never created in the first place (which means interest can never truly be paid off, but merely shifted to someone else).

That more than anything else is what creates our dog-eat-dog, musical chairs economy -- an economy in which millions of people work frantically to capture other people's loan principal; and in which virtually everyone works (to one extent or another, and whether they realize it or not) as indentured servants to the banking elite.

Austrian School propagandists routinely suggest or imply that a necessary ingredient to solving this problem is to simply hault or slow the creation (or "printing") of money, but as any objective observer can now see, not only would that not solve anything -- since it would neither hault nor even slow the compounding of the countless billions in unpayable interest debt that hangs over our heads -- it would, by increasing the built-in money shortage, merely excellerate the speed by which the banking elite could foreclose on countless properties and businesses nationwide (a fraud-based looting of the real economy that Austrian School cranks like to euphestically call a market-based “correction” or “adjustment”).

Now, does that mean more “spending” is the answer? No, because at present, more government spending means either more debt or more tax hikes (or both), and we can no more borrow our way out of a debt-caused depression than we can tax an already overtaxed economy into prosperity.

The solution is to go to the root of the problem by instituting a debt-free money system in place of the current debt-based system!

If you understand and agree with me thus far, you may now be asking: "How can we institute such a system without creating either runaway hyperinflation or a depression-inducing money supply contraction in the process?”

I'll address that question in my next post.

[Geolibertarian]

Many proposals have been made over the years on how to switch from a debt-based money system to a debt-free money system.

IMHO, the most sensible and desirable proposal is the one put forth by Robert De Fremery in his book, Rights vs. Privileges.

To understand why, please read the following excerpts (all emphasis original):

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"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."

-- 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 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."

-- Ibid., 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."

-- Ibid., 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."

-- Ibid., pp. 117-121

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The reform I advocate is the same as De Fremery's, but with two exceptions:

(a) we should mandate by law that new money be issued only to fund the production and repair of public goods that everyone can see and benefit from, and that add to the productive capacity of the economy (roads and bridges would qualify as public goods; prisons and military weapons would not);

(b) instead of instituting what I consider to be an overly-rigid "population standard" -- whereby the money supply is allowed to expand only to the extent necessary to keep the per capita supply of dollars constant -- we should mandate by law that the debt-free expansion rate of our money supply be such that (1) the per capita supply of money never falls (thus guarding against depression-inducing contractions, such as the 1/3 contraction that caused the Great Depression), (2) the money supply never increases by more than nine percent in any given year (thus guarding against runaway hyperinflation), and (3) new money issuance is moderately adjusted inversely with the rise or fall of the general price level. The third requirement is what would keep prices stable, while the first two are fail-safe measures to ensure that no adjustment to the money supply expansion rate is ever so extreme in either direction as to cause economic chaos. No Yugoslavian-style hyperinflation (or anything close to it); no Japanese-style deflation (or anything close to it).

[Geolibertarian]

For anyone new to this, below are five additional monetary reform measures, any one of which would be an enormous improvement over the current system:

The Monetary Reform Act

       http://www.youtube.com/watch?v=nNumEm2NzQA
       http://www.themoneymasters.com/mra.htm

The American Monetary Act

       http://www.infowars.com/?p=4174
       http://jurisvodcast.com/2008/08/30/the-american-monetary-act/   
       http://www.monetary.org/amacolorpamphlet.pdf <--- .pdf file!

The American Transportation Act

       http://www.wealthmoney.org/solution.html
       http://www.wealthmoney.org/happen.html

Ellen Brown's Monetary Proposal

       http://webofdebt.wordpress.com/monetary-proposal/

Richard C. Cook’s “Greenback and National Dividend” Proposal

       http://www.globalresearch.ca/index.php?context=va&aid=12932

[Geolibertarian]

Below is another key excerpt from Ellen Brown's book, Web of Debt:

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http://www.webofdebt.com/excerpts/chapter-37.php

Chapter 37

THE MONEY QUESTION:
GOLDBUGS AND GREENBACKERS DEBATE


You shall not crucify mankind upon a cross of gold.

-- William Jennings Bryan, 1896 Democratic Convention

At opposite ends of the debate over the money question in the 1890s were the "Goldbugs," led by the bankers, and the "Greenbackers," who were chiefly farmers and laborers. The use of the term "Goldbug" has been traced to the 1896 Presidential election, when supporters of gold money took to wearing lapel pins of small insects to show their position. The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers' gold, having felt its crushing effects in their own lives. As Vernon Parrington summarized their position in the 1920s:

To allow the bankers to erect a monetary system on gold is to subject the producer to the money-broker and measure deferred payments by a yardstick that lengthens or shortens from year to year. The only safe and rational currency is a national currency based on the national credit, sponsored by the state, flexible, and controlled in the interests of the people as a whole.

The Goldbugs countered that currency backed only by the national credit was too easily inflated by unscrupulous politicians. Gold, they insisted, was the only stable medium of exchange. They called it "sound money" or "honest money." Gold had the weight of history to recommend it, having been used as money for 5,000 years. It had to be extracted from the earth under difficult and often dangerous circumstances, and the earth had only so much of it to relinquish. The supply of it was therefore relatively fixed. The virtue of gold was that it was a rare commodity that could not be inflated by irresponsible governments out of all proportion to the supply of goods and services.

The Greenbackers responded that gold's scarcity, far from being a virtue, was actually its major drawback as a medium of exchange. Gold coins might be "honest money," but their scarcity had led governments to condone dishonest money, the sleight of hand known as "fractional reserve" banking. Governments that were barred from creating their own paper money would just borrow it from banks that created it and then demanded it back with interest. As Stephen Zarlenga notes in The Lost Science of Money:

All of the plausible sounding gold standard theory could not change or hide the fact that, in order to function, the system had to mix paper credits with gold in domestic economies. Even after this addition, the mixed gold and credit standard could not properly service the growing economies. They periodically broke down with dire domestic and international results. In the worst such breakdown, the Great Crash and Depression of 1929-33, . . . it was widely noted that those countries did best that left the gold standard soonest.

The debate between these two camps still rages. However, today the Goldbugs are not the bankers but are in the money reform camp along with the Greenbackers. Both factions are opposed to the current banking system, but they disagree on how to fix it. That is one reason the modern money reform movement hasn't made much headway politically. As Machiavelli said in the sixteenth century, "He who introduces a new order of things has all those who profit from the old order as his enemies, and he has only lukewarm allies in all those who might profit from the new." Maverick reformers continue to argue among themselves, while the bankers and their hired economists march in lockstep, fortified by media they have purchased and laws they have gotten passed, using the powerful leverage of their bank-created fiat money.

Congressman Ron Paul of Texas is one of the few contemporary politicians to boldly challenge the monetary scheme in Congress. He is also a Goldbug, who argued in a February 2006 address to Congress:

It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value . . . . As governments grew in power they assumed monopoly control over money. . . . In time governments learned to outspend their revenues {and sought} more gold by conquering other nations. . . . When gold no longer could be obtained, their military might crumbled.

. . . Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: "He who prints the money makes the rules". . . . Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system.

. . . The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value.

Modern-day Greenbackers, while having the highest regard for Congressman Paul's valiant one-man crusade, would no doubt debate the details; and one highly debatable detail is his assertion that it is the government that now has monopoly control over money, and it is the government that is counterfeiting the money supply.  Greenbackers might say that the government should have monopoly control over money creation, but it doesn’t. Wars are fought, not to preserve the dollars of the U.S. government, but to preserve the Federal Reserve Notes of a private banking cartel. It is this private cartel that has monopoly control over money, and its monopoly grew out of a shell game called "fractional reserve banking," which grew out of the very "gold standard" the Goldbugs seek to reinstate. We have been deluded into thinking that what is wrong with the system is that the government has a monopoly over creating the money supply. The government lost its monopoly when King George forbade the colonies from printing their own money in the eighteenth century. Banks have created most of the national money supply for most of our national history. The government itself must beg from this private cartel to get the money it needs; and it is this mounting debt to an elite class of banker-financiers, not profligate government spending on social goods, that has brought the United States and most other countries to the brink of bankruptcy. If Congress had used its Constitutional power to create money to fund its own operations, it would not have needed to pursue imperialistic foreign wars to extort money from its neighbors.

[Continued...]

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

[Geolibertarian]

Since Ellen Brown, Richard C. Cook, Stephen Zarlenga, and the producers of The Money Masters all advocate instituting a modern-day "Greenback" system, and since "Goldbugs" usually cry foul whenever this is proposed, it's worth considering the following excerpt (all emphasis original) from pages 453-65 of monetary historian Stephen Zarlenga's masterwork, The Lost Science of Money:

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


Thanks to over a century of relentless propaganda, the image of the Greenbacks comes down to us as worthless paper money. But upon more careful examination, on balance they were probably the best money system America has ever had....Demonstrating how far monetary history has been distorted, readers may be surprised to learn that every Greenback printed was ultimately as valuable as its gold equivalent, and became redeemable for gold coinage at full value. Today the Greenback supporters are erroneously presented as merely being pro-inflation or against sound money. What they really wanted was a more honest money system, controlled by government, instead of banks....

They [Greenbacks] were receivable for all dues and taxes to the U.S., except import duties, which still had to be paid in coin. The Greenbacks were payable for all claims against the U.S. except interest on bonds which was still payable in coin. The Greenbacks were declared a legal tender for all other debts, public and private....

Greenback critics argue that they were inflationary and mistakenly measure the inflation against gold, starting at equal to a gold dollar in early 1862, and falling to 36 cents against a gold dollar by mid 1864. So one gold dollar exchanged for nearly $2.50 in Greenbacks. That is often the whole of their analysis and it is very misleading. Actually the Greenbacks did drop against gold; first to 58 cents at the end of 1862, then back up to 82 cents in mid 1863 and then down to a brief low of 36 cents on July 16, 1864.

From that point they moved up steadily, averaging 39 cents for August; 45 cents for September; and 48 cents for October, 1864. They retreated to $0.44 in December, and averaged $0.68 for December 1865. From there they gradually rose to $1.00, at par with gold in December 1878. Greenbacks became freely convertible into gold, dollar for dollar, in January 1879....

Economists mistakenly argue that it was only because the Greenbacks were eventually made convertible into gold by law, that made them hold and increase their value. However, that law was a hard fought political struggle, dependent on the 1868 presidential election. The battle could have gone either way and the actual "resumption" law could not get passed by Congress until 1874, for implementation in 1879. This could not have kept the Greenback from further declines, and start moving it upward back in mid-1864.

What did occur in July 1864 was that our government put a limit of $450 million on the Greenbacks and from that month they started rising (i.e. gold began falling in terms of Greenbacks)....

While the Greenbacks lost substantial value for a period, the nation was engaged in the bloodiest war in its history, in which 13% of the population served in the armed forces and 625,000 died....Is it reasonable to expect that any government in those circumstances could completely protect its citizens from financial and other hardships?

[Economic historian Irwin] Unger has noted that:

"It is now clear that inflation would have occurred even without the Greenback issue."

And comparing a wartime inflation under a government run money system (the Civil War) to wartime inflation under a private banker run system (WW I), Civil War historian [J.G.] Randall wrote:

"The threat of inflation was more effectively curbed during the Civil War than during the First World War."....

The fact that the Greenbacks were not accepted for import duties may also have been an important negative factor against the currency:

"Hence it has been argued that the Greenback circulation issued in 1862 might have kept at par with gold if it, too, had been made receivable for all payments to the Government," wrote financial historian [Davis Rich] Dewey.

Also, if interest payments on government bonds had been paid in Greenbacks instead of gold, a large part of the demand for gold would have disappeared.



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

So the bottom line is that, contrary to popular myth, Greenbacks actually performed quite well (particularly given the extreme circumstances in which they were issued), and would have functioned even better if they had been made receivable for the payment of both import duties and interest on government bonds, and would have functioned better still if they had been issued for the production, rather than destruction, of public goods.

[Geolibertarian]

Two more essential excerpts (all emphasis original) from The Lost Science of Money:

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

[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!

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

The great German hyper-inflation of 1922-1923 is one of the most widely cited examples by those who insist that private bankers, not governments, should control the money system. What is practically unknown about that sordid affair is that it occurred under the auspices of a privately owned and controlled central bank.

Up to then the Reichsbank had a form of private ownership but with substantial public control; the President and Directors were officials of the German government, appointed by the Emperor for life. There was a sharing of the revenue of the central bank between the private shareholders and the government. But shareholders had no power to determine policy.

The Allies' plan for the reconstruction of Germany after WWI came to be known as the Dawes Plan, named after General Charles Gates Dawes, a Chicago banker. The foreign experts delegated by the League of Nations to guide the economic recovery of Germany wanted a more free market orientation for the German central bank.

[Hjalmar] Schacht relates how the Allies had insisted that the Reichsbank be made more independent from the government:

"On May 26, 1922, the law establishing the independence of the Reichsbank and withdrawing from the Chancellor of the Reich any influence on the conduct of the Bank's business was promulgated."

This granting of total private control over the German currency became a key factor in the worst inflation of modern times.

The stage had already been set by the immense reparations payments. That they were payable in foreign currency would place a great continuing pressure on the Reichsmark far into the future.

HOW IS A CURRENCY DESTROYED?

In a sentence, a currency is destroyed by issuing or creating tremendously excessive amounts of it. Not just too much of it but far too much. This excessive issue can happen in several ways, for example by British counterfeiting as occurred with the U.S. Continental Currency, and with the French Assignats. The central bank itself might print too much currency, or the central bank might allow speculators to destroy a currency through excessive short selling of it, similar to short selling a company's shares, in effect allowing speculators to "issue" the currency.

The destruction of an already pressured national currency through speculation is what concerns us in this case. A related process was recently allowed to destroy several Asian currencies, which dropped over 50% against the Dollar in a few months time, in 1997-98, threatening the livelihood of millions.

It works like this: First there is some obvious weakness involved in the currency. In Germany's case it was World War One, and the need for foreign currency for reparations payments. In the case of the Asian countries, they had a need for U.S. dollars in order to repay foreign debts coming due.

Such problems can be solved over time and usually require national contribution toward their solution, in the form of taxes or temporary lowering of living standards. However, because currency speculation on a scale large enough to affect the currency's value is still erroneously viewed as a legitimate activity, private currency speculators can make a weak situation immeasurably worse and take billions of dollars in "profits" out of the situation by selling short the currency in question. This doesn't just involve selling currency that they own but making contracts to sell currency that they don't own -- to sell it short.

If done in large amounts, in a weak situation, such short selling soon has self-fulfilling results, driving down the value of the currency faster and further than it otherwise would have fallen. Then at some point, panic strikes, which causes widespread flight from the currency by those who actually hold it. It drops precipitously. The short selling speculators are then able to buy back the currency that they sold short, and obtain tremendous profits, at the expense of the producers and working people whose lives and enterprises were dependent on that currency.

The free market gang claim that it's all the fault of the government that the currency was weak in the first place. But by what logic does it follow that speculators take this money from those already in trouble? Currency speculation in such large amounts should be viewed as a form of aggression, no less harmful than dropping bombs on the country in question.

Industrialists should realize that when they allow such activity to be included under the umbrella of "business activity," they are making a serious error. They should help isolate such speculation and educate the populace on how destructive it is, so that it can be stopped through law.

Limitations could easily be placed on speculative currency transactions without limiting those that are a normal part of business and trading, while stopping the kind of transactions that are thinly disguised attacks on the country involved. Placing a small tax on such transactions would be a healthy first move.

TOO MANY GERMAN MARKS ISSUED

By July 1922 the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923 it was at 1,100,000 to $1. It reached 2.5 trillion marks to $1 in mid November, 1923, varying from city to city.

In the monetary chaos Hamburg, Bremen and Kiel established private banks to issue money backed by gold and foreign exchange. The private Reichsbank printing presses had been unable to keep up and other private parties were given the authority to issue money. Schacht estimated that about half the money in circulation was private money from other than Reichsbank sources.

CAUSE OF THE FIRST INFLATION: SCHACHT'S FIRST "EXPLANATION"

There is often a false assumption made that the government allowed the mark to fall, in order to more easily pay off the war indemnity. But since the Versailles Treaty required payment in U.S. Dollars and British Pounds, the inflationary disorder actually made it much harder to raise such foreign exchange.

Hjalmar Schacht's 1967 book, The Magic of Money, presents what appears to be a contradictory explanation of the private Reichsbank's role in the inflation disaster.

First, in the hackneyed tradition of economists, he is prepared to let the private Reichsbank off the hook very easily and blame the government's difficult reparations situation instead. He minimized the connection of the private control of the central bank with the inflation as mere co-incidence....

THEN SCHACHT GIVES THE REAL EXPLANATION

Schacht was a lifelong member of the banking fraternity, reaching its highest levels. He may have felt compelled to give his banker peers and their public relations corps something innocuous to quote. But Schacht also had a streak of German nationalism, and more than that, an almost sacred devotion to a stable mark. He had watched helplessly as the hyper-inflation destroyed "his mark."

For whatever reasons, after 44 years he proceeded to let the cat out of the bag, with some truly remarkable admissions, which shatter the "accepted wisdom" the Anglo-American financial community has promulgated on the German hyper-inflation....

SCHACHT'S REVELATION

It was in describing his 1924 battles in stabilizing the Rentenmarks that Schacht made his revelation, giving the private mechanism of the hyper-inflation. Schacht was obviously very upset when the speculators continued to attack the new Rentenmark currency. By the end of the November 1923:

"The dollar reached an exchange rate of 12 trillion Rentenmarks on the free market of the Cologne Bourse. This speculation was not only hostile to the country's economic interests, it was also stupid. In previous years such speculation had been carried on either with loans which the Reichsbank granted lavishly, or with emergency money which one printed oneself, and then exchanged for Reichsmarks.

"Now, however, three things had happened. The emergency money had lost its value. It was no longer possible to exchange it for Reichsmarks. The loans formerly easily obtained from the Reichsbank were no longer granted, and the Rentenmark could not be used abroad. For these reasons the speculators were unable to pay for the dollars they had bought when payment became due (and they) made considerable losses."

Schacht is telling us that the excessive speculation against the mark -- the short selling of the mark -- was financed by lavish loans from the private Reichsbank. The margin requirements that the anti-mark speculators needed and without which they could not have attacked the mark was provided by the private Reichsbank!

This contradicts Schacht's earlier explanation, for there is no way to interpret or justify "lavishly" loaning to anti-mark speculators as "helping to keep the government's head above water." Just the opposite. Schacht was a bright fellow, and he wanted this point to be understood. He waited until he wrote the Magic of Money in 1967. His earlier book, The Stabilization of the Mark (1927), discussed inflation profiteering but did not clearly identify the private Reichsbank itself as financing such speculation, making it so convenient to go short the mark.

Thus it was a privately owned and privately controlled central bank, that made loans to private speculators, enabling them to speculate against the nation's currency. Whatever other pressures the currency faced (and they were substantial), such speculation helped create a one way market down for the Reichsmark. Soon a continuous panic set in, and not just speculators, but everyone else had to do what they could to get out of their marks, further fueling the disaster. This private factor has been largely unknown in America.

-- Ibid., pp. 579-87

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

[lostdog2323]

The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers' gold, having felt its crushing effects in their own lives.

yeah how's your precious greenback doing now? crushing the world 

[planning4acrash]

Greenbacks were accepted by the population during the Civil War, because they were backed by a nation that was expanding, growing, and had vast untapped resources.

Who would accept fiat money backed by a bloated, socialist, backward looking country that taxes its citizens to the hilt, and explodes most of its wealth via depleted uranium rounds in foreign lands.

No, a Greenback would only work if the country turned the corner. Otherwise, it will have no more value than the ridiculous SDR's, which are loosing value by the minute.

Greenback would also, only be necessary if America has no gold. If America has the gold it says it has, it could back its currency by simply revaluing gold against the dollar, fixing it, and by nationalizing the Fed, ending its inflationary practices, by simply following the Constitution. Gold would have to rise to between $4,000 and $8,000, but that's OK. And prudent folk who accumulated, sensibly, would then have an incentive to go use their gain to invest in their community.

[Revolt426]

Homeowners and Bank Protection Act of 2007

Whereas, the failure the leadership of the United States Congress to pass the Homeowner and Bank Protection Act of 2007 proposed by Lyndon LaRouche in his July 25, 2007 webcast, has transformed a dire situation from one that could have remained manageable through the Autumn of 2007, into a breakdown crisis of not only the U.S. economy, but of the world economy;

Whereas, the Congressional leadership instead chose a course of insulting treatment of state and local legislative and associated bodies within the states, who clamored for the Congress to enact the HBPA, as shown in the HBPA's passage by five state legislatures, and more than 150 city councils across the United States, in addition to hundreds of endorsements by trade union and other constituency leaders individually;

Whereas the repeated attempts approved by Congress to bail out financial institutions with cumulative trillions of taxpayers' and Federal Reserve money, have utterly failed;

Whereas, forcing the leadership of the U.S. Congress into more responsible behavior on the HBPA now, is perhaps the only chance to begin to move things in a direction which could lead to saving the United States of America itself from the deepest physical depression in its history;

THEREFORE, be it resolved, that

the City/State of______________________

hereby endorses the Homeowners and Bank Protection Act of 2007, as initiated by economist Lyndon H. LaRouche, Jr. This Act includes the following provisions:

1. Congress must establish a Federal agency to place the Federal and state chartered banks under protection, freezing all existing home mortgages for a period of however many months or years are required to adjust the values to fair prices, and restructure existing mortgages at appropriate interest rates. Further, this action would also write off all of the speculative debt obligations of mortgage-backed securities, derivatives, and other forms of Ponzi schemes that have plunged the banking system into bankruptcy.

2. During the transitional period, all foreclosures shall be frozen, allowing American families to retain their homes. Monthly payments, the equivalent of rental payments, shall be made to designated banks, which can use the funds as collateral for normal banking practices, thus recapitalizing the banking systems. These affordable monthly payments will be factored into new mortgages, reflecting the deflating of the housing bubble and the establishment of appropriate property valuations, and reduced fixed mortgage interest rates. This shakeout will take several years to achieve. In the interim period no homeowner shall be evicted from his or her property, and the Federal and state chartered banks shall be protected, so they can resume their traditional functions, serving local communities, and facilitating credit for investment in productive industries, agriculture, infrastructure, etc.

3. State governors shall assume the administrative responsibilities for implementing the program, including the rental assessments to designated banks, with the Federal government providing the necessary credits and guarantees to assure the successful transition. And therefore,

Be it Further Resolved, that a copy of this resolution shall be forwarded to members of Congress from the state, and also be delivered to the President of the United States, for immediate implementation.

[Revolt426]

End Wall Street bankers rule – End the derivatives depression
Webster Tarpley: End the Fed
 
By Webster G. Tarpley
 
The November 22 End the Fed rallies raise a vital issue: it is past time to abolish the unconstitutional, illegal, and failed institution known as the Federal Reserve System, the privately owned central bank which has been looting and wrecking the US economy for almost a hundred years. We must end a system where unelected, unaccountable cliques of bankers and financiers loyal to names like Morgan, Rockefeller, and Mellon set interest rates and money supply behind closed doors, leading to de-industrialization, mass impoverishment, and a world economic and financial depression of incalculable severity. The Fed helped cause the crash of 1929, did nothing to stop the banking panic of 1932-33, and is the main cause of the $1.5 QUADRILLION derivatives crisis which is devastating the world. The Federal Reserve System is Wall Street's murder weapon against the United States , and the Fed must be stopped.
 
The purpose of abolishing the Fed is to get re-industrialization, economic modernization, full employment, and rising standards of living for all the people. Contrary to monetarist fetishes, the value and soundness of currency in the modern world are determined by the ability of a national economy to produce physical commodities that the rest of the world wants to buy. The decline of the dollar has its roots in the wanton destruction of the US industrial base initiated by the Trilateral administration of Jimmy Carter and Feds boss Paul Adolph Volcker with his 22% prime rate. Over the past forty years, the US standard of living has declined by two thirds, and the country has become a post-industrial rubble field, a moonscape monument to the folly of a post-industrial service economy. If you want to go back to sound money, you must gear up modern industrial production so that the world will need dollars to buy goods manufactured in this country. No amount of gold will do the trick.
 
Gold has a critical role to play in a new international currency system, but returning to a gold coin standard would create the most ferocious deflation of all time. Got any credit card debt? If you do, a gold coin standard would make it infinitely harder to ever pay it off. You would be slaving for the rest of your life to pay off a $5,000 credit card balance, or less.  

The United States is blessed by the world's greatest tradition of economics, the American System of political and national economy. Contrary to monetarist mythology, the American System never had anything to do with free trade or “free markets.” It is a tradition of protectionism, mercantilism, and dirigism. It starts with Governor Winthrop of Massachusetts Bay in the 1600s, who promoted industry and launched a sovereign currency. Benjamin Franklin, the founder of the post office, was another dirigist. George Washington was always devoted to infrastructure projects, and Alexander Hamilton created the First Bank of the United States, without which the new nation would have collapsed into poverty, chaos, and a return of British monetarist rule. The Second BUS was created by James Madison, again to ward off chaos. Henry Clay coined the term of The American System, and it meant a national bank, a protective tariff, and national infrastructure financed by the federal government. Daniel Webster tried to create a third BUS, and when he fell short the slide into slave power and civil war resulted. Friedrich List, Matthew Carey, Henry Carey, and Justin Morrill were American System economists who influenced or advised Lincoln. The rise of the US as the world's greatest industrial power came thanks to a protective tariff and a controlled currency, the greenbacks. When Wall Street imposed the Cross of Gold, the American System tradition was continued by the Populist Party. The New Deal, the fruit of mass struggles and the rise of the labor movement, provided a way out of the Herbert Hoover depression by forcing the Morgan-controlled Fed to knuckle under to the FDR presidency. JFK tried to revive the New Deal and break the power of the Fed, and was assassinated by the financiers with the help of the CIA.
 
Monetarists pretend that this history does not exist. Their hero is Andrew Jackson, whose hare-brained meddling caused the Panic of 1837 and shut down US economic development, putting the country firmly on course for the Civil War two decades later. When they talk about the constitution, monetarists seem to be working off the Confederate constitution of 1861, which eliminated the General Welfare clause, and ruled out a protective tariff. During the 19th century, the free trade party was the pro-British slavery party. Monetarist dogma is a mix of Herbert Hoover, Robert Taft (of the Skull & Bones family), Barry Goldwater, Ronald Reagan, and other reactionary Republicans. Monetarism is based on the von Hayek-von Mises Austrian school, which started when a bunch of rent-gouging Viennese landlords wanted to abolish rent control and hired some scribblers to prove that “the market” was always infallible and government is always the enemy. Von Hayek got his chance under the reactionary old battle axe Margaret Thatcher, who brought back rickets, scurvy and pellagra for British working people. The dumbed-down US version of the same doctrine is Milton Friedman and his Rockefeller-funded Chicago School, which got its big road test under the fascist Pinochet regime in Chile.
 
MONETARISM CAUSED TODAY'S WORLD ECONOMIC DEPRESSION

Today's depression has been caused by 40 years of monetarist-inspired deregulation. Derivatives were illegal from 1936 until Reagan legalized them in 1982. Then Wendy Gramm, Greenspan, Bob Rubin, and Larry Summers teamed up to start the derivatives bubble during the Clinton years. Now there are $1.5 quadrillion of derivatives strangling the world economy. Derivatives, not subprime mortgages, are the reason for today's crisis. Today's depression also comes from privatization – like the privatization of Fannie Mae, which worked fine for thirty years as a government agency, but was then privatized, opening the door to the looting excesses which are now well known. The oil market is deregulated, and Goldman Sachs and Morgan Stanley were quick to exploit this situation. This past summer, when you were paying over $4 a gallon for gas, more than half of that was going directly to Wall Street hedge fund hyenas, with a full $1 per gallon for Goldman Sachs and Morgan Stanley alone, the backers of the deregulated offshore ICE exchange.
 
The real enemies of economic progress are the Wall Street bankers, financiers, and finance oligarchs. If you let them control the government, the results are catastrophic. We must therefore fight to take government out of the hands of the bankers. Any other strategy amounts to surrender to Obama and his fascist corporate state.
 
HOW TO END THE DEPRESSION WITH A RETURN TO THE AMERICAN SYSTEM
1. Wipe out derivatives, destroying the largest mass of fictitious capital the world has ever known. This includes credit default swaps, mortgage backed securities, structured investment vehicles, collateralized debt obligations, repo agreements, and other toxic paper. Outlaw hedge funds. Outlaw adjustable rate mortgages. Stop all foreclosures. Seize bankrupt banks, brokerages, and insurance companies and put them through debt triage under Chapter 11 bankruptcy proceedings. Re-establish the uptick rule against short sellers. Stop speculators with position limits and margin requirements for oil and other energy markets. Stop exporting jobs to third world sweatshops under NAFTA, CAFTA, and WTO.
 
2. Seize control of the Federal Reserve System and nationalize it as a bureau of the US Treasury. Decisions about money supply and interest rates must be made by public laws, passed by the House and the Senate and signed by the President. Re-start the US economy by issuing an initial tranche of $1 trillion in cheap 0.5% to 1% federal credit – federal lending, not spending – to state and local governments as well as to private companies engaged physical production. Production means infrastructure, manufacturing, mining, construction, farming, forestry, transportation, and commerce in tangible goods. Productive activities qualify for 1% or less federal credit. Gambling, narcotics, prostitution, financial speculation, speculation, and money laundering are not productive, so they must take their chances in the free market they claim to admire so much. A centerpiece of a recovery program would be the rebuilding of rail systems, water systems, electrical grids, and the interstate highways, all of which are approaching the point of physical breakdown. Nationalize the Big Three auto companies and reconvert them for mass transit.
 
3. We must keep Social Security, Medicare, Medicaid, unemployment insurance, food stamps, Head Start, WIC, and the remaining parts of the social safety net fully funded, since IRA/401k accounts and private insurance will increasingly be wiped out. Federal emergency relief on the model of FERA, CWA, and WPA will soon be needed. Any cuts in these programs will lead to death on a vast scale, especially among the old, the sick, and the very young. Monetarist ideologues who sneer at the nanny state should tell us where they stand when it comes to the very real threat of genocide against the American people.
 
4. Abolish the International Monetary Fund and the World Bank, and set up a new world monetary system based on full employment through the revival of industrial production.

[Voskhod3]

Derivatives were illegal from 1936 until Reagan legalized them in 1982.

I don't understand much of this, could someone explain how Reagan pitched this to Congress or whoever passed the law.

Was it sold as a benefit to the people?

How?

[Revolt426]

I don't understand much of this, could someone explain how Reagan pitched this to Congress or whoever passed the law.

Was it sold as a benefit to the people?

How?

The First Great Depression was caused by 3 main factors
1) The Gold Standard Combined with the FED
2) The then equivilent to Derivatives
3) De-Regulation of the entire speculation system

A Derivative, in the 1930's when Franklin Roosevelt took office was called an option. Since 1901, When Traitor Teddy Roosevelt destroyed lincolns system with the Gold Standard, the Nation began to slowly de-industrialize.

A Derivative is essentially a mass of toxic unpayable mortgages or (futures of mortgages) that are worthless. They are "Exotic investment vehicles" That the private banking sector promised tremendous returns on, in todays case a mass of unpayable mortgages.

There is a 1.5 Quadrillion Dollar bubble of these Derivatives in the system today. This means there is 1.5 Quadrillion dollars of unprinted financial obligations that must be either A) Printed and paid off or B) Frozen

So, in regards to 1920-1932, this was a tremendous bubble that was blown out over the course of 13 years under the Treaury Secretary Andrew Mellon in which the Federal Reserve issued 100 Billion dollars in Gold Convertable FED Notes with only 4 Billion in Reserves. The bubble was created, by the private sector and on the Gold Standard, thus, by the time FDR took office, the entire system was collapsing and there was no way to rebuild the nation that had been de-industrialized for decades after the destruction of the Greenback / Credit system.

When FDR took office in 1933, the entire system had failed after "Free Marketeer" Herbert Hoover pumped banks full of money and accomplished nothing but destroying the United States Banking system. When FDR was inuagurated people were unable to cash checks or make cash withdrawals at most banks. He immediately put the entire system into bankruptcy as opposed to "Bailing out banks, and allowing the markets to correct themselves"...................

Eventually after freezing many speculations and using the bankrupt FED to monetize federal loans and rebuild the nations basic infrastructure, he signed a law banning all Derivatives, or "Options", which are nothing more then speculations meant to destroy the economy and allow bankers to loot the Nation.

Contrary to the Austrian myth that the Private Sector can never make a mistake, and an invisible hand will swoop down and fix the system, on this occasion and every prior occasion a domestic Gold Standard was implimented in the United States, it resulted in an uncorrectable Depression which required Government Intervention. This is a historic fact that they will continue to ignore until the 9th gate of hell opens.

Either way, as for  your question in particular, Reagan was put into office after 15 years of Monetarism, which is simply the beleif that money can be printed (in the form of gold or paper) with intinisic value and that all Government Regulations are bad for the economy. This is an idea based on the concept of a "Post Industrial Society" and a "Consumer Economy", which is a myth as well. Prior to reagans election, there was a depression caused by Nixon/Kissinger's Vietnam War, followed by Jimmy Carter and Paul Volker by raising the FED prime rate to 23% and destroying the industrial base of the United States, hence the Reaganites came in and de-regulated the financial markets to substitute for physical production. This lasted for 20 years until the bottom of the system fell out and we are now experiancing the ramifications of
A) Monetarist De-Regulation, specifically in the form of Derivatives (Speculations)
B) A Nation without updated Infrastructure, that is literally collapsing,  which is required for a productive economy to function (Bridges, Freight Trains, Mass Transit, Roadways, Water Treatment Plants, Power plants).
C) A Private Bank issueing our currency with no Congressional or Treasury Control that colludes with the Treasury. This is Fascism in reality, because the Treasury Secretary is colluding with a Private Bank (The Federal Reserve)

So, we are now dealing with a Post Industrial Wreckage field of an economy, of which the basic infrastructure is collapsing and the entire system is bankrupt. Some people advocate we "Allow the system to collapse", but neglect to realize that if we do indeed follow these insane methods, it will blow the entire world economy out overnight and the economy will grind a complete halt. We will literally end up, in the stone age - you will probably have to hunt for food , that is if you can get around the military who will surely be called in to quell the chaos of an economic collapse in the form of Martial Law.

The proposals in this thread are alternatives to the insane methods, that would not result in genocide on a scale never before witnessed.

[lord edward coke]

The First Great Depression was caused by 3 main factors
1) The Gold Standard Combined with the FED
2) The then equivilent to Derivatives
3) De-Regulation of the entire speculation system

A Derivative, in the 1930's when Franklin Roosevelt took office was called an option. Since 1901, When Traitor Teddy Roosevelt destroyed lincolns system with the Gold Standard, the Nation began to slowly de-industrialize.

A Derivative is essentially a mass of toxic unpayable mortgages or (futures of mortgages) that are worthless. They are "Exotic investment vehicles" That the private banking sector promised tremendous returns on, in todays case a mass of unpayable mortgages.

There is a 1.5 Quadrillion Dollar bubble of these Derivatives in the system today. This means there is 1.5 Quadrillion dollars of unprinted financial obligations that must be either A) Printed and paid off or B) Frozen

So, in regards to 1920-1932, this was a tremendous bubble that was blown out over the course of 13 years under the Treaury Secretary Andrew Mellon in which the Federal Reserve issued 100 Billion dollars in Gold Convertable FED Notes with only 4 Billion in Reserves. The bubble was created, by the private sector and on the Gold Standard, thus, by the time FDR took office, the entire system was collapsing and there was no way to rebuild the nation that had been de-industrialized for decades after the destruction of the Greenback / Credit system.

When FDR took office in 1933, the entire system had failed after "Free Marketeer" Herbert Hoover pumped banks full of money and accomplished nothing but destroying the United States Banking system. When FDR was inuagurated people were unable to cash checks or make cash withdrawals at most banks. He immediately put the entire system into bankruptcy as opposed to "Bailing out banks, and allowing the markets to correct themselves"...................

Eventually after freezing many speculations and using the bankrupt FED to monetize federal loans and rebuild the nations basic infrastructure, he signed a law banning all Derivatives, or "Options", which are nothing more then speculations meant to destroy the economy and allow bankers to loot the Nation.

Contrary to the Austrian myth that the Private Sector can never make a mistake, and an invisible hand will swoop down and fix the system, on this occasion and every prior occasion a domestic Gold Standard was implimented in the United States, it resulted in an uncorrectable Depression which required Government Intervention. This is a historic fact that they will continue to ignore until the 9th gate of hell opens.

Either way, as for  your question in particular, Reagan was put into office after 15 years of Monetarism, which is simply the beleif that money can be printed (in the form of gold or paper) with intinisic value and that all Government Regulations are bad for the economy. This is an idea based on the concept of a "Post Industrial Society" and a "Consumer Economy", which is a myth as well. Prior to reagans election, there was a depression caused by Nixon/Kissinger's Vietnam War, followed by Jimmy Carter and Paul Volker by raising the FED prime rate to 23% and destroying the industrial base of the United States, hence the Reaganites came in and de-regulated the financial markets to substitute for physical production. This lasted for 20 years until the bottom of the system fell out and we are now experiancing the ramifications of
A) Monetarist De-Regulation, specifically in the form of Derivatives (Speculations)
B) A Nation without updated Infrastructure, that is literally collapsing,  which is required for a productive economy to function (Bridges, Freight Trains, Mass Transit, Roadways, Water Treatment Plants, Power plants).
C) A Private Bank issueing our currency with no Congressional or Treasury Control that colludes with the Treasury. This is Fascism in reality, because the Treasury Secretary is colluding with a Private Bank (The Federal Reserve)

So, we are now dealing with a Post Industrial Wreckage field of an economy, of which the basic infrastructure is collapsing and the entire system is bankrupt. Some people advocate we "Allow the system to collapse", but neglect to realize that if we do indeed follow these insane methods, it will blow the entire world economy out overnight and the economy will grind a complete halt. We will literally end up, in the stone age - you will probably have to hunt for food , that is if you can get around the military who will surely be called in to quell the chaos of an economic collapse in the form of Martial Law.

The proposals in this thread are alternatives to the insane methods, that would not result in genocide on a scale never before witnessed.

    Where do you come up with this CRAPPOLA     

The international banksters caused the great depression, just like now, by not loaning/extending credit. Companies have levereged all assets to the banksters. This is how they liquidate the companies. The banks demand more assets be put up for collateral .

The Crash of 1929 and the resulting depression have been exhaustively covered in a previous work (Secrets of the Federal Reserve, 1983).  Roosevelt was elected president in 1932 in a campaign which ignored Hoover’s Rothschild connections and his World War I record.  Instead, Roosevelt blamed Hoover for a depression which had been set up by the Bank of England.  Hoover states in his Memoirs.

“In replying to Roosevelt’s statement that I was responsible for the orgy of speculation, I considered for some time whether I should expose the responsibility of the Federal Reserve Board by its deliberate inflation policies from 1925-28 under European influence, and my opposition to these policies.”
Hoover remained silent, and was ushered out of office.  He later termed Gerard Swope’s “economic planning” for the New Deal as “the precise pattern of Fascism”.  “The New Dealers”, by an Unofficial Observer, Literary Guild 1934, noted that the New Deal included W.A. Harriman, administrator in charge of heavy industry, and his sister, Mary Rumsey, who backed Newsweek with Vincent Astor, and the New Deal weekly, Today.  “Observer” also noted that Col. House was the elder statesman behind the New Deal, and that House had only backed two Presidential candidates, Wilson and FDR.  Roosevelt continued the Wilson policies (actually the House policies outlined in “Philip Dru, Administrator”), with the same personnel, and ended as Wilson did, by involving America in another World War.  Observer states that Col. House’s New York apartment was only two blocks from the Roosevelt home on E. 65th St. in New York, and that House was seen there almost every day in 1932.  He also visited Roosevelt in New England and on the Roosevelt yacht.

To consolidate Roosevelt’s power, his backers used the typical World Order scheme – they set up his “opposition”.  In August, 1934, the principal architects and financiers of his New Deal formed the Liberty League, immediately characterized as an “extreme rightwing” organization.  Pierre and Irenee DuPont put up $325,000 for it.  The League was also financed by J.P. Morgan, the Rockefellers, J. Howard Pew, and William J. Knudsen (who was later appointed by FDR to an important position!).  The backers of Liberty League, who were busily denouncing Roosevelt & his staff as “Communist”, which many of them were, were also the organizers of American International Corporation, which had been formed to prevent the economy of the Soviet Union from collapsing.  Liberty League successfully corralled the opponents of FDR and branded them as “rightwing nuts”.  Roosevelt was given the opportunity to rant against his opposition as “economic royalists”, “the Old Guard”, and “princes of privilege”.  Gerald L.K. Smith was then brought into the picture, in order to smear Roosevelt's opposition as “anti-Semitic”.  The ploy operated from 1934 to the 1936 elections, when it effectively destroyed London's campaign.  No effective political opposition was organized against Roosevelt for the rest of his lifetime in office.  It was one of the most successful political hoaxes in American history.  Roosevelt then married his son to an heiress of the DuPont dynasty.  At the very time that Eugene DuPont, cousin of Pierre, was one of the most active members of the Liberty League, F.D. Roosevelt Jr. was courting his daughter, Ethell !  They were married June 28, 1937, in what Time Magazine called the “Wedding of the Year”, presided over by Dr. Endicott Peabody.  The couple made the cover of Time magazine, the only newlyweds ever to do so.

These measures were necessary because FDR's backers were planning to involve the U.S. in the Second World War.  Any popular political opposition to Roosevelt might have swept him out of office in 1940, just when he was needed to bring off the Pearl Harbor attack.  On the morning of Pearl Harbor, Gen. Marshall, his Chief of Staff, met secretly with Maxim Litvinov (married to Ivy Low of England), to assure the Russians that everything was going according to plan.  Marshall later testified before Congress that he “couldn't remember” where he was on Pearl Harbor Day.

The “managed conflict” was well on its way.  Jacques Rueff points out that Schacht did not invent Hitler's monetary policy; it was imposed on Germany “by American and British creditors to finance war preparations and finally unleash war itself” (The Monetary Sins of the West).  Rueff also points out that the Standstill Agreement of 1931 allowing Germany a moratorium on war debts through the 1930s was a amicable pact between the London, New York and German branches of the Warburg and Schroder houses.  Max Warburg remained Schacht's deputy at the Reichsbank until 1938; Kurt von Schroder then became his deputy.  (Schacht's father had been Berlin agent for the Equitable Life Insurance Co. of New York.)  The industrialist levies for Hitler (the Circle of Friends) were paid into the Schroder Bank.

Throughout the 1930s, Hitler was duped into persevering in his desire for friendship with England, an alliance originally proposed jointly by Theodore Roosevelt and the Kaiser in 1898 between the three Nordic powers, England, Germany and the United States.  The Schröders assured Hitler that their Anglo-German Fellowship in England was a hundred times more influential than it actually was.  With such figures as the Astors and the Chamberlains supporting rapport with Germany, Hitler was persuaded that war with England was impossible.  In 1933 he had announced his discovery that Marx, Lenin and Stalin had all said that before international Communism could triumph, England and her Empire must be destroyed.  “I am willing to help defend the British Empire by force if called upon,” he declared.  In 1936, Hitler arranged for meetings to take place between English and German diplomats, but the desired result was never attained, as the British had only one goal to lull Hitler into a sense of false security until they could declare war against him.

To lure Hitler into World War II, it was necessary to guarantee him adequate supplies of such necessities as ball bearings and oil.  Jacob Wallenberg of the Swedish Enskilda Bank, which controlled the giant SKF ball bearing plant, furnished ball bearings to the Nazis throughout the war.  The anti aircraft guns sending flak against American air crews turned on SKF ball bearings.  Its American plant, SKF of Philadelphia, was repeatedly put on the Proclaimed List, and each time, Dean Acheson removed it.

President William S. Farish of Standard Oil refueled Nazi ships and submarines through stations in Spain and Latin America.  When Queen Elizabeth recently came to the U.S., the only family she visited was the Farishes.  Throughout the war, the British paid royalty to Ethyl-Standard Corp. on the gasoline used by German bombers who were destroying London.  The money was placed in Farben bank accounts until after the war.  I.G. Farben was organized by the Warburgs in 1925 as a merger between six giant German chemical companies, Badische Anilin, Bayer, Agfa, Hoechst, Welierter-Meer, and Griesheim-Elektron.  Max Warburg was director of I.G. Farben, Germany, and I.G. Chemie, Switzerland.  American I.G. Farben was controlled by his brother, Paul, architect of the Federal Reserve System, Walter Teagle of Standard Oil, and Charles Mitchell of National City Bank.  Just before World War II broke out, Ethyl-Standard shipped 500 tons of ethyl lead to the Reich Air Ministry through I.G. Farben, with payment secured by letter of Brown Bros. Harriman dated Sept. 21, 1938.

Throughout World War II, the Paris branches of J.P. Morgan and chase National Bank continued to do business as usual.  At the end of the war, occupation authorities repeatedly issued orders to dismantle I.G. Farben plants, but were countermanded by Gen. William Draper of Dillon Read, which had financed German rearmament in the 1920s.

Winston Churchill remarked of this “managed conflict” in 1945, just before it ended, “There never was a war more easy to stop.” (quoted in Washington Post June 11, 1984).  The only real difficulty had been encountered in getting it started.  Churchill succeeded in prolonging the war for at least a year by defeating Gen. Wedemeyer's plan for a Channel crossing in 1943, and by embarking on his ruinous North African-Sicilian swing, a replay of his disastrous Gallipoli campaign of the First World War.  Life revealed April 9, 1951 that Eisenhower had radioed Stalin through the U.S. Military Mission in Moscow of his plan to stop at the Elbe and allow the Russians to take Berlin.  The message had been written by Ike's political advisor, John Wheeler-Bennett of RIIA, received by W. Averill Harriman, and delivered to Stalin.  In Washington, Gen. Marshall assured President Truman that we were “obligated” to allow the Russians to take Berlin.  Senator Joseph McCarthy later called Marshall “a living lie”.

The conquered German people were now systematically looted and ruthlessly governed by the occupying powers.  Henry Kissinger, John J. McCloy (son-in-law of a J.P. Morgan partner), Benjamin Buttenweiser, partner of Kuhn, Loeb & Co. (his wife was Alger Hiss's lawyer at his trial for perjury), and other Rothschild operatives descended like locusts upon the prostrate nation.  Aid to Soviet Russia continued under the guise of the Marshall Plan, a rerun of Hoover's Belgian Relief Commission in World War I.  The Marshall Plan originated as a special study by David Rockefeller for the Council on Foreign Relations, “Reconstruction of Western Europe” completed in 1947.  It was retitled the “Marshall Plan” and advertised as a great contribution to “democracy in Europe”.  (Imperial Brain Trust-Shoup).  W. Averell Harriman was installed in the Rothschild's Paris mansion, Hotel Talleyrand, as head of the Marshall Plan.

The victorious Rothschilds consolidated their control of world monetary systems by the Bretton Woods pact, a replica of the charter of the Bank of England.  It provided immunity from the judicial process, its archives were inviolable and not subject to court or Congressional inspection;  no taxation could be levied on any security dividend or interest of the Fund;  all officers and personnel were immune from legal processes.  The pact systematically looted Western Europe and the United States.  On April 3, 1984, AP reported that “British” investments in the U.S. were now $115 billion, and the British held $28 billion in U.S. bank assets.  At least one U.S. Senator is a member of the British aristocracy, Malcolm Wallop, (R. Wyo.) son of Hon. Oliver Wallop, whose brother is Earl of Portsmouth (created 1743).  Sen. Wallop's sister, Lady Porchester, married Lord Porchester, son of the Earl of Carnarvon.  Lord Porchester is the Queen's Master of Horse, and her Racing Manager.

Lord Carrington, for many years British Foreign Minister, is now Henry Kissinger's partner in Kissinger Associates, and was recently appointed head of NATO.  He is chum of GE chum Australian New Zealand Bank, director of Rio Tinto, Barclay's Bank, Cadbury Schweppes, Amalgamated Metal, British Metal, and Hambros Bank.  His mother was the daughter of Viscount Colville, who was financial secretary of the treasury 1936-38.  Richard Davis notes in “The English Rothschilds” that Lionel Rothschild was a frequent visitor at Lord Carrington's house in Whitehall.  In fact, Lord Carrington was related to the Rothschild family by marriage.  The first Lord Carrington was Archibald Primrose.  His son became Viscount Rosebery.  The 5th Earl Rosebery married Hannah Rothschild, daughter of Mayer, in 1878.  She was given away by Disraeli.

World War II delivered the peoples of the world into the hands of the World Order, with the predictable result that they have been systematically despoiled, terrorized, oppressed and massacred in further “managed conflicts”, not the least of which was the Vietnam War, in which American boys with little or no combat training were sent into battle against the highly trained guerilla troops of Ho Chi Minh and General Giap, communist troops whose leaders had been intensively trained by the special OSS Deer team.

The Rothschilds rule the U.S. through their foundations, the Council on Foreign Relations, and the Federal Reserve System, with no serious challenges to their power.  Expensive “political campaigns” are routinely conducted, with carefully screened candidates who are pledged to the program of the World Order.  Should they deviate from the program, they would have an “accident”, be framed on a sex charge, or indicted on some financial irregularity.  Senator Moynihan stated in his book, “Loyalties”, “A British friend, wise in the ways of the world, put it thus: They are now on page 16 of the Plan.”  Moynihan prudently did not ask what page 17 would bring.

The American citizen works hard and pays taxes, blissfully unaware that at any moment the secret rulers, operating through the Federal Reserve Board, can make a monetary ruling which will place him in onerous debt or bankrupt him.  Gary Allen writes in American Opinion, Oct. 7, 1979, “Whatever the future holds, you can bet it will be unstable with wide swings in the value of the dollar and precious metals.  As long as Volcker's sponsors know in advance what his policies will be, they will make big money.”  This accurate prediction was followed by 20% interest and 25% inflation.

Businessweek, Feb. 20, 1984, stated, “The worst market for traders is a stable one.... Investment banks now have a greater than ever vested interest in market instability.  They can rack up enormous profits by guessing right about rapid, wide swings in profits, prices and interest rates.”  It is obvious that they can rack up “enormous profits” if they know in advance what the monetary decisions will he.  Anyone who seriously believes that no one knows in advance what Federal Reserve decisions will be is too naive to be allowed out on their own;  anybody who believes that there is no one who can tell the Federal Reserve Board what its policies are to be is even more out of touch with reality.  Many people believed that Lord Montagu Norman ran the Bank of England as a one-man show for thirty years, showing that some people will believe anything.  A. Craig Copetas writes in Harper's, Jan. 1984, “How the Barbarians Do Business” about the 2,000 dealers of the London Metal Exchange, that viewing these people objectively, “you are left with a simple scrap merchant – a rag and bone man, as the British call their junk dealers.”  It is the rag and bone men who are running the economies of the world up and down like a window shade, and profiting handsomely on every move of the markets.

Carter Field notes in his biography of Baruch, “Baruch got out of the market just before the Crash.  But what made Baruch sell stocks and buy tax-exempts at such a favorable time?”  Field offers no answer.  Norman Dodd, who was then with Bankers Trust, states that Henry Morgenthau came into Bankers Trust a few days before the Crash, and ordered the officers to close out all securities of his trusts, $60 million, in three days.  The officers tried to remonstrate with him, pointing out that if he would sell them over a period of weeks, he would make much greater profits, perhaps five million dollars more than if they were disposed of on such short notice.  Morgenthau became furious, screaming at them, “I didn't come here to argue with you !  Do as I say!”  Black Friday occurred within the week.

On May 30, 1936, Newsweek wrote about a Roosevelt appointee to the Federal Reserve Board, Ralph W. Morrison, “He sold his Texas utility stock to Insull for ten million dollars, and in 1929 called a meeting and ordered his banks to close out all security loans by Sept. 1.  As a result, they rode through the depression with flying colors.”

The insiders come through “with flying colors”, while millions of victims are ruined, destroyed by forces which they refuse to believe exist.  Heartbreak, losses of homes and businesses, breakdowns, suicides, destruction of families, these are the results of World Order economic policies initiated and carried out by “the rag and bone men”.

Through its monetary command to the Federal Reserve Board, the World Order determines the outcome of American elections.  A news commentator recently pointed out that Paul Volcker would determine whether Reagan would be re-elected.  In 1980, the Federal Reserve Board deliberately defeated Carter and elected Reagan.  Otto Eckstein noted in U.S. News, Sept. 5, 1983, that the prime rate reached 21.5% in late 1980, creating a recession in an election year.  Eckstein, head of Data Resources in Lexington, Mass. (he later died suddenly), said, “The Federal Reserve had never before made such a move.”  Only the World Order knows whether the Federal Reserve will ride Reagan back into office in 1984 on a high tide of prosperity, or throw him out as the new Herbert Hoover.  The more likely prospect is that he will be the Herbert Hoover of 1986 or 1988.

One critic pointed out that Volcker has boosted interest rates, which hurts U.S. stocks, making short term U.S. money instruments more desirable than long-term, and bringing about the very instability of foreign capital flows which he claims to fear.  Gordon Thether writes in The London Financial Times, “In all history, there can be fewer instances of a man having inflicted greater damage on the interests of his fellow human beings than Volcker has done with 'benigh neglect' and its all too many malignant manifestations – not the first of which is the ill-conceived gold demonetization campaign Washington has been engaged in since the late 60s.  Interest rates rise when gold does not back currency.”

Through the London Gold Pool, the Federal Reserve System and the U.S. Treasury disposed of American gold at the giveway price of $35 an ounce, one tenth of its current value, robbing the American public of billions of dollars.  On July 24, 1969, Volcker authorized SDR paper gold, Special Drawing Rights, to replace gold in foreign exchange.  He then triumphantly remarked to his fellow bankers in Paris, “Well, we got this thing launched.”  Secretary of the Treasury Connally then took the Nixon Administration off gold, devaluing the dollar in August, 1971.

On July 17, 1984, Jack Anderson described the Federal Open Market Committee in the Washington Post as “a mysterious council of 12”, “the enigmatic group” with “excessive secrecy” who, says Anderson, “influence what rates you will pay, how much money will be available for business to borrow and whether inflation once again will eat up your earnings and reduce the value of your bank accounts.”

Despite the far-reaching importance of “Volcker's” decisions, his testimony before Congress is shrouded in gobbledy-gook;  this writer has gone through hundreds of pages of his testimony without finding a single quotable phrase about his economic intentions.  On July 9, 1984, Jack Anderson said of Volcker's meetings with high Treasury officials, “One of them, asked if he could recall anything Volcker had said during the high-level meetings, thought a moment and replied, ‘I can't remember anything he said that I understood'.”

Sen. Moynihan noted in the New Republic, Dec. 31, 1983, “The Fed does not control the precise money supply and cannot precisely determine interest rates.  But it can set the direction and range for both, and this it did.  Anyone who tried to dissent was soundly rapped.  Its two dozen or so central bankers decided to bust the economy, and bust it they did.”

Paul Craig Roberts writes in Businessweek, Feb. 27, 1984, “Whatever Volcker's intentions, the empirical data show that there has been a deceleration in money growth since last spring and that the Fed has been using open market operations to keep interest rates up.... What concerns the financial markets is the eclipse of Reagan's policies by Volcker's.... the most likely result will be higher taxes and higher deficits.”

Nevertheless, the press and the Democrats attack Reagan as responsible for the deficit, over which he has no control, and which Volcker creates.

The New York Times stated that whoever won the election in Nov. 1984, it has already been decided that taxes will be increased by $100 billion.  Here again, why have an election of elected officials who have no influence in economic affairs ?  Brunner recently interviewed Walter Wriston, retired head of Citibank, who said, “I have been through the Fed's actions for the past fifteen years in detail – the Fed has exercised a malign influence on the economy of this country.  Its interference in the financial markets of America over the last decade has resulted in persistently excessive money growth, inflation which undermined the financial strength of U.S. corporations owing to the combined inflation and excessive rates of taxation, and record debt.”

Forbes pointed out June 20, 1983 in a story about “Tony” Solomon, “Solomon may be the most important man in the Federal Reserve System after the chairman, and what he says and does has an effect upon us all.”

Perhaps you have never heard of “Tony” Solomon.  Certainly you have never voted him into any office, yet what he says and does has an effect upon us all.  He is the chairman of the Federal Reserve Bank of New York, a post formerly held by Paul Volcker.  This bank represents the New York money market in the Federal Reserve System.  Fifty-three per cent of its stock is held by five New York banks whose controlling influence is the London House of Rothschild.  The chairman of the FRBNY sits permanently on the FOMC at the right hand of the chairman of the Board of Governors.  Sec. 12A of the 1913 Federal Reserve Act provided that five representatives of the 12 Federal Reserve Banks should rotate on the FOMG.  This was quietly amended in August 1943, while World War II was raging, to read, “one elected annually by the board of directors of the Federal Reserve Bank of New York” replacing the provision that “one should be elected annually by the boards of directors of the Federal Reserve Banks of Boston and New York”.  FRBNY is now the only Federal Reserve Bank with a permanent seat on the FOMC.  The American public was never informed of this change.

[Revolt426]

    Where do you come up with this CRAPPOLA     

The international banksters caused the great depression, just like now, by not loaning/extending credit. Companies have levereged all assets to the banksters. This is how they liquidate the companies. The banks demand more assets be put up for collateral .

I come up with it from doing REAL research as opposed to being a "GOOGLE" Researcher. Here , go educate yourself instead of posting nonsense propaganda from the AMERICAN LIBERTY LEAGUE:
http://coat.ncf.ca/our_magazine/links/53/all-both.html

http://www.tarpley.net/29crash.htm

PART 7

BRITISH FINANCIAL WARFARE: 1929; 1931- 33

HOW THE CITY OF LONDON CREATED THE GREAT DEPRESSION

by Webster G. Tarpley
December, 1996

[Revolt426]

I would just like to add, that everything posted by Lord edward coke is pure propaganda from a Group called the American Liberty League, Funded by JP Morgan , Rockefeller, the Duponts and the Mellons;

The American Liberty League
By Richard Sanders, Editor, Press for Conversion!

Lurking in the background behind the plot to oust FDR was the American Liberty League, a pro-business think-tank and ultra-right wing lobby group. Its treasurer was Jerry MacGuire’s boss, Grayson Murphy, a leading J.P. Morgan broker. One of its top donors was Robert Clark, who also tried to recruit General Smedley Butler into the conspiracy to oust President Franklin D. Roosevelt.

The origins of the League were very closely tied to an earlier organization of multi-millionaires, motivated entirely by greed and self-interest, that concerned itself with repealing the alcohol prohibition laws, The Association Against the Prohibition Amendment.

General Butler testified to the MacCormack-Dickstein Committee that when he asked whether anything was “stirring” with regards to Jerry MacGuire’s wealthy backers’ plans for a “superorganization” to coordinate the coup against FDR, MacGuire predicted the American Liberty League’s emergence, saying: “Yes, you watch; in two or three weeks you will see it come out in the paper. There will be big fellows in it. This is to be the background of it.”

Jules Archer, in The Plot to Seize the White House (1976), said the “link between the conspiracy and the powerful interests…in the background” was “the most significant” part of Butler’s testimony. However, MacGuire’s foreknowledge of the League and its links to the fascist plot were deleted from the Committee’s published report.

Archer notes that Butler was “stunned” and “genuinely alarmed” upon reading of the League’s formation:

"For the first time it dawned upon him that if the American Liberty League was the ‘superorganization’ behind the plot, [as] it seemed to be, the country’s freedom was in genuine peril. Such money and power as the men behind the League possessed could easily mobilize a thinly-disguised Fascist army from the ranks of jobless, embittered veterans and do what Mussolini had done in Italy with the financial support of the Italian plutocracy.... MacGuire had outlined...the conspirators’ plans for a putsch [coup], indicating it would easily succeed...because …the American Liberty League, was behind it with money and arms.... MacGuire revealed that the people behind him... could... raise $300 million for the putsch."

On January 23, 1936, Senator Schwellenbach denounced all the “rascals and crooks who control the American Liberty League.” Senator Robert La Follette, Jr., said it cannot “be expected to defend the liberty of the masses of the American people. It speaks for the vested interests.”

The League, funded by Wall Street’s leading fascists, received $500,000 during its first year alone. So much of this money came from the du Ponts that U.S. Postmaster General, Jim Farley, called it the “American Cellophane League” because, he said, it was a du Pont product that you could see right through. The du Ponts – through their control of the Remington Arms Co. – were also prepared to provide weapons for the Croix de feu-like veterans’ organization that the conspirators wanted Butler to lead as part of their plan to overthrow the government.

With a staff of 50 in their 31-room, New York City headquarters, the League was FDR’s most formidable foe. It launched chapters at 26 colleges and universities and spawned 15 front groups across the country to spread anti-labour, anti-communist and anti-Semitic hatred. The League distributed 50 million copies of extremely right-wing, often blatantly fascistic, pamphlets. It bankrolled a speakers’ bureau, hosted nation-wide radio shows and launched lawsuits targeting the New Deal’s 1935 Wagner Act because it allowed collective bargaining.

Created in August 1934, this association of wealthiest corporate leaders said its goals were “to combat radicalism, to teach...respect for the rights of persons and property, and generally to foster free private enterprise.” It attacked government funding for poverty relief and social services and opposed all “burdensome taxes imposed upon industry for unemployment insurance and old age pension.”

League news releases were often used verbatim by corporate media that shared the League’s anti-democratic values. Between Aug. 1934 and Nov. 1936, the League got 35 favourable, front-page stories in the New York Times. An exception to the anti-FDR media were the Scripps-Howard papers. In Jan. 1936, they ran a story headlined “Liberty League Controlled by Owners of $37,000,000,000.” It exposed that League backers directed U.S. Steel, General Motors, Standard Oil, Chase National Bank, Goodyear Tire and the Mutual Life Insurance Co.

Sources:

Jules Archer, The Plot to Seize the White House, 1976.

Charles Higham, Trading with the Enemy, 1983.

Gerard Colby, DuPont Dynasty, 1984.


FDR on the League
On Jan. 3, 1936, in an unprecedented joint session of Congress, when President Roosevelt announced a ban on military exports to fascist Italy, he blasted the American Liberty League:

"They steal the livery of great national ideals to serve discredited special interests…. This minority in business and industry... engage in vast propaganda to spread fear and discord among the people. They would gang up against the people’s liberties…. They seek the restoration of their selfish power.….
Our resplendent economic aristocracy does not want to return to that individualism of which they prate, even though the advantages under that system went to the ruthless and the strong. They realize that in 34 months we have built up new instruments of public power. In the hands of a people’s government this power is wholesome and proper. But in the hands of political puppets of an economic aristocracy, such power would provide shackles for the liberties of the people. Give them their way and they will take the course of every aristocracy of the past – power for themselves, enslavement for the public."
http://www.janda.org/politxts/State%20of%20Union%20Addresses/1934-1945%20Roosevelt/FDR36.html

[Revolt426]

And, if you would like to know who FDR really was as opposed to the complete DISTORTED HISTORY that is posted all over the internet, which is nothing more then parroting of the American Liberty League and JP Morgan, i would advice reading the following:

A) A direct witness (Roosevelts son) to a fight between Churchill and FDR on British Imperialism:
http://www.larouchepub.com/eiw/public/2007/2007_30-39/2007_30-39/2007-37/pdf/59-61_736.pdf

B)
The Morgan Fascist Coup Plot
and How FDR Defeated Ithttp://www.larouchepub.com/other/2006/3332morgan_coup_plot.html

[Revolt426]

And finally, since i know Lord Edward Coke is going to post Pearl Harbor Propaganda, FDR was not involved and it has been DEBUNKED HERE:

http://forum.prisonplanet.com/index.php?topic=88303

Webster G. Tarpley Debunks Pearl Harbor Myths (And British Spy Ring EXPOSED)

[lord edward coke]

And finally, since i know Lord Edward Coke is going to post Pearl Harbor Propaganda, FDR was not involved and it has been DEBUNKED HERE:

http://forum.prisonplanet.com/index.php?topic=88303

Webster G. Tarpley Debunks Pearl Harbor Myths (And British Spy Ring EXPOSED)

The FDR 'family' connections are apperent to anyone with eyes open.    FDR=POS.

Pearl harbor was FDR 2nd great accomplishment.

His first : the total Socialization of the USA.      http://www.druglibrary.org/olsen/COMMON/factfict.html

Our Constitution Has Been Suspended
Since March 9, 1933, the United States has been in a state of declared NationalEmergency.
-Senate Report 93-549

When in the course of human events, ordinary citizens have reason to fear their government, it's time to look seriously at cause and cure.

Government officials are supposed to be instruments by which we, the people, govern ourselves. Under a constitutional government, the citizens are the ruling class. All other offices are subservient to the citizens. How did citizens become the subjects of government and government officials become the ruling class?


Government Has Achieved Ability to Rule by Decree
The US Constitution was basically the shackles placed on the federal government by a sovereign people. The people possessed God-given rights. These rights were only secured by the constitution. All rights not specifically granted to the government were reserved for the people.

This country started out as a constitutional republic, that is, a union of sovereign nation states. The federal government was to be an agent of the states.

As a safeguard, the constitution provides that during times of rebellion or invasion, the president may assume all powers. These emergency powers should end after the crisis. President Lincoln assumed all powers during the Civil War. Since he was dealing with a rebellion, we may say that he established a constitutional dictatorship.

Since then, however, the definition of "emergencies" requiring total control has been stretched to include economic problems, social imbalances, and perceived threats to the US by a foreign country's actions on another continent. When authoritarian control is exerted during times other than rebellion or enemy invasion, it is an unconstitutional dictatorship. The federal government has overstepped the bounds placed on it by the constitution.

Through the insidious, yet steady encroachment of "emergency powers," the government has now achieved the ability to rule the people by statute or decree, without the vote or consent of the ruled. Through a maze of political maneuvers, the emergency powers granted to President Franklin D. Roosevelt in 1933 to deal with an economic depression have become part of the US Code as permanent everyday powers. America has continued under the "unconstitutional dictatorship" of war and emergency powers to this day, more than 60 years later.


Emergency Rule Means Government Owns All Rights
In reality, under this "unconstitutional dictatorship," the roles have been reversed. We have no rights except those the government grants us. Under our constitutional government, we the people had all rights except those specifically granted to the government.

We have lost our constitutional rights. How did it happen? What does it mean? What can we do about it? Increasingly, US citizens are unwilling to be the pawns of arbitrary and capricious decrees. We have both the right and duty to reclaim our country.

The government today, with its inflated bureaucracy, political posturing, and ineffectual programs, would be a laughingstock if it weren't for the sinister side - arbitrary seizure of property without proven cause by many government agencies, federally mandated but unfunded programs that choke the states' right to rule themselves, an unsound money system, and a de facto economic depression for the last 10 years. Add a growing separation between "haves" and "have nots" and we have a powder keg on a short fuse.

Government has grown so big, so unreachable, that the ordinary citizen feels helpless to influence it. Government by the people? Even those with clout and political savvy, such as state governors, seem unable to sway D.C.

Government acts like a tyrant gone rampant, wilfully imposing its policies on citizens, protecting its image, and covering up its mistakes. Fear sets in when we realize that the government can play kickball with our lives - and there is no one to stop it. Today, with our constitutional rights effectively suspended, we are at the mercy of the giant.

Hitler used Germany's emergency powers clause (Article 48) to perpetrate his atrocities. Granted, no US president has even approached Hitler's dictatorship, but he has the power to do so. The difference is the degree of benevolence with which the US government has ruled and with which Hitler ruled.

The US constitution provides for the president to be granted emergency powers in times of war or enemy attack. The fatal flaw in the constitution, however, is that once the president has these powers, he himself must give them up. Eleven presidents, both Democrat and Republican, have failed to reinstate the constitution and give up these emergency powers. Today we see the president and entrenched bureaucracy passing rules through the executive branch's many agencies without challenge from the other two branches of government - the congress and the judiciary.


We Have Been Under Emergency Rule for 61 Years
Senate Report 93-549, written in 1973, said "Since March 9, 1933, the United States has been in a state of declared national emergency." It goes on to say:

"A majority of the people of the United States have lived all their lives under emergency rule. For 40 years, freedoms and governmental procedures guaranteed by the constitution have, in varying degrees, been abridged by laws brought into force by states of National emergency. In the United States, actions taken by government in times of great crisis have... in important ways shaped the present phenomenon of a permanent state of National emergency."...

"These proclamations give force to 470 provisions of federal law. These hundreds of statutesdelegate to the President extraordinary powers, ordinarily exercised by Congress, which affect the lives of American citizens in a host of all-encompassing manners. This vast range of powers, taken together, confer enough authority to rule this country without reference to normal constitutional process.

"Under the powers delegated by these statutes, the President may: seize property, organize and control the means of production; seize commodities; assign military forces abroad; institute martial law; seize and control all transportation and communication; regulate the operation of private enterprise; restrict travel; and, in a plethora of particular ways, control the lives of all American citizens."

Today most of the people living in the US have not been taught the constitution, have never enjoyed the constitutional rights for which our forefathers fought a revolutionary war, and know that something is terribly wrong with our government yet have no idea what to do about it.

Knowledge is power. Once the American people understand what has happened, they will demand just and reasonable action. It was said of the Revolutionary War against Great Britain in 1776 that the real revolution occurred in the hearts and minds of the American people before a shot was fired. God grant that we may have a revolution in the hearts and minds of the American people without a shot being fired.


Chapter Two
What the Government Can Do When the Constitution is Suspended
It is not the function of the government to keep the citizen from falling into error; it is the function of the citizen to keep the government from falling into error.
-US Supreme Court

Good People Get into Trouble
You probably think that if you lead a straight life and obey the rules, you aren't going to get into trouble, right? Wrong. Consider these examples:

Diane, a soft-spoken school teacher, was called to serve on the grand jury. She was asked to fill out a lengthy form disclosing everything about herself, including how much money she made, how much her house was worth, what kind of car she drove, etc. She would not answer the questions because she thought this was an invasion of privacy and she didn't see how it affected her right to serve on a jury. The judge had her arrested for contempt of court and jailed.

Linda, a young mother, was getting ready to go to work one morning when a Child Protective Service worker showed up on her doorstep. She insisted on coming in, inspecting the house and four-year-old Johnny, and looking for signs of child abuse. Linda showed up at work in tears two hours later, but it wasn't over. She received a call at work asking both her and her husband to come in for an interview. More grilling. Files were made on the parents. The young couple had to supply references, and the child protective service worker called these people asking if they had seen any signs of child abuse. The visits and interviews continued for six months. The reason for all this? Someone called in a "tip." The agency refused to tell the young couple who called, but it didn't take them long to figure out it was a former friend who held a grudge.

Janette and Bob were selling a house and buying another one. In the packet of forms for the closing was a report that a woman with the same first and last names, but a different middle name and a different social security number, had declared bankruptcy six years previously. Janette had to prove that she wasn't that person, including getting forms notarized, which required going to three different bureaucracies. Janette's realtor told her that since November, 1993, buyers' names are run through a computer, which sometimes comes up with 25 or so similar names. The buyer has to prove he is none of those people.

Don got a notice in the mail from his bank that his account had been attached by the IRS. No notice, no warning, no reason, no appeal. Bob owned a piece of land some distance from his home. When he visited it, he found that it had been confiscated by the government because they had found illegal drug activity on it. He had to prove he was not involved and had no knowledge of it before he could have his land back.


Government Agents May Knock Down Our Doors
A crippled old black man was in bed asleep one night when a drug squad burst in and sprayed him with bullets. They claimed he was resisting arrest. The squad had a tip that a young man who sometimes visited the elderly gentleman was into drugs, but the young man didn't live there and in fact, wasn't there that night. The slain man's son, a well-known sports figure, demonstrated on TV how crippled his father was and how he would have had to go through a series of slow and painful maneuvers to even sit up on the side of the bed.

The Bureau of Alcohol, Tobacco and Firearms fiasco in Waco, Texas was played out on national TV. What isn't widely known is that the original warrants were for a total of $400 for two guns suspected of not having had the excise tax paid on them. This justified attacking a private residence with a riot squad, laying siege to the compound for two months at a cost of over a million dollars a day to taxpayers, imprisoning and torturing men, women and children for over two months without benefit of charges being filed or a trial being held, and in the end the deaths of 86 people plus four ATF troopers. Incidentally, the survivors were acquitted by a jury of charges of conspiracy to commit murder.


Senseless Rules Waste Our Time
A young couple wanted to pull their trailer from Virginia to Texas, but the trailer was unlicensed. He called his mom in Texas to buy him a trailer license. Mom called the licensing office in the county in which the son lived and told them what she needed, inquired about their hours and explained that she was 60 miles away. When she arrived, they refused to issue a license on the trailer because she did not have proof that the car which would pull the trailer had insurance. Her explanations that the car was in Virginia fell on deaf ears. So too did her question as to why they didn't tell her that before she drove 120 miles round trip. She went back home and called the local county agency and they told her just to bring in any proof of insurance on any car. Makes a lot of sense, doesn't it?


Guilty Until We Prove Ourselves Innocent
If you are found with more than $10,000 cash on your person, it can be confiscated. You must prove how you earned it and that it is legally yours.

If you deposit or withdraw $10,000 or more from your bank account, the bank is required by law to report it to the IRS.

If you get in trouble with one agency, another agency often investigates you (usually the IRS).

These are just a few everyday examples of real people and their small and large troubles with government agencies.


Examples Are Common in Everyday Life
These situations are so common that you can easily find other examples in the problems of your family and friends.
Some Acts Are Inherently Wrong;
Others Are Just Against the Rules

We are not saying there should be no punishment for crimes. Some acts are inherently wrong - murder, rape, kidnapping, arson, etc. But some acts are "crimes" only because some legislative body or bureaucrat has made a law that says it is. Another agency may even have a conflicting rule. These "crimes" change regularly depending on who is in power. Legal terminology makes the distinction between malum se - evil in itself, versus malum prohibitum - a crime because someone has made a law against it.

The story of Daniel in the Bible illustrates this point. Daniel was accustomed to praying every day from his window. The ruler made it against the law for anyone to pray. Daniel continued to do so. He was seized and thrown into the lion's den because he broke the law.

In our case, our liberties have been taken from us and are being sold back to us in the form of licenses.

A person doesn't stop knowing how to drive if he misplaces his drivers license. A merchant doesn't lose his ability to run a business if he has no commercial license. A farmer doesn't stop being a steward of the land if he doesn't get a pesticide applicator's license.

Restricted Liberties Have Not Bought Safety
Even though many of our liberties have been taken, the system still isn't working. The streets are not safe, drugs and violence are rampant in schools, young couples can't make a living for their families, many elderly are starving and neglected, and millions of Americans can't afford health care. Restricted liberty did not buy us safety and well-being.


What Can't the Government Do to Us?
What can government agencies do to us if they suspect us of not following their arbitrary edicts that may change tomorrow? Anything they wish. They can and do:


Rob our time and productivity with senseless rules paperwork.
Invade our privacy.
Take our money and property.
Throw us in jail.
Take our children from us.
Ruin our reputation.
Kill us.
We Have No Recourse
Do we have any recourse? Not really. Most people don't have the time and money to fight. Our only hope is big media attention and public outcry. Few have the ear of the media. We are alone when we are pitted against the various government agencies with their awesome and arbitrary power.


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

Chapter Three
Why the Revolutionary War Was Fought
Since the close of the last war, the British Parliament, claiming the power of right to bind the people of America by statute in all cases whatsoever ... - Declaration of Rights, 1774

England Looked on Colonies as Property
The colonists were in a new land fending for themselves. They either learned self-reliance and responsibility or they didn't survive.

England gave them no help to speak of. To England, America was a group of trading companies whose purpose was to further Great Britain's dominion over the world. King George regarded England as the owner of the colonies and the colonists, and exploited as he pleased.


Colonies Had No Sound Money System
The colonies had no official money. They were greatly hampered in trade by the many different types of trade "coin." They used furs, tobacco, wampum (mussel shells made into beads), French louis, English guineas, German thalers, Dutch ducats, Spanish doubloons, and the Spanish milled dollar, or piece of eight.

England ignored the needs of the colonies and made no effort to provide gold or silver coin or small change currency.

The Massachusetts Bay Company started minting coins in Boston in 1652. Other colonies and individuals tried minting projects but generally failed. The new land still did not have a standard money.

England Levies Taxes on Colonists to Finance War
The British got into a war with Spain. They needed more and more wealth to pay for it. They took more and more from the colonies.

The British levied taxes on tea and tobacco and stamps to raise money for the war. They made arbitrary rules and expected the colonists to obey. The rules could change at any time.

The colonists began to complain of "taxation without representation."


England Uses Force
The British tightened the rules. They put on shows of force. They attacked villagers, burned towns, and plundered the coasts and seas. The final blow was when the colonists learned large numbers of foreign mercenaries were sailing toward the new world in order to subdue the colonists.

Colonists Declare Independence
Representatives of the people met in Philadelphia in 1776 to decide what to do. After long and bitter debate and soul searching, these men asked Thomas Jefferson to draft the Declaration of Independence to tell the world why the colonists were cutting their ties with Great Britain.

Let's look at some excerpts. The second paragraph says:

"We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any form of government becomes destructive of these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles, and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness..."

It goes on to say this step is not taken lightly, that the colonists have been very patient.


Complaints Against King George
It begins to set forth the complaints against King George. Several complaints deal with his refusal to make fair laws, to make needed laws, to allow representation by the colonists, and his dissolving bodies of representatives repeatedly when they disagreed with him.

Then we come to these complaints: "He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries.

"He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and to eat out their substance.

"He has kept among us, in times of peace, standing armies, without the consent of our legislatures. "He has affected to render the military independent of, and superior to, the civil power.

"He has combined with others to subject us to a jurisdiction foreign to our Constitution, and unacknowledged by our laws, giving his assent to their acts of pretended legislation.

"For quartering large bodies of armed troops among us:..."

We have some of these situations today.

The ending words:

"And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortune, and our sacred honor." With the signing came seven long years of bloodshed and destruction.


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

Chapter Four
Rights the Constitution Guaranteed Us
The powers not delegated to the United States by the constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people. - United States Constitution

When the colonists declared themselves independent, they had already begun to think of themselves as a new people, as Americans.

After they defeated the British, they were determined never again to be the subjects of tyrants and despotism, either from without or within.

They began to hammer out the philosophy of the United States.

First they formed into a loose confederation of states. One problem was that the individual states could easily ignore the confederation, and there was nothing to prevent one state declaring war on another, as was common in Europe.


States Rights Versus Federal Supremacy
Out of this grew a great debate between the Federalists and the Anti Federalists.

The Federalists felt that a stronger union was needed to ensure domestic peace, represent the new country abroad, protect the country, and strengthen the growing nation.

The Anti Federalists feared a strong central government would put them back into a situation like the one they had fought to overthrow for seven years.

Eventually a consensus was reached. The Constitution of the United States was drafted. Its great purpose was to preserve peace on this continent and ensure liberty. Americans became citizens of both their states and the new nation. Because of this dual citizenship, the American Constitution formed a federal republic.
(It was a republic because not everyone could vote. Only free white males could vote. The country did not become a democracy until the constitution was amended to allow everyone the right to vote, including African-Americans, Indians, and women.) Coming out of oppression and despotism, the founding fathers tried to craft a constitution that would ensure equality, opportunity and justice for all, for all time.

They spelled out the rights of the people and said that all rights not specifically given to the federal government or the states were reserved for the people.


Human Beings Have Inalienable Rights
The Constitution clearly stated that all human beings have certain inalienable rights just because they belong to the human species. Among these inalienable human rights are the right to life, liberty, and the pursuit of happiness. The Constitution sought to form a government with the consent of the governed, one that would ensure domestic tranquillity, a common national defense, and promote the general welfare and secure the blessings of liberty for everyone.

Individual rights were reinforced with the "bill of rights" (the first ten amendments), and other amendments later on. (The complete Constitution may be found in the Appendix.)

Let`s look at the rights guaranteed by the Constitution. At the same time, let's think about whether these <$irights;constitutional vs. reality>rights are real for us today, or whether they exist on paper only.

Please look into the reality of the situation FDR=POS!!!

http://www.druglibrary.org/olsen/COMMON/factfict.html

[Revolt426]

And you refuse to look at the fact that it's been debunked, nor will you debate me on his policies i assume.

You can post lie after lie for the rest of your life, you just quoted a Amity Shlaes, from the council on foreign relations in your history.

Do some real research , please....

[Geolibertarian]

REVIVE LINCOLN’S MONETARY POLICY:
AN OPEN LETTER TO PRESIDENT OBAMA

Ellen Brown, April 8th, 2009
http://www.webofdebt.com/articles/lincoln_obama.php


Dear President Obama:

The world was transfixed on that remarkable day in January when, to poetry, song, and dance, you gazed upon Abraham Lincoln’s likeness at the Lincoln Memorial and searched for wisdom to navigate these difficult times. Indeed, you have so many things in common with that venerable President that one might imagine you were his reincarnation in different dress. You are both thin and wiry, brilliant speakers, appearing on the national stage at pivotal times. Fertile imaginations could envision you coming back dressed in that African heritage you freed, to help heal the great scar of slavery and prove once and for all the proposition that all men are created equal and can achieve great things if given a fighting chance.

As Wordsworth said, however, our birth is but a sleep and a forgetting; and if that is true, you may have forgotten a more subtle form of slavery from which Lincoln tried less successfully to free his countrymen.  You may have forgotten it because it has been omitted from our popular  history books, leaving Americans ill-equipped to interpret the lessons of our own past.  This letter is therefore meant to remind you.

President Obama, we are now met on another battlefield of that same economic war that visited Lincoln and the Founding Fathers before him.  For you to finish the work Lincoln started would be a poetic triumph no American could miss.  The fate of our economy and the nation itself may depend on how well you understand Lincoln’s monetary breakthrough, the most far-reaching “economic stimulus plan” ever implemented by a U.S. President.  You can solve our economic crisis quickly and permanently, by implementing the same economic solution that allowed Lincoln to win the Civil War and thus save the Union from foreign economic masters.

Lincoln’s Monetary Breakthrough

The bankers had Lincoln’s government over a barrel, just as Wall Street has Congress in its vice-like grip today. The North needed money to fund a war, and the bankers were willing to lend it only under circumstances that amounted to extortion, involving staggering interest rates of 24 to 36 percent. Lincoln saw that this would bankrupt the North and asked a trusted colleague to research the matter and find a solution. In what may be the best piece of advice ever given to a sitting President, Colonel Dick Taylor of Illinois reported back that the Union had the power under the Constitution to solve its financing problem by printing its money as a sovereign government. Taylor said:

“Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes . . . and pay your soldiers with them and go ahead and win your war with them also. If you make them full legal tender . . . they will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution.”

The Greenbacks actually were just as good as the bankers’ banknotes. Both were created on a printing press, but the banknotes had the veneer of legitimacy because they were “backed” by gold. The catch was that this backing was based on “fractional reserves,” meaning the bankers held only a small fraction of the gold necessary to support all the loans represented by their banknotes. The “fractional reserve” ruse is still used today to create the impression that bankers are lending something other than mere debt created with accounting entries on their books.¹

Lincoln took Col. Taylor’s advice and funded the war by printing paper notes backed by the credit of the government. These legal-tender U.S. Notes or “Greenbacks” represented receipts for labor and goods delivered to the United States. They were paid to soldiers and suppliers and were tradeable for goods and services of a value equivalent to their service to the community. The Greenbacks aided the Union not only in winning the war but in funding a period of unprecedented economic expansion. Lincoln’s government created the greatest industrial giant the world had yet seen. The steel industry was launched, a continental railroad system was created, a new era of farm machinery and cheap tools was promoted, free higher education was established, government support was provided to all branches of science, the Bureau of Mines was organized, and labor productivity was increased by 50 to 75 percent. The Greenback was not the only currency used to fund these achievements; but they could not have been accomplished without it, and they could not have been accomplished on money borrowed at the usurious rates the bankers were attempting to extort from the North.

Lincoln succeeded in restoring the government’s power to issue the national currency, but his revolutionary monetary policy was opposed by powerful forces. The threat to established interests was captured in an editorial of unknown authorship, said to have been published in The London Times in 1865:

“If that mischievous financial policy which had its origin in the North American Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”

Lincoln was assassinated in 1865. According to historian W. Cleon Skousen:

“Right after the Civil War there was considerable talk about reviving Lincoln’s brief experiment with the Constitutional monetary system. Had not the European money-trust intervened, it would have no doubt become an established institution.”

The institution that became established instead was the Federal Reserve, a privately-owned central bank given the power in 1913 to print Federal Reserve Notes (or dollar bills) and lend them to the government. The government was submerged in a debt that has grown exponentially since, until it is now an unrepayable $11 trillion. For nearly a century, Lincoln’s statue at the Lincoln Memorial has gazed out pensively across the reflecting pool toward the Federal Reserve building, as if pondering what the bankers had wrought since his death and how to remedy it.

Building on a Successful Tradition

Lincoln did not invent government-issued paper money. Rather, he restored a brilliant innovation of the American colonists. According to Benjamin Franklin, it was the colonists’ home-grown paper “scrip” that was responsible for the remarkable abundance in the colonies at a time when England was suffering from the ravages of the Industrial Revolution. Like with Lincoln’s Greenbacks, this prosperity posed a threat to the control of the British Crown and the emerging network of private British banks, prompting the King to ban the colonists’ paper money and require the payment of taxes in gold. According to Franklin and several other historians of the period, it was these onerous demands by the Crown, and the corresponding collapse of the colonists’ paper money supply, that actually sparked the Revolutionary War.²

The colonists won the war but ultimately lost the money power to a private banking cartel, one that issued another form of paper money called “banknotes.” Today the bankers’ debt-based money has come to dominate most of the economies of the world; but there are a number of historical examples of the successful funding of economic development in other countries simply with government-issued credit. In Australia and New Zealand in the 1930s, the Depression conditions suffered elsewhere were avoided by drawing on a national credit card issued by publicly-owned central banks. The governments of the island states of Guernsey and Jersey created thriving economies that carried no federal debt, just by issuing their own debt-free public currencies. China has also funded impressive internal development through a system of state-owned banks.

Here in the United States, the state of North Dakota has a wholly state-owned bank that creates credit on its books just as private banks do. This credit is used to serve the needs of the community, and the interest on loans is returned to the government. Not coincidentally, North Dakota has a $1.2 billion budget surplus at a time when 46 of 50 states are insolvent, an impressive achievement for a state of isolated farmers battling challenging weather.³ The North Dakota prototype could be copied not only in every U.S. state but at the federal level.

The Perennial Inflation Question

The objection invariably raised to government-issued currency or credit is that it would create dangerous hyperinflation. However, in none of these models has that proven to be true. Price inflation results either when the supply of money goes up but the supply of goods doesn’t, or when speculators devalue currencies by massive short selling, as in those cases of Latin American hyperinflation when printing-press money was used to pay off foreign debt. When new money is used to produce new goods and services, price inflation does not result because supply and demand rise together. Prices did increase during the American Civil War, but this was attributed to the scarcity of goods common in wartime rather than to the Greenback itself. War produces weapons rather than consumer goods.

Today, with trillions of dollars being committed for bailouts and stimulus plans, another objection to Lincoln’s solution is likely to be, “The U.S. government is already printing its own money – and lots of it.” This, however, is a misconception. What the government prints are bonds – its I.O.U.s or debt. If the government did print dollars, instead of borrowing them from a privately-owned central bank that prints them, Uncle Sam would not have an eleven trillion dollar millstone hanging around his neck. As Thomas Edison astutely observed:

“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 that 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 that 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.”

A Wake-up Call

Henry Ford observed at about the same time:

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Today we the people are starting to understand our banking and monetary system, and we are shocked, dismayed, and furious at what we are discovering. The wizard behind the curtain turns out to be a small group of men pulling levers and dials, creating an illusory money scheme that, behind all the talk and bravado, is mere smoke and mirrors. These levers are controlled by a privately-owned, unaccountable central bank called the Federal Reserve, which has recently dispensed billions if not trillions in funds to its banker cronies, without revealing where these monies are going even under Congressional inquiry or in response to Freedom of Information Act (FOIA) requests. As Chris Powell pointed out recently in conjunction with an FOIA request brought by Bloomberg News, which the Fed declined to comply with:

“Any government that can disburse $2 trillion secretly, without any accountability, is not a democratic government. It is government of, by, and for the bankers.”⁴

There was a time when private central bankers were the heavyweights in control, able to run their ultra-secret agenda with impunity; but that era is coming to an end. The bankers are scrambling, trying to patch up their crumbling creations with schemes, bailouts and sleight of hand. That effort, however, must ultimately prove futile. As investment adviser Rolfe Winkler said in a recent article:

“The great Ponzi scheme that is the Western World’s economy has grown so big there’s simply no ‘fixing’ it. Flushing more debt through the system would be like giving Madoff a few billion to tide him over. Or like adding another floor to the Tower of Babel. To what end? The collapse is already here. The question is: How much do we want it to hurt? Using the public’s purse to finance ‘confidence’ in a system that is already kaput may delay the Day of Reckoning, sure, but at the cost of multiplying our losses. Perhaps fantastically.”⁵

The bankers are on the run, feverishly trying to use the collapse of the current system to steer us toward an “Amero”-style North American currency, or a one-world private banking system and privately-issued global currency that they and only they control. We the people will not accept those solutions, however, no matter how bad things get. We demand real solutions that empower us, not further enslave us.

Abraham Lincoln had such a solution. President Obama, you can finally bring his monetary solution to fruition. Manifest the vision of Lincoln, Jefferson, Madison and Franklin, and we the people will make sure you are placed in the pantheon of our greatest leaders and are revered for all time. America’s greatest days can still be ahead of us; but for this to happen, we need to expose and root out the deceptive banking scheme that would enslave us to a future of debt and increasing homelessness in this great country our forefathers founded. The time has come for democracy to rise superior to a private banking cartel and take back the power to create money once again. Such a transformation would represent the most epochal and empowering shift that humanity has ever seen. As you recently said:

“This country has never responded to a crisis by sitting on the sidelines and hoping for the best. Throughout our history we have met every great challenge with bold action and big ideas.”

Your words are a timely reminder of our long legacy of action and bold solutions in the face of adversity. Can we do this? Yes we can.

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

1.  See Ellen Brown, “Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme Called Fractional Reserve Banking,” www.webofdebt.com/articles (December 29, 2008).
 
2.  Congressman Charles Binderup in a 1941 speech, “How America Created Its Own Money in 1750: How Benjamin Franklin Made New England Prosperous.” Binderup quotes historian John Twells on this point.
 
3.  E. Brown, “Turning the Tables on Wall Street: North Dakota Shows Cash-starved States How They Can Create Their Own Credit,” www.webofdebt.com/articles (March 11, 2009).
 
4.  Chris Powell, “Fed Refuses to Disclose Recipients of $2 Trillion,” GATA (December 12, 2008).
 
5.  Rolfe Winkler, “More Debt Won’t Rescue the Great American Ponzi,” Option Armageddon (March 9, 2009).

[lostdog2323]

 The New Deal and Roosevelt’s Seizure of Gold: A Legacy of Theft and Inflation

by William L. Anderson
by William L. Anderson

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In a recent discussion on the economy with a faculty colleague, I reminded her of some of the absurdities of New Deal economic policies (many of which have been laid out in previous issues of Freedom Daily and elsewhere). She reminded me that Franklin D. Roosevelt is a “hero” to her and other Democrats, which, translated, means that the New Deal cannot be criticized in any form.

Indeed, in May the New York Times op-ed page paid homage to Roosevelt. Ted Widmer wrote that a book by Newsweek’s Jonathan Alter, who he says “has nurtured a schoolboy crush on F.D.R.,” reflects “on the way that Roosevelt reinvented the presidency during his first hundred days in office, through bold policy innovations, brilliant speeches and broadcasts and a personal connection with the American people that has not been equaled since.”

Democrats today may think of themselves as belonging to a “modern” political party, but Roosevelt still is its central figure and any policy “innovations” that come forth from party intellectuals ultimately must be in line with the New Deal. The shocked Widmer writes that

    a recent spate of books from the right, including Jim Powell’s FDR’s Folly and Thomas E. Woods Jr.’s Politically Incorrect Guide to American History, have accused [Roosevelt] of prolonging the Great Depression and generally screwing up America.

Admirers of Roosevelt – including the editorialists at the New York Times – hold such thinking to be nonsense, especially the first part about the New Deal’s prolonging the Great Depression instead of ending it. After all, has not the Times’s favorite economist, Paul Krugman, himself said that capitalism had created conditions in which “inadequate” aggregate demand existed during the 1930s, leading Roosevelt to attempt to increase aggregate demand through government spending?

While most analyses of the New Deal look at the various programs and policies that expanded government bureaucracies, the New Deal as we know it would not have been possible without the issuance of Executive Order 6102 in 1933. With Roosevelt’s signature, gold as legal money disappeared in the United States, paving the way for the government to engage in near-unconstrained debasement of the currency. Historians generally pass by EO 6102, but without it Roosevelt’s economic programs never would have gained traction.
Understanding the New Deal

Most articles, books, and papers that cover the New Deal concentrate on the myriad of programs and policies of the Roosevelt administration, such as the National Industrial Recovery Act, the Agricultural Adjustment Act, and the Wagner Act, and the battles between Roosevelt and the U.S. Supreme Court, which had struck down some key elements of the New Deal in 1935. For the most part – and especially in those writings that are favorable to Roosevelt – authors tend to emphasize the vast unemployment and helplessness that gripped the United States (and much of the world) in 1933.

Certainly the horrifying numbers are there. In February 1933, a month before Roosevelt took office, the nation’s overall rate of unemployment stood at 28.3 percent. Nearly half the banks in the United States had failed, millions of people were homeless, and the country’s manufacturing facilities operated at perhaps two-thirds or less of their capacity. Farming communities were devastated, as commodity prices fell drastically, making it impossible for farmers to pay their debts and crippling the small rural banks that held the mortgages.

To right the economic ship, the Roosevelt administration proposed a set of programs that came to be known as the New Deal. The problem, however, was not with Roosevelt’s desire to halt the Depression but rather in the misjudging of its causes and with implementing policies that ultimately would prolong it. It is not surprising, then, that Roosevelt and his “brain trust” of intellectual advisors (mostly from Columbia University) blamed free-market capitalism for the economic free fall and set about to ensure that government would set the agenda for the economy.

Progressives who dominated the Roosevelt administration held that the principal cause of the economic downturn was falling prices, along with falling wages. Furthermore, they believed that the cause of falling prices was “overproduction,” so the “cure” was to find ways to limit the production of goods. Thus, in the minds of the New Dealers, the government needed to restrict production and force up prices. As prices rose, so would wages, and high wages would bring the country out of the Depression. For inspiration and direction, they used the economic programs of Italy’s fascist dictator, Benito Mussolini, as their model.

If one applies even simple logic to such a plan, it is obvious that restricting output also would mean that less labor would be required, which would translate into more unemployment. Yet that is exactly opposite from what Roosevelt and his “brain trust” claimed: that restricting production somehow would mean that fewer businesses would fail, thus eliminating unemployment.

For example, his vaunted National Industrial Recovery Act attempted to organize the entire U.S. economy into a series of cartels that would restrict production, force up prices, and keep wages high. Ironically, the NIRA was a comprehensive plan of what Herbert Hoover’s administration had tried to do in a piecemeal fashion – with disastrous results.

The Agricultural Adjustment Act, while aimed at keeping crop prices high, did so by ordering the mass destruction of crops, as well as animals such as pigs and chickens. In order to pay for the destruction of crops, the Roosevelt administration had Congress enact a tax on agricultural products. Thus, the economic ethos of the New Deal was that production was bad and nonproduction was good.

While many economists and astute journalists such as H.L. Mencken immediately pointed out the folly of such policies, the New Dealers believed that they had an ace in the hole: inflation. Yes, they reasoned, these are restrictive policies, but if the government could find a way to massively inflate the currency, then somehow people would start buying more goods as their dollars depreciated, and the ensuing spending spree would wipe out unemployment.

The monetary system of the United States at the time of the Depression could not sustain inflation very long because the country was on a gold standard. If people sensed that the government was printing too many paper dollars, by law they could redeem those dollars from the government’s store of gold. Moreover, gold coins circulated along with silver dollars, half-dollars, quarters, and dimes.

If people were exchanging their dollars for gold, then the government’s own gold supply would be diminished. Since the gold standard included requirements that the country’s money supply have at least a 40 percent gold backing, a drain on gold reserves would have forced the government to stop printing so many dollars. Therefore, the plans of the New Dealers ran headlong into the reality of the gold standard and its check on inflation.

Thus, early in his presidency, on April 5, 1933, Roosevelt signed Executive Order 6102, which ordered people to turn in their gold to the government at payment of $20.67 per ounce. While there were some exceptions for dental use, jewelry, and artists and others who used gold in their jobs, most people were not covered. (Individuals could hold up to $100 in gold coins, but the government confiscated the rest.) Furthermore, the president’s order nullified all private contracts that called for payment in gold, something that led Sen. Carter Glass of Virginia to declare that the whole thing was “dishonor.”

Roosevelt based his order on the 1917 Trading with the Enemy Act, which gave the president the power to prevent people from “hoarding gold” during a time of war. Of course, the United States was not at war in 1933, but Roosevelt claimed that it was a “national emergency” and Congress and the courts meekly bowed to the executive.

In earlier times, such an order would have been met with outrage, as freedom-loving Americans would have rebelled against such a confiscatory order from Washington. Certainly, no president before the Progressive Era would have ordered such action for fear of impeachment or being voted out of office at the next election. However, by the time Roosevelt took office in 1933, the courts already had upheld government restrictions on freedom of speech (especially during World War I) and Congress had begun the unconstitutional delegation of some of its lawmaking powers to the executive branch.

Furthermore, given the economic calamity that prevailed when Roosevelt issued EO 6102, many Americans had become convinced that economic and political freedom meant freedom to starve and were willing to give the president whatever he wanted.

Roosevelt attempted to put “teeth” in his order by means of Section 9 of the order, which said that anyone who refused to comply could be fined as much as $10,000 or be sentenced to a maximum of 10 years in prison. (Most Americans did not resist, although some simply hid their gold until the order was repealed 41 years later.) To understand the magnitude of Roosevelt’s actions against individuals, he was threatening serious fines and prison terms against anyone who held on to what historically had been the money of the American people.

Although Roosevelt made it illegal for Americans to redeem their dollars for gold, he also realized that he could not make the same threats against people from other countries. Therefore, representatives of foreign governments still could trade in their dollars for gold, although shortly after issuing his order, Roosevelt increased the price to $35 an ounce. However, given the state of international trade at the time, foreign holdings of dollars were relatively small, something that would not be the case a half century later.

The small burst of inflation generated by Roosevelt’s move did create a bit of an economic boom, as usually occurs in the early stages of inflation, although unemployment remained at about 15 percent. However, Roosevelt’s twin pillars of what historians call the First New Deal were causing havoc among some producers and entrepreneurs, who realized that the NIRA and AAA were stifling entrepreneurship and productivity. In 1935, the U.S. Supreme Court declared both the NIRA and AAA unconstitutional, but by then the New Dealers had shifted from endorsing business cartels to promoting labor cartels through the unionization of workers.

When the U.S. Supreme Court in 1937 upheld the 1935 Fair Labor Standards Act (or Wagner Act), the inflation-induced “boom” ended soon afterward and the economy tumbled into a recession within a depression, a first for the U.S. economy, as unemployment climbed to nearly 20 percent. But while Roosevelt’s seizure of privately held American gold failed to regenerate the economy, it did lay the foundation for further economic deterioration.
The 1971 collapse of the dollar

Following the Bretton Woods agreement of 1944, currencies were fixed against each other and the dollar still could be redeemed by foreign governments at $35 an ounce. For about 20 years after World War II ended, the arrangement seemed to work. However, in order to pay for the vast expansion of government welfare programs associated with Lyndon Johnson’s Great Society and the escalating Vietnam War, the Federal Reserve System aggressively expanded the supply of money, which not only depreciated the currency at home but also flooded the rest of the world with dollars.

France’s government, under Charles de Gaulle, recognized the situation at hand and began to redeem its dollars in U.S. gold, which was stuck at its 1933 price. While U.S. representatives at first denied there was a problem, by mid-1971 U.S. gold reserves were disappearing quickly, leading Richard Nixon to close the gold window and impose wage and price controls. While some price controls were lifted within the year, oil and gasoline controls remained through the decade, causing untold havoc in the economy.

Conclusion

The presidency of Franklin Roosevelt was characterized by arrogance and outright fraud. Unfortunately, much of the Roosevelt legacy stands. Many historians and economists continue to insist that his economic programs “saved capitalism” when, in fact, they were based on confiscation of property and on the false notion that inflation is the source of prosperity.

Today, the U.S. monetary system is adrift in inflated dollars. Gold prices at this writing are nearly $650 an ounce and the dollar has been falling against other international currencies. The only constraints on the Federal Reserve System’s determination to continue this inflation are political, and the vast majority of politicians and Americans have come to believe that the Fed creates prosperity when it creates new dollars.

Franklin Roosevelt in 1932 campaigned on a platform of restrained government spending and sound money. His legacy, however, is one of runaway spending, government intrusion into peaceful economic exchange, and the utter debasement of U.S. money. To this day, his successors in the executive branch have only extended the worst aspects of the New Deal presidency. Historians might regard his 1933 seizure of gold as a minor point in history, but in many ways it was every bit as significant as all the other New Deal measures put together.
December 9, 2006

William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute.

[Voskhod3]

Thanks Revolt426, your reply was much appreciated.

[Geolibertarian]

To those who seem intent on derailing this thread, this thread is about monetary reform, not about whether FDR was the friggin anti-Christ or not.

So would you please take your FDR debate to a thread already devoted to that topic?

       http://forum.prisonplanet.com/index.php?topic=84736.0

Thanks.

[Voskhod3]

I'm confused.

We have now have accusations of Rockefeller propaganda against Rothschild propaganda.

I though they were on the same side.

[lostdog2323]

I'm confused.

We have now have accusations of Rockefeller propaganda against Rothschild propaganda.

I though they were on the same side.

Its just a shell game. Problem reaction more of the same...

[Geolibertarian]

God there is so much wrong here it's overwhelming.

Indeed there is, only not with what anything I wrote, but with your knee-jerk reaction to it.

I'll give it a try.

And destroy your credibility in the process.

when banks loan (and thereby create) money, they create only the principal, not the interest.

this is just absurd.

As everyone is about to see, the absurdity is yours, not mine.

“(and thereby create money)”. They don't thereby create money.

The hell they don't!

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

"Banks are unique among financial intermediaries in that only they can create money. When banks make loans, they put the proceeds of such loans in the borrowers' checking accounts. Insofar as demand deposits are part of the money supply, these newly created deposits constitute 'new money' that did not exist before."

-- Roy J. Ruffin & Paul R. Gregory, Principles of Economics, 7th ed., p. 549

"The Wahoo bank has acquired an interest-earning asset (the promissory note which it files under 'Loans') and has created demand deposits (a liability) to 'pay' for this asset. Grisley has swapped an IOU for the right to draw an additional $50,000 worth of checks against its demand deposit in the Wahoo bank....All this looks simple enough. But a close examination of the Wahoo bank's balance statement will reveal a startling fact: When a bank makes loans, it creates money. The president of Grisley went to the bank with something which is not money--her IOU--and walked out with something that is money--a demand deposit....By extending credit the Wahoo bank has 'monetized' an IOU....The bulk of the money we use in our economy is created through the extension of credit by commercial banks." [Emphasis original]

--  Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 294

"When a commercial bank makes a loan to a business or an individual, it credits the checking account of that business or person with the amount loaned....Banks manufacture money through this loan process because they create money by monetizing debt."

-- The Appraisal Institute, The Appraisal of Real Estate, 11th ed., p. 100

"In the course of their lending activity, banks create money." [Emphasis original]

-- Marcia Stigum, The Money Market, 3rd ed., p. 17

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


Banks do "thereby create money."

Period. End of story.

By blindly insisting otherwise, you merely demonstrate for all to see that you are not the know-it-all on this issue you so arrogantly presume to be.

The Fed Reserve system enables that;

The Fed enables that by creating the "reserve base," but that doesn't change the fact that commercial banks (not the Fed) create the bulk of our money supply via fractional reserve lending. 

take away the abilities to “(and thereby create money)” and credit comes from savings.

Now you're contradicting yourself (as self-appointed know-it-alls often do), because a moment ago you insisted that banks don't "create money" when they make loans. How, then, can one "take away" from banks a money-creating "ability" that -- according to you -- they don't even have?

Allow me to clarify with an example. For the sake of simplicity, let's assume the money supply is currently zero, and that there are only two people in the economy -- Person A and Person B.

Yes lets assume there are only two people in the economy? What value does paper have to them other then to wipe with?

An amusing choice of words, in light of the endless bullshit you keep spewing.

Federal Reserve Notes are, of course, made of "paper," yet, because they're legal tender, anyone reading this can walk into any store and buy merchandise with them.

So much for that straw man.

This is a glaring contradiction, 2 people wouldn’t use money to exchange goods and services from eachother;

You continue to make an utter mockery of yourself, because the fact of the matter is: people "use money to exchange goods and services from each other" all the time. (That's the whole purpose of having money in the first place.)

By asserting otherwise, you merely demonstrate once again that, far from being the know-it-all you presume to be, you don't even have a basic understanding of this issue -- and thus no credibility.

they would simply exchange the goods and services at what they value them.

Yes, but they would facilitate this exchange with money, and for the same reason that people facilitate such exchanges with money now.

You are clearly blinded by your own self-righteous arrogance, because practically everything you say is so absurdly wrong, that even a grade-schooler would laugh upon reading it.

The rest of the entire example, STARTS from a fallacy and is moot.

Wrong again. As revealed above, your idiotic reaction to that example starts from a "fallacy," and is thus "moot."

But I’ll go over the further problems as well.

Unintended humor if ever I saw it. 

Next, let's assume that a newly chartered local bank -- which I'll call Bank X -- has $200 in "excess reserves" (presumably loaned to it by a central bank through a "discount window").

this would be not one but 2 new people (or entities) in the economy that provide no productivity

Oh puh-lease, do you have any idea how ridiculous you sound? If there were only two people in the economy, the only way they could continue to exist as people is by "producing" things! Do you ever say anything that isn't bullshit?

and have nothing to offer but paper,

Wrong again, they have the same thing the people who possess Federal Reserve Notes have to offer: their labor.

regardless of whether 100 is printed on it or not, it’s only real use in this example is again… wiping.

False. As any objective observer can now see, that is the "only real use" your knee-jerk reaction to my example has.

(further, where did they get the paper for the 200$ or is this a cashless society)

From the same place local banks get it now, genius: a private central bank.

Now I think we’re starting to get to the point. Yes, the Federal Reserve creates new debt and charges interest on it, and that system should be abolished. You didn’t need this gigantic fallacious example to prove that point,

First of all, the only thing "fallacious" is your childlike response to my example, not the example itself. Second, the laughable ignorance you've demonstrated in this thread proves that this example was needed, because there are arrogant know-it-alls like yourself running around giving the anti-NWO/pro-America movement a bad name by misinforming people about how the current money system actually works.

you’ve effectively DEFEATED that point with this giant nonsense.

On the contrary, you're effectively destroyed your credibility on this issue with the endless "nonsense" you've posted in response to my "point."

When you go to Bank X and pay the $110 you owe, the principal portion of that loan -- $100 -- vanishes back into the nothing from which it was created, while your $10 interest payment goes into Bank X's capital assets. Thus, the most that Bank X can spend back into the economy is $10. Let's assume it does so by paying Person B $10 to wax its floors.

This brings the money supply back up to $100, thereby leaving Person B with $10 of unpayable interest debt –- a debt that will now proceed to compound over time (see http://www.wealthmoney.org/wonder.html).

this is utter nonsense. The 100$ won’t VANISH, it will be in the banks assets.

As usual, the "nonsense" is yours, not mine:

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

"If commercial banks create demand deposits--money--when they make loans, is money destroyed when loans are repaid? Yes."

--  Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 294

"Commercial banks create money--create demand deposits, or deposit money--when they make loans....Money is destroyed when bank loans are repaid."

-- Ibid., p. 302

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

You think they’re going to burn it or something?

Do you "think" at all, or do you only react?

They won’t have to print for the next loan they’ll make. It goes back to the bank, and the economy still has $200 in it.

No it doesn't, because under the current system, vault cash is not part of the money supply. That cash only becomes "money" when it is loaned into circulation at interest. Thus, if no one indebts himself to the bank, the currency remains out of circulation. And as long it's out of circulation, it ceases to exist as "money."

By asserting otherwise, it's not just me you're disagreeing with:

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

"Currency held by a bank, you will recall, is not part of the economy's money supply." [Emphasis original]

-- Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 289

"The monetary base is not the money supply. The narrow money supply, M1, is the sum of currency in circulation plus demand deposits (including all deposits on which checks can be written). The monetary base equals the sum of vault cash (which is not part of the money supply), reserves on deposit at the Fed, and currency in circulation. Of these only currency in circulation is part of M1." [Emphasis added]

-- Roy J. Ruffin & Paul R. Gregory, Principles of Economics, 7th ed., pp. 557-8

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

A word of advice: before you go shooting your mouth off again about something I wrote, at least try to have a basic understanding of the issue in question first. (Unless, of course, you enjoy making a fool of yourself.)

You see how it works? The reason Person B must accept increasingly lower wages for the same work is that, after each payment, there is literally that much less recirculated interest in the economy for him to recapture through production-and-exchange.

That's how it works in a purely abstract construct.

In a real-world construct, however, this theory of Person B paying off his interest debt through amortized payments simply doesn’t work, because real-world constraints have to be assumed out of existence.

Aaaah good another point made from a horribly fallacious example.

Unfortunately for you, I've already proven that the only thing "fallacious" here is your understanding of this issue.

Except that it’s wrong.

No, as usual it's your moronic response to it that's wrong.

The bank has $110 from which to draw these wage payments from, not the interest portion of what he’s paying.

Wrong again. As explained above, "money is destroyed when bank loans are repaid." The more you insist otherwise, the more you prove my point about you having zero credibility.

That is of course, unless the bank burned the $100s it received back. You seem to think that because the 100$ was not PROFIT, that it simply ceases to exist. Simply not true. The economy still has a total of $200 in circulation. You’re point, is fallacious and moot.

As everyone can now see, it is your point that is "fallacious and moot," not mine. But you obviously have so much ego invested in being right, that you'd sooner say 2+2=5 than admit to this.

The first assumption is absurd, because as any experienced businessman will tell you, there’s a break-even point (between operating costs and sales revenue) below which business owners simply cannot lower prices without bankrupting themselves in the process.

no THIS assumption is absurd.

No, your reaction to it is.

If the supply of money shrinks the value of their operating cost stays the same and would be repriced based on the supply of money.

Now you're simply parroting the Austrian School's fairy-tale argument that the money supply "doesn't matter," yet anyone familiar with history knows that this argument has been proven wrong over and over and over again.

If the money supply is truly irrelevant, as Austrian School cultists claim, then the 1/3 contraction of the money supply that occurred between 1929-1933 should not have had anywhere near the catastrophic effect it had on the U.S. economy.

Just like his labor isn’t valued less, neither is their cost. This absurd argument contradicts the original argument, that he would earn less even though his work was valued the same. If his labor is valued the same, then the stores costs and revenue are going to be valued the same.

The absurdity, as usual, is your own. If there's literally less money in existence with which to pay him for his labor, then his wages will fall regardless of how much his labor is "valued." 

But you've already demonstrated your ignorance of how money is "uncreated" whenever a bank loan is repaid, so it's only natural that you would continue to draw one "absurd" conclusion after another from this false first premise of yours.

[Geolibertarian]

You seem to think i'm arguing that fed's and banks today don't create money. Certainly you've missed the point that 1) they don't create value, and 2) they certainly don't create productivity.

You can throw sand in the air all you want, you're still not going to weasel out of what you said.

In a previous post I wrote: "when banks loan (and thereby create) money, they create only the principal, not the interest."

In response to that statement, you said:

this is just absurd. “(and thereby create money)”. They don't thereby create money.

That was the "point" you made, and I proved that point wrong for everyone to see.

You don't want to admit to this, of course, so now you're trying to pretend you didn't deny point blank that banks create money by lending it.
 
Yet your refusal to admit to this changes nothing. You were proven wrong, Mr. Know-It-All. Period. End of story. Get over it.

So why, in this 2 person economy with ever changing rules would a 3rd person be intruduced, write down money, require a 4th person to provide the reserve, and loan the money to the only 2 productive people in the economy?

Look, anyone who isn't trying to deliberately confuse the issue understands that simplified examples are called such for a reason: because they allow the reader to more easily understand the underlying principles of a seemingly complex system.

Now, with regard to the "two" people in my example (Persons A and B) you're suddenly obsessed with, they merely symbolize the millions of people who borrow money from banks in the real world, since without such borrowing, the bulk of the U.S. money supply wouldn't even exist.

It was only when explaining why "amortization" doesn't solve the money-shortage problem inherent to fractional reserve lending that I expanded my example to include local business owners.

So you're entire argument basically boils down to this: "You [Geolib] expanded your example, so your example is therefore wrong."  But in reality, you've disproven none of the key points brought forth in that example. On the contrary, in the process of trying to refute those points, you merely demonstrated that you don't even have a basic understanding of the very issue you presume to know so much about.

You arrogantly denied that banks create money when they extend loans. I proved you wrong.

You arrogantly denied that the money created by a bank loan is destroyed when the loan is repaid. I proved wrong again.

Then you insisted that vault cash was part of the money supply. I proved you wrong a third time.

So it's quite obvious that all you're really doing at this point is trying desperately to save face.

It ain't gonna work. You were proven wrong. Period. Your diversionary nitpicking isn't going to change that.

[Geolibertarian]

No, What i said was "this is just absurd. “(and thereby create money)”. They don't thereby create money. The Fed Reserve system enables that; take away the abilities to “(and thereby create money)” and credit comes from savings." You're taking a quotation, out of context.

The hell I am. You denied point blank that banks create the money they loan, and I called you on it.

You're no better then the MSM taking soundbites out of context.

On the contrary, you're no better than a establishment shill who refuses to admit when he's been caught parroting a blatant falsehood.

CLEARLY the contextual meaning of those two sentences is that the federal reserve system enables the creation of money by the banks.

No, clearly you said that, when banks make loans, they do not "thereby create money." I proved they do "thereby create" money, and that you were thus wrong to assert otherwise.

Now you're trying once again to weasel out of what you clearly said with this red herring about the Federal Reserve "enabling" the banks to do this.

I, of course, pointed out from the very beginning that the Fed creates the reserve base through its purchase of government debt (thus "enabling" the banks to create the bulk of our money supply through fractional reserve lending), so you were not correcting anything I said, but simply trying to confuse the issue.

The bottom line is this: when banks make loans, do they -- or do they not -- thereby "create" money? I said point blank that they do. In response to this, you said point blank that they don't, and the only reason you could offer is the fact that the Fed "enables" banks to do this. That, of course, is a non sequitur, because the Fed's injection of high-powered money into the economy does not change the fact that the bulk of the money supply isn't created by the Fed, but by local banks via fractional reserve lending.

You falsely implied that it did some how "change" this fact. I called you on it, and you've been trying desperately to save face ever since.

Your lack of creativity doesn't make a bad example any more or less valid.

Repeating the same empty assertion about my example being "bad" does not make that assertion any less empty, nor does it change the fact I proved you wrong on three separate points.

If we were debating physics and your example was a car performing a 90 degree left turn at 300mph with 0 loss in speed your example would STILL be wrong because it ignores the fundamental laws of inertia, Any premise based of this supposition that a cars can turn 90 degrees without losing speed then is inherently bad as well.

Does any of the above diversionary drivel change the fact that (a) banks create money when they make loans, (b) banks do not create the money needed to pay the interest on these loans, and (c) money is destroyed whenever the principal of a bank loan is repaid?

The answer, of course, is that it changes none of those facts. So once again, it's not my example that's "bad," but your mindless knee-jerk reaction to it.

You arrogently assert that you prove me wrong but your either A) haven't explained how it's destoryed, or B) That it's is effectively destroyed because it goes into reserves, a point to which i have redressed, but you have not rebutted.

There's nothing to rebut, because you are simply denying one of the most basic and universally recognized facts of Econ 101:

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

"If commercial banks create demand deposits--money--when they make loans, is money destroyed when loans are repaid? Yes."

--  Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 295

"Commercial banks create money--create demand deposits, or deposit money--when they make loans....Money is destroyed when bank loans are repaid."

-- Ibid., p. 302

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


When you can cite anything aside from your own hyperinflated ego as a source for your blanket assertions, perhaps I and others will begin to take you a little more seriously. Until then, you'll continue to come across no less absurdly than someone insisting that his claim that the earth is flat be "rebutted." Some of us have better things to do than waste our time rebutting a "point" that ridiculous.

aside from this statement asserting that you have, you have NOT addressed my point that that money still affects the economy in terms of valueing the bank that holds the reserves, and the risks of depositing and investing in that bank.

That's because your point is irrelevant to the fact that vault cash (contrary to what you suggested) is not part of the money supply:

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

"Currency held by a bank, you will recall, is not part of the economy's money supply." [Emphasis original]

-- Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 289

"The monetary base is not the money supply. The narrow money supply, M1, is the sum of currency in circulation plus demand deposits (including all deposits on which checks can be written). The monetary base equals the sum of vault cash (which is not part of the money supply), reserves on deposit at the Fed, and currency in circulation. Of these only currency in circulation is part of M1." [Emphasis added]

-- Roy J. Ruffin & Paul R. Gregory, Principles of Economics, 7th ed., pp. 557-8

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


The banks could have trillions in vault cash, yet if people didn't indebt themselves to those banks, then none of that cash would function as "money."  It would simply sit there, and the economy would simply crash as a result.

For someone who presumes to know so much about this issue, it is absolutely ridiculous that I should even have to explain something this basic to you.

[Geolibertarian]

The hell i did. You're making a ridiculous argument that i didn't MEAN what i said i meant. You're taking one sentence, ignoring the context within which i said it.

No I'm not, because I specifically explained why your point about the process by which the Fed "enables" the banks to create money (via fractional reserve lending) does not change the fact that local banks -- not the Fed -- create the bulk of our money supply.

And the whole thing is a >><<[gigantic red herring]<> for you to ignore all of my other arguments.

On the contrary, your ridiculous accusation about me taking "out of context" your assertion that banks don't create the money they loan is a "gigantic red herring" for you to divert attention from the fact that your assertion (a) was not taken out of context, and (b) was proven wrong.

Let it go.

It is you who needs to "let go" of your precious ego and simply admit that you made several false statements.

I Said that what i mean is that you were grossly simplifying the details by saying "(and thereby creating money)."

And I explained why you were wrong in saying that, because the fact is that banks do "create" the money they loan. So it's not that I'm grossly "simplifying" things; it's that you are grossly confusing them. (On purpose, it would seem.)

Regardless of how much face you think i'm trying to save, that's my argument

No, that's your non sequitur.

Again, when I said banks create money via the lending process, you reacted by calling my statement "absurd," and the only reason you offered in support of this arrogant accusation was the fact that the Fed "enables" banks to lend money. Yet as I pointed out in in my last post, the Fed's injection of high-powered money into the economy in no way changes the universally-recognized fact that the bulk of the money supply is created by local banks (through fractional reserve lending), not the Fed.

The bottom line, once again, is this: when banks make loans, do they -- or do they not -- thereby "create" money?

When I initially answered "yes" to this question, your immediate reaction was to accuse me of being "wrong." I promptly proved that it was you, not I, who was wrong on that particular question. Ever since then you've been throwing a hissy fit.

Before you embarrass yourself further, take your own advice and "let it go."

Now you're trying once again to weasel out of what you clearly said with this red herring about the Federal Reserve "enabling" the banks to do this.

Yes. the fact that they do means they are ALLOWED to do, the fed reserve system allows this and removal of the system and the ability disallows that.

That, as friggin usual, is besides the point. The point is that, in the post to which you had your initial knee-jerk reaction, I described how the current system does work, not how it would work if the Fed's powers were "removed."

And in response to my description of how it currently does work, you described as "absurd" my point that banks "create" the money they loan. Now you're trying yet again to weasel your way out of what you said by pretending that what you were really referring to was how things would work in the absence of the Fed.

Intellectual dishonesty at its most pathetic.

I, of course, pointed out from the very beginning that the Fed creates the reserve base through its purchase of government debt (thus "enabling" the banks to create the bulk of our money supply through fractional reserve lending), so you were not correcting anything I said, but simply trying to confuse the issue.

And then preceded in making this 2 person economy, and within that 2 person economy we decided we need a rule change by adding a bank which "(and thereby creates money)" And ignoring the above complications that would create 2 new entities in your economy. 1 entity to create the reserve base, and another entity to print the money, so the other 2 entities can spend the money.

Wrong again. First of all, I specifically said that Bank X received its reserve base through a "discount window" from a "central bank." So are lying when you say I "ignored" the question of how the reserve base came into existence.

Second, I said it was a 2-person "economy," not a 2-person world. In doing so, I was simply highlighting the fundamental distinction between (a) the average citizen -- who is not allowed to lend "money" he doesn't have and charge interest on it -- and (b) a private bank -- which is allowed to lend "money" it doesn't have and charge interest on it.

Since there's only now 4 people in this economy the existence of the bank, and reserve, is unproductive, and unnecessary and would be an abject failure.

Hello! McFly! Anybody home?? That is precisely why I prefaced my example with the phrase, "For the sake of simplicity."

If, for the purpose of illustrating the mathematical principle that 1+1=2, a math teacher used the example -- "If both Person A and Person B have one quintillion dollars each, and Person A gives all his money to Person B, how much money does Person B have?" -- everyone would understand (a) that to answer that Person B would have two quintillion dollars would not be to validate the hypothetical premise that anywhere near that much actual money exists in the real world, and (b) that the "hypothetical" nature of said premise is IRRELEVANT to the non-hypothetical nature of the underlying principle (1+1=2) involved.

"Everyone," that is, except you.

You would sit there and spend hour after hour after hour wasting everyone else's time with endless complaints and whining about how "absurd" the conclusion drawn from the example was, since the "example" itself was purely (and admittedly) hypothetical in nature.

Since your argument from the get go assumes out of existence the principles by which the system works,

Good god, everything you say is bullshit. As I explained above, far from "assuming" the principles themselves out of existence, my argument illustrates those principles by assuming out of existence the complex-seeming and ever-changing variables that surround them. That's the whole point of using a simplified example.

You are the only person in this entire forum who seems not to understand this. That alone should tell you something.

The bottom line is this: when banks make loans, do they -- or do they not -- thereby "create" money? I said point blank that they do. In response to this, you said point blank that they don't, and the only reason you could offer is the fact that the Fed "enables" banks to do this. That, of course, is a non sequitur, because the Fed's injection of high-powered money into the economy does not change the fact that the bulk of the money supply isn't created by the Fed, but by local banks via fractional reserve lending.

And, again, i'm not arguing that that's not how it works

Bullshit, that's exactly what you were arguing. I correctly said (in the context of my simplified example) that banks create the money they lend. You "argued" otherwise. I correctly said that the money created by a bank loan is destroyed whenever the principal of a bank loan is repaid. Again, you "argued" otherwise. I correctly said that vault cash is not part of the money supply. Yet again, you "argued" otherwise.

Face it, you were caught red-handed parroting one blatant falsehood after another, and have been trying desperately to undo what you said ever since. But it's not going to work. You were proven wrong, plain and simple.

[Geolibertarian]

Here we go now we've come to the problem....

No, now we've come to your next red herring.

You don't understand what an economy is.

On the contrary, you don't understand how the current banking system operates.

You're embarrassed that I've proven your lack of understanding for all to see, so you think you can win back your lost credibility by obsessively nitpicking my admittedly hypothetical example over and over and over and over and over again.

Ain't gonna work. You destroyed your own crediblity on this issue, and there's no getting it back.

If there's a bank, it's a 3 person economy, if there's a central bank, it's a 4 person economy (or entity) not to mention the people that work at them unless we assume each is own and run by 1 people. Your argument from the get go fails to even comprehend what "an economy" is,

No, your knee-jerk reaction from the get-go fails to comprehend what a simplified example is.

Again, if, for the purpose of illustrating the principle that 1+1=2, a math teacher said that one quintillion people plus another quintillion people equals two quintillion people, everyone would understand that the purely hypothetical nature of that example in no way invalidates the non-hypothetical principle being illustrated by that example.

"Everyone," that is, except you.

You would immediately hop on your intellectual high horse and start lecturing the math teacher ad nauseum about how he doesn't "comprehend" how the real world operates, since the real would could never sustain that many people. 
 

you're trying to argue with me over whether or not i said banks create money from a central bank.

I'm not "arguing" over what you said, but merely drawing attention to what anyone reading this can see for themselves that you said in response to my point that, under the current system, banks "create" money by "lending" it; that the money thus created is destroyed whenever the principal of a bank loan is repaid; and that vault cash is not part of the money supply. Your initial reaction was to immediately dismiss all three points as "absurd" and "wrong."

The more you try (in troll-like fashion) to divert everyone's attention from the fact that I proved you wrong on those three points, the more I'm going to draw their attention right back to it.

You're not going to weasel out of what you said, no matter how much sand you throw in the air, and no matter how much you whine about being "attacked" whenever I commit the almighty sin of disagreeing with you. Got that?

None of your arguments are to support your proposal so far, only to attack me personally,

If you make a false statement, and I call you on it, that is not a "personal" attack; it is merely an attack on what you said. So spare us your inecssant whining about being "attacked."

If you're that hypersensitive, you should never have started this debate in this first place by waxing critical about how "absurd" and "wrong" my views are.

If you can't take criticism, then don't dish it out.

It's intellectual dishonesty at it's most pathetic.

More like Freudian Projection at its most obvious.

Again, you're ignoring the rules of the game to make your point.

Again, no I'm not. I'm illustrating the rules of the game using a simplified example. But because I disproved the dismissive statements you initially made in response to three of the key points brought forth in that example, you continue to troll and troll and troll this thread in a desparate attempt to regain your lost credibility.

Do they create Bank of AmeriaDollars? Do they create Chasebucks or disneybucks? No. They create Federal Reserve Notes, and they can do this without going to jail for counterfeiting because they've been empowered by the fed reserve act and congress. This is NOT beside the point because *IT WAS YOUR POINT* that this system creates only principle, charges interest, and drives america into servitude. A point i never argued.

Yes you did, and the more you deny that you did, the more I'm going to expose this denial for the bald-faced lie that it is.

In my third post to this thread, I wrote the following:

When banks loan (and thereby create) money, they create only the principal, not the interest. This is why the overall indebtedness of the economy is always many times greater than even the most liberal estimate of the money supply. Granted, if no one borrowed, there would be no interest to pay; but there would also be no money supply, and thus no economy.

This was your response:
 

this is just absurd. “(and thereby create money)”. They don't thereby create money.The Fed Reserve system enables that; take away the abilities to “(and thereby create money)” and credit comes from savings.

As everyone reading this can see, you flat-out denied that, when banks "loan" money under the current system (I made it clear at the very outset that the purpose of my example was to explain how things work under the current system, not some imaginary system in which the Fed no longer exists), they thereby "create" money.

And as everyone can also see, your point about how the Fed "enables" the banks to do this does not change the fact that the money created by a bank loan is not created by the Fed, but by the bank that made the loan:

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

"Banks are unique among financial intermediaries in that only they can create money. When banks make loans, they put the proceeds of such loans in the borrowers' checking accounts. Insofar as demand deposits are part of the money supply, these newly created deposits constitute 'new money' that did not exist before."

-- Roy J. Ruffin & Paul R. Gregory, Principles of Economics, 7th ed., p. 549

"The Wahoo bank has acquired an interest-earning asset (the promissory note which it files under 'Loans') and has created demand deposits (a liability) to 'pay' for this asset. Grisley has swapped an IOU for the right to draw an additional $50,000 worth of checks against its demand deposit in the Wahoo bank....All this looks simple enough. But a close examination of the Wahoo bank's balance statement will reveal a startling fact: When a bank makes loans, it creates money. The president of Grisley went to the bank with something which is not money--her IOU--and walked out with something that is money--a demand deposit....By extending credit the Wahoo bank has 'monetized' an IOU....The bulk of the money we use in our economy is created through the extension of credit by commercial banks." [Emphasis original]

--  Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 294

"When a commercial bank makes a loan to a business or an individual, it credits the checking account of that business or person with the amount loaned....Banks manufacture money through this loan process because they create money by monetizing debt."

-- The Appraisal Institute, The Appraisal of Real Estate, 11th ed., p. 100

"In the course of their lending activity, banks create money." [Emphasis original]

-- Marcia Stigum, The Money Market, 3rd ed., p. 17

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


Bottom line: you did make a false statement, I called you on it, and you've been trolling this thread ever since in a desperate attempt to save face.

I hereby request that you stop trying to weasel your way out of what you clearly said and that you simply find someone else's thread to troll!

[Geolibertarian]

*sigh* more of the same insecure nonsense.

*sigh* more of the same trolling and desperate attempts at face-saving.

You're weak and insecure and unwilling to stand behind your proposal.

On the contrary, it is you who are "weak and insecure and unwilling" to admit that I proved you wrong on three separate points.

Your Freudian Projection doesn't change that.

You're attacking me with baseless attacks instead of addressing my criticisms of your proposal.

No, you're trolling this thread by attacking the same straw man over and over again; by refusing to admit that I've already refuted your baseless criticism of my explanation as to how the current money system operates; and by whining about being "attacked" every time I draw everyone's attention back to the credibility-destroying statements you keep trying to divert their attention from.
 

You're ignoring the many times in that first post where i agreed with you on the "NON example" stuff, even on the principle you were trying to illustrate,

No, you're still trying to weasel your way out of the the fact that you disagreed point blank with the key principles I illustrated with my example.

but only criticised your example,

No, you dismissed as "wrong" and "absurd" the principles illustrated by that example. I've already proven this multiple times for all to see, yet you continue to troll this thread!

I was pointing out that your theoretical model was flawed.

Yes, and I pointed out that you did so by making flawed statements of your own with respect to how money is created by bank loans and subsequently destroyed when bank loans are repaid, and that it was thus your criticism of my example, not that example itself, that was invalid.

I called your example, and not your statement on how money was created absurd.

Another bald-faced lie. Again, you categorically denied that, when a bank "lends" money under the current system (of which my simplified example was a symbolic illustration), it thereby "creates" money. It was the principle of loan-based money-creation that you called "absurd," not just the example I used to illustrate that principle.

And every time you lie about this, I'm going to call you on it.

I also stated that you ignore the weight of vault cash on the economy, which you further ignore by saying "i was right and you were wrong" over and over and over.

Yet another bald-faced lie. Here's the exchange you're obviously hoping no one will go back and re-read:

When you go to Bank X and pay the $110 you owe, the principal portion of that loan -- $100 -- vanishes back into the nothing from which it was created, while your $10 interest payment goes into Bank X's capital assets. Thus, the most that Bank X can spend back into the economy is $10. Let's assume it does so by paying Person B $10 to wax its floors.

This brings the money supply back up to $100, thereby leaving Person B with $10 of unpayable interest debt –- a debt that will now proceed to compound over time (see http://www.wealthmoney.org/wonder.html).

In reaction to this, you posted the following:

this is utter nonsense. The 100$ won’t VANISH, it will be in the banks assets.

I then proceeded to prove that the "nonsense" was yours, not mine, by posting the following two quotes:

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

"If commercial banks create demand deposits--money--when they make loans, is money destroyed when loans are repaid? Yes."

--  Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 295

"Commercial banks create money--create demand deposits, or deposit money--when they make loans....Money is destroyed when bank loans are repaid."

-- Ibid., p. 302

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

Then, in the same paragraph, you essentially claimed that vault cash was part of the money supply when you wrote the following:

They won’t have to print for the next loan they’ll make. It goes back to the bank, and the economy still has $200 in it.

I then proved that assertion wrong with the following:

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

"Currency held by a bank, you will recall, is not part of the economy's money supply." [Emphasis original]

-- Campbell R. McConnell & Stanley L. Brue, Economics, 14th ed., p. 289

"The monetary base is not the money supply. The narrow money supply, M1, is the sum of currency in circulation plus demand deposits (including all deposits on which checks can be written). The monetary base equals the sum of vault cash (which is not part of the money supply), reserves on deposit at the Fed, and currency in circulation. Of these only currency in circulation is part of M1." [Emphasis added]

-- Roy J. Ruffin & Paul R. Gregory, Principles of Economics, 7th ed., pp. 557-8

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


So you were wrong when you said that money isn't "created" by bank loans, you were wrong when you said that money doesn't vanish (i.e., is not "destroyed") when a bank loan is repaid, and you were wrong when you said that vault cash is part of the "economy" (and hence the money supply) -- wrong not because I say so, but because Econ 101 says so.

I then rightly pointed out (and apparently wounded your fragile ego in the process) that you were in no position to make endless empty assertions about the "absurdity" of my views on a subject you didn't even understand, and you've been obsessively trolling this thread ever since.

And that's why I refuse to waste my time responding to all your other ridiculous statements, because you've proven over and over again that you (a) are incapable of admitting when you're wrong, (b) will flat-out lie in order to divert attention from the fact that you've been proven wrong, and (c) are thus incapable of rational debate.

Anyone who acts in such a childish, troll-like fashion is simply not worth my time and effort.

Now, if any rational, open-minded adult reading this has questions regarding any of the views I've expressed in this thread, then I'll be more than happy to address that person's questions.

[Revolt426]

"BLAH BLAH BLAH, i am wrong but i cannot admit it"

I've noticed you tend to change the subject everytime you are proved wrong. Is this a mental condition or are you just in denial?.

If you cannot understand that the FED sucks cash out of the US economy and destroys it with it's interest rates because it's a PRIVATE BANK, then you should probably go work in another area, economics is not for you. Where do you think the interest goes? do you think the Federal Reserve gives it to the Government to pay down the National Debt? No, actually ..... it's called a defacto inflation tax which allows the jackals to maintain domestic purchasing power of the dollar by sucking currency out of the physical economy (The PEOPLE) and allowing the banks to transfer the majority of profits to themselves , since the FED does indeed LEND money to the BANKS at X% Interest, and the BANKS in turn LEND MONEY to the "alleged" businesses that are supposed to produce goods at Y% Interest.(Or they use to, now they are insolvent). Y% Interest is far greated then X% interest in our case, so the banks indeed are sucking money from the economy and hoarding it, and the FED is indeed sucking money from the economy and destroying it.

And as for your economic text books, that is appearently your problem. You are just as educated as the jackasses at Harvard , Yale and Columbia that put us into this mess (Such as LARRY SUMMERS).

[Revolt426]

hey look three monkeys f**king a football

Hey look, an uneducated crank commenting in a monetary reform thread when he has no idea how an economy works.

Why dont you go puff a Cigar and read the bible, those seem to be your areas of expertise, maybe we should wait for Jesus to come in and save the Economy. That might work too.   

If you are going to comment in a thread, it's usually a good idea to comment on the TOPIC as opposed to DERAILING it........

And people like you are the primary reason i only visit this forum once every few days. Take Care "Tough Guy".

[lostdog2323]

Hey look, an uneducated crank commenting in a monetary reform thread when he has no idea how an economy works.

Hey look an educated person with his/her shoulders in his/her ass who doesnt understand how an empire gets its funding. 

[Geolibertarian]

I get it now, you guys are on your soapbox argueing with the "sheeple" and not at all reading what I posted.

No, we just see what you post for the bullshit that it is.

As I pointed out, Geolib, has "and henced" basically my entire post to argue that i said the fed and banks aren't responsible for creating money.

On the contrary, I've shown multiple times how you categorically disagreed with me when I said that banks "create" money when they "lend" it, and that the money thus created "vanishes" (i.e., is "destroyed") when loans are repaid.

And such is your desperation to save face, that now you're making the ridiculous claim that money can be part of the "economy" without being part of the money supply. Only in the Orwellian fantasy land of a thoroughly discredited troll can money that has been "destroyed" (via loan repayment) continue to exist in the "economy" as money.

He doesn't understand his own proposal

No, you don't understand how the money system works, and your panties are still in a bunch because I've proven this for all to see.

Your credibility is destroyed. Deal with it.

[aerborne]

And such is your desperation to save face, that now you're making the ridiculous claim that money can be part of the "economy" without being part of the money supply. Only in the Orwellian fantasy land of a thoroughly discredited troll can money that has been "destroyed" (via loan repayment) continue to exist in the "economy" as money.

Credit.

[planning4acrash]

all of my posts were deleted?

Mine too. Well, he's got the stinkers, we've got the thinkers.

[lord edward coke]

hey look three monkeys f**king a football

LMAO!!!

Current Law: No State Shall Make Any Thing But Gold And Silver Coin A Tender In Payment Of Debt. (U.S. Constitution, Art. 1, sec. 10)
Current Law: 31 United States Code 371: "The money of account of the United States shall be expressed in dollars or units, dimes or tenths, cents or hundredths, and mills or thousandths, a dime being the tenth part of a dollar, a cent the hundredth part of a dollar, a mill the thousandth part of a dollar, and all accounts in the public offices and all proceedings in the courts shall be kept and had in conformity to this regulation."

The question was put to an attorney: Is Article 1, section 10, of the United States Constitution, particularly the words "No state shall...make any Thing but gold and silver coin a tender in payment of debt..." still binding on a State? He replied:

"...the only lawful answer is Yes. Meant to 'crush paper money' by unanimous consent of the constitutional Convention of 1787, this section prohibits the States from imposing upon the people a paper currency, paper money, or anything else other than gold or silver coin as a medium of exchange in the discharge of debts. Since the Constitution can be changed by amendment only, and since no amendment has changed this section, no federal action can excuse a State of this prohibition.
The effect of this section is thus:

If a paper FRN is delivered to, or received from a State-authorized party without particular objection to its being an unlawful tender under Article 1, Section 10, no Constitutional question has arisen, and the payor/payee, in remaining silent, has renounced his individual rights flowing from the Constitutional prohibition.

Those rights are the following:

A. Discharge of the debt in gold or silver coin, if provided for in the debt;

B. Dismissal or forgiveness of the debt altogether, if the debt is not denominated in gold or silver coin, since any rule or judgement that is repugnant to the Constitution is void, invalid, and without effect.

As with other rights, the right to gold and silver coin, and the right to be forgiven of any debt not denominated in same, are considered waived unless properly and timely asserted."


Specifically regarding "notes" and such, the courts have had some equally interesting things to say:

"They had a certain contingent value, and were used as money in nearly all the business transactions of many millions of people. They must be regarded therefore, as a currency imposed on the community by irresistible force." 75 U.S. 11

"Considered in themselves, and in the light of subsequent events, these notes had no real value, but they were made current as dollars by irresistible force. They were the only measure of value which the people had, and their use was a matter of almost absolute necessity. And this use gave them a sort of value, insignificant and precarious enough it is true, but always having a sufficiently definite relation to gold and silver, the universal measure of value, so that it was always easy to ascertain how much gold and silver was the real equivalent of a sum expressed in this currency." 75 U.S. 13

"One is said to act in a fiduciary capacity when the business that he transacts, or the money or property which he handles, is not his own..." A "fiduciary relation" can include "informal relations which exist whenever one man trusts and relies upon another--it exists where there is special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to interests of one reposing the confidence." Black's Law Dictionary, 4th ed.

The Federal Reserve itself tells you that it is "confidence" that is the reason that anyone at all accepts FRNs! By accepting the government's obligations in good faith and confidence, besides becoming a fiduciary (with a corresponding duty, making you "subject" to specific performance, you then become an "accommodation party", in effect becoming like a co-signor for the government's debts. Until the Federal Reserve has been fully paid for use of it's special paper, it has a lien upon all that you have acquired with it. Thus that man that passed the FRN to you does not really own your goods - now the Fed owns them, although they do not have possession of them. It is like the plantation owner, who owns the clothes on the backs of his slaves.

Don E. Williams Co. v. Commissioner of Internal Revenue, 429 U.S. 569 (1977): Notes cannot pay debt, debt cannot pay debt.

"No state shall make any thing but gold and silver coin a tender in payment of debts." U.S. Constitution, Article 1, section 10, never amended. Thus, any other form of promised money is a fraud.

"Federal Reserve Notes are not legal money." Justice Martin V. Mahoney, Credit River Township, Dec. 7-9, 1968 in Jerome Daly vs. First National Bank of Montgomery, Minn.