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Missouri's 7th District, U.S. House of Representatives

  
 

 

 

Congressional Issues 2010
MONEY AND FINANCE
Abolish the Federal Reserve




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Audit the Fed!The Fed regulates banks, influences interest rates, and determines the size of our money supply through a complex process, called Open Market Operations, that involves buying and selling securities (mostly government debt). The Fed's policies determine the value of your money, the health of the economy, and the rates you pay to borrow. And yet the Fed is completely unrepresentative and unaccountable.

  • The Fed's decision-making process is secret, using confidential information.
  • Minutes of these secret meetings aren't due until three weeks after decisions are announced.
  • Transcripts of meetings don't become available until five years later.
  • Aside from the Chair, Fed board members serve the longest terms of any federal bureaucrat (14 years), and they can't be fired for political reasons.
  • The Comptroller General, head of the Government Accountability Office, is legally prohibited from auditing the Fed's Open Market operations, and several other important Fed activities. (See our Background page.)
  • The Fed is part of the Federal Government, but acts without any of the regular checks and balances.

Some argue that this secrecy and independence are necessary to protect the Fed from partisan political influence. Their argument is reasonable, but it leaves the American people in the grip of a virtual economic dictatorship. And the economic consequences of Fed policies can be just as devastating as taxes, regulations, and even war . . .

And yet, you have absolutely no control, or even influence, over what the Fed does.

Click here to tell your representatives to audit the Fed.

The Federal Reserve System should be abolished. It is
  • immoral
  • unconstitutional
  • harmful to our economy

The Federal Reserve was created by the Federal Reserve Act, which was written by a conspiracy of powerful bankers to give them the power to cheat, steal, and corrupt America. Outrageous claims? What's outrageous is how completely true these claims are, and how ignorant Americans are of the truth.

The Federal Reserve is the cause of inflation. The Fed was created to inflate. Inflating is the purpose of the Fed. Outrageous claim?

The Federal Reserve caused the "economic crisis" of late 2008, and the medicine they prescribed was more toxic inflation of the money supply, called the "bailout" by its detractors, and a "rescue plan" by the Bush Administration. The Obama Administration is committed to the same policies.

If you were to read transcripts of meetings of the Board of Governors of the Federal Reserve System, and hear them planning out the details of our economy and its future growth, and understand how they engage in the debasement of the currency -- which has always been understood to be wicked and immoral -- and if you were told that the transcripts you are reading were translated from the original Russian, you would assume you are reading the words of atheistic communist czars in the Soviet Union. The Federal Reserve has nothing to do with capitalism in "the land of the free."

The links below are often to official Federal Reserve websites. Their own words condemn them.

Most Americans do not know what "The Federal Reserve System" is, or how it functions. Yet it is arguably the most important government agency of them all. By far.

It is also immoral and harmful. This webpage will show:

  • Why Money is Important
    • (Not just because you can spend it to buy stuff, but because stuff doesn't come into existence without money)
  • Why Some Money is Immoral
    • Can you describe the fundamental moral difference between a quarter or dime minted in 1964, and a coin minted in 1965?
    • The average teenager in colonial America knew more about economic morality than today's adults.
  • How the Fed Creates Immoral Money
    • It creates money out of thin air, making your money worth less.
    • It loans this new money and charges interest, transferring purchasing power from you to the borrower.
    • This is theft.
  • How the Federal Reserve Corrupts the Entire Economy
    • The Fed "spreads the wealth" from hard-working, successful future-oriented savers to present-oriented borrowers.
    • There is a profound moral dimension to this kind of government-orchestrated economic growth.

For a higher-def version of this classic film go here.


Scholarly resources on the Origin and Function of "Money"

Why Money is Better than Barter

Easy summary:  Why I Y Money


Immoral "Money"

In an introduction to his notes on the Constitutional Convention's deliberations in Philadelphia, James Madison, the "Father of the Constitution," noted that one of the defects the Convention was assembled to remedy was that

In the internal administration of the States, a violation of contracts had become familiar, in the form of depreciated paper made a legal tender.

If you're like 40% of all government-school graduates who are functionally illiterate when they finish schooling, you probably don't understand that statement, or appreciate its full significance. If you don't understand the importance of Madison's statement, click here.

What Madison is saying is that the economy can't prosper if people can't depend on their contracts. Imagine that you're a home-builder, and you enter into a contract with a homebuyer to build a home for $100,000. Now imagine that the buyer has "connections" with a judge or some other "public servant," and he gets that politician to pass a law that changes the amount due in the contract from $100,000 to $10,000. You just built a $100,000 home and you only get paid $10,000. Your attorney now tells you that no court will enforce any contract you write. Will you be more likely or less likely to enter into a similar contract in the future?

Only 1 out of 100 Americans understand what Madison means about "depreciated paper." Until recently, paper currency was backed by gold or silver. A "Silver Certificate" used to say, "This certifies that there is on deposit in the Treasury of The United States of America One Dollar in silver payable to the bearer on demand." Today all you can redeem your paper money for is more paper money.

"But I can buy things!" some will say.

Nobel prize-winning economist Milton Friedman has described the mythical, circular reasoning surrounding paper money:

. . . each accepts them [the pieces of paper] because he is confident others will. The pieces of green paper have value because everybody thinks they have value, and everybody thinks they have value because in his experience they have had value.

In the final analysis, emphasizes Friedman, acceptance of paper money "is a social convention which owes its very existence to the mutual acceptance of what from one point of view is a fiction."

Your children may learn this lesson the hard way.

* Of course, printing pieces of paper is not necessary --
"money" is just blips in a bank's computer.

The Social Security system is bankrupt. There may come a day when the government will simply have to print up enough paper money to pay social security recipients.*  If enough paper money is created to pay all social security obligations, the value of everyone else's paper money will decline. The government says everyone will get their benefits, but admits the benefits may not be worth anything when they get them. This is the evil of paper money.

Accordingly, Madison and the other delegates included a provision in the U.S. Constitution that prohibits paper money, or the emitting of "bills of credit." (Art. 1, § 10, ¶ 1) That provision reads:

No State shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make any thing but gold and silver a legal tender in payment of debts; pass any bill of attainder, ex-post-facto law, or law impairing the obligation of contracts; or grant any title of nobility.

In Federalist Paper No. 44, possibly the most authoritative source for constitutional interpretation, Madison explained the provision:

The extension of the prohibition to bills of credit must give pleasure to every citizen, in proportion to his love of justice and his knowledge of the true springs of public prosperity. The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the States chargeable with this unadvised measure, which must long remain unsatisfied; or rather an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice, of the power which has been the instrument of it. ... No one of these mischiefs is less incident to a power in the States to emit paper money, than to coin gold or silver. The power to make any thing but gold and silver a tender in payment of debts, is withdrawn from the States, on the same principle with that of issuing a paper currency.

After the Constitution was ratified, THE COINAGE ACT OF 1792 was passed, specifically defining the "dollar" as a certain amount of gold or silver.

Pieces of Eight Index
The most comprehensive and definitive study on the legal history of the United States coinage, paper currency, legal tender, and political banking from the Colonial period to the present day.
The author, Edwin Vieira, Jr., holds four degrees from Harvard: A.B. (Harvard College), A.M. and Ph.D. (Harvard Graduate School of Arts and Sciences), and J.D. (Harvard Law School).
How to Interpret the Constitution
According to those who wrote it.

How Fractional Reserve Banking Steals from the Poor


What is Money? What is Moral Money? What is Immoral Money?

Money is "a medium of exchange." A "medium" is like a channel or a bridge. It bridges two people who want to trade.

Money is the most marketable commodity in the economy.

Without money, you must barter for the things you want. You have chickens; you want hamburger. You have to find someone who has cows that wants chickens more than his cows. If the guy with cows wants fish, you're out of luck. But if there's something that everyone in the economy is willing to trade for -- like gold and silver -- then these commodities can be used as money and you can trade silver for his cows, and he can trade silver for the fish he wants.

The government destroys honest money.

Pull a quarter out of your pocket. Note the orange ring around the edge. This is copper. Prior to 1965 coins like dimes and quarters were made out of silver. Today they are nickel-coated copper, not silver. Even pennies have been "debased." According to the U.S. Mint

The [pre-]1982 copper cent weighs 3.11 grams and is 95% copper and 5% zinc. The current copper-zinc cent weighs 2.5 grams and is 97.5% zinc and 2.5% copper.

Who do you think profits from the substitution of less-expensive copper for silver and cheaper zinc for copper? Answer: not you

And if you think there are profits to be made by debasing coins, think about how much can be made with paper money and the government printing presses! Then consider that most of our money is nothing more than electronic blips in the bank's computers.

By debasing the currency, our government has engaged in systematic theft on a massive scale.

And whenever the government and its friends create new money, it makes each dollar you have worth less.

The government steals purchasing power from you and redistributes it to its supporters. The government buys votes with your future.

"Debasement of the currency" has always been understood to be immoral, the strategy of an unethical and imperialistic government. Our nation's monetary system is immoral to the core.

We need Honest Money. We need Just Weights and Justice. (We do not need a government-imposed "Gold Standard," however.)



 How the Fed Creates Immoral Money

http://www.republicmagazine.com/magazines/issue10/


The Federal Reserve Corrupts the Entire Economy

By creating new money out of thin air, the Federal Reserve "spreads the wealth" by redistributing purchasing power. The Federal Reserve (and the federal government in general) does not create new goods (food, housing, clothing, etc.), it simply prints up tickets to buy the things that have been created by those who work for a living.
       The people who receive these tickets to wealth are losers. They don't have the money they want, and they are willing to become slaves to the lender in order to get what they (1) haven't worked for, or (2) haven't worked successfully, or (3) haven't successfully satisfied the needs of consumers. These are lower class people. The Fed gives them the power to get what they want NOW, to get "something for nothing," and this purchasing power is taken from people who worked successfully, deferred gratification and saved for a rainy day, or are living on a fixed income (pension, annuity, etc.).

In other words, the Federal Reserve transfers purchasing power
From the best to the worst;
From the productive to the unproductive;
From the future-oriented to the present-oriented;
From the successful to the unsuccessful;
From the hard-working to the lazy.
In response, the Fed will say they are creating "economic growth" by making business loans to new or existing businesses.
If these borrowers are entrepreneurs, then the businesses they start will have the moral character of their founders. These business owners have not saved the profits from past successes. They don't want to work and save, they want money NOW so they can start a business and make money NOW. These businesses will
Sell the worst products, not the best;
Appeal to short-sighted people, not the long-term interest of the country;
Use up scarce resources and then go belly-up;
Manufacture products that lazy people buy, not hard-working people.
Yes, the profits from the "Pet Rock" company added to the nation's GDP and added to our "economic growth." Is this kind of "economic growth" truly good for mankind?
Among the stated purposes of the Federal Reserve:

The Federal Reserve claims to know how to make our entire economy grow and create full employment. It claims to know which businesses need capital. It claims to know how to engineer economic growth, and how to orchestrate industrial development. By controlling the money system, the Federal Reserve controls the entire economy.

This is socialism, and a complete denial of the theory of "the division of labor" in a capitalistic economy. There is not a single human being on earth who knows how to build a pencil from scratch. How can the Federal Reserve build an entire pencil business, oversee the pencil industry, and engineer the entire economy, of which the pencil industry is just a part? Read about "the Invisible Hand" that created the humble pencil: Capitalism and the Division of Labor: Astonishing Providence and the Pencil. In comparison to "the Invisible Hand," the Federal Reserve is a very, very bad idea.

A good idea for the bankers, but not for the rest of us.



From January of 2001 to August of 2008, the Federal Reserve increased the supply of checkbook-money capital by more than 70 percent of the cumulative total amount it had created in the whole of the previous 88 years of its existence — that is, almost 2 trillion dollars. This means people who borrowed money from the Fed from 2001 to 2008 were able to purchase $2 trillion worth of goods and services instead of those who worked and saved. These hard-working, productive people had their dollars devalued, and were able to buy $2 trillion less than they would have in the absence of the Fed.


Your Congressman must take an oath to support the Constitution, yet 99% of all politicians do not support what the Constitution says about money and banking. (If they went to government-run schools, it's likely that they don't even know or understand what the Constitution says.) The principle of "Liberty Under God" is as relevant today as it was 200 years ago, and the old-fashioned morality embodied in the Constitution's principles on money and banking can be applied in tomorrow's world of financial cryptology and digital cash.

Any politician who takes a solemn oath to "support the Constitution" should be committed to the following goals:

In the next Two Years, Congress should:

  Long-term Goals:

  • uphold its constitutional duty to maintain the purchasing power of the dollar by enacting legislation that makes long-run price stability the primary objective of Federal Reserve monetary policy;
  • recognize that the Fed cannot fine-tune the real economy but can achieve monetary stability by following a rule that confines nominal growth of gross domestic product to a noninflationary path;
  • recognize that all prices should naturally be going down, and hold the Fed accountable for achieving zero expected inflation over a reasonable time frame;
  • pass the Honest Money Act.
  • abolish the Exchange Stabilization Fund, since the Fed’s role is to achieve zero inflation, not to stabilize the foreign exchange value of the dollar by intervening in the foreign exchange market; and
  • offer no resistance to the emergence of digital currency and other substitutes for Federal Reserve notes, so that free-market forces can help shape the future of monetary institutions.
 
A Guide to Digital Cash Articles
  • Primary Dealer Lists - the banks from which the Fed buys securities, according to the Federal Reserve Bank of New York. The money created by the Fed and given to these securities dealers forms the basis for money creation throughout the banking system.

The Limits of Monetary Policy 


next: Financial Deregulation

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