(The text below
was published in Dec-2015)
1: The text below is Chapters 1 to 5 of ‘Monetary Revolution USA’,
which is the complete book. Go to Section 2 below to see the added chapter which converts it to ‘How
to Grow and Protect Your Wealth’.
Monetary Revolution USA
Convert the USA to Use Gold as Money
Notes are Just Claim Checks for Gold
24 ct Gold is Unit of Account for Pricing
Private Mints with License Optional
Fed, USD, and Legal Tender Laws
Author: David Redick
The US Monetary System
A Brief History of Money 15, and U.S. Silver Coins 18
20, US Central Banks 21
Creating the Fed 22
Structure of the Fed 25
Effects of the Fed and Other Central Banks 29
The Impact of Fake Money
The Feds’ Record of Results 35
The Heroin Analogy and Price Inflation 38
Money and Legal Tender Laws 40
Central Banking and Meddling Worldwide 50
3 The US Banking and Securities System
Abuse of the System by Banks and Congress
Causes of the Sep-2008 Wall Street Debacle 71
Politicians Use Fake Money to Keep Their
4 Use of Gold as Money
Why Gold? 87, Redick’s Four Monetary Rules 91
A Five-Step Plan to Convert to Gold as Money 99
5 The New Gold Money Era
of Introducing Gold 115
1. Authors, Books, and Sources
3. Dave’s Glossary
4. Dave’s Biography
List of Tables and Figures
Table 1: The Honest National Debt 30
Table 2: Gold Reserves vs $M1 and Forex
3: Gold Reserves per Person
4: History of Central Bank Gold Reserves 111
Table 5: Bullion Coins and Medallions
Table 6: Weight Conversion (for precious metals) 141
1: Monetary Base (M0) 1918
2: The Shrinking Dollar
"Give me control of a nation's money and I care not who makes it's
laws" – 1790, Mayer Amschel Bauer Rothschild (1743 -1812), Founder of the worldwide Rothschild Banking Dynasty
Definition of Revolution: Activity or movement designed to effect fundamental changes
in the socioeconomic situation (Merriam-Webster)
book is written to educate a broad audience, from citizens and students, to professors, politicians, and bankers, on what
is wrong with our monetary system, and how to fix it.
USA needs a Monetary Revolution
to end distortions and losses in our
economy, and end corruption in government and the financial services industry. Most of our citizens have accepted the immoral
and counterproductive attitude that: 1. The government should and will bail out most people and businesses that get in financial
trouble, even if due to irresponsible, self-serving, conduct, and 2. It is proper to tax others (typically ‘the rich’
and ‘corporations’) to fund benefits for yourself, which I call gang-theft-by-vote. Federal money feeds these
bad habits. The Liberals and Progressives want ‘their’ politicians to fund their projects (to get their votes),
but object when other politicians support subsidies and favors for the ‘capitalism and ‘corporations’ they
hate. Of course, once the door is opened a bit for the government to ‘help’ and ‘manage’ social and
business projects, it is pushed wide open by these money and favor seekers! The economic and moral decline of our country
and its worldwide empire are the result.
does our monetary system have to do with this? The key underlying issues are: 1. Internationally, the US dollar is the world’s
primary reserve currency (while this status lasts), so we are the only nation that can create dollars out of thin air to pay
our foreign debts (imports and loans) with our own currency (most nations must buy US Dollars) without facing exchange rates
(very handy for our big spending government !), and 2. Our central bank, the Federal Reserve System, creates new fake money
to fund the excessive federal spending (politicians like that better than raising taxes), plus recent massive bailouts of
firms run by their friends, using phony reasons such as ‘too big to fail’. In addition to ‘normal’
borrowing to fund deficits, our federal debt increases because, 1. Our foreign suppliers often invest in US Treasury securities
with the dollars we pay them for our imports, thus making it easier for us to borrow and spend more, and 2. More borrowing
and new money is needed because US states become dependent on federal money as they seek and accept grants, pork, and federally
funded state projects with strings attached (happily provided by vote-seeking congresspersons). All of this federal spending
leads to an excessive increase in our money supply, which causes price inflation and eventual failure of the US dollar as
its value drops worldwide. Thus, our present mode of operation is not sustainable and must end.
As my effort to avoid further decline of our USA, this book focuses on problems
and solutions about our monetary system, and how we fund government at all levels (city to federal), and banking. My prior
book, ‘Rebuild America Now’, covers other economic and social problems.
Broadly, a ‘monetary system’ for a nation is the system used to provide and control the exchange of money. It includes the currency (physical coins and paper, or their electronic form; see Glossary), mints, various types
of private (not government owned) banks, and usually a ‘central bank’ which manages the system and stores the
nation’s reserves (gold, currency of other nations, etc.). In most nations, the central bank is owned and operated by
the government, but our Federal Reserve System is a so-called ‘private’ corporation, but operates in secrecy and
kow-tows to pressure from politicians; more on that in Chapter 2. All developed nations today control their monetary systems
tightly, including ‘legal tender’ laws that in various ways force people to use the ‘official’ government
money. History shows us that private money (issued by non-government mints) and banking always works well, where anyone can
create money and run a bank, and the only government role is to prevent fraud and theft (see ‘Private Gold Standard’
on pages 100 and 140, and Core Principle on pages 13, and 139). The crooks that create and push fake money (as in dope ‘pushers’)
are soon discovered and no one will use their money or bank. However, when the government is the crook, and uses legal tender
laws to force use of their fake money, it is harder for the citizens to make corrections! Politicians always try to gain control
of the system so they can manipulate it to fund projects to keep and enhance their jobs, egos, and power. They make new fiat
money out of thin air, debase coins (reduce precious metal content or coin size), etc. ‘Fiat’ means the government
declares the ‘face value’ of metal or paper money without regard to the market-based value
of the material of which it is made. They also borrow money from banks and other nations, usually by selling bonds. Bankers
have the same incentive to control government (with loans, bribes and threats), and thus the monetary system, and history
shows they have been successful at it. Their favorite method is to control the central bank of a nation, and it is said they
arrange ‘troubles’ (wars, assassinations) for those who won’t cooperate. The Rothschild banking family has
been preeminent worldwide in starting and controlling central banks. The formative days of banking and securities dealers
in the U.S. (through 1930) were dominated by the families of Morgan, Rockefeller, Warburg, Carnegie, Harriman, du Pont, Astor,
and Kennedy. Their legacy of government control is still with us.
Thus, the world has a long history of nations that have failed due to abuse of their monetary system to fund
wars, excessive spending, and corruption. The failed empires (they had lots of colonies) of Rome, France, Portugal, Spain
and England are examples. Sadly, the USA is in the late stage of a failing empire for the same reasons. We don’t have
colonies, but with our over 800 bases in 130 countries (and growing), we exert a lot of control, which has the same effect.
For more on empires, see Chapter 2 in my book ‘Rebuild America Now’, and part 5 in left margin of my site www.Forward-USA.org.
Given those historical trends,
where are we today? It is not surprising that our monetary system, and those in most of the world, are controlled by corrupt
politicians, securities dealers (aka ‘Wall Street’), and bankers. Learned economists join the group-thought to
have secure jobs. The greed and treachery of these financial industry leaders and their willing dupes caused the world depression
that started in 2007 and is still unfolding as I write in February, 2013. Greed is a human trait and present wherever humans
operate, and in any type of political or economic system (Capitalism, Socialism, ‘Progressive’, Fascism, Communism;
see Glossary). Crooked leaders and their gangs are worst in the latter four more centralized and authoritarian systems, where
the authority of government, and its fake money, protect their jobs and feed their growth. When these self-serving people
get control of a government, and a country’s financial system, major distortions, wars, and then economic and moral
failure, always occur.
book will analyze where we are today, and offer a plan on how we can repair the damage and recover.
of my work and books is to promote a form of government that creates more liberty, peace, prosperity, justice and morality.
I find that free-market capitalism (all voluntary, and run by willing buyers and sellers, no government ‘favors’
to ‘crony pals’) is best. All of my recommendations comply with my core principle: ‘'The government's
proper role is to protect the personal and property rights of its citizens and legal residents, as individuals, from threat to, or violation of, their rights by others”. Our Constitution supports this approach.
more information, and updates on topics herein, see my web site www.Forward-USA.org. Please send comments to RedickD@aol.com.
Thanks for your interest
and support, Dave Redick
(see page 142 for details)
Personal and Education:
1935: Born in MI (near Detroit)
1958: BS-Engineering, University of Michigan, Ann Arbor, MI
1965: MBA-Economics, Santa Clara University, Santa Clara, CA
1958 -1969: Aerospace Engineering and hi-tech sales
1970 -2004: Telecommunications
sales and management
1993 -2000: VP Sales then CEO of consultant HNTelecom.com
2000 -2001: VP and Cofounder of $6 mill. venture capital funded
startup Fiberstreet.com (closed, use Google)
2004 - Present: a) Speaker and Author on Economics, Better Government, and Trends, and b) Energy Consultant
Politics: Active in ‘limited government and
sound money’ political work since 1978. Candidate for US Congress (3 times), and State Assembly (2).
Chapter 1: The US Monetary System
A Brief History of Money
Various material of value (shells, hoes, tobacco) have been used as money, and all served the need for a medium of exchange, unit of account, and a store and measure
of value, but gold always emerges as best, as described below (see p.91). People made token coins of base metal (not rare
or precious) for local use. Metal objects were
introduced as money around 5,000 B.C. By 600 BC, the Lydians (now part of Turkey) became the first in the Western world to
make metal coins of a certain weight, fineness (purity), and shape. Their Stater was made of electrum, a
naturally occurring mixture of gold and silver. The Arabs used the gold Dinar, which is still in use. Greece
used the silver Drachma. The Byzantine Solidus (meaning ‘solid’)
gold coin, which evolved to the Bezant, was introduced by Emperor
Constantine I, in 312 AD, permanently replacing the Aureus as the gold coin of the Roman Empire. The Bezant was about 4.5 grams
of 23 ct gold, and was maintained essentially unaltered in weight, dimensions and purity for 600 years. This stability of
value was a key factor in the prosperity of those times. For more on old coins, see; http://en.wikipedia.org/wiki/List_of_historical_currencies.
Some of the earliest known paper
money was about AD 960 in China. This money, made of material with little or no market value when not used as money, was often
abused by over-production and became worthless (sounds familiar today!). The world’s first central bank was the Bank
of England, founded in 1694. It was a privately owned bank, but was given special privileges by the King, such as buying royal
bonds with their paper notes. At first, the notes were redeemable in specie (gold or silver), but excessive creation of ‘notes’
soon started, redeemability ended, and their value dropped. In 1699 King William III appointed physicist Sir Isaac Newton
as Master of the Mint to develop rules for management of the banks’ money. Newton developed what we now call the Classical
Gold Standard with paper notes, or base-metal token coins, redeemable in a certain weight and purity of gold at the issuing
bank or mint, by bearer on demand. The rules started in 1707, but were again soon broken and price inflation followed. The
British Pound still survived as a ‘good as gold’ coin and the world’s reserve currency until 1914 when they
suspended gold redemption so they could inflate the money supply to pay for WW1. The Bank of England was nationalized into
a central bank in 1946.
In the USA
The American colonies created ‘colonial scrip’ (paper currency not backed by a commodity such as
gold). It worked well for a few years but it was abused
by excessive expansion of supply (monetary inflation) in some areas, and became worthless. This gave our Founders fair warning about the problems with paper money. The
King of England frowned on their attempts at monetary independence and their scrip was banned by English Parliament in the ’Currency Act of 1764’. This caused a depression in the colonies, and was one of the reasons for the American Revolution. Notice that this is not in the government-approved history books in our schools!
The Colonies and early U.S. used many types of currency from other nations, and
had no ‘official’ U.S. money. The ‘Spanish Milled Dollar’ (or ‘8 Reales’) was prominent
due its known silver content (averaged 27.47
grams of 0.93 fine silver, but varied with mint
and date; Wiki). People often cut these coins
into pie-slice shaped halves, quarters, and eighths (or ‘bits’) to make change. These are the famous “pieces
of eight”, and ‘2 bits’ equals a quarter dollar.
Following Alexander Hamilton’s
recommendations to create a national currency, Congress enacted the ‘Coinage Act of
1792’ (The Mint Act). It established gold
and silver as the monetary standards of the United States with the gold set at 15 times the value of silver. This fixed ‘bi-metallic’
standard caused trouble later! The initial US silver dollar coins were struck of 26.96 grams of 0.8924 fine silver
(alloyed with copper). The diameter was 39 to 40 millimeters with a lettered edge reading ‘HUNDRED CENTS ONE DOLLAR OR UNIT’. The act also allowed for the creation of a national mint. It was the world’s first decimal-based monetary
Between the adoption of the Constitution and the Civil War the United States government did not issue paper money as we know it today, but on many occasions it did
issue short term debt called Treasury Notes. They also issued Demand Notes that were intended to function as money, and were authorized within the legal framework of
Treasury Notes. This was a ‘sneaky’ ploy since the U.S. was not generally assumed to have the authority to issue
banknotes at that time.
The Continental Congress had issued Continental dollars between 1775 and 1779 to help finance the American Revolution. The paper Continental dollars nominally entitled the bearer to an equivalent amount of Spanish Milled dollars but were never redeemed in silver and lost 99% of their value by 1790 despite the American victory. Some claim that British
General Howe printed thousands of Continentals and sold them cheaply in order to destroy its value. With the fate of the Continentals
in mind, the Founding Fathers put no provision for a paper currency in the Constitution, and they forbaide the states to use anything but gold or silver
as legal tender. As a result, the pre-Civil War circulation of banknotes in the United States consisted of private issues,
including issues by private federally chartered banks such as the First and Second banks of the U.S. (more below). The Coinage
Act of 1834 set gold at 16 times the value of siver, which undervalued the silver, causing traders to export it for use abroad.
In 1861 Lincoln needed money to
finance the so-called ‘Civil War’ (actually a war of aggression against the South, which had the right to secede,
to retain them as a source of cotton, and a market for Northern manufactured goods; see page 131), so he went with his Secretary
of the Treasury to New York to apply for the necessary loans. The Bankers (money changers), wishing the Union forces to fail,
offered loans at annual rate of 24% to 36%. Lincoln declined the offer. An old friend of Lincoln's, Colonel Dick Taylor
of Chicago, was put in charge of solving the problem of how to finance the war. His solution is recorded as this: "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." The initial ‘Greenbacks’ were redeemable in gold or silver,
but redemption soon ended so the Legal Tender Act of 1862 was issued to force people and firms to accept them. Next came the National Bank Acts of 1863 and 1864 that created
a system of federally chartered ‘national’ banks that issued bank notes supplied by the new ‘Office of the Comptroller of the Currency’ (OCC) and US Mint (both part of the Department of the Treasury). The Acts also put a ten percent tax on state-issued bank notes, which ended their money-making and gave us the first federal
monopoly on money creation! The Secret Service was also created, so only DC could make counterfeit money! (more on P. 61)
Silver Coins and Certificates
The next major banking law was the ‘Fourth Coinage Act of 1873’ led
by Pres. Grant that demonetised silver and effectively put the US on the gold standard, which replaced the fixed-ratio gold
and silver bimetallic
standard that had been created by Alexander Hamilton. Many of the poorer citizens saw this as a "crime" because
it devalued their silver, which then prompted passage of the Bland-Allison Act by Congress on February 28, 1878. It did not provide for the "free and unlimited coinage of silver" demanded by
Western miners, but it did require the United States Treasury to purchase up to $4 million of silver bullion from mining companies
in the West, to be minted into coins that would be legal tender for all debts, like gold. Paper ‘Silver Certificate’
money was first issued in 1878 and bore the words; ‘Silver Certificate, This certifies that there is on deposit in the Treasury of the United States of America ‘x’
Dollars in silver payable to the Bearer on Demand’, and ‘This Certificate is Legal Tender for all Debts, Public
and Private.’ Most were $1, $2, and $5. Redemptions were paid in $1 silver coins ( 0.8 ounces of 90% pure silver). See an image of the $1 at part 2 in the left margin of my
The Gold Standard
Act of 1900 ended bi-metalism (a fixed ratio of gold to silver value), and required the US Mint must hold only 40% gold reserves
to redeem notes. The bankers conspired to get the Federal Reserve System approved on December 23, 1913 (see page 21). Today’s
‘Federal Reserve Notes’ only bear the words ‘This Note is Legal Tender for all Debts Public and Private. JFK was planning to bypass the Fed by having the Treasury issue ’U.S. Notes’ (certificates redeemable in silver) and
silver coins. Some say this led to his death.
The Morgan silver
dollar coin (1878-1921), and the Peace (1921-1935) had 0.8 oz of 0.9 purity, thus 0.72 oz; four quarters or ten dimes had
the same total, and all had wide usage. Pres. Johnson
approved the ‘Coinage Act of 1965’ which ended silver content in coins (their bullion market value had exceeded
their face value), thus 1964 and prior coins (known as ‘junk’ silver due to wear) were ‘hoarded’ and
valued for their silver content. Now the quarter is 91.67 percent copper and 8.33 percent nickel.
Pennies are 97.5% zinc and 2.5% copper. The exception
was the Kennedy half dollar which started in 1964 as a memorial (he died on Nov. 22, 1963) with 90% silver (0.362 oz), then
40% in 1965-70 and zero from 1971 until now. The Eisenhower silver dollar in 1971-78 had 0.316 oz. Redemption for metal of
Silver Certificates ended in Oct-1967, but they remain legal tender. See P. 117 for more. Nixon abrogated the Bretton Woods
Agreement in August, 1971, ending all US money ties to precious metal.
The Petrodollar System
The 1971 floating, goldless, USD was saved by the Petrodollar System, a paper crutch!. The
deal is explained in this excerpt from a Jan-2012 article by Marin Katusa of www.CaseyResearch.com; “In 1973, President Nixon and Sec. Kissinger asked King Faisal
of Saudi Arabia to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes,
and bills. In exchange, Nixon pledged to protect Saudi Arabian oil fields from the Soviet Union and others. It was the start
of something great for the US, and is the foundation for the value of the USD.
1975 all of the members of OPEC agreed to sell their oil only in US dollars. Every oil-importing nation in the world started
saving their surplus in US dollars so as to be able to buy oil; with such high demand for dollars the currency strengthened.
On top of that, many oil-exporting nations like Saudi Arabia spent their US dollar surpluses on Treasury securities, providing
a new, deep pool of lenders to support US government spending.” For the entire article, visit: (http://www.caseyresearch.com/cdd/demise-petrodollar.
Notice that the Oil Embargo, related to the Yom Kippur War, started in 1974. OPEC demanded, and got, price increases to $12.20 bbl in 1975
and $25 by 1979 (but this only accounted for inflation since the $2.77 price in 1948; it had been only $3.50
in 1973!!). The Petrodollar system continues today, and remains a key support of the USD. One of the reasons the US invaded
Iraq and Libya (and is threatening Iran) was that their leaders had started selling oil for gold and other currencies; a death
warrant! Other reasons are; 1) getting their oil and denying it to China, and 2) Israel. Based on recent gold purchases, and
China’s May-2014 US$400 bn purchase of gas (may be paid in yuan) from Russia, China and Russia might be planning
to destroy the petrodollar system by using their own money, and thus help crash the U.S. economy by ending the USD’s
role as a reserve currency? (More on P. 59)
US Central Banks
Politicians like central banks that control the national monetary system because they can manipulate them to
gain funding without politically unpopular taxation. In 1791, the ‘First Bank of the United States’, (BUS-1),
was started, but it failed in 1811. The second attempt was the ‘Second Bank of the United States’ (BUS-2), which
was chartered in 1816, with a renewal required in 1836.
predominant reason that the Second Bank of the United States was chartered was that in the War of 1812, the U.S. experienced severe inflation and had difficulty in financing military operations. The Second B.U.S. was in no sense a federal-national bank but rather a privately held banking corporation. The bank had a unique relationship (special deals, monopolies, etc.) with
the federal government that gave it access to substantial profits. President Andrew Jackson strongly opposed the renewal of the ‘second’ bank’s charter, and built his platform for the election of
1832 around doing away with the Second Bank of the United States, which he did in Sep-1833.” (wikipedia.org)
The Whig Party (which liked ‘big government’,
and included the young, ambitious, Abe Lincoln) was started to oppose Jackson’s termination of BUS-2, but it failed.
Creating the Fed
The Federal Reserve System should
be considered the third U.S. central bank (BUS-3). The secret plan to create the financial monster now known as the ‘Fed’
was consummated on November 22, 1910 at a private club on Jekyll Island, Georgia. Congregated at his clandestine meeting were
some of the most powerful political and financial people in Europe and America including:
Nelson W. Aldrich: Republican "whip" in the Senate, chairman of various
committees including the Committee on Finance and Chairman of the National Monetary Commission. Aldrich was a business associate
of J. P. Morgan and father-in-law to John D. Rockefeller, Jr.
Frank Vanderlip: President of the National City Bank of New York, which at the time was one of
the most powerful banks in the US and was under the control of William Rockefeller and the international investment banking
house of Kuhn, Loeb & Company. His 1935 book ‘From Farmboy to Financier’ revealed the secret events on Jekyll
A. P. Andrew: Assistant Secretary of the U.S. Treasury
Davison: Senior Partner of J. P. Morgan
Company, emissary of J. P. Morgan
Charles D. Norton: President
of the Morgan-dominated First National Bank of New York
Benjamin Strong: Head of J. P. Morgan's Bankers Trust Co. and loyal lieutenant of J. .P Morgan
Paul Warburg: A recent émigré from Germany, partner in the
banking firm of Kuhn, Loeb & Co. who was the agent of the German Central Bank (Reichsbank) and the Rothschilds and Warburgs
banking dynasties based in Europe. He wrote a book about how they contrived passage by Congress and approval by Pres. Wilson.
sole intention of these conspirators was to draft a blueprint for a strong central bank that served their interests. This
blueprint was the Federal Reserve System and the prize was the future control of the money supply and credit
of the United States.
Because the Federal Reserve System was to be a bank of issue
then, just as the plotters understood all too well, it was unconstitutional from its inception. (www.overlordsofchaos.com)
headed a commission in 1911 to study the role and need for central banks. He came home from a study trip to Europe claiming
to be a new supporter of them, but that was a ploy to cover the existing plans from Jekyll Island in 1910. The Aldrich Commission's
report was submitted to Congress in 1912. Although Woodrow Wilson, a Democrat, won the 1912 election, the Republican Aldrich's
plan shaped the extensive debate that followed. A Democrat, Carter Glass of Virginia, shepherded the Federal Reserve Act through
the Congress. On Dec. 23, 1913, when many Congresspersons, including major opponents of central banking, had already left
town, Congress adopted the Federal Reserve Act, also known as the Owens-Carter Act. Even the name was meant to deceive, so
they chose: 1. ‘Federal’ to make it seem to be part
of the government, and 2. ‘System’ instead of ‘Bank’ because many Congresspersons opposed a federal
bank. They planned the ‘system’ with twelve regional banks (each a privately owned corporation) to satisfy private
bankers that their regional concerns would be heard.
Fake ‘Mandates’ and the ‘Real Reasons’ the Fed was Created
A further fake ‘selling point’ to gain support from the people and
Congress was to declare that the ‘dual mandate’ of the Fed was to maintain; 1. Stable value of the Dollar, and
2. High employment, and the Fed has failed at both! The fake mandates shielded the ‘real’ reasons of;
1. A ‘flexible’ source of new money for politicians to spend (causing price inflation, a hidden tax), and 2. The
‘lender of last resort’ role to bail out banks and other firms with good political connections! This, and other
government meddling, led to the ‘casino banking’ that caused the 2008 crash, with more to come in 2013 and up.
speed" with which the Federal Reserve Act had been passed by Congress during what became known as "the Christmas
Bernard Baruch, a principal contributor to Wilson's campaign fund, was stunned when he was informed
that Wilson refused to sign the bill. So he assured Wilson that his concerns were a minor matters, which could be fixed up
later through "administrative processes". With this reassurance, Wilson signed the Federal Reserve Act on December
23, 1913. History proved that on that day, the Constitution ceased to be the governing covenant of the American people.’
Structure of the Fed
Reserve System consists of the Board of Governors (The US President appoints the seven members of the Board
and they serve for 14 years. The chairman and vice-chairman are chosen by the President from among the sitting Governors for
four-year terms. Thus political independence is a joke!) the 12 Federal Reserve banks, the Federal
Open Market Committee, the Federal Advisory Council, and, since 1976, the Consumer Advisory Council. There are also within
the system several thousand member banks. The Board of Governors of the Federal Reserve System, domiciled in Washington DC,
determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates
established by the 12 Federal Reserve banks, and reviews the budgets of the reserve banks.
Each Federal Reserve Bank is a privately owned corporation established pursuant to the Federal
Reserve Act of 1913 to supposedly serve the public interest. A board of nine directors governs each Federal Reserve
Bank, six of whom are appointed by the member banks and three of who are appointed by the Board of Governors of the Federal
Reserve System. The 12 Federal Reserve banks are located in Boston, New York, Philadelphia, Chicago, San
Francisco, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, Kansas City and Dallas. Determination of Federal Reserve Bank policy in the purchase and sale of securities on the open market is the power of the
Federal Open Market Committee (FOMC) consisting of the seven members of the Board of Governors and five members elected by
the Federal Reserve banks. The supreme regulatory powers in fiscal affairs gifted to this private monopoly called the Federal
Reserve System manifest in several ways but the most important are the instruments of so-called direct or indirect control.
Of direct control, one method used is adjusting the legal reserve ratio (i.e. the proportion of its deposits that a member
bank must hold in its reserve account) thereby increasing or reducing the amount of new loans that the commercial
banks can make. Thus, in this way the potential money supply is expanded or reduced because loans give rise
to new deposits.
2. Another direct control mechanism to influence potential money supply is by the manipulation of the discount
(rediscount) rate, which is the rate of interest charged by Federal Reserve banks on short-term secured loans to member banks.
Loans are usually sought to maintain reserves at their required level, and so an increase in the cost of such loans has an
effect similar to that of increasing the reserve requirement.
3. Of indirect control, the classic method
is through open-market operations. It was first used in the 1920s but is now employed daily to make small adjustments in the
market. This control mechanism has the Federal Reserve Bank selling or purchasing securities on the open markets that causes
a reduction or increase the size of commercial-bank reserves. That is, when the Federal Reserve sells securities, the purchasers
pay for them with checks drawn on their deposits, thereby reducing the reserves of the banks on which the checks are drawn'
4. A supplemental control mechanism occasionally used by the Federal Reserve Board is that of changing the margin
requirements involved in the purchase of securities.’ (from www.overlordsofchaos.com)
Notice that the word ‘reserve’ is used extensively
above, both in the name of the Fed, and its activities. This is because if a private bank gets low on reserves (compared to
the legal requirements at the time), it can’t make new loans, and this could be widespread in bad economic times. While
a new bank depends on investments by shareholders for its initial reserves, profits and borrowing from the Fed become major
sources as it grows. Hence, the Fed’s role in loaning banks money to boost their reserves is a powerful tool in ‘managing’
the level of economic activity nationwide. It also allows the Fed, as ‘lender of last resort’, to do bail-outs
in bad times!
The above description shows how the so-called ‘privately owned’ Fed bank controls the US monetary system.
Not mentioned, is that most of its meetings and actions are secret, even to Congress, and that it is heavily politicized and
controlled by the Federal government. It was annoying to see the liar Bernanke plead that Rep. Ron Paul’s bill HR-1207
(paul.house.gov; retired Jan-2013) to audit the Fed would reduce its independence. What a joke!
He really wants the right to secrecy to help his ‘friends’!
Nelson Hultberg (www.AFR.com) said it well in
his essay ‘The Fed is a Fascist Cartel’: “The Federal
Reserve, in my opinion, should not be classified as a private corporation. It should be termed a government-run fascist cartel.
There are several important reasons for this. For example,
1. All nationally chartered banks in the Federal
Reserve system are forced by the government to join the cartel.
Bernanke and his board of governors are appointed by the President and approved by the Senate.
3. The Federal
Reserve came into being because of an act of Congress, and it can be altered or legislated out of being at anytime by Congress.
These factors are not how private corporations are created or operated. The Fed
involvement in a massive way. Without
the special monopoly privileges legislated by Congress that sustain the Fed, it disappears.”
But take heart! It’s never too late to abolish the Fed and return to the proven gold standard. Due to
rapidly increasing lack of confidence in the Fed since the crash started in 2008, in Nov-2010 a ground swell of support for
the gold standard erupted. Here are three examples;
1. Over the weekend of November 6-7, 2010, World Bank president,
Robert Zoellick, proposed, in a column written for the Financial Times, that the global economy once more
be linked to gold as an anchor to help maintain currency stability and reduce inflationary expectations in international markets.
He soon ‘clarified’ his comment, but the uproar had started!,
2. On November 9, 2010, Dr. Richard Ebeling, Professor of Economics at Northwood University (Northwood.edu), posted
the article ‘A Return to the Gold Standard?’ in the Daily Bell (dailybell.com) commenting on
Mr. Zoellick’s statement. Dr. Ebeling wrote; ‘At one point in his article, Martin Wolf mentions that some
have called for an even more radical monetary reform than even a government-managed new gold standard: the abolition
of central banking and a full separation of money from the state, through a monetary system based on competitive, private
free banking. Wolf sets that alternative aside as well, thinking that the world is certainly not ready for such a
change, even if it was workable. But, in fact, this is the ultimate and most reasonable of all the alternatives to
the existing system of monetary central planning through the government institution of central banks.’
For a detailed
plan for conversion of our fiat ‘Fed Note’ and coin system to use of gold as money, which includes a form of Prof.
Ebeling’s plan for allocation of U.S. gold to redeem Fed Notes and coins, refer to my ‘Five Step Plan’ on
page 99. The plan was in the 1st edition of this book in Jan-2010.
There is a growing movement
to end corrupt government. Young people are getting concerned. We must Fight On!
Chapter 2: Effects of the Fed and Other Central
The Impact of Fake Money
You won't read the following analysis in the newspapers or in a college economics
course. Most government and industry leaders, and professors like the present system because their jobs, grants, and
social life depend on having and supporting it! This requires an ethical lapse where the fake nature of the money is
ignored in order to gain a personal advantage from it They want to be viewed as 'normal', not a radical 'gold
bug' who respects the importance of sound money which means gold or silver coins, and paper notes redeemable
in gold by anyone, on demand.
of fiat ‘official’ government money has had a profound effect in history and on our nation and the world today.
‘Fiat’ means it is worth whatever the government says it is (its ‘face value’), although the material
of which it is made may have more or less market value (examples: valuable silver dollars and worthless paper, both declared
worth $1, and today’s American Eagle bullion coin with a ‘face value’ of $50 for one ounce of gold!).
KEY POINT ! Normally, when a nation creates too much fake money, sellers avoid it for payment, or stop buying its bonds,
due to the falling value of both, and the party is soon over. However, the US is in a unique position
in the history of the world. Our fiat paper money is the primary de facto (not ‘formal’, since 1971) world’s ‘reserve
currency’ (1. anyone will accept it for payment, and keep it as cash, or as a dollar-denominated asset; 2. over 60%
of world transactions use it, thus banks keep large reserves of it). Thus, we can create new money (paper or electronic) out
of thin-air by the billions and sellers of goods and services worldwide (and in the U.S.) will accept it, and we can
pay our debts with it, even as the federal government spends to excess. No other country can do that!!
We have abused the 'privileged’ status of the U.S. dollar (USD) in many immoral and counterproductive ways.
It is the underlying cause (funder) of our major problems with jobs (exported due to excessive imports of goods), banking
and securities (strange deals based on loose money), excessive personal spending and debt (borrow, buy and play now, pay later!),
and expensive wars.
The Honest National Debt
and Unfunded Liabilities
A, $ 18.406 tn National Debt (disclosed debt)
Key Misc. unfunded Liabilities (not disclosed
A, B, and D (unfunded)
trillion Total for B
$ 117,075 trillion
= Grand Total (A+B)
(Source: USDebtClock.org, Oct. 14, 2015)
The ‘official’ government debt figures ignore the above Medicare, Soc. Sec. and Misc. items (treated
as ‘off-budget’ !!), plus potential trillions that loom due to $5.3 tn losses at Fannie and Freddie, now government-owned.
There are other ‘Misc.’ items, such as food stamps, not shown above.
The deceit is exposed by the fact that after Congress increased
the federal debt limit to $12.104 tn in Feb-2009 (80% of GDP), in Feb-2010 increased it to $14.3 tn, and
in Jan-2012 to $16.4 tn (102% of GDP) which was approached in Dec-2012 stirring the ‘fiscal cliff ’ chaos! On
Jan. 23, 2013 they suspended the legal limit on government borrowing until May 19, then agreed on the increase. In Feb., 2014 they agreed to more spending,
with no limits, until March, 2015!! Government accounting is loaded with hypocrisy. They ignore the normal accounting rules
and honesty that apply to mere citizens, in order to hide the problems they have created. They prosecute private firms for
doing the same thing! Note that the above figures do not count the trillions for Obama’s health plan!
In 1970 the national
debt was $380.9 bn (about $3.4 tn in 2015 dollars), and 37.6% of the GDP. As of Oct. 14, 2015 the national debt was $18.4
tn, and 103% of GDP, thus reaching the danger level of more than GDP!! For definitions of GDP and GNP see p. 139; the government
now prefers to use GNP. No one believes the debt will ever be paid. To eliminate it, we can; 1) Increase taxes a lot, 2) Do
an overt default (repudiation), and refuse to pay most of it (a serious possibility; Russia and Brazil did!), or 3) Create
new fake money (the IMF ‘SDR’?), but this would likely cause hyper price inflation, and destroy the US dollar
and economy. Horrible choices, all thanks to irresponsible government leaders.
Of course consumer debt (cars, home mortgages
– first and second -, credit cards, TVs, etc.) zoomed upward because of the easy (lax terms, sub-prime), cheap (low
interest) fake money created by the Fed in 2000 to 2007. As more people lose their jobs, more bills go unpaid, and the defaults
and foreclosures are now doing the upward zoom. Sad.
New fiat money, and lax terms, funded the debt explosion. This excessive credit creates
and feeds the abusive and corrupt Wall Street and Main Street excessive spending and debt. One cannot underestimate the
importance of our ability to pay debts to other nations, and not be required to convert to their money. We can simply create
new dollars to pay our debts, with only a minor impact on its value in the short-term. Conversely, other nations must buy
dollars (or Euros) to pay for most imports or loans, and face declining exchange rates if they have expanded their money supply
too much. We have abused this 'reserve' status and in mid-2010 other nations started seeking alternatives (yuan, yen,
a 'basket of currencies', etc.). Most people are not aware that the 'reserve' currency is used for most payments
between other nations (example: India pays Brazil for coffee with USD). Hence, all nations keep a supply
of USD to use in trade. All banks are required to have sufficient ‘reserves’ to show a strong asset base for the
bank’s obligations (mainly demand and time deposits). Since the USD has been valued by the world system as ‘good
as gold’, it is known as a ‘reserve currency’ and used instead of gold to fund these bank reserves. The
Dollar has been used in about 80% of international transactions since its ascendancy in the 1920’s (the English ‘Pound
Sterling faded), but it has become weaker since 2000, and declined to 60% or less in 2012.
About 30% of international deals are now
done in Euros, Swiss francs and Yen, but that is increasing as the economies and currencies of China and others grow stronger.
Indeed, China started using its yuan for international transactions in mid 2010, and also allowed foreign firms to create
a yuan-denominated private equity funds. There was a 13-fold increase in trades settled in yuan in the first half of 2011
from the prior year. This outweighs the potential cost of an unfavorable move in the yuan-dollar exchange rate.
of the money supply (like a balloon) reduces the value of every US dollar, the US government prefers this to deflation because
‘free money’ from inflation helps pay off federal debts to other nations. In the extreme, this is a form of default,
since the lender gets paid in near-worthless paper money. In mid-2010, our lenders (China, etc.) voiced concern about this
The federal funds target interest rate were at historic lows of about 1% during 2001 to 2005, which was done to stimulate
recovery after the ‘dot-com’ bubble burst on NASDAQ in March-2000. In Jan-2006 Fed Chairman Greenspan increased interest rates to 5.25%, some say
‘to put the brakes on’. The U.S. economy started failing because many banks and Wall Street firms were highly leveraged (over 25:1) in risky
investments and could not tolerate losses caused by the rate increases.
During the 2000 to 2007 boom times, Wall Street had been ‘securitizing’ bundles of
various weak and bad debt instruments (subprime mortgages, credit card debt, student loans, etc.) into ‘mortgage-backed
securities’ (MBS), then getting their complicit rating agencies (Moodys, Standard and Poors -S&P-, Fitch) to falsely
label them AAA, an act of fraud. By doing so, they could sell them worldwide to get them off their books, and then make more
money by making new loans to other weak borrowers. Finally, in Jan-2013 the government filed a law suit against S&P for
of cheap fake money, supplied by the Federal Reserve System started and supported these debacles. More money was created for
Bush’s $700 billion TARP program (Troubled Asset Relief Program) in 2008, with the Fed pouring about $2.2 trillion into
the economy for their bailouts (the ‘Bernanke Spike’), and then $787 bill. more for Obama’s Feb-2009 Recovery
plan. It’s like pouring gas on a fire! This combined $2.987 trillion is now called ‘Quantitative Easing-1’,
or ‘QE-1’, and showed meager results. Then in Nov-2010 the Fed announced QE-2 to buy $600 billion in long-term U.S. Treasury bonds, ostensibly to push down long-term interest rates,
and in Sep-2012 QE-3 to spend $40 bn. per mo. on mortgage-based securities, plus the existing ‘Operation Twist’
of $45 bn. mo.(to buy and sell short- and long-term US bonds - hence the ‘twist - to reduce interest rates), with no end date! The US monetary base has grown from $848 bn in 2008, to a horrible $4, tn
Bernanke specialized in study of the ‘Great 1930’s
Depression’ for his doctoral program. He claimed that the Fed should have increased the money supply in 1929 when the
depression started, instead of reducing it. He was determined to not let that mistake happen again, so he flooded the economy
with new money in 2008! As of Nov-2014, results have been disappointing as unemployment gets worse and prices rise. So much
for fixing by flooding.
Thomas G. Donlan, Editorial Page Editor of ‘Barron's’ (Barrons.com) said it well in Oct-2010;
just part of a bailout-and-stimulus program that is a huge loser. The government has borrowed money and shoveled it out the
window for more than two years. A little of it has leaked back in under the door.’
Most of our current economic problems were
created by the Fed (with cheering from Congress) by flooding the nation with cheap, fake, money as a stimulant since the early
‘90s. It should surprise no one that people, bankers, and Wall Street reacted by seeking high-return, risky investments
(derivatives, etc.) to help them beat the price inflation caused by this easy money (low interest, lax terms), and excessive
expansion of the money supply. A second cause of seeking excessive profits and risk was the ‘moral hazard’ of
knowing they would probably be bailed out by the Fed if they got in trouble. Since its creation in 1913, and with a surge
since 2000, the Fed has expanded (‘inflated’) the money supply by twenty times. ‘Price Inflation’,
a secondary effect caused by inflating the money supply, has reduced the US dollars’ (USD) purchasing power by 95% (20:1)
since 1913, So much for government management !
Many people claim that ‘unfettered free-market Capitalism’ was the
cause of the 2008 crash, and call for more regulation. In fact, we have ‘crony capitalism’ where the government
and businesses exchange favors, and the people lose! Liberal want those favors for their own projects, so they falsely blame
‘Capitalism’. In fact, Capitalism is just an ‘economic system' based on private
ownership, free enterprise, and minimal regulation. Capitalism offers more than economic results, it is a
moral system that depends on the activity of willing buyers and sellers within the rule of law, not coercion and
control by others (the government power folks). Socialists, Liberals, and Progressives have distorted the meaning to call
it a ‘social system based on greed and power for the rich’. They blame ‘corporations’ for most of
the abuse, while ignoring that in any system (government, church, club, etc.), concentrated power and self-serving, unethical
people are always the cause. What they also ignore, through ignorance or bias, is that we have not had a free market since
1913 (when the Fed was born), and worse since 1933 when FDR declared that the government was our mother and boss, and responsible
to provide convenience and security for all, and have ‘someone else’ (the government or ‘the rich’)
pay for it. This pushed a dagger into the heart of our citizen’s sense of ethics and personal responsibility, and gave
birth to ‘crony capitalism’. Now Liberals tout ‘shared responsibility’ or ‘the rich were just
lucky, so should pay more’ as their basis for taxing others to fund their projects (health, welfare, education, etc.).
They forget (or don’t know) that the top 1% (by income) of citizens have 20% of the income and pay 38% of the taxes,
while 51% of lower income people pay none. Liberals grab for a higher percent but ignore that ‘dollars paid’ is
what counts (have you ever paid for something with ‘percent’?), and on this basis of 38-to-1, ‘the rich’
are already paying more than ‘their share’. Our nation‘s culture and economy have been sliding downhill
ever since Progressive Taxation started. Unconstitutional government programs and intervention in the free market have caused
our problems. This result shows in every country run by central authority in history, and worldwide today.
shows us that free market capitalism always provides more liberty, peace, prosperity, morality, and justice for all. I recognize that people violate ethics
and justice under capitalism, but this relates to bad people and can occur in any economic system (or church or club). Capitalism
still comes out best. Centralized systems such as Socialism give more power to the bad guys.
The Fed’s Record
The purchasing power (value) of
the US dollar (USD) has dropped by more than 95% since 1913, all due to excessive creation of new money (expansion of the
money supply; monetary inflation). This hurts the people (especially those on limited or fixed incomes, and those with savings),
but the bankers have done well, since they make money selling US debt (T-bills, etc.) and get bailed-out when in trouble due
to their own greed (Bear-Stearns in 2008, etc.). Most Fed meetings are secret, and proceedings are not even available
to Congress; Preposterous ! Some economists say the Fed is needed in order to assure adequate 'liquidity' or
‘elasticity’ for growth by proper expansion of the money supply, equal to growth of the economy; about 3 to 5%
per year. The problem is that such powers are ALWAYS abused by governments
(by expansion of 10 to 20% per year, or more!), though some (the Swiss) less than others (the US is among the worst of the
major currencies). We cannot, and should
not, trust the government or Fed to 'manage' our monetary system. This excess money causes bad spending and investment decisions at both the business and personal level, which
creates financial distortions (big peaks, then valleys), as seen in: 1. Bailing-out England after WW1, leading to mal-investment
(too much money around) and the crash of 1929 when, after ten years of excessive expansion, the money supply was suddenly
reduced by about 30% by the Fed, and 2. The 2007-2008 housing price and construction collapse due to a Fed interest rate
increase of 4.25% (from 1 to 5.25%) in 2006, and 3. Many other large peaks and valleys, and 90% loss of purchasing value, since
the Fed was created. So much for government 'management' of currency and the economy!!
As James Quinn wrote on his web site www.The BurningPlatform.com, in his article ‘Grand Illusion – The Federal Reserve’: “The average American
might just conclude that prices always go up, so what’s the big deal about inflation. This is where the Federal Reserve
and politicians have pulled the wool over your eyes. The CPI was 30.9 in 1964. Today, it is 211.1. This means that prices
have risen 683% since 1964. The only problem is that your wages have not risen at the same rate, even using the government
manipulated CPI. Using a true CPI figure, average weekly earnings are 64% below what they were in 1964. This explains why
a family of five could live well with one parent working in 1964, but even with both parents working and using debt
in prodigious amounts, the average family does not live as well today.”
When nations used real money (gold coins, and tokens and certificates redeemable
for gold), they had small highs and lows in their economies, but they were 'self-liquidating' (private investors stop
putting limited funds into bad deals), and they never had the huge variations now caused by excessive
fake money (investors and the government have lots of money to keep funding lots of deals; good and bad).
The analogy below helps demonstrate what fake money does to an economy, its firms,
The Heroin Analogy
The injection of heroin into your body, or a large increase in the money
supply (over 5% per year) into an economy, are both 'stimulants', but cause illness when used to excess. When the
stimulants are ended to solve the bad effects, your body suffers from withdrawal, and the economy from recession,
or worse! Creating fake money to fund 'stimulus' risks price inflation (reduced purchasing power of the US dollar),
but or 'leaders' in DC like it because it is a quick 'fix' (shows that they are ‘doing something’),
and also helps them payoff their friends (campaign donors) on Wall Street, and federal debt, with cheap dollars. This is part
of the heroin analogy, where our 'leaders' (Obama, Geithner, Bush, Paulson, and most Congresspersons) are shameless,
dishonest pushers and dealers with their ‘bailout’ programs. Their priority is to get re-elected (or keep their
appointed job) by doing favors for voters, their bosses, and campaign donors, no matter what the long-term harm to the nation
and its people!
Global investor Jim Rogers (JimRogers.com)
said in Nov-2010; “The banks who lent the money and made the mistakes should lose money. The bondholders and
the stockholders of those banks should lose money. It’s that simple.” The logic applies equally in the
USA, but campaign donors and pals got bailed-out instead.
shown in the May 5, 2009 issues of Gary North's Reality Check, Issue 854, www.GaryNorth.com, “The FED is engaged in a gigantic system of misrepresentation.
It is misrepresenting the solvency of large banks and financial firms in debt to banks.The FED is doing its best to conceal
the degree of risk and uncertainty in the capital markets. Central banks around the world are cooperating with the FED.
This is an international effort by central bankers to deceive the public. To the extent that this deception is working,
investor confidence will increase.
On April 15, 2008, the FED held $866 billion in assets,
which served as the monetary base for the nation. On April 15, 2009, it held $2.2 trillion! “
These increases are the same as
giving more heroin to a sick addict. See more on inflation below.
Some say the Fed should be eliminated because it is a preposterous, damaging, and unconstitutional
scheme. Others prefer to just reform it (audits, transparency, etc.). I am in the former camp, and add that we should
convert to gold money as discussed in Chapter 4. If we convert to the gold standard, the world will soon follow as fake money
is refused by Sellers; a reverse form of; a) Gresham's Law (without legal tender laws), and b) Nixon’s cut of the
dollar’s tie to gold in 1971. In this case, good money drives out bad. This would end the justification by all
governments for money control and manipulation groups such as central banks worldwide, the BIS, World Bank, IMF,
FDIC, legal tender laws, etc., all of which should be abolished.
Bernanke and his pals worldwide would need to look for useful, productive, honest work. Good riddance!
The above heroin analogy sends the message that you will always get counter-productive conduct when you
flood a system (nation, industry, family) with money. Examples are:
1. Student Loans: Student
loans and Pell Grants (no repayment) seem like a ‘nice’ thing for governments to provide, but they have resulted
in the annual cost of attending college (tuition, books, fees, housing, and meals) in the 1960s going up over twice as fast
as starting salaries for graduates. This is due to higher teacher and administrator salaries, more teachers (often with a
low teaching load) and support staff, excessive building construction, the growing inefficiency of tenure, etc. ‘Hot’
professors get raises due to bidding wars between schools that want them. GROWTH is a top goal for most college presidents!
These expenses are fed by an unending supply of money from students. The college ‘industry’ is the only one that
can keep raising prices without losing customers (students); they just borrow more! Student loan debt now exceeds credit card
debt! ($1,025 vs $843 bn,; 22% more!)
2. Government Payments:
Health care costs have soared since Medicare started in the 1960’s. When it costs them little or nothing, patients don’t
care what a service costs, or if excessive services are used.
101 says we should expect price increases in any industry (college and health above, or any other) where the firms and customers
can get money from the government at special rates or free, and there is little connection to ‘return on investment’! It’s
an old story of unsustainable distortions caused by government meddling with the economy (social-engineering, stimulants,
depressants, controls, etc., etc.). This also causes price inflation (reduced purchasing power of the Dollar), but government
people like monetary inflation because they have more money to pay off their debts, though the creditor gets less- valuable
paper. Again, this is a form of partial default.
solution is to use real money and free markets so there is a stable supply of money, and 1. Thus not enough funding
for wars and other corrupt deals, and 2. Failing deals aren't funded for long (with fiat money, government deals
usually get MORE money when in trouble!). Not perfect, but many times better results (peace, prosperity, justice, etc.)
than produced by government 'management' and meddling (intervention in the free market)!
Monopoly Money and Legal Tender Laws
remember being asked sometime in about 1995 whether I thought Greenspan was doing a good job. I replied that ‘It’s
not a matter of who has the job, I don’t want the Fed to exist!’ The Fed tends to increase the money supply too
much in an effort to ‘stimulate‘ the economy. Congressional 'leaders' like Sen. Dodd and Rep. Frank, and
others, kept asking for more! Only a few people in Congress (Senators Hagel, McCain, Dole and others, and Rep. Paul)
raised the red flag in the 2000 to 2005 period about the risks of excessive money creation, but they were ignored. The crash
of Oct-2008 was the result!
measures the quantity of U.S. money ('money supply') worldwide in four ways, in order of liquidity (how close it is
to cash): M0= basic money supply (Fed Notes and coins = currency, cash), M1 = M0 + checking account deposits, M2 = M1 + near-money
(savings accounts, mutual funds, etc; quick conversion to money), and M3 = M2 + large time-deposits (over $100k). They stopped
publishing M3 in 2006 claiming high costs, but do they actually have something to hide? Private sources estimated M3 at $14
trillion in mid 2010, of which $6 trill. was overseas. Less than ten percent of M1 is coins or paper (= 'currency').
The rest is only in electronic form on computers.
But there is another part of the money supply, namely unused credit (credit ‘lines’). As John
Mauldin, of www.frontlinethoughts.com, penned on April 17, 2009: " It's
a bit misleading to talk about money supply, because money really is roughly $2 trillion of cash and then $50 trillion in
credit. Because what do the banks do? They take deposits in and then they borrow money to leverage them up (this is their
deal with the Fed: maintain about ten percent 'reserves', the actual deposits, and then borrow your 'lending money'
from the Fed). I take my credit card and I spend with it. I borrow against a house. I have an asset that rises, and
I borrow against it.
We have $2 trillion of actual cash propping up $50 trillion in credit. If we all decided to settle and pay off
everything, we couldn't do it because there is not enough cash. There would be massive asset deflation. We, as a nation,
are leveraged 25 to 1, or we were. Now, that $50 trillion is in a real sense the money supply because that is what we are
all pretending is real money. I lend you money and you pretend you are going to pay me back. Then you pretend he is not going
to call your debt for cash, and we are all going to keep the system going. "
In addition to creating the Fed,
the government tampers with money in other ways, such as 'Legal Tender' laws. Early controls, such
as Art.1, Sec. 10 of the Constitution shown below, were used to assure that only ‘real’ commodity-based money
was produced by the government, but politicians find ways to avoid these limits. Ignoring the Constitution is a convenient
method, and no one seems to mind! Later, laws were designed to force people to accept fake money, such as Civil War ‘Greenbacks’,
rather than insist on gold, etc. This forced Sellers to accept government money when offered (tendered) if they wanted legal
recognition of deals (i.e., enforceable in court). These laws are usually a sign of weakness and fraud in a monetary system.
Primary U.S. monetary laws are now as follows:
“The U.S. Constitution, Art. I Sec. 10 Cl. 1, states, in part: ‘No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender
in Payment of Debts; ...’.
During the early American Civil War, the federal government first issued United States Demand Notes (the first ‘greenback’ notes). They were redeemable in gold and silver coin, and became in shortage due to hoarding.
Due to eventual difficulties in redeeming Demand Notes (lack of gold in mint reserves), a money-strapped Congress which had
to pay for the war, adopted the Legal Tender Act of 1862, thus compelling people to accept these United States Notes, backed only by treasury securities, as payment for debts. Once forced to accept federal banknotes, the recipients wanted
to be able to use them to pay their own debts to each other, and this led to litigation from those who did not want to accept
them, but instead preferred coin. The United States Supreme Court ruled the practice unconstitutional in Hepburn v. Griswold in 1870, but later reversed this decision following the appointment of two new judges by President Ulysses S Grant. The Court held that paper money, even that not backed by specie such as the United States Notes, can be legal tender, in the Legal Tender Cases, ranging from 1871 to 1884.
On the other hand, coins made of gold or silver may not necessarily be legal tender, if they are not fiat money
in the jurisdiction where they are preferred as payment. The United States Coinage Act of 1965 states (in part);
‘United States coins and currency (including Federal Reserve notes and circulating notes of Federal reserve
banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are
not legal tender for debts.’
Title 31 of the US Code outlines the role of legal tender. Foreign gold or silver coins are not legal tender for debts. ‘ This statute means that all United States money as identified
above are a valid and legal offer of payment for debts when tendered to a creditor in the U.S..” (from www.wikipedia.org)
Another example of serious tampering
is when FDR issued the Gold Recall Act (illegal Executive Order 6102) in 1933 that made it illegal for US citizens to
own gold anywhere in the world, except for jewelry, and rare coins. This was codified by the Gold Reserve Act of 1934. It
demonetized gold, and increased the government holdings. There are two explanations for this action:
1. The ‘official’ reason is that FDR was worried
because foreign nations were redeeming their paper USD to gold because they knew the U.S. was running out of it. That was
true, but it was only part of the plan. To replenish the government supply the people were forced to sell it to the government
in exchange for the going rate of $20.67 of paper Fed Notes per ounce. But after he had the gold, he increased the 'official'
price to $35 oz ! (a bonus for the government !). The Act also voided contracts, and prohibited new ones, that called for
settlement in gold (a ‘gold clause’).These restrictions on gold ownership were weakened over the years, and ended
2. The ‘true’
reason is that FDR wanted to create new money to pay for his planned New Deal programs so used the above confiscation and
restrictions as a tricky way to end the right of gold redemption by citizens concerned about such inflation. Now he could
create all the money he wanted!
also established the Exchange Stabilization Fund (ESF), which is still active. Initially funded by the above ‘bonus’
from gold confiscation, it had assets of $51.2 bill. as of June-2008. Its function is to use this special fund to: a. purchase
or sell foreign currencies (manipulate the market!), b. hold U.S. foreign exchange and IMF-created ‘Special Drawing
Rights’ (SDR) assets, and c. to provide financing to foreign governments (p. 71, Mexico), all aimed at bringing stability
to the foreign exchange market (read, ‘manipulate it to suit the US’). There is strong evidence that it was used
in the 1990s to intervene (i.e., sell US gold) in the public gold market to suppress the price of gold (a high gold price
makes fiat money look bad), and again in 2011 and 2012 (took gold from $1,900 oz. to $1,500). The Sec. of the Treasury has
broad discretion in use of the money, and only his signature is required, and the transactions are not made known, even to
Congress. We need to audit the Fed to reveal how much gold they still have, and of what quality.
In Jan-2013 Germany asked for return the 300 tonnes of gold it had stored in the
Fed vault in New York (some say they were annoyed by the above secret price meddling in 2011). It is scheduled to be complete
by 2020; 7 years! Why so long? In earlier attempts to verify the existence of its gold, the Fed only allowed Germans to take
a peek into the vault, but no audit. Is it there, or has it been used for ESF dealing, leased, etc.?? If the Fed has to buy
gold in the market to restore the German gold, it could cause a ‘repatriation run’ if the world (nations, banks
and people) decide they want to possess their gold. For example, delivery
requests on the COMEX for physical gold are usually about 10 tonnes per month, but for Feb-2013 are reaching 43 tons!
While the1933 confiscation
of gold effectively ended redeemability of paper ‘money’ for gold by mere people, the 1944 'Bretton
Woods Agreement’ made it formal. This deal is named for the resort area in NH where major nations
met to arrange world money ‘management’ in July, 1944. They set rules to: 1. Allow only nations to redeem
paper for gold between each other (not people; a form of the Gold Bullion Exchange standard), 2. Create the International
Monetary Fund (IMF; www.imf.org) to handle its foreign exchange transactions, and promote ‘stability and cooperation’
between nations (also used to payoff bank loans, then impose ‘austerity’ to make the people repay the IMF!), 3.
Create the World Bank (www.worldbank.org; 1 of 5 orgs in this group) to make loans to developing nations to reduce poverty (or bribe dictators, and 4. Set
the USD as the ‘official’ (not determined by market usage) world’s reserve currency, with a fixed
value of $35 per ounce of gold. In 1961 the U.S. and seven Euro countries created the ‘London Gold Pool’ to buy
and sell gold to stabilize prices. It failed in 1968. The U.S. engaged in so much monetary expansion (inflation of the money
supply) after WW2 (VietNam, Medicare, welfare) it lost much of its value and due to high spending there, flooded Europe with
so-called 'Euro-dollars'. France finally started demanding gold for most of their paper dollars, which peaked with
De Gaulle’s famous press conference on Feb. 4, 1965 where he described the U.S. as having an ‘exorbitant privilege’
as the world’s reserve currency, which allowed us to pay our debts with money created out of thin air. France started
redeeming their paper dollars to gold, but Nixon soon refused to remit gold to any nation (we were running out), and then
abrogated Bretton Woods on Aug. 15, 1971, setting the dollar 'afloat' with no redeemability. Soon, all nations had
done the same, including conservative Switzerland, and everybody could make money out of thin air! Great job security for
Central Bank ‘meddling-managers’!
Figure 1: Monetary Base (M0) 1918 to 2011
Figure 1 shows how the US money supply increased rapidly after 1971 (Nixon ended
the tie to gold) and then spiked with Fed Chm. Bernanke’s ‘Quantitative Easing’ (create new money) in 2008.
Analysis of Figure 1: The Federal Reserve System started in 1913, helped fund WW1,
did large M0 increase in early 1920s to help England after WW1, then reduced M0 quickly due to market frenzy in mid ‘20s,
a major cause of the 1929 depression. The Fed increased M0 to fund WW2, and increased it in the ‘80s as a stimulant
after ‘80-81 recession, which led to the ‘dot.com bubble’ in ‘90s. Interest rates were reduced in
2000 to 2006 to boost housing and recover from the dot.com bubble crash in March-2000. ‘Easy money’ became the
underlying cause of the 2002-7 housing bubble, then its burst, as this money fed the CRA, Fannie, Freddie, Main Street, and
Wall Street binges of excessive spending, debt, and fraud! The ‘Bernanke Spike’ of $2 trill. in late 2008 was
to stimulate the economy after the housing bubble burst in 2007. It didn’t work. Constant meddling fails !
Fed destroys the value of our money by excessive expansion of the money supply (‘monetary inflation’) and other
meddling. Proof is shown in the start and end "purchase power" amounts below, which are from www.measuringworth.com:
1774 to 1912: It took $1,202.05 in the year 1912 for the same "purchase power" as
$1,000 in the year 1774 (a 17.7% loss in 138 yrs, or 0.13 % per yr).
1913 to 2008: It took $22,427.40 in the year 2008 for the
same "purchase power" as $1,000 in the year 1913 (a 95.5% loss in 95 yrs, or 1.0% per
yr). Almost eight times worse than before the Fed!
2009 thru 2014: The US Federal
Reserve held between $700 billion and $800 billion of Treasury notes on its balance
sheet before the recession. In late November 2008, the Fed started buying $600 billion in Mortgage-backed
securities (MBS). By March 2009, it held $1.75 trillion of bank debt, MBS, and Treasury notes, and reached a peak of $2.1 trillion
in June 2010. Further purchases were halted as the economy had started to improve, but resumed in August 2010 when the Fed
decided the economy wasn't growing enough and bought $30 billion in 2–10 year Treasury notes a month. In November
2010, the Fed announced a second round of quantitative easing, or "QE2", buying $600 billion of Treasury
securities by the end of the second quarter of 2011. Since late 2013 they have ‘tapered’
to smaller buys and the program as of June, 2014 stands at $45 billion per month. Fed Chairman Janet Yellen expects
the program to wind down steadily through 2014 and conclude by year-end, assuming the economy remains healthy! (Ha! What ‘health’)
The Fed admitted loaning almost $3 tn to European banks, along with large loans to US banks and
businesses (especially those with good political connections). All this was done secretly with no Congressional oversight.
No wonder there is a movement to ‘End the Fed’.
The above favors to businesses
end up as a hidden ‘inflation tax’ on US citizens. A decline in purchasing power of the dollar, and thus price
increases, always follows a rapid and excessive (over 5% per year) increase in the money supply (monetary inflation). As shown
in Figure 2 below, the dollar lost 95% of its value from 1913 (when the Fed started) to 2000, but the largest percentage increases
in the money supply occurred after Nixon cut the Bretton Woods tie to gold in 1971. Other factors, such as a reduced supply
of goods and services, can cause price increases, but monetary inflation has caused the most harm (See Figure 1 above). An
example of distorting the supply of consumer goods is the payroll for workers in aerospace and military industries, where
the workers have more money, but the things they produce are not available for purchase.
Purchasing Power of the US Dollar
Source: Byron King, www.agorafinancial.com
The US dollar has lost over 95% of its purchasing power since 1913 due to excessive monetary inflation by the Fed (creating new money for the government to pay bills). This
has been the main cause of the 2,000 % increase (20X) in price inflation since 1913. Excessive money creation by banks prior
to 1913 resulted in short-term inflation and ‘panics’ (runs on insolvent banks), but after 1913 the Fed allowed
long-term abuse by bailing-out such banks, which in turn caused the ‘moral hazard’ (taking high risks with the
expectation of a bailout if needed) of the banks taking excessive risks by seeking ‘casino’ profits since the
the USD emerged as the world's reserve currency (good as gold) after WW1 because all fiat paper money (not redeemable
for a commodity) is actually viewed as a share in the economy of the issuer. Thus, the paper of a large and stable government
and economy has good value (the best choice within the world’s fake money). Until 2008 the US was without question the
world’s strongest economy, and thus the USD had good value as a ‘share’ (like ‘stock’)
in 'USA, Inc.'. Since 1971, the US has abused its currency by inflating its supply even more than
other countries, borrowed and spent to excess, and the dollars’ value has decreased (prices increased) rapidly ever
since (look at any chart) on both the international exchange basis (about 4:1 against western Europe 'legacy'
currencies from 1971 to 1999, then a loss of about 2:1 against the Euro from 1999 to 2008; 0.8 to 1.5 USD per Euro !),
and by about 10:1 domestically (price increase of cars, pizza, etc.; things not subsidized or under price controls). Thus
our ‘share of USA Inc.’ money is decreasing in value and confidence as viewed by other nations, and they are seeking
less dependency on the USD as the primary reserve currency for the world. This has massive implications on our ability to
create new money to pay our bills to other countries, and could result in a crash (loss of 50% or more of purchasing power)
of the USD!!
Central Banking and Meddling Worldwide
The various central banks worldwide,
and the parasitic politicians, staff, and bailout recipients who feed off them, are another layer of monetary manipulation
and damage. With a self-regulating (if allowed) gold standard, they would all be looking for useful, honest work. Good!
Major organizations are:
A. Bank for International Settlements (BIS): The BIS, established by the Hague agreements of 1930 to handle German debt from WW1, is an international organization of 55 central banks, based in Basel, Switzerland. It claims to "foster international monetary and financial cooperation and serves as
a bank for central banks" , and says it seeks to make monetary policy more predictable and transparent among its member central banks. Although a private corporation, the BIS, its offices, employees, directors and members share an incredible immunity
from virtually all regulation, scrutiny and accountability, with quasi diplomatic status granted and supported by the Swiss
government. Many believe the BIS is; 1. Controlled
by elite bankers to serve not just the interests of their nation, but also of business and personal ‘friends’,
and 2. Is the cause of most currency-related problems. Stay tuned!
B. The Central
Bank Gold Agreement (CBGA): Also known
as the ‘Washington Agreement on Gold’, it was announced on September 26, 1999. It followed a period of increasing
concern that uncoordinated central bank gold sales were destabilising the market, driving the gold price sharply down. (http://www.gold.org/government_affairs/)
banks held around 33,000 tonnes of gold in September 1999 (then to 30,563 in 2011), nearly a quarter of all the gold estimated
to be above ground, so their actions were of key interest to the gold market.
of this interest focused on the central banks of Western Europe. Many of these held - and still hold - substantial stocks
of gold in their reserves. Some (Netherlands, Belgium, Austria, Switzerland and the UK) figured among those banks which had
recently sold gold or announced plans to do so. At the same time, with rising demand for borrowed gold, a number of central
banks were increasing their use of lending, swaps and other gold derivative instruments (hence the need for audits; see ESF
on page 45). Due to the workings of the gold derivatives market, an increase in gold lending normally results in additional
gold being sold. That’s why this growth in lending was adding to the amount of gold supplied to the market.
In addition to the destabilizing effect of these sales, market fears about central bank intentions were causing
further falls in the price of gold. The market falls caused considerable pain for gold producing countries.
In response to these concerns, fifteen European central banks (those of the then
11 Eurozone countries plus the European Central Bank and those of non-member Sweden, Switzerland and the UK) drew up the first
Central Bank Gold Agreement in 1999. A far better plan would have been to trash the fake Euro, and convert all the nations
to the Gold Standard! The Euro crisis, ongoing since early 2011, confirms this.
C. Elite Private Groups: 1) ‘The Bilderberg Group’: This is a private club for ‘world leaders’. The
original Bilderberg conference (bilderberg.org, or bilderbergmeetings.org) was held at the Hotel de Bilderberg in the Netherlands in1954. Its focus is on world monetary affairs and holds an annual invitation-only conference for persons of influence in the fields of politics, business, and banking to talk about a variety of global issues, 2) ‘World
Economic Forum’: Davos. Switzerland has hosted the WEF
(weforum.org) since 1988. It is an annual meeting of global political and business elites to discuss world
problems and solutions, 3) ‘The Trilateral Commission’
(trilateral.org) was created in 1973 to bring together experienced leaders within the private sector to discuss issues of
global concern at a time when communication and cooperation between Europe, North America, and Asia were lacking, 4) The ‘Council
on Foreign Relations’ (cfr.org) is an American nonprofit, publisher and think
tank specializing in U.S. foreign
policy and international
affairs. It was founded in 1921, and 5) Founded as a scholarly
group in 1947, the Mont Pelerin Society (www.montpelerin.org) meets annually in places worldwide. The society advocates freedom
of expression, free
market economic policies, and the political values of an open
society. 6) Russia sponsors the annual ‘St. Petersburg International Economic Forum’, their answer to Davos. The sixth one was May 22-24, 2014. World business and political
leaders are invited to discuss issues, and make buy-sell deals.
D. G-20: This group of 20 major nations (www.G20.org), and the European Community Bank (ECB), started in 1999, and has an annual meeting in a major city (and fancy hotel) to discuss ‘money problems’.
It evolved from the G-8, which was founded in 1975, as the main economic council of wealthy nations. It became G-7
when Russia was ejected in March, 2014 over the Crimea issue.
The G-20 web site, and press releases after their meetings, make grand statements on how they will save the world’s
financial system, but they accomplish little because the group has little authority. The meeting in Cannes, France in Oct-2011
is a good example. It was followed by a special meeting there in Nov-2011 to deal with the critical Greek situation (default,
leave Euro?) and other problems in the Euro-Zone of seventeen nations (not all are in G20). The European Community Bank (ECB;
the Euro-Zone central bank) is running short of funds, so there was much talk of ‘mandating’ the IMF to print
more of its Special Drawing Rights (SDR; an IOU that countries can exchange for cash in major currencies; USD, Yen, Sterling
and Euros; soon Yuan?) so nations can use them to strengthen their central banks reserves, and allow more borrowing.
The Oct-2011 Group of 20 meeting did nothing to solve the euro crisis, but the (ultimately rejected) suggestion that Germany put up its
gold to back up a bailout fund confirmed that gold is once again going to become an important part of the world monetary system.
Russia assumed the G20 presidency for the first time on December 1, 2012. The G20 Leaders'
Summit, held in St. Petersburg, Russia, on September 5-6, 2013, was the main G20 event of 2013.
The vision of the BIS, CBAG, Bilderberg
Group, and G20 for world prosperity (under their
control) will fail because it is based on fiat money that has no commodity-based market value, is subject to excessive creation
of new money, meddling in the market by self-serving (builds power, income, career security, and vanity) banksters and politicians,
and thus unsustainable. The members and guests of these groups love to pontificate about ‘problems’ and how they
will solve them; always with more government intervention. They fear the free market, where high-risk deals, or incompetent
and corrupt owners and managers, are allowed to fail (and their investors or depositors lose), and better players take their
place. They prefer the perverse incentive of bailouts (central banks admit they are ‘lender of last resort’) where
they can play for high risk-reward deals and never lose! With nations, central banks, and the IMF providing the bailout funds,
the bad deals and firms are propped-up and the citizens pay in the form of national debt or price inflation.
empires fail in part due to running out of purchasing power when their fake money becomes almost worthless. The failed empires
of Rome, Italy, Spain, France, England, USSR, etc. are examples. Another sign of failing is decadence of the citizens. Look
at how the content of TV, movies, and magazines have changed since the ‘50s, with more
sex, violence and cursing. Just as Romans wanted
bread and circuses, with lions and gladiators, our people thrive on the violence of NASCAR and cheating and fighting in sports,
or the silliness of ‘Dancing with the Stars’.
Starting in the late ‘90s, Pres. Clinton and Rep. Barney Frank (the worst
mortgage abusers) pushed Fannie and Freddie to ‘help the poor’ (and vote for me) by making more subprime loans,
many of which were then sold to Wall Street to be securitized. As Peter Schiff (www.peter-schiff.com) wrote on Feb. 14, 2009;
“Developed primarily over the last 10 years, securitization permitted loans of all shapes and sizes to be packaged
into investment-ready securities. The system worked, fueling unprecedented levels of lending in the home, auto, student, and
credit card sectors. But in the last few years, as the collateral underpinning of these securities has collapsed in value,
the trillions of dollars of securitized debt now in circulation has become the toxic sludge at the bottom of our financial
Foreign banks and investors happily
bought trillions of dollars of these securities because they were primarily based on US real estate, had high interest income,
and were apparently backed by the US government. The process was corrupt from the start, but was pushed by Congress and Wall
Street elites. As the false prosperity slowed, and caused loss of US jobs, then mortgage foreclosures, these fake securities
lost value, and the worldwide crash started in late 2008.
From the beginning of the Greek debt crisis in April 2010,
the Greek bailout has been about saving the Western banks that had purchased the Greek government's IOUs. The member states
must be provided with euros, so that they can continue to make interest payments to the banks. Mario Draghi, an Italian banker and economist, succeeded Jean-Claude Trichet as the President of
the European Central Bank (ECB) on 1 November 2011. He is expected to be aggressive in centralizing financial planning in the Eurozone
(bye, bye, sovereignty!). (INSERT: The British BREXIT vote occurred on June 23, 2016 and showed voter preference to leave
the EU. It caused an uproar in markets, and prompted talk of other nations leaving. More in the next edition)
The northern nations were using the European Financial Stability Facility (EFSB) to support
the south (Portugal, Italy, Greece, Spain; the PIGS), but this proved insufficient to control the panic. Another bailout facility,
the European Stability Mechanism (ESM), was finally approved by Germany’s courts in Sep-2012 that is
much bigger and more permanent. It is as a €700bn fund that includes the €80bn of capital that is being provided by euro countries, plus
€620bn of guarantees. It will have a lending capacity of €500bn, all run by the ECB. Ben Bernanke secretly gave
(loaned?) the ECB trillions of USD to bail them out, and thus avoid damage to the USD. This was preposterous and should be
illegal! Since early 2012, the Euro and USD have bounced-around in value as the world made choices of the ‘least bad’
Another disaster struck on March 17, 2013 when the Eurozone
announced a €10 bn ‘bail-in’ of major Cyprus banks, that would be paid for by a ‘tax’ on deposits. Then on April 28, 2013, Bank of Cyprus, the island's
largest bank, said; 1) It had converted 37.5 % of deposits over 100,000 euros into "class A" shares, with 22.5 %
held as a buffer for possible conversion in the future, and 2) 30 % would be ‘temporarily’ frozen and held as
deposits. That leaves only 10% available to the ‘owners’!
Surprise, any government
can do whatever they want, despite prior agreements and laws. Get used to it! They have the guns and courts. I say the worldwide central bank efforts
to make these and other fiat currencies work are doomed, and should be, because they exist (despite PR and Lies to the contrary)
only to serve banksters and politicians. Many U.S. banks are exposed to the Eurozone problems, and could be hurt; We’ll
Will Germany end the futile game by reviving a gold-backed ‘New Deutsche
They need to break-loose from the Euro mess, as Ludwig Erhard did in 1948 when he ended post-war price controls and the Germany
economy blossomed. See my essays on this, and other monetary topics, at part 8, section B-2, in the left margin of my Forward-USA.org
Avoiding the U.S. Dollar
The trend is to use less of the USD as a ‘reserve currency’
for international transactions. This will; 1. Reduce demand for dollars, and result in a major (50 to 80% ?) drop in value,
and 2. Limit the USA’s ability to get USD denominated loans at low rates (by selling bonds), and then repay them with
newly created dollars; DeGaulle called it our Exorbitant Privilege!
Countries we buy imports from (China leads) accumulate billions of USD and buy
our T-bills to get some interest (and help feed future purchases by the U.S.?). This is a re-cycling of fake money, with interest
paid by fake money, with all parties hoping it will last forever! Foreign nations that hold large amounts of USD-denominated
assets (mostly bonds) are getting nervous that the USD will drop in value, so they are looking for ways to avoid dependency
on, and ownership of, USDs. A flight to safety is starting, and could lead to a collapse in USD value. Fake money requires
demand to keep its PP. Gold
is safe, and this why the Russian central bank has added 570 metric tons of the metal in the past decade, a quarter more than
runner-up China, according to IMF data. Based
on these gold purchases, maybe China and Russia are planning to destroy the petrodollar system by using gold as money, and
thus crash the U.S. economy by ending the USD’s role as a reserve currency? (see P.20)
The BRICS: The BRICS are Brazil, Russia, India, China, and South Africa. They started trading with each other in their
own currencies in 2011, thus reducing demand for the USD, and speeding its fall in value! If we keep spending and borrowing
too much, and keep creating new money to pay for it; 1) The USD will crash in purchasing power (PP), 2) The price of foreign
purchases will rise, and 3) Interest rates will soar for our debt. When this occurs we will pay existing foreign debts and
interest with our near-worthless paper money. This is debt default by hyperinflation. No country wants this to happen, especially
our creditors and holders of cash and USD denominated assets. Thus they discuss alternatives for a smooth departure from the
current dependency on the USD and banking system for world trade. A major step was taken at the sixth summit of the BRICS in Brazil on July 15-17, 2014 when they set
up:1) the $100 billion ‘New Development Bank’ and, 2) a reserve currency fund worth $100
billion. Each country has a different share.
Africa and Mideast: Gadhaffi was pushing use of the gold Dinar for all sales
of oil by African nations. This, along with evicting the 35,000 Chinese workers in Libya, and controlling their oil, was the
real reason we and NATO invaded in Apr-2011. Part of Saddam Hussein’s death warrant was to convert Iraq oil sales to
payment in Euros in 2002. China and Russia suggested at the Jan-2009 ‘World Economic Forum’ in Davos that a new
system is needed to replace the USD as the world’s primary reserve currency, then they agreed to trade in their own
currencies. In Aug-2011, China and France agreed to form a task force
to discuss how the Yuan could become part of the SDR. It is said they want 20% USD (was 42%), 20% Yuan, 20% Yen, 20% Euro,
and 20% Pound Sterling. In Dec-2011 China and Japan agreed to trade in their own currencies. In Jan-2012 Iran said it would
sell oil to India in Rupees. China holds trillions of USD denominated bonds and other assets, and doesn’t want the USD
to crash. Is this why in Feb-2013, China's central bankers suggest the world is moving "to a '1+4' system,
with the greenback serving as the anchor of global payments, supplemented by 'four smaller reserve currencies' –
the euro, sterling, yen and yuan." In any combination of the above trends, the USD is sliding from its mighty perch!
Even the solid Swiss Franc is under pressure. In Sep-2011 the Swiss National Bank
(their central bank) announced they would buy Euros ‘as needed’ to reduce the strength of the Swiss Franc which
had been hurting exports. Thomas Jacob, a monetary activist in Zurich, has started http://www.goldfranc.org/ to seek parliamentary approval to issue a Swiss coin containing gold. Good luck Thomas!
China Seeks Power: China made a major announcement on Oct. 24, 2014 with the creation the Asian Infrastructure Investment Bank (AiiBank.org), a multilateral development bank to provide finance to infrastructure projects in the Asia region. AIIB is regarded by some
as a rival for the IMF, the World Bank and the Asian Development Bank (ADB), which are dominated by developed countries like the United States.
As of April 15, 2015, almost all Asian countries and most major countries outside Asia (total of 50) had joined the AIIB,
except the US, Japan (which dominated the ADB) and Canada. North Korea's and Taiwan's applications for Prospective
Founding Member (PFM) were rejected. The rush of our ‘friends’ in Europe to join is an indication of China’s
growing economic power. It is not clear which currency the AIIB will use. It could be the Yuan, or even the IMF SDR, with
the Yuan included. Either choice would reduce the USD dominance as a reserve currency, an ominous step toward collapse of
the US economy!! On Aug. 4, 2015 the IMF announced the above SDR changes would NOT occur at the IMF annual
meeting to be held in Lima, Peru in Oct-2015! This rejection was pushed by the U.S. based on the fact that China’s debt
is 280% of their GDP, thus too weak to be part of the SDR. Then on Nov. 13, 2015, IMF chief Christine Lagarde said the fund now deemed the yuan "meets the requirements to be a 'freely
usable' currency" -- a key hurdle to joining the yen, dollar, pound, and euro as a leading unit in international
trade. This implied the yuan (same as ‘Renminbi’) could be formally
admitted to the IMF's "special drawing rights" currency basket at the IMFs’ Nov. 30, 2015 meeting in Sweden.
Indeed! On Monday, Nov. 30, the IMF announced their approval of the Chinese renminbi as one of the world’s main central
bank reserve currencies, and part of the SDR. Minor changes in the percent of each currency in the SDR left the USA at 42,
China now 11, and reductions for Yen to 8, Euro to 31, and the UK pound to 8. The changes will take effect in Oct-2016.
The IMF decision will help pave
the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power.
Chinese leaders view it as a giant step up for their place in world economics! The trouble is that much of the increase in
demand for the yuan/renminbi will reduce demand for the USD, and its’ purchasing power will fall even faster. Peter
Schiff (SchiffGold.com) said; ‘Another issue is a possible Chinese move to un-peg the yuan from the dollar, which could set off a worldwide economic earthquake.
The US Banking and Securities System
The System includes,
1. 'Commercial Banks', which provide checking, loan,
and other services, and accept customer deposits. Some are state chartered, and others are chartered and supervised by the OCC and
use the word ‘national’ in their name.
2. 'Investment Banks' which invest their own, and shareholders, capital in securities, mortgages, etc.
(not securities brokers or dealers), and with 1999 changes in the 1933 Glass-Stegall started accepting customer deposits (which
led to the abuses that crashed in 2008!),
3. 'Savings and Loan Institutions'
('Thrifts'), which provide home mortgages, and accept customer deposits, and
Exchanges’ (SE), which sell securities (shares) issued by corporations. Examples are: New York SE, Pacific
SE, NASDAQ, etc.
The 'system' is regulated
1. 'Federal Reserve System'
2. 'Securities and Exchange Commission' (SEC), created in 1934 to regulate securities markets,
3. 'Federal Deposit Insurance Corp.' (FDIC) which insures deposits up
to $250,000 against bank failures,
4. 'Office of Comptroller of Currency' (OCC) was started in 1863 as a bureau of the U.S. Department of the Treasury. The OCC’s main purpose was to create federally chartered
national banks that could issue ‘Treasury Notes’, and tax (thus end) issuance of money by state
banks, and create a Federal monopoly. (more on P. 18)
5. 'Commodity Futures Trading
Commission’ (CFTC) is an independent agency of the US government. Its mission is to protect market users and the public from fraud, manipulation, and abusive practices
related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound
futures and option markets,
6. 'Office of Thrift Supervision' (OTS), an agency of the United States Department of the Treasury, is the primary regulator of federal savings associations (sometimes referred to as federal thrifts). Federal savings associations include both federal savings banks and federal savings and loans. The OTS is also responsible for supervising savings and loan holding companies (SLHCs) and some state-chartered institutions.
The OTS was established by Congress as a bureau of the Department of the Treasury on August 9, 1989 as part of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989.
7. 'The Federal Housing Finance Agency' (formed in Sep-2008 as part of
the bailout), conservator to regulate Super GSE's FannieMae and FreddieMac. And
'Troubled Assets Relief Program' (TARP) became the manager of the Oct-2008 $700+ billion bailout of Wall Street
and banking firms. The initial plan was to buy toxic mortgage-based assets from Wall Street firms, but by Nov-2008 the target
had shifted helping with frozen consumer debt. What is Next in this 'Panic to Patch' ??
Abuse of the System by Banks and Congress
It’s bad enough that self-serving politicians and bankers created the Fed
to supply money for themselves and their career-enhancing (job saving) projects and wars, but that’s only part of how
the banks abuse their customers, the people, and the government. They pay off politicians to get laws that accommodate their
schemes to increase profits by entering into high reward but risky deals, while protecting themselves from the risk. The casino
culture that caused the 2008 crash and ensuing bailouts of Wall Street form a perfect example.
They sell the toxic CRA mandated ‘no-doc’,
‘fake appraisal’, ‘sub prime’ home mortgages to GSEs Fannie and Freddie the same day they make them.
This takes the risk and loan funding off their books while they continue to earn fees for ‘servicing’ the deal
by collecting payments, etc. With the prior deals sold, they still have the reserves needed to make new deals. A real profit
churn, with the taxpayers at risk via the GSE’s.
Prudent bankers are wary of high-risk projects so they won’t go insolvent
due to project failures. This became ‘no problem’ when they created the Fed to be ‘lender of last resort’
to replenish their reserves, even when the ‘market’ would avoid them. This is called a ‘moral hazard’
(acting imprudently because you know you will be bailed-out). The same applies to any business or person with good government
The ownership of deposits has been distorted by friendly judges and Congresspersons to give an advantage to
the banks. Deposits were originally considered to remain the property of the depositor (a ‘bailment’), but courts
ruled that since the specific pieces of money could not be identified in the case of losses that the banks were not accountable.
Thus deposits became more like loans to the bank that they could use however they wished (loan to others, etc.).
'Fractional reserve' banking is a big part of the
problem. When the Fed sets the legal reserve at a typical 10%, banks can loan ten times more than they have. Example: If you
deposit $100, they can loan $1,000 (newly created money), and still have your deposit as a 10% reserve. Note that every time
a loan is made, or a credit card issued, the money supply increases, and value of all USDs go down.
Another key problem is the Federal Deposit Insurance Corp. (FDIC). This fake 'insurance'
(rates not set by market risks; not adequately funded) was created by the government in 1933 so depositors wouldn't get
suspicious of fake money and worry enough to withdraw, or avoid making deposits, and now covers $250,000 per depositor per bank. It back-fired in 1991 when the also
fake Federal Home Loan Banks ('Savings and Loan' banks) were deregulated in 1990 (as to rates paid to depositors),
yet were still insured. White-collar crooks started or bought S&Ls, offered excessive high interest rates to attract
deposits, then paid themselves high salaries and bonuses before going bankrupt due to high costs! It was planned that way.
A federal taxpayer-funded bailout ensued as yet another unintended consequence of government intervention in the free (honest)
market. As the FDIC bailed-out depositors of failed banks in the 2008 crash, they replenished their depleted fund by fees
imposed on the well-managed surviving banks. Why should the prudently managed banks be forced to bail-out the greedy casino
banksters? Another rip-off! With sound money the FDIC is not needed.
The FHA (Federal Housing Administration), created in 1934, insures lenders against default by homebuyers. This
is another distortion of the market that weakens our economy. Sure enough, use of the FHA was broadened in the 2008 home mortgage
crisis to bailout home 'owners' who signed-up for loans they couldn't afford, and lenders who knowingly approved
their bad or insufficient credit. This is another case of the government pouring good money after bad, rather than liquidating
past counterproductive 'help'.
counterproductive monetary intervention is the 'Pension Benefit Guaranty Corporation'. It is an independent agency
of the federal government that was created to support (bail-out?) private pension plans. How in the world
does Congress justify using taxes (or fake money, or under-funded insurance premiums) to bail out private pension plans? Well,
it is called 'buying votes' from pensioners. This is what economists call a 'moral hazard' (or perverse incentive),
because it allows firms to under-fund their pension plans without penalty; thus more do it. The same applies to 'Federal
Disaster Insurance' (passed by Congress in Nov-2007), and 'National Flood Insurance' (NFIP, 1968) which forces
all taxpayers to subsidize rates for 'other people' or land developers (including fees tagged-on to home loans, even
in areas with extremely low flood risk; such as a small creek nearby !!) so they can get 'affordable' (subsidized)
insurance to build (or rebuild) in high risk (flood, hurricane. etc.) areas. All this applies to FEMA, the disastrous Federal
organization that is supposed to help us after disasters, which in fact should be treated as State and local issues!
This is more counterproductive 'vote getting' with fake money (the States run out of money, but the Federal government
doesn't; it is another form of Federal pork)! FEMA should be abolished.
Yet other damaging contrivances (they distort financial markets) are the federally chartered GSE (Government
Sponsored Enterprise) corporations.
A. Congress created the first GSE
in 1916 with the Farm Credit System;
B. it initiated
GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and
targeted education when it chartered Sallie Mae in 1972 (SLM Corporation, NYSE: SLM; commonly known as Sallie Mae; originally the Student Loan Marketing Association); it became a fully private institution via legislation in 1995).
National Mortgage Association (FMNA, Fannie Mae, was founded in 1938 by FDR, www.fanniemae.com/). Pres. Johnson converted Fannie to a
publicly traded corporation, (FNM) in 1968 so it wouldn't be 'on the books' as part of the US budget deficit caused
by the Viet Nam war.
Federal Home Loan Mortgage Corp. (Freddie Mac, in 1970, www.freddiemac.com
These fake organizations were
created in part to allow banks to issue 30-year fixed-rate home mortgages (sometimes with liberal terms to qualify; such as
'no job, no money') to 'help' make home purchases 'affordable' (with fake, not market-based rates
and terms). The problem is that no sane banker would ever guarantee a rate for 30 years! The game is that private banks sell
these loans to home buyers, and then re-sell them to Fannie or Freddie the same day (to get rid of such garbage).
Both are listed on the NYSE (FNM and FRE), and because their debts were semi-guaranteed by the U.S. Government ('fully'
as of Sep-2008), they are able to borrow at low rates. A further deal is that they pay no state or local taxes, and are not
required to disclose internal 'problems' as normal banks are. We saw the predictable result of corrupt management
policies in Sep-2008 when the US Treasury and Fed invoked the new 'Housing and Economic Recovery Act of 2008' to bail-out
(buy?) failing Fannie and Freddie, then set up 'The Federal Housing Finance Agency' (FHFA) to regulate them.
A better solution would have been to liquidate them in bankruptcy! They were key originators of the ‘2008 Crisis’
by fraudulently representing their weak loans (poor borrower credit) as prime when they sold them to Wall Street to be securitized. On September 17, 2008, Byron W. King of www.DailyReckoning.com said: “It used to be that the job of the Federal Reserve was, as former Chairman William
McChesney Martin Jr. told it, “to take away the punch bowl just as the party gets going.” Now it seems like the
Fed is laying a direct pipeline to the distillery to keep everyone loaded.”
A third player, Ginnie Mae (GNMA), Government National Mortgage Association
also provides a link between capital markets (the lenders) and the Federal Housing markets. This makes mortgage-backed securities
more attractive to investors, such as pension funds and the like. The main difference between this company and Fannie Mae
lies in the government backing. While the backing was only perceived in Fannie Mae (until the government ‘bought’
it on Sep. 7, 2008), it is real in the case of a Ginnie Mae backed security or mortgage since the US Government owns Ginnie.
About 95% of all home loans through FHA (Federal Housing Authority) and the VA (Veterans Administration) are backed by GNMA.
These organizations distort
our financial system, since at their fake low loan rates, excessive money goes into housing because low wage earners can buy
bigger houses. This is nice for politicians who want votes, but is a misallocation of resources in the overall economy!
Of course, the Federal Reserve is part of the game with its rate and reserve manipulations. This is what caused the 'subprime'
mortgage crash in 2008! Further, the banks 'borrowed-short, and lent-long', which puts the lender at high risk, and
no sane banker would do it. BUT, in the US the Fannie-Freddie twins buy these toxic loans from the banks, and take on the
risk. Even socialist Canada, while amortizing the principal over 30 years, requires the interest rate to be adjusted ‘to market' every five years, and interest
is not tax deductible. They have no Fannie or Freddie equivalents to distort the market, and they allow national branch banking
to spread risk. Hence, Canada has been doing welI since the US economy plunged in 2008. I recommend that the Canadian approach
be adopted by the US. Part of the fun in the US is that Mom and Pop borrower get to pay-off their loan with cheap dollars
(the USD value declines every year, 10:1 since 1975, and most wages and salaries go up, but only partially compensate).
In 1999 the ‘Banking Act of 1933’
(called the ‘Glass-Stegall Act’; yes the same Rep. Carter Glass who helped push the Federal Reserve Act through
in 1913!), which created the FDIC and separated investment and commercial bank dealings, management, and ownership, was amended
by the ‘Gramm–Leach–Bliley Act’. This effectively removed the separation that previously existed between
investment banking (which issued securities and used their shareholder’s money) and commercial banks (which accepted deposits and loaned the depositor’s money). The deregulation
also removed conflict of interest prohibitions between investment bankers serving as officers of commercial banks. Many view
this change as the ‘flexibility’ that Wall Street banksters used to commit their customer abuse that was a big
part of the crash of 2008!
money (combined with greed) also hurts the 'big guys'. The Mar-2008 bailout of investment bank Bear-Stearns by the
Fed (and injection of over $200 bill. 'liquidity' for others) was to prevent the bankruptcy of Bear Stearns, and its
ripple effect on others, caused by high-risk, high-leverage (up to 40:1), high-profit investments that got into trouble.
The Fed stepped in to save the US 'financial system'. What a pathetic, costly joke! They damage the system with 'loose'
money, then try to fix it with more of the same. Guess who loses?; The taxpayers
and little guys!.
Here are some words that came
out of the April 3, 2008 Senate Banking Committee hearing investigating the near collapse of Bear Stearns: "20 years
ago the Fed would have let Bear Stearns go bust. Today, it is too interlinked to fail." Not too big
to fail…, too interlinked
to fail. Which describes the world of derivatives,
and hedge funds. The proliferation of a vast array of complex financial instruments that are sliced and diced and recombined
in a bewildering variety of forms and bought and sold and traded by thousands of parties across the globe (and sometimes labeled
‘AAA’ even though backed by junk loans; can you say FRAUD) has woven everyone tightly together into one big knot.
It wasn’t just Bear-Stearns, but the entire system of globally interlinked financial markets and Crony Capitalism that
got bailed out! Again, the Insiders win, and the People lose! ‘Too big to fail’ is a phony concept
to justify bailouts. The greedy and incompetent managers get saved, as their prudent competitors pay for FIDC insurance.
The ‘moral hazard’ (perverse incentive) here is
that Wall Street knows they will get bailed-out the next time their high-risk, highly leveraged ventures fail. Oh sure, Paulson
and Bush promised ‘sweeping changes’ with new regulations and powers for the Fed, but the changes will be minor,
and Wall Street will find a new away around them.
Nov-2009 Sen. Dodd, Chairman of the Senate Banking Committee, unveiled a sweeping regulatory reform bill that would strip
the Federal Reserve of nearly all of its power to oversee banks. It was quickly watered down.
It all comes back to the unspoken core problem; Fake Money. Without the hundreds
of billions of ‘liquidity’ the Fed poured into the financial system since the ‘90s, these games couldn’t
be played. The toys they play with are the fake sub-prime home mortgages, plus other loose-money-based securities.
In the past, we could keep spending this fake money worldwide
(by both people and government) because the USD was still the world's primary 'reserve currency'
(anyone would accept it as payment, and hold assets denominated in it) because despite our problems, others have been
worse (past tense; others are becoming attractive, namely the Euro, Yen, and Yuan). The USD now has competition! Our
formerly strong economy set the confidence level that the dollar won't become worthless, (but in early 2008 it started
falling because the US is bankrupt due to debt and spending, with no cure in sight. For fear of starting world-wide panic
by selling too much, those countries who own a lot of USD (trillions in China, Japan, etc. due to payments for exports to
the US) can't afford to dump them as their value declines, but history shows us that something always triggers panic selling,
and a crash in value. Due in part to its mercantilist policy of ‘pegging’ the yuan (at 6.83) to the falling dollar.
China now leads the world in value of annual exports as of Dec-2009 (passing Germany), and also in foreign reserves at $2.4
trillion, $799 bill. (33%) of which are in US Treasury securities.
For example, as of mid 2008, individuals and businesses worldwide started to avoid transactions, investments, and
savings in USD. They feared ongoing loss of market value in dollar-denominated assets. They were right, and this is how worldwide
crashes in a currency can start! As should be expected, in late-2009, China and others started to: 1. Use their
own currency for international trade, and 2. Reduce their 'reserves' of USD (slowly, to avoid a panic).
Governments play the 'hold-and-hope' game with
'other people's money', but people and businesses avoid a failing currency since their own money and assets are
at risk!! The crash could start from the bottom up, as merchants and producers refuse to accept US dollars !
One of the risks foreign
governments fear is that the US will pay off the debt they own (U.S. bonds, etc.) by using cash created out of thin air. This
would greatly reduce the value of the dollar, and is a form of default. They should be concerned. The US has huge debts
(some are even 'off the books', such as future obligations of Social Security, Medicare, etc.; see Table 1 on page
30) so our 'leaders' prefer inflation so they have more (albeit of less value) money to pay debts. Deflation
(less money in circulation; more value per dollar) would help recovery from the coming depression, but that would eliminate
the easy payoff of debt by the US. It’s called being 'between a rock and a hard place', caused by the short-term
pleasure of fake money.
Causes of the Sep-2008 Wall Street Debacle
The US economic problems have been brewing since extreme abuse
of the US dollar started in 1971 with Nixon’s cutting of its last link to gold. With all this fake money to play with,
Congress showed its willingness to offer loans and gifts to bailout companies, industries and nations who were in trouble
(and could produce votes and campaign donations) per this list (2008 $): Penn Central Railroad, 1971, $3.2; Lockheed, 1971, $1.4; Franklin Nat’l Bank, 1974, $7.8; New York City,
1975, $9.4; Chrysler, 1980, $4.0; Continental Illinois, 1984, $9.5; Savings and Loan Industry, 1989, $293.3; Mexican Gov’t,
1994, $20 (the bailout money came from the ESF, see p. 45); Long-Term Capital Management L.P. (LTCM),
1998, $3.6; US Airlines, 2001, $18.6; Bear-Stearns, 2008, $30; AIG, 2008 $180; U.S. Auto Industry, 2008, $25; TARP,
2008,$700; Citigroup, 2009, $280; Bank of America, 2009, $142.2. This largesse created the ‘moral hazard’ of firms taking big risks on the assumption they would
be bailed out if needed, and, along with lax regulation and false credit ratings, led to the crash that started in 2007.
Roberts, and Miller showed vision in their writings in A.
and B. below. Stockman gives a review in C.
A. As written by Paul Craig Roberts Ph.D. (www.paulcraigroberts.org ; click ‘articles’ for archives) on May 07, 2002 in #3 ‘Time
Running Out for the Dollar?’ of his prescient
seven-part series of articles ‘No -Think
Nation ’ on America’s imperiled future: “The U.S. current account deficit is running at an annual rate
of 4% of Gross Domestic Product. That’s about $1 billion per day. For a number of years the large U.S. current account
deficit has been accompanied by a strong dollar. Could the dollar’s strength be coming to an end? Since January the
dollar has declined almost 6% in value against the Euro, which has been a weak and uncertain currency since its introduction.
Is this a harbinger that a large dollar overhang is beginning to worry those who are holding our currency?”
His concerns were correct, as shown by the crash
of 2008 and the plans in 2009 by other major nations to start replacing the US dollar as the primary world reserve currency.
The Dec. 5, 2009 issue of the Wall Street Journal had an article ‘Requiem for the Dollar’ by free-market oriented
Investment Advisor James Grant (grantspub.com) that confirmed the decline of the Dollar’s strength, and recommended
gold money as a solution to avoid further damage from government meddling.
B. Donald W. Miller, Jr., M.D. (DonaldMiller.com) warned us in his prescient article ‘A Fourteen Point Plan for a Post-Wilsonian America’, which he published
on September 28, 2001 at www.LewRockwell.com : “Likewise, if we do not wish to be mired in the coming economic depression
for a prolonged period of time, as happened with the last one in the 1930s, which lasted twelve years, we must substantially
reduce government spending, taxes, and regulatory compliance costs. Federal spending has grown eight times faster than the
economy since the last depression. Over the last forty years federal expenditures on regulatory activity have increased 2.7
times faster than economy – a 14 per cent per year annual growth rate, compounded. Government regulations currently
consume $977 Billion annually, siphoning off 13 per cent of the economy, which is $3,300.00 per man, woman, and child. In
order for our country to regain economic health we must make sure that the free-market private sector once again becomes,
as it was before our nation assumed the burdens of empire, the largest and fastest growing segment of the economy.”
C. David Stockman gave a lecture in March, 2011 (http://lewrockwell.com/stockman/stockman16.1.html)
that revealed many details about how the 2008 crash
was caused by greed and fraud since Nixon left gold in 1971. His latest book is ‘The Great Deformation’, April-2013.
The rush of home loan defaults
and bank problems started in late 2007, and peaked in Sep-2008. The underlying cause was Fed manipulation of interest rates,
as described above. The excessive supply of low-interest money, delivered to lenders by the Fed and its pals at FreddieMac
and FannieMae, was the ‘mother’s milk’ of market distortion. Of course, our Wars for
Empire (not defense) in Afghanistan and Iraq added to the domestic spending spree (which pours unproductive money into the
economy), that we can no longer afford.
are due for leaders who raised the warning flags early, despite opposition from both Bushes and Clinton, and lack of support
from ’vote-for-me’ fellow Congress members. Since 1976, Rep. Ron Paul MD (R-TX-14, first elected in 1976 with
2 gaps totaling 14 years; born 1935; retired Jan-2013) was always the strongest
fighter in Congress for more liberty and less government. His Libertarian philosophy calls for sound money (gold and silver
in coins, paper redeemable for precious metal), and he wanted to abolish the Federal Reserve Bank (HR-2755), and associated
GSEs Fannie, Freddie, the World Bank, IMF, BIS, etc. He wanted to at least make the Fed subject to audit by his HR-1207, which
had 317 cosponsors as of late 2009, and a similar bill S-604 in the Senate. Rep. Barney Frank did all he could to derail it,
but it became an amendment on his “Financial
Stability Improvement Act of 2009″, bill
HR-3996. Rep. Paul became Chairman of the ’Domestic
and International Monetary Policy’ committee in 2011, and grilled Chm. Bernanke more than once in his 2011 hearings.
Former Rep. Paul introduced many bills to restore sound money, including HR 4248 on Dec. 9, 2009, the ‘Free Competition in Currency Act’ that would
end legal tender laws and allows competing currencies. He gained mainstream support on January 19, 2010 when Pat Buchanan
gave him credit for being the principled promoter of policies that are good for the US. Passage of a similar
bill would be a huge step forward, and crucial to the goals of this book!
On Jan. 26, 2011, Rep. Paul introduced HR-459, the ‘Federal Reserve Transparency Act of 2011’, and as of Nov. 4, 2011 it had 191 cosponsors.
On the same day, a similar bill, S-202, was introduced in the Senate by his son Sen. Rand Paul (elected Nov-2010), and had 18 cosponsors.
were described as: ‘A bill to require a
full audit of the Board of Governors of the Federal Reserve System and the Federal Reserve banks by the Comptroller General
of the United States before the end of 2012, and for other purposes.’
On April 11, 2011,
Rep. Paul introduced HR-1496 ‘to reform the
manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States
and the manner in which such audits are reported, and for other purposes.’ These three bills launched a thorough, and
long overdue, audit of the Fed!
Paul retired from Congress in Jan-2013, but Rep. Paul Broun MD of GA-10 has introduced bill H.R. 24 to audit the Fed. On Feb.
4, 2013, Ron’s son Sen. Rand Paul (R-Ky.) entered bill S. 209
for Fed transparency. Both men are continuing Dr. Paul’s work for sound money. On Feb. 12, 2013 Sen. Paul gave
the ‘Tea Party’ response to Pres. Obama’s State of The Union’ speech. Paul said all the right things
about reduced spending and taxes, and the benefits of free-market capitalism. Bravo! Keep it rolling Rand!
On June 28, 2011, Sen. Jim DeMint (R-S.C.), with cosponsors Mike Lee (R-Utah) and Rand Paul (R-Ky.), introduced
legislation that would exempt gold and silver coins declared by the federal or any state government as legal tender from taxation.
Sen. DeMint resigned in late 2012 to become Pres. of Heritage.org, a conservative think tank, replacing Ed Feulner.
The ‘Sound Money Promotion Act’, S. 1287 of 2012, is meant to build
on what the sponsors see as a reaction to overspending by the federal government and the falling value of the dollar. The
senators said that in May, Utah became the first state to recognize these coins as legal tender within the state, and said
12 other states, including South Carolina, are considering similar measures.
As far back as 1993, legendary House Banking Committee Chairman, the late Henry B. Gonzalez (D-Texas-20, 1961-1999; lived 1916-2000),
fought to make the Federal Reserve and GSEs more accountable Then in May, 2006, Sen. Chuck Hagel (R-NE, 1996-2009; born 1946), Sec. of Defense since 2013, wrote a letter,
co-signed by 19 other Senators, asking Majority Leader Frisk for support of his 2005 bill S.190 ‘Federal Housing Enterprise
Regulatory Reform Act’ that would protect taxpayers from potential losses by the same GSEs. He got no support, and the
bill died. Then disaster struck in 2008, as predicted!
A major facilitator to start this mess was the Community Reinvestment
Act (CRA), a 1977 federal law pushed by Pres. Carter that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a
practice known as ‘redlining.’ The purpose of the CRA is to provide credit, including home ownership opportunities, to underserved (unqualified?)
populations and commercial loans to small businesses.
The CRA was passed
into law by the U.S. Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite
considerable opposition from the mainstream banking community. The CRA mandates that each banking institution be evaluated
to determine if it has met the credit needs of its entire community. In 1995, as a result of interest from President Clinton's
administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention
on institutions' performance in helping to meet community credit needs (that is, forcing lenders to make more subprime
The Clinton Administration's regulatory revisions with
an effective starting date of January 31, 1995 were credited with substantially increasing
the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers (i.e., 'subprime',
unqualified!) for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders,
like Countrywide Financial Corp. (set up as an ‘off brand’ by Bank of America, then purchased in Jan-2008 when
CWF got in trouble), which was aggressive and did not mitigate loan risk with savings deposits (ie, borrowers must have deposits)
as did traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans ('subprime',
high risk for banks). The above Clinton revisions allowed the securitization of CRA loans containing subprime mortgages (ie, packaging good and bad debt (mostly
mortgages) together and calling the bunch 'AAA'. These are called ‘mortgage-backed securities’ (MBS). This is FRAUD by the rating firms!! The first public securitization of CRA loans started in 1997 by Bear Stearns, and it
helped break them in Sep-2008!. The number of CRA mortgage loans increased by 39 percent
between 1993 and 1998, while other loans increased by only 17 percent (a flood of money into high risk).
As noted on P. 33, a major factor was sloppy, incomplete, fraudulent, self-serving
(to get and keep customers) work by credit rating firms such as Standard and Poors, Fitch, and Moody’s, who were complicit in the chain of perpetrators who falsely labeled bad debt as AAA. In 2008, the
firms agreed to change their policies, but as of Feb-2013 all three firms are being investigated by the New York Attorney General over whether they breached the 2008 settlement.
In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory
overhaul in the housing finance industry since the savings and loan crisis a decade ago." This change was to move
governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee
that Washington will bail the companies out if they run into financial difficulty. That perception enabled them to issue debt
at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed
Among banks and
the regulatory agencies, there was a consensus that data collection, recordkeeping, and reporting requirements imposed a heavy
burden on small community institutions. As a result of a 2002 review of the CRA regulations, and revision
of an initial Federal Deposit Insurance
Corporation (FDIC) proposal following a public commenting
period that was largely negative, the FDIC, Office of the Comptroller
of the Currency (OCC) and the Federal Reserve Board (FRB), made substantive changes to the implementation
of regulations for the CRA for banks (not Thrifts). Credit for portions of above two paragraphs to: (http://en.wikipedia.org/wiki/Community_Reinvestment_Act) .
In the 1980s, groups such as the activists
at ACORN (‘Association
of Community Organizations for Reform Now’, www.acorn.org) began pushing charges of "redlining" - claims that banks discriminated against
minorities in mortgage lending. In 1989,
sympathetic members of Congress got the Home Mortgage Disclosure
Act amended to force banks to collect racial data on mortgage applicants. This allowed various studies to
be ginned up that seemed to validate the original accusation.
In fact, minority mortgage applications were rejected more frequently than other applications - but the overwhelming reason
wasn't racial discrimination, but simply that minorities tend to have weaker finances. A study in 1992
proved that bias was not the problem. Yet the harm was done and banks loosened their rules to avoid lawsuits.
The 'Troubled Assets Relief Program' (TARP) was a 3-page note introduced
by Paulson and Bush in Oct-2008 in a panic mode based on predictions of a sudden crash in the economy. They wanted $500
billion with no questions asked, and no liability. Congress converted it to a pork-laden 500+ page tome that still had little
oversight. They and the recipients have refused to account for how the first $385 bill. was spent! The so-called 'panic'
urgency is now being viewed by many as a lie used by Paulson and Bush to bail out firms run by their friends
and campaign donors, and the voters who own their stock. It is grossly unfair to well-managed firms who now must continue
to fight rescued competitors (run by greedy jerks or fools) who should have failed. Similar problems and bailouts occurred
in Europe. Only Iceland; a. let their banks fail, so the losses fell on managers and investors rather than citizens, and b.
prosecuted managers for fraud. The economy is recovering well.
A new book, ‘Financing Failure: A Century of Bailouts’, by Vern McKinley,
was issued on Jan. 10, 2012. His research shows how the financial crisis starting in 2008 was caused by
the government and Fed due to their years of meddling with the money supply, interest rates, and subsidies, then made worse
by bailouts for political ‘friends’.
The huge debts incurred by the Treasury and Fed to pay for the bailouts have created
a large risk of future reduction in value of the US dollar due monetary inflation. Stay tuned!
The Bad News
Here is the bad news about possible collapse of the US Economy
and Dollar, and how to protect yourself.
Walter J. "John" Williams has been
a private consulting economist and a specialist in government economic reporting for more than 25 years. He started ‘Shadow
Government Statistics’ (http://www.shadowstats.com/) in 2004 because government reporting was
so false and incomplete. In an Aug-2010 interview article ‘Economy Heading for a Systemic Collapse into Hyperinflationary Great Depression’
(http://www.marketoracle.co.uk/Article21676.html) he discusses how the failing US economy and Dollar could soon descend into sudden hyperinflation (loss of over 90% of purchasing
power of dollar in a few days), and force people to barter for food and supplies. Unlike the 2007 start of hyperinflation
in Zimbabwe, where they used dollars as a ‘backup’ currency, the US has no such choice. He predicts barter and
chaos, with precious metal becoming the only useful ‘money’, valued by weight, until the government gets settled
(in some form; fascist, ultra-liberal, etc.??). He recommends having a month or two of food (canned, dried) and a means to
purify water for survival until things (food stores, banks) start working again.
2. Similar predictions have been made by Dr. Marc Faber, of Marc Faber Ltd. (http://www.gloomboomdoom.com/).
3. Dr. Paul Craig Roberts (www.paulcraigroberts.org) sees the possibility of neighborhood self-defense clans emerging from the chaos in ‘The Year America Dissolved’ (http://www.vdare.com/roberts/100726_dissolved.htm). In his articles ‘The Collapsing US Economy ‘ (http://www.informationclearinghouse.info/article21714.htm, ‘The End of American Hegemony (http://www.creators.com/opinion/paul-craig-roberts/the-end-of-american-hegemony.html),
and ‘How the US Economy Was Lost’
http://informationclearinghouse.info/article22087.htm), he finds a major depression likely.
4. In 2002, Congress created the
military ‘US Northern Command’ (NorthCom) to ‘work with’ local police nationwide for homeland defense.
Guess who ends-up in charge ? (Clue: The Army with its bigger staff, equipment, and political power) See http://www.northcom.mil/about/index.html). This is an unprecedented incursion of the military into domestic law enforcement! They expect ‘social unrest’
as more people worry about the War on Terror, and now (2013) about lost jobs, homes, and maybe soon, hunger. Arrests
will be made simply for complaining loudly. Major detention camps (jails) have been built to hold ‘troublemakers’.
Martial law will be imposed whenever the Feds want it; they have the laws all set-up! Michael Edwards says it well in ‘The Ultimate Betrayal: Police and Military Working
Together to Oppress Americans’; see http://www.activistpost.com/2010/08/ultimate-betrayal-police-and-military.html . “The concepts of
military service and public police service are worlds apart, for good reason. Today in America, we are currently witnessing
the culmination of a decades-long trend that has introduced the language, weapons, and tactics of the overseas battlefield
onto the streets of America.”
5. In Feb-2012, Wyoming legislators proposed a plan to study what the state should
do in the event of a complete economic and/or political collapse in the United States.
It would create a state-run government ‘continuity task
force’, which would prepare Wyoming for potential catastrophes, from disruptions in food and energy supplies, loss of
police and fire services, etc., and the need to issue its own alternative currency. In Jan-2013 state Rep. Kendell Kroeker
wrote a bill nullifying Obama’s gun control laws, and making it a crime, subject to arrest, for the Feds to come into
WY to enforce it, saying; "We've got a right to make our laws, and if the federal government is going to try to enforce
unconstitutional laws on our people and take away the rights of Wyoming citizens, then we as a state are going to step up
and make that a crime."
6. I suggest that survival gear, including storable food and water (with purification supplies), a wood-burning
stove, matches, medical kit, guns for self-defense and hunting, and pre-1964 US ‘junk’ silver coins (usable for
bullion value when paper money crashes), and a crank-powered radio (with cell phone charger cable) will be needed.
above bad news fits the pattern of a declining empire, and thus applies to Empire-USA. See my empire analysis at Part 5 in
the left margin of my political site Forward-USA.org..
discussed on page 29 (see ‘Key Point’), the crash of the US economy and dollar have been delayed by the fact that
the dollar is the world’s primary reserve currency (held by others as ‘good as gold’), and countries that
own a lot of dollars (China, Japan, S. Korea, etc.) don’t want it to crash. However they are also tired of our abuse
where we create dollars out of thin air to pay for imports and debts. Conversely, other nations must buy dollars to pay for most imports, and face declining exchange rates if they
have expanded their money supply too much.
As the bond and securities markets
decline in value and dividends, we will see serious problems in funding of life insurance and pensions that had ‘overly
optimistic’ funding plans based on returns of 8 to 10 percent.
comes back to how distortions of the free-market by the government always do more harm than good, often to the intended beneficiaries.
Very few people understand, or care about, the
above economic and currency issues. They prefer bread and circuses, as we crash!! SAD.
Politicians Use Fake Money to Keep Their Jobs
Politicians hate to have the government run out of money.
They need it to fund projects as gifts to voters and campaign donors that help them win elections, and continue their lush
lifestyles of fun and power. Most are ushers at the trough; ‘Slip me $5 and come to the front of the line and get $100
from the trough.’ A good return on investment ! This is why political campaigns raise and spend so much money; the donors
give it (a bribe) in expectation of a big payback ! This is true of any country, but is worst when there is a central bank
to provide fake money for paybacks (fake base-metal coins and paper have no redeemability to a commodity such as gold).
As discussed on p.21, our central bank, the unconstitutional,
privately owned, secretive, banking industry cartel called the ‘Federal Reserve System’ (Fed), was created secretly
by bankers for long-term control of the financial system and profits, and also to fund wars (the ‘1812’, 1845
‘Mexican-American’, 1861 ‘Civil’, and 1898 ‘Spanish-American’ wars all had funding problems).
The ‘war goods’ industry (Ike’s ‘military-industrial complex’) views wars as good business,
despite the death and destruction. This evil motive is justified by slogans like ‘stop killer dictators’, ‘spread
democracy’, ‘preemptive defense’, and other fake excuses. Some say they pressured ‘pacifist’
Wilson to enter WW1 to assure their customers England and France won and could pay their debts to them. In fact they help
start wars; was the sinking of the Lusitania by a German U-Boat a planned trigger? Did someone leak to the Germans that it
was carrying munitions to England?
easy access to money makes it easier for governments to start or enter wars, instead of negotiating a settlement or minding
their own business! As shown in Appendix 2 on page 129, all of our wars since the 1776 Revolution have been started by lies
from DC to serve economic and political goals, not homeland defense. This is an abuse of our troops and economy, but is good
for the power lust and re-election of politicians!
almost ALWAYS abuse access to an unlimited supply of money by creating too much, thereby reducing, or destroying, its purchasing
power. Since the Fed started in 1913, the US dollar’s (USD) purchasing power has dropped by over 95% (20:1)!
Since Fed Chm. Bernanke started
pumping money into the U.S. government (and the world) in 2008, he has been buying U.S. Treasury bonds (which creates new
money) at fake low interest rates. As Peter Schiff said in his March 1, 2013 ‘Gold Letter’ (europacmetals.com);
“ The Fed is expected to buy nearly 90% of new Treasury bonds in 2013, according to Bloomberg. This
is a tremendous subsidy that has kept 10-year Treasury yields below 1.95% on average this year so far. Last year, with
10-year yields averaging 1.8%, the Treasury spent $360 billion on interest payments alone. That was nearly 10% of all
expenditures. Let's assume a Fed tightening causes these rates to triple - not unreasonable for a government facing over
100% debt-to-GDP. If these rates triple by 2015, and another $2 trillion or so is added to the debt, then interest would make
up over 30% of annual federal expenditures; Just interest. Then, there are principal repayments, Medicare/Medicaid, Social
Security, the Armed Forces, and all the other entitlements for which the Treasury is responsible. Is DC going to default
on our creditors, our seniors, or our men and women in uniform? “ (see Table 1, p.30).
The self-serving, lying, politicians and economists (99% are) modify measures
like GDP and unemployment to make things look better. They claimed ‘green shoots’ were showing back in March-2009!
Paul Craig Roberts Ph.D. wrote ‘The Missing Recovery’ on March 1, 2013 (click ‘Articles’ at;
PaulCraigRoberts.org) to point out the truth.
this money creation is done to cover spending by Congress, but is destroying the value, and Reserve Currency status, of the
USD, so is unsustainable and leading to devastating higher rates and costs! As I write in March-2013, the Dems and Repubs
are screaming like children to blame each other for our fiscal mess. ‘Cliff’ talk has been replaced by ‘sequestration’. Another form of fake money (the IMF ‘CDR’?)
is being discussed to replace the failing USD, but gold is also being viewed as money by more banks, governments and people.
The next few years will be very interesting!
few people who warn of such abuse, and tout the gold standard as the solution, are called kooks and dinosaurs by the elite
in power, who also call gold a ’barbarous relic’. This elite includes most ‘economists’ since they
are dependent on government funds for their jobs.
A classic ‘elite’ family is the Rockefellers. They spent millions (from Standard Oil) on philanthropy,
but also sought power in world politics and banking. To promote central banking (and its benefits to them), the Rockefeller’s
started a plan in 1902 called ‘The General Education Board‘ to pay ‘grants’ to professors who would
support the concept of central banking and our Fed. Note on page 22 that Sen. Nelson Aldrich, who headed the commission that
designed the Fed structure, was father-in-law of J. D. Rockefeller Jr. Rockefeller's academic empire included the University
of Chicago, which he cofounded in 1890, that is known as home of the ‘Monetarist School’ which endorses management
of monetary system by central banks (see Glossary page 135). David Rockefeller was Chairman of Chase-Manhattan bank until
1981, and remains a leader there and in the Council on Foreign Relations and the Trilateral Commission (see p.53) to manipulate
money and politics. Henry Kissinger and Zbigniew Brzezinski were two of his ‘operatives’.
Since the 1930’s (when Keynes
arrived) the academic economics profession has been united on only one topic: the superiority of central banking
to the gold standard. That’s how they get published, tenure, and grants. The politicians like the associated
‘stimulus’ spending as a way to do favors to get votes and campaign donations. Follow the money and hubris! Support
of central banking is basic to the entire university curriculum in modern economics worldwide.
Critics of the gold standard
point out that gold’s price varies widely. In his Dec. 3, 2011 report, Gary North (garynorth.com) says: ‘
Excuse me? The gold market today establishes the price of gold in terms of fiat money systems run by central banks. So, the
price of gold as denominated in fiat money varies mainly because the value of currencies fluctuates
wildly.’ This is a KEY POINT because this book recommends pricing in ‘weight of gold’, which
produces stable pricing, and there is no ‘price of gold’, just an ‘exchange rate’ with other money.
Lewis Lehrman said it well starting
on page 12 of the first edition (Aug-2011) of his book ‘The True Gold Standard’; ‘The test of what will
endure as honest money can only be studied in the empirical laboratory of human history; mathematical abstractions, drawn
from the blackboards of academic economists, will not do.’ The trouble with ‘academics’ is that they
live in an unaccountable world as to results of their meddling with fiat money (inflation, bubbles, wars, corruption, etc.).
Bernanke’s money-flooding will soon be seen as a failure, and he will retire and say ‘I tried’!
It has been a fun party since the
Bretton Woods Agreement in 1944 made the USD the official 'worlds’ reserve currency', and then our de facto
status since 1971, allowed us to print money to pay our bills, and borrow to excess. Watch out, our era of
financing wars, Empire-USA, foreign aid, imports, and homeland spending with fake money is about to end!
Chapter 4: Use of Gold as Money
All forms of money serve as a ‘medium of exchange’, and ‘unit
of account’, which is convenient and flexible compared to barter. Key Point: Note that when a valuable
commodity (such as gold) is used as money (‘monetization of gold’), the money is worth as much as the goods or
services in the transaction. This is also true of barter, but with gold’s high value per weight and volume, etc. (see
the nine characteristics on P. 92), using gold is more convenient, and thus helps improve commerce. Two more benefits of using
commodity money are to; 1. Limit excessive expansion of the money supply (inflation; loss of value) by the government,
and 2. Provide a market-based, and stable, store and measure of value. This system needs no government controls except inspections
(which could be by a private org) to verify mints indeed have the gold reserves they claim to for redeemability. The commodity
could be (and has been) wheat, iron, diamonds, notched sticks, or pearls, but the market (users of money) usually chooses
gold because it works best for the reasons shown in ‘Redick’s First Monetary Rule’ on page 92. Thus, it
will be used as the ‘presumed market choice’ in this book. Silver and copper supplies and costs are more volatile
than gold (more new production, are consumed for industrial use, etc.), so are less attractive, but useable.
As also discussed on page 92,
paper ‘money certificates’ and token coins (base metal) can be used as a convenience (cheap to make, light weight,
avoid loss of gold due to wear, etc.) but users of this ‘representative money’ will insist the money must be marked
on its face as to how much gold it represents (weight and fineness) and be redeemable for that amount on demand by any bearer
at the issuing bank or mint. Further, users will insist the bank or mint must disclose to the public (via lobby poster, mail
to depositors, Internet web site, etc.) that it has enough gold in its’ reserves (physically; with no encumbering liens
or leases) to redeem 100% of the ‘representative money’ (paper notes) it has in circulation. Without these conditions,
and in the absence of legal tender laws, people (the ‘market’) will not use such representative money, and will
seek better money from another mint. Competition will produce good money!
When gold is used as money, it has no ‘price’ in dollars, yen, etc.
Weight is the unit of account (such as milligrams). Sellers will set prices in weight of gold. There
will be prices IN weight of gold, but not OF gold! (Example again; What is the price of a dollar?). Gold money will have an
‘exchange rate’ with other money, but not a ‘price’. This will take some getting used to as we evolve
to pricing in weight of gold.
shows us that when countries use sound money (such as gold coins, or paper and tokens as redeemable receipts for gold)
they have zero or low inflation, zero or minor 'cycles' of economic panic or depression, and more peace, liberty,
and prosperity (smaller governments). For example, the number of grams of gold needed to buy a barrel of oil has been very
steady over the years. Thus, we would expect all countries to use sound money, except the leaders want more money than they
can get by just taxing, especially for wars. They want a way to create money ‘out of thin air’. Fiat paper money
(not redeemable for gold; we call ours ‘Federal Reserve Notes’) serves this purpose. Even when some level of redeemability
exists, governments often 'suspend' it before, during, and after wars (the US did for the Revolutionary, 1812, and
Civil wars), and then must be pushed to restore it (often with less value).
The US ended the right for other nations (FDR took it from mere people in 1933) to redeem
paper dollars for gold when Nixon abrogated the Bretton Woods Agreement on August 15, 1971 due to our serious financial problems
such as; a. We were running out of gold; France and others were redeeming their 'Euro-Dollars' to gold (USDs accumulated
in Europe due to our postwar spending and loans there); b. The US was poor after spending on Vietnam and LBJ's
'Great Society'. Under this pressure, Nixon illegally 'floated' the USD (no fixed-price for gold; no
fixed exchange rates with foreign currency), and ended redeemability of Fed Notes to gold by any person or government. This
meant the US could make dollars out of thin air at will, and did we ever! Due to this increase in the money supply, the dollar’s
value has fallen by 82% since 1971 (5 to 1; per CPI by Bureaus of Labor Statistics), and over 98% since the Fed started in
1913 (50 to 1); Thus prices are higher, because the dollar is ‘worth less’ (two words).. This is a ripoff of most
people because their incomes do not increase as fast as price inflation, and their savings are worth less. As a result, more
wives are working, spending and debt replace saving, and speculative, leveraged, buying of homes and securities increases.
Again, the main purpose using gold as money (‘notes’
and base-metal tokens are not money, but just claim checks, or receipts, for gold held by the mint who issued them) is to
prevent excessive expansion of the money supply ('monetary inflation') by the government or private mints, and
thus reduction in purchasing power. Without redeemability for gold, this 'fiat money' is an unlimited 'piggy-bank'
and credit card for the government or mints. History and logic shows the government cannot be trusted to not abuse money creation. The excessive money has allowed damaging, unconstitutional, corrupting, massive increases in government spending
for wars, welfare, and pork. It has also created the growth in the number of lobbyists seeking favors. Prices
started to rise a few years after 1971 as the effect of excessive money and spending trickled to the US economy, and most
increased by a factor of 5 to 8 by 2011. By 1975, all nations worldwide ceased redeemability, even the prudent Swiss floated
the Swiss franc (SF) in 2000, but have been less abusive than others. Hence while 1 USD = about 4 SF in 1961, it is now about
1 US = 1 SF, so they only inflated by 2.5 while by 2008 the US inflated by 10; four times more!
The US has been the worst abuser among developed nations (older countries remembered their
lessons from past monetary failures). Again, the US has created so much new 'free, fake money' since
1971 that the USD has lost 80% of its purchasing power since then (this excessive expansion of the money supply is called
‘monetary inflation', like a balloon) with its consequent price increases (due to loss of the Dollars’
purchasing power) called ‘price inflation’. Check prices of common 'commodity' items (that are not imported,
subsidized, cheaper due to new technology, or under price control), such as a pizza, a restaurant meal, or even
a car. Good examples are: 1. A room at a 'Motel 6' cost $6 in the 1950s but is now in the $50 range in 2013
(same type of room and service), and 2. A family car cost about $2,000 in the ’60s but is now about $20,000 in 2013.
There is your 8 to 10X loss of USD value since the late 1940’s (when the post-war big-spending started)! This goes along
with a 98% loss since the Federal Reserve monopoly was created in 1913!
The only reason we can get away with this is because the USD is the world's primary 'reserve currency'
(held by banks as ‘good as gold’ reserves; any person, firm, or bank will take and keep it as if 'good
as gold'; example- when nations buy and sell from each other, they use mostly USD, but this is changing! - see P. 59),
because it is viewed as a share in 'USA, Inc.', the world's strongest economy, which sadly is fading (faster since
2007) as we continue the long abuse of our economy (by spending, taxing, and harmful intervention 'management' by
the Fed and government) and money (by excessive expansion of the supply). The era of US world dominance is ending, as it does
with all empires.
History shows us that the use
of 'real money' (made of a commodity with market value such as gold, with its ‘representative’ paper ‘notes’
or base-metal tokens redeemable for gold by bearer, on demand) is fundamental to the long-term success and survival of a nation.
'Fake Money', paper and base-metal coins created and 'managed' by a central bank (ours is the Federal Reserve
System; ‘the Fed’) is what allows the massive spending and debt for wars and domestic pork and welfare. The
pork and grants have corrupted the ethics of our federal government ('Here's some pork, vote for me.'), and the
states, citizens, business, universities, and academics, etc. who happily accept it. Congresspersons brag on their web sites
about how much pork they have obtained for their districts or states. This 2-way corruption is a fatal sign of a failing Empire.
Redick’s Four Monetary Rules
I offer below, ‘Redick’s Four Monetary Rules’ to describe the requirements
for a monetary system using ‘real money’ (money made of a valuable commodity). The market has historically chosen
the commodity based on the 10 characteristics shown below (in Rule 1) which are best satisfied by a valuable metallic commodity
such as gold, silver, or copper. Hence, this book uses them for discussion and examples. However, private mints could offer
any commodity as money, and let the market (money users) decide what they want.
First Rule: Money can
be in any form, but this analysis will discuss coins and paper notes
A. Coins, which
can be of two types;
where they are partly or wholly made of a commodity such as gold or silver. Various coin values would have different amounts.
For example, a small, round, gold disc could be forged into a hole in the center of a coin. This would allow testing to assure
its purity and weight. The balance of the coin would be hard base metal or alloy, with the weight of precious metal the coin
contains marked on it, or
(or ‘Token’), where they are made of base metals such as copper, aluminum, zinc, nickel, steel, and alloys thereof,
and are marked as redeemable to a certain weight and purity of a commodity such as gold or silver. These are useful for lower
To achieve broad use, commodity coins must be made of, or contain, a material that has these ten characteristics:
1) Rare, with a low amount in existence now, and limited
can be pressed/stamped into coins,
3) Stable physically and chemically; doesn't break, rust, or rot; can be stored; lasts through much handling,
4) Easy to identify,
and determine purity and weight,
5) Difficult or impossible to counterfeit,
6) Homogeneous; a piece is the same throughout,
7) Divisible into pieces; diamonds and pearls aren’t,
8) High value per ounce; not bulky to handle or store, and
9) Acceptable to most Sellers; familiar and saleable.
10) Has market value when not used as money (thus is; a) equal in value to the good or service in a transaction,
b) a store and measure of value.)
The ‘market’ (users of money) has decided that gold fits these requirements best, but silver and
copper can have a role in parallel, with no fixed ratios set as to value per gram (i.e., no bi-metallic standard). The coins
must be valued and marked by weight of their precious metal content (such as ‘milligrams’), or the amount they
can be redeemed for. It is interesting to note that gold is not ‘consumed’ as other commodities, including silver
and copper, are. Thus except for wear, over 90% of all gold mined in history still exists (even if buried in a tomb).
Approximately 160,000 metric tonnes of gold have been mined in all history. The aggregate un-mined known reserves
of all the world's gold mining companies is approximately 45,000 tonnes. Gold is being mined at about 2,600 tonnes a year,
so the above-ground supply is expanding at 1.6% per annum.
‘best estimate’ of gold ownership by major nations and consortiums (all need audit) through Oct-2012 is shown
in Tables 2 and 3 on pages 108 and 109, plus the IMF 2,814 tonnes, ECB 502 tonnes, and 102 other nations for a total of 30,563
tonnes (data from www.marketoracleco.uk, and Spiegel.de). For more info, go to www.resourceinvestor.com. If the IMF is dissolved, one would assume its gold would
be distributed to its 186 shareholders, of which the US is by far the largest with 16.79 percent of the ownership and votes
(Japan is #2 at only 6.02 %). On this basis, the US could own another 478.3 tonnes.
There is always ‘enough’ gold for money, because if a nation’s economy
(GDP) grows faster than its gold supply, the increased demand will cause their gold for domestic transactions to APPRECIATE
in purchasing power. The same logic applies to the world economy. It is self-adjusting and needs no government meddling!
B. Paper: A ‘representative’
note is just a ‘receipt’ or ‘claim check’ for precious metal, and must be; 1) Valued and
marked by the weight or amount of the commodity it represents. No ‘name’, such as ‘dollar’, is needed,
and 2) Redeemable for such commodity by the Bearer upon a demand to the Issuer (mint or bank) of the paper
at Issuer’s various premises, with such locations publicized (via Internet web site, sales literature, etc.).
Second Rule: No government laws shall apply to control the Issuers, foreign or domestic, of coins and paper notes, except
to assure full disclosure of percent content of precious and base metal (hard metals may be included to decrease wear) of
issued coins, and ready access for inspection of the amount, purity, and legal status (owned, not leased, or encumbered) of
physical precious metal in their possession to redeem notes and tokens.
Money issued by the government, if any, shall have no special status, or privilege, over money issued by persons, or
privately owned firms. Such money would be issued by the nation’s Treasury Department, and there would be no ‘central
Rule: There will be no designated ‘world
reserve currency’, set by agreement between nations, but such status might exist de facto due to free market usage.
Thus, buyers and sellers will decide which are the ‘preferred’ currencies, and fake or debased money will
be avoided. Examples of former primary world reserve currencies are the French franc, British pound, and now the US dollar
(which is approaching ‘former’ or ‘reduced’ status).
the US, the above rules would require abolition of the legal tender laws (as a start), and a law that mints (or banks acting
as mints) must hold 100% gold reserves to redeem all paper notes, or base metal tokens, in circulation. As to gold reserves
for banks, I recommend that ‘demand deposits’ (checking) be required to have 100% reserves, and ‘time deposits’
have reserve ratios (40 to 60%?) based on prudence of the bank managers and approval of their customers (or they will withdraw
their funds or sell the stock). Banks would be free of government control (including foreign bank branches in the U.S., starting
a new bank, and multi-state banking), but would be required to publicly disclose their reserves, loan amounts, and other obligations
that affect solvency. State-owned banks offer an interesting step away from the Fed. North Dakota (banknd.nd.gov) has had a successful one
since 1919, and others states are considering having one (and using gold and silver coins; check Utah).
The goal is to engage in a transition to real money in the US, then promote the
same transition worldwide. This is likely to work, because fake money, or money from issuers with inadequate reserves of gold
for redeemability, will, 1. soon be refused as payment, 2. be discounted (the Seller will ask a higher price to accept it),
or 3. not be held as savings or investments. This shows the error in Gresham’s Law which states ‘bad money drives
out good’. It does not consider 1, 2 and 3 above, because it only applies where the exchange rate between currencies
is fixed by law, and legal tender laws exist.
Results from the Rules
Some of the results of using these Rules are;
A. Stable Purchasing Power: Purchasing Power will be stable, or increase, in the long-term (hundreds of
years), with; 1) possible minor and gradual decreases as new gold is mined, or 2) increases (appreciation) if some of the
existing supply is taken out of circulation, or as economic activity grows, causing an increase in demand for the existing
supply of gold. The appreciation is a positive incentive to save, and avoid debt. For example, gold is now (Mar. 1, 2013)
worth near $1,580 per oz., so it would take about 12 oz. to buy a modest car (with current ‘dollar’ pricing).
Maybe after 20 years on the gold standard, it will take only 6 oz. to buy a car (we hope things are priced in ‘weight
of gold’ by then, not ‘dollars’). This subject is discussed in depth in Nobel Laureate F. A. Hayek's
'Denationalization of Money: The Argument Refined', 1976, which puts forth
the case to; 1) end the government monopoly on money creation, 2) let anyone create money, and 3) let
the free market determine which type of money is used (just as I suggest in ‘Monetary Rules’ above). The point
is to end government politicalization, abuse, and fraud in creation of money. Remember, the plan is to get rid of currency ‘names’, and just label them as to the weight of gold.
The sooner we change, the better.
B. Reduction of Excessive Spending, and Its Damage: With real money, people, firms and governments will not be able to engage in excessive spending very long
because they will run out of money. This gives incentive for them to engage in honest, rational, positive acts such as; spend
carefully, save, and plan ahead. As a result there will be; 1) fewer and smaller wars; 2) no major bubbles in housing, Silicon
Valley, or Wall Street; 3) less welfare, pork, subsidies, etc. which make people, schools and firms dependent on DC money,
and attract lobbyist to ‘buy’ legislators so they can get favors. A nice side-effect is that most lobbyists will
go out of business because their will be little or no pork and subsidies available from DC; also, when the ‘paybacks’
get low, campaign funding will be less, so campaigns will be cheaper, and more ‘normal’ people will be able to
run for office; and 4) no excessive imports, and resultant ‘off-shoring’ of US jobs, factories, and professionals,
because there will be no unlimited supply of fake money, injected into the economy by the Fed, to fund these payments to foreign
suppliers! Again, this can only be carried to extremes by the issuer of the world’s primary reserve currency; for now
the USA. These limits will be automatic. Some will say, this is a loss of needed ‘liquidity’ and ‘flexibility’,
but I say it is a good brake on unfettered (dare I use the Liberal’s pejorative?) spending.
result is a positive incentive to save, and avoid debt, due to APPRECIATION of purchasing power of the money,
a concept that people today have never seen because all nations use fiat money. Econ 101 tells us that
a commodity (such as gold) in limited supply, and with increasing demand for it (growth of the economy), will APPRECIATE
in value. This has huge
importance because it kills the ‘there is not enough gold’ argument!! Appreciation of value is; a. ignored by most economists and b. suppressed, or
unknown to, all politicians (they love paying debts and avoiding taxation by expanding the money supply with fake money --
monetary inflation – and paying debts with low value money).
Notice that part ‘B-4)’ above solves the problem of excessive imports causing loss of jobs due to
off-shoring of factories. With the finite supply of real money, US importers will find themselves, and their banks, getting
short of money, and import less. Demand will increase for domestic producers, and the money will stay in the same country.
Free trade is good, unless importing is taken to extremes by the use of fake money. Note again, this can only happen if the
fake money is also the world’s reserve currency (until demoted!). Poor citizens in third-world countries which have
little ‘real money’ to buy imports, will have incentive to work hard, innovate, and earn gold from exports.
Many articles have
been written about causes and cures of the current economic crash since it started in late 2007. Politicians want various
versions of ‘stimulus’ (more spending) to fix a problem caused by too much money in the economy. This will make
things worse after a few months of fun spending. What they should do is cut taxes, end wars and empire, end all subsidies,
end the Dept. of Education, Homeland Security, Commerce, Agriculture, and others, and take broad measures to reduce government
spending. Free-market capitalism will rise from the ashes, and produce honest, sustainable, jobs, peace, and prosperity. Pres.
Obama, N. Klein, R. Reich, P. Krugman, and others whine that ‘capitalism was tried and failed’. What a joke! The
US economy has had a declining percent of capitalism since fake money was started in 1913, and the above positive benefits
of capitalism have fallen even faster since the end of partial-gold backing of our money in 1971. It is Socialism that has
harmed us most since 1913.
I don’t underestimate the difficulty of, and opposition to, a transition to gold as money. Some will say
we should set less ambitious goals, but I say these lesser goals are just steps along the way and we must never stop striving
for the ultimate goal of eradicating the government from our monetary system.
Maybe if we hit bottom hard enough
(2015, 2020?) in the current depression people and the government will start to listen to us ‘real money’ folks,
and go for the gold.
Former U. S. Rep. Ron Paul was
a leader for many years in the fight for ‘sound money’ and compliance with the Constitution as to reduced spending
and intervention at home and abroad. Former U.S. Sen. Chuck Hagel issued warnings in 2004 and 2005 about impending trouble
at the GSEs, but was ignored. Bravo to these leaders, plus P. C. Roberts Ph. D., and others shown on the list of authors quoted
in this book, starting on page 121.
the Fed gives it an unlimited supply of funding, the U.S. Federal government has become an arrogant master that dominates
and abuses its citizens, the U.S. States, and other countries (by jerking the purse strings), while providing big incomes
and privileges to those people and firms that have ready access to it. Our national disease is that it is deemed ‘normal’
to have the government supply whatever is ‘nice’, ‘good’, ‘needed’, or ‘wanted’,
and most people want/expect ‘somebody else’ to pay for it (‘the rich’). This parasitic
mode of living is immoral and unsustainable, and reveals the classic signs of decadence in a failing empire.
Fighting the system is hard, but I predict Ghandhi's aphorism
will prevail: "First
they ignore you, then they ridicule you, then they fight you, then you win."
A Plan to Convert the USA to Gold As Money
This Five-Step plan, first published
in Jan-2010, has my original ideas, but builds on the work and concepts from Founder Charles H. Carroll (1794–1865, U.S. Congressman for New York); Ludwig von Mises (1881-1973; mises.org); F. A. Hayek (1899-1992); Prof. J. Salerno (1950-) in his Sep-1982 Policy Analysis No. 16
‘The Gold Standard: An Analysis of Some Recent Proposals’ for Cato Institute (www.Cato.org); Murray Rothbard (1926-1995)
in his 1991 book ‘The Case for a 100% Gold Dollar’; former U.S. Rep. Ron Paul M.D (1935- ) and his many House
Resolutions, speeches, books, and essays; Lewis Lehrman’s work since he co-chaired Reagan’s ‘Gold Commission’
with Dr. Paul in 1981, his Aug-2011 book ‘The True Gold Standard’, and his site www.TheGoldStandardNow.org; and Dr. Edwin Vieira, Jr.,’Pieces of Eight’. Author Doug Casey has been a strong promoter of gold as money (caseyresearch.com;
see page 121). There are many more supporters of gold-as-money, so please forgive the omissions. Mises noted the true advantage
of a gold standard when he said; ‘a managed fiat money must become a plaything of politics.’ My plan ends the
government and Fed monopoly on control and issuance of money, and makes ‘weight of gold’ the unit of account.
Read on for more details on how to implement the transition to gold, and the benefits to expect.
There have been three ‘mainstream’ (recognized by academics and the
government) types of gold standards in the past; 1. Gold Specie, 2.
Gold Exchange, and 3. Gold Bullion. See the Glossary on page 140 for details.
I now re-introduce number 4. the
‘Private Gold Standard’. I say ‘re-introduce’ because the ‘mainstream’ academics
and the government folks have ignored or ridiculed past essays on the topic. Maybe this is because the bureaucrats’
jobs and social life depend on being ‘mainstream’. Pathetic! Several versions are discussed in Salerno’s
1982 ‘Cato Analysis 16’ shown above, and a similar approach in the Paul-Lehrman report, ‘Case for Gold’,
1982. My version is based on ‘Redick’s Four Monetary Rules’ shown on page 91, and implemented by the
Five-Step Plan shown below. While other private gold standards include ‘parallel government currency’ and other remnants of the monopoly and Fed system, my
version has zero mandatory (but some optional) control by the government, and banks. The Fed will be gone! Notice
that under this plan money is produced by private firms in the free market where customers (users of money) decide which source
and type of money is best, and mints compete for customers by supplying a good product. There is no Fed, and government mints
(run by the Treasury), if any, are optional, and have no control or privilege over the private mints. The free market is allowed
The Five-Step Plan:
Step 1. Repeal: a. All legal tender laws so private firms (mints)
can issue new money, b. Laws that tax increase in market value (then to be known as ‘purchasing power’) of precious-metal
coins (formerly considered numismatic), and c. Any other laws that prevent, inhibit, or tax the new money. The only government
role would be to prevent fraud (including counterfeiting), and to verify by physical inspection that reserves are as advertised
(but with no reserve ‘requirements’). Again, I recommend that ‘demand deposits’ (checking) have 100%
reserves, and ‘time deposits’ have reserve ratios based on prudence of bankers and approval of their customers
(or they will withdraw their funds or sell the stock). The Federal Reserve will be abolished three to five years after private
money becomes legal (or if Congress refuses abolishment, let it atrophy to death from lack of customers and income). Its useful
functions could be done by private firms.
Step 2. Private mints are
allowed, with government licensing optional. Banks could also provide mint services. As discussed on pages 87 and 91, silver,
semi-precious metals, and foreign coins could be used (based on market demand), but for simplicity, only use of gold will
be discussed here. The mints would introduce new gold money labeled by law as to the weight and purity (fineness) of gold
a coin contains, or that redeemable tokens or paper certificates represent (thus ‘weight’ is the unit of account).
Some might offer ‘Digital Gold Currency’ (see goldmoney.com). All mints would be required by law to; 1. Publicize
the weight and purity of gold they have as a reserve for redeeming paper or digital money, and the value of money issued,
2. Allow unscheduled physical inspections to confirm that the gold is in their possession, and free of encumbrances such as
liens, leases, etc. The same would apply to base-metal coins. The ‘unscheduled’ requirement will prevent relocating
the same gold to be put on display at different mints, or their branches, ‘just in time’ for an inspection! The
results of these inspections would be published by the mint’s Internet web site, newspaper, poster in the mint, etc.,
and available from a government web site. The inspections would be justified as a routine function of the government to prevent
fraud, but could be done by a private org. Mints with strong reserves will advertise their strength to attract customers.
Customers will ‘wake up’ and pay attention to reserve status, rather than assuming the government is protecting
them with regulations. The free market at work!
Step 3. Require the Federal Reserve banks, the U.S. Treasury (Ft. Knox), the Exchange Stabilization
Fund, and any other part of the United States government that has gold, to promptly submit to a private audit of the amount
and purity of gold they own and its title status (leased?, loaned?), reveal the results to the public, and then give it all
to a ‘Redemption Trust’ owned by the U.S. Treasury, to be used to redeem existing coin or paper currency, ‘digital
deposits’, and bonds (such as M3, see page 42) on demand, based on a certain weight per Dollar, in accordance with the
plan below. The Fed would not be involved in such conversions. Some may argue that the Fed is a private firm and owns the
gold it has, but this ignores the fact that it got it from the US citizens illegally in the first place by issuing fake Fed
Notes, and perhaps some from FDR’s confiscation of gold in 1933 (see ESF on page 45). If the Fed manages to win a court
fight on this point, the Treasury could buy it with US bonds.
U.S. government claims to have 8,134 metric tonnes of gold in its reserves (an audit is needed). At 32,150 troy oz. per metric
tonne, the US has 260.415 million troy ounces. Others say the US currently holds 261.5 mill. troy ounces, or 265 mill., but
these figures are all close enough for this analysis. There is also a question as to the purity (fineness) of the US gold (debased or fake bars in storage, or gone
on lease or loaned?). Only a proper audit will tell.
Fed stopped publishing M3 in 2006 (claiming high expenses; I say to hide its growth!), but private sources put it at about
$15 trillion worldwide in Feb-2012. If 100% of the M3 Fed Note dollars and bonds were made redeemable with our 260.415 million
troy ounces of gold there would be 0.0000186 oz. per dollar (about 2 ‘100 thousandths’). This
means 53,763 ‘gold-backed’ Fed Note dollars would be redeemable for one troy ounce of gold. This implies a 97% drop
in the dollar's current value versus today's about $1,750 per oz.; a ‘gold value’ ratio of about 34:1,
to be known as the ‘Conversion Factor’. Some suggest we repudiate all federal debt, but this
would be immoral (of course other nations –Russia, Argentina, etc.- have done it without legal backlash). The dreaded
day of reckoning! But this issue fades as all nations convert to gold money (they must or no sellers will take their
trash fiat 'money' once the US dollar is redeemable) and there is no ‘price’ for gold, just its weight.
It remains to be
learned just how many ‘Fed Note’ dollars there are, and how much gold we have. On Aug. 25, 2010, former Rep.
Ron Paul (R-TX) explained why we need to audit and inspect U.S. gold reserves in the Ft. Knox and the New York Fed vaults, and whether some has been secretly removed, leased, loaned, or some
bars replaced by gold-plated base metal
Once the legal tender laws are repealed;
a. No additional units (physical or electronic, including new credit) of the old ‘Fed Note’ money
will be issued. The free market will provide new money as needed; if the Fed isn’t required to stop creating new money
at first – due to politics, etc.- the new private money should proceed in parallel; let the best money win!,
of old ‘Fed Note’ physical money would be required to convert it to new private money within two years of private
money becoming legal,
c. The government must accept payments by ‘new private money’ if the issuing firm’s reserves
are at least forty percent, and have been verified to the public and gov’t, and
d. Federal and State governments can issue new gold money,
but it would have no privileges over private issues.
Step 4. To implement the new monetary system, I propose that Congress create the ‘Currency Act of 2017’.
No government ‘commission’ is needed to ponder whether a gold standard is needed (unless forced for political
reasons!). The Act should:
a) Incorporate the ideas and requirements in ‘Redick’s Four Monetary Rules’ and this ‘Five
Set the weight and fineness of gold that the existing Fed Notes and coins (physical, bond, or digital) will represent. This
will involve debate as to % reserves and how many USD - M1, M3? - are covered, and the effective date. I suggest 100% of M3
and activation of the new system within 3 to 6 mo. after the Act is passed. Using M1 (or repudiating all debt) would have
a lower inflationary impact on the dollar’s value (more gold per dollar), but leave savings accounts, and domestic and
foreign bond owners, with worthless paper, which amounts to default, repudiation, and theft! Reserves of 40% for time deposits
(savings) might be enough to avoid redemption ‘runs’ that would destroy the new system, but it is better to be
on the safe side. A ‘run’ could ruin the system, just as occurred in the 1960s, ending in Nixon ‘closing
the gold window’ in Aug-1971.
c) Require that new money issued by the U.S. Treasury (no Fed issues) be labeled only by weight and purity of
gold (no ‘name’ or religious content) and made available on the day the new system is effective. All government
transactions (fees, payments, taxes, Soc. Sec., bond principal, etc.) would be denominated by weight of gold. This will foster
public use of gold weight as the unit of account for pricing.
d) Include lessons from how other nations changed money,
e) Publicize the discussions leading to the definition of the Act so US citizens
and firms, and other nations, are aware and can submit their ideas and make their conversion plans. I oppose multi-nation
planning conferences; they would just cause delays and dilution of terms.
f) The Act should include a ‘Conversion Factor’ (about
equal to the ratio of gold price between the new and old systems; ‘34’ per Step 3 above) to adjust values in existing
agreements (bonds, wages, loans, mortgages, pensions, insurance, etc.), and set new values by weight of gold. Using lower
reserves, or M1, would reduce this factor but increase risk of a ‘redemption run’. Pricing for new transactions
or agreements would be set in the free market, and using ‘weight of gold’ as pricing would be encouraged.
Step 5. Terminate Useless and Harmful Organizations:
A. Domestic: Abolish the unconstitutional GSEs such as Fannie, Freddie, Ginnie, and Sallie Mae, FHA, Pension Benefit Guaranty
Corp (PBGC), FDIC, all TARP-Like projects, the Exchange Stabilization Fund (ESF), Export-Import Bank, USAID, NSA, CIA, NED,
etc., etc. All of these are part of the government’s counter-productive intervention in, and manipulation
of, money, private business, banking, and the affairs of other nations. While at it, end all unconstitutional departments
B. International: Terminate US membership in
the IMF (and get our gold back), World Bank, CBGA, BIS,
G-20, G-8, NATO, United Nations, NAFTA, CAFTA, GATT, WTO, and others. The gold and silver price ‘fix’
groups are dying a painful death due to corruption. Free trade and embassies are adequate for contact with other nations.
A Review of Other Conversion Plans by Others
The above plan is unique because it cuts all mandatory ties to government (mint
licenses are optional, no legal tender laws), abolishes the central bank, converts all existing money and bonds (M3) to ‘gold
backed’ as a transition, and uses ‘weight of gold’ as the unit of account for all ‘new’ money.
It offers more detail than any plan I am aware of. I hope somewhere Mises, Rothbard, and Hayek are smiling.
Former Rep. Ron Paul M.D. gives a general description of his
free-market monetary system on pages 203 to 207 in his 2009 book ‘End the Fed’. Key issues are; 1. End legal tender
laws and allow private mints, 2. All money redeemable in gold, and 3. Termination of the Fed (of course!). He discusses how
purchasing power of the gold money (when in fixed supply) rises as GDP grows (more demand for money). This is the Appreciation
effect presented in this book (see Index), which shows there is always ‘enough’ gold!
On November 9, 2010, Dr. Richard Ebeling, Professor of Economics at Northwood
University (Northwood.edu), posted the article ‘A Return to the Gold Standard?’ in the Daily
Bell (dailybell.com) which touts a free-market system. See more about Ebeling on pages 28 and 122.
In an article on May 18, 2011, Robert Wenzel (economicpolicyjournal.com) wrote:
‘…The current supply of gold owned by the United Sates should be divided by the number of dollars (Some version of M1)
and made fully redeemable to those holders.’ Thanks Bob!
Lewis Lehrman’s book ‘The True Gold Standard’ of Aug-2011 (TheGoldStandardNow.org, or LehrmanInstitute.org),
proposes conversion of the USD to gold, then gold settlements with all world currencies, so no formal reserve currency is
needed. Unfortunately, he retains legal tender laws and the Fed (or an equivalent).
In his Nov-2011 speech at the ‘Cato Monetary Conference’ (Cato.org)
in D.C., Prof. L. White, Ph.D (economics.gmu.edu) proposed that since our banks are only required (usually) to have 20% reserves
to back deposits, we only need to have gold reserves to redeem 20 percent of M1. I support his plan to make gold weight the
‘unit of account’, but I prefer use of M3 (see Step 4-b above), and fear that such low reserves could induce a
‘run’ by dollar and bond holders to redeem for gold.
Nathan Lewis (see page 127) wants to use of gold with ‘a system to adjust the supply of base money.’
In May, 2014 Steve Forbes and
co-author Elizabeth Ames, issued their book ‘Money’. They call it a ‘Gold Standard for the 21st
Century’, for ‘sound’ money with stable value, but it is loaded with government intervention which; seeks
a fixed price of gold, treats gold as ’backing’ (not money), uses gold only as a ‘measure’
that is not wealth (so has no role as a ‘store of value’), and avoids redemption of paper notes for gold. They
retain the Fed to manage interest rates, run the discount window, manage the USD price of gold, and serve as lender of last
resort. It is a very flawed plan, designed to serve ‘big government’, and Cato Inst. erred in lauding it in their
June 19, 2014 Book Forum.
How Gold Reserves Will Affect Conversion
The gold ‘per currency unit’
(Gold/M1) shown in Table 2 below, and ‘per person’ in Table 3, will have an impact when a nation converts to gold
Table 2: Gold Reserves vs $M1 & Forex*
| || || || || |
* Forex’ is bank ‘foreign exchange’
reserves of gold, foreign currency, and foreign bonds used for international transactions.
* Credits to marketoracle.co.uk and dollardaze.org for M1 data,
and en.wikipedia.org/wiki/Gold_reserve (Dec-2010; gold $1,400 oz) for Forex %. Russian M1 is an estimate.
the gold leaders in Table 2 ‘feel rich’, ‘live high’, and buy assets abroad from owners that need
gold? For sure, the low-end nations will have new incentive to be productive and get gold by exports, redemption U.S. T-bills
for gold, or sale of assets.
Strong nations that have low amounts
of gold in their reserves usually hold the cash or interest-bearing securities of strong foreign nations instead. This includes
China, Japan, S. Korea, and Canada, plus others. They can redeem, or use ‘as if gold’, USD denominated assets
after the US converts. Update; 90% of Portugal’s Forex is gold.
Table 3: Gold Reserves per Person
Gold Population Troy
U.S. owners of gold will enjoy a one-time increase in value
(purchasing power) when the conversion occurs, but this will fade as prices are increased. The situation will be dynamic,
with many unpredictable market and government variables, including: a) How much gold the US will own once an audit is done,
and b) What M3 and the price of gold will be by the time the Act is approved.
Since the 1990’s, Canada and the UK have chosen to hold interest-bearing bonds rather than gold. Canada
went from 1,083 tonnes in 1985 to 3.4 in 2011. China and India, both persons and government, have been 52% of world buying
since 2010. China’s total for 3rd quarter 2011 was about 146 metric tonnes, compared to 120 for all of 2010
! The Chinese government is expected to announce its gold holdings in 2014. It will be big!, and part of the ‘backing’
if the yuan becomes a reserve currency.
may be a rush of foreign buyers using their ‘now more valuable’ gold to acquire bargains in the US. To avoid losses,
US sellers will increase prices as appropriate, per Step 4, item f), above. The free market will adjust.
Fortunately, the amount of
gold per dollar or person is not crucial in the long run. When we start a new system of pricing by weight of gold, the market
will adjust, and we will grow from there. The same applies to all nations that also convert, and they all will, or Sellers
won’t accept their fake money!
Central banks have acquired more
gold in recent years. They often scoff at the need for gold as a ‘barbarous relic’ but in fact fear it because
a rising gold price means the currency value is dropping. Table 4 is a sample of five nations, and total world holdings for
all central banks.
4: History of Central
Bank Gold Reserves
| || || |
| || || ||
|| || || |
Source: World Gold Council, Research Study
Comments about Table 4:
1. USA had redemption exports after 1944 when nations converted Fed Notes to gold due to our monetary inflation,
2. The UK sold about 395 tonnes from July 1999 to March 2002, at an average price of about USD275 per ounce,
3. Central Banks have been net buyers since Jan-2010.
Most central banks engage in buying and selling
to ‘stabilize’ the gold price (see US ‘ESF’ on page 45) to suit political goals. They scoff at gold,
but show they believe it has fundamental market value since they keep it in their reserves (if they can afford to).
Of the 160,000 tonnes of gold mined in history, the world allocation is about 52% for jewelry (83,200 tonnes),
19% central banks (30,563 tonnes), 16% investment bars, and coins (25,600 tonnes),11% industry (17,437 tonnes), and 2% (3,200
tonnes) not accounted for. About 50,000 tonnes is estimated as yet unmined.
As the world moves to gold-as-money, names like ‘Dollars’ can be eliminated and ‘weight’
will rule as the unit of account! Since the U.S. has trillions of fiat 'dollars' in circulation worldwide, the market
value of a USD for conversion (trade-in) purposes will be a small fraction of an ounce, as shown in ‘Step 3’ on
page 102. This implies that a minimum dollar amount may be required for an owner to redeem representative money for physical
gold, since the tiny physical size of gold per dollar would be a problem in handling and measuring. If it were not a secret
as to how much gold the government has at Fort Knox, the IMF, and in Federal Reserve facilities, a better estimate could be
Conversion of fiat money to gold
money needs planning to avoid panic and uncertainty among current owners of fake money. Thus my Five-Step plan allows the
Federal Reserve Notes to be redeemable for gold right away (but no new ones created), and used in a two year transition period
during which they must be exchanged for new notes or coins from any mint. Since the existing Fed Notes will immediately represent
gold, there will be no panic among Fed Note owners to get rid of their Notes (i.e., no ‘redemption run’).
Once the new gold money is introduced, I predict all nations
will soon follow in converting to their own gold money as their fake money is refused as payment by Sellers and Lenders. In
this case, good money drives out bad; the reverse of Gresham’s Law. This would end the justification by governments
for money-control schemes that central banks, the IMF, and the BIS pursue worldwide, which always do more harm than good.
Key changes to expect, all based on free market reality, not laws or ‘G-20
1. The concept of a 'reserve currency' would no longer be needed because any gold-based money would be
accepted in world trade, or for bank reserves, if there was confidence it could be redeemed for gold
2. When most nations convert to gold money, the concept of
a ‘price’ for gold will vanish. The reverse will occur, as coins or notes are ‘valued’ in the weight
and fineness of gold they contain or represent, and Sellers advertise ‘prices’ in grams (milli, micro?) or ounces
3. The foreign
exchange business (Forex) with banks will wither and die as it becomes useless, as will government manipulation such as the
U.S. ‘ESF’ (see page 45).
4. People like to give ‘names’ to money (Dollar, Franc, etc.), but these would be social terms and
would not need to appear on the money (but weight of gold would), unless the minter chooses to do so. Weight of gold will
be the unit of account.
Nations will convert to gold money on their own terms, as and when needed. There will be no need for grand conferences (G20,
G100?) to set rules, although some ‘Agreements’ may occur, and then whither when the ‘rules’ become
onerous and counterproductive.
6. There will be no ‘weak’ or ‘strong’ currencies or ‘pegs’, all of which were
part of the manipulations in the past. Gold will be the great equalizer and honest broker. The games will be over (and most
of the wars).
the present system of constant inflation, borrowers have the advantage of repaying loans with depreciated (less value) money,
but with gold as money (by weight) its value may increase during the term of the loan, thus giving the lender an advantage
of being paid in a weight that is more valuable. I predict that loan terms will be developed to adjust for this, because both
borrowers and lenders will demand it. The likelihood of appreciation will also be a positive incentive to
save more, and borrow less.
Patrick Barron, an Adjunct Instructor in Austrian Economics at the University
of Iowa (patrickbarron.blogspot.com), said it well in his May 16, 2009 essay ‘The World Does Not Need a Reserve Currency’:
“Each country should
set its own ratio of local currency to gold and settle all trades in the actual commodity. Then no country—not the U.S.,
not the European Community, not China, nor Japan—will be able to inflate its currency without destroying its ability
to import goods. It will run out of gold for settlement purposes and be forced to deflate. No special governmental agreements
are needed. Gold would settle just as checks settle today—by debiting and crediting each nation’s gold accounts
wherever they may be. Just as no business can operate with zero money—it is forced to economize—no nation
would be able to import continuously by papering the world with its currency, as the U.S. does today. As the profligate
nation’s gold reserves dwindled, its ability to import would dry up; prices would drop, making its goods a bargain for
export; its gold reserves would start to climb and all would be well.” I first read this in Jan-2012. It ties-in with my ‘5. Fewer Jobs ‘Off-Shored’ statement on page 119.
As painful as the transition
to ‘gold as money’ may be for some people and nations, it is better than the chaotic hyperinflationary crash (with
money values approaching zero) that is otherwise 99% likely to occur under our present worldwide fiat money, and central banking
Chapter 5: The New Gold Money Era
The Challenges of Introducing Gold
will say that this plan for new money is too simplistic, and will not work in todays’ complex world. I say they are
wrong, because most of the complexity is created by government manipulation of their fake money, and those problems will end
when fake money ends. Most (over 95%) of today’s self-serving politicians and economists have bought the idea that;
1. the government must run the ‘economy’ and monetary system, 2. all financial activities must be tightly regulated
to avoid abuse, and 3. there must be a central bank. Of course they are biased, because they want the jobs,
grants, and perquisites that come with this approach, and have been so brainwashed in college and work that most of them can’t
imagine another way, and they are WRONG!
The new era will depend more on incentive than regulation Gold money in a free market is self-regulating. The heroin-upper effect of loose money will be gone (see
Heroin Analogy on page 38). People operate differently when using limited funds, and without the perverse incentive of a bailout.
A fake and excessive supply of money creates a pot of honey that breeds irresponsibility and bad ethics as people scramble
to get more of it. Gold money puts a damper on this frenzy because governments can’t create it out of thin-air, short
of reducing reserves for paper ‘representative’ money, which has its limits too.
will other nations do? The people, merchants, and governments will prefer the new gold money, and it will prompt conversions
to gold in other nations since their fake money will soon be rejected as payment by sellers and lenders worldwide.
I see no long-term ‘downside’ to the future with gold as money. Of course there will be hardships during the conversion,
but the alternative of a hyperinflation depression is worse.
and Private Medallions
As a partial step toward using
precious metal coins again, the 1933 law that prohibited private ownership of gold coins and bullion (numismatic coins and
jewelry were allowed) was repealed in 1975. In 1985, Pres. Reagan approved the ‘Gold Bullion Coin Act of 1985’
and ‘Public Law 99-61’ for silver, to create the ‘Eagle’ series. Both coins were soon popular worldwide.
Since then the US Mint (http://www.usmint.gov/) has issued a variety of gold, silver, and platinum bullion coins. As shown
in Table 5, their face values are far below their market value, and thus, though they are legal tender,
are not used in commerce (somewhere a bureaucrat is laughing!). They are sold at ‘spot price’ for the metal content,
plus fees for production and profit (‘seniorage’). However, one businessman paid his employees with $5 gold Eagles
(see P. 117) and they filed their income taxes based on the low face value. The IRS sued but gave up due to a hung jury. Many
other nations offer bullion coins.
bullion coins are legal tender, due to low face values they are all viewed as investments, and are not used as money.
A bonus is that they posture the owners to use them at bullion value if Congress ever repeals the legal tender laws and allows
use of private mints and coins. See former Rep. Ron Paul’s HR-4248. They could also come into use if we have a chaotic
economic crash and people start using gold, and other commodities, as money. Many US dealers sell the bullion, medallions,
numismatic coins, and bars issued by various countries and private mints. For your convenience (not a recommendation), examples
are: 1. Precious Metal Dealers; InvestmentRarities.com, europacmetals.com, caminocompany.com, monex.com, JimsCoins.net, opencurrency.com, blanchardonline.com, goldmoney.com
2. Private Mints; nwtmint.com, CoinsForAnything.com, and medalcraft.com. Use an Internet search engine (Google,
etc.) to find more. Many private ‘mints’ make precious metal medallions as commemorative pieces for private use
(jewelry, keepsakes, etc.). The mints have die-makers (craftsmen) and presses so can quickly design and produce new pieces
with any imprint. 3.
Foreign Currencies and Stock: EuroPacific Capital (EuroPac.net) is a broker that offers purchase of stock and funds
denominated in foreign currencies. Everbank (Everbank.com) is a bank that offers savings accounts in foreign currencies. Ron
Holland, www.bfi-consulting.com , is an author (TheDailyBell.com) and advises investors for global diversification outside U.S. markets and the dollar.
of the most popular government-issued gold coins are shown in Table 5. See P. 18 for more on coins.
5: Bullion Coins
Country ; Name ; Metal;
Sizes (troy oz.); Face Values ($)
USA ; Eagle; 0.9167 Gold ; 1,1/2, 1/4, 1/10; $50, 25, 10,
USA ; Silver Eagle; 0.9999 Silver; 1
Mapleleaf; 0.9999 Gold; 1,1/2, 1/4, 1/10; C$20,10,5,1
So. Africa; Krugerrand
; 0.9167 Gold; 1, 1/2, 1/4, 1/10; no FV
P. R. China ; Panda ;
0.9999 Gold ; 1, 1/2, 1/4, 1/10 ; no FV
carat = 0.9999 pure gold 22 carat = 0.9167 pure)
In addition to survival gear (see page 81), a prudent person
will own an ample supply of small bullion gold coins (1/4 and 1/10 oz), or old legal tender silver coins (pre-1965 US dollars,
quarters and dimes). People will soon learn that they have 0.72 oz silver content per dollar (0.18 for quarter, 0.072 for
dime), for use as money if it becomes legal to trade at the bullion value (or a black market will start). If the value of
gold and silver soar after the crash, these will be useable sizes with strong purchasing power, but even lower value coins
will be needed.
Benefits of a Gold-Money World
we can expect the following benefits when the new gold money becomes legal:
1. More Peace: Wars are
very expensive. The absence of an unlimited supply of fake money will inhibit the starting of wars; Diplomacy will be used
instead. Imperialistic aggressors will have trouble getting funded.
2. More Prosperity: Gold
money will increase in value (purchasing power) if percent economic growth exceeds the percent addition of newly mined gold.
Savings will be rewarded, more money value will be available for investments, and managers can plan better.
Less Government: Governments need money
Index: A. Authors-P.121,
B. Books-P.126, C. Organizations-P.128, D. Internet Sites-P.128
A. Authors Noted in this Book. (alpha order)
1. Douglas R. Casey: In his book ‘Crisis Investing’, 1979, Doug predicted a major depression due to government intervention. It came
in 2008! He; 1) Is an independent thinker, with ‘on the ground’ business experience (not biased by academic rules
and vanity), 2) Supports liberty, the gold standard, and limited government as the path to peace and prosperity, and 3) Has
written these books about investing and government; His new book ‘Totally Incorrect’‘, 2012, with L. James and T. Coxon,
is an unabashed treatise for libertarianism and free-market capitalism;
‘Crisis Investing’, 1995; and ‘The International Man’
1979, with H. Schulz. See his
articles: 1) Feb-2012 about war, oil, gov’t, and gold at: lewrockwell.com/casey/casey108, 2) Mar-2012, ‘The Ascendence of Sociopaths in US Governance’ lewrockwell.com/casey/casey112, and 3) Nov-2012 ‘The America That Was – Now the United (Police) State of America’. His archives are at; lewrockwell.com/casey/casey-arch, and caseyresearch.com/cdd/archives.
Thomas G.: He joined Barron's as a reporter 1979, and
became its editorial page editor in 1992 (Barrons.com). His books
are; "Supertech," 1991, "Don't Count On It," 1994, and "A World of Wealth: How Capitalism Turns Profit into Progress," in 2008. These books present his case on a range of
topics. In his columns, he writes about the power of capitalism and
how free markets and free-enterprise offer the best solutions to create more liberty, peace, prosperity, justice, and morality
in a nation or society.
3. Ebeling, Richard, Ph.D., (1950- ): He received his B.A. degree in economics from California State University, Sacramento, his M.A. degree in economics from Rutgers University, and a Ph.D. in economics from Middlesex University in London, UK. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008, and has written and edited numerous books and articles, including the three-volume Selected
Writings of Ludwig von Mises (Liberty Fund), recovered from Russia. His most recent works are Political Economy,
Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition, (2010), and Austrian Economics
and the Political Economy of Freedom, (2003). More on page 28.
Michael: After graduating
from Rutgers University, Michael Edwards began his career as a technical writer and editor operating freelance for trade magazines
and books in a variety of areas. In early 2010, Michael co-founded
ActivistPost.com, a blog where his own writings appear, along
with co-founder, Eric Blair, as well as many contributors. They post new articles daily on a broad range of issues which challenge
the diluted, biased, and often false info the political ‘establishment’ and Main Stream Media offer.
5. F. William Engdahl: His writing and research bridges the disciplines of economics,
politics, and the less known field of geopolitics. His books on oil and geopolitics are; ‘A Century of War:
Anglo-American Politics and the New World Order’, and 'Full Spectrum Dominance: Totalitarian Democracy
in the New World Order, which deals with the Pentagon agenda of global hegemony in the post-Cold War era. He is a
writer and consulting economist and teaches at the University of Applied Sciences, Wiesbaden, Germany. His website is, www.engdahl.oilgeopolitics.net
Antal, Ph.D.: He
is a mathematician, monetary scientist and educator. He is a proponent of the gold standard and a critic of
the current monetary system. Go to the Home page of www.professorfekete.com to see ‘Remobilize
Gold to Save the World Economy’, and other writings. He has been criticized for his emphasis on ‘real bills’.
7. Hayek, Frederick A., Ph.D.: Nobel Laureate. See; 'Denationalization
of Money: The Argument Refined', 1976, which puts forth the case to; 1) end the government monopoly on money
creation, 2) let anyone create money, and 3) let the free market determine which type of money is used.
Ph.D., Arthur: While on the Reagan staff in the 1980s he was one of the creators
of Supply-Side Economics and the Laffer Curve, which shows the tradeoff between tax rates and revenues. His books include
‘End of Prosperity’, and most recently ‘Return to Prosperity’. He earned an MBA and Ph.D. in economics
from Stanford University. See www.laffercenter.com.
9. Lehrman, Lewis: An ardent promoter of the benefits of the gold standard for over thirty years, he co-chaired Reagan’s
‘U.S. Gold Commission’
with Dr. Ron Paul in 1981, and co-authored their Minority Report, ‘The Case for Gold’ in 1982. His new book ‘The True Gold Standard’
(Aug-2011, published by LehrmanInstitute.org) is his latest effort.
10. Miller, Donald W., Jr., M.D.: He is a cardiac surgeon and Professor of Surgery at the University
of Washington in Seattle, and writes on politics, health and medicine. For a start, see his excellent
‘A Fourteen Point Plan for a Post-Wilsonian America‘ at http://www.lewrockwell.com/orig2/miller2.html, and his archives at www.lewrockwell.com. His web site is www.donaldmiller.com.
S.J.D., Ludwig von:
As the leading scholar of the ‘Austrian School’ of economics, Mises has written many books, led by ‘Human
Action’ (1949), ‘Socialism’ (1922), and ‘The Theory
of Money and Credit’ (1912). See more at www.mises.org.
Rep. Ron, MD (R-TX, retired): He wrote 'The
Revolution: A Manifesto' in Apr-2008, ‘End the Fed’ in Sep-2009, and ‘The Case for Gold’,
with L. Lehrman, in 1982. A Republican candidate for President in the 2008 and 2012 primaries. Dr. Paul says we have been
lied-to, robbed and abused by our own government. He retired from Congress in Jan-2013. On April 17, 2013 Dr. Paul announced
creation of his ‘Institute for Peace and Prosperity’, with a mission to educate and advocate for a peaceful foreign
policy and the protection of civil liberties at home. (ronpaulinstitute.org). Also visit campaignforliberty.com, and dailypaul.com.
13. Quinn, James: He is Senior Director of Strategic Planning for a major university, and author
of a series of essays on world financial affairs. For more, go to
and his main site; http://www.theburningplatform.com/
Rickards is an investment banker, speaker, and author of; 1) ‘Currency Wars: The Making of the Next Global
Crisis’, Nov-2012. He shows that currency wars are one of the most destructive and feared outcomes in international
economics, and 2) ‘The End of Money’, April-2014. More at jimrickards.blogspot.com
15. Roberts Ph.D.,
Paul Craig; An Economist and author of eight books and many articles on economics and politics; all based on fact
and logic, and seeking the truth. He holds a Ph.D. from the University of Virginia. He a former associate editor
of the Wall Street Journal, a former Assistant Secretary of the U.S. Treasury with Reagan. See his site paulcraigroberts.org (click on ‘Articles’
to see ‘Assault on Gold’, April-2013), and his full story at
16. Rothbard, Murray,
Ph.D., 1926-1995, was a prominent economist of the Austrian school,
Professor, and prolific author. See 'What has the Government Done to our Money?’, 1964, ‘Origins of the
Federal Reserve’, ‘The Mystery of Banking’, 1983, and ‘The Case for the 100% Gold Dollar’,
1962, at http://www.lewrockwell.com/rothbard/rothbard207.html,
more at http://www.mises.org/money.asp
Ph.D., Joseph, is a professor of economics at Pace University and chair of the economics graduate program. He is also a senior faculty member of the Mises Institute, for which he frequently lectures and writes about monetary policy and banking.
18. Schiff, Peter, is President of Euro Pacific Capital, and author of ‘The Real Crash’ (2012), ‘The Little Book of Bull Moves in Bear Markets’ (2008, 2010) and ‘Crash Proof: How to Profit from the Coming Economic
Collapse’ (2009). See europac.net, and archives at www.lewrockwell.com/schiff/schiff-arch.
19. Selgin Ph.D., George, is an economic historian
whose research has convinced him that minimal governmental intervention in financial matters and that markets
with fewer regulations are more robust and better at generating wealth and economic development. A
prolific author, he now teaches economics and monetary subjects at Terry School of Business, University of Georgia, Athens.
Starting in Sep-2014, he will run
the new ‘Center for Monetary Studies’ at Cato Inst. in DC.
20. Wenzel, Robert: A financial consultant and author of
economicpolicyjournal.com, he writes with
an Austrian perspective on economics, and keeps us informed on world activity and his opinions about it. He promotes sound
money, such as the gold standard, but opposes government meddling as done by central banks.
21. White Ph.D., Lawrence H. (economics.gmu.edu)
is author of ‘The Theory of Monetary Institutions’ (1999), ‘Free Banking in Britain’ (2nd ed., 1995),
‘Competition and Currency’ (1989), and other volumes. He specializes in banking and money.
22. Woods Jr., Ph.D., Thomas E.: He is a historian with focus on government,
economics, and law. Of his eleven books, those that apply most here are ‘Rollback’ (2011) and
a trilogy by Chalmers Johnson, 1931-2010, (Blowback-2000, Sorrows of Empire-2004, Nemesis-2007), plus Dismantling the Empire-2010.
Johnson shows how our meddling, and expensive, foreign policy does harm’
2. ‘The Coming Collapse of the Dollar
and How to Profit from It’, Dec-2004 (2008), by James Turk and John Rubino. They describe how monetary systems have long been abused by governments.
See; fgmr.com, goldmoney.com (buy and store precious metals), www.dollarcollapse.com, and www.cmre.org
3. ‘The Creature from Jekyll Island:
A Second Look at the Federal Reserve’, Edition #1,1994; #5, 2010, by G. Edward Griffin (realityzone.com and freedomforceinternational.org). He reveals the sinister origins and self-serving goals of the bankers
who started the Fed, and publishes the FFI newsletter.
4. 'Empire of Debt', 2006, by W. Bonner and A. Wiggins. It addresses how
excessive national debt and spending can drastically reduce the value of the U.S. dollar, and cause a major depression.
5. 'The Great Reckoning: How the world will change in the
depression of the 1990s', 1991, by J. Davidson and Lord R. Mogg. They warn of economic collapse of the US due to overspending and Empire-style
‘Index of Economic Freedom’, annual since 1994, The Heritage Foundation,
charts economic success vs. freedom; www.heritage.org/research/features/index/ and b) Economic Freedom of the World: Annual report by Cato Institute, http://www.cato.org/pubs/
7. 'A Nation of Sheep', 1961, by William Lederer (also 'The
Ugly American'), is about how Americans accept abuse by the government without complaint, as long as the 'good times
8. 'A Nation of Sheep', 2007, by Andrew Napolitano, (also 'Constitutional Chaos' and ‘Lies
the Government Told You’), is about how Americans accept abuse by the government without complaint or curiosity, as
long as the 'good times roll'.
9. ‘Gold, The Once and Future Money’, 2007. by Nathan Lewis. An economist by trade,
Lewis refers to ‘good money’ as the ‘cornerstone of good government’, and promotes the gold standard
as the best system. www.newworldeconomics.com
by Gerald Celente. A ‘futures analyst’, he tells how to prepare and profit from changes in the 21st
century. Visit www.trendsresearch.com
11. Older Books that Gave Warning and Good Advice
a. ‘The Law’, 1850, by F. Bastiat. With his perspective of the French Revolution,
he explains the fallacies of Socialism and how it must degenerate into Communism.
b. 'The True Believer', 1951, by Eric Hoffer, a book which shows how people join a group or mass
to bring a sense ‘belonging’ or ‘superiority’.
c. ‘Capitalism: The Unknown Ideal’,
1967, by Ayn Rand.
Discusses both the productive and moral aspects of Capitalism. Review by Alan Greenspan (before joining the Fed banksters)
Dare Call It Conspiracy’, 1972, Gary Allen with Larry Abraham. Probes the secret dealings of bankers, industrialists, and politicians to distort
US policy and money for their own gain.
e. ‘A Time for Truth’, 1979, by William Simon. Bill warned us of the damage being caused
by excessive spending, taxes, and the debasement of our currency.
f. ‘An American Renaissance’, 1979, by Rep. Jack Kemp. Jack sent an upbeat
message on how less government spending and lower taxes would produce more growth, all based on his support of Austrian economics.
the American Dream’,
1979, by Robert Ringer. Robert warned us of a trend in the US to expect a ‘free lunch’, and how we can reverse
C. Organizations: Free-market and limited government oriented essays, books, blogs, meetings, and courses.
1. The Cato Institute: www.cato.org
2. The Independent Institute: www.independent.org
3. The Ludwig von Mises Institute: Daily essays are at www.LewRockwell.com, plus books and articles at mises.org.
4. Reason Foundation: A magazine and www.reason.org
Foundation for Economic Education: www.Fee.org
D. Internet Sites:
1. For more on money and gold, visit: , en.wikipedia.org/wiki/Money_supply, zerohedge.com, goldstandardinstitute.net, gold.org, mises.org/freemarket_detail.aspx?control=483, kitco.com, history.com/minisites/money/viewPage?pageId=52498, DollarCollapse.com, goldmoney.com, cmre.org, fgmr.com, en.wikipedia.org/wiki/History_of_money,goldismoney.info, measuringworth.com, MoneyWatch.com, shadowstats.com, xat.org/xat/moneyhistory, 321Gold.com, USDebtClock.org, GATA.org, .
2. General Web Sites
about Government & Economics: See a flow of essays from; LewRockwell.com, Activistpost.com, WindRockWealth.com, Antiwar.com, FFF.org, Truthdig.com, Alternet.org, VDare.com, reason.org, pacificreasearch.org, freedomforceinternational.org, independent.org, pacificlegal.org, cato.org, online.barrons.com, garynorth.com, LP.org, dailyreckoning.com,
pgpf.org, mises.org, shadowstats.com, economicpolicyjournal.com, informationclearinghouse.info, a2zPublications.com, trendsresearch.com, freedomworks.com, campaignforliberty.org
1. Remobilize Gold to Save the World Economy 129
2. Wars and the Lies That Start Them
3. Fake Money: Cause of Wars, Depressions 132
4. The Phases of Empire
Go to the Home
page of www.professorfekete.com to see ‘Remobilize Gold to Save the World Economy’, by
Dr. Antal Fekete. Here is an excerpt: ‘The debt
crisis of 2008 was a dress rehearsal. It gave the world a foretaste. This crisis is a gold crisis. It is
a crisis indicating the threat of a shortage of the ultimate extinguisher of debt, without which our runaway debt tower is
doomed. When it topples, it will bury the world economy under the rubble, as the Twin Towers buried the people working inside
in 2001.’ Dr. Fekete is a mathematician, monetary scientist and educator. He is a proponent of
the gold standard and a critic of the current monetary system. Also see his ‘Proposed Parallel Gold-Coin
Standard to the Federal Reserve System’ at http://www.afr.org/antal.html .
(Note: This Op-Ed is included because
all of the wars shown below were financed by fake money, Dave)
Published Mon. Sep. 10, 2007 in the Wisconsin State Journal
(www.madison.com), a regional
daily newspaper based in Madison, and ActivistPost.com as ’13 Lies…’ (on 15Dec2010, click on ‘Contributors’
then scroll down to ‘original archives’, by year & month).
‘Wars and the Lies That Start Them’
presidents, and their complicit henchmen, have lied us into every war since the revolution in 1776.
Their real reasons have
not been legal, constitutional, or politically acceptable, so they invent one or more false reasons that they can "sell
" to the people.
Sadly, most people believe the lies, and proudly support them as "wars for defense. " They can't
imagine that our leaders would be so evil as to spend the lives of our troops to gain their hidden political and economic
goals for Empire-USA.
The secret plan of Bush and his gang was to: 1) Take over all oil in the Middle East so we don 't have to
share it with China and India, 2)
Land for bases, 3) Evict China from Eastern Europe and Africa, and 3) Defend Israel at any cost. Control of oil was the hidden reason for the Balkans, Afghan, and Iraq wars.
Iran is their
The war drums are beating in Washington to justify bombing Iran, so this is a good time to consider whether our leaders
are lying again. Here are the facts on how we got into a few major wars. Each one could be a book, so please forgive the brevity.
War of 1812
Lies: In 1812, Congress declared war on
England based primarily on their kidnapping ("impressment ") of our sailors at sea. Truth: To drive England out
of North America and get southern land. The war started with our invasion of Canada, at Detroit. We burned their Parliament
buildings in York (now Toronto), so they burned DC ! The 'Star Spangled Banner' was written when British boats
shelled Baltimore Harbor.
War (Polk, 1845)
Lies: Fight to defend our Texas border
with Mexico. Truth: We invaded to expand, and took the northern half of Mexico, now our entire Southwest region.
Civil War (Lincoln,
Lies: Fight to end slavery and preserve
the union. Truth: The South seceded due to economic abuse by the North. Slavery was ended later (but only in Southern states).
War (McKinley, 1898)
Lies: Spain blew-up the U.S. battleship Maine in Cuba 's Havana harbor. Truth: The accidental explosion
was used to invade Cuba, and the Philippines (for a Pacific port).
World War I
Lies: Join Europe to "Make the World
Safe for Democracy. " Truth: Wilson was convinced to join by U.S. and European industrialists.
World War II (FDR, 1941)
Lies: Defend the United States from unprovoked attacks by Japan. Truth: FDR wanted
be sure Germany didn’t win and become a world power, and also preserve our Far East oil and industrial sources and markets,
so he poked Japan until he got his "incident."
Korean War (Truman, 1950)
Defend America. Truth: Truman and the generals wanted a reason to have troops in the Far East area of our Empire.
Lies: Johnson said Vietnam attacked our
ships in the Gulf of Tonkin. Truth: The United States didn't want to lose the southeast Asia region, and its oil, to China.
Gulf War (Bush-41,
Lies: To defend Kuwait from Iraq. Truth:
Saddam was a threat to Israel, and we wanted his oil.
Balkans (Clinton, 1998)
Prevent Serb killing of Bosnians. Truth: Get the Chinese out of Eastern Europe and Caspian Sea areas so they couldn't
get control of the oil.
Afghanistan (Bush-43, 2001)
Lies: The Taliban were
hiding Osama. Truth: To access the east of Caspian oil region by building a gas/oil pipeline from Turkmenistan,
thru Afghan, to a warm water port near Karachi.
Lies: Stop use of WMDs, or bring democracy.
Truth: Oil, defense of Israel, land for permanent bases and restore oil sales in the U. S. dollar.
Possible Iran War
Lies: They almost have an atom bomb. Truth: Oil, end sales in gold, and defense
Fight the Bush gang to stop their plans for war against Iran.
Redick is president of Forward-USA.org.
Published as the ‘Guest Column’ on Jan. 29, 2008 by
the Wisconsin State Journal, a regional daily newspaper based in Madison, WI (www.madison.com), by David Redick.
Money: Cause of Wars, Depressions’ .
On Jan. 22, 2008, the Federal Reserve System
issued an interest rate cut to "rescue the economy. " This shows how counterproductive government "management
" of the economy is.
It creates problems with too much easy money (mortgages), and then tries to solve them with more of the same
(a "stimulus " package). The analogy is that easy money is like a heroin high, and recessions are like withdrawal.
In each case, it is better to avoid the fake highs and let the free market work.
Our monetary system is very important because it affects government
policy so much.
Our leaders in Congress want an unlimited supply of that money so they can continue to give handouts to voters and
fund wars for empire, such as Iraq.
Since only the federal government can create money, we see an increase in the number of state projects funded
by Washington and more pork from the Capitol.
You won 't read the following analysis in the newspapers or in a college economics course. Most politicians,
business leaders and professors like the current system of fake money, because their jobs, grants, and social lives depend
they ridicule the idea of real money (redeemable for gold, by any person, on demand) as old-fashioned. However, history and
logic show us that the use of real money, not subject to manipulation by government, is fundamental to the long-term success
and survival of a nation.
Conversely, all failing nations in history have resorted to debasement of their currency, using worthless paper
and less-precious metal in coins, to fund their excessive spending. Fake paper money, managed by the Federal Reserve, is what
allows the massive spending and debt for wars and domestic pork and welfare that have brought the United States to the brink
of economic collapse.
The Fed is a private bank created in 1913, which was granted authority to produce our currency and manage our
monetary system. Its mission to bring stability and maintain the dollar's value has been a failure. The U.S. dollar has
lost 95 percent of its purchasing power since 1913, and 40 percent against the Euro since 2001.
The key reason to allow redeemability
of paper ‘representative’ money to a commodity is to limit excessive expansion of the
money supply. The commodity could be wheat, iron, diamonds, or pearls, but gold works best for many practical reasons. Politicians
hate real money because it limits their spending.
The United States is bankrupt due to excessive debt, spending and future obligations,
with no cure in sight. Those countries that own a lot of U.S. dollars can't afford to dump them as their value declines
due to fear of starting worldwide panic selling.
But history shows us that something always triggers panic selling and a crash.
This crash could reduce the value of the U.S. dollar by 50 percent or more in a few days, and start a worldwide depression.
Sadly, very few people understand or care about currency issues. Instead, they prefer our version of Roman bread and circuses
as we crash.
of Madison is President of www.Forward-USA.org.
The Phases of Empire
This analysis explains why all empires, and 'Imperial Style' governments, in
history have failed, and why our 'Empire-USA' faces the same fate. See the full analysis at; 1. Part 5 in the left
margin of www.Forward-USA.org and 2. www.activistpost.com ’
(on 20Aug2010, click on ‘Contributors’ then scroll down to ‘original archives’, by year & month).
3. Depression: Any economic downturn where real GDP (Gross Domestic product) declines by more than 10 percent. Also; Two or
more quarters of reduced GDP. A recession is an economic downturn that is less severe.
4. Economics: (Types, alpha order)
a. ‘Austrian School’ of economic thought (Hayek, von Mises, Rothbard), emphasizes the spontaneous organizing power of free market
pricing, decisions by individuals, gold as money, and little or no government management or stimulation of the economy.
b. Capitalism - An ‘economic system' based on private ownership, free enterprise, and minimal regulation. It offers
more than economic results. It is a moral system that depends on willing buyers and sellers
within the rule of law, not coercion and control by others. It has been re-defined as a mean, self-centered, you’re
on your own, ‘social system’ by those who prefer Socialism (sharing by force, causing a more equal but lower standard
of living for all). The U.S. now has ‘Crony Capitalism’, a damaging distortion where firms and
people get favors from government (often in exchange for campaign donations!).
c. Communism: The government owns all housing, agriculture, industry and transportation (almost everything but the clothes
on your back). The government tells you where to live, go to college (if any), and where to work.
d. Fascism allows private ownership of businesses, but there is extensive government control and preeminence.
e. ‘Keynesian Theory’ (started by J. M. Keynes and now used by Krugman, Samuelson, Stiglitz, Bernanke)
depends on massive use of government fiscal (spending) and monetary (interest rates, money supply) policy trying to create
prosperity or avoid and end depressions. History and logic show the Keynes approach is unsustainable and never works for more
than a year or two (longer if supported by natural resources; oil, timber, mining, etc.).
f. Monetarism: An approach
identified with the ‘Chicago School of economics led by Prof. Milton Friedman Ph.D. of the University of Chicago. It
emphasizes management of the money supply by the Fed to control inflation and GDP growth. Most Monetarists dislike the gold
standard as ‘too inflexible’ in changing the money supply, except by mining more gold or silver. They are wrong
because they ignore how the purchasing power of gold increases (appreciates) with more demand. Thus, there is always ‘enough’.
g. Socialism: Most of the means of production and trade (factories, railroads,
etc) are owned by the government, which sets pricing, product types, etc. The government controls most wages, with an emphasis
on ‘fairness’, need, and ‘hours worked’, rather than value of the service performed. High, and steeply
progressive, taxes support a ‘single-payer health system and pension plan
Side’ economics: This school of thought emphasizes increasing incentive to invest by reductions in; a.
capital gains and income taxes (focusing on lower marginal rates), and b. regulation. These should be the
first steps to revive a troubled economy because they have the lasting effect of stimulating action by producers and investors. “Supply Side’ was originated by economists
P. C. Roberts Ph.D., Robert Mundell Ph.D., and Arthur Laffer Ph.D., and politicians Pres. Ronald Reagan and Rep. Jack Kemp
in the 1980s.
5. Fiat Money: Fiat (by decree) money is worth whatever the government says it is (face value), although the material of
which it is made may have more or less market value (examples; one ounce silver dollars and worthless paper, both declared
worth $1; one ounce American Eagle gold coin with face value of $50).
6. Fiscal Policy: Management of government spending to fulfill obligations, and in some cases to ‘stimulate’, or ‘guide’,
7. Free Market: A market that is free from government intervention (i.e., regulation, subsidies, price controls, or governmental monopolies, etc.).
In a free market, property rights (ownership of goods and services) are voluntarily exchanged at a price and terms arranged
solely by the mutual consent of sellers and buyers/consumers, with no government control of pricing, creation of new firms, pay and benefits, hiring and firing, etc.
8. Gang Theft: This occurs when one group of people in some manner overpowers
another group, and forcibly takes assets from them. Most people agree that it is immoral, and should be illegal, but oddly,
most people believe it is OK to employ gang-theft-by-vote to tax, restrict, or control others (usually ‘the rich’),
via government power as the larger group sees fit. They justify it by; ‘making their victims pay their ‘fair share’,
or ‘they got rich by luck’, etc. This in fact describes an immoral government.
9. Gross Domestic Product
(GDP): The market value of all final
goods and services made within the borders of a country in a year. Gross National Product (GNP) is GDP plus income received
from other countries (interest and dividends), less similar payments made to other countries.
10. Inflation: 1. Monetary Inflation: A rapid and excessive expansion of the money supply (such as over 5% per year; or more than growth of GNP);
purchasing power of a given monetary unit (Dollar, etc.) is reduced, 2. Price Inflation: Increase in current
prices due to reduced purchasing power of money, in turn due to an increase in the money supply (or other factors such as
reduced supply of goods for sale, increased demand, cartel pricing, etc.). ‘Nominal’ is the listed price at a
given time. ‘Real’ is a past or future nominal price adjusted for ‘price inflation’.
11. Mercantilism: An economic system where the ruling
government seeks wealth, especially gold or silver bullion, by playing a protectionist role in the economy, and by encouraging exports and discouraging imports, notably through the use of tariffs, subsidies, and money valuation. The opposite is a policy of laissez-faire, which says that all trade is good and that such controls are counterproductive, and usually evolve to be used as political
12. Monetary Policy: Management of the monetary system including money supply,
bank reserves, interest rates, etc.
13. Money: (mostly from wikipedia.org)
Money is anything that is generally
accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, and a store and measure of value.
Money originated as commodity money, then evolved to easier-to-transport representative money in which a paper certificate, or base-metal coin can be
redeemed by the Bearer on demand to the Issuer (Mint). However, nearly all contemporary money systems at
the national level are fiat money systems. Fiat money is without value as a physical commodity, and derives its value by being declared by
a government to be legal tender; that is, it must be accepted at face value (dollar, etc.).
14. Principle: An underlying guide to thinking and action. A comprehensive and fundamental law, doctrine, or assumption. A rule or code of conduct.
Dave’s core political principle is: ‘'The
government's proper role is to protect its citizens and legal residents, as individuals, from threat to, or violation of, their personal and property
rights by others”. Note that; a) ‘groups’ (by
sex, ethnic, age, etc.) have no special rights or privileges, and b) legal entities (corporations, etc.) only have property
rights, but their officers may represent the personal rights of shareholders.
15. Reserves: 1. Fractional
Reserve Banking means the bank need only retain a certain percent of deposits on hand (typically about ten percent)
and can loan the rest. In fact, this means banks can loan ten times the amount of their deposits, thereby creating new money!
For example, a $1,000 deposit can back $10,000 of new loans. 2. ‘Reserve Currency’ is the money
of a certain nation that by agreement or common usage; 1. can be used by banks as their ‘reserve’ (‘good
as gold’) which underpins their loans and obligations, and 2. is acceptable for payments between other countries worldwide.
16. Standards for Gold-Based
The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold.
Gold Specie Standard is the system in which the monetary unit is associated with a circulating gold coin.
(issuer has 100% reserves for redemption of paper notes)
2) The Gold Exchange Standard may involve only the circulation
of silver coins, or coins made of other metals, but the authorities will have guaranteed a fixed exchange rate with another
country that is on the gold standard, hence creating a de facto gold standard in that the value of the silver coins has a fixed external value in terms of gold that is independent
of the intrinsic silver value. An example is the Bretton Woods Agreement of 1944.
3) The Gold Bullion Standard is a system in which gold coins do not actually circulate as such, but in which the authorities have agreed to sell
gold bullion on demand at a fixed price.
(#16-1,2,3 from http://en.wikipedia.org/wiki/Gold_standard)
4) The Private Gold Standard version introduced
here is based on ‘Redick’s Four Monetary Rules’ (see page 91). Under this plan, money is produced by private
firms in the free market where customers (users of money) decide which type and source of money they prefer, and mints compete
for customers by supplying a good product. There is no central bank (our Fed), or legal tender laws, and government mints
(run by the Treasury), if any, are optional, and have no control or privilege over the private mints. The free market is allowed
to work! The ‘unit of account’, and thus prices, are weight of the commodity (typically gold
and silver) used as money. Gold reserves (in physical possession of the mint) for redemption must be 100%, and must be published
17. Table 6: Weight: Conversion:
Common units for precious metals are:
1 Tonne (metric) = 2,205 pounds (Lbs) = 1,000
= 32,150 troy oz.
1 US Ton (Short) = 2,000 Lbs advp. =
1 UK Ton (Long) = 2,240 Lbs advp.
= 1,016.5 Kg
1 gram = 15.43 grains
= 5 metric carats = 0.643 pennyweight
1 Troy Ounce = 31.10 grams = 480 grains (gr)= 120 engl. carats
1 Troy Pound = 12
Troy ounces (Oz) = 373.2 grams
1 Avoirdupois Lb= 16 avp. ounces= 453.6 grams=7,000 grains
1 Avp. ounce =
28.35 grams (g), 437.5 grains
1 English carat = 1.296 metric carats (for precious stones)
Europe System Carat System
1. The ‘Long
Ton’ is the Imperial system used in the UK
2. The ‘Short Ton’ is used in the US and Canada.
3. The IMF and all nations measure their
gold in metric tonnes.
4. Gold weighs 19,320 kg per cubic meter. Tungsten is close
19,600, so it is sometimes gold plated and used as fake gold
bars and ingots. Steel is 7,850, copper 8,930, lead 11,340, and
5. Grains, grams, and Tonne are metric units. The Troy system
by King Henry II of England. The Avoirdupois
system evolved through common usage in Europe.
6. Fineness: The purity of a precious metal measured in 1,000
a gold bar of 0.995 fineness contains 995 parts gold and 5 parts of other metal; 0.999 means a coin is 99.9% pure.
Personal: Dave grew up with his two brothers in a
middle class family near Detroit, MI. When he was 14, the family moved to an 80-acre general farm near Ann Arbor, Michigan.
He has an honorable discharge from the U.S. Army Reserve. After 46 years in California, he moved to Madison, WI in 2004
to be near his family.
and Business: Dave
won a four-year tuition scholarship to the University of Michigan, based on grades, activities (Sr. Class President, sports),
and need, and started in the fall of 1953. He completed his BS-Engineering in 1958.Upon graduation he worked
as an aerospace engineer for 5 years (rocket engines and satellites) in California, and then started his career in telecom
sales and management. In 1965 he earned an MBA in Economics from Santa Clara University in Santa Clara,
CA, and after management positions in several other firms, in 1995 became VP Sales, then President,
of a wireless engineering consulting firm www.hntelecom.com. He left in 2000 to be VP and cofounder of a Silicon Valley telecom startup ‘Fiberstreet’ (closed,
see Google), and helped raise $6 million of venture capital. He moved to WI in 2004, and started Sustainable
Energy Earth, a renewable energy engineering consulting firm. Since 2009 he has also worked as a Speaker, and
Author of books, on the interaction of governments, business, people, and economics.
Political: In 1978, Dave became concerned about economic and social
damage caused by government corruption, abuse, and counterproductive 'management'. He then read about and discussed
this subject widely and became an activist for more cost-effective, and less abusive, government. He ran for Congress
as a Libertarian in 1982 in District CA-1 (and got 3% of the vote), then returned to his Republican roots and ran again in
1984 with Reagan in the same District as a Republican (and got 38%). During the G. W. Bush administration, Dave became concerned
about the Republican Party's departure from its core principles. In 2006 he was the Chm. of LPWI.org, and in
2007 the Wisconsin contact for The Republican Liberty Caucus (WI.RLC.org and RLC.org), which promote the principles of limited government and free enterprise. In 2007 Dave founded his political website www.Forward-USA.org. In 2010, Dave ran for WI State Assembly District. 77, and got 19% in a very ‘Progressive’ district where no
Republican had run for over twenty years.
Contact: RedickD@aol.com END Part 1
2: The text below is Chapter 4, the last
chapter of ‘How
to Protect and Grow Your Wealth’.
Chapters 1 to 3 are a condensed form of the first 5 chapters of ‘Monetary Revolution USA’, of which the full text
of its chapters 1 to 5 are shown above.
The International USD
Internationally, the USD emerged as the world's
primary reserve currency (good as gold) after WW1 because of our economic strength. When Nixon cut ties to gold in 1971 (and
soon all other nations did) it retained its’ reserve currency status because all fiat paper money (not redeemable
for a commodity) is actually viewed as ‘backed’ by the economic strength of the issuing nation. Until 2007, the
US was without question the world’s strongest economy, and thus the USD was strong because it was viewed as a share
in ‘USA Inc.'.
Since ending redeemability of paper money for gold
in 1971, the US, 1) increased the rate of expansion of its M0 money supply even more than most other ‘developed’
countries, and 2) borrowed and spent to excess. Thus the dollars’ value has decreased (and prices increased) rapidly
ever since on both the 1) international exchange basis (about 4:1 against western Europe 'legacy' currencies
from 1971 to 1999, then a loss of about 2:1 against the Euro from 1999 to 2008; 0.8 to 1.5 USD per Euro !),
and 2) by about 10:1 domestically (price increase of cars, pizza, etc.; things not subsidized or under price controls). Thus
our ‘share of USA Inc.’ money is decreasing in value and confidence as viewed by other nations, and they are seeking
less dependency on the USD as the primary world reserve currency (see BRICS, p. 48). Loss, or a major reduction, of our reserve
currency status will reduce or end our ability to; 1) create new money, and 2) borrow at low rates, to pay our bills at home
and to other countries, and could result in a crash (loss of 50% or more of purchasing power in a few weeks) of the USD as
international business flees to other currencies!! All empires fail in part due to
running out of purchasing power when their fake money becomes almost worthless. The failed empires of Rome, Italy, Spain,
France, England, USSR, etc. are examples. Another sign of failing is decadence of the citizens. Look at how the content of
TV, movies, and magazines have changed since the ‘50s, with more sex, violence and cursing.
Starting in the late ‘90s, Pres. Clinton and Rep. Barney Frank (the worst mortgage abusers) pushed Fannie
and Freddie to ‘help the poor’ (and ‘vote for me’) by making more subprime loans, many of which were
then sold to Wall Street to be securitized.
Foreign banks and investors happily bought trillions
of dollars of these securities because they were primarily based on US real estate, had high interest income, and were apparently
backed by the US government. The process was corrupt from the start, but was pushed by Congress and Wall Street elites. As
the false prosperity slowed, and caused loss of US jobs, then mortgage foreclosures, these fake securities lost value, and
the worldwide crash started in late 2008.
Euro Woes From the beginning of the Greek debt crisis in April 2010, the Greek bailout has
been about saving the banks that had purchased the Greek government's IOUs. The member states must be provided with euros,
so that they can continue to make interest payments to the banks. Mario Draghi,
an Italian banker and economist, succeeded Jean-Claude Trichet as the President of the European
Central Bank (ECB) on 1 November 2011. He was expected to
be aggressive in centralizing financial planning in the Eurozone. Despite a charter rule against it, in Jan-2015 he announced
a major plan to have the European Central Bank (ECB) spend 1.1 tn euros on Eurozone government bonds which caused borrowing
rates to drop (as planned; to attract investments), and drove the euro lower against the USD. Another disaster struck on March 17,
2013 when the Eurozone announced a €10 bn ‘bail-in’ (a new term) of major Cyprus banks, that would be paid
for by a ‘tax’ on deposits.
Deposits were exchanged for near-worthless shares of
the bank. At the G20 (G20.org, the twenty largest nations), annual meeting in Australia in Nov-2014 they agreed that all members
would pass laws to allow Bail-Ins! Surprise,
any government can do whatever they want, despite prior agreements and laws. Get used to it! They have the guns and courts.
I say the worldwide
central bank efforts to make these and other fiat currencies work are doomed, and should be, because they exist (despite PR
and Lies to the contrary) only to serve banksters and politicians. Many U.S. banks are exposed to the Eurozone problems, and
could be hurt; We’ll see.
Avoiding the U.S. Dollar The trend
is to use less of the USD as a ‘reserve currency’ for international transactions. This will; 1. Reduce demand
for dollars, and result in a major (50 to 80% ?) drop in value, and 2. Limit the USA’s ability to get USD denominated
loans at low rates (by selling bonds), and then repay them with newly created dollars. Countries we buy imports from (China leads) accumulate billions of USD and buy our T-bills to get some interest (this also helps fund future purchases
by the U.S.). This is a re-cycling of fake money, with interest paid by fake money, with all parties hoping it will last forever!
Foreign nations that hold large amounts of USD-denominated assets (mostly bonds) are getting nervous that the USD will drop
in value, so they are looking for ways to avoid dependency on, and ownership of, USDs. A flight to safety is starting, and
could lead to a collapse in USD value. Fake money requires demand to support its’ PP. Gold is safe, and this why the Russian central bank has added 570 metric tons of
the metal in the past decade, and China has added 1,656 tonnes since 2009!. Based on these gold purchases, maybe
China and Russia may be planning to destroy the petrodollar system by using gold as money, and thus crash the U.S. economy
by ending the USD’s role as a reserve currency? China and Russia suggested at the Jan-2009 ‘World Economic Forum’ in Davos that a new system is
needed to replace the USD as the world’s primary reserve currency, then they agreed to trade in their own currencies.
In Aug-2011, China and France agreed to form a task force to discuss
how the Yuan could become part of the SDR. It is said they want 20% USD (was 42%), 20% Yuan, 20% Yen, 20% Euro, and
20% Pound Sterling. In Dec-2011 China and Japan agreed to trade in their own currencies. In Jan-2012 Iran said it would sell
oil to India in Rupees. China holds $1.3 trillions of USD denominated bonds and other assets, and doesn’t want the USD
to crash. Is this why in Feb-2013, China's central bankers suggest the world is moving "to a '1+4' system,
with the greenback serving as the anchor of global payments, supplemented by 'four smaller reserve currencies' –
the euro, sterling, yen and yuan." In any combination of the above trends, the USD is sliding down, and could lose over
50% of its’ PP! Another reason some countries, especially Russia, want to create a new financial system is to end the
US ability to impose political sanctions by restricting use of the US system. Obamas early 2014 sanctions proved his concern.
The BRICS (Brazil,
Russia, India, China, and South Africa) started trading with each other in their own currencies in 2011, thus reducing demand
for the USD, and speeding its fall in value! At the July-2014 sixth summit of the BRICS in Brazil they started funding of two multilateral
financial institutions designed to erode the dominance of the World Bank and International Monetary
Fund as arbiters of the global economic system. Namely: 1) A $100 billion New Development Bank’
(like the World Bank), and 2) a Reserve Currency Fund (like the IMF) worth another $100 billion. Vladimir
Putin, at the 11th meeting of the Valdai International Discussion Club in Sochi on Oct.24, 2014, said, “
Russia is making strides
in assembling a massive new trading bloc known as the Eurasian Union. When it opens for business on January
1, 2015, Russia, Belarus, and Kazakhstan will be a barrier-free market with 170 million people and a GDP of $2.7 trillion.
Armenia, Kyrgyzstan, Tajikistan, and Uzbekistan likely will join in the near future, which would expand the Eurasian Union
to 217 million people and a GDP of $2.8 trillion. We have an integration-oriented, positive, peaceful agenda; we are working actively with our colleagues in the
Eurasian Economic Union, the Shanghai Cooperation Organisation, BRICS and other partners. This agenda is aimed at developing
ties between governments, not dissociating.” The Union will further reduce demand for the USD, and thus reduce its’ value (purchasing power).
The great Paul Craig Roberts, PhD.
lauded Putin’s Sochi remarks, and his mature, diplomatic, conduct in response to Obama;’s recent Ukraine meddling
and sanctions against Russia, by writing this article on Oct. 25, 2014: ‘Vladimir Putin Is The Leader Of the Moral World’ (http://www.paulcraigroberts.org/2014/10/25/vladimir-putin-leader-moral-world-paul-craig-roberts/) He wrote; “Vladimir Putin’s remarks at the 11th
meeting of the Valdai International Discussion Club are worth more than a link in my latest column. These are the remarks
of a humanitarian political leader, the like of which the world has not seen in my lifetime.”
The Crash of 2008 and How to Prevent Another The US economic problems have been brewing since extreme excess of the US dollar creation started in 1971 with
Nixon’s cutting of its last link to gold. With all this fake money to play with, Congress showed its willingness to
offer loans and gifts to bailout companies, industries and nations who were in trouble (and could produce votes and campaign
donations. This largesse created the ‘moral hazard’ of firms taking big risks on the assumption they would be
bailed out if needed, and, along with lax regulation and false credit ratings, led to the crash that started in 2007.
The rush of home loan defaults and bank problems started in
late 2007, and peaked in Sep-2008. The underlying cause was Fed manipulation of interest rates, as described above. The excessive
supply of low-interest money, delivered to lenders by the Fed and its pals at FreddieMac and FannieMae, was the ‘mother’s
milk’ of market distortion. Of course, our Wars for Empire (not defense) in Afghanistan and Iraq added to the domestic
spending spree (which pours unproductive money into the economy), that we can no longer afford. Kudos are due for leaders who raised the warning flags early, despite opposition from both Bushes and Clinton,
and lack of support from ’vote-for-me’ fellow Congress members. Since 1976, former Rep. Ron Paul MD (R-TX-14,
first elected in 1976, he retired
Jan-2013) was always the strongest
fighter in Congress for more liberty and less government. His Libertarian philosophy calls for sound money (gold and silver
in coins, paper redeemable for precious metal), and he wanted to abolish (or at least audit) the Federal Reserve Bank (see
his book ‘End the Fed’), and associated GSEs Fannie, Freddie, the World Bank, IMF, BIS, etc. The 'Troubled Assets Relief Program'
(TARP) was a 3-page note introduced by Treasury Sec. Paulson and Pres. G. Bush in Oct-2008 in a panic mode
based on predictions of a sudden crash in the economy. They wanted $500 billion with no questions asked, and no liability.
Congress converted it to a pork-laden 500+ page tome that still had little oversight. They and the recipients have refused
to account for how the first $385 bill. was spent! Similar problems and bailouts occurred in Europe. Only Iceland; a) let
their banks fail, so the losses fell on managers and investors rather than citizens, and b) prosecuted managers for fraud.
Their economy is recovering well. It all comes back to how distortions of the free-market by the government always do more harm than good, often
to the intended beneficiaries. Very
few people understand, or care about, the above economic and currency issues. They prefer bread and circuses, as we crash!!
SAD. It has been a fun party since the Bretton Woods Agreement in 1944 made the USD the
official 'worlds’ reserve currency', and then our de facto status since 1971, allowed us to print money to pay
our bills, and borrow to excess.
Chapters 1 to 3 explained how the USA money, banking, and securities systems started and works today, and how
the abuse of these systems by politicians, ‘banksters’, and other ‘interest groups’ has caused the
decline in strength of our money and economy. As stated in the Introduction, over 95% of Americans living today have never
experienced a depression, or severe recession. Except for the ‘bubble burst’ losses in 2008, which has been temporarily
repaired by massive increases in our money supply (‘monetary inflation’) called ‘Quantitative Easing’
by the Fed, all stock, bonds, and real estate investments have increased in price since their teen years, and most people
expect it to continue. Americans tend to look at losses as minor ‘corrections’ or ‘bumps’ in the upward
path. Well folks, the bad times are here, and investors need to ‘wake up’ and become aware that after decades
of high spending and borrowing, the USA economy is now approaching the cliff of a crash in US Dollar value
(over 50% loss), major investment losses, and consumer price increases (hyperinflation). In this chapter, I give you ideas
on how to protect and grow your wealth during these perilous times.
As I write in Nov-2015, the US Dollar (USD) has lost 98% of its 1913 purchasing power (PP), and over 80% of
its 1971 PP (the decline rate got worse after Nixon severed the USD tie to gold in 1971). Most investors judge values of stock
by the prices listed by the various stock exchanges, and trends shown by the Dow Jones Industrial Average (an index of 30
US stocks published since 1896), and the ‘S&P 500’, but this ignores any change in the value (PP) of the currency
in which the stock (or any other investment) is denominated. This brings a new meaning to ‘diversification’ of
your investment portfolio. The new factors are; 1) Trends of change in currency value in the U.S. and other nations (and their
politics), and conversion to a better currency when needed, 2) Inclusion of precious metals (PM) as an inflation hedge, and
3) Selection of a Wealth Manager to create your
plan (Trust Fund, etc.) for more wealth, and less risk, taxation, and confiscation. More at #6 on p. 80.
Five Key Issues
The five topics below
focus on how to find and use info sources and strategies you may not have considered before.
1. Instead of just ‘Price’ (from ‘Dow Jones’ etc.), the ’Value’, or ‘Purchasing
Power’ (PP), of your investments is what you should want to increase. You can test changes in PP by tracking how much
of a ‘standard product’ (ie, a common product with minimal exposure to politics, subsidies, tariffs, offshoring,
price controls, and new technology), such as a cement block, a loaf of normal bread, a room at Motel 6, a Big Mac burger,
etc. that your investment will buy. Price increases in these items are caused primarily by loss of currency PP. Don’t
use milk, eggs, or gasoline. They are distorted higher because of corn subsidies (and high demand due to the government pushing
corn-based ethanol for gas), and wars in the middle-east. Radios and portable devices (pocket calculators, cell phones, iPads,
etc.) are lower because of cheap integrated circuits, mass production, and offshoring of manufacturing. For a recent change,
look back at the early 1970s, before the 1971 ‘no gold’ floating USD inflation took effect. Notice that family
cars cost about $2,000 and are about $20,000 today!; same for Motel 6 going from $6 to $50. To look back further, go to Figure
1 on P. 42 to see the 98% loss of USD PP sjnce the Fed started in 1913.
The ‘price’ of your asset in currency ‘X’ may go up, but if the PP of the currency in
which it is ‘priced’ falls by a greater percent, you have lost value. Again, foreign exchange markets are a good measure of ‘relative’
changes (one currency to another) in PP of currency, but they may all be falling! The ‘absolute’
PP is measured by how much of ‘standard products’ (not affected much by subsidies or politics) a currency unit
2. Domestic IRAs and 401(K)s have tax advantages, but; a) their
contents can be confiscated by the government (US or other) and replaced with a high-risk, or near worthless, bond (Obama’s
‘MyRA’ is a first step), or b) drop in value if the USD keeps falling, etc. This even applies to Gold IRAs because
the IRS requires they must all be kept in their ‘approved’ vault in the ‘Delaware Depository’ in Wilmington
which makes it easy for them to confiscate the gold.
3. The yield on CDs and bonds
is negative if the PP of the currency in which they are denominated falls at a higher rate than the CD interest rate. (see
4. The Dow Jones Industrial Averages (DJIA) may rise, but you
need to consider how much of this is price inflation caused by falling currency value. This ‘false happiness’
caused the stock boom of the 1990s, and continues today because of the QE program. When the Fed increases the money supply
(monetary inflation), each existing USD becomes worth less (2 words!) and this means more USD are needed to buy any good or
service (price inflation). For protection from losses due to failure of your broker, visit www.bulletproofshares.com.
5. Most important, all fiat money (not redeemable for a valuable
commodity, and forced to use at face value by legal tender laws) eventually falls to little or nothing in value (purchasing
power). As shown in Figure 1 on P. 42, the USD has lost 98% of its PP since the Fed started in 1913.
Key Point: Most investors don’t consider all of the above five issues, so they become victims of falling
currency values, and often don’t even know it. You will read below the advantages of currency and nation diversification,
and personal possession of bullion. Under duress, laws mean nothing to the government. Remember the Cyprus ‘bail-ins’
of 2013 (deposits were replaced by worthless bank shares).
consider the four ideas below as a supplement to all you know from strategy that most ‘traditional’ securities
1. Select a Wealth Manager who thinks beyond the ‘conventional wisdom’,
and considers currency value risks, and government taxes and confiscation, to create your plan for more wealth. (see p. 80)
2. Watch trends in the purchasing power, based on the foreign exchange markets,
of the currency in which your ‘paper’ assets are denominated,
3. Consider the possibility of taking ‘physical possession’ of commodities
you own (such as gold; handy for storage because it is small in size for a high value), and
4. Know the politics (corruption, restrictions, etc.) of the nations whose securities, private business stocks,
and currency you buy, or use for storage of PM.
For example, a key event occurred on July 1, 2014 when the U.S. activated the Foreign Account Tax Compliance Act (FATCA; see Appendix, p. 86) which will require all banks worldwide to file an egregious amount of forms and documents with the US government
if they accept US citizens as clients. The foreign bank will be subject to a 30% withholding tax on any “withholdable
payment” made to its proprietary account for failing to comply with FATCA. Many banks are refusing to deal with
US citizens, thus time is running out to freely ‘internationalize’ assets!
Table 3 below shows the ranking of the Top 10 nations with ‘strong’
currencies and economies (stable and less likely to decline in value than others). Note that Japan and the Eurozone Bank are
engaging in major monetary inflation and may fall off the list.
Table 3: Ranking of Nations with Strong Currencies
| || |
| || || |
(10 yrs) %
(% of GDP)
(Source: SeekingAlpha.com/article/313342, Dec-2011 except Debt/GDP is
Dec-2012; the same order in Jan-2015)
The trend is up (worse) for the Debt/GDP ratios of all countries except China, Australia, Switzerland, and Sweden
(Sweden was 37.2% in Dec-2012, and is considered a strong currency). The Chilean economy has grown well since their conversion
from a military dictatorship (Pinochet) in 1990, to democracy and free market policies. Their peso (CLP) has strengthened
against the USD since 2004, and their Debt/GDP ratio is only 12%. Their stocks, currency and land are becoming attractive
for purchase. Countries with the best combination of numbers in Table 3 will be attractive to investors seeking currency diversification.
Note that negative trade balances and high debt-to-GDP are a warning of future decline.
As I write in Nov-2015, a US citizen can still buy Precious Metals
(PM) without the government knowing (good, it’s none of their business!), but as the USD falls, the government gets
desperate for ways to protect itself from; 1) falling faster, or 2) citizen use of other currencies and PM, at home and abroad
(see BRICS, P. 54).
For your convenience, some firms
you can use are shown below. Some are ‘contrarian’, and not likely to be mentioned by mainstream, ’conventional’,
securities brokers. Search the Internet for others. Many offer newsletters.
1. Precious Metal Dealers; Shop-around; check on their ‘premiums’ (price above ‘spot’), minimum order size, ‘ship
and insure’ fees, etc.; SchiffGold.com (articles and radio info by Peter Schiff, and EuroPacificFunds.com), JMBullion.com,
MoneyMetals.com, InvestmentRarities.com (newsletter), Caminocompany.com,
Monex.com, JimsCoins.net, LearCapital.com, Apmex.com, Blanchardonline.com, HardAssetsAlliance.com (click on choices at top of HardAssets home page), GoldSilver.com
(articles by Mike Maloney), MilesFranklin.com (articles by Andy. Hoffman), Gainesvillecoins.com, Goldmoney.com, SwissAmerica.com,
GlobalGold.ch, Sgpmx.com, MerkGold.com, BGASC.com, and NWTmint.com.