(The text below was published in
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’.
Private Mints Issue Gold as Money
Abolish Legal Tender Laws
and the Fed
Adopt Dave’s ‘Private Gold Standard’
Quotes and data shown herein are used by permission or under terms of the Fair Use laws.
All sources are attributed by showing their web site.
Copyright © 2013 for all editions, by David Redick, 1935 - . All rights reserved. No part of this book may be used or
reproduced in any manner without written permission, except by a reviewer who may quote brief passages, with credits. For
information, contact the author at RedickD@aol.com.
January, 2010 106 pages
Second Edition February, 2010
December, 2010 116 pages
Fourth Edition November,
2011 134 pages
Fifth Edition February,
2012 138 pages
Sixth Edition June,
2014 146 pages
Published by: ‘Forward USA Foundation’, www.Forward-usa.org
Library of Congress Control Number: 2009941213
ISBN: 1449904238 , EAN-13: 9781449904234
Printed in the USA by CreateSpace.com, a DBA of On-Demand Publishing LLC, part of the Amazon group of companies.
Other books by Dave: First
edition dates are shown, but all books have been updated as needed.
1. ‘Rebuild America Now’, June-2009, 156 p.; Presents a broad range of
problems and solutions about the Federal government.
2. ‘How to Protect and Grow Your Wealth’,
April-2014, 106 p.; Internationalize your assets to avoid decline of the US Dollar, capital controls,
and confiscation, and to minimize taxes.
3. ‘Build the New GOP’, March-2013, 156 p.; A manual for new-generation
candidates and leaders. Restore basic principles.
4. ‘What a
Libertarian President Would Do’, May-2013, 156 p.; How a Libertarian President would change policies and create more peace, justice, and prosperity for all citizens.
All books are available on Amazon.com.
As with my first book
‘Rebuild America Now’, this book is dedicated to my daughters, their families, and all others in their generations
and beyond, who will inherit the debt, losses, and problems discussed in this book.
I hope my work makes things better for them.
"Give me control of a nation's
money and I care not who makes it's laws" –1790, Mayer Amschel Bauer Rothschild
only thing necessary for the triumph of evil is for good people to do nothing.", Edmund Burke
"Resistance is not futile, but the most constructive and
noble stance of all.", Lew Rockwell
"There are lots
of bad governments in this world. The only bad government we have a right or obligation to change is the one in Washington,
D.C.", Charley Reese
“Conspiracy theories abound
in our society, and are widely accepted, provided you are identifying the "politically correct" conspiracy……
I, for one, gladly admit to the embracing of any conspiracy theory for which there is credible evidence.”
"Principles are intended especially to guide our behavior in difficult timees. If they don't do
so, then our proclaimed principles stand revealed as having been nothing but rhetoric in the worst sense of the word.",
"An honest politician is one who when
bought, stays bought.", Simon Cameron
men and women of capacity refuse to take part in politics, they condemn themselves, and the people, to the punishment of living
under bad government.", Sam Ervin
“A nation of sheep will beget a government of wolves.”, Edward R. Murrow
“If you have interest rates
at or near zero, you essentially discourage people to save and encourage them to speculate.", Marc Faber
US Monetary System
A Brief History of Money
15, and U.S. Silver Coins 18
US Central Banks 21
Creating the Fed
Structure of the
Effects of the Fed and Other Central Banks
The Impact of Fake Money 29
The Feds’ Record of Results 36
The Heroin Analogy and Price Inflation 38
Monopoly Money and
Legal Tender Laws 41
Central Banking and Meddling Worldwide 51
3 The US Banking and Securities
The System 61
of the System by Banks and Congress 62
of the Sep-2008 Wall Street Debacle 71
The Bad News 79
Politicians Use Fake Money to Keep Their Jobs 82
4 Use of Gold as Money
Why Gold? 87, Redick’s Four Monetary Rules
A Five-Step Plan to Convert to Gold as Money
The New Gold Money Era
The Challenges 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
Table 2: Gold Reserves vs $M1 and Forex
Table 3: Gold
Reserves per Person
Table 4: History
of Central Bank Gold Reserves 111
Table 5: Bullion
Coins and Medallions
Table 6: Weight
Conversion (for precious metals) 141
Figure 1: Monetary Base (M0) 1918 to 2011 47
Figure 2: The Shrinking Dollar
Page 9; Introduction
This 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.
The 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.
What 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 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
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 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.
The purpose 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.
For 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)
1935: Born in MI
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
-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)
- 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).
Page 15; 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 US 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 system.
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 bimetallicstandard
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 site Forward-USA.org.
The Gold Standard Act of 1900 ended bi-metalism
(a fixed ratio of gold to silver value), and required the US Mint must hold at least 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 ’US 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
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
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.
By 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 value. 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, 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? (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.
“The 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,
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 Island.
A. P. Andrew: Assistant Secretary of the U.S. Treasury
Davison: Senior Partner of J. P. Morgan
Company, emissary of J. P. Morgan
Norton: President of the Morgan-dominated
First National Bank of New York
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.
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
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)
Aldrich 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.
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'
A supplemental control mechanism occasionally used by the Federal Reserve Board is that of changing the margin requirements
involved in the purchase of securities.’
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.
factors are not how private corporations are created or operated. The Fed entails government 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
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!
Page 29; Chapter 2: Effects of the Fed and Other Central Banks
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! They want to be viewed
as 'normal', not a radical 'gold bug' who respects the importance of sound, or ‘real’, money which
means gold or silver coins, and paper redeemable in gold by anyone, on demand. This requires an ethical lapse where the fake
nature of the money is ignored in order to (hopefully) gain an advantage from it.
creation 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 never
seen in the history of the world.
Our fiat paper money (‘fiat’ means face value declared by government; not redeemable in precious metal) is the
primary de facto (not ‘formal’, since 1971) world’s ‘reserve currency’ (anyone will accept it
for payment, and keep it as cash, or as a dollar-denominated asset). 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 US) will accept it, and we can pay our
debts with it, even as the federal government spends to excess. We have abused the 'privileged’ status
of the US 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 wars (expensive).
The official FY2011 (started Oct. 1, 2010) US budget was updated in August, 2011
by the Treasury and Office of Management and Budget (OMB) to $ 2,302 billion receipts, and $3,601 bn spending, thus a deficit
of $ 1,299 bn. Private analysts estimate it will be about $1,600 bn!
Table 1: The Honest National Debt ($ Trillions)
$ 112.4 Medicare;
A+B=$89.8, D=$22.6 (unfunded)
17.1 Social Security (unfunded as of Feb-2013)
National Debt (liabilities it is obliged to fulfill;
includes federal debt, pensions and health
benefits, and state and local gov’t)
$ 146.9 tn
USDebtClock.org, June 3, 2014)
The ‘official’ government
debt figures ignore the Table 1 Medicare and SS items, plus potential trillions that loom due to losses among the about $5.3
trill. of mortgages owned by Fannie and Freddie, now government-owned (who as of Nov-2011 warn they may need $400 bn more).
The deceit is exposed by the fact that
after Congress increased the federal debt limit to $12.104 trill. in Feb-2009 (80% of GDP), in Feb-2010 increased it to
$14.3 trill., and in Jan-2012 to $16.4 trill. (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. ’ 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 that Obama’s
new health plan will cost.
In 1970 the national debt was $380.9
bill., and 37.6% of the GDP (see Glossary). In 2010 it was estimated at $14,456.3 bill., and 98.1% of the
GDP. Most of the increases occurred after 2002. No one believes this 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, but this would likely cause hyper price inflation, and destroy the US dollar and economy.
Horrible choices, all thanks to irresponsible government leaders, and their willing dupes, on Wall and Main Street.
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.
While ‘inflation’ 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 possibility.
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% to ‘put the brakes on’, just as he ended his final term and handed the reins (and keys to the vault and
printing press?) to Bernanke. The sudden Fed increase
caused mortgage rates to rise, which in turn triggered the 2007 decline in housing prices and purchases, and started the worldwide
depression. Fed intervention strikes again! The U.S. economy failed quickly because many banks and Wall Street firms were
highly leveraged (over 25:1) in risky investments and could not tolerate losses.
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 fraud.
Massive amounts 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!
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 Feb-2013, results have been disappointing
as unemployment gets worse and prices rise. So much for fixing by flooding.
G. Donlan, Editorial Page Editor of ‘Barron's’ (Barrons.com) said it well in Oct-2010; ‘TARP is 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. They have re-defined 'capitalism'
and 'corporations' so they have straw men to attack. In fact, Capitalism is just an ‘economic system'
based on private ownership, free enterprise, and minimal regulation, and corporations are primarily just a way to
raise money through sale of shares. 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. 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.
History 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 of Results
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!!
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, Bernanke - Fed Chm. since February 1,
2006 -, Greenspan, 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!
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.
As 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.
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! “
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.
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
Econ 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.
The 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)!
Money and Legal Tender Laws
Alan Greenspan was Chairman of the Federal Reserve System from
1987 to 2006 and was thus the chief, self-serving, 'pusher, dealer' of heroin money (excessive increase in money
supply) into the US economy. He did this to keep his job (the Chm. is appointed by the President every 4 years) with
full knowledge of, a) the risk of 'distortions' that the equally complicit Congress and Presidents would use it for
(war costs, cheap loans for houses), and b) the resulting reduction in value (purchasing power vs. other currencies) of
the USD. His meek excuse in Nov-2008 that: 'I erred in trusting the free market' is a lie, and he should be treated
as a self-serving liar. He knew he was doing harm, as all heroin pushers do. I 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!’ Congressional 'leaders' like Sen. Dodd and Rep. Frank deserve equal shame, plus others.
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 and fake money, but they were ignored. The crash of Oct-2008 was the result!
The Fed 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), 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.
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);
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!
The Act 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.
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. Within a few years, all
nations had done the same, including conservative Switzerland, and everybody could make money out of thin air!
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 by
Greenspan 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 !
The 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 early 1990s.
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 recently (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!!
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:
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.
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.
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.
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’. Gary North said
in his Nov. 4, 2011 newsletter: ‘The G-20 was
created to deal with the first major threat to the New World Order's plan to launch the Euro in 2000, as the first step
in the establishment of a worldwide managed currency.’
Their 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, to be held in St. Petersburg, Russia, on September 5-6, 2013, will be the main G20 event of 2013.
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 pit.”
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.
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 is expected to be
aggressive in centralizing financial planning in the Eurozone (bye, bye, sovereignty!).
northern nations were using the European Financial Stability Facility (EFSB) to support the south (Greece,
Italy, Spain), 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’ currency.
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. As Pat Buchanan said (buchanan.org): ‘The reaction was so scalding that the regime had to back off
raiding insured deposits. The little people of Cyprus were spared. Not so the big depositors, among whom are Cypriot entrepreneurs
and thousands of Russians. Their 10 percent "haircut" has now become an amputation. Large depositors in the Bank
of Cyprus, the island's largest, face confiscation of 60 percent of their capital. In Laika, the No. 2 bank, which is
to be euthanized, the large depositors face losses of up to 80 percent. All of Laika's bondholders will be wiped out,
and all employees let go. When the Cypriot banks opened again on March 28, capital controls had been imposed. Only 300 euros
could be withdrawn daily from a bank, and only 1,000 euros out of Cyprus.’
Then …..’ If this persuades depositors to seek security first for their income, pensions and savings,
and to transfer funds out of risky banks into more solid institutions, is that such a bad thing?’
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’!
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.
Will Germany end the futile game by reviving a gold-backed ‘New
Deutsche Mark’? 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 site.
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 (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! If we keep spending
and borrowing (increasing our deficits and debt) too much, and keep creating new money (inflate the money supply) to pay for
it; 1. The USD will crash in purchasing power (PP), 2. We will not be able to afford foreign purchases with our soon near-worthless
paper money, 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. Some claim this is a key reason why Bernanke
is creating trillions of new USD with his QE-1, 2, 3 programs! 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 as the primary reserve currency for world trade.
The IMF is pushing to implement the ‘Bancor’, which has been introduced as the currency version of the SDR. 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!
Page 61; Chapter 3:
Banking and Securities System
The System includes,
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
4. ‘Stock Exchanges’
(SE), which sell securities (shares) issued by corporations. Examples are: New York SE, Pacific SE, NASDAQ, etc.
The 'system' is regulated by the:
'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,
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)
'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,
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
8. The '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 ‘connections’.
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 excessivehigh 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.
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
Another 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).
D. Federal 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!
Excessive 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
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.
In 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.
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.
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.
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.
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, 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. Both 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!
Rep. 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.
‘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
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,
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 loans!!).
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
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.
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
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.
The 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
As 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.
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!!
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!
Governments 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).
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
All 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!
Those 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.
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’.
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.
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’! He should
be sent to the ‘failed-liars’ prison with Greenspan and all complicit Fed managers.
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!
85; 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.) the weight and purity of gold it has on hand
(physically; no encumbering liens or leases) for redemption, and the amount of ‘representative money’ currently
issued. 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.
History 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
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!
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
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
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 9 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.
Rule: Money can be in any form, but this
analysis will discuss coins and paper notes
A. Coins, which can be of two types;
1. ‘Commodity’, 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,
2. ‘Representative’ (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 value transactions.
achieve broad use, commodity coins must be made of, or contain, a material that has these nine characteristics:
1) Rare, with a low amount in existence now, and limited
can be pressed/stamped into coins,
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,
Difficult or impossible to counterfeit,
Homogeneous; a piece is the same throughout,
Divisible into pieces; diamonds and pearls aren’t,
High value per ounce; not bulky to handle or store, and 9) Acceptable to most Sellers; familiar and saleable.
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.).
No government laws shall apply to control the Issuers, foreign or domestic, of coins and paper currency, 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 precious metal
in their possession to redeem notes and tokens.
Third Rule: 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 bank’.
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).
In the US, the above rules would
require abolition of the legal tender laws (as a start), and curtailment or elimination of fractional-reserve banking to ensure
adequate gold for redemption of representative money, and refund of deposits. I recommend that ‘demand deposits’
(checking) 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).
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.
from the Rules
Some of the results of using these
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
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
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
Because 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); Dr. Antal Fekete (1932-), www.professorfekete.com; 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 (also see Ralph Benko’s work there); 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 to
The Five-Step Plan:
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.
The 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.
The 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;
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!,
b. Holders 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
Federal and State governments can issue new gold money, but it would have no privileges over private issues.
4. To implement the new monetary system,
I propose that Congress create the ‘Currency Act of 2013’. 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 Step Plan’,
b) 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% 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 and agencies!
B. International: Terminate US membership in
the IMF (and get our gold back), World Bank, CBGA, BIS,
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.
launched, in my above version of the Private Gold Standard,
value (purchasing power) is self-controlled by supply and demand, with no ‘parities’ to maintain.
Gold and money ‘values’ are the same (gold IS money, and there is no ‘price’ for gold).
No ‘management’ is needed!
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’
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!
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 use of gold with ‘a
system to adjust the supply of base money’ to keep a parity with the currency and gold ‘values’. This is
doomed to abuse and error! He likes ‘modest’ gold reserves, which I fear (again) could lead to ‘redemption
In her book ‘Fixing the Dollar
Now’, Judy Shelton Ph.D. (SoundMoneyProject.org) suggests a ‘Treasury Trust Bond’, redeemable in
Fed Notes or gold, to allow people to ‘get comfortable’ using gold.
leave the above issues up to the Congressional debate during writing of the ‘Currency Act of 2013’.
Reserves Will Affect Conversion
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 as money.
Table 2: Gold Reserves vs $M1 & Forex*
* Forex’ is bank ‘foreign exchange’ reserves of gold, foreign currency,
and foreign bonds used for international transactions.
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.
Will 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.
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.
There 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
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.
Table 4: History of Central Bank Gold Reserves
Source: World Gold Council, Research Study 23
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
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).
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 made.
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
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
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).
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
5. 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
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).
7. In 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
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 system.
Page 111; Chapter 5: The
New Gold Money Era
Challenges of Introducing Gold
Some will say that this plan for new money is too simplistic,
and will not work in today’s 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!
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. Gold money will bring a promising future, while propping-up the
old system just brings more losses and war.
Bullion Coins 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. Since then the US Mint (http://www.usmint.gov/) has issued a variety of gold, silver,
and platinum bullion coins. As shown below, 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.
Although some 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,
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.
Some of the most popular government-issued gold coins are shown in Table 5. See P. 18 for more on coins.
Table 5: Bullion Coins
; Name ; Metal; Sizes (troy oz.); Face Values
Eagle; 0.9167 Gold ; 1,1/2, 1/4, 1/10; $50, 25, 10, 5
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
In summary, we
can expect the following benefits when the new gold money becomes legal:
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.
Noted in this Book. (alpha order)
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, 3) Nov-2012 ‘The America That Was – Now the United (Police) State of America’, lewrockwell.com/casey/casey139, and 4) http://lewrockwell.com/casey/casey150.html . 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.
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
an esteemed author, 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.
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.
8. Laffer 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.
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): He
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,
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
main site; http://www.theburningplatform.com/
14. James 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
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 http://en.wikipedia.org/wiki/Paul_Craig_Roberts.
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.
Ph.D., Judy, wrote ‘Money
Meltdown’ in 1994, ‘A Guide to Sound Money, 27 pages, in 2010, and ‘Fixing the Dollar Now’, in 2011.
She is co-Director of SoundMoneyProject.org.
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
1. ‘The Blowback Triology’, 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 foreign policy.
6. a) ‘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 roll'.
'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
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.
2000’, 1997, by
Gerald Celente. A ‘futures analyst’, he tells how to prepare and profit from changes in the 21st century.
11. Older Books that Gave Warning and Good
‘The Law’, 1850,
by F. Bastiat. With his perspective of the French Revolution, he explains the fallacies of Socialism and how it must degenerate
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.
‘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
‘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.
g. ‘Restoring 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 the trend.
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.
Reason Foundation: A magazine and www.reason.org
Foundation for Economic Education: www.Fee.org
For more on money and gold, visit:
TheGoldStandardNow.org, SoundMoneyProject.org, AtlasNetwork.org, en.wikipedia.org/wiki/Money_supply, http://www.goldstandardinstitute.net, www.gold.org, mises.org/freemarket_detail.aspx?control=483, history.com/minisites/money/viewPage?pageId=52498, DollarCollapse.com, goldmoney.com, cmre.org, fgmr.com, en.wikipedia.org/wiki/History_of_money,goldismoney.info, pgpf.org, measuringworth.com , shadowstats.com/, MoneyWatch.com,transaction.net/money/lets/,professorfekete.com, xat.org/xat/moneyhistory, 321Gold.com, USDebtClock.org
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, dailyreckoning.com, pgpf.org, mises.org, economicpolicyjournal.com, informationclearinghouse.info, a2zPublications.com, trendsresearch.com, freedomworks.com, campaignforliberty.org
1. Remobilize Gold to Save the World Economy
2. Wars and the Lies That Start Them
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 an esteemed author, 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’
By David Redick
Our 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.
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.
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 next target.
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 (Madison, 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.
Mexican-American 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, 1865)
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)
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 (Wilson,
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)
Lies: Defend America.
Truth: Truman and the generals wanted a reason to have troops in the Far East area of our Empire.
Vietnam War (Kennedy, 1955)
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, 1990)
Lies: To defend Kuwait from Iraq. Truth: Saddam was a threat to Israel, and we wanted
Lies: 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.
Iraq (Bush-43, 2003)
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.
Lies: They almost have an atom bomb. Truth:
Oil, end sales in gold, and defense of Israel.
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.
‘Fake Money: Cause
of Wars, Depressions’ .
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.
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.
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.
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.
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 on it.
Thus 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.
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.
Redick of Madison is President of www.Forward-USA.org.
Appendix 4: 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.
- 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!).
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.
allows private ownership of businesses, but there is extensive government control and preeminence.
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’.
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
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’, the economy.
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’.
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
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.
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.).
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
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.
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
16. Standards for Gold-Based
gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold.
1) The Gold
Specie Standard is the system in which the monetary unit is associated with a circulating gold coin. (issuer has
100% reserves for redeemability)
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 inherent 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), 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.
17. Table 6: Weight: Conversion: Common units for precious metals
1 Tonne (metric) = 2,205 pounds (Lbs) = 1,000 Kilograms
= 32,150 troy oz.
US Ton (Short) = 2,000 Lbs advp. = 907.2
UK Ton (Long) = 2,240 Lbs advp. = 1,016.5
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) =
Avoirdupois Lb= 16 avp. ounces= 453.6 grams=7,000 grains
1 Avp. ounce = 28.35 grams
(g), 437.5 grains
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 at
19,600, so it is sometimes gold plated and used as fake gold
and ingots. Steel is 7,850, copper 8,930, lead 11,340, and
Grains, grams, and Tonne are metric units. The Troy system
was started by King Henry II
of England. The Avoirdupois
system evolved through common usage in Europe.
Fineness: The purity of a precious metal measured in 1,000
parts: 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.
4. Biography of Dave Redick
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.
Education 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 ‘Ron Paul 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.
5. Index: Pages for topics in Glossary or Headings are bold type
Banking Central 8, 10-12, 16, 20-23, 28, 29, 36, 39, 51-55,
57-59, 82, 84, 91,94, 106, 108, 111, 112, 114,115,135, 140
…‘Banking Act of 1933’ (called
the ‘Glass-Stegall Act’) 61, 68
Deposits 18, 25, 26, 32, 42, 55, 61- 64, 68, 76, 88, 94, 95,101,139
Fractional Reserves 64, 95, 139
Reserve Currency 10, 15, 20, 29, 32, 46, 51, 57-59, 69, 71, 81, 85,
90, 94, 97, 107,113, 114, 119,
Bastiat, F. 126
Benko, Ralph 99
Bernanke, Ben 26, 27, 33, 34,38, 39, 47, 48, 54, 57, 58, 73,
Bank of US-1, BUS-2, BUS-3
20, 21, 143
Appreciation of gold’s purchasing power 93, 95, 97, 106, 113
‘Coin Act of 1792’ 16; ‘Currency Acts’ 16,
73, 104, 107
Commodity 16, 43, 51, 55 , 61, 62, 65, 82, 87, 90-94, 97, 114, 116,
85, 125, 134
11, 28, 29, 31, 41, 44, 45, 51, 55, 57, 84, 88, 89, 97, 100, 103,
112, 114, 137,
Gold Standards 3, 11, 15, 16-19, 27, 28, 39, 51, 53, 83-85, 96, 99,
100, 104-107, 121-123, 126, 140
Office of Comptroller of Currency (OCC) 18, 61, 74, 78
Four Monetary Rules’ 7, 91, 100, 104
87, 88, 94, 112, 138
(see Banking) 140
Special Drawing Right (SDR) 45, 54, 56
M0, M1, M2, M3; 8, 42, 47, 102-110, 132
38, 87-92, 101, 138
Money-Political Conferences and Orgs
TriLateral Comm. 53, 145; The Mont Pelerin Society 54
Moral Hazard 35, 50, 63, 65; (Perverse Incentive 55,
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.
1 to 3 explained how the USA money, banking, and securities systems started and work 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. Chapter 4 will give you info on how to protect and grow your wealth during these perilous times.
As of April-2014, 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 for more wealth, and less risk and taxation.
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. 41 to see the 98% loss of USD PP.
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, (see p. 41) 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’ a currency unit will buy.
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 accounts.
Visit www.tdvselfdirectedira.com about an off-shore IRA.
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 #1 above)
The Dow Jones Industrial Averages (DJIA) may rise, but you need to consider how much of this is due to falling currency value.
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 example, if costs of raw materials go up, and a company
increases its product price to compensate, the number of dollars in that profit will be greater and will appear as more earnings
per share. This makes investors happy if they are unaware of the false nature (no increase in purchasing power) of these higher
earnings. This ‘false happiness’ caused the stock boom of the 1990s. For protection from losses due to failure
of your broker, visit www.bulletproofshares.com.
how the MF Global meltdown robbed investors!
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. 41, 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. Most brokers
ignore these issues because they only offer USD denominated securities and it would reduce their income if clients left them
to buy PM from a commodities dealer or a broker who offers securities (equity and bonds) denominated in foreign currencies.
This book strives to
inform you on the perils of falling currency values, and how to protect yourself with a Wealth Management Plan. Thus you will
read below the advantages of currency 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).
Please consider the four ideas below as a supplement to all
you know from strategy that most ‘traditional’ securities brokers promote;
a Wealth Manager to create your plan for more wealth, and less risk and taxation.
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.
example, a key event will occur on July 1, 2014 when the U.S. activates the Foreign
Account Tax Compliance Act (FATCA) 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 will refuse to deal with US citizens,
thus time is running out to freely ‘internationalize’ your assets! (see Appendix A)
Table 2 below shows the ranking of nations with ‘strong’ currencies
and economies (stable and less likely to decline in value than others).
2: Ranking of Nations with Strong Currencies
(10 yrs) %
(% of GDP)
SeekingAlpha.com/article/313342, Dec-2011 except Debt/GDP is Dec-2012)
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 2 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 June, 2014, 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. 48). For example, on Jan. 1, 2014 Connecticut
imposed gun controls, record-keeping about the buyer, and limits on PM purchases. The citizens are fighting the new rules.
For your convenience, some firms you
can use are shown below. Some are ‘contrarian’, and not likely to be mentioned by mainstream securities brokers.
Search the Internet for others. Many offer newsletters.
Precious Metal Dealers; Shop-around; check on their ‘premiums’ (price above ‘spot’),
minimum order size, ‘ship and insure’ fees, etc.; Europacmetals.com , InvestmentRarities.com, Caminocompany.com,
Monex.com, JimsCoins.net, Blanchardonline.com,
HardAssetsAlliance.com (click on choices at top of HardAssets home page), GoldSilver.com, JMBullion.com, MilesFranklin.com,
Gainesvillecoins.com, Goldmoney.com, SwissAmerica.com, sgpmx.com, and NWTmint.com. There are many others. Visit
Here are some ideas for
basic items to buy:
When the USD crashes, pre-1965 US silver
coins (see P. 18-20, ‘junk silver’), and new government-issued bullion coins (such as gold or silver Eagles),
will be useable as money (by weight and fineness/purity) because Sellers will know their content. For example, if silver rises
to $80 per oz (4 x April-2014 price) a pre-1965 dime (0.072 oz silver) will be worth $5.76, and a Silver Eagle (1 oz Silver)
$80. Since 1986 the US Mint (www.usmint.gov) has issued a variety of gold, silver, and platinum bullion coins. As shown in
Table 3 below, their face values are far below their bullion market value, and thus, though they are legal tender, are
not used in commerce. Many US dealers sell the bullion, medallions, numismatic coins, and bars issued by various countries
and private mints. Be careful, bars and ingots are easy to fake by plating base metal with a precious metal.
Table 3 shows some of the more popular
bullion coins (all made by government mints). There are many more.
Table 3: Popular Bullion Coins
; Name ; Metal;
Sizes (troy oz.); Face Values ($)
; Gold Eagle; 0.9167 Gold ; 1,1/2,
1/4, 1/10; $50, 25, 10, 5
; Silver Eagle; 0.9999
Silver; 1 ;
0.9999 Gold; 1,1/2, 1/4, 1/10; C$20,10,5,1
Africa; Krugerrand ; 0.9167 Gold; 1, 1/2, 1/4, 1/10; no FV
R. China ; Panda ; 0.9999
Gold ; 1, 1/2, 1/4, 1/10 ; no FV
(24 carat = 0.9999 pure gold 22 carat = 0.9167 pure)
2. Precious Metal Storage:
Once you own some precious
metal (PM), where do you keep it? Most dealers work with domestic or foreign ‘vault’ firms you can
use. Some have their own (sgpmx.com). But most banks and commercial vaults are not safe (even overseas) because the U.S. government can use ‘lockouts’,
bank ‘holidays’, ‘Bail-ins’ like Cyprus, or ‘forced exchange’ for bonds or fiat
cash, etc. to prevent access by you. This is ‘confiscation’ (theft?) they claim is legal based
on the 1917 'Trading with the Enemy Act'!). If you keep it in your possession, it must also be safe from burglars.
Most gun stores sell lockable cabinets. A somewhat bizarre, but useful, choice is to bury your PM in a sealed container in
a private place such as your backyard. A two to four foot long piece of 4 or 6 inch diameter PVC pipe from your local hardware,
with end-caps glued on, will work. Plant a bush over it and tell 2 trusted people where it is in case you die, or forget.
3. Precious Metal Mines: These are high risk/reward investments. Credible sources for
Doug Casey CEO of Caseyresearch.com, and his staff, are world experts on PM mining; see Caseyresearch.com .
b. The EuroPac.net ‘Gold Fund’
(EPGFX) invests in precious metals, PM producers, PM exploration,
and prospecting companies. See; EuroPacificFunds.com
c. ‘Streetwise Reports’ publishes ‘The Gold
Report’, that includes info on mines at; theaureport.com/pub/htdocs/38.
d. Mining.com offers
‘Global Mining News’ and issues free reports on mining minerals and precious metals.
e. The ‘World Mining Congress’ (http://www.wmc.org.pl/) has members worldwide and holds annual conventions.
The ‘World Gold Council’
(www.gold.org ) is a non-profit association of the world's leading gold mining companies, that promotes the use of gold.
Foreign Currencies and Equities:
a. Euro Pacific Capital, Inc. (EuroPacificFunds.com, EuroPac.net)
is a broker-dealer that offers a variety of services and products, including seven mutual funds they created (for ‘nation
diversity’), and precious metals. Look at all parts of the above sites for details. They promote geographic and currency
diversification. (Note: Europacificbank.com cannot be used by US citizens)
b. Merkinvestments.com offers 4 foreign currency funds (merkfunds.com), and reports.
Also see vanguard.com
c. EverBank Financial Corp. (EVER, Everbank.com) is a U.S. bank
that offers savings accounts denominated in foreign currencies. The
EverBank ‘Evolving Economies’ Certificate of Deposit (CD) diversifies your money into a basket of currencies
that get stronger as the USD declines.
d. For exchange rate info, transfers, and brokerage, see Forex.com
and usforex.com .
5. Wealth Management Consultants
There are a variety of ‘traditional’,
‘mainstream’, Financial Planning firms, often part of banks or securities brokers, but to my knowledge none have
the ‘new generation’ combination of legal and market protection, and multi-generational structure, that TDV plans
offer, as discussed below. TDV works with a few Advisory firms that have compatible views on monetary and legal issues, and
are CFA-licensed. I will focus on the TDV services in this analysis.
TDV Media & Services, LLC was started
by Jeff Berwick, CEO, and has grown to a family of news and investment services, including TDVWealthManagement.com, (TDV-WM). I have a business
relationship with them. Please contact me at Dave@SaferInvesting.org (or RedickD@aol.com, tel. 608-469-8922) to schedule a presentation, and on request, a price quote. Thanks.
urge you to attend one of their 3 day ‘Crisis Conferences’ (at
a resort hotel) to meet, and hear presentations by, the staff of TDV-WM. Visit; TDVWealthManagement.com/crisis.
It is a great way to learn about their unique services and methods.
The staff of TDV-WM assists investors to implement
their choice of an international diversification of assets based on creating an International Business Company (IBC), Multi-Generation
Succession Program, a Charitable Trust for tax minimization, and bank accounts. All are located outside of the USA, and custom-developed
by the TDV-WM professionals to suit each client. To minimize setup and operating costs, you can join a Group Plan.
There are many reasons to incorporate out of the USA jurisdiction
and other options for TDV-WM clients to take advantage of, so the TDV-WM staff works to understand the wants and needs of
each client to insure the proper jurisdiction and plans are chosen. TDV-WM uses its’ working relationships with licensed
Financial Advisors, as needed.
create a legal structure for a ‘Multi-Generational Succession Plan’, designed to fit your needs and goals, using
an ‘International Common Law Trust’, an ‘International Business Corp’ (IBC), and a ‘Charitable
Trust’, all based in a safe foreign jurisdiction. We believe our approach is unique as to the asset safety and growth
it offers you and your future generations. Key points are:
1) It is fully legal, in both the spirit and letter of the law, and uses no loopholes
are no capital gains taxes when you join our plan, and thereafter. You ‘transfer’ ownership of your assets to
the Charitable Trust. There is no ‘Sale’.
3) You are protected from the onerous documentation rules of FATCA (see the index)
because the Trust owns your assets (but you control the Trust). FATCA applies to ‘personal’ assets.
provide protection in a unique legal structure, not investment advice, and encourage you to have your current Advisors join
us in a conference-call to assure our credibility.
Now that you
are more aware of the worsening legal and currency investment risks you face, what should you do? The solution is to get your
money out of the USD and invested in hard assets, protected by a foreign trust, before the dollar declines further and currency
controls are put in place. The solution is to internationalize your assets in a tax efficient manner without losing any control.
MULTI-GENERATIONAL SUCCESSION PLAN
and away the most effective way to migrate assets out of the US and diversify them internationally is to establish a Multi-Generational
Succession Plan. This is a three step process that results in extraordinary benefits including:
extremely high level of asset protection from creditors and frivolous lawsuits
Investment restrictions are eliminated
control over the assets
• Significantly reduced reporting requirements
Capital gains taxes on appreciated assets are eliminated
• Estate tax
is avoided (for you and all future generations)
• No probate
Generous tax deductions may be realized
• Tax on future investment
• Qualified plan assets such as IRAs can be protected
from creditors and future rule changes.
Benefits: The Multi-Generational Succession
Plan provides you and your family with the ability to invest assets worldwide in any type of investment without restriction.
The assets will not be subject to creditor attacks, frivolous lawsuits, future US currency controls, or other unnecessary
For more details, see full text of Berwick’s Jan. 7, 2014 essay ‘The
Top 5 Reasons Why You Should Get Out of The Western Financial System Now’ in Appendix 1A, p.
74 (plus 1B and 1C).
of Your Investment Portfolio
wish you Good and Safer Investing ! Please send
comments to Dave@SaferInvesting.org (or RedickD@aol.com, tel 608-469-8922), and go to www.SaferInvesting.org for more information.
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.
Reason Foundation: A magazine and www.reason.org
Foundation for Economic Education: www.Fee.org
B. Internet Sites:
1. For more on money and gold: visit en.wikipedia.org/wiki/Money_supply, fgmr.com, http://www.goldstandardinstitute.net, www.gold.org, mises.org/freemarket_detail.aspx?control=483, history.com/minisites/money/viewPage?pageId=52498, DollarCollapse.com, goldmoney.com, cmre.org, en.wikipedia.org/wiki/History_of_money,goldismoney.info, pgpf.org, measuringworth.com , MoneyWatch.com, transaction.net/money/lets/, xat.org/xat/moneyhistory, 321Gold.com, GATA.org, Kitco.com,
Web Sites about Government & Economics: See a flow of essays from; PaulCraigRoberts.org, 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, dailyreckoning.com, pgpf.org, mises.org, shadowstats.com, economicpolicyjournal.com, informationclearinghouse.info, a2zPublications.com, trendsresearch.com, freedomworks.com, campaignforliberty.org, USDebtClock.org , theeconomiccollapseblog.com, economiccollapse.org, Dave’s essays, App. B, p.87.
A. Problems with FATCA and
IMF; by TDV
Reasons to Get Out of Western Financial Sys. 74
2) The IMF Will Take All Your Money
3) FBAR, FATCA, and Capital Controls,
B. Dave’s Published
Internet Essays (13)
C: Table 4: Weight: Conversion: Common units for 91
The Top 5 Reasons Why You Should Get Out Of The Western Financial
By; Jeff Berwick, Chief Editor,
people are not aware of the incredibly dire, impending risks of holding your assets in the Western world in the immediate
future. Mainstream media will not tell you about much of this. Politicians and government definitely won't.
this is all factual information, all from government sources, in fact, with references that paints a very clear, dire picture.
The picture couldn't really be any clearer once you see this information.
is just the top five of literally dozens of reasons why you should be looking to secure your assets now.
1. The International Monetary Fund (IMF) announced in Oct-2013 that due to government debt levels in developed (read: Western)
countries being at 200 year highs that there will be severe "financial repression" necessary. What do they
define as severe "financial repression"? They give a number of possibilities including outright debt default
(which will cause a financial system collapse) or an "inflationary surprise" (hyperinflation, destroying the Western
currencies). In either case, having your assets in a bank or brokerage account in the West will likely lead to near
destruction of the value of your money/capital.
2. FATCA (Foreign Account Tax Compliance Act).
Not many Americans know anything about this but if you do have money or assets outside of the US, you already are supposed
to file a FBAR (which essentially means, 'tell us where your money is') and a Form 8389 (which essentially means,
'tell us where your assets are'). Failure to file is punishable by extreme fines. To make matters worse,
if you don't have any assets or money outside of the US, FATCA is coming into effect on July 1, 2014 and will all but
make it nearly impossible to expatriate your assets.
Income Tax. Until just a few years ago it was only the US and Eritrea that actually demanded that you pay a
worldwide income tax in your "home" country no matter where you lived or resided and no matter where you made your
money. That is all changing fast. In just the last few years numerous countries including Australia, Mexico, Chile
and others have all started to claim that even if you are a non-resident citizen making money outside of the country you still
owe tax to the country of your citizenship. In fact, as we will likely write about tomorrow, Panama just tried to enact
a worldwide income tax over Christmas of this year. What this means is that if you don't structure your financial
affairs properly it is quite likely that no matter where you live and what you do that you will owe a very significant percentage
of your income to the countries (plural) in which you hold citizenship.
Bail-Ins. You likely remember in the spring of 2013 the country of Cyprus just took nearly 50% of everyone's
money in their bank account if they had more than $100,000 in their account. In effect, the opposite of something like
the Federal Deposit Insurance Corporation (FDIC) where instead of protecting your funds the government just takes it. Many
countries have since instituted "bank bail-in" clauses in laws which state that if banks have problems and need
funds (which they will, see point 1. above) that they are legally allowed to take their depositor's money.
These places include every country in Europe, Canada, Australia and
even the US. Jim Sinclair, chairman and chief executive officer of Tanzania Royalty Exploration Corp., and whose family started
Goldman Sachs, Salomon Brothers, Lehman Brothers, and others, has been warning of this for a while. “Bail-ins are
coming to North America without any doubt, and will be remembered as the ‘Great Leveling,’ or the ‘great
Flushing’. Not only can it happen here, but it will happen here...It stands on legal grounds by legal precedent both
in the US, Canada and the UK," said Sinclair.
Fund Seizure. Think it can't happen? It has already happened in numerous countries and the US Treasury
has discussed nationalizing all private pensions in the US. In 2009, Ireland seized €4 billion from its Pension
Reserve fund. In 2010 Hungary told its citizens to remit their private pension funds to the government. Later in 2010 the
French parliament took €33 billion from their national reserve pension fund and in 2011 $80 million in private retirement
funds were transferred to the state’s pension scheme in Bulgaria. And, in September of 2013 the Polish government
confiscated the bulk of the assets of the country’s private pension funds. The writing on the wall is clear, they
will also come for your pensions... and that is beyond the Social Security funds that have already long been taken and spent.
those five reasons alone don't have you incredibly concerned about salvaging your wealth then there is probably nothing
more I can do to help you. None of the above five reasons for the need to do so are conjecture. They all come direct
from the IMF and the US government who have announced their intentions. It can't get any clearer than that.
Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of a popular video podcast. Jeff is a prominent speaker at many of the world’s freedom, investment and
gold conferences as well as regularly in the media.
The IMF Just Announced They Will Take All Your Money and You Won't Believe How
Obviously They Did It!
By Jeff Berwick,
dollarvigilante.com, Jan. 6, 2014
of the reason why I love my job warning people about The impending ‘End Of The Monetary System As We Know It’
(TEOTMSAWKI) is because the institutions I rally against do a lot of the work for me.
I tell you, "In Oct., 2013 the International Monetary Fund (IMF) announced in their ‘Taxing Times’ report
that the financial and political systems are going to steal all of your savings," many people might think that I am just
a little bit off my rocker. But, when the IMF themselves announce that this must be considered an option, I can sit back and
let the researchers over at the IMF do much of the work for me. Although, reading their reports is always a difficult refresher
in "academese." (the dry language spoken by academics), nonetheless, I did gather some key facts from the report.
instance, in the new IMF "commissioned" report it is suggested that if you forget that large debts always lead to
“radical coercive measures,” you suffer from “amnesia.” If that doesn't spell it out, I am not
sure what possibly could.
In the new (“purely theoretical”) study by the IMF, an unprecedented wave of forced measures against the savers of Europe (and it won't just be Europe, it will
be the entire Western world) is called for.
According to the IMF, the Western sovereign
debt crisis will only be eliminated by, ultimately, "financial repression." As if Cyprus wasn't enough?
Because the current sovereign debt of developed countries has reached levels not seen in 200 years.
are some quotes taken from the paper;
magnitude of the overall debt problem facing advanced economies today is difficult to overstate. The mix of an aging society,
an expanding social welfare state, and stagnant population growth would be difficult in the best
the size of the problem suggests that restructurings will be needed, particularly, for example, in the periphery
of Europe, far beyond anything discussed in public to this point.”
What the IMF
states in this report is exactly what we've been saying for nearly four years!
going to start happening faster and faster as these governments grow more desperate, and the toolbox available to the state
runs the historical gamut and was outlined very well by the IMF itself above. Already we've seen wealth confiscation via
“bail-ins” and an onslaught of regulations beyond the wildest of imagination. But, the IMF suggests this isn't
going far enough to fix the current problems facing the western world.
So, although the IMF might
not follow us to our ultimate conclusion, that you should get your assets out of Europe, it is now more important than ever
protect yourself from the threat of wealth confiscation.
But, the threat doesn't
stop in Europe, as the US government also plans to enact FATCA in July, 2014, which is a new level of capital controls heretofore
unseen in the US.
For this reason we held our first ‘TDV Wealth Management Crisis Conference’
in Panama on Feb. 5 to 9, 2014. The conference brought together some of the world's top international advisors to not
only tell you how but actually get you started on a multi-generational wealth preservation journey for which your descendants
will thank you.
At least at this point, if most or all of your assets are taxed, stolen or sequestered
you can't say we didn't warn you. You can't even say the IMF didn't warn you.
FBAR, 8398, FATCA,
and Capital Controls - The Trail That Leads to the Forced Repatriation of Your Foreign Assets
By, Jim Karger, TDV Legal Correspondent, www.DollarVigilante.com June-2012
American taxpayers worldwide
face a June 30, 2014 deadline to file with the U.S. Department of Treasury the Form TD-90-22.1, Foreign Bank Accounts Report, also known as the FBAR.
On its face, the FBAR is just another form in a long line of
forms required by the US government of its citizenry. But, as with all government incursions on privacy and freedom,
the FBAR is much more than a form. It is a first step to the US government having access to American taxpayers'
assets worldwide. To understand how the FBAR fits into the puzzle, one must follow the legislative bread crumbs.
FBAR - "Tell Us Where Your Money Is"
Any U.S. person with a financial interest in, or authority over, a foreign financial account (accounts
that exceed $10,000 in the aggregate) must file an IRS Form TD-90-22.1, Report of Foreign Bank Accounts Report (FBAR). This
requirement also extends to U.S. citizens or residents with signature or other authority over a foreign financial account.
Exactly what constitutes a "foreign financial account"
has been hotly debated. Suffice it to say that the IRS takes a broad view of the term. If you have or believe you may have a foreign financial account, you should consult
with your tax attorney or tax advisor immediately.
The FBAR is not a part of the US tax return. Rather, it is an independent report that must be filed with
the US Treasury, to be received (not mailed) by June 30 of each year.
It is important to be right on what foreign financial accounts to report and to be timely since there are
no extensions available for the FBAR filing and since penalties for failing to file the FBAR are severe, including a civil
penalty of $10,000 for each non-willful violation, and the greater of $100,000 or 50% of the amount in the account for each
violation, with each failure to file a separate violation.
Form 8398 - "Tell Us Where Your Foreign Assets Are"
In addition to the FBAR, beginning in tax year 2011, every US taxpayer with "specified foreign financial
assets" must report them on IRS Form 8938, which was due for most US taxpayers April 15, 2012, this pursuant to Foreign
Accounts Tax Compliance Act (FATCA).
who holds “any interest” in a “specified foreign financial asset” must attach to their income tax
return certain required information (in the Form 8398), if the aggregate value of such assets exceeds $50,000. A “specified
foreign financial asset” includes any financial account maintained by a foreign financial institution, and if not maintained
by a foreign financial institution, any stock or security issued by a non-U.S. person, any other financial instrument or contract
where the issuer or counterparty is a non-U.S. person, or any interest in a foreign entity.
Exactly which assets are covered (and which are not), both for FBAR and Form 8398, remains subject
to dispute, including, for example, foreign real estate owned in a trust or corporation.
Unlike the FBAR, Form 8398 must be attached to your Form 1040. It does not replace the FBAR.
Many Americans are required to file both. Much of the information is duplicative, but other information is not.
Many Americans will, no doubt, fail to file one form or the other,
or both, or fill in the blanks incorrectly, not understanding what is covered and what is not. It has been posited that
the complexity and duplicative nature of these filings reveal an intent by government to insure non-compliance in order that
the taxpayer can be fined and threatened into submission. We will know soon enough.
FATCA to Banks - "In Case You Didn't Tell Us, They Will"
The 8398 required by FATCA will, no doubt, prove to be a challenge to many taxpayers, but it is not the
worst, nor the most invasive, requirement of FATCA. Rather, it is the requirements imposed by the US on foreign banks
that requires them to report to the IRS all their U.S. account holders starting in 2013.
Foreign financial institutions with US account holders stare into the face of a compliance nightmare.
They will have three basic choices: (1) enter into an agreement with the IRS to put procedures in place to identify and disclose
U.S. account holders, (2) accept the 30% withholding tax on U.S. payments, or (3) restructure their businesses to stop serving
U.S. customers, stop offering (and owning) U.S. investments, or both.
Many foreign banks are already closing American accounts, not willing to jump through the hoops of an American
government gone wild with power and hubris. Other banks and financial institutions will comply if only because they
fear the financial repercussions of losing American accounts or having their rights to wire funds into and out of the United
States summarily terminated.
Capital Controls - "Now
That We Know Where Your Money Is . . . "
All of the above is frightening
enough for most, but it is just the beginning. The combination of FBAR, Form 8398, and FATCA's gross impositions on foreign
financial institutions puts the US government just one short step from being able to force US citizens to repatriate
their financial assets to the United States.
FATCA, such a step would be formidable, requiring the US government to actually know of a non-compliant foreign account without
a fishing expedition, then file suit in the foreign jurisdiction in which the taxpayer resided, and finally go through a long
and costly legal process to seize an American's offshore financial assets.
Now, with a knife in each hand, one held to the throats of US taxpayers via FBAR and Form 8398, and the
other to the throats of banks worldwide via FATCA, one need not strain credulity to envision a day US law will be extended
(or simply interpreted by Executive Order) to require foreign banks and financial institutions to freeze or even repatriate
foreign financial assets in response to a demand by the US government for a violation or perceived violation of US law, or
for the "common good", or just because they want the money.
In times of desperation, due process, equal protection and any sense of decency or fairness go out the
window. Under what specific circumstances might the US government be interested in freezing, seizing and/or repatriating a
US citizen's foreign assets? There are many, and they include:
1. To collect from US taxpayers in
arrears. Considering the pending legislation that would permit the US to revoke an American citizen's passport
for owing back taxes, it is not much of a reach to see the same government desirous of seizing those taxpayers' other
assets, including their foreign assets.
2. To prevent capital flight. At such
time as capital begins its flight from the US to other jurisdictions viewed more financially responsible or at least safer
from government confiscation, there is little doubt the US government will institute capital controls, limiting the ability
of US citizens to move money, gold and other assets out of the United States, all in attempt to stabilize what will then be
a failing US dollar.
With over six million Americans
now living outside the United States and more fleeing every day, and an untold number of financial accounts held by those
who still live in the United States, merely limiting capital flight from within the country may not be enough to save
the dollar, even temporarily. With the knowledge of the whereabouts of all taxpayers' foreign financial
assets via FBAR and Form 8398, and with foreign banks acting as reporting and collection agents of the US government, it is
only one short step from forcing those with offshore financial assets to repatriate those assets to the United States where
they will once again come under control of government.
Only Way Out Is Out
Failing to file a FBAR on covered foreign
financial assets is dangerous. The same is true for Form 8398. Once FATCA takes effect on July 1,, 2014, foreign
banking institutions will be providing identities of US account holders, leaving US citizens with foreign financial assets
a Hobson's choice: Either file and identify the whereabouts of their financial assets, making them easy targets
for possible seizure and repatriation, or do not file and subject themselves to Draconian civil and criminal penalties.
There is little doubt that beginning next year, hundreds, perhaps thousands, of Americans will be made examples of in order
to bring the herd into compliance. The question that begs to be answered: "Is there any legal way to avoid identifying
(and thus making a target) of my financial assets, while at the same time avoiding the risk of massive fines and possible
imprisonment for failing to file the FBAR and 8398?" Yes, there is.
Expatriation, the relinquishing or renouncing of one's US citizenship, turning in the US passport,
may eliminate these reporting requirements going forward. But, the costs for some will be high, too high, including
the possibility the expatriate may never be permitted back into the United States.
(See the proposed "Expatriation
Prevention by Abolishing the Tax-Related Incentives for Offshore Tenancy Act," referred to as the Ex-PATRIOT Act, which provides that anyone who
renounces U.S. citizenship and has a net worth of at least $2 million or an average income-tax liability of at least $148,000
over the previous five years would be presumed by the Internal Revenue Service to have renounced citizenship for tax
purposes and would face a 30% tax on future capital gains on U.S. investments - twice the current 15% rate - and
be forever barred from receiving a visa to enter the United States.)
The decision to expatriate should not be undertaken lightly or emotionally. Many factors and individual
circumstances come into play and will be the subject of future articles.
The endgame, however played, is not to avoid filing forms, but to avoid being imprisoned inside the United
States, either as the result of you or your assets being seized, repatriated or limited in movement. In the meantime, the
Hobson's choice remains.
Jim Karger is a lawyer who has represented
American businesses against incursions by government and labor unions for 30 years. He has been the subject of many feature articles,
including, "Outlandish Labor Lawyer Gets No Objections From Staid Clients," published in the Wall Street Journal,
and most recently was featured in an article entitled, "You Can Get There From Here," published by the American
Bar Association. In 2001, he left Dallas, and moved to San Miguel de Allende in the high desert of central Mexico
where he sought and found a freer and simpler life for himself and his wife, Kelly. His website is www.crediblyconnect.com.
B: Links to Dave’s Published Essays
of 3: Government Structure and Conduct
a) The Phases of Empires Aug-2010
How empires rise and fall, and how
five key characteristics vary for each Phase.
b) The Cost of Building and Operating Empire-USA Aug-2010
How owning colonies/territories, or controlling other countries,
damages the economics, civil rights, and morals of the Homeland.
c) ‘Save the USA by Restoring Government to its proper
2, 2012 update of original April 22, 2011
USA governments at all levels (city,
county, state, federal) have grown in power since our founding, and are causing great social and economic harm with their
regulations, spending, and abuses, most of which is unconstitutional.
Internationalize to Protect and Grow Your Assets;
article is designed for investors who are willing to look beyond the asset diversification recommendations issued by ‘traditional’
banks, brokers, and financial advisors (usually all in U.S. dollars), and consider the added diversification of ‘Internationalization’
by converting most of their assets into trust arrangements, and safer foreign currencies and nations.
2. Monetary Systems
Use Gold as Money? Dec-2010
The benefits of using a commodity as money, and why the market
b) How to Abolish the Fed
and Convert to Gold as Money
six-step plan to convert the US to gold as money, allow private mints, and the benefits it would bring.
c) The Impact of Fiat Money as
the World’s Reserve Currency
issuer of the world’s primary reserve currency, the USA can create new money to