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Fed Chairman Ben Bernanke Fears Economic Collapse If the Fed is Audited
During a 4-hour grilling by Congress, Federal Reserve chairman Ben Bernanke made a significant statement that could be perceived in two ways – either as an alarming and veiled threat of Fed-perpetrated financial terrorism, or a prediction that exposure of Fed accounting will culminate in its legal termination. He was questioned by Rep. Duncan on Thursday about his response to the fact that a majority of Representatives (to date, 242 out of 435) are co-sponsoring Ron Paul’s H.R. 1207 bill to audit the Federal Reserve banks.
“Do you think it would cause problems for the Fed or for the economy if that legislation was to pass?”
“My concern about the legislation is that if the GAO (Government Accountability Office) is auditing not only the operational aspects of the programs and the details of the programs but is making judgments about our policy decisions, that it would effectively be a takeover of monetary policy by the Congress and a repudiation of the independence of the Federal Reserve which would be highly destructive to the stability of the financial system, the Dollar and our national economic situation.”
First, I would ask, “Dr. Bernanke, what stability? This nation’s financial system has historically proven to be very un-stable for The People for the 96 years that the Fed has had control of the helm.” The only true stability of the system has been in the growth of wealth held by the banks.
Second, the chairman clarifies once and for all beyond doubt that the Fed is “independent” of the United States government, and that this independence can be repudiated (meaning annulled, abolished). Congress has the power to take back to itself the control of monetary policy for the nation. With Congress in control, at least their policy-making would be free of the private interests of central bank stockholders.
Third, why would a mere audit be construed by the bankers as a takeover? Every other corporation and entire industries are audited, yet they do not consider audits a takeover. The only time a business might fear being taken over due to an audit, would be if they were found to be fraudulent; in which case they would more likely be shut down.
Fourth, why exactly would an audit of the Fed be destructive, unless there were questionable, improper, fraudulent or damning accounting practices, or anti-American policy-making practices? And why was the federal reserve banking system set up to prevent full-disclosure audits in the first place?
United States families have long been struggling to make ends meet, and paying more and more taxes on goods and on income regardless of the technological advances making production more efficient which should afford people more leisure time and a greater ability to build savings; yet the opposite has happened in our nation. Both parents must work, and even that is not enough sometimes. Yet banks have grown to amass billions of dollars in wealth with which to recklessly speculate, while the nation has gone into debt in the trillions of dollars. What is your logical conclusion here? The nation goes into debt, while the banks amass that lost wealth? You must see that the nation’s wealth has been somehow transferred to the bankers. An audit of the Fed central banking system will show just how this was done. Amschel Rothschild said in the early years of his family’s banking empire “Give me the control of a nation’s money and I care not who makes its laws.” President Andrew Jackson said of the central bankers “You are a den of vipers and thieves; I intend to rout you out and by the eternal God I WILL rout you out!” He did, and paid off the national debt, the last time it ever was.
There is no place in the patriot’s life for the attitude of “Ignorance is bliss” regarding the financial policies made for the nation by the people working for the Fed banks. Whatever policies the for-profit Fed has constructed, the policies and profits are not for the taxpayers, they are not for The People of the nation; otherwise we would all be much more wealthy than we are in this, the greatest of nations, today. We would all have savings, we could all afford to be charitable, we could all afford to invest- based on promising companies, not on speculative, casino-type betting on bubbles controlled by powerful banks- if the Fed were not charging interest to the government for the money that the government alone constitutionally has the power to create. The Fed’s system of banking has, however, ensured that our children and grandchildren will be born into paying a share of the debt owed. That is certainly not the ‘better life’ that American Taxpayers work for for their children. Since the government Of The People has the power to create interest-bearing Treasury Bonds, it can create its own non-interest bearing legal tender. Abraham Lincoln’s administration did it, refusing to pay the 24% to 36% interest the central bankers told him they’d charge. Lincoln needed the money to fund the war to keep the states together. Powerful banking interests from England and France had funded those countries’ militaries to back both sides of the North and South. France was poised on the Mexican border, England was poised on the Canadian border. And the United States was fighting for more than tariff law reform- whether they realized it or not- Lincoln’s top priority, as can be seen from his writings, was to preserve the Union. Otherwise, England and France would split the country in two and divide the resources, population and wealth between them. The European central bankers intended to capitalize on the new and prosperous United States. Lincoln’s printing of Greenbacks – non-interest bearing legal tender and fully Constitutional- saved this union; and the Czar’s Russian navy parked on our East and West coasts helped keep England and France at bay while we sorted things out in our Civil War. The Czar at that time was also one of the few leaders who resisted the central bankers’ dominance, and he didn’t want the new United States divided up to add to the English and French agendas, and he admired Lincoln’s outsmarting the central bankers. (Yes, our schools really need to detach themselves from the dumbed-down educational policies largely formed by the Rockefeller foundations.)
Bernanke is afraid that it will be discovered in an audit that the policies for the nation’s money are actually shaped for the benefit of the for-profit owners of the Fed – policies which have certainly worked to ensure the fortunes of the banks at the expense of the nation itself. Is this not treason? Bernanke and every central banker has good cause to be afraid of an audit. The central bankers will no doubt attempt money manipulations and, as always, claim it is not their policy at fault. They do it without fear of audit, why stop when their books are to be examined? It would be protective for the nation if, when an audit IS begun, that the investment banks and firms which have revolving doors for personnel between them and the Fed, have their funds frozen, so they would not be able to throw the economy into chaos.
It is not coincidence that the income tax act was passed together with the Federal Reserve Act; the bankers who authored the federal reserve act saw that their newfound power to charge interest on conjured money loaned to the government would need The People’s money to pay that interest. They have been siphoning the wealth of the American taxpayer in a steady stream for 96 years. The 12 federal reserve banks are owned by their member banks. The member banks are owned by their private owners and stockholders- who require profits above all. Repeal of the Glass-Steagall Act, which forbids banks to co-mingle investment banking with customer service banking was lobbied for by the biggest banks on Wall Street. The Act had been passed to protect depositors (working families) from unscrupulous risk-taking with customers’ money by investment banking. Investment banking is strictly speculative buying and selling of rated assets, betting on markets transactions in derivatives, for the purpose of hopefully making money from speculation for stockholders. The basic legality of ‘conflict of interest’ makes one wonder why and how the big banks were able to get this Act repealed. It is exposure of unquestionable fraud, that any banks or investment firms which lost money in the recent financial meltdown, lost the money for The People. The Peoples’ money should never have been legally permitted to be speculated with by bankers.
Bernanke implies that any attempt to restore monetary policy powers constitutionally granted to the Congress would be seen as a “takeover” (by the bankers of the Fed) and the result would be destructive to the stability of the financial system. Destructive to what financial system exactly? To the monopoly system we’ve had for 96 years which has effectively funneled the wealth of The People into the hands of a few bankers? To the system we’ve had which has perpetrated booms and busts which enable banks to acquire businesses and property for pennies on the dollar? Destructive to the financial system which has built up an unpayable national debt by charging interest to the government for money created out of thin air? And why would audit and discovery necessarily be destructive to the nation’s financial stability? (If you call this stability) Real stability would return, if the interest-charging Fed and its private for-profit policies were eliminated, and the United States would return to printing its own money which charges no interest. The United States can create interest-bearing Treasury bonds to sell for the money it needs; it needs therefore only to create the interest-free money itself, eliminating the ever-growing national debt to the Fed.
"If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People." -Thomas Edison
Saturday, June 27, 2009
Monday, May 25, 2009
If the government can ‘print’ interest-bearing bonds it can ‘print’ its own legal tender
If the government can ‘print’ interest-bearing bonds it can ‘print’ its own legal tender
Letter Written by: Erin McCarthy
Date of Letter: 2009-05-25
Subject: Federal Reserve
http://www.freedomsphoenix.com/Letter-to-Editor.htm?EdNo=001&Info=0057938
I’d like to propose a suggestion to all the small groups across our nation who are working on their various patriotic endeavors toward raising awareness, making preparations for an economic crash, speaking out for our rights, voting and running and blogging and petitioning and emailing and discussing: That we find a way to advocate for curing the disease causing the decimation of the United States – and the cure is, I believe, for the Congress to take up once again its power to coin (as in ‘coin a phrase’; invent) money; debt-free, interest-free money and issue “the full faith and credit of the United States" directly. Let me present some substance for thought on this subject. President Barrack Obama said on Saturday, May 23, that “We are out of money now. We are operating in deep deficits”. In 1933, Franklin Roosevelt pronounced the country officially bankrupt, and ordered the promise to pay in gold removed from the dollar bill. The dollar was instantly transformed from a promise to pay in legal tender into legal tender itself. [Now] 76 years later, Congress could again acknowledge that the country is officially bankrupt, propose a plan of down-sizing and re-organization, and turn its debts into ‘legal tender’. Andrew Jackson completed the payoff of the federal debt after vetoing the then central banking system charter renewal. It has never been paid off since. Congress today needs to take back the power of creation of money from the privately owned central banking cartel misleadingly named the ‘Federal Reserve’, by buying back its own bonds with its own newly-issued legal tender. If that sounds like a radical solution, wake up and realize that it is exactly what is being done right now – not by the government, but by the private Federal Reserve cartel. The difference is that when the Fed buys the government’s bonds with newly-issued Federal Reserve Notes, it doesn’t take the bonds out of circulation. Two sets of securities (the bonds and the cash) are produced where there should only be one. This highly inflationary result could be eliminated by Congress allowing the government to buy back its own bonds and voiding them out of circulation, as paid off. As it stands, as you may already know, the United States government pays interest to the Fed on ‘loans’ of money which the Fed does not have until it is created by keystroke (fraud) at the request of the government. The government ‘prints’ bonds, and the Fed ‘prints’ cash and they trade stacks. Now, both are treated equally as money in the markets, by foreign central banks, by investors, and traded world-wide in huge volumes equally as money. The government prints bonds (for a few pennies each) to sell for various face values, to raise cash for spending. The incentive to buy the bonds are that they are interest-bearing -- their cost of purchase ‘matures’ later becoming worth more. And so, the government is supposed to pay this interest on the bonds owned by everyone. Now, when you and I purchase bonds, we pay with our existing cash. The Federal Reserve does not pay with existing cash; the Fed ‘printed’ the money into existence to buy them. What’s wrong with this picture? All of the $Billions in bonds owned by the Fed cannot, and have not been able to be paid off on time by the government. So the government takes out loans (it is the Congress’ Constitutional power to borrow money) from the ‘Federal’ Reserve banking system to pay back partial sums, or the government prints more bonds for the Fed to ‘buy’ with more conjured cash for the government to use to pay the last wave of bonds, and the Fed ‘rolls over’ the bonds not yet paid and collects just the interest, and you see how the hole has been dug. When one has dug oneself into a hole, *stop digging!
The point is, if the government can ‘print’ interest-bearing bonds which trade like legal tender, it can ‘print’ its own legal tender and eliminate the accumulation of debt to a privately owned banking cartel! Fiat money holds negative connotations for lots of people. However, like a tally system of notched sticks, or shells, or a system of community currency traded as work hours, or like postage stamps or coupons, fiat money (money not backed by silver or gold) is what we use right now, for the simple reason that we believe it is a trade tool of worth. As we’ve all heard, during war times, cigarettes, chocolate and other things were traded for other goods. The faith of the people trading is what gives money its usefulness or worth. Fiat money, printed as easily as bonds by the government, would continue to be used by the people as ‘receipts’ for trade. The difference is WHO is creating the fiat money that makes the fiat currency a tool for private fraud and theft or a tool for a nation’s prosperity. A debt-backed fiat currency is what the Federal Reserve system has produced for 96 years. The federal debt has grown to some $12 Trillion dollars! The Fed has not provided financial stability in those 96 years, which is why its proponents claimed it was needed in the first place. Instead, the privately owned central banking system has siphoned the wealth of the nation to the hands of a very few, very rich people. What, oh what is the interest on $12 Trillion dollars? The Fed and the government know that The People cannot ever pay this back. Fiat currency produced by the government of The People, For The People and By The People would have no debt attached, and would facilitate commerce between The People. Without the “Federal” Reserve interest to pay, there would be no further need for the tax on income. Technically, the government could mint one coin with the entire federal debt/interest stamped on it, to pay off the debt to the federal reserve. If you didn’t already know, a report issued by the Grace Commission during the Reagan Administration concluded that most federal income tax revenues go just to pay the interest on the government’s burgeoning debt. When the federal income tax was instituted in 1913 (same year as the Federal Reserve Act), all income tax collections were forwarded directly to the Federal Reserve. In 2005, the government spent $352 billion just to service the government’s debt. That is one-third of the total individual income tax revenues that year, which totaled $927 billion. A cover letter addressed to President Reagan stated that one-third of all income taxes were consumed by waste and inefficiency in the federal government, and yet another third of any taxes actually paid went to make up for the taxes not paid by tax evaders and by the burgeoning underground economy, a phenomenon that had blossomed in direct proportion to tax increases. The report concluded: “With two-thirds of everyone’s personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the federal debt and by federal government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their government.” The U.S. Treasury itself in January 2004, demonstrated the simplicity of the procedure to buy back its own bonds when it "called" (or redeemed) a 30-year bond issue before the bond was due. The Treasury announced on January 15, 2004: TREASURY CALLS 9-1/8 PERCENT BONDS OF 2004-09 The Treasury today announced the call for redemption at par on May 15, 2004, of the 9-1/8% Treasury Bonds of 2004-09, originally issued May 15, 1979, due May 15, 2009 (CUSIP No. 9112810CG1). There are $4,606 million of these bonds outstanding, of which $3,109 million are held by private investors. Securities not redeemed on May 15, 2004 will stop earning interest. These bonds are being called to reduce the cost of debt financing. The 9-1/8% interest rate is significantly above the current cost of securing financing for the five years remaining to their maturity. In current market conditions, Treasury estimates that interest savings from the call and refinancing will be about $544 million. Payment will be made automatically by the Treasury for bonds in book-entry form, whether held on the books of the Federal Reserve Banks or in Treasury Direct accounts. The provision for payment "in book entry form" meant that no dollar bills, checks or other paper currencies would be exchanged. Numbers would just be entered into the Treasury's direct online money market fund ("Treasury Direct"). The securities would merely change character - from interest-bearing to non-interest-bearing, from a debt owed to a debt paid. Bondholders failing to redeem their securities by May 15, 2004 could still collect the face amount of the bonds in cash. They would just not receive interest on the bonds. The Treasury's announcement generated some controversy, since government bonds are usually considered good until maturity; but early redemption was actually allowed in the fine print on the bonds. Provisions for early redemption are routinely written into corporate and municipal bonds, so that when interest rates drop, the issuer can refinance the debt at a lower rate. How did the Treasury plan to refinance this $4 billion bond issue at a lower rate? Any bonds not bought by the public would no doubt be bought by the banks. Recall the testimony of Federal Reserve Board Chairman Marriner Eccles: When the banks buy a billion dollars of Government bonds as they are offered . . . they actually create, by a bookkeeping entry, a billion dollars. If the Treasury can cancel its promise to pay interest on a bond issue simply by announcing its intention to do so, and if it can refinance the principal with bookkeeping entries, it can pay off the entire federal debt in that way. It just has to announce that it is calling its bonds and other securities, and that they will be paid "in book-entry form." No cash needs to change hands. The funds can remain in the accounts where the bonds were held, to be reinvested somewhere else. The Treasury did it that time using money from the Fed; it could have done it with its own legal tender. Indeed, at this point the only way to fend off national bankruptcy may be for the government to simply issue fiat money, buy back its own bonds, and void them out. That is the conclusion of G. Edward Griffin in The Creature from Jekyll Island, as well as of Stephen Zarlenga in model legislation called the American Monetary Act. Zarlenga notes that the federal debt needn't be paid off all at once. The government's debts extend several decades into the future and could be paid gradually as the securities came due. PAYING OFF BONDS WITH THE FULL FAITH AND CREDIT NOTES OF THE UNITED STATES WITHOUT CAUSING MASSIVE INFLATION The idea that the federal debt could be liquidated by simply printing up money and buying back the government's bonds with it is dismissed out of hand by economists and politicians, on the ground that it would produce Weimar-style runaway inflation. But would it? Inflation results when the money supply increases faster than goods and services, and replacing government securities with cash would not change the size of the money supply. If the government were to buy back its own securities with cash, these instruments representing financial value would merely be converted from interest-bearing into non-interest-bearing financial assets. The funds would move from M2 and M3 into Ml (cash and checks), but the total money supply would remain the same. That would be true if the government were to buy back its securities with cash, but that is very different from what is happening today. When the Federal Reserve uses newly-issued Federal Reserve Notes to buy back federal bonds, it does not void out the bonds. Rather, they become the "reserves" for issuing many times their value in new loans; and the new cash created to buy these securities is added to the money supply as well. That highly inflationary result could be avoided if the government were to buy back its own bonds and take them out of circulation. The Fed way of buying securities greatly increases the money supply and so causes de-valuation of the dollar, the hidden taxation funneling inconceivable wealth to those who create and control the money supply. From 1913 until now inflation of the dollar has been 2950%. A 1913 dollar would now be worth $.034. A wage earner in 1950 could buy a full breakfast, eggs, sausage, hashbrowns, shortstack, juice, and coffee for $.39. This morning I paid $9.60 for the same, an inflation of 2460%. Solving the Social Security Crisis In March 2005, the federal debt clocked in at $7.713 trillion. Of that sum, $3.169 trillion, or 41 percent, was in "intragovernmental holdings" - government trust funds, revolving funds, and special funds. Chief among them was the Social Security trust fund, which held $1.705 trillion of the government's debt. The 59 percent owned by the public was also held largely by institutional investors - U.S. and foreign banks, investment funds, and so forth. Dire warnings ensued that Social Security was going bankrupt, since its holdings were invested in federal securities that the government could not afford to redeem. Defenders of the system countered that Social Security could not actually go bankrupt, because it is a pay-as-you-go system. Today's retirees are paid with withdrawals from the paychecks of today's working people. It is only the fund's excess holdings that are at risk; and it is the government, not Social Security, that is teetering on bankruptcy, because it is the government that lacks the money to pay off its bonds. The issue here, however, is what would happen if the Social Security crisis were resolved by simply cashing out its federal bond holdings with newly-issued U.S. Notes? Would dangerous inflation result? The likely answer is that it would not, because the Social Security fund would have no more money than it had before. The government would just be returning to the fund what the taxpayers thought was in it all along. The bonds would be turned into cash, which would stay in the fund where it belonged, to be used for future baby-boomer pay-outs as intended. Cashing Out the Federal Securities of the Federal Reserve Another institution holding a major chunk of the federal debt is the Federal Reserve itself. The Fed owns about ten percent of the government's outstanding securities. If the government were to buy back these securities with cash, that money too would no doubt stay where it is, where it would continue to serve as the reserves against which loans were made. The cash would just replace the bonds, which would be liquidated and taken out of circulation. Again, consumer prices would not go up, because there would be no more money in circulation than there was before. That is one way to deal with the Federal Reserve's Treasury securities, but an even neater solution has been proposed: the government could just void out the bonds. Recall that the Federal Reserve acquired its government securities without consideration, and that a contract without consideration is void. The legal definition of consideration is “a value that can be objectively determined.” What would the Federal Reserve use in that case for reserves? Article 30 of the Federal Reserve Act of 1913 gave Congress the right to rescind or alter the Act at any time. If the Act were modified to make the Federal Reserve a truly federal agency, it would not need to keep reserves. It could issue "the full faith and credit of the United States" directly, without having to back its dollars with government bonds. Cashing Out the Holdings of Foreign Central Banks Other major institutional holders of U.S. government debt are foreign central banks. At the end of 2004, foreign holdings of U.S. Treasury debt came to about $1.9 trillion, roughly comparable to the $1.7 trillion held in the Social Security trust fund. Of that sum, foreign central banks owned 64 percent, or $1.2 trillion. What would cashing out those securities do to the money supply? Again, probably not much. Foreign central banks have no use for consumer goods, and they do not invest in real estate. They keep U.S. dollars in reserve to support their own currencies in global markets and to have the dollars available to buy oil as required under a 1974 agreement with OPEC. They keep dollars in reserve either as cash or as U.S. securities. Holding U.S. securities is considered to be the equivalent of holding dollars that pay interest. If these securities were turned into cash, the banks would probably just keep the cash in reserve in place of the bonds - and count themselves lucky to have their dollars back, on what is turning out to be a rather risky investment. Fears have been voiced that the U.S. government may soon be unable to pay even the interest on the federal debt. When that happens, the U.S. can either declare bankruptcy and walk away, or it can buy back the bonds with newly-issued fiat money. Given the choice, foreign investors would probably be happy to accept the fiat money, which they could spend on real goods and services in the economy. And if they complained, the U.S. government could argue that turnabout is fair play. John Succo is a hedge fund manager who writes on the Internet as "Mr. Practical." He estimates that as much as 90 percent of foreign money used to buy U.S. securities comes from foreign central banks, which print their own local currencies, buy U.S. dollars with them, and then use the dollars to buy U.S. securities. The U.S. government would just be giving them their fiat currency back. Market commentators worry that as foreign central banks cash in their U.S. securities, U.S. dollars will come flooding back into U.S. markets, hyperinflating the money supply and driving up consumer prices. But we've seen that this predicted result has not materialized in China, although foreign money has been flooding its economy for thousands of years. American factories and industries are now laying off workers because they lack customers. A return of U.S. dollars to U.S. shores could prime the pump, giving lagging American industries the boost they need to again become competitive with the rest of the world. We are continually being urged to "shop" for the good of the economy. What would be so bad about having our dollars returned to us by some foreigners who wanted to do a little shopping? The American economy may particularly need a boost after the housing bubble collapses. In the boom years, home refinancings have been a major source of consumer spending dollars. If the money supply shrinks by $2 trillion in the next housing correction, as some analysts have predicted, a supply of spending dollars from abroad could be just the quick fix the economy needs to ward off a deflationary crisis. There is the concern that U.S. assets could wind up in the hands of foreign owners, but there is not much we can do about that short of imposing high tariffs or making foreign ownership illegal. We sold them the bonds and we owe them the cash. But that is a completely different issue from the effects of cashing out foreign-held bonds with fiat dollars, which would give foreigners no more claim to our assets than they have with the bonds. In the long run, they would have less claim to U.S. assets, since their dollar investments would no longer be accruing additional dollars in interest. Foreign central banks are reducing their reserves of U.S. securities whether we like it or not. The tide is rolling out, and U.S. bonds will be flooding back to U.S. shores. The question for the U.S. government is simply who will take up the slack when foreign creditors quit rolling over U.S. debt. Today, when no one else wants the bonds sold at auction, the Fed and its affiliated banks step in and buy them with dollars created for the occasion, creating two sets of securities (the bonds and the cash) where before there was only one. This inflationary duplication could be avoided if the Treasury were to buy back its bonds itself and just void them out. Congress could then avoid the debt problem in the future by simply refusing to go into debt. Rather than issuing bonds to meet its costs, it could issue dollars directly. Prelude to a Dangerous Stock Market Bubble? Even if cashing out the government's bonds did not inflate consumer prices, would it not trigger dangerous inflation in the stock market, the bond market and the real estate market, the likely targets of the freed-up money? Let's see .... In December 2005, the market value of all publicly traded companies in the United States was reported at $15.8 trillion. Assume that fully half the $8 trillion then invested in government securing got reinvested in the stock market. If the government's securities paid off gradually as they came due, new money would enter markets only gradually, moderating any inflationary effects; and eventually, the level of stock market investment would have increased by 25 percent. Too much? Not really. The S&P 500 (a stock index tracking 500 companies in leading industries) actually tripled from 1995 to 2000, and no great disaster resulted. Much of that rise was due to the technology bubble which later broke; but by 2006, the S&P had gained back most of its losses. High stock prices are actually good for investors, who make money across the board. Stocks are not household necessities that shoot out of reach for ordinary consumers when prices go up. The stock market is the casino of people with money to invest. Anyone with any amount of money can jump in at any time, at any level. If the market continues to go up, investors will make money on resale. Although this may look like a Ponzi scheme, it really isn't so long as the stocks are bought with cash rather than debt. Like with the inflated values of prized works of art, stock prices would go up due to increased demand; and as long as the demand remained strong, the stocks would maintain their value. The stock market crash of 1929 resulted because investors were buying stock largely on credit – money that didn’t actually exist except as debt. In the scenario considered here, the market would not be pumped up with borrowed money but would be infused with cold hard cash, the permanent money received by bondholders for their government bonds. The market would go up and stay up. At some point, investors would realize that their shares were overpriced relative to the company's assets and would find something else to invest in; but that correction would be a normal one, not the sudden collapse of a bubble built on credit with no "real" money in it. As for the real estate market, cashing out the federal debt would probably have little effect on it. Foreign central banks, Social Security and other trust funds do not buy real estate; and individual investors would not be likely to make that leap either, since cashing out their bonds would give them no more money than they had before. Their ability to buy a house would therefore not have changed. People generally hold short-term T-bills as a convenient way to "bank" money at a modest interest while keeping it liquid. They hold longer-term Treasury .notes and bonds, on the other hand, for a safe and reliable income stream that is hassle-free. Neither purpose would be served by jumping into real estate, which is a very illiquid investment that does not return profits until the property is sold, except through the laborious process of trying to keep it rented. People wanting to keep their funds liquid would probably just move the cash into bank savings or checking accounts; while people wanting a hassle-free income stream would move it into corporate bonds, certificates of deposit and the like. That just leaves the corporate bond market, which would hardly be hurt by an influx of new money either. Fresh young companies would have easier access to startup capital; promising inventions could be developed; new products would burst onto the market; jobs would be created; markets would be stimulated. New capital could only be good for productivity. A final objection that has been raised to paying off the federal debt with newly-issued fiat money is that foreign lenders would be discouraged from purchasing U.S. government bonds in the future. …… "So what?" Once the government reclaims the power to create money from the banks, it will no longer need to sell its bonds to investors. It will not even need to levy income taxes. It will be able to exercise its sovereign right to issue its own money, debt-free. That is what British monarchs did until the end of the seventeenth century, what the American colonists did in the eighteenth century, and what Abraham Lincoln did in the nineteenth century. It has also been proposed in the twenty-first century, not just by "cranks and crackpots" in the money reform camp but by none other than Federal Reserve Chairman Ben Bernanke himself. At least, that is what he appears to have proposed. The suggestion was made several years before he became Chairman of the Federal Reserve, in a speech that earned him the nickname "Helicopter Ben". . . . …..The solution of Greenspan's successor Ben Bernanke is not entirely clear, since like his predecessors he has been playing his cards close to the chest. Being tight-lipped actually appears to be part of the job description. When he tried to be transparent, he was roundly criticized for spooking the market. But in a speech he delivered when he had to be less cautious about his utterances, Dr. Bernanke advocated what appeared to be a modern-day version of Lincoln's Greenback solution: instead of filling the balloon with more debt, it could be filled with money issued debt-free by the government. The speech was made in Washington in 2002 and was titled "Deflation: Making Sure 'It' Doesn't Happen Here." Dr. Bernanke stated that the Fed would not be "out of ammunition" to" counteract deflation just because the federal funds rate had fallen to 0 percent. Lowering interest rates was not the only way to get new money into the economy. He said, "the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." He added, "One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies." If the government was inexperienced with the policies, they were not the usual "open market operations," in which the government prints bonds and the Fed prints dollars, leaving the government in debt for money created by the Fed. Dr. Bernanke said that the government could print money, and that it could do this at essentially no cost. The implication was that the government could create money without paying interest, and without having to pay it back to the Fed or the banks. Later in the speech he said, "A money-financed tax cut is essentially equivalent to Milton Friedman's famous 'helicopter drop' of money." Dropping money from helicopters was Professor Friedman's hypothetical cure for deflation. The "money-financed tax cut" recommended by Dr. Bernanke was evidently one in which taxes would be replaced with money that was simply printed up by the government and spent into the economy. He added, "[I]n lieu of tax cuts, the government could increase spending on current goods and services or even acquire existing real or financial assets." The government could reflate the economy by printing money and buying hard assets with it - assets such as real estate and corporate stock! That is what the earlier Populists had proposed: the government could buy whole industries and operate them at a profit. The Populists proposed nationalizing essential industries that had been monopolized by giant private cartels, including the railroads, steel — and the banks. The profits generated by these industries would return to the government, to be used in place of taxes. - - The Japanese Experiment Dr. Bernanke went further than merely suggesting the "helicopter-money" solution. He evidently carried it out, and on a massive scale. More accurately, the Japanese carried it out at his behest. During a visit to Japan in May 2003, he said in a speech to the Japanese: My thesis here is that cooperation between the monetary and fiscal authorities in Japan [the central bank and the government] could help solve the problems that each policymaker faces on its own. Consider for example a tax cut for households and businesses that is explicitly coupled with incremental BOJ [Bank of Japan] purchases of government debt - so that the tax cut is in effect financed by money creation. Dr. Bernanke was advising the Japanese government that it could finance a tax cut by creating money! (Note that this is easier to do in Japan than in the United States, since the Japanese government actually owns its central bank, the Bank of Japan.) The same month, the Japanese embarked on what British economist Richard Duncan called "the most aggressive experiment in monetary policy ever conducted."5 In a May 2005 article titled "How Japan Financed Global Reflation," Duncan wrote: In 2003 and the first quarter of 2004, Japan carried out a remarkable experiment in monetary policy - remarkable in the impact it had on the global economy and equally remarkable in that it went almost entirely unnoticed in the financial press. Over those 15 months, monetary authorities in Japan created $35 trillion . . . approximately 1% of the world's annual economic output. $35 trillion . . . would amount to $50 per person if distributed equally among the entire population of the planet. In short, it was money creation on a scale never before attempted during peacetime. Why did this occur? There is no shortage of yen in Japan. Japanese banks have far more deposits than there is demand for loans .... So, what motivated the Bank of Japan to print so much more money when the country is already flooded with excess liquidity? Duncan explained that the shortage of money was not actually in Japan. It was in the United States, where the threat of deflation had appeared for the first time since the Great Depression. The technology bubble of the late 1990s had popped in 2000, leading to a serious global economic slowdown in 2001. Before that, the Fed had been bent on curbing inflation; but now it had suddenly switched gears and was focusing on reflation - the intentional reversal of deflation through government intervention. Duncan wrote: Deflation is a central bank's worst nightmare. When prices begin to fall, interest rates follow them down. Once interest rates fall to zero, as is the case in Japan at present, central banks become powerless to provide any further stimulus to the economy through conventional means and monetary policy becomes powerless. The extent of the US Federal Reserve's concern over the threat of deflation is demonstrated in Fed staff research papers and the speeches delivered by Fed governors at that time. For example, in June 2002, the Board of Governors of the Federal Reserve System published a Discussion Paper entitled, "Preventing Deflation: Lessons from Japan's Experience in 1990s." The abstract of that paper concluded ". . . we draw general lessons from Japan's experience that when inflation interest rates have fallen close to zero, and the risk of deflation is high, stimulus - both monetary and fiscal - should go beyond the levels conventionally implied by baseline forecasts of future inflation and economic activity." Just how far beyond the conventional the Federal Reserve was prepared to go was demonstrated in the Japanese experiment, in which the Bank of Japan created $35 trillion yen over the course of the following year. The yen were then traded with the government's Ministry of Finance (MOF) for Japanese government securities, which paid virtually no interest. The MOF used the yen to buy approximately $320 billion in U.S. dollars from private parties, which were then used to buy U.S. government bonds. Duncan wrote, "It is not certain how much of the $320 billion the MOF did invest into US Treasury bonds, but judging by their past behavior it is fair to assume that it was the vast majority of that amount." Assuming all the dollars were so used, the funds were sufficient to float 77 percent of the U.S. budget deficit in the fiscal year ending September 30, 2004. The effect of this unprecedented experiment, said Duncan, was to finance a broad-based tax cut in the United States with newly-created money. The tax cuts were made in America, but the money was made in Japan. Three large tax cuts took the US. budget from a surplus of $127 billion in 2001 to a deficit of $413 billion in 2004. The difference was a deficit of $540 billion, and it was largely "monetized" by the Japanese. Duncan asked rhetorically, "Was the BOJ/MOF conducting Governor Bernanke's Unorthodox Monetary Policy on behalf of the Fed? . .. Was the BOJ simply serving as a branch of the Fed, as the Federal Reserve Bank of Tokyo, if you will?" If so, Duncan said, "it worked beautifully” The Bush tax cuts and the BOJ money creation that helped finance them at very low interest rates were the two most important elements driving the strong global economic expansion during 2003 and 2004. Combined, they produced a very global reflation.... US tax cuts and low interest rates fuelled consumption in the United States. In turn, growing US consumption shifted Asia's export-oriented economies into overdrive. China played a very important part in that process. . . . China used its large trade surpluses with the US to pay for its large trade deficits with most of its Asian neighbors, including Japan. The recycling of China's US Dollar export earnings explains the incredibly rapid "reflation" that began across Asia in 2003 and that was still underway at the end of 2004. Even Japan's moribund economy began to reflate. In 2004, the global economy grew at the fastest rate in 30 years. Money creation by the Bank of Japan on an unprecedented scale was perhaps the most important factor responsible for that growth. In fact, 35 trillion could have made the difference between global reflation and global deflation. How odd that it went unnoticed. many excerpts from "Web Of Debt" by Ellen Hodgson Brown
Letter Written by: Erin McCarthy
Date of Letter: 2009-05-25
Subject: Federal Reserve
http://www.freedomsphoenix.com/Letter-to-Editor.htm?EdNo=001&Info=0057938
I’d like to propose a suggestion to all the small groups across our nation who are working on their various patriotic endeavors toward raising awareness, making preparations for an economic crash, speaking out for our rights, voting and running and blogging and petitioning and emailing and discussing: That we find a way to advocate for curing the disease causing the decimation of the United States – and the cure is, I believe, for the Congress to take up once again its power to coin (as in ‘coin a phrase’; invent) money; debt-free, interest-free money and issue “the full faith and credit of the United States" directly. Let me present some substance for thought on this subject. President Barrack Obama said on Saturday, May 23, that “We are out of money now. We are operating in deep deficits”. In 1933, Franklin Roosevelt pronounced the country officially bankrupt, and ordered the promise to pay in gold removed from the dollar bill. The dollar was instantly transformed from a promise to pay in legal tender into legal tender itself. [Now] 76 years later, Congress could again acknowledge that the country is officially bankrupt, propose a plan of down-sizing and re-organization, and turn its debts into ‘legal tender’. Andrew Jackson completed the payoff of the federal debt after vetoing the then central banking system charter renewal. It has never been paid off since. Congress today needs to take back the power of creation of money from the privately owned central banking cartel misleadingly named the ‘Federal Reserve’, by buying back its own bonds with its own newly-issued legal tender. If that sounds like a radical solution, wake up and realize that it is exactly what is being done right now – not by the government, but by the private Federal Reserve cartel. The difference is that when the Fed buys the government’s bonds with newly-issued Federal Reserve Notes, it doesn’t take the bonds out of circulation. Two sets of securities (the bonds and the cash) are produced where there should only be one. This highly inflationary result could be eliminated by Congress allowing the government to buy back its own bonds and voiding them out of circulation, as paid off. As it stands, as you may already know, the United States government pays interest to the Fed on ‘loans’ of money which the Fed does not have until it is created by keystroke (fraud) at the request of the government. The government ‘prints’ bonds, and the Fed ‘prints’ cash and they trade stacks. Now, both are treated equally as money in the markets, by foreign central banks, by investors, and traded world-wide in huge volumes equally as money. The government prints bonds (for a few pennies each) to sell for various face values, to raise cash for spending. The incentive to buy the bonds are that they are interest-bearing -- their cost of purchase ‘matures’ later becoming worth more. And so, the government is supposed to pay this interest on the bonds owned by everyone. Now, when you and I purchase bonds, we pay with our existing cash. The Federal Reserve does not pay with existing cash; the Fed ‘printed’ the money into existence to buy them. What’s wrong with this picture? All of the $Billions in bonds owned by the Fed cannot, and have not been able to be paid off on time by the government. So the government takes out loans (it is the Congress’ Constitutional power to borrow money) from the ‘Federal’ Reserve banking system to pay back partial sums, or the government prints more bonds for the Fed to ‘buy’ with more conjured cash for the government to use to pay the last wave of bonds, and the Fed ‘rolls over’ the bonds not yet paid and collects just the interest, and you see how the hole has been dug. When one has dug oneself into a hole, *stop digging!
The point is, if the government can ‘print’ interest-bearing bonds which trade like legal tender, it can ‘print’ its own legal tender and eliminate the accumulation of debt to a privately owned banking cartel! Fiat money holds negative connotations for lots of people. However, like a tally system of notched sticks, or shells, or a system of community currency traded as work hours, or like postage stamps or coupons, fiat money (money not backed by silver or gold) is what we use right now, for the simple reason that we believe it is a trade tool of worth. As we’ve all heard, during war times, cigarettes, chocolate and other things were traded for other goods. The faith of the people trading is what gives money its usefulness or worth. Fiat money, printed as easily as bonds by the government, would continue to be used by the people as ‘receipts’ for trade. The difference is WHO is creating the fiat money that makes the fiat currency a tool for private fraud and theft or a tool for a nation’s prosperity. A debt-backed fiat currency is what the Federal Reserve system has produced for 96 years. The federal debt has grown to some $12 Trillion dollars! The Fed has not provided financial stability in those 96 years, which is why its proponents claimed it was needed in the first place. Instead, the privately owned central banking system has siphoned the wealth of the nation to the hands of a very few, very rich people. What, oh what is the interest on $12 Trillion dollars? The Fed and the government know that The People cannot ever pay this back. Fiat currency produced by the government of The People, For The People and By The People would have no debt attached, and would facilitate commerce between The People. Without the “Federal” Reserve interest to pay, there would be no further need for the tax on income. Technically, the government could mint one coin with the entire federal debt/interest stamped on it, to pay off the debt to the federal reserve. If you didn’t already know, a report issued by the Grace Commission during the Reagan Administration concluded that most federal income tax revenues go just to pay the interest on the government’s burgeoning debt. When the federal income tax was instituted in 1913 (same year as the Federal Reserve Act), all income tax collections were forwarded directly to the Federal Reserve. In 2005, the government spent $352 billion just to service the government’s debt. That is one-third of the total individual income tax revenues that year, which totaled $927 billion. A cover letter addressed to President Reagan stated that one-third of all income taxes were consumed by waste and inefficiency in the federal government, and yet another third of any taxes actually paid went to make up for the taxes not paid by tax evaders and by the burgeoning underground economy, a phenomenon that had blossomed in direct proportion to tax increases. The report concluded: “With two-thirds of everyone’s personal income taxes wasted or not collected, 100 percent of what is collected is absorbed solely by interest on the federal debt and by federal government contributions to transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their government.” The U.S. Treasury itself in January 2004, demonstrated the simplicity of the procedure to buy back its own bonds when it "called" (or redeemed) a 30-year bond issue before the bond was due. The Treasury announced on January 15, 2004: TREASURY CALLS 9-1/8 PERCENT BONDS OF 2004-09 The Treasury today announced the call for redemption at par on May 15, 2004, of the 9-1/8% Treasury Bonds of 2004-09, originally issued May 15, 1979, due May 15, 2009 (CUSIP No. 9112810CG1). There are $4,606 million of these bonds outstanding, of which $3,109 million are held by private investors. Securities not redeemed on May 15, 2004 will stop earning interest. These bonds are being called to reduce the cost of debt financing. The 9-1/8% interest rate is significantly above the current cost of securing financing for the five years remaining to their maturity. In current market conditions, Treasury estimates that interest savings from the call and refinancing will be about $544 million. Payment will be made automatically by the Treasury for bonds in book-entry form, whether held on the books of the Federal Reserve Banks or in Treasury Direct accounts. The provision for payment "in book entry form" meant that no dollar bills, checks or other paper currencies would be exchanged. Numbers would just be entered into the Treasury's direct online money market fund ("Treasury Direct"). The securities would merely change character - from interest-bearing to non-interest-bearing, from a debt owed to a debt paid. Bondholders failing to redeem their securities by May 15, 2004 could still collect the face amount of the bonds in cash. They would just not receive interest on the bonds. The Treasury's announcement generated some controversy, since government bonds are usually considered good until maturity; but early redemption was actually allowed in the fine print on the bonds. Provisions for early redemption are routinely written into corporate and municipal bonds, so that when interest rates drop, the issuer can refinance the debt at a lower rate. How did the Treasury plan to refinance this $4 billion bond issue at a lower rate? Any bonds not bought by the public would no doubt be bought by the banks. Recall the testimony of Federal Reserve Board Chairman Marriner Eccles: When the banks buy a billion dollars of Government bonds as they are offered . . . they actually create, by a bookkeeping entry, a billion dollars. If the Treasury can cancel its promise to pay interest on a bond issue simply by announcing its intention to do so, and if it can refinance the principal with bookkeeping entries, it can pay off the entire federal debt in that way. It just has to announce that it is calling its bonds and other securities, and that they will be paid "in book-entry form." No cash needs to change hands. The funds can remain in the accounts where the bonds were held, to be reinvested somewhere else. The Treasury did it that time using money from the Fed; it could have done it with its own legal tender. Indeed, at this point the only way to fend off national bankruptcy may be for the government to simply issue fiat money, buy back its own bonds, and void them out. That is the conclusion of G. Edward Griffin in The Creature from Jekyll Island, as well as of Stephen Zarlenga in model legislation called the American Monetary Act. Zarlenga notes that the federal debt needn't be paid off all at once. The government's debts extend several decades into the future and could be paid gradually as the securities came due. PAYING OFF BONDS WITH THE FULL FAITH AND CREDIT NOTES OF THE UNITED STATES WITHOUT CAUSING MASSIVE INFLATION The idea that the federal debt could be liquidated by simply printing up money and buying back the government's bonds with it is dismissed out of hand by economists and politicians, on the ground that it would produce Weimar-style runaway inflation. But would it? Inflation results when the money supply increases faster than goods and services, and replacing government securities with cash would not change the size of the money supply. If the government were to buy back its own securities with cash, these instruments representing financial value would merely be converted from interest-bearing into non-interest-bearing financial assets. The funds would move from M2 and M3 into Ml (cash and checks), but the total money supply would remain the same. That would be true if the government were to buy back its securities with cash, but that is very different from what is happening today. When the Federal Reserve uses newly-issued Federal Reserve Notes to buy back federal bonds, it does not void out the bonds. Rather, they become the "reserves" for issuing many times their value in new loans; and the new cash created to buy these securities is added to the money supply as well. That highly inflationary result could be avoided if the government were to buy back its own bonds and take them out of circulation. The Fed way of buying securities greatly increases the money supply and so causes de-valuation of the dollar, the hidden taxation funneling inconceivable wealth to those who create and control the money supply. From 1913 until now inflation of the dollar has been 2950%. A 1913 dollar would now be worth $.034. A wage earner in 1950 could buy a full breakfast, eggs, sausage, hashbrowns, shortstack, juice, and coffee for $.39. This morning I paid $9.60 for the same, an inflation of 2460%. Solving the Social Security Crisis In March 2005, the federal debt clocked in at $7.713 trillion. Of that sum, $3.169 trillion, or 41 percent, was in "intragovernmental holdings" - government trust funds, revolving funds, and special funds. Chief among them was the Social Security trust fund, which held $1.705 trillion of the government's debt. The 59 percent owned by the public was also held largely by institutional investors - U.S. and foreign banks, investment funds, and so forth. Dire warnings ensued that Social Security was going bankrupt, since its holdings were invested in federal securities that the government could not afford to redeem. Defenders of the system countered that Social Security could not actually go bankrupt, because it is a pay-as-you-go system. Today's retirees are paid with withdrawals from the paychecks of today's working people. It is only the fund's excess holdings that are at risk; and it is the government, not Social Security, that is teetering on bankruptcy, because it is the government that lacks the money to pay off its bonds. The issue here, however, is what would happen if the Social Security crisis were resolved by simply cashing out its federal bond holdings with newly-issued U.S. Notes? Would dangerous inflation result? The likely answer is that it would not, because the Social Security fund would have no more money than it had before. The government would just be returning to the fund what the taxpayers thought was in it all along. The bonds would be turned into cash, which would stay in the fund where it belonged, to be used for future baby-boomer pay-outs as intended. Cashing Out the Federal Securities of the Federal Reserve Another institution holding a major chunk of the federal debt is the Federal Reserve itself. The Fed owns about ten percent of the government's outstanding securities. If the government were to buy back these securities with cash, that money too would no doubt stay where it is, where it would continue to serve as the reserves against which loans were made. The cash would just replace the bonds, which would be liquidated and taken out of circulation. Again, consumer prices would not go up, because there would be no more money in circulation than there was before. That is one way to deal with the Federal Reserve's Treasury securities, but an even neater solution has been proposed: the government could just void out the bonds. Recall that the Federal Reserve acquired its government securities without consideration, and that a contract without consideration is void. The legal definition of consideration is “a value that can be objectively determined.” What would the Federal Reserve use in that case for reserves? Article 30 of the Federal Reserve Act of 1913 gave Congress the right to rescind or alter the Act at any time. If the Act were modified to make the Federal Reserve a truly federal agency, it would not need to keep reserves. It could issue "the full faith and credit of the United States" directly, without having to back its dollars with government bonds. Cashing Out the Holdings of Foreign Central Banks Other major institutional holders of U.S. government debt are foreign central banks. At the end of 2004, foreign holdings of U.S. Treasury debt came to about $1.9 trillion, roughly comparable to the $1.7 trillion held in the Social Security trust fund. Of that sum, foreign central banks owned 64 percent, or $1.2 trillion. What would cashing out those securities do to the money supply? Again, probably not much. Foreign central banks have no use for consumer goods, and they do not invest in real estate. They keep U.S. dollars in reserve to support their own currencies in global markets and to have the dollars available to buy oil as required under a 1974 agreement with OPEC. They keep dollars in reserve either as cash or as U.S. securities. Holding U.S. securities is considered to be the equivalent of holding dollars that pay interest. If these securities were turned into cash, the banks would probably just keep the cash in reserve in place of the bonds - and count themselves lucky to have their dollars back, on what is turning out to be a rather risky investment. Fears have been voiced that the U.S. government may soon be unable to pay even the interest on the federal debt. When that happens, the U.S. can either declare bankruptcy and walk away, or it can buy back the bonds with newly-issued fiat money. Given the choice, foreign investors would probably be happy to accept the fiat money, which they could spend on real goods and services in the economy. And if they complained, the U.S. government could argue that turnabout is fair play. John Succo is a hedge fund manager who writes on the Internet as "Mr. Practical." He estimates that as much as 90 percent of foreign money used to buy U.S. securities comes from foreign central banks, which print their own local currencies, buy U.S. dollars with them, and then use the dollars to buy U.S. securities. The U.S. government would just be giving them their fiat currency back. Market commentators worry that as foreign central banks cash in their U.S. securities, U.S. dollars will come flooding back into U.S. markets, hyperinflating the money supply and driving up consumer prices. But we've seen that this predicted result has not materialized in China, although foreign money has been flooding its economy for thousands of years. American factories and industries are now laying off workers because they lack customers. A return of U.S. dollars to U.S. shores could prime the pump, giving lagging American industries the boost they need to again become competitive with the rest of the world. We are continually being urged to "shop" for the good of the economy. What would be so bad about having our dollars returned to us by some foreigners who wanted to do a little shopping? The American economy may particularly need a boost after the housing bubble collapses. In the boom years, home refinancings have been a major source of consumer spending dollars. If the money supply shrinks by $2 trillion in the next housing correction, as some analysts have predicted, a supply of spending dollars from abroad could be just the quick fix the economy needs to ward off a deflationary crisis. There is the concern that U.S. assets could wind up in the hands of foreign owners, but there is not much we can do about that short of imposing high tariffs or making foreign ownership illegal. We sold them the bonds and we owe them the cash. But that is a completely different issue from the effects of cashing out foreign-held bonds with fiat dollars, which would give foreigners no more claim to our assets than they have with the bonds. In the long run, they would have less claim to U.S. assets, since their dollar investments would no longer be accruing additional dollars in interest. Foreign central banks are reducing their reserves of U.S. securities whether we like it or not. The tide is rolling out, and U.S. bonds will be flooding back to U.S. shores. The question for the U.S. government is simply who will take up the slack when foreign creditors quit rolling over U.S. debt. Today, when no one else wants the bonds sold at auction, the Fed and its affiliated banks step in and buy them with dollars created for the occasion, creating two sets of securities (the bonds and the cash) where before there was only one. This inflationary duplication could be avoided if the Treasury were to buy back its bonds itself and just void them out. Congress could then avoid the debt problem in the future by simply refusing to go into debt. Rather than issuing bonds to meet its costs, it could issue dollars directly. Prelude to a Dangerous Stock Market Bubble? Even if cashing out the government's bonds did not inflate consumer prices, would it not trigger dangerous inflation in the stock market, the bond market and the real estate market, the likely targets of the freed-up money? Let's see .... In December 2005, the market value of all publicly traded companies in the United States was reported at $15.8 trillion. Assume that fully half the $8 trillion then invested in government securing got reinvested in the stock market. If the government's securities paid off gradually as they came due, new money would enter markets only gradually, moderating any inflationary effects; and eventually, the level of stock market investment would have increased by 25 percent. Too much? Not really. The S&P 500 (a stock index tracking 500 companies in leading industries) actually tripled from 1995 to 2000, and no great disaster resulted. Much of that rise was due to the technology bubble which later broke; but by 2006, the S&P had gained back most of its losses. High stock prices are actually good for investors, who make money across the board. Stocks are not household necessities that shoot out of reach for ordinary consumers when prices go up. The stock market is the casino of people with money to invest. Anyone with any amount of money can jump in at any time, at any level. If the market continues to go up, investors will make money on resale. Although this may look like a Ponzi scheme, it really isn't so long as the stocks are bought with cash rather than debt. Like with the inflated values of prized works of art, stock prices would go up due to increased demand; and as long as the demand remained strong, the stocks would maintain their value. The stock market crash of 1929 resulted because investors were buying stock largely on credit – money that didn’t actually exist except as debt. In the scenario considered here, the market would not be pumped up with borrowed money but would be infused with cold hard cash, the permanent money received by bondholders for their government bonds. The market would go up and stay up. At some point, investors would realize that their shares were overpriced relative to the company's assets and would find something else to invest in; but that correction would be a normal one, not the sudden collapse of a bubble built on credit with no "real" money in it. As for the real estate market, cashing out the federal debt would probably have little effect on it. Foreign central banks, Social Security and other trust funds do not buy real estate; and individual investors would not be likely to make that leap either, since cashing out their bonds would give them no more money than they had before. Their ability to buy a house would therefore not have changed. People generally hold short-term T-bills as a convenient way to "bank" money at a modest interest while keeping it liquid. They hold longer-term Treasury .notes and bonds, on the other hand, for a safe and reliable income stream that is hassle-free. Neither purpose would be served by jumping into real estate, which is a very illiquid investment that does not return profits until the property is sold, except through the laborious process of trying to keep it rented. People wanting to keep their funds liquid would probably just move the cash into bank savings or checking accounts; while people wanting a hassle-free income stream would move it into corporate bonds, certificates of deposit and the like. That just leaves the corporate bond market, which would hardly be hurt by an influx of new money either. Fresh young companies would have easier access to startup capital; promising inventions could be developed; new products would burst onto the market; jobs would be created; markets would be stimulated. New capital could only be good for productivity. A final objection that has been raised to paying off the federal debt with newly-issued fiat money is that foreign lenders would be discouraged from purchasing U.S. government bonds in the future. …… "So what?" Once the government reclaims the power to create money from the banks, it will no longer need to sell its bonds to investors. It will not even need to levy income taxes. It will be able to exercise its sovereign right to issue its own money, debt-free. That is what British monarchs did until the end of the seventeenth century, what the American colonists did in the eighteenth century, and what Abraham Lincoln did in the nineteenth century. It has also been proposed in the twenty-first century, not just by "cranks and crackpots" in the money reform camp but by none other than Federal Reserve Chairman Ben Bernanke himself. At least, that is what he appears to have proposed. The suggestion was made several years before he became Chairman of the Federal Reserve, in a speech that earned him the nickname "Helicopter Ben". . . . …..The solution of Greenspan's successor Ben Bernanke is not entirely clear, since like his predecessors he has been playing his cards close to the chest. Being tight-lipped actually appears to be part of the job description. When he tried to be transparent, he was roundly criticized for spooking the market. But in a speech he delivered when he had to be less cautious about his utterances, Dr. Bernanke advocated what appeared to be a modern-day version of Lincoln's Greenback solution: instead of filling the balloon with more debt, it could be filled with money issued debt-free by the government. The speech was made in Washington in 2002 and was titled "Deflation: Making Sure 'It' Doesn't Happen Here." Dr. Bernanke stated that the Fed would not be "out of ammunition" to" counteract deflation just because the federal funds rate had fallen to 0 percent. Lowering interest rates was not the only way to get new money into the economy. He said, "the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." He added, "One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies." If the government was inexperienced with the policies, they were not the usual "open market operations," in which the government prints bonds and the Fed prints dollars, leaving the government in debt for money created by the Fed. Dr. Bernanke said that the government could print money, and that it could do this at essentially no cost. The implication was that the government could create money without paying interest, and without having to pay it back to the Fed or the banks. Later in the speech he said, "A money-financed tax cut is essentially equivalent to Milton Friedman's famous 'helicopter drop' of money." Dropping money from helicopters was Professor Friedman's hypothetical cure for deflation. The "money-financed tax cut" recommended by Dr. Bernanke was evidently one in which taxes would be replaced with money that was simply printed up by the government and spent into the economy. He added, "[I]n lieu of tax cuts, the government could increase spending on current goods and services or even acquire existing real or financial assets." The government could reflate the economy by printing money and buying hard assets with it - assets such as real estate and corporate stock! That is what the earlier Populists had proposed: the government could buy whole industries and operate them at a profit. The Populists proposed nationalizing essential industries that had been monopolized by giant private cartels, including the railroads, steel — and the banks. The profits generated by these industries would return to the government, to be used in place of taxes. - - The Japanese Experiment Dr. Bernanke went further than merely suggesting the "helicopter-money" solution. He evidently carried it out, and on a massive scale. More accurately, the Japanese carried it out at his behest. During a visit to Japan in May 2003, he said in a speech to the Japanese: My thesis here is that cooperation between the monetary and fiscal authorities in Japan [the central bank and the government] could help solve the problems that each policymaker faces on its own. Consider for example a tax cut for households and businesses that is explicitly coupled with incremental BOJ [Bank of Japan] purchases of government debt - so that the tax cut is in effect financed by money creation. Dr. Bernanke was advising the Japanese government that it could finance a tax cut by creating money! (Note that this is easier to do in Japan than in the United States, since the Japanese government actually owns its central bank, the Bank of Japan.) The same month, the Japanese embarked on what British economist Richard Duncan called "the most aggressive experiment in monetary policy ever conducted."5 In a May 2005 article titled "How Japan Financed Global Reflation," Duncan wrote: In 2003 and the first quarter of 2004, Japan carried out a remarkable experiment in monetary policy - remarkable in the impact it had on the global economy and equally remarkable in that it went almost entirely unnoticed in the financial press. Over those 15 months, monetary authorities in Japan created $35 trillion . . . approximately 1% of the world's annual economic output. $35 trillion . . . would amount to $50 per person if distributed equally among the entire population of the planet. In short, it was money creation on a scale never before attempted during peacetime. Why did this occur? There is no shortage of yen in Japan. Japanese banks have far more deposits than there is demand for loans .... So, what motivated the Bank of Japan to print so much more money when the country is already flooded with excess liquidity? Duncan explained that the shortage of money was not actually in Japan. It was in the United States, where the threat of deflation had appeared for the first time since the Great Depression. The technology bubble of the late 1990s had popped in 2000, leading to a serious global economic slowdown in 2001. Before that, the Fed had been bent on curbing inflation; but now it had suddenly switched gears and was focusing on reflation - the intentional reversal of deflation through government intervention. Duncan wrote: Deflation is a central bank's worst nightmare. When prices begin to fall, interest rates follow them down. Once interest rates fall to zero, as is the case in Japan at present, central banks become powerless to provide any further stimulus to the economy through conventional means and monetary policy becomes powerless. The extent of the US Federal Reserve's concern over the threat of deflation is demonstrated in Fed staff research papers and the speeches delivered by Fed governors at that time. For example, in June 2002, the Board of Governors of the Federal Reserve System published a Discussion Paper entitled, "Preventing Deflation: Lessons from Japan's Experience in 1990s." The abstract of that paper concluded ". . . we draw general lessons from Japan's experience that when inflation interest rates have fallen close to zero, and the risk of deflation is high, stimulus - both monetary and fiscal - should go beyond the levels conventionally implied by baseline forecasts of future inflation and economic activity." Just how far beyond the conventional the Federal Reserve was prepared to go was demonstrated in the Japanese experiment, in which the Bank of Japan created $35 trillion yen over the course of the following year. The yen were then traded with the government's Ministry of Finance (MOF) for Japanese government securities, which paid virtually no interest. The MOF used the yen to buy approximately $320 billion in U.S. dollars from private parties, which were then used to buy U.S. government bonds. Duncan wrote, "It is not certain how much of the $320 billion the MOF did invest into US Treasury bonds, but judging by their past behavior it is fair to assume that it was the vast majority of that amount." Assuming all the dollars were so used, the funds were sufficient to float 77 percent of the U.S. budget deficit in the fiscal year ending September 30, 2004. The effect of this unprecedented experiment, said Duncan, was to finance a broad-based tax cut in the United States with newly-created money. The tax cuts were made in America, but the money was made in Japan. Three large tax cuts took the US. budget from a surplus of $127 billion in 2001 to a deficit of $413 billion in 2004. The difference was a deficit of $540 billion, and it was largely "monetized" by the Japanese. Duncan asked rhetorically, "Was the BOJ/MOF conducting Governor Bernanke's Unorthodox Monetary Policy on behalf of the Fed? . .. Was the BOJ simply serving as a branch of the Fed, as the Federal Reserve Bank of Tokyo, if you will?" If so, Duncan said, "it worked beautifully” The Bush tax cuts and the BOJ money creation that helped finance them at very low interest rates were the two most important elements driving the strong global economic expansion during 2003 and 2004. Combined, they produced a very global reflation.... US tax cuts and low interest rates fuelled consumption in the United States. In turn, growing US consumption shifted Asia's export-oriented economies into overdrive. China played a very important part in that process. . . . China used its large trade surpluses with the US to pay for its large trade deficits with most of its Asian neighbors, including Japan. The recycling of China's US Dollar export earnings explains the incredibly rapid "reflation" that began across Asia in 2003 and that was still underway at the end of 2004. Even Japan's moribund economy began to reflate. In 2004, the global economy grew at the fastest rate in 30 years. Money creation by the Bank of Japan on an unprecedented scale was perhaps the most important factor responsible for that growth. In fact, 35 trillion could have made the difference between global reflation and global deflation. How odd that it went unnoticed. many excerpts from "Web Of Debt" by Ellen Hodgson Brown
Monday, May 18, 2009
Monday, April 13, 2009
Trading With The Enemy Act
In 1917, the Trading with the Enemy Act (Public Law 65-91, 65th Congress, Session I, Chapters 105, 106, October 6, 1917) was passed and which defined, regulated and punished trading with enemies, who were then required by that act to be licensed by the government to do business. The National Banking System Act (Public Law 73-1, 73rd Congress, Session I, Chapter 1, March 9, 1933), Executive Proclamation 2038 (March 6, 1933), Executive Proclamation 2039 (March 9, 1933), and Executive Orders 6073, 6102, 6111 and 6260 prove that in 1933, the United States Government formed under the executive privilege of the original martial rule went bankrupt, and a new state of national emergency was declared under which United States citizens were named as the enemy to the government and the banking system as per the provisions of the Trading with the Enemy Act. The legal system provided for in the Constitution was formally changed in 1938 through the Supreme Court decision in the case of Erie Railroad Co. v. Tompkins, 304 US 64, 82 L.Ed. 1188. On April 25, 1938, the Supreme Court overturned the standing precedents of the prior 150 years concerning "COMMON LAW" in the federal government.
THERE IS NO FEDERAL COMMON LAW, AND CONGRESS HAS NO POWER TO DECLARE SUBSTANTIVE RULES OF COMMON LAW applicable IN A STATE, WHETHER they be LOCAL or GENERAL in their nature, be they COMMERCIAL LAW or a part of LAW OF TORTS." (See: ERIE RAILROAD CO. vs. THOMPKINS, 304 U.S. 64, 82 L. Ed. 1188)
The significance is that since the Erie Decision, no cases are allowed to be cited that are prior to 1938. There can be no mixing of the old law with the new law. The Common Law is the fountain source of Substantive and Remedial Rights, if not our very Liberties. (See also: Who is Running America?)
THERE IS NO FEDERAL COMMON LAW, AND CONGRESS HAS NO POWER TO DECLARE SUBSTANTIVE RULES OF COMMON LAW applicable IN A STATE, WHETHER they be LOCAL or GENERAL in their nature, be they COMMERCIAL LAW or a part of LAW OF TORTS." (See: ERIE RAILROAD CO. vs. THOMPKINS, 304 U.S. 64, 82 L. Ed. 1188)
The significance is that since the Erie Decision, no cases are allowed to be cited that are prior to 1938. There can be no mixing of the old law with the new law. The Common Law is the fountain source of Substantive and Remedial Rights, if not our very Liberties. (See also: Who is Running America?)
Freedom Videos
"You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out... If people only understood the rank injustice of the money and banking system, there would be a revolution by morning." --Andrew Jackson
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Click here to view "Freedom to Fascism"
Click here to view "Money as Debt "
Click Here to view Senator Ron Paul
Click Here to view "Loose Change"
Click --> for the National Debt Clock --> http://www.brillig.com/debt_clock/
The Original 13th Amendment
The 13th Article of Amendment
to the original Constitution of the United States of America
“If any citizen of the United States shall accept, claim, receive or retain any title of nobility or honour, or shall, without the consent of Congress, accept and retain any present, pension, office or emolument of any kind whatever, from any emperor, king, prince or foreign power, such person shall cease to be a citizen of the United States, and shall be incapable of holding any office of trust or profit under them, or either of them.”
to the original Constitution of the United States of America
“If any citizen of the United States shall accept, claim, receive or retain any title of nobility or honour, or shall, without the consent of Congress, accept and retain any present, pension, office or emolument of any kind whatever, from any emperor, king, prince or foreign power, such person shall cease to be a citizen of the United States, and shall be incapable of holding any office of trust or profit under them, or either of them.”
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