The Federal Reserve: The Scam of the History

First, digest this obvious truth: Central banking is not an industry. It can only distribute wealth. Next, view the video from the Mises Institute. Then, optionally listen to the audio lecture by G. Edward Griffin below. Then read the rest of the story. Finally realize that the government is armed and dangerous, and learn how to Stop Being Ripped Off by the Rigged Money System:

Video Windows Media Player®. Money, Banking and the Federal Reserve (Windows Media Video, .afs)  Steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.Running time: 42:08. From The Ludwig von Mises Institute, Auburn, Alabama. If it doesn't work, copy the url - http://mises.org:88/Fed - and in Windows Media Player, hit Ctrl+U and past it in.

"The Federal Reserve System virtually controls the nation's monetary system, yet it is accountable to no one. It has no budget, it is subject to no audit, and no Congressional Committee knows of, or can truly supervise its operations."

Listen  RealAudio®, The Creature from Jekyll Island: A Lecture on the Federal Reserve by G. Edward Griffin talks about the origin of the FED, exposing the most blatant scam of all history. It’s all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. It's just exactly what everyman needs to know about the power of the central government and the FED.  Running time: 1:29:28.3 / File Size: 10.6 MB. The John Birch Society, reformed-theology.org. (NB! Please allow the file to be downloaded.)

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

Abolish the Fed by Rep. Ron Paul, MD

In the House of Representatives, September 10, 2002:

Mr. Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. I also ask unanimous consent to insert the attached article by Lew Rockwell, president of the Ludwig Von Mises Institute, which explains the benefits of abolishing the Fed and restoring the gold standard, into the record.

Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans' standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve."

"Government spending is always a “tax” burden on the American people and is never equally or fairly distributed. The poor and low-middle income workers always suffer the most from the deceitful tax of inflation and borrowing." -Congressman Ron Paul

WHY GOLD?

By Llewellyn H. Rockwell, Jr.

As with all matters of investment, everything is clear in hindsight. Had you bought gold mutual funds earlier this year, they might have appreciated more than 100 percent. Gold has risen $60 since March 2001 to the latest spot price of $326.

Why wasn't it obvious? The Fed has been inflating the dollar as never before, driving interest rates down to absurdly low levels, even as the federal government has been pushing a mercantile trade policy, and New York City, the hub of the world economy, continues to be threatened by terrorism. The government is failing to prevent more successful attacks by not backing down from foreign policy disasters and by not allowing planes to arm themselves. These are all conditions that make gold particularly attractive.

Or perhaps it is not so obvious why this is true. It's been three decades since the dollar's tie to gold was completely severed, to the hosannas of mainstream economists. There is no stash of gold held by the Fed or the Treasury that backs our currency system. The government owns gold but not as a monetary asset. It owns it the same way it owns national parks and fighter planes. It's just another asset the government keeps to itself.

The dollar, and all our money, is nothing more and nothing less than what it looks like: a cut piece of linen paper with fancy printing on it. You can exchange it for other currency at a fixed rate and for any good or service at a flexible rate. But there is no established exchange rate between the dollar and gold, either at home or internationally.

The supply of money is not limited by the amount of gold. Gold is just another good for which the dollar can be exchanged, and in that sense is legally no different from a gallon of milk, a tank of gas, or an hour of babysitting services.

One may say that, apart from wars and revolutions, there is nothing in our modern civilizations which compares in importance to [inflation]. The upheavals caused by inflations are so profound that people prefer to hush them up and conceal them.
-Elias Canetti, Crowds and Power

Why, then, do people turn to gold in times like these? What is gold used for? Yes, there are industrial uses and there are consumer uses in jewelry and the like. But recessions and inflations don't cause people to want to wear more jewelry or stock up on industrial metal. The investor demand ultimately reflects consumer demand for gold. But that still leaves us with the question of why the consumer demand exists in the first place. Why gold and not sugar or wheat or something else?

There is no getting away from it: investor markets have memories of the days when gold was money. In fact, in the whole history of civilization, gold has served as the basic money of all people wherever it's been available. Other precious metals have been valued and coined, but gold always emerged on top in the great competition for what constitutes the most valuable commodity of all.

There is nothing intrinsic about gold that makes it money. It has certain properties that lend itself to monetary use, like portability, divisibility, scarcity, durability, and uniformity. But these are just descriptors of certain qualities of the metal, not explanations as to why it became money. Gold became money for only one reason: because that's what the markets chose.

Why isn't gold money now? Because governments destroyed the gold standard. Why? Because they regarded it as too inflexible. To be sure, monetary inflexibility is the friend of free markets. Without the ability to create money out of nothing, governments tend to run tight financial ships. Banks are more careful about the lending when they can't rely on a lender of last resort with access to a money-creation machine like the Fed.

A fixed money stock means that overall prices are generally more stable. The problems of inflation and business cycles disappear entirely. Under the gold standard, in fact, increased market productivity causes prices to generally decline over time as the purchasing power of money increases.

In 1967, Alan Greenspan once wrote an article called Gold and Economic freedom. He wrote that:

"An almost hysterical antagonism toward the gold standard is one issue
which unites statists of all persuasions. They seem to sense--perhaps
more clearly and subtly than many consistent defenders of
laissez-faire--that gold and economic freedom are inseparable, that the
gold standard is an instrument of laissez-faire and that each implies
and requires the other. . . . This is the shabby secret of the welfare
statists' tirades against gold. Deficit spending is simply a scheme for
the confiscation of wealth. Gold stands in the way of this insidious
process. It stands as a protector of property rights."

He was right. Gold and freedom go together. Gold money is both the result of freedom and its leading protector. When money is as good as gold, the government cannot manipulate the supply for its own purposes. Just as the rule of law puts limits on the despotic use of police power, a gold standard puts extreme limits on the government's ability to spend, borrow, and otherwise create crazy unworkable programs. It is forced to raise its revenue through taxation, not inflation, and generally keep its house in order.

Without the gold standard, government is free to work with the Fed to inflate the currency without limit. Even in our own times, we've seen governments do that and thereby spread mass misery.

Now, all governments are stupid but not all are so stupid as to pull stunts like this. Most of the time, governments are pleased to inflate their currencies so long as they don't have to pay the price in the form of mass bankruptcies, falling exchange rates, and inflation.

In the real world, of course, there is a lag time between cause and effect. The Fed has been inflating the currency at very high levels for longer than a year. The consequences of this disastrous policy are showing up only recently in the form of a falling dollar and higher gold prices. And so what does the Fed do? It is pulling back now. For the first time in nearly ten years, some measures of money (M2 and MZM) are showing a falling money stock, which is likely to prompt a second dip in the continuing recession.

Greenspan now finds himself on the horns of a very serious dilemma. If he continues to pull back on money, the economy could tip into a serious recession. This is especially a danger given rising protectionism, which mirrors the events of the early 1930s. On the other hand, a continuation of the loose policy he has pursued for a year endangers the value of the dollar overseas.

How much easier matters were when we didn't have to rely on the wisdom of exalted monetary central planners like Greenspan. Under the gold standard, the supply of money regulated itself. The government kept within limits. Banks were more cautious. Savings were high because credit was tight and saving was rewarded. This approach to economics is the foundation of a sustainable prosperity.

We don't have that system now for the country or the world, but individuals are showing their preferences once again. By driving up the price of gold, prompting gold producers to become profitable again, the people are expressing their lack of confidence in their leaders. They have decided to protect themselves and not trust the state. That is the hidden message behind the new luster of gold.

Is a gold standard feasible again? Of course. The dollar could be redefined in terms of gold. Interest rates would reflect the real supply and demand for credit. We could shut down the Fed and we would never need to worry again what the chairman of the Fed wanted. There was a time when Greenspan was nostalgic for such a system. Investors of the world have come to embrace this view even as Greenspan has completely abandoned it.

What keeps the gold standard from becoming a reality again is the love of big government and war. If we ever fall in love with freedom again, the gold standard will once more become a hot issue in public debate.

http://www.house.gov/paul/congrec/congrec2002/cr091002b.htm

ABOLISH THE FEDERAL RESERVE
Congressman Ron Paul
U.S. House of Representatives
September 10, 2002

"A fixed money stock means that overall prices are generally more stable. The problems of inflation and business cycles disappear entirely. Under the gold standard, in fact, increased market productivity causes prices to generally decline over time as the purchasing power of money increases." --Lew Rockwell

Reading list

1. PDF E-book: America’s Great Depression, Fifth Edition by Murray N. Rothbard Copyright © 2000 by The Ludwig von Mises Institute
2. Mises Store The Case Against the Fed. AUTHOR: Rothbard, Murray N. PRICE: $5.00, 158 pp.

   The most powerful case against the American central bank ever written. This work begins with a mini-treatment of money and banking theory, and then plunges right in with the real history of the Federal Reserve System. Rothbard covers the struggle between competing elites and how they converged with the Fed.Rothbard calls for the abolition of the central bank and a restoration of the gold standard. His popular treatment incorporates the best and most up-to-date scholarship on the Fed's origins and effects.
   Read the review by David Gordon The Bankers' Cartel

3. Fractional Reserve Banking by Murray N. Rothbard "Let's see how the fractional reserve process works, in the absence of a central bank. I set up a Rothbard Bank, and invest $1,000 of cash (whether gold or government paper does not matter here). Then I "lend out" $10,000 to someone, either for consumer spending or to invest in his business. How can I "lend out" far more than I have? Ahh, that's the magic of the "fraction" in the fractional reserve. I simply open up a checking account of $10,000 which I am happy to lend to Mr. Jones. Why does Jones borrow from me? Well, for one thing, I can charge a lower rate of interest than savers would. I don't have to save up the money myself, but simply can counterfeit it out of thin air. (In the nineteenth century, I would have been able to issue bank notes, but the Federal Reserve now monopolizes note issues.) Since demand deposits at the Rothbard Bank function as equivalent to cash, the nation's money supply has just, by magic, increased by $10,000. The inflationary, counterfeiting process is under way."
4. The Myth of the “Independent" Fed by Thomas J. DiLorenzo
5. Stop Being Ripped Off by the Rigged Money System - Discover How You Can Protect Your Money While You Make Money, Do Good, And Have Fun With the Liberty Dollar:
   "Remember years ago when gas was only 25-cents a gallon? You could take a dollar down to the gas station and buy four gallons of gas for a buck! Well, guess what? That old Silver Dollar with real silver is now worth $10 and if you could use it at the gas station it would still buy four gallons of gas! That just proves silver holds its value and it is the green paper money that is now worth a lot less. As a matter of fact, when you think about it, you realize that gas, food, and almost everything else has NOT gotten more expensive. It only seems that way because the value of the green paper money is worth less and less and so it takes more and more of it to buy the same goods. Most people think prices have gone up, but in reality: it is the value of the US dollar that has actually gone down. Luckily, now there is a simple and profitable solution to the coming inflation." - Bernard von NotHaus, The Liberty Dollar.
6. HOT Audio Lectures (.mp3, .wav, etc.) recorded at the Austrian Economics and Financial Markets conference at The Venetian Hotel Resort Casino, Las Vegas, 18th and 19th of february 2005. Lectures by Joseph Salerno, Chris Leithner, Antony Mueller, Hans-Hermann Hoppe, Adrian Day, Anne Williamson, David Gordon, Burton Blumert, Frank Shostak, Walter Block, Mark Thornton, Thomas DiLorenzo, Toby Baxendale, William Weidner, Stefan Karlsson, James Fogal, Ron Paul, Doug French. Additionally a Panel debate with Mueller, Shostak, Williamson, and Leithner from the Ludwig von Mises Institute.

"Since 1980, the FED has enjoyed absolute power to do litteraly anything it wants: ... To buy not only U.S. governement securities, but any asset whatever, to buy as many assets, and to inflate credit as much as it pleases ... There are no restraints on the Federal reserve. The Fed is master of all it controls" -- Murray N. Rothbard.