If it hadn't been for that last amendment, we might have been full swing into a global discussion about renewing the most ambitious wealth siphoning system in history. Unfortunately, the amendment exists and the power of the fed has no such expiration date.
Is this really so bad?
To answer that question, lets take a look at the last 100 years of fractional reserve banking and you can judge for yourself. For those of you who would rather watch a cartoon instead of reading boring posts about our country's economic foundation... I've got you covered:
For the rest of you... lets dig a bit deeper...
How it started...
The push for a centralized banking system began well before our nation was founded. Prior to the establishment of the United States, the big bankers were much more up front about their deceptive banking practices. Take for example the quote often attributed to Mayer Amschel Rothschild... "Let us control the money of a country and we care not who makes its laws." 4
Many of our greatest national leaders opposed the banking institutions and feverishly condemned their involvement with monetary policy and specifically the issuance of currency for fear of the abuse that would accompany it. Among these men were Thomas Jefferson, Abraham Lincoln, Andrew Jackson, and many others.
Our story, for the purposes of brevity, begins with the first time our currency was devalued under the banner of financial stability. The Federal Reserve Act was signed into law in 1913 by Woodrow Wilson, and it was about as "Federal" as Federal Express. A cartel of 12 privately owned banks were to take control of the nation's monetary policy. Most notably, this act allowed for the expansion of money supply beyond our nation's holdings in physical reserves. Although it was a pivotal moment in our country's history, it was not nearly as powerful as the Fed we tolerate today. The Fed of 1913 was severely limited, not only by the 20 year expiration date mentioned earlier, but by physical gold reserves. Even at a time when we first began to dabble in the abandonment of hard currency, we still had the good sense restrict the dangerous power of artificially inflating the money supply. To prevent over-inflation, the Fed was only allowed to expand money supply to a percentage above the nation's holdings of physical gold. This act, like the Aldrich-Vreeland Act before it, and the many revisions to the National Currency Act before that, was a mere stepping stone toward the modern monetary monster we know today. If the banks were to have the power they sought, they would have to bastardize hard currency and pry it from the dollar at every opportunity. This is exactly what they did.
As people were slowly introduced to the new financial system, they began to hold gold in events of financial uncertainty. This was exactly what people had done for centuries in order to shield themselves from the devaluation that occurs as the money supply is expanded. The banks knew they needed to eliminate the culture of gold holdings. It wasn't long before the attack on gold and silver based currency continued.
Executive Order 6102
On April 5th, 1933, President F. D. Roosevelt signed Executive Order 6102 "forbidding the hoarding of gold coin, gold bullion, or gold certificates within the continental United States". This order literally criminalized the possession of monetary gold by any individual, forcing everyone into the new system regardless of their position on monetary policy.
Although by this point the bankers had made great strides toward controlling the US monetary system, there was still a faction of opposition within our government.
Executive Order 11110
Fast forward to June 4th, 1963. JFK authorized the US Treasure to begin printing a new form of silver certificate. $4 billion worth (roughly $30 billion in today's dollars), free of debt, free of interest, redeemable for hard silver reserves. These certificates would not involve the fed at all and would compete with the traditional federal reserve note. 5 Months later, on November 22, 1963 Kennedy was assassinated. Less than 3 months after Kennady was buried the executive order was derailed in March of 1964 when Secretary of the Treasury C. Douglas Dillon halted redemption of silver certificates for silver dollars. The new reserve notes were removed from circulation and destroyed with the exception of the few remaining samples held by collectors.
JFK was an opponent of institutional secrecy, an ingredient fundamental to the survival of the Fed by their own admission (more on this later). He was in clear and direct opposition to secret organizations, and made that abundantly clear in a well known speech made two years before his assassination.
We're All Keynesians Now
Unfortunately, Richard Nixon was not among the list of the few courageous men who publicly denounced the abusive monetary system. In a famous speech by Nixon in 1971, it was declared to the world that we had completed our transition from a responsible currency to a system comprised of mythology, theft, and secrecy. Ironically, Nixon's stated intent was to "defend the dollar".
..."the overwhelming majority of Americans who buy American made products in America, your dollar will be worth just as much tomorrow as it is today."
So was Nixon right? According to the published consumer price index figures over time, one dollar in 1971 has the purchasing power of only $0.18 in today's world 5. This was the result of only 40 years of completely decoupling gold from our dollar.
I Must be a Conspiracy-loving Paulbot Moron
Many will argue that wages have increased at the same rate, and so the devaluation is non existent in real terms... but is that really true? In short, maybe the Mayans were onto something after all...
Chart Source: TPM
TPM's Data Source: Economic Policy Insitutte [PDF]
As you can see, something occurred in the early 70s that changed the direct relationship between productivity and compensation. We began to develop a gap that seems to under-compensate workers, and the gap is growing very rapidly. Could it have been Nixon's abandonment of gold backed currency combined with the Fed's persistant expansion of our money supply?
Many will tell you the flexibility provided by the Federal reserve's ability to introduce new money into the system has saved us from imminent financial disaster. Others, including myself, will look at the world around them and call bullshit.
To defend the fractional reserve banking system, you must make several leaps of faith that I am not prepared to assume. The most important of which comes down to the secrecy of the fed (although the politically accepted term has become "the independence of the Fed").
In order to defend this system, you must accept that the individuals granted such massive financial power do not need to be completely transparent or accountable in order to operate in the best interests of the people. You must simply trust that they are behaving responsibly. This is because no government official has the authority to peak behind the curtain and completely Audit the Federal Reserve. In fact, the fed is owned by a group of shareholders whose identities are not publicly known. The Fed of course claims all of this keeps you safe from the meddling of your pesky elected representatives, but how can we ever come to any proper conclusion without all of the information? I'm starting to understand what Kennedy was talking about.
And now, for the grand finally. I have uncovered a massive plan to replace the dollar. In fact, the notes have been drafted and kept secret from the public... until now. It looks as though they have decided to stay with the lovely color scheme we have all come to know so well, but have reduced the size of the bills by about 40% to save paper and ink. Introducing the world's new reserve currency:
So, which of the two fathers of economic theory do you believe?
1 - Federal Reserve Act of 1913 (P.L. 63-43, 38 STAT. 251, 12 USC 221)
2 - Standard Catalog of United States Paper Money 30th Edition, ,George S. Cuhaj, William Brandimore, p. 279
3 - Standard Catalog of United States Paper Money 30th Edition, ,George S. Cuhaj, William Brandimore, p. 279
4 - Rural Credits - Joint Hearings Before the Subcommittees on Banking and Currency of the Senate and of the House of Representatives Sixty-third Congress, Second Session, Washington Government Printing Office, 1914
5 - Inflation Calculator - Dollar Times - http://www.dollartimes.com/calculators/inflation.htm
2 - Standard Catalog of United States Paper Money 30th Edition, ,George S. Cuhaj, William Brandimore, p. 279
3 - Standard Catalog of United States Paper Money 30th Edition, ,George S. Cuhaj, William Brandimore, p. 279
4 - Rural Credits - Joint Hearings Before the Subcommittees on Banking and Currency of the Senate and of the House of Representatives Sixty-third Congress, Second Session, Washington Government Printing Office, 1914
5 - Inflation Calculator - Dollar Times - http://www.dollartimes.com/calculators/inflation.htm
