From A Concerned Citizen - Joe Sixpack P.O. Box 777, Freedom Town USA
Re: Banking Reform
The Honorable John McCain United States Senate 241 Russell Senate Office Building Washington, D.C. 20510-0303 DATE: May 3, 2008
Dear Senator McCain,
Recently, I have recently seen a video that has opened wider my eyes with regard to what appears to be the most pressing problem facing our nation today. Please review the contents of this letter and the 3 ½ hour video (link provided) at your convenience.
Question: What is the trouble with America today? Why are we over our heads in debt? Why can’t the politicians bring the debt under control?
Answer: Because we are laboring under a “Debt–Money” system that is designed and controlled by private bankers.
Now, some will argue that the Federal Reserve System is a quasi-governmental agency. But the President only appoints 2 of 7 members of the Federal Reserve Board of Governors every 4 years. And he appoints them to 14 year terms, far longer than his own. The Senate does confirm those appointments, but the whole truth is that the President wouldn’t dare appoint someone to that board whom Wall Street does not approve.
Of course, this does not preclude the possibility that some honorable men may be appointed to the Board of Governors. But the fact is that the Fed is specifically designed to act independently of our government, as nearly are all other central banks.
Some argue that the Fed promotes monetary stability. We have seen the head of the Bank of England, Eddy George, claim that this was the most important role of a central bank. In fact, the Fed’s role of stabilizing the economy shows it to be a miserable failure in this regard. Within the first 25 years of its existence, the Fed caused 3 major economic downturns including the Great Depression. And for the last 40 years has shepherded the American economy into a period of unprecedented inflation.
This is not some kind of wild conspiracy theory. It’s a well known fact among top economists, like Milton Friedman.
The stock of money prices and output was decidedly more unstable after the establishment of the Federal Reserve System than before. The most dramatic period of instability in output was, of course, the period between two wars, which includes the severe [monetary] contractions of 1920-21, 19290-33, and 1937-38. No other 20 year period in American history contains as many as three such severe contractions.
This evidence persuades me that at least a third of the price rise during and just after World War ! is attributable to the establishment of the Federal Reserve System… and that the severity of each of the major contractions, 1920-21, 1929-33, and 1937-38 is directly attributable to acts of commission and omission by Reserve authorities…
Any system which gives so much power and so much discretion to a few men, [so] that mistakes—excusable or not—can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any affective check by the body politic—this is the key political argument against an independent central bank.
To paraphrase Clemencea: “Money is much too serious a matter to be left to the central bankers.”—Milton Friedman, Economist.
So, although the banks don’t create currency, money has been used to purchase U.S. Bonds on the open market which provides the banks with roughly 50 billion dollars in interest—risk free, each year, less the interest they pay to sum depositors.
In this way through ‘Fractional Reserve Lending’, banks create over 90% of money and therefore create 90% of our inflation.
What can we do about all this?
Fortunately, there is a way to fix the problem fairly easily, speedily, and without any serious financial problems.
We can get our country totally out of debt in two-three years by simply paying off these U.S. Bonds with debt-free U.S. Notes.—just like ‘Lincoln Issue’. Of course, that by itself would create tremendous inflation since our present currency is multiplied by the ‘Fractional Reserve Banking System’. But here’s the ingenious solution advanced in part by Milton Friedman—to keep the money supply stable and avoid inflation and deflation while the debt is retired.
As the Treasury buys up its bonds on the open market with U.S. Notes, the reserve requirements of your home town local bank will be proportionately raised, so the amounts of money that remains in circulation remains constant. As those holding U.S. Bonds are paid off in U.S. Notes, banks will be at ‘100% Reserve Banking’ instead of the fractional reserve system that is currently in use.
From this point on the former Fed’s buildings will only be needed as a central clearing house for checks and as vaults for U.S. Notes. The Federal Reserve Act will no longer be necessary and could be repealed. Monetary power can be transferred back to the Treasury Department. There would be no further creation or contraction of money by banks.
By doing it this way our national debt can be paid off in a single year or so. And the Fed and ‘Fractional Reserve Banking’ abolished. Without national bankruptcy, financial collapse, inflation or deflation, or any significant change in the way the average American goes about his business.
To the average person, the primary difference would be for the first time since the Federal Reserve Act was passed in 1913, taxes would begin to go down. –Now there’s a real national blessing for you, rather than for Hamilton’s banker friends.
If we start to act to reform our monetary system we can avoid what the private banker did in the 20’s and 30’s. The longer we wait, the greater the danger we will permanently lose control of our nation.
The main provisions of a monetary reform act which needs to be passed by Congress is as follows: 1) Pay off the debt with debt free U.S. Notes.
As Thomas Edison put it: if the U.S. can issue a dollar bond, it can issue a dollar bill. They both rest on the faith and credit of the United States Government. This amounts to a simple substitution for one type of government obligation for another. One bears interest, the other doesn’t. Federal Reserve Notes could be used for this as well but could not be printed after the Fed is abolished as stated by this proposal. So it is suggested using U.S. Notes instead.
2) Abolish fractional reserve banking. As the debt is paid off, the reserve requirements of all banks and financial institutions would be raised proportionally at the same time to absorb the new U.S. Notes which would be deposited and become the bank’s increased reserves. Towards the end of the first year if the transition period, the remaining liability of financial institutions would be assumed or acquired by the U.S. Government in a one-time operation. In other words, they, too, would be eventually be paid off with debt-free U.S. Notes in order to keep the money supply stable. At the end of the first year or so, all of the national debt would be paid. And we could start to enjoy the benefits of full reserve banking. The Fed would be obsolete.
3) Repeal the Federal Reserve Act of 1913 and the National Banking Act of 1864. These acts delegate the money power to a private banking monopoly. They must be repealed and the money power handed back to the Department of Treasury where they were initially under President Abraham Lincoln. No banker or person with any affiliation with financial institutions should be allowed to regulate banking. After the first 2 reforms, these Acts would serve no useful purpose anyway since they relate to a fractional reserve banking system.
4) Withdraw the U.S. from the IMF, the BIS and the World Bank. These institutions like the Federal Reserve are designed to further centralize the power of the international bankers over the world economy and the U.S. MUST withdraw from them. Their harmless functions, such as currency exchange, can be accomplished either nationally or in new organizations limited to those functions.
Such a monetary reform act would guarantee that the amount of money in circulation would remain very stable causing neither inflation nor deflation. Remember, for the last four decades the Fed has doubled the American money supply every ten years. That fact and fractional reserve banking are the real causes of inflation and the reduction in our buying power - a hidden tax. These and other taxes are the real reasons both parents now have to work just to get by.
The money supply should increase slowly to keep prices stable roughly with population growth, about 3% per year. Not at the whim of a group of bankers meeting in secret. In fact, all future decisions on how much money should be in the American economy must be made based on statistics based on population growth and the price level index.
The new monetary regulators and the Treasury Department, perhaps called the ‘Monetary Committee’, would have absolutely no discretion in this matter except in times of declared war (note: tape was made prior to 9/11). This would ensure a steady stable money growth of roughly 3% per year resulting in stable prices and no sharp changes in the money supply.
To make certain the process is completely open and honest all deliberations would be public, NOT SECTET! –as meetings of the Fed’s Board of Governors are today.
How do we know this will work? Because these steps will remove the 2 major causes of economic instability: The Fed and fraction reserve banking, and the newest one as well, the BIS, the Bank of International Settlements. But most importantly, the danger of severe depression would be eliminated.
With regard to severe economic depression, Milton Friedman states:
“I know of no severe depression, in any country or any time, that was not accompanied by a sharp decline in the stock of money, and equally of no sharp decline in the stock of money that was not accompanied by a severe depression.”
Issuing our own money is not a radical solution. It’s been advocated by Presidents Jefferson, Madison, Jackson, Van Buren and Lincoln. And its been used at times in Europe as well.
How would the bankers react to these reforms?
Certainly the international bankers’ cartel will oppose reforms that will do away with their control over world economics as they have in the past. But it is equally certain that Congress has the Constitutional authority and responsibility to authorize the issuance of debt-free money, U.S. Notes, and reform the very banking laws it ill-advisedly enacted.
Undoubtedly, the bankers will claim that issuing debt-free money will cause severe inflation or make other dire predictions. But remember, it is fractional reserve banking which is the real cause of over 90% of all inflation – not whether debt-free U.S. Notes are used to pay for government deficits.
In the current system, any spending excesses on the part of Congress are turned into more debt bonds and the 10% purchased by the Fed are, then, multiplied many times over by the bankers causing 90% of all inflation.
Our fractional reserve and debt-based banking system is the problem. We must ignore the inevitable resistance to reform and remain firm until the cure is complete.
With reference to this fractional reserve banking system…
“Banking is conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money and control credit, and with the flick of a pen they will create enough money to buy it back again. Take this great power away from bankers and all great fortunes like mine will disappear, and they ought to disappear, for this would be a better and happier world to live in.”—Josiah Stamp, Director of the Bank of England in the 1920’s
We must learn from history before it is too late.
Why can’t politicians control the federal debt? Because all our money is created out of debt. Again, it is a ‘Debt-Money’ system. Our money is initially created by the purchase of U.S. Bonds. The public buys bonds, the banks buy bonds, foreigners buy bonds. And when the Fed want to create more money in the system, it buys bonds, but pays for them with a simple book-keeping entry which it creates out of nothing. Then this new money created by the Fed is multiplied by a factor of 10 by the banks thanks to the ‘Fractional Reserve Principle’. —Excerpt taken from The Money Masters by Bill Still, available at http://video.google.com/videoplay?docid=-515319560256183936