What are some policies or programs that could improve the economic stability of the country? Here are the policies that must be changed to recover economic stability. Why the fed must be abolished. The Fed should be abolished . It a private cartel of bankers permitted by congress in 1913 to create money out of nothing. It is thee cause of all our economic difficulties • It is incapable of accomplishing its stated objectives. • It is a cartel operating against the public interest. • It is the supreme instrument of usury. • It generates our most unfair tax. • It encourages war. • It destabilizes the economy. • It is an instrument of totalitarianism. The three previous Central banks of the United States collapsed. If t is not abolished the fourth collapse is imminent and unavoidable. Default will result for the first time Historians seeking to justify governmental control of the monetary system have claimed the booms and busts that occurred during the Civil War through the 1920's were the result of free and competitive banking. But these destructive cycles were the direct result of the creation and then extinguishing of fiat money through a system of federally chartered banks, dominated by a handful of firm on Wall Street which constituted a half-way house to central banking. None of these banks were truly free of state control nor were they competitive in the traditional sense of the word. They were in fact subsidized by the government and had many monopolistic privileges. From the perspective of bankers on Wall Street however there was a great deal more to be desired. For one thing, America still did not have a "lender of last resort:. That is banker language for a full blown central bank with the power to create unlimited amounts of money which can be
rushed to the aid of any individual bank that is under siege by its depositors wanting their money back. Having a lender of last resort is the only way a bank can create money out of nothing and still be protected from a potential "run" by its customers. In other words , it is the means by which the public is forced to pay a hidden tax of inflation to cover the shortfall of fractional-reserve-banking. That is why the so-called virtue of a lender of last resort is taught with great reverence today in virtually all academic institutions offering degrees in banking and finance. It is the means by which the system perpetuates itself The banks could now inflate more radically and more in unison than before the war but, when they pushed too far and too fast their bank generated booms, still collapsed into recessions. While this could be highly profitable to the banks, it was also precarious. (more about this on pages 432 and433 of The Creature From Jekyll Island (5th edition September 2010) Between 1900 and 1910 seventy percent of American Corporate growth was funded internally, making industry increasingly independent of the banks. What the bankers wanted-- and what many businessmen wanted also -- was a more "flexible" or "elastic" money supply that would allow them to create enough of it at any point in time so as to be able to drive interest rates downward at will. That would make loans to businessmen so attractive they would have little choice but to return to the bankers' stable. One more problem facing Wall Street was the fact that the biggest investment houses, such as Morgan & Company and Kuhn Loeb & Company, although they remained as competitors, were by this time so large they ceased doing serious battle against each other. The concept of trusts and cartels had dawned in America and, to those who already had made it to the top. joint ventures, market sharing, price fixing, and mergers were far more profitable than free-enterprise competition as Ron Chernow explains on pages 433 and 434 This trend was not unique to the banking industry, Ron Paul and Lewis Lehrman provide the historical perspective on pages 434 and 435. The challenge no longer was how to overcome one's adversaries, but how to keep new ones from entering the field. When John D, used his enormous profits from Standard Oil to take control the Chase national bank, and his brother, William, bought th national City Bank of new york , Wall Street, had ye tone more gladiator in the financial arena. Morgan found that he had no choice except to allow Rockerfeller,s into the club but, now that they were in, they all agreed that the influx of competitors had to be stopped. And that was to be the hidden purpose of federal legislation and government control which Gabirel Kolko explains on page 435. Writing in the year 1919 , from the perspective of an inside view of Wall Street at that time, John Moody completes the picture on pages 435 to 437 And the event of the Aldrich Vreeland Act of 1908 as well as the creation of a national Monetary Commission to study the problems of the American banking industry and make recommendations to Congress finally brings us to he Jekyll Island plan for convincing
Congress and the public that the establishment of a banking cartel was ,somehow, a measure to protect the public. The Jekyll Island strategists laid down the following plan of action. 1. Do not call it a cartel or even a central bank 2. Make it look like a government agency 3. Establish regional branches to create the appearance of decentralization, not dominated by Wall Street banks 4. begin with a conservative structure including many sound banking principles knowing that the provisions can be quietly altered or removed in subsequent years 5. Use the anger caused by recent panics and bank failures to create popular demand for monetary reform 6. Offer the Jekyll Island Plan as though it were in response to that need 7. Employ university professors to give the plan the appearance of academic approval 8 Speak out against the plan to convince the public that Wall Street banker do not want it. The American public would never have accepted the Federal reserve System if they had known it was half cartel and half central bank. Even though the concept of government protectionism was rapidly gaining acceptance in business and academic circles, of cartels, trusts, and restraints of free competition was still quite alien to the average voter. And within the halls of Congress, any forthright proposal for either a cartel or a central bank would have been soundly defeated. This is further described on page 439 through 449. Banking in the period immediately prior to the passage of the Federal Reserve Act was subject to a myriad of controls regulations, subsidies and privileges at both the federal and state levels. Popular history portrays this period as one of unbridled competition and free banking. It was in fact, a half-way house to central banking. Wall Street, however, wanted a "lender of last resort to create unlimited amounts of fiat money for their use in the event they were exposed to bank runs or currency drains. They also wanted to force all banks to follow the same inadequate reserve policies so that more cautious ones would not draw down the reserves of the others..
The first draft of the Federal Reserve Act was called the Aldrich Bill and was cosponsored by Congressman Vreeland , but it was not the work of either of these politicians. It was the brainchild of banker Paul Warburg and was eventually written by bankers Frank Van der lip and Benjamin Strong. Aldrich’s name attached to a banking bill was bad strategy because he was known as a Wall Street Senator. His bill was not politically acceptable and was never released from committee. The groundwork had been done, however, and the time had arrived to change labels and political parties. The measure would now undergo minor cosmetic surgery and reappear under the sponsorship of a politician whose name would be associated in the public mind with anti-Wall Street sentiments Why the fed must be abolished. The Fed should be abolished. It a private cartel of bankers permitted by congress in 1913 to create money out of nothing. It is thee cause of all our economic difficulties. • It causes inflation which at %% annually causes 64% loss of savings in every twenty year generation, 94% in a working lifetime. • It is a cartel operating against the public interest. • It is the supreme instrument of usury. • It generates our most unfair tax. • It encourages war. • It destabilizes the economy. • It is an instrument of totalitarianism. If it is not abolished the fourth collapse s Central banks of the United is imminent and unavoidable. FIRST REASON TO ABOLISH THE SYSTEM That is the scorecard eighty years after the Federal Reserve was created supposedly to stabilize our economy! There can be no argument that the System has failed in its stated objectives. Furthermore, after all this time, after repeated changes in personnel, after operating under both political parties, after numerous experiments in monetary philosophy, after almost a hundred revisions to its charter, and after the development of countless new formulas and techniques, there has been more than ample opportunity to work out mere procedural flaws. It is not unreasonable to conclude, therefore, that the System has failed, not because it needs a new set of rules or more intelligent directors, but because it is incapable of achieving its stated objectives.
If an institution is incapable of achieving its objectives, there is no reason to preserve it— unless it can be altered in some way to change its capability. That leads to the question: why is the System incapable of achieving its stated objectives? The painful answer is: those were never its true objectives. When one realizes the circumstances under which it was created, when one contemplates the identities of those who authored it, and when one studies its actual performance over the years, it becomes obvious that the System is merely a cartel with a government facade. There is no doubt that those who run it are motivated to maintain full employment, high productivity, low inflation, and a generally sound economy. They are not interested in killing the goose that lays such beautiful golden eggs. But, when there is a conflict between the public interest and the private needs of the cartel—a conflict that arises almost daily—the public will be sacrificed. That is the nature of the beast. It is foolish to expect a cartel to act in any other way. This view is not encouraged by Establishment institutions and publishers. It has become their apparent mission to convince the American people that the system is not intrinsically flawed. It merely has been in the hands of bumbling oafs. For example, William Greider was a former Assistant Managing Editor for The Washington Post. His book, Secrets of The Temple, was published in 1987 by Simon and Schuster. It was critical of the Federal Reserve because of its failures, but, according to Greider, these were not caused by any defect in the System itself, but were merely the result of economic factors which are "s000 complicated" that the good men who have struggled to make the System work just haven't been able to figure it all out. But, don't worry, folks, they're working on it! That is exactly the kind of powder-puff criticism which is acceptable in our mainstream media. Yet, Greider's own research points to an entirely different interpretation. Speaking of the System's origin, he says: As new companies prospered without Wall Street, so did the new regional banks that handled their funds. New York's concentrated share of bank deposits was still huge, about half the nation's total, but it was declining steadily. Wall Street was still "the biggest kid on the block," but less and less able to bully the others. This trend was a crucial fact of history, a misunderstood reality that completely alters the political meaning of the reform legislation that created the Federal Reserve. At the time, the conventional wisdom in Congress, widely shared and sincerely espoused by Progressive reformers, was that a government institution would finally harness the "money trust," disarm its powers, and establish broad democratic control over money and credit.... The results were nearly the opposite. The money reforms enacted in 1913, in fact, helped to preserve the status quo, to stabilize the old order. Money-center bankers would not only gain dominance over the new central bank, but would also enjoy new insulation against instability and their own decline. Once the Fed was in operation, the steady diffusion of financial power halted. Wall Street maintained its dominant position— and even enhanced it. 1
Antony Sutton, former Research Fellow at the Hoover Institution for War, Revolution and Peace, and also former Professor of Economics at California State University, Los Angeles, provides a somewhat deeper analysis. He writes: Warburg's revolutionary plan to get American Society to go to work for Wall Street was astonishingly simple. Even today,... academic theoreticians cover their blackboards with meaningless equations, and the general public struggles in bewildered confusion with inflation and the coming credit collapse, while the quite simple explanation of 1. Greider, p. 275. the problem goes undiscussed and almost entirely uncomprehended. The Federal Reserve System is a legal private monopoly of the money supply operated for the benefit of the few under the guise of protecting and promoting the public interest.1 The real significance of the journey to Jekyll Island and the creature that was hatched there was inadvertently summarized by the words of Paul Warburg's admiring biographer, Harold Kellock: Paul M. Warburg is probably the mildest-mannered man that ever personally conducted a revolution. It was a bloodless revolution: he did not attempt to rouse the populace to arms. He stepped forth armed simply with an idea. And he conquered. That's the amazing thing. A shy, sensitive man, he imposed his idea on a nation of a hundred million people? SECOND REASON TO ABOLISH THE FEDERAL RESERVE A sober evaluation of this record leads to the second reason for abolishing the Federal Reserve: Far from being a protector of the public, it is a cartel operating against the public interest. THIRD REASON TO ABOLISH THE SYSTEM Centuries ago, usury was defined as any interest charged for a loan. Modern usage has redefined it as excessive interest. Certainly, any amount of interest charged for a pretended loan is excessive. The dictionary, therefore, needs a new definition. Usury: The charging of any interest on a loan of fiat money. Let us, therefore, look at debt and interest in this light. Thomas Edison summed up the immorality of the system when he said:
People who will not turn a shovel full of dirt on the project nor contribute a pound of materials will collect more money...than will the people who will supply all the materials and do all the work. 2 Is that an exaggeration? Let us consider the purchase of a $100,000 home in which $30,000 represents the cost of the land, architect's fee, sales commissions, building permits, and that sort of thing and $70,000 is the cost of labor and building materials. If the home buyer puts up $30,000 as a down payment, then $70,000 must be borrowed. If the loan is issued at 11% over a 30-year period, the amount of interest paid will be $167,806. That means the amount paid to those who lend the money is about 21/2 times greater than paid to those who provide all the labor and all the materials. It is true that this figure represents the time-value of that money over thirty years and easily could be justified on the basis that a lender deserves to be compensated for surrendering the use of his capital for half a lifetime. But that assumes the lender actually had something to surrender, that he had earned the capital, saved it, and then lent it for construction of someone else's house. What are we to think, however, about a lender who did nothing to earn the money, had not saved it, and, in fact, simply created it out of thin air? What is the time-value of nothing? As we have already shown, every dollar that exists today, either in the form of currency, checkbook money, or even credit card
money—in other words, our entire money supply—exists only because it was borrowed by someone; perhaps not you, but someone. That means all the American dollars in the entire world are earning daily and compounded interest for the banks which created them. A portion of every business venture, every investment, every profit, every transaction which involves money—and that even includes losses and the payment of taxes—a portion of all that is earmarked as payment to a bank. And what did the banks do to earn this perpetually flowing river of wealth? Did they lend out their own capital obtained through the investment of stockholders? Did they lend out the hard-earned savings of their depositors? No, neither of these was their major source of income. They simply waved the magic wand called fiat money. The flow of such unearned wealth under the guise of interest can only be viewed as usury of the highest magnitude. Even if there were no other reasons to abolish the Fed, the fact that it is the supreme instrument of usury would be more than sufficient by itself FIFTH REASON TO ABOLISH THE SYSTEM There are few historians who would challenge the fact that the funding of World War I, World War II, the Korean War, and the Vietnam War was accomplished by the Mandrake Mechanism through the Federal Reserve System. An overview of all wars since the establishment of the Bank of England in 1694 suggests that most of them would have been greatly reduced in severity, or perhaps not even fought at all, without fiat money. It is the ability of governments to acquire money without direct taxation that makes 1. Congressional Record, April 29, 1997. modern warfare possible, and a central bank has become the preferred method of accomplishing that.
One can argue the necessity, or at least the inevitability, of fiat money in time of war as a means of raw survival. That is the primal instinct of both individuals and governments, all other considera-tions aside. We shall leave that for the philosophers. But there can be no debate over the fact that fiat money in time of peace has no such justification. Furthermore, the ability of governments and banking institutions to use fiat money to fund the wars of other nations is a powerful temptation for them to become embroiled in those wars for personal profit, political advancement, or other reasons which fall far short of a moral justification for bloodshed. The Federal Reserve System has always served that function. The on-going strategy of building up the military capabilities of America's potential enemies leaves us no reason to believe we have seen the last of war. Therefore, it is not an exaggeration to say that the Federal Reserve System encourages war. There can be no better reason for the Creature to be put to sleep. SIXTH REASON TO ABOLISH THE FED One of the myths about the Federal Reserve is that it is needed to stabilize the economy. Yet, it has achieved just the opposite. Destabilization is dramatically clear in the years prior to the Crash, but the same cause-and-effect continues to this day. As long as men are given the power to tinker with the money supply, they will strive to circumvent the natural laws of supply and demand. No matter how high their intentions or pure their motives, they will cause disruptions in the natural flow. When these disruptions are perceived, they will try to compensate by causing opposite disrup-tions. But, long before they act, there will already be new forces at work which they cannot, in all their wisdom, perceive until they are already manifest. It is the height of egotistical folly for "experts" to think they can outsmart or do better than the combined, interactive decisions of hundreds of millions of people all acting in response to their own best judgment. Thus, the Fed is doomed to failure by its nature and its mission. That is the sixth reason it should be abolished: It destabilizes the economy. SEVENTH REASON TO ABOLISH THE FED What has any of this to do with the Federal Reserve System? The answer is that the Federal Reserve is the starting point of the pessimistic scenario. The chain of events begins with fiat money created by a central bank, which leads to government debt, which causes inflation, which destroys the economy, which impoverishes the people, which provides an excuse for increasing government power, which is an on-going process culminating in totalitarianism. Eliminate the Federal Reserve from this equation, and the pessimis-tic scenario ceases to exist. That is the seventh and final reason to abolish the Fed: It is an instrument of totalitarianism. If the optimistic scenario is too optimistic and the pessimistic scenario is too pessimistic, then what is the scenario that we should hope lies in our future?
There is a middle course that lies between optimism and pessimism. It is called realism. Calling it a realistic scenario is not meant to imply that it is predetermined to happen, nor that it is even likely to happen. It is realistic only in the sense that it can happen if certain conditions are met. The balance of this chapter will be devoted to an analysis of those conditions. Let us begin by allowing our opponent, Cynicism, to state the problem we face: "Is it realistic to believe that the current trends can actually be reversed? Isn't it just fantasy to think that anything can be done at this late date to break the CFR's hold over government, media, and education? Do we really expect the gum-chewing public to go upstream against the indoctrination of newspapers, magazines, television, and movies?" Apathy joins in: "Forget it. There's nothing you can do. The bankers and politicians have all the money and all the power. The game is already over. Make the most of it, and enjoy life while you can." Do not listen to Cynicism and Apathy. They are agents of your enemy. They want you to quietly get in line and submit without a struggle. However, they do make a point that must not be overlooked. The battle has progressed far, and our position is not good. If we are to reverse the present trends, we must be prepared to make a herculean effort. That does not mean "Write your Congressman" or "Vote on Tuesday" or "Sign a petition" or "Send in a donation." That is far too easy. Those measures still play an important role in the battle plan but they fall far short of the need. Armchair campaigns will no longer do it. Before turning to the question of what kind of effort will be required, let us first be clear on what it is we want to accomplish. WHAT MUST NOT BE DONE Let us begin with the negatives: what must not be done. The most obvious item in this category is that we must not turn to government for more of the same "cures" that have made us ill. We do not want more power granted to the Fed or the Treasury or the President, nor do we need another government agency. We prob-ably don't even need any new laws, with the possible exception of those legislative acts which repeal some of the old laws now on the books. Our goal is the reduction of government, not its expansion. We do not want to merely abolish the Fed and turn over its operation to the Treasury. That is a popular proposal among those who know there is a problem but who have not studied the history of central banking. It is a recurrent theme of the Populist movement and those advocating what they call Social Credit. Their argument is that the Federal Reserve is privately owned and is independent of political control. Only Congress is authorized to issue the nation's money, not a group of private bankers. Let the Treasury issue paper money and bank credit, they say, and we can have all the money we need without having to pay one penny in interest to the bankers.
It is an appealing argument, but it contains serious flaws. First, the concept that the Fed is privately owned is a legal fiction. The member banks hold stock, but it carries no voting weight. No matter how large the bank or how much capital is paid in, each bank has one vote. The stock cannot be sold or traded. Stockholders 568 THE CREATURE FROM JEKYLL ISLAND have none of the usual elements of control that come with ownership and, in fact, they are subservient to the central board. The seven members of the Board of Governors are appointed by the President and confirmed by the Senate. It is true that the Fed is independent of direct political control, but it must never be forgot-ten that it was created by Congress and it can be extinguished by Congress. In truth, the Federal Reserve is neither an arm of government nor is it private. It is a hybrid. It is an association of the large commercial banks which has been granted special privileges by Congress. A more accurate description would be simply that it is a cartel protected by federal law. But the more important point is that it makes no difference whether the Fed is government or private. Even if it were entirely private, merely turning it over to the government would not alter its function. The same people undoubtedly would run it, and they would continue to create money for political purposes. The Bank of England is the granddaddy of central banks. It was privately owned at its inception but became an, official arm of the British government in more recent times. It continues to operate as a central bank, and nothing of substance has changed. The central banks of all the other industrialized nations are direct arms of their respective governments. They are indistinguishable in function from the Federal Reserve. The technicalities of structure and ownership are not as important as function. Turning the Federal Reserve over to the Treasury without at the same time denuding it of its function as a central bank—that is, its ability to manipulate the money supply—would be a colossal waste of time. The proposal of having the Treasury issue the nation's money is another question and has nothing to do with who owns the Fed. There is nothing wrong with the federal government issuing money so long as it abides by the Constitution and adheres to the principle of honesty. Both of these restraints forbid Congress from issuing paper money that is not 100% backed by gold or silver. If you are in doubt about the reasoning behind that statement, it would be a good idea to review chapter fifteen before continuing. It is true that, if Congress had the power to create as much money as it needs without the Federal Reserve System, interest would not have to be paid on the national debt; but the Fed holds only a small portion of the debt. The majority of those bonds are held by individuals and institutions in the private sector. TerminatTHE JFK RUMOR In 1981, a rumor was circulated that President Kennedy had been assassinated by agents of the hidden money power because he had signed Executive Order #11110 instructing the Treasury to print more than $4 billion in United States Notes. That is precisely the
kind of money we are discussing: paper currency without gold or silver backing issued by the government, not the Federal Reserve. According to the rumor, the bankers were furious because they would lose interest payments on the money supply. When the Order was tracked down, however, it involved Silver Certificates, not United States Notes. Silver Certificates are backed by silver, which means they are real money, so the rumor was wrong on that point. But there is no interest paid on Silver Certificates either, so the rumor held up on that point. There was a third point, however, which everyone seemed to overlook. The Executive Order did not instruct the Treasury to issue Silver Certificates. It merely authorized it to do so if the occasion should arise. The occasion never arose. The last issuance of Silver Certificates was in 1957, and that was six years before the Kennedy executive order. In 1987, the order was rescinded by Executive Order 12608 signed by President Reagan. The government did print some U.S. Notes in 1963, but these were in response to an 1868 act of Congress which directed the Treasury to maintain the amount of U.S. Notes outstanding at a fixed level. That required worn or damaged specimens of older Notes to be replaced by new ones. Some of these new Notes did get into circulation but were quickly snapped up by private collectors. They never became a significant part of the money supply and were not intended to. This printing was not ordered by JFK and, in fact, there was no reason for him even to have had knowledge of it. The persistent rumor regarding the bankers' role in JFK's death was reinforced by several books circulated in conservative circles. They contained an ominous passage from Kennedy's speech at Columbia University, just ten days before his assassination. He is quoted as saying: "The high office of President has been used to foment a plot to destroy the Americans' freedom, and before I leave office I must inform the citizen of his plight."1 However, when Columbia University was contacted to provide a transcript of the speech, it was learned that Kennedy never spoke there—neither ten days before his assassination nor at any other time! Ronald Whealan, head librarian at the John Fitzgerald Kennedy Library in Boston, provides this additional information: "Ten days prior to the assassination he was at the White House meeting with, among others, the ambassador to the United States from Portugal."2 It is possible that the President did make the remarks attributed to him on a different date before a different audience. Even so, it is a cryptic message which could have several meanings. That he intended to expose the Fed is the least likely of them all. Kennedy had been a life-long socialist and internationalist. He had attended the Fabian London School of Economics; participated in the destruction of the American money supply; and engineered the transfer of American wealth to foreign nations. (See page 109.) There is little reason to believe that he had suddenly "seen the light" and was reversing his lifelong beliefs and commitments.3 MONETARISTS VS SUPPLY-SIDERS But we are off the topic. Let us return to those unworkable theories regarding monetary reform. Prominent in this category are the Monetarists and the Supply-Siders. The
Monetarists, adhering to the theories of Milton Friedman, believe that money should continue to be created by the Mandrake Mechanism of the Federal Reserve, but that the supply should be determined by a strict formula established by Congress, not the Fed. The Supply-siders, represented by Arthur Laffer and Charles Kadlec, believe in 1.Quoted by M.J. "Red" Beckman, Born Again Republic (Billings, Montana: Free-dom Church, 1981), p. 23; also by Lindsey Williams, To Seduce A Nation (Kasilof, Arkansas: Worth Publishing, 1984), p. 26. 2.Letter to Hollee Haswell, Curator at the Low Memorial Library, Columbia University, October 13, 1987. 3.For a more comprehensive analysis of the "JFK Myth," visit the web site, Home, and see the Update section for The Creature from Jekyll Island. formulas also, but they have a different one. They want the quantity of money to be determined by the current demand for gold. They are not talking about a true gold standard in which paper money is fully backed. By following what they call a "gold-price rule," they would simply observe the price of gold in the free market and then tinker with the dollar by expanding or contracting the money supply to keep its relative value, compared to gold, fairly constant. These groups share the same underlying philosophy. Each has a different formula, but they agree on method: manipulation of the money supply. They share the same conviction that the free market will not work without assistance; the same faith in the wisdom and integrity of politically-created formulas, bureaus, and agencies. The Fed remains unscathed throughout all these debates because it is the ultimate mechanism for intervention. These people don't really want to change it. They just want their turn at running it. Occasionally a truly original proposal appears that captures one's attention. Addressing a prestigious gathering of conservative monetary theorists in 1989, Jerry Jordan suggested that the mone-tary base could be expanded by holding a national lottery. The government would pay out more dollars in prize money than it received in ticket sales. The excess would represent the amount by which the monetary base would expand. Presumably, if they wanted to contract the money supply, they would pay out fewer dollars than taken in. It was an intriguing thought, but Mr. Jordan was quick to add: "The problem, of course, is that there would not be any effective institutional restraint on the growth of the mone-tary base."1 Indeed, that is the problem with all schemes involving monetary control by men. BALANCED-BUDGET AMENDMENT A so-called balanced-budget amendment to the Constitution is not the answer either. In fact, it is an illusion and a fraud. Some of the biggest spenders in Congress are supporters. They know that it is popular with the voters but would not cramp their
spending style in the least. If they were not permitted to spend more than they receive in taxes, they would have a perfect excuse for raising taxes. It would be a way of punishing the voters for placing limits 1. "The Future of Price Stability in A Fiat Money World," by Jerry L. Jordan, Durell Journal of Money and Banking, August, 1989, p. 24. 572 THE CREATURE FROM JEKYLL ISLAND on them. The voters, on the other hand, would collapse under the burden of higher taxes and demand that their Congressmen circumvent the very amendment they previously supported. And that would be easy. Most versions of the balanced-budget amend-ment have an escape hatch built for just that purpose. Congress shall balance its budget "except in cases of emergency." Who decides what constitutes an emergency? Congress, of course. In other words, Congress shall balance its budget except when it doesn't want to. So what else is new? A serious amendment would have to tackle, not balancing the budget, but limiting the spending. If that were done, the budget would take care of itself. But even that would be a waste of time considering the present composition of Congress. Instead of gener-ating political pressure for a Constitutional amendment, we would be better off directing that same effort toward throwing the big spenders out of office. As long as the spenders are allowed to stay in there, they will find a way to get around any law—including the Constitution itself. Another flaw in most versions of the balanced-budget amend-ment is that it would not affect the off-budget expenditures called entitlements. They now represent 52% of all federal outlays and are growing by 12% each year. A strategy that ignores that backbreaking load is not worth even considering. Even if Congress could be forced to stop deficit spending, the balanced-budget amendment would not solve the problem of inflation or paying off the national debt. The Federal Reserve can now inflate our money supply by using literally any debt in the world. It does not have to come from Congress. Unless we zero in on the Fed itself, we will just be playing political games with no chance of winning. Every year, a few concerned Congressmen submit a bill to investigate or audit the Federal Reserve System. They are to be commended for their effort, but the process has been an exercise in futility. Their bills receive little or no publicity and never get out of committee for a vote. Even if they did receive serious attention, however, they could actually be counterproductive. On the surface, it would appear that there is nothing wrong with a Congressional investigation or an audit, but what is there to investigate? We must assume the Fed is doing exactly what it says and is in total compliance with the law. A few minor improprieties probably would be discovered involving personal abuse of funds
A REALISTIC SCENARIO 573 or insider profiteering, but that would be minor compared to the gigantic fraud that already is out in the open for all to see. The Federal Reserve is the world's largest and most successful scam. Anyone who understands the nature of money can see that without a team of investigators and auditors. The danger in a proposal to audit the Fed is that it would delay serious action for years while the audit is going on. It would give the false impression that Congress is doing something. It also would give the monetary technicians an opportunity to lay down a smoke screen of verbiage and confusing statistics. The public would expect that all the answers will be forthcoming from the investiga-tion, but the very groups and combines that need to be investigated would be conducting, or at least confounding, the investigation. By the time fourteen volumes of testimony, charts, tables, and exhibits finally appear, the public would be intimidated and fatigued. We do not need a bill to audit the Fed. We need one to abolish it. A PLAN FOR ELIMINATING THE FED So much for things not to do. All that would be required to abolish the Federal Reserve System is an act of Congress consisting of one sentence: The Federal Reserve Act and all of its amendments are hereby rescinded. But that would wipe out our monetary system overnight and create such havoc in the economy that it would play right into the hands of the globalists. They would use the resulting chaos as evidence that such a move was a mistake, and the American people then likely would welcome a rescue from the IMF/World Bank. We would find ourselves back in the Pessimistic Scenario even though we had done the right thing. There are certain steps that must precede the abandonment of the Fed if we are to have a safe passage. The first step is to convert our present fiat money into real money. That means we must create an entirely new money supply which is 100% backed by precious metal—and we must do so within a reasonably short period of time.1 To