By Dan Beaulieu
As most of us already know,
the Federal Reserve [Fed] came under expansive scrutiny in 2008 after the
housing bubble burst and reaped havoc on our dollar. What most people don’t
know is why the Federal Reserve came
under fire. The absence of that knowledge creates a lack of conviction and
rectifying our economic problems can only occur when both knowledge and
conviction are achieved. The majority of Americans perceive our Federal Reserve
as necessary and integral to our economy, as air is to our respiratory system.
Most people don’t understand the immoral inner workings of the Fed nor do they
understand the unconstitutionality of it. People are often surprised when they
learn that the fed is privately owned.
Ex-federal reserve chairman and now presidential candidate Herman Cain has
repeatedly defended the Federal Reserve claiming an audit would be “counterproductive”.
He also recently announced that he admired Alan Greenspan, the man who created
the giant bubble that led to our current crisis. Given the understanding that Herman Cain must certainly have
about the Fed, being that he was a Federal Reserve Chairman, his defense is
inexcusable, irresponsible and immoral to the wellbeing of the American people.
In this document, I will take you over the failures of fiat money, the corruption
it breeds and the negative effect it has on our savings. This document is for
those who want to understand the Fed more deeply, I offer a moderate history of
the Fed to hopefully elucidate the subject and display why Herman Cain would be a continuation
of bad economic policy and immorality against the American people.
“It is well 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
History of Fiat Currency
In 1775 the Continental Congress
began issuance of a paper currency called the Continental in preparation of the war with Great Britain. Since the
notion of taxation was highly ridiculed and the war costs were so high, they
began printing Bills of Credit (short term public loans
to the government) in
order to fund the war.
This proved problematic as by
1776, due to inflation (diluting the money supply), the Bills of Credit
depreciated to 66% of initial value. In an attempt to combat the
depreciation the states made paper currencies legal tender for all purchases
and debts, enacted price controls and continued to print more money. In 1778
state and federal directed Procurement Officers (soldiers) to seize and pillage
the people giving certificates of debt in return, which also quickly diminished
in value. By 1780, hyperinflation led Congress to the conclusion that further
printing was futile; the money supply had been diluted to just 1% of its
original value in 6 years.
The overall failure of the paper Continental led our founders to authoring
Article 1 Section 10 of our Constitution, which declared that only gold and
silver were to be legal tender. This law was designed to protect us from
the immorality of a devaluating currency; the theft of wealth at the behest of
others.
The Federal Reserve Act
"This [Federal Reserve Act] establishes the most gigantic trust on
earth. When the President [Wilson] signs this bill, the invisible government of
the monetary power will be legalized....the worst legislative crime of the ages
is perpetrated by this banking and currency bill." Charles A. Lindbergh,
Sr., 1913
On December 23 of 1913 under Woodrow Wilson, the Federal Reserve Act
was instated, which, at the peril of our Constitution, was granted legal
authority to issue Federal Reserve notes. This system would be built around the
ideology of macroeconomics, (later labeled Keynesian economics
post 1936). Initially, as a safeguard, the dollar was fixed on the value of
gold and was to be redeemable in gold at a rate of $20.67 per ounce. This
assured low inflation and placed natural market restrictions on the Fed by
allowing the market to influence the economy (although notably hindered by
intervention).
During that time the Federal
Reserve comptroller assured the people that it was mathematically impossible to
have economic recessions, claiming that this form of economic planning was
superiorly more sophisticated; perfect. However according to the National
Bureau of Economic Research, this notion was quickly invalidated as between
1918 and 1919 we experienced our first bubble and recession.
Bubbles
Bubbles form when the Federal
Reserve lowers interest rates below the natural levels of a market, it
influences expansion of investments well beyond sustainable levels. This
distorts the signals that business uses to assess risk. These distortions then
lead businesses to believe that consumers have the savings to back up their
investments. However, artificially low (below market) interest rates don’t
generate new wealth to make good on investments. So when the bubble pops these
fallacies are realized in lost investments.
The bubbles and economic
recessions continued, just as they had with every other central bank. Bubbles
occurred in 1918 to 1919, 1920 to 1921, 1923 to 1924, 1926 to 1927, and 1929 to
1933. As you might be aware, 1933 was the year that President Franklin D. Roosevelt
issued Executive
order 6102 which not only
restricted Americans from owning gold but ordered the seizure of gold. The gold
fixed value of the dollar was then immediately changed from $20.67 to $35 per
ounce. The Bubbles continued, 1937 to 1938, 1945, 1948 to 1949, 1953 to 1954,
1960 to 1961, and 1969 to 1970. Then things changed with a new Chairman of the
Federal Reserve.
When Arthur Burns was
appointed Chairman of the Fed (1970-78), he pushed for more secrecy by ending minutes keeping
during meetings, allowing for concealment in meetings. He also made arguments for
elasticity in our dollar by removing the “restriction” of the gold standard. On
August 15, 1971 he got his wish.
We went off the gold standard and introduced ultimate elasticity to the Fed.
This afforded them the ability to control the value of the dollar at their whim. This allso allowed
the fed to interject the business cycle to make economic booms last longer,
which in turn allowed the recessions last longer. The presence of real market
restricts the boom from perpetuity, that is, every period of economic euphoria
must be respected by an equal period of economic misery.
The recessions from 1918 to
1970 were relatively short and went fairly unnoticed due to the dollars fixed
value. Once elasticity was granted and was perverted over time by intervention
through inflation and low interest rates, the severity of the recessions were
much more notable. Post gold fixed bubbles include 1973 to 1975, 1980, 1981 to
1982, 1990 to 1991 and 2000 to 2007, which brings us to our current crises.
The Great Bubble
The great bubble was largely
attributed to the bad policies of Alan Greenspan (Herman Cain’s hero) who was the
chairman of the Federal Reserve from 1987 until 2006. Greenspan intervened in
the recession that should’ve followed the dot-com bubble. Instead of accepting the natural
recession that should have occurred in 2001, the Fed began expanding the
Housing Market. This didn’t negate the previous bubble; it merely stalled it by
creating a bigger bubble. The Fed arrogantly continued its efforts to stop
recession through low interest rates and actual interest rates fell below
historical averages. At that point the Fed had abandoned all monetary rules in attempts to prop
the market.
Alan Greenspan slashed the
federal fund targets from 6.5% in January of 2001 all the way down to 1% by
June 2003. He fixed the rates at an artificial low of 1% for a full year, which encouraged more bad
investments and caused a massive expansion of the bubble. Then, by June of 2006,
Greenspan had raised it back to 5.25%, a move that popped the bubble and
unleashed the havoc of three overdue recessions.
“The few who understand the system, will either be so interested from
its profits or so dependent on its favors, that there will be no opposition
from that class.”
- Rothschild Brothers of London, 1863
Surly a man of Alan
Greenspan’s intelligence saw what was happening as he undoubtedly understands basic
economics and the business cycle. Bearing that leads to the question, what
motive would Greenspan have for knowingly doing this? All one has to do is look
to who gets the money, and the answer is obvious. Alan Greenspan was protecting
the fed’s banking, big business and political interest by skirting the
financial burden on the people, essentially socializing loss.
“Inflation is the most
evasive and aggressive form of taxation it transfers wealth from the middle
class to the privileged rich”. – Ron Paul
Corruption
The Federal Reserve is falsely known as a politically neutral part of our
government. This cannot be further from the truth on either count. As a private institution the Fed succumbs to
the interest of its controllers and shareholders. The Federal Reserve, being
the most secret institution in our country, can give undisclosed money to
corporations and influence politics by adjusting (loosening) rates during
elections. An example of this, which can be found in Ron Paul’s best-selling
book “End The Fed”, is Arthur Burns (Fed Chairman
1970-78) attempt at seducing President Carter in 1976.
It is well documented that Arthur Burns, in an attempt to be reappointed,
cut discount rates and accelerated money growth to alter the perception of the
economy. He told Carter that reappointment would make him out to be a high
minded statesman and suggested that if reappointed he (Arthur Burns) would
stop criticizing everything near and dear to him (Carter). He failed and his
intervention in the market brought on the worst bout of price inflation in a
century and caused the democrats to lose the office to Regan.
People like this are the masters of our economy?
"Give me control of a nation's money and I care not who makes its
laws"
-Mayer Amschel Bauer Rothschild (Rothschild family is the largest Fed shareholder)
The Audit
"Some people, I
believe, think there is some sort of smoking gun or some sort of secrecy that
the public doesn't know that goes on behind those closed doors and the reason
why that is not one of my big issues is, I don't think they are gonna find
anything. I know that the internal controls of the Federal Reserve are as tight
as a drum, that’s what I learned serving on the Federal Reserve board for 5
years " – Herman Cain Minneapolis, MN on June 18th, 2011
Although they do have regular
audits, the auditors are extremely limited in what they can actually audit which
makes them irrelevant altogether. Contrary to Herman Cain’s claim that calling
the Fed will provide all the answers, the reality is that all past requests for
information have always been met with arrogance from Fed chairmen, turning them
down, as if the requests were outrageous.
In 2009 Ron Paul introduced
the Federal Reserve Transparency Act (H.R.1207), which requested a full audit of the
Federal Reserve, the first in its 100 year history. It gained wide attention
and support but what passed was Senator Bernard Sanders lite version titled Federal
Reserve Sunshine Act (s.604), which demanded a partial audit, and
here are their findings. (unelected.com)
The list of institutions
that received the most money from the Federal Reserve can be found on page 131
of the GAO Audit and are as follows:
Citigroup:
$2.5 trillion ($2,500,000,000,000)
Morgan Stanley:
$2.04 trillion ($2,040,000,000,000)
Merrill
Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of
America: $1.344 trillion ($1,344,000,000,000)
Barclays
PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear
Sterns: $853 billion ($853,000,000,000)
Goldman
Sachs: $814 billion ($814,000,000,000)
Royal
Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan
Chase: $391 billion ($391,000,000,000)
Deutsche
Bank (Germany): $354 billion ($354,000,000,000)
UBS
(Switzerland): $287 billion ($287,000,000,000)
Credit
Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman
Brothers: $183 billion ($183,000,000,000)
Bank of
Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP
Paribas (France): $175 billion ($175,000,000,000)
Well Mr. Cain did they find
anything? Was it counterproductive? How could you, bearing this knowledge, say
the fed is not an issue? Mr. Cain, millions of dollars of this money, at our
expense, went to the Libyan government and to Mohammar Quadaffi
yet you still support the Fed?
This secret stimulus inflates our
dollar and thus is a tax on the people; our money went to these thieves by way
of devaluation of our savings.
Ben Bernanke & Quantitative
Easing:
Ben Bernanke is the current
chairman of the Fed. He continues with the bad practices that Greenspan used. He
continues the inflation of our currency and devaluation of the dollar, a direct
tax on the people’s savings and earnings. Ben Bernanke believes that he can “fix”
our current economic crisis by printing money; stimulus through quantitative
easing. Essentially treating the illness with what caused it in the first
place.
Quantitative Easing (QE) is another form
of stimulus, an injection of money into our supply. QE happens as a result of artificially
low interest rates. To better understand this process I urge you to watch this
film QE Explained.
This is Ben Bernanke’s secret (and only) weapon, and its proliferating the
problem.
Private Counterfiters:
"Some people think that the Federal Reserve Banks are United States
Government institutions. They are private monopolies which prey upon the people
of these United States for the benefit of themselves and their foreign
customers; foreign and domestic speculators and swindlers; and rich and
predatory money lenders." The
Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in
the 1930s
Each of the twelve Federal Reserve Banks is organized into a corporation
with shares. Those shares are sold to the commercial banks and thrifts
operating within each of the twelve Fed Bank's district. The shareholders get
to elect six of the nine the board of directors for their regional Federal
Reserve Bank, they also elect the president. I urge you to look over which
banks got bailed out and contrast them to the list below. Corporate interests
at its finest.
The shareholders are kept mostly confidential, however author Eustace
Mullins exposed some of the members in his bombshell book titled “Secrets
of the Federal Reserve” Citibank, Chase Manhattan,
Morgan Guaranty Trust, Chemical Bank, Manufacturers Hanover Trust, Bankers
Trust Company, National Bank of North America, and the Bank of New York to name
a few.
The Fed is guilty of secretly counterfeiting money and creating credit for private, corporate and political interest.
Conclusion:
Herman Cain has been asked
time and time again if he believes the Federal Reserve should be scrutinized or
even audited and his answer is always a resounding “no”. During the Bloomberg
debate Ron Paul asked Mr. Cain, if he still thinks the Fed shouldn’t be
audited.
“First of all you have
misquoted me, I did not call you or any of your people ignorant. I don’t know
where that came from so you gotta be careful of the stuff you find on the
internet because that’s just not something that I have said. Secondly, when I served
on the board of the Federal Reserve in the 1990s we didn’t do any of the things
that this Federal Reserve is doing I don’t agree with the actions of this Federal
Reserve. I don’t agree with the actions that have been undertaken by ben Bernanke.
We didn’t have a $14 trillion dollar debt to prop up some of the actions they
are taking and I have also said, to be precise, I do not object to the Federal
Reserve being audited.”
A blatant, provable lie:
He claimed that it would be
“counterproductive” to do so, echoing Fed chairman Ben Bernanke’s words verbatim.
How can he say this when taking into considerations immoralities of inflation,
stimulus, bailouts, political intervention and war funding? How can he endorse
the secret nature of the Fed, while claiming to be a freedom loving American?
It certainly cannot be because he is ignorant of the facts.
Mr. Cain also claimed that
the fed wasn’t doing “the things that they are now” when he was Director of the
Kansas City branch from 1992 to 1996, which is another blatant lie. Alan Greenspan
was chairman from 1987 until 2006; his practices have always been the same. All
of his predecessors’ practices were the same and his successors practices are
the same. It’s the flawed Keynesian system that the Federal Reserve was founded
on.
Regarding the comment about
the $14 trillion in debt, that “we didn’t have” while he was Director. This was
a direct result of the policies that Herman Cain endorsed, an
accumulation of things including the tarp bailouts.
Mr. Cain, if time and time again the government has been wrong in the
allocation of our capital (nasdaq, housing, stimulus), then how can we trust
them to be right in the future? How can we trust you?
The flaws of the Fed, the
great depression and the current crisis can be proven syllogistically and down
to central economic planning, the departure from the gold standard and Keynesian
economics. The benefits of an elastic fiat currency allow for
rich men to prop up their interests (often overseas) at the expense of the
American people. It’s a morally corrupt system that claims ethical high ground,
this moral high ground drives us into socialism.
It’s the American people’s job
to stop encouraging the Fed’s existence by demanding benefits from congressmen
that can only be produced by printing fiat money. We are neglecting our future
and our children’s future and selling it out for the short term benefits of now.
We encourage the Fed by supporting wars which could only be funded with an
elastic money supply.
Often people make the
reference that we should not “throw the baby out with the bathwater”. This is
an ignorant notion as it cannot apply to a private institute with private
interests. If the baby is the American Peoples interest, the baby has long
since left the bathwater.
Resources:
A major resource was my copy of Ron Paul's book End The Fed
Mises.org
usconstitution.net
usagold.com
Many more included through the document.
