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<A HREF="aol://5863:126/alt.conspiracy:478519">The Federal Reserve System</A>
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Subject: The Federal Reserve System
From: [EMAIL PROTECTED]
Date: Thu, Jan 14, 1999 1:20 PM
Message-id: <77ln26$m6n$[EMAIL PROTECTED]>
THE FEDERAL RESERVE SYSTEM:
A FATAL PARASITE ON THE AMERICAN BODY POLITIC
Dear Informed Reader,
If you find yourself still somewhat mystified by the hidden nature of the
fiat FRN and its incestuous relationship to taxation, the following monograph
by Dr. Edwin Vieira, Jr., considered by many to be the preeminent authority
on the subject, will enlighten you (presented herein in two parts - part II
to follow tomorrow).
A list of additional, more detailed works by Dr. Vieira can be obtained by
writing to: The National Alliance for Constitutional Money, Inc. P.O. Box
3634, Manassas, VA 22110-0976
THE FEDERAL RESERVE SYSTEM:
A FATAL PARASITE ON THE AMERICAN BODY POLITIC
�by Dr. Edwin Vieira, Jr.
INTRODUCTION:
�by Richard L Solyom, Chairman Sound Dollar Committee
Dr. Edwin Vieira, Jr., has condensed into this Monograph the substance of
addresses he has given to small groups that represent a cross-section of
American citizens concerned with fundamental monetary and banking reform.
Dr. Vieira's purpose is to present an analysis of the Federal Reserve System,
its fiat paper currency, and "fractional-reserve" banking that infrequently,
if ever, appears in the popular press, in the media, in the discourse of
legislators or political candidates, or (worse yet) in the nation's schools.
This analysis, however, is crucial to popular understanding of what the
Federal Reserve System is, what it does, and the dangers it poses to
America's economy and republican institutions of government. And such an
understanding is crucial to sweeping legislative or judicial reform of the
monetary and banking systems - hopefully, before the Federal Reserve System
causes an economic and social catastrophe; but, if not, at least after such a
catastrophe makes painfully clear to every thinking man and woman the urgent
necessity of such reform along Constitutional lines.
Dr. Vieira's central theme is that today's scheme of Federal-Reserve-System
fiat currency and fractional-reserve banking is plainly unconstitutional,
inherently fraudulent, economically unworkable in the long run, and
subversive of America's political traditions of individual liberty and
private property. This may appear, at first blush, a harsh indictment of a
system in existence since 1913, and which the vast majority of Americans
apparently accepts (albeit on next to no real knowledge). But, harsh or not,
it is an indictment substantial political-economic theory and historical
evidence support.
Hopefully, Dr. Vieira's message will prove to be a warning that comes, if
none too soon, at least not too late. [END OF INTRODUCTION]
[START OF PART I - THE FEDERAL RESERVE SYSTEM:
A FATAL PARASITE ON THE AMERICAN BODY POLITIC]
"Although the press, the media, and major political figures never mention it
the major cause of the financial) dangers facing America today is the
incestuous relationship between the national government and the quasi-public,
but largely private banking cartel deceptively called the Federal Reserve
System (FRS). Although historians can state with little difficulty when
various stages in the establishment and evolution of the FRS took place,
understanding what the FRS has done to America's money, and how and why the
FRS has done it, is not quite so easy. Rather, it requires careful attention
to certain critical details of American monetary and banking theory and
history that are usually forgotten in discussions of the problems the FRS has
caused.
ANALYSIS
I. Most contemporary debate on the FRS focuses on whether what people call
the "dollar" should, in some way, be "linked to" or "backed by" gold or
another valuable commodity. The fundamental, unexamined, and utterly
fallacious assumption in this debate is that the paper currency the FRS
generates, the Federal Reserve Note (FRN), is, as a matter of fact and a
matter of law, a "dollar" at all. As American constitutional law and history
show, the FRN is not a "dollar", has never been declared by Congress to be a
"dollar'; and could never be an actual "dollar" notwithstanding all the
statutes or resolutions Congress might enact. Rather, as cited in the
Constitution and as historically defined in the Coinage Act of 1792 a
"dollar" is a specific coin containing 371-1/4 grains of fine silver. Very
simply put, the Constitution fixes the monetary unit of the United States as
this (silver) "dollar", empowers Congress to coin silver and gold coins the
values of which are to be "regulated" in relation to the "dollar", prohibits
any government from issuing what the Founding Fathers denominated "Bills of
Credit" (and what we today would understand as paper currency redeemable in
silver or gold), and outlaws any form of "legal tender" except silver and
gold coins. Thus, from the constitutional perspective, it is literally
senseless to talk about making the "dollar" redeemable, or adopting a
"silver-" or "gold-backed" "dollar". And that such debate as occurs on the
FRS and the FRN fixes on this senseless point demonstrates how confused the
American people are concerning their own monetary system.
II. Defining the "dollar" constitutionally, however, is only the first step
in explaining the real problem the FRS poses. Three other matters require
careful consideration:
First, the evolution of the FRS exemplifies the typical historical devolution
- or corruption - of monetary systems throughout the world in the last two
centuries from commodity money, to fiduciary money, to fiat money. Here,
accurate definitions of various forms of money are useful.
A commodity money is a medium of exchange the units of which are fixed
amounts of an actual commodity that has value other than as money alone.
Historically, silver and gold coins of known, standard weights and designs
have emerged as the preferred commodity monies of the entire civilized world.
In the case of a commodity money, the actual commodity - silver or gold - is
both the medium of exchange and the standard of value (that is, the unit in
which prices are stated in the marketplace). The supply of commodity money is
self-limited by the costs of mining, refining, and coining silver and gold.
New supplies of commodity money will be coined only to the extent that
coinage is economically profitable in comparison to alternative investments
of the capital needed to mine the precious metals.
A fiduciary money is a medium of exchange composed of some intrinsically
valueless substance (such as paper) which the issuer promises to redeem on
demand in a commodity money (such as silver or gold coin) or in a monetary
commodity (such as silver or gold bullion). Historically, private bank notes
and government treasury notes were fiduciary monies in general circulation
prior to the 1930s. In the case of a fiduciary money, the paper promise to
pay is the medium of day-to-day exchange, but the actual money and the
ultimate standard of value remains the promised medium of payment, the silver
or gold coin with which the note is to be redeemed. The supply of a fiduciary
money is also self limited by the requirement of redemption. In a free market
system, new supplies of a fiduciary money will be issued only to the extent
the issuer is confident it can satisfy demands for redemption of its notes in
a commodity money. The condition "in a free-market system" is crucial,
because the self-limiting aspect of fiduciary money historically has failed
in an economic regime in which the government or powerful private interests
license the issuers of fiduciary monies to suspend or repudiate entirely
their promises to redeem those monies on demand in coin.
Finally, a fiat money is a medium of exchange composed of some intrinsically
valueless substance which the issuer does not promise to redeem in a
commodity or a fiduciary money. Because a fiat money has no direct legal
connection to a commodity money (in terms of redemption) and, therefore, no
real economic cost to its production, the supply of a fiat money can never be
self-limiting; and the value of a fiat money is always largely a matter of
public confidence in the economic or political stability of the issuer. For
these reasons, historically almost all fiat monies have self-destructed in
what is popularly called "hyperinflation" (that is, extreme decreases in
purchasing-power) caused by either unlimited increases in the supply of those
fiat monies by the issuers or accelerating loss of public confidence in the
continued value of the monies or the economic or political fortunes of their
issuers, or both.
Second, the theory and history of fiduciary money (which is also largely the
theory and history of banking) must always focus on the ever-present problem
of redemption. Emphasis on the noun "problem" is warranted, because a
fiduciary money is, by definition, a promise today the real, commodity money
of the country. A piece of commodity money - typically, a silver or gold coin
- is itself payment because it contains a fixed weight of precious metal. But
a unit of fiduciary money - typically, a bank or government-treasury note -
is only a contingent and uncertain payment that depends upon the ability or
the willingness of the issuer to redeem. And there always exists a temptation
for issuers to renege on their promises to redeem. Thus, fiduciary money
always threatens to become fraudulent money. Not surprisingly, therefore, the
history of fiduciary money has been more or less the history of monetary
fraud, both economic and political.
Third, the danger of fraud in the issuance of fiduciary money becomes
particularly acute in the case of modern "fractional-reserve banking". Under
fractional-reserve banking, the bank always issues more units of fiduciary
money, supposedly "payable on demand", than it has units of commodity money
available for redemption, counting on the unlikelihood that the majority of
its customers will ever seek redemption at one time. Thus, modern
fractional-reserve banking is inherently fraudulent, because:
�For the bank simultaneously to fulfill all its promises to redeem its
outstanding notes "on demand" is impossible. �The bank's managers know that
complete redemption "on demand" is impossible, and therefore that the bank's
promises to pay are false. And, �The bank's customers, by and large, are
ignorant of how the fractional-reserve scheme works, and the dangers it poses
to them.
III. Fully to comprehend the significance of the FRS also requires
recognition that no such thing as "politically neutral" or "politically
independent" money exists. For, ultimately, money is a medium both for
storing wealth and for exchanging wealth. Thus, money is both itself a form
of property and a mechanism for implementing contracts that transfer other
kinds of property from one party to another. So, even in a free-market
economy with a limited government, money exhibits a necessarily political
character, inasmuch as the degree to which the government protects the
monetary system from private fraud and public looting reflects the degree to
which the government respects and protects private property and the right of
private contract. A free-market economy will have one kind of money; a
"mixed" or "fascist" economy, another kind of money; a "socialist" economy,
yet another kind; and so on - but in each case, the monetary system will
accurately reflect the values of the political system.
Thus once again, the contemporary debate over whether and to what degree the
FRS should be "politically independent" of Congress and the United States
Treasury is badly misdirected. Originally, the Constitution made Americans'
money independent of electoral politics, by fixing the monetary unit as the
(silver) "dollar", outlawing "Bills of Credit", and allowing only silver and
gold coin to operate as "legal tender" in the payment of debts. But the
Constitution is itself the basic political charter of the country - so, far
from making money "politically independent" or "politically neutral", the
Constitution actually settled on one, very specific political formula for
money: namely, a commodity money of historically proven intrinsic value, the
supply of which the political authorities could not manipulate at will.
Creation of the FRS in 1913 did not render FRNs "politically independent" or
"politically neutral", but merely changed the political character of the
monetary system by empowering a small, unelected clique of self-professed
"experts" and self-interested bankers and politicians to control the supply
of FRNs, interest rates, and other monetary and banking phenomena. Thus, as
contrasted with the constitutional system, the FRS actually politicized
money, by enabling politicians, administrators, and a few selected
special-interest groups to exercise the very influence over this country's
monetary and banking systems that the Constitution had originally disallowed.
Americans tend to accept the description of the FRS as "politically
independent" because, although control of the monetary and banking systems
has serious political significance, the apologists for the FRS have been
successful, over the years, in removing monetary and banking issues from the
agenda of political panics and candidates and stifling public discussion of
those issues. Yet,
�It is of vital political importance that no major political movement now
advocates the immediate restoration of America's original constitutional
monetary system of silver and gold coinage. �It is of vital political
importance that no major political movement demands that all the paper
currencies of private banks be true fiduciary monies - that is, be redeemable
in silver or gold, or some other commodity with intrinsic value. �It is of
vital political importance that no major political movement attacks - or even
questions - inherently fraudulent fractional-reserve banking. �It is of vital
political importance that no major political movement denounces the
incestuous and corrupt relationship between the national government and the
banking industry through the FRS, the Federal Deposit Insurance Corporation,
and so on. �It is of vital political importance that no major political
movement challenges the government's use of the monetary and banking systems
to "regulate" the economy and to impose pervasive police-state surveillance
on individuals. �It is of vital political significance that the short-term
economic effects of the FRS's monetary and banking policies - especially in
terms of redistribution of wealth through "inflation" - are more or less of a
mystery to the average American, and that even the long-term effects are
difficult for economists and political scientists to predict. �It is of vital
political significance that members of Congress seem impotent even
competently to investigate and expose, let alone to correct, the misguided
and harmful policies of the FRS. And, �It is of vital political significance
that the general public - to which public officials and all branches and
agencies of the government are supposedly responsible - is unable to impose
accountability on the FRS as the "agency of government" it pretends to be.
Obviously, a group that could completely excise these matters from political
discourse in the United States, without effective (or, indeed, much of any)
complaint by a significant pan of the public, must be powerful indeed. Now,
how the apologists for the FRS have been successful since 1913 in stifling
political debate on money and banking the history books do not satisfactorily
explain. What is clear enough, nonetheless, is that the FRS was established
to remove the Constitution as the arbiter of national monetary policy on
behalf of all Americans and to guarantee instead that certain
special-interest groups are disproportionately (indeed, monopolistically)
influential in the determination of that policy, for the peculiar benefit of
those groups and at everyone else's expense. Here, more than one level of
analysis is pertinent.
A. At the first level, the FRS appears as primarily a mechanism to
"stabilize" the inherently fraudulent fractional-reserve banking system. The
purpose of the FRS is to impose structure, cooperation, and even discipline
on the banking community, so as to serve the collective interest of those who
benefit from the emission of irredeemable paper currency. Consider the
devolution of the monetary system from a regime of commodity money to one of
fiat money:
Under a regime of commodity money, the bankers employ the inherently
fraudulent fractional-reserve system to expand the supply of fiduciary money
(that is, bank-notes and deposit-currency) beyond the supply of commodity
money (that is, gold and silver coin) available for redemption. This has two
effects.
1. The bankers can loan more "money" than otherwise, thereby increasing their
profits.
2. The holders of the fiduciary money become unknowing (and presumably
unwilling) "partners" with the bankers in these excessive loans, thereby
spreading the risk of those loans throughout society and indirectly
"insuring" the bankers at the expense of the general public.
Because the expansion of the supply of this inherently fraudulent fiduciary
money is limited by the possibility of widespread demands for redemption
(so-called "bank runs"), followed by bankruptcy of the issuing banks, the
bankers as a class support a series of steps designed to insulate the
fractional-reserve scheme from collapse.
First, they use every available means of propaganda, agitation, and
disinformation to instill unjustified confidence in the holders of fiduciary
money, so as to minimize redemption and thereby facilitate ever-greater
expansion of the supply of that money. Underfunded "deposit-insurance"
schemes (either private or public) typify this deceptive tactic.
Second, if "bank runs" do occur, the bankers importune the government to
authorize "suspensions of specie payments": temporary refusals on the part of
the issuers of the fiduciary money to redeem their notes with commodity
money. This permits the bankers to remain in business even though they are
bankrupt. "Suspensions of specie payments" are a key indicator of the
breakdown of the free-market economy, because they are a governmentally
protected repudiation of contracts - in effect, governmentally licensed
theft.
Third, to prevent "bank runs" altogether, the bankers lobby for
governmental permission to repudiate their fiduciary money totally and
permanently - that is, to transform their fiduciary money into fiat
money. This generally requires that the government activate some
mechanism for the "forced circulation" of the fiat money, such as
�by making that money the unit for payment of taxes and for public
expenditures; �by declaring that money "legal tender" for all debts; or �by
outlawing contracts payable in any other form of money, especially commodity
money.
These steps substitute the government - actually, the taxpayers - for the
banks and their shareholders as the ultimate guarantors of the fiat money, in
return for which the banks agree to two requirements:
1. They "monetize" the public debt, in effect enabling the government to use
the fiat-money system as an instrument of taxation. And,
2. They cooperate in a cartel or other self-regulatory scheme to control
their expansion of the supply of fiat currency within limits that maintain
public confidence in the banking system and the government.
[END PART I]
THE FEDERAL SYSTEM:
A FATAL PARASITE ON THE AMERICAN BODY POLITIC
PART II of II: Monograph No. 4 by Dr. Edwin Vieira, Jr.
In short, the government and the banks agree to divide the amount that can be
looted from the general public by manipulation of the money supply, and to
moderate that looting so that the public never catches on or complains.
The FRS is simply an elaborate device set up to accomplish these rather
simple ends in a highly convoluted, and thereby deceptive, way. The FRS was
the response of bankers and their political cronies to decades of failures in
the fractional-reserve banking system at the local and regional levels
throughout the United States.
The FRS was an attempt to maintain that system in perpetuity - first, at the
national level with the Federal Reserve Act in 1913, and then at the
international level with the Bretton Woods Agreement in 1944. "Was" is the
appropriate verb, because the Bretton Woods Agreement collapsed in 1971, with
President Nixon's repudiation of redemption of FRNs in gold internationally;
and mounting strains in the system have been appearing domestically since the
1970s.
The key dates in the devolution of the FRS are as follows:
1913 - Congress creates the Fits; permits the emission of FRNs, redeemable in
"lawful money"; and declares FRNs to be "obligations of the United States",
but not "legal tender". In practice, the Federal Reserve Banks and the United
States Treasury redeem FRNs for gold coin on demand. FRNs are a fiduciary
currency.
1933 - Congress repudiates redemption of FRNs in gold for United States
citizens, and declares that FRNs shall be "legal tender". The government
continues to redeem FRNs in gold for foreigners; and United States citizens
can redeem FRNs for "lawful money" (such as United States Treasury Notes and
silver certificates), which is redeemable in silver coins. Therefore, FRNs
remain a fiduciary currency, redeemable directly in gold internationally and
indirectly in silver domestically.
1968 - Congress repudiates redemption of all forms of "lawful money" in
silver, thus turning FRNs into a fiat currency domestically for the first
time.
1971 - President Nixon repudiates redemption of FRNs in gold, thus turning
FRNs into a fiat currency internationally for the first time.
So, today, Americans suffer under a regime of fiat money and unlimited
fractional-reserve banking. In this system, the FRS plays a very simple, but
vital role: When public confidence in the monetary and banking systems
weakens, the FRS acts to "restore confidence". The FRS may use what the
public considers "drastic means" in this alleged "fight", but never means so
drastic that they precipitate genuine economic collapse or seriously endanger
the long-term interests of the banking cartel, its satellite industries, and
its political cronies.
The unavoidable problem, of course, is that any system of fractional-reserve
banking suffers from inherent instability that increases over time, because
at base fractional-reserve banking is a kind of "Ponzi" or "pyramid" scheme.
For that reason, fractional-reserve banking is a "confidence game" in both
senses of that term. The FRS, the banking cartel, and the politicians of the
American one-party system operate on the theory that "You can fool all of the
people some of the time, and some of the people all of the time - and that's
good enough!" But they forget that, as Lincoln concluded, "You can't fool all
of the people all of the time." Over time, some people - often large numbers
of them - do learn. And people who have learned tend to act on their
knowledge. So the remaining lifetime of the FRS "confidence game" may, and
likely will, be relatively short.
B. On a higher level of analysis, the FRS is not simply a control-mechanism
for the national banking cartel, but also one of the most important
mechanisms in a pervasive system of fascistic "economic regulation" that has
been set up in this country, slowly but surely, since the turn of the
century. This explains the "political independence" of the FRS in a way more
logical than the idea that money and banking are no longer politically
important, divisive, or even interesting subjects. If a fascistic state is to
"regulate" the economy with relative autonomy from the electoral public and
most special-interest groups, then its monetary agency must claim "political
independence". (Actually, in a fascistic state, all of the regulatory
agencies must claim "political independence" to some degree - which claim,
not surprisingly, is advanced by essentially every administrative agency of
the national government today. But the degree of "political independence"
will vary with the importance of the agency to the overall scheme of
centralized regulation of society.) Thus, the "political independence" the
FRS claims is precisely expectable were it part of an and-democratic
mechanism of economic and political control. And that no constitutional
branch of the national government - floe the Congress, not the President, and
not the Judiciary - disputes the FRS's supposed "independence" proves that
those branches, too, have been co-opted as agencies of the fascistic state.
In sum, contemporary political money and the politicized banking system that
generates it have five major consequences:
1. First, modern political money is the prime means by which the government
operates a scheme of OPPRESSIVE, HIDDEN TAXATION through increases in the
supply of money that generate systematic increases in the prices of goods and
services (what the public calls "inflation").
2. Second, by operating as a system of hidden taxation, modern political
money licenses the dominant financial and political oligarchy of this country
to "REDISTRIBUTE" THE NATION'S WEALTH from one group to another - more than
$6 trillion since World War II, according to the American Institute for
Economic Research.
3. Third, by functioning as a mechanism for "redistributing" wealth, modern
political money SYSTEMATICALLY CORRUPTS THE ELECTORAL PROCESS, enabling
politicians to buy votes with promises of new or expanded governmental
spending-programs made possible only by the banking system's ability to
"monetize" the public debt.
4. Fourth, by linking the banking system to the public debt, modern political
money licenses the banks to LOOT THE PUBLIC TREASURY, initially by
guaranteeing FRNs as "obligations of the United States" and specially
privileging those notes as "legal tender", and ultimately by providing
taxpayer-funded "bail outs" of the bankers when the scheme of inherently
fraudulent fractional-reserve banking collapses.
5. Fifth and last, modern political money and political banking function as
key mechanisms in the scheme of FASCISTIC CENTRAL ECONOMIC PLANNING that
misdirects and wastes resources and thereby lowers the standard of living of
the vast mass of Americans for the benefit of a privileged few.
IV. Although long a powerful - and today still a politically untouchable -
institution, the FRS faces a dismal future. This can be assessed by
considering the contemporary political-economic conditions that have given
rise to the problem of colla
I believe in paying all taxes for which the written law makes me liable.
I do not protest any tax; therefore, I am not a tax protester. I protest
the misapplication of the tax laws by the IRS and the courts.
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Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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