Similarly, Pope John Paul II mentions another
yardstick for measuring economic reform proposals:
[by] determining their conformity with or divergence from
the lines of the Gospel teaching...
Friedman continues:
The other reason is very different. It is so that if a
crisis requiring or facilitating radical change does arise,
alternatives will be available that have been carefully developed
and fully explored.
Further, modern history is replete with instances in which the
Hegelian dialectic has been applied to the political and economic
orders to manipulate or soften-up governments to change in ways
contrary to the public good. This method usually involves the
artificial (i.e. coldly calculated) initiation of conflict of
some kind after careful conditioning of the elements of the society
who could either obstruct or implement the planned change; followed
by a crisis (e.g. an economic or political anomaly such as
the stock market crash of 1929 or the oil crises of 1974 and 1979);
which is then "interpreted" by controlled mass media to direct the
responses to the crisis into pre-planned avenues and away from
correct responses such as careful analysis of the causes and
criminal indictment of the perpetrators (Manipulation on the
personal/psychological order follows a similar pattern of stress,
emotion, counseling). Orwell noted this in 1984:
In governing the populace, unrest cannot be averted.
Therefore, it must be channeled and cultivated.
The following quotation of David Rockefeller, then Chairman of
Chase Manhattan bank, speaking at the June, 1991 Bilderberger
meeting in Baden Baden, Germany (a meeting attended by then-Governor
Bill Clinton) is illustrative of the media control mentioned
above:
We are grateful to the Washington Post, the New York Times,
Time Magazine and other great publications whose directors have
attended our meetings and respected their promises of discretion
for almost forty years. He went on to explain: It would
have been impossible for us to develop our plan for the world if
we had been subjected to the lights of publicity during those
years. But, the world is more sophisticated and prepared to march
towards a world government. The supernational sovereignty of an
intellectual elite and world bankers is surely preferable to the
national autodetermination practiced in past
centuries.
In light of such scheming, it surely makes sense to attempt to
anticipate the dangers involved and to prepare means of escaping
them.
If man lets himself rush ahead without foreseeing in good
time the emergence of new social problems, they will become too
grave for a peaceful solution to be hoped for. - Pope Paul VI
Also, such a discussion can encourage the development
of authentic reform movements based on the conclusions reached,
which would otherwise have no focus or rallying point. Finally,
though the mass media would blind us to the sufferings of the
3rd, and now 4th, world by ignoring it and
redirecting our interests to sports and fantasy and our compassion
to seals and snail darters, nevertheless we will always have the
poor with us on this planet, those who suffer the ravages of extreme
poverty while we dwell in relative plenty. The number of unemployed
people has grown rapidly around the world and was estimated by the
International Labor Organization to be over one billion by 1994. In
fact, the present debt-based monetary system inevitably results in
vast accumulations of wealth in fewer and fewer hands, which
necessitates extreme poverty for vast numbers of mankind. In 1997,
441 billionaires owned as much of the world’s wealth as the poorer
one-half (50%) of mankind (2.4 billion people). Consistent with
one’s state-of-life, we must come to the aid of the increasing
multitudes of our impoverished fellow men.
Let us all set to work, for at this time a grave duty is
imposed upon the consciences of all; a duty for all, employers and
employees, citizens and farmers, moralists, pastors and their
flocks, to help resolutely in the solution of the economic problem
that distresses us. Universal suffering puts it in the front rank
and bestows upon it a character of sacredness.
These words of French Cardinal Verdier during the Great Monetary
Contraction (a.k.a. the Great Depression) are fully
apropos to the situation in over four-fifths of the world
today, where extreme poverty is ubiquitous and deepening very
rapidly. There children are born into a Great Depression which only
worsens as they grow up in it.
[Consider] the reality of an innumerable multitude of people
- children, adults and the elderly, in other words real and unique
persons, who are suffering under the intolerable burden of
poverty. There are many millions who are deprived of hope due to
the fact that, in many parts of the world, their situation has
worsened. Before these tragedies of total indigence and need, in
which so many of our brothers and sisters are living, it is the
Lord Jesus himself who comes to question us... (Cf.
Mt.25:31-46) - Pope John Paul II
Even in the U.S. and Canada the middle class is rapidly being
squeezed down into poverty as the poor increase in numbers daily,
despite the employment of both spouses now, often holding second and
even third jobs, being forced to warehouse their children in
institutions.
The philosophers’ ideal of secure, modest wealth widely diffused
to all classes is being supplanted by the two extremes, both harmful
to mans’ spiritual development, of extreme wealth or extreme
poverty. As Mahatma Gandhi noted: Materialism and morality have
an inverse relationship - when one increases the other
decreases.
We are very rapidly becoming a world composed exclusively of the
very few, very rich, and the very many, very poor. The middle
remaining cannot hold. Modern technology and mass media has vastly
increased the ability of the super-rich to sustain this process to
historically unprecedented orders of magnitude. However, some of the
effects of this growing disparity in wealth even have the super-rich
concerned enough to propose novel "solutions" such as National
Security Council Study Memorandum 200 which defines a program
aimed at reducing the populations of 13 nations targeted for their
raw materials needed to maintain the ruling elite’s lifestyle,
including Brazil, India, Columbia, Mexico, Ethiopia and Egypt:
How much more efficient expenditures for population control
might be than [expenditures for] raising production through
direct investments in additional irrigation and power plants and
factories ... (NSSM 200, April, 1974).
Reducing targeted populations to a bare subsistence level by
withholding investments, in effect forces less expensive population
control on them while reducing to a minimum the labor costs of
producing raw materials. Interestingly, since the passage of NAFTA,
despite the transfer of hundreds of thousands of U.S. jobs to
Mexico, Mexican labor wages have fallen by nearly 50%.
There has also been afoot for some time the
"debt-for-nature" scheme proposed at the 4th World
Wilderness Conference held in Denver, Colorado in 1987 of forcing
nations to transfer national parks and undeveloped areas (up to 30%
of the world’s wilderness - 12 billion acres) to a World Wilderness
Trust or similar U.N. agencies (and thereby effectively losing
sovereignty over part of their national territory) which would
function as a collection agent for the IMF, the World Bank and
private banks and would operate as follows:
- Creditor banks transfer 3rd world debt to the World
Conservation Bank (a new bank with a "soft" name) thereby
relieving the debtor nations of their debt to the original
banks;
- at full book value (even though these loans now have market
values as low as 6-25 cents on the dollar and cost the banks
nothing to create due to fractional reserve banking - the legally
required reserve ratio on such loans being typically 0%);
- in return for such debt relief, the debtor nations would
transfer to the World Wilderness Trust natural resource assets of
equivalent value (World Heritage sites such as the Amazon basin or
the gold-laden hills around Yellowstone will likely be included at
some point);
the World Wilderness Trust will eventually allow development by
the World Conservation Bank in order to pay the private banks full
value for the transferred debts.
Obviously, this scheme, which is already being implemented in
Bolivia, Costa Rica and Ecuador, simply interposes a new bank to act
in the name of the international community (or the U.N.) as
collection agent for the private banks and their jointly run banks
(e.g. the IMF and the World Bank), thereby obscuring the
stark reality of de facto foreclosure proceedings by private
banks against whole national territories. This transforms a
politically unpalatable worldwide land grab by private banks into a
"conservation transfer" to a body that appears to be a neutral
conservation agency of some kind. One of the remarkable features of
such institutions is their immunity to popular influence and their
hostility to democracy and human need. Widespread economic
exploitation of these transferred territories by the private banks
will be authorized by the new bank owners, absent the many
inconveniences of national sovereignty, regulation and authentic
environmental control.
Similar schemes propose every imaginable means, referred to as
"substitutes for war", to exploit or eliminate the poor
through coercive forms of demographic control including poverty,
famine, forced abortions and sterilization, euthanasia and eugenics,
the introduction of new diseases, environmental pollution,
etc., and, of course, war itself. A goal of 300-500 million
people worldwide (less than 10% of the current world population) is
a common theme. Selected, smaller numbers are far easier to
manipulate and control, besides, having reduced those on the bottom
to unemployment, total desperation and utter destitution, they have
no more material utility and being in unresigned and irreligious
poverty are too susceptible to authentic "reactionary" alternatives
or disturbance. Obviously, such "solutions" are morally repugnant
and sound reform alternatives must be presented, which do not
destabilize the entire financial system with the attendant risks of
a generalized crisis.
What Christianity forbids is to seek solutions ... by the
ways of hatred, by the murdering of defenseless people, by the
methods of terrorism ... - Pope John Paul
II
The granting of loan extensions, rescheduling, rate reductions or
partial remission of debts, though helpful, are at best temporary
stop-gap measures merely delaying the day of reckoning. Of course, a
debt jubilee (total remission of debts) would entirely solve the
problem for the present, but is more than unlikely as few creditors
take a broad, selfless or charitable enough view to support such a
solution.
Rather, too many creditor banks foist policies on their nations,
which assume the shape of a ruthless war on the poorer nations, and
on the poor in their nations, financing projects over-priced through
the fraudulent complicity of corrupted politicians creating odious
debts. For example: during the decade 1980-90 Latin American
countries paid $418 billion in interest on original loans of $80
billion.
By the end of 1990, 3rd world debt had passed $1.3
trillion — over $200 for every living person on earth. This debt had
increased by 30% in three years. Debtor nations had total arrears of
$26 billion in interest. The Financial Review (October 4,
1990) pointed out that much of the debt was owed to private banks,
and that:
...the swelling of arrears has drawn concern from the IMF,
where some officials complain that banks are successfully
pressing the IMF to become their debt-collection
agency...
Nations endowed with power are creating new forms of
relationships of inequality and oppression, perverting the use of
modern technology and global organizations for this purpose, rather
than seeking just revision of loan terms or fundamental reform.
Since most modern money is created by banks as bank loans with an
equivalent debt, all nations trade from a position of indebtedness.
As a result, nations attempt to export more than they import,
deliberately seeking an imbalance of trade, trying to gain a surplus
of foreign revenues to reduce their indebtedness. This has caused
international trade and foreign relations, to descend from trade for
mutual benefit, to thinly disguised economic warfare.
Ever mounting debt has pressured agriculture to become dominated
by the production, processing and distribution of every-cheaper food
with declining nutritional content, to the increasingly severe
detriment of peoples’ health and contrary to clear consumer
preference. Large businesses with wasteful mass-production
techniques and using large scale transport as a competitive
marketing strategy are given an advantage in the intensely
competitive financial conditions created by debt-finance. This has
culminated in the current ascendancy of huge, bank dominated
multinational corporations.
The developed nations have come to rely on private debt to
provide their money. This typically involves massive and mounting
housing debt via mortgages. Such mortgage debt prevents the majority
of people from outright ownership of a home.
Many potentially prosperous 3rd world nations have had
their development distorted by the global debt-based financial
system. These nations have been entrapped into endemic debt of a
wholly false and illegitimate nature, obligated to multinational
banks such as the IMF and World Bank whose guiding principles and
policies have been designed to support the export drives of the
wealthy, developed nations, themselves forced by debt to maximize
export revenues.
The terrible poverty this forces on debtor nations limits the
development of their peoples, and their intellectual and cultural
development is narrowed to the limited exigencies of their daily
struggle for survival.
Absent authentic monetary reform, debtor nations
unable to pay their debts will ultimately be left with five (5)
options:
1. To increase exports in order to increase foreign
exchange revenues.
Where this is possible, it transforms
the citizens into de facto workers for foreign banks which
siphon the national production out of the country, further
impoverishing the people. Increased commodity production saturates
markets and reduces prices, partially or wholly defeating the
purpose. In any case this is rarely possible, as exports have
usually been maximized already.
2. This necessitates submitting to the
IMF-imposed rape of their national resources and the starvation of
their people while surrendering their national sovereignty by
degrees.
This is the option recently taken by the S.E. Asian nations
(South Korea, Indonesia, Thailand, Philippines). This is, of course,
a closed loop back to debt. Of the $123 billion IMF S.E. Asian
bailout, Chase Manhattan bank is in line to receive $32 billion;
J.P. Morgan for $23 billion; Bank of America for $16 billion. This
$71 billion will never reach S.E. Asia, as it is transferred from
the U.S. Treasury, to the IMF, to the Wall Street banks. The IMF
bailout saves their bad loans to these nations.
Courtesy of the U.S. government, some such foreign debt is being
transferred ("monetized") to U.S. taxpayers for payment via
increased taxes and inflation. Interestingly, Congressional leaders
were told by the Clinton Administration that unless they agreed to
fund the IMF bailout of banks which make loans to South Korea, there
was danger of invasion of South Korea by North Korea — war
blackmail.
3. Unilaterally to repudiate their foreign debts.
This action incurs the danger of being followed by trade
strangulation (necessitating barter agreements in foreign trade, as
was successfully conducted by the Axis powers and later by
Rhodesia), and military invasion (e.g. witness the fate of
these defaulter nations: Haiti, Somalia, Iraq, the former Yugoslavia
[Bosnia et al.] invaded by U.S. and U.N. armed forces acting
as unwitting, de facto mercenaries):
Tote dat bar! Lif dat bale!
Try to buck the system, and you land in jail!
It is no easy task to break free of debt, nor of the
international banking system. Lacking preponderant military
strength, a well-armed populace (like the Swiss) is a necessary
precaution to exercise this option successfully, if indeed it is
still possible.
4. To seek legal repudiation of their foreign debts, based on
the doctrine of "odious debts".
This is an established international law principle permitting
debt repudiation when a government incurs a debt without the
informed consent of its people, and which is not used in the
legitimate interest of the State.
Ironically, this doctrine was first used by the U.S. to repudiate
Cuba’s debts after the U.S. took Cuba from Spain. The jurist who
coined the phrase "the doctrine of odious debts", held that
debts incurred to subjugate a people or to colonize them should also
be considered odious. This doctrine shifts responsibility to the
lenders, neither to corrupt nor to utilize corrupted politicians and
governments to initiate loans, and allows collection from the
despots who wasted the funds — both desirable changes.
Of course, an independent, uncorrupted judiciary is a
prerequisite to obtaining legal repudiation with this legal theory,
which is extremely unlikely when corrupted politicians appoint
politically subservient judges to the World Court who would hear
such cases. A national legal repudiation on this ground would be a
good start though, and could be at least legally valid, but might be
a practical nullity, resulting in the same consequences as a
unilateral repudiation without a recognized legal basis (#3.,
above).
5. To issue sufficient quantities of the national money
specifically to retire the international debt.
Since most revenues obtained from foreign loans are shortly spent
(often wasted), partly domestically and partly in foreign countries,
the results are usually inflationary (in both the country of origin
— usually the U.S., and in the recipient country), partially
multiplied by private domestic (and foreign) banks through
fractional reserve banking loans. Therefore, while issuing
sufficient new money to retire foreign debt would work, it would
also result in hyperinflation where the foreign debt is great in
relation to the economy, particularly due to the subsequent
multiplier effect of any high-powered money in a fractional reserve
banking system. This ruinous negative effect has been felt by
numerous nations which inflated to retire foreign debt.
Of course, the technical solution to avoiding such hyperinflation
lies in the domestic prohibition of fractional reserve
banking, coupled with simultaneous, proportionate foreign exchange
regulation, which would require the banks to absorb the new money as
increased reserves in a transition to full reserve banking.
This response amounts to legislated domestic monetary reform,
which is, therefore, not an option "absent authentic monetary
reform" (like the first four options above [i.e. 1-4])
but, rather, is authentic monetary reform.
In short, if nations find the first four options, above,
unacceptable, then they will be forced to consider authentic
monetary reform, which brings us back to the subject of this article
in order to describe this type of reform.
Having set forth the rationale for drafting model monetary
reform legislation, where does one begin? A careful study of the
fundamentals of our economic system and of the reforms proposed by
scholars is a logical starting point.
The draft legislation following was influenced by numerous
sources including the writings and declarations on this subject of:
President Abraham Lincoln; former Congressmen Charles A. Lindberg,
Louis T. McFadden, Robert H. Hemphill, Wright Patman, Francis H.
Shoemaker, Jerry Voorhis, Henry Gonzales and former Senator Elmer
Thomas, all courageous supporters of banking and monetary reform
legislation; Thomas A. Edison; Irving Fisher; Henry C. Simons and
the old Chicago School of Economics; Nobel Laureate Frederick Soddy,
M.A., F.R.S.; Gertrude M. Coogan; G.K. Chesterton and the
Distributist school; Rev. Denis Fahey, C.S.Sp.; Major C.H. Douglas
and the Social Credit school; W. Cleon Skousen; Popes Leo XIII, Pius
XI, John XXIII, Paul VI, and John Paul II; the Pontifical Commission
Justice and Peace; Nobel Laureate Prof. Milton Friedman; Murray N.
Rothbard; E.F. Schumacker; Peter Cook; Theodore R. Thoren; Richard
F. Warner; Charles and Russell Norburn; George Tolley and a host of
others, as well as the historical experience of reform legislation
in various nations including the U.S. during the Civil War; Britain
during WWI; Sweden in the early 1930's; Portugal from 1931 to 1974
(when it had no national debt); Canada in the mid- 20th
century; the Isle of Guernsey, and many others.
Certain economic reform principles emerge from the study of their
proposals. The first and most important is made salient from the
fact that there is grave danger to society, worldwide, which must be
addressed, when a handful of men hold the power of life and death
over national economies as is certainly the present case. As Pope
Pius XI pointed out in the Encyclical Quadragesimo Anno
(1931):
. . . the power to create money and to expand or contract
the money supply at will carries with it too great an opportunity
of economic domination [and therefor ultimately of tyranny],
to be left to private control without injury to the community
at large.
Similarly Prof. Friedman:
The power to determine the quantity of money...is too
important, too pervasive, to be exercised by a few people, however
public-spirited, if there is any feasible alternative. There is no
need for such arbitrary power ... 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 effective check
by the body politic - this is the key political argument against
an independent central bank.
Similarly Rev. Dennis Fahey, C.S.Sp.:
If a private group exercise the power to originate the
exchange-medium and then manipulates the volume of it, that group
becomes a power greater than the government itself. It becomes a
super-government, paralyzing the efforts of the lawful government
for the common good.
It is perfectly idle to talk about a democracy or a republic when
the sovereign power is being exercised de facto by a small
group of international bankers not committed to the long-term
development of the country, who manipulate public opinion and
politicians though their money and media control; the worst of whom
seek to arrogate to themselves the exercise of absolute power.
What are nations without justice but bands of robbers. -
St. Augustine
And remember, where you have a concentration of power in a
few hands, all too frequently men with the mentality of gangsters
get control. History has proven that. All power corrupts; absolute
power corrupts absolutely. — Lord
Acton
Congressman Lindbergh noted this nearly seventy years ago. These
Money Changers, he said,
have become bold, aggressive, vindictive and merciless and
command the people to support them.
Therefore the first monetary reform principle to emerge is that
control over the monetary system must be taken back out of the
private hands who have usurped the power of the State by deceit,
bribery and intrigue for their selfish or ideological ends, and be
resumed by the State. From this it flows that money creation by
private persons must be prohibited, thus fractional reserve banking
must be prohibited, and full reserve banking mandated by law.
Resolving this danger over the long-term demands that the
monetary system be so arranged as to facilitate the production,
distribution and exchange of material goods and services in view of
supporting the virtuous life of all of the members of
society. This requires a stabilized (i.e. not manipulated)
price level, while avoiding the opposite end-of-the-spectrum problem
of government favoritism in lending. This summarizes as follows:
Sound monetary reform requires the issuance of all
money (legal tender) by the State, exclusively; in amounts
calculated to stabilize the general price level; without debt
obligation to private persons; with all lending to be performed by
private legal persons, exclusively; while safeguarding the
widespread ownership of private property.
Let us separate these principles (numeric), with their implicit
corollaries (alphabetic):
Monetary Reform Principles
1.) Require the
issuance of all
money (legal
tender)
by the State, exclusively;
|
7. |
Corollaries |
|
a. this implies the prohibition of all
private money creation; |
14. |
b. this implies the prohibition of
fractional reserve banking; |
14. |
c. this implies the requirement of
full
reserve banking; |
9. |
d. this implies withdrawal from
international banks with credit/
reserve-creating authority (such
as the IMF
SDRs); |
15. |
2.) in amounts calculated to
stabilize the general
price level; |
6. |
Corollaries |
|
a. this implies avoiding inflation
and deflation, a
condition for
steady and healthy economic
growth, as
government policy; |
6,7. |
b. this implies the abandonment of
a single commodity
standard (e.g.
gold) inasmuch as no commodity
is available on the same time as
all goods in
general (besides the
problems of hoarding,
manipulation
through export, etc.); |
7. |
c. this implies a
fixed relationship
or rule between the quantity of
money and goods; |
7. |
d. this may imply a war-time ex-
ception to #3,
below; |
8. |
e. this implies government policy
to stabilize
excessive fluctuation
of exchange
rates; |
16. |
3.) without debt obligation
to
private persons; |
5. |
Corollaries |
|
a. this implies paying off national
debts (not
necessarily intra-
government debt); |
5. |
b. this implies requiring full
reserve
banking; |
4. |
c. this implies the issuance of all
money (medium of
exchange) by
the State; |
7. |
4.) with all
lending to be performed
by private legal
persons, exclusively; |
|
Corollaries |
|
a. this implies the prohibition of all
government
lending (e.g. contrary
to communist and national
socialist legislation); |
7. |
b. this implies the prohibition of us-
urious rates of
interest, which
defeat or prevent the
beneficial
effects of lending and create
obstacles to
secure ownership
of property; |
14. |
c. #1, supra., implies that #4
would be limited
by the amount
of funds the lender had or
obtains to
lend; |
9. |
5.)
safeguarding the widespread
possession of private
property. |
|
Corollaries |
|
a. this implies both the secure
(which implies
permanent)
and modest possession of
private property
by all
classes of people; |
7, 14. |
b. this implies a homestead exem-
ption from property
taxation and
in bankruptcy; |
7. |
c. this implies that the power to create
money not be
delegated to private
persons for their individual
benefitby
the State since this results in
vast
concentrations of property; |
7, 14. |
d. this implies that the right to
private
property is subordinated
to the right to common use
where
the danger of economic domination
of the
community is too great to
leave it in private hands.
|
|
These principles are consistent with and are required
by the increasingly higher principles of subsidiarity, solidarity,
justice (i.e. legal, distributive and social) and equity.
Subsidiarity is the principle that states that one should
not withdraw from individuals and commit to the community (nor from
a lower community to a higher order of community) what they can
accomplish by their own enterprise or industry. Negatively put, it
states that it is an injustice, a grave evil, and a disturbance of
right order for a larger, higher organization or jurisdiction, to
arrogate to itself functions (or ownership) which can be performed
efficiently by smaller and lower, local bodies. The notion of
rational decentralization and the Distributist school derives from
this principle. Subsidiarity is, therefore, that principle which
dictates to common sense that each man select his own food, home,
job and spouse and not be told which by some capitol (or capital)
bureaucrat. It reflects the nature of man and of his unique
personality which requires that men be not wholly subject to the
will of others, but retain their liberty and freedom from
oppression, economic imperialism, bureaucratic control and
centralization which dries up the wellsprings of initiative and
creativity.
Subsidiarity is also that principle which prohibits government
lending since this, unlike money creation, can be efficiently
performed privately, at the local level without danger to the common
good. Needs are best understood and satisfied by people who are
closest to them, who are also capable of perceiving deeper causes
and needs due to their more personal contact.
Unlike subsidiarity, which required some necessary definition
here, solidarity, justice and equity are at least commonly
understood, if in a vague sense, and these are not on the same level
as our consideration here, which is narrowly limited to considering
practical monetary reform legislation.
Interestingly, on January 1, 1998, in his Angelus message,
Pope John Paul II said,
The process of globalization under way in the world needs to
be orientated in the direction of equity and solidarity...it is
indispensable for everyone to strive for
justice...
Following these basic principles of sound monetary reform, which
are available to common sense enlightened by modest reflection in
this area, non-experts are perfectly capable of judging reform
proposals such as that following. Indeed, by use of a peculiar
esoteric jargon and pure gibberish, central bankers and their
economists have intimidated the public from considering this
artificially arcane subject area leaving the field to their paid
"experts".
Would such reform make monetary policy a plaything for
politicians, ending the independence of the Central Bankers? Yes,
and so it should be! Quoting Prof. Friedman again: This is an
argument for, not against, eliminating the central bank’s
independence. The economic order is properly subject to the
political, not the reverse as is the case presently.
Elected officials with political accountability should run the
country, not bankers busily betraying their nation’s autonomy and
sovereignty. Further, capital is a mere instrument, a means of
production at the service of man and his labor, not the reverse. It
should be subject to him, not he to it. This is simply to express
the obvious primacy of man over things.
This draft Act has gone through numerous technical revisions
based on suggestions from numerous sources, and more are invited. In
particular, we are grateful for suggestions received from Prof.
Milton Friedman. The principles contained herein are equally
applicable to Canadian (or other national) draft monetary reform
legislation, though the particulars would vary considerably.
Points of controversy in details will doubtless include the
following:
1. Whether to abolish or fundamentally reform the existing
Federal Reserve System;
2. Whether to require banks to have their reserves in the form of
cash, government securities, or Treasury deposits;
3. Whether the State, or private persons, ought to purchase the
bank liabilities the banks must liquidate in order to transition to
full reserve banking;
4. Whether future monetary growth should be partially
discretionary (i.e. but based on a known rule) with some
national Monetary Authority, or non-discretionary and based on a
fixed rate of growth, and if the latter, at what fixed rate (but
having any definite and unambiguous rule is more important than
which rule is settled upon);
5. Whether bank reserves ought to earn interest or not, and if
so, how much;
6. Whether prior bank profits ought to be disgorged, and if so,
whether via a nationalization and re-privatization of banks or by
confiscation or tax-surcharge.
The endnotes of the draft Act following, briefly address these
points. We regard the choice of such options regarding these points
as non-essential to sound monetary reform.
Novel reform proposals, such as: computerized barter systems
based on market pricing; the creation of new forms of private
monies; using bearer certificates tied to inflation-indexed and
non-indexed bonds, or futures widely indexed to result in a
relatively constant stable price; localized or municipal currencies,
now in use in fifty-two U.S. communities (e.g. the
"Bread" [Berkeley Region Exchange
And Development] labor certificates), which were
issued in c. 400 local communities during the Great
Depression; the widespread establishment of State-owned banks
(e.g. the very successful State-owned Bank of North
Dakota); and discounted private organization debit cards; are
not considered here as they seem presently too speculative,
localized or costly to replace national currency and demand
deposits. But that may change before we know it, and these proposals
all merit further discussion and refinement.
Other non-monetary reforms, such as: increased utilization of
credit unions; a new Homesteading Act, instead of allowing
idle farmland and abandoned urban buildings to remain so; single
parent’s cooperatives to assist them and their children to achieve
self-sufficiency; tax incentives for micro-mass transit such as
community vans; micro-lending; tax reduction including abolition of
property and land taxes; and many other worthy ideas have been put
forth, which certainly would help society cope with the problems
created by the present corrupt banking system, but these go beyond
our topic here.
The fundamental, basic economic reform needed — the abolition and
recriminalization of usury, is closely related to our topic, but
beyond its specific scope. Let it suffice here to state that it is
usury, defined as: the charging of interest on a loan which is
not productive, which is the root cause of the evils of
fractional reserve banking and the debt finance system, which are
merely "refinements" of it, as is compound interest and money
manipulation in general. Usury is not merely the charging of an
excessive or unlawful rate of interest. Unless addressed, usury
inevitably leads to these other evils, which are our focus here, and
to the decay of justice and civilization.
Regarding a gold standard: there is no unanimity as to what type
of gold standard to consider. However, except for a true gold
standard - in which either gold coin or gold deposit certificates
circulate as money - the others are easily manipulated. But even a
true gold standard can be manipulated in a variety of ways, as
history demonstrates, and has only this appeal: that it would
certainly be better than the current state of affairs in that it is
one step more difficult to manipulate its quantity than a purely
fiat currency.
However, even a true gold standard has numerous problems
(including its relative inelasticity in relation to GNP, GDP or
similar yardsticks, resulting in, at least in the short-term,
inflation and/or deflation) and would not be preferable to true
reform as set forth in the draft Act following, for a number of
reasons which we cannot discuss in detail here.
In any case, without the simultaneous abolition of fractional
reserve banking (and the retirement of the national debt), adoption
of a true gold standard would simply be changing the form of
high-powered money from Federal Reserve Notes to gold - a largely
meaningless change. Whereas, with the adoption of full reserve
banking, including a fixed rate of monetary growth, any commodity
standard (e.g. gold) becomes problematic and a potential
obstacle to authentic reform. For these reasons, the political
support for it is very slight, and was even in the exigencies of the
Great Contraction. This seems unlikely to change.
Concerning implementation: the fundamental causes of the world
debt crisis are not economic, but philosophical, theological and
moral. We cannot expect economic justice in a society that murders
innocent children in the womb and idolizes money. So authentic
reform cannot be reduced to a technical or drafting problem, which
is, however, our specific focus here. Nothing serious or deep is
accomplished exclusively by changing techniques, laws or
governments.
It is obvious that no change of system or machinery can
avert those causes of social malaise which consist in the egotism,
greed, or quarrelsomeness of human nature. What it can do is to
create an environment in which those are not the qualities
encouraged. It cannot secure that men live up to their principles.
What it can do is to establish their social order upon principles
to which, if they please, they can live up or not live down. It
cannot control their actions. It can offer them an end on which to
fix their minds and, as their minds are, so in the long run, and
with exceptions, their practical activity will be. —
R.H.
Tawney
The well being of families, the security of the nation, the
happiness of humanity — these can be conceived only in terms of the
ordered use by individual persons of their God-given virtues and the
objects to which these correspond. There is no such thing (save in
metaphor) as a sinful (or "holy") nation or system; there are only
nations and systems composed of individual persons either in revolt
against nature, right reason, justice and good, or who by reason of
their personal virtue are in harmony and union with nature, right
reason, justice and God, radiating their personal virtue into the
national or systemic life.
So the reform of society and of systems must begin with the
reformation of the individual morals of the individual persons who
comprise society. Hopefully, this will be initiated before our
remaining freedoms, which are indirectly tied to our economic
independence (including our national economic independence and
sovereignty) are so far gone as to be irretrievable and injustice
degenerates into irremediable conflicts.
No leader in public economy, no power of organization will
ever be able to bring social conditions to a peaceful solution,
unless first there triumphs moral laws based on God and
conscience. —
Pope Leo
XIII
Institutional reform follows on individual reform, which
experience teaches is often predicated on trial or crisis. Crises
bring to the surface deeper disorders not otherwise discovered. A
better world cannot be built in the midst of crisis, but it is
precisely in time of crisis that the anvil is hot for shaping the
kind of world peace may provide. Of course, the international
bankers know this too, and plan to create and use crises for their
own ends, as mentioned above.
Nevertheless, is very unlikely reform will advance in the U.S.
until economic crisis deepens and touches larger numbers of our
citizens, either suddenly, in a major upheaval (i.e. a severe
economic depression or war) or by gradually spreading impoverishment
due to continually increasing inflation/taxation/and interest on
debt. The false sense of economic and social security to which our
citizens presently cling will be increasingly tested and shaken,
either way.
As Aristotle noted in his Politics:
For war compels men to be just and temperate, whereas the
enjoyment of good fortune and the leisure that comes with peace
tend to make them insolent. Those then who seem to be the best-off
and to be in the possession of every good, have special need of
justice and temperance.
So realistic opportunity for authentic reform may present itself
in the context of an economic/political crisis in which increasing
numbers of our citizens, hitherto untouched, personally experience
the harsh consequences of the lack of justice and charity in the
present economic system, since the changes needed are ultimately of
the heart and are therefore personal.
Let us glimpse our future, through the eyes of a Brazilian
viewing their present:
The third world war has already started. It is a silent war.
Not, for that reason, any less sinister. This war is tearing down
Brazil, Latin America and practically all the Third World. Instead
of soldiers dying, there are children. It is a war over the Third
World debt, one which has as its main weapon interest, a weapon
more deadly than the atom bomb, more shattering than a laser
beam.
Despite their country’s fabulous national wealth, 40% of the
Brazilian population go hungry whilst seven million children work as
slaves or prostitutes.
The relentless activity and ceaseless agitation against justice
and right order financed by the Money Changers need not unduly
discourage us. This apparent vitality masks the restless spirit
injustice generates, which seeks to salve the conflicted conscience
by resolving, consciously and subconsciously, to justify its actions
externally, in a torrent of words and works. Inner conflict thus
leads to outer conflicts, where increasingly aggressive (even
murderous) forms of coercion are employed against the outer world,
and ultimately against themselves (e.g. neurosis, alcoholism,
suicide) to bend the truth of justice to their denial of it.
In short, injustice ultimately creates internal conflict in the
individuals (and groups) so acting, as well as in their collective
efforts, as they attempt to repress those portions of their own
consciousness and of their own groups (and others), which condemn
their injustice. This repression requires increasingly greater
efforts to maintain (as each act of repression increases the
injustice, necessitating even more repression), thus diverting their
energy to destructive ends and away from the creativity necessary to
maintain their position and power. In fact, so draining is this
effort that most people are not capable of the deception, the
tight-rope walking, the consistent criminality and repression
required to maintain a great evil conspiracy.
In contrast, a conscience at peace naturally tends towards an
unworried, calm approach to life, yet this is a sign of strength and
integrity, not weakness. Of course, complacency, the opposite
extreme, is to be avoided. It is therefore necessary to work
simultaneously for the conversion of hearts and for the reform of
systems, with the emphasis much on the former. As Pope John Paul II
put it:
We are all called, indeed obliged, to face the tremendous
challenge ... because the present danger threatens everyone: a
world economic crisis, a war without frontiers ... every
individual is called upon to play his or her part in this peaceful
campaign, a campaign to be conducted by peaceful means, in order
to secure development in peace.
Our part of this development in peace may begin with a prudent,
clear-eyed objectivity to determine what actions are appropriate to
the real situation before us. This cannot be achieved except by an
attitude of ‘silent contemplation’ of reality, during which the
egocentric interests of man are, at least temporarily, silenced. In
that silence, the knowledge of truth may be transformed into
decisions corresponding to reality. However, it is the province of
true religion to define this for those so drawn and to
revealdistinctly religios responces to this crisis.
The author, Patrick S.J. Carmack, B.B.A., J.D.,
practiced corporate law; is a former Administrative Law Judge for
the Corporation Commission of the State of Oklahoma; is a member of
the bar of the U.S. Supreme Court; and is the co-author of the two
volume-video, THE MONEY MASTERS, How International Bankers
Gained Control of
America. | 
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