Posted on 12/23/2013 3:22:13 PM PST by BfloGuy
It is little wonder that early Democrats garnered such popular support and would demand Andrew Jackson end America’s experiment with central banking. Jackson called it “dangerous to the liberty of the American people because it represented a fantastic centralization of economic and political power under private control.”
It’s hard to believe that guy who said that is now on the $20 bill.
Jackson also warned that the Bank of the United States was “a vast electioneering engine” that could “control the Government and change its character.” These sentiments were echoed by Roger Taney, Jackson’s Treasury Secretary, who talked of the Bank's “corrupting influence” and ability to “influence elections.” (The Whigs would later get revenge on this future chief justice when Abraham Lincoln, in response to a written opinion with which he disagreed, issued his arrest warrant.)
But the courtship between the political classes and their cronies would continue in the decades following Lincoln’s assassination. Those politically well-connected groups that benefited from early central banking continued to benefit from government finance, especially off of “internal improvements,” which is the nineteenth-century term for pork. National banking would appear during the War Between the States, setting in place a banking system in which individual banks would be chartered by the federal government. The government itself would use regulations backed by a new armed U.S. Treasury police force to encourage the banks’ inflation and protect them from the market penalties that inflation would otherwise bring them, such as the loss of specie and the occurrence of bank runs.
The boom and bust cycle, explained by the Austrian School in such detail, became worse and worse in the period leading up to 1913. And with the rise of Progressive Era spending on war and welfare, and with the pressure on banks to inflate to finance this activity, the boom and bust cycles worsened even more. If there was one saving grace about this period it would be that banks were forced to internalize their losses. When banks faced runs on their currencies, private financiers would bail them out. But this arrangement didn’t last, so when the losses grew, those financiers would secretly organize to reintroduce central banking to America, thus engineering an urgent need for a new “lender of last resort.” The result was the Federal Reserve.
This was the implicit socialization of the banking industry in the United States. People called the Federal Reserve Act the Currency Bill, because it was to create a bureaucracy that would assume the currency-creating duties of member banks.
It was like the Patriot Act, in that both were centralizing bills that were written years in advance by people who were waiting for the appropriate political environment in which to introduce them. It was like our current health care bills, in which cartelized firms in private industry wrote chunks of the legislation behind closed doors long before they were introduced in Congress.
It was unnecessary. If banks were simply held to similar standards as other more efficient industries were held to — the rule of law at the very least — then far fewer fraudulent banks would ever come about. There were market institutions that would penalize those banks that over-issued currencies, brought about bank runs, and financial crises. As Mises would later write:
What is needed to prevent further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling each individual and firm to fulfill all obligations in full compliance with the terms of contract.
The bill was passed fairly easily, in part because the Democrats had a larger majority in both Houses than they do today. There were significant differences that were resolved in conference, with one compromise resulting in the requirement that only 40 percent of the gold reserve back the new currency. So instead of a 1-to-1 relationship between gold and currency issued — a ratio that defined sound market banking since the time of Renaissance Italy — the new Federal Reserve notes would be inflated, by law, at a ratio of 1-to-2.5.
The bill that was first drawn up at Jekyll Island was signed by Woodrow Wilson in the Oval Office shortly after the Senate approved it. At one point during the signing ceremony, as he reached for a gold pen to finish signing the bill, he jokingly declared “I’m drawing on the gold reserve.”
Truer words were never spoken.
Central banks always result in feeding those forces that centralize and expand the nation-state. The Fed’s policies in the 1920s, so well documented by Rothbard, would provoke the Great Depression, which, in the end, wrenched political power from cities and state governments to the swampland in Washington. Today people take seriously the claim that there can be a viable federal solution to every problem thanks to the money printed up by the Fed, while each decade has seen a larger proportion of the population become dependent on its inflation.
And yet Andrew Jackson’s beliefs about the perniciousness of the Second Bank of the United States are just as applicable to the Federal Reserve today.
Here’s to hoping we’ll see Jackson’s hawkish nose and unkempt hair on a gold-backed, privately issued currency in the not–too-distant future.
>> “Gotta be pretty clueless to swallow that story.” <<
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Clues have always been in short supply to the excessively educated elite.
Cool. Find me one advanced major nation-—Switzerland doesn’t count-—that doesn’t have one. Waiting , , .
Love it. “International banker cabal.” Better than the goldbug conspiracy whacko cabal any day.
Professor can “teach” hundreds of students, write a dozen books on the subject, but doesn’t try to refute a few simple factual arguments. Because the facts are simple and true; there is no refuting them. The proof laid bare for all to see.
What the heck does that have to do with anything. If Switzerland jumps in the lake, do we have to, too?
Look. Every nation has a central bank for the same reason: to participate in the monetary war to keep its currency's exchange value competitive with [or below] all the others'. That great race to the bottom written by John Maynard Keynes and produced at Bretton Woods.
Anyone should be allowed to print money -- why not? Of course, the catch is getting other people to use it. But if they can do that and it becomes generally accepted as a means of trade, what's wrong with it?
Tell me just why government should have a monopoly on it? After all, if government is allowed to create money, it has no need to earn it.
Ridicule must contain an element of truth. Ask Rush.
I didn't know. Thus the question. Thanks. Will have to read up on it.
Some background:
The bare bones essential function of government is the military. It follows with the simplest and smallest of real or theoretical “nations”, for example, the early colonies in America. A shared defense of a community by that same community.
Of course, national defense in peacetime hardly seems worth it to many citizens. Though preparedness is the cheapest, in terms of both blood and treasure, in the long run, everyone won’t necessarily see this during peacetime and happily donate to the cause of national defense preparation. They get no immediate, direct and personal benefit from having to pay for such an operation, hence it’s an “overhead” cost. Of course, if the amount is miniscule, no one cares much, but as the amount becomes very large, it becomes burdensome.
Of course, today’s national defense preparation in America is far more costly that it would have to be if new world order had not engineered so much war in the last 200 years. But the US, like every nation, still would need some national defense even if there had not been any NWO meddling.
Perhaps the next “shared” cost government could legitimately incur - especially at the local level - would be transportation infrastructure. While we may not want to have to directly pay for the road in front of our house the first time it’s put in, we certainly do like a road in front of our house or business. Of course, it’s highly cumbersome to everyone else if I “own” the road in front of my house, operate it differently than my neighbor, etc. So I think most would agree that transportation can have some government involvement.
The point is, government should not be “earning” its money by providing products or services to citizens, since that is the domain of the private sector, and when the private sector operates businesses (as long as legitimate rights are observed as to making contracts and private property)... we see three wonderful resulting effects: 1) the profits from business operations results in an increase of wealth and 2) the profits allow for reasonable taxation and 3) there is employment and thus earnings for citizens that does NOT have to be paid for by taxing other citizens (i.e., the productive activities are self-funded by satisfied customers who buy products and services of their own volition.
Private money:
First, we need to differentiate from commodities, goods, accounts payable/receivable, etc., and money. Unless a bank account is set up as a 100% reserve account, meaning my cash is not loaned out, then my bank balance is not money, it’s a customer account the bank keeps to track what they owe me. With 100% reserve accounts, there is never any question that the bank has the cash on hand so all their depositors can withdraw the money in their cash accounts.
Time deposits, or debt instruments of various kinds, like a certificate of deposit (CD), on the other hand, do not give me rights to immediate full withdrawal without penalties. I can only get my principal and interest back in full if I wait until the time deposit matures. So CDs are not money, but debt instruments, i.e., a loan from me to the bank.
Now when we get to “private money issue”, folks often talk about the “money” being “backed” by something. This means that I could take the “money”, present to the entity who issued the “money”, and exchange it for whatever “backs” it - but NOT exchange it for other money.
In essence, the entity, say a bank, would need assets on their balance sheet with NO matching liability. Since Assets - Liabilities = Equity, that means that the bank could only issue as much money as they had equity on their books to be sure that they could redeem all the money they issued and not be insolvent.
There’s a problem, however. Since the redemption is done with something other than cash, say gold, or grapes, or some other commodity, first, the equity that was being held in reserve for redemptions would have to be held in gold or grapes, or whatever was “backing” the money. The business would also want cash on hand IN ADDITION to those commodities. This presents a problem for the financial performance of the issuing bank; it has to keep part of its assets tied up in this commodity, which then serves as a constraint on it’s business operations.
The big problem for everyone, however, is that the price of any commodity varies over time based on supply and demand.
If the value of money has a hard-link to the value of its redemption commodity, i.e., gold, grapes, etc., then the value of cash on hand changes with the value of the commodity.
Commercial transactions often occur over a period of time. Say a company buys a computer on June 12. The seller creates an invoice for, say $100,000 with the date of June 12 and sends a bill to the customer. 4 days later, the bill arrives at the customer and an accounts payable voucher is entered into their a/p system; this recognizes the $100k liability, but does not pay the bill. 4 weeks later, the computer is shipped and arrives at the customer site. It’s installed the customer signs for it on July 11. The customer’s accounts payable system then matches the receipt of the computer with the voucher and generates a check for $100k; the next morning, July 12, it’s mailed out to the vendor. The vendor receives the check 3 days later, it’s matched to the outstanding invoice and an offsetting accounting entry is created for the $100k invoice, which closes the invoice. It’s real straightforward.
Now, what if the customer paid their bill in Euros instead of Dollars, because the European subsidiary made the sale ?
Well, even though both accounting systems would have recorded everything in the local Euro currency, back in the US the holding company that owns the European subsidiary would need to translate the amounts to Dollars when they create their US financial statements. Suddenly, ouch. The amount billed would be translated to dollars based on the exchange rate on June 11. But the payment ..... would be translated based on the exchange rate on July 12. Probably a different exchange rate. It would look, in US dollars - like their was either a gain or loss on the sale due to currency translation !
Now what if our currency was backed by gold, or barrels of oil. The value of those things changes between June 11 and July 12 as well - the price of 1 oz of gold or 1 barrel of oil or one bushel of grapes varies over time based on how much the world is using and wanting at the moment and how much is sitting around at the moment.
Ergo, we discovered the concept of money. It does not need to be translated or redeemed for something. It can always be used to pay for things directly. We still have the issues related to multiple currencies, i.e., changing from one countries money to another, but if we stay within our own country and our own currency - every asset we own, every sale we make, every bill we pay - it’s all done in our local currency (dollars, etc.).
So let’s back it with debt...
Say somebody owes my business $100. I print up a $100 PieterC note. Can I go spend that ? Wait, my balance sheet was $1,000 Assets (including the $100 owed to me), $700 Liabilites, $300 Owner’s Equity. When I printed my $100 PCNote, I just added to my assets ! Without doing anything other than printing a note, I instantly had $1,100 Assets. Where’s the balancing credit ? I have no additional $100 Liability... I would then credit Owner’s Equity. I just created $100 out of nothing. But it’s “backed” by the $100 receivable I have that someone owes me. If you want to “redeem” your $100 PCNote, you can come give it to me - and I’ll give you the loan note that some schmuck owes me $100 on. Doesn’t sound like much backing, sounds like there would be tons of money out there that does not have the backing we think it does even though we say it’s “backed”. And even if that issue is somehow addressed, our private money is enabling people to print money instead of earning it.
So let’s remove the “backing” on private money... which of course still does not work.
Now, let’s see what happens if we let people or businesses create/print their own currency backed by nothing. Well, I’d go right out and buy the printers, inks, etc, and start printing - wouldn’t you ? I would therefore not be producing my goods and services. Why bother ? We have a license to print money ! Woo-hoo !
Government in the open
If only the government can print money, everyone, every business, every banker, every financial elite - everyone - will have to earn their money. Thus we have a basis for productivity.
If the government publishes accurately exactly how much money it creates, then everyone knows this figure. Too much or too little, if they start causing pain, can translate into political pressure.
Can there be lies and behind-the-scenes dealings, yes, but there is now.
We’re just racking up a future tax burden to pay back every Treasury bond - with interest - the government issues.
Unfortunately there is absolutely no answer that works well as long as the leadership of society is a bunch of criminal elitists that keep our government buried in debt which is “backed” by future taxes on productive citizens.
Because the bankers knew they could control the money supply, the money laundering, and take 4% per year out of the flow of money as an illegal skim. They knew they could force people into mortgages, car loans, and loans of all kinds by offering cheap money, which raises prices to the point where a loan is practically necessary. They salivated at creating the fed for 100 years prior but they need a public catalyst to allow them to do it and the robber barons were their ticket as they used class warfare to gain public support against “the filthy rich!”
I didn't disagree with a single word until that statement.
Under a gold standard, for example, the dollar would not simply be backed by gold, it would be defined as gold. Let's say that it is newly defined by Congress as 1/4 of 1 grain of gold.
Under that system, fluctuations in the price of gold would have no effect on the dollar whatsoever [they are one and the same] and since all contracts would be denominated in dollars or in gold, the fact that I was paid in Euros wouldn't matter to me as the buyer would have to settle at the current gold/dollar price.
Now, let’s see what happens if we let people or businesses create/print their own currency backed by nothing. Well, I’d go right out and buy the printers, inks, etc, and start printing - wouldn’t you ? I would therefore not be producing my goods and services. Why bother ? We have a license to print money ! Woo-hoo !
But who in his right mind would use your money? In order for money to become commonly-accepted [else it isn't really money, is it], it would have to be backed by something and you would need to have a well-established reputation.
I certainly was not suggesting that Joe print up some coupons and call it money, though I probably wouldn't pass a law against that, either, unless he was trying to counterfeit someone else's. I just don't see why government should have a monopoly on the thing.
I'm a believer in so-called "hard" money. My comments on money here are always premised by that. I distrust the government much more than I do markets. That was really my point.
Regarding “defined” as gold, then we would have completely moved over to a gold standard.
In that case, we’d have certificates that are denominated in how many ounces of gold back each particular certificates, and gold coins.
Let’s call the currency GOZ, for gold ounces.
We could have paper GOZ notes denominated like this:
(ounces of gold)
0.001
0.01
0.1
1.0
Then, the currency that businesses and people would keep their records and report in would be in GOZ.
In terms of the relationship between GOZ and other currencies, GOZ would be just another currency.
Now the currency is truly defined as gold; a .01 ounce gold note would always be worth .01 ounces of gold.
Unfortunately, the supply and demand for gold as a commodity would fluctuate. These fluctuations, of course, would not have any effect on the GOZ currency valuation relative to gold, because the GOZ paper and electronic currency denominations simply descriptively say exactly how much gold those GOZ currency units are worth.
But here we get into whether we want the GOZ currency actually to have ounces of gold sitting in a vault, enough to back every paper or electronic ounce.
If we do want that “backing” gold in a vault, at today’s dollar price of gold, there is nowhere near enough gold available to the US Treasury to back the GOZ currency that would translate to the USD that is now in paper or electronic form.
If the Dollar price of gold were, say, $20,000 per ounce, perhaps we’d be getting close (I’d looked into this a little a few years ago, but don’t have much interest in getting into those details if not necessary).
So at the time of changeover from USD to GOZ currency, the price of gold in USD would shoot up much higher than it is today.
After a changeover, if the GOZ replaced the USD completely, so USD go out of circulation and are no longer used and the US only used GOZ, we’d be left, worldwide, with a very tight supply of GOZ. This is because if they economy expands and we get in increased velocity of money, and we then desire to grow the money supply, the Treasury would have to wait for gold producers to mine and purify gold and then buy it from them with newly created GOZ paper or electronic money.
The goldmining companies would sell directly to the Treasury, which would be unable to issue GOZ notes or coins - other than by purchasing gold from the goldmining companies.
Unfortunately, the Congress and Treasury still could and would continue taxing and borrowing in order to get money to spend for everything it currently spends on. The Treasury doesn’t create money today - it taxes and borrows to get cash. So the GOZ would not fix the problem of government spending more than it receives in taxes.
New world order would still be in the driver’s seat in terms of controlling our government, because in addition to controlling sovereign debt markets, they have controlled the precious metals industry for centuries. Through precious metals mining, that is, increasing or decreasing production, or coming up with new uses for increased demand or obsolescence of old uses, the creation of money by the government would be very much still subject to their control. Government would simply stand there with their hand out begging for gold. Of course, new world order might prefer that the Federal Reserve be the entity that creates this GOZ money anyway, which would mean that pretty much everything would remain the same as it is, that is, after new world order profited enormously and caused who knows what kind of world events to happen during the changeover.
Now -the privately issued money. I agree, the “little people” would be unable to get anyone to accept the money they created. Large banks, financials, etc. (new world order), however, certainly could successfully push such instruments they created out into the market.
So then we come to the question of whether the money created by say, JP Morgan, actually had good backing. If the money JPM issued is presented to JPM for redemption, can JPM redeem it. A) does it have the assets that it says “back” the money still in its possession - can it deliver ? B) Are those assets still worth what the money says they are worth ?
Well, JPM and others of these banks recently securitized a lot of mortgages - and the underlying assets - the mortgages those securities were supposedly backed by - wound up being worth significantly less than they were touted to be worth.
How often does Wall Street do a pump and dump on an IPO ?
Doesn’t bode well, IMHO.
I looked over my prior post and I have to make a correction.
The credit to the issuance of the PCNote actually would not be to Equity, it should be, IMHO, to a Liability account, something akin to Unearned Revenue.
Ergo, there is a liability, but the moment the PCNote is issued - it sits on my books as a short term asset - cash - and a liability, unearned revenue, so things are still in balance. I have the liability, but it has an exact matching asset, so my balance sheet is still in good shape.
It’s the moment that I spend my PCNote; it’s supposed to be spendable like money, after all. I spend it and someone accepts it. I credited PCNote Cash and debited say, my telephone expense.
Now I still have that liabilty I booked - any time someone presents my PCNote back to me and “demands” - I have to exchange it for the underlying asset.
What really happened in all this ? My businesses just wrote itself a collateralized loan. No outside approval was needed - the approval comes when I convince someone to accept my PCNote as payment. So my PCNote is really a debt instrument.
True Cash, however, is not a debt instrument. If I paid my telephone bill with $100 - 100 Dollars - and later on someone brought the $100 bill back to me for redemption - I don’t have to redeem it. I can sell them something for $100 - they can use it to buy anything from anyone. But I don’t have to redeem dollars that I’ve paid out.
My debt instrument, my PCNote - if it says it’s backed by, let’s say a mortgage, and is redeemable - then when someone presents my PCNote for redemption, I would have to give them the mortgage that I’m holding, if that’s what backs it.
If the “mortgage” at the point of PCNote redemption is non-performing, I’ve then concluded my hoodwinking of my vendor. They’ve legally accepted payment, which I made with something worthless.
Given the way the world operates (the bigger the financial institution, seems like the more corrupt they are), and the fact that the bigger the institution, the more accepted their “private money” would be, “private money” sounds like in practice it would never work.
Of course, there’s the more fundamental problem that privately issued notes that are redeemable are private-sector-issued debt instruments. Even if they have underlying collateral, the collateral always has a degree of uncertainty - and even the issuer does as well (i.e., the issuer going bankrupt would basically wipe out the underlying collateral).
So this type of private money really isn’t money. Using it to make payments then is actually barter, with one entity using debt notes for their part of the transactions.
These types of ideas are the the Von Mises Institute puts out, to the joy of new world order. They present alternatives to the current new world order scams, alternatives that are designed for “conservatives”. This makes the choices available to the public a) continue as we are or b) use this “conservative”, “sound economics” alternative. Of course, either way, new world order is happy with the outcome.
Of course, Von Mises work - actually points out “the oligarchy”, Rothbard even wrote the book “Wall Street, Banks, and American Foreign Policy”.
But how else to make sure that conservatives and libertarians do not think that the needing money to be “backed” by something is yet another “establishment” or “new world order” trick ? Be absolutely sure to have the idea touted by a group - that makes a point of calling out “new world order”.
New world order would never create a group that attacks itself, that’s preposterous. These Von Mises guys CAN’T be new world order - they vociferously attack new world order. They MUST be on our side.
It’s very easy to trick someone who thinks you are on their side; they can’t help but color their judgement of what is being said by who is saying it, and their preconceptions about that person.
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