The earth belongs to the living, not the dead. The will and the power of men expire with their lives, by nature's law ... Each generation has the usufruct of the earth during the period of its continuance ... We may consider each generation as a distinct nation, with a right, by the will of the majority, to bind themselves, but none to bind the succeeding generation ...
-- Thomas Jefferson, in a Letter to Eppes, June 24, 1813 Dr. Martin A. Larson, The IRS vs. the Middle Class, p.182
![[House of Cards]](cards-s.gif)
Is your children's future
a house of cards?
Remarkable Remedy
Jean Carpenter
IV Third Event
Back to Top
The Federal Reserve Act
AMIDST BUSY PREPARATIONS for departure for Christmas recess, legislation was railroaded through both houses of Congress on December 22, 1913. It was signed into "law" by President Wilson on December 23. Some of its opponents had already departed, and those hesitant who were present were assured their doubts were unfounded. That is how the third event, the passing of the Federal Reserve Act, came about. It would be the main link in the chain -- for which the first two were merely necessary prerequisites.
Its proponents did not necessarily have evil intent. Many of them sincerely thought it would solve serious problems -- now known to have been artificially created. (Read Mysterious Moneychangers. See inside back cover.) Some of the most prominent of their number are known to have later bitterly regretted their action. These included Woodrow Wilson, the President who had signed it into being; William Jennings Bryan, the Democrat Party Whip, without whom it would probably never have passed the House; and its sponsor in the Senate, the Senator from the new state of Oklahoma, Robert Owen, who spent the rest of his life trying to get the Act repealed. (See "Incredible Money Caper, Part II," in The Treasury, p. 62.)
Back to Top
Alleged Purpose of the Federal Reserve Act
The alleged purpose of the Federal Reserve Act was the prevention of crashes, panics, and depressions. But sixteen years after its enactment came the Great Crash of 1929 and the ensuing Great Depression.
In 1930 this nation did not lack industrial capacity and skilled and willing workers. It did not lack fertile farmland and industrious farmers. It had an extensive and efficient transportation system in railroads, highways, and inland and ocean waterways.
Communication was the best in the world, utilizing telephone, teletype, radio, and a well-operated government mail system -- with twice-daily delivery at 3 cents per ounce. No war had ravaged the country. No pestilence weakened the population. Famine had not stalked the land.
In 1930 the U.S. lacked only one thing: an adequate supply of money. Because there was no money to buy them, oranges were dumped into the sea, crops were plowed under, baby pigs were killed -- while people were hungry. How could it be?
That was the question everyone asked in 1929 as honorable and hitherto successful businessmen jumped from windows to their deaths, unable to face financial ruin. That was the question everyone asked all during the '30s as the depression dragged on and on.
In one state 60,000 dwellings and farms were brought under the hammer in a single day. 71,000 houses and farms in Oakland County, Michigan, were sold and their erstwhile owners dispossessed.
-- Congressman Louis T. McFadden (1934)
This is how it happened: The Federal Reserve suddenly quit fueling a several-year credit expansion. Bankers, the source of America's money and credit, withheld billions from circulation by refusing loans to industries, stores, and farmers, while calling in existing loans. Money was thus rapidly taken out of circulation and was not replaced. Goods were available. Jobs were waiting. But there was little money. Banks foreclosed on tens of thousands of homes, farms, and businesses. In that crash fortunes were lost... and great fortunes were made.
Some politicians were blamed for the Depression, and some took credit for ending it. It began to end in 1939, when government spent large sums into circulation in preparation for war. The truth is that lack of money, ordered by the Federal Reserve, caused the Depression, and adequate money ended it.
Within the two decades following the mid-seventies, the U.S. has plummeted from creditor nation status to the world's greatest debtor. Catastrophic consequences will soon be reaped in another and even greater depression, barring a major turnaround. Why was this possible?
Back to Top
Do You Know What Is In Your Wallet?
"Money" is an abstract term applied to whatever is used as the "medium of exchange" for goods and services. It is the economic lifeblood of a nation. Vitally important is the form of the "whatever" that is used as money.
A nation has a choice: it can base its money on real wealth (real money); or it can base it on nothing, or on debt (both are fiat money). To the extent accepted by the users, all work. But each has its consequence. Do you know what's in your wallet?
Back to Top
Wealth-Based Money
Real money is some commodity of enduring universal value, such as metal, water, gems.... It is based on wealth. Its value is governed by supply in relation to demand -- by the actual quantity in existence and by the expenditure of energy (such as in mining). Therefore, the value is fairly stable, with relatively minor fluctuation.
The United States Coinage Act of April 2,1792, 31 U.S.C. 371, (never repealed) describes the way real money gets into any country's monetary system :
SECTION 14. ... it shall be lawful for any person or persons to bring to the mint gold and silver bullion, ... [it] shall be there assayed and coined ..., and that free of expense to the person ... by whom the same shall have been brought ....
The "dollar" (a unit of measure, such as pounds, inches, quarts ...) was in that Act defined as 371.25 grains of pure silver, or 412.5 grains of 90% silver in minted coin. It has intrinsic value.
Back to Top
Nothing- or Debt-Based (Fiat) Money
Fiat money has little or no value in itself. It could be a piece of paper or a computer entry. It is based on nothing or -- far worse -- less than nothing: debt (to be explained later). Debt incurs interest (more debt). The value of fiat money, also, is governed by supply and demand, but the supply can be almost instantly changed at the whims of those who control it.
Paper money and modern banking, as we know it today, developed from a 17th century European custom of storing coins, gold, and other valuables with goldsmiths, who had vaults for storing the material of their craft. The goldsmiths gave warehouse receipts in return for the valuables. These receipts came to be used as money, since they were so much more transportable than the metal itself. The goldsmiths, then, were the first bankers.
The trouble arose when the banker realized he had a vault full of gold that everyone was content to leave there. How easy to issue a little more paper than there was gold to back it. Probably nobody would notice. ... And nobody did.
His newly-found power went to his head. He made lots more paper that represented nothing. He benefited magnificently. So did those who got his business. But, down the line, prices went up. Inflation set in.
Back to Top
Only One Cause of Inflation
The only cause of inflation is the expansion of the supply of money. Inflation and deflation follow the fluctuation of the amount of money in circulation in relation to the amount of goods available. This fluctuation is controlled in the United States by people not accountable to the voters. This game of "Monopoly" is played by rules not of our own devising.
Words are laundered as well as money: Inflation is another word for devaluation (decreasing the value) of the money. It is done by artificially increasing its supply.
Deflation is another word for shrinking of the money supply. It can cause even greater hardship, such as was common during the Depression.
Hyperinflation is runaway inflation. Of that we are in very real danger within the next few years, according to Harry Figgie, Jr., a co-chairman of the Grace Commission. (See his Bankruptcy 1995: The Coming Collapse of America and How To Stop It.) In such case your bonds, CDs, and insurance won't be worth the paper they are written on.
By quick foreclosure, in defiance of law enacted by Congress to help the farmer, bankers are parting small farmers from the lands that have been in families for generations. These lands are being bought up by agribusiness.
--related by William C. Goodloe, former Justice of the Supreme Court of the State of Washington, who was called to North and South Dakota to help investigate this situation. Related to the National Committee of the U.S. Taxpayers Party in November 1992Forty-one per cent of all farmland is now owned by non-farmers. -- Paul Harvey August 11, 1992
I sincerely believe ... that banking establishments [established central bank] are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
-- Thomas Jefferson, In A Letter To John Taylor, May 28, 1816
Inflation is a vicious form of taxation -- without the formality of legislation. The government benefits from inflation by paying its debts with money that is worth less than that which it borrowed. In the same way inflation forces us all into the immorality of defrauding one another, as we discharge our debts with money that is worth less and less. It spells cruel hardship for the retired and all whose incomes do not rise with inflation.
But the most insidious effect of all -- and the least visible by any except those directly and devastatingly affected in each case (since rarely do we hear about it on the nightly news) -- is the steady transfer of real wealth (property -- individual and business) into the hands of the few. It happens by means of the whiplash caused by fluctuation between inflation when loans are made, and depression (recession), as loans are called and foreclosed. Sometimes it happens generally. Oftentimes it is a weapon wielded locally or at targeted groups (see box).
![[Pork]](frog.gif)
We would consider it all utter madness if we had not been gradually deceived like the frog that was cooked in the pot of cool water brought slowly to a boil! Like the frog, many of us may not feel the heat until it's too late.
But how can they do that? To find the answer we have to look at how our money is "created."
... if what is used as a Medium of Exchange is fluctuating in its value, it is no better than unjust Weights and Measures, both which are condemned by the Laws of GOD and Man, ... the longest and most universal custom could never make the use of such a medium either lawful or reasonable.
-- Roger Sherman in A Caveat Against Injustice, p. 32, The most important economics handbook ever written. It was the basis for Article 1, ¤10, Clause 1, of the Constitution, which ensured us a sound monetary system.
The following account is not to be construed as an indictment against your friendly neighborhood bankers, who know only the system they are taught. Many of them have fallen victim of this caper.
You might cry "foul" if your neighbor could "legally" write checks for vast amounts, with no pretence of having any money in his checking account.
The fiat money we use today is "created" in just that way: out of nothing. The "creators" (private corporations, not the government) invest nothing but the cost of paper and bookkeeping. They write a check or make a bookkeeping entry, and -- Abra Cadabra -- there is money! This sleight-of-hand is only part of what was authorized by the Federal Reserve Act.
Section 16 of this Act (as amended in 1934) provides for the Federal Reserve to purchase bills of all denominations -- "Federal Reserve Notes" -- from the U.S. Treasury for the cost of printing (about 2¢ each), then to lend them back to the government (us tax payers!) -- at full face value plus interest. That is debt-based money.
And that is only the tip of the iceberg! The whole incredible caper of how our "money" is simply borrowed into existence and then multiplied, through fractional reserve banking, is too complex to be recorded here. The unbelievable details are laid out in their very own words, in a publication of the Federal Reserve Bank of Chicago, called Modern Money Mechanics , a very brief and simplified synopsis of which is in "The Incredible Money Caper" in The Treasury. (pp. 55 ff.)
If the banks create ample synthetic money, we are prosperous; if not, we starve! ... the tragic absurdity of our hopeless position is almost incredible .... It is the most important subject any intelligent person can investigate and reflect upon. It is so important that our present civilization may collapse unless it is widely understood and the defect remedied ....
-- Robert H. Hemphill, former Credit Manager The Federal Reserve Bank of Atlanta Senate Document #23, page 102, January
Here is how the chain becomes a closed shackle of debt and oppression: Since "money" is being endlessly created by means of government deficit spending, there must be a mechanism for sopping it up to prevent runaway inflation. The sopper-upper is the Income Tax!
Blackstone wrote that the laws of nature are "binding over all the globe, in all countries, and at all times: no human laws are of any validity, if contrary to this." The Founding Fathers understood these laws of nature, and their economic application: that as man cannot create something out of nothing -- he cannot create money out of nothing. He builds from lumber and concrete. He makes shoes from leather. The use of gold and silver coins as money is not a violation of these laws, since they are produced from rare minerals mined from the earth by use of time and energy.
Any attempt to violate the laws of nature has inescapable consequences. The use of fiat money is such an attempt. It is like the optimist who jumped from the skyscraper thinking he could fly and was heard to exclaim as he passed each floor, "So far, so good ... so far, so good." It will have a similar end. It cannot be otherwise.
Back to Top
Ace Up The Sleeve of the States
By law, Federal Reserve Notes are not dollars (371.25 grains silver). Like other notes, they are evidence of debt. But, unlike other notes, the debt is our debt to the Fed -- not the other way around. They are used to confiscate our property, piece by piece. (Silver Certificates, on the other hand, were evidence of government debt to us.)
The solution is clearly contained in the Constitution. The chief purpose of the Convention of 1787 was to resolve a similar money crisis. This nation already had a government -- in many ways a good one -- under the Articles of Confederation. Its major flaw: paper money was causing runaway inflation and making normal commercial activity impossible. The urgent need was to end inflation. Nine months before the signing of the Constitution, Gen. Washington wrote to Gen. Knox, "I feel ... infinitely more than I can express to you, for... the disorders which have arisen in these States. Good God! Who, besides a Tory, could have foreseen ... them?"
Thanks to Roger Sherman, the author of the "gold and silver bullet" (Article I, ¤10, Clause 1), of the Constitution they achieved the purpose of the Convention.
Mr. Wilson and Mr. Sherman moved to insert after the words, "coin money" the words, "nor emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts," making these prohibitions absolute, instead of making the measures allowable ... with the consent of the Legislature of the U.S.
-- James Madison, Documents Illustrative, p. 627James Madison left his testimony that "the pretext for a paper currency, and particularly for making the bills a tender, either for public or private debts, was cut off." This is the interpretation of the clause, made at the time of its adoption alike by its authors and by its opponents, ... and never disputed so long as any one man who took part in framing the constitution remained alive. (Emphasis added.)
-- by George Bancroft, in History of the United States of America, p. 303.This ten-volume history is still considered to be the most accurate history of our country. George Bancroft, born in 1800, was personally acquainted with Madison and Adams. He was Secretary of the Navy and founder of the Naval Academy at Annapolis. He knew the intent of the framers of the United States Constitution better, perhaps, than any of his contemporaries. This comment, referring to Article I, Section10, leaves no room for doubt that paper money was not to be allowed.
Article I, Section10, is the ace up the sleeve of the state legislatures. In this Article, the power, authority, and responsibility of the States to limit the federal government was clearly defined. It reads, in part:
No State shall ...; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; ... (emphasis added)
The purpose of this clause was to make the States stand guard over one thing vitally essential to a free people: honest money -- the subversion of which is their inevitable undoing. If the States could require the use of nothing but gold or silver coin, then any other "legal tender" proclaimed by Congress would break down. (See Madison's notes above.)
Article I, Section10, has never been repealed or amended. Gold and silver coin are the only lawful money in the United States.
For fees we might still have the convenience of credit cards and checking accounts. Paper and plastic could serve as receipts for gold and silver, rather than for more paper, plastic, and dancing electrons.
The Framers gave us wealth-based money as the cure for the pestilent effects of fiat money. And they made the legislatures of the States responsible to enforce its use by denying them authority to make any other a tender for payment of debts.
To continue: IVb The Federal Reserve: Effect and Antidote