The Federal Reserve is Privately owned
166 2013-10-07 by MR-OZ
The Federal Reserve is Privately owned - by Thomas D. Schauf
"There is a self-satisfied dogmatism with which mankind at each period of its history cherishes the delusion of the finality of existing modes of knowledge." - Alfred North Whitehead
Dear American:
Pursuant to your request, I will attempt to clear up questions you have about the Federal Reserve Bank (FED). I spent much time researching the FED and these are the shocking and revealing conclusions.
THE FEDERAL RESERVE BANK IS A PRIVATE COMPANY.
Article 1, Section 8 of the Constitution states that Congress shall have the power to coin (create) money and regulate the value thereof. Today however, the FED, which is a privately owned company, controls and profits by printing money through the Treasury, and regulating its value.
The FED began with approximately 300 people or banks that became owners (stockholders purchasing stock at $100 per share - the stock is not publicly traded) in the Federal Reserve Banking System. They make up an international banking cartel of wealth beyond comparison (Reference 1, 14). The FED banking system collects billions of dollars. in interest annually and distributes the profits to its shareholders. The Congress illegally gave the FED the right to print money (through the Treasury) at no interest to the FED. The FED creates money from nothing, and loans it back to us through banks, and charges interest on our currency. The FED also buys Government debt with money printed on a printing press and charges U.S. taxpayers interest. Many Congressmen and Presidents say this is fraud.
Who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well kept secret, has been revealed:
Rothschild Bank of London
Warburg Bank of Hamburg
Rothschild Bank of Berlin
Lehman Brothers of New York
Lazard Brothers of Paris
Kuhn Loeb Bank of New York
Israel Moses Seif Banks of Italy
Goldman, Sachs of New York
Warburg Bank of Amsterdam
Chase Manhattan Bank of New York
These bankers are connected to London Banking Houses which ultimately control the FED. When England lost the Revolutionary War with America (our forefathers were fighting their own government), they planned to control us by controlling our banking system, the printing of our money, and our debt
The individuals listed below owned banks which in turn owned shares in the FED. The banks listed below have significant control over the New York FED District, which controls the other 11 FED Districts. These banks also are partly foreign owned and control the New York FED District Bank.
First National Bank of New York
James Stillman National City Bank, New York
Mary W. Harnman
National Bank of Commerce, New York
A.D. Jiullard
Hanover National Bank, New York
Jacob Schiff
Chase National Bank, New York
Thomas F. Ryan
Paul Warburg
William Rockefeller
Levi P. Morton
M.T. Pyne
George F. Baker
Percy Pyne
Mrs. G.F. St. George
J.W. Sterling
Katherine St. George
H.P. Davidson
J.P. Morgan (Equitable Life/Mutual Life)
Edith Brevour T. Baker
How did it happen? After previous attempts to push the Federal Reserve Act through Congress, a group of bankers funded and staffed Woodrow Wilson's campaign for President. He had committed to sign this act. In 1913, a Senator, Nelson Aldrich, maternal grandfather to the Rockefellers, pushed the Federal Reserve Act through Congress just before Christmas when much of Congress was on vacation. When elected, Wilson passed the FED. Later, Wilson remorsefully replied (referring to the FED), "I have unwittingly ruined my country".
Now the banks financially back sympathetic candidates. Not surprisingly, most of these candidates are elected. The bankers employ members of the Congress on weekends (nickname T&T club -out Thursday...-in Tuesday) with lucrative salaries. Additionally, the FED started buying up the media in the 1930's and now owns or significantly influences most of it.
Presidents Lincoln, Jackson, and Kennedy tried to stop this family of bankers by printing U.S. dollars without charging the taxpayers interest Today, if the government runs a deficit, the FED prints dollars through the U.S. Treasury, buys the debt, and the dollars are circulated into the economy. In 1992, taxpayers paid the FED banking system $286 billion in interest on debt the FED purchased by printing money virtually cost free. Forty percent of our personal federal income taxes goes to pay this interest. The FED's books are not open to the public. Congress has yet to audit it.
Congressman Wright Patman was Chairman of the House of Representatives Committee on Banking and Currency for 40 years. For 20 of those years, he introduced legislation to repeal the Federal Reserve Banking Act of 1913.
Congressman Henry Gonzales, Chairman of a banking committee, introduces legislation to repeal the Federal Reserve Banking Act of 1913 nearly every year. It's always defeated, the media remains silent, and the public never learns the truth. The same bankers who own the FED control the media and give huge political contributions to sympathetic members of Congress
THE FED FEARS THE POPULATION WILL BECOME AWARE OF THIS FRAUD AND DEMAND CHANGE
We, the People, are at fault for being passive and allowing this to continue.
Rep. Louis T. McFadden (R. Pa.) rose from office boy to become cashier and then President of the First National Bank in Canton Ohio. For 12 years he served as Chairman of the Committee on Banking and Currency, making him one of the foremost financial authorities in America. He fought continuously for fiscal integrity and a return to constitutional government (Reference 1). The following are portions of Rep. McFadden's speech, quoted from the Congressional Record, pages 12595-12603:
"THE FEDERAL RESERVE BOARD, A GOVERNMENT BOARD, HAS CHEATED THE GOVERNMENT OF THE UNITED STATES AND THE PEOPLE OF THE UNITED STATES OUT OF ENOUGH MONEY TO PAY THE NATIONAL DEBT.
The depredations and the iniquities of the Federal Reserve Board and the Federal Reserve banks acting together have cost this country ENOUGH MONEY TO PAY THE NATIONAL DEBT SEVERAL TIMES OVER."
About the Federal Reserve banks, Rep. McFadden said, "They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; the rich and predatory money lenders. This is an era of economic misery and for the reasons that caused that misery, the Federal Reserve Board and the Federal Reserve banks are fully liable."
On the subject of media control he state, "Half a million dollars was spent on one part of the propaganda organized by those same European bankers for the purpose of misleading public opinion in regard to it."
Rep. McFadden continued, "Every effort has been made by the Federal Reserve Board to conceal its power but the truth is the Federal Reserve Board has USURPED THE GOVERNMENT OF THE UNITED STATES. IT CONTROLS EVERYTHING HERE AND IT CONTROLS ALL OUR FOREIGN RELATIONS. IT MAKES AND BREAKS GOVERNMENTS AT WILL.
No man and no body of men is more entrenched in power than the arrogant credit monopoly which operates the Federal Reserve Board and the Federal Reserve banks. These evil-doers have robbed this country of more than enough money to pay the national debt. What the Government has permitted the Federal Reserve Board to steal from the people should now be restored to the people."
"The Federal Reserve Act should be repealed and the Federal Reserve banks, having violated their charters, should be liquidated immediately.
FAITHLESS GOVERNMENT OFFICERS WHO HAVE VIOLATED THEIR OATHS SHOULD BE IMPEACHED AND BROUGHT TO TRIAL", Rep. McFadden concluded (Reference 1, contains an entire chapter on Rep. McFadden's speech).
If the media is unbiased, independent and completely thorough, why haven't they discussed the FED? Currently, half the states have at least a grass roots movement in action to abolish the FED, but there's no press coverage. In July, 1968, the House Banking Subcommittee reported that Rockefeller, through Chase Manhattan Bank, controlled 5.9% of the stock in CBS. Furthermore, the bank had gained interlocking directorates with ABC.
In 1974, Congress issued a report stating that the Chase Manhattan Bank's stake in CBS rose to 14.1% and NBC to 4.5% (through RCA, the parent company of NBC). The same report said that the Chase Manhattan Bank held stock in 28 broadcasting firms. After this report, the Chase Manhattan Bank obtained 6.7% of ABC, and today the percentage could be much greater. It only requires 5% ownership to significantly influence the media. This is only one of 300 wealthy shareholders of the FED. It is believed other FED owners have similar holdings in the media. To control the media, FED bankers call in their loans if the media disagrees with them
Rockefeller also controls the Council on Foreign Relations (CFR), the sole purpose of which is to aid in stimulating greater interest in foreign affairs and in a one world government. Nearly every major newscaster belongs to the Council on Foreign Relations. The Council on Foreign Relations controls many major newspapers and magazines. Additionally, major corporations owned by FED shareholders are the source of huge advertising revenues which surely would influence the media. It can be no wonder why groups such as FED-UP(tm) receive minimal, if any, press attention.
How do taxpayers stop financing those whose purpose it is to destroy us? First, expose their activity, then demand change.
THE SOLUTION:
109 comments
18 Obsologic 2013-10-07
Wow, this is amazing. Will keep an eye on this.
-10 sakananyc 2013-10-07
and not a single actual, verifiable citation anywhere! imagine! keep an eye on it for sure!
9 virgule 2013-10-07
I am sorry if I sound rude. I have no such intentions. Consider me uncertain about how to convey the message otherwise. I've just about had it with you lazy schmucks!
You want 'sources' and 'verifiable citations' and 'links', yes? You are connected to the internet. Go fetch! :<<<<
-7 sakananyc 2013-10-07
I read the actual web site. All the "evidence" is just other conspiracy web sites. So, no actual evidence.
5 BallisticBux 2013-10-07
Did you even look up who owns the Federal Reserve?
Straight from the Feds website: It is not "owned" by anyone and is not a private, profit-making institution.
...but it's not government either? I would believe what their website says... They really should be trusted...because you know, it has Federal in it's name...
2 [deleted] 2013-10-07
The 12 regional Federal Reserve Banks are indeed privately owned. They're "owned" by their "stockholders," they make their own pay and hiring policies, and pay local property taxes.
HOWEVER:
They're CONTROLLED by the publically-appointed Board of Governors of the Federal Reserve System - a government agency. Its employees are employees of the federal government, paid in accordance with federal government pay scales, and part of the federal employee retirement system. The premises are federal government property. The seven Board members are appointed by the President with advice and consent of the Senate in the same fashion as other government appointees.
They're restricted to conducting business specified by the Federal Reserve Act. Nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.
5 BallisticBux 2013-10-07
Except it's a revolving door for Ex-Goldman Sachs Employees...
2 [deleted] 2013-10-07
It's worse than that. Companies like Goldman Sachs tend to be a retirement home for ex government officials.
And it's not specific to banking. Top officials in all the government agencies that oversee specific industries know that they can expect to retire to one of the companies they oversee, with a salary and pension that utterly dwarfs what they get in their government jobs.
Just as long as they don't enact or enforce any regulations that those companies don't like.
Goldman Sachs however, is not one of the Reserve Banks. I could be wrong, but I'm not sure there's a conflict of interest anywhere near the scale of what I mentioned above.
I'm not anti-conspiracy theory. I just think we should focus on the real ones.
-3 sakananyc 2013-10-07
Yes yes. But waft about the woooo Rothschild Bank? Where is that exactly? And the Fed is owned by the UK? Where is that substantiated? Gobbledygook.
3 letsownthenwo 2013-10-07
stfu
Looking at the state of (post-9/11) America today — the perpetual War on Terror, empire building in the name of “humanitarian regime change” of democratically elected leaders in foreign countries, the Department of Homeland Security and its Transportation Security Administration goon squad, the National Defense Authorization Act and its ability to disappear American citizens suspected of terrorism without due process of law, Obamacare, the National Security Administration’s big brother surveillance state, the militarization of our police in an ever-expanding police state, the common core, the Federal Reserve’s runaway monopoly money printer and a nation hanging on the verge of economic collapse, the crackdown on food freedom. And when revolutionaries like MICHAEL HASTINGS are assassinated, it only strengthens the flame yearning for resistance and justice.
1 LinkFixerBotSnr 2013-10-07
/r/politics
This is an automated bot. For reporting problems, contact /u/WinneonSword.
-4 sakananyc 2013-10-07
Who are you even responding to with your demented rant?
Great job substantiating the bullshit Fed claims, by the way. Very lucid, cogent points. I'm nearly swayed.
-2 letsownthenwo 2013-10-07
k shill
0 sakananyc 2013-10-07
Ah, "shill". The last gasp of the weak argument.
2 [deleted] 2013-10-07
According to the web site for the Federal Reserve Bank of Richmond, "more than one-third of U.S. commercial banks are members of the Federal Reserve System. National banks must be members; state chartered banks may join by meeting certain requirements
https://en.wikipedia.org/wiki/Federal_Reserve_System
-2 sakananyc 2013-10-07
What's your point? Where is the Rothschild references on Wikipedia?
4 zeneval 2013-10-07
if you can't spend 10-15 minutes looking around to figure it out for yourself then you're a lost cause. it really doesn't take long to piece 2 and 2 together, if you actually do some research. fucking laziness, the downfall of our society.
2 zeneval 2013-10-07
this is from 1976. it's a lot more complex now, but this should give you an idea.
2 zeneval 2013-10-07
2 zeneval 2013-10-07
here's a more "modern" source.
http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0025995
11 no1113 2013-10-07
Very relevant and related.
5 ModernSinatra 2013-10-07
Commenting so I can watch later. Looks interesting but I don't have 3 hours to watch it right now. Thanks for the post!
4 no1113 2013-10-07
Watch it in parts. I watched like half and hour to an hour a day for a few days. Amazing information in it.
10 KILL_FederalReserve 2013-10-07
The simplest way I can explain it: It's a private bank, not a government bank, and when you control an entire nation's money supply, you in turn control the entire nation. Not to mention that it's designed to continually pile the entire nation into an abysmal debt hole.
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” - Napoleon Bonaparte, Emperor of France
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States" - Sen. Barry Goldwater in With No Apologies
“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” - Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924.
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford, founder of the Ford Motor Company.
-9 [deleted] 2013-10-07
Except that it has no such control.
Yes, the 12 regional Federal Reserve Banks are privately owned. They're "owned" by their "stockholders," they make their own pay and hiring policies, and pay local property taxes.
HOWEVER:
They're CONTROLLED by the publically-appointed Board of Governors of the Federal Reserve System - a government agency. Its employees are employees of the federal government, paid in accordance with federal government pay scales, and part of the federal employee retirement system. The premises are federal government property. The seven Board members are appointed by the President with advice and consent of the Senate in the same fashion as other government appointees.
They're restricted to conducting business specified by the Federal Reserve Act. Nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.
5 boxingnun 2013-10-07
So by your explanation it is a privately owned bank with appointed (not elected) government oversight. So how is government oversight working for all the other government agencies?
3 KILL_FederalReserve 2013-10-07
You're pretty good at spreading disinfo.
-3 [deleted] 2013-10-07
Oh? Is there anything inaccurate - or even a half-truth or misrepresentation - in what I wrote?
6 Grandest_Inquisitor 2013-10-07
There are half-truths.
As I commented below it's misleading when you state the Fed is "controlled" by a publicly appointed agency. Just like the name Federal Reserve is misleading and the Federal Reserve Note is misleading; you are making it seem like an agency of the government, like the Treasury Department, when the whole system can better be described as a public/private partnership with an independent organization ostensibly in charge of it.
But the FOMC is probably more important as far as policy goes than the Board of Governors. And even though the Board of Governors are appointed by the President, and subject to advice and consent by the Senate, they serve crazy long terms and can only be removed "for cause." Unlike other agency appointments that can be removed at the discretion of the Executive branch.
So they have much more independence than a regular government agency.
Also, there are Presidents of the Regional Reserve Banks and Board of Directors of these banks that are not appointed by elected politicians. Then we go to the next level down, the member banks, which are entirely private.
I won't even get into the fact that the President and Senate appoint lackeys anyways, but it's misleading to imply there is significant public control of the privately-owned Federal Reserve system. Their policy choices certainly indicate they are more concerned with their member banks than the public.
4 PaintChem 2013-10-07
You provide only plausible deniability and not probable reality.
-2 [deleted] 2013-10-07
You can confirm it at any number of credible sources. Say, the Department of Economics College of Charleston, S.C.. Or a Specialist in Macroeconomics at the Economics Division of the Library of Congress.
You know, folks that don't peddle gold scams to gullible wingnuts.
2 DiscerningDuck 2013-10-07
Is "peddle gold scams to gullible wingnuts" the catchphrase of the day for the Fed cheerleaders?
Why do central banks buy gold, anyway?
-1 [deleted] 2013-10-07
The sites (
WingNutDailyWorldNetDaily, InfoWars, etc.) that peddle Fed conspiracy theories are notorious for also peddling gold scams to their readers.Long-term investment - like the central banks do - is not the same as "Buy while the price is at an all-time high!!!" scams.
1 KILL_FederalReserve 2013-10-07
Yes, nearly your entire comment. Either you're misinformed or you're intentionally spreading disinfo - which is it?
As if I have to ask...
You pulled a bunch of reasonably sounding jargon out of your ass and it's obvious to anyone that remotely understands the Federal Reserve.
0 [deleted] 2013-10-07
I stand by what I wrote above.
You can confirm it at any number of credible sources. Say, the Department of Economics College of Charleston, S.C.. Or a Specialist in Macroeconomics at the Economics Division of the Library of Congress.
You know, folks that don't peddle gold scams to gullible wingnuts.
Hope you didn't lose too much.
1 KILL_FederalReserve 2013-10-07
You honestly don't think there would be any disinfo spread around the internet by a massively fraudulent, insidious, and powerful "government" bank?
I do hope you are simply misinformed but I find that difficult to believe.
I stand by what I have said and encourage everyone to insistently research the Federal Reserve through numerous sources.
Like I said: You are pretty good at spreading disinfo.
-5 [deleted] 2013-10-07
And the folks trying to peddle gold scams to gullible wingnuts are freedom fighters. Whatever you say.
3 KILL_FederalReserve 2013-10-07
Wow, you're relentless hahaha.
Why would they peddle scams that are non-existent - It makes absolutely no sense; please think about that.
I hope you're getting paid well - if not, you should be.
3 strokethekitty 2013-10-07
They are controlled by their own. You said yourself that the president appoints these board members. When the president is paid to appoint certain people, those certain people, in turn, pass regulations that are pursuant to their own agenda.
Its like NSA having oversight from appointed judges in a secret court. It allows the illusion of oversight but in reality its all the same people, doing only for themselves.
Im not necessarily disagreeing with your comment. I just wanted to point out that your comment failed to address the problem people have with the system, and your comment seems to harbor the sentiment that all of this is okay because it seems to be regulated, but you fail to admit that those who regulate it are the same breed.
10 [deleted] 2013-10-07
[deleted]
7 SameShit2piles 2013-10-07
In the book behold a pale horse by william cooper that is his take.
1 ListenToKPFA 2013-10-07
Also a good doc series on youtub called know your enemy. Basically Israeli Jews will be blamed for the "end of world" or starting ww3. This was planned pre_holocaust by ..... I think people who operate like masons with multi_generational plans, those seeking global domination. Israel like the US will be a mask on the face of true power.
8 zeneval 2013-10-07
i was recently commenting on someone's facebook status that said the following:
and my response was the following, which someone suggested I share, since apparently most people don't understand this stuff, and it's totally relevant to this topic, so i thought'd i'd share.
2 PaintChem 2013-10-07
Well done.
6 User_Name13 2013-10-07
Thanks OP, no doubt this will be a TL;DR for many people thereby making your title that much more poignant. This post and like minded ones should be plastered across the top of /r/conspiracy in perpetuity.
6 D3ntonVanZan 2013-10-07
Interesting read. I'm always up for factual info. I did notice however the link at the end of the article is no longer valid.
http://theunjustmedia.com/Banking
Here's the updated link per the main website.
5 platinum_peter 2013-10-07
Long but worth the read! Learning about the Fed was one of the first things that opened me up to the world behind the curtain. This is a great read and contains a lot of lesser known information.
Thanks OP!
4 strokethekitty 2013-10-07
I share your sentiment here. Learning about the FED for the first time made me realize im not being a responsible citizen because i didnt know a damn thing about any of it. And to be honest, i didnt believe any of it at first. But its not a secret, the FED is private. Then i started my researching, and havent stopped. Therez so much shit, its no wonder why the average citizen doesnt know whats going on. Who wants to do thousands of hours of research on boring subjects like quantitative easing and inflation and politcal science? Especially when theres more important things to do to spend thousands of hours on, like watching honey boo boo... Or playing call of duty..
4 PeaceOneday 2013-10-07
The Oscar nominated film "Inside Job" really is a good place to start educating yourself about the Banksters. Here's a link to the trailer:
www.youtube.com/watch?v=TqWHP7OuAj4
1 [deleted] 2013-10-07
I second this.
3 2012ronpaul2012 2013-10-07
End the Fed!
3 t10drvr 2013-10-07
Beware the Creature from Jekyl Island. G. Edward Griffin
3 archonemis 2013-10-07
Most of which came from Eustace Mulins' "Secrets of The Federal Reserve."
3 archonemis 2013-10-07
"Demand change."
As in ask the bully to stop jacking your lunch money?
Bullies don't take well to requests.
2 MR-OZ 2013-10-07
Sorry it's only my second post, next time I'll just post a link to it.
Here is the link to the easier to read version.
3 truthaddicted 2013-10-07
Thanks
2 kahirsch 2013-10-07
A lot of this stuff in this post is false. This is a very low quality essay. For example, not only do the banks mentioned not own the Federal Reserve, some of them don't even exist. There never has been a "Rothschild Bank of Berlin", by that name or any other name. There's no information on any "Israel Moses Seif" having to do with the Bank of Italy. There was an Israel Moses Sieff, but he was neither Italian nor a banker.
There's no secret at all about who owns Federal Reserve bank stock (all the member banks in each district) or about how the leadership of the Federal Reserve banks are chosen (each member bank gets two votes, and a federal agency gets to appoint 3 of 9 directors for each of the 12 regional Federal Reserve banks). It wouldn't be easy at all for a small group to control the Federal Reserve.
Aldrich tried to pass an earlier central bank proposal, but it went nowhere. Part of Woodrow Wilson's campaign platform was reform of the banking and monetary system, and the Federal Reserve Act was his fulfillment of his promise. Most bankers were for Wilson's Republican opponent, not for Wilson. The Federal Reserve Act was very popular and passed the House of Representatives by an overwhelming margin. Although some senators left for vacation before the final vote, it was known that there were enough votes to pass in the full Senate. An earlier version of the bill passed the Senate by 54 to 34 votes.
This is a hoax.
The quotes from Benjamin Franklin are all fake, part of a hoax from the 1930s that was circulated by Congressman Binderup.
The story of John F. Kennedy opposing the Federal Reserve is another hoax. Kennedy eliminated the printing of silver certificates and replaced them with Federal Reserve notes.
This is supposedly from a letter written in 1863 about Lincoln's new National Bank Act, not the Federal Reserve. It is actually a hoax from the 1890s. It provably cannot have been written in 1863 since it refers to a court case in the 1870s.
Here are some other random falsehoods in this essay:
The Fed doesn't own any media.
I don't have the figures for 1992 on hand, but this is certainly false today. Only about 8% of federal spending goes to pay interest on the national debt, and only a small fraction of that goes to the Federal Reserve. Most of the money that does go to the Federal Reserve gets paid back to the government.
The Fed's annual reports, audited by outside accountants, are on the web.
This was written in 1992. It didn't come to pass.
We don't pay interest on Federal Reserve Notes.
4 MR-OZ 2013-10-07
THE FACTS
England nearly destroyed the Colonies by creating fake Colonial money and hyper-inflation.
Rothschilds who control the Bank of England (Like our FED) said that by controlling the issue of money (printing it) you can control the government.
The authors of the Constitution understood private banks" control over governments. The Constitution gives only Congress the right to print money.
From the beginning of the United States to present there have been two ways to issue new currency:
The first way is to have the government print the money, debt and interest- free, and circulate it through the economy for use as a medium of exchange. There is no tax levied to pay interest on the currency in circulation because it is debt and interest-free. This is the system Lincoln used with his "greenbacks", a system Kennedy desired, and Jefferson demanded.
The second method is: The Citizens allow the bank to print $500 billion in currency (cash). The bank pays for printing costs, ink, and paper. The Citizens do not charge the bank any interest for use of the $500 billion in printed currency. The bank uses the $500 billion cash to buy a $500 billion government bond which pays the bankers interest. The bank keeps some of the bonds and sells, for a fee (10%), some of the bonds to the public. The bank can buy back the bonds from the public simply by printing more money. The bankers can create inflation and depressions by manipulating the amount of currency in circulation. The FED operates exactly like this today. It also prints money (through the U.S. Treasury) and uses this printed money to buy loans from other banks. This money has created our inflation. We give the bank cash interest-free, then they charge us interest on our own currency.
3 boxingnun 2013-10-07
The second method you mentioned is also known as "Fractional Reserve Banking". For those who might not know.
4 Grandest_Inquisitor 2013-10-07
You never responded to my reply to your previous comment where you incorrectly stated that there were no private owners of the federal reserve.
As you pointed out there and here, the Federal Reserve is owned by member banks, which are private. In short, this is a cartel, or trust, of private banks that own our Central Bank. As one of the many opponents of the Federal Reserve pointed out at the time, Congressman Charles Lindbergh:
― Charles A. Lindbergh Sr., Lindbergh On the Federal Reserve 1923 (renamed from The Economic Pinch, found online here) Edit: I can't find the quote attributed above in the online edition (which is the problem getting quotes from these websites that aggregate quotes), but I think it must come from his 1913 book, "Banking and the Money Trust." It certainly is consistent with his writings though.
See also Lindbergh's other books, Banking and Currency and the Money Trust (1913), and Why Your Country is at War (1917 ( "There is a sinister influence at work in our country, which if it is not checked, intends to completely undermine the original purpose of the formation of our government...and to bring all the world into one control and one system, which for purposes of deception of the plain people, they would call a "world democracy", but which in fact it is their plan to make the rule of the wealth grabbers, maintained by simple organization of themselves and disorganization of the masses, pitting the masses against each other... The few now desire to cut off every possible avenue of escape from industrial slavery for the masses.)
I also don't accept your representation that the Federal Reserve Act was popular. The question of whether to have a privately held central bank was one of the most contentious political issues from the beginning of the country. This contentious history has been obscured in our modern consciousness and standard history lessons. There were many people spitting mad about the Federal Reserve Act, like Charles Lindbergh, for good reason. [Just starting to look at his book, "The Economic Pinch", available online, and I see he describes the process of passing the legislation and his committees investigating the money trust, and I intend to read more on it.]
Also, the public does not control the Federal Reserve System, as you imply. At least it doesn't have total control, and in practice it's more like a marriage of convenience between the banking cartel and the politicians where the politicians agree to let the banking trust do what it wants and pretend to have oversight. The banking cartel on the other hand gets to point to the theoretical control the public has over it, as you do, as political cover.
Here is how the government pretends to oversee the Federal Reserve:
Note that it was set up to give the Federal Reserve great independence (and indeed Congress has granted the Fed an expanded oversight role into more than just monetary policy . . . it could regulate the shadow banking system if it wanted to, for instance, or regulate usury).
Also note the varying layers that create obfuscation about who really runs things. There's the Board of Governors, the FOMC, the Reserve Bank Presidents, the Reserve Bank's Board of Directors, then of course the member banks in turn will have Presidents and Board of Directors, etc. It doesn't really matter which banks and individuals have an over-sized role in controlling the bank trust, because most of the member banks have similar interests.
1 kahirsch 2013-10-07
Fair enough. I should have said that no private individuals (or families) own stock of Federal Reserve Banks.
Well, there weren't any opinion polls at the time, so I can't say for sure, but I'm not aware of any significant opposition in the general public. The bill passed the House 298 to 60. How often do you see that kind of margin for anything controversial?
I didn't say that. You may be thinking about Roger_Strong's comments. I always try to say that there's a mixture of public and private control.
3 Grandest_Inquisitor 2013-10-07
Yes, my mistake. I actually edited my comment before your reply to reflect that you implied that statement but didn't make it. Not sure what the editing protocol is here . . . but I try to only edit within the first few minutes of posting. I went on a bit of a rant on this confusing topic so did a bit more editing here . . .
But they may in fact own stock, indirectly, by owning a controlling or significant share, of the member banks. This is the crux of the issue. The federal reserve system is a lot like the corporate system wherein it allows people to control things behind the scenes. It has many layers.
That's the benefit of a trust or an industry association as well. It's hard to pinpoint specific people responsible for policies but they are very effective at serving their interests.
You made the same mistake above about Federal Reserve control of the media. The original article states that member banks, like Chase Manhatten Bank, control significant shares of media companies, giving them effective control. You made it seem like the article was arguing that the Fed directly owned the media.
I agree it's hard to determine. But like I say, this has historically been a hot button issue going all the way back to the beginning of the country and in fact in the late 19th Century there was a strong debate about whether to have a loose or hard currency. Many "progressives" came from the Greenback and Grange parties that argued for more control of banking and a loose money system.
As a student of history, I feel like this aspect of our history was not emphasized as much as it should have been and I am trying to learn more. It might not surprise you that I am open to larger conspiracies around these issues and think the financial panics and even the progressive parties were controlled by financial elites and trusts and that by the early 20th Century they pretty much owned Congress. Well, they probably have always owned large portions of Congress, but the progressive era purported to open up the democratic process and make it less corrupt, when before it was more openly corrupt and served elite interests, so I think the Federal Reserve System and similar schemes were designed to give the veneer of democracy and accountability in a new progressive age.
1 errie_tholluxe 2013-10-07
thanks to both of you i now know more than I did before I read and fact checked your statements. Thanks you two.
2 strokethekitty 2013-10-07
I second this comment. Even when you guys seemed to disagree, you were respectful and found a common understanding, and for that i thank you. Just goes to show that respectful debate is beneficial not just to those debating, but those observing as well..
4 TheUltimateSalesman 2013-10-07
Ok, for the sake of argument, let's say EVERYTHING you said is true.
Do you think it's ok that the member banks of Federal Reserve aren't 100% vested in USD? If they have holdings in foreign currency what is the motivation for a strong dollar?
4 Grandest_Inquisitor 2013-10-07
There are three big problems with the private banking system:
First. We allow private banks to create money via fractional reserve lending. Banks get to create money out of thin air, in essence, subject to minimal requirements like a small reserve and capital requirement. There is no requirement this money be lent out for the public good. This is pure private profit using the public's money.
If the Federal Reserve Banks were truly public, and if it did the lending and if these profits were given back to the people, and lending regulations were created that benefited the public good, then I would have a more favorable opinion of the Federal Reserve system.
Second. The Fed engages in quantitative easing (giving money away to their buddies) by buying bank assets at more than fair value, and by accepting crappy collateral from these banks. This obviously benefits the member banks i.e. the banking trust. Bernanke hinted years ago that if there was an economic emergency he would distribute money from a helicopter if he had to, implying he would give money to regular people to alleviate deflation. But instead of doing this he gave the money to the already insanely rich--the banking trust.
We would be much better off if these tens of trillions of dollars to engage in quantitative easing/stimulus/bailouts were to go to the public on a per capita basis. Or at least spend the money on things that benefit the people more generally. For instance, the Fed could have paid off individual mortgages rather than buying MBS. The Fed could have bought the Social Security Trust fund treasury obligations, since its so concerned with them. It could have paid off pension underfunding, both public and private. It could have paid off state and local debt. Instead, it gave more money to member banks by buying their crappy assets that they incurred from their gambling habits.
Third. You state:
Well, this is roughly 8% too much. There is no need to fund our government obligations via debt. We could have a system where we use something like Greenbacks, or Continental Scrips, to pay our debts. Sure, the treasury is reimbursed from the Treasury Bonds the Fed holds, but its really the private banks that once again benefit from debt based financing of government.
Also, it's no coincidence the income tax was created around the same time as the Fed. We wouldn't need the income tax to raise money if we paid our obligations directly using fiat money not backed by debt.
6 zeneval 2013-10-07
Not sure why you're getting downvoted, you're right on the money (no pun intended) about quantitative easing, which most people unfortunately just don't understand. The fed is literally buying dollars and bonds, balances in a bank's ledger, for more than their actual worth, to bail out the banks so the banks can pay back their debt to the fed. It's still the same as "printing money" to pay off bills, but instead of doing it directly, they go about it in this round-about way. i discuss this more in another post in this thread if any of you are interested.
2 Grandest_Inquisitor 2013-10-07
Yeah, I agree with much of what you write. Especially the usury part.
But I don't share your views about the dangers of inflation.
I actually advocate a guaranteed income or something like the dividend under the Social Credit model. In fact, as this article notes, this system was promoted by Congress over 75 years ago:
I imagine something like $15,000 per person per year would do the trick, but it could be set using a scientific model that will prevent inflation or deflation.
3 zeneval 2013-10-07
What does having a guaranteed income have to do with inflation and a debt based economy?
1 Grandest_Inquisitor 2013-10-07
Well, a guaranteed income would be the opposite of having a debt-based economy. It would create new money without interest. Therefore people wouldn't need to constantly earn more money to pay off the greater money required because of interest.
It seemed your concern with "quantitative easing," which is similar to a guaranteed income but given to the people on a per capita basis rather than to the banks, is that it would create inflation. But a guaranteed income does not have to lead to a inflation.
1 zeneval 2013-10-07
Hmm, now I see where you're going with that... so you're saying instead of having the fed give money to the banks, that they give it to people directly without interest, who would then have to give it to the banks to pay off the interest they owe to the banks? Seems like more of the same, just more abstraction and confusion, and more potential for problems.
0 Grandest_Inquisitor 2013-10-07
This is a good article on Social Credit and why inflation is not a concern and also answers your concerns that creating new money (that is interest free) is an unsustainable "infinite growth" model. He points out:
1 tttorosaurus 2013-10-07
Who in the government do you want deciding for the private banks what the "public good" is?
2 Grandest_Inquisitor 2013-10-07
Well, the parameters should be spelled out so there should be few decisions done by individual bankers. Most wiggle room would come in determining personal business loans but these should be pretty easy to get (e.g. you want to be a dentist and have a degree you get a loan . . . you want to open a comic book store you get a loan).
But I would actually severely limit other lending to individuals.
I would do away with revolving credit (credit cards).
I would limit personal loans to auto loans , mortgage loans, and business loans. Maybe not even auto loans. I would do away with education loans and health care loans because I would have both be free, provided for by the government, ideally.
Mortgage loans would be old fashioned 20% down and 30 years loans or less, with conservative underwriting (to prevent bubbles). Same with autos . . . they would follow old fashioned traditional lending rules as well (with a shorter repayment period than currently vogue and more down).
These loans should be usury free, with no interest except maybe a rate pegged to inflation. All loans should be fully dischargeable in bankruptcy.
There will be limits re fraud of course though (e.g. you can't say you will open a barbershop and go on a vacation).
Mostly, the public banks would loan for personal business maybe partnerships (under a certain size) and large public works projects for state and local governments. Like infrastructure. Public transit. Roads. Public power. Maintaining waterways, etc. Federal public works projects would ideally be paid for in Greenbacks directly.
Larger entities, like corporations would have to raise money the old fashioned way.
All private lending would be illegal with maybe the possible exception of a 100% reserve and capital requirement and no usury allowed.
-1 tttorosaurus 2013-10-07
So you would replace modern finance with a system of extreme regulation, including quite an elaborate system of arbitrary caps on various financial instruments, and then put in place some sort or elaborate financial monitoring policing system that would prevent disfavored transaction types and their equivalents from taking place.
Two questions to get us back to the fundamental roots of what you propose: (1) What is the social welfare function you seek to maximize in this centralized financial system, my planner friend? (2) How did you arrive at the cap figures you used as examples in the context of that function?
2 Grandest_Inquisitor 2013-10-07
Well, I actually seek to return to a simpler system that is centuries old.
The bible outlaws usury, no?
Modern finance with it's system of complex financial instruments is nothing but a big obscure gambling machine that make a small number of people very rich at the expense of most of us.
Private banking is like a parasite. Just look at the 3% or so we pay to use credit cards (oh, btw, I would nationalize the electronic payment systems and make debit cards free to use--b/c credit cards are outlawed). Look at the shadow banking system and the systemic risk we all suffer under because of this gambling.
As far as my "arbitrary" caps I acknowledge this is my own opinion but I was trying to be noncontroversial by using "traditional" lending caps for such things as houses and autos (caps that have worked very well for the last 75 years or so, well, at least before the recent bubbles).
The social welfare function I seek to maximize is simply to return our government back to the people, rather than as tool of the elite, and to use our massive wealth and resources to provide a basic standard of living to all the people who have collectively produced this wealth. Education, health care, and basic banking functions are more efficiently and fairly provided by the state than by private usurious corporations. There can still be private education and people can pay their own way for extra health care. "That's not outlawed."
To me the benefit of the state providing these basic services is self evident (oh, and a basic retirement fund, like Social Security is best provided by the state). I would limit government in many other ways though. I would end income taxes (except maybe on the top 1% to 5% to prevent runaway wealth). I would end the police state, most federal crimes, the huge homeland security dept. Etc. I think this model would maximize personal freedom while everyone could share in a basic social compact that will make our country stronger and happier.
This model is actually very old. It's similar to the Social Credit model proposed by C.H. Douglas in the early 20th century. http://en.wikipedia.org/wiki/Social_credit And by Ezra Pound and others. And somewhat implemented by states like National Socialist Germany.
3 zeneval 2013-10-07
Yep, gotta love that hypocrisy, eh?
The original definition of usury, apparently now "obsolete" was "interest paid for the use of money" but now it's commonly defined as something along the lines of "exorbitant interest paid for the use of money."
That greed...
0 tttorosaurus 2013-10-07
We are obviously approaching this subject from very different perspectives. I believe the only rational way to consider the bundle of policies you are proposing would be to consider their effects on the economy within a positive economic model; however, it seems (and correct me if I am wrong) that you are simply creating a philosophical framework based on your religious views and a normative critique of what you view to be the failings of large national banks.
I would simply posit to you that, if you cannot with reasonable certainty provide a projection of how your policies would affect the millions of people they would be foisted upon, then you should probably refrain from advocating them; after all, without even having a theoretical framework to analyze the policies, how can you even begin to say whether they would be good or bad for anyone?
If you really want to continue discussing this, I'll just note that you did not answer my question about your social welfare function. I suggest you spend a little time reading about what a social welfare function is. It's a very basic concept that will help you in thinking about these types of issues.
Given that we are not quite on the level of talking about SWFs at present, let me ask you a simpler question: what effect do lower leverage allowances have on investment? You can use whatever macro model you think is best, but please explain your assumptions.
0 Grandest_Inquisitor 2013-10-07
Yes. We are coming from different perspectives.
I am basically advocating a Social Credit model, as promoted by C.H. Douglas, as I explained in this very thread. I left another link in another comment in this thread and I suggest you spend a little time reading about the Social Credit system. We may not be able to have this discussion until you learn a little bit more about this.
As discussed in the links below, and of course elsewhere, these policies have been modeled and in fact the U.S. Congress favored this system in 1932 and it has been tried in a few countries. I think Switzerland is on the verge of implementing a guaranteed income, for instance. It was promoted to some extent in Canada and implemented in part in National Socialist Germany.
Perusing the social welfare function, per your suggestion, it does not appear to be a "very basic concept" as you describe. Can you tell me the importance of this concept?
Similarly, what is the importance of asking about lower leverage allowances on investment?
Also, what framework do you advocate? How does the framework you advocate take into account the social welfare function (SWF!) and lower leverage allowance on investment?
1 tttorosaurus 2013-10-07
I understand the model you say you support, but my point is that you do not seem to have deeply considered the implications for implementing it in the modern economy. I asked about the social welfare function you were using because I believed it would prompt you to disclose either (A) that you had thought seriously about the problem and considered its tradeoffs, or (B) you had not.
The social welfare function is the notion at the heart of how serious people think about changing economic policies (or even regimes). At a very advanced level, SWFs are use sophisticated formulas to model very complex systems and behaviors. But they need not be so complex in order to serve as a jumping point for truly thinking about the benefits and costs of a given policy. The reason I asked you about it was because the foundation of the SWF is a mapping of one's assumptions about behavior and economic variables. Seeing as your proposals struck me as obviously highly destructive to the welfare of millions of people, I was very curious as to whether you had really thought as far as their effects or if you had simply gobbled together a hodgepodge of proposals and ran with it. It seems the latter was closer to the truth.
Following that same line of inquiry, I am still curious as to whether you understand the relationship between leverage ratios and investment. The reason I am asking is because it is one of the most studied areas in modern macro economics and it is at the heart of the major costs to your proposal--costs which, given a reasonable SWF (e.g., set of assumptions based on empirical data), will redound to the detriment of those who live under your proposed regime.
Do you understand the relationship between leverage ratios and investment?
1 Grandest_Inquisitor 2013-10-07
So, "SWFs are []sophisticated formulas to model very complex systems and behaviors" and unless I've done this I can't opine about implementing a Social Credit system?
Does one need a Phd in Economics to opine about our current system hurting millions of people? You seem to be defending the general current system and are claiming you've done all this complex modeling but I don't trust economic professionals wowing us with complex bullshit about how great the current regime is and how we just don't understand how change would harm millions.
Plus, I'm pretty sure there are professional economists that disagree with your take on things and support the Social Credit model. Look at how millions in Germany benefited in the 1930s! We might see soon enough about what happens in Switzerland. http://www.policymic.com/articles/66677/switzerland-will-vote-to-give-all-adults-a-guaranteed-2-800-monthly-income Since you are an academic superstar can you tell me what professional economists think of Switzerland's proposals? And the U.S. Congress proposals during the 1930s? And Social Credit in general? Why will these proposals hurt millions? Is Switzerland about to enter 3rd World status? You better get yourself there quick and warn them about your models.
Instead of playing professor Gotcha and quizzing me on complex economic theory why don't you tell us why the Social Credit system won't work. And a piece of advice, making your argument so complex that you are incapable of explaining it in a coherent way doesn't impress people as much as you think. Makes people think you're just hiding behind academic jargon.
And . . . I don't know if I should take your bait with your question about the relationship between leverage ratios and investment but my understanding is that higher leverage allows more private investment, under our current system. But that isn't necessarily "good" investment as it creates bubbles and systemic risk. Would you agree we have relatively high leverage ratios the last few decades? And what has it gotten us? A stock market bubble, a housing bubble, and a huge derivatives bubble. How do these help the common person? The systemic risk from the shadow banking system has been a net negative, and I'm pretty sure even some professional economists would agree with that.
And what about the relationship with investment ratios in National Socialist Germany? They cut private leverage way down and engaged in Keynsian public investment, no? Didn't this model create a lot more "good" investment than say the American model of investment, especially before the New Deal?
I don't mind you using your claimed expertise to add to the discussion. Just don't be a dick about it.
1 tttorosaurus 2013-10-07
I already told you why your system wouldn't work. If I'm being a bit unclear its because I see from your writing style that you are obviously far more intelligent than most I've encountered who support the types of ideas you do and I suspect you can make reasonable inferences given the chance. The main thought I want to leave you with is that you have not thought about your system in some very important ways--ways critical to understanding whether or not you should be advocating it at all.
To be clear, the most obvious reason is your system would not work in the modern world is because of the relationship between leverage and investment. You are just going to push investment (capital) overseas and make America far poorer.
And you do not need to know SWFs to opine on the subject. I simply suggest, again, that realizing you lack fundamental knowledge in a subject area (here economics) should give you pause about the propriety of opining upon it.
1 Grandest_Inquisitor 2013-10-07
Well, I admit that I may be missing something and have more to learn.
But not even the professional economists seem to have a complete understanding of these matters and get things majorly wrong. The last 6 or 7 years has shown us that.
I'm willing to take the risk on a Social Credit system or similar reforms. I don't care if private capital, such as the large investment banks, flee our country. They are parasites. Good riddance. We should have let them go bankrupt and imprisoned as many as we could 6 years ago. We should have reigned in their leverage. The dire warnings from the Fed and financial elite about millions suffering unless we bailed them out were overblown. I know there are IMF studies and professional economists that agree with me on these things.
Sure, the international financiers may be able to cause short term pain, as they did when President Jackson kicked them in the arse when he let the second bank end. But they periodically cause this pain even when we give them succor, as Charles Lindbergh warned and as we've seen in the last few years.
Even Alan Greespan has lamented that the financial innovation of these complex financial instruments have not really added much. The common person and the real economy is not any better off because of these instruments. What have leveraged buy outs, derivatives, and the shadow banking system given to the common man?
I say rip the parasites off and let the short term wounds heal. We will probably recover even stronger . . . just as Germany did in the 1930s, and America did using Continental scrips and Greenbacks.
Public investment can make up for the fleeing private capital investment of the parasites.
So, a better question for you would be, what private investment would flee that you don't think we could do without under a Social Credit system or something similar, that drastically reduced leverage ratios and limited private lending?
1 tttorosaurus 2013-10-07
almost all private investment would flee because every other first or second world country has a far more favorable financial regime than the one you proposed. why would you park your money in a place where it can get no return? in the world of finance, that is an effective loss. and where do these magical "public investment" funds come from, in your view? you would be destroying millions of jobs, pushing extremely valuable human capital (why do you think NYC is the center of finance?) to other jurisdictions, and--on top of that--greatly raising the cost of capital for the non-"international financiers" (read: small businesses) who remain. your proposed system is devastating on every level. just step back from it and think through the fundamental relationships such as the relationship between leverage ratios and investment and follow the implications from there.
and then you have to grapple with really tricky questions. for example, are you also going to ban cross-border lending?
1 Grandest_Inquisitor 2013-10-07
See here at Washington's Blog for an academic that supports my positions and even mentions Thomas Edison and Henry Ford's work to bring about such a system of using debt-free money. They didn't worry about international financiers fleeing.
1 tttorosaurus 2013-10-07
Thank you for sharing, but you seem to be misunderstanding the article. The author is talking only about winding down the federal government's debt, starting with the cancellation of intragovernmental debt and then buy selling governmental assets and drastically cutting down the size of government. This means he wants the treasury to default on the bonds it issued to the social security administration, etc.; it is different from the leverage ratio for private banks and banning debt in private markets, though the absence of US treasuries would raise banks' cost of capital.
1 Grandest_Inquisitor 2013-10-07
I suggest you reread. He's not saying to default on any debt or obligations.
He suggests paying Social Security promises as they "come due" with debt-free money, e.g. Greenbacks or platinum coins. So beneficiaries would be fully paid.
He also doesn't recommend drastically cutting the size of government . . . his piece is agnostic on that point. He recommends paying off Treasury debt as it comes due with debt-free money, thus eliminating the debt, not the government. Government could be financed with debt-free currency rather than taxes or selling bonds.
Also, this piece doesn't get into the details about prohibiting or limiting private bank creation of money (what you call leverage ratios), although he hints at it ("Debt-free money could be created to directly pay for public goods and services, and government could be employer of last resort for infrastructure investment. Because infrastructure creates more economic output than investment cost, this results in falling prices. So, we can have full-employment, the best infrastructure we can imagine, and falling costs to consumers.").
I don't think you really understand the alternative I've been proposing that you've so blithely dismissed. See also Ambrose Evans-Pritchard's discussion of "Abenomics" and his recommendation that Japan use a similar monetary reform.
If this approach is so bad why did it work for Japan and Germany in the 1930s without hardly any inflation?
1 tttorosaurus 2013-10-07
He wants to cancel intragovernmental lending as "a matter of simple bookkeeping." That is not paying the debt as it comes due, that is, in economic terms, a default on the treasuries bought by other branches of the government (which account for less than a third of our national debt).
I agree in general that the government could theoretically be run without debt. But that would require a massive tax increases, massive sales of assets, massive reductions in services, or a combination of those three, especially if he is proposing we somehow pay all our debt as it comes due without issuing more. That's the nature of our current federal budget. The author (a high economics teacher, as far as I can tell) seems to be suggesting we just print more money--$12 trillion. He doesn't mention how to balance the current deficit (which is funded constantly be bond offerings), but I suppose he'd have us keep printing money to do that too. So I guess we just keep printing more money, right? What do you think Milton Friedman would say about that idea? Can you predict what happens when a country simply devalues its currency to meet its debt obligations? It's pretty much macro 101. Hint: It starts with "in" and ends with "flation." There is no free lunch, my friend. The debts are real.
And I still fail to see how any of that has anything to do with the truck load of regulations on private banks that you proposed earlier. No one is recommending those, in Japan or elsewhere. In fact, Japan is doing quite the opposite in deregulating its banking sector.
1 Grandest_Inquisitor 2013-10-07
That is simply false. No taxes are needed. No bonds are needed. No governmental services need be cut. This is pure propaganda to scare people away from a more just monetary system.
Also, the author does indeed propose paying the existing debt as it comes due ("And in this light, we could enact what is called “monetary reform” for the US Treasury to pay the outstanding ~$12 trillion of debt held by the public as it becomes due with debt-free currency created by the US government"). There's no big difference between paying Treasury bills as they come due and paying pensions and Social Security benefits as they 'come due.' And of course that's what he's implicitly arguing for when he wants to cancel the intra-governmental debt. He also says "[d]ebt-free money could be created to directly pay for public goods and services."
You're also wrong about the definition of default. When the entity due money, in this case the U.S., cancels a debt, in legal terms it is cancellation of debt, not default.
Why wasn't there hyperinflation in Japan and Germany in the 1930s when they did this?
And re Milton Friedman, did you see this from the article:
Also, the Modern Monetary Theory academics also advance these theories, most noatably at the University of Missouri, Kansas City, and include:
Also, my proposals are my own unique take on this and you're right . . . I haven't seen any explicit proposals similar to this (although there may be), but I'm taking the proposals I've see elsewhere (such as with MMT) to their logical conclusions. If private bank money creation were illegal or regulated to almost non existence, as was done in Germany for instance (and probably other places but I haven't looked at the history in depth), public investment/lending would take its place (contra your argument). I'm not sure how it was done in the other examples, e.g. Germany, but I don't think they did much lending to households. Nor did even capitalist countries that relied on debt at that time. Indeed, we did just fine in the U.S. without large scale home loans, and auto loans, or revolving credit. I too would do away with revolving credit but make a provision for some individual lending (in my example, homes, autos, and small business).
1 tttorosaurus 2013-10-07
Germany and Japan never printed the quantities of money you are talking about here. Look to Zimbabwe. Not that any of that is even at all relevant to your regulations, which you cannot offer any actual defense for. If you cannot see that, then I think this has runs it's course.
Btw, I went to uchicago and studied with a great many of Friedman's colleagues. I know his work quite well. Neither the article you posted nor the underlying article that mentions Friedman supports the contention that he thought the us govt should simply print off money to pay off treasuries. He never would have supported that view because he understood inflation as well as anyone.
I also have to note that you are mixing up the payments the author proposed. He never suggests paying social security as it comes due; he suggests canceling all intergovernmental debt. That's 5 trillion beyond the 12 trillion he later mentions. That means he wants the SSA's asset of treasuries to disappear at the same time the Treasury's liability for those bonds disappears. That what he means by adjusting the books. If you think it sounds stupid when spelled out more explicitly, then you may have just pinched yourself and woke up.
Instead of getting all of your Econ views from a smattering of ideological echo chambers across a few fringe websites, I really recommend you spend more time wrestling with the fundamentals of economics. You are smart enough to think critically about these issues but you are denying yourself the tools to do so.
1 Grandest_Inquisitor 2013-10-07
Well, I have studied the fundamentals. And been taught the cult of Law and Economics from actual U of C educated professors.
I'm open to being convinced these theories and solutions are wrong . . . but so far I find the criticism (and the fear mongering) to be unconvincing.
Can you point me to a source that explains how Germany and Japan's experience is much less "printing" than these proposals would be? Because Germany spent large amounts of debt free money on such things as the Autobahn and this is much more likely to enter the economy in the form of inflation than cancelling intra governmental debt. Or even paying off bonds as they come due with debt free money. I find the economic and historical analysis on this to be missing, at least from popular sources.
I am also not mixing up payments as the author proposed. The author proposes using debt free currency to pay off existing bonds as they come due (thus any inflation, if any, would be tempered because of the gradual nature of it) and using debt free currency to pay for current spending. Social Security benefits clearly fall under current spending. I don't know any proponent of this type of system that wants to use these monetary reforms as a backhanded way to eliminate Social Security or pension benefits. The whole reason there is a trust fund in the first place is citizens have been paying more into dedicated payroll taxes than has been taken out. It is indeed an accounting trick. There is no need for a distinct revenue stream from other government funding for Social Security. Once you realize it's like needlessly printing out an IOU to yourself you have just pinched yourself and woken up.
Also, I fail to see how cancelling intra governmental debt will lead to any inflation at all, as discussed at the Economics subreddit when the above article was linked there. Clearly, the use of debt free currency to pay for current spending is the most likely to lead to any inflation, and I am willing to go with the heterodox economicsts, Modern Monetary Theory, and the aforementioned cranks like Thomas Edison, Henry Ford, Charles Lindbergh Sr., and C.H. Douglas (and not to mention Keynes and Friedman and others, to the extent they support these theories) who all say this is easily managed.
I don't have the time to examine the author's claims about Friedman and your claims to the contrary. . . but I have seen other Modern Monetary Theorists make a similar point that many Austrian or conservative economists would be surprised Friedman supported some aspects of these theories.
1 tttorosaurus 2013-10-07
You keep touting the 1930s economies of Germany and Japan as if they are in any way similar to the modern US economy. They are not. Even at their peak, they were orders of magnitude poorer, less productive, and far more isolated than the modern US economy. Moreover, both were eventually supported by imperial empires and slave labor. They were not health economic models for actual wealthy, diversified, and interconnected modern economies. You keep having to refer (very vaguely and without much context) to those countries' economies from 80 years ago because you cannot explain logically how your proposed reforms would effect the modern US economy. That was my whole point at the beginning--you have not thought these ideas through enough to even guess at how they would affect the economy, so it is weird (and borderline fascinating to me) that you advocate them with such conviction.
You really need to actually read about what happened in Germany: http://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic . Great precedent, that. No hyper inflation there at all. No, sir. Didn't even lead to one of the most ruthless mass murderers in history destroying large swaths of Europe, either.
Again, you do realize that Japan was a military dictatorship that grew by government mandated industry (in a country that had perviously been agriculture-based and was very lower productivity) and by invading and exploiting China and Korea, right? That's your economic model? How do you suppose that is even remotely applicable to the modern US?
Relying on names of historical people who believed in some theory is not an argument for that theory. Why would I care what several men who died before the field of modern monetary economics was even born had to say about the subject, especially when we are debating the subject in a context (read: the modern economy) that is completely different from the context they knew? If you want to make an argument for how your theory is going to work, you need to just rely on the fundamentals of economics to determine how incentives and behaviors will change. We are back full circle to the SWFs concept.
The bonds owned by the SSA and other such intergovernmental bond purchases are not a needless IOU. US Treasuries are an incredibly important financial instrument for any fund to hold. Do I need to explain that to you as well? I suppose the SSA should just hoard cash?
You are still wrong about what the author you cited to said about the 5 trillion of intergovernmental loans. Do I have to quote it to you again?
Even over a longer time frame, you are proposing injecting trillions of dollars of cash into the global economy. That you think this will not lead to inflation and the debasement of the US dollar is just silly. Look at the current account deficit. You are talking about injecting around a trillion dollars of cash into the economy per year. You think that is going to have no effect? I'm sorry if I'm getting frustrated at this point, but you cannot be serious.
1 Grandest_Inquisitor 2013-10-07
Wikipedia was not the scholarly study I was looking for.
You do realize National Socialist Germany was not Weimar Germany, right?
You do realize this hyperinflation was caused by a debt based system controlled by the victors of WWI, in part because the victors extracted harsh reparation payments and basically ran the central bank, right? It was probably a continuation of the war policies--you know, after Britain starved the German population on purpose.
And I bring up the names of historical people and current academics because you were claiming that the theory I backed was not serious. We've now dispensed with that argument.
But I am getting frustrated as well because you purport to have advanced knowledge but you can't seem to get beyond platitudes about the dangers of hyperinflation without getting into the specifics.
And you keep insisting on repeating misleading propaganda . . . or maybe you really don't understand some basic issues--like your statement that "maybe SSA should just hoard cash?" It doesn't need to hoard cash, hold Treasuries, or hold the special Treasury I.O.U.s that it currently holds. It's an accounting gimmick. Should we develop a trust fund for military spending as well? You're being obtuse if you claim to not understand this simple point.
1 tttorosaurus 2013-10-07
If I keep repeating the same "platitudes" (I'd call them economic fundamentals, but whatever), it's because you've (1) refused to provide any analysis on your actual financial regulation proposals, (2) changed the subject from your initial proposals to an entirely unrelated set of monetary/fiscal proposals, and (3) now refuse to deal with the very obvious basics of that monetary/fiscal system you propose, e.g., you would be pumping ~$US 1 trillion/year into the world economy, which would debase the dollar. So we haven't really made much progress on the basic points I've made; they've just been ignored.
And the SSA purchase of treasuries is not just some accounting gimmick. The SSA is funded through tax revenues. Those tax revenues purchase treasuries. The treasuries, like all bonds, change the time preference for the payments on the economic value of that cash. The federal government uses the revenue from those bond sales by the treasures (and other tax revenues and bond bond sale revenues) to fund its daily operations via the general fund. It's really not that complicated, and it is a real debt owed. You cannot wish it away magically without eviscerating the SS trust fund and stealing the value of the tax dollars invested in those bonds.
The reason we have a trust fund for SS is because it is a program where contributions are made during people's productive years and then paid out during their retirement. You think we should just sit on that cash? Or perhaps you have some awesome model where we just tax current tax payers directly for retirees' benefits? Or maybe you just think we should abolish SS altogether and that's why you aren't thinking seriously about defaulting on the bonds the treasury owes to the SSA? That you would compare such a fund to yearly military procurement allocations shows you are missing the basics of what's going on.
In any case, you are so far off the mark about all of this that I'm now sure this has run its course. Short of teaching you basic economics, I'm not sure what you want me to do. Far from being open minded, you are just striving to be contrarian and changing the goal posts, rather than pausing and trying to work out how your proposals would actually function in the real world. You still have not even tried to explain the simple fundamentals of what you are proposing and how they would achieve the distributional end you seek.
So I guess you should just enjoy the confirmation bias thrill of the few websites that think Nazi Germany is the economic model of the future. I would humbly suggest, however, that you spend some time on Khan Academy or MIT Opencourseware if you want to be able to have the tools to see beyond the views of that august clique.
1 Grandest_Inquisitor 2013-10-07
You are being intentionally obtuse if you pretend to not understand the arguments and claim I need to learn basic economics. If you don't understand this basic point about reforming Social Security funding it is you that needs remedial tutoring.
There is no need for a SS trust fund to fund SS benefits. There is no need to even collect payroll taxes, as Warren Mosler and other MMTers have suggested ("When the recession hit, Mr. Mosler said, the government should have spent and spent until unemployment came down to a comfortable level. Forget saving the banks through the Troubled Asset Relief Program. Washington should have eliminated the payroll tax, given every state $500 per resident and offered a basic job to anyone who wanted one.").
How is military spending different than pension benefits spending? Why does one need a distinct and separate revenue stream while the other doesn't? Doing this is simply a policy decision in order to constrain one type of spending and not limit the other. There is no economic reason to do so.
1 tttorosaurus 2013-10-07
There is a sound economic reason to spread the payments out over the course of the lifetimes of the beneficiaries. Can you really not see it? Hint: Why do insurers structure their policies to collect fees over the lifetime of a policy as opposed to a lump sum payment at some point in time? Another hint: there is a relationship between the liability risk and amount of time a person holds a policy. One more hint: SS functions as an insurance policy.
Nice continued avoidance of any discussion of the inflation your plan would cause, by the way. And nice avoiding admitting you were wrong about the SSA's treasury holdings and the policy to do away with them as a matter of "book keeping." Since, you're back though, I want to point out why I chose to cite the German hyperinflation, because it seems to have flown right over your head. That inflation was caused by exactly the same thing you are advocating: printing money to pay off a country's debts.
1 Grandest_Inquisitor 2013-10-07
I'm not avoiding a discussion of inflation. That's precisely what I was looking to discuss instead of your simple bold assertions that use of debt free currency by a state inevitably leads to hyperinflation. I want to get into the nitty gritty and the hidden history of this debate.
Yes, printing too much currency under certain conditions leads to hyperinflation, as happened in Weimar Germany.
But as people like Thomas Edison, C.H. Douglas, and others argued at the time, and as the National Socialists and Japanese proved, it doesn't lead to inflation as long as it's done under certain circumstances. For instance, when the "printing" is done via infrastructure investment and given to people via jobs and there are price and wage controls.
You are not open to these distinctions and learning about this history, instead you are sticking to your fear-based platitudes about "printing" inevitably leading to hyperinflation.
As for the analogy that SS is like an insurance policy . . . yes, that's correct. But a government sovereign in its own currency does not need to fund these insurance policies like a private corporation does. That's fine if you think using debt free money like Greenbacks to pay for the insurance-like SS benefits will lead to "hyper-inflation." Especially if we do away with income taxes and most other domestic taxes. Make that argument then.
But there is nothing that requires this set up and that's why other government spending that TPTB like, like military spending, don't have similar restraints.
1 tttorosaurus 2013-10-07
"Yes, printing too much currency under certain conditions leads to hyperinflation, as happened in Weimar Germany.
But as people like Thomas Edison, C.H. Douglas, and others argued at the time, and as the National Socialists and Japanese proved, it doesn't lead to inflation as long as it's done under certain circumstances. For instance, when the "printing" is done via infrastructure investment and given to people via jobs and there are price and wage controls."
Are you trolling me? You do see what you're doing here, right? You are not dealing with my criticism; instead, you are once again moving the goal post and introducing heretofore unmentioned parameters for your economic model.
You are not talking about injecting the money into the economy through "infrastructure purchases"; you are explicitly talking about injecting the money through the financing of the federal government (printing money to make up for the gap between tax revenue and expenses--including the paying off of interest rate debt on bonds already issued). That's exactly what happened in Germany. And in Zimbabwe. And in dozens of other failed regimes. And now magically you envision that your proposed process has something to do with infrastructure investment? Which is it? Or is the current account deficit not large enough and you think the US should be printing off more money? And how does that help your argument about inflation? Moreover, you do realize it wouldn't matter at all if the government were simply running and balanced budget and then printing off $ 1 trillion on top of it to pay for infrastructure, right? The effect on inflation would be nearly the same; the cash is just entering the economy through different channels. I'm now convinced you are making this up as you go along.
As if that wasn't enough, now you're also talking about government wage and price controls on top of your other regulations and your monetary/fiscal system. You haven't even defended your first set of regulations on the merits, or your second--so now we're moving on to round number three. (Not to mention you are now advocating getting rid of the income tax and most other domestic taxes? It's hard to keep up with how fast you are moving the discussion away from the actual implications of your previously stated policies. Thankfully for you, you have a lot of half-baked ideas to choose from in your toolbox, apparently.)
So forget it. I tap out. You can have the final word. My last note, brought about by the chutzpah of trying to rest your system on Friedman's good name and genius while invoking price and wage controls, is this: price and wage controls are horribly inefficient in the long run. To the extent they had any success at all in Nazi Germany, it's because Hitler enforced them with concentration camps and other draconian penalties, which served to deny that economic allocations his people actually desired.
Milton Friedman on wage and price controls can play me out: http://www.youtube.com/watch?v=UGKl1MzOc8k
1 Grandest_Inquisitor 2013-10-07
I'm not moving the discussion around . . . it's always been about the Social Credit theory, Modern Monetary Theory reforms, and the examples of National Socialist Germany, Japan in the 1930s, the U.S. when it used Greenbacks, and the Colonies using scrip. There have been a few variations on this basic theme of using non debt based currency.
You have not fairly analyzed these examples and are obfuscating.
Social Credit (that Edison, Ford, and many others advocated) was the most "extreme" because it used price controls and wage controls (I think) and also proposed a guaranteed income, or dividend. But even the capitalist economies at that time used price controls and wage controls (through a very progressive income tax) and "central planning" of industries--the U.S. government controlled whole industries and also had price controls, etc.--I just visited Monterey Bay and FDR controlled the fishing/sardine industry by fiat, for example.
Less "extreme" versions may be like Lincoln or the Continental governments using debt free currency to pay for expenditures.
Modern Monetary Theory seems to promote the more extreme theories in theory, but also use a variety of practical fixes that get us closer to to their ultimate goal (like paying down intra governmental debt first since this would have little, or no, inflation).
I have been searching for a detailed history of these policies and and a better analysis of them and can't find much even though they were huge deals in the day (Congress agreed with these theories in 1932 for instance) . . . I imagine because there is something to hide. Your obtuse and misleading responses continue that trend.
I am interested in what Friedman says about the use of debt free currency for government spending so I'll look more into that as well as your link . . . .
1 Grandest_Inquisitor 2013-10-07
And Thomas Edison also came up with his own idiosyncratic plan: http://faculty.washington.edu/dtwills/resources/Edisons-Monetary-Option.pdf
These concepts are intuitive and the economics profession is like a priest class that I don't trust. I'd rather trust Thomas Edison, Henry Ford, and C.H. Douglas deciding economic policy rather than Ben Bernanke and Alan Greenspan.
2 platinum_peter 2013-10-07
We don't pay interest on Federal Reserve Notes.
But do we pay interest on the bonds that the FED gets in exchange for Federal Reserve notes?
1 kahirsch 2013-10-07
Yes, that's correct. And most of that is given back to the government.
1 sakananyc 2013-10-07
no one will care and you will be downvoted. You are anti-narrative and ergo: shill for big banks.
6 cccpcharm 2013-10-07
shill{s}
2 VideoLinkBot 2013-10-07
Here is a list of video links collected from comments that redditors have made in response to this submission:
1 gonzobon 2013-10-07
I went to a college in WA state and was taking Macroeconomics 4-5 years ago. I told them the Fed. was a private company. My teacher and the rest of the class all laughed at me. Even after 2-3 weeks of providing them evidence.
Some people are just so dependent on the system and sold on, "The Dream", that they will hopelessly defend it till the day the die.
Idiots.
1 fora-mejora 2013-10-07
You guys should check out Republic, Lost by Lawrence Lessig if you're into this kind of stuff.
Lessig fucking nails it.
-7 truthaddicted 2013-10-07
Way too long... You could have just provided the link...
6 im_buhwheat 2013-10-07
Why do you care?
-1 truthaddicted 2013-10-07
Why do you care enough to ask why I care?
-7 sakananyc 2013-10-07
I read the actual web site. All the "evidence" is just other conspiracy web sites. So, no actual evidence.
1 ListenToKPFA 2013-10-07
Also a good doc series on youtub called know your enemy. Basically Israeli Jews will be blamed for the "end of world" or starting ww3. This was planned pre_holocaust by ..... I think people who operate like masons with multi_generational plans, those seeking global domination. Israel like the US will be a mask on the face of true power.