After the Village of Ben Tre in Vietnam was virtually destroyed, an American Major speaking with the journalist and legendary Gulf War reporter Peter Arnett, said, “It became necessary to destroy the town to save it.” It was in 1976, the American Bicentennial, when I reached an era of enlightenment. I had begun to study the true writs of the American Republic, as laid out in the papers and writings of the founding fathers. In those sorely underread texts, I found some very distinct perspectives on the principles which we ought to embrace in forming the nation’s monetary system and its attendant laws.
The Articles of Confederation had given the combined colonies the power to “emit bills of credit”. George Washington, Alexander Hamilton, and others, believed this power should be reserved to private banks; while Thomas Jefferson, James Madison, and others, believed that such banks of issue were more dangerous than standing armies – today we have both.
Article 1 Section 10 Clause 1 of the Constitution settled the matter of money rather abruptly. “No state Shall…make any Thing but gold and silver Coin a Tender in Payment of Debts”. This was a rather stark departure from the liberal Provisions in the Articles of Confederation. Congress, along with George Washington, veered slightly off this enshrined maxim by delegating a power (which they did not possess) and granting a privilege (which was not theirs to give) to the First Bank of the United States. In what has since become the tradition of this nation: the power to issue money, money of an unconstitutional nature, was delegated to a privately held institution.
For the better part of the last century this fact has been obscured from the American people. The principles are widely misunderstood. I challenge my readers to ask ten of their friends, “to which Branch of the Federal Government does the Federal Reserve System belong?” When I began my quest in 1976, only one in a hundred could correctly identify this institution as privately held. Today, with the plethora of publications such as The Creature from Jekyll Island (G. Edward Griffin), The Secrets of the Federal Reserve (Eustace Mullins), and films such as “From Freedom to Fascism” (Aaron Russo) and “The Money Masters” (Bill Stills); the ratio has changed. Now that these pioneers have allowed daylight to shine upon the dark magic of money creation, many of their initiates want to abolish the Federal Reserve System.
I have long given my views on this subject: I despise the Fed, I resent the influence it has over our affairs, but we cannot simply “abolish the Fed.” To do so would be akin to economic suicide for the current generation’s asset base. It is simply not prudent to return to the gold standard on one sunny afternoon. Therefore it is with heavy heart that I must confess to the nation that there is an inoperable cancer within. It has assimilated itself into every muscle of our existence. If we strike out to kill this thing, it will emit a toxic spew of bankruptcy and foreclosure that will devastate the wealth of a generation.
Furthermore the Fed is simply one of a legion of GSEs, or Government Sponsored Enterprises, which prey upon the productive capacities of this nation. Agency bonds are issued by an alphabet soup of these GSEs and then used as assets within the banking system. To abolish the Fed we would also need to abolish the Ex-Im Bank, the IMF, Freddie Mac, Fannie Mae, Ginnie Mae and all the assorted GSEs that mobilize the future productivity of the people.
Let the titans of academia and business dictate chapter and verse the complexities of the Fed and its vital necessity in our daily lives. They would forever defend this institution and its many public functions, even in the throes of her worst excesses. Those who despise the Fed, such as I do, will continue to condemn its existence and wish to free ourselves from the enormous and unnecessary interest payments on our own circulating money. However, it is unfair to suggest that the Federal Reserve is keeping all of the spoils. It is more appropriately described as a mechanism used by others to sap the resources that should be directed to the benefit of “We the People.” The only sensible action left to take is to enlist and engage these same mechanisms, not for private profit, but into the employ of the people.
Before I am branded a Socialist, I should be quick to point out that I also believe in: a standard dollar, no direct capitation, and a strict adherence to the Bill of Rights. Winding the clocks back only slightly to the Community Redevelopment Act of 1993, we find that Congress had the ability to issue U.S. Notes by Title 31 5115:
(a) The Secretary of the Treasury may issue United States currency notes. The notes (1) are payable to bearer; and shall be in a form and in denominations of at least one dollar that the Secretary prescribes.
(b) The amount of United States currency notes outstanding and in circulation (1) may not be more than $300,000,000; and (2) may not be held or used for a reserve.”
Assuming Congress had the power (and, moreso, the political will) to allow the issuance of United States Notes, we could use these to redeem Federal Reserve Notes and thereby recapture our bonds by the interim. The only problem with this approach is that it is too slow. We could never act in a swift enough manner to counteract the corrosive efforts that the Fed’s owners would take to forestall such a change. Attempting to abolishing the Fed without paying notice to its current beneficiaries would be a tragic mistake. Returning to the gold standard without providing an escape valve for a generation of debtors would be, as William Jennings Bryant suggested, “to crucify this nation on a cross of gold.”
A far more sensible approach would be to nationalize all of the GSEs and harness their productive capacity to pay off the National Debt. Not just the Fed – but all of the GSEs. Furthermore, by enacting a standard dollar, the supply of money would once again be a matter of public record. If the quantity in circulation were increased, we would know and could adjust our affairs accordingly. To secure the blessings of liberty, the power to create money should be restored to the people. The future productive capacity of the nation has already been factored into the current monetary system. To suggest that all this debt should suddenly be met solely in terms of our current productive value would be devastating.
The genie is already out of the bottle. Let’s put it to work, not cork it back up.