Restoring the Dollar II
Dr. Edwin Vieira, Jr.
Constitutional Control Removed
Clearly, the Federal Reserve was established to remove the Constitution as the controlling agency in national monetary policy, and to guarantee that certain special interest groups be monopolistically represented in determination of that policy for the special benefit of those groups and at everybody else's expense. There are two levels of analysis on which to consider this fact.
First Level: Banking
The Federal Reserve System is a tool for stabilizing the inherently fraudulent fractional reserve system. The purpose of the Federal Reserve System is not to do what the bankers want; but to do what the bankers need.
Let us look at the way a monetary system corrupts from a regime of commodity money to that of fiat. In a regime of commodity money, the bankers employ the inherently fraudulent fractional reserve system; they expand the supply of fiduciary money beyond the supply of commodity money available. This has two effects.
One, it enables bankers to loan more money than they otherwise would, and that increases their profits.
Two, it makes the holders of the fiduciary money unknowing, and, I assume, unwilling partners with the bankers in those excessive loans and spreads the risk of the loans throughout society, indirectly insuring the bankers at the expense of the public.
Because the expansion of the supply of this inherently fraudulent fiduciary money is limited by the possibility of bankruptcy — lots of people asking for redemption, followed, logically by the bankruptcy of the banks — the bankers support legislation that is designed to insulate the fractional reserve banking system.
First Con: Propaganda
They use propaganda and all sorts of disinformation to con the public into believing that the banks are sound. One such mechanism is so-called deposit insurance. "If we fail, the government will pay. Don't ask us who will pay the government." But it is you who will actually pay. So the first con is disinformation.
Second Con: Suspension of Specie
With their influence, as we saw in the 1930's and many instances before that, the bankers asked the government to authorize what was called "suspension of specie payments" or simple refusal to fulfill their promises to redeem the fiduciary money with commodity, allowing bankrupt bankers to stay in business — not allowed for any other segment of the economy.
Suspension of specie payments is a key indicator of the breakdown of the free-market economy because that is a governmentally allowed repudiation of contracts. In effect, they are governmentally licensed thefts.
Third Con: Fiduciary Turns Fiat
To prevent bank runs altogether, the bankers get government permission to repudiate fiduciary money totally; converting the fiduciary money into fiat money. No more bank runs: there's nothing to redeem.
The government then forces circulation of the fiat currency by some mechanism such as making that to be money for payment of taxes for public expenditures. Or the government could declare that money legal tender for all debts; or the government could outlaw contracts that are payable in any other form of money, especially commodity money. That is precisely what the government did in the banking crisis in the 1930's –1933, '34 and '35. They, in essence, with respect to gold coin, at least, turned Federal Reserve Notes into a fiat legal tender currency. This substituted the government, or the taxpayers, for the banks and the banks' shareholders as the ultimate guarantors of fiat money, in return for which the banks agreed to do two things:
First, they agreed to monetize the public debt; that is, to buy government securities for duly created fiat money, in effect, enabling the government to use the fiat money system as an instrument of taxation.
Second, the banks agreed to cooperate in some kind of cartel or self-regulatory scheme to control the expansion of the supply of fiat money within limits that maintained public confidence; that is, the government and the banks agreed to divide the amount that can be looted from the general public by manipulation of the money supply and to moderate that looting so that the system doesn't collapse and the public doesn't catch on.
The fractional reserve banking system is nothing but a conspiracy between the public officials and the bankers to loot the American people. The Federal Reserve is simply a very elaborate and complicated device that has been set up to accomplish these simple ends in a higher more deceptive way.
The Federal Reserve system was created in response to failures in the reserve banking system at the local or regional levels. It is a national system regulating all; and it was an attempt, essentially domestically, in 1913, and then internationally under the Bretton Woods agreement in 1944, to expand that kind of fractional reserve system, first throughout the United States and then throughout the world.
Real fiat money came into existence in this country only in 1968. The promise to pay in gold was repudiated in 1933; and the promise to redeem all currency, or any currency, in silver was refuted in '67 and into '68. It was in June of 1968 that we finally had, for the first time in this country, a true fiat currency in the Federal Reserve. So this is a fairly recent problem, as historical political problems go.
In only about twenty years of fiat currency we have seen a geometric breakdown in the monetary system, under which we suffer today.
In this system, the Federal Reserve plays a simple but very vital role. The public confidence in the monetary banking system weakens because of the effect of overexpansion of the supply of fiat money. That is always the direction in which fiat money goes: expansion, expansion, expansion. The Federal Reserve jumps in to "restore confidence," by what they call "fighting inflation;" that is, producing increases, and then decreases in the purchasing power of the medium of exchange. The Federal Reserve may use what the public considers drastic means in this alleged fight. Nixon imposed wage and price controls with a four percent inflation. But the Federal Reserve will never use means so drastic that they precipitate a genuine economic collapse or seriously endanger the long-term interests of the banking cartel, its satellite industries or its political cronies.
However, any system of fractional reserve banking suffers from inherent instability that increases over time; because at the base, fractional reserve banking is a kind of Ponzi or pyramid scheme. For that reason, fractional reserve banking is a confidence game in both senses of the term. The Federal Reserve, the banking cartel, and the politicians of the American one-party system operate under the theory that you can fool all the people some of the time, and some of the people all of the time, and that's good enough. But they forget that, as Lincoln remarked, "You can't fool all the people all the time." Over time, some people encourage others to learn what's going on. And people who have learned tend to act.
So we can expect that the remaining lifetime of the Federal Reserve confidence game will be relatively short.
Second Level: Economic
Now let me shift to a somewhat higher level of analysis.
The Federal Reserve system is not simply a control mechanism for the national banking cartel. It is one of the most important mechanisms in a pervasive system of Fascist economic regulations that has been set up in this country, slowly but surely, since the turn of the century. This explains the political independence of the Federal Reserve system in a way that is much more logical than the idea that money and banking are not politically important, divisive or even interesting.
If a Fascist administrative state is to regulate the economy with relative autonomy from the electoral public and most special interest groups — which is the definition of an administrative state — it runs the economy without having to be subject to the whims of the voters. In that kind of state, the monetary agency has to claim political independence. In fact, all of the major regulatory agencies have to claim political independence — which, they really all do claim, to some degree. The Federal Reserve claims it to the greatest degree. So political independence is precisely what one would expect the Federal Reserve to claim, being a part of an anti-Democratic mechanism of economic and political control.
And that no constitutional branch of the national government — not the Congress, not the President, and not the Judiciary — ever disputes the Federal Reserve system's supposed independence, proves that those branches, too, have been couped with agencies of this Fascist state.
… by functioning as a mechanism for redistributing wealth, modern political money systematically corrupts the electoral process because it enables politicians to buy votes with promises of new government spending programs made possible only by the banking system