This paper concerns the current monetary system being practiced in the United States and much of the world. I have divided it into two parts. The first is my analysis of the way it is practiced, what exactly it is backing the Dollar, and its flaws. The second part is my proposal for a possible replacement for this system and a better monetary system.
The Analysis:
First, the Federal Reserve is a private bank. That is known fact. It is run by a consortium of private bankers that have been given the power to print money and collect taxes. In fact, shortly after the Federal Reserve was created, it was they (not the actual Federal Government) that created the Income Tax. They also control the Prime Lending Rate… a private bank.
Now, near as I can figure, our taxes go into the Federal Reserve, then if the government wants to spend some of that money it gets loaned to them with the expectation of being paid back; the government has to borrow from its own funds. So, first off any debt the country incurs can never be paid back.
Now, if the government is running short (like when it approves a trillion dollar budget), it has to borrow money… from the Federal Reserve, to be later paid back with interest. So here’s the trick: If Congress passes a high enough budget that they need to borrow money, they do so from the Federal Reserve, but what if the Federal Reserve doesn’t have that $5 trillion that Congress needs? Simple, they print it; they were given the authority by President Wilson, after all.
But how can you just print money that is backed by nothing? You actually print what amounts to promissory notes that say “Hey, the Reserve owes you this amount”. Notes that you can spend anywhere in the world because you have convinced the rest of the world to accept them. Basically, it’s funny money; counterfeit. But, the Reserve is charging interest, so after the Government collects some real money from whatever sources (trade with other countries, taxes and fees, land foreclosures, whatever) it uses this to pay back the interest and that is where these private banks get their real money. The Reserve lends out IOUs as money and get paid back in real assets, all they have to do is make sure that there is always a debt and that it is too high to ever be paid off. And those taxes they collect from us? Probably never really leave their hands.
Look at your average dollar bill: it says “Federal Reserve Note”, not “Treasury Note” as would be on legal tender. No, these are notes printed based on the value of their company’s assets, which is to say us. We’re the assets, and their Income Taxes are their way of collecting their profit from their production line.
The final aspect of this is to get the world’s economy to accept the U.S. Dollar as their common economic basis instead of gold; that way everyone is accepting these promissory notes as spending money, thus allowing the Federal Reserve to drain real money and assets out from the world’s economy straight into their coffers.
But what is backing that “money” if not gold? Debt! The dollar is backed purely by debt, and ours is a debt-based economy.
That would be bad enough, but why control the Prime Lending Rate? Allegedly you raise interest rates to slow down the economy when it’s getting too good (why would you ever need to?), yet right now the rates are going up to “counter inflation”, despite the fact this does nothing to reduce inflation for the average person, just give the banks extra buffer at our expense. Well, the main reason for fluctuating interest rates has to do with a thing called the Exchange Market.
The Exchange Market is where countries and companies go when they need to exchange one country’s money for another’s. The guys in the middle performing the exchange take a little off the top, as might be their right. A couple trillion bucks a month goes through the Exchange Market every month, so even getting a 0.1% fee off that is a real money maker (I don’t know the exact percentage). But, what if the value of one country’s money shifts relative to another? Now you can make money going in the other direction. Say you exchange US Dollars for Euros when the Euro is down, allowing you to buy a whole lot of Euros, but later the value shifts so you can trade in those Euros for a whole lot more US Dollars. A chance shift allowing you to make a mint? Not when you’re also the same ones controlling the Prime Lending Rate so you can shift things around anytime you want to cash out.
Put it all together and you have a private bank controlling our economy to feed their own coffers, using our economy to control the world’s economy because, hey why settle for a mere hundred billion in profit when you can get a couple trillion? You have an economy that is backed by debt and nothing in the way of real assets (correction: the citizens of the (Corporation of) The United States of America and their productivity are the assets), the debts being maintained by those in Congress who are on the take, and an economy being manipulated by that same bank for the sole purpose of squeezing more profit out of their assets (again, us).
Quite a con job and it’s been going on for a long time, and only getting worse. Solution? Dissolve the Federal Reserve, move all its functions to the Treasury Department, confiscate all the Reserve’s assets, get rid of the income tax (after confiscating the Reserve’s assets, you won’t need it anyway), and start jailing some big bankers for High Crimes.
But that’s all just off the top of my head.
The Solution:
This is my proposal for a possible replacement for the way the Federal government handles monetary supply and wealth distribution. The debt-backed dollar system does not work, and while the gold-backed dollar is vastly superior, a better system would be a more generalized version of the gold-backed dollar.
Basically, the U.S. dollar would be backed by resources, product, and services, the Federal government being authorized to print money on as as-needed basis for such. Here’s an example: Suppose someone mines out $100 million of iron ore. He can then sell it to the Federal government, who would pay him a standardized fair market value, said money being printed up specifically for this transaction. The Feds get the iron ore and the miners get the new money in exchange. From there this new money would trickle down from the main company in the form of paying others for whatever equipment they need, paying their employees, and so on; these would be the primary beneficiaries. Then the Feds could go over to a refinery and ask them to turn that ore into steel girders, in exchange for more newly printed money. Or the Feds could commit these new resources they’d purchased to some big government project; maybe going to contractors to have some naval ships built, a satellite, whatever. In each case the government prints out the money as needed to pay out to these contractors.
Or take farmers. As required, the Feds could buy some produce from farmers– in exchange for more newly printed money– to then give that produce to some government-backed project to feed the poor, feed the troops with, and other such.
People contracted by the Feds– such as troops, medical doctors, researchers, and so forth– would be paid with more Federally-printed money.
In each case, any resource, product, or services sold to or contracted out to the Federal government would be paid for by fresh federally-printed money. Money would never be printed ahead of time until there is a tangible asset to be gained in exchange for it. This money from such purchases goes direct to the primary beneficiaries, who are then free to spend it as they desire; use it to buy food, go to the movies, hire a plumber, whatever. These others would then be the secondary beneficiaries, as this Federally-printed money spreads out through the population. All government workers, holders of political office, and such, would also be paid in this way, their wages determined by a standardized list of pay versus services rendered.
For this to work there are a few built-in requirements. First, in no case would the Feds expect to earn a profit on these payments. Thus, no income taxes of any sort; no need since they’re printing up the money needed for anything they need to purchase. Second, there would obviously be need of an ethics oversight. Thus, no politician would have any power to vote on their own salary, no contracts to contractors that just happened to be owned by one of the politicians voting on the purchase, any purchase would have to be backed by a direct need, that sort of obvious thing. Third, all purchase prices (for resources, products, or services) would be taken from a standardized list of fair-market value prices to be determined by a neutral party. This would include all governmental salaries. The Treasury Department would handle keeping track of all purchases, money produced, that standardized list of fair-market purchase-prices, and everything else.
Note that this would also put the Treasury Department in charge of governmental salaries as well. Such salaries would follow a standardized template (i.e.: all Representatives get $X, all Senators get $Y, cabinet members get $Z, and so forth), to be determined by a nonpartisan Treasury panel and quite possibly put up to a national vote for any adjustments.
State governments would still handle their finances the way they currently do (some states have an income tax, some don’t), the only difference being that any grants they would be getting from the Feds, after approved by the Treasury Department, would come in the form of more freshly-printed money.
The Federal Government (in the form of the Treasury Department) would also be empowered to make loans direct to businesses or individuals. Such loans would, as everything else, involve the lending out of fresh-printed money, but would have ZERO interest to be paid on it; all that would be expected would be the repayment of the value of the loan. The money paid back from such loans would then go into a national bank whose funds would be reserved for such as social security (nice way to take care of or eliminate the social security tax) or even other public projects (infrastructure improvements, parks, housing for the poor, etc.). Such loaned out money would serve the purpose of invigorating new businesses, people trying to purchase homes, and so forth, and would be another way of spreading wealth through the populace. Obviously there would still have to be requirements for such loans, so we don’t run afoul of someone starting a business just to make it fail so he can keep the money; the government could still collect on defaulted loans in the usual ways, by seizing assets equal to the loan amount.
Those that fail to quality for a direct government loan could still borrow from banks, who are then free to charge their own interest, but at this point any bank charging more than about 4% would be considered as loansharking. Note that this would greatly take away the power of the banking system, particularly if you insist that all banks can only loan out in total no more than the bank’s total positive assets– that is, they could not include any debts owed them as part of their value when figuring how many loans they can make, but could include all cash and the current value of any investments. Banks would still be a good place to hold your money and have interest into your savings, but their stranglehold on the world’s economy would be at an end.
By setting the base prices on all resources and products it purchases, the Federal Government would have direct influence on such product prices nationwide. This means that the Feds could directly control the inflation rate, and keep everything steady at 0% forever, by merely maintaining a steady grip on their own base prices. Note that with no inflation, there would never be a need to have to increase any government salaries, or the value of the minimum wage.
This would also be the best way to instill any newly discovered resources into the economy. Suppose you find an asteroid with about a trillion dollars worth of minable resources, then who would have enough cash to pay for it all without crashing the market value of those resources? In this way the Feds would simply exchange newly-printed money for the asteroid– assuming, of course that the Feds have an imminent use for such resources. Of course, the outfit with the asteroid is still free to sell it to any other company that has the available cash to pay them in their own private agreement.
If you want to control the economy then you control the list of prices, and Congress can vote on the maximum amount of money to be generated by for all such payments. Every dollar would thus be backed by something tangible instead of debt as is currently, with the Federal government in direct control of the production of money (as it should be), instead of a private banked called “The Federal Reserve”. There would be no income taxes, or Federal taxes of any sort– at least not on anything domestic. The Feds would still have the power to levy any import fees on things coming in from other countries, since this is key to controlling the economic hold any foreign powers may be trying to get on our country.
Note that this system also completely eliminates the entire concept of a national debt (which is owed to the Federal Reserve anyway), with all money it prints being the source of the national economy, every dollar printed going direct into the economy in exchange for something actually tangible.
As far as any international payments from the Federal government, all such payments would have to be in the form of exchange of resources held by the Federal government. This would primarily be gold reserves, as the gold standard is popular internationally, but could also include other resources as well (for instance, some of that food bought up from the farmers, mined minerals off that asteroid it bought, or even the services of some government specialists– who would be paid as normal for any government worker). In no case would new money be produced to grant to foreign powers, since such moneys would then never be returned into the national economy. Likewise, any money paid back from government loans could also not be given out to foreign powers. In short, all money directly Federally produced stays within the U.S. economy (individuals, of course, are still free to make their own private deals with their own money and international concerns); international grants of U.S. dollars would be replaced with resource exchange or resource grants. One side effect of this would be to greatly cut down (if not eliminate) on international money laundering by our own Congress. In a sense, this would be extending the gold-standard turned resource-standard into a more international commodity. It would also wreck mayhem on those banks making trillions on the Exchange market since this system would absolutely stabilize the U.S. dollar (the Exchange market relies on a fluctuating economy, not a stable one).
This system makes the Federal Government the source of the economy and money supply, eliminates the need for taxes, makes it a lot harder for politicians to use the taxpayer as their own private piggy bank, and takes the stranglehold of power away from the banks.