by Jim Marrs
According to Dr. Charles K. Rowley, Duncan Black Professor of Economics at George Mason University and general director of the Locke Institute, “The prognosis is catastrophic if projected government policies are not cut back. According to the White House’s own estimates, the federal budget deficit in 2009 will be $1.6 trillion, approximately 11.2 percent of the overall economy, the highest on record since the end of the Second World War. In 2019, the national debt will represent 76.5 percent of the US national economy, the highest proportion since just after the Second World War. In such circumstances, the international reserve status of the US dollar will not survive. As it fades, so interest rates on government securities will rise and the real burden of servicing the debt will increase. In such circumstances, the US economy will teeter on the edge of a black hole.”
To prevent an American economic collapse, Rowley argued against socialism, stating, “Prosperity and full employment in the US will only be restored by a return to laissez-faire capitalism…on the micro-economic side, tariffs and other trade barriers should be repealed unilaterally; a ‘Right-to-Work’ Act should reduce the minimum wage and curtail the powers of unions; and business regulation should be reduced. Individual banks and their counterparties should not be bailed out, although the system should be protected by ensuring that failing banks are wound up in an orderly fashion—this is the only way to restore market discipline.” Laissez-faire is a French term loosely meaning “let it be.” Laissez-faire capitalism generally is defined as a system that allows the marketplace to regulate and police itself, that the law of supply and demand will smooth all production and distribution problems. This system works fine unless, as has happened in modern American, the marketplace devolves down to a handful of multinational corporations under the control of the globalist fascists.
Rowley’s argument in favor of laissez-faire capitalism is acceptable only if one assumes the economic playing field is level and that everyone has an equal chance at commercial prosperity. But, historically, prosperity has never been within equal reach to everyone. The history of the United States is the story of groups prospering at the expense of others, whether in the name of the trust, syndicate, cartel, or corporation.
In fact, the big just get bigger in a laissez-faire system. Case in point: the consolidation of media, banking, and automobile corporations. To use media again as an analogy, today freedom of the press belongs only to those who own the presses. But if this is the case, how are unique points of view expressed to the public? There are plenty of dedicated and well-intentioned journalists still working in the United States, but hardly any can afford to purchase and run a major news outlet. Consequently, news and information is left in the hands of the large corporations, where a pecking order demands acceptance of the boss’s demands.
If the United States is to have a truly free-enterprise marketplace, legislators must find a way to balance the laws and regulations necessary to prevent monopolies and to curtail freewheeling capitalist systems so that anyone with the intelligence and ambition can succeed. They must find a way to break apart the giant multinational corporations so that true free enterprise can once again assert itself.
AUDIT THE FED
MUCH OF THE NATION’s monetary problems come from the Federal Reserve System.
In a study entitled “Is the Federal Reserve System a Governmental or a Privately Controlled Organization?” the American Monetary Institute (AMI) explained the confusion and ambiguity over the ownership and purpose of the Federal Reserve System, which is neither wholly a federal agency nor a completely private company.
The AMI asserted that “ambiguity of control has resulted in the monetary power being misused. It has allowed great power to be wielded without responsibility. No amount of false PR will change that. The money power vested in Congress by the Constitution has been improperly delegated to private interests without sufficient public interest benefit, if any. Congress must resume the power vested in it. Had such delegation of power been shown to work in the public interest, one could consider maintaining or adjusting the present system. But look what it has done. This calls for a major shifting of how our money system operates and is controlled. Anything less, with minor benefits that merely alleviate the problems temporarily, will allow the destructive process to eventually resume…. The ambiguity must cease.”
AMI director Stephen Zarlenga wrote that the institute has been working on comprehensive legislation called “The American Monetary Act,” designed to resolve ambiguity over who controls the Fed. Rather than resorting to simple abolishment, the AMI’s plan posits that the federal government should incorporate the Fed.
“Monetary reform is achieved in three parts, which must be enacted together for it to work. Any one or any two of them alone won’t do it, but could actually further harm the monetary situation,” Zarlenga explained.
“First, incorporate the Federal Reserve System into the US Treasury where all new money is created by government as money, not interest-bearing debt, and spent into circulation to promote the general welfare; monitored to be neither inflationary nor deflationary.
“Second, halt the banks’ privilege to create money by ending the fractional reserve system in a gentle and elegant way. All the past monetized private credit is converted into US government money. Banks then act as intermediaries accepting savings deposits and loaning them out to borrowers; what people think they do now.
“Third, spend new money into circulation on infrastructure, including education and healthcare needed for a growing society, starting with the $1.6 trillion that the American Society of Civil Engineers estimate is needed for infrastructure repair; creating good jobs across our nation, reinvigorating local economies and re-funding government at all levels.”
Zarlenga noted that AMI’s plan would not be supported except under emergency conditions. “The idea is to have it ready and to inform enough citizens and lawmakers around the country about it,” he wrote. “At the same time, it is necessary to begin action now and there is a ‘small step’ called the Monetary Transparency Act…. It starts the process of making the Fed more accountable to the Congress, by requiring the compilation of certain statistics which are otherwise difficult to get. These are numbers which almost automatically point the way toward better public policy decisions.”
The statistics that Zarlenga noted are accessible through the little-known Comprehensive Annual Financial Reports (CAFRs). More than eighty-four thousand CAFRs are completed each year by local governments in the United States, but only rarely does the public get a view of them. According to veteran Wall Street commodity trader Walter Burien, every state, county, and major metropolitan city is keeping two sets of books. One—the budget—is commonly available and tracks each governmental entity’s costs and tax revenue. “The Budget is the financial record that’s seen by the public and used by politicians to justify new governmental services and higher taxes,” he said.
However, the second set of books—the CAFR—is virtually unknown to the public but contains the real record of total governmental income. The budget gives an accurate account of government costs, according to Burien, but only the CAFR gives an accurate account of the government’s income. “The CAFR is the accounting Bible for all local government. It shows the total gross income, investment structure, and also shows the general purpose operating budget as is ‘selectively’ created by your local government. I note that the selectively created operating budget usually amounts to one-third of the gross income and is where 100 percent of tax income is shown. The other two-thirds of the gross income is shown only in the CAFR report and…is derived from return on investments and enterprise operations of which said enterprise operations will have their own CAFR or Annual Financial Report listing their own investments and gross income separate from the local government they are under (many games are played here).”
Burien explained tax cuts and CAFR hidden assets with this metaphor: “The foxes have been writing the laws on how many chickens
they can eat from the hen house. At first, out of our 3,000 chickens…we gave [the foxes] 100 per year. They ate them and said they need 200. So we gave them 200. They ate them and then said they needed 400. So we gave them 400, but we started complaining saying enough is enough. So the foxes said they needed 440, justifying 440 with any logic available to them but realizing we were complaining about giving them 100, then 200, then 400, so they, in their wisdom, started to put 150 aside each year in their own hen house held by them and undisclosed to us. Well, after many a year, in the foxes own hen house they have collected 6,500 chickens (total available revenue not tied in directly with the publicly known operating budget) as they continue to collect the now 510 (the disclosed operating Budget) as the foxes cry to us saying they are barely getting by on the 510, but since we are complaining about the 510 they will cut back the annual take to 490 at great sacrifice to themselves, the foxes….” Under this method of cooking the books, government entities, from the federal to the state and even county level, can store much more money than is reflected in the publicly available budgets.
“[I]t is obvious that the inside players’ crucial element for success was to make sure the people did not review, understand, or comprehend their financial game plan as it grew,” explained Burien. “To be able to pull this off government required the full cooperation of the syndicated media, organized education, and the political parties…. It is obvious they got it and got it due to the money involved. If you cooperated, you were on easy street. If you did not, you were marginalized or worse.”
To correct this hidden government theft, citizens must first learn how much money their local government is hiding. “Make sure all know to carefully look at, review, and examine their local government CAFRs. Avoidance or refusal by your local government to do so in plain language is treason and financial fraud by intentional non-disclosure of the worst sort. When all the people know to look, I am confident there are a few sharp cookies out there that can take the corrective measures necessary to reverse the game back into the benefit and control of the people.”
Bruce Wiseman, the U.S. national president of the Citizens Commission on Human Rights, compared President Barack Obama’s 2009 agreement to join the Financial Stability Board (FSB), which he signed at the G-20 meeting in London, to the Bretton Woods Agreements approved by representatives of forty-four Allied nations in July 1944. The result of Bretton Woods was an established monetary management system and the rules for international commercial and financial relations. Additionally, the agreements served as the foundation for creating the World Bank and the International Monetary Fund.
Wiseman stated that President Obama’s approval of the FSB, the global monetary authority connected to the Bank for International Settlements, must be scrutinized carefully. “Let your Representatives and Senators know the Financial Stability Board must be approved by Congress and must be subject to oversight by elected officials of the countries involved. Personal visits, followed by calls and faxes to both Washington and local offices, are the most effective. Don’t be surprised if they don’t know what you’re talking about. Politely insist they find out and take action. And understand this when dealing with legislators or their staffs: they are focused almost exclusively on legislation that has already been introduced—a bill with a number on it. That is not the case here. You want them to take action on this matter by introducing legislation that brings the approval and structure of the Financial Stability Board under congressional control.”
Wiseman noted that there is nothing inherently evil about an international financial organization: “It is a global world today, and a body that oversees the smooth flow and interchange of currencies and other financial instruments [such as the FSB] is needed in today’s world…. But the organization cannot be controlled by international bankers who are not answerable to the citizens of the countries in which they operate. It should be overseen by a senior level group which itself is organized as a liberal republic, following the original model of the United States.
“The point is not to get Congress to approve what has been done. It is to first get them to recognize that agreements have been made that affect our entire financial system and that it is their responsibility to shape these agreements in a way that is beneficial to our Republic AND [original emphasis] to provide a mechanism for real oversight of this international body. Central bankers should not be making decisions about international finance without oversight and a system of checks and balances that are reflective of those provided by a republican form of government.”
For those states whose governments have mismanaged finances, history offers suitable lessons for revitalizing local economies. Most people probably haven’t heard of a small island off the coast of England called Guernsey. After the blitzkrieg, the Germans occupied the island and deported nonnative islanders to German concentration camps. According to Toby Birch, managing director of Birch Assets Limited in Guernsey, the little-known history of Guernsey includes a great deal of monetary ingenuity. “As weary troops returned from a protracted foreign war [the Napoleonic Wars], they encountered a land racked with debt, high prices and a crumbling infrastructure, whose flood defenses were about to be overwhelmed. While 1815 brought an end to the conflict on the battlefront, however, severe austerity ensued on the home front. The application of the Gold Standard meant that loans issued over many years were then recalled to balance the ratio of money to precious metals. This led to economic gridlock as labor and materials were abundant, but much-needed projects could not be funded for want of cash…. This led to a period of so-called ‘poverty amongst plenty.’” A committee was formed to find a way out of the situation.
“Like all great ideas, the principles were straightforward,” Birch noted.
“The committee realized that if the Guernsey States issued their own notes to fund the project, rather than borrowing from an English bank, there would be no interest to pay. This would lead to substantial savings. Because as anyone with a mortgage should understand, the debtor ends up paying at least double the amount borrowed over the long-term…. The irresponsible creation of credit is a dangerous game that temporarily benefits the current generation but steals from the next; a lesson that has been forgotten yet again in modernity. To bring balance to the equation, therefore, the people of Guernsey had to find a way to neutralize such deficits while neither contracting nor expanding the money supply.
“On a purely practical level, this was achieved by adding a sell-by date to the notes in issue, rather like a maturity date on a bond. For example, on a note issued 21 November 1827, it ‘Promises to pay the bearer One Pound on the first of October 1830’. This begs the question as to how the future obligation was to be honored, but again, a simple mechanism was implemented whereby rent from the resulting infrastructure and tax revenues on liquor was set aside into a sinking fund to pay off the interest-free borrowing.
“The end result of the Guernsey Experiment was spectacular—new roads, sea defenses and public buildings were established, fostering widespread trade and prosperity. Full employment was achieved, no deficits resulted and prices were stable, all without a penny paid in interest. What started as a trial led to a string of construction projects, which still stand and function to this day. Money was used in its purest form: as a convenient mechanism for oiling the wheels of commerce and development.”
But Birch also noted that there was a fly in the ointment. “One would have thought that everyone would be happy with such a success story but this was not the case. When you open a closed shop to competition, those with vested interests become highly protective. In those days it was the private banks who were threatened, because they were cut out of the equation. No loans meant no interest and no profit margin. So they may well have been the source of a mysterious complaint made to England’s Privy Counsel which put a ceiling on the issuance of Guernsey notes for the next century.”
Why should we pay attention to a situation on a small British isle almost tw
o hundred years ago? “Whenever stimulus packages, tax rebates or bank bail-outs are paraded as solutions to the credit crisis they are actually part and parcel of its very cause,” explained Birch. “It all stems from the quick-fix approach of producing money out of thin air and leaving it for the next generation to pay-off. This has been on-going in the United States since [at the very least] the Vietnam War, when the last vestige of monetary restraint was cast aside; in abandoning gold as a check on the money supply, the US freed the world from financial discipline. The dissolution of the Dollar has been evident ever since.”
Birch said banks still have a role to play in providing liquidity by matching investors with borrowers, but they can no longer be trusted with the unrestrained creation of credit. “The Guernsey Experiment…shows that simple ideas can work wonders,” he said. “They simply require an unselfish philosophy and a desire to do the right thing for future generations, much like America’s Founding Fathers.”
To disengage from the inflated national economy and to bolster local businesses, some Americans are experimenting with their own money. One instance of this is the BerkShare system, a local currency that has circulated in the Berkshires area of Massachusetts since 2006. According to the BerkShare website, nearly four hundred businesses in the Berkshire area accept BerkShares, which are printed on special paper including security features.
Labeled a “great economic experiment” by the New York Times, BerkShares are “a tool for community empowerment, enabling merchants and consumers to plant the seeds for an alternative economic future for their communities.” The BerkShare website proclaims, “Five different banks have partnered with BerkShares, with a total of thirteen branch offices now serving as exchange stations. For BerkShares, this is only the beginning. Future plans could involve BerkShare checking accounts, electronic transfer of funds, ATM machines, and even a loan program to facilitate the creation of new, local businesses manufacturing more of the goods that are used locally.”