President Obama: Nationalize the Fed and Create Our Own Money

by Doug Page

www.dissidentvoice.org/, February 7th, 2009

We are all full of anxiety these days. How bad will the depression be? Will the bailout work? How will we (and our children and grandchildren) be able to pay for the massive bailout of the Banks and our massive public debt?

The new book, The Web of Debt, by Ellen Hodgson Brown, Stephen J. Zerlanga's proposed American Monetary Act, and Paul Grignon's 47 minute video Money and Debt present a persuasive case for the United States to exercise its sovereignty by creating its own currency, and for the nationalization of the Federal Reserve System. The fact that Wall Street banks are "too big to fail," is a compelling reason, among many others, why they should be nationalized. These authors present interesting solutions for our current anxiety. They propose a way to abolish our Ponzi-like private banking system and to curb banker fraud.

Here are some shocking little-known facts from the sources here reviewed:

The Federal Reserve Bank is a private institution owned and controlled by private banks. It is a private bank that enriches its private owners.

The US Mint does not create our money. It creates about 3% of it in the form of dollar bills and coins. The rest is generated through computerized bookkeeping entries by the private banks.

Banks do not make loans only from money they have on deposit Through what is called "fractional reserve banking," They loan well over ten times the amount they have on deposit. This is how our money is created. It is created out of thin air.

All debt of the US, all corporate debt, and all individual debt are owed to private banks.

All money is debt.

Over 20% of our taxes are used just to pay the interest on our government debt

Banks are no longer limited to loaning money to make their profit. The 1999 abolition of the Glass-Steagall Act allows them to gamble in the stock market, the commodity exchanges, the foreign currency exchanges, collateralized debt obligations, and to buy and sell other banks and businesses.

AN ILLUSTRATION OF THE WAY THE PRIVATE BANKING SYSTEM MAKES HUGE PROFITS OUT OF THIN AIR

Let's use $10,000 as an example to understand the process.

The Federal Reserve Bank buys $10,000 of US debts called Treasury Bills from the US. Where does the Fed get the money? The Fed creates it out of thin air. This is the first bit of magic. This is authorized by the Federal Reserve Act of 1913, and is a questionable delegation by Congress of its own power to "coin money and regulate the value thereof. It is the ultimate in privatization. It is an authorization for the Fed and the banks to counterfeit actual hard money. Other federal laws make this counterfeit money legal tender for the payment of all debts and taxes.

The Fed then loans this $10,000 to a bank and requires the bank to pay the current federal funds rate as interest. This $10,000 becomes a "liability" of the bank, but the bank immediately loans this money to a borrower, but in double entry bookkeeping, this $10,000 loan becomes an "asset" of the bank from which the bank can make further loans. Here is where the second bit of magic occurs called "fractional reserve banking." The reserve is not gold or any other hard asset. The "reserve" is debt.

The bank is permitted by the Fed to loan 90% (or more) of that $10,000 loan to make a second loan of $9,000 which also becomes an "asset" of the bank from which the bank can make a third loan of 90% or $8100 and continuing to a maximum of 10 times the first $10,000 or $100,000.

The bank "earns" interest on this magic $100,000 created out of thin air which is the source of the bank's immense Ponzi-like profit. A bank can earn more profit by borrowing more from the Fed and loaning it. This explains why the banks are so eager to give us credit cards.

By federal law, this money created out of thin air is "legal tender" and must be accepted in the payment of debts and taxes. The backup security is not gold, but "the full faith and credit" of the United States.

All of this is made clear and understandable by the video "Money and Debt."

WHAT IS WRONG WITH THIS PRIVATE PONZI-LIKE SYSTEM OF CREATING OUR MONEY?

The power to create money is immense private power that exists parallel to our governmental power. This private power generates tremendous private wealth that is then used to control, dominate, and thwart our government and our right to govern ourselves.

The power to create money gives the private banking system the power to control our money supply. By curtailing the money supply, the banks can cause a deflation. By increasing the money supply the banks can cause inflation. As we now see, they can also cause a depression.

This private power is used solely to make a profit for the owners of the private banks. There is no public control. There is no enforceable obligation of the banks to serve the public interest or to meet public needs. We have allowed our entire existence to be dominated and controlled by those few individuals who control the banks that create our money.

It makes short term profit making the dominant influence on all of us and negates 2200 years of the moral wisdom of our civilization: "When gold argues the cause, eloquence is impotent;" "One cannot love both God and Mammon;" "Money is the mother's milk of politics;" "Follow the money."

More than 20% of our taxes is used to pay the interest owed to private bankers on the U.S. debt.

OUR GOVERNMENT SHOULD CREATE OUR MONEY

Professor Michael Hudson on January 30 in Counterpunch gave us a hint of what we could do:

"Bank credit is created freely. Governments could do the same. Indeed, this is what the U.S. Treasury did during America's Civil War, when it issued greenback credit."

There are many successful historical and current instances where sovereign governments have created their own currency.

King Henry I in England in 1100 A.D. created England's money by simply dictating that England's currency was to be solely wooden sticks called "tallies" with varying notches to indicate the denomination. The sticks were then split in half and one half was held by the King to prevent counterfeiting. The other half was used by his subjects to buy and sell goods. The King required all taxes to be paid with these sticks. This tally system financed the British Empire successfully for 700 years.

Prior to our Revolutionary War, Pennsylvania issued money for 50 years because England limited the supply of its money in the colonies. The King's edict prohibiting the colonies from issuing their own money was a cause of that War.

The American colonies financed the Revolutionary War by issuing paper money.

During the Civil War the Northern Banks would loan President Lincoln money to finance the Civil War only at interest rates of 24-36%, so Lincoln caused the Congress to authorize the Secretary of the Treasury to issue Greenbacks, paper dollars that were U.S .legal tender. These Greenbacks successfully financed the Civil War and remained in circulation for decades thereafter.

Stephen J. Zerlenga has drafted a proposed American Monetary Act.

This proposed Act is very useful concrete example of how the U.S. would create its own money, how it would work, and the surprising array of public benefits that could be obtained.

The proposed Act begins with a finding:

(1) The Federal Reserve Act of 1913 effectively ceded the sovereign power to create Money delegated to Congress by the Constitution to the private financial industry.

(2) This cession of Constitutional power has resulted in a multitude of monetary and financial afflictions, including an uncontrollable national debt, excessive taxation of citizens, inflation of the currency, drastic increases in the cost of public infrastructure investments, excessive un- and under-employment, and erosion of the ability of Congress to exercise its Constitutional responsibilities to provide for the common defense and general welfare.

The Secretary of the Treasury, following targets established by a 9 member Monetary Authority appointed by the President with the advice and consent of the Senate, shall directly issue all money, called United States Money, the nominal unit being the U.S. Dollar. This money shall be legal tender, backed by the full faith and credit of the United States.

The Act stops the creation of money by private banks. Fractionalized Reserve Banking is prohibited and banks can loan only the United States Money they actually have on deposit.

The Federal Reserve System (but not the local banks) is nationalized as a Bureau within the U.S. Treasury.

The United States would no longer borrow money. The Secretary of the Treasury shall issue United States Money as needed in lieu of public borrowing.

All existing money shall be exchanged for United States Money.

U.S. Money can be loaned to local banks which can continue to loan United States Money but with maximum charges not to exceed 8%. Banks can loan only U.S. Money.

The U.S. shall pay off the principal and interest of the national debt as they came due with directly issued United States Money.

The U.S. would use directly issued United States Money to rebuild the nation's infrastructure.

The United States could loan United States Money interest free to states and local governments.

It is contemplated that in the future United States Money would be issued to finance Universal Health Care and an Education Funding Program that would at least put the United States on par with other developed nations.

CONCLUSION

President Obama and his economic advisors can be encouraged by the fact that famous and influential economist Milton Friedman supports the idea of abolishing the Fed. For at least 300 years, the private banks have used their wealth and power to persuade governments to allow them exclusive control over money. They have relentlessly and vigorously battled every single effort of governments to create currency. The author Ellen Brown does not expressly claim that banks have resorted to actual assassination, but she does note the strange sudden deaths of many of the reformers such as President James Garfield who urged public creation of currency. The political power of Wall Street banks is currently illustrated by their ability promptly to get billions of dollars of bailout money with no serious debate. The banks due to their own greed and ineptitude are now near bankruptcy and collapse. They are more vulnerable now to nationalization than they ever have been. They have brought all of us to the brink of economic disaster. This is a strategic political time for the U.S. to create our money. The awesome political power of private banks driven by the quest for huge profits would be curbed. Public control of the money supply would unleash the government to meet our legitimate human needs as it has done in the past in our own history. If the private banks can create money out of thin air, there is no reason why the government could not do it. We would all escape our excessive debt and tax burdens due to the interest owed to private banks. If interest must be charged, let it go into the public treasury.

Doug Page is a retired lawyer for unions, a former Democratic politician, and a life long observer of government, unions and business. He can be reached at: dougpage2@earthlink.net. Read other articles by Doug, or visit Doug's website.

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