The responses to my proposal to extract a death tax ([link edited for length]) from the assets of those that have died have surprised me with the variety of reasons that it is a bad idea. I would like to examine some of the response and respond to them and why I believe that the responses I received are exactly why we need this kind of tax to get the deficit under control and Congress back within our control.
The responses below are not just from those responding at Nolan Chart, but from conversations on the phone and in person with people I also sent this column to directly.
Many people believe that this issue is not a result of their behavior, is not something they asked for, the money was not spent on their behalf, etc. If that is the case, then I ask you who should be held accountable for the spending? What person or group of persons should we go to and demand payment for this debt that is in our name?
The Constitution of the United States begins with "We the People of the United States". It is "We the People" that have empowered those that have spent this money. It is "We the People" that have sat back, done little if nothing to address this problem, and it will be "We the People" that must be the ones to address it. The responsibility begins and ends with us and we must step up to the plate. To pass this responsibility on to future generations not yet born is obscene. Why should they be more responsible for it that we who are already here and have chosen to do nothing about it? Taking no action against those that have acted in our name does not absolve us of responsibility. If we did not like the action, then we should have taken the necessary steps to address it.
Yes it will be painful-As it should be. To this point, there has been no pain. When you feel pain, you generally stop what you are doing, and do something to address the cause of the pain. Do you have a pebble in your shoe? Stop and remove it. For those that want to have this issue addressed, yet are concerned about the financial pain, that is exactly what we need.
We need to have every American feel or be concerned about this pain. We should not do as our current tax code does and have only those that can "afford" it feel the pain. That is part of the problem today as those that feel no pain from the debt feel comfortable demanding more services.
Then, and only then, will we have the political fortitude to elect politicians who are not willing to spend money that we do not have.
They keep spending anyway. Why? Because there is no consequence directly or indirectly for their spending as the system now operates. Voters are not enraged enough to demand that spending be cut. We will elect 90% of the same spenders to Congress each and every time they are up for reelection.
At first, they would likely keep spending. But how long will it be before the voting public, realizing that they are now being held directly accountable for the actions of those they elected, begin to demand different results than what we have been getting?
The problem does look too big to address at first glance. But it isn't. Getting financial discipline in the budgetary process will also get us discipline when it comes to Social Security and other unfunded programs. Why? Those same politicians we begin to elect when the outrage is sufficient will apply the same controls across the board. Ron Paul does not vote one way on the budget and another way on Social Security.
I do not believe that any of us would tell our children their issues are too big to address and to ignore them. We should not do this either. Because it is "We the People" that are 100% responsible.
5. Many People Have No Assets at Death
There are many Americans that die with no assets. But the great majority of us do have assets at death. Unlike the Estate Tax which redistributes income and affects an absolute minority of Americans ( as of today the first $2,000,000 has no tax), this tax works to collect the debt accumulated on your behalf. Libertarians believe in a Pay as You Go system. They should here as well.
I challenge you not to run from this issue because it is too large, too complicated, or will be painful.
The only thing that will get the attention of the American voter is realizing that personal responsibility is alive and well. Personal responsibility is a critical cornerstone of the Libertarian system of beliefs. Are we going to ignore that responsibility? Do we only believe in personal responsibility when it causes us no pain or discomfort?
The money was spent by the United States of America, by officials elected directly (and indirectly). We have approved of the officials and their actions by reelecting them 90% of the time. If we are not directly responsible, please tell me who you feel is. There have been only two Presidents elected in my lifetime that have not won reelection. Certainly, "We the People" bear that responsibility for the outcome.
Whether you agree or not, I look forward to reading your feedback. It challenges my beliefs and allows me the opportunity to understand how "We the People" think.
EJ
©2008 EJ Moosa, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Friday, August 8, 2008
Last modified: Friday, August 8, 2008
The views expressed in this article are those of EJ Moosa only and do not represent the views of Nolan Chart, LLC or its affiliates. EJ Moosa is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
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Reader Comments:
Posted By: Republicae
Date: 2008-08-08 15:24:32
On your first point you once again ignore the most basic issues involved. The government has, over the decades, resorted to a highly centralized, massively consolidated conglomeration. It has long ignored not only the most common-sense measures, but also the actual consent of the people themselves. Granted, there has been a slumber of complacency within this country, partially brought on by the manner in which the government has sought to operate, partially by a growing sense of helplessness on the part of the people and misplaced trust in those who have been elected as stewards over the affairs of this country.
The main problem with you premise is that there is neither enough time or enough assets in this country to cover the massive amount of debt and future unfunded liabilities this government has accrued, all in the name, of course, of the People. The system will collapse long before such a debt could be paid. The other fact that you obviously have totally ignored, how I don’t understand, is that in the functionality of a fiat economy you cannot pay down debt, it is impossible due to the nature of the system upon which the economy is built. When you pay down debt in a fiat monetary system that amount is taken out of the general circulation of the economy proportionally. There is a contraction and economic dislocation by paying down the debt since the system relies totally and completely on the expansion of debt to remain somewhat viable.
Once again, the entire system is going terminal, it is not a question of whose responsibility the debt is or who recklessly accrued such a massive, irreversible debt, the question is just how soon the system will face its terminal point?
You say it would be painful, I don’t think any of us have a clue about what type of pain faces this country, it is not merely a Great Depression type of event this country faces, it is the complete destruction of our society as we know it. That almost sounds hysterical however, the truth of the matter is that the fiat system is now global, the collapse will domino throughout our world in ways that will simply devastate society, as we know it. We tend to think that an event such as this could not happen, but to think that way is to ignore some of the most valuable lessons that history has to offer. Everything, imagine everything that is associated with fiat money, now imagine that money rapidly becomes absolutely worthless, what happens?
David Walker, the former Comptroller General pretty much summed it up when he said the country was technically bankrupt, the question will be how long will that just be a technicality? Once again, I will repeat myself because you obviously didn’t grasp what I said on your other posting. David Walker said that it would take such a massive cut and such massive taxation to even get this country close to economic soundness that it is, in effect, impossible.
What you are stating in your articles ignores some of the most fundamental realities facing this country and the system that it has been forced to place its faith. This is not simply a pebble in our shoe, this presents perhaps the most dangerous period in the history of our country, and the people of this country have never, ever faced what we will face. I say we because I firmly believe that, even at my age, I will bear witness to the most destructive event in our history, the fall of the United States of America. The problem is that when this domino falls it will strike others with such force that they too will topple. You see, in times past, when one country fell into such economic trauma there were other, more healthy countries that could lend assistance, it will not be the case when this disaster strikes, there will be no helping hand.
So, when you blithely make the statement that it will be painful and exactly what we need in this country, once again, you ignore the depth of the problem this country and the world now faces. The people of this country have already been reduced to basically a society of peonage; before it is all finished we will be reduced to hunter-gatherers.
I don’t mean to be mean however, you don’t seem to get it; this country must now borrow nearly 3 Billion Dollars per day just to keep operating. We don’t have any money; we are, as David Walker stated, bankrupt. That technical bankruptcy will eventually become an effective bankruptcy.
Concerning consequences for politicians, you once again ignore a reality that should be obvious; the system is geared toward professional politicians. If you look at the campaigns of the last 50 years you will notice one particular common theme, the candidates of both parties have been making the same promises, using basically the same slogan and debating basically the same issues. In other words, there is an entrenchment within American Politics that will not be dislodged by any means we now have available to us, they simply will not allow it because, at least at this point, it is too profitable in terms of wealth and power. The elections are basically a staged play performed for the benefit of the People, who think, and sometimes hope they still live in America, the Free. The Socialists are deeply entrenched and they will not willingly give up their booty, not without the shedding of blood. It is naïve to think that we will be allowed to vote for any candidate who espouses measures that would deny this government the ability of unbridled power and expansion. Just look at the most recent primary elections, the man who most closely advocated such things barely scratched the surface of the electorate, he was, in large part, ignored by the media all the while he was, as he has been, shouting from the roof top the fact that this country is in deep trouble, few listened, few cared.
I am not sure what you are looking at, but the problem is massive, not only at first glance, but if you delve deeper you will see just how dangerous a problem this country really faces, and does so in the very near future. As I stated, the system is reaching the terminal point in its life span, when that happens, well, as I said, it will be like nothing we have faced before. I speak with certainty because I am just that certain. You mentioned Social Security, do you realize that beginning 2009 that nearly 1/3 of this country’s population will enter the Social Security System. That system, already technically bankrupt, will crash much sooner than the government’s prediction of 2040. First, the Social Security Trust Fund is basically empty, the fund now consist of “special government securities”, not actual funds. The thing about those “special government securities” is that the thing that makes them so special is that they are all unmarketable securities; they cannot be sold on any market, redeemed by any bank or traded. The only thing that backs those very special securities is the name of a government that is technically bankrupt, the government of The United States of America. The audit of the Social Security Trust Fund consist of a man walking into the vault and counting the number of sheets of those very special government securities, which are, in real terms, worthless.
Now, do you have any idea just how big the debt really is? I mean what don’t you understand about 100 Trillion Dollars? That is not simply a number; it is a massive pressure on our society, one that will continue to grow because of the exponential multiplication of irreversible debt. The system is, as stated, technically insolvent right now, the time involved on solving such a problem is not on our side. Your solution would require time and that is something we no longer have a premium on. Also, as I stated, the system does not allow for such a pay-down because the economy will be contracted proportionally to the payment, and this economy cannot stand such an intentional contraction. In a fiat system, all repayments of debt takes a proportional amount our of general circulation and when such massive amounts of money is taken out of circulation the economy contracts proportionally, such a contraction would prove disastrous, almost as disastrous as the economic collapse we face when the fiat system reaches terminal.
This massive debt is not going to be passed on to our children and grandchildren, the only thing they will see is the destructive results of fiscal and monetary policy by a government that cares little for anything but its own growth and power.
It is not a matter of your challenge; it is a matter of a reality that you seem to constantly ignore. There is absolutely no mystery when projecting the pattern of failure inherent in fiat monetary systems, they all work the same way and they die in the same way. It is, at least in my estimation, impossible to ignore the fact that a monetary system that is subject to initial interest obligations, such as our fiat system, will multiply debt in direct proportion to the circulation. Each “dollar” being a portion of debt, an issue of credit without asset backing. Eventually, existing dollars must be dedicated to servicing the multiplication of debt and fewer dollars can be dedicated to sustaining the economy. The entire system is rapidly becoming marginalized, eventually the system will no longer allow for consideration of credit-worthiness and with the destruction of that credit-worthiness comes the end of international lending to this country. Without such lending and holding of U.S. government securities, it will be impossible to maintain circulation. It will tend only take a few minor collapses within the economy to become critical and thus contraction and deflation of monetary circulation will happen at a very dramatic rate, almost overnight. In such instances it would be nothing to see 70% to 80% of monies held in any given sector vanish within a short period, perhaps less than a month.
To give an example of just what is occurring at this moment, one need not look far, the evidence is obvious that there is a massive looming problem that simply cannot be solved by your suggestion, there is not enough time to work through such a solution, even if that solution was correct, which its not. If you look at the BOGNONBR, or Non-borrowed Reserves of Depository Institutions you will quickly see just what has taken place in this economy, you will see that we are on the very edge of collapse, not merely an economic down-turn, but a systemic collapse of the entire monetary and thus economic system that this country maintains. The observations of this tool show that there has been a drastic, truly dramatic nose dive in Non-Borrowed Reserves, at the end of 2007 the percentage was a +27.169, by April it was a whopping -91.938 percent. That is a tale-tale sign, along with the fact that the economy can no longer tolerate even minor interest rate increases that something disastrous has occurred. This is the first time, in the history of the Fractional Reserve System, that such reserves have not only hit zero, but have plummeted to a negative value. This is extremely important when seeking to understand just what we now face in this country, but few seem to be paying attention and more wouldn’t understand or believe it if you spelled it out to them. This basically means that the banks don’t even own the reserves they are suppose to have on hand to cover their depositors, did you get that? Do you grasp just what that means in a Fractional Reserve System? Can you say, “Get Ready, Get Set, Go…as fast as you can to your bank, because they are technically broke!” Will you hear that on the news, absolutely not, it would immediately cause such a panic in this country that you would have people killing each other as they are lined up at the banks. But the Federal Reserve released this chart a couple of months ago, but I have yet to hear one word about it on any of the financial networks or financial periodicals, have you?
So, why are the criminals we voted into office simply ignoring the fact that we are facing a rather immediate disaster? They are simply so afraid that such news would cause a massive uprising and that the government would be overthrown, indeed...
So, you see, time is not on our side, and your solution is a non-solution because it requires a complete restructuring of the entire monetary system in order for it to work and there is neither the will power nor the ability to make such changes, at least not in the time left.
Posted By: Republicae
Date: 2008-08-08 18:01:10
By the way EJ, just to give you an idea about the real per-capita debt burden in this country, counting all known obligations and liabilities the real amount is closer to the $500,000.00 mark or over for each family in this country making the our individual share in the debt approximately $156,250.00.
Posted By: EJ
Date: 2008-08-08 20:48:36
Republicae,
Thanks for the feedback once again. As someone who makes their living as a contrarian, there is not much that I will take out of context, and you will not sound mean to me.
First, there have been ample books written on the coming end of things for us here in the United States. In the late 70's it was Japan that was certain to surpass us. Now it will be the Chinese or the Indians. Or we should have run out of oil. How many great depressions have been forecast? Look around. It has not happened. Not saying that it never will happen, but we do not live in a system that does not adapt when needed.
Second, the amount of debt we have already should not be the reason that we choose not to change the trend of spending now. The financial situation we are in did not start in a day and will not be resolved in a day.
Unlike you, I believe that the economy can handle changes in the interest rate. I believe they are needed and our business cycles are now being negatively affected because we do not have the necessary and critical component needed for a free market to survive. Recessions are needed. Inefficient and unprofittable businesses must be shuttered. Just because a business has started is no reason for the Federal Reserve to act to save it. For our economy to grow, we must have the destruction of inefficient operations. That includes brokers, auto manufacturers, and many of the mom and pop stores we see every day.
I believe our economy will move ever faster towards mediocracy if we have a system where we do not destroy the worst parts of our economy. We need the destructive parts of the business cycle and the job displacement that forces people to learn new skill sets and to develop new products.
Our government has gotten to the point that any discomfort is not tolerable. Energy bills too high? Here is a subsidy. Out of work too long? We will extend your benefits. Can't afford college? Don't work-take this loan instead. I could go on and on.
And we are to blame. We refuse to elect people that will chart a different path. Ron Paul could not make a dent, as you inferred. Why is that? Because the things Ron Paul preaches about have caused no pain to any of the voting public. Even with all of the things that you have mentioned as wrong with the system, tell me how to this day you have suffered because of it. What have you been kept from doing because of the system we currently have in place? You can argue that the government has done this without our permission. But with the re-election rates in this country, they seem to have had our stamp of approval. Why would any politician have strayed from this course if they had a 90% shot at reelection by doing what everyone else is doing?
How does anyone expect a system to change if what is going on this day causes no one any sort of pain or sacrifice? Honestly, what reasons would a majority have to change the system as it exists today?
We re-elect 90% of incumbents. Even with a 10% approval rating of Congress, 90% will be re-elected. There is an obvious flaw in our system, and I think there are many flaws that overlap. But in the end, we are the ones responsible, and unless we plan to sit back and do nothing, then some solutions must be discussed, dissected, and perhaps implemented. But waiting for the collapse and doing nothing except predicting the collapse is not a solution.
Sometimes you must do the right thing even if there are other things that are beyond your control. Getting the day to day spending under control is the right thing to do. Even if one day the system does collapse.
And even if you are 100% absolutely certain you are going to be right in your predictions, you should also be prepared in case you are wrong. You may be 100% right, just not in your lifetime.
EJ
Posted By: Jake, the champion of the constitution
Date: 2008-08-09 02:28:54
Dear EJ -
I had an issue in the last column, but after reading and investigating Republicae's comments, all of the banks are in deep frickin manure. Its a little bleak out there, I urgeyou to take a look at the link below and decide for yourself.
I wonder if the recent buying of US gov't paper by other gov'ts in the last 2 weeks of August has anything to do with the pres elections or olympics. I could see China being ok with delaying the USDX collapse a month.
Maybe if this hits before the Rep convention, they will let Paul give a speech or something. He may not have widespread name recognition, but he is a financial guru now for the MSM... maybe I should get my pitchfork sharpened too.
http://benbittrolff.blogspot.com/2008/06/really-scary-fed-charts-june-just-1-of.html
Posted By: Republicae
Date: 2008-08-09 09:17:31
You are right, the financial situation we are in today didn’t start in a day, but if you are a serious student of history, particularly economic history then there is absolutely no way that you can ignore the what is now happening in this country and I apologize, but that appears to be what you are doing. The mere fact that for the first time in our Fractional Reserve System history that the non-borrowed reserves have hit a negative value is extremely pertinent to the problems we are facing. The entire Fractional Reserve System relies totally upon those non-borrowed reserves otherwise you have no fractional reserves, with no fractional reserves a bank cannot operate for long.
Two and a half years ago, I began telling my friends to start preparing for what I saw coming. Two of my friends in particular were very well off, successful real estate brokers who employed over 200 agents, they were in the process of purchasing three homes over $1 million each and to accomplish this feat they were taking out option arm mortgages. I warned them that it was not only dangerous, but that in a couple of years the system would begin to slide. Today, they have lost all but a very few agents, lost all three of their homes and are on the verge of bankruptcy. Within two years they lost their wealth, their homes, and their multi-million dollar business. They didn’t listen and unfortunately they are paying a heavy price because of it. You see, they simply could not believe something like this could happen and it definitely couldn’t happen to them, but it did. I told them that everything was fine in June of 1929, there was to be a “chicken in every pot”, but by October of 1929, the first stage of a massive dislocation began, it wasn’t for another two years that the rest of the country felt the effects that would later be known as the Great Depression. In fact, the Crash of 29 was not even head-line news, it made the second and third pages in the newspapers and was just a short comment in Time Magazine at the time. It was viewed as inconsequential by the majority of the people and the politicians in this country, but as FED policies began to fully filter through the economy it became evident that the ripples of the Crash of 29 turned into a full-fledged tsunami, and it washed over the country in the most unexpected ways. Over a decade of FED policy created a massive credit bubble during the 20s and that bubble burst, but the consequences of that explosion were actually minor in effect, but reeked havoc in the entire economy. This time the consequences will be far greater, a much greater and devastating event then the Great Depression and the reason for that is the complexity of the economic system that has built up on this fiat foundation of sand, this house of cards is now tottering and will fall because it is constructed on mathematical impossibilities, such as the money that is solely backed by and created through debt.
Now, concerning interest rates, it has absolutely nothing to do with belief, it has to do with definable facts based upon historic economic reactions to interest rate modulation. If you look at the history of rate changes during the last 50 years then you can easy determine how the economy react to rate changes, you can see the business cycles as the either contract or expand verses rate changes. It is not a question of belief, if that were the case then why even bother. If you look at the most drastic rate increases in the late 70s and early 80s, you will see that even though the rates were high, the economy, while in a definite slump, remained relatively consistent. A few years ago, when the FED began very incremental rate increases the economy began to convulse, so much so that they almost immediately reversed their position and lowed rates, the problem was that it caused a chain of events that not only exposed the weakness of the economy, but also helped bring about the situation in which we now find ourselves. For the last 15 years I have been watching economic reaction to interest rate changes, and anyone with eyes can see that the ability of the economy to withstand rate increases has gradually been narrowed. As I said, it is not a matter of belief, it is a matter of simply looking at the economic data. You can believe what you want to but if you don’t have facts to back up that belief then what good does it do you? Pull you head out of the sand, look at the data and you will see that the narrowing of tolerance is a fact of our economic reality.
Concerning business cycles, well it is obvious looking at business cycles that Mises was correct and the FED facilitates such drastic swings in those cycles through its fiat monetary policies. Every one of the business cycles under the fiat system are influenced cycles, they each have a commonality in that monetary policy is effecting. In a fiat monetary system it is not capital productivity that influences business cycles but monetary policy, it is a distorted cycle system. The monetary policies create or at least facilitate the booms and with every artificially manipulated boom, due to easy credit, there must always be a bust when credit is tighten because, as I said, the fiat economy operates on and is expanded by credit creation. Recessions, like booms, are manipulated by FED policy. The FED is nothing more than a grand manipulator of the economy, it is a centrally planned economy not a free-market economy. The booms and busts are manipulated into existence by policy, the problem with this last bust is that it revealed the true weaknesses in the underlying fiat economy and those weaknesses are far deeper then anyone in the FED realized. You see, in such an fiat economy, if you are a student of economic history, there are stages of decay. Each fiat economy in history has basically followed the same stages in its life span, each follows a pattern of degradation, without exception. If you want to know what is going to happen next, then look at the history of fiat systems all the way back to 20B.C. in Rome and you will see the same pattern of decay. Now if you ignore such history then you do so are your peril, because our fiat economy is following the same pattern as every other fiat system in history.
Posted By: Republicae
Date: 2008-08-09 09:19:14
The problem is that the government is a collaborator with the FED and monetary policy. The government benefits from FED policy and from the booms and the busts associated with that policy. This latest bust will provide the government with more power over economic markets than it has gripped since the Great Depression. As we know, or should know, the FED policy was the primary instigator of the Great Depression. So the FED creates the problems and then comes to the rescue when panic strikes, nothing like a “broken glass theory” to make your dreams come true.
Ron Paul did all that he could do, he spoke the truth and few were willing to listen. The political system in this country, like the economic system, is a heavily planned, highly administered system that borders on oligarchy. Read my article on the Fabians, if you want to know what is going on with this government. Read the Economic Plan of the Fabians and you will suddenly recognize that their plan has been implemented in this country to a large degree. John Maynard Keynes, a Fabian Socialist and the father of the American Planned Economy said: "By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some....The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose."
The entire thing is FIXED, but for a purpose that includes far more than riches, there is a very specific, very definitive purpose in the system that has been imposed upon this country and it has absolutely nothing to do with individual freedom or free markets. The Federal Reserve System is nothing more then a part of the Fabian Economic Plan, don’t believe it then read what the Fabians wrote, read their plans for not only Britain, but also for the United States, you will feel a shiver go down your spine when you compare their plan with what has happened in this country. The problem is that the Fabians believe in their plan 100%, even though they are using a system, the Fiat Monetary System, what will collapse.
First, lets see exactly why the Federal Reserve was created, or at least the stated reason. It was created to stabilize the economy through management of the currency however, if you look at every financial crisis since at least 1893 there was heavy manipulation of the economy by the banking elite, especially J.P. Morgan. Interestingly, it was Morgan who was one of the primary proponents of a Central Bank. You could say that these crises were, in one way or another, orchestrated.
The Fed, formed during the Wilson Administration in 1913, ushered in a massive economic expansion during the following Harding Administration. As the Fed has done since that time, creating booms and setting the stage for busts, the Fed flooded the economy with something that was created through the events of WWI called “debt money”. Wilson later declared that he had destroyed the future of the country by promoting the creation of the Federal Reserve.
In addition, during the 20s, the Fed’s Fractional Reserve system of banking allowed them to expand the money supply to over 60% within a three-year period. With that much money flooding the market economy, loans and speculation boomed, as it always does when the supply of money distorts usual market forces. This distortion always gives the illusion of prosperity and replaces rational risk assessment. Stock Market speculation shot through the roof, businesses expanded beyond realistic rates of return and credit was free flowing. Sounds familiar doesn’t it?
In 1923, the Federal Reserve “purchased” huge amounts of U.S. Government Bonds, drastically increasing the money supply and credit liquidity. This move by the Fed prompted an extremely high confidence by the public in the economy, so high in fact that everyone wanted to get into the speculation game and many did. The problem is that, at that time, when the Fed “bought” those bonds, the economy, while driven by over-confidence, will suffer an eventual contraction because of those bond “purchases”.
By the middle of 1929, a couple of factors began to negatively influence the Stock Market. One was that the Federal Reserve began to constrict the money supply by making even more huge bond “purchases”. During the same time, a couple of big investors, namely Morgan and Rockefeller [Fed Insiders] completely divested their stocks, by the 24th of October all the large Brokerage houses called in all “call loans” forcing investors and private brokers to immediately liquidate their stock holdings and thus the Crash of 29 began.
However, it should be noted that the Fed Insiders made out like the bandits they were, making massive purchases at rock-bottom prices, snatching up foreclosed properties and creating a massive monetary machine that continues to this day to manipulate the market at will and to their own benefit at the expense of everyone else!!!
At the time, The Chairman of the House Banking and Currency Committee, Rep. Louis McFadden, stated that it was no accident but a contrived occurrence created by central bankers. He was correct!
"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal reserve banks. The Federal Reserve Board, a Government board, has cheated the Government of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through defects of the law under which it operates, through the maladministration of that law by the Federal Reserve Board and through the corrupt practices of the moneyed vultures who control it.
What is needed here is a return to the Constitution of the United States. We need to have a complete divorce of Bank and State. The old struggle that was fought out here in Jackson's day must be fought over again…The Federal Reserve Act should be repealed and the Federal Reserve Banks, having violated their charters, should be liquidated immediately. Faithless Government officers who have violated their oaths of office should be impeached and brought to trial. Unless this is done by us, I predict that the American people, outraged, robbed, pillaged, insulted, and betrayed as they are in their own land, will rise in their wrath and send a President here who will sweep the money changers out of the temple." Rep. Louis McFadden on the floor of the House of Representatives-1932
An interesting thing is that although the Federal Reserve was touted to be the singular stabilizing force in banking and currency, since its creation there have been a disproportional amount of recessions, deep recessions and besides the Great Depression, several minor depressions. Instead of stabilizing the economy, it has been the primary factor in all booms and busts, transferring wealth from the many to the few. n fact if you study the rates of inflation you will see that there was almost none prior to 1913 and the advent of the Federal Reserve System. There was a slow, but steady increase until 1933 when FDR devalued the Dollar by 54%, at that point it began to rise relatively quickly and then in 1971 when Nixon did his little trick, inflation has shot through the roof. The policies of Bush will probably push us to the edge of hyper-inflation or right smack in the middle of it.
Look at history, in the 1800s there were about 4 or 5 economic panics, two of which were brought on by the same Bankers whose actions prompted the Great Depression.
However, after the Federal Reserve was created, for the express reason of stopping such panics, there have actually been 3 Depressions in the 20th Century; the first was in 1920-1921, the next was 1929-1933 and the next was 1937-1938. There were sharp Recessions; 1923-1924, 1948-1949,1953-1954, 1957-1958, 1973-1975, 1981-1982. 1987. Then there were 7 mild Recessions; 1926-1927, 1960-1961, 1969-1970, 1980, 1990-1991, 1999 and then 2001 brought on by the events of 9/11. That is not the best record in the world for the Federal Reserve System and Keynesian Economics.
To understand the issues we face we must look at history and events that drastically altered the manner and means in which our government operates and how those altered functions have directly affected the manner of relationship this government has with the People. Besides the drastic changes that took place in 1913 with the advent of the 16th and 17th Amendments to the Constitution and the Federal Reserve Act, the other massive mutation that was staged through the passage of those pieces of legislation in 1913, came during the Great Depression. The Great Depression was a direct result of monetary intervention by the Federal Reserve and government complicity. In fact, the new Chairman of the Fed: Ben Bernanke finally confessed that it was the policies of the Federal Reserve in the early Twenties that led to the Crash of 1929 and the Great Depression.
Posted By: Republicae
Date: 2008-08-09 09:20:43
I completely realize that there are those among us that are apologist for issues like the New Deal, after all, we have all been taught through the years just how wonderful the New Deal was for the working man and women of this country, how it saved this nation, but once you read the facts it becomes difficult to defend the politics of such a drastic and damaging policy. By the way, I speak from experience for I was once an apologist myself, defending the actions of THE STATE as justified and in the best interest of the “people” but my ability to justify such interventions by THE STATE faded as I begin to see the injustice that prevailed throughout the system. Even so, I realize that there will be those who will continue to act as apologist, for those who are die-hard Statists, there is hope...I am proof!
By Order of the President: "All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them."
In terms of 1934 value of Gold, FDR confiscated (stole) 15,050 Million dollars worth of the People’s Gold and on top of it, he made it illegal to own Gold with penalties up to 10 years in prison. Even so, the People did not completely comply with such dictatorial mandates, many hid their Gold from the snares of THE STATISTs. In fact, it turns out that there were a lot of law breakers since only 29% of the Gold Coin in circulation was relinquished by the People under the heavy threat of law.
Yes, the New Deal…what didn’t it do? FDR and many within his Administration thought highly of Mussolini and the Cooperative System under Italian Fascism. In fact, if you read the papers of both FDR and his advisors, like Rexford Tugwell, and you will find them advocating almost the exact same system as Mussolini, with fascism’s Public Works Projects, Corporatism, organization of trade and industrial groups under direct government supervision. There were those in his Administration who admired Stalin and the Stalinist model of State, thankfully few of those ideals influenced the direction FDR took this country, the Mussolini model was bad enough.
Similar to Mussolini’s tax program, the New Deal was financed by tripling various federal taxes and the creation of taxes on just about everything you can imagine, most of the consumer goods taxed during the New Deal were everyday consumer items used by the common working man. These excise taxes hit the poor and the working class harder than anyone else because it included taxation on all sorts of things that were mainly used and consumed by the working men and women of this country, things like cigarettes, matches, margarine, fruit juices, telephone calls, movie tickets, playing cards, dice, electricity, radios, soft drinks, cars, tires. The New Deal was a raw deal for those who had to finance it, mainly the ones it was suppose to help, in fact these taxes exceeded all personal income taxes and corporate taxes until the beginning of WWII and those taxes fell, according to the Treasury Department at the time, “disproportionately on the less affluent.”
While it is true that FDR started many relief programs under the National Industrial Recovery Act (1933), The Agricultural Adjustment Act (1933), National Labor Relations Act (1935), the statistics of the day indicate that those programs fostered a steady unemployment rate of 17%. In fact, these programs forced industries to cut back production and forced wages above what the market could bear and made it very difficult for employers to hire people, especially those who were unskilled. It was estimated that over a half a million African Americans lost their jobs because of the NIRA (1933). Tenant farmers were hit the hardest by the Agricultural Adjustment Act, forcing many off the land and the land owners to leave the fields bare and unproductive. The National Labor Act actually led to violence as workers went on strike as compulsory unionization created mass layoffs. All of these things actually precipitated a second financial crisis in 1938 that almost brought this nation to its knees again.
Of course, we rarely hear of the WPA strikes, we rarely hear about the fact that FDR vastly increased WPA jobs right before he won his second term only to lay off those same 400,000 workers immediately after the election.
If you look at how the New Deal was financed and who financed it you will soon learn that not only didn’t it do what most people think it did, but also it increased the suffering of far more than it helped. The “little man” had far less because of the heavy taxation pressed upon him by the New Deal, less to spend on food, essential items, clothes, shoes, fuel and other necessities of life. Also, something else is overlooked, because the vast majority of funds came from taxation, there was actually little economic stimulation from real business concerns that would have had an effect on the economy.
Also, a fact that few people ever consider when speaking about the New Deal, is that the majority of the funds were siphoned off of and away from of the poorest States, those found in the South, and was pumped into massive projects in the East and the West. It is a strange fact when you begin to look at the political implications of those actions by the Administration of FDR.
Oh, but what about the Tennessee Valley Authority (a government corporation), didn’t it bring electricity to the South? Sure it did and it did so at a very high cost to the people of the area, especially the thousands upon thousands of people expelled from their land, many of whom were very poor sharecroppers who didn’t own the land and received no compensation from the government for robbing them of their lives and livelihoods.
At the time that the people needed help the most with the cost of goods and services was the very time that they received it the least. They were forced to pay higher than normal prices especially after FDR implemented the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937); these essentially banned the discounting of all goods, especially household goods and food. We rarely hear that the Agricultural Adjustment Administration ordered farmers to destroy crops, kill livestock in order to increase prices, which in turn made if very difficult for the working man to put food on his family’s table.
Posted By: Republicae
Date: 2008-08-09 09:23:07
Granted, the WPA and the CCC workers did some wonderful things, but the picture that is painted by those up hold the New Deal up as the salvation of this country during the Great Depression never, ever seem to want to reveal the entire story because it is not in their political interest to see such facts and face them while upholding their ideology.
We never hear that FDR feared a massive revolt among the American People or that he considered imposing a dictatorship similar to one of his favor fascist Mr. Mussolini. FDR hated independent organized labor and he looked the other way as “industrial big wigs” used strong-armed tactics, using armed strike-busters and even city police departments to break up many of the violent strikes between 1933 and 1937. Oh yeah, FDR was for the common man all right as long as the common man lined up with FDR’s programs.
The New Deal left out two main sectors of the population: blacks and women. Blacks in particular were excluded from labor laws, the GI Bill, Social Security, educational programs, home ownership programs and anything to do with small businesses. FDR exempted several groups of farm labor and domestic help from all labor protection, unemployment insurance and SSI. FDR also refused to pass or consider legislation that would have desegregated the Armed Force, anti-lynching laws, or abolishing the poll tax.
Read about the shameful Bracero Programs if you want to see the real deal about the New Deal. Basically, it allowed the legalized enslavement of guest workers by big farmers in the Southwest. Don’t forget the Japanese Americans either…nothing like Concentration Camp justice to show the real deal behind FDR.
The New Deal did little for over a hundred thousand homeless women and children who were forced to roam the city streets begging for food and it did nothing for almost 4 million unemployed women. If a woman was divorced, or single or widowed, they were hopelessly pushed aside in this marvel called the New Deal. It was not until almost a decade later that women actually was given some assistance under a limited program and then only a small percentage was allowed to work under the WPA leaving almost 3 million unemployed and another 2 million were only allowed part-time work that was barely enough to live on.
At the end of eight years, FDR was in a panic about still having over 8 Million men and several Million women unemployed, many homeless and that left only one thing to do: allow, prompt, or prod a crisis to infuse the economy with capital…what better way to do that then a war. Indeed, this technique by the warmongers has been used very successfully before and since, most recently was the use of the Iraq War to pump capital into the economy after 9/11.
Concerning SSI, the man who actually coined the term Social Security, Abraham Epstein, cried out against it and he was one of the strongest liberal reform proponents of the time. He said that the SSI bill would “transfers the entire burden…to the backs of the young workers and their employers… Since industry will make every effort to pass on its levy to the consumers, it means that the young employees—in their dual role of workers and consumers—will bear the major cost…No other nation has ever put into operation a plan of this nature without government contributions derived from the higher-income groups…in placing the entire burden of insecurity upon the workers and industry, to the exclusion of the well-to-do in the nation, the present social-security bill violates the most essential modern principles of social insurance.”
The context of the New Deal would be inconsequential had it not been for the failed policies of the Federal Reserve during the 20s, the context of the creation of the Federal Reserve would be inconsequential had it not been for the intervention of government and the influence of big bankers during the late 1800s and early 1900s. The context of where we currently find ourselves today would be inconsequential were it not for the policies and changes to our system of both government and finance brought about by the New Deal.
If you think that those who dreamed up the New Deal didn't intentionally transfer an enormous amount of real wealth from the hands of the People, look again! There were some very definite beneficiaries of the policies of the New Deal and it wasn't the working men and women of this country. The New Deal did exactly what it was created to do and the People of this country have paid the price for such skull-duggery. Just like I said, read what FDR thought about the working men and women of this country, what he said about those who controlled the government behind the scenes, read what his advisors thought and what they proposed...tell me that their actions were unintentional and without malice.
It is far from a nebulous blame here, there is a direct line of cause and effect that can not only be followed in detail, but the actions of each policy can be directly summed up both in terms of economic mathematics and in very discernable terms as those polices impacted peoples lives, mainly working men and women.
Today, the poor and the working class are still paying for the New Deal. Corporatism, that began in earnest during the New Deal, now reigns over a massive working class of producers. Workers who labor to receive dollars debased of value, poor who must submit to the authority of the government’s restrictions on the benefits they receive. Today we have a heavily planned economy, thanks primarily to the New Deal, that is now suffering under its own weight. The entire system is crumbling, inherently terminal and yet we continue to believe the promises of politicians who have not only benefited from the system, but have been induced into many of their political opinions solely based upon the monetary system that controls them. When we fail to understand, when we fail to pull back the curtain we can only continue to believe that the “little elite man” pulling the levers behind that curtain is the Great and Powerful OZ.
So, tell me, after looking at the history that surrounds the creation of the Federal Reserve, the implementation of the New Deal, do you still place blame upon the People, the People have been victimized by a banking cartel along with those collaborators in government. It is not a question of elections, which now are little more than performances. The two parties have not been contrarians to each other’s agendas since the 50s; the minor differences are just that minor, the goal is The State, the power to impose the will of The State over the population. That has been the case since the election of Lincoln and it remains the case.
Now, I am not sure what point you are really trying to make by using the word “pain”, but I can assure you there will be plenty of pain to go around. The majority of people in this country are woefully ignorant; not only of their own country’s history, but also of just about every socio/political/economic issue that directly and indirectly affects their lives. The system has been opened to the open market of politics, the ideals and workings of the Republic have been effectively neutralized by the democratization of the entire process, until there is a restoration of the Republic, until the States assert their rightful place as independent and free Republics, until the People assert their Sovereignty then we will continue down this feckless road to disaster. It has always been my hope that the People of this country would rise up against the forces of tyranny, but it until the People realize just what has happened in this country they will continue to think everything is relatively normal.
Now concerning your suggestion that we should do the right thing and get spending under control, but you neglect, once again, the fact that under this monetary system, deficit spending is a must, credit expansion is the life-blood of the entire system. Until the system is changed you cannot restrain deficit and debt, because to do so, as I have said time and again, will contract the economy in ways that would instantly have a devastating effect. The problem, once again, is that the system as backed us into a corner, a “Catch 22” with no realistic way out, the system does not allow, by its very nature, that the debt be paid down or off because the economy built upon this system would go into instant convulsions.
I realize it is difficult for you to understand that, it is obvious by your statements that you haven’t been able to wrap your mind around the monetary/economic system and that system relies upon an the ever expanding creation of credit/debt. I realize it is hard to understand that our money is debt and for the circulation of money to continue and for economic growth to continue that it is absolutely necessary that debt be increased, that deficit spending continue, it is a reality that is hard to come to grips with because most people simply don’t understand how our money is made.
The Federal Reserve, in their own publications, state clearly that there is no money until an act of borrowing creates it, in other words, until a debt is incurred. Until that debt is incurred, the money is nothing, absolutely nothing more than printed paper, worthless without any value of exchange, the only thing, and I mean the only thing that gives it value is the underlying debt accrued and at that very moment that worthless paper becomes money in a fiat system. Since that is the case, if there is no debt, or if a massive amount of debt is paid down, then a proportional amount of money is removed from circulation.
The current contraction of the economy is a direct result of debt being corrupted, bad loans in other words, those billions of dollars, perhaps over a trillion dollars by the time it is all revealed, is money that is no longer in circulation, it has disappeared and the economy is in the process of contracting because that debt money has been taken out of circulation. Now, the same thing occurs when debt is paid, if the government paid the debt down by 3 Trillion dollars then the circulation of money would be contracted by a proportional amount and the contraction in the economy would reflect that fact in dislocation. If the government paid down the entire debt, which it simply can’t because its broke, then the economy would be dead, there would be absolutely no commerce, no trade, nothing because in a fiat system where the money consist of nothing, absolutely nothing more than debt, there would be no money to exchange. Until you know what our money really is then it will be impossible for you to understand the mechanics of the economy and how much trouble we are really facing.
Now, I am not sure where you attained your logic, but concerning being prepared for such disastrous eventualities would logically mean that I would be equally prepared if those eventualities never happened. Logic dictates that to be prepared for the worse, is nevertheless to be prepared for lesser degrees of the “worse”, would it not?
Concerning it happening in my lifetime, well, it is happening now though you don’t want to realize it. There are those in the system that seem to realize that something very different is happening in this latest “down-turn”, a few weeks ago the Royal Bank of Scotland sent out a warning to its clients stating that they fully expected a global depression within 3 to 6 months, so I am not sure how deep in the sand that you want to stick your head, but I personally look at all the information available to make my personal decisions and preparations for such eventualities. The system is rapidly reaching its maximum possible life span, it will end as all other fiat systems have in the past, if the past is a good teacher for the future then we would be wise to heed those lessons. This system is following exactly the same pattern as every other fiat system in history, why would we think that it would end any differently, perhaps wishful thinking?
Posted By: Republicae
Date: 2008-08-09 10:08:05
If I might make a few reading suggestions...here are a few from my collection:
Human Action by Mises
The Theory of Money and Credit by Mises
Man, Economy, and State - Murray Rothbard
Institutional Bases of the Spontaneous Order: Surety and Assurance by Albert Loan
Natural Elites, Intellectuals, and the State by Hans-Hermann Hoppe
Man, Economy, and State / Power and Market by Murray Rothbard
Epistemological Problems of Economics by Mises
Fiat Money Inflation in France by John Mackay
The Conquest of Poverty by Hazlitt
Salvos Against the New Deal by Garrett
Fugitive Essays by Frank Chodorov
The Cost of War by John V. Denson
Money, Bank Credit, and Economic Cycles by Jesus Huerta de Soto
The Causes of Economic Crisis by Ludwig von Mises
America’s Great Depression by Murry N. Rothbard
Commerce and Government Considered in Their Mutual Relationship by Abbe de Condillac
Principles of Economics by Carl Menger
Essentials of Economics by Ballve
The History of Money in America by Alexander del Mar
Harmonies of Political Economy by Frederic Bastiat
Thinking as a Science by Hazlitt
The Politics of Obedience: The Discourse of Voluntary Servitude by Etienne De La Boetie, written in 1553
The Constitution of Liberty by F. A. Hayek
Tragedy and Hope by Carroll Quigley
The Decline of the American Republic by John Flynn
Posted By: trd
Date: 2008-08-09 10:59:03
WOW! Republicae does have a lot to write!
Posted By: trd
Date: 2008-08-09 11:04:48
On the other hand, if I can pay $32,000 now to clear my part of theat 'debt' and not pay any more taxes in my lifetime, I would do it immediately. Since that is not going to happen, then is not a debt. It is infinite bottomless robbery.
Posted By: Republicae
Date: 2008-08-09 12:17:39
TRD...yep, I do have a lot to write about, I guess when you have been roaming the earth for as long as I have and have seen as much as I have seen over the decades then its to be expected that I would ramble as I do...
The emphasis that I have tried to impart is that because the entire system upon which our economy is built upon is the expansion of credit, and in turn the creation of debt, that for such a system to function it must continue to expand credit and accrue debt. In such a system it is an absolute fantasy to believe that debt, in terms of the so-called “national debt” is the same as say your credit card debt, it is not, your credit card debt is a secondary debt, the system relies upon primary debt creation and that debt on an order of functionality. Granted, the spending habits of the government do not help matters, however that is not the main, most pressing problem with the system, the main problem is the manner in which our money is created and how it functions as a unit of exchange in our society. Under this current system “new money” must enter circulation as debt, that is the only way our money is created since it does not exist independently of debt, because the fiat economy requires further circulation to sustain all commerce and the only way that monetary circulation can occur in a fiat monetary system is by the constant creation of debt. While debt in itself is not a bad thing if properly handled and maintained, it is impossible to either handle or react responsibly to the type of debt that creates our money because of the requirements of monetary circulation within the economy. The primary focus of this problem is the interest obligations associated with the creation of our debt money, it multiplies the original obligation to the point that the debt becomes irreversible, as our debt has become.
So, the debt must continually multiply in proportion to the circulation of the currency however, since any debt subject to interest obligations and continual expansion of debt will eventually end in what is essentially like a negative amortized position where the principle amount becomes larger than the original obligation; you can calculate the maximum possible life span of the system and determine, with accuracy, the terminal point when the system will become terminal. All systems which depend upon the constant multiplication of debt will collapse in insolvency, there is no other way for them to end, nor are there any real solutions to the problem, simply paying against the debt will not work because it must then be replenished to sustain monetary circulation.
Those who have advocated this system, since its inception in 1913, have done all they can to protect the system from discovery. They have benefited enormously for they have transferred the wealth by the use of fiat inflation and used that wealth to purchase real assets. Those who, through the decades, controlled the banking cartel, the central banks, have grown immensely rich on the hard labor transferred through the use of “bills of credit” or Federal Reserve Notes which are little more than “scripts of labor” that are exchanged primarily for the labor of the hard working men and women of this country, all the while the value of those “scripts” have been gradually debased to the point that each hour of our labor, though it may be measured in the face value of our “dollars” is really devalued to the point that the People are laboring for actual pennies on the “dollar”. This system is, in every sense of the word, an expanding system of peonage, a feudal serfdom created by stealth and deception. The People think they are making a decent living because they look at their pay checks and see that they are “earning” more than their parents earned, but the reality is that they are only “earning” more in face value, but far less in actual value.
The system cannot be sustained, either the People will rise up and overthrow this oppressive system or the system will, as all others before it, implode upon itself leaving a massive swath of social, economic and political destruction in its wake.