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thinks function of Fed Reserve is "maintaining an overall stable price
(Aug 30, 2006)
York, NY – Really? Let’s analyze that assumption, shall we?
First, what is a price? According to free market economists F.A. Hayek and
Ludwig von Mises, prices are qualitative exchange ratios determined by
individuals who value their exchanges unequally. I give up my bushel of
tomatoes to receive your shoes because I value shoes higher than tomatoes.
You, however, do the opposite. They are not necessarily equal values
because we each have a scale of priorities. The point is, market prices
cannot be managed by some central economic czar or else those “prices”
become government mandates, and thus not market prices reflecting supply and
The hallmark of a free market, fluctuating prices, is exactly the opposite of what the WSJ says
is the core function of the Fed Reserve: maintaining stable price levels.
The function of free market prices is not stability but rather to rise and
fall as supply and demand changes. This could be large or small price
changes, depending on what’s happening in the market. The point is, it’s
very important for free market prices to not be “maintained” but rather to
freely fluctuate so we know where there are shortages or at least higher
demand for whatever commodities or services people freely want. A free
market takes care of prices automatically (and a stable currency, which is
not the same thing as stable prices, ensures that business functions
Perhaps the WSJ means that it is the function of the private Federal Reserve
to “maintain” the value of a stable currency? So now we have to ask what is
the definition of a currency or a medium of economic exchange? And wherein
medium of economic exchange is whatever people freely choose. It could be
gold, silver, tobacco, or peanuts. OK, let’s keep it short. Gold wins out
for obvious reasons and that’s why the Founding Fathers stated in the U.S.
Constitution that nothing but gold or silver shall be COINED as valid
money. Not paper, and not Federal Reserve Notes. In addition, Congress
does not have the authority to push that job off onto a private contractor
or a group of private bankers called The Federal Reserve.
But allowing a private contractor, The Fed Reserve, to COIN money – via
issuing instructions to the U.S. Treasury – is not the end of the problem.
The central bankers had a further agenda in mind when they took over
America’s money supply. As planned, they created a fractional
banking system in which The Fed issued more Paper Receipts for Gold, i.e.
paper money or Promissory Notes, than the face value of the stored gold in
the Treasury. Fractional banking is actually fraud or counterfeiting.
Why? Think about what paper money really is. It is a Mercantile Receipt or
Invoice for a deposit of some hard commodity deposited into a warehouse. If
the U.S. Treasury has 10 million ounces of gold, say one dollar = 1 oz of
gold, and it issues 100 million dollars in Promissory Notes, then the Fed
has counterfeited 90 million dollars and lied to all the holders of paper
money. The fact that the population does not storm the U.S. Treasury all at
once and demand the gold does not excuse the counterfeiting and fraud. In
essence, the private Fed Reserve in this example just made itself – and the
buddies to whom they first loan or give the money -- 90 million dollars
richer by printing up fake paper money, counterfeiting, out of thin air.
(No, paper money doesn’t equal GDP because the Fed does not own all the beer
bottles and diapers of everybody in the U.S. Throw out the GDP argument as
a definition of the Fed’s excuse to counterfeit our paper money.)
Second, the next step by the private Fed Reserve was to completely remove
the gold, the Mercantile Deposit it was entrusted to hold in a warehouse for
the holder of the Promissory Note, as the backing for U.S. printed money,
which in effect is a contract. That is, the bankers stole the gold from the
depositor by violating the contract. That’s like removing the real home
from a Deed of Trust, a promissory note that says the Deed entitles the
bearer to the hard commodity called a house, and pretending it’s OK. It’s
like running down to the mortgage lender or bank to pay off your house and,
instead of obtaining your house, you receive another piece of paper that
says “House” on it. You never receive a real house, only another Federal
House Note, a piece of paper. It’s called theft and the Federal Reserve did
it with gold instead of houses. Your gold.
In other words, the Fed Reserve and the government redefined money as
Federal Reserve Notes and removed the “payable to the bearer on demand” and
the certification that “there is on deposit in the U.S. Treasury X-amount of
silver or gold.” So now the Fed Reserve and Congress have completely
removed the definition, the connection, and the distinction between a hard
commodity and the receipt for the storage and retrieval of that hard
commodity. How clever.
Further, America’s public education system teaches that the Federal Reserve
Note, not redeemable in anything and not a receipt for gold or silver, is
real money. Why did the central bankers do this? Easy. Because they can
now print up as much paper money (and credit) as they and Congress want
without either asking or taxing the citizens. In this clever manner, the
Federal Reserve gets to enrich themselves under the guise of “maintaining an
overall stable price level” and saving us from recessions and Flying Widgets
The Fed Reserve must be the biggest scam ever perpetrated upon the American
public: swiping everybody’s hard commodity money (gold), issuing ten times
the amount on deposit as paper money, making the hard commodity (gold)
irredeemable, redefining the paper receipt for money as the money itself
(like the Deed for your House IS the house itself?), and then printing up
and issuing as much money as the Fed Reserve wants to spend.
Every definition of money taught at all universities, from “hey, it’s the
GDP” to “information” to “trust us,” avoids the real definition of the
original Promissory Note when Americans deposited their hard money into the
U.S. Treasury. More important than robbing everybody of their commodity
savings and issuing fake paper in return, we now have lost a measuring stick
for prices. By removing the number of oz of gold per dollar definition, we
do not have a stable measuring stick for paper money. Issuing paper money
without being defined in terms of a specific quantity of gold or silver is
the same as issuing different lengths of rulers and yardsticks and scales to
measure miles or feet or kilometers or pounds or tons or gravity or the
speed of light. (While the value of gold as money can and should fluctuate
relative to other commodities because gold itself is a commodity, the
measure of how much gold = one paper dollar, a Promissory Note, a contract,
cannot fluctuate any more than the number of houses per Deed of Trust can
fluctuate. Fixed measurable contracts cannot legally morph on a daily
basis.) Imagine a world of Physics in which the length of a tape measure
changes daily. Would that be stable? Could you build a house with that
tape measure? That is why the markets are roiling and reeling and
businessmen do not know how to forecast anything: because their measuring
sticks are changing on a daily basis. The actions taken by the private
Federal Reserve in their central banking schemes have made it almost
impossible to predict and calculate prices and thus make good business
decisions. The existence and role of the Fed Reserve is doing the exact
opposite of what the WSJ claims is it’s major function.
In fact, socialism always fails because it destroys the free market pricing
mechanism needed to resolve supply and demand and thus create prices. The
Fed Reserve has robbed the people and screwed up the value of the money
supply, especially as they raise and lower the Prime Rate and inject or
constrict the issuance of their counterfeit Fed Reserve Notes and credit.
Now they’ve created new problems: every nation is in on this crazy central
banking fractional reserve system and each nation tries to gain an advantage
over other nations by cranking up or constricting their own paper money and
credit. This manifests itself as a new phenomenon called trade surpluses
and trade deficits. Now we really don’t have international price stability
as every country tries to outsmart every other country through fiat monetary
manipulation. The existence of the Fed Reserve has ensured that real market
prices do not even exist, never mind their goal of stability, which is an
oxymoron in a free market anyway.
Besides the immorality of stealing the people’s gold and issuing Funny Money,
expanding and contracting the money supply by a Central Monetary Czar called
The Federal Reserve Chairman and voted upon by a Federal Open Market
Committee (FOMC) and a Board of Federal Reserve Governors is exactly what a
free market is NOT.
If the so-called advocates of business and the free market, the Wall Street
Journal, don’t even understand what’s wrong with their statement, i.e., the
Federal Reserve’s “core job is maintaining an
overall stable price level,” then God help the rest of the econo-serfs
in America. By definition, the WSJ is advocating economic fascism, a form
of socialism in which the government – or worse yet, an individual called
the Fed Reserve Chairman -- controls and regulates all the means of
production via a private cartel of bankers regulating the money supply,
exactly the opposite of a free market. We have to ask: is the WSJ simply
ignorant about basic economics and monetary politics, do they have another
agenda, or do they know that the real reason the Fed Reserve exists is for a
group of private central bankers to “legally” fleece the unsuspecting
public? – FM Duck
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