ZGram - 9/13/2002 - "Legislation Introduced To Abolish The Federal Reserve"

irimland@zundelsite.org irimland@zundelsite.org
Fri, 13 Sep 2002 20:38:57 -0700


ZGram - Where Truth is Destiny

9/13/2002

Good Morning from the Zundelsite:

This is a story worth watching!  Almost too good to be true!

[START]

Legislation Introduced To Abolish
The Federal Reserve
By Rep. Ron Paul, MD
9-13-2

In the House of Representatives, September 10, 2002
 
Mr. Speaker, I rise to introduce legislation to restore financial 
stability to America's economy by abolishing the Federal Reserve. I 
also ask unanimous consent to insert the attached article by Lew 
Rockwell, president of the Ludwig Von Mises Institute, which explains 
the benefits of abolishing the Fed and restoring the gold standard, 
into the record.
 
Since the creation of the Federal Reserve, middle and working-class 
Americans have been victimized by a boom-and-bust monetary policy. In 
addition, most Americans have suffered a steadily eroding purchasing 
power because of the Federal Reserve's inflationary policies. This 
represents a real, if hidden, tax imposed on the American people.
 
=46rom the Great Depression, to the stagflation of the seventies, to 
the burst of the dotcom bubble last year, every economic downturn 
suffered by the country over the last 80 years can be traced to 
=46ederal Reserve policy. The Fed has followed a consistent policy of 
flooding the economy with easy money, leading to a misallocation of 
resources and an artificial "boom" followed by a recession or 
depression when the Fed-created bubble bursts.
 
With a stable currency, American exporters will no longer be held 
hostage to an erratic monetary policy. Stabilizing the currency will 
also give Americans new incentives to save as they will no longer 
have to fear inflation eroding their savings. Those members concerned 
about increasing America's exports or the low rate of savings should 
be enthusiastic supporters of this legislation.
 
Though the Federal Reserve policy harms the average American, it 
benefits those in a position to take advantage of the cycles in 
monetary policy. The main beneficiaries are those who receive access 
to artificially inflated money and/or credit before the inflationary 
effects of the policy impact the entire economy. Federal Reserve 
policies also benefit big spending politicians who use the inflated 
currency created by the Fed to hide the true costs of the 
welfare-warfare state. It is time for Congress to put the interests 
of the American people ahead of the special interests and their own 
appetite for big government.
 
Abolishing the Federal Reserve will allow Congress to reassert its 
constitutional authority over monetary policy. The United States 
Constitution grants to Congress the authority to coin money and 
regulate the value of the currency. The Constitution does not give 
Congress the authority to delegate control over monetary policy to a 
central bank. Furthermore, the Constitution certainly does not 
empower the federal government to erode the American standard of 
living via an inflationary monetary policy.
 
In fact, Congress' constitutional mandate regarding monetary policy 
should only permit currency backed by stable commodities such as 
silver and gold to be used as legal tender. Therefore, abolishing the 
=46ederal Reserve and returning to a constitutional system will enable 
America to return to the type of monetary system envisioned by our 
nation's founders: one where the value of money is consistent because 
it is tied to a commodity such as gold. Such a monetary system is the 
basis of a true free-market economy.
 
In conclusion, Mr. Speaker, I urge my colleagues to stand up for 
working Americans by putting an end to the manipulation of the money 
supply which erodes Americans' standard of living, enlarges big 
government, and enriches well-connected elites, by cosponsoring my 
legislation to abolish the Federal Reserve.
 
WHY GOLD? By Llewellyn H. Rockwell, Jr. As with all matters of 
investment, everything is clear in hindsight. Had you bought gold 
mutual funds earlier this year, they might have appreciated more than 
100 percent. Gold has risen $60 since March 2001 to the latest spot 
price of $326.
 
Why wasn't it obvious? The Fed has been inflating the dollar as never 
before, driving interest rates down to absurdly low levels, even as 
the federal government has been pushing a mercantile trade policy, 
and New York City, the hub of the world economy, continues to be 
threatened by terrorism. The government is failing to prevent more 
successful attacks by not backing down from foreign policy disasters 
and by not allowing planes to arm themselves. These are all 
conditions that make gold particularly attractive.
 
Or perhaps it is not so obvious why this is true. It's been three 
decades since the dollar's tie to gold was completely severed, to the 
hosannas of mainstream economists. There is no stash of gold held by 
the Fed or the Treasury that backs our currency system. The 
government owns gold but not as a monetary asset. It owns it the same 
way it owns national parks and fighter planes. It's just another 
asset the government keeps to itself.
 
The dollar, and all our money, is nothing more and nothing less than 
what it looks like: a cut piece of linen paper with fancy printing on 
it. You can exchange it for other currency at a fixed rate and for 
any good or service at a flexible rate. But there is no established 
exchange rate between the dollar and gold, either at home or 
internationally.
 
The supply of money is not limited by the amount of gold. Gold is 
just another good for which the dollar can be exchanged, and in that 
sense is legally no different from a gallon of milk, a tank of gas, 
or an hour of babysitting services.
 
Why, then, do people turn to gold in times like these? What is gold 
used for? Yes, there are industrial uses and there are consumer uses 
in jewelry and the like. But recessions and inflations don't cause 
people to want to wear more jewelry or stock up on industrial metal. 
The investor demand ultimately reflects consumer demand for gold. But 
that still leaves us with the question of why the consumer demand 
exists in the first place. Why gold and not sugar or wheat or 
something else?
 
There is no getting away from it: investor markets have memories of 
the days when gold was money. In fact, in the whole history of 
civilization, gold has served as the basic money of all people 
wherever it's been available. Other precious metals have been valued 
and coined, but gold always emerged on top in the great competition 
for what constitutes the most valuable commodity of all.
 
There is nothing intrinsic about gold that makes it money. It has 
certain properties that lend itself to monetary use, like 
portability, divisibility, scarcity, durability, and uniformity. But 
these are just descriptors of certain qualities of the metal, not 
explanations as to why it became money. Gold became money for only 
one reason: because that's what the markets chose.
 
Why isn't gold money now? Because governments destroyed the gold 
standard. Why? Because they regarded it as too inflexible. To be 
sure, monetary inflexibility is the friend of free markets. Without 
the ability to create money out of nothing, governments tend to run 
tight financial ships. Banks are more careful about the lending when 
they can't rely on a lender of last resort with access to a 
money-creation machine like the Fed.
 
A fixed money stock means that overall prices are generally more 
stable. The problems of inflation and business cycles disappear 
entirely. Under the gold standard, in fact, increased market 
productivity causes prices to generally decline over time as the 
purchasing power of money increases.
 
In 1967, Alan Greenspan once wrote an article called Gold and 
Economic Freedom. He wrote that: "An almost hysterical antagonism 
toward the gold standard is one issue which unites statists of all 
persuasions. They seem to sense =F1 perhaps more clearly and subtly 
than many consistent defenders of laissez-faire =F1 that gold and 
economic freedom are inseparable, that the gold standard is an 
instrument of laissez-faire and that each implies and requires the 
other. . . . This is the shabby secret of the welfare statists' 
tirades against gold. Deficit spending is simply a scheme for the 
confiscation of wealth. Gold stands in the way of this insidious 
process. It stands as a protector of property rights."
 
 
He was right. Gold and freedom go together. Gold money is both the 
result of freedom and its leading protector. When money is as good as 
gold, the government cannot manipulate the supply for its own 
purposes. Just as the rule of law puts limits on the despotic use of 
police power, a gold standard puts extreme limits on the government's 
ability to spend, borrow, and otherwise create crazy unworkable 
programs. It is forced to raise its revenue through taxation, not 
inflation, and generally keep its house in order.
 
Without the gold standard, government is free to work with the Fed to 
inflate the currency without limit. Even in our own times, we've seen 
governments do that and thereby spread mass misery. Now, all 
governments are stupid but not all are so stupid as to pull stunts 
like this. Most of the time, governments are pleased to inflate their 
currencies so long as they don't have to pay the price in the form of 
mass bankruptcies, falling exchange rates, and inflation.
 
In the real world, of course, there is a lag time between cause and 
effect. The Fed has been inflating the currency at very high levels 
for longer than a year. The consequences of this disastrous policy 
are showing up only recently in the form of a falling dollar and 
higher gold prices. And so what does the Fed do? It is pulling back 
now. For the first time in nearly ten years, some measures of money 
(M2 and MZM) are showing a falling money stock, which is likely to 
prompt a second dip in the continuing recession.
 
Greenspan now finds himself on the horns of a very serious dilemma. 
If he continues to pull back on money, the economy could tip into a 
serious recession. This is especially a danger given rising 
protectionism, which mirrors the events of the early 1930s. On the 
other hand, a continuation of the loose policy he has pursued for a 
year endangers the value of the dollar overseas.
 
How much easier matters were when we didn't have to rely on the 
wisdom of exalted monetary central planners like Greenspan. Under the 
gold standard, the supply of money regulated itself. The government 
kept within limits. Banks were more cautious. Savings were high 
because credit was tight and saving was rewarded. This approach to 
economics is the foundation of a sustainable prosperity.
 
We don't have that system now for the country or the world, but 
individuals are showing their preferences once again. By driving up 
the price of gold, prompting gold producers to become profitable 
again, the people are expressing their lack of confidence in their 
leaders. They have decided to protect themselves and not trust the 
state. That is the hidden message behind the new luster of gold.
 
Is a gold standard feasible again? Of course. The dollar could be 
redefined in terms of gold. Interest rates would reflect the real 
supply and demand for credit. We could shut down the Fed and we would 
never need to worry again what the chairman of the Fed wanted. There 
was a time when Greenspan was nostalgic for such a system. Investors 
of the world have come to embrace this view even as Greenspan has 
completely abandoned it. What keeps the gold standard from becoming a 
reality again is the love of big government and war. If we ever fall 
in love with freedom again, the gold standard will once more become a 
hot issue in public debate.

[END]
 
Dr. Ron Paul is a Republican member of Congress from Texas.