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