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Abolish the Federal
Reserve
by REP. RON PAUL
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.
From 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 Federal 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 Federal 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--perhaps more clearly and subtly
than many consistent defenders of laissez-faire--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
ABOLISH THE FEDERAL RESERVE
Congressman Ron Paul
U.S. House of Representatives
September 10, 2002
The mass media that is
controlled by the Council on Foreign Relations, Skull & Bones, and
high freemasonry of the 33rd degree level want you to believe that
anyone who says there is a conspiracy for world government and
therefore destroy the Constitution is a quack. They use such phrases
as: oh, another conspiracy theorists; right wing nuts, etc.
The mass media was used to destroy the credibility of Senator Joseph
McCarthy in the 1950s even though he only discovered 10% of the
Communist infiltration into the U.S. State Department. Even the Senate
Subcommittee on Un-American Activities used the word conspiracy in its
findings.
The key is: DISCREDIT ANYONE OF ANY CONSEQUENCE WHO COMES AGAINST THE
CONSPIRACY! That was testimony in the Alger Hiss trial by a former
Communist who left the conspiracy to fight and expose Communism.
All of the founding documents of the United States make clear that WE,
THE PEOPLE, were to be free to enjoy LIFE, LIBERTY and PROPERTY.
**LIFE - increasing
taxes starting in 1913 are sucking the LIFE out of Americans.
**LIBERTY - Americans can be
jailed for any infraction or held hostage in jail until fines or taxes
are paid.
**PROPERTY - Bank accounts can
be seized; homes, automobiles and businesses seized to pay the ransom
of taxes, penalties and interest.
How and why is this all happening to Americans? It is all based upon
the Communist Manifesto! The Ten Planks of the Communist Manifesto are
being enforced in America that usurps our Constitutional Rights. This
is being done BY OUR OWN FEDERAL GOVERNMENT. WHEN THE GOVERNMENT
CONTROLS EVERYTHING - THAT IS COMMUNISM!
1st Plank of Communism: Abolish Private Property. This is being
accomplished by land use laws, property taxes, zoning laws,
environmental laws, etc.
2nd Plank of Communism: A heavy progressive income tax. There was NO
income tax until 1913 when it began at 1%, never to go above 2%. What
are you paying?
3rd Plank of Communism: Abolish all rights of inheritance. Today, we
have heavy legal and probate fees plus inheritance taxes.
4th Plank of Communism: Confiscate all property of emigrants and rebels
(anyone who speaks out against the government). Unconstitutional
Regional Government has been installed which controls all of the
physical, social and economic assets of all the counties.
5th Plank of Communism: Centralization of Credit in the hands of the
state. In America this was done in 1913 with the Federal Reserve Act.
At first, it was simply the International Bankers who controlled the
Federal Reserve; but by 1933, the U.S. was bankrupt and these bankers
foreclosed on America. They created a new form of government called
Socialism that has replaced our once Constitutional Republic. Public
Law 91-151 prohibits any person to extend credit without a special
license: a $1,000 fine or one year in prison could result (not yet
enforced). A Social Security number is required in a business
transaction.
6th Plank of Communism: Control all means of Transportation and
Communication. The mass media has been in the hands of the Marxist
Council on Foreign Relations for years [One of the Communist Rules of
Revolution was to get control of all media and use it for their
propaganda]. Presidential Executive Orders #10999 and #10995 provide
for the take-over of all transportation and communications. They
provide for the regulating of airlines, railroads, highways and the
news media. Look at Homeland Security and the military at airports.
7th Plank of Communism: All production is to be controlled BY the
State. There is a massive number of federal guidelines that industry
must follow. The federal government is now involved in over 850
businesses. The Federal Bureaucracy forces farmers to grow [or not
grow] specific crops and sell them below production costs. No wonder
thousands of farmers leave the land every year and conglomerates take
over. We have Corporate Socialism in America!!!
8th Plank of Communism: Equal liability of ALL to labor. Women are
forced out of the home to work just to survive. Equal opportunity
employment for both sexes. Executive Order #11000 will force civilians
into government work brigades.
9th Plank of Communism: Combine agriculture with manufacturing, thus
abolishing the distinction between town and country. We have seen the
emergence of Urban Renewal, Population Control, Metro Councils,
Regional Government Planning Programs, and the plans to eliminate
Counties, Local Government and State Borders.
10th Plank of Communism: Control ALL Education. Federal "aid" to
education means we have government-controlled schools and curriculum.
All Ten Planks of the Marxists’ Communist Manifesto are being forced
upon us in America. Repent and cry out to God for deliverance. Our
Senators and Representatives seemed to have no concept as to WHAT they
are legislating upon our once FREE nation. If we continue on our
present course, America will fulfill the prophecy by a presidential
candidate in the 1930s that said they will give us small doses of
Socialism until we wake up one day to find we have Communism.