The History of Money Part 5: Greenbacks to the Fed

THE RETURN OF THE GOLD STANDARD (1866 - 1881)

The greenback currency was only issued twice, a total of $449,338,902 debt and gold free paper money was created. The price inflation during the war which reached over 100% was blamed on it. While this was largely true, those who were issuing fractional reserve (so-called gold backed) banker money had most of the power over the money supply even then. Especially after the National banking act ended the issuing of greenbacks.

"While boasting of our noble deeds, we are careful to control the ugly fact that by an iniquitous money system, we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery."- Horace Greely, American journalist and politician (1811-1872)

The bankers wrote:

"Slavery is likely to be abolished by the war power and all chattel slavery abolished. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led on by England, is that capital shall control labor by controlling wages. The great debt that the capitalists will see to it is made out of the war, must be used as a means to control the volume of money. To accomplish this the bonds must be used as a banking basis. We are now waiting for the Secretary of the Treasury to make this recommendation to Congress. IT WILL NOT DO TO ALLOW THE GREENBACK, as it is called, TO CIRCULATE AS MONEY any length of time, as WE CAN NOT CONTROL THAT. But we can control the bonds and through them the bank issues." - Hazard Circular of 1862

By the end of the Civil war, a Greenback dollar was worth less than 50 cents to the banker "gold" dollar. But as it became obvious that Congress would redeem them in gold, and accepted them as payment of taxes, they became worth more and more. By 1868 it only took $138 in Greenbacks to buy $100 in gold, and by 1874, $111. In 1875, Congress passed a law saying that on January 1, 1879, Greenbacks would be redeemable in gold on a one-to-one basis. This happened with no fanfare whatsoever. Yet still the debtless Greenbacks were removed from circulation.

To give the American public the impression that they would be better off under the exclusive gold standard, the money changers used the control they had been given to create money under the National Bank Act to cause economic instability and panic the people. This was fairly easy to do by calling in existing loans and refusing to issue new ones, a tried and proven method of causing depression and reducing the money supply. They would then spread the word through the media they largely controlled that the lack of a single gold standard was the cause of the hardship which ensued, while all this time using the Contraction Act to lower the amount of money in circulation. Most of this money was debt created money through fractional reserve banking, but the people were led to believe that it was Greenbacks that caused the problems.

The money supply was reduced from $1.8 billion in circulation in 1866 ($50.46 per person), to $1.3 billion in 1867 ($44.00 per person), to $0.6 billion in 1876 ($14.60 per person) and down to $0.4 billion only ten years later. That is merely $6.67 per person. Thus was the depression of the 1870's.

By 1872 the American public was feeling the squeeze, but it wasn’t fast enough. So the Bank of England sent Ernest Seyd, with piles of money, to bribe congressmen into passing an unconstitutional law demonetizing silver. (The word "dollar" was originally defined as 371.25 grains of silver.) Ernest drafted the legislation himself, which became law with the passing of the Coinage Act, effectively stopping the minting of silver as money.

Here's what he said about his trip, obviously pleased with himself:

"I went to America in the winter of 1872-73, authorized to secure, if I could, the passage of a bill demonetizing silver. It was in the interest of those I represented - the governors of the Bank of England - to have it done. By 1873, gold coins were the only form of coin money." - Ernest Seyd

Or as explained by Senator Daniel of Virginia "In 1872 silver being demonetized in Germany, England, and Holland; a capital of 100,000 pounds ($500,000.00) was raised, Ernest Seyd was sent to this country with this fund as agent for foreign bond holders to effect the same object (demonetization of silver)".

At that time the National Banks were issuing paper notes, and the government was coining metals into money, the only government paper money was the greenbacks.

By 1876, with 30% of the work force unemployed, the American people began to long for the days of silver money and the greenbacks. The US Silver Commission was set up to study the deflating currency problem and reported this telling history:

"The disaster of the Dark Ages was caused by decreasing money and falling prices... Without money, civilization could not have had a beginning, and with a diminishing supply, it must languish and unless relieved, finally perish. At the Christian era the metallic money of the Roman Empire amounted to $1,800,million. By the end of the fifteenth century it had shrunk to less than $200,million. History records no other such disastrous transition as that from the Roman Empire to the Dark Ages..."

While the United States Silver Commission obviously could see the problems being caused by the restricted money supply, this declaration did little to help the problem, and in 1877 riots broke out all over the country. The bankers response was to do nothing except to campaign against the idea that greenbacks should be reissued or silver remonitized. The American Bankers Association secretary James Buel expressed the banker’s attitude well in a letter to fellow members of the association.
He wrote:

"Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the agricultural and religious press, as will oppose the greenback issue of paper money; and that you also withhold patronage from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country, for then we can better protect each other. To repeal the Act creating bank notes, or to restore to circulation the Government issue of money, will be to provide the people with profits as bankers and lenders. See your Congressman at once and engage him to support our interests, that we may control legislation." -James Buel American Bankers Association (from a circular issued by authority of the Associated Bankers of New York, Philadelphia, and Boston signed by one James Buel, secretary, sent out from 247 Broadway, New York in 1877, to the bankers in all of the States)


James Garfield became the Republican President in 1881 with a firm grasp of where the problem lay:

"Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate." - James Garfield 1881 (Within weeks of releasing this statement President Garfield died of poisoning.)

For ten years after a great populist movement grew within the country and the Democratic Party became the silver party, or the anti gold-only party.
The cry from the streets was to...


FREE SILVER (1891 - 1912)

The dollar was originally defined in silver and although there was a not so smart exact rate of 15:1 value of silver to gold from 1792 to 1873, demonitizing silver was a very bad idea, besides being unconstitutional.

Fleecing of the flock is the term the money changers use for the process of booms and depressions which make it possible for them to repossess property at a fraction of its worth. In 1891 a major fleece was being planned:

"On Sept 1st, 1894, we will not renew our loans under any consideration. On Sept 1st we will demand our money. We will foreclose and become mortgagees in possession. We can take two-thirds of the farms west of the Mississippi, and thousands of them east of the Mississippi as well, at our own price... Then the farmers will become tenants as in England..."- 1891 American Bankers Association (as printed in the Congressional Record of April 29, 1913)

The continued gold only standard made this possible. William Jennings Bryan was the Democratic candidate for President in 1896; campaigning to bring silver back as money (free silver). He said in his famous speech:

"We will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold."- William Jennings Bryan

Of course the money changers supported his opposition on the Republican side as long as he wanted the exclusive gold standard maintained. They all suggested that monetizing silver was simply “inflation” (which obviously was not what the bankers feared, but rather the lack of BANKER CREATED inflation was). The factory bosses were convinced to tell their work force that business would close down if Bryan was elected, and everyone would lose their jobs. Bryan lost a very close election but tried again in 1900 and in 1908 but lost both times. He became Secretary of State under Woodrow Wilson in 1912 but resigned in 1915 under suspicious circumstances connected with the sinking of the Lusitania which drove America into the First World War.

J.P.MORGAN AND THE CRASH OF 1907

If you want to understand the causes of the crash of 1907 (which led to the creation of the Federal Reserve), seeing who benefited is where you should look first. When the stock market slumped causing many of the over extended fractional reserve banks to falter, J.P. Morgan stepped in and offered to save the day. People will do strange things when in a panic, and this might explain why Morgan in effect became the central bank of the United States and was authorized to print $200 million out of thin air merely by loaning it out, which he used to "prop" things up. Some of the troubled banks with less than 1% in reserve had no choice but to borrow from him. It was accept this solution or go under. Even if they realized that their problems had been caused by the same people now offering the solution, there is not a lot they could have done about it. J.P. Morgan was hailed a hero even by the next presidential candidate:

"All this trouble could be averted if we appointed a committee of six or seven men like J.P. Morgan to handle the affairs of our country." -Woodrow Wilson

But not everyone was fooled:

"The market prices of commodities vary from day to day. This occurs when there is no radical difference in the proportion to the supply and the natural demand. This FACT is conclusive proof that our system is controlled by manipulators and fundamentally wrong. Act No. 1 was the manufacture, between 1896 and 1907, through stock gambling, speculation and other devious methods and devices, of tens of billions of watered stocks, bonds, and securities. Act No. 2 was the panic of 1907, by which those not favorable to the Money Trust could be squeezed out of business and the people frightened into demanding changes in the banking and currency laws which the Money Trust would frame. ... see how these bankers have impoverished us by selling to us, - at usury prices, - the credit that is supported by our own toil,... The king bankers put in motion, in 1907, a great scheme. They had gambled and speculated on Wall Street, until so many watered stocks and bonds had been manufactured on speculation, that numberless speculators, big and small, sprang up all over the country, and stocks, bonds, and credits were pyramided, and re-pyramided, and re-re-pyramided. Of course such a condition could not last and a crash was inevitable, because it was not natural for such gambling to continue." -Congressman Charles Lindbergh, Sr.

Notice how these artful and cunning men created the panic of 1907 so that they could provide the solution. Is this not the old Hegelian principle at work?

Apart from making a small number rich at the expense of the many, in this case the instability also served the second purpose of encouraging the public to believe that they would be better off living under a Central Bank and a fractional-reserve "Gold" Standard, The Federal Reserve System.

Ron Paul says stop allowing them to "Monetize the debt"

What does it mean to "monetize the debt"? The Banking system is not merely paper money, it is much worse. It is debt money. To illustrate:

OK, here is the simple version of what our banking system does and why it is so crappy. The system we have is less viable now than it was during the Great Depression, but because of the added peace of mind that the FDIC (Federal Depositor Insurance Corporation) gives us we milk it along expecting it to last forever. It won’t, it can’t.

We Poe folk who actually work for a living have been continuously robbed since 1913, actually long before if you look into it. The ability for banks to manufacture money by merely loaning it out has been around for over 300 years. Governments in Europe looked to bankers for money when they went to war, and the bankers loaned out more money than they had. This has happened time and time again. It is how the rich stay rich, and the poor stay poor. As soon as a poor man gets rich, he either gets involved in the scheme, or his heirs go poor again. What I am saying is if your last name is Rothschild, Rockefeller, Schiff, Roosevelt, Morgan, Kennedy, or Bush, or you probably don’t have to work if you don’t want to, no matter how much money you spend. Just buy a Central Bank

The best way to illustrate the scheme is to simplify the operation. So let’s say there are only two banks and then the Federal Reserve above them. Picture a triangle. OK, I am Bank1, and in competition is Bank2. I have $100 and he has $100. I get a thousand people to deposit $1 in my bank to store it for them totaling $1000 plus the $100 of my own. I send out a monthly statement telling all my customers they have their full amount in my bank, but I can loan out all $1000, as long as I keep my $100 in reserve for those who spend their $1 out of my bank. This is the 10% required “reserve” in our fractional reserve system. This works great if not too many come in at the same time and take their money out. Cool for me and the FDIC for you.

But that’s nothing.

I loan out $1000 at interest by writing a check to my loan customer, he deposits the $1000 into Bank2. Now Bank2 has $1000 + $100 investment. He can loan out $1000 now too. His customer gets a check for $1000 and deposits it into my Bank1. Now I can lend out $900 of that. Bank2 gets that new deposit and can loan out $810, I can loan out $729, he can loan out $656.10 and on and on and on until all the money is loaned out, and all of it is tied up in the 10% reserve. It doesn’t matter if my customers spend their money, because whomever they give it to will usually just deposit it anyway! Cool eh?

Is everybody happy? So far the loans I am making interest money on total $2629, and my customer statements show a total of $3466.10, while I only spent $100. Cool. Interest money comes in, people take their money out, spend it, and others put it back in. All is well. Until, rats, the fool I loaned the $1000 to disappears with the loot. All heck breaks loose until, thank goodness, the Fed rescues me and loans me whatever I need into my reserves to keep the ship afloat.

Guess where the Fed gets the money it loans to me? Well, it used to be monetized gold, but now, it is 100% monetized debt. The Fed loans money to me that is backed by Government debt or my debt to them. They storing the debt paper makes the money they spent buying it have value. As a result, the total money supply grows by no other means than by loaning it.

The ability to manufacture money from loans has put lots of money in supply, and made it easy to get loans for houses and cars. But it requires more loans to sustain itself. Stop borrowing, and all the money disappears to the banks long before the loans are paid off; keep borrowing and the money becomes worthless, and most of it goes to the banks in interest.

This system is corrupt, and it is a house of cards waiting to be knocked over. There are toothpicks and band aids continuously stuck into it to keep it up. Bank owners are making a killing on interest, but all that interest money is created by debt, which creates a need for more inflation to cover the interest. There is no way this can sustain itself forever. The national debt is VITAL to keeping this joke afloat. Pay it off, and we get the great depression once again. Keep borrowing and we get runaway inflation and the great depression German style.

The solution is simple. Eliminate dishonest fractional reserve banking, and inflate the currency through government action, not bank action. BOTH must happen; neither will work independently. This is the only solution, there is no other way. Money must also have intrinsic value; not credit value, but tangible asset value. This would make our economy the wealthiest in the world again. And everyone would be wealthy, not just tax exempt bankers.

Inflation redifined for Ron Paul and Ben Bernanke

‘Inflation’ is a word that has too many definitions. Confusion comes from trying to use this word in conversation when the meaning of the word is not concrete. Therefore I am going to follow the teenage mutant ninja turtle’s guideline and invent new words to crack this word into three.

Inflation has 3 definitions.
1- Money supply increase.
2- Overall price of goods and services increase.
3- Currency value decrease, or devaluation
The third meaning comes from the first two and is oxymoronic, for how can a decrease come from the word inflate?
My new words are:
1- Monflation,
2- Priflation, and
3- Demonvaluation.
Cool words huh. Cowabunga dude

When the Federal Reserve chairman is being grilled by my favorite man in politics, Dr. Ron Paul, they are speaking of two different things. Mr. Smooth himself, Ben Bernanke attempts to dismiss Dr. No by stating things that he knows are not 100% true. They both use the word Inflation, but Dr. No is talking about monflation, while Mr. Smooth is talking about priflation; both of which they know produce demonvaluation. Dr. No believes that monflation creates demonvaluation and therefore priflation. Mr. Smooth believes that priflation is controlled by attempting to reduce demonvaluation through keeping interest rates rather than monflation as the criteria.

Most people don’t know it, but the priflation statistics that the Federal Reserve uses are not what you would think. In their “core” CPI (consumer price index), the only relevant data to them regarding priflation, they do not include things that you or I would. You know, things like food, gas, and the price of buying a house. I may not be a rocket scientist, but that is kinda like lying if you ask me. The inflation rate, according to Mr. Smooth (priflation), is 3%, but according to Dr. No (demonvaluation), it is 10%. For some reason, I believe Ron Paul more than Ben Bernanke.

The Amero vs Social Security

The Amero is coming. What is the Amero you ask? The Amero is a new currency that is based on a new international bank and the North American Union. It is a currency that will compete with the dollar as legal tender in Canada, the United States, and Mexico. This new bank is already in existence, so don't think this is a conspiracy "theory" WATCH

The downturn of our economy is precipitating a need for the Amero as the dollar gets weaker and weaker. We are going to see a need for it, but there is a BIG problem, and that is it is unconstitutional and seriously undermines United States soveriegnty. What I propose is something much better AND will have no adverse impact on our economy. In fact it would stimulate it like nothing else. What is that you say?

THE SOCIAL SECURITY BANK

The more I contemplate this idea, the more I like it. It would be politically correct, bipartisan, and have popular support. Not only that, it would lower the federal deficit and repair Social Security at the same time. The only problem is overcoming ignorance from the masses and lack of ignorance from the banking lobby.

In essence it would be a chartered Central Bank that has only one client but tons of investors. It would save Social Security while at the same time lowering the National Debt. The Federal Reserve would have necessary congressional oversight, and the dollar would begin to rise in value.

The chartering of the bank would include rules removing the ability of the Federal Reserve to buy Treasury Securities and requires them to Issue Federal Reserve Securities to borrow the money from the Social Security Bank that it loans to other banks. This new bank would be directly managed by the Congress of the United States, thus making it legal under the Constitution. All the Citizenry can invest in this bank by buying retirement "Social" securities called FEDERAL RESERVE BONDS. The money we inject into this bank will buy these bonds from the Federal Reserve.

Along with the bill chartering this bank new rules will mandate all banks including the Federal Reserve to raise their reserves at a steady rate while keeping the discount and federal funds rates frozen at 5%. This intrest rate rule would end when reserves reach 100%. This will build in a demand for loans from the Federal Reserve, and thus demand for the Federal Reserve to issue Fed Securities to gain this needed money. The Social Security Bank will have NO reserve requirements except for the Federal Government demand deposits. Congress can use tax money to buy Fed bonds if needed. All interest income from these bonds would go into the Treasury.

I haven't gone to college, haven't taken any economics courses, but I have read alot about our monetary system. This looks viable and practical to me, but would gladly take any criticism of it. Am I nuts?

Money, Money, Money, Money

People really don't understand anything about how money is created, yet it is so very simple. I was amazed at the magic myself until I finally understood it. Fully one half of every transaction in almost everything we do involves money, and yet I had no idea where money originated or how it is worth anything. The most amazing thing is, we don't even care. Millions of people make their living dealing with money every day and most of them don't even know why money is money. It is truly amazing. Sigmund Freud suggested that there is a psychological connection between money and feces; he said we grew up thinking shit was valuable. (In fact they used to call outhouses "vaults") Maybe that is why we guard such smelly truth, and don't even want to discuss it.

Right now our money system is so benignly fraudulent that we call anyone who criticizes it a "conspiracy theorist". Amazing, for Ron Paul is right on, and he is considered crazy. If he could have his way, everyone would be better off. Even those who think he is “insane”, even the bankers. The only place that money gets into society is through a bank, and every time a bank issues money, they demand it back with interest. Why is it strange to think that it cannot work forever? Maybe it is because it has worked for so long, even though it really hasn’t. Why is it strange to think that whoever controls the bank, eventually owns whatever, and controls whatever else they want? Including bribery, donating to campaigns, buying off news editors, running the education system, and intimidating or even killing someone who threatens them? What a cash cow. What would you do if you had this power, would you rather be president of the United States?

There are two fundamental problems with our money system, and both have been around much longer than the Federal Reserve. But the Federal Reserve monopolized and multiplied it instead of fixing it. The fundamental problems are:

1- Fractional Reserve banking,
This allows a bank to loan out much more money than it has, and that money is backed mostly by the IOU documents written up at the time the loan is made. Only a small percentage of their own money is used to "back" the loan. Right now reserve requirements are between 8 and 16 percent. This, in any other business, is fraud; but in banking it is merely a regulated rule. The problem is when a loan defaults, it deletes the IOU but not the money, and as a result all money becomes worth less. This has been a practice of bankers for hundreds of years, but it is not common knowledge even today. Every single bank failure in history would not have happened if this practice was illegal.

2- Treasury Securities
This is the national debt chopped into little pieces and sold. There are different types of securities and they are a great investment to buy because they are guaranteed by the government to earn interest. The problem is, they are a burden to all taxpayers and give the rich a desire for the nation to stay in debt. Individuals are limited in how much they can buy, but banks are not. The Chinese central bank buys approximately $2 billion of these every day. This market, called the bond market, has caused (along with fractional reserve banking) all money in circulation to lose gold backing completely. Today all money is backed only by these government IOU's. The Federal Reserve has the very most "debt paper" as its assets. These "assets" are the backing to our Federal Reserve notes. (Yes, it is magic) When Alexander Hamilton first instituted this scheme within the first year of the constitution, Thomas Jefferson said:

“America is being transformed into a gaming table…Already the new national government is imperiled by the financial mania. Furthermore their gamester ethic will corrode the traditional frugality and industry that defines the American character”

The real problem with this type of government debt is the immorality of it. Those who are in government are less likely to curb government spending when they know that they can profit personally from the debt. As Hamilton said to the First National Bank president Robert Morris “A national debt, if not excessive, to us is a national blessing” For some reason, I am glad that Aaron Burr won that duel. I only wish it would have happened twelve years sooner. This system was eliminated by Andrew Jackson, but then restored during the Civil War, and has been with us ever since.

Wouldn’t it bee cool to see debtless money enter the economy through farming, manufacturing, and natural resources? Will it ever happen? I doubt it.

Ron Paul and money

Whenever you become indebted, you loose some fundamental freedom. You tie yourself to that person or institution that you become indebted to in somewhat of a master-servant relationship. Whether that is fundamentally right or wrong depends upon individual opinion. It really depends who you become indebted to, and whether you like being in debt to them or not. Our financial system is based on debt. The fundamental unit of the dollar is debt, or the use of credit. Credit is merely trust. Our dollar is based on the trust that the Government can pay back it’s debt to the Federal Reserve. The dollar is based upon the IOU treasury notes issued by the United States treasury. The fundamentals of this system are severely flawed, and practically unfixable. Right now there are $22 in debt for every $1 in circulaion! Although it is fixable, it would take a massive education effort first; for if the majority of people do not know what the problem is, they cannot fix it. Here is the problem: Fractional reserve banking, and private central banking. Our government issues debt "bonds", "bills", and "notes" to fund their over budget spending, and the Federal Reserve issues paper money into the banking system by loaning it at interest to the Government and other banks. Then the other banks loan out many times that amount. For every $1000 the Fed issues (by loaning it to the government), the banks can loan out $100,000 Realizing this is true you can see that it is impossible to get out of the debt and have any money left. There is no money created to cover the interest, and that has been the case since before the Federal Reserve. In fact the Federal Reserve bank was created to fix the problem!
There is a solution, and it is not impossible to do without severely rocking our economy. The first thing that must be done is end fractional reserve banking, money creation should be done by government if it is not gold, or silver. We must completely eliminate the fraudulent fractional reserve policy. Of course the gold standard is the absolute best money system in history, and it is the only money that is legal tender in the Constitution, but it is limiting for a people and a government. You cannot spend gold that you do not have, even if you need something and the one who has that thing wants something from you. If you do not have gold as money to complete the exchange, you are severely hampered.
One solution is the “Greenbacks” the way Abraham Lincoln did it. Congress, by the authority of the Constitution has the right and the power to coin money, and regulate the value thereof. The problem is the trust people have in a completely fiat currency is very weak. Congress can have absolute power over inflation by regulating the value of the dollar directly, but they would not have something to exchange for it, (which is the case now). But it would take debt out of equation. This way congress is responsible for inflation, completely, rather than just being blamed for it.
Another solution is to print dollars from the value of not exclusively gold, but to silver, land, and a host of other real tangible things; even commodities, and energy. Congress can authorize the printing of money based on the value of these things.
Another possibility is to charter a second Central Bank, called the Social Security Bank, and allow only citizens to deposit money there and then loan that to banks and the government as the Federal Reserve does; at interest, and make fractional reserve banking illegal. The Treasury would deposit all of its money here in the only checking account of the Federal Government. Interest would all be in paid only on retirement, but accumulate throughout the time the money stays there. They would issue “Social Security Notes” that are adjusted against Federal Reserve Notes every day at the Federal Reserve bank, thus removing devaluing inflation. If money gets scarce than this bank can issue loans to other banks that is based on credit too, but that should be only very short term. The interest would become property of the Treasury, completely, and a source of income for the government.

Here is what I propose:
FIRST pass a law increasing the commercial bank’s required reserves at the Central Bank and in their vaults at a steady rate per year, say 5-10%.
SECOND, create a second silver value currency that the government issues to pay it’s debts and have that backed by gold and silver, the value of government property, say, National Park dollars, Highway dollars, and Capital building dollars etc. with that money completely debt free.
THIRD, as interest at banks rise because of the rise in reserve requirements, the Social Security bank can lend money it borrows from the new hard asset currency that the Treasury creates.

A Central Bank that was truly owned by the Government, with branches in each state and territory, each raising their own money and lending it at interest to other banks would be great, it would be interest income for the government and would pay for things with much less taxation.

We all can dream can't we?