Monday, August 15, 2011


War and the Federal Reserve

Talk of imminent threat to our national security through the application of external force is pure nonsense…. Indeed, it is a part of the general patterns of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear. While such an economy may produce a sense of seeming prosperity for the moment, it rests on an illusionary foundation of complete unreliability and renders among our political leaders almost a greater fear of peace than is their fear of war. – General Douglas MacArthur

Why is the United States constantly at war? If we look at the last half century or so, there is hardly a time when we haven’t been engaged in some major conflict with a purportedly global threat to our very existence.


[Quoting economist Paul Krugman:]“Think about World War II, right? That was actually negative social product spending, and yet it brought us out [of the depression] [...] Look, we could use some inflation.[...] It’s very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish a great deal.”


The Fed can “monetize” the debt simply by pushing a button on the government’s control panel [and printing more money to pay for military expenses...] and the President can [simultaneously] push another one marked “War” – and all without congressional approval.


Krugman’s canard about how World War II dragged us out of the Great Depression has been debunked by economists on both the right and the left, but plain common sense should alert the non-expert reader to the illogic of this view, let alone its complete lack of any moral sense. Essential goods and services were strictly rationed during the war years, and the relaxation of wartime regulations and controls was bound to create an economic upswing relative to what had gone before. Secondly, the rest of the Western world lay in ruins in the aftermath of the war, while the continental US was spared: this above all explains the postwar economic boom.


The central cause of the boom-bust-war cycle is the Fed, which is the motor of the war machine and the creator of the economic bubble that always ends in a painful bursting. Until [the Federal Reserve] is ended, or at least reined in, the buttons marked “inflation” and “war” are going to remain on the government’s control panel – begging to be pushed.

Justin Raimondo

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 5
Chapter 7 – Just what is money?

Some years ago, a Mr. A.F. Davis mailed a ten-dollar Federal Reserve Note to the Treasury Department.

Attached to Mr. Davis’ note was a request for the Treasury to honor the inscription on the note that said the US would redeem this note for “lawful money.” The Treasury sent back to Mr. Davis two five-dollar bills, each bearing the same inscription: “The United States of America will pay to the bearer on demand five dollars.”

Mr. Davis then sent back one five-dollar bill, asking for his money. This time, the Treasury returned his five-dollar bill with an attached note saying the term “lawful money” was not defined in federal legislation and furthermore that the term no longer had any special significance.

The phrases “…will pay to the bearer on demand” and “…is redeemable in lawful money” were deleted from our currency altogether in 1964.

This is also the same time that silver quarters were diluted with copper. Why not save money, I wonder, and make quarters thinner or smaller? The effect is the same - a quarter is worth less, but the latter solution doesn't require using up any copper. I have a few silver quarters, collected some years ago (which is how I know the date 1964 coincides with their devaluation), but my guess is there are few or none remaining in circulation.

Early money – why metals:

Experts may haggle over the precise quality of a gemstone, but an ingot of metal is either 100% pure or it isn’t, and it either weighs 100 ounces or it doesn’t.

Perhaps the most important monetary attribute of metals is their ability to be precisely measured, [and the] primary reason metals became widely used as commodity money is that they meet all of the requirements for convenient trading. In addition to being of intrinsic value for uses other than money, they are not perishable … ; by melting and reforming they can be divided into smaller units and conveniently used for purchases of minor items, which is not possible with diamonds, for example; and, because they are not in great abundance, small quantities carry high value.

This should give us a clear view of human nature. We can be amongst the elite only if we possess something that most people do not – and cannot – have.

We value that which is rare.

This only applies to material things, interestingly enough. Otherwise, we should value rare things such as truth, artistic abilities, altruism, compassion and intelligence. We do not.

We do, however, value gold.

It is estimated that approximately 45% of all the gold mined throughout the world since the discovery of America is now in government or banking stockpiles. There undoubtedly is at least an additional 30% in jewelry, ornaments, and private hoards. Any commodity which exists to the extent of 75% of its total world production since Columbus discovered America can hardly be described as in short supply.

The deeper reality, however, is that the supply is not even important.

If Santa Claus were to visit everyone on Earth next Christmas and leave in our stockings an amount of money exactly equal to the amount we already had, there is no doubt that many would rejoice over the sudden increase in wealth. By New Year’s day, however, prices would have doubled for everything, and the net result on the world’s standard of living would be exactly zero.

This I suppose explains the situation which I have argued more than once to co-workers: quit whining about how the boss makes too much money. It doesn’t matter that the boss makes a great deal more money than you, nor even whether he merits it. The only thing that matters is whether you believe you have enough, and if you don’t, then complain to someone who might possibly do something about it. But you will never have more than enough. (And these days you may be lucky to have just that.) The system works so that if you make more money, you are going to at the very least pay more taxes. If your coworkers also manage to get a similar raise, you are all going to end up paying more for things like health coverage (because the insurance industry knows you are now making more money) and housing, etc (because you are all forever competing for the same goods). Your ratio of income to expenses is going to remain essentially fixed. The system is rigged.

Of course, that is very simplified, and there must be factors that create more or less purchasing power for the average worker, otherwise we wouldn’t be able to talk about being better or worse off from one generation to another, so I was wrong in this one regard; our income to expense ratio is growing worse, possibly because, contrary to what we are told, we do not live in a free-market enterprise – it’s finagled and tinkered to the advantage of the few at the top, and oddly supported by many at the bottom who labor under the delusion 1) that they are not at the bottom and 2) can actually get to the top.

Enough for now.

Perhaps it would behoove us to think of ways to make good use of US bills once they become worthless as money. We could, of course, burn them for heat, but I think you wouldn’t get much return for your investment there. Since they are fabric and do in fact make it through the wash, we could use them to create clothing, drapery and bed linens. What else?

....but hey, do what you will anyway.

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