Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

WSJ thinks function of Fed Reserve is "maintaining an overall stable price level"
(Aug 30, 2006)

New York, NY – Really?  Let’s analyze that assumption, shall we?

   First, what is a price?  According to free market economists F.A. Hayek and Ludwig von Mises, prices are qualitative exchange ratios determined by individuals who value their exchanges unequally.  I give up my bushel of tomatoes to receive your shoes because I value shoes higher than tomatoes.  You, however, do the opposite.  They are not necessarily equal values because we each have a scale of priorities.  The point is, market prices cannot be managed by some central economic czar or else those “prices” become government mandates, and thus not market prices reflecting supply and demand.

   The hallmark of a free market, fluctuating prices, is exactly the opposite of what the WSJ says is the core function of the Fed Reserve:  maintaining stable price levels.  The function of free market prices is not stability but rather to rise and fall as supply and demand changes.  This could be large or small price changes, depending on what’s happening in the market.  The point is, it’s very important for free market prices to not be “maintained” but rather to freely fluctuate so we know where there are shortages or at least higher demand for whatever commodities or services people freely want.  A free market takes care of prices automatically (and a stable currency, which is not the same thing as stable prices, ensures that business functions smoothly.) 

   Perhaps the WSJ means that it is the function of the private Federal Reserve to “maintain” the value of a stable currency?  So now we have to ask what is the definition of a currency or a medium of economic exchange?  And wherein lies value?

   A medium of economic exchange is whatever people freely choose.  It could be gold, silver, tobacco, or peanuts.  OK, let’s keep it short.  Gold wins out for obvious reasons and that’s why the Founding Fathers stated in the U.S. Constitution that nothing but gold or silver shall be COINED as valid money.  Not paper, and not Federal Reserve Notes.  In addition, Congress does not have the authority to push that job off onto a private contractor or a group of private bankers called The Federal Reserve.

   But allowing a private contractor, The Fed Reserve, to COIN money – via issuing instructions to the U.S. Treasury – is not the end of the problem.  The central bankers had a further agenda in mind when they took over America’s money supply.  As planned, they created a fractional banking system in which The Fed issued more Paper Receipts for Gold, i.e. paper money or Promissory Notes, than the face value of the stored gold in the Treasury.  Fractional banking is actually fraud or counterfeiting.  Why?  Think about what paper money really is.  It is a Mercantile Receipt or Invoice for a deposit of some hard commodity deposited into a warehouse.  If the U.S. Treasury has 10 million ounces of gold, say one dollar = 1 oz of gold, and it issues 100 million dollars in Promissory Notes, then the Fed has counterfeited 90 million dollars and lied to all the holders of paper money.  The fact that the population does not storm the U.S. Treasury all at once and demand the gold does not excuse the counterfeiting and fraud.  In essence, the private Fed Reserve in this example just made itself – and the buddies to whom they first loan or give the money -- 90 million dollars richer by printing up fake paper money, counterfeiting, out of thin air.  (No, paper money doesn’t equal GDP because the Fed does not own all the beer bottles and diapers of everybody in the U.S.  Throw out the GDP argument as a definition of the Fed’s excuse to counterfeit our paper money.)

   Second, the next step by the private Fed Reserve was to completely remove the gold, the Mercantile Deposit it was entrusted to hold in a warehouse for the holder of the Promissory Note, as the backing for U.S. printed money, which in effect is a contract.  That is, the bankers stole the gold from the depositor by violating the contract.  That’s like removing the real home from a Deed of Trust, a promissory note that says the Deed entitles the bearer to the hard commodity called a house, and pretending it’s OK.  It’s like running down to the mortgage lender or bank to pay off your house and, instead of obtaining your house, you receive another piece of paper that says “House” on it.  You never receive a real house, only another Federal House Note, a piece of paper.  It’s called theft and the Federal Reserve did it with gold instead of houses.  Your gold.

     In other words, the Fed Reserve and the government redefined money as Federal Reserve Notes and removed the “payable to the bearer on demand” and the certification that “there is on deposit in the U.S. Treasury X-amount of silver or gold.”  So now the Fed Reserve and Congress have completely removed the definition, the connection, and the distinction between a hard commodity and the receipt for the storage and retrieval of that hard commodity.  How clever.

   Further, America’s public education system teaches that the Federal Reserve Note, not redeemable in anything and not a receipt for gold or silver, is real money.  Why did the central bankers do this?  Easy.  Because they can now print up as much paper money (and credit) as they and Congress want without either asking or taxing the citizens.  In this clever manner, the Federal Reserve gets to enrich themselves under the guise of “maintaining an overall stable price level” and saving us from recessions and Flying Widgets and whatnot.

   The Fed Reserve must be the biggest scam ever perpetrated upon the American public: swiping everybody’s hard commodity money (gold), issuing ten times the amount on deposit as paper money, making the hard commodity (gold) irredeemable, redefining the paper receipt for money as the money itself (like the Deed for your House IS the house itself?), and then printing up and issuing as much money as the Fed Reserve wants to spend.

   Every definition of money taught at all universities, from “hey, it’s the GDP” to “information” to “trust us,” avoids the real definition of the original Promissory Note when Americans deposited their hard money into the U.S. Treasury.  More important than robbing everybody of their commodity savings and issuing fake paper in return, we now have lost a measuring stick for prices.  By removing the number of oz of gold per dollar definition, we do not have a stable measuring stick for paper money.  Issuing paper money without being defined in terms of a specific quantity of gold or silver is the same as issuing different lengths of rulers and yardsticks and scales to measure miles or feet or kilometers or pounds or tons or gravity or the speed of light.  (While the value of gold as money can and should fluctuate relative to other commodities because gold itself is a commodity, the measure of how much gold = one paper dollar, a Promissory Note, a contract, cannot fluctuate any more than the number of houses per Deed of Trust can fluctuate.  Fixed measurable contracts cannot legally morph on a daily basis.)  Imagine a world of Physics in which the length of a tape measure changes daily.  Would that be stable?  Could you build a house with that tape measure?  That is why the markets are roiling and reeling and businessmen do not know how to forecast anything:  because their measuring sticks are changing on a daily basis.  The actions taken by the private Federal Reserve in their central banking schemes have made it almost impossible to predict and calculate prices and thus make good business decisions.  The existence and role of the Fed Reserve is doing the exact opposite of what the WSJ claims is it’s major function.

   In fact, socialism always fails because it destroys the free market pricing mechanism needed to resolve supply and demand and thus create prices.  The Fed Reserve has robbed the people and screwed up the value of the money supply, especially as they raise and lower the Prime Rate and inject or constrict the issuance of their counterfeit Fed Reserve Notes and credit.  Now they’ve created new problems: every nation is in on this crazy central banking fractional reserve system and each nation tries to gain an advantage over other nations by cranking up or constricting their own paper money and credit.  This manifests itself as a new phenomenon called trade surpluses and trade deficits.  Now we really don’t have international price stability as every country tries to outsmart every other country through fiat monetary manipulation.  The existence of the Fed Reserve has ensured that real market prices do not even exist, never mind their goal of stability, which is an oxymoron in a free market anyway.

   Besides the immorality of stealing the people’s gold and issuing Funny Money, expanding and contracting the money supply by a Central Monetary Czar called The Federal Reserve Chairman and voted upon by a Federal Open Market Committee (FOMC) and a Board of Federal Reserve Governors is exactly what a free market is NOT.

   If the so-called advocates of business and the free market, the Wall Street Journal, don’t even understand what’s wrong with their statement, i.e., the Federal Reserve’s “core job is maintaining an overall stable price level,” then God help the rest of the econo-serfs in America.  By definition, the WSJ is advocating economic fascism, a form of socialism in which the government – or worse yet, an individual called the Fed Reserve Chairman -- controls and regulates all the means of production via a private cartel of bankers regulating the money supply, exactly the opposite of a free market.  We have to ask:  is the WSJ simply ignorant about basic economics and monetary politics, do they have another agenda, or do they know that the real reason the Fed Reserve exists is for a group of private central bankers to “legally” fleece the unsuspecting public? – FM Duck

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