Debt Ceiling Memo To Tea Party, Federal Reserve Debt Monetization Far More Dangerous Than ObamacareSubmitted by bundesbauer on Mon, 10/21/2013 - 13:19
The two pillars of the establishment Tea Party's stand against President Obama have been fiscal conservatism and constitutional authority. If the positions were truly principled rather than personal there's no way they could not be applied to the elephant in the room - the Federal Reserve's unconstitutional authority to create money which automatically causes the national debt to skyrocket.
For sure, there are many grassroot Tea Partiers who make the connection and are actively part of efforts at the state level to bring monetary policy into focus but since the departure of Rep. Ron Paul from Congress the elected officials who claim Tea Party affiliation have been a one-trick pony chanting 'death to Obamacare' with next to nothing to say about the Federal Reserve, beyond rhetorical flourishes about the eventual inflationary danger that quantitative easing poses for the American economy. Unfortunately, there is nothing eventual about the Fed's deleterious impact - felt since it was born 100 years ago.
Lost or intentionally avoided in critiques of the Fed is the manner in which the creature from Jekyll Island creates money - through the creation of debt. Thus a critical mass of Tea Partiers fixated on Big Government have a blind spot in their worldview - they accept that currency has to be created by the United States government going into debt to a privately-owned central bank. Rather than confront the root process and a banking oligarchy they'd prefer to fight Democrats over low-hanging budgetary fruit.
Before offering my challenge to the Tea Party to truly evolve into a Populist movement it helps to give historical perspective and look at the underlying technical process we now live under.
The founding fathers of America knew the history of societies and nations of Europe which previously made the mistake and error of issuing currency not backed by sound value. Therefore they put in the Constitution, in Article I. Section 8, a guarantee to avoid this by giving only Congress the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures," and by ensuring in Article I Section 10 that "No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts."
Eventually, however, as was the case in Europe, wealthy and powerful banking families influenced members of government to create a central bank that they would control, supplanting the authority given to Congress by the Constitution. These efforts culminated with a central bank known as the Federal Reserve, being given the power to issue currency and control its value while regulating America's entire banking system. Unfortunately the birth of the Federal Reserve in 1913 did not just take the power to create money out of the hands of Congress, it also guaranteed that the very creation of money itself would cause America to go deeper into debt.
In 1964 Congressman Wright Patman explained, "The dollar represents a dollar debt to the Federal Reserve System. The Federal Reserve Banks create money out of thin air to buy Government bonds from the United States Treasury, lending money into circulation at interest, by bookkeeping entries of checkbook credit to the United States Treasury. The Treasury writes up an interest bearing bond for one billion dollars. The Federal Reserve gives the Treasury a one billion dollar credit for the bond, and has created out of nothing a one billion dollar debt which the American people are obligated to pay with interest."
In the 1996edition of his book The Secret World Of Money, respected monetary historian Andrew Gause wrote in response to the question, "Are Federal Reserve Notes really 'dollars'?","Our Bureau of Engraving and Printing prints the money, and then sells it to the Federal Reserve Bank simply for the cost of the printing. The Federal Reserve bank then loans it back to our Government. The Federal Reserve also demands security to back up the loan, so Congress authorizes the Treasury to print US bonds which are given to the Federal Reserve as collateral against this loan. This means that the United States has been mortgaged to a handful of international bankers."