Not All ‘End the Fed’ People Quite Get It

Several days ago I managed to get myself drawn into a Facebook exchange with someone who opposes the Federal Reserve and the current banking system in general for not quite the right reasons. Thus the Fed is a “private bank,” it does not put enough money into circulation, its member banks enslave people by charging interest on loans, etc. This person thinks of himself as part of the “liberty movement.”

Another claim of his was that the elites funded and promoted the Austrian School of economics, and that these same elites were behind the funding of Karl Marx. This theory would probably have a difficult time accounting for why Austrian economics is still relatively obscure — why should that be, if the world’s most powerful people are supposedly promoting it? — or why Marx, far from drowning in money thrown at him by the elites, spent his life begging for money, mainly from Friedrich Engels. Given how badly Marx treated and took advantage of Engels, the latter would presumably have been delighted if some moneybags had taken over the task of funding poor Karl.

Until now I’ve more or less let these folks be. But when I heard someone say he had dropped out of the End the Fed movement because it was so dominated by people like this — people who think fiat money per se is fine, but that it ought to be issued directly by Congress rather than by the Fed — I began to wonder if I should address it. So in this exchange, I asked my opponent if he could distill his thoughts into five or ten propositions on money, which I could then examine. I am convinced that the misguided policy proposals coming from people like this are the result of fallacious reasoning about money, so I wanted him to spell out his thinking clearly and systematically.

I am going to reproduce for you what he wrote. The first time through he listed ten things he wanted me to prove. I explained to him that demands are not propositions. I want to know what your views on money are, I said. Someone came along and reworded his demands into the form of propositions.

I said I would respond to these propositions. Not because of the importance or lack thereof of the individual involved, but because these fallacies are evidently widespread within the end-the-Fed orbit. I’d like to have good answers out there.

But look at what he produced. Totally unsystematic. Fundamental issues completely ignored, and in general the list makes me feel foolish for even offering to do this. (If you were asked to give ten propositions on money, would you leave out what money is, where it comes from, and what purpose it serves?) I have no idea what his positive theory of money is, what his ideal system is, or whether the charging of interest is just or unjust in itself in his view.

I said I would respond to these, so I will do so in the coming days, in dribs and drabs. But yikes.

Here are the propositions:

1. The fact that people are having trouble paying their debt indicates that too few dollars are in circulation.

2. It is impossible to pay back the interest on the debt when payments are reloaned, and not recirculated.

3. Monetary deflation benefits the private bankers who wish the People to default in order to seize collateral with, or without govt force.

4. Engineered scarcity is the PRIMARY cause of higher commodity prices. The People in a drought with lack FRN’s [Federal Reserve Notes]. They are not drowning in too many FRN’s.

5. Private bankers will create private monopolies to control the People rather than “compete” in a “free market.”

6. Private banks can enslave the people through the use of un-payable interest based contracts.

7. Private banks will not compete, or offer interest free money creation/lending to people with, or without government force.

8. Private banks are the sovereigns and use patsy government to escape the wrath of the People. “Divide and conquer”

9. Austrian/Keynsian economics are simply a Hegelian Debate wherein un-payable debt/interest contracts prevail with, or without force.

10. If you end central banking, and remove all government granted privileges to the private bankers, they will CONTINUE reign over the people. Private banks do not wish to “compete” in a “free market”. “Competition is a sin” -Rockefeller.

11. Bonus: Here is a money related topic that Alex Jones/most others refuse to cover. Some VERY DEEP truth which few will touch due to: possible threats of anti-semitism/political correctness. However, it is essential to dig into this deep, and ugly history so that we may gain greater understanding of why the US has dozens of US-Israeli citizens in its govt.(Chertoff/Emanuel/etc) And why the US is perpetually fighting Israel’s wars INCLUDING WWI+II. The private usurers have been the sovereigns for thousands of years. Usury/riba/interest if forbidden by each of Islam, Christianity, and Judaism. Because it is a MATHEMATIC fraud, whereby it is impossible for all borrowers to pay. However, Judaism permits ELITE Jews to perp the voluntary contract fraud/usury on gentiles. Elite, Jews have sacrificed millions of beautiful Jews, and gentiles with genocide, and perpetual war. Usury is a methodology of international conquest. Usury bankrupts nations and steals their national sovereignty. There’s a reason why there’s a Rothshchild Star of David on the back of a buck. Usury is the original sin of the worlds economic, and monetary problems. Al Pacino represents “Shylock” in Shakespear’s “The Merchant of Venice” on topic. https://vimeo.com/33399039

12. “Love the Sinner(parasitic usurers) hate the Sin(usury)” Prayers go out for peace, and blessings to all our Brothers in Sisters in Rothschilds’ occupied Israel/Palestine. Rothschild will sacrifice beautiful Jew, and gentile alike as the private usurers are the “Synagogue of Satan”

See what I mean?

http://www.TomWoods.com Tom Woods

David, are there any pictures of this check?
http://www.TomWoods.com Tom Woods

Well, that was a productive contribution. Let’s get angry at people who resent being called tools of the bankers. Why, we should all shut up and enjoy being called tools of the bankers. I get it.
Jordan Sheppherd

Yikes, this is bad. I’ve been around some of these Greenbackers, and while they are very nice people, I can’t say that any of them have been impressive when it comes to an understanding of how money works, or even trust them to know what is the Federal Reserve exactly, and how it works.

I’ve found that debating with these people is a waste of time. Most of them don’t even know what they believe, they just think things are bad and that elites are shape-shifting lizards from the planet Niburu who have telepathic powers and can jump to different dimensions. Their “position” ends up being nothing more than a hob nob of conspiracy theories and claptrap they heard from Webster Tarpley.

Point is, I’m not sure I’d waste too much time on this guy. He has a rather large learning curve to overcome before he’d be of use to anyone in our movement.
guest

If the money supply would stop increasing, all debts could be paid. Price inflation as a result of monetary inflation is what makes the debts hard to pay back; Your cost of living is rising.
Under a sound currency (such as gold), real wages rise as a result of price DEFLATION. Your cost of living would go down, which would free up nominal dollars for use in paying debts.
guest

Here are some of Gary North’s articles about the Greenbackers:
Government Money Masters: Anti-Gold Videos that Thousands of Tea Party Voters Think Are Conservative
http://www.garynorth.com/public/8574.cfm
Ellen Brown’s Web of Debt Is an Anti-Gold Currency, Pro-Fiat Money, Greenback, Keynesian Tract. Here, I Take It Apart, Error by Error.
http://www.garynorth.com/public/department141.cfm
Interest Rates in a Gold Coin Standard
http://lewrockwell.com/north/north1075.html
Gold Bugs and Anti-Gold Bugs
http://www.lewrockwell.com/north/north1199.html
guest

You have to admit that putting “In God We Trust” on fiat money is deviously brilliant.
http://www.facebook.com/caleb.j.kitts Caleb Joshua Kitts

I think that person is reading your posts, you two been downvoted D:
http://www.facebook.com/profile.php?id=546092083 Terry Mcintyre

No, the greenbackers are not coming from Marx, at least not directly. The liberty movement does know about the marxist roots of occupy – I was there at the Charlotte GA, and I know many others who have told similar stories about the origins.

The roots of the greenbackers usually go to Ellen Brown and Web of Debt, or some similar source. They hate all banks and hate usury — a concept which goes back a long, long way; in medieval times, usury was outlawed entirely.
guest

Except that Ellen Brown holds to a Marxist view of money, whether she believes so, or not.
Plank #5 of Communism:
Obama’s Brand of Marxism
http://teapartyeconomist.com/2012/09/04/obamas-brand-of-marxism/
“5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”
Of Ellen Brown and the other Greenbackers’ politics, Gary North says:
Ellen Brown’s Web of Debt Is an Anti-Gold Currency, Pro-Fiat Money,
Greenback, Keynesian Tract. Here, I Take It Apart, Error by Error.
http://www.garynorth.com/public/department141.cfm
“There was never any question of the Greenbackers’ politics. They were leftists,
and openly sided with government controls on the economy.”
guest

What they mean by that is that the money is not loaned, but just spent into circulation.
Gary North addresses their argument against interest in this article:
Interest Rates in a Gold Coin Standard
http://lewrockwell.com/north/north1075.html
guest

Gary Johnson is among those “End the Fed” people that don’t quite get it, too, by the way.
In the following interview with Robert Wenzel, he says that getting rid of the Fed would be ideal, but that without the Fed the government would still print money.
Just How Libertarian is Gary Johnson?
http://www.youtube.com/watch?v=aTch7InkZjo
MarxMarvelous

link to show? that would be interesting to hear
Anonymous

Nice summation!!
http://www.facebook.com/russnelson Russ Nelson

You cannot expect perfection from any candidate who hopes to get elected.
Anonymous

These Greenquackers are just too much….
guest

That’s true, as far as it goes.
But is it ok if I expect people in government to not support the VERY PHENOMENON that is responsible for economic crashes;
that deceives the Left into blaming the free market for the same;

that allowed government to trick other countries into allowing us to export our inflation onto them;
that allows government to steal my property and liberties at home and to fund the smearing of the concept of free markets in other countries via unconstitutional military interventions, occupations, and “humanitarian aid”?
This is no small issue. It’s fundamental. We’re not getting our liberty back unless we end the central planning of the supply of the money we use, and return to sound money.
In fact, those on the Right, who believe in Friedmanite monetary policy, will grow government and steal our liberties in an economic crisis, just like the Left, all because they think that the economy is crashing because the money supply is too low and/or there’s not enough spending.
This is why even Ronald Reagan grew government.
One’s view on monetary policy is the most important issue, and Gary Johnson can not deliver.
Anonymous

Do you see why I left? I spent two years meeting with these people every week and discussing political economy. I, being the well-read Austrian, was in the very small minority. I tried as well as I could to get them to actually read and study the things that they were talking about, but they refused. They all thought that they had the answer based upon the viewing of a few internet documentaries and the like. There was simply no talking to them.

Trust me, it wasn’t just my local ETF group, it is pretty much every ETF group that I met with that was primarily made up of greenbackers, socialists, anti-semites and conspiracy theorists (Illuminati, Rothschild, Rockefeller, Jewish bankers, lizard people, etc).

Don’t get me wrong, I want to end the fed and I want to end it now. Also, I often associate with those of differing opinions because it makes things interesting and I can often learn from other points of view. There was nothing to learn from these people and it was clear that they didn’t want anything to do with Austrian ideas. So, I felt it was best to leave, to disassociate, and to attempt to fight the good fight without them.

The saddest part about the whole thing is that the movement began from the ideas that Ron Paul was sharing, yet those who embody the movement today despise those ideas. They’re all chartalists for the most part, though not a single one of them can even explain the basic theories of chartalism.
Ocean

Please correct me on my logic if it is awry.

1. 95%+ of all “money” is created through loans.

2. Therefore, “Principle” IS created, but the “Interest” element is not.

3. Therefore, the “Interest” has to be extracted somehow and from somewhere. It must therefore come from the existing overall money supply.

4. Therefore, there is a net money “drain” built into a usury system like that. There also therefore, be fewer dollars chasing the existing goods and services, than there would be under an interest-free system.

5. Is that not a recipe for deflation, not inflation?

6. Is that therefore not perhaps why the economy has been able to withstand massive injections of money via bailouts and quantitative easing, WITHOUT creating hyper inflation?

The “money creation” process (in conjunction with a usury-based money drain) is inherently deflationary therefore.

“Inflation” on the other hand, far from being caused my “printing fiat money”, is actually caused by producers needing to continually raise their prices because they have to to compensate for the ever-shrinking over all money supply, caused by the “debt drain effect” of interest NOT being created, yet still extracted.

This weakens the economy because higher prices mean that less people can afford the goods and services offered.

And on a related subject.

1. Bank don’t even “lend” money at all really.

2. They certainly don’t provide “consideration”.

3. They get their customer to sign a “loan agreement”.

4. That “loan agreement”is actually a Promissory Note is it not?

5. That Promissory Note is ONLY given “value” by the power of the “lenders “promise to pay”.

6. That Promissory Note then, is the “value” that makes the creation of the money even possible in the first place. The banks are not “unwilling to lend” right now, they actually NEVER lend !!

7. BUT … they DO take Promissory Note that do not belong to them (they belong to the signature provider) and they monetize them for themselves!

8. What right does the bank have to take that piece of paper and use it as if it was theirs?

9. The best that a bank could be described as in that situation is an “agent” or “public servant”, representing the owner and beneficiary of that financial instrument. This is the biggest “mis-selling” fraud ever.

10. Surely all that banks should be entitled to, is a flat rate fee, chargeable for administering the money creation process, on behalf of their client, similar to the way that a notary garners a fee for his work.

11. Therefore, if the Promissory Note, NOR the money (that they DO NOT LEND to the customer) belongs to the bank, at all, then how are they allowed to charge “Interest/usury” on that money was never theirs to begin with?

12. If that Promissory Note then does NOT “belong” to the bank, (which it doesn’t) then how are they ALSO permitted, to bundle it together with a lot of others, and then proceed to sell them as “securitized” financial instruments?

This is the economics of the mad house. Even a 10 year old with a bag of marbles could prove that “you can’t blood out of a stone”, just as you can’t get “interest” out of a money supply that is only made up of 100% principle !!

I’m not an “expert” bt any means, but surely unless first the ethics, as well as the “hard science” of the math regarding how money is created, are sorted out first, then all the subjective theories and the “soft science” of “economics”, are just so much tinkering around the edges of a deeply flawed system.

Why is it that debt is seen as the only way to create money, rather than real, personally “backed” credit?

When a person/bank wants to take “interest” from someone, why don’t they instead take an interest IN a business or a property?

A business partner takes a “stake”, or an “interest” in the property/business of someone else. This is in line with natural law; the law that states, that everything has consequences and everything is subject to “cause and effect”.

Banks though, choose to operate outside of those natural laws. They want all the benefits, but with none of the risks.

They “take” 100% of the value from clients (some would say that they “steal” it), and then they charge interest on that same money; money that they NEITHER “created”, NOR loaned out from their existing savers account, as they like to claim.

They have therefore, inserted themselves into a process, such that they share NO risk, and yet they claim ALL of the benefits !!

Then, when things go wrong, they forecloses on the property for instance, thereby grabbing real tangible value for themselves, in the form of a property, in exchange for facilitating a simple money creation contact.

So they loan out NOTHING that belongs to them, (or to their savers), and yet they rake in decades-worth of mortgage and loan repayments, amounting to many times what they fraudulently did NOT loan out in the first place!

But anyway, if that’s the way that the system works, then I suppose that we’ll all just have to continue to “bend over” and “take it”!

Or maybe we can all just ask people like the Ron Paul’s of this world to get to the heart of the matter, and stop them from distracting us all with irrelevant side shows and bagatelles.

Well, we can all dream, can’t we!
guest

You say that banks grab real assets for simply creating new money and loaning it out – which you consider to be fraud.
The Austrians would agree with this, though they would consider simply the spending of new paper money into circulation to be fraud, too. They have a name for this fraud: the Cantillon Effect.
Tom Woods talks a bit about this in a video to which I’m about to link you.
A lot of the problems you’re bringing up are the result of a fiat money system. Once you realize that what Austrians call sound money, or real money, has to have first been a commodity that BECOMES the money, then a lot of your questions get answered.
A lot of the bad loans happen, not because the banks hope people will default, but because FDIC gives the banks an elevated level of risk tolerance, by saying they can just print the money to bail them out if they get in trouble. This is called moral hazard; It is a situation created by central planning, not the free market.
I would recommend the following resources, in the following order:
Smashing Myths and Restoring Sound Money | Thomas E. Woods, Jr.
http://www.youtube.com/watch?v=HAzExlEsIKk
Basic Economics Lesson 4 – Time Preference, Interest Rates, and Production
http://www.youtube.com/watch?v=g2OK5D_3TzM
Interest Rates in a Gold Coin Standard
http://lewrockwell.com/north/north1075.html
Ocean

Hi

Thank you for the links, and I will for sure eagerly watch them with keen interest (no pun intended!).

But If I can just perhaps assist by focusing in on my main concern.

I am less concerned with interest rates, and banks “grabbing assets” (“the Law is an Ass” mostly, but they have it on their side it seems most of the time), than I am with “usury” as a mathematical problem.

Usury = Debt slavery because of the mathematical certainty that it will cause the implosion of any economy, and no amount of “backing” by ANYTHING can change that math.

You simply CAN’T pay Principle + Interest (P+I) when ONLY (P) is created at the point of loan creation (where 95%+ of money is created).

There is just no way around that mathematical fact.

So really, gold standard or not, my issue “predates” and goes deeper than that.

There were many “boom/busts/recessions/depressions” WITH a gold standard too, simply because that “hard science” math simply will not change.

Hence why interest-free “money” that is “spent into existence”, will always trump “usurious money” that is “loaned into existence”.

But, I will now watch the videos you have sent, to see if they shine a light on that core issue.

Thank you for your prompt reply. I will reply again after watching what you have kindly directed me to.
guest

The last two resources to which I linked should help with the usury issue.
Regarding the creation of only the money to pay the principle, and not the interest, what you’re forgetting to account for is price deflation – provided they just stop printing money, which causes price INflation.
Suppose they stop creating money out of thin air (but still loan money); In a free market, prices would tend to fall because of capital creation and the division of labor. So, since the cost of living would be going down, that would allow people to pay back their debts.
It’s actually monetary creation of the kind you propose – interest free (and regardless of whether it’s loaned or simply spent into circulation) – that is responsible for most of the economic destruction we’re experiencing. Monetary inflation results in price inflation, and this raises the cost of living.
Regarding the booms/busts WITH a gold standard, Tom Woods talks about that, too. They were the result of deviations from the gold standard, not because of it.
Here are some resources on that issue:
No, Rick Santorum, We Don’t Need a Little Inflation
http://www.youtube.com/watch?v=J6a10UuQFOM
Monetary Lessons from America’s Past | Thomas E. Woods, Jr.
http://www.youtube.com/watch?v=91OIBnrjzLU
http://www.TomWoods.com Tom Woods

Also, http://www.libertyclassroom.com/panics
The Libertarian Kook

Ha Ha! You’re absolutely right, Bob! I’ve heard and read that one several times, myself! To me, it’s just common sense that a more limited amount of gold simply means that the same monetary value would be placed on a smaller quantity of gold, than if there were a more abundant supply. That seems the only logical assumption.
http://www.facebook.com/people/Matt-Fox/538404372 Matt Fox

Bitcoin?
Marc

Search for Byron Dale or go to http://www.wealthmoney.org. This man has studied the “money” system for most of his life. He has lived it. He has written letters to the FED and to the Treasury and they wrote back. He proves that all currency in America is created by a loan and then the interest to pay back the loan is created by more loans. It is unbelievably devious and so corrupt.
w0wb0bw0w

I believe one of the places this type of skewed thought regarding the Fed & money is coming from the work of Stephan Zarlenga and his book “The Lost Science of Money” which makes many false claims about the Austrian School of Economics and claims that money cannot be a comodity.
w0wb0bw0w

*Stephen Zarlenga (corrected first name)
http://twitter.com/_Zero30_ Conscious Objector

Tom – a lot has been written about your facebook exchange with these people, and about you and Austrian economics generally on this blog: http://realcurrencies.wordpress.com/2012/10/18/answering-tom-woods/

On this page: http://realcurrencies.wordpress.com/interest-free-economics/ are all the links explaining what they believe in their own words.

I don’t really understand how what they propose could possibly work, but I would LOVE to see you answer them properly – because on the surface, their point about ‘usury’ i.e. interest is very appealing. Who wouldn’t want to pay interest on anything after all?!
http://www.TomWoods.com Tom Woods

If it is their view that people do not place a premium on present as opposed to future goods, then an apple 100 years from now must be viewed as being just as serviceable as an apple today. The phenomena of time preference and interest are how Bohm-Bawerk disproved Marx’s “surplus value” claim.

I’m going to write something about how their “debts are inherently unpayable” claim is false, and that should pretty much do it.
http://twitter.com/_Zero30_ Conscious Objector

Tom – a lot has been written about your facebook exchange with these
people, and about you and Austrian economics generally on this blog: http://realcurrencies.wordpres…

On this page: http://realcurrencies.wordpres… are all the links explaining what they believe in their own words.

I don’t really understand how what they propose could possibly work,
but I would LOVE to see you answer them properly – because on the
surface, their point about ‘usury’ i.e. interest is very appealing. Who
wouldn’t want to pay interest on anything after all?!
http://twitter.com/_Zero30_ Conscious Objector

Awesome, I think that’s what really needs to be demolished. They are completely convinced that interest is systematically draining all the real wealth out of our lives. I tried to explain that if I can produce one car a week that I sell for 10k, and I borrow 30k for new machines that will enable me to produce ten cars a week, I can pay back the interest (say 7k), and sell more cars for consumers, at say, 8k each, enriching me and my consumers with, you know, REAL WEALTH.

But noooo, that only proves that those banks, those DAMN BANKS TOM, are stealing everything!!

I find this position odd considering that they DO seem to recognise that the function of money is stand in for real assets at the point of exhange, but hey ho!
Mark

A loaf of bread was a billion marks in the Weimar Republic.