Wednesday, December 24, 2008


“Banking was conceived in iniquity and born in sin. Bankers own the
world. Take it away from them, but leave them the power to create money, and with the flick of the pen (or en entry on a computer screen today), they will create enough money to buy it back again. Take this power away from bankers, and all great fortunes like mine will disappear, and they ought to disappear, because this would then be a better and a happier world
to live in . .But if you want to continue to be the slaves of bankers, and pay the cost of your slavery, let them continue to create money.” - Josiah Stamp, former President of the Bank of England

“The few who can understand the system [Central Banking & Fractional Reserve Banking) will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” - Nathan Mayer Rothschild, Governor of the Bank of England and principal architect and owner of the US (private) Federal Reserve Bank (FED).

“It is well that the people of the Nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” - Henry Ford


An Introduction to Monetary Reform Principles

By Patrick Carmack


Why draft model reform legislation with little to no chance of enactment under the present circumstances? Nobel Laureate in Economics, Milton Friedman, offers two reasons:

Milton Friedman is worth discussing radical changes, not in the expectation that they will be adopted promptly but for two other reasons. One is to construct an ideal goal, so that incremental changes can be judged by whether they move the institutional structure toward or away from that ideal.

Similarly, Pope John Paul II mentions another yardstick for measuring economic reform proposals:

[by] determining their conformity with or divergence from the lines of the Gospel teaching...

Friedman continues:

The other reason is very different. It is so that if a crisis requiring or facilitating radical change does arise, alternatives will be available that have been carefully developed and fully explored.

Further, modern history is replete with instances in which the Hegelian dialectic has been applied to the political and economic orders to manipulate or soften-up governments to change in ways contrary to the public good. This method usually involves the artificial (i.e. coldly calculated) initiation of conflict of some kind after careful conditioning of the elements of the society who could either obstruct or implement the planned change; followed by a crisis (e.g. an economic or political anomaly such as the stock market crash of 1929 or the oil crises of 1974 and 1979); which is then "interpreted" by controlled mass media to direct the responses to the crisis into pre-planned avenues and away from correct responses such as careful analysis of the causes and criminal indictment of the perpetrators (Manipulation on the personal/psychological order follows a similar pattern of stress, emotion, counseling). Orwell noted this in 1984:

“In governing the populace, unrest cannot be averted. Therefore, it must be channeled and cultivated.”

The following quotation of David Rockefeller, then Chairman of Chase Manhattan bank, speaking at the June, 1991 Bilderberger meeting in Baden Baden, Germany (a meeting attended by then-Governor Bill Clinton) is illustrative of the media control mentioned above:

“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years.
He went on to explain: It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supernational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries.

Similarly, Zbigniew Brzezinski wrote in 1972 that the

"nation state as a fundamental unit of man's organized life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state."

[Brzezinski, Between Two Ages: The Technetronic Era (Penguin Books , 1971)

Two more interesting pre-9/11 Statements:

"We are on the verge of a global transformation. All we need is the right major crisis and the nation will accept the New World Order." -- David Rockefeller, Chairman of Chase Manhattan Bank (now J.P. Morgan Chase bank)

"The process of transformation.. is likely to be a long one, absent some catastrophic and catalyzing event - like a new Pearl Harbor." -- PNAC (Neo-con Project for a New American Century document)

In light of such scheming, it surely makes sense to attempt to anticipate the dangers involved and to prepare means of escaping them.

If man lets himself rush ahead without foreseeing in good time the emergence of new social problems, they will become too grave for a peaceful solution to be hoped for. -Pope Paul VI

Also, such a discussion can encourage the development of authentic reform movements based on the conclusions reached, which would otherwise have no focus or rallying point. Finally, though the mass media would blind us to the sufferings of the 3rd, and now 4th, world by ignoring it and redirecting our interests to sports and fantasy and our compassion to seals and snail darters, nevertheless we will always have the poor with us on this planet, those who suffer the ravages of extreme poverty while we dwell in relative plenty. The number of unemployed people has grown rapidly around the world and was estimated by the International Labor Organization to be over one billion by 1994. In fact, the present debt-based monetary system inevitably results in vast accumulations of wealth in fewer and fewer hands, which necessitates extreme poverty for vast numbers of mankind.

In 1997, 441 billionaires owned as much of the world's wealth as the poorer one-half (50%) of mankind (2.4 billion people). Consistent with one's state-of-life, we must come to the aid of the increasing multitudes of our impoverished fellow men.

Let us all set to work, for at this time a grave duty is imposed upon the consciences of all; a duty for all, employers and employees, citizens and farmers, moralists, pastors and their flocks, to help resolutely in the solution of the economic problem that distresses us. Universal suffering puts it in the front rank and bestows upon it a character of sacredness.

These words of French Cardinal Verdier during the Great Monetary Contraction (a.k.a. the Great Depression) are fully apropos to the situation in over four-fifths of the world today, where extreme poverty is ubiquitous and deepening very rapidly. There children are born into a Great Depression which only worsens as they grow up in it.

[Consider] the reality of an innumerable multitude of people - children, adults and the elderly, in other words real and unique persons, who are suffering under the intolerable burden of poverty. There are many millions who are deprived of hope due to the fact that, in many parts of the world, their situation has worsened. Before these tragedies of total indigence and need, in which so many of our brothers and sisters are living, it is the Lord Jesus himself who comes to question us... (Cf. Mt.25:31-46) - Pope John Paul II

Even in the U.S. and Canada the middle class is rapidly being squeezed down into poverty as the poor increase in numbers daily, despite the employment of both spouses now, often holding second and even third jobs, being forced to warehouse their children in institutions.

The philosophers' ideal of secure, modest wealth widely diffused to all classes is being supplanted by the two extremes, both harmful to mans' spiritual development, of extreme wealth or extreme poverty. As Mahatma Gandhi noted: Materialism and morality have an inverse relationship - when one increases the other decreases.

We are very rapidly becoming a world composed exclusively of the very few, very rich, and the very many, very poor. The middle remaining cannot hold. Modern technology and mass media has vastly increased the ability of the super-rich to sustain this process to historically unprecedented orders of magnitude. However, some of the effects of this growing disparity in wealth even have the super-rich concerned enough to propose novel "solutions" such as National Security Council Study Memorandum 200 which defines a program aimed at reducing the populations of 13 nations targeted for their raw materials needed to maintain the ruling elite's lifestyle, including Brazil, India, Columbia, Mexico, Ethiopia and Egypt:

How much more efficient expenditures for population control might be than [expenditures for] raising production through direct investments in additional irrigation and power plants and factories ... (NSSM 200, April, 1974).

Reducing targeted populations to a bare subsistence level by withholding investments, in effect forces less expensive population control on them while reducing to a minimum the labor costs of producing raw materials. Interestingly, since the passage of NAFTA, despite the transfer of hundreds of thousands of U.S. jobs to Mexico, Mexican labor wages have fallen by nearly 50%.

There has also been afoot for some time the "debt-for-nature" scheme proposed at the 4th World Wilderness Conference held in Denver, Colorado in 1987 of forcing nations to transfer national parks and undeveloped areas (up to 30% of the world's wilderness - 12 billion acres) to a World Wilderness Trust or similar U.N. agencies (and thereby effectively losing sovereignty over part of their national territory) which would function as a collection agent for the IMF, the World Bank and private banks and would operate as follows:

Creditor banks transfer 3rd world debt to the World Conservation Bank (a new bank with a "soft" name) thereby relieving the debtor nations of their debt to the original banks;

at full book value (even though these loans now have market values as low as 6-25 cents on the dollar and cost the banks nothing to create due to fractional reserve banking - the legally required reserve ratio on such loans being typically 0%);

in return for such debt relief, the debtor nations would transfer to the World Wilderness Trust natural resource assets of equivalent value (World Heritage sites such as the Amazon basin or the gold-laden hills around Yellowstone will likely be included at some point);

the World Wilderness Trust will eventually allow development by the World Conservation Bank in order to pay the private banks full value for the transferred debts.

Obviously, this scheme, which is already being implemented in Bolivia, Costa Rica and Ecuador, simply interposes a new bank to act in the name of the international community (or the U.N.) as collection agent for the private banks and their jointly run banks (e.g. the IMF and the World Bank), thereby obscuring the stark reality of de facto foreclosure proceedings by private banks against whole national territories. This transforms a politically unpalatable worldwide land grab by private banks into a "conservation transfer" to a body that appears to be a neutral conservation agency of some kind. One of the remarkable features of such institutions is their immunity to popular influence and their hostility to democracy and human need. Widespread economic exploitation of these transferred territories by the private banks will be authorized by the new bank owners, absent the many inconveniences of national sovereignty, regulation and authentic environmental control.

Similar schemes propose every imaginable means, referred to as "substitutes for war", to exploit or eliminate the poor through coercive forms of demographic control including poverty, famine, forced abortions and sterilization, euthanasia and eugenics, the introduction of new diseases, environmental pollution, etc., and, of course, war itself. A goal of 300-500 million people worldwide (less than 10% of the current world population) is a common theme. Selected, smaller numbers are far easier to manipulate and control, besides, having reduced those on the bottom to unemployment, total desperation and utter destitution, they have no more material utility and being in unresigned and irreligious poverty are too susceptible to authentic "reactionary" alternatives or disturbance. Obviously, such "solutions" are morally repugnant and sound reform alternatives must be presented, which do not destabilize the entire financial system with the attendant risks of a generalized crisis.

What Christianity forbids is to seek solutions ... by the ways of hatred, by the murdering of defenseless people, by the methods of terrorism ... - Pope John Paul II

The granting of loan extensions, rescheduling, rate reductions or partial remission of debts, though helpful, are at best temporary stop-gap measures merely delaying the day of reckoning. Of course, a debt jubilee (total remission of debts) would entirely solve the problem for the present, but is more than unlikely as few creditors take a broad, selfless or charitable enough view to support such a solution.

Rather, too many creditor banks foist policies on their nations, which assume the shape of a ruthless war on the poorer nations, and on the poor in their nations, financing projects over-priced through the fraudulent complicity of corrupted politicians creating odious debts. For example: during the decade 1980-90 Latin American countries paid $418 billion in interest on original loans of $80 billion.

By the end of 1990, 3rd world debt had passed $1.3 trillion — over $200 for every living person on earth. This debt had increased by 30% in three years. Debtor nations had total arrears of $26 billion in interest. The Financial Review (October 4, 1990) pointed out that much of the debt was owed to private banks, and that:

...the swelling of arrears has drawn concern from the IMF, where some officials complain that banks are successfully pressing the IMF to become their debt-collection agency...

Nations endowed with power are creating new forms of relationships of inequality and oppression, perverting the use of modern technology and global organizations for this purpose, rather than seeking just revision of loan terms or fundamental reform.

Since most modern money is created by banks as bank loans with an equivalent debt, all nations trade from a position of indebtedness. As a result, nations attempt to export more than they import, deliberately seeking an imbalance of trade, trying to gain a surplus of foreign revenues to reduce their indebtedness. This has caused international trade and foreign relations, to descend from trade for mutual benefit, to thinly disguised economic warfare.

Ever mounting debt has pressured agriculture to become dominated by the production, processing and distribution of every-cheaper food with declining nutritional content, to the increasingly severe detriment of peoples' health and contrary to clear consumer preference. Large businesses with wasteful mass-production techniques and using large scale transport as a competitive marketing strategy are given an advantage in the intensely competitive financial conditions created by debt-finance. This has culminated in the current ascendancy of huge, bank dominated multinational corporations.

The developed nations have come to rely on private debt to provide their money. This typically involves massive and mounting housing debt via mortgages. Such mortgage debt prevents the majority of people from outright ownership of a home.

Many potentially prosperous 3rd world nations have had their development distorted by the global debt-based financial system. These nations have been entrapped into endemic debt of a wholly false and illegitimate nature, obligated to multinational banks such as the IMF and World Bank whose guiding principles and policies have been designed to support the export drives of the wealthy, developed nations, themselves forced by debt to maximize export revenues.

The terrible poverty this forces on debtor nations limits the development of their peoples, and their intellectual and cultural development is narrowed to the limited exigencies of their daily struggle for survival.

Absent authentic monetary reform, debtor nations unable to pay their debts will ultimately be left with five (5) options:

1. To increase exports in order to increase foreign exchange revenues.
Where this is possible, it transforms the citizens into de facto workers for foreign banks which siphon the national production out of the country, further impoverishing the people. Increased commodity production saturates markets and reduces prices, partially or wholly defeating the purpose. In any case this is rarely possible, as exports have usually been maximized already.

2. This necessitates submitting to the IMF-imposed rape of their national resources and the starvation of their people while surrendering their national sovereignty by degrees.

This is the option recently taken by the S.E. Asian nations (South Korea, Indonesia, Thailand, Philippines). This is, of course, a closed loop back to debt. Of the $123 billion IMF S.E. Asian bailout, Chase Manhattan bank is in line to receive $32 billion; J.P. Morgan for $23 billion; Bank of America for $16 billion. This $71 billion will never reach S.E. Asia, as it is transferred from the U.S. Treasury, to the IMF, to the Wall Street banks. The IMF bailout saves their bad loans to these nations.

Courtesy of the U.S. government, some such foreign debt is being transferred ("monetized") to U.S. taxpayers for payment via increased taxes and inflation. Interestingly, Congressional leaders were told by the Clinton Administration that unless they agreed to fund the IMF bailout of banks which make loans to South Korea, there was danger of invasion of South Korea by North Korea — war blackmail.

3. Unilaterally to repudiate their foreign debts.

This action incurs the danger of being followed by trade strangulation (necessitating barter agreements in foreign trade, as was successfully conducted by the Axis powers and later by Rhodesia), and military invasion (e.g. witness the fate of these defaulter nations: Haiti, Somalia, Iraq, the former Yugoslavia [Bosnia et al.] invaded by U.S. and U.N. armed forces acting as unwitting, de facto mercenaries):

Tote dat bar! Lif dat bale!
Try to buck the system, and you land in jail!

It is no easy task to break free of debt, nor of the international banking system. National leaders would obviously have to weigh the consequences of debt repudiation to the specific situation of their nations with great care and sagacity.

4. To seek legal repudiation of their foreign debts, based on the doctrine of "odious debts".

This is an established international law principle permitting debt repudiation when a government incurs a debt without the informed consent of its people, and which is not used in the legitimate interest of the State.

Ironically, this doctrine was first used by the U.S. to repudiate Cuba's debts after the U.S. took Cuba from Spain. The jurist who coined the phrase "the doctrine of odious debts", held that debts incurred to subjugate a people or to colonize them should also be considered odious. This doctrine shifts responsibility to the lenders, neither to corrupt nor to utilize corrupted politicians and governments to initiate loans, and allows collection from the despots who wasted the funds — both desirable changes.

Of course, an independent, uncorrupted judiciary is a prerequisite to obtaining legal repudiation with this legal theory, which is extremely unlikely when corrupted politicians appoint politically subservient judges to the World Court who would hear such cases. A national legal repudiation on this ground would be a good start though, and could be at least legally valid, but might be a practical nullity, resulting in the same consequences as a unilateral repudiation without a recognized legal basis (#3., above).

5. To issue sufficient quantities of the national money specifically to retire the international debt.

Since most revenues obtained from foreign loans are shortly spent (often wasted), partly domestically and partly in foreign countries, the results are usually inflationary (in both the country of origin — usually the U.S., and in the recipient country), partially multiplied by private domestic (and foreign) banks through fractional reserve banking loans. Therefore, while issuing sufficient new money to retire foreign debt would work, it would also result in hyperinflation where the foreign debt is great in relation to the economy, particularly due to the subsequent multiplier effect of any high-powered money in a fractional reserve banking system. This ruinous negative effect has been felt by numerous nations which inflated to retire foreign debt.

Of course, the technical solution to avoiding such hyperinflation lies in the domestic prohibition of fractional reserve banking, coupled with simultaneous, proportionate foreign exchange regulation, which would require the banks to absorb the new money as increased reserves in a transition to full reserve banking.

This response amounts to legislated domestic monetary reform, which is, therefore, not an option "absent authentic monetary reform" (like the first four options above [i.e. 1-4]) but, rather, is authentic monetary reform.

In short, if nations find the first four options, above, unacceptable, then they will be forced to consider authentic monetary reform, which brings us back to the subject of this article in order to describe this type of reform.

Having set forth the rationale for drafting model monetary reform legislation, where does one begin? A careful study of the fundamentals of our economic system and of the reforms proposed by scholars is a logical starting point.

The draft legislation following was influenced by numerous sources including the writings and declarations on this subject of: President Abraham Lincoln; former Congressmen Charles A. Lindberg, Louis T. McFadden, Robert H. Hemphill, Wright Patman, Francis H. Shoemaker, Jerry Voorhis, Henry Gonzales and former Senator Elmer Thomas, all courageous supporters of banking and monetary reform legislation; Thomas A. Edison; Irving Fisher; Henry C. Simons and the old Chicago School of Economics; Nobel Laureate Frederick Soddy, M.A., F.R.S.; Gertrude M. Coogan; G.K. Chesterton and the Distributist school; Rev. Denis Fahey, C.S.Sp.; Major C.H. Douglas and the Social Credit school; W. Cleon Skousen; Popes Leo XIII, Pius XI, John XXIII, Paul VI, and John Paul II; the Pontifical Commission Justice and Peace; Nobel Laureate Prof. Milton Friedman; Murray N. Rothbard; E.F. Schumacker; Peter Cook; Theodore R. Thoren; Richard F. Warner; Charles and Russell Norburn; George Tolley and a host of others, as well as the historical experience of reform legislation in various nations including the U.S. during the Civil War; Britain during WWI; Sweden in the early 1930's; Portugal from 1931 to 1974 (when it had no national debt); Canada in the mid- 20th century; the Isle of Guernsey, and many others.

Certain economic reform principles emerge from the study of their proposals. The first and most important is made salient from the fact that there is grave danger to society, worldwide, which must be addressed, when a handful of men hold the power of life and death over national economies as is certainly the present case. As Pope Pius XI pointed out in the Encyclical Quadragesimo Anno (1931):

. . . the power to create money and to expand or contract the money supply at will carries with it too great an opportunity of economic domination [and therefor ultimately of tyranny], to be left to private control without injury to the community at large.

Similarly Prof. Friedman:

The power to determine the quantity of too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power ... Any system which gives so much power and so much discretion to a few men, [so] that mistakes - excusable or not - can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic - this is the key political argument against an independent central bank.

Similarly Rev. Dennis Fahey, C.S.Sp.:

If a private group exercise the power to originate the exchange-medium and then manipulates the volume of it, that group becomes a power greater than the government itself. It becomes a super-government, paralyzing the efforts of the lawful government for the common good.

It is perfectly idle to talk about a democracy or a republic when the sovereign power is being exercised de facto by a small group of international bankers not committed to the long-term development of the country, who manipulate public opinion and politicians though their money and media control; the worst of whom seek to arrogate to themselves the exercise of absolute power. What are nations without justice but bands of robbers. - St. Augustine

And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that. All power corrupts; absolute power corrupts absolutely. — Lord Acton

Congressman Lindbergh noted this nearly seventy years ago. These Money Changers, he said, have become bold, aggressive, vindictive and merciless and command the people to support them.

Therefore the first monetary reform principle to emerge is that control over the monetary system must be taken back out of the private hands who have usurped the power of the State by deceit, bribery and intrigue for their selfish or ideological ends, and be resumed by the State. From this it flows that money creation by private persons must be prohibited, thus fractional reserve banking must be prohibited, and full reserve banking mandated by law.

Resolving this danger over the long-term demands that the monetary system be so arranged as to facilitate the production, distribution and exchange of material goods and services in view of supporting the virtuous life of all of the members of society. This requires a stabilized (i.e. not manipulated) price level, while avoiding the opposite end-of-the-spectrum problem of government favoritism in lending. This summarizes as follows:
Sound monetary reform requires the issuance of all money (legal tender) by the State, exclusively; in amounts calculated to stabilize the general price level; without debt obligation to private persons; with all lending to be performed by private legal persons, exclusively; while safeguarding the widespread ownership of private property.

Let us separate these principles (numeric), with their implicit corollaries (alphabetic):

Monetary Reform Principles

Act Sections

1.) Require the issuance of all money (legal tender) by the State, exclusively;

a. this implies the prohibition of all private money creation;

b. this implies the prohibition of fractional reserve banking;

c. this implies the requirement of full reserve banking;

d. this implies withdrawal from international banks with credit/
reserve-creating authority (such as the IMF SDRs);

2.) in amounts calculated to stabilize the general price level;


a. this implies avoiding inflation and deflation, a condition for
steady and healthy economic growth, as government policy;

b. this implies the abandonment of a single commodity standard (e.g.
gold) inasmuch as no commodity is available on the same time as
all goods in general (besides the problems of hoarding, manipulation
through export, etc.);

c.this implies a fixed relationship or rule between the quantity of
money and goods;

d. this may imply a war-time exception to #3, below;

e. this implies government policy to stabilize excessive fluctuation
of exchange rates;

3.) without debt obligation to private persons;


a. this implies paying off national debts (not necessarily intra-government debt);

b. this implies requiring full reserve banking;

c. this implies the issuance of all money (medium of exchange) by
the State;

4.) with all lending to be performed by private legal persons, exclusively;


a. this implies the prohibition of all government lending (e.g. contrary
to communist and national socialist legislation);

b. this implies the prohibition of usurious rates of interest, which
defeat or prevent the beneficial effects of lending and create
obstacles to secure ownership of property;

c. #1, supra., implies that #4 would be limited by the amount
of funds the lender had or obtains to lend;

5.) safeguarding the widespread possession of private property.


a. this implies both the secure (which implies permanent)
and modest possession of private property by all
classes of people;

b. this implies a homestead exemption from property taxation and
in bankruptcy;

c. this implies that the power to create money not be delegated to private
persons for their individual benefit by the State since this results in vast
concentrations of property;

d. this implies that the right to private property is subordinated
to the right to common use where the danger of economic domination
of the community is too great to leave it in private hands.

These principles are consistent with and are required by the increasingly higher principles of subsidiarity, solidarity, justice (i.e. legal, distributive and social) and equity.

Subsidiarity is the principle that states that one should not withdraw from individuals and commit to the community (nor from a lower community to a higher order of community) what they can accomplish by their own enterprise or industry. Negatively put, it states that it is an injustice, a grave evil, and a disturbance of right order for a larger, higher organization or jurisdiction, to arrogate to itself functions (or ownership) which can be performed efficiently by smaller and lower, local bodies. The notion of rational decentralization and the Distributist school derives from this principle. Subsidiarity is, therefore, that principle which dictates to common sense that each man select his own food, home, job and spouse and not be told which by some capitol (or capital) bureaucrat. It reflects the nature of man and of his unique personality which requires that men be not wholly subject to the will of others, but retain their liberty and freedom from oppression, economic imperialism, bureaucratic control and centralization which dries up the wellsprings of initiative and creativity.

Subsidiarity is also that principle which prohibits government lending since this, unlike money creation, can be efficiently performed privately, at the local level without danger to the common good. Needs are best understood and satisfied by people who are closest to them, who are also capable of perceiving deeper causes and needs due to their more personal contact.

Unlike subsidiarity, which required some necessary definition here, solidarity, justice and equity are at least commonly understood, if in a vague sense, and these are not on the same level as our consideration here, which is narrowly limited to considering practical monetary reform legislation.

Interestingly, on January 1, 1998, in his Angelus message, Pope John Paul II said,

The process of globalization under way in the world needs to be orientated in the direction of equity and is indispensable for everyone to strive for justice...

Following these basic principles of sound monetary reform, which are available to common sense enlightened by modest reflection in this area, non-experts are perfectly capable of judging reform proposals such as that following. Indeed, by use of a peculiar esoteric jargon and pure gibberish, central bankers and their economists have intimidated the public from considering this artificially arcane subject area leaving the field to their paid "experts".

Would such reform make monetary policy a plaything for politicians, ending the independence of the Central Bankers? Yes, and so it should be! Quoting Prof. Friedman again: This is an argument for, not against, eliminating the central bank's independence. The economic order is properly subject to the political, not the reverse as is the case presently.

Elected officials with political accountability should run the country, not bankers busily betraying their nation's autonomy and sovereignty. Further, capital is a mere instrument, a means of production at the service of man and his labor, not the reverse. It should be subject to him, not he to it. This is simply to express the obvious primacy of man over things.

This draft Act has gone through numerous technical revisions based on suggestions from numerous sources, and more are invited. In particular, we are grateful for suggestions received from Prof. Milton Friedman. The principles contained herein are equally applicable to Canadian (or other national) draft monetary reform legislation, though the particulars would vary considerably.

Points of controversy in details will doubtless include the following:

1. Whether to abolish or fundamentally reform the existing Federal Reserve System;

2. Whether to require banks to have their reserves in the form of cash, government securities, or Treasury deposits;

3. Whether the State, or private persons, ought to purchase the bank liabilities the banks must liquidate in order to transition to full reserve banking;

4. Whether future monetary growth should be partially discretionary (i.e. but based on a known rule) with some national Monetary Authority, or non-discretionary and based on a fixed rate of growth, and if the latter, at what fixed rate (but having any definite and unambiguous rule is more important than which rule is settled upon);

5. Whether bank reserves ought to earn interest or not, and if so, how much;

6. Whether prior bank profits ought to be disgorged, and if so, whether via a nationalization and re-privatization of banks or by confiscation or tax-surcharge.

The endnotes of the draft Act following, briefly address these points. We regard the choice of such options regarding these points as non-essential to sound monetary reform.

Novel reform proposals, such as: computerized barter systems based on market pricing; the creation of new forms of private monies; using bearer certificates tied to inflation-indexed and non-indexed bonds, or futures widely indexed to result in a relatively constant stable price; localized or municipal currencies, now in use in fifty-two U.S. communities (e.g. the "Bread" [ Berkeley Region Exchange And Development] labor certificates), which were issued in c. 400 local communities during the Great Depression; the widespread establishment of State-owned banks (e.g. the very successful State-ownedBank of North Dakota); and discounted private organization debit cards; are not considered here as they seem presently too speculative, localized or costly to replace national currency and demand deposits. But that may change before we know it, and these proposals all merit further discussion and refinement.

Other non-monetary reforms, such as: increased utilization of credit unions; a new Homesteading Act, instead of allowing idle farmland and abandoned urban buildings to remain so; single parent's cooperatives to assist them and their children to achieve self-sufficiency; tax incentives for micro-mass transit such as community vans; micro-lending; tax reduction including abolition of property and land taxes; and many other worthy ideas have been put forth, which certainly would help society cope with the problems created by the present corrupt banking system, but these go beyond our topic here.

The fundamental, basic economic reform needed — the abolition and recriminalization of usury, is closely related to our topic, but beyond its specific scope. Let it suffice here to state that it is usury, defined as: the charging of interest on a loan which is not productive, which is the root cause of the evils of fractional reserve banking and the debt finance system, which are merely "refinements" of it, as is compound interest and money manipulation in general. Usury is not merely the charging of an excessive or unlawful rate of interest. Unless addressed, usury inevitably leads to these other evils, which are our focus here, and to the decay of justice and civilization.

Regarding a gold standard: there is no unanimity as to what type of gold standard to consider. However, except for a true gold standard - in which either gold coin or gold deposit certificates circulate as money - the others are easily manipulated. But even a true gold standard can be manipulated in a variety of ways, as history demonstrates, and has only this appeal: that it would certainly be better than the current state of affairs in that it is one step more difficult to manipulate its quantity than a purely fiat currency.

However, even a true gold standard has numerous problems (including its relative inelasticity in relation to GNP, GDP or similar yardsticks, resulting in, at least in the short-term, inflation and/or deflation) and would not be preferable to true reform as set forth in the draft Act following, for a number of reasons which we cannot discuss in detail here.

In any case, without the simultaneous abolition of fractional reserve banking (and the retirement of the national debt), adoption of a true gold standard would simply be changing the form of high-powered money from Federal Reserve Notes to gold - a largely meaningless change. Whereas, with the adoption of full reserve banking, including a fixed rate of monetary growth, any commodity standard (e.g. gold) becomes problematic and a potential obstacle to authentic reform. For these reasons, the political support for it is very slight, and was even in the exigencies of the Great Contraction. This seems unlikely to change.


Concerning implementation: the fundamental causes of the world debt crisis are not economic, but philosophical, theological and moral. We cannot expect economic justice in a society that murders innocent children in the womb and idolizes money. So authentic reform cannot be reduced to a technical or drafting problem, which is, however, our specific focus here. Nothing serious or deep is accomplished exclusively by changing techniques, laws or governments.

It is obvious that no change of system or machinery can avert those causes of social malaise which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can live up or not live down. It cannot control their actions. It can offer them an end on which to fix their minds and, as their minds are, so in the long run, and with exceptions, their practical activity will be. — R.H. Tawney

The well being of families, the security of the nation, the happiness of humanity — these can be conceived only in terms of the ordered use by individual persons of their God-given virtues and the objects to which these correspond. There is no such thing (save in metaphor) as a sinful (or "holy") nation or system; there are only nations and systems composed of individual persons either in revolt against nature, right reason, justice and good, or who by reason of their personal virtue are in harmony and union with nature, right reason, justice and God, radiating their personal virtue into the national or systemic life.

So the reform of society and of systems must begin with the reformation of the individual morals of the individual persons who comprise society.

Hopefully, this will be initiated before our remaining freedoms, which are indirectly tied to our economic independence (including our national economic independence and sovereignty) are so far gone as to be irretrievable and injustice degenerates into irremediable conflicts.

No leader in public economy, no power of organization will ever be able to bring social conditions to a peaceful solution, unless first there triumphs moral laws based on God and conscience.—Pope Leo XIII

Institutional reform follows on individual reform ( We must be the change we seek to see in the world – Gandhi), which experience teaches is often predicated on trial or crisis. Crises bring to the surface deeper disorders not otherwise discovered. A better world cannot be built in the midst of crisis, but it is precisely in time of crisis that the anvil is hot for shaping the kind of world peace may provide. Of course, the international bankers know this too, and plan to create and use crises for their own ends, as mentioned above.

Nevertheless, is very unlikely reform will advance in the U.S. until economic crisis deepens and touches larger numbers of our citizens, either suddenly, in a major upheaval (i.e. a severe economic depression or war) or by gradually spreading impoverishment due to continually increasing inflation/taxation/and interest on debt. The false sense of economic and social security to which our citizens presently cling will be increasingly tested and shaken, either way.

As Aristotle noted in his Politics:

For war compels men to be just and temperate, whereas the enjoyment of good fortune and the leisure that comes with peace tend to make them insolent. Those then who seem to be the best-off and to be in the possession of every good, have special need of justice and temperance.

So realistic opportunity for authentic reform may present itself in the context of an economic/political crisis in which increasing numbers of our citizens, hitherto untouched, personally experience the harsh consequences of the lack of justice and charity in the present economic system, since the changes needed are ultimately of the heart and are therefore personal.

Let us glimpse our future, through the eyes of a Brazilian viewing their present:

The third world war has already started. It is a silent war. Not, for that reason, any less sinister. This war is tearing down Brazil, Latin America and practically all the Third World. Instead of soldiers dying, there are children. It is a war over the Third World debt, one which has as its main weapon interest, a weapon more deadly than the atom bomb, more shattering than a laser beam.

Despite their country's fabulous national wealth, 40% of the Brazilian population go hungry whilst seven million children work as slaves or prostitutes.

The relentless activity and ceaseless agitation against justice and right order financed by the Money Changers need not unduly discourage us. This apparent vitality masks the restless spirit injustice generates, which seeks to salve the conflicted conscience by resolving, consciously and subconsciously, to justify its actions externally, in a torrent of words and works. Inner conflict thus leads to outer conflicts, where increasingly aggressive (even murderous) forms of coercion are employed against the outer world, and ultimately against themselves (e.g. neurosis, alcoholism, suicide) to bend the truth of justice to their denial of it.

In short, injustice ultimately creates internal conflict in the individuals (and groups) so acting, as well as in their collective efforts, as they attempt to repress those portions of their own consciousness and of their own groups (and others), which condemn their injustice. This repression requires increasingly greater efforts to maintain (as each act of repression increases the injustice, necessitating even more repression), thus diverting their energy to destructive ends and away from the creativity necessary to maintain their position and power. In fact, so draining is this effort that most people are not capable of the deception, the tight-rope walking, the consistent criminality and repression required to maintain a great evil conspiracy.

In contrast, a conscience at peace naturally tends towards an unworried, calm approach to life, yet this is a sign of strength and integrity, not weakness. Of course, complacency, the opposite extreme, is to be avoided. It is therefore necessary to work simultaneously for the conversion of hearts and for the reform of systems, with the emphasis much on the former.

As Pope John Paul II put it:

We are all called, indeed obliged, to face the tremendous challenge ... because the present danger threatens everyone: a world economic crisis, a war without frontiers ... every individual is called upon to play his or her part in this peaceful campaign, a campaign to be conducted by peaceful means, in order to secure development in peace.

Our part of this development in peace may begin with a prudent, clear-eyed objectivity to determine what actions are appropriate to the real situation before us. This cannot be achieved except by an attitude of 'silent contemplation' of reality, during which the egocentric interests of man are, at least temporarily, silenced. In that silence, the knowledge of truth may be transformed into decisions corresponding to reality. However, it is the province of true religion to define this for those so drawn and to reveal distinctly religious responses to this crisis.

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