Wednesday, December 24, 2008


To: U.S. Congress

This petition calls for the abolishment of the US Federal Act, the Federal Reserve Bank (FED)and its Board of Governors by Congress. (read article below: What is the FED by Greg Hobbs.)

“The Central Bank is an institution of the most deadly hostility existing against
the principles and form of our Constitution. I believe that banking institutions are more dangerous to our liberties than standing armies. The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. Already they have raised up a monied aristocracy that has set the Government at defiance.

The issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.”

- Thomas Jefferson

Tragically, this prophecy has already materialized...

“Money is the creature of law and the creation of the original issue of money
should be maintained as an exclusive monopoly of National Government.
Government possessing the power to create and issue currency . . . need not and
should not borrow capital at interest as the means of financing governmental work
and public enterprise.

The Government should create, issue, and circulate all the
currency and credit needed to satisfy the spending power of the Government and
the buying power of consumers. The privilege of creating and issuing money is not
only the supreme prerogative of Government, but it is the Government’s greatest
creative opportunity. The taxpayers will be saved immense sums in interest. . . . Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.

The money power preys upon the nation in times of peace and conspires
against it in times of adversity. It is more despotic than monarchy, more insolent
than autocracy, more selfish than bureaucracy. I see in the near future a crisis
approaching that unnerves me and causes me to tremble for the safety of my country.
Corporations have been enthroned, an era of corruption in high places will follow,
and the money-power of the country will endeavor to prolong its reign by
working upon the prejudices of the people until the wealth is aggregated in a few
hands and the Republic is destroyed. -Abraham Lincoln

“Some people think the Federal Reserve Banks are United States Government institutions. They are not Government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers and rich and predatory money lenders.

Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. .... This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it. " - Congressman McFadden on the Federal Reserve Corporation Remarks in Congress, 1934 Floor of the House of Representatives by the Honorable Louis T. McFadden of Pennsylvania. Mr. McFadden served as Chairman of the Banking and Currency Committee for more than 10 years. There were two assassination attempts against McFadden.

“This act establishes the most gigantic trust on earth, such as the Sherman
Antitrust Act would dissolve if Congress did not by this act expressly create what
by that act it prohibited. When the President signs this act the invisible government
by the money power, proven to exist by the Money Trust investigation, will be legalized. The greatest crime of Congress is its currency system. The schemiest legislative crime of all the ages is perpetuated by this new banking and currency bill.” — Congressman Charles A. Lindbergh

“And the control of the system of banking and of issue which our new laws are to
set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative.” Woodrow Wilson, 1913

Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote:

“I am a most unhappy man. I have unwittingly ruined my country. A great
industrial nation is controlled by its system of credit. Our system of credit is con-centrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world — no longer a government by free opinion, no longer a government by conviction and the vote of the
majority, but a government by the opinion and duress of a small group of dominant
men.” Woodrow Wilson, 1916

And As Nathan Mayer Rothschild - the principal architect of the FED - stated:

“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.” Rothschild Bros. of London, 1863

And as Henry Ford rightly stated and warned:

“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

That day is not far. The world is now too small for anything but Truth and Justice.

I encourage all those who wish to live as free men/women to urgently and actively carry out their own research on the fraudulent workings of the both Federal Reserve Bank (FED) and of the global financial architecture (i.e. Central Banking & Fractional Reserve Banking).

It (the banking system) is the most important subject intelligent persons
can investigate and reflect upon. It is so important that our present civilization
may collapse unless is widely understood and the defects remedied very soon.”
— Robert Hemphill, former credit manager of the Federal Reserve Bank of

As Goethe said:

“None are more enslaved than those who falsely believe to be free.”

As Tolstoy rightly stated:

“ Money is a new form of slavery, distinguishable from the old simply due to the fact that there is no personal and visible human relationship between master and slave.”

“While boasting of our noble deeds, we are careful to conceal the ugly fact that
by our iniquitous money system we have nationalized a system of oppression,
which, though more refined, is not less cruel than the old system of chattel slavery.” — Horace Greeley

What is the Federal Reserve Bank (FED) and why do we have it? By Gregg Hobbs

The FED is a central bank. Central banks are supposed to implement a country's fiscal policies. They monitor commercial banks to ensure that they maintain sufficient assets, like cash, so as to remain solvent and stable. Central banks also do business, such as currency exchanges and gold transactions, with other central banks. In theory, a central bank should be good for a country, and they might be if it wasn't for the fact that they are not owned or controlled by the government of the country they are serving. Private central banks, including our FED, operate not in the interest of the public good but for profit.

There have been three central banks in our nation's history. The first two, while deceptive and fraudulent, pale in comparison to the scope and size of the fraud being perpetrated by our current FED. What they all have in common is an insidious practice known as "fractional banking."

Fractional banking or fractional lending is the ability to create money from nothing, lend it to the government or someone else and charge interest to boot. The practice evolved before banks existed. Goldsmiths rented out space in their vaults to individuals and merchants for storage of their gold or silver. The goldsmiths gave these "depositors" a certificate that showed the amount of gold stored. These certificates were then used to conduct business.

In time the goldsmiths noticed that the gold in their vaults was rarely withdrawn. Small amounts would move in and out but the large majority never moved. Sensing a profit opportunity, the goldsmiths issued double receipts for the gold, in effect creating money (certificates) from nothing and then lending those certificates (creating debt) to depositors and charging them interest as well.

Since the certificates represented more gold than actually existed, the certificates were "fractionally" backed by gold. Eventually some of these vault operations were transformed into banks and the practice of fractional banking continued.

Keep that fractional banking concept in mind as we examine our first central bank, the First Bank of the United States (BUS). It was created, after bitter dissent in the Congress, in 1791 and chartered for 20 years. A scam not unlike the current FED, the BUS used its control of the currency to defraud the public and establish a legal form of usury.

This bank practiced fractional lending at a 10:1 rate, ten dollars of loans for each dollar they had on deposit. This misuse and abuse of their public charter continued for the entire 20 years of their existence. Public outrage over these abuses was such that the charter was not renewed and the bank ceased to exist in 1811.

The war of 1812 left the country in economic chaos, seen by bankers as another opportunity for easy profits. They influenced Congress to charter the second central bank, the Second Bank of the United States (SBUS), in 1816.

The SBUS was more expansive than the BUS. The SBUS sold franchises and literally doubled the number of banks in a short period of time. The country began to boom and move westward, which required money. Using fractional lending at the 10:1 rate, the central bank and their franchisees created the debt/money for the expansion.

Things boomed for a while, then the banks decided to shut off the debt/money, citing the need to control inflation. This action on the part of the SBUS caused bankruptcies and foreclosures. The banks then took control of the assets that were used as security against the loans.

Closely examine how the SBUS engineered this cycle of prosperity and depression. The central bank caused inflation by creating debt/money for loans and credit and making these funds readily available. The economy boomed. Then they used the inflation which they created as an excuse to shut off the loans/credit/money.

The resulting shortage of cash caused the economy to falter or slow dramatically and large numbers of business and personal bankruptcies resulted. The central bank then seized the assets used as security for the loans. The wealth created by the borrowers during the boom was then transferred to the central bank during the bust. And you always wondered how the big guys ended up with all the marbles.

Now, who do you think is responsible for all of the ups and downs in our economy over the last 85 years? Think about the depression of the late '20s and all through the '30s. The FED could have pumped lots of debt/money into the market to stimulate the economy and get the country back on track, but did they? No; in fact, they restricted the money supply quite severely. We all know the results that occurred from that action, don't we?

Why would the FED do this? During that period asset values and stocks were at rock bottom prices. Who do you think was buying everything at 10 cents on the dollar? I believe that it is referred to as consolidating the wealth. How many times have they already done this in the last 85 years?

Do you think they will do it again?

Just as an aside at this point, look at today's economy. Markets are declining. Why? Because the FED has been very liberal with its debt/credit/money. The market was hyper inflated. Who creates inflation? The FED. How does the FED deal with inflation? They restrict the debt/credit/money. What happens when they do that? The market collapses.

Several months back, after certain central banks said they would be selling large quantities of gold, the price of gold fell to a 25-year low of about $260 per ounce. The central banks then bought gold. After buying at the bottom, a group of 15 central banks announced that they would be restricting the amount of gold released into the market for the next five years. The price of gold went up $75.00 per ounce in just a few days. How many hundreds of billions of dollars did the central banks make with those two press releases?

Gold is generally considered to be a hedge against more severe economic conditions. Do you think that the private banking families that own the FED are buying or selling equities at this time? (Remember: buy low, sell high.) How much money do you think these FED owners have made since they restricted the money supply at the top of this last current cycle?

Alan Greenspan has said publicly on several occasions that he thinks the market is overvalued, or words to that effect. Just a hint that he will raise interest rates (restrict the money supply), and equity markets have a negative reaction. Governments and politicians do not rule central banks, central banks rule governments and politicians. President Andrew Jackson won the presidency in 1828 with the promise to end the national debt and eliminate the SBUS. During his second term President Jackson withdrew all government funds from the bank and on January 8, 1835, paid off the national debt. He is the only president in history to have this distinction. The charter of the SBUS expired in 1836.

Without a central bank to manipulate the supply of money, the United States experienced unprecedented growth for 60 or 70 years, and the resulting wealth was too much for bankers to endure. They had to get back into the game. So, in 1910 Senator Nelson Aldrich, then Chairman of the National Monetary Commission, in collusion with representatives of the European central banks, devised a plan to pressure and deceive Congress into enacting legislation that would covertly establish a private central bank.

This bank would assume control over the American economy by controlling the issuance of its money. After a huge public relations campaign, engineered by the foreign central banks, the Federal Reserve Act of 1913 was slipped through Congress during the Christmas recess, with many members of the Congress absent. President Woodrow Wilson, pressured by his political and financial backers, signed it on December 23, 1913.
Recommend you all read “The Creature from Jekyll Island” by Edward Griffin, so you understand the FED and how it was created and by whom.

The act created the Federal Reserve System, a name carefully selected and designed to deceive. "Federal" would lead one to believe that this is a government organization. "Reserve" would lead one to believe that the currency is being backed by gold and silver. "System" was used in lieu of the word "bank" so that one would not conclude that a new central bank had been created.

In reality, the act created a private, for profit, central Banking Corporation owned by a cartel of private banks. Who owns the FED? The Rothschilds of London and Berlin; Lazard Brothers of Paris; Israel Moses Seif of Italy; Kuhn, Loeb and Warburg of Germany; and the Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York.

Did you know that the FED is the only for-profit corporation in America that is exempt from both federal and state taxes? The FED takes in about one trillion dollars per year tax free! The banking families listed above get all that money.

Almost everyone thinks that the money they pay in taxes goes to the US Treasury to pay for the expenses of the government. Do you want to know where your tax dollars really go? If you look at the back of any check made payable to the IRS you will see that it has been endorsed as "Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig." Yes, that's right, every dime you pay in income taxes is given to those private banking families, commonly known as the FED, tax free.

Like many of you, I had some difficulty with the concept of creating money from nothing. You may have heard the term "monetizing the debt," which is kind of the same thing. As an example, if the US Government wants to borrow $1 million ó the government does borrow every dollar it spends ó they go to the FED to borrow the money. The FED calls the Treasury and says print 10,000 Federal Reserve Notes (FRN) in units of one hundred dollars.

The Treasury charges the FED 2.3 cents for each note, for a total of $230 for the 10,000 FRNs. The FED then lends the $1 million to the government at face value plus interest. To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer. The above was just an example, because in reality the FED does not even print the money; it's just a computer entry in their accounting system. To put this on a more personal level, let's use another example.

Today's banks are members of the Federal Reserve Banking System. This membership makes it legal for them to create money from nothing and lend it to you. Today's banks, like the goldsmiths of old, realize that only a small fraction of the money deposited in their banks is ever actually withdrawn in the form of cash. Only about 3 or 4 percent of all the money that exists is in the form of currency. The rest of it is simply a computer entry.

Let's say you're approved to borrow $10,000 to do some home improvements. You know that the bank didn't actually take $10,000 from its pile of cash and put it into your pile? They simply went to their computer and input an entry of $10,000 into your account. They created, from thin air, a debt, which you have to secure with an asset and repay with interest. The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED.

It sort of puts a new slant on how you view your friendly bank, doesn't it? How about those loan committees that scrutinize you with a microscope before approving the loan they created from thin air. What a hoot! They make it complex for a reason. They don't want you to understand what they are doing. People fear what they do not understand. You are easier to delude and control when you are ignorant and afraid.

Now to put the frosting on this cake. When was the income tax created? If you guessed 1913, the same year that the FED was created, you get a gold star. Coincidence? What are the odds? If you are going to use the FED to create debt, who is going to repay that debt? The income tax was created to complete the illusion that real money had been lent and therefore real money had to be repaid. And you thought Houdini was good.

So, what can be done? My father taught me that you should always stand up for what is right, even if you have to stand up alone.

If "We the People" don't take some action now, there may come a time when "We the People" are no more. You should write a letter or send an email to each of your elected representatives. Many of our elected representatives do not understand the FED. Once informed they will not be able to plead ignorance and remain silent. This petition will be sent to all members of Congress, do your part and sign this petition.

Article 1, Section 8 of the US Constitution specifically says that Congress is the only body that can "coin money and regulate the value thereof." The US Constitution has never been amended to allow anyone other than Congress to coin and regulate currency.

Ask your representative, in light of that information, how it is possible for the Federal Reserve Act of 1913, and the Federal Reserve Bank that it created, to be constitutional. Ask them why this private banking cartel is allowed to reap trillions of dollars in profits without paying taxes. Insist on an answer.

Thomas Jefferson said, "If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered."

Jefferson saw it coming 150 years ago. The question is, "Can you now see what is in store for us if we allow the FED to continue controlling our country?"

"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he breaks, servitude is at once the consequence of his crime, and the punishment of his guilt." John P. Curran

Click on the title above to sign the petition.


Below is a copy of the Bill introduced by Congressman Ron Paul for the abolition of the Federal Reserve Bank (FED) and its Board of Governors.


1st Session

H. R. 2755

To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.


June 15, 2007

Mr. PAUL introduced the following bill; which was referred to the Committee on Financial Services


To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


This Act may be cited as the `Federal Reserve Board Abolition Act'.


(a) In General- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Board of Governors of the Federal Reserve System and each Federal reserve bank are hereby abolished.

(b) Repeal of Federal Reserve Act- Effective at the end of the 1-year period beginning on the date of the enactment of this Act, the Federal Reserve Act is hereby repealed.

(c) Disposition of Affairs-

(1) MANAGEMENT DURING DISSOLUTION PERIOD- During the 1-year period referred to in subsection (a), the Chairman of the Board of Governors of the Federal Reserve System--

(A) shall, for the sole purpose of winding up the affairs of the Board of Governors of the Federal Reserve System and the Federal reserve banks--

(i) manage the employees of the Board and each such bank and provide for the payment of compensation and benefits of any such employee which accrue before the position of such employee is abolished; and

(ii) manage the assets and liabilities of the Board and each such bank until such assets and liabilities are liquidated or assumed by the Secretary of the Treasury in accordance with this subsection; and

(B) may take such other action as may be necessary, subject to the approval of the Secretary of the Treasury, to wind up the affairs of the Board and the Federal reserve banks.


(A) IN GENERAL- The Director of the Office of Management and Budget shall liquidate all assets of the Board and the Federal reserve banks in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury.

(B) TRANSFER TO TREASURY- After satisfying all claims against the Board and any Federal reserve bank which are accepted by the Director of the Office of Management and Budget and redeeming the stock of such banks, the net proceeds of the liquidation under subparagraph (A) shall be transferred to the Secretary of the Treasury and deposited in the General Fund of the Treasury.

(3) ASSUMPTION OF LIABILITIES- All outstanding liabilities of the Board of Governors of the Federal Reserve System and the Federal reserve banks at the time such entities are abolished, including any liability for retirement and other benefits for former officers and employees of the Board or any such bank in accordance with employee retirement and benefit programs of the Board and any such bank, shall become the liability of the Secretary of the Treasury and shall be paid from amounts deposited in the general fund pursuant to paragraph (2) which are hereby appropriated for such purpose until all such liabilities are satisfied.

(d) Report- At the end of the 18-month period beginning on the date of the enactment of this Act, the Secretary of the Treasury and the Director of the Office of Management and Budget shall submit a joint report to the Congress containing a detailed description of the actions taken to implement this Act and any actions or issues relating to such implementation that remain uncompleted or unresolved as of the date of the report.



“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.


“The Central Bank is an institution of the most deadly hostility existing against
the principles and form of our Constitution. I believe that banking institutions are more dangerous to our liberties than standing armies. The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. Already they have raised up a monied aristocracy that has set the Government at defiance.

The issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.”

- Thomas Jefferson

Tragically, this prophecy has already materialized...

“Money is the creature of law and the creation of the original issue of money
should be maintained as an exclusive monopoly of National Government.
Government possessing the power to create and issue currency . . . need not and
should not borrow capital at interest as the means of financing governmental work
and public enterprise.

The Government should create, issue, and circulate all the
currency and credit needed to satisfy the spending power of the Government and
the buying power of consumers. The privilege of creating and issuing money is not
only the supreme prerogative of Government, but it is the Government’s greatest
creative opportunity. The taxpayers will be saved immense sums in interest. . . . Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.

The money power preys upon the nation in times of peace and conspires
against it in times of adversity. It is more despotic than monarchy, more insolent
than autocracy, more selfish than bureaucracy. I see in the near future a crisis
approaching that unnerves me and causes me to tremble for the safety of my country.
Corporations have been enthroned, an era of corruption in high places will follow,
and the money-power of the country will endeavor to prolong its reign by
working upon the prejudices of the people until the wealth is aggregated in a few
hands and the Republic is destroyed. -Abraham Lincoln


Proposed law for a monetary reform of the (US/global) financial/banking architecture (i.e. Central Banking & Fractional Reserve Banking)


This proposed law would require banks to increase their reserves on deposits from the current 10%, to 100%, over a one-year period. This would abolish fractional reserve banking (i.e., money creation by private banks) which depends upon fractional (i.e., partial) reserve lending. To provide the funds for this reserve increase, the US Treasury Department would be authorized to issue new United States Notes (and/or US Note accounts) sufficient in quantity to pay off the entire national debt (and replace all Federal Reserve Notes).

The funds required to pay off the national debt are always closely equivalent to the amount of money the banks have created by engaging in fractional lending because the Fed creates 10% of the money the government needs to finance deficit spending (and uses that newly created money to buy US bonds on the open market), then the banks create the other 90% as loans (as is explained on our FAQ page). Thus the national debt closely tracks the combined total of US Treasury debt held by the Fed (10%) and the amount of money created by private banks (90%).

Because this two-part action (increasing bank reserves to 100% and paying off the entire national debt) adds no net increase to the money supply (the two actions cancel each other in net effect on the money supply), it would cause neither inflation nor deflation, but would result in monetary stability and the end of the boom-bust pattern of US economic activity caused by our current, inherently unstable system.

Thus our entire national debt would be extinguished – thereby dramatically reducing or entirely eliminating the US budget deficit and the need for taxes to pay the $400+ billion interest per year on the national debt - and our economic system would be stabilized, while ending the terrible injustice of private banks being allowed to create over 90% of our money as loans on which they charge us interest. Wealth would cease to be concentrated in fewer and fewer hands as a result of private bank money creation. Thereafter, apart from a regular 3% annual increase (roughly matching population growth), only Congress would have the power to authorize changes in the US money supply - for public use -not private banks increasing only private bankers' wealth.


An Act

To restore confidence in and governmental control over money and credit, to stabilize the money supply and price level, to establish full reserve banking, to prohibit fractional reserve banking, to retire the national debt, to repeal conflicting Acts, to withdraw from international banks, to restore political accountability for monetary policy, and to remove the causes of economic depressions, without additional taxation, inflation or deflation, and for other purposes.1

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that:

Section 1. SHORT TITLE. This Act may be cited as the Monetary Reform Act.

Sec. 2. IMPLEMENTATION. This Act shall be implemented over a one-year transition period, beginning thirty days after the date of the enactment of this Act.

Sec. 3. DEFINITIONS. The definitions of terms shall be those set forth in the Federal Reserve Act of December 23, 1913, as amended. United States Notes as used herein shall mean Treasury issue United Stated currency notes (as defined in 31 U.S.C. Sec. 5115) not bearing any interest, being lawful money and legal tender for all debts, public and private, and which term as used herein shall include Treasury Department Deposits (a.k.a. Treasury Deposits or Treasury book entries) convertible to United States Notes, which may be substituted therefor at the discretion of the Secretary of the Treasury. During the transition period, Treasury Deposits as used herein shall include Federal Reserve Deposits.

Sec. 4. ONE HUNDRED PERCENT (100%) RESERVE REQUIREMENT. Section 19(b)(2)(A-D) of the Federal Reserve Act is hereby amended to raise the Reserve Requirement ratio for financial institutions, in equal monthly increments of eight and one-half percent (8.5%), to one hundred percent (100%), during the said transition period. No existing reserve requirements shall be reduced, but shall be increased as the overall Reserve Requirement ratio incremental increase surpasses them. The initial minimum overall Reserve Requirement ratio shall be fixed at eight and one-half percent (8.5%) for all accounts, effective in one month. United States Notes, Federal Reserve Notes, Treasury Deposits and Federal Reserve Deposits shall be included in Reserve calculations in the transition period. No waivers or exemptions to this section may be granted, and any in existence are hereby repealed.2

Sec. 5. RETIRING THE NATIONAL DEBT. The Secretary of the Treasury is hereby authorized and directed to purchase, in open market operations or otherwise, all outstanding Federal Debt held by the public, with United States Notes; thereby the net (public) National Debt is to be completely retired and replaced with United States Notes.3 Treasury Deposits are to be created for intra-U.S. government debt in quantity sufficient to extinguish the remaining gross National Debt.

Sec. 6. STABLE MONEY SUPPLY. The Secretary of the Treasury is hereby authorized and directed to time and apportion the purchase of United States Bonds and other federal debt securities held by the public, and the issuance of United States Notes and the creation of Treasury Deposits to the rate of the Reserve Requirement Ratio increases made pursuant to this Act, in order to keep the money supply (calculated including the monetary substitutions provided for herein) constantly stable, except as is provided in section 7, infra. Should the Secretary of the Treasury determine that additional bank deposits be needed to provide funds for the bank reserve ratio to be increased to 100% without inflation or deflation, the Treasury Secretary is authorized to retire other U.S. government agency securities with U.S. Notes issued in sufficient amount to provide the needed funds, or such amounts shall be transferred from aforesaid (see Section 5., supra.) Treasury Deposits to commercial bank accounts. 4

Sec. 7. FUTURE MONETARY GROWTH. Beginning with the transition year period, and thereafter on an annual basis, the total dollar amount of United States Notes (as defined supra: i.e., the sum of outstanding currency plus Treasury Deposits) outstanding (calculated to include the total amount of outstanding Federal Reserve Notes, i.e., not yet replaced with U.S. Notes) shall be increased by the Treasury Department, steadily, by three per cent (3%) per annum5, which amount shall be paid into the economy by the Treasury Department, first to retire (or purchase) any future war bonds (issued pursuant to section 8. hereof), then any remaining marketable and non-marketable federal debt (e.g., Federal government agency securities, intra-governmental debt, and fully guaranteed obligations of the government), then, pursuant to appropriation by Congress, to pay for goods, services, or interest. Any such new money not appropriated (i.e. allocated for expenditure) by Congress during any such year, shall be rebated by the Secretary of the Treasury to individual, personal income taxpayers on a fixed percentage basis within thirty (30)days of the close of such year. Except in time of war, no United States government bonds, bills, savings bonds or other debt obligations may be sold by the government, except as is provided for in this Act. No federal agency or federally-chartered bureau, board or instrumentality may engage in any further lending or borrowing, nor guarantee same, after the date this Act becomes law.

Sec. 8. WAR EXCEPTION. In the case of a formal Congressional declaration of war with a foreign nation, the three percent (3%) monetary growth provided for in section 7., supra, may be exceeded and United States government bonds may be sold or purchased in open market operations by the Treasury Department, pursuant to Congressional authorization. The suspension of the fixed three per cent (3%) monetary growth, and United States government bond sales, shall terminate annually unless renewed by Congress, or upon the cessation of hostilities, or by formal proclamation of the President declaring the war ended, or upon the exchange of ratifications of the treaty of peace. The provisions of this Act shall supersede the provisions of the National Emergencies Act (50 U.S.C. 1601, et seq., Titles I-V, as amended), and any declaration of emergency by any member of the Executive Branch.

Sec. 9. FULL RESERVE BANKS. After the transition period, institutions using the word bank in their name or title, may not engage in lending, except that the capital of the owners may be invested or loaned on the open market, but may charge fees for their services and may invest deposits in Treasury Department Deposit accounts. These: full reserve; one hundred percent (100%) reserve; deposit; check or narrow; banks, as they, exclusively, may also be titled, must treat deposits received as trust-funds of money held for depositors. By the end of the transition period, for every dollar deposited, banks must have a dollar of United States Notes on hand or invested in a Treasury Department Deposit account. All bank deposits shall be in demand accounts. Banks shall be free to pay any rate of interest on accounts. Only bank deposits may be transferable by check, credit card, electronic transfer or any substitute therefor. At the beginning of the transition period, entry into such one hundred percent (100%) reserve banking shall be open to all persons having no criminal record, subject to minimal bonding requirements to be established by the Secretary of the Treasury.6

Sec. 10. TREASURY DEPOSITS. Funds placed in Treasury Department Deposits shall be utilized by the Secretary of the Treasury pursuant to appropriation by Congress, to pay for goods, services, or interest needed by the federal government. Any such funds received by the government in excess of federal expenditures not funded by tax revenues shall be rebated to individual, personal income taxpayers on a fixed percentage basis within thirty (30) days of the close of that year. Withdrawals of Treasury Deposits in excess of receipts in any given year shall be funded by future monetary growth as provided in section 7., supra, or should the withdrawals ever exceed monetary growth, by tax increases; in this latter, unlikely event, the Secretary of the Treasury is hereby authorized, in the absence of any other, specific authority, to add a fixed percentage surcharge to income taxes for that period, equal to the sum of excess withdrawals.

Sec. 11. INTEREST. The initial rate of interest payable on Treasury Department Deposits shall be equal to the average yield on three-month Treasury bills during the preceding quarter. Thereafter, it shall be adjusted quarterly in accordance with changes in the average yield of ninety-day commercial paper over the preceding quarter.7

Sec. 12. LENDING INSTITUTIONS. Banks or any other persons may establish separate associations, with or without joint ownership or management, not to be titled banks, such as investment trusts, mutual funds, brokerage or lending houses, to sell stock, to receive, borrow, lend or invest money at interest, but by the end of the transition period only from existing funds (i.e. United States Notes and Treasury Deposits). Contractual provisions must be made by such institutions upon the receipt of any funds with their owners, investors or depositors, that at no time may more funds be subject to demand than are presently idle and one hundred per cent (100%) available on demand. For any funds deposited with such associations payable on demand there must be a dollar of United States Notes on hand or deposited in a Treasury Deposit. No such association may denominate any account a demand account, nor promise immediate availability of any funds which may be invested, deposited or otherwise placed by such association without notice in any instrument or account other than Treasury Deposits. No funds deposited or invested with such associations may be transferred by check, credit card, electronic transfer or any substitute therefor. Owners, investors, lenders and depositors must be advised of the use of their funds, fairly appraised of the risks including the risk of total loss, of the maximum term of the use and of the potential and actual lack of availability of their funds, and the agreed or expected interest rate or the rate of return.

Sec. 13. REPEAL OF CONFLICTING ACTS. The National Banking Act of 1864 and amendments, and the Federal Reserve Act of 1913 and amendments, are hereby repealed,8effective at the end of the transition period. All Federal Reserve System monetary authority and Federal Reserve Deposits shall be transferred to the Treasury Department at the end of the transition period. From the effective date of this Act, and during the transition period, the Federal Reserve System and its District Banks shall not engage in open market transactions, nor change the Federal Funds Discount Rate, nor alter any Reserve Requirements, nor otherwise alter any money aggregate, nor transfer, dispose of, nor move any gold or silver in either their physical or legal possession, except as provided for in this Act, contrary provisions of the Federal Reserve Act or other statutes notwithstanding. The paid-in capital of Federal Reserve System member banks shall be credited to their Federal Reserve Deposit accounts at the beginning of the transition period, and the Federal Reserve Banks, employees, assets and liabilities transferred to the jurisdiction and control of the Treasury Department and employed for the purposes of this Act, including continuation of check-clearing and other services not prohibited by this Act. The Secretary of the Treasury is directed to replace gradually all outstanding Federal Reserve Notes with United States Notes, as soon as is practicable. Outstanding Federal Reserve Notes shall remain legal tender for all debts, public and private. Section 602(g)(14) of the Riegle Act of 1994 amending U.S.C. Title 32, insofar as it removed the requirement of reissuing United States currency notes upon redemption, is hereby repealed. Title 31 U.S.C. Section (a)2(b) limiting United States Notes to a total of $300 million and prohibiting their use as reserves, is hereby repealed. Existing legislation in conflict with this Act, whether in whole or in part, is hereby repealed in whole or in part as may be necessary to resolve any conflict with this Act.9

Sec. 14. PENALTIES. After the transition period, no person may loan, create credit or liabilities payable on demand or transferable by check, credit card or electronic transfer, without having one hundred percent (100%) reserves of United States Notes, dollar for dollar, for any such amounts. Violation of this provision will subject the violator to civil penalties for fraud, and to criminal penalties. 18 U.S.C. Crimes and Criminal Procedure §1344. Bank fraud: is hereby amended to include a new subsection (3) as follows: Whoever knowingly executes, or attempts to execute, a scheme or artifice — (3) to engage in fractional reserve banking practices as described and prohibited by the Monetary Reform Act, Section 14, shall be fined not more than three times the total dollar amount of the violation(s), or imprisoned not more than 20 years, or both; but if the amount of the violation does not exceed $1,000, the violator(s) shall be fined treble damages or imprisoned not more than one year, or both.

Sec. 15. WITHDRAWAL FROM INTERNATIONAL BANKS. It is hereby declared as a matter of federal statutory law that membership and/or participation of the United States government, or its agencies, or of the Federal Reserve Board or Reserve Banks or any officer or employee thereof, with the Bank for International Settlements, the International Monetary Fund, the World Bank, and all other international banks, is inconsistent with and in direct conflict with the purposes of this Act of Congress. The President is hereby authorized and directed to take such steps as may be necessary to withdraw the United States from all participation, and membership, in the Bank for International Settlements, the International Monetary Fund, the World Bank, and all other international banks, in any orderly manner, but in a period not to exceed one year from the effective date of this Act, and to recover the original and any subsequent United States subscriptions, contributions and quotas to such organizations, not already fully and lawfully expended, whether in the form of gold, deposits, currency or otherwise; and to enter into negotiations to establish new exchange facilities consistent with the purposes of this Act having no authority to create money or credit in any form, and having no independent authority to establish laws or regulations binding upon the United States or its banks, financial institutions or citizens, and subject to the ongoing, annual budgetary authority and approval of Congress.10

Sec. 16. FOREIGN EXCHANGE. The Secretary of the Treasury is hereby authorized and directed to enact regulations allowing the external rate of exchange freely to fluctuate, as foreign price levels fluctuate (i.e. in accordance with their respective purchasing power), while utilizing the exchange stabilization fund and foreign currency reserves to counterbalance fluctuations in the exchange rate. The Secretary of the Treasury shall enact such regulations in order to: 1. keep the stable, internal domestic price level established by this Act unaffected by foreign exchange rate fluctuations; 2. maintain imports and exports of capital, in equilibrium. In no event shall foreign exchange rates be allowed to alter the fixed rate of monetary growth set forth in section 7., above.11'

In any period in which the exchange stabilization fund and foreign currency reserves are inadequate to maintain equilibrium in capital flow, the Secretary of the Treasury is hereby authorized and directed: to restrict any imbalanced inflow of dollars to an amount equal to the monetary growth rate for such period (as set forth in Section 7.,supra), which monetary growth shall be thus funded; and, to prohibit any imbalanced outflow of dollars. Imbalances in excess of such amounts must first be chronologically booked for subsequent exchange as soon as the free markets restore the equilibrium necessary for the exchange(s) to occur.

The Secretary shall issue regulations to establish an advance foreign exchange book, open for public inspection, of all contracted, future foreign exchange transactions and obligations, in order to facilitate such exchanges. Such exchanges must be assigned by the Secretary on a first-come, first-served basis, in order to guarantee foreign exchange availability, for a one quarter per cent (0.25%) fee. 12

Sec. 17. APPROPRIATIONS. The Secretary of the Treasury is authorized and directed to establish Treasury Department Deposits, convertible to United States Notes on demand, sufficient to accomplish the provisions of this Act. The Federal Reserve Act is hereby amended to add this section: that the Governors of the Federal Reserve System are authorized and directed to establish Federal Reserve Deposits sufficient to accomplish the purposes of this Act, in amounts to be determined by the Secretary of the Treasury. The Director of the Bureau of Engraving is hereby authorized and directed to print a sufficient quantity of United States Notes to accomplish the provisions of this Act. There is hereby authorized to be appropriated, out of any funds not otherwise appropriated, such sums as may be necessary to carry out the purposes of this Act.13

Sec. 18. SEVERABILITY. If any provision of this Act, an amendment made by this Act, or the application of such provision or amendment to any person or circumstance shall be held to be unconstitutional, the remainder of this Act, the amendments made by this Act, and the application of the provisions of such to any person or circumstance shall not be affected thereby.

* * *


1. A draft in 17 sections by Patrick Carmack, J.D.; Copyright 1996. All rights reserved. For a free copy of the Act, send a SASE to: Monetary Reform Act, P.O. Box 67, Manitou Springs, CO 80829-0067, or call 1-888-THE PLOT to order the video The Money Masters which has the Act as an insert, or visit Minor revision is an ongoing process in response to suggestions received. Return to main article

2. The principal point of this section and of the entire Act is to replace private creation of money by debt-based, bank-book-entry creation (i.e. by bank loans), based on fractional reserves (i.e. high-powered money) which is inherently unstable and unjust, with government creation of money by credit-based Treasury deposits and U.S. Notes (i.e. for government payments or purchases) which are based on full reserves (i.e. not high-powered money), by definition for the benefit of all the people, not just for bankers. Return to main article

3. The gross National debt is presently c. $9.9 trillion [Sept. 2008]. The net or Public National Debt portion of that (i.e. net of what the government owes itself) is c. $5.4 trillion, of which the Federal Reserve holds c. $480 billion in the System Open Market Account managed by the NY Fed. There is obviously less urgency in paying off what the government owes itself (i.e., the difference between the gross and the public national debt, owed to different government departments and funds), presently c. $4.5 trillion. The Act provides that the remaining c. $5.4 trillion public debt should be paid off with U.S. Notes issued by the Treasury Department. The only real objection to this is that, under the present law, such action would be hyperinflationary, which is true. This is why the proposed Act requires the simultaneous increase in the required reserve ratios of banks from 10% to 100%, which both fully solves the inflationary issue and ends private bank creation of money. Commercial bank loans in the US total c. $7 trillion. This represents money created by the banks as loans. Increasing the reserve ratio to 100% would require banks to have a source of deposits equal to the needed increase in reserves which would be c. $7 trillion, in order to avoid calling in loans Paying off the public national debt would provide c. $5.4 trillion of the needed capital. Commercial banks hold another c. $1 trillion in other US government agency securities, which the Act provides would also be paid with U.S. Notes, thus providing a total of $6.4 trillion and extinguishing national debt to the same amount. The Act provides for the gradual payment of the c. $4.5 trillion intra-governmental debt, which shall be timed to provide the balance of the needed reserves (c. $600 billion), and thereafter to provide the 3% growth of the money supply, until fully retired. The intra-governmental debt thus provides a ready and flexible avenue for the Treasury to manage the amount of U.S. Notes created to retire the National debt to match capital needed for the reserve ratio increase. Hence there is no technical obstacle to implementation of this section.

Alternatively, in a less comprehensive but arguably easier reform, full-reserve banks could be required to keep their reserves in either the form of cash or federal debt securities. This would be equivalent to keeping their reserves in interest-bearing Treasury Deposits. Both methods would effectively require banks to substitute existing bank liabilities for the entire marketable government debt in one form or another. Free markets to facilitate this substitution would very rapidly arise and should be allowed to so function. Similarly, Federal Reserve Notes and/or Deposits could be used instead of U.S. Notes and Treasury Deposits, PROVIDED one hundred percent (100%) reserve banking (Act section 4.) is enacted. The form of the new reserves required for the transition to full-reserve banking is immaterial provided they result in the substitution of government securities for existing bank liabilities, and provided fractional reserve banking is terminated as the reserve requirement is increased to one hundred percent (100%), scheduled concurrently to avoid any inflationary/deflationary effect. Return to main article

4. In another example and approach, the “monetary base” created by the Fed is presently about $911 billion. This is multiplied by the commercial banks between 9 and 10 times (due to exceptions in the required reserve ratio of 10%) resulting in banks “assets” of roughly $9.9 trillion (after deducting required reserves). The gross national debt is presently c. $9.9 trillion. Paying off the gross national debt would provide $9.9 trillion in new reserves to fund the banks’ assets (predominantly loans) on a 100% basis, without the banks creating any money. The US Treasury would have created the $9.9 trillion and used it to pay off the gross national debt. Return to main article

5. The three percent (3%) figure represents the low end of the three-to-five percent (3-5%) range proposed by Prof. Friedman and Mrs. Friedman, for a Constitutional Amendment limiting monetary growth, which we completely support (see endnote 14. for text). However, this draft Act takes the practically-easier legislative approach and adds the critical prohibition of fractional reserve banking as well as other related issues. With population growth and productivity increases averaging approximately one percent (1%) each per year for the last thirty years, a three percent (3%) growth figure will insure stable prices within a vary narrow range and would allow for price-level or cost-of-living adjustments (COLAs) in contracts with a predictable effect to address any slight variation in economic activity from the three percent (3%) monetary growth rate. Further, as perfect fine-turning of monetary growth in a complex economy is not possible, to err on the side of a very slight inflation would at least relieve those burdened by debt of some of the effects of the prior inequity caused by private money creation, whereas to err on the side of deflation would exacerbate such inequity. A fixed rate of growth will provide the needed stability so long lacking m monetary policy, which instability has caused every economic depression in United States history. In 1931, Sweden established a mixed commodity krona by setting up an oflicial C.P.I., and succeeded in keeping it stable (within 1.75%) for several years, until she had to give up the system under pressure from international bankers to stabilize foreign exchange rates. This example demonstrates both empirical proof of the validity of this ideal approach, and of its susceptibility to failure by political manipulation

Periodic, non-discretionary, fine-tuned adjustments based on widespread indexation of prices, by a Monetary Commission of some sort would be the ideal, but lack the stability and predictability of a fixed growth rate and are subject to corruption and to manipulation indirectly (e.g. such as by alteration of index definitions, components or base years as has repeatedly occurred with the Department of Labor's Consumer Price Index [CPI]).

The zero (0%) monetary growth proposal, particularly if tied to freezing high-powered money, lacks the essential feature of abolishing fractional reserve banking. This is particularly important in light of all the exceptions to maintaining any reserve ratio. However, if combined with such an abolition (and allowing for COLAs to address the inevitable deflationary effects), would be acceptable and arguably easier to advance politically due to the Schelling point effect of a figure such as zero, as Prof. Friedman has pointed out. But, as Paul A. Samuelson noted, the gyrations in the futures markets tend to belie the notion that monetary stability can be found in that direction Return to main article

6. Absent massive fraud or theft, full reserve banks cannot fail, rendering insurance such as F.D.I.C. and F.S.L.I.C. unnecessary. Only a minimal cost to insure against fraud or theft would be necessary. Had full reserve banking been in place before the S & L collapse, this one reform would have saved the U.S. taxpayers over $600 billion. Return to main article

7. As now, no interest would be paid on currency in circulation - the government benefitting from the seigniorage. However, as Prof. Friedman and George Tolley warn, if the government pays no (0%) interest on reserves, which is the theoretical ideal (or charges banks interest on Treasury-assumed bank liabilities [e.g. on so-called Commercial Bank Conversion Bonds] - a variation of a one-time government take-over of existing reserveless [i.e. factional-reserve-based loans] bank liabilities), this would create a high incentive for private near-monies of various kinds (e.g. new forms of negotiable debt, equity or derivative instruments) to proliferate, particularly in advanced economies such as the U.S.

This would threaten many of the benefits of monetary reform including the stability of the money supply and the prohibition of private fractional reserve money creation. The interest may be viewed as a social cost for the benefits of a stable national money. The private trading (circulation) of futures based on widespread price indices as money offers only speculative, though intriguing, reform possibilities at this time. Return to main article

8. While it would theoretically be easier simply to reform the Federal Reserve System than to abolish it, the experience of the last 300 years in Europe and the last 200 in the U.S. has proven time and again that private banking interests invariably utilize any independence afforded a central bank from government control as an opportunity to exert undue influence over it, often by acquiring outright ownership interests in it, and/or to gain control of it through placement of their employees and experts (schooled in protecting and promoting their private interests who often "retire" to very well-paid positions in private banking) in its key positions at the expense of the public good. This is one reason for the seeming anomaly that private banking interests champion the "independence" of central banks from any effective oversight by politicians generally controlled by them. It simply exposes central banks to even greater private manipulation with less interference from and explaining to have to do to "unreliable" politicians. Independent central banks concentrate national economic control in a body too removed from accountability and therefor from responsibility to the body politic, at least in the often critical short-term.

The so-called independence or autonomy of central banks from governmental control, such as the Federal Reserve System has in the United States, to whatever degree granted, has in practice meant increased private influence and control to that same degree.

The avowed purpose of central bank independence or autonomy - to reduce political (i.e. private special interest) influence over its functions - something the present independent central banking system utterly fails to achieve but rather enhances, can be accomplished without this danger, by establishing a fixed rate of monetary growth not subject to any discretionary authority or manipulation, as is set forth in section 7. Of course, this too could be a reform within the present Federal Reserve System, but absent direct accountability to Congress (including for annual budget appropriations - a power now uniquely delegated to the Fed which funds its operations without Congressional budget authorization or audit, from interest it receives on the U.S. bonds it purchases for the cost of the paper) the Fed would remain the powerful, effectively independent and dangerous, entrenched banking lobby with virtually unlimited and unaudited funds, constantly working to resist, obstruct and repeal reforms, just as it did during the Great Contraction (i.e. Depression) which it caused. Further, the current division of responsibility for monetary policy between the Fed and the Treasury has allowed both bodies to shift responsibility to the other for harmful actions. This can only be solved by ending this division. Return to main article

9. Other conflicting, or partially conflicting Acts, such as the Banking Acts of 1933 and 1935; Federal Securities Act of 1933; Securities Exchange Act of 1934; Margin Requirements Act of 1934; Public Utility Holding Company Act of 1935; Bretton Woods Agreements Act of 1944; Federal Deposit Insurance Act of 1950; Bank Holding Company Act of 1956; Bank Merger Acts of 1960 and 1966; Emergency Loan Guarantee Act of 1971; Electronic Funds Transfer Act of 1978; International Banking Act of 1978; Financial Institutions Regulatory and Interest Rate Control Act of 1978; Depository Institutions Deregulation and Monetary Control Act of 1980; Bank Export Services Act of 1982; Garn-St. Germain Act of 1982; Financial Institutions Reform Recovery and Enforcement Act of 1989, and subsequent amendments, would be repealed in whole or in part where in conflict with this Act. Return to main article

10. The U.S. Supreme Court, in an increasingly important decision, held that an Act of Congress is on full parity with a treaty (or any lesser agreement), and that when a federal statute which is subsequent in time is inconsistent with a treaty, the statute, to the extent of the conflict, renders the treaty null. Whitney v. Robertson, 124 U.S. 190 (1888); et aliacf. Reid v. convert, 354 U.S. 1 (1957)Return to main article

11. It is estimated that c. $350 billion in U.S. currency is held outside the U.S. This is high-powered money that would cause hyperinflation if repatriated in large amounts in a short period of time. Additionally, the U.S. presently has a high trade deficit, which has been roughly balanced by U.S. bond sales to foreigners, which total approximately $2.5 trillion at present. Further, currency speculators manipulate and exacerbate temporary exchange fluctuations, which can radically affect internal price stability, as was demonstrated in several of the Southeast Asian nations a few years ago.

Whoever originates and controls the volume of money, controls every single economic operation. Therefore, it is essential to monetary stability, and so to reform, as well as to maintaining national sovereignty, that the import and export of capital be kept in balance, so that the domestic money supply be not subject to manipulation nor to fluctuation in quantity, beyond the rule fixed in section 7., above.

Stability of the internal quantity of money is the only basis on which to obtain a stable price level, and foreign exchange rates must not be allowed to disrupt internal price stability. This can be accomplished, there being no theoretical difficulty. For example, the government of China simply forbids banks from handling large foreign transactions other than those for the purchase of Chinese goods, and also maintains a large exchange stabilization fund to defend the yuan. Chile requires that 30% of capital inflows stay in the country a minimum of one year. Return to main article

12. i. e. the so-called Tobin tax, designed to discourage speculative trading in small differentials in interest on exchange rates. Return to main article

13. Prior inequitable and usurious profits accumulated by banks from fractional reserve banking practices are not addressed in this draft Act, which therefor leaves the banks in possession of prior profits of some $1.2 trillion (2008 commercial bank net worth), most of it from such unjust practices. Likewise, prior distribution of profits to bank owners is not addressed. This vast wealth and the economic and political influence it represents, particularly through the control of the media it has purchased, constitutes a standing danger to the Republic and should be addressed, perhaps by some effective form of anti-trust legislation and/or Court action breaking-up the giant banks (and media) into small localized units with separate ownership, or more aggressively by a bank nationalization, break-up into smaller units, and immediate reprivatization by public stock sale pursuant to rules insuring widespread ownership.

But any nationalization Act without an immediate reprivatization clause would create a new and unnecessary danger, as the power to loan does not properly rest with the government, is most effectively handled at the local free market level, and is easily abused for political purposes as was the case with pre-war Germany's Reichbank which granted loans to whomever the government chose for political reasons, as do government banks in communist command economies.

The goal is not nationalization of banks, but of money. By contrast, and by definition, creation of a national currency/money supply can only be effectively and properly handled by a national government, not by local governments or private persons, as reason and experience abundantly prove.

It is primarily for these reasons that we disagree with that portion of the monetary reforms advanced by Messrs. Peter Cook, Theodore R. Thoren and Richard F. Warner, insofar as they advance the notion that the Treasury ought to become a lender to banks and local governments, while we are in general agreement with their reform proposals otherwise (including their rejection of a return to a gold standard). Rather, consistent with the sound reform principle of subsidiarity, the private sector alone ought to engage in the various legitimate forms of lending, as set forth in section 12. herein, with free market supply and demand setting the interest rates.

Government selection of lending proposals for "creditworthiness" or "profound societal impact" etc., or any criteria imaginable, and their evaluation, is inevitably subjective and therefor open to grave abuse by a monolithic lender. As Ms. G. M. Coogan wrote in Money Creators (p. 333-334), for the government to create money as loans is even more vicious than for private banks to create money as loans, carrying with it the power to aid (by granting loans) or destroy (by denying loans) whomever it chooses.

Decentralized, private lending agencies generally tend to loan to any creditworthy applicant, their primary motive being profit (or profit-derived power) which is maximized by making more loans; whereas governments replace this profit priority with political ends such as rewarding their supporters, the political value of which is maximized by restricting loans. So government lending tends to arbitrary discrimination for political motives, an abuse generally avoided in a truly free market lending situation.

Thus, perhaps the most dangerous error of any monetary reform proposal would be to place the lending of money in the hands of the government, which is the essence of communist economics, carrying with it the power to destroy. Indeed, Lenin recommended government origination and control of lending for the political control it affords. That money-lending ought to be carried out by private legal persons rather than the government is a major principle of sound monetary policy. The lending of money ought to be completely divorced from its origination, for as Ms. Coogan pointed out, it is fundamental that money ought not to come into existence as loans or in response to loan applications, but only as the total stock of available goods increases (or a reasonable approximation thereof, such as three percent [3%] in the U.S.). Further, there is simply no need for the government to get involved in lending, and risk the dangers mentioned, in order to reform the present system and achieve all of the ends set forth in the preamble hereof. Return to main article

14.Prof. Milton Friedman on his proposed Constitutional Amendment

"When the Constitution was enacted, the power given to Congress 'to coin money, regulate the value thereof, and of foreign coin' referred to a commodity money: specifying that the dollar shall mean a definite weight in grams of silver or gold. The paper money inflation during the Revolution, as well as earlier in various colonies, led the framers to deny states the power to 'coin money; emit bills of credit [i.e., paper money]; make anything but gold and silver coin a tender in payment of debts.' The Constitution is silent on Congress's power to authorize the government to issue paper money. It was widely believed that the Tenth Amendment, providing that the 'powers not delegated to the United States by the Constitution . . . are reserved to the States respectively, or to the people,' made the issuance of paper money unconstitutional.

During the Civil War, Congress authorized greenbacks and made them a legal tender for all debts public and private. After the Civil War, in the first of the famous greenback cases, the Supreme Court declared the issuance of greenbacks unconstitutional. One 'fascinating aspect of this decision is that it was delivered by Chief Justice Salmon P. Chase, who had been Secretary of the Treasury when the first greenbacks were issued. Not only did he not disqualify himself, but in his capacity as Chief Justice convicted himself of having been responsible for an unconstitutional action in his capacity as Secretary of the Treasury.'

Subsequently an enlarged and reconstituted Court reversed the first decision by a majority of five to four, affirming that making greenbacks a legal tender was constitutional, with Chief Justice Chase as one of the dissenting justices.

It is neither feasible nor desirable to restore a gold-or-silver coin standard, but we do need a commitment to sound money. The best arrangement currently would be to require the monetary authorities to keep the percentage rate of growth of the monetary base within a fixed range. This is a particularly difficult amendment to draft because it is so closely linked to the particular institutional structure. One version would be:

Congress shall have the power to authorize non-interest-bearing obligations of the government in the form of currency or book entries, provided that the total dollar amount outstanding increases by no more than 5 percent per year and no less than 3 percent.

It might be desirable to include a provision that two-thirds of each House of Congress, or some similar qualified majority, can waive the requirement in case of a declaration of war, the suspension to terminate annually unless renewed.

A Constitutional Amendment would be the most effective way to establish confidence in the stability of the rule. However, it is clearly not the only way to impose the rule. Congress could equally well legislate it."

Quoted from: A Program for Monetary Stability, by. Dr. Milton Friedman, Fordham University Press (N.Y. 1960, 1992), pgs. X, 66-76, 100-101; and, Free to Choose by Dr. Milton & Rose Friedman, Harcourt Brace & Co. (San Diego 1980, 1990), pgs. 307-308. Return to main article