The 100th Year of the Federal Reserve (Representing The Past) Versus The Rise of Bitcoins (Representing The Future)
If there is an annual pre-Christmas Eve ritual in Washington, DC, and Wall Street, some invitation-only celebration within the travertine marble headquarters of one organization and several other joint ceremonies amidst banks of computer terminals, flat-screen displays and heavily carpeted floors, if such an event does exist – a December 23rd night of champagne toasts and conspiratorial communiqués – I do not know of it. Or, rather, I have yet to receive any such greeting.
But, for champions of bitcoins as a premier form of peer-to-peer digital currency, December 23rd should be the day – this year – when we draw the ultimate contrast between a mathematically-based concept, which owes its origins (in part) to the monetarist principles of the late Milton Friedman, and the moment when we can point to the calendar and say:
“This is the day, and this is the year, one hundred years prior, when fiat triumphed over sound finance. Now is the time to reclaim the intellectual legitimacy of money.”
For December 23rd marks the centennial of the birth of the Federal Reserve System, an independent central bank (with regional satellites), whose legacy – at best – is mixed. My conclusion about the Fed’s record is a charitable one, considering it is only independent to a degree; it must conform to a congressional mandate (the Humphrey-Hawkins Full Employment Act), which theoretically restricts its powers, while simultaneously enjoying the right to print money with abandon. Call these actions anything you like, inveigh against their influence, condemn their legality, bemoan their short-sightedness and expose their failures — but please, never associate the Fed with anything remotely similar to a free market.
The Fed’s wholesale printing of money, the phenomenon known as “quantitative easing,” is, in my opinion, an oxymoron and the single greatest act in favor of an alternative currency like Bitcoins. As to the name itself, quantitative easing, it is a misnomer because the qualifying adjective suggests there is a scientific underpinning to the policy, something calculable and definable. As in, “We know there should be x-number of dollars (‘M0, MB, M1, M2, M3, MZM’) in circulation at any given time. If we have less than that amount we exert deflationary pressure on the economy, while anything in excess of that standard brings us into inflationary territory.”
The not-so-secret truth is, however, that neither the outgoing Fed Chairman nor the incoming Chairwoman (pending her Senate confirmation) knows what that amount is. And, before I finish this point, as it is a preamble in defense of Bitcoin, let me also remind readers that all of this – the statements issued by the Fed, including the oracular pronouncements of Alan Greenspan, as well as well the reactions by traders to the perceived bullish or bearish news from the Central Bank — all of this proves there is nothing quantitative or scientific about the Fed’s actions or fiat money in general.
I write these words without any partisan rancor, so put aside the politics of the Fed as an institution, and ask yourself this simple question: If the Fed’s printing of money is right, as a matter of pure mathematics (meaning: the policy reconciles with an equation, which yields an expected outcome), why is there such volatility in the stock market alone, with massive upswings and sell-offs, based on no change in policy? Of course, emotion and the herd mentality play a role in the behavior of markets – man is hardly a rational creature – but if the policy is correct, rooted firmly in science, then the intended result should, after more than 5-years of “stimulus,” be clear: Significant economic growth, millions of new jobs and the fulfillment of Congress’s requirement – legislation signed by then President Carter – that by 1988 the unemployment rate would be zero!
Not only is the Fed not in compliance with the law, but the entire facade – including the very greenbacks and coins in our pockets – rests on a foundation of words – the “Full Faith and Credit Clause” of the Constitution – not numbers or any singular brand of economics. These factors make an alternative currency both inevitable and a necessity.
Making the Case for Bitcoins: The Triumph of Logic
The case for Bitcoins is, as described above, inevitable, accelerated by technology and modern communications. Indeed, one of Professor Friedman’s more famous remarks involves his advocacy for replacing the Fed with a computer. Each year, it “would print out a specified number of paper dollars” to augment the money supply. “Same number, month after month, week after week, year after year.”
“The Fed has had very few periods of relatively good performance,” he continues. “For most of its history, it’s been a loose cannon on the deck, and not a source of stability.” A spot-on assessment from a Nobel laureate with a prophetic eye in which the only change (in the 14 years since the delivery of that advice) would be to pluralize the computer to hundreds of millions of computers – server farms, fiber optic cables and data centers – linking us in one worldwide web. Welcome to the Internet, home of the peer-to-peer digital currency we call bitcoins!
In not so many words: Friedman’s words are right because his theory is right. The time between the issuance of the theory and the rise of bitcoins is a matter of technology, which is often the case with any scientific argument. Put another way, technology does not create a theory; it reveals and validates one. Such is the case with monetarism and bitcoins.
Such, too, is the case with physics, where the legendary Higgs boson (the “God particle,” first theorized by Professor Peter Higgs in 1964) is now, 49-years later, verifiable — thanks to the construction of a 9-billion-dollar super collider with a 17-mile circumference. Thankfully, the proof for the necessity of bitcoins does not involve such expensive technology.
Allow me, also, to defend Friedman’s prediction without endorsing or opposing his politics. That is, the logic of monetarism, however coincidental or integral it is to the libertarian beliefs of Friedman, is its own separate entity. We need not favor abolishing the licensure of doctors or the legalization of illicit drugs, two of several longstanding arguments made by Friedman and his ideological disciples, to acknowledge and accept the closest thing to an economic scientific fact: That there is global demand for and merchant recognition of bitcoins as a legitimate, alternative currency.
Communicate the Truth with Enthusiasm and Data
The responsibility, for supporters of bitcoins, is now one of communications. Our duty is to popularize this phenomenon – to explain and showcase the facts – before our opponents politicize this issue with heated rhetoric and the illogic of insults, in lieu of intelligence.
The intensity of criticism comes from those who dismiss any kind of change. Their faith, and it is nothing more than blind allegiance, is in a single paper currency, allegedly backed by the faith of the U.S. government.
Rather, it is faith by others – in us, and the U.S., to never fail to honor our debts – that would make the most fervent adherents of monotheism blush. Critics may cite history as their shield and source of credibility, but I place my faith in the universal truth of mathematics, because history does not repeat itself – patterns of behavior recycle themselves, instead – and I recognize the difference between the two. Or, as the saying (purportedly from Mark Twain) goes: “History does not repeat itself, but it does rhyme.”
Alas, a rhyme is no substitute for rhythm — and the long continuity of numbers, measurable and eternal, transcendent of the false barriers we erect against each other. A philosophical observation on my part, to be sure, but custodianship of the greatest subsection of history we know is predictable: Mathematics.
Bitcoins is, in that regard, the intellectual heir to an esteemed branch of history and a solid trunk of science. The goal is to make that tree of knowledge grow, free of the weeds of ignorance and the pestilence of imprudence.
This Blog Post and Accompanying Video Playlist Is Designed To Help Explain The Complex Nature Of The "Federal Reserve" Aka The U.S. "Banking Cartel" And Why We Need To Have An Alternate Way Of Paying For Our Goods And Services That Is Less Costly And More Technologically Advanced (Like Bitcoin Or Any Other Via Virtual Currency) As Compared To What We Have Now.
"Let Me Issue And Control A Nation's Money And I Care Not Who Writes The Laws."
Mayer Amschel Rothschild,
"If The American People Ever Allow Private Banks To
Control The Issue Of Their Currency, First By Inflation,
Then By Deflation, The Banks And Corporations That Will Grow Up Around Them Will Deprive The People Of All Property Until Their Children Wake-up Homeless On The Continent Their Fathers Conquered"
"It Is Well Enough That 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."
The title "The Creature From Jekyll Island" refers to the November 1910 meeting at Jekyll Island, Georgia, of six bankers and economic policymakers, who represented the financial elite of the Western world. The meeting was recounted by Forbes founder B. C. Forbes in 1916, and recalled by participant Frank Vanderlip as "the actual conception of what eventually became the Federal Reserve System". Griffin states that participant Paul Warburg describes the Jekyll Island meeting as "this most interesting conference concerning which Senator Aldrich pledged all participants to secrecy".
Griffin's work stresses the point which Federal Reserve chair Marriner Eccles made in Congressional testimony in 1941: "If there were no debts in our money system, there wouldn't be any money." Griffin advocates against the debt-based fiat money system on several grounds, stating that it devours individual prosperity through inflation and it is used to perpetuate war. He also described a framework of central bankers underwriting both sides of an ongoing war or revolution. Griffin says that the United Nations, the Council on Foreign Relations, and the World Bank are working to destroy American sovereignty through a system of world military and financial control, and he advocates for United States withdrawal from the United Nations.
The "Mandrake Mechanism"Also known as the money multiplier effect, the Mandrake mechanism is a term coined by Griffin in this book. Mandrake the Magician was a comic strip character from the 1940s. He had the ability to magically create things and, when appropriate, make them disappear. Griffin's view is similar to many other gold-standard supporters' critique of the fractional-reserve banking system and the Federal Reserve in particular: that it makes money "magically" appear from nothing.
In Griffin's view, the "magical" quality of this mechanism is really just a simple mathematical limit. When banks loan money, they don't actually loan existing money. Rather, they allocate money to loan, but they are limited by how much money they can create. The law basically says that, for each dollar a bank has on hand in one of its savings accounts, it is allowed to create another 90 cents to give out as a loan. (The dollar from the savings account is still there, and can still be spent by the person who owns the savings account.) This loan is then spent, and the recipient puts it into another bank, and that bank can now loan 90 cents times 0.9 = 81 cents. This can be repeated many times (depending on the demand for loans) until it approaches its mathematical limit of 10 dollars.
For example, when the Federal Reserve holds on deposit 1 billion in marketable United States Treasury security then the banks in the banking system, public and private, and bound by U.S. financial law, are able to generate 10 billion in new debt over time.
Additional Resources And Solutions:
* Monetary Reform Act
* Majority Of U.S. States Join Sovereignty Movement, Assert 10th Amendment Rights (Video)
* Abolish Fractional Reserve Banking
* Bernard@libertydollar.org (Liberty Dollar) Subscribe To His Newsletter To Stay On Top Of This Case As It Develops You Can Sign Up Here.
* Form For Disallowing IRS Income Tax Collection
* Book: Ron Paul's Revolution
* What is BitCoin and How Does It Work?
* I.R.S. Can't Identify Law Requiring The Payment Of Income Taxes
Supreme Court Rulings Denying The I.R.S. The Authority To Collect An Income Tax: http://tinyurl.com/m33efj4 (There Are Numerous Other Supreme Court Rulings Stating The Same: http://tinyurl.com/m85te6s).
“We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear…” Brushaber v. Union Pacific R.R., 240 U.S. 1, 11 (1916)
* America From Freedom To Fascism (Video):
See Video Section 25:00 Minutes To 30:00 To See Actual Proof Demonstrating That The I.R.S. Has No Legal Authority For The Collection Of Income Taxes, Seizure of Property For Non-Payment, Audits Of Citizens Tax Filings, etc.: http://youtu.be/gKToYTOE128
The I.R.S. Also Fails To Actually Define Income: See Video Section 32:41
Feel free to send this letter to the White House (Fax: 202-456-2461), your congressman and/or senator, etc.
(Edit where necessary)
To Barack Obama,
On top of everything else you have to contend with.. I think It's high-time we address the issue of "monetary reform" it seems that the banking system "cartel" have their own agenda (world domination?) in terms of what they (the Federal Reserve and the Central Bankers, etc.) want to see happen to the U.S and the world's monetary system vs what the American people actually expect from these same institutions.
We (you, the Whitehouse and I) need to urgently communicate the message that there is a major problem with these institutions and how they operate (fiat currency, fractional reserve banking, debt-issuance, engineered boom and bust cycles, etc.).
You already should and will achieve legendary status because of what you've accomplished with healthcare reform, capturing Osama Bin Ladin, etc.
However, to take on the banking cartel with the help of the eager youth of today, the Internet, virtual currencies, etc. You will rival Thomas Jefferson and Andrew Jackson, for they knew and admitted publicly what central banking meant for democracy.
We are in a prime position to actually prepare the USA and lead the world into the 21st century by reforming the monetary system even if it means abolishing the Federal Reserve.
What do I need to do to help out in this effort and how can we (you, the Whitehouse) and the American people do to finally fix this last and critical area of economic manipulation.
Monty Henry, Owner
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