Thursday, February 26, 2009

Real Change-Replacing the Federal Reserve

Our thinking about the fair tax approach has reminded us of the fact that in our society money is a commodity generally distributed throughout the land, not in the first instance pooled in the hands of a few. The contrary impression has been created by the centralized banking system, which along with the income tax obscures the simple fact that goods and services (and therefore the money that represents their value) start life as widely distributed as the individuals who actually produce and perform them. The first economic question therefore is not about the distribution of money (the false pretense of socialist and communist thinking) but about the mechanism for gathering it. Just as the income tax gathers money for government without regard to the choice of the people making it, the centralized banking system absorbs money from people that is then used (circulated in channels) without regard for choices they should make based on the actual circumstances of their lives. By disconnecting bankers' choices from the real life conditions of the people whose money they employ, the centralized banking system encourages the existence of the seemingly lucrative, but illusory assets whose corrupting weaknesses have caused its present crisis.

We're told that some banks and other financial institutions are too big to fail. But like a mass of cells growing in a way that burdens and harms the body (we call it a cancer), the question is, what allows the existence of something that continues to grow without regard for any contribution it makes to the real health and strength of the body (in this case the community or society in which it exists)? When the body must tax itself to exhaustion to maintain a tumor, we don't generally rush to rescue the tumor, or re-enforce the processes that encourage its growth. No, we seek to stop and reverse its growth, or by other means to kill it or remove it from the body. Even when dealing with the body's cancers we are finding that the real answer lies in re-discovering and strengthening the healthy functions and processes that respect the organic nature of the whole, rather than, at its expense, nourishing unproductive cancerous growths.

What we need is a fair banking system that, like the fair tax system, would make the flow of money more dependent on the choices of the individuals (and private associations) that produce its value in the first place. Step by step, let's try to envisage it. Private individuals make money. At first they may store it away about their persons, or in their homes, but experience teaches them that as the amount increases their individual ability to ward off thieves can't keep pace with the incentive others have to steal it away. Let's suppose that a family with a very large store of money has built a safe house for it. The neighbors approach them, asking whether, on some terms of mutual advantage and trust they could deposit their money in the safe house. They agree to share the burden of defending it (the cost of its security). Naturally, just as the store of money attracts interest from people willing to steal it, it attracts interest from others who, averse to stealing, are willing to ask for a loan. The owners of the store of money see the advantage of making such loans, on terms that help to defray the cost of its security, and eventually generate a profit. They agree to share in the profits in some way commensurate with the contribution each makes to the store. They also agree to let someone (perhaps the original owner of the safe house) make decisions about the amount and terms of lending, provided always that they make sure enough is available to meet the needs of the depositors as they arise.

Clearly, everyone involved can benefit from these arrangements, so long as sufficient care is taken to keep the lending practice strictly in line with the needs and interests of the depositors. If for example the depositors are farmers, the person in charge of the lending will make sure more reserves are on hand before planting season, when withdrawals will have to be made to buy seed, refurbish equipment and so forth; or at harvest time when more hands may be needed to bring in a particularly abundant yield. Of course those are also times when the demand for loans may rise. Therefore, loans have to be carefully prioritized to help the original depositors maintain their productive capacity, provided they're doing what's needed to make a good harvest more likely. The properly responsive local bank, tied to local needs and realities, has few opportunities to outgrow the health of the community in which it arises. By and large those temptations will be kept within bounds by due regard for the survival of the depositors whose productivity is the mainstay of its existence. Such a bank is like a healthy organ, interacting with the body whose health it reflects and helps to maintain.

A society whose financial life rests on a base composed of such institutions (independent local banks, sanely integrated with the communities they serve) has no special charm to avoid all calamities. Harvests will fail, lending decisions prove wrong, the occasional crooked professional bank schemers more dangerous than thieves in the night. But the impact of failures will be more localized, their effects more contained and transitory. This kind of bank failure was fairly common in nineteenth and early twentieth century America, before the creation of the Federal Reserve set up the conditions for a far more generalized and longer lasting form of failure.

I'm not saying that all more centralized financial institutions are intolerable. In fact, when the realities of life lead to the amassing of very large fortunes (as the discovery of large gold and silver deposits did in the U.S.) the community based banking model proves inadequate. Where one or a few individuals largely capitalize a bank (fill the store with their money), its practices will be driven by their desire for a good (and often a quick) return on their money. But there needs to be a sign marking the region occupied by such banks that says "enter at your own risk". Anyone who deals with them should have to live with that warning, including enterprises willing to depend on them for working capital. Moreover, this region should be hedged about in ways that prevent individuals and families from much involvement with them. People whose lives depend on their income (they live on a paycheck) need banks that keep an eye on conditions close to home. Properly understood, such individuals include business enterprises (including the affiliates of large, diversified corporations) located in a community and structuring a labor force that depends upon their operations. Such locally rooted enterprises should have to store their operating capital and reserves where they live, and get a return for it related to the health of their immediate environment.

In practice such a hedge might involve restricting certain banks to individual depositors above a specified deposit threshold, or to dealings with the corporate entities that float above and tie together locally based outlets and production units. The money available for such investments would be limited to the net profits (after seasonally adjusted local reserves are met) sent on to such corporate entities in return for the services they provide to their affiliates.

Instead of setting conditions that allow banks (or other enterprises) that are too big to fail, we need to structure the system purposefully so that failure is the natural consequence of bad decisions and actions, but no failure is catastrophic for people not directly involved with the institutions whose management decisions occasioned it. We need to structure it so that local communities benefit from the healthy result of their own efforts, rather than seeing those results siphoned off for uses that have little or no regard for their needs and interests. We need to structure it so that the folks who live at the grassroots deal with banks that rise or fall on the strength of the community, and which therefore have a vital interest in making responsible decisions that contribute to its strength. Finally we need to structure it so that the investments available to people who live on their income mainly take the form of equity in the enterprises they themselves depend on, so that they not only profit from their work but from the overall success of the business that makes use of it.

As we consider this kind of banking structure, one question looms: what about the large deposits and flows of money the national government requires to perform its functions. Well, if we think about the reasons people have for putting their money in the bank, instead of keeping it at home, none of those reasons apply to government. The Federal government has the wherewithal to safeguard and manage its own money. It also has a functional imperative (service to the people and national community as a whole) different than the more narrow, profit-oriented perspective of the private banking system. Government money should therefore be placed in a government bank, staffed and run like any other government department or agency. The hybrid monstrosity that is the Federal Reserve (a private system capitalized with public money) is a contradiction in terms that invites the kind of crack-up we're currently witnessing.

The problem of course is that the indebtedness of the Federal government conjures the hybrid monster into existence. At the end of the day, the government ends up being like the house many people live in- because you owe more than you own, the bank owns the house, not you. Unless you can service what you owe, the bank owns the house, not you. This means that unless the American people have a government that lives on the revenues generated by their activities, they don't' own the government, its creditors do. In generations past political leaders who cared about preserving liberty (that is, government of, by and for the people) hated and feared large government indebtedness. Politicians today pretend that they can spend without regard for the indebtedness which results. They seem content to lead the American people into permanent debt slavery, effectively overthrowing the form of government based upon their freedom. Having quietly turned control over to creditors (including potentially hostile foreign governments) they are no longer free to act as representatives of the people.

By abolishing the income tax, we give people back control of the money they make. By restoring a locally based banking system, we give communities back control of the money the people of those communities supply. By establishing a properly public bank for public monies, we restore to the American people institutional control of and responsibility for monies intended for public use. But we will not restore the real liberty all these steps envisage until we discard the notion that the national government must be the servant of all our aspirations. Instead we must limit its activities to those functions directly related to its true purpose. According to our Constitution, the U.S. government's job is to secure (make safe) the blessings of liberty. It cannot produce them. That's our work. The Federal government is somewhat like the security team at a factory. The fact that its activities are vital to the operation of every shop in the factory doesn't mean that the head of security should make decisions best left to the people responsible for those shops. Even where centralization makes sense, it isn't sensible to make the national government the focus of centralization except in those areas (for example, border security, military preparedness, and international relations) where the Federal government rightly claims responsibility based on the provisions of the U.S. Constitution.

I conclude therefore that the current economic crisis requires these bold steps:

  1. Abolish the income tax and replace it with a fair tax system such as that proposed in the Linder bill;
  2. Abolish the Federal Reserve and replace it with a) a locally rooted banking system for people who live off their wage or salary income and for locally rooted enterprises b) a private, at your own risk banking system for rootless corporate investors and individual depositors who live off their wealth, not their income; c) a U.S. government bank for managing the government's money.
  3. Thoroughly restructure the Federal government's activities so as to eliminate every activity, department and agency not strictly related to its specifically mandated Constitutional responsibilities. We must end, not extend the failed socialist experiments of the last century.
This is not a prescription for populist hand-outs and other lying policy delusions. It implies a return to individual, family and local responsibility. It implies restoration of the central role of private business, and religious and charitable associations. It implies an end to the pretense that government makes money, or progress or prosperity. It implies, in a word, a return to liberty- with all the hard work, risks and challenges liberty entails. But we all know that in many ways the present trends of our political and social life undermine the disposition and virtues people must have to accept these challenges. Therefore, economic restoration cannot occur unless our political system and moral identity are restored at the same time. Otherwise, real change will not come about, and would not be sustainable if it did. We must discard the political system that has failed and betrayed our liberty. We must reclaim the moral character that can produce energy and courage enough for the new politics that must replace it. No more manipulative, so-called Republicans. No more insidiously delusional Democrats. Just Americans striving as best we can to be decent human beings. Strong enough to be independent. Wise enough to stand united. Good e
nough to be free.
Obviously, we've got a lot more to think through. Stay with me.

Worth considering? Then don't forget to DIGG IT!!!!

9 comments:

mikedean said...

Sir, I pray that God allows you to be part of the rebuilding of America. You have the ideas I know we will need. I believe principal and reason will prevail and we must be ready when reality reveals itself to these power hungry fools in DC. Thank you for your inspirational words and I look forward to your future posts.

gilbertabrett said...

I think by the time we put down our potato chips and turn off Gossip Girl, we will all be too old to even remember what ORGANIZATION means.

I see your blog, and so many others that are opposed to what is going on with our Federal Government, and yet I see no one putting all these people together and starting movements across our country.

When gas went up so high last year, I told many people that if we could get everyone to send out emails across America and agree on a week to not buy gas it would send a message. Or don't go shopping at Wal-Mart for just one week... could you imagine one million people not shopping and/or buying gas for ONE WEEK?

But as usual I got the same responses. Not even a PEEK of interest! "Oh, no one would want to do that." And mostly from my Christian friends. I cannot even tell you how infuriating AND LAZY THEY ARE. Unless it is meeting to eat somewhere after church...

We are supposed to be the majority in this country and yet not only do we have no power in the church, but we refuse to use the GOD given rights we have in our Constitution.

I know in my heart that it is going to take something on the scale of 911 to wake Christians back up. I saw it lasted, oh... maybe a year or so after that horrible day that everyone seemed to be awake. Then, of course, the Democrats realized that an election was coming up so America be damned. They went for blood whenever they saw an (R) near anyone's name. Did not matter how qualified or honorable the person was. Of course when we do get attacked again, Obama will have our military so depleted that we will just sit there looking stupid and crying, "Please don't hurt us. We will do anything!"

If anyone reads this and gets ill at me, GOOD! Then maybe someone out there has some emotions that the TV has not eaten away from the rest of the pitifully LAZY people in this country.

PLEASE my fellow citizens. WAKE UP and ORGANIZE.

DO something - ANYTHING RESPONSIBLE - while we have some freedom to do it!

George Soros bought an election with his money. Is there not ONE extremely wealthy Christian that could get all these talented and intelligent people together to start a real movement in our country?

Alan Keyes, Ann Coulter, Walter Williams, Sean Hannity, Thomas Sowell, and the list goes on and on. Even down to little old uneducated people like myself. I CAN read... I CAN walk... I CAN make signs and petitions... What ARE we waiting on? Hopefully not another Obama...

Terry Morris said...

Gilbert wrote:

"When gas went up so high last year, I told many people that if we could get everyone to send out emails across America and agree on a week to not buy gas it would send a message. Or don't go shopping at Wal-Mart for just one week... could you imagine one million people not shopping and/or buying gas for ONE WEEK?"

Gilbert,

I agree with you that people are generally lazy. But, Gilbert, that's just human nature as recognized by our founding generation - "...and accordingly all experience hath shown that mankind is more disposed to suffer while evils are sufferable," - and all that.

However, people ARE beginning to organize themselves in a variety of ways. Consider the "Tea Party" rallies that are happening this very day in a number of cities across the U.S. The Tenth Amendment Resolutions movement among the several states is another example. And I could give you several more. And I would simply point out that market driven economics is primarily responsible for the major difference in gas prices today as opposed to what we saw only a few months ago. So what would a week-long "organized" boycott on gas have accomplished to your mind that the market didn't better do itself?

nail-in-the-wall said...

"We must reclaim the moral character that can produce energy and courage enough for the new politics that must replace it. No more manipulative, so-called Republicans. No more insidiously delusional Democrats. Just Americans striving as best we can to be decent human beings. Strong enough to be independent. Wise enough to stand united. Good enough to be free. Obviously, we've got a lot more to think through. Stay with me."

You've got to be kidding,.. and I think I can speak for most everybody on this site anyway...

You say 'jump', Alan and I will say 'how high'.

As for thinking it through - there is none better.

This will be fun...

'God's will of Liberty, ... be our Freedoms cry".

Guy C.

PS. You know, you as I,.. are free to use all the resources at CESJ.org Library [←Link] only if it helps the "Thinking it through" .

http://www.cesj.org/homestead/summary-cha.htm

Democratization, Solidarity, Subsidiarity and Justice for all.

"Just" Americans - now that's a novel idea.

gilbertabrett said...

Hello Terry et al,

The only thing I think a boycott on ANYTHING that produces tax revenue for our federal (and in some cases state and/or local) government would do is get their attention. The ONLY thing they, and MOST Americans, understand is money. Hence the administration we are under now...

I do not believe in sitting around and waiting on things to always work themselves out. I do not come from that type of family either. We work for what we want and make things happen. My dad was always the one doing while everyone else sat around talking about how to do it best. By that time, he had finished the job...

In the case of gas, I think that has a lot more to do with the few powerful OPEC people that would sooner slit our throats as soon as they drain our pockets... and most Americans are not willing to give a little to gain a lot. In this case, I believe, their voices back.

But, as you said, most people would rather cry about it than do anything.

I have seen some of the movements going on and I am too far away to travel there (sad, but can you believe I am unemployed for two months???). I would not have known about them though if I had not been looking. All I am saying is for the most part, it is not in our faces like most liberal causes.

I even got several recorded calls from Obama's people right before the criminalus bill was passed urging me to contact my congressional reps in support! How sick is that?

I just think we need more money where our mouth is and need to be better organized. I do not know where you are Terry, but here in VA, Terry McAuliffe has been running for governor since Obama got elected. He is doing the same things the Obama camp did: Meeting with every black organizational leader (especially women) and liberal group; getting all the information he can so when he starts giving major speeches he can tell the voters what they want to hear. Go to Google and he is there. He is on EVERY TV network at least 3-4 times a day. Sometimes more. The other people running? We do not know unless WE look because our media tell us nothing. (What's new?)

I am glad to see we can have open dialog here though and thanks for the information.

GOD bless,

Gilbert

Larry Walker Jr said...

Thank you. I am of the same mind and heart. May God Bless independents like you who are not biased, not insiders, and have the vision to restore out Constitutional Republic. Real change was promised in 2008, and all American's got is 'worse-than-the-same'.

tapsearcher said...

We have been an advocate for workers dignity and fair trade since 1992. This is when we discovered the U.S. Federal Government sponsored the moving of factories outside the USA starting in 1956. In that same year, a Globalization of Money came after the Suez Crisis caused a money crisis which especially affected England's currency. The Globalization of Money and goods came at the same time. See our Chronicals of events behind our economic crisis at http:/tapsearch.com/tapartnews and explore the lost worlds in the Globalist Free Traders Flat World of Thomas Friedman, the Bush family, the Clintons and Alan Greenspan at http://tapsearch.com/flatworld.
A mobile user friendly summary of articles are at http://tapsearchnewsmobile.filetap.com and
http://tapsmobileworld.filetap.com

We proposed a new approach in taxes too with most of our tax codes obsolete. Our economies based on making money on money instead of making things is burning out. Tariffs have been taken off goods and put on workers and labor. And actually the stimulus packages are in essence part of these tariffs.

The Globalist Free Traders forgot that the value of workers and labor represent a money standard. This value is a real tangible one and not one created by printing images on paper and calling it money.

See our proposal for Taps instead of Taxes at http://tapsearch.com/realtaxreform and at http://ezinearticles.com/?expert=Ray_Tapajna ( feel free to use any of these ezine articles on your blogs The most popular article is Lend Lease was real Free Trade and not chopped liver as in the Globalist world. )

We also ask if our current problems are a money crisis or a human nature crisis at our blog where we explore the latent responses from philosophy and religion in the global economic arena. Currently we are trying to get a handle on the common good. See http://www.therationale.com. and note -Human Nature on Trial. At- http://www.bizarrepolitics.com Start with a series of reviews of Alan Greenspan's book - The Age of Turbulence starting with http://www.bizarrepolitics.com/confessions-for-history.
And actually Federal Reserve Chairman Ben Bernanke hit the target when he told Congress during the last stimulus debate that the best way to stimulate the economy, is to buy "domestically produced goods". I was surprised by his statement which actually was a ultimate disclaimer for all the funny money products flowing from the Federal Reserve Bank - see http://www.bizarrepolitics.com/ben-says-buy-usa

Please also note http://www.bizarrepolitics.com/obama-cart-before-horse-economy and http://www.bizarrepolitics.com/cart-before-the-horse-economy.

We have many other articles and sites going back more than ten years - search under tapsearch com, tapsearcher, tapart news, Ray Tapajna, arkline art and especially search under the title of our most popular artwork on the web - Clinton Years American Dream Reversed - it is part of more than 5 million search results on Yahoo. View it at http://tapsearch.com/clinton

Franz said...

Dr. Keyes, you're right on the money about centralized banking, taxes and the scope of government. I support your ideas and do everything I can to disseminate them. I thank God for your inspired and inspiring leadership, Christ's own example.

nail-in-the-wall said...

Dr. Keyes;

“Natural Law would suggest that the family needs ‘capital’, like they need air to breathe and therefore live – staying alive-.”

Recently you expanded the definition of Capitalism as and I quote;

“Who is the head? Who is the head? That’s why I think we sometimes have church, because ultimately, God is the head. And what capitalism really means – it even meant it in Adam Smith, though a lot of people try to misunderstand this, o.k.? Is an understanding of how one deals with the perpetuation of life in a material sense, the form of life in which we find ourselves here, as a result of God’s will. How we do that in such a way as to respect God’s will and acquit our responsibility toward Him, that’s capitalism”. [What Direction for the Global Economy? –AIPnews.com]

Therefore I would hypothesis that if you abolish, kill, or end the Federal Reserve (material source of capital-credit) you kill the very nature of that which sustains life, limited and controlled as it is. Wouldn’t it be better to change/repair/ defend a thing to its proper and rightful owner’s first, “The Sovereign people” before changing it?

Quoting - R. Buckminster Fuller; “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

Many would agree with you and others have profited, trying to fight the existing reality to “End the Fed.”. Thereby removing the privately owned Federal Reserve bank cartel, because on the surface they (‘They’ at aipnews.com) have hijacked both our banking system and the capital it represents. They own the “air to breathe” to reference my initial statement. Not only do ‘they’ own it, they through “usury” have dishonestly profited.

However glum this all appears, if we hold true to your statement on “Capitalism” and ‘our responsibility toward his will’, than we should ‘own’ that which is our natural birth right and not allow this tyranny (lite) to continue. “Own the Federal Reserve Bank’.

One can only imagine what would have happened in another time in the United States of America history, if the bankrupt Plantations (today’s Fed.) of the mid 19 century would have instead transferred some ownership to the “slaves” (modern day – Wage slaves) perhaps the Civil War would have never been a total blood bath, their cause was to ‘Abolish the Plantations’ and it's effect was to "end slavery". And didn’t Lincoln promise forty acres and a mule for those ‘slaves’ who fought to get out of that repressive system. Had a system been put in place to expand ‘capital’ ownership of the Plantation system than we might not have the massive amount of capital in the hands of a few select “Corporations” today. Dr Keyes you also suggested the same with in your proposals to South Africa and apartheid, and Latin America to “Expand Capital Ownership”. Oh! had those that would have listened in 1986 had ‘just’ eyes to see.

So which is it should we fight to change the existing reality at the Fed. And end it –abolish it (your words), or should we build a new model that makes the existing model obsolete. Than how in 'Gods Kingdom' do we change, repair or defend that which we do not “own”? And that includes self governance.

I and mine prefer to “OWN” the Federal Reserve and lift the barriers of expanded capital ownership. And than we can work on making it ‘Just”. Citizen owned Federal Reserve Certificates of ownership. More at www.cesj.org

"Too much capitalism does not mean too many capitalists, but too few capitalists." -- GK CHESTERTON

Mere unthinking negative opposition to the current of events, clutching in despair at what we still retain, will not suffice in this age. A conservatism of instinct must be reinforced by a conservatism of thought and imagination. – Russell Kirk

“Own or Be Owned”

“Your Student”

Our means is to build an economic reality, a firm foundation for a basis for the culture of LIFE.

Gen. 50:20

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