Eventual Return to Historical Roots?
It is sometimes instructive to look back at history and understand similar periods to try and get insight into what is
happening today and to project what is likely tomorrow. As Winston Churchill once put it, "The farther backward you
look, the farther forward you can see." In our February 2004 On The Horizon column, we outlined the upcoming clash
between a Statist central bank controlled fiat currency and a free market gold standard and that the crisis of the former
lay ahead. This discussion is a review and update of where we are in that cycle which has evolved as suggested thus far.
The secular bull market in gold that we argued for then, still appears likely to develop for these reasons.
The world during 1815-1914 had a rough international gold standard that underwent periodic breaks and returns. It was
far from a pure and perfect gold standard though, as books like Ron Paul’s The Case for Gold relate. There were
frequent manipulations of the gold/silver ratio, occasional moves off of the gold standard completely, and other manipulations
aimed at increasing the money supply that led to booms and busts. Yet, from an international trade perspective, this period
(absent the Civil War) is considered the period of a competitive international gold standard that regulated trade. Interest
rates were generally stable and low, and business cycles were less volatile when gold/silver ratios were not modified, and
displayed quite volatile booms and busts when money supply was tampered with. However in general, as is the case in a pure
gold standard (see Skousen’s Economics of a Pure Gold Standard), under this international system of gold coinage
and backing of currency, with regards to international trade under this system the elegance is compelling - gold flows out
of deficit countries and intto surplus exporting countries. This leads to an increase in money supply in exporting country
A and a decrease in money supply in importing country B. Country B sees credit cut, interest rates rise and prices fall which
leads to higher exports and lower imports. Conversely exporting country A sees an increase in money supply leading to lower
interest rates and higher prices resulting ultimately in lower exports and higher imports. Country A and B thus meet half-way
in restoring the imbalance of trade naturally. This free-market system, where governments could not manipulate money supply,
and where interest rates were determined by the free market, not a government committee, lasted until prior to WWI, when the
need for war finance induced a devil’s bargain we are now paying dearly for – for the second time in history.
As Thomas Jefferson argued forcefully, “Gold is the perfect medium [for money], because
it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands…[Paper
money] is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.”
The founding fathers felt so strongly about a gold standard that they directly sought to give no other monetary powers to
the government besides weighing and measuring gold and silver in the Constitution, and in the Mint Act of 1792, decreed death
for any one who debased the coinage of the United States. It is important to understand that for the founding fathers then,
gold and freedom were inseparable.
The world was taken off of the gold standard during
the Great War - as Swiss Banker Ferdinand Lips relates in his great book Gold Wars, WWI could not have occurred without
an abandonment of the gold standard. The Federal Reserve Act preceding WWI had installed a central bank into the mix with
increasing powers, many not originally even intended in the original Glass-Owen legislation that had created it. Within
years after armistice the decision had to be made of how to return to a gold standard - the only system of international discipline
that had led to rising prosperity and rising balanced global trade in global commerce. But, in 1922, the gold standard was
not restored fully and central bankers were brought permanently into the mix in what they called the “gold exchange
standard,” which undermined the very substance of what makes a pure gold standard work. Currencies were still definable
in weights of gold or in terms of other currencies, but coins were stopped and gold no longer moved internationally. The
actual monetization of gold was removed and so were the effects of the movement of gold in actuality partially undercut.
Central bankers, not actual trade of gold for goods as reflected by true supply/demand forces, began to take the reins of
the system controls.
Where the founding fathers
had placed free individual actions at the reins of gold flows and government was only Constitutionally empowered with the
ability to “coin, weigh, and measure” gold and silver to facilitate the free-market choice of individuals via
a monetary unit with its own intrinsic value that could not be debased, the new system empowered central banks with regulating
the flow of gold. The gold-exchange system thus appeared to offer some restraint from gold, but did not offer the same degree
of discipline and international balance in trade. The difference at the time was thought to be small – but it was
profound in its implications for increasing money supply and credit creation, especially as international trade exploded after
the war. The classical gold standard (which had been chipped away at periodically before through a shift in the gold/silver
ratio to inflate the currency) was essentially killed in 1922, and many of its most beneficial characteristics reduced.
One of the constraints in thinking at the time that helped undermine a return to the classic
gold standard after WWI was a belief that to do so meant returning to old ratios of gold/currency that prevailed prior to
the massive spending of WWI. A devaluation of the ratio but strict adherence to that new ratio could have arguably eased
some of the deflationary adjustment while allowing the benefits of a true gold standard to continue into the future. Instead
the partial gold standard “gold-exchange” system was employed which replaced gold coins with paper currencies
that were only theoretically tied to gold and were not redeemed among trading nations which allowed leverage to grow as international
trade increased.
Coinage stopped and so gold did not flow out of importing countries to
create an eventual optimum balance. Instead new central banks began to accumulate not just gold but foreign currencies and
securities denominated in foreign currency as well. Thus a country importing more than it exported would not have to reduce
its money supply and tighten credit as it would under the more classical gold standard – particularly if it was a privileged
reserve currency country like Britain. When British Pounds left Britain as excess imports swelled, the central bank of the
excess exporting country kept Pounds or invested them in British securities instead of converting them to gold. There was
therefore not a corresponding money supply/gold reduction in Britain from excess importation. A deficit country lost currency
but not really gold and did not have to reduce credit to compensate fully, while a surplus country gained something convertible
into gold but not really gold and could therefore expand credit - trade deficits became less painful and were not corrected
while the mechanism forcing surplus exporters to meet the imbalance half-way was eroded. Global credit was thus inflated
and global trade was part of the area where credit inflation could occur, so it expanded sharply. In the short-run both deficit
and surplus countries benefited (It is no coincidence that the US and China found themselves in similar circumstances in
the 2001-2007 period. The situation was similar where both avoided a necessary adjustment that would be painful by preventing
trade flows from balancing more fully as a gold standard would have forced upon them).
In
a pure gold standard there is also no “fractionalization” of the banking system. A loan is a loan of actual gold
from one party who owns it to another who doesn’t. With paper currencies, banks could start loaning more than their
actual underlying assets. That produced leverage for banks, increased their profits in the short and intermediate-run, but
led to economy-wide leverage levels increasing beyond what was sustainable if the debt structure started to delever. It
also put the banks at the center of the currency and interest rates. It thereby violated a key tenant of the Constitutional
argument for a gold standard that the Founding Fathers had argued for and installed. As Thomas Jefferson noted in 1802:
, “I believe that banking institutions are more dangerous
to our liberties than standing armies. If the American people ever allow
private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that
will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent
their fathers conquered. The issuing power should be taken from the banks
and restored to the people, to whom it properly belongs." Thomas Jefferson
- letter to the Secretary of the Treasury Albert Gallatin (1802).
The Great Depression
and the current deleveraging cycle have proven how prophetic Jefferson and other Founding Fathers were in understanding what
would happen if the gold standard were taken hostage by a central bank as they were beginning in 1922. As Alan Greenspan
observed, "to the extent that there is a central bank governing the amount of money
in the system, that is not a free market."
The
currency under the “gold exchange standard” thus became partly fiat, partly gold, in essence and in effect. Of
course this expansion of credit helped lead to an eventual rise in debt/GDP levels that would have been impossible under a
true gold standard and were unsustainable - the deflationary deleveraging collapse known as the Great Depression eventually
developed from the run-up in credit from fractionalization of financial instruments and inflation in trade without corresponding
costs. Yet it was WWII that led to the end of the Depression, not a realization and correction of the underlying problem.
During the 1930’s devaluation became an important component of fairly unsuccessful attempts
to recover. In fact those nations that devalued from even the “gold-exchange” system after the crash were in
essence rewarded in the short-term, and Britain’s timid defense of its conversion ratio ended with under 5% interest
rates in 1931, with the next weakest dominos falling in succession. Keynesians and even Monetarists have argued that adherence
to the “gold-exchange” ½ gold standard helped make the Depression worse. What they say is true in isolation,
though they ignore the fact that not returning to a pure gold standard after WWI was a key to allowing the excess leverage
that created the crash and the over-indebted economy that led to the decline in the first place.
During the 1930’s as credit became scarce, Britain started and eventually every other country followed in a series
of competitive devaluations against even the gold-exchange system conversion rates. It was true that on an individual basis
devaluation led to some dampening of the economic adjustment, but when every country started to devalue, competitive devaluations
actually exacerbated the downside economically on a global basis as every country sought to improve itself at the expense
of the others. Eventually even the gold bloc nations of Switzerland, Belgium, and the Netherlands threw in the towel and
devalued. Such would not have been possible or necessary in a classic gold standard.
Gold-bugs
are well to remember what happened to gold owners in 1933 when Roosevelt made US private gold ownership illegal. The government
seized every ounce of gold in every safety deposit box in the country and forced gold-holders to “turn in” their
gold while paying them a paltry $20.67 an ounce for it, at the same time marking up the government’s official value
of the gold they took to $35 an ounce, denying investors in gold their profits to build a $52 billion slush fund called the
Exchange Stabilization Fund for the Treasury at their expense. They “took” so much gold from private holders
at forced sale prices that they had to build Fort Knox to house it.
After WWII, the main
shift became the replacement of the US for Britain as the reserve currency host. Gold ownership in the US was kept illegal
and so convertibility for US citizens eliminated. But eventually as credit expanded, and as the US faced no discipline forcing
it to reverse chronic current account deficits, it became clear that the US could not even afford to convert foreign dollars
to gold, and so convertibility was ended, and the currency became fully fiat in 1971, with Nixon’s declaration that
“we’re all Keynesian’s now,” and his classic blaming of the “speculators” for the problem.
This was the culmination of the Bretton Woods “fixed-dollar standard” which set the dollar as the reserve currency
and attempted to anchor it to gold in way that was unsustainable and allowed for credit system and reserve currency chronic
current account deficit expansion of a more subdued but unsustainable pace until the gold link was dropped completely and
then a flood of debt and larger current account deficits followed inevitably. Since then US current account deficits have
become chronic and grown consistently – because there is much less stringent a power to force discipline upon us or
upon our excess exporters to restore the balance of trade. We lose dollars but China and Japan don’t really demand
payment; they gain dollars and invest them so that leverage proliferates globally as checks and balances are not instituted.
Trade is not balanced completely, it is increasingly leveraged with perceived benefits to all sides as long as the bubble
is expanding. Fractionalizing banking also helps pump up the volume of air into the super bubble. Each round of Keynesian
stimulus is not really fully paid for, and each round of new money supply is leveraged 8/1 or more into new loans that flow
into the system and keep the bubble expanding. Growth is overly amplified in booms, and overly reduced in busts, requiring
ever-new rounds of stimulus to “dampen” the downside. The degree of increase in the debt/GDP ratio following
1971 is testament to the damage that a purely fiat currency does to an economy over the long-run.
Chart 1: Debt/GDP rising to unsustainable levels above
those of 1930’s. Source Keen’s DebtWatch
But just as in the 1930’s,
eventually the bubble gets too inflated and it cannot be sustained. Debt/GDP this time went above the heights of the 1930’s
before deleveraging has now set in. And economists used to tools to increase the pace of airflow into the bubble solving
every economic problem, cannot quite understand why things are not working this time. They are talking about ways to make
the air-valves bigger and to control parts that aren’t working. But what they don’t realize is that once the
bubble starts deleveraging and deflating past a certain point, it becomes nearly impossible for any amount of airflow the
markets would allow to do much more than slow the rate of inevitable deflating of the bubble. And the bubble is not just
in one asset this time – it is in all assets and all production. Aggregate demand was pumped up to unsustainable levels,
and production was geared to a US consumer that can no longer sustain its demand without more credit – and credit is
unlikely to ever rematerialize in enough size again because the assets that were being borrowed against to sustain the rate
of consumption, have now deflated. There are no more assets to borrow on.
Japanese exports
were growing at 15%-20% annual rates in 2007, but they have now collapsed at a post-Depression record rate of over 35%. The
benefits of being able to swap temporary economic benefit for long-term problems have ended and we are left with the bill.
The great benefit of a true gold standard is that it corrects global imbalances of trade and
allows the market forces attempting to equate the supply and demand interaction of free individuals to be reflected in production
and demand actual outcomes. It also takes the power to print a free lunch away from government or any other entity by necessitating
the currency to be something the free market intrinsically values as a true medium of exchange. Under a gold standard, international
imbalances of trade were quickly corrected. Under a fiat currency system the imbalance of trade between the United States
and China, for example, was instead allowed to grow and grow and grow until the US consumer had to borrow on every asset he
had to sustain demand. When the value of assets borrowed on began to finally crack, the entire production-demand system imploded
because production was geared for years to a level of demand that could only be sustained by ever-higher debt levels that
became impossible to expand with declining collateral values. Over $2.5 trillion of dollar securities are now held abroad
representing the build-up of excess chronic current account deficits over the years. Since this system provided temporary
benefits to both US consumers and Chinese exporters providing new jobs to the massive migration of labor in China, both sides
benefited from this growing misalignment until this vendor-finance system imploded because US consumers can’t pay for
the financing anymore. A system not based on a truly redeemable medium of exchange that has its own intrinsic value is based
nearly entirely on the confidence of participants in that system. And now it is confidence, both of lenders and of borrowers,
that is on strike.
That collapse in confidence likely ultimately means that the current
monetary system will not last decades longer and the environment ahead will entail its demise. As Ludwig von Mises observed
in Human Action:
"There is
no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should
come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe
of the currency system involved." - Ludwig von Mises, in Human Action, Regnery, 1966, p. 572
The
main question then is whether this crisis will involve the collapse of the dollar as the reserve currency in the pursuit of
avoiding the pain of too much debt expansion – and increasingly the answer is looking like it is no. Spending is exploding
now in the hope of papering over the debt deleveraging wrought by too high a debt/GDP ratio. But the real spending crisis
has barely begun and will grow much worse in the years ahead as the baby boomers begin to both retire and grow older, leading
to a call on the false and unpaid-for promises of Social Security and Medicare. At that point the markets may begin to disallow
further debasement of the reserve currency and dollar destruction becomes a distinct possibility.
The hope is that mankind will learn its lessons and re-implement a monetary system with more discipline, with a medium
of exchange that has intrinsic value, and where the foxes of government are not guarding the proverbial henhouse of the value
of everything with a printing press ripe for abuse. The historical answer to this currency dilemma is gold – and the
odds are that gold will eventually find some use in any new monetary regime that has any hope of being sustainable. Yet it
is likely that both economists versed in Keynesianism and Monetarism that represents the science of how to adjust the hose
of money creation, and current politicians who benefit substantially from being able to control the printing press, will not
go down gently without a fight against instituting such a system. As we have suggested in articles in the past, the fight
of Freedom and Capitalism versus Statism is not over as long as a Statist currency system exits. The great free market
economist Ludwig von Mises once termed the 20th century to be the clash of “Capitalism versus Statism,”
of freedom for mankind versus domination by the State. The philosophy of the Fascists of the early 1900’s theorized
that Fascism would be superior to Capitalism because it had “one mind organizing its parts properly” instead
of thousands of independent actors unaware of the others actions, and “eliminated wasteful competition” in the
economy. As Benito Mussolini said “Fascism should rightly be called Corporatism as it is a merge of state and corporate
power.” The invisible hand of Adam Smith could not hold
up to the organization of one brilliant leader and designer, it was thought. The philosophies of Communism and Socialism
popularized by Karl Marx in “Das Kapital” similarly theorized that utopia for all would result from giving the
State totalitarian control of all property and almost all individual rights and decisions. The great hero of individual freedom,
Austrian Economist Mises, showed swiftly and decisively that a system of individual rights and freedoms would economically
outperform Statist systems consistently, and render those under them relatively poor. Mises pointed out that one of the main
problems with any Statist system was that it did not take into account the motivations and incentives faced by the individual
participants in them and align those incentives to any kind of economic achievement. Mises turned out to be correct –
and much of the 20th century did indeed turn out to be the triumph of freer capitalistic-based systems over more
Statist based systems of Fascism and then Communism and Socialism.
But a major leg of Statism,
Statist control of money, replaced the gold standard decisively by 1922, and it is precisely the abuse and control of the
debt created by the paper fiat money that has led to our current crisis and faces possible failure in the period ahead.
Thus, the next battle of Freedom versus Statism lies directly ahead – that of Central
Bank fractional reserve fiat currencies and a free market currency of gold (or at least some currency with free-market intrinsic
value that cannot be manipulated or printed). This is the battle that will be raging in the markets as the deleveraging wrought
by the failed Statist regime of government controlled paper currencies comes further unglued.
As Ferdinand Lip observed, “only a gold standard can return an ailing world economy to its full potential, reduce
unemployment, help restore law and order, and help to secure peace and freedom for mankind.” The battle between market
forces and reflation forces and between market valued currencies and bonds and the desire to spend unheard of sums to try
and cushion the downside is now underway.
"I place
economy among
the first and most important of republic virtues, and public debt as
the greatest of the dangers to be feared." -Thomas Jefferson to William Plumer
Thomas Jefferson's prediction: "The natural progress of things is for
government to gain ground and for liberty to yield."
"Since the general civilization of mankind, I believe
there are more
instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations." - James
Madison – 1788
"No generation has a right to contract debts
greater than can be paid off during the course of its own existence." - George
Washington to James Madison 1789
"I believe
that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control
the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them,
will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.
The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
" Thomas
Jefferson - letter to the Secretary of the Treasury Albert Gallatin (1802).
"...There is no nation on earth powerful enough to accomplish our overthrow. ... Our destruction, should it come at all,
will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence. I fear that they may
place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way
they may be made the dupes of designing men, and become the instruments of their own undoing."
- Daniel Webster, June 1, 1837
“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people
under the pretense of taking care of them.” --Thomas Jefferson
"It is impossible to introduce into society a greater
change and a greater evil than this: the conversion of the law into an instrument
of plunder." Frederic Bastiat's famous economics book The Law, published in 1850
"Behind all the complexities of modern political economy lies the simple fact
that human beings are, speaking generally, of two persuasions: the first would spend tomorrow what they earn today; the second
would spend today what they hope to earn tomorrow. From this rudimentary
biological fact arise all conflicts that lead to economic crises:
to panics, depressions, violent and revolutionary transfers of wealth, and perhaps most wars." Freeman Tilden, 'A World in Debt' – 1935
"There
is no subtler, no surer means of overturning the existing basis of
society than to debauch the currency. The process engages all the
hidden forces of economic law on the side of destruction, and does it in a manner which not
one man in a million is able to diagnose." Lord John Maynard Keynes (1883-1946), renowned British economist
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.
There is no safe store of value. The financial policy of the welfare state requires that there be no way for the owners of
wealth to protect themselves. Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which
governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. The
abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited
expansion of credit (debt creation)." - by Allan Greenspan
"The decline of great powers is caused by simple economic over extension." - Paul Kennedy 'The Rise and Fall of the Great Powers - economic change and military
conflicts 1500-2000'
"Government has three primary functions.
It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens
against crimes against themselves or their property. When government -- in pursuit of good intentions -- tries to rearrange
the economy, legislate morality, or help special interests, the costs come in inefficiency, lack of innovation, and loss of
freedom. Government should be a referee, not an active player. It is my view that what is important is cutting
government spending, however spending is financed. A so-called deficit
is a disguised and hidden form of taxation. The real burden on the public is what government spends (and mandates others to spend). As I have said repeatedly, I
would rather have government spend one trillion dollars with a deficit of a half a trillion than have government spend two
trillion dollars with no deficit." - Milton Friedman, Noble laureate
"It
is the aim of good government to stimulate production, of bad government to encourage
consumption." - Jean Baptiste Say, French economist 1767-1832
"Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged
sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and
the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather,
the citizenry, infused with fear and blinded with patriotism, will offer up all of their rights unto the leader, and gladly
so. How do I know? For this is what I have done! And I am Caesar." 100 BC to 44 BC
"Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that
ever has." - Margaret Mead
"The first panacea for a mismanaged nation is inflation
of the currency; the second is war. Both bring a temporary prosperity; both bring a
permanent ruin. Both are the refuge of political and economic opportunists." - Ernest Hemingway - 1899-1961 - Nobel laureate Literature 1954
"There is no means of avoiding the
final collapse of a boom brought about by credit (debt) expansion.
The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt)
expansion, or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises, in Human Action, Regnery, 1966, p. 572
"The
consequences of inflation are malinvestment, waste, a wanton redistribution of wealth and income, the growth of speculation and gambling,
immorality and corruption, disillusionment, social resentment, discontent, upheaval and riots, bankruptcy, increased governmental
controls, and eventual collapse." Henry Hazlitt 1894-1993
"Government interventions always breed
economic dislocations that "necessitate" more government interventions."
Ludwig von Mises
"To the extent that there is a central
bank governing the amount of money in the system, that is not a free
market," said former
Federal Reserve Chairman Alan Greenspan in September 2007 on T-V to Jon Stewart
"We can't solve problems by using the same kind of thinking we used when we created them. A
type of insanity,
doing the same thing over and over again and expecting different results."
- Albert Einstein 1879-1955 - Nobel laureate Physics 1921
“During times of universal deceit, telling
the truth becomes a revolutionary act.” - George Orwell 1903-1950 author and journalist
"Great Powers in relative decline instinctively respond by spending more on ‘security,’ and thereby divert potential resources
from ‘investment’ and compound their long-term dilemma." - Historian
Paul Kennedy describing “imperial overstretch” in The Rise and Fall of Great Powers 1989
"Ponzi’
finance units must increase its outstanding debt in order to meet its financial obligations.” -
Hyman Minsky, economist, characteristics of financial crises
"The security of the dollar involves
the security of us all... We are determined to do whatever must be done in the interest of this country and, indeed, in the interest of
all to protect the dollar as a convertible currency at its current
fixed rate.We are determined to
maintain the firm relationship of gold and the dollar at the present
price of $35 an ounce, and I can assure you will do just that." - speech 30 Sept. 1963 by President Kennedy to the IMF
"The
farther backward you look, the farther forward you can see." - Winston
Churchill
"This is the shabby secret of the welfare statists' tirades against
Gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious
process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists'
antagonism towards the Gold Standard."
Alan Greenspan - Gold and Economic
Freedom (1966)
"Give me control of a nation's money and I care not who makes it's laws"
-- Mayer Amschel Bauer Rothschild
"From now on, depressions will
be scientifically created."
-- Congressman Charles
A. Lindbergh Sr. ,
1913
"The
financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority
of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the
use of other people's money"
-- Charles
A. Lindbergh Sr.,
1923
"I
have never seen more Senators express discontent with their jobs.... I think the major cause is that, deep down in our hearts,
we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we
know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
-- John Danforth
(R-Mo)
"The [Federal Reserve Act] as it stands seems to me
to open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it
possible to submerge the gold standard in a flood of irredeemable
paper currency."
-- Henry Cabot Lodge Sr.,
1913
"When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn.
When the Federal Reserve writes a check, it is creating money."
-- Putting
it simply,
Boston Federal Reserve Bank
"We
are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit.
If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money
system....
It is the most important subject intelligent persons can investigate
and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the
defects remedied very soon."
--Robert H. Hamphill
Atlanta
Federal Reserve Bank
"Whoever controls the volume of money in any country is absolute master of all industry and
commerce."
-- James A. Garfield
President
of the United States
"Every Congressman, every Senator knows precisely what causes inflation... but can't, [won't]
support the drastic reforms to stop it [repeal of the Federal
Reserve Act] because it could cost him his job."
--
Robert A. Heinlein
Expanded Universe
"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
"Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it
away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits
to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought
to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers
and pay the cost of your own slavery, let them continue to
create deposits".
- SIR JOSIAH STAMP
(President
of the Bank of England in the 1920's, the second richest man in Britain)
"The modern Banking system manufactures
money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banks can
in fact inflate, mint and un-mint the modern ledger-entry currency".
- MAJOR L .L. B. ANGUS:
When
the people find they can vote themselves money, that will herald the end of the republic.
Benjamin Franklin
A democracy cannot exist as a permanent form of government. ..[Eventually],
the majority always votes for the candidates promising the most benefits from the public Treasury, with the result that a
democracy always collapses over loose fiscal policy. . . The world's greatest civilizations have progressed through this sequence:
from bondage to spiritual faith; from spiritual faith to great courage; from great courage to liberty; from liberty to abundance;
from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependence; from
dependency back again to bondage.
Sir
Alex Fraser Tyler
At
the heart of western freedom and democracy is the belief that the individual man... is the touchstone of value, and all society,
groups, the state, exist for his benefit. Therefore the enlargement of liberty for individual human beings must be the supreme
goal and abiding practice of any western society. Robert F. Kennedy
"We are
completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If
the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system....
It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present
civilization may collapse unless it becomes widely understood and the defects remedied very soon." --Robert H. Hamphill,
Atlanta Federal Reserve Bank
"The [Federal Reserve Act] as it stands seems to me to
open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it possible
to submerge the gold standard in a flood of irredeemable paper currency." -- Henry Cabot Lodge Sr., 1913
"When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal
Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it
is creating money." -- Putting it simply, Boston Federal Reserve Bank
"History
records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their
control over governments by controlling money and its issuance". -- James Madison
"The
two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution
so the second will not become the legalized version of the first." - Thomas Jefferson (The Thomas Jefferson Papers)
If you are interested in receiving a free copy
of MRG Institutional Update, Macro Theme Portfolio Update, Portfolio Strategy Letter or a copy of Daily Commodity Service,
please contact us at staff@midasusallc.com or irochkab83@gmail.com.
You can
also call us at (650) 967 1941
