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Why we must nationalize the Federal Reserve

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Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions -- including the privately held Federal Reserve. Banks create the principal but not the interest to service their loans. To obtain the interest, new loans must continually be taken out, expanding the money supply, inflating prices -- and robbing you of the value of your money.

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures.

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Problem is, this scheme has reached its mathematical limits. Specifically, there isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. And when the investors realize that the "insurance" against catastrophe that they have purchased, in the form of derivatives, is worthless, they are quite likely to jump ship and bring the whole shaky edifice crashing down.

Just the interest on the U.S. government's burgeoning $9 trillion debt will soon be more than the taxpayers can afford to pay. When that happens, the economy will collapse unless the monetary system is radically overhauled.

Articles are appearing daily in the news that bring the looming economic crisis into sharper focus and strengthen the case for monetary reform. Foreign central banks are increasingly abandoning the U.S. dollar as a reserve currency, while the impending implosion of the housing bubble threatens to bring down the whole money system, national and international. As the riskier mortgages go into foreclosure, the institutional investors owning them as mortgage-backed securities will be left holding the bag. But these institutional investors are largely the pension funds on which the retirements of workers depend. So, to keep up appearances, the "Plunge Protection Team" has been authorized by presidential order to use U.S. taxpayer money to manipulate markets to make them appear healthier than they are, and lately it has been working overtime. But official assurances of a "soft landing" are mere window dressing, aimed at preventing another worldwide depression as home buyers and stock market investors stampede for the exits. http://www.webofdebt.com/

The Case for Nationalizing the Fed

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"Banking is not a proper function of the government, but oversight is. The Treasury Department should not be outsourcing to the Fed its oversight responsibilities. The Fed, which failed miserably to oversee the banks, should be put under Treasury instead. It's time for the government to operate in the public interest, not in the interest of private banks. It's time to stop bailing out banks and begin building up America."

-- Congressman Dennis Kucinich

The Fed is a private bank owned by other banks. In the hands of the wrong people, it could be used at the peril of the entire nation. Any private central bank is driven by a small financial elite in secret boardroom meetings that are beyond congressional control. The power to create money is a double-edged sword even for a government, but at least a government must answer to the people in the public forum of a democracy.

The Treasury's Troubled Asset Relief Program (or TARP) moved "toxic" assets off the books of the culpable Wall Street derivative banks and onto the backs of the taxpayers. (here)

The key problem here is that government officials and Federal Reserve officials alike believe that the only way the nation can have a functioning credit system is to maintain business as usual on Wall Street. But this is not true. A public banking system headed by a truly federal central bank could provide all the credit we need.

To prevent corruption and abuse, the current system of money and credit would need to be made subject to the sort of public monitoring and control provided by the checks and balances built into the Constitution. Stephen Zarlenga, president of the American Monetary Institute, suggests that the U.S. money system should be organized as a fourth branch of government alongside the executive, judicial and congressional branches. The Fed is acting like a fourth branch now, but without the public oversight of a true government agency. Congressman Ron Paul has brought a bill (HR1027) to audit the Federal Reserve, and Congressman Dennis Kucinich told Congress earlier this month that he would soon be bringing a bill to nationalize the Fed.

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Note, however, that if the Fed is nationalized and it continues to issue credit for the benefit of consumers, small businesses, and the government itself, it will actually be in the banking business; and that is indeed how it should be.

Our money system today is nothing more than a series of legal agreements between parties. "Credit" is merely an agreement to repay over time. While private parties and private banks should be free to lend their own money or their investors' money, we also need the sort of "credit" that is created on a computer screen; and that sort of credit, as money reformer Richard Cook observes, is properly administered as a public utility. The dollar is backed by nothing but "the full faith and credit of the United States" and should be dispensed and monitored by the United States. As William Jennings Bryan declared in his winning presidential nomination speech at the Democratic Convention in 1896:

"[W]e believe that the right to coin money and issue money is a function of government. . . . Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson . . . and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business. . . . [W]hen we have restored the money of the Constitution, all other necessary reforms will be possible, and . . . until that is done there is no reform that can be accomplished."

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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