Friday, January 14, 2011

"The people must be helped to think about money.
They must be told what it is; what makes it money;
and what are the possible 'tricks of the system'
which put nations and people under the control
of the few." - Henry Ford
Cliff Küle believes the attached article (below) entitled 10 Things That Would Be Different If The Federal Reserve Had Never Been Created (by 'Economics Collapse Blog') makes some claims that are debatable. Also, by using language, such as 'ultra-wealthy elite' to describe the owners of the Federal Reserve, it comes across as radical & biased. That is a shame because of the important & substantive truths it contains.. such as one point it makes that has been a recurring theme of ours : "If the Federal Reserve had never been created, the American people would be much more free. We would not be enslaved to this horrific national debt." Cliff Küle believes the issues presented in this article should be debated in an open & unbiased fashion. We strongly believe that Henry Ford was right to suggest that the people should think about money; what it is; what makes it money & the 'tricks of the system' that give control of our lives to those with the power to create money. This is Cliff Küle's goal! (see our goals in the right hand column). We believe the authors of this article missed the most important thing that would be different if the Federal Reserve had never been created: Instead of steering our country away from its founding principles, the United States might still uphold & hold dear the principles in its Constitution .. it is those principles that made our country great; not its money.


Anonymous said...

Sorry, but this article shows only a rudimentary understanding of economics and money supply. In Canada we have the Bank of Canada, which is owned by the government (and hence the tax payers), and the inflation pattern here is not much different from the inflation pattern in the US.

The author seems to think that if the Government prints the money, not a private entity, inflation won't happen. Maybe he should talk to someone from Zimbabwe or Argentina about governments with the authority to print money.

Taxes have gone up because citizens have demanded more services from governments (defence, roads, schools, hospitals). These need to be paid for.

Cliff Küle said...

The Bank of Canada has chosen to work for the Federal Reserve System; w/in the framework that uses the paper notes issued by the Federal Reserve as 'Reserve Currency'. The Federal Reserve is in charge of the system. Canada owns the Bank of Canada; metaphorically, they are the CEO of their business, but the Federal Reserve is their Chairman of the Board of Directors. Canada may not have much realistic choice, but the words 'owned by the government (hence taxpayers)' can miss the point that what Canada owns is like a franchise; while the Federal Reserve is like the franchiser.
We mentioned that some of the essay's points are debatable and you have rightly hit on one of them. No one can say whether the increased demand for more & more govt services would have occurred under the U.S.Constitution's definition of money. No one can prove something that might have been, but a Constitutional money system would have had better checks & balances on govt spending. It would have required taxes raised to pay for services or that national accounts of gold & silver be redeemed. Tricks could have been played by borrowing from ourselves, but it would have been more transparent that whatever the govt spends, has to be taken away from its citizens. It would seem to be better restraint on bigger govt than our 'fiat' system.
That is an important point. A 'fiat' money system encourages demand for more services from govt. No matter which country, a 'fiat' money system allows the authorities to take money from taxpayers in ways that are not transparent. It facilitates the transfer of 'money' to friends & politically connected 'special interests'(on both the 'right' & the 'left').
A 'fiat' money system takes power away from the people and hands it to the authorities that can issue money by 'fiat'. Canadian taxpayers own the Bank of Canada, but they have given 'Power of Attorney' over all their money to their own authorities and to whoever the authorities are that control the Federal Reserve. We don't know who the owners are because no one has the authority to audit those authorities.
Howard Buffett (Warren's father) wrote a great essay in 1948 that explained the importance of some of these issues. It may make the article in question appear less 'rudimentary understanding' to you. see:
We said the article we posted made claims that are debatable. Things said in our response to you are probably debatable. Words are inadequate to make perfect explanations (eg. 'owned by govt & hence taxpayers'..that has a lot of 'wiggle room' for issues of un- authorized control & usage).
We hope you'll keep thinking in a critical manner about the issues we present. None of the presentations are perfect. Our goal is, like Henry Ford said, to get people to think about what it is that makes Money Money. We believe that good money would make this a better world. We believe the framers of the U.S. Constitution were on the right track.