dollars

STAFF NEWS & ANALYSIS
Annals of Disaster: Will Congress Print and Spend Directly?
By Daily Bell Staff - January 19, 2016

The Citadel Is Breached: Congress Taps the Federal Reserve for Infrastructure Funding … The highway measure would be financed in part by a one-time use of Federal Reserve surplus funds and by a reduction in the 6 percent dividend that national banks receive from the Fed. . . . Banks with $10 billion or less in assets would be exempt from the cut. The Fed's surplus capital comes from the 12 reserve banks. The highway bill would allow for a one-time draw of $19 billion from the surplus, which totaled $29.3 billion as of Nov. 25. – Web of Debt/Truthdig

Dominant Social Theme: It's about time that the Congress took over from the Fed and began printing money and paying for things without central bank mediation.

Free-Market Analysis: Our old friend Ellen Brown has just released a triumphant article, excerpted above, that celebrates Congress's decision to extract funds directly from the Federal Reserve and its member banks.

Readers familiar with The Daily Bell will know that we have tracked this meme for years – and participated in arguments about it – fearing that backers of the increasingly beleaguered Federal Reserve would create a direct payment stream to the American people as a way of regaining popularity.

More precisely, what we expected might happen is that Fed backers would start a campaign to transfer central bank power directly to the US legislature and executive branch. This would be done under the guise of reducing Fed power. But in reality, once the transfer was accomplished, the same power brokers would regain control by subterfuge.

Brown writes, "The Citadel Has Been Reached." What she means is that this process is now underway, though putatively it is being driven by fiscal necessity rather than manufactured by artificial public sentiment.

Here's more from Brown's article:

On December 4, the last day the Department of Transportation was authorized to cut checks for highway and transit projects, President Obama signed a 1,300-page $305-billion transportation infrastructure bill that renewed existing highway and transit programs.

… Less publicized was where Congress would get the money: largely from the Federal Reserve and Wall Street megabanks. Banks vigorously fought the dividend cut, which was estimated to generate about $17 billion over 10 years for the highway trust fund.

… The deal was summarized in a December 1st Bloomberg article titled "Highway Bill Compromise Would Take Money from US Banks."

In her article, Brown provides a brief historical overview of this increasingly epochal battle. "For over a century, populists and money reformers have petitioned Congress to solve its funding problems by exercising the sovereign power of government to issue money directly, through either the Federal Reserve or the Treasury," she explains.

She then rehearses the US history of direct government printing, reminding us that beginning in the 1860s, "Abraham Lincoln issued debt-free US Notes or 'greenbacks' to finance much of the Civil War, as well as the transcontinental railroad and the land-grant college system."

From her point of view – and she has worked tirelessly to regularize the debasement of money as a legislative function – momentum is slowly beginning to favor her cause.

She notes that way back in 1999, Illinois Rep. Ray LaHood introduced the State and Local Government Economic Empowerment Act (H. R. 1452), "which would have authorized the US Treasury to issue interest-free loans of US Notes to state and local governments for infrastructure investment."

In this latest article, she informs us that, "Law professor Timothy Canova plans to reintroduce this funding model if elected to represent Florida's 23rd Congressional district, where he is now running against the controversial Debbie Wasserman Schultz, current chair of the Democratic National Convention."

Interestingly, she quotes from an article that Prof. Canova wrote in December 2012 rebutting those critical of the idea that Congress should print money directly for federal government funding.

Here, from his article, as quoted:

Wall Street bankers and mainstream economists will argue that greenbacks and other such proposals would be inflationary, depreciate the dollar, tank the bond market, and bring an end to Western civilization.

Yet, we've seen four years of the Federal Reserve—now on its third quantitative-easing program—experimenting with its own type of greenback program, creating new money out of thin air in the form of credits in Federal Reserve Notes to purchase trillions of dollars of bonds from big banks and hedge funds.

While the value of the dollar has not collapsed and the bond market remains strong, neither have those newly created trillions trickled down to Main Street and the struggling middle classes. The most significant effect of the Fed's programs has been to prop up banks, bond prices, and the stock market, with hardly any benefit to Main Street.

Let's provide a larger frame of reference to clarify why such statements make us crazy. Prof. Canova believes that because the HUNDREDS OF TRILLIONS printed by central banks around the world over these past five years have not yet ruined the global economy, it is absurd to think that such ruination is possible.

If one is alive, in other words, one ought to conclude that death is not feasible. In fact, the world's economy is in such desperate shape that securities marts have shed trillions in value in 2016 alone.

Like Prof. Canova, Brown simply refuses to give credence to the idea of monetary inflation. Both of these individuals do not believe that granting Congress the explicit ability to print money sets a dangerous precedent. Neither one is worried that Congress – an institution trusted by less than 10 percent of US citizens – might abuse the vast power of monetary creation just as the Fed itself has.

Setting the price and volume of money by artificial means – by fiat – is a price fixing exercise. Price fixing distorts economies and falsifies demand. Over time price fixing destroys capital and ruins nations.

These are lessons that history teaches us. As the famous economist Murray Rothbard pointed out, money is what people decide to accept in a given region. And this is a holistic and competitive process. The marketplace determines what money is, not the State.

But Brown and many others including the British Fabians are determined to redefine history. For reasons known only to themselves, these individuals want us to believe that the state can do a better job of managing money than the Invisible Hand.

Why do they argue for state control of money when the evidence of nation-state incompetence is strewn all around us? This is something only the opponents of free markets can answer. We certainly can't.

We can only observe that if direct legislative control of money becomes a significant Western trend, the current economic environment will become even more dire.

After Thoughts

Please pay attention. Protect yourself and your loved ones as you can because you must. And buy some gold. And silver, too.

Posted in STAFF NEWS & ANALYSIS
  • ZebBlanchard

    Counter to Ellen Brown is Marilyn Barnewall hyping the BND. This is a “state” run bank at the state level with a history of success. North Dakota runs budget surpluses to this day.

    • http://www.thedailybell.com/ The Daily Bell

      We’re well aware of that bank, which has various monopoly powers. To use it as an example of normal banking enterprise is misleading.

  • PETER J. NICKITAS

    Sir, you misapprehend thenature of money. Money that is borrowed into existence — 97.6% of the money presently, comes with strings attached — the interest, or, as my Goodfella friends call it, the “vig” to pay back — by borrowing more money. Money like Lincoln’s Greenbacks are debt-free.

    If we do not change the way money works, nothing will change. Even the Internet Reformation without a change in money’s operation will suffice.

    Continue your intelligent discussions at the Bell. I do not miss any articles. Your inclusion of Brandin Smith, Paul Roberts, and Ron Paul I see as most welcome.

    Respectfully, Nick Nickitas

    • http://www.thedailybell.com/ The Daily Bell

      Thanks for the kind words. In a free-market, notes borrowed into existence would have to compete with every other kind of monetary manifestation. That’s are often-stated position and we don’t believe it includes any misapprehension.

    • Bruce C.

      “Money like Lincoln’s Greenbacks are debt-free.”

      Debt free to whom? Those Greenbacks created a lot of debt for the purveyors of the war. Greenbacks lost about 50% of their value relative to gold by the end of the war. Only those who used “gold clauses” in their contracts were made whole (or better). That’s when/why “gold clauses” became outlawed by our friends at the Supreme Court, until being “re-allowed” in the late 1870s just in time for an industrial boom (or could it have been the other way around?) Humm….

  • Earn nest

    Fiat doesn’t ruin it merely misallocates. However it does tend to fund those who do ruin.

  • PETER J. NICKITAS

    Excellent point, sir; well stated. Alternative currencies do add vitality to an economy in competition with fiat, debt based, fractional reserve currencies. Note the Austrian cities that made their own currencies in 1931 and the existing Swiss Wir.

    Nick

  • Rojelio Febrero

    The path to true peace on Earth lies in the abolishment of all private
    central banking everywhere, and a return to the state-issued value-based
    currencies that allow nations and people to become prosperous.

  • http://johnturmel.com John C. Turmel, B. Eng.

    Jct: Notice the only criticism about government printing instead of banks is inflation. Ellen doesn’t understand inflation Shift B and can’t rebut. http://SmartestManOnEarth.Ca/bankmath explains why letting banks continue to print and loanshark new money at interest isn’t as smart as printing and getting it at no interest. Sadly, the Daily Bells thinks banks should keep the privilege to create our money and loanshark it to us.

    • http://www.thedailybell.com/ The Daily Bell

      We don’t think banks should have any “privileges” except to compete on a level playing field in a private market with every other provider of money and currency. We would be surprised if many banks survived such a regime.

  • Bruce C.

    I don’t think Brown or Cornova care about the long term. They probably figure it will be okay in their lifetimes and then it will be someone else’s problem and who knows what “solutions” might be available then. Also, there seems to be a discrepancy between what “they” want and the DB’s point of view: They just want a way to fund the Highway bill, and issuing the money by fiat is a way to do that. Maybe, they might argue (though I doubt it) that the infrastructure improvements would benefit the economy so much that the debasement caused by the issuance would be counterbalanced. Sort of like Inflation + Deflation = zero.

    What should be interesting is to see how the market place reacts to this. Usually this sort of shenanigans is kept secret. I’m sure the construction companies will accept the fresh, unbacked scrip (unfortunately, their refusal to do that may be too much to expect – which is why “we get what we deserve”) but maybe the bond markets won’t like it, especially Treasuries. In any case, the spark is going to be when SOMEBODY refuses dollars and demands something like gold instead.

    Come to think of it, maybe I’ll start billing my customers in ounces of gold. How’s that for taking “human action.”

  • Danny B

    FED…… FEDGOV ,,, a fair-weather friendship?
    Greenspan, “I never said that the FED is independent”
    Armstrong, “ALL governments eventually default”
    3 years ago, Bernanke, “We have come to the limits of monetary policy. The GOV must implement fiscal policy to correct the problems”

    The FED was hitched up to pull the government cart. They printed for whatever congress wanted to fund. 51% of Americans receive a check from GOV.. The FED has no army and must depend on influence to retain control.

    If you owe the bank $100, you have a problem. If you owe the bank $ 100 million, the bank has a problem.

    The higher the FED balance sheet goes, the less influence it has. It can’t give an ultimatum to congress BUT, congress can give IT an ultimatum.
    A couple of years ago, the FED was dragooned into returning all interest BACK to GOV. GOV is turning over every rock that it can find to scare up more money. The biggest rock that it can squeeze is the FED.
    It was recently reported that loss from confiscation by GOV was greater than all losses from crime.

    Each time that the debt ceiling is raised, the FED is put in a poorer position. Given a choice between revolution and supporting the bankers, GOV will choose to avoid revolution.

  • PETER J. NICKITAS

    Sir: Greenbacks did not lose 75%. The alternative was borrowing money at 24-36%. Lincoln was no fool.

    The demonetization of silver in 1873 caused the worst depression in US history, beginning in 2874. The country took 20+ years to recover.

    Gold or silver is not a full answer. Even Ron Paul acknowledges that.

    Congress, in issuing Greenbacks, issued $449.5 million out of $450 million authorized. The record is worth studying.

    Do you want unelected ganef banksters to continue calling the shots?

    Something must change–first of all, ourselves and our preconceived notions. G-d knows I have some of those.

    Nick

    • Bruce C.

      If you’re referring to my comment below I did change that to more like 50%, but the truth is they varied widely in value relative to gold depending upon how the Union was perceived to be doing in the war. For example, the Greenback started out on par with gold but gradually declined. In July ’64 Lee was holding his own and the conversion was 2.58 GB to 1 but then ended down only 50% by the end of the war.

      Anyway, what’s interesting was Lincoln supposedly didn’t want to “endette” the nation to banksters so he reluctantly printed his own counterfeit figuring that’s somehow better. Those jackals in government today probably could care less about debt, they just don’t want to get ousted for raising taxes.

    • Benjamin Titshaw

      Lincoln was a fool indeed. A murderous one at that.

    • Shark-Proof

      Perhaps a better alternative might have been not funding the civil war at all. It is strange how Greenbackers point to the funding of a bloody war for centralization of power as an example of success.

      • http://www.thedailybell.com/ The Daily Bell

        Good point. It almost seems a kind of sickness.

      • rahrog

        XLNT!!!

    • natural human

      You are so correct, Mr. Nickitas. And the Bell is so wrong on this issue, which is a rare thing. The present monetary system is the most monstrous human tragedy in history. We are led to believe in a myth that money must be borrowed into existence and the banks are the only entity which can lend it to us. It is a scam of epic proportion so vast that even the Canadians staffing the DB have been hoodwinked. They should know better as their central bank purchased government debt without interest up until sometime in the mid-twentieth century, at which point Canada’s fiscal problems began. The banks have abused their license to print money and are in need of being nationalized and relegated to savings, lending and money transfer. The purchase of government debt should be strictly forbidden to banks. Private investment banks will arise to fill the capital markets roles and the separation rightfully imposed by Glass-Steagall will be resumed. We need to awaken to the fact that the current system is enslavement by interest.

      • http://www.thedailybell.com/ The Daily Bell

        We don’t need to awaken to anything except free markets. Let each actor present his wares peacefully and without interference and you will soon see that the Invisible Hand sorts out monetary issues in an efficient and amicable way. You want yet another dictator to sort through the markets, forbidding this and supporting that. We believe in freedom. And that’s not “wrong.”

        • natural human

          Yes, we need to awaken to free markets, which are impossible in a system covertly controlled by a global cartel of central banks acting in unison to protect and enhance the business model of present day commercial banking, a model based on the exclusive license to create money out of thin air, lend it into existence at interest, and enslave the entirety of humanity under a money system that accrues interest to this parasite on every currency unit in existence. In my humble opinion, this is not a free market.

          • http://www.thedailybell.com/ The Daily Bell

            You think?

  • robertsgt40

    Thomas Jefferson
    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 currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children 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.

  • Praetor

    19 trillion debt! 200 trillion plus of the books liabilities! 305 billion for transportation Infrastructure! Infrastructure of what, asphalt over old crumbling roads, paint some old rusty bridges, put up some signs saying your money at work, what. BS. Theft by fiat. 6 years ago a sign goes up, your money at work, but no work. I maintain, the government did not do away with the mob, the mob did away with the government. Extortion, fraud and massive corruption. Any project they have started in this country, is on going and over budget and asking for more, due to unforeseen difficulties, these people have become a joke. No bid contracts by the crony capitalist of the corporate structure and their partners in washed-up DC have destroyed the U.S. The DB be right, begin to accumulate the competing currency of the PM’s. It will be the only surviving currency at the end of the day!!!

  • MetaCynic

    Over the years, I don’t recall that Congress had ever criticized the Fed for being too loose with money creation. It was always for being too tight. With the move for Congress now to get into the act of issuing money, the monkey will no longer receive cocaine in measured doses. It will have free access to all the cocaine it wants.

    I wonder who or what will be blamed for the ensuing wild price inflation? Ignorant people may blame the swaying of the trees for hurricanes. Ignorant politicians will definitely blame the “need” to print more money on rising prices.

  • j christensen

    at least we’ll issue the money without the debt attached which allows the bankers to control everything. that’s kinda an improvement.

  • Martin the American redux

    I am having a hard time understanding just why the DB is complaining about Canova’s gripes. I thought so that this channel understood clearly that throughout history, monetary inflation was is always followed up w price inflation. Therefore, why would an unbalanced viewpoint such as Canova’s be looked at as a bad thing? Seems to me that it is merely hurrying along the inevitable, no? Please disregard if my comprehension is off kilter.

    • http://www.thedailybell.com/ The Daily Bell

      People like Canova and Brown want the government to be in charge of money. We disagree. We know from history that money is a private phenomenon subject to market forces. Once you give monopoly money powers to someone, you guarantee chaos and slow motion ruin.The Invisible hand is in charge of money one way or another.

      • Martin the American redux

        I agree 100%, however, the American and world populace have been convinced since 1913 and maybe even bolstered into the belief that fiat (as in-let it ride) money since 1971 or so is what’s good. Maybe an ultimate crash is what’s needed to shake us out of the sleep cycle! I say let a 12 a loon like Canova push us out and into the light.

  • Clayton Smith

    Whenever discussing money, we must remember von Mises’ assertion that “Money is the most marketable good.” What makes it the most marketable good? Is it voluntary choice, or is it fiat? Secondly, we must remember Gresham’s assertion that “the Bad drives out the Good (money).” This is where we are headed. To avert the consequences of our current debt saturated economy, while allowing sufficient circulating media, a vast amount of money must be created. The quantity of this creation will be in inverse relation to the esteem placed on the money created and so it will eventually become it own destroyer. The question the intelligent investor must ask is in what form is it best to hold my surpluses of production? What will be left unmolested in my possession after the deluge? What can I maintain in the face of the rapaciousness to come? Finally, should the Empire collapse along with its money system, what will preserve me in the aftermath? Nasty questions for nasty times?

    • http://www.thedailybell.com/ The Daily Bell

      Great questions, thanks.

      • Freedomenergyfarms

        Hello could you assist me with the contact information on Colombia land opportunity

  • ALPHAMEG

    All the world wants American dollars. Until that changes within the next 5 years, it makes no difference who by fiat prints the dollars. The policy is set by the Rothschild Dynasty in the City of London. Soon the major currencies other than USA will continue to fall, and determined
    instant change will occur over night to one world digital accounting by the United Nations, with Drawing Rights for each nation, and individual accounts for each world citizen. All to be administered by the United Nations through parameters issued by the ELITE BANKING FAMILY.
    This will catch all money launderers with dollars that turn worthless overnight. Unless you are issued a digital account, you will be unable to buy or sell. One GIANT computer with back up duplicates will handle all transactions instantaneously. This move will disenfranchise .the Middle Class overnight. There will be worldwide chaos resulting. The United Nations will also have direct control of the world’s armies to put down disorders. Blood will flow. All to be administered by the Secretary General of the UNITED NATIONS, BARACK OBAMA.

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