Financial fix? Abolish Fed

says congressman
Paul: Constitution requires
coin based on gold, silver
Posted: February 21, 2009
8:35 pm Eastern

By Bob Unruh
WorldNetDaily


U.S. Rep. Ron Paul
In just recent weeks, the federal government has designated billions of tax dollars for bank bailouts, including vast quantities to quasi-government agencies that helped create the economic crisis; billions more for automakers, and billions more for homeowners who default on their loans, so where will it end? Republican Rep. Ron Paul of Texas says he has at least part of the answer: abolish the Federal Reserve.

The congressman, a candidate for the 2008 Republican presidential nomination, once again has introduced a bill that would get rid of the private organization that sets interest rates and establishes monetary priorities.

"Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy," Paul said in a statement at the time the proposal was introduced.

"The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency," Paul said. "The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy."

You've never needed to understand money like you need to understand it now! "Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free" unravels the deception of the Federal Reserve and presents a crystal clear picture of the financial abyss towards which we are heading.

The Texas lawmaker said the constitutional mandate to Congress actually provides only for currency "backed by stable commodities such as silver and gold."

"Abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold," he said.

Paul said every problem in the economy, "from the Great Depression, to the stagflation of the '70s, to the current economic crisis caused by the housing bubble," can be traced to Federal Reserve policy.

Paul's opinions on the Fed are available in a video linked here and embedded here:



Paul's plan calls for the director of the Office of Management and Budget to "liquidate" Fed assets "in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury."

Columnist and commentator Chuck Baldwin believes it's about time.

"'We've seen money go out the back door of this government unlike any time in the history of our country,' Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor. 'Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?'" he wrote.

"Senator Dorgan is exactly right. No one oversees the Fed. The Fed is held accountable to absolutely nobody. But Senator Dorgan (as with everyone else in Congress) has no one to blame but himself. Ever since the Marxist, E. Mandell House, convinced President Woodrow Wilson to create the Federal Reserve in 1913, the Congress of the United States has had virtually nothing to do with the way our fiscal policies are managed. The Fed (which is not even a government agency, but rather a private corporation consisting of mostly foreign bankers) dictates America's financial policies," Baldwin said.

Baldwin cites the U.S. Constitution itself. In Article I, Section 8, Paragraph 5, it states Congress has the authority to "coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."

"Only the elected Congress, not some private foreign (or even domestic) banking interest, has the power to make monetary policy," he said, and "paper money – known as the Federal Reserve Notes – is not even legal tender."

The problem Paul's plan confronts is simple, he wrote.

"No cosponsors. That's right. No cosponsors," he said.

"Until the American people demand that their elected members of Congress live up to their duties and responsibilities under the Constitution, they will continue to have their pockets picked clean by these corrupt banksters in New York City (and London) and their contemptible facilitators in Washington, D.C.," Baldwin wrote.

Paul's spokeswoman, Rachel Mills, told WND the congressman has strong feelings about the issue.

"The inflationary policies of the Fed are insidious," she told WND. "It's a hidden tax on the poor."

She confirmed the idea has been getting more attention recently, because "people are becoming really curious about the roots of our problems."

Federal Reserve Chairman Ben Bernanke this week said "policymakers" have "pulled out all the stops – cutting the federal funds rate … and establishing a series of lending programs designed to add liquidity into credit constrained markets."

He also committed to more "transparency," by introducing a new website for Fed information and new communications efforts.

Paul was unimpressed.

"While I applaud any effort towards greater Federal Reserve transparency, Chairman Bernanke's latest effort contains more window dressing than substance," he said.

Getting information from the Fed won't help, he said, "as this data is often inaccurate.

"If the Fed could not be trusted to foresee the present economic downturn, despite the myriad of market commentators predicting this, why should the current Fed data and predictions be any more trusted?" Paul asked. "Furthermore, these new initiatives only divert focus from the real areas where transparency is needed. The Fed's agreements with foreign central banks and international finance institutions need to be audited, as do the source and destination of funds provided through the Fed's emergency funding facilities."

At the CitizenEconomists.com site, J.D. Seagraves noted his organization's poll showed a "sarcastic and/or deranged 5 percent of respondents" believe the Fed's performance in the current economy is excellent.

One in four in that poll believe, "We should get rid of them."

"Support for abolishing the Federal Reserve System is mounting every day," the report said. "The fact that people are beginning to wake up to the problems caused by the Federal Reserve System is a hopeful sign. The only question is: is it too late? Can the dollar be saved by the political action of the president and the Congress, or must we wait for the entire global financial system to completely melt down so we can start over?"

Columnist Jacob Hornberger last year noted that while Paul's abolition plan is considered "wacky" by some, at least two Nobel Prize-winning economists have agreed.

Economists Milton Friedman and Friedrich Hayek called for the abolition of the Fed during their careers, Hornberger notes.

"While Friedman spent much of his life advocating externally imposed constraints on the Fed's power to expand the money supply, his first wish was to have the Fed abolished, as he pointed out in a 1995 Reason magazine interview. In his book, 'Denationalization of Money: An Analysis of the Theory and Practice of Concurrent Currencies,' Hayek advocated a free-market monetary system of competing currencies," said Hornberger.

"Most Americans probably still believe that the Great Depression was caused by 'the failure of the free-enterprise system.' It is a false belief. The truth is that the worst economic disaster in American history was caused by the Federal Reserve. Give current Fed Chairman Ben Bernanke credit for publicly acknowledging that fact in a speech delivered in 2002 commemorating Friedman's 90th birthday," Hornberger said.

U.S. Taxpayers Risk $9.7 Trillion on Bailouts as Senate Votes

By Mark Pittman and Bob Ivry

Feb. 9 (Bloomberg) -- The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.

Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

Financial Rescue

The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid.

Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.

The worst financial crisis in two generations has erased $14.5 trillion, or 33 percent, of the value of the world’s companies since Sept. 15; brought down Bear Stearns Cos. and Lehman Brothers Holdings Inc.; and led to the takeover of Merrill Lynch & Co. by Bank of America Corp.

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.

‘All the Stops’

“The Fed, Treasury and FDIC are pulling out all the stops to stop any widespread systemic damage to the economy,” said Dana Johnson, chief economist for Comerica Inc. in Dallas and a former senior economist at the central bank. “The federal government is on the hook for an awful lot of money but I think it’s needed to help the financial system recover.”

Bloomberg News tabulated data from the Fed, Treasury and FDIC and interviewed regulators, economists and academic researchers to gauge the full extent of the government’s rescue effort.

Commitments may expand again soon. Treasury Secretary Timothy Geithner postponed an announcement scheduled for today that was to focus on new guarantees for illiquid assets to insure against losses without taking them off banks’ balance sheets. The Treasury said it would delay the announcement until after the Senate votes on the stimulus package.

Program Delay

The government is already backing $301 billion of Citigroup Inc. securities and another $118 billion from Bank of America. The government hasn’t yet paid out on any of the guarantees.

The Fed said Friday that it is delaying the start a $200 billion program called the Term Asset-Backed Securities Loan Facility, or TALF, to revive the market for securities based on consumer loans such as credit-card, auto and student borrowings.

Most of the spending programs are run out of the Federal Reserve Bank of New York, where Geithner served as president. He was sworn in as Treasury secretary on Jan. 26.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return. Collateral is an asset pledged by a borrower in the event a loan payment isn’t made.

Fed Sued

Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn’t received a response to the request.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

The Manipulation Of The Gold Market

By Bill Murphy
Created 2005-11-16 08:00
The key to understanding the manipulation of the gold market, this enormous scandal and fraud, is that it can be compared to a murder trial. In the United States a murderer can be put to death if he is found guilty beyond a reasonable doubt. Many times murder defendants are convicted based solely on "circumstantial" evidence because a reasonable person could reach no conclusion other than guilty.

For seven years GATA has discovered one piece of evidence after another supporting our long-held contention that the gold market is managed by certain central banks and their agents, the bullion banks. It is a price-fixing case involving some very powerful people and institutions … in fact it is a Gold Cartel. The U.S. attorney handling the Samsung conspiracy conviction said in an interview this fall that the United States had experienced an "epidemic" of price-fixing cases in the late 1990s. All GATA has done is uncovered one of them, the grandest of all.

For one to appreciate how this can go on and on and not be brought to the attention of the public, one need only to reflect on Enron and Refco. Before its initial public offering of stock, Refco was audited by the most highly regarded firms on Wall Street and nothing wrong was discovered. Yet look at what was really transpiring behind the scenes. Now the company is bankrupt and under criminal investigation.

That said, GATA does have its "smoking gun." It has to do with derivatives and central bank gold. The mainstream gold world says the central banks have nearly 32,000 tonnes of gold in their vaults (minus a small amount that has been sold in recent years or is on loan to gold producers for their hedging operations). GATA says the central banks have less than half of that -- the difference being what was clandestinely fed into the market to suppress the gold price over the last 10 years. The work of three respected GATA consultants -- Reg Howe, Frank Veneroso, and James Turk -- each using different methodologies, supports GATA's contention of vastly diminished central bank gold supply.

Veneroso made a presentation at GATA's African Gold Summit in Durban, South Africa, on May 10, 2001, laying out why the central bank gold loans are far higher than generally believed. This presentation, "Facts, Evidence and Logical Inference ... A Presentation On Gold Supply/Demand, Gold Derivatives and Gold Loans," may be reviewed at:

http://www.gata.org/node/5275 [1]

Howe and Turk have done the same at their Internet sites:

http://www.goldensextant.com/ [2] and http://www.goldmoney.com/ [3].
Meanwhile the International Monetary Fund has instructed central banks to lie about their gold reserves -- to count gold loans and swaps as gold in their vaults. So as not to be so audacious without backup to validate our more than dramatic claim, let me explain. Canadian GATA supporter Andrew Hepburn posed the following question to the IMF in October 2001:

Why does the IMF insist that members record swapped gold as an asset when a legal change in ownership has occurred?

See http://groups.yahoo.com/group/gata/message/903 [4]

The IMF responded:

"This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets. (See Data Template on International Reserves and Foreign Currency Liquidity, Operational Guidelines, para. 72, http://www.dsbb.imf.org/guide.htm"

(For more on this, see http://groups.yahoo.com/group/gata/message/904 [5]. The IMF link mentioned above is no longer operating. It was in 2001 as noted in the GATA dispatch.)

Yet a footnote on the Internet site of the central bank of the Philippines contradicts the IMF's claim and reveals it to be bogus:

"Beginning January 2000, in compliance with the requirements of the IMF's reserves and foreign currency liquidity template under the Special Data Dissemination Standard (SDDS), gold swaps undertaken by the BSP with non-central banks shall be treated as collateralized loans. Thus, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap."

(See http://www.bsp.gov.ph/statistics/sefi/fx-int.htm [6].)

The European Central Bank and other central banks corroborated exactly what the central bank of the Philippines declares about counting gold loans the same as gold in the vault.

The "smoking gun" part of this has to do with the gold derivatives on the books of the Bank for International Settlements in Switzerland. The gold establishment says the gold derivatives on those books have been associated with gold producer hedges. Yet in the last four years gold producers have reduced their hedges by more than 2,000 tonnes of gold, or more than 50 percent of their hedging at its peak. Consider this excerpt from a Reuters report from November 8, 2005:

"LONDON -- .... The Hedge Book report produced by Haliburton Mineral Services and industry consultants Virtual Metals said the so-called hedge impact of the global book fell by 1.0 million ounces to 52.8 million ounces. ... The global hedge impact in the July-September quarter was just more than half its level in the same quarter of 2001 when it peaked at 102.8 million ounces."

Meanwhile, gold derivatives have gone up during that period of time, not down. While these are complicated and technical, Howe updated GATA's evaluation of the BIS gold derivatives in a report he posted at GoldenSextant.com in June, "Gold Derivatives: Skewing the World":

"On May 20, 2005, the Bank for International Settlements released its regular semi-annual report on the over-the-counter derivatives of major banks and dealers in the G-10 countries for the period ending December 31, 2004. The total notional value of all gold derivatives rose from $318 billion at mid-year 2004 to $369 billion at year-end. As subsequently detailed in table 22A of the June issue of the BIS Quarterly Review, released June 13, 2005, forwards and swaps increased slightly from $129 to $132 billion while options rose dramatically from $189 to $237 billion."

Howe's report can be found here:

http://www.goldensextant.com/commentary29.html#anchor3776 [7]

The only explanation for the dichotomy between the reduced hedges and the increased gold derivatives on the books of the BIS is undisclosed lending of gold and writing of central bank call options associated with the price suppression scheme.

There is one other anecdotal point to make proving how right GATA has been all along and what it means for gold investors in the years to come. For years GATA has claimed that the key to the eventual surge in the price of gold was the rising physical demand for gold amid the diminishing supply of central bank gold used to suppress the price. The gold establishment has associated the rise in the price of gold over the years with the weakening of the U.S. dollar. GATA has claimed otherwise.

We said the Gold Cartel was using the action of the dollar for price-rigging purposes. GATA has said over and over that the price of gold could rise hundreds of dollars per ounce and the dollar do nothing relative to other currencies. We said it would happen when the gold cartel began to lose control of its price manipulation scheme.

Well. ...

The euro came into existence on January 1, 1999, at $1.17. The price of gold that day was $284. As this is written in mid November 2005, the euro approached $1.17 again while gold has rocketed $194 per ounce since the beginning of 1999.

Here's more that helps to prove GATA's case about the gold market. At the beginning of 2005 gold was $420 and the euro was $1.30. In mid November the euro was trading at $1.17. But the price of gold was $478. The argument that gold is tied to the dollar has gone the way of the Dodo bird. Of course, should the dollar crash, which it should, this can only help the gold price.

The price of gold is headed to well beyond $2,000 per ounce. GATA knows why.

Now you do too.