REPRINT WITH PERMISSION
THE CIRCULAR CHARADE
Copyright 1997 J.N. Tlaga
The Proposal:
The simplest way to repudiate Federal Reserve notes
is to declare them null and void, and to replace them
instantly with cents that are currently in circulation.
Because the proportion of Federal Reserve notes to
coin cents now in circulation is about 22:1, and
because more than one-half of the face value of these
notes circulates abroad, replacing dollars with cents
will not change the overall money supply in the United
States if all the prices, deposits and accounts are
adjusted by the factor of 10 and rounded off to the
next cent. The whole reform can be executed overnight.
And the entire federal debt will have to be
repudiated together with the Federal Reserve notes.
Federal Reserve note is a cancer, and federal debt is
what sustains it.
The Objection:
What do you plan to tell the millions of workers and
retirees who have a substantial portion of their savings
in the form of Treasury securities? What will you tell
the hundreds of thousands of businesses and banks when
they discover that the T-bills they once owned as a safe
way to store cash before the next payroll are now good
only for scratch paper?
The Explanation:
As of September 1994, the debt of the US Government,
worth about $5 trillion ($5 000 000 000 000) and made up of
Treasury bills (maturity of less than one year), Treasury
notes (maturity of one to ten years), and Treasury bonds
(maturity of ten to thirty years), was held by the following
entities:
Money market funds
Corporations
Insurance companies
Commercial banks
State and local governments
Individuals
Foreign entities
Other entities
|
3%
7%
8%
9%
11%
11%
26%
27%
|
Other entities:
This mysterious category consists of the Federal Reserve
banks and the exclusive club of the Treasury securities
dealers ("authorized" by the Fed). To them I would say:
Gentlemen: Since 1914, you have been operating a private
organization that was authorized by the Congress of the
United States to circulate private Federal Reserve notes as
the official dollar currency of the United States, and to
distribute US Treasury securities denominated in these
private "dollars". Pursuant to the enabling legislation of
the Congress of the United States, the President (it may
even be William Jefferson Clinton) has now declared all the
Federal Reserve notes null and void. The cent coins in
circulation are now recognized as the only lawful currency
of the United States, while all prices, deposits and
accounts are adjusted by the factor of 10, and from time now
on are to be denominated in the United States cents. In his
proclamation, the President also repudiated all the Treasury
securities that were denominated in "dollars".
Two new currencies may be subsequently introduced:
Gram of Silver (gram of monetary silver 9/10 fine) and
Gram of Gold (gram of monetary gold 9/10 fine), with their
parity to the United States Cent to be determined by a free
float during the transition period. Gram of Silver to be
used primarily at home, and Gram of Gold, primarily in
foreign trade.
The era of global wars and fiat money that financed them
is over. Your enterprise is now closed, and its functions
revert by operation of law to the Treasury of the United
States. From time now on, you will not be able to print
your money. Like everybody else, you will have to earn it.
We harbor no grudge for all you have done to us, and in
Christian spirit we sincerely wish you a good fortune.
Foreign entities:
This category includes central banks and commercial banks
dealing in "euro-dollars". To them I would say:
Gentlemen: Since 1947, you have been enjoying foreign
trade edge resulting from two-tier Federal Reserve dollar,
that has been pricing US-made products one-third more
expensively in your countries, and your countries' products
one-fourth less expensively in the United States. For over
twenty years you have been exchanging your surplus dollars,
accumulated in the course of this uneven trade, into gold
bullion at the US Treasury.
After the gold window in Washington was closed for good,
you elected to maintain the Bretton Woods economic order
(whose entire meaning has been to keep US dollar overvalued)
by alternate means, namely, by buying dollars on the open
market to elevate their exchange rate far above their
purchasing power parity. Lent to, and spend by the US
Government, these dollars were again used to purchase more
imports, only to be reacquired by you and lent to our
spendthrift government all over again. After two generations
of this circular charade, America is now deindustrialized,
and to considerable extent simply lives on her deficit
dollars borrowed from abroad.
And, as if that would not be enough, you began to create
on the massive scale new dollar "deposits" out of nothing,
against securities of the Treasury of the United States.
In honest banking, loss of liquidity is the price one
pays for interest. If one keeps one's wealth in liquid
form, that is in the form of cash, one earns no interest.
When one lends one's cash to someone against acceptable
collateral, one changes one's liquid assets into less liquid
asset, a deposit, in exchange for interest. And the general
rule is that the less liquid the assets, the higher the
return (interest). On the euro-dollar market, you are
getting both, interest and liquidity at the same time, and
you make others pay for this convenience; US taxpayers, in
the form of interest on Treasury Bills, notes and bonds, and
general public, in the form of currency purchasing power
loss (resulting from injecting new money into economy).
Your massive investment in US Government securities
serves two purposes. To recycle deficit dollars, so that
they can be used for purchasing more imports, and, to
acquire massive reservoir of liquid reserves to cover your
limitless creation of new "dollars" on euro-dollar market.
Your banks stand ready to put together any euro-dollar loan
on a moment's notice, and it doesn't matter that the taker
becomes insolvent and unable to pay. The lent "dollars"
never existed in the first place, and new "dollars" can
always be created to cover any such loss simply by making a
new computer entry.
Fifty years of this charade is enough by any measure.
It is the informed decision of the Congress of the United
States and the President to repudiate the dollar currency of
the United States, along with dollar denominated securities
of the US Treasury.
To say it plainly, you have on your hands $1.3 trillion
in bounced securities, and God only knows how many trillions
in "dollars" you have created out of thin air. Tomorrow,
you will be accepting new deposits and making new loans in
new currencies. Whatever your choice of currency may be,
one thing is certain, it will not be the US dollar ever
again.
Commercial banks, insurance companies, corporations, money market funds:
To them I would say:
Gentlemen: For generations, you have been the primary
beneficiaries of the unnatural, unjust and downright
fraudulent monetary system.
Commodity money, silver and gold, is by nature the money
of a democracy. Its supply is finite, its value stable, and
everyone, at least in theory, is free to compete for it.
One can acquire it lawfully only by earning it.
Fiat money is by nature the money of an oligarchy.
It functions very much like the counterfeited money, which
acquires its value by diluting the "earned money" in
circulation. This counterfeiting aspect is difficult to
grasp, because the counterfeited dollar of today becomes
through daily commerce the earned dollar of tomorrow. The
difference between Federal Reserve's counterfeiting and
Mafia's counterfeiting is that Mafia's dollars are subject
to confiscation, while Federal Reserve dollars are treated
as lawful money of the land.
Unlike the commodity money, that is accessible to all on
more or less equal basis, the fiat money is first made
available to the insiders of the system, who then pass it on
to the rest of the population as they see fit. If one owns
a newspaper which criticizes this oligarchy, one is refused
credit which in the present day economic order simply means
bankruptcy. Here, no KGB thugs are needed to threaten
people to toe the line. People control themselves.
The fact of the sheer existence of your enterprises is a
proof that you have been enjoying good relations with the
system's insiders. Otherwise, you would have filed for
bankruptcy years ago.
Even though you have access to all the credit you may
need, you do not shrink from milking the system for extra
profit. Ordinarily, you cannot have both, liquidity and
interest. But by keeping your cash reserves in Treasury
securities, you can. But this is done at the expense of
others. Taxpayers who pay the interest, and general public
who gets diluted dollars. Please don't tell me your stories
about struggling entrepreneurs, who are shaving few extra
basis points of interest from their payroll money. The real
struggling entrepreneurs cannot afford to buy the Treasury
securities. More often than not they borrow their payroll
money. The scandal at Solomon Brothers did open everybody's
eyes on how and to whom Treasury securities are really sold.
What repudiation of US dollar and of US Treasury
securities will mean to you?
You will loose your paper dollars, but your coins will
appreciate in value ten times over. On the average, your
cash position will remain the same. (Banks are likely to
gain.) All your deposits (other than euro-dollar deposits)
and accounts will remain the same. Only they will be
adjusted by the factor of 10 and will be denominated in new
cents. You will unconditionally loose your Treasury
securities though, and in accordance with banking, insurance
and corporate principles, your depositors, insured persons
and shareholders will ultimately absorb your loss.
Afterwards, with Federal Reserve System scrapped, you
will have to learn to compete like everybody else, without
lender of last resort, and without money printed for you on
demand.
State and Local Governments:
To them I would say:
You have no business to buy Treasury securities
- because you can make adequate provisions to protect
your cash flow with your own state banking system,
- because giving extra money to Congress is like giving
extra bottle to an alcoholic, and
- because you will get back less than 21 cents on a
dollar for every 30 year Treasury bond you'll buy.
(With such rate of depreciation, why bother to buy
bonds? Why not give your money to Congress as your
State's outright gift?)
Individuals:
To them I would say:
Not even majority of you are "workers and retirees"
anymore because the rigged exchange rates system introduced
under Bretton Woods regime virtually deindustrialized
America and wiped out the well-paid unionized workers and
turned them into part-time servants, and your retirement
monies the Government has been collecting from you in the
form of Social Security taxes were spent for other purposes.
The whole industrial plants were shipped abroad, while
you, the elderly workers who worked those plants, are now
told that the Government cannot afford decent retirement for
you because your Social Security taxes that were to be kept
in separate trust fund are simply gone, having been applied
toward welfare benefits to those who were thrown on the
streets before you!
Statistically, each one of you is holding $5,500 in the
Government's debt. (11% of $5 trillion is $550 billion,
divided by 100 million taxpayers, makes $5,500.)
In reality most of you never even thought about buying
Treasury bonds. Most of you are only one or two paychecks
away from insolvency all the time. But when for each one
thousand of you one Bretton Woods millionaire, who is making
fortune from shipping his plant abroad and importing its
products (made by foreign workers at $5 a day) back to
America to collect one-fourth hidden subsidy (created by
rigged rates of exchange) buys $5 500 000 in Treasury bonds,
the statistics show that each one of you is holding $5,500
in Treasury bonds.
To those of you who may actually have $5,500 in Treasury
bonds, I say this:
You bought 30-year Treasury bonds worth $5,500 in 1967,
and in 1997 the Government paid you back your $5,500, while
every year you have been collecting your 6% interest (or
whatever the rate might be). You consider it a good deal.
But is it?
Do you know how much money will you actually get for your
$5,500 in 1997? Do you?
Less than 21 cents on a dollar!
Why?
Because Federal Reserve dollar depreciated 79.1% between
1967 and 1997. That's why.
And why Federal Reserve dollar depreciates so rapidly?
Because it is not defined in weight of gold or silver.
Each time Federal Reserve owners take out one gallon of
wine, they throw one gallon of water back into the barrel.
That's why!
To scrap this fraudulent system, it is necessary to
abolish its "dollar" currency all at once, and to bounce all
Treasury bills, notes and bonds. There is no other way!
And the people who want to maintain this fraud
indefinitely, now turn around and say to you:
Did you hear what this man is trying to do to you?
He is trying to take your Treasury bonds away from you!
I say: Away with your bonds! By throwing away less than
21 cents on a dollar you have lent to these money-changers
thirty years ago, you will get back your decent retirement
that was stolen from you, and you will bring this Bretton
Woods nightmare, that has been choking you and yours for
much too long, to its well deserved demise.
Do you still remember that propagandist of the Council on
Foreign Relations and her article "The Waste, Fraud and
Abuse Fraud"?
She was trying to "enlighten" you to the need of still
further cuts in your Social Security retirement check, by
resorting to her kitchen matches parable.
She translated national debt burden and Social Security
"burden" to so many kitchen matches on the table, to sell
her thesis that there was not enough fat in Government's
"waste, fraud and abuse" to balance the budget without
further cuts in Social Security retirement checks.
But she never said it was time to put the national debt
on the table for cuts. Her name is Jessica Tuchman Mathews.
And who is the gentleman who is so concerned about
"millions of workers and retirees" here, and does not want
them to loose their 21 cents on a dollar in their Treasury bonds?
His name is Edward Flaherty, and he is a PhD candidate in
Economics at Florida State University. His dissertation,
yet to be completed, is entitled "Threshold Cointegration
Analysis and Exchange Rate Equilibrium Conditions". In
other words, he is writing "a book" on monetary exchange
rates. He is an expert.
His presence on the Usenet is firmly focused on
"Debunking the Fed Conspiracy Myths", to use the title of
a boilerplate article from his web page as a descriptive
phrase?
On June 18, 1996, stephenh@netcom.com (stephenh) placed
an article commenting upon
the statement of Clyde Farnsworth of the New York Times:
The "Times" did not do a story on this Bilderberg
meeting because it was decided it was not news for us.
In response to Stephenh's list of luminaries who attended
that meeting, and his not so rhetoric question why would the
secret meeting of such people NOT BE OF ANY INTEREST TO THE
PEOPLE OF THE UNITED STATES...
Edward Flaherty wrote on June 19, 1996,
in <4q9337$f6p@news.fsu.edu>
Hey! Don't forget me, I was there!
We rule, man.
I am not saying there is anything inherently wrong in making
such comments. Personally, I find many of Mr. Flaherty's
remarks enlightening and sometimes even entertaining.
The reason why I am bringing this up is to offer an
explanation why is Mr. Flaherty so persistently arguing
against the evidence.
Would it amount to putting a second cherry on the pie, if
we would quote the motto Mr. Flaherty keeps on his web page"?
"A wise man proportions his belief to the evidence."
David Hume
Kindly read my essay "WE HAVE BEEN HAD" that was posted
here in two parts recently.
It's a long essay because...
it contains a lot of evidence.
I have the honor to remain
Very truly yours,
J.N. Tlaga
tlaga@shadow.net
