The Mandrake Mechanism-(How the Fed Creates Money)

The Creature from Jekyll Island -Book Excerpt ^ | May 1998 | G. Edward Griffin

[AdamSelene235]

Yeah, just ask those who lost everything in the 1820s due to wild cat banking about "moral hazard."

Oh please. Is that the best boogey man you can conjure up?

The Government encouraged the wildcatters to purchase war-debt bonds and convert them into bank notes to help fund the War of 1812. Within 2 years this tripled the nation's currency supply.

Hardly an example of "free banking" or a GS.

[bvw]

You woke up on the wrong side of the bed ... I could use a more profane and apt analogy ... but you are in some foul mood, fer shure. You ain't reading what people have said, rather you are answering to your own personal demons. We all have them, on occassion. Take a nap and come back in a few days ... bring a bag lunch of humble pie. You are smart guy and well read, but who should answer you when you have such a rotten disposition today?

[AdamSelene235]

You woke up on the wrong side of the bed ... I could use a more profane and apt analogy ... but you are in some foul mood, fer shure. You ain't reading what people have said, rather you are answering to your own personal demons. We all have them, on occassion. Take a nap and come back in a few days ... bring a bag lunch of humble pie. You are smart guy and well read, but who should answer you when you have such a rotten disposition today?

He's like this all the time.

[bvw]

He's smart and well-read. If he can come to read the best into what others say -- I mean, looking for how what they say is in some consistent with his model of how things work, that would be a start.

[jd777]

So it is in no way private.

The world's central banks are private corporations. If the fed is public/private (whatever that means)then why did the united states government not recieve a single share in the federal reserve bank?

[AdamSelene235]

He's smart and well-read. If he can come to read the best into what others say -- I mean, looking for how what they say is in some consistent with his model of how things work, that would be a start.

I could swing a dead cat and hit a dozen people who are twice as smart and infinitely more civil.

[Deuce]

How do you propose we convert today's fiat (debt) to tomorrow’s hard currency?

My goal would not be to convert, necessarily, to a hard currency but rather to convert to an honest one. The single-most important characteristic of an honest currency requires that NO ONE be empowered to create and distribute money by fiat. I have summarized briefly, below, the reform I have in mind.

We can convert to honest money by retiring (actually replacing) the national debt with non-interest bearing Treasury Certificates while simultaneously increasing the reserve ratio. In the process of retiring debt by issuing TCs and raising reserve ratio, the money supply would remain unchanged. This systematic and simultaneous process would convert our current dishonest debt based system to an honest one. In the process, the proposed reform would eliminate the national debt, would save hundreds of billions in annual interest, and would remove the money creation and distribution privilege from the banking system. In short, the reform would institute a currency that has scarcity and distributional integrity. Under my proposed reforms, the classic gold standard would be a natural candidate for settling international accounts.

I look forward to your comments, questions, and opinions.

[Deuce]

In your comments on the constitutionality of (un-backed) paper money and the history, thereof, you over-simplify some key issues and make some outright errors. For example, you oversimplify the interplay between three distinctly different, but related issues: 1.) coining money, 2.) emitting bills of credit, and 3.) establishing legal tender. States were explicitly disallowed from coining money (a power explicitly granted to Congress), from emitting bills of credit (i.e. issuing un-backed paper money) and from making anything but gold or silver legal tender. Congress was explicitly granted the power to coin money. The issues, as I say, are very complex. Based on original intent, however, both the states and the federal government were precluded from issuing money.

Also, you cited wildcat banks as examples of banks issuing currency. This is inaccurate. Wildcat banks notes, like all 19th century bank notes, were legally redeemable in specie. They were not legal tender. To make it difficult for people to redeem in specie wildcat banks established their main offices where “even the wildcats wouldn’t go.” Before 1933, the only fiat currencies were the Continentals issued during the Revolutionary War, the Greenbacks issued during (and directly after) the Civil War, and maybe an issue during the War of 1812. In any event, banks issued bank notes, not currency.

[4CJ]

Madison and Jefferson were complete numbskulls when it came to economics and finance. That is why Hamilton could make mincemeat out of them.

I never heard of President Hamilton. Too bad.

[justshutupandtakeit]

It was too bad for he certainly would have been a better one than either J or M. But their media hachet men: Freaneau, Bache and Callender had done too good a job of demonizing him with a campaign of lies still followed by their DemonRat spiritual descendents.

Hamilton's decision to write a pamphlet about his affair with Maria Reynolds after J's minions had disclosed it was spectacularly bad. He should have just ignored it as Jefferson did the revelations of his affair with Sally. But he was too combative for that course.

[justshutupandtakeit]

When your officers are appointed by the President of the United States and all the profits go to the Federal treasury you are not a private corporation by any meaningful sense of the term.

Policies are set by the Federal REserve board put in place by the government and subject to that government. Stockholders do not profit from this corporation nor do they establish the policies.

Private banks are MEMBERS of the Federal Reserve system but do not control it. It is the other way around.

What does the government need shares for when it controls the corporation and receives ALL the profit? LoL.

[justshutupandtakeit]

Currency- Any form of money in actual use as a medium of exchange.
- circulation, vogue, medium of exchange.
Wildcat banks issued what passed as currency. Since the specie standard left America without sufficient money their notes were used as money.

As for your first point I didn't mention the interplay between those issues. That section of the constitution was written to stop the states from doing what they had done as colonies. They had issued paper money, issued Bills of Credit and made things payable in things other than Gold or Silver. I don't think they ever issued any GS coins though.
Since that section explicitly prohibited states it would have also prohibited the feds if that had been the intent. A blanket prohibition on all governments like in the 2d amendment would have been established not one explicitly directed at the states.

If only coins were to be issued (how is another question for you since a Mint was not mentioned) why would the phraseology have been "coin Money" rather than "issue coins" or "mint coins?" Had there been a desire to prevent the issuance of paper money that would have been made explicit since the writers were very familiar with the experience of the Continentals. But since Morris and Hamilton were on the Committee on Style I am sure they would have been opposed to any such flat prohibition and prevented its inclusion.

Even by that time Hamilton had expert knowledge of the functions of the Bank of England and was well aware of its
great assistance to the Crown in raising sufficient funds for its wars. Wars impossible under a gold standard. Wars which had made redeemability of BoE notes out of the question. After decades some redeemability was regained only to be lost again a short time later.

Non-metallic currency was clearly a means to use the power granted Congress to declare war and provide for the national defense. Since that was impossible under a gold standard (we had no gold) it is clearly constitutional.

[justshutupandtakeit]

Greenspan is no more an advocate now of the gold standard than I am. Try another deception. His Randian delusions are things of the past. Ayn's monetary and economic theories are as simple minded as her novels. They are to Economics as her fiction is to great literature and her "philosophy" is to philosophy. Not to be taken seriously.

The problem with the GS standard is that it does not allow sufficient liquidity. That is the reason that western monetary history is a history of the attempts to get around it and provide a large enough money supply to keep the economy expanding.

Allowing a supersition to cause massive suffering and economic starvation is a thing of the past and it will never be resurrected. It never worked well anyway.

[justshutupandtakeit]

Bow-wow would be an increase in sensibility from most gold buggers.

[hedgetrimmer]

IF indeed *you* aren't free, please explain what *you* are forbidden to do or say.

Ride a bicycle or motorcycle without a helmet?
Build a house on a piece of property that has red legged frogs?
Burn my old newspapers in a burn barrel?
Plow my land without getting a permit first?
Use a pesticide on my farm without a permit?
Cut down a tree on my property for profit without a permit?
Fish anywhere without a permit?
Smoke in a public area?
Build anything without going before the "soviet style " planning department for the county?

[bvw]

Without convertability to a hard standard -- gold, silver, platinum, palladium -- fiat money is a form of slavery no different from scrip paid mine workers only redeemable in the "company" store. No different -- with one allowance to mimic the effect of a central authority's fiat money arbitrary expansion or removal of currency we have the arbitrary setting of prices by the mine owner in the "company" store. (I put company in quotes, for to call such an enterprise a company is a misnomer. A company implies companions in enterprise. However in both the fiat money and "company" store model the relation is not one between companions -- that's a possible but less-than-stable condition, more likely it degrades into owner-slave, or elite-indentured.)

[justshutupandtakeit]

Wildcat banking came into play a decade or so after the War of 1812. The term came from Michigan in the 1830s. Government needs occasioned by the War of 1812 had nothing to do with Wildcat banking.

Republican fanaticism had allowed the charter of the the National bank to expire (despite Madison's effort to recharter) and there was then no way to finance the War. Interest bearing Bank notes were then issued to cover the cost of the War. These were used in some cases to form reserves for state chartered banks but the "government" did not "encourage the wildcatters" since this was about 2 decades before the Wildcatters.

Any discussion of "free banking" general starts with the Wildcats. You can argue about the appropriateness of the association if you like it isn't mine.

But it is entirely correct that the moral hazard of the Wildcats was far greater than any federally chartered bank which is the point.

[justshutupandtakeit]

Quite the contrary I have been in a great mood for a week since Bush's outstanding Victory in Iraq. Good has triumphed over Evil in a gigantic way so who wouldn't feel great about that?

Now it is true I have little patience for these perpetual disinformation threads posted by the Gold buggers and no regard for those who take them seriously. But it isn't Personal, Sonny It's business.

[AdamSelene235]

Greenspan is no more an advocate now of the gold standard than I am. Try another deception.

In 2002 Ron Paul presented Sir Alan with a copy of “Gold and Economic Freedom.” and asked Mr. Greenspan to autograph it and asked him if he would change anything. Mr. Greenspan said, “Not a word!”

Similarly in 1993, Dr. Lawrence Parks asked him if he still agreed with the reasoning and the conclusions he drew in that article. " He looked me right in the face and said, “Absolutely!” "

Allowing a supersition to cause massive suffering and economic starvation is a thing of the past and it will never be resurrected. It never worked well anyway.

It is no more a superstition than the belief the government should control the money supply.

Furthermore, I'm not arguing for a GS. I'm arguing for an end of government control of money.

Something big happened to M3 back in 1995, right about the time Clinton needed to be re-elected. The expansion hasn't stopped since.

Do you believe that our productivity has doubled along with the money supply since 1995 ?

[justshutupandtakeit]

More nonsense. As one who was raised in a town where company script was used at one time I will say you don't know of which you speak.

Company script was good ONLY at the company store. Dollars are good EVERYWHERE from Moscow to Mongolia. So that stupid analogy is smashed into oblivion. Inappropriate comparisions destroy your argument and hysterical falsehoods don't help.

If you think you are a slave your delusions go far beyond what I can help you with. Call Dr. Malfi maybe she can help.