Chapter VI
Money — Our Greatest Problem
Being convinced that the greatest problem before the people of the United States is money, its correct functioning, I shall undertake to give you a picture of money as it now functions, and then suggest a remedy. The entire discussion shall be from the standpoint of a depositor-borrower, and I shall seek to make it a story that the man on the street may understand.
No organic body can survive, or remain in a healthy state, unless its bloodstream is filled with pure blood, bearing in its liquid stream the proper food elements, and in the proper proportions. Its tissues starve without the proper amount of food supplied constantly. Whether the body is active, or in a passive state of complete relaxation and rest, the bloodstream must never stop for a moment.
Civilization is an organic body, composed of millions of cells (each a human being), just as the body of a man is composed of millions of cells. Just as the cells of the human body are held together by a centripetal energy, the law of cohesion, so are the cells of the body of civilization, society, held together by a centripetal energy, adhesion, a more flexible law than the law of cohesion. And, just as a cell of the human body, failing to receive constantly an adequate supply of the proper food, failing to receive the constant renewing of its cells by the bath of life-sustaining food, diluted in the bloodstream, dies and weakens that portion of the human body; so with the cells of civilization, society, when they fail to get their required bath of life. sustaining blood, bearing in its liquid form food for the cells.
Some two hundred and fifty years ago Pope said: "Money is the lifeblood of Civilization," while Locke, even earlier, said, "If exportation will not balance importation, away must go your silver again, whether monied or not monied." In those two concise, congent statements, we find the complete purpose and danger of money.
Just as the bloodstream of the human body must perform two definite labours, if the body is to remain normal and healthy; so must the bloodstream of civilization. First. The bloodstream must carry the proper food in the proper amount to every cell of the body; and, Second. The bloodstream must carry away worn out and/or unneeded particles of food and of the body.
To carry this simile further: while money is the lifeblood of civilization, the banking system is the arteries and veins of the body of civilization through which this lifeblood flows. The two functions of banking — the keeping of the people's money on deposit together with the cashing and clearing of their cheques, and the lending of money, fit nicely into the figure of speech. The Treasury of the United States (ought to be), under the Constitution of the United States, is the heart of the blood system" while the banks are main arteries, and veins, and the depositing of money in the banks and the chequeing it out, is the network of capillaries breaking down the bloodstream and taking food to every particle of the body. This the banks fail to do consistently. Money lending is an aid to the process of growth, which adds new tissues to the body by swelling the bloodstream.
In other words, every human being in a social state has direct contact with the bloodstream, money, the use of it, that he may clothe, feed, shelter and entertain himself; and, conversely, as often as he has an excess of any human necessity or luxury, he must dispose of it and should receive for it money that he may keep his money stream normal and healthy; that he may spend money for what he has not. He must receive money for his excess, and the ideal condition obtains when he receives for his excess goods the exact amount required to buy the goods he lacks.
If he receives more than he spends, he shunts from the bloodstream that much which, if continued, will pile up ganglions of dead capital; and, just as with the human body, tumours, often cancerous, will form and interfere with the normal functioning of the entire body of civilization. Or, if he spends more money than he receives, soon the bloodstream will fail to carry to him, or another human being, maybe many, that food which their bodies must have if they remain normal and healthy. Just as tumours on the human body result finally in death to the entire body, unless expert surgery is employed; so does a tumour on the body of civilization tend to produce the death of civilization, unless expert surgery is employed in its removal.
If one segment of civilization, say a nation, sends out more money for goods than it takes in for goods sent out, it must ultimately find its bloodstream dried up, resulting in the death of that segment. And should it receive more money than it sends out, then tumours will form, and only expert surgery will prevent death.
In other words" an excess of money is just as certain death to a normal and healthy human being, or to a segment of civilization, and many of its cells, as is a lack of it. Then our problem is to ascertain how we may keep the bloodstream of civilization filled with the proper amount of lifeblood: the needed portion for the cells' food supplied the outworn and unneeded particles removed: one building up, the other removing the debris.
That problem, can and must be solved. It can and will be solved by making proper adjustments in our modern money system. In these pages we shall undertake to indicate that solution.
For 168 years banks have been using two very unlike dollars: the earned dollar, and the phoney dollar.
The earned dollar was silver and gold coins. The miner laboured long and hard to mine and separate the gold and silver from the dross. He took it to the Government. The Government minted the gold into coins, and returned them to the miner at no cost to the miner — the "free coinage" practice. The Government could well afford to do that, because it provided the Government with metals which were in common use as money and they, in this act, obeyed the demand of the Constitution that the "Congress . . . shall coin money, and regulate the value thereof." They fixed the value of the coin at approximately the market value of the metal.
But finding the quantity of them too small, the Government, at the behest of bankers, began the practice of printing gold and silver certificates. This was not a thing of value, not a product of labour in the truest sense of the word, but a phoney "gold" and "silver" dollar added by the Government to swell the volume of money. It proved to be a wise thing to do under existing conditions; and since it was done by the Government for the people it was an act of the people, and immediately on the certificates being paid out to customers of the banks, and paid for products of labour, they became earned dollars. But when private banks, then National Banks, then Reserve Banks began to flood the country with private I.O.U.s, the earned dollar dropped into a very minor role in the money markets of the world. The earned dollar was just used for pocket and cash register change.
Had the government retained control of money and credit, and issued all paper money, and added all deposit credits on the books of the banks, limiting bankers — money lenders to the lending of the actual deposit credits they had in their own banks, together with such deposit credits as customers of the banks might have subrogated to them (as time deposits) no harm would have been done; but when the Reserve Act made corporation stock basis of bank reserves, which in turn became the source of bank credit, which was loaned to customers and thereby transformed into deposits, transferable by cheque with which customers of banks made over 90 percent of their monetary payments, the phoney dollar, the unearned dollar practically crowded the earned dollar out of the picture, and bankers were given the power of life and death over every person in the United States, by extending or withholding credit.
Producers of the material things people want and buy, together with those who serve others for hire, came up with their earned dollar, which amounted to a few billions, while the bankers shoved into the volume of money trillions of phoney dollars, which have competed with the earned dollar in the markets of the world. It reduced the earned dollar's buying power almost to nothing, and left the producer forced to continually fight for more pay that he might meet the high prices the phoney dollar has forced the sellers to demand.
Many definitions of money have been used, but the most accurate definition is "a medium of exchange."
In its true sense money is anything the seller will receive from the buyer in payment for his goods and/or services. It is always a promise to pay. In fact, money is a note the seller holds against the buyer.
But, before you may dignify a buyer's promise to pay as money, the promise must have the endorsement of the Government, that the seller may have the Government's guarantee that the promise to pay will be paid in full, and received by any seller. Therefore, the credit of the Nation must be pledged behind every dollar that the people may use and be assured that the money will be acceptable to all sellers.
Originally, our government minted gold and silver coin, products of labour, which had an intrinsic value, that is, a market value approximately equivalent to the stamped value of the coin. So the "guarantee" of the government was not imprinted on the coin, because the holder of the coin knew that the coin itself was worth the dollar; and that all sellers would receive it in payment for goods without question.
But as buying and selling increased, and the difficulty in keeping (from robbers) the gold and/or silver, and the transporting of it from buyer to seller became more and more difficult and hazardous, and even the quantity of it became inadequate, the Government began to engrave paper to be used in addition to coin.
This paper money, at the beginning, was gold Certificates, bearing the usual clause: "This certifies that there is on deposit in the Treasury of the United States of America Ten Dollars in gold payable to the bearer on demand." With the additional clause: "This certificate is legal tender for all debts, both public and private."
These statements were necessary because the odour of "continental currency" hung in the mental atmosphere so thickly that the people would not trust even the more stable Government of the United States.
Congressman John Sherman of Ohio chairman of the Banking Committee, on the passage of the National Bank Note Act, wrote the agents of the Rothschilds in New York:
"The Congress has passed your proposed Act, and it will become popular, and the people will accept it readily because it will look so much like Treasury Certificates. Very few citizens will understand the National Bank Notes Act, but those who do will be under such necessity of enjoying the banks' favours that they will say nothing about it, and the masses will bear the burden never knowing what it is all about."
That assertion is as true today as in the 70s when John Sherman wrote the letter.
But following the panics of 1873, 1893, and 1907, when banks failed and depositors lost billions of "money" deposits, a committee was appointed, at the behest of the bankers, to make a study of banking and money. When this committee made its report to Congress, the bankers introduced the Infamous Federal Reserve Act, which became a law with only six Congressmen and Senators voting against it; the others voted yes, and many of the leaders had been royally entertained at "Hobcaw", the 17,000 acre "Shangrila", owned by Bernard Baruch, a Doctor's son who went from rags to riches via the New York Stock Exchange.
The producers and servers laboured long hours' for their dollars. The bankers with the flick of a pen could create billions while the producers were earning hundreds.
Dollars are like spuds, the more you have of them, the less they will sell for; so every time banks add phoney money to the stream, it cheapens every earned dollar and unearned dollar, too.
The only solution is for Congress to obey the Constitution, and take over the creation of money, deposit credits, which are transferable by cheque from buyer to seller; then keep the people's deposit accounts, cash and clear their cheques.
And keep this in mind, the $1,250 billion bank credits created in the issuing and selling $250 billion U.S. Bonds during World War II, was just as good money as the time deposits on the books, of the banks, and that sum, plus the $250 billion in bonds, gives a total of $1 trillion $500 billion dollars. All was a gift from the people of the United States of America; and as an added punishment for dumbness, we are having to pay $10 billion a year in interest.
I have said that the Federal Reserve Banking System has given us the most fluid money in the world; and that the commercial banks render the people of the United States a very great service:
(a) in creating money (bank deposits); (b) in keeping the depositors' accounts; (c) in cashing and clearing their cheques; and
I have also said that all that they do is unconstitutional. It's their abuse which must we must stop.
To explain how they render those essential monetary services, would be easy, if you let me junk all the gobbledegook bankers use in running their business, and the page after page of "rules" they literally "have" Congress, pass as laws; and that is exactly what I shall do and have done.
In Chapter II, I have quoted from the Board of Governors of the Federal Reserve System's booklet, first printed in 1939, "THE FEDERAL RESERVE SYSTEM — Its Purposes and Functions," excerpts which succinctly tell the "how" the system functions . . . I omit the purposes (almost) because they say nowhere and at no time the "real" purpose of banking. They always say: "Just trying to give the country a sounder money." And always repeating "To control credit."
I want you to read and re-read those lifted statements, given here with Chapter II, page 18, and try to see if you can get a clear picture of banking. It is pretty good, because those statements were made under the direction of the Reserve Board headed by Mariner S. Eccles, inoculated with the Dr. Roosevelt serum.
It was the first official serum administered to public officials which made them prone to put human rights above property rights; and these enlightening quotations should be memorized by you that you may understand what I shall say, and why.
There are two parties deeply involved in money: the buyer and the seller; there are two parties mixed up in the creation and control of money: the Government and Private Banking Corporations. There must always remain the buyer and seller, for money is an invention made by them, not as a measure of value but as an aid in the exchange of goods and services. The interests of buyer and seller are always antagonistic so the Government should act as umpire and call the plays.
There must not continue the co-partnership in creating and controlling money: the Government and banks. One must be eliminated, and the Constitution definitely eliminates the private banking corporations; therefore there must be only the Government in control of the creation of money, and fixing its purchasing power.
The first Article of the Constitution, and the very first Section says:
"All legislative powers herein granted SHALL BE vested in a Congress of the United States . . . " Sections 2, 3, 4, 5, 6 and 7 constitute the Congress, and the 8th Section enumerates SPECIFICALLY the powers of Congress; and the first power mentioned is "money" "lay and collect taxes," and the second, "borrow Money," and the 5th:
"To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures."
Memorize that section; for it must ever be in your mind, as you study banking, money, your place in the system.
I shall prove to you that we must eliminate the banking corporations from the creation, circulation, and control of money; and confine them to "lending only the deposit credits" to their credit on the books of the United States Depositories in absolute control of the Treasury of the United States, with the hand of Congress guiding every step and act in the business of providing the Nation its money supply — even the lending of deposits.
The trouble with bank deposits is that they are created in too large volume by private corporations for the corporations' gain, and incidentally usable as a "medium of exchange."
We have had this sort of money since Andy let Nick taunt him into killing the Second Bank of the United States, first in small quantities, as Gold and Silver. Even at that late date coins were shuttling about in an effort to meet the fluid demands of money; while today personal cheques are used in over 90 percent of our monetary payments.
We might wink at the Congress's farming out the public credit to private banking corporations, and giving them absolute (almost) control of the creation of money and the control of its circulation, and credit, if they did not hog the wealth of the Nation "with phoney money."
Under the Federal Reserve Act, bankers, private corporations formed strictly for private gain, use the credit of the United States (its vast natural and material resources, its vast industrial and commercial activities, its resourceful planning, its eager, know-how man power, its, most democratic government poorly umpiring) to the hurt of the masses, the toiling, labouring, planning workers. The banking practices, given unlimited powers over money under the Federal Reserve Act, empowers them to expand or contract the flow of money at will, on a moment's notice, which either gives us "good times," or puts us in the bread line.
How true Ex-Congressman Callaway's statement to me in 1933: "I voted against the Federal Reserve Act of 1913, because it gives the bankers the power of life or death over every man, woman and child in the Nation."
The mechanics of money are so simple, when shorn of all the lengthy "red tape" bankers use to obscure money! The best money the world has discovered, as I have and shall often repeat, is "deposit credits, transferable by cheque, wherewith people make the bulk of their monetary payments." The Federal Reserve Act, which has just this year been "revised and amended," extending the red-tape obscurations, covering 252 pages, makes the creation of money a most mysterious thing.
Here are the essentials in that best money, which I shall reveal to you:
(1) A United States Depository in every community in the Nation,
(2) a set of books carrying the deposit credits of every person, firm or corporation served by that community's Depository,
(3) a staff of clerks and bookkeepers to administer the duties of the Depository,
(4) the Treasury of the United States as directing head, and
(5) the Congress of the United States. The course of cheques would be as follows, eliminating all clearing houses: John Doe in Austin would write a cheque to Joe Doak in any other community in the United States, in payment of a purchase Doe made from Doak. Doak would deposit it in his (local) depository; the depository would credit Doak's deposit account the face of the cheque, dollar for dollar, and mail the cheque to Doe's Depository in Austin, and Doe's Depository would debit Doe's account face of the cheque, dollar for dollar.
That would be the whole of the mechanics of that soundest and most fluid money the world has ever seen, if the Congressmen would quit perjuring themselves by taking an oath to support and uphold the Constitution, then turning around and violating that Constitution either witlessly or ignorantly.
The source of all deposit credits to the credit of the Government and the people, of course, will be Congress! And the only way new deposit credits may get on these books will be by an order of Congress, and the new deposits will be written in the Depository's account by the Treasurer. Money's coming in from foreign countries, of course, will have to be handled by a special department of the Treasury, under rules laid down by Congress, that no additional deposit credits from any source other than from and through Congress, may enter the Nation's money stream.
There will be little bookkeeping required of the Depository's staff, other than crediting deposits to the depositor's account who hands, them cash or a cheque, or debiting another depositor's, account when a cheque he drew is presented to his depository. Of course they will keep an adequate supply of "United States tokens," money, on hand to cash cheques when presented and this will really be "cashing cheques," the transforming of deposits into currency. At the end of each day, each depository will send to the Treasury in Washington, a report of cheques cashed, deposits credited to customers, and deposits charged to depositors' accounts; and these reports will be quickly tabulated, and the Treasury will know how much money has been chequed out (or received by each and all Depositories in the Nation) , and where the deposits are, Depository to Depository, and ,the grand total of these each day must be the same as the grand total of the day before; for under the Treasury control and administration of the Depositories it is important that, no deposits can appear or disappear, without the fact being conveyed to the Treasury, then to Congress.
One of the major objectives of the Congress will be to keep the supply of money constant from day to day. The constant volume of deposits transferable by cheque, will maintain a constant value of the dollar; for dollars are like spuds, the more you have of them (the nation as a whole) the less the dollar will buy; and the only value you can give a dollar, is its purchasing power. The Gold dollar coin never did that; nor any other fiat dollar. Only volume controls.
That is exactly why the wise men who wrote the Constitution of the United States couched in the same "power" both the coining of money, and the fixing of the standard of weights and measures.
To tell me that a gold dollar has so many grains of gold is of no interest to me, because I do not intend to use the metal. My only purpose would be to use it to buy a commodity, say coffee. The bankers still say that the standard value of our dollar is gold; yet in 1943, before World War II dragged us in, you could buy four pounds of coffee for $1.08; now one pound of coffee will cost you $1.09; so in '43 the gold dollar was worth four times what it is today, in the coffee market of the world. How absurd. And Uncle Sam is still paying $35 an ounce for gold.
The defenders of "creditalism" say that coffee costs more to deliver it to the customer . . . always, they say, "because wages went up — the damned union!"
And the Union replies that we had to have more because what we bought cost more . . . on ad infinitum . . . to nausea.
When Congress controls volume of dollars, if a dollar would buy a bushel of wheat today, a dollar would buy a bushel of wheat August 19, 1997; for the relationship and the relative values of the deposit dollar and the commodity for sale, would not change. So in the end the value of the dollar would be fixed in terms of corn, wheat, spuds, tuna fish, or what have you; and when once fixed, it could not fluctuate; for if it did, then my dollar which could not fluctuate in volume and therefore purchasing power, would not buy my necessities.
The high priest of fluctuating values, Bernard Baruch, and the patron god of the Federal Reserve System, which pours new deposit money into the deposit reservoirs in a constant flood; and has been doing it in ever increasing flood volume since their complete bust in 1933, and their reshoring the dykes with legislation in 1934, says now, in today's Saturday Evening Post:
". . . my experience as chairman of the War Industries Board in World War One taught (me) that if 'inflation were to be prevented in a second war, a ceiling has to be imposed on all prices, wages, rents and profits at the very start of the emergency. (But every day is an emergency.) But when World War II started, both President Franklin Roosevelt and Congress decided to 'wait and see.' The necessary over-all ceilings were not imposed for two years and then only after the inflationary race was on. The same process of wait and see was repeated in the Korean War." If price ceilings in war times, why not in peace times?
Barney had his mind on what his dollar would not buy, and wanted to lay the whole blame on the price the seller charged. He wanted to continue his stream of new dollars, and then have the Congress and President compel people to take his cheap dollar at the old (in the 30's price level) dollar's buying power.