Chapter IX
Some Further Reasons Why Banking Must Be Abolished
Article I, Section 8: The Congress shall have power to coin (create) money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.
Article I, Section 10: No state (then certainly no private corporation) shall . . . coin (create) money; emit bills of credit; make anything but gold and silver coin a tender in payments of debts.
Certainly these three means of "regulating the value of money" have failed: (a) make all money gold and/or silver coin, (b) make gold the money standard with private corporations in control, (c) "fix prices on wages, goods, rents, and profits," as Mr. Baruch induced the Government to do in last two great World Wars.
Modern life could not be served with metallic or paper money; but it is being served by the substitution of deposits on the books of the banks to the credit of the people. This money can be used by means of a personal cheque.
Deposit money can be limited, or fixed in volume, and therefore its buying power can be made constant and fixed. Not by fixing the volume at a fixed figure, but fixing its volume at that proper ratio to the business the Nation transacts in any given year. If you keep the ratio of money constant. The Reserve System has a board of 19 members who meet tri-weekly. They could fix this ratio so definitely that the buying power of the dollar would be constant; that is, if that were their purpose, but it is not. Their business is to make profits; not for their customers, the people of the United States, but for the stockholders, which constitute a very small percentage of the people of the United States.
That they might get more and more investment obligations, for ten years now, they have been pouring bank credit into the money stream of the Nation, making the dollar cheaper and cheaper, until today it buys on an average about one-fourth as much as it did in the 30's and early 40's.
Now their vaults are bulging with "investment obligations," and they have decided that it is time to begin foreclosing and taking title to the lands and industrial and commercial properties of the people of the United States. A few months ago these 19 kings of America met, scratched just common, ordinary chins, and used just ordinary brains, and came up with the idea that now is the time to put on the squeeze. So tight money followed, up to now just for the little man - the big boys are still building houses in blocks costing many millions, but the little fellow who had been building a house at a time, selling it, paying off the banker, then borrowing again to build again, can't get a dollar.
Remember 1929, and the years that followed, and curse yourself for not compelling Congress to take back the creation and control of money, and the Nation's credit then.
If Congress should "remember" the Constitution, and take over the creation of money, and its control, cash and clear the people's cheques, the Congress could play the role of the 19 kings, to the benefit of all. When the Treasury found the volume of money inadequate, Congress could order the Treasurer to give the Government credit in its chequeing account for that additional money the increased business of the nation required, and the ratio would remain the same. Of course they would not automatically siphon this money off when the demands of trade fell below the ratio to the volume of money, so the Congress, in its power to regulate the value of money, could "fix" prices at the status quo level.
Congress could not legally or constitutionally profit in the creation and control of money; neither could the employees of the Treasury who would man the thousands of United States Treasury Depositories, for they could not buy investment obligations, nor make loans. Their sole business (duty) would be to keep accurate accounts of the people's depository deposits, cash their cheques, and clear them exactly, almost, as cheques, are now cashed and/or cleared. The system now in use is fairly simple, but the Treasury would simplify the mechanics of money much more.
This will be developed to greater length as we give you the Constitutional Solution.
There is another emergency which may confront Congress at any time: war. If that should happen again, and we would be faced with another $250 billion war costs, the Congress would order the Treasurer to give Congress credit for the $250 billion. Since it would not draw interest, or disturb our total deposit volume, except as the Government chequed it out for goods and supplies, and services, it would make no difference if the Government never chequed it out; for as long as it remained to the Government's credit in the Treasury, it would have no effect on our money supply.
As the Government chequed against the $250 billion it would transfer these deposits from the Treasury to the people's accounts in the Depositories of the country. It would swell the volume of money; but Congress would immediately fix prices on all commodities, wages, interest, and what have you and there would be no increased costs of goods.
At the end of the war, should our increased business activity fall off, and return to normal; the Congress would take these extra billions out of circulation, as explained elsewhere, and the deposit dollars would nicely balance the dollars business required annually.
No army of "experts" would be needed to keep the Congress posted; it would be as simple as keeping Congress posted on the post office needs and activities. No smart lawyers would be needed to interpret contracts, and pile up mountains of gobbledegook, to confuse and to mislead the people.
Perhaps the most difficult proposition for the people to grasp is how bank deposits are obtained. This is so because the people have been taught that bankers lend cash, and that when they get the cash, if they do not want to have it in their possession, they "deposit the cash" in the bank, and get a deposit slip, showing that they have the cash on deposit in the bank.
This is wholly erroneous. You do not borrow cash; you borrow bank credit, and bank credit is a fictitious fund carried on the books of banks. When you borrow "bank credit" you are given a deposit slip, as stated above, which shows in the loan that bank credit was converted into bank deposits.
You must remember this; there is no relationship between volume of cash and the volume of bank deposits. This is strikingly shown on Page 25, Reserve booklet 1939, which gives total cash as of December 31, 1938, in circulation as $6,856,000,000; yet at that time the bank deposits in all of the banks of the United States amounted to hundreds of billions of dollars.
So in our discussion remember that bank deposits are readily convertible into cash, and that cash is readily convertible into bank deposits; and that loans have no bearing on cash, and cash bears no relationship to bank deposits.
Surely you get the enormity of it, the crime of it, the unconstitutionality of it. Surely you see that the bankers have created money until today it is not worth 10c. on the dollar.
There has been grave disagreement among the people of the United States on the interpretation of the Constitution of the United States of America: (a) those who contend that we should obey the letter of the Constitution; (b) those who contend that we should obey the spirit of the Constitution.
I have ever been one who believed that we must obey the letter of the Constitution, because there is no human power of mental analysis that can state that "this is the spirit of the Constitution," and give more than his interpretation of the Constitution - and there would be as many "spirits of the Constitution" as there are those expressing an opinion of the "spirit of the Constitution."
The framers knew that. They wanted to outline a specific foundation for our Government, and knowing that this could be done only in specific words, chosen because they expressed exactly what they wanted the Constitution to say to future generations. They did not use a single useless word; they expressed the purpose of the Constitution completely, clearly, in just fifty two words.