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Old 03-31-2010, 12:35 AM   #1
SteelCityMom
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Default Is the Federal Reserve Constitutional?

I've long had a problem with the Federal Reserve, and yes while I understand that Congress was constitutionally give the power to coin money...why did it ever turn the power of debt and money over to private bankers? If Congress can write and pass an act for a private company to print and regulate the flow of money...why couldn't they do it for themselves?

I found some interesting points while digging around, and found a couple things I had never heard before.

Quote:
The monetary policy of the United States is the domain of the Federal Reserve Bank and not the government. This process is in direct contradiction of the U.S. Constitution that reposes the responsibility of the monetary system with the Congress of the United States. On April 27, 1936, hearings were held by the House Committee on Banking and Currency. The preamble of the bill - HR 9216 of the Seventy-fourth Congress, states, "The committee had under consideration the bill (HR 92163 to restore to Congress its constitutional power to issue money and regulate the value thereof; to provide monetary income to the people of the United States at a fixed and equitable purchasing power of the dollar, ample at all times to enable the people to buy wanted goods and services at full capacity of the industries and commercial facilities of the United States; to abolish the practice of creating bank deposits by private groups upon fractional reserves, and for other purposes."

The Congress declared, "Whereas the permanent welfare of the people and the protection of the economic life of the Nation are dependent on the establishment of a monetary system wholly subject to the control of Congress that will promote the interests of agriculture and labor, of industry, trade, commerce, and finance for the economic well being of all citizens by the maintenance of an adequate supply of money with a unit of fixed average purchasing power, which will avoid excessive expansion or disastrous contraction." That preamble led to the body of the text. "Section 1. That it is hereby declared to be the policy of Congress to provide such issuances of certificates of national credit as shall be requisite so to increase the purchasing power of the consumers of the United States as to make it conform to the capacity of the industries and people of the United States for the production and delivery of wanted goods and services, which capacity be declared to be the measure of national credit." The Congress attempted to issue non-interest bearing Treasury Notes. A Federal Credit Commission linked to the Secretary of the Treasluy was the goal of Congress.

The Commission was to consist of seven commissioners appointed by the President with approval of the U.S. Senate. U.S. citizenship was a prime requirement and they could not have more than four from one political party. It was also made unlawful for anyone to interfere with the commission. The concern of Congress was that banks were issuing loans without the backing of real deposits and that it was controlling money based on the price it attracted on international money markets or by the amount of interest they could charge. The Congress wanted to withdraw from the banks the right to issue credit on fractional reserves, and leave the banks the right to issue credit on account of actual deposits, which means that permanent money will be loaned not bank manufactured money.

"By this bill, Congress resumes its constitutional duty of issuing money and regulating its value, a duty and a right which it has long been abdicated to the private banking system," read the preamble of the bill. The bill would have eliminated the private manufacture of money - a direct contravention of the mandate of the Constitution, which places the right to coin money in the hands of Congress.

PAYING OFF THE NATIONAL DEBT

The bill would have allowed the nation to pay off its national debt and stay out of debt. In one year's time, with this bill, the national debt could have been paid, and without any tax increases, plus it would have allowed for full employment. "Because of the unsound practice of relying on the private manufacturing of monetary credits by private groups, you are preparing to lay heavier taxes on the shrunken income of the people, without hope of balancing the Budget perhaps for years to come," was the testimony of Allen B. Brown, chairman of the New Economic Group. Remember, this testimony is in 1936. "In order to meet the Budget deficits, this administration and the preceding one committed themselves to a program of borrowing, so that now the national debt has doubled with every prospect of further increase. More than half of this great sum of added debt represents merely book figure which the banks have lent the Government. To pay for their service of writing figures on their books and canceling the Government checks in their clearing system, the Government has engaged to tax the American people. They must pay back the billions of book figures with sweat and labor, with goods and services to which they are now denied access of purchasing power for their families, and they must pay enormous debt charges." Brown said that the bill before Congress would "put a stop to this process of privately manufacturing monetary credit for the use of business out of added government debt."

"The banks manufacture, without borrowing it, the monetary credit which they loan to the Government. For every dollar they themselves contribute to the loaning process, they manufacture 10 credit dollars, and call them their own, although they base the credit dollars on human sweat and labor and productive genus that is not their own." The comments by Brown was a direct slap at the Federal Reserve System - that was only 23 years old, at the time. "The crying fault of our prevailing money system is its impermanence. It fluctuates wildly in volume, because it is debt-money, loans, and subject alternately to the fears and the sanguine expectations and speculative propensities of its private owners who have become the debt-masters of all business." He added, "We need to be delivered of the curse of a money system that is not owned, as a cash-credit system, by the American people. We want no longer a system that can at any time be cancelled out of existence with the dumping of pledged securities and, simultaneously, with the depression and deflation of all the physical and intangible assets of the American people."

The bill would have ended immediately the private monetary credit inflation. The Federal Reserve can create money out of nothing, simply printing it, lending it and printing more. You could have guessed that this bill never became law in 1936 - the banking interest was too powerful.
Another point that I would like to look more into is this, and if it's true, it's imperative that more people know about it.

Quote:
No Congress, no President has been strong enough to stand up to the foreign-controlled Federal Reserve Bank. Yet there is a catch - one that President Kennedy recognized before he was slain - the original deal in 1913 creating the Federal Reserve Bank had a simple backout clause. The investors loaned the United States Government $1 billion. And the backout clause allows the United States to buy out the system for that $1 billion. If the Federal Reserve Bank were demolished and the Congress of the United States took control of the currency, as required in the Constitution, the National Debt would virtually end overnight, and the need for more taxes and even the income tax, itself. Thomas Jefferson was concise in his early warning to the American nation, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."
http://dmc.members.sonic.net/sentinel/naij2.html

Could you imagine buying out the Federal Reserve for a billion dollars and walking away from national debt to the Fed?
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Old 03-31-2010, 12:40 AM   #2
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Default Re: Is the Federal Reserve Constitutional?

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Congressman Ron Paul
U.S. House of Representatives
September 10, 2002

ABOLISH THE FEDERAL RESERVE

Mr. Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. I also ask unanimous consent to insert the attached article by Lew Rockwell, president of the Ludwig Von Mises Institute, which explains the benefits of abolishing the Fed and restoring the gold standard, into the record.

Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. 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.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, 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. Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans' standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.
http://www.house.gov/paul/congrec/co.../cr091002b.htm

If Congress does not have the constitutional right to ink its own paper money just because there is a lack of statement that they do have that power, then Congress in turn does not constitutionally have the right to pass that power onto a private banking system.

IMO this is just as big of an issue as health care, war on terror etc. etc...if not bigger. And there certainly aren't enough people who are genuinely concerned about the root cause of this nations monetary problems.
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Old 03-31-2010, 04:30 PM   #3
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Default Re: Is the Federal Reserve Constitutional?

That is a very, very good question. Thank you for asking it. I don't pretend to know the answer, but the claim is that left in the hands of the government, the printers would never stop once the first crisis came along, and that hyper-inflation would ensue. Private bankers, we are assured, have longer-term goals in mind, and would not give in to the whims of angry masses.

I'm sure most here know by now how I feel about that theory, so I'll spare you my lengthy diatribe. It should suffice to say that an institution which is legally prohibited from thinking further ahead than the next quarterly return for its shareholders cannot possibly be more forward-thinking than any given elected official.

I still say that our economy should be run by single moms with three kids, putting all of them through college. These are people who actually know what money is worth and how to earn it, save it and invest it. Instead our economy is run almost exclusively by people who have not had to think about their income even once in their lives.
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Old 03-31-2010, 05:40 PM   #4
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Default Re: Is the Federal Reserve Constitutional?

Agreed. It's a good question.

Love him/hate him/ indifferent to him... Ron Paul brings up that very topic in his book

I don't agree with everything in it, but he does, at least, make interesting points and he incites critical thinking on some tough subjects. I highly recommend it

http://www.amazon.com/Revolution-Man...20&sr=8-1#noop
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Old 03-31-2010, 06:22 PM   #5
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Default Re: Is the Federal Reserve Constitutional?

SCM,
The Fed is somewhere in the quasi- constitutional zone. The Federal government was never given the power to emit bills of credit (both the Federalists and the anti-Federalists were in agreement that paper money was a death trap), but the Constitution, as amended by the 14th reads:
Quote:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
So it is technically Constitutional, since the Fed is a form of public debt authorized by law.
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Old 03-31-2010, 06:51 PM   #6
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Default Re: Is the Federal Reserve Constitutional?

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Originally Posted by ricardisimo View Post
That is a very, very good question. Thank you for asking it. I don't pretend to know the answer, but the claim is that left in the hands of the government, the printers would never stop once the first crisis came along, and that hyper-inflation would ensue. Private bankers, we are assured, have longer-term goals in mind, and would not give in to the whims of angry masses.

I'm sure most here know by now how I feel about that theory, so I'll spare you my lengthy diatribe. It should suffice to say that an institution which is legally prohibited from thinking further ahead than the next quarterly return for its shareholders cannot possibly be more forward-thinking than any given elected official.

I still say that our economy should be run by single moms with three kids, putting all of them through college. These are people who actually know what money is worth and how to earn it, save it and invest it. Instead our economy is run almost exclusively by people who have not had to think about their income even once in their lives.
True...the power to control money probably shouldn't be left up to Congress. They can barely find their own feet.

One thing that bothers me most though is that there is no way to regulate the Fed. An audit of their business is long overdue IMO. It's absurd in my eyes that the US government would contract out the duty of regulating US currency and then never check up on it.
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Old 03-31-2010, 07:01 PM   #7
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Default Re: Is the Federal Reserve Constitutional?

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Originally Posted by GoSlash27 View Post
SCM,
The Fed is somewhere in the quasi- constitutional zone. The Federal government was never given the power to emit bills of credit (both the Federalists and the anti-Federalists were in agreement that paper money was a death trap), but the Constitution, as amended by the 14th reads:


So it is technically Constitutional, since the Fed is a form of public debt authorized by law.
For one, the 14th amendment was written before there was printed money (or at least before the gold standard was done away with...I know there were bills of debt for gold then), and was written more for the purpose of saying that the United States or any state within would not be obligated to pay back debts or slaves incurred by the Confederacy, particularly to England and France.

The Federal Reserve is more in the business of creating public debt, by ballooning and busting the economy at a whim. I'm positive this is not what the 14th amendment was written for and designed to do.
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Old 03-31-2010, 10:19 PM   #8
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Default Re: Is the Federal Reserve Constitutional?

SCM,
Preachin' to the choir.
Central banking and a debt-driven economy have been a scourge.
So yeah... this isn't what the 14th was intended for, but it is technically permissible under it. Just as section 1 applies to more than just freed slaves, section 4 permits Federal debt.

BTW, I love the idea of buying out the Fed for a billion dollars.
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Old 04-01-2010, 01:06 PM   #9
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Default Re: Is the Federal Reserve Constitutional?

I don't understand the whole idea of owing a bank money anyway. What do they do, say "I need 1billion dollars" so they hit the presses all night and voila, you are now in debt for years to come with interest?"

The whole system appears to be built on match sticks, or better yet, clouds. Nothing is tangible, it's all "fake".
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Old 04-01-2010, 05:42 PM   #10
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Originally Posted by Bng_Hevn View Post
I don't understand the whole idea of owing a bank money anyway. What do they do, say "I need 1billion dollars" so they hit the presses all night and voila, you are now in debt for years to come with interest?"

The whole system appears to be built on match sticks, or better yet, clouds. Nothing is tangible, it's all "fake".
Exactly...the Federal Reserve is really doing nothing else but being legal counterfeiters.
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