Lessons of the Money Masters

From http://libertyrevival.wordpress.com/2010/04/22/lessons-of-the-money-masters/


Lessons of the Money Masters
April 22, 2010 by Keith Gardner

Everyone should learn from Bill Still, producer of The Money Masters: How The International Bankers Gained Control of America and The Secret of Oz: it isn’t what backs the currency — it is who controls the quantity. I’d suggest to read Stephen Zarlenga’s The Lost Science of Money as well.
I would like add to this lesson and say it isn’t what backs the currency that is important, it is who controls the quantity of it, who benefits from inflation and deflation, and who benefits from monetary expansion. The value of money is determined by the net production of an economy. The net production of the economy changes when the number of workers changes, the productive output of the workers change, or money is exported or imported, which is effectively adding or reducing workers beyond borders.
Deflation results when the net production of the economy expands faster than the supply of money. Deflation should be prevented since deflation results in the transfer of wealth from those who hold debt, investments, or commodities to those who hold monetary units. Deflation is prevented through monetary expansion, or the creation or adding of monetary units to the economy.
Inflation results when the supply of money is expanded faster than the net production of the economy. Inflation should be prevented since it results in the net transfer of wealth from those who hold monetary units to those who hold debt, investments, or commodities.

Furthermore, inflation and deflation should both be prevented since it creates unpredictability in the real interest rates of savings and debt, as well as real returns on investments and commodities, which distorts markets, especially in savings and loans. Inflation should not be left unchecked with the desire to have a correction, since the correction often destroys the wealth of those who can least afford or plan for the correction while it leaves those who can play both sides of the fence with a benefit. The worker with a 30-year mortgage can’t plan for deflation. The banker can make money on the inflation with high interest rate loans and on the deflation by taking the real assets purchased with loans.
Gold when used as a currency is no longer valued as a commodity for it’s intrinsic value, it is valued according to the net production of the economy. Under a gold system, the people who hold or mine gold control the quantity, benefit from deflation, and benefit from monetary expansion.
Our current Federal Reserve system is a debt currency where private banks create money by loaning money and destroy money by deleting money when debt is paid, while keeping the interest. Private banks, under the coordination of the Federal Reserve, control the quantity, benefit from inflation, and benefit from monetary expansion.

The public should control the quantity, should benefit by having no inflation and no deflation, should have rates which are transparent and predictable, and should benefit from monetary expansion. The banks should strictly be in the business of competiting for savings and loans at the best rates.
The public should benefit from monetary expansion since it is the economy as a whole which gives need for monetary expansion, not gold holders, gold miners, or banks. Monetary expansion is a form of found wealth, not earned wealth — the same type of found wealth when a person who holds an empty city lot sees the value of the lot increase in value, not because he developed and used the land productively, but because the community around him increased the value of it. It is found wealth which is public wealth, and public wealth should be used for public funding of government. Gold should be left in the free market as a commodity. Savings and loans should be separated from monetary creation and be left in the free market as a commodity. Earned wealth should be left in the private hands of those who earned the wealth. Congress should control the quantity of money and regulate the value thereof to be free of inflation and deflation.
A free market of currency is not going to be better than gold or the Federal Reserve system because it will just have the same problems of both, only worse, and because the government will have to set limits on what currency they’ll accept for payment of taxes. The angles of special interests, control, manipulation, and draining of public wealth will only grow exponentially, as we learned in Adam Smith’s Wealth of Nations, who even defined money incorrectly as a commodity rather than as a legal abstraction of the value of the production when government declares a currency to be fiat, or payment for taxes, whether gold, debt, or paper.

When you leave private interests to benefit from the control of the currency, we run into situations where private special interests game the government for their benefit. For example, since private banks benefit from monetary expansion, it is the special interest of banks why we have an illegal immigration problem. The private banks want to benefit from the monetary expansion that immigration brings, whether it is a benefit to the public or not. The banks don’t care about the crime and drain on the system it brings. All they care about is earning interest on printing money, free of inflation. If you hate inflation, you should love illegal immigration.
Furthermore, the gold system, used by tyrants throughout history, and our current Federal Reserve system is a constant drain to the system. The Federal Reserve system, the gold system, and private currencies are like parasites, sucking wealth from the net production of an economy through inflation, deflation, and monetary expansion. It gets worse when the government declares any such currency as payment for taxes since the government drains the private and earned wealth of people while the private controllers and thieves of monetary expansion also drain the private and earned wealth of people.
If we ended the Federal Reserve system and fractional reserve lending, we end the special interest of bankers benefiting from monetary expansion and inflation. Furthermore, the public can be free of the parasites and will see a huge benefit as the public can replace fractional reserves with real reserves, raising the revenue necessary to end national debt and end income taxation.
Bond holders of national debt are another parasite to the public in that they act as a special interest. Wealthy bond holders pay taxes to themselves, effectively lowering their tax rate or gaining a tax benefit from the tax payer. At 5% interest on our current national debt ceiling of $14 trillion, bond holders are being paid $700 billion by tax payers, many of whom don’t have the wealth to hold savings in bonds, especially with a debt monetary system, spending most of their wealth on regressive payroll taxes, sales taxes, property taxes, and hidden taxes, such as corporate taxes, on goods. If we can reform our monetary system the correct way, we can rid ourselves of many parasites, including the parasites who hold the national debt while they lobby, game, and corrupt the government for a national debt.
It isn’t what backs the currency since the currency is backed by the economic output of the people. It is who controls the quantity and who benefits from that control. If a currency is declared public, the public will control the quantity, and the public will become the uncorrupted special interest influence on government, rather than the private special interests of bankers, bond holders, gold holders, or gold miners. If a currency is declared public, we can have a free market where public wealth is public wealth, private wealth is private wealth, commodity, savings, and credit markets are left alone without distortion, and government corruption and special interest influence is reduced.
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“Many readers may be surprised to learn the extent to which the Graduate Institute and then Mises himself in the years immediately after he came to United States were kept afloat financially through generous grants from the Rockefeller Foundation. In fact, for the first years of Mises’s life in the United States, before his appointment as a visiting professor in the Graduate School of Business Administration at New York University (NYU) in 1945, he was almost totally dependent on annual research grants from the Rockefeller Foundation.” — Richard M. Ebeling, “The Life and Works of Ludwig von Mises“