Sunday, 25 August 2013
A Fed Anniversary Report Card

The Federal Reserve Act was passed during the Wilson administration, only 100 short years ago. So how has the Fed done over the last 100 years? First of all, let's mention that the Federal Reserve is not a government agency. It is about as "federal" as Federal Express. It was formed in 1913 in a devil's deal between bankers, who would get bailouts and Government, who would be able to spend money they didn't have (plenty more about that in these pages). So if you had to grade their performance over the last 100 years, how have they done:

  • The biggest disaster in the history of the US economy was the Great Depression, well into the Fed's watch.
  • The 2008 financial crisis was caused, in large part, by mal-investment encouraged by Fed action and was the latest in a string of greater and greater downturns in the economy.
  • While the dollar essentially kept its value before the advent of the Fed, today's dollar can buy a little less than what a nickel could purchase in 1913.
  • Debt is over $17 Trillion and is going up every minute with no sign of abatement.
  • Interest rates have been artificially maintained at a low level once again, guaranteeing another market bubble will pop that will likely be greater than the one in 2008.
Here are a couple of graphs showing the value of the dollar over the entire history of our country. Notice what caused the drop in value as the years progress. Before 1913, the value of the dollar fluctuated based on wars. The Revolution, the War of 1812, the Civil War, are all easily identified. Each time, the dollar recovered.

But what about after the Fed was established in 1913? You can see WWI with a modest but incomplete recovery and WWII with no recovery at all. Because the government began printing money to satisfy bankers and politicians, the recovery of the value of the dollar has not happened.

This is clear evidence that demonstrates the fraud and theft of American wealth that has been propagated on us by our government through the mechanism of the Fed. The Federal Reserve must be stopped.

Posted on 08/25/2013 5:43 PM by Jack Massari
Saturday, 17 August 2013
Where Did We Go Wrong?

More and more people today are coming to the realization that the US is in a bit of a pickle. There are countless articles about a looming "fiscal cliff" or another "financial crisis" from a wide range of pundits, economists and prognosticators. Candidates promise to fix things, but the solutions they offer generally don't target the real problems and targeting the wrong problem often makes things worse. Perhaps it would be helpful to look at how we got where we are in order to find the most rational and successful solutions for the future.

History tells us Presidents can't do much good even when they want to, but they can certainly do a lot of harm. So while part the blame for the problems we face may lie with a few "bad" presidents, the major fault lies with a consistently "bad" Congress, whose members have put their own self-interest over the interest of the country and future generations.

In 1845, Congress created their first subsidy. There was much debate about the constitutionality of such an action at the time, but in the end the temptation to meddle in the affairs of private industry was too great. After spending millions of taxpayer dollars subsidizing a steamship venture which failed in bankruptcy a dozen years later, Congress learned their lesson. It was decades before they subsidized another maritime venture! Of course, the subsidy cat was out of the bag and the taxpayer became an engine for malinvestment as Congress has made it their business to pick winners and losers from that day forward at the taxpayer's expense.

In 1887, Congress created the Interstate Commerce Commission, the very first agency or commission. Again there was debate about the constitutionality of the idea since the vesting clause says that Congress and only Congress is vested with the power of lawmaking. But the opportunity was too good to pass up. By turning over responsibility for lawmaking to agencies, Congress could claim they are not to blame for bad laws. In fact, they are correct. Agencies do not answer to Congress, to the President and certainly not to the people. They are only responsible to the statute that created them. Today, we are governed by over 700 agencies and commissions that we do not control. The only power Congress has is to eliminate the agencies they have created.

In 1912, progressive Republican Teddy Roosevelt lost the primary to conservative Republican incumbent Howard Taft. He ran anyway under the auspices of the Bull Moose Party, splitting the Republican ticket with Taft. In the end, progressive Democrat Woodrow Wilson was elected President along with a Democratic Congress. Wilson was the first genuine socialist to occupy the white house. Under his administration, we gained the income tax, the Federal Reserve and other socialist agenda items. The Federal reserve, as is noted elsewhere on this website, was a bargain between banking and government. Banks got bailouts and government got to spend money it didn't have.

President Franklin D. Roosevelt, took us towards socialism and collectivism with his "New Deal" policies that prolonged the depression, doubled the Federal deficit, created many cumbersome regulations on business and left us with the now broke Social Security system. President Lyndon Johnson tried to divert attention from the Viet Nam War with his "Great Society" policies that left us with Medicaid, Medicare, Food Stamps, Federal Education spending and countless environmental and other big government policies. We could go on with Carter (Dept of Energy and Education), Bush (Homeland Security & Patriot Act, SOX, No Child Left Behind, sCHIP, prescription drugs for seniors and more) and Obama (bailouts, overspending and Obamacare which was snuck through by nefarious methods within the Senate). Each of these Presidents and the Congress that served with them believed government could form better solutions than the people. Each of their programs limited liberty and freedom in favor of "safety and security" and government control. History shows clear evidence of progress when governments get out of the way and the opposite when governments get involved. Time and again, people left to their own devices will develop better solutions than government. There is no historical evidence that any government has ever done anything better than the private sector. In fact, the preponderance of evidence points to the failure of socialist states, not their success. Government needs to stay out of the way for optimum progress. It's a little chaotic and unpredictable, but it works.

The United States rose from nothing to the most powerful nation in the world in 150 short years. We did so during a time when there was no government selection of winners and losers besides the free market, no agencies or commissions to separate the people from lawmaking, no income tax, no Federal Reserve to steal from the people by monetizing debt and no government redistribution of wealth. If we want to fix problems, it is in these places we need to find solutions.

Posted on 08/17/2013 11:29 AM by Jack Massari
Friday, 2 August 2013
Jefferson's Opinion on the Constitutionality of a National Bank : 1791

The bill for establishing a National Bank undertakes among other things:

  1. To form the subscribers into a corporation.
  2. To enable them in their corporate capacities to receive grants of land; and so far is against the laws of Mortmain. (1)
  3. To make alien subscribers capable of holding lands, and so far is against the laws of Alienage.
  4. To transmit these lands, on the death of a proprietor, to a certain line of successors; and so far changes the course of Descents.
  5. To put the lands out of the reach of forfeiture or escheat, and so far is against the laws of Forfeiture and Escheat.
  6. To transmit personal chattels to successors in a certain line and so far is against the laws of Distribution.
  7. To give them the sole and exclusive right of banking under the national authority; and so far is against the laws of Monopoly.
  8. To communicate to them a power to make laws paramount to the laws of the States; for so they must be construed, to protect the institution from the control of the State legislatures, and so, probably, they will be construed.

I consider the foundation of the Constitution as laid on this ground: That " all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [XIIth amendment.] To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.

The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution. They are not among the powers specially enumerated: for these are:

  1. A power to lay taxes for the purpose of paying the debts of the United States; but no debt is paid by this bill, nor any tax laid. Were it a bill to raise money, its origination in the Senate would condemn it by the Constitution.
  2. "To borrow money." But this bill neither borrows money nor ensures the borrowing it. The proprietors of the bank will be just as free as any other money holders, to lend or not to lend their money to the public. The operation proposed in the bill first, to lend them two millions, and then to borrow them back again, cannot change the nature of the latter act, which will still be a payment, and not a loan, call it by what name you please.
  3. To "regulate commerce with foreign nations, and among the States, and with the Indian tribes." To erect a bank, and to regulate commerce, are very different acts. He who erects a bank, creates a subject of commerce in its bills, so does he who makes a bushel of wheat, or digs a dollar out of the mines; yet neither of these persons regulates commerce thereby. To make a thing which may be bought and sold, is not to prescribe regulations for buying and selling. Besides, if this was an exercise of the power of regulating commerce, it would be void, as extending as much to the internal commerce of every State, as to its external. For the power given to Congress by the Constitution does not extend to the internal regulation of the commerce of a State, (that is to say of the commerce between citizen and citizen,) which remain exclusively with its own legislature; but to its external commerce only, that is to say, its commerce with another State, or with foreign nations, or with the Indian tribes. Accordingly the bill does not propose the measure as a regulation of trace, but as `' productive of considerable advantages to trade." Still less are these powers covered by any other of the special enumerations.

II. Nor are they within either of the general phrases, which are the two following:

  1. To lay taxes to provide for the general welfare of the United States, that is to say, "to lay taxes for the purpose of providing for the general welfare." For the laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They are not to lay taxes ad libitum for any purpose they please; but only to pay the debts or provide for the welfare of the Union. In like manner, they are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose. To consider the latter phrase, not as describing the purpose of the first, but as giving a distinct and independent power to do any act they please, which might be for the good of the Union, would render all the preceding and subsequent enumerations of power completely useless. It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please. It is an established rule of construction where a phrase will bear either of two meanings, to give it that which will allow some meaning to the other parts of the instrument, and not that which would render all the others useless. Certainly no such universal power was meant to be given them. It was intended to lace them up straitly within the enumerated powers, and those without which, as means, these powers could not be carried into effect. It is known that the very power now proposed as a means was rejected as an end by the Convention which formed the Constitution. A proposition was made to them to authorize Congress to open canals, and an amendatory one to empower them to incorporate. But the whole was rejected, and one of the reasons for rejection urged in debate was, that then they would have a power to erect a bank, which would render the great cities, where there were prejudices and jealousies on the subject, adverse to the reception of the Constitution.
  2. The second general phrase is, "to make all laws necessary and proper for carrying into execution the enumerated powers." But they can all be carried into execution without a bank. A bank therefore is not necessary, and consequently not authorized by this phrase. If has been urged that a bank will give great facility or convenience in the collection of taxes, Suppose this were true: yet the Constitution allows only the means which are "necessary," not those which are merely "convenient" for effecting the enumerated powers. If such a latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to everyone, for there is not one which ingenuity may not torture into a convenience in some instance or other, to some one of so long a list of enumerated powers. It would swallow up all the delegated powers, and reduce the whole to one power, as before observed. Therefore it was that the Constitution restrained them to the necessary means, that is to say, to those means without which the grant of power would be nugatory

But let us examine this convenience and see what it is. The report on this subject, page 3, states the only general convenience to be, the preventing the transportation and re-transportation of money between the States and the treasury, (for I pass over the increase of circulating medium, ascribed to it as a want, and which, according to my ideas of paper money, is clearly a demerit.) Every State will have to pay a sum of tax money into the treasury; and the treasury will have to pay, in every State, a part of the interest on the public debt, and salaries to the officers of government resident in that State. In most of the States there will still be a surplus of tax money to come up to the seat of government for the officers residing there. The payments of interest and salary in each State may he made by treasury orders on the State collector. This will take up the greater part of the money he has collected in his State, and consequently prevent the great mass of it from being drawn out of the State. If there be a balance of commerce in favor of that State against the one in which the government resides, the surplus of taxes will be remitted by the bills of exchange drawn for that commercial balance. And so it must be if there was a bank. But if there be no balance of commerce, either direct or circuitous, all the banks in the world could not bring up the surplus of taxes, but in the form of money. Treasury orders then, and bills of exchange may prevent the displacement of the main mass of the money collected, without the aid of any bank; and where these fail, it cannot be prevented even with that aid.
Perhaps, indeed, bank bills may be a more convenient vehicle than treasury orders. But a little difference in the degree of convenience cannot constitute the necessity which the Constitution makes the ground for assuming any non-enumerated power.

Besides, the existing banks will, without a doubt, enter into arrangements for lending their agency, and the more favorable, as there will be a competition among them for it; whereas the bill delivers us up bound to the national bank, who are free to refuse all arrangement, but on their own terms, and the public not free, on such refusal, to employ any other bank. That of Philadelphia I believe, now does this business, by their post-notes, which, by an arrangement with the treasury, are paid by any State collector to whom they are presented. This expedient alone suffices to prevent the existence of that necessity which may justify the assumption of a non-enumerated power as a means for carrying into effect an enumerated one. The thing may be done, and has been done, and well done, without this assumption, therefore it does not stand on that degree of necessity which can honestly justify it.

It may be said that a bank whose bills would have a currency all over the States, would be more convenient than one whose currency is limited to a single State. So it would be still more convenient that there should be a bank, whose bills should have a currency all over the world. But it does not follow from this superior conveniency, that there exists anywhere a power to establish such a bank; or that the world may not go on very well without it.

Can it be thought that the Constitution intended that for a shade or two of convenience, more or less, Congress should be authorized to break down the most ancient and fundamental laws of the several States; such as those against Mortmain, the laws of Alienage, the rules of descent, the acts of distribution, the laws of escheat and forfeiture, the laws of monopoly? Nothing but a necessity invincible by any other means, can justify such a prostitution of laws, which constitute the pillars of our whole system of jurisprudence. Will Congress be too strait-laced to carry the Constitution into honest effect, unless they may pass over the foundation-laws of the State government for the slightest convenience of theirs?

The negative of the President is the shield provided by the Constitution to protect against the invasions of the legislature: 1. The right of the Executive. 2. Of the Judiciary. 3. Of the States and State legislatures. The present is the case of a right remaining exclusively with the States, and consequently one of those intended by the Constitution to be placed under its protection.

It must be added, however, that unless the President's mind on a view of everything which is urged for and against this bill, is tolerably clear that it is unauthorized by the Constitution; if the pro and the con hang so even as to balance his judgment, a just respect for the wisdom of the legislature would naturally decide the balance in favor of their opinion. It is chiefly for cases where they are clearly misled by error, ambition, or interest, that the Constitution has placed a check in the negative of the President.

(1) Though the Constitution controls the laws of Mortmain so far as to permit Congress itself to hold land for certain purposes, yet not so far as to permit them to communicate a similar right to other corporate bodies.-T. J.

Posted on 08/02/2013 2:28 PM by George M. Johnson, PC