Here is a copy of a draft letter I intend to send to academic economists. Feel free to forward it to any you know, or to make suggestions on how to make it shorter or more clear.
It is the global banking system we are talking about it, but once you grasp that most decisions are local and simply need to not be blocked, a very few principles contain all that in my view anyone needs to know.
The footnotes did apparently copy to the bottom, but the hyperlinks do not work.
Dear Sir,
My name is Eddie Rickenbacker, and I am trying to improve the
world. This may frighten you—perhaps it should frighten you—but I not trying to
make money, simply to ask you to think about things in a new way.
world. This may frighten you—perhaps it should frighten you—but I not trying to
make money, simply to ask you to think about things in a new way.
Let me ask you a basic question:
What
is the difference, in principle, between pointing a gun at a man or woman and
demanding $100; and scribbling “$100” on a piece of paper and then loaning it
to the first person who asks for it, to be paid back with interest?
is the difference, in principle, between pointing a gun at a man or woman and
demanding $100; and scribbling “$100” on a piece of paper and then loaning it
to the first person who asks for it, to be paid back with interest?
Has actually productive economic activity happened in
either case? Have any widgets or
mousetraps been invented, marketed or distributed?
either case? Have any widgets or
mousetraps been invented, marketed or distributed?
The fundamentally predatory nature of central banking
and fractional reserve banking[1] is generally overlooked
because it is stipulated that economic growth is and should be the principle
focus of economic policy, and that such growth is assumed to require “capital”. Since banks are the source of capital,
whatever defects in the system people perceive, they assume they are—in their
present form—a necessary evil.
and fractional reserve banking[1] is generally overlooked
because it is stipulated that economic growth is and should be the principle
focus of economic policy, and that such growth is assumed to require “capital”. Since banks are the source of capital,
whatever defects in the system people perceive, they assume they are—in their
present form—a necessary evil.
It is small wonder those empowered by law to create
money from nothing own much of our world.
I read on the one hand that the super-rich may have stashed up to $32
trillion in wealth in off-shore banks[2]; and on the other that
household debt in the US is about $11 trillion, give or take; and that the
national debt is about $17 trillion.
money from nothing own much of our world.
I read on the one hand that the super-rich may have stashed up to $32
trillion in wealth in off-shore banks[2]; and on the other that
household debt in the US is about $11 trillion, give or take; and that the
national debt is about $17 trillion.
Now, I do not want to argue either that that is necessarily
all money made by bankers, or that that the money of the wealthy be confiscated. What I DO want to suggest is that access to
credit–by nations, corporations, and individuals–has a strong correlation with
economic outcomes in the modern world; and that it would be very interesting if
$32 trillion were suddenly parachuted into our economy.
all money made by bankers, or that that the money of the wealthy be confiscated. What I DO want to suggest is that access to
credit–by nations, corporations, and individuals–has a strong correlation with
economic outcomes in the modern world; and that it would be very interesting if
$32 trillion were suddenly parachuted into our economy.
Since at least the time of David Hume, it has been
understood that if you were to give everyone in the country $100, that price
inflation would in short order destroy any momentary advantages it may
convey. Only those who were quick to
spend the money would benefit fully.
understood that if you were to give everyone in the country $100, that price
inflation would in short order destroy any momentary advantages it may
convey. Only those who were quick to
spend the money would benefit fully.
However, in a society riddled with debt, the dynamics
would work quite differently. Let us say
that we give everyone in the United States $1,000,000. Massive price inflation would ensue nearly immediately. For the sake of argument, let us assume that
the date of this gift is known in advance, and that vendors of everything raise
their prices in anticipation, meaning that real purchasing power is unaffected
in the slightest. It just now costs $100
to buy an apple.
would work quite differently. Let us say
that we give everyone in the United States $1,000,000. Massive price inflation would ensue nearly immediately. For the sake of argument, let us assume that
the date of this gift is known in advance, and that vendors of everything raise
their prices in anticipation, meaning that real purchasing power is unaffected
in the slightest. It just now costs $100
to buy an apple.
But—and
this point is CRITICAL—the relationship most people, businesses, and
governments have with banks would be reversed.
this point is CRITICAL—the relationship most people, businesses, and
governments have with banks would be reversed.
Long term debt is contractual. The dollar amounts, in most cases, are
fixed. This means that people could use
this money to pay off their debt even if the date was announced in
advance. People could not use the money
to gain an advantage buying a hot dog, but substantially all mortgages would
disappear. People would own their
cars. Credit card bills would disappear. Business debt would be retired. Our national debt, State debt, and local and
municipal debt would disappear.
fixed. This means that people could use
this money to pay off their debt even if the date was announced in
advance. People could not use the money
to gain an advantage buying a hot dog, but substantially all mortgages would
disappear. People would own their
cars. Credit card bills would disappear. Business debt would be retired. Our national debt, State debt, and local and
municipal debt would disappear.
As you may know, the ancient Hebrews appear to have
practiced the remission of debts and property every fifty years, in what they
termed a Jubilee. There is nothing in
the modern world which would prohibit reviving this practice, although once is
enough with my plan.
practiced the remission of debts and property every fifty years, in what they
termed a Jubilee. There is nothing in
the modern world which would prohibit reviving this practice, although once is
enough with my plan.
Here is my proposal, which is similar in spirit to a
plan called the Chicago Plan, but which retains a healthy skepticism about the
consolidation of power that inheres in granting ANY body the power to create
money on an on-going basis.
plan called the Chicago Plan, but which retains a healthy skepticism about the
consolidation of power that inheres in granting ANY body the power to create
money on an on-going basis.
1. Federalize the Federal Reserve, putting it under the
control of Congress.
control of Congress.
2. Use the Federal Reserve to pay off all debts, public
and private. Following this process, the
assets of all banks would consist solely in their actual capital.
and private. Following this process, the
assets of all banks would consist solely in their actual capital.
3. Revalue the dollar nearly immediately by issuing a
new, high-tech currency which is finite.
For every “dollar” that is circulated virtually, there needs to be an
actual bill—which could be a chit, a piece of paper, or other physical object—to
which it corresponds. In principle, we
should be able to make a physical pile of all American dollars, and this number
should not ever change.
new, high-tech currency which is finite.
For every “dollar” that is circulated virtually, there needs to be an
actual bill—which could be a chit, a piece of paper, or other physical object—to
which it corresponds. In principle, we
should be able to make a physical pile of all American dollars, and this number
should not ever change.
I will deal with my thought process on this in a moment.
4. Require full reserve banking. Banks can only loan money they accrue through
investment and profits on loans.
investment and profits on loans.
5. Abolish the Federal Reserve.
As I implied at the beginning, the act of creating money
ex nihilo, and making a claim thereby on the physical or intellectual property
of someone else, is inherently predatory.
It is a wealth transfer. It is
theft, in important respects.
ex nihilo, and making a claim thereby on the physical or intellectual property
of someone else, is inherently predatory.
It is a wealth transfer. It is
theft, in important respects.
This is true if that money creation is done by
governments, fractional reserve banks, or central banks. In all cases, the money created confers
wealth on the creator, and diminishes through inflation the value of all other
holders of money. Inflation, as we know,
diminishes the value of a savings account.
It diminishes the value of investments. If inflation did not happen, that
value would not diminish. On the
contrary, if the value of the money increased, which we call deflation,
everyone would profit except those who hold debts.
governments, fractional reserve banks, or central banks. In all cases, the money created confers
wealth on the creator, and diminishes through inflation the value of all other
holders of money. Inflation, as we know,
diminishes the value of a savings account.
It diminishes the value of investments. If inflation did not happen, that
value would not diminish. On the
contrary, if the value of the money increased, which we call deflation,
everyone would profit except those who hold debts.
The reason the Great Depression started was that
monetary deflation so greatly increased the value of existing debts in a nation
where a lot of borrowing had been going on, that it caused vast numbers of
personal, then business, then banking bankruptcies. The banking bankruptcies, of course, caused further deflation, in a cycle that lasted some 3-4 years.
monetary deflation so greatly increased the value of existing debts in a nation
where a lot of borrowing had been going on, that it caused vast numbers of
personal, then business, then banking bankruptcies. The banking bankruptcies, of course, caused further deflation, in a cycle that lasted some 3-4 years.
This is the reason a currency increasing in
value is feared today. Given high debt
loads, it is economically disastrous.
value is feared today. Given high debt
loads, it is economically disastrous.
But given no debt it would be a boon of enormous power.
My contention is that throughout the 20th
century we should have seen the steady increase in the value of money that
characterized most of the latter half of the 19th Century[3], despite the plethora of
competing currencies.
century we should have seen the steady increase in the value of money that
characterized most of the latter half of the 19th Century[3], despite the plethora of
competing currencies.
Where did our wealth go?
We transmogrified from a nation of home owners and savers into a nation
of debtors and spendthrifts, but SOMEBODY owns everything in this nation. Everything.
Some of it went into enormous government buildings and enormous
bureaucracies and their pensions. Most
of it became profits for banks. Goldman
Sachs alone is worth nearly $1 trillion on the books, and it’s quite possible
they control numerous other assets via various legal vehicles.
We transmogrified from a nation of home owners and savers into a nation
of debtors and spendthrifts, but SOMEBODY owns everything in this nation. Everything.
Some of it went into enormous government buildings and enormous
bureaucracies and their pensions. Most
of it became profits for banks. Goldman
Sachs alone is worth nearly $1 trillion on the books, and it’s quite possible
they control numerous other assets via various legal vehicles.
I would argue that an average person should be able to
live a comfortable life on 20 hours of work a week or less. We should have no
poverty. We should have no unemployment,
and much, much less crime. All of these
would have come about gradually and naturally if we had not tampered with our
currency.
live a comfortable life on 20 hours of work a week or less. We should have no
poverty. We should have no unemployment,
and much, much less crime. All of these
would have come about gradually and naturally if we had not tampered with our
currency.
I am sometimes misunderstood as proposing a return to
the Gold Standard. I am not. I am pointing out the obvious fact that there
is ZERO intrinsic value in money, not even in gold, qua gold. Given this, why not create a specific amount
of money once, then let it increase in value?
This would incent savings, facilitate investment, and generalize
prosperity.
the Gold Standard. I am not. I am pointing out the obvious fact that there
is ZERO intrinsic value in money, not even in gold, qua gold. Given this, why not create a specific amount
of money once, then let it increase in value?
This would incent savings, facilitate investment, and generalize
prosperity.
All of these facts are well known to professionals. In my view, the reason radical ideas like the
Chicago Plan are not discussed are threefold:
Chicago Plan are not discussed are threefold:
1) Institutional habit.
People tend to follow well worn paths, and even most conservative
economists accept inflation of some small degree in principle, and simply
differ on the degree of acceptable government intervention in the economy.
People tend to follow well worn paths, and even most conservative
economists accept inflation of some small degree in principle, and simply
differ on the degree of acceptable government intervention in the economy.
2) Banks, self evidently, oppose these ideas quite
strongly, and are, I suspect, not infrequently in a position to guide discussions,
and influence hiring, firing, and publication.
strongly, and are, I suspect, not infrequently in a position to guide discussions,
and influence hiring, firing, and publication.
3) It has been alleged[4] that some 6,000 people
shape most decisions made the world over.
An immediate implication of my idea is that people can consume more and
buy more. It seems likely that at Davos
and the Bilderberg (which clearly does exist, even if its motives are far from
sinister) they are working on decreasing the environmental impact world
humanity is having, as well as pursuing population control policies that have
always been in favor among elitists.
shape most decisions made the world over.
An immediate implication of my idea is that people can consume more and
buy more. It seems likely that at Davos
and the Bilderberg (which clearly does exist, even if its motives are far from
sinister) they are working on decreasing the environmental impact world
humanity is having, as well as pursuing population control policies that have
always been in favor among elitists.
With regard to this last objection, what I would submit
is that much of the energy driving consumption is a perception of lack. Given a sense of abundance, I think time
could quickly be seen as the more important resource than “stuff.” I would compare the role of economic progress
and a sense of satiety with the clear historical tendency of developing nations
to first see population skyrocket, then stabilize, then—in most of Europe and
East Asia—drop.
is that much of the energy driving consumption is a perception of lack. Given a sense of abundance, I think time
could quickly be seen as the more important resource than “stuff.” I would compare the role of economic progress
and a sense of satiety with the clear historical tendency of developing nations
to first see population skyrocket, then stabilize, then—in most of Europe and
East Asia—drop.
Summary
There are some powerful and heretical ideas in here, but
I have been unable to find anyone able to critique the basic structure of my
analysis, or dispute any of my facts.
Self evidently, hyperinflation followed by revaluation would be chaotic;
but so too will national bankruptcy. We
are $17 trillion in debt, and increasing that number over a trillion dollars a
year.
I have been unable to find anyone able to critique the basic structure of my
analysis, or dispute any of my facts.
Self evidently, hyperinflation followed by revaluation would be chaotic;
but so too will national bankruptcy. We
are $17 trillion in debt, and increasing that number over a trillion dollars a
year.
Obama’s budget quite literally NEVER
balances annual income with annual expenditures, which means that our annual
expenditures on interest will continue to rise until in short order they exceed
our Defense budget, and that at a time when entitlement spending is
skyrocketing.
balances annual income with annual expenditures, which means that our annual
expenditures on interest will continue to rise until in short order they exceed
our Defense budget, and that at a time when entitlement spending is
skyrocketing.
We are on a path to self destruction. This
fact is ineluctable.
fact is ineluctable.
Historically, many nations have defaulted on debts and
made good. What makes my proposal unique
is that I bundle consumer and business credit in there as well. I also
eliminate the camouflage inherent in the inflation of regimes like the Weimar
Republic and Argentina that it is something other than the government serving
its own interests at the expense of the people.
made good. What makes my proposal unique
is that I bundle consumer and business credit in there as well. I also
eliminate the camouflage inherent in the inflation of regimes like the Weimar
Republic and Argentina that it is something other than the government serving
its own interests at the expense of the people.
My proposal is democratic. It serves all the people, not just the power
elite.
elite.
My email is, If you would like to discuss this, it would
be my pleasure. If you can find where I’m
being stupid, let me know.
be my pleasure. If you can find where I’m
being stupid, let me know.
And with respect to my ideas, I have no desire for
credit, or to see my name printed anywhere.
I am simply trying to influence discussions I will never hear, in
meetings I couldn’t get invited to in a million years.
credit, or to see my name printed anywhere.
I am simply trying to influence discussions I will never hear, in
meetings I couldn’t get invited to in a million years.
Thanks for your consideration!!!
Sincerely,
Ernestine Hayek
[1] Lest there be any confusion: if I
hold $100 in assets and deposits and loan out $90 based upon it while still in
theory allowing that money to be withdrawn, then now $90 are in circulation and
affecting prices that should be laying still in a vault. That money is created and it expands the
monetary base in an inflationary way. That
money is eventually “extinguished”, but not without first having created
deposit accounts in many other banks, who themselves then use it to make more
loans. One deposited dollar can in
theory, as I understand it, be used to create some $27 more, although of course
this will be sensitive to economic conditions.
hold $100 in assets and deposits and loan out $90 based upon it while still in
theory allowing that money to be withdrawn, then now $90 are in circulation and
affecting prices that should be laying still in a vault. That money is created and it expands the
monetary base in an inflationary way. That
money is eventually “extinguished”, but not without first having created
deposit accounts in many other banks, who themselves then use it to make more
loans. One deposited dollar can in
theory, as I understand it, be used to create some $27 more, although of course
this will be sensitive to economic conditions.
[2] http://www.huffingtonpost.com/2013/04/29/wealthy-stashing-offshore_n_3179139.html
[3] As
documented many years ago by Milton Friedman and Anna Jacobson Schwarz in “A
Monetary History of the United States.”
documented many years ago by Milton Friedman and Anna Jacobson Schwarz in “A
Monetary History of the United States.”
[4] http://www.amazon.com/Superclass-Global-Power-Elite-Making/dp/0374531617 “An entertaining and well
researched taxonomy of the rich and powerful who shape foreign policy and
business in our globalized world. Rothkopf gives us the story behind Davos
Man.” —Joseph E. Stiglitz, Nobel Prize Winner in Economics and author
of Making Globalization Work and Globalization and its Discontents
researched taxonomy of the rich and powerful who shape foreign policy and
business in our globalized world. Rothkopf gives us the story behind Davos
Man.” —Joseph E. Stiglitz, Nobel Prize Winner in Economics and author
of Making Globalization Work and Globalization and its Discontents