What are the root causes of the global economic crisis?
by AIS
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." ― Henry Ford
Historically, many things have been used for money with the most enduring form being Gold or Silver. Paper money is largely a new idea, and the tool of scoundrels and the devious to debase the value of people's savings.
The US dollar as the World's Reserve Currency was established as such by the Bretton Woods Agreement in 1944: “The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments”.
“On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to Gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."
Fiat currency is simply this: The government says that something is money and must therefore be used as money. In the case of the US it is paper money and base metal coins.
The Fed essentially creates money “out of thin air”. You can find out how this is done here.
To understand the current US banking system you have to understand one completely absurd truth (at least for them), namely “debt is money”. The more debt there is, the more money a bank can “create”. The entire banking system is a complete fraud.
The central banks in other countries do primarily the same thing that the Fed does - money is created mostly by the push of a computer button and sent to banks as “loans”. There is no substance to back the money, there is no Gold backing the money - just the “full faith and credit of United States Government” which at this point looks like no faith and lousy credit.
There is no intrinsic value to any fiat currency - there is only perceived value. It is not like Gold or Silver which historically have been used for money and both are metals that people want and recognize as something which can store value. Prosperity can never come from a printing press.
An increase of the money supply by the Fed “pumping” money into the system has caused the majority of America's financial woes. For example, Greenspan pumped billions of dollars (all electronically created) into the US economy after the disaster of 9/11 which helped create a “housing bubble” of over inflated house prices that burst in late 2007 and led to the collapse of the US housing markets and was soon followed by the stock market.
David Gregory, moderator of “Meet The Press” on NBC asked Greenspan: “Are U.S. treasury bonds still safe to invest in?” Alan Greenspan, former Chairman of the Federal Reserve responded, “Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default.”
Greenspan's comment above may sound crazy. He's right. The Fed can just keep on its rampage of inflating the money supply and pay off any debt. The problem is that when the money supply is inflated, the price of goods follows right behind it. And there comes a point in time when people demand too many dollars and thus hyper-inflation happens.
Since The Fed's inception and its control of the money supply the dollar's value has eroded by 96% of it's purchasing power from 1914. What was purchased for 4 cents in 1914 now requires $1.
As the world governments and central banks, particularly The Fed, have no substance to back the money with, that is Gold or Silver, there is no limit to how much money can be “created”. It is a vicious cycle - the more money “created out of thin air” the higher the prices of goods and the less confidence people have in the money as being a way to retain their purchasing power or savings.
The current price of Gold or Silver is a strong indication that many have no confidence in paper money and they're buying Gold and Silver it as protection against the devaluation of their wealth of fiat currency. Gold this year alone has increased in value by around 30%.
As the US had flooded the world with its debt (by borrowing money from places like China, for instance) in order to fund its wars, many countries are realizing that the US dollar is worth less and less as time goes by. They realize it would be better to not use the dollar as much, or to trade in currencies other than the US dollar.
And, it appears that the US is losing its “reserve currency” status. Several countries have directly tried to get away from the dollar and trade goods based on other currencies or commodities. Iraq, under Saddam Hussein, tried and I would suggest where that got him and Iraq. Iran is doing the same thing. They are trading their oil on the open market and receive payment in the form they want, which is not based on the value of the dollar.
The collapse is simple. The US flooded the world with its ever increasing supply of dollars which has led to a declining value of the dollar and its resulting impact upon markets. Countries want to get away from the US dollar as the reserve currency to something more stable.
The world is in a transition phase to some other standard of money. There have been talks about the use of Gold as money or the return of the US to the Gold standard but in the short term it appears highly unlikely that the “banksters” will allow anything that will interfere with their ability to create money “out of thin air”.
The control or manipulation of the money supply is too important to be left in the hands of any government or central bank. It should be left to people alone to decide what form of money they want. For example, if you want to be paid with pencils or copper pipe it's entirely your prerogative to receive such for payment.
There is no “free market” in the US. It is a completely controlled, centrally planned economy. You're not free to create a business without having to comply with countless “regulations” which are merely designed to crush creativity, prevent competition, and confiscate the wealth of those that would be so adventurous as to try and make money.
Ron Paul is the only politician in America who stands firmly against the Fed, fiat currency, and Federal spending. I believe that he has a very clear understanding of economics and why there's a business cycle of “boom and bust” and how to stop it - End the Fed, end the wars, and eliminate the US governments ability to control the money supply.
Here are what I believe are some great quotes about banking:
"I believe that banking institutions are more dangerous to our liberties than standing armies..." - Thomas Jefferson
Concerning the central bank in his time, “You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out”. - Andrew Jackson
“I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy danger us to the liberties of the country”. - Andrew Jackson
"The few who understand the system, will either be so interested from its profits or so dependent on its favors, that there will be no opposition from that class." - Rothschild Brothers of London, 1863
"Give me control of a nation's money and I care not who makes it's laws" - Mayer Amschel Bauer Rothschild
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States" - Sen. Barry Goldwater (Rep. AR)
"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson] signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill." - Charles A. Lindbergh, Sr., 1913
"From now on, depressions will be scientifically created." - Charles A. Lindbergh Sr., 1913
"The financial system has been turned over to the Federal Reserve Board. That Board as ministers the finance system by authority of a purely profiteering group. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money" - Charles A. Lindbergh Sr., 1923
"The Federal Reserve bank buys government bonds without one penny..." - Congressman Wright Patman, Congressional Record, Sept 30, 1941
"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it". - Congressman Louis T. McFadden in 1932 (Rep. PA)
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers - Congressman Louis T. McFadden (Rep. PA)
"Some people think the Federal Reserve Banks are the United States government's institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers" - Congressional Record 12595-12603, Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." - John Danforth (R-Mo)
"These 12 corporations together cover the whole country and monopolize and use for private gain every dollar of the public currency..." - Mr. Crozier of Cincinnati, before Senate Banking and Currency Committee – 1913
"The [Federal Reserve Act] as it stands seems to me to open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it possible to submerge the gold standard in a flood of irredeemable paper currency." - Henry Cabot Lodge Sr., 1913
By the Federal Reserves Own Admissions:
"When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money." - Putting It Simply, Boston Federal Reserve Bank
“Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries." - Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975
"The Federal Reserve system pays the U.S. Treasury $20.60 per thousand notes - a little over 2 cents each- without regard to the face value of the note. Federal Reserve Notes, incidentally, are the only type of currency now produced for circulation. They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60 per thousand price reflects the Bureau's full cost of production. Federal Reserve Notes are printed in 01, 02, 05, 10, 20, 50, and 100 dollar denominations only; notes of 500, 1000, 5000, and 10,000 denominations were last printed in 1945." - Donald J. Winn, Assistant to the Board of Governors of the Federal Reserve system
"We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system...It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon." - Robert H. Hamphill, Atlanta Federal Reserve Bank
"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft." - John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book The Economic Consequences of Peace (1920). [NB Keynes was a scoundrel. He means in the affirmative of what he'd like to do with those that try and save money - take it from them.
"Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed." - John Maynard Keynes, Consequences of Peace "Banks lend by creating credit. They create the means of payment out of nothing" - Ralph M. Hawtrey, Secretary of the British Treasury “A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank." - Ron Paul “Believe me, the next step is a currency crisis because there will be a rejection of the dollar, the rejection of the dollar is a big, big event, and then your personal liberties are going to be severely threatened”. - Ron Paul “Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers." - Ron Paul “I will always vote what I have promised, and always vote the Constitution, as well as I will not vote for one single penny that isn't paid for, because debt is the monster, debt is what's going to eat us up and that is why our economy is on the brink." - Ron Paul Conclusions The world's economic woes have been created and are not accidental. They are a consequence of the central banks ability to create money out of thin air. Central economic planning and controls by the governments of the world have only made things worse. There are several books and web sites which I believe will provide much more information about this entire debacle: