|Subject:||[socialcredit] Richard Cook's latest essay|
|Date:||Saturday, May 12, 2007 10:54:48 (-0700)|
|From:||MODERATOR <socredus @.....com>
This is list member Richard Cook's latest Internet
essay. I have certain reservations regarding his
recommendations, which I shall discuss in future
Monetary Reform and How a National Monetary System
© Copyright Richard C. Cook, 2007
By Richard C. Cook
May 11, 2007
The author has received an overwhelming response to
his recent Global Research report entitled, “An
Emergency Program of Monetary Reform for the United
States.” The introduction to that report stated that,
“the U.S. financial system headed by the Federal
Reserve System has failed, and…only an emergency
program of monetary reform can address conditions
which may be leading to a catastrophe like the Great
Depression or worse.”
This new report on “Monetary Reform and How a National
Monetary System Should Work” continues the dialogue by
outlining the principles and mechanisms available to
help guide the creation of a monetary system for any
nation that wishes to enjoy economic democracy with
prosperity. This would be in contrast to the
collapsing debt-based monetary system overseen by the
Federal Reserve and the other central banks of the
world, coordinated at the top by such institutions as
the International Monetary Fund, the European Central
Bank, and the Bank of International Settlements.
Note that all the banks of the Western world are
ultimately private institutions owned by the world’s
super-rich. The international banking structure is
operated by and on behalf of the world’s monetary
elite primarily for their own profit.
Just below the banking system are the giant
corporations of the global economy which derive
capital from and funnel profits into the financiers’
empire. Bringing up the rear are the populations and
debt-serfs of the no-longer-sovereign nation states,
including those of the United States, whose
participation in the system as consumers is essential,
but whose jobs continue to disappear as manufacturing
is increasingly automated.
The author had realized as early as 1970 that the
central problem with the world’s economy lay on the
side of distribution, not production. He came to
Washington, D.C., that year and spent most of the next
thirty-six years working within sight of the
Washington Monument, learning how things really work,
and pondering the methods that might be more in
concord with such founding documents of American
democracy as the Declaration of Independence and the
U.S. Constitution. Twenty-one of these years were with
the U.S. Treasury Department.
Now, for the first time, this report builds on the
findings of many of the world’s monetary reformers
past and present by offering a complete prescription
for a new and better world. This prescription is
radically different from most progressive reform
agendas that address only symptoms of the underlying
WHERE MONEY COMES FROM
When setting out to study monetary principles, we must
realize how little we know of the real facts of
monetary history. Economics is an extremely limited
discipline rife with untested assumptions and
unchallengeable dogmas. Its most pernicious doctrine
is the assertion that there is something called “the
market,” where there is an “invisible hand” that makes
everything work out the way it is supposed to.
Actually, an economy functions according to the
principles according to which it is designed and
regulated. If it is designed to funnel wealth into the
hands of the monetary controllers, then that is what
the “market” and the “invisible hand” will do. If it
is designed to foster “the general welfare,” as it
should according to the preamble to the U.S.
Constitution, then the “market” and the “invisible
hand” will tend in that direction.
Unfortunately, we march today to the tune of the
monetary elite, so they are the ones who reap the
profits and the benefits. They are the ones on whom
the “invisible hand” lavishes the wealth of the world.
It is done through the process of bank-created credit.
While during the nineteenth century other forms of
money circulated, such as large quantities of coinage,
silver certificates, and government-issued greenbacks,
almost all the money that exists today originates
through a loan by a financial institution to an
individual or a business.
When a loan is made it is issued as a liability on the
bank’s ledger. When it is repaid, the liability is
canceled. With today’s computer systems, all
transactions are digitized, of course. The bank keeps
the interest on the loan as its combined
administrative fee and profit. The money that is lent
had no prior existence.
Once money is created as credit, it takes many forms
according to how the loan recipient spends it. Some
credit is used by businesses or individuals as
investment in order to generate profits over and above
the amount they must repay to the bank with interest.
If the money is used simply for consumer purchases,
the individual consumer must pay back the loan through
future earnings. In those cases where the borrower
defaults on the loan or goes bankrupt, the money
simply remains in circulation however it was spent.
Unfortunately, large amounts of credit are used mainly
for speculation, not for any benefit to the producing
economy. This includes securities bought on margin and
borrowing by hedge funds where the fund may make a
profit even if the value of its investments goes down.
Bank-created credit in this case is little more than
chips in a casino.
Other borrowing takes place by equity funds and other
types of investors for leveraged mergers or buyouts of
entire companies, where the predators wreck a
company’s infrastructure by reducing costs and selling
its assets, then pay back their bank loans before
unloading the business on someone else.
The most important thing to realize about the banking
system is that the money which enters into circulation
as purchasing power must eventually be returned in the
repayment of loans. This is why the Federal Reserve’s
monetary measures—M1, M2, and M3—are meaningless,
because so much of it has liens against it.
We are taught that paying it back is the way things
should be—obviously, if we borrow something, we should
pay back what we owe.
But the peculiar thing is that because the borrowed
money pays for labor, commodities, rent, etc., it
becomes part of the prices that are eventually charged
for goods and services. However, when the money goes
back to the bank to cancel a loan, that purchasing
power disappears. Neither the banks nor economists
ever make note of the fact that this process creates a
chronic shortage of purchasing power which must be
filled by more loans and more bank profits. The
economy is thus a treadmill that borrowers must
constantly trudge along in order to have enough money
So a system which is seemingly grounded in the simple
adage that if you borrow you should repay is all
wrong. The reason it is all wrong is that in most
cases, individual consumers should never have to
borrow in the first place. And we never ask ourselves
why, with the abundance that is possible from modern
science and technology, should people have to borrow
money at interest for the necessities of life—a house,
a car, household expenses, an education, etc.
Thus we realize that the financial system works
against what should be the real purpose of money,
which is to serve as a ticket for the purchase by
people of articles they need to survive or otherwise
desire to utilize once the demand for survival has
People have needs and desires. The economy is fully
capable of producing all the goods and services needed
to fulfill those needs and desires. But the system is
broken, because, despite the abundance of credit
available for financial speculation, there is not
sufficient money available at the consumer level to
mediate between prices and consumption, even when most
people have a job. We still must borrow, and that is
wrong. There should be a better way for society to
generate the money for what people need.
So what is really going on here?
One of the things that is going on is that money is
being mis-defined as a commodity. People who believe
money is a commodity think it has value
in-and-of-itself. But one of the hardest things to
grasp about money is that not even gold or silver
money, or paper money supposedly backed by gold or
silver, has or could have intrinsic value.
Actually, money is anything that a willing buyer and a
willing seller agree to exchange for something else.
Money could be and has been such things as gold,
silver, paper, wampum, cows, stones, shells, sticks
with notches, or, today, electronic blips. What may
appear to give gold or silver value is its scarcity
and durability. But unless there are goods and
services available and for sale, gold and silver are
totally useless. You can’t eat gold or silver, live in
them, or wear them. In and of themselves they have no
value. What gives any money value is the producing
economy and nothing else.
So by this definition, bank-created credit, while it
may generate money which a willing buyer and seller
agree to exchange, is money with strings attached, in
that at some point, it must travel back to the bank in
cancellation of a debt. Thus a buyer who offers it to
a seller is, in reality, deceiving himself about his
actual ability to pay. He is not a free man. Always
lurking in the back of his mind is that with every
article he has purchased he has shackled himself ever
more firmly to future indentured servitude.
The seller, on the other hand, may breathe a little
more freely having just acquired some of the monetary
medium necessary to repay his own debts. And so it
goes, ad infinitum. Even if the money were backed by
gold and silver, the system would work in exactly the
So by what right do the bankers bind the economy in
such a straightjacket of debt? Again, the underlying
logic is that money is a commodity. A group of men
have money. It is their money, we believe, rightfully
earned. Therefore, because these individuals have
money, they have a further right to lend it to others.
But under existing laws, the banking system then makes
the leap of assuming that because they have money
which can be lent, they have a right to lend much more
than they actually possess. Somehow they have become
fit practitioners of the fractional reserve banking
system whereby, as described above, they can lend
simply by creating debits in their computers, based on
some ratio between their capital stock and their
But if bankers can do this, why can’t you or I? If I
have $1,000, why can’t I then lend $10,000 and collect
the corresponding interest? The answer is that a bank
has a government charter and supposedly can guarantee
through various safeguards that the people to whom it
lends can repay. But even this isn’t required of a
bank any more if it can package its loans and sell
them to some other business entity, such as an
But the fact is that banks can only be created by
people who are already rich, can put up some initial
capital, build a functioning business, and obtain the
government charter mentioned above. Once they do this,
they are the masters of the world.
Also note that under today’s highly unstable financial
conditions, it is not only banks which create credit
through lending. Since the deregulation of the 1980s,
Wall Street brokerage firms greatly expanded the
system whereby speculative loans are floated for
purchase of securities. This has resulted in a current
ratio of debt to equity of 22:1 in the U.S. securities
markets, where debt far outweighs value.
WHAT IS CREDIT?
The word “credit” is one of the most widely-used and
important in the English language. Dictionary.com
lists twenty-one definitions. All these definitions
have some connotation of the concept of “value” and
the exchange of that value across the dimensions of
time and space between one person and another.
Obviously, the ideas of “credit” and “money” are
The idea of credit when viewed from a macroeconomic
perspective refers to the ability of an economy to
produce goods and services of value to the members of
that community. It refers to the potential value of
that economy to support life. What it does not and
cannot refer to is money in and of itself, because
money, as we have seen, has no intrinsic value.
Without the credit-potential of a producing economy,
money has no meaning.
On the other hand, money can be a convenient yardstick
to measure credit, as when we state that the 2006 GDP
of the United States was $12.98 trillion. But
actually, the “real” credit of the U.S. economy was
much higher, because our economy is not running at
anywhere near its full capacity. The automobile
industry, for instance, is running at about fifty
percent of its physical potential. So the real credit
of the U.S. is actually higher than the GDP.
“Credit” in an economic sense confers a legal right to
draw on the goods and services that make up the
potential GDP of the nation. It is the way the society
agrees to hand out the monetary tickets by which the
GDP may be acquired.
Obviously, the issuance of either too many or too few
tickets will cause problems. The issuance of too few
tickets will result in underproduction, poverty, even
death. The issuance of too many tickets will result in
inflation. When the Federal Reserve creates, then
deflates, asset bubbles, like the currently collapsing
housing bubble, these effects alternate, resulting in
the kind of ongoing economic chaos we have seen for
It can readily be seen that credit is a cultural
phenomenon. It is the sum total of the entire
productive capacity of the nation. It has grown from
the past, exists in the present, and can be projected
into the future. It is the result of the work of
untold millions of people, dead and gone, alive today,
and yet unborn. Many of its results may be
proprietary, in terms of businesses, property, and
patents owned, etc., but every person who has ever
lived, lives today, or who will live in the future is
a participant in that culture.
Therefore, credit can and should be viewed as a
communal endowment, a public phenomenon, a part of
what is called “the commons,” even with the normal and
natural fact of the existence of private property. So
the use of credit and its distribution should be
treated as a public utility, like water or
electricity. Everyone should have a right to its use,
according to some rational, lawful, and humane
criteria of need or contribution to creating it.
As with the use of other utilities, it is the
responsibility of the community to see that credit is
used wisely and for positive and constructive
purposes. But no one should be denied it altogether,
because it is a necessity of life.
Money, as a measure of credit, should therefore be
available to the entire community. The government, as
the representative of the community, has the
responsibility of overseeing, coordinating, and
regulating its availability, keeping in mind the
fairest and most socially beneficial ways for it to be
utilized. Monetary reformers would argue that
extensive availability of credit to the working
population should be part of the “general welfare”
guaranteed by the preamble to the U.S. Constitution.
This should not be confused with the virtually
unlimited availability of credit to speculators and
stock predators as is presently the case with our Wall
But these principles are poorly recognized. Money, and
therefore credit, is viewed as private property, even
though most of it, as stated previously, is made by
banks “out of thin air.” It is no exaggeration to say
that the existing system is one whereby the financial
elite has confiscated and privatized the most
important public resource of all, more important than
water, land, electric power, etc. This has resulted in
much of the world’s wars, poverty, and crime.
Let us again examine the ways money enters into the
economic system, this time looking at the total credit
picture of the U.S. economy. We said that the 2006 GDP
was $12.98 trillion. This takes into account a trade
deficit of $726 billion. The question is, where did
the credit come from to purchase the GDP, because, by
definition, it all had to be paid for in prices.
According to official data, the available national
income in 2006 was $10.23 trillion, including wages,
salaries, interest, dividends, personal business
earnings, and capital gains. Of this amount,
approximately one-third was taken through taxes by
government at the federal, state, and local levels.
Churning through the economy was borrowing of all
kinds—for consumption, commerce, investment,
speculation, new government debt, and to finance
business transactions. In fact it was the net increase
in debt—$3.77 trillion—that paid for the difference
between GDP and national income.
Debt also financed much of the trade deficit by our
borrowing to purchase what was imported from abroad.
The need to borrow has been greatly increased by the
decline of the U.S. manufacturing sector, where
well-paying jobs that contributed to the national
income have disappeared or been outsourced overseas.
The ratio of debt to national income has reached
historic proportions—460 percent of the national
income today vs.186 percent in 1957.
Orthodox economics, including the manipulation of
interest rates by the Federal Reserve, has no tools
for resolving this crisis. The main reason is that
neither economists nor politicians understand it,
though bankers certainly do.
Orthodox economics is helpless because people do not
understand how the gap between production and
purchasing power relates to the way the microeconomics
of the corporation translates into the macroeconomics
of nations. We observed earlier in this report that
prices of articles within the economy include the
loans that are taken out during the production
process. But these loans are canceled as bank
liabilities when they are repaid. Therefore the
purchasing power of the economy always lags behind
But this is not the only area where prices include
factors that are not paid out in wages, salaries,
dividends, or other sources of individual or business
income. Other factors include retained earnings,
insurance, certain maintenance and overhead costs,
plus the cumulative effect of corporations buying from
each other with payments which never exit the
As a result, only somewhere between a third and a half
of all costs are ever distributed to consumers. This
analysis has been documented at length by the Social
Credit movement and has been well-known to monetary
reformers for decades.
This gap is what drives nations to seek overseas
markets for their products as the U.S. did so
strenuously during the post-World War II period. When
the U.S. balance of payments later fell into negative
territory, we tried to compensate by the policy of
“dollar hegemony,” whereby we foisted our currency on
the rest of the world as the principal means of oil
trading, maintenance of currency reserves, and paying
for our trade deficit.
But as the U.S. internal and external debt grows and
our fiscal and trade deficits deepen, a total systemic
breakdown is starting to take place. The main recent
prop of the U.S. economy, the housing bubble, is
deflating. And frantically, we are trying to escape by
a radical devaluation of the dollar combined with an
aggressive military policy based essentially on
confiscating the resources of other nations such as
This, combined with action to prop up our fiscal
deficit by importing dollars spent abroad on
manufactured products we no longer make ourselves, has
created a house of cards that must soon come down. All
that is lacking is a major shock, such as a widening
war in the Middle East or inability by foreign
creditors to continue to accept devalued dollars.
Neither devaluation nor aggression will solve the
problem which derives from the failure of debt
financing to create real purchasing power and thereby
resolve the chaos through which a system built for the
profits of the financiers can never produce enough
unencumbered credit to maintain our desired level of
production and the standard of living that goes with
As with anyone facing bankruptcy, it is time for those
who wish to understand the current U.S. economic
crisis to take a deep breath, step back, and gather
themselves in order to correctly assess the situation.
Obviously the solution is not to risk blowing up the
world by continuing to resolve our domestic economic
problems through overseas conquests. This is what the
Western nations have been trying to do for centuries,
and it appears that the rest of the world may finally
have had enough. This is especially the case today
when the main factor that is floating the U.S. economy
is the huge U.S. trade imbalance where foreign nations
must use the dollars they take in to their ultimate
disadvantage by financing a federal budget deficit
that is measured in dollars whose value is dropping.
Nor does the solution lie on the production side of
the equation. The U.S. and other developed economies
are capable of producing everything their populations
need, even accompanied by a reasonable amount of
foreign trade, especially if we can return our
industry to the level of productivity we enjoyed prior
to the Federal Reserve-induced recession of 1979-83
which gave us today’s anemic “service economy.”
Rather the solution lies with the federal government
taking back its constitutionally-authorized control of
the credit of the nation from the financiers and
managing it as previously stated—as a public utility.
There is no need to eliminate capitalism, change the
basis of property ownership, abolish corporations,
etc., because the organization and administration of
the production process is essentially irrelevant to
the real problem.
Once again, the producing economy is not the problem.
It has performed with tremendous effectiveness in
creating the goods and services people need and want.
It would be the basis for real economic democracy if
its bounty could be made available and distributed in
accordance with democratic principles.
It is essential to realize that the central government
of a sovereign nation has the right, the ability, and
the responsibility to introduce ALL new credit into
existence. This is totally different from having the
central bank “print money” by relaxing lending
policies, resulting in an infusion of cheap loans
which must still be repaid.
Sovereign creation of credit is not based on debt. It
is and should be based on direct spending of money
into circulation by the government itself. Obviously
the government should do this in a way that promotes
the best interests of the members of society while
respecting the varying degrees of contribution by
those of different levels of skill and achievement. It
is quite possible to enact such a program with due
regard to all established conventions of private
property and the private ownership and control of
To those who are concerned that the concept of
publicly-controlled credit postulates a monetary
supply that can be turned on and off like tap water,
this is a misconception. There is indeed a cornucopia
of supply on the earth, but it is not of money. If is
of what human beings are capable of producing with the
skill of their hands and their heads and the knowledge
of science and technology.
Money is only a ticket to transfer this abundance from
producer to consumer, but it must be plentiful enough
to allow the transfer of all that is reasonably
desired, it should not be misused for financial
speculation, and it is the job of government to bring
that money to the place of the economic activity where
it is needed. The key point is that such money should
not be encumbered by debt to a financial institution,
including the banks of the Federal Reserve System.
This should be done according the following
1. The decisions of what goods and services should
be produced should represent a reasonable mix of what
is needed and desired by consumers with what is
required for the public good by way of regulation and
infrastructure. Decisions should be made by a
combination of market forces, business governance, and
oversight by representative government. In other
words, production should be conducted as we imagine it
is done at present, though in reality neither the
market, business, nor representative government can
function properly and responsibly today because they
are under so much pressure from a disastrously
dysfunctional monetary system.
2. Purchasing power should be provided to all
individuals whether they work or not. This is
increasingly important as fewer workers are needed due
to automation to produce an increasing amount of
goods. There is no way to avoid dislocation of workers
due to change in an advanced economy, but it is
essentially that people be protected from such change
even if they decide to opt out of working for a living
at all. There are many productive things people can do
without having to draw an income from a paying job.
The money provided to people regardless of whether
they work would constitute the National Dividend
envisioned by a Social Credit system. One way to
manage such a system would be to require everyone to
work until the age of 40, when optional retirement
would be offered.
3. The idea of one nation being the world’s
policeman with military bases everywhere and a right
to conquer other nations at will and take their
resources must be abandoned once and for all. A system
where the nations of the world are financially
independent and self-sustaining as described in this
report would lead to the possibility of international
stability and trade among nations and regions of the
world acting as equals. The history of the last
century proves that the drive to war is largely fueled
by the need for financial dominance as an offset to
the failure to generate sufficient internal purchasing
power through democratic management of credit. This
syndrome would be eliminated by the monetary reforms
These are the principles—a functioning economy that
combines responsible free enterprise with government
regulation and infrastructure; democratic distribution
of a National Dividend which supplements earned
income; and an international system of economic
relationships among sovereign nations acting as
equals. None of these principles is currently being
met, and no one in a leadership position has a plan to
take us there, either now or when the crisis strikes.
The first measure in bringing about change, taking the
U.S. as an example, would be for the federal
government to create a Monetary Control Board as
envisioned by model legislation proposed by the
American Monetary Institute. This board would oversee
the entire process of assuring that the money supply
is sufficient to express the real credit demands of
the nation in paying for the GDP. This would be
followed by a combination of the following steps:
1. We should spend sufficient credit into
existence to supply the basic operating expenses of
government at all levels without recourse to either
taxes or borrowing. In the past, this has been done by
the colonial American legislatures, the Continental
Congress at the time of the Revolutionary War, and the
federal government during the Civil War. Probably
two-thirds of existing federal government expenditures
could be eliminated, because much of it is to
compensate for a failed monetary system, including
much of the military machine. Further, at least ninety
percent of all taxes could be eliminated under such a
program. The only taxes that would be retained would
be those in the form of user fees for infrastructure
operations and maintenance or those levied as a
control mechanism to prevent inflation. Capital
expenses for infrastructure construction at the
federal, state, and local levels could be financed
through a self-capitalized national infrastructure
bank. Government expenditures would continue to
require legislative approval under our republican form
of government which would be enhanced, not threatened,
by monetary reform.
2. The remainder of the total societal gap between
production and purchasing power would be filled by a
non-taxable National Dividend of two types. One would
be a cash stipend paid to all citizens which would
also serve the purpose of eliminating poverty by
providing everyone with a basic income guarantee. The
remainder of the National Dividend would consist of an
overall pricing subsidy, whereby a designated
proportion of all purchases, including home building
expenses, would be rebated to consumers. The total
National Dividend per person would probably exceed
$12,000 per year under today’s economic conditions. It
would be a calculated value charged against a
government ledger but would be off-budget, with no
need to finance it with taxation or borrowing.
3. A portion of the National Dividend would be
made available to all citizens reaching the age of
eighteen, who would receive a non-taxable lump-sum of
$60,000 for higher education, trade school, or
4. Bank financing would be much more limited than
at present. Private sector corporate investment would
be funded entirely out of retained earnings and
capital markets without recourse to bank lending. Bank
lending for stock speculation would be abolished as
would leveraged buyouts.
5. Bank lending would be accomplished without
fractional reserve methods by requiring banks to
supplement their capital and deposits with credit
borrowed at very low rates from the federal government
as publicly-created credit. While the banks would be
allowed to add administrative costs and a reasonable
business profit for lending used to finance commerce,
mortgages, and small business start-up, government
guarantees and subsidies should result in net interest
rates to borrowers no greater than one percent.
6. International trade would be accommodated
through a regulated system of exchange rates based on
real purchasing values of respective national
This program would not create a Utopia or install a
Big Brother to watch over us. It would not relieve
mankind of the need to work, study, save, take care of
our environment, make wise decisions, use
opportunities intelligently, participate in
representative government, care for those less
fortunate, provide for our posterity, practice
self-restraint, obey moral strictures, worship our
creator, or love our neighbor as ourselves.
What this program would do would be to allow the
nation’s monetary system to reach the same level of
maturity, functionality, and access presently found,
at least potentially, in the physical economy which
utilizes science and technology so effectively in
producing abundant goods and services.
This means that the program would free mankind from
the control of the monetary elite which has unjustly
usurped the fruits of the labor of everyone else. The
amount of money involved in this control over time is
immense. In his report on “An Emergency Program of
Monetary Reform of the United States,” the author
calculated that the National Dividend for 2006 should
have resulted in an average stipend paid to each U.S.
citizen of $12,600. For a person aged 60, this would
work out to $756,000 over a lifetime in current
This figure of $756,000 represents the amount of money
an individual has had to borrow from financial
institutions to make up what he should have received
as his share of a National Dividend if Congress had
not ceded the public prerogatives of credit-creation
that exist in the Constitution to private financiers.
Extrapolated for the entire U.S. population, the
amount of unnecessary borrowing probably has exceeded
$100 trillion since World War II. We can gain
confidence that this figure is in the ball-park by
realizing that total societal debt in the U.S. today
has been reliably estimated at over $48 trillion.
Thus it is easy to see that in time, the program of
monetary reform described in this report could
eliminate poverty and the main causes of war, reduce
the size of government, and give individuals a chance
to prosper. It would replace the current system of
debt-serfdom caused by monetary strangulation at the
consumer level with true economic democracy.
Economic democracy may be defined as free access to
the bounty of God’s earth, according to one’s need,
character, ability, and work. The purpose of this
access is for individuals to have the liberty to work
out responsibly their own occupation, lifestyle,
identity, and destiny without these being dictated by
external authorities or the threat of economic ruin.
These are the freedoms that are inherent in the ideals
that created America and, though compromised so much,
have been America’s gift to the rest of the world.
The reader might ask why, if these reforms could so
readily be made, weren’t they thought of and
implemented before? The answer is that these reforms
have been known and promoted by many people in the
past, both known and unknown, including such leaders
in America as Benjamin Franklin, Thomas Jefferson,
Andrew Jackson, Thomas Edison, Henry Ford, Herbert
Hoover, Franklin D. Roosevelt, John F. Kennedy, and
many others. But working against such enlightened
leaders has been an international financier conspiracy
with immense political power.
The modern era of financier control in the U.S.
started with the Federal Reserve Act of 1913. But
during the 1920s, the U.S. was still outstripping the
rest of the world with rapid economic growth. This was
due to a favorable financial position with respect to
Europe after World War I, the wide availability of
credit in the domestic economy, rapid industrial
progress, and the predilection of American
industrialists to pay their workers generous wages.
Note that President Herbert Hoover is on this list of
enlightened leaders. It is not generally known that
Hoover, elected in 1928, had become familiar with the
Social Credit system which originated in Great Britain
with Major C. H. Douglas, who published the seminal
work “Economic Democracy” in 1918. Douglas, with
intimate knowledge of the events of the time, later
related in his book “Warning Democracy” that in order
to counter Hoover’s enlightened economic ideas, the
financiers decided to wreck the U.S. economy, starting
with the stock market crash of 1929.
There is an official version of history, then there is
the way things really happened. Thus Hoover is
popularly, but mistakenly, portrayed as a failed
president. But Hoover, an engineer and one of the most
capable presidents in U.S. history, identified the
Federal Reserve, acting on its own, as having brought
on the Great Depression. He responded by creating the
Reconstruction Finance Corporation to revitalize the
economy with a fresh infusion of credit, but, having
been blamed for the crash, was voted out of office in
favor of F.D.R. in 1932.
The RFC remained and was instrumental in rebuilding
the economy over the next two decades. Roosevelt
himself understood that the federal government had to
maintain a decisive degree of control over credit,
though he was undermined by people in his own
administration favorable to the financiers. So he
never completed a program of real monetary reform.
During the 1930s, Douglas was forecasting another
world war due to monetary causes, but he was told
during his visits to the U.S. that the financiers
would never allow Social Credit to be implemented.
According to monetary reform folklore, the financial
elite looked around for an economist to combat
Douglas’s ideas and settled on John Maynard Keynes.
The Keynesian system tried to deal with the monetary
problem through massive government deficits, high
taxes, and rapid economic growth.
This system worked through the World War II years and
beyond but ran out of steam after the 1963
assassination of JFK and the loss by the U.S. of its
trade advantages and fiscal solvency during and after
the Vietnam War. The financiers reasserted control
throughout the 1970s, leading to the devastating
Federal Reserve-induced recession of 1979-83 and the
deregulation of the financial industry during the
Reagan years of 1981-9.
That left matters where they stand today. Since the
1980s, every U.S. economic expansion has been nothing
more than a Federal Reserve-created asset inflation.
The latest has been the now collapsing housing bubble,
the largest bubble in history. The financiers are
trying to bring about an orderly decline—the so-called
“soft landing”—though at the likely cost of the
wealth, health, jobs, homes, and perhaps even some of
the lives of tens of millions of demoralized people.
Will we let them get away with it? Obviously, the
government has bail-outs on its mind, though now, with
housing gone, there may be nothing left for the
financiers to inflate for the next round of chaos.
Still, they are trying. Analysts are now calling
attention to a new merger and acquisition bubble and a
huge securities lending boom that has driven the stock
market to historic levels even as consumer purchasing
power in the U.S. crumbles.
If this bubbles bursts, much of the middle class
wealth that remained after the 1987 stock market
crash, the 2000-2002 bursting of the dot.com bubble,
and the ongoing decline of the housing market will be
gone for good.
Maybe the party is finally over. Maybe at the end of
their 300-year reign, starting roughly with the
creation of the Bank of England in 1694, the
financiers have finally succeeded in doing enough
damage to the world economy that the rest of us are
willing to take action. Or maybe there will be a
sufficient distraction by more war in the Middle East
and elsewhere. Maybe peak oil or global warming will
intervene with destruction on too large a scale to
ignore. Or maybe we’ll just limp along into the
Only time will tell. But however the change may
happen, it remains the author’s conviction that, one
way or the other, a fair and intelligent monetary
system will someday exist on the planet earth.
Richard C. Cook is the author of Challenger Revealed:
An Insider’s Account of How the Reagan Administration
Caused the Greatest Tragedy of the Space Age. A
retired federal analyst, his career included stints
with the U.S. Civil Service Commission, the Food and
Drug Administration, the Carter White House, and NASA,
followed by twenty-one years with the U.S. Treasury
Department. He is now a Washington, D.C.-based writer
and consultant and will be speaking at the AMI annual
conference in Chicago in September 2007. His website
is at www.richardccook.com.
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