[magprob]

So you say the fed has not printed too much money and that there really is no inflation and that since there is really no inflation, prices are at a normal level?

[magprob]

Executive Order 11110

AMENDMENT OF EXECUTIVE ORDER NO. 10289 AS AMENDED, RELATING TO THE PERFORMANCE OF CERTAIN FUNCTIONS AFFECTING THE DEPARTMENT OF THE TREASURY. By virtue of the authority vested in me by section 301 of title 3 of the United States Code, it is ordered as follows:

SECTION 1. Executive Order No. 10289 of September 19, 1951, as amended, is hereby further amended - (a) By adding at the end of paragraph 1 thereof the following subparagraph (j): '(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12, 1933, as amended (31 U.S.C. 821 (b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption,' and (b) By revoking subparagraphs (b) and (c) of paragraph 2 thereof. SECTION 2. The amendment made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue and may be enforced as if said amendments had not been made.

JOHN F. KENNEDY
THE WHITE HOUSE,
June 4, 1963

-------------------------------------------------------------------

Once again, Executive Order 11110 is still valid. According to Title 3, United States Code, Section 301 dated January 26, 1998:

Executive Order (EO) 10289 dated Sept. 17, 1951, 16 F.R. 9499, was as amended by:
EO 10583, dated December 18, 1954, 19 F.R. 8725;
EO 10882 dated July 18, 1960, 25 F.R. 6869;
EO 11110 dated June 4, 1963, 28 F.R. 5605;
EO 11825 dated December 31, 1974, 40 F.R. 1003;
EO 12608 dated September 9, 1987, 52 F.R. 34617

The 1974 and 1987 amendments, added after Kennedy's 1963 amendment, did not change or alter any part of Kennedy's EO 11110. A search of Clinton's 1998 and 1999 EO's and Presidential Directives has also shown no reference to any alterations, suspensions, or changes to EO 11110.

The Federal Reserve Bank, a.k.a Federal Reserve System, is a Private Corporation. Black's Law Dictionary defines the 'Federal Reserve System' as: 'Network of twelve central banks to which most national banks belong and to which state chartered banks may belong. Membership rules require investment of stock and minimum reserves.'

Privately-owned banks own the stock of the FED. This was explained in more detail in the case of Lewis v. United States, Federal Reporter, 2nd Series, Vol. 680, Pages 1239, 1241 (1982), where the court said: "Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. The stock-holding commercial banks elect two thirds of each Bank's nine member board of directors."

The Federal Reserve Banks are locally controlled by their member banks. Once again, according to Black's Law Dictionary, we find that these privately owned banks actually issue money:

"Federal Reserve Act Law which created Federal Reserve banks which act as agents in maintaining money reserves, issuing money in the form of bank notes, lending money to banks, and supervising banks. Administered by Federal Reserve Board (q.v.)".

"The privately owned Federal Reserve (FED) banks actually issue (create) the 'money' we use. In 1964, the House Committee on Banking and Currency, Subcommittee on Domestic Finance, at the second session of the 88th Congress, put out a study entitled Money Facts which contains a good description of what the FED is: "The Federal Reserve is a total money-making machine. It can issue money or checks. And it never has a problem of making its checks good because it can obtain the $5 and $10 bills necessary to cover its check simply by asking the Treasury Department's Bureau of Engraving to print them."

Any one person or any closely knit group who has a lot of money has a lot of power. Now imagine a group of people who have the power to create money. Imagine the power these people would have. This is exactly what the privately owned FED is!

No man did more to expose the power of the FED than Louis T. McFadden, who was the Chairman of the House Banking Committee back in the 1930s. In describing the FED, he remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932:

"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal reserve banks. The Federal Reserve Board, a Government Board, has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt.

The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government.

It has done this through the maladministration of that law by which the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it."

Some people think the Federal Reserve Banks are United States Government institutions. They are not Government institutions, departments, or agencies. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers. Those 12 private credit monopolies were deceitfully placed upon this country by bankers who came here from Europe and who repaid us for our hospitality by undermining our American institutions.

The FED basically works like this: The government granted its power to create money to the FED banks. They create money, then loan it back to the government charging interest. The government levies income taxes to pay the interest on the debt. On this point, it's interesting to note that the Federal Reserve Act and the sixteenth amendment, which gave congress the power to collect income taxes, were both passed in 1913.

The incredible power of the FED over the economy is universally admitted. Some people, especially in the banking and academic communities, even support it. On the other hand, there are those, such as President John Fitzgerald Kennedy, that have spoken out against it. His efforts were spoken about in Jim Marrs' 1990 book "Crossfire":

Another overlooked aspect of Kennedy's attempt to reform American society involves money. Kennedy apparently reasoned that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest.

He moved in this area on June 4, 1963, by signing Executive Order 11110 which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System. That same day, Kennedy signed a bill changing the backing of one and two dollar bills from silver to gold, adding strength to the weakened U.S. currency.

Kennedy's comptroller of the currency, James J. Saxon, had been at odds with the powerful Federal Reserve Board for some time, encouraging broader investment and lending powers for banks that were not part of the Federal Reserve system. Saxon also had decided that non-Reserve banks could underwrite state and local general obligation bonds, again weakening the dominant Federal Reserve banks.

In a comment made to a Columbia University class on Nov. 12, 1963, ten days before his assassination, President John Fitzgerald Kennedy allegedly said:

"The high office of the President has been used to foment a plot to destroy the American's freedom and before I leave office, I must inform the citizen of this plight."

In this matter, John Fitzgerald Kennedy appears to be the subject of his own book... a true Profile of Courage

[ordinaryguy]

So you say the fed has not printed too much money and that there really is no inflation and that since there is really no inflation, prices are at a normal level?

No, I didn't say there is no inflation, but I have no reason to believe that the 2% to 4% range that the Bureau of Labor Statistics has been reporting for the last several years is grossly inaccurate. These are not crisis levels by any means.

The idea of inflation is easier to understand than it is to measure. Complications include the constantly-changing mix of products (buggy whips, video games) and services (cell phone, internet) that make up the "shopping basket" of items whose prices must be sampled, as well as the changing attributes and features (fuel efficiency, cup holders) of established products (automobiles).

If the price of fuel goes up, but you decide to drive a more fuel-efficient car, are you a victim of "inflation"? The cost per unit of fuel, as well as the cost of the car may have gone up, but your cost per mile of transportation may not have, or at least not proportionally. If actual transportation cost does get really high, more people will decide that they can find a way to live closer to where they work or need to go most often.

Human ingenuity directed toward adaptation and substitution is the antidote to high prices, whether due to supply restriction, demand increases, or conspiratorial market manipulators.

[magprob]

If the price goes up and your real wage stays the same, are you a victum of inflation?
If a can of beans is 0ne dollor today and one dollar and twenty-five cents tomorrow, and your real wage has sunk because of it, what is the real price of that can of beans?
If you save money and the fed cuts interest rates and prints more money in their up and down, magic system of economics, do you have enough to retire on in 30 years?
Or, has a portion of your savings been siphoned off? Right out of the bank vaults by magic?

"If the price of fuel goes up, but you decide to drive a more fuel-efficient car, are you a victim of "inflation"? "
Or, is it just time to tighten our belts again? Here in the richest country in the world?

And please don't get me wrong, I'm not picking a fight, I'm picking your brain. I have wanted a university trained economists view on all this for some time.

[ETWolverine]

Because someone is squeezing the real value out and putting it in their pockets.

How, exactly, does that work, mag? If the value of the dollar is being deliberately manipulated downward, wouldn't that also decrease the value of the dollar for the guy who is doing the manipulating? Wouldn't his dollars also be worth less? How does one decrease the value of the dollar for everyone else, but still gain value for themselves?

This idea simply doesn't make any sense. There is no mechanism by which it can be accomplished. It makes for good conspiracy talk, but there's no way for it to actually happen.

BTW, I also have a degree in economics and am a financial analyst by profession... so I have something of a background in all this economic stuff. That makes two people with economics training who disagree with your assertions regarding a conspiracy to manipulate the value of the dollar.

Elliot

[magprob]

With every dollar they print, there comes a built in profit for them, or debt to the borrower called interest. The national debt is 9 trillion because of the interest owed to the federal reserve. As our government borrows more dollor for this war, the interest grows= national debt. No?

[ordinaryguy]

And please don't get me wrong, I'm not picking a fight, I'm picking your brain. I have wanted a university trained economists view on all this for some time.

I'm glad you said that, because it had occurred to me to wonder what you were picking.

There is a difference between money and wealth. Wealth is the capacity to satisfy the wants of people who have something of value that they are willing to trade for that satisfaction. Wealth resides in the world's farms, forests, mines and fisheries, and in the complex web of transporters, processors, fabricators, distributors and retailers that turn raw materials into finished and intermediate goods and offer them for sale in convenient locations and at a moment's notice. Wealth also resides in the less-tangible but equally real capacity (tools and expertise) to provide a desired service to a satisfactory standard of performance, and in a timely fashion.

Money is to economic activity as motor oil is to an engine. Its role is to reduce friction so that the many moving parts can function without generating excessive heat and wear. It serves as a temporary storage medium for wealth, and as an efficient means for converting one form of wealth into another. That's all. Money does not have and does not need to have any intrinsic value. The one and only thing that money absolutely must have in order to serve its lubricative function in the economic engine is the confidence of (almost) all buyers and sellers that its value will be reasonably stable for a reasonable period. When that confidence disappears, economic activity reverts to barter, which is exceedingly cumbersome and inefficient.

Like oil in an engine, there can be too much or too little money in circulation. The "right amount" of money is the amount that exactly matches the needs for today's transactions to move real goods and services from producers and providers to users and consumers. There is no necessary relationship between the right amount of money to have in circulation in the world's economy and the amount of gold or other precious metals that may exist in the world, whether as refined bars in a vault or as ore still in the ground. Precious metals are valuable for a variety of reasons to a variety of people, but they are not money, they are commodities.

The rate at which goods and services are produced has a necessary inertia built into the process and can't change too suddenly. If the amount of money increases faster than the rate of production and consumption, a larger number of dollars will be divided up between a lesser amount of actual value created, so the price per unit of value has to go up. That's inflation. If the amount of money is increased slower than the rate of production and consumption, some transactions are delayed, inventories build up until the cost of holding them begins to be burdensome and sellers must reduce prices in order to move product. That's deflation. If producers have to reduce prices below a profitable level, they will reduce production levels for awhile. That's recession. If the reduction in the rate of production and consumption is large enough and persists long enough, many producers will go bankrupt. That's depression.

The role of the central bank is to dispense the "right amount" of money to properly match the rate of production and consumption in the economy. If they get it right, there is an acceptable degree of (not perfect) price stability, without recession or depression. Of course they occasionally get it wrong, sometimes knowingly, but more often out of ignorance or incompetence.

[ordinaryguy]

With every dollar they print, there comes a built in profit for them, or debt to the borrower called intrest. The national debt is 9 trillion because of the intrest owed to the federal reserve. As our government borrows more dollor for this war, the intrest grows= national debt. No?

There is nothing sinister or nefarious about the market for credit. The market rate of interest is our collective determination of the current value of waiting. For the saver, interest is the payment received for the service of waiting until later to spend (consume). To the borrower, it is the cost of consuming now instead of later, i.e. not waiting. The banking system's function is to facilitate this transaction between savers (both households and businesses) and borrowers (mostly businesses, plus some household borrowings, mostly for housing and transportation).

Like everybody else, when the government spends more than it takes in, it has to make up the difference by borrowing. The Treasury Department (not the Federal Reserve) does this by issuing and selling bonds, which are simply a promise to repay the face amount over a specified time at a specified rate of interest. The interest on the national debt is owed and paid to the purchasers of those bonds, whether they be pension funds, foreign governments, banks, insurance companies, or little old ladies. Although the Federal Reserve System does buy and sell US Treasury securities as part of the mechanics of managing the money supply, the interest paid from the Treasury to the Federal Reserve is a tiny fraction of the total interest paid on the national debt, most of which is held by private entities.

Of course, if the government weren't such a voracious consumer of credit, the money it borrows would be available for use by private businesses and consumers to support a somewhat higher standard of living at somewhat lower interest rates.

[magprob]

YouTube - Ron Paul on Federal Reserve, banking and economy

[inthebox]

OG:

"Of course, if the government weren't such a voracious consumer of credit, the money it borrows would be available for use by private businesses and consumers to support a somewhat higher standard of living at somewhat lower interest rates"

Please understand this is from someone who has no economics background:

Is your statement consistent with Mag's concern over the growing deficit?

As the gov't overspends, uses credit, and piles on debt; is this to the detriment of private business and the consumer?

If private / small business cannot borrow [ or not borrow as much] to expand, or stay competitive, or stay in business could this start a cycle of recession and or depression?

Thanks in advance.





Grace and Peace

[ordinaryguy]

Is your statement consistent with Mag's concern over the growing deficit?
As the gov't overspends, uses credit, and piles on debt; is this to the detriment of private business and the consumer?
If private / small business cannot borrow [ or not borrow as much] to expand, or stay competitive, or stay in business could this start a cycle of recession and or depression?

In order to make any kind of sense out of all this, it's important to have a concept of the relative size of the various pieces and parts of "the economy". Although government spending, taxation, and borrowing behavior gets a lot of well-deserved scrutiny and debate, it still constitutes a modest share of the total economy. Since 2001, US government spending as a share of Gross Domestic Product (GDP) has increased from about 18% to around 20%. This means that private individuals and businesses still control the spending and saving decisions over 8 out of 10 dollars in circulation. Yes, the government is "big", but only one-fifth as big as the private sector. An eight hundred pound gorilla is still quite a bit smaller than a two-ton gorilla. So that's an important thing to keep in mind.

Another thing to consider is that the government deficit (the difference between tax receipts and spending outlays on an annual basis) is relatively small (about 2% of GDP) compared to the levels of spending and revenue. Thus new net government borrowing in a given year is a small fraction of total government spending, and a tiny fraction total private borrowing. So yes, it has an effect, but seen in perspective, it's not some kind of economic tsunami that's about to swamp the boat.

[magprob]

OG, I have always respected your intelligence in most matters but today I have one more question to ask you, have you ever, or do you now, work for the government?

[K_3]

Ordinaryguy, explain to me if big governments do not control the world, who does? How can a country possibly stay strong by spending more than it has or can generate. Small companies are being bought up by larger corporations. Farms are even being bought by
Large corporations. Seed companies are being bought by corporations. I took economics in college also. I only have to open my eyes and see what is really happening to our country to be concerned. One can debate all day as to who is right and who is wrong from a book point of view. The evidence is in front of our faces. The price of oil does not only pick ones pocketbook at the gas station, it is in the price of heating our homes, all products from food to shoes due to trucking expenses. The gas farmers need to farm is killing them, whick in turn hurts us. If our economy is so great and the federal reserve is doing their job why are people losing their homes? I know as an individual, if you start living on credit and borrowing from your neighbor your household is going to one day collapse and your neighbor will own your home. Our country has been living on credit and has borrowed from other countries and I am afraid we no longer own our country.

[magprob]

YouTube - Ron Paul on Federal Reserve, banking and economy

[magprob]

Inside the Kremlin, with Putin nearing the end of his second and final term as president, that sum now looks like peanuts. Russia's gold and foreign-currency reserves have risen by more than that amount just since July. The soaring price of oil has helped Russia increase the federal budget tenfold since 1999 while paying off its foreign debt and building the third-largest gold and hard-currency reserves in the world, about $425 billion.

[ordinaryguy]

Ordinaryguy, explain to me if big governments do not control the world, who does?

Nobody.

How can a country possibly stay strong by spending more than it has or can generate.

When you say "country" do you mean "local, state, and federal governments" or "private businesses and individuals", or "both public and private production, consumption and investment"? I'm also not quite sure what you mean by "more than it has or can generate".

At the aggregate level of "the nation", we consume everything we produce (except net ex/imports) and we either spend, save or invest everything we earn. Taxes are simply what the private sector decides to spend on government services of all kinds. Granted, some of these "services" amount to very little more than picking my neighbor's pocket and giving it to me (minus a "service charge" of course), but somehow those on the receiving end of these transfers don't usually see it that way. That's part of what makes politics so entertaining. But I digress.

Small companies are being bought up by larger corporations. Farms are even being bought by large corporations. Seed companies are being bought by corporations.

Yeah, so, some conglomerates are spinning off businesses and going private. Bigger is not always better, as many a failed corporate merger has demonstrated. The amount of influence that government policy can have on most of these transactions is small, and that is exactly as it should be. Business and financial lessons are being learned every day in the school of risk and reward, and yesterday's revered dogma becomes tomorrow's bad joke. Remember the "Internet Boom"? Hint: It was just before the "Real Estate Boom".

I took economics in college also. I only have to open my eyes and see what is really happening to our country to be concerned.

And what is it, exactly, that you think is "really happening to our country" that concerns you so? Is it that you think the public sector is too big, or just that it spends your tax money on the wrong things? Is it that you think private businesses have too much economic freedom, or too little?

One can debate all day as to who is right and who is wrong from a book point of view.

I haven't got to that yet. I'm still just describing the facts of the situation.

The evidence is in front of our faces. The price of oil does not only pick ones pocketbook at the gas station, it is in the price of heating our homes, all products from food to shoes due to trucking expenses. The gas farmers need to farm is killing them, whick in turn hurts us.

Times are tough all over. So it has always been, and so shall it always be. What's your point?

If our economy is so great and the federal reserve is doing their job why are people losing their homes?

Because they borrowed more money than they had the ability to pay back, and/or because they accepted loan terms that not only put all the risk of higher interest rates on them rather than the lender, but actually amplified that risk. Should the government have prevented them from taking these risks? Now that they have lost the bet (that prices would appreciate rapidly and interest rates would remain low for the foreseeable future) should government (i.e. the rest of us) bail them out?

I know as an individual, if you start living on credit and borrowing from your neighbor your household is going to one day collapse and your neighbor will own your home. Our country has been living on credit and has borrowed from other countries and I am afraid we no longer own our country.

It would be hard to overstate the advantage that the US has had relative to other nations because (many many) foreigners, including individuals, businesses, banks, insurance companies, pension funds, and governments are willing to loan money to both the US Treasury and US private businesses. That would be generous enough by itself, but in addition, they often use our money even for their own purely domestic transactions, and allow major export products (most importantly, crude oil) to be priced in dollars. All of these things work to our advantage as long as that willingness endures. To the degree that it wanes, we will begin to reap some of the more bitter fruits of all the excess consumption (beyond a domestically achievable level) that we have indulged in since the greenback became the defacto reserve currency for the world economy.
Personally, I don't think it will hurt us to eat a little bitter fruit and learn to live by the same financial realities that the rest of the world faces. I just hope we don't have to eat it all at one meal, or even all in one year.

[ordinaryguy]

OG, I have always respected your intelligence in most matters but today I have one more question to ask you, have you ever, or do you now, work for the government?

I have never worked directly for the Federal Government, though I have participated in university research that was federally funded. I did work for State government for 10 years (mid-80's to mid-90's). For the last 13+ years I have been a self-employed producer of beef cattle.