16 September 2010
by
Alex Newman
Source: The New American
The Federal Reserve has been a nightmare
for the American people. It inflates the money supply, thereby devaluing
already-existing money and placing a massive hidden tax on the people
via rising prices. It also uses its monopoly power to cause interest
rates to go up or down, usurping the rightful place of the market and
causing massive malinvestment and generally an improper and unproductive
allocation of resources.
The Fed also causes the boom-and-bust cycle through its
manipulations of the currency and credit supply. It serves as the
government’s partner in perpetually expanding the “welfare-warfare
state,” allowing the state to spend far more than it could ever hope to
reasonably raise through direct taxation. And of course, the fact that
all Federal Reserve notes enter the economy as debt with interest
attached (but never created) has led to a situation where it is
literally mathematically impossible to pay off the debt. In sum, the
consequences of such a system have been disastrous for average Americans
— hence the growing calls to audit and even end the Fed.
But now, imagine such a system at the global level. And it isn’t just
a mental exercise; the global central bank is already emerging. As bad
as the Fed has been for America — and indeed the world — a similar
system at the international level would be far worse. Disaster might
even be an understatement.
International Liquidity and Inflation
One of the most serious threats posed by a global central bank and world
fiat currency is the fact that it would allow the emerging planetary
regime to print its own money and finance its activities independently.
That means wealth could be secretly siphoned away from all of humanity
to pay for armies, tax collectors, courts, bureaucracies, law
enforcement, wealth redistribution, propaganda, and much more. With no
limits. But to advocates of such a system, that is one of its primary
benefits.
“A super-sovereign reserve currency not only eliminates the inherent
risks of credit-based sovereign currency, but also makes it possible to
manage global liquidity. A super-sovereign reserve currency managed by a
global institution could be used to both create and control the global
liquidity,” wrote Chinese central-bank boss Zhou Xiaochuan in his public
paper calling for a world currency. “The centralized management of its
member countries’ reserves by the Fund will be an effective measure to
promote a greater role of the SDR [Special Drawing Rights, the
International Monetary Fund’s first effort at a world currency] as a
reserve currency.” Of course, communists have always supported control
of “liquidity” (Karl Marx was a strong advocate of central banks with a
monopoly on currency and credit). But to people who care about freedom
and prosperity, the communists’ support should be a huge red flag.
The United Nations has also backed global currency proposals for the
same reason. In a report earlier this year calling for the end of the
dollar’s status as a reserve currency and a new monetary regime
controlled by the International Monetary Fund, the UN’s
World Economic and Social Survey
for 2010 points out that, “Such emissions of international liquidity
could also underpin the financing of investment in long-term sustainable
development.” The term “sustainable development” — especially when used
by the UN — is often used to refer to stronger central planning,
population reduction, more land in government hands, and other ideas
repugnant to average Americans and the U.S. Constitution. Other schemes
for “international liquidity” could be even worse.
Hiding behind the passive voice, a separate report by the UN Conference
on Trade and Development adds in the concept of wealth redistribution:
“It has been suggested that in order for the SDR to become the main form
of international liquidity and means of reserve holding, new SDR
allocations should be made according to the needs of countries.” It then
promotes worldwide central planning to “stabilize global output growth”
by issuing more SDRs or retiring them as the emerging global government
deems necessary. As it stands, wealth redistribution around the world
is bad enough. Surrendering that power to a global institution would be a
nightmare.
In its report published earlier this year, the IMF also recently came
out in favor of allowing it to print its own money to provide
“international liquidity.” “A global currency, bancor, issued by a
global central bank would be designed as a stable store of value that is
not tied exclusively to the conditions of any particular economy,” the
paper says. “The global central bank could serve as a lender of last
resort, providing needed systemic liquidity in the event of adverse
shocks and more automatically than at present.” In laymen’s terms, the
IMF, with its power to “emit liquidity” out of thin air, would be
empowered to “bail out” companies, governments, and whomever it wished.
If you thought the Fed handing out trillions of dollars to the big banks
and other insiders was bad, just wait until a global central bank
exercises that power.
Allowing the emerging global government to supply its own money would
free it from the constraints of having to raise money through national
contributions or direct international taxation. But of course, printing
all of this new “liquidity” and financing all of its ambitious projects
would be inflationary by definition. And this inevitably would represent
a massive problem.
Even John Maynard Keynes, the original proponent of the world currency
called “bancor,” understood the concept well. In 1919, he wrote in his
book
The Economic Consequences of the Peace, “By a continuous
process of inflation, governments can confiscate, secretly and
unobserved, an important part of the wealth of their citizens.”
To understand the effects, one can look to history and examine examples
such as what occurred in the Weimar Republic of Germany, where the money
supply was inflated to such an extent, to finance government spending
and war debt, that Germans actually found their money more valuable to
burn as fuel than to use to purchase items. Or, in more recent years,
the tragedy of hyperinflation in Zimbabwe, where inflation exceeded
millions of percent per year and it could cost a person billions of
dollars for a loaf of bread, provides a more current warning. Even in
America — with a comparably stable currency up until now — inflation has
wreaked havoc on the economy and the lives of citizens, as we have
become a country where husbands and wives must both work to make ends
meet. And these all happened in a world where there was still a check on
unlimited inflation of fiat money — the fact that citizens could quit
using it and purchase other currencies that were not losing their value
as quickly. But under a global fiat monetary regime, there would be no
such option.
Economists who have been proven correct over the decades about the
economic consequences of creating money out of thin air are already
sounding the alarm. “A world paper currency and world central bank would
heighten the moral hazard and lead to a global inflationary regime such
as we’ve never seen,” noted Lew Rockwell, the chairman of the Ludwig
von Mises Institute. That is, the “easy” money and credit would cause
people to borrow and spend way beyond their means, creating an
unprecedented global bubble that would at some point inevitably burst.
“There would be no escape from political control at that point.”
And the consequences would be dire. “Inflation tears apart the whole
fabric of stable economic relationships,” explained the legendary
free-market economist Henry Hazlitt. “It leads men to demand
totalitarian controls. It ends invariably in bitter disillusion and
collapse.”
Closer Integration and Total Control
Existing monetary unions are often seen as the model for a global
currency by advocates of such a system. But surrendering control over
money to supranational institutions has consequences, as the people of
the Eurozone are discovering. For one, according to data compiled by the
European Central Bank, economic growth has slowed dramatically in
countries using the euro since the introduction of that single currency —
a phenomenon not observed in other areas of the world.
But more importantly, the goal of keeping the monetary union intact is
leading to ever greater fiscal and political integration as rules are
harmonized and authority continues shifting from nations toward European
institutions. During the height of the crisis in Greece, other European
governments were forced to bail out the Greek regime over fears that it
could bring down the euro. But on top of that, Eurozone heads of state
and government got together and used the crisis as an excuse for pushing
deeper integration and the imposition of “economic governance” at the
European level.
“We commit to promote a strong coordination of economic policies in
Europe. We consider that the European Council must improve the economic
governance of the European Union and we propose to increase its role in
economic coordination and the definition of the European Union growth
strategy,” announced the euro-area heads of state and government in a
statement. “The current situation demonstrates the need to strengthen
and complement the existing framework to ensure fiscal sustainability in
the euro zone and enhance its capacity to act in times of crises.”
Around the same time, IMF boss Dominique Strauss-Kahn joined the calls
for deeper integration in Europe, offering IMF funds with strings
attached. “The launching of the euro was only a first step,” he
explained. “You can’t have a single currency without having a more
coordinated economic policy.” And indeed, such economic control will
also lead to more political control — just as we have seen with the
transformation of the European Common Market into the European Union.
Obviously, if the euro is the model for a world currency, the same
phenomenon would occur at the world level. That would mean closer
integration among the nations of the world, the vast majority of which
are ruled by totalitarian regimes of various varieties. A world fiat
currency, then, would be the surest way to accelerate the development of
a true global government and the accompanying destruction of national
sovereignty. But to planetary currency enthusiasts, that is a non-issue.
Noting that there would be critics of the development of a world central
bank, especially in America, Council on Foreign Relations insider and
global fiat currency promoter Jeffrey Garten points out in an article
for
Newsweek, “Among their many charges, critics will protest
the establishment of ‘world government.’ But we have a World Trade
Organization with legally binding powers over trade disputes. We have a
World Health Organization for communicable disease with the ability to
quarantine entire countries. And a World Court functions today that has
considerable legal and moral clout.” Dismissing critics protesting the
establishment of a world government by pointing out that it already
exists in rudimentary form is hardly likely to pacify those critics.
But what would a global currency really mean aside from the destruction
of the dollar and the U.S. economy? “A global central bank would be a
disaster,” financial guru Bob Chapman, editor of the International
Forecaster, told
The New American. “It means the acceptance of
world slavery.” Chapman also pointed out that the present international
monetary system was being deliberately destroyed precisely to bring
about a global currency like the bancor. “It’s just not fiscal and
monetary policy. It is every facet of your life that these elitists want
to control.” And they’re moving rapidly toward that goal.
In addition to printing money, the emerging global central bank and its
affiliates are already usurping other powers traditionally exercised at
the national level. In his
Newsweek article, Garten calls for the
new planetary central bank to be the “lead regulator” of all sorts of
financial institutions, monitor risks, push national authorities to
“modify their policies,” coordinate national “stimulus programs,”
orchestrate a “global-stimulus plan,” force taxpayers around the world
to bail out companies, and even act as a bankruptcy court. The IMF, in
its own report, called for global “imbalance” taxes, capital controls,
and a true world financial regulatory regime. A lot of that is already
coming into being, but as the new monetary order develops, the agenda
will only accelerate.
And as if all that wasn’t bad enough, there is no accountability for
this newly empowered IMF. Jim Rickards, the director of market
intelligence for Omnis, explained that, while the IMF has articles of
association and some governance rules, the true power structure behind
it is the G20, which is “completely unaccountable.”
Options, Solutions
As the international monetary crisis unfolds with a collapsing dollar,
there will need to be some sort of reforms. The question is which ones.
Instead of “currency reform” coming “from the marble palaces of the
monetary elites,” economist Lew Rockwell of the Mises Institute points
out, “private currencies traders the world over could, on their own,
give rise to a new currency rooted in gold and traded by means of
digital media.” This would be far superior for numerous reasons, he
argues. “Under a gold standard, the physical metal is the limit and the
market is the master. Under a global paper system, the paper provides no
limit whatsoever and the politicians are the masters.”
And indeed, while the elites push their fiat world currency,
entrepreneurs have already been working on making gold a sort of
currency without the need for government dictates. “Money was invented
in pre-history by people interacting peacefully with one another to help
improve their situation by trading. Money is not an invention of
government,” explained James Turk, founder of GoldMoney, a company
holding over a billion dollars in assets that allows customers to
purchase, store, and trade precious metals. “There is a better solution.
It was the one created by Sir Isaac Newton and given to King William
III. We now call it the classical gold standard, which lasted from circa
1700 to 1914. If governments are to issue currency, it must be tied to
gold. It is this link that provides essential discipline needed to rein
in the aspirations of politicians to spend money, even money the
government doesn’t have,” he told
The New American, adding that
the bankers pushing for a world fiat currency “will do everything they
can to continue this special privilege that they have assumed for
themselves.”
Omnis’ Rickards also has some ideas about how America can put a freeze
on the emergence of the global paper currency: cuts in taxes and
spending; higher interest rates to strengthen the dollar; and,
eventually, getting back on the gold standard. “The U.S. is in the best
position to go back to the gold standard,” he explained, pointing out
that, with an estimated 8,000 tons, America has more gold than any other
country. “The first country that goes to the gold standard will — in
effect — dominate the world of finance because they will have the
currency that everybody wants. ... Would you rather have a gold-backed
dollar or a paper SDR?” What’s missing right now, he said, is just the
political will to do it.
“What you’re going to see over the next few years is a global struggle
between the forces who want to create new forms of paper and just give
it a different name and a different issuer and continue to flood the
world with paper liquidity and keep the game going on the one hand,
versus people who will recognize that the only true form of money is
gold and will start bidding up the price of gold against the dollar,”
Rickards predicted.
John McManus, president of The John Birch Society, has a similar view of
how to rectify the current situation without moving toward an
international central bank to manage a global fiat currency. “If the
currency is a commodity like gold or silver, it does not have to be
managed. The free market place will manage it,” he explains in
Dollars and Sense,
a short video presentation on the monetary system. “Money should be a
commodity valuable to all people; and there’s no management needed.”
It is ironic that the likely imminent collapse of the world’s current
fiat “reserve currency” is being used as an excuse to implement a global
fiat currency. But it is extremely serious. Escaping the elites’
clutches would become almost impossible as wealth is steadily
transferred from humanity to the banking oligarchy and its
ever-expanding global government. And so the scheme must be prevented.
