Crime of 73

["William B. Ryan" <w_b_ryan@xxxxxxxxx>]

----original message----
> Exactly right.  In the absence of Treasury securities, the Fed would
> have to monetize private sector securities to provide the base money
> needed by the economy.  That would distort the asset prices of those
> securities the Fed chose to monetize.  Being able to monetize publicly
> owned Treasury securities, means the Fed's role is neutral in terms of
> relative prices of financial assets in the private sector.
---------------------------------------------

Hardly neutral because the purchasers of government
securities purchase them in alternative to private
sector securities.  Prior to 1930s reforms the Fed
itself purchased private sector and foreign private
securities.  It was a matter of invective on the
floor of Congress from McSpadden and others.
Presently, the Fed purchases only Treasury securities
through so-called "open market" dealers, not directly
from government.  The theory is that the "market"
thereby determines the prices for the securities, not
government fiat.

It is not true that in the absence of Treasury
securities the Fed would have to "monetize" private
sector securities to provide the "base money" needed
by the economy.

Hummel's assertion falls back on the old bankers'
theory of "real bills," that there can be no
inflation if bankers limit monetization to "real
bills" deriving from trade and commerce.  "Real
bills" include securities of all types, from the
private sector and government.  It's pure ideological
doctrine.  Many central banks throughout the world do
not limit themselves to their government's
securities, including the Bank of England to this
very day.

The alternative to Fed monetization of securities of
any type - whether government or private - is to pay
dividends directly to consumers.  That would
stimulate the economy from the bottom rather than in
trickle from the top.

As to the matter of the early 1920s German hyper-
inflation, and the American Greenbacks:

I am no Greenbacker, but the German hyperinflation
was not the result of government printing and
spending money, but the enormous inflation in bank
credit, which had much to do with exchange rates and
reparations.

The Civil War Greenbacks were fought tooth-and-nail
by the banks, which steadfastly refused to accept
them either for deposit or in payment of debt, as
mandated by the wartime legal tender legislation.
The greenbacks therefore quickly fell into the hands
of speculators at pennies on the dollar.  The refusal
of the banks to accept them during the war was, in my
opinion, tantamount to treason.  The U. S. Supreme
Court ultimately upheld the legal tender legislation,
but the banks refused to acknowledge the authority of
the Supreme Court.  The bankers finally won the
battle completely, overruling the Supreme Court, when
the Republican dominated Congress under General
Grant, now President of the United States, passed the
"Resumption" act that redeemed the Greenbacks at full
face value in specie, greatly enriching the
speculators while at the same time affirming the
power of banking over democratic government and the
people.

The sorry episode was followed by legislation known
in Greenbacker and Populist lore as the "Crime of 73"
demonetizing silver, further solidifying the power of
banking.

Bill Ryan

--

----original message----
>We need neither the Fed nor public debt.   All we need to maintain the money
>supply is for the government to spend dollars into circulation.
>
And a super fast printing press.

The Germans tried something like that in the early 1920s.  In 1923
alone, the value of the German mark fell from an already fantastic
18,000 to the dollar to 4,200,000,000,000 to the dollar.

Any other thoughtful ideas?



____________________________________________________________
Get advanced SPAM filtering on Webmail or POP Mail ... Get Lycos Mail!
http://login.mail.lycos.com/r/referral?aid=27005