END THE FED BY Milton Friedman
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END THE FED BY Milton Friedman




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END THE FED BY Milton Friedman END THE FED BY Milton Friedman Document Transcript

  • Milton Friedman END THE FED andWithdraw from the Bank for International Settlements, the IMF and the World BankNobel Laureate Milton Friedman is known now as one of the most influential economists of the20th century. As our readers will have noted, Dr. Friedman praised our Monetary Reform Actand perhaps unbeknownst to them assisted in drafting it, with suggestions and constructive criticisms. Yet a few of our readers have emailed wondering how Dr. Friedman could support genuine reform in the markets based on reform legislation when he seemed to be fundamentally opposed to government interference in the marketplace. The distinction is between theory and practice. Theoretically to minimize government interference in the operation of the free markets is an ideal, which follows Frederich von Hayek’s (author of 1944classic The Road to Serfdom) view that maximizing the ability of business to allocate resourcesefficiently at the lowest levels without government or political interference combined with thefreedom to contract worked best to ensure a productive economy. Conversely, the failedexamples of communist and socialist governments, which prohibited or controlled privatebusiness nearly totally, seemed to cement Hayek’s view as the correct approach.The gradualvictory of Hayek’s anti-regulatory, pro-market economic views in the West, largely through theinfluence of Milton Friedman particularly in the 1980s Reagan-Thatcher period (Friedman wasan economic advisor to President Reagan) began a worldwide deregulatory trend that eventuallyincluded the financial sector. The Economist magazine praised him as “the most influentialeconomist of the second half of the 20th century…possibly of all of it“. In 1988 he received thePresidential Medal of Freedom and the National Medal of Science. Initially the results ofimplementing his pro-market prescriptions were largely positive. Excessive governmentregulation, particularly in more socialist economies, had in fact created a stranglehold onbusinesses – especially small to medium-sized – that was doing far more harm than good.
  • Pushed too far the same views that initially helped businessresulted in an extreme anti-regulatory environment that began tobenefit only the largest companies as they were increasingly freedto use their economic power to warp the free markets in theirfavor. This became particularly true in the financial sector in the1990’s when they succeeded in getting part of the 1933 Glass-Steagal Act repealed with passage of the 1999 Gramm-Leach-Bliley Act. A host of federal and state regulatory acts stemmingfrom the experiences of the Great Depression were repealed in the1990s and beyond. Branch banking and interstate banking becamewidespread resulting in numerous bank mergers consolidatingmost banking into a handful of banks later deemed TBTF (TooBig to Fail) and so were given special, favored treatment byTreasury Secretary Hank Paulson and later Secretary TimGeithner and Fed Chairman Bernanke with taxpayer-financedbank bailouts and low interest loans. The foxes were rewarded forgutting the hen house.Without recounting those partial causes of the 2007-2010 Credit Contraction, suffice it to notethat one result was a trend away from the almost laissez-faire (French trans. “leave it alone”)anti-regulatory approach of the 1980s on. Some have turned the blame for the current situationon Milton Friedman. Is that fair? It depends on who and what is to blame for the currentrecession/depression (as Present Reagan sagely noted, “If your neighbor is unemployed it’s arecession; if you are unemployed it’s a depression”).Let us listen to Milton Friedman on the single cause of severe economic depressions: “I know of no severe depression, in any country or any time, that was not accompanied by asharp decline in the stock of money, and equally of no sharp decline in the stock of money thatwas not accompanied by a severe depression.”Was Friedman right this time too – was this recession/depression caused by a “sharp decline inthe stock of money.” If so, what was its origin? Let’s start with a look at the top of the international financial system. The Central bankers’ Bank for International Settlements (BIS) in 1988 in its “Basel I” regulations imposed an 8% capital reserve standard on member central banks. This almost immediately threw Japan (which had banks with 3- 5% capital reserves) into a 15 year economic depression as those banks contracted credit to comply with Basel I. In 2004 Basel II imposed “mark to the market” capital valuation standards that required international banks to revalue their reserves according to changing market valuations (such as falling home or stock prices). The US implemented those standards in November, 2007. Almost immediately, in
  • December 2007 the US stock market collapsed and credit began drying up as banks withheld loans to comply with the 8% capital requirement as collateral valuations, particularly on homes, began to drop. The snowball effect of tightening credit, which reduces economic activity and values further, which resulted in further tightening of credit, etc., has produced a worldwide recession/depression.Was Friedman to blame for that, or was the BIS and implementation of its Basel II regulations? For those unfamiliar with the BIS – it is the central bankers’ bank. It is above all governments, is exempt from the laws of its host country – Switzerland, and its regulations, which are adopted among its 53 memberCentral banks, become in effect part of the banking law of those nations without legislativeapproval (such as that of the US Congress). Yet they effect the economies of those membernations and that of the world, as we are still experiencing, a’ la Japan. The BIS is in mostrespects, when combined with the IMF (International Monetary Fund) and World Bank, aworldwide version of the US Federal Reserve System. Here is former JP Morgan Chase CEOWalter Shipl-ey on this point re the IMF: “The same thing is true on the international front. The world clearly needs the globalequivalent of the Federal Reserve. That is what the role of the IMF is.”What was Milton Friedman’s attitude towards the Fed (and towards the BIS/IMF/World Bankcombo which is the global equivalent of the US Fed). For starters, he squarely blamed the GreatDepression on the Fed: “The Fed was largely responsible for converting what might have been a garden-varietyrecession, although perhaps a fairly severe one, into a major catastrophe. Instead of using itspowers to offset the depression, it presidedover a decline in the quantity of money byone-third from 1929 to 1933 … Far from thedepression being a failure of the free-enterprise system, it was a tragic failure ofgovernment.”. —Milton Friedman , TwoLucky People, 233Friedman was opposed to the very existenceof the Fed: “Any system which gives so much powerand so much discretion to a few men, [so]that mistakes -- excusable or not -- can havesuch far reaching effects, is a bad system. It isa bad system to believers in freedom just because it gives a few men such power without anyeffective check by the body politic -- this is the key political argument against an independent
  • central bank. . .To paraphrase Clemenceau: money is much too serious a matter to be left to theCentral Bankers.Friedman was in favor of abolishing the Federal Reserve System and replacing it with amathematical model that would keep the quantity of money increasing at a steady rate, issueddirectly by the government (Treasury) and ending fractional reserve banking powers for thebanks, which is why he supported our Monetary Reform Act. He said he actually would “like toabolish the Fed“, and pointed out that when he wrote about reforming the Fed it was simply hisrecommendations of how it should be run given that it exists. Though opposed to the existenceof the Fed, Friedman argued that, given that it does exist, a steady expansion of the moneysupply was the only wise policy, and he warned against efforts by a treasury or central bank suchas the Fed to do otherwise.Friedman emphasized the advantages of free market economics and the disadvantages ofgovernment intervention and regulation. He opposed cartels and monopolistic business practicessuch as the Federal Reserve Act of 1913 created in theUS banking industry, delegating to them the exclusivepower to create most of the US money supply.Friedman later concluded that all governmentintervention associated with the New Deal was “thewrong cure for the wrong disease“, arguing that themoney supply should simply have been expanded,instead of contracted. Friedman and economist AnnaSchwartz argued that the Great Depression was causedby monetary contraction, which was the consequenceof poor policymaking by the Fed. Friedman encapsulated his philosophy in a lecture atUniversidad Católica de Chile, saying: “free markets would undermine political centralizationand political control.”Friedman said: “If a government were put in charge of the Sahara Desert, within five yearsthere’d be a shortage of sand”. Friedman’s distrust of massive government has recently been reflected in the public mood resulting in the upset election of a Republican Senator in liberal Massachusetts. After Friedman’s death, Keynesian Nobel Laureate Paul Krugman, while regarding Friedman as a “great economist and a great man,” criticized him during 2007 by writing that “he slipped all too easily into claiming both that markets always work and that only markets work. It’s extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose.” However, Keynesian economists William Baumol and Alan Blinder repudiated that view, writing that “Friedman is surely no anarchist … He recognizes that any society needs laws, and that legislation and enforcement of the law are proper roles for government in a free society.” Friedman himself acknowledged cases where, for instance, government regulation or a public
  • monopoly may be preferredto private monopoly (e.g., inmoney creation, whichshould be exclusively theperogative of governmentand never delegated toprivate banks to create usingfractional reserve lendingpractices as is the presentcase) and noted numerousareas where he believedgovernment intervention isnecessary:“A government which maintained law and order, defined property rights, served as a meanswhereby we could modify property rights and other rules of the economic game, adjudicateddisputes about the interpretation of the rules, enforced contracts, promoted competition, provideda monetary framework, engaged in activities to counter technical monopolies and to overcomeneighborhood effects widely regarded as sufficiently important to justify governmentintervention, and which supplemented private charity and the private family in protecting theirresponsible … would clearly have important functions to perform. The consistent [classical]liberal is not an anarchist.” Rather than an economic anarchist, Friedman was a believer in freedom. He opposed what he saw in communist and socialist command economies as excessive governmental control and restriction on freedom (even in the educational realm), and similar tendencies in the Western economies. He was not a laissez-faire economist, rather he was a monetarist – a school of economic thought that may betraced back to the 16th century School of Salamanca. Monetarists do not generally supportgovernment intervention in the markets as this is contrary to a properly functioning free marketsystem. However, if the economic system is already warped by special interests and privatemonopolistic practices (such as the financial system in the US is and has been since the passageof the Federal Reserve Act of 1913 cabalizing the US banking industry and allowing their cabalto create money using fractional reserve banking) then monetarists inevitably want to seebalance and justice restored to the free market system, in this case by abolishing the Fed andwithdrawing from participation in the BIS/IMF/World Bank combination.Monetarists are neithersupporters of socialism nor monopoly capitalism. They are instead supporters of the third way –the free market system – which opposes both aforesaid forms of economic totalitarianism.Friedman was a monetarist and a strong supporter of the free market system (even in theeducational system by supporting use of school vouchers).In the current economic setting, Freidman’s writings suggest that cutting spending to reduce thefiscal deficit would result in less transitional unemployment than raising taxes to do so. In other
  • words, the solutions proposed by the Bush and Obama administrations of massive government intervention in the markets will prolong unemployment compared to reducing government spending (which is diverting national resources away from productive industry). At the same time Friedman, a strong supporter of transparency, would undoubtedly support Congressman Ron Paul’s push to audit and to end the Fed. He supported prohibition of fractional reserve banking and withdrawing the US from the BIS/IMF/World Bank global equivalentof the Fed (as his support of our Monetary Reform Act which advocates exactly thatdemonstrates [see Monetary Reform Act Sections 4 and 15 excerpted below this article]). TheBIS is responsible for this current recession/depression and with the US Fed has misused itscontrol of great wealth and resulting influence radically to tilt the economic system in the favorof the major international banks and against all other economic sectors. This threatens to subject the political liberty of the entire world to BIS supra-governmental economic regulations since political liberty depends upon private control of private property. Just as in the Great Depression (renamed the Great [Credit] Contraction by Friedman), the government caused the current severe recession/depression by implementing the BIS Basel II regulations and is again applying “the wrong cure for the wrong disease.” The right cure is to abolish the Fed, prohibit fractional reserve banking and withdraw from the BIS/IMF/World Bank supra-government that initiated this economic crisis. The international banks behind these financial bodies have manipulated the financial system of the world to aggregate more and more wealth into their hands, concentrating vast economic power and hence political power under their control. What Friedman wrote regarding theUS Fed, quoted above, is even more germaneto the international combination of theBIS/IMF/World Bank:Any system whichgives so much power and so much discretionto a few men, [so] that mistakes -- excusableor not -- can have such far reaching effects, isa bad system. It is a bad system to believers infreedom just because it gives a few men suchpower without any effective check by the bodypolitic -- this is the key political argument against an independent central bank. . .To paraphraseClemenceau: money is much too serious a matter to be left to the Central Bankers.” – MiltonFriedman. Excepts from the Monetary Reform Act (supported by Dr. Friedman: “I am entirelysympathetic with the objectives of your Monetary Reform Act…I am impressed by yourattention to detail in your successive revisions… Milton Friedman”):
  • Sec. 4. ONE HUNDRED PERCENT (100%) RESERVE REQUIREMENT. Section 19(b)(2)(A-D) of the Federal Reserve Act is hereby amended to raise the Reserve Requirement ratio forfinancial institutions, in equal monthly increments of eight and one-half percent (8.5%), to onehundred percent (100%), during the saidtransitionperiod.Sec. 15. WITHDRAWAL FROMINTERNATIONAL BANKS. It is hereby declared as a matter of federal statutory law thatmembership and/or participation of the United Statesgovernment, or its agencies, or of the Federal ReserveBoard or Reserve Banks or any officer or employeethereof, with the Bank for International Settlements, theInternational Monetary Fund, the World Bank, and allother international banks, is inconsistent with and in directconflict with the purposes of this Act of Congress. Allmovies below explain The Federal Reserve System andhow the system cheats Americans out of their hard earneddollars. The Federal Reserve System is the root cause ofour financial difficulties in America END THE FED andlets all prosper.The Money Masters Full Movie:http://www.youtube.com/watch?v=JXt1cayx0hsThe Secret of Oz:http://www.youtube.com/watch?v=7qIhDdST27gG Edward Griffin Creature From Jekyll Island:http://www.youtube.com/watch?v=bhMacPvc5qcAmerica: Freedom To Fascism: http://www.youtube.com/watch?v=orHVNUnRKlIMoney, Banking and the Federal Reserve: http://www.youtube.com/watch?v=iYZM58dulPEMoney As Debt I: http://www.youtube.com/watch?v=Dc3sKwwAaCUMoney as Debt II: http://www.youtube.com/watch?v=rCu3fpg83TYThe American Dream: http://www.youtube.com/watch?v=ZPWH5TlbloU http://www.infowars.com/ http://prisonplanet.tv/index. php Federal Reserve Tells YouTube to Take Down Critical Video!! http://www.youtube.com/watch?v=4UqcY8lGUUE