August, 2004

Dear Friend of Radio Liberty,

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth."
Alan Greenspan: 1966 [1]

"In the past few months, Mr. Greenspan has said publicly the U.S. budget deficit threatens the nation's economic stability. . . ."
The Wall Street Journal, July 22, 2004 [2]

"In our view . . . derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
Warren Buffet: Annual Report: 2002 [3]

"Over the past two decades I was excessively fearful of inflation. More to the point at hand, I started way back in 1987 to publicly worry about our mounting trade deficits . . . . Berkshire has made significant investments in . . . several (foreign) currencies. . . . To hold other currencies is to believe that the dollar will decline. . . . Both as an American and as an investor, I actually hope these commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders . . . would incur from a plunging dollar."
Warren Buffet: Shareholder's letter: 2003 [4]

"The current economic recovery has not been good for employment. Despite 25 months of 'recovery,' the economy has 2,944,000 fewer private sector jobs than in January 2001. American manufacturing has experienced the largest job loss, with 2,599,000 fewer jobs today than 35 months ago when President Bush took office. . . . These figures include the losses of the 2001 recession. The really scary part of the story is that, far from recovering these job losses during the last 25 months of economic recovery, the economy has continued losing jobs. . . . We are witnessing redistribution of First World income and wealth to developing countries with excess labor supplies."
Dr. Paul Craig Roberts, January 18, 2004 [5]

"We are confident of our case in Iraq, but the struggle we have entered will not end with success in Iraq. Overcoming terrorism and bringing greater freedom to the nations of the Middle East is the work of decades."
President Bush, June 3, 2004 [6]

Most articles published on the editorial pages of The Wall Street Journal claim the United States is in the early stages of a strong economic recovery. David Malpass wrote:

"America is in the early stages of a relatively long expansion, in which inflation and innovation will be more important variables than the trade deficit, or foreign-capital flows.

While it's true that foreigners own a big portion of U.S. government securities, they own a smaller, declining portion of overall U.S. assets - including Treasuries, perhaps $2.5 trillion (the net debtor position of the U.S.) out of $80 trillion in total U.S. assets. . . .

The global trade imbalance presents a true problem, but not the financial or dollar crisis often discussed. For years, U.S. growth and investment rates have exceeded that of most other countries. A more balanced global economy would see heavier investment and faster growth in less-developed economies. The best, and most likely, resolution of the U.S. trade deficit and capital surplus, will be faster growth and heavier investment abroad, rather than capital flight from the dollar and U.S. government securities.

The fixation with the trade deficit encourages protectionism in the U.S. and leads to an underestimate of the power of the American economic model. It would be wise to spend less time analyzing trade deficits and more time removing obstacles to investment and innovation both in the U.S. and abroad." [7]

Mr. Malpass contends:

(1) America is in the early stages of a relatively long expansion.
(2) The global trade imbalance presents a real problem, but not the financial or dollar crisis often discussed.
(3) We shouldn't worry about the fact that foreigners hold $2.5 trillion dollars of American debt, the growing trade deficit, or foreign financial flows.
(4) The solution is "heavier investment abroad," i.e. transfer of American jobs, industries, and wealth to other nations.

I believe David Malpass is wrong. The U.S. economy has performed well because the United States has a managed monetary system that has stolen the wealth of the American people, and brought our economy to the brink of collapse. If the United States continues transferring jobs, industries, and wealth to other nations, the United States will become a third-world nation. We have two choices. We can either return to an honest money system and preserve our sovereignty, or continue our current course and lose our liberty.

The concept behind the present monetary system is not new. Similar programs have been tried before. They always failed, and destroyed the middle class. Alan Greenspan understands what lies ahead; he wrote an article about our monetary system in 1966 titled "Gold and Economic Freedom." In those days Alan Greenspan championed the cause of "honest money" and "personal freedom." Later he compromised his principles, joined the "welfare-state elite," and betrayed the heritage of the American people. Alan Greenspan wrote:

"Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible. . . .

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." [8]

Civilization required men to link the value of goods and services to a commodity. Some societies used tally sticks, others used sea shells, salt, cattle, cigarettes, and tobacco. Men eventually adopted gold and silver coins as their medium of exchange because the metals are valuable, they can't be counterfeited, and rulers can't increase the quantity of "money" in circulation to enrich themselves and destroy society. [9]

My November and December 2002 Radio Liberty letters discuss the history of fiat money. Copies are available on the Internet at www.radioliberty.com, or can be purchased in a bound volume. This letter summarizes that information.

Ancient Athens established a democracy, used gold coins, and prospered until the government, accumulating debt, minted coins made of base metal, expanded the money supply, produced rampant inflation, and destroyed the economy. Athens fell because the populace couldn't protect their savings, pay their taxes, or plan their future. [10] James Dines discussed what happened:

"In 400 B.C. Greece was struck by an inflation-induced depression from which it never fully recovered, because it had lost its commercial and military advantages." [11]

Professor Alexander Tyler explained the demise of ancient Greece. The following statement is attributed to him:

"A democracy cannot exist as a permanent form of government. It can only exist until ( a majority of) the voters discover they can vote themselves largesse (gifts) from the public treasury. From that moment on the majority always votes for the candidate promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy (taxing and spending), always followed by a dictatorship." [12]

Sophocles wrote about the immorality that accompanied the inflationary spiral that led to the fall of Athens:

"Money: there's nothing in the world so demoralizing as money." [13]

Plato described the demise of Greek democracy:

"Democracy passes into despotism." [14]

Aristotle warned of the danger of fiat money:

"There is nothing inherently wrong in effect with fiat money, provided we get perfect authority and God-like intelligence for kings." [15]

Diocletian ruled the western half of the Roman Empire from 285 A.D. to 305 A.D. His predecessors debased the coinage, expanded the money supply, and imposed oppressive taxation. The rampant inflation that followed destroyed the middle class, and threatened to destroy Rome, so Diocletian imposed wage and price controls and restored the value of the currency. The western half of the Roman Empire fell in 476 A.D. The eastern half of the Empire was ruled from Constantinople; they used gold coins and survived 1000 years. [16]

Gold and silver coins were the primary medium of exchange in Europe until 1716 when a Scotsman named John Law convinced Phillip II, duc d'Orleans, he could solve France's monetary problems by issuing paper currency backed by royal revenues and land. The system worked well for several years, and many people prospered until inflation destroyed the economy, impoverished the middle class, and John Law was driven out of France. [17]

The Continental Congress printed fiat money to help finance the American Revolution. The script was accepted for a time, but soon became worthless, which led to the term, "It's not worth a Continental." That's why Article I, Section 10 of the U.S. Constitution stipulates:

"No state . . . shall coin money, emit bills of credit; make any thing but gold and silver coin a tender in payment of debts. . . ." [18]

Following the French Revolution, the French legislature established a fiat monetary system backed by property seized from the Catholic Church and government revenues. The system worked well for a time. Shops opened, businesses prospered, and the stock market boomed until prices rose and the government was forced to print more money to maintain the economy. Double-digit inflation was replaced by triple-digit inflation, then quadruple-digit inflation. When the monetary system collapsed, France returned to gold-backed currency. [19]

Thomas Jefferson warned of the danger of fiat money. He wrote:

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by a deluge of bank paper, as we were formerly by the old Continental paper. . . . I am an enemy to all banks discounting bills or notes for anything but coin. But our whole country is so fascinated by this Jack o'lantern wealth, that they will not stop short of its total and fatal explosion."

Four years later the banks contracted the money supply, the economy collapsed, and thousands of industrious Americans lost their farms, their businesses, and their homes. [20]

Abraham Lincoln had the U.S. Treasury print $150 million to help finance the Civil War. By January 1864 there was $1,125,877,034 in circulation. Prices skyrocketed, and the economy boomed until the fiat currency lost value. When the Civil War ended, the Treasury stopped printing greenbacks, and saved the economy. [21]

You can read about the clandestine plot that led to the creation of the privately owned Central Bank that controls our economy in Edward Griffin's book, The Creature From Jekyll Island, and Professor Antony Sutton's book, The Federal Reserve Conspiracy. They are available from Radio Liberty.

U.S. currency was backed by gold and silver until 1965, and by gold until August 15, 1971, when President Nixon took the United States off the Gold Standard and imposed wage and price controls to control inflation. The rate was 5% at that time. [22] Nine years later (in 1980) inflation was 15%, the interest rate was 19%, and the economy collapsed. When Ronald Reagan became President in 1981, the national debt was $1 trillion; he cut taxes and launched a massive deficit spending program that increased the national debt, on average, $200 billion a year. When President Reagan left the White House in 1989, the national debt was over $2.7 trillion. [23] The national debt will reach $7.38 trillion in October 2004. The U.S. presently has $44 trillion in unfunded liabilities for Social Security, Medicare, government and veterans' pensions, and no way to pay them. The Bush administration claims the 2004 federal deficit will be $445 billion, but doesn't mention they will borrow $250 billion from Social Security and Medicare, and request an additional $50 billion to fund the Iraq war after the November election. The U.S. trade deficit is over a half-trillion dollars a year; foreign governments purchase $1.6 billion of U.S. government securities every day to fund our deficits. Most corporate pension funds are underfunded. If the stock market drops, retired employees will lose their corporate pensions because the Pension Benefit Guaranty Corporation is running out of money. We've lost almost 3 million manufacturing jobs since 2001, major industries are leaving America, and many corporations are outsourcing their jobs. Our currency has lost almost 40% of its value, and the U.S. has become the greatest debtor nation in recorded history. [24] Alan Greenspan discussed the source of our problem in 1966:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold . . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirade against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." [25]

Alan Greenspan is aware of the growing threat to our economic stability. The Wall Street Journal reports:

"In the past few months, Mr. Greenspan has said publicly the U.S. budget deficit threatens the nation's economic stability. . . ." [26]

Long-Term Capital Management invested $2.6 billion in 1998, and bought securities worth $125 billion on credit, then used the securities as collateral to purchase derivative contracts worth $1.25 trillion. When the financial market turned against LTCM, the impending crisis threatened the stability of the world monetary system. The FED intervened and rescued the banking system. [27] U.S. banks currently hold derivatives worth over $85 trillion; the world banking system holds over $230 trillion in derivative contracts. They are a "ticking time bomb." [28]

Sir Julian Hodge is a Welsh banker who deals in derivatives. He wrote:

"In no circumstances enter the derivatives trading market without first agreeing it in writing with me . . . at some time in the future it could bring the world's financial system to its knees." [29]

Warren Buffett is said to be the second richest man in the world. He discussed the danger of derivatives in his 2002 Annual Report:

"We view them as time bombs both for the parties that deal in them and the economic system. . . In our view . . . derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." [30]

Warren Buffet believes the value of the U.S. dollar will continue to decline. His 2003 letter to Berkshire Hathaway shareholders stated:

"Over the past two decades I was excessively fearful of inflation. More to the point at hand, I started way back in 1987 to publicly worry about our mounting trade deficits. . . . Berkshire has made significant investments in . . . several (foreign) currencies . . . to hold other currencies is to believe that the dollar will decline.

Both as an American and as an investor, I actually hope these commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders . . . would incur from a plunging dollar." [31]

The Rothschilds established the daily price of gold for over 200 years; they recently discontinued that program. Why? I believe they know what lies ahead, and hope to profit from the collapse of our monetary system. Warren Buffett and Lord Rothschild are friends.

An article in the August 10, 2004, edition of The Wall Street Journal contained the following notation:

"Warren Buffett's Berkshire Hathaway Inc. still thinks the grass is greener in foreign currencies, and is positioning its portfolio to take advantage of future dollar weakness.

The holding company reported that in the first half of 2004, the notional value of its foreign-currency forward contracts - investments that favor foreign currencies over the dollar - increased by $8 billion to $19 billion as of June 30." [32]

Dr. Paul Craig Roberts is an astute observer. He believes "globalization" will destroy the American economy and impoverish our people. He wrote:

"The current economic recovery has not been good for employment. Despite 25 months of 'recovery,' the economy has 2,994,000 fewer private sector jobs than in January 2001. American manufacturing has experienced the largest job loss, with 2,599,000 fewer jobs today than 35 months ago when President Bush took office. . . .

The really scary part of the story is that, far from recovering these jobs losses during the last 25 months of economic recovery, the economy has continued losing jobs. . . .

We are witnessing redistribution of First World income and wealth to developing countries with excess labor supplies." [33]

Rising oil prices threaten our economy, prolonged conflict in the Middle East will bankrupt our nation. When President Bush addressed the graduating class at the Air Force Academy in Colorado Springs on June 2, 2004, he stated:

"We are confident of our case in Iraq, but the struggle we have entered will not end with success in Iraq. Overcoming terrorism and bringing greater freedom to the nations of the Middle East is the work of decades. . . ." [34]

The annual Radio Liberty seminar will be held on November 6, 2004, in Aptos, California. There will be excellent speakers, and lunch will be served. Please call 800-544-8927 to make your reservation. I look forward to seeing you there.

I will cover the history of Central Banking, and the plan to destroy our nation, next month. Why would anyone want to destroy the United States? Because some people march to a different drum beat, they dream a different dream, they worship a different god. Martin Luther understood the nature of our struggle when he wrote:

"And though this world with devils filled,
Should threaten to undo us,
We will not fear, for God hath willed,
His truth to triumph through us:
The Prince of Darkness grim -
We tremble not for him;
His rage we can endure,
For lo, his doom is sure,
One little word shall fell him." [35]

The coming economic chaos will awaken the American people. Our job is to reach them with the truth.

I appreciate your faithful support, and your prayers.

Yours in Christ,


Stanley Monteith




REFERENCES

1. www.321gold.com/fed/greenspan/1966.html
2. Michael Schroeder, "Greenspan Hails Bush's Tax Cuts," The Wall Street Journal, July 22, 2004, p. A2.
3. www.ex.ac.uk/~RDavies/arian/scandals/derivatives.html
4. www.fortune.com/fortune/investing/articles/0,15114,525644,00.html
5. Paul Craig Roberts, "The Jobs Problem...or is it?," The Washington Times, January 18, 2004, p. B3.
6. Ron Hutcheson, "Defeating terrorism is years away, Bush says." Mercury News, June 3, 2004, p. 6A.
7. David Malpass, "Their Money, Our Strength," The Wall Street Journal, August 5, 2004, p. A10.
8. Alan Greenspan, op. cit.
9. Encyclopedia Americana, 1965, Volume 19, pp. 344-50.
10. James Dines, The Invisible Crash, James Dines & Co, Belvedere, CA, 2003, p. 6.
11. Ibid,, p. 7.
12. W. Cleon Skousen, The Making of America, The National Center for Constitutional Studies, Washington D.C., 1985, p. 265.
13. John Bartlett, Bartlett's Familiar Quotations, Little, Brown and Company, Boston, 1981, p. 74.
14. Ibid., p. 85.
15. James Dines, op. cit., p. 6.
16. Encyclopedia Americana, op. cit., Volume 9, p. 132.
17. Ibid., Volume 17, p. 109.
18. Ibid., Volume 13, p. 427.
19. Andrew Dickson White, Fiat Money Inflation in France, The Foundation for Economic Education, Inc., Irvington-on-Hudson, New York, 1959.
20. Benjamin S. Catchings, Master Thoughts of Thomas Jefferson, The Bar of New York City, 1907, p. 169.
21. Encyclopedia Americana, op. cit., Volume 13, p. 427.
22. Richard Nixon, Address to the Nation: August 15, 1971.
23. Bob Woodward, Maestro, Simon and Schuster, New York, p. 16: See Also: www.presidentreagan.info/reagan_budgets.cfm
24. Bob Chapman, www.theinternationalforecaster.com
25. Alan Greenspan, op. cit.
26. Michael Schroeder, op. cit.
27. http://mt.sopris.net/mpc/finance/Itcm.html
28. Bob Chapman, op. cit.
29. www.ex.ac.uk/~RDavies/arian/scandals/derivatives.html
30. Ibid.
31. www.fortune.com/fortune/investing . . . op. cit.
32. "Berkshire Hathaway Investment Strategy Bets Against Dollar," The Wall Street Journal, August 10, 2004, p. C3.
33. Paul Craig Roberts, op. cit.
34. Ron Hutcheson, op. cit.
35. Martin Luther: A Mighty Fortress is our God, third stanza.


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