New Money for Old
G. Edward Griffin | The New American
October 27, 1986
A new currency is planned. Less than a year ago Treasury officials were steadfastly denying that there was any truth to the rumors, but, then, on March 18th of this year, the formal announcement was released; a new currency is definitely on its way for America.
In a phone call on September 29th, a Treasury Department spokesman matter-of-factly stated that production is now scheduled to begin in January and that the target release date is now March or April of 1987! This seemed to confirm what had long been predicted by monetary analysts Ron Paul and Lawrence Patterson.
But, in a follow-up phone call on October 2nd, Treasury Public Affairs officer Ira Polikoff made the surprising observation that the new currency will be almost identical to the old. The color and general design will be the same, a small polyester strip will be added, and "microprinting" will be placed on that strip as well as around the portrait. The strip will show the denomination, and the print around the portrait will read "The United States of America."
Will metallic thread be embedded to trigger detection devices such as are found at airports? "Not now," said Mr. Polikoff, "but what will be true in three or four months, I cannot say."
What about the addition of pastel colors, watermarks, or other design modifications so conspicuous to the new currencies of Europe and Latin America? "Not at this point in time," claimed Mr. Polikoff.
Unless Treasury spokesmen are blatantly lying (which is possible but unlikely), this is not the big currency switch that has been predicted. Yes, there will be a new money, but it now appears that it is to be but a small, interim step toward a truly radical monetary transformation planned for a later time or, more likely, a later event.
This can make things very confusing. Are we talking about a new money or a new, new money? For the sake of clarity in this report, therefore, we shall use the words interim money to describe that which is planned for release in the Spring of 1987 and the words new money for a more revolutionary currency planned for a later release. It is the new money that is the subject of this report.
Counterfeit Explanation
The official explanation from Washington is that a new, interim currency with an embedded polyester thread is necessary to combat counterfeiting. A second "justification" for a new currency, although not officially part of the Treasury announcement, is that it will put a stop to the clandestine movement of cash associated with drug smuggling.
With regard to counterfeiting, Treasury freely admits that this is not now a problem and that counterfeiting currently is at one of the lowest levels in history -- certainly not the kind of national problem that would justify the massive effort, expense, and inconvenience of changing over the nation's entire currency system. So, what's going on?
The answer from the Treasury Department is that, although counterfeiting is not now a problem, when the next generation of high-tech, color photocopiers arrive, amateur counterfeiters will proliferate. A Treasury Department "Issue Brief," dated July 29, 1986, notes that, over the last ten years, the Secret Service has been able to seize nearly 90 percent of all counterfeit currency before it ever gets into circulation. Then it adds: "Color photocopiers could change this situation by allowing counterfeiting to become widespread and decentralized."
Advocates of a gold-backed currency are not impressed with this explanation. They believe that it is a classic example of a half-truth, which has the effect of a falsehood. They argue that, since none of our so-called valid money is backed by anything of intrinsic value and since it is created out of nothing but paper, ink, and magnetic impulses in a computer, in reality it is all counterfeit, and those who are expressing deep concern over the possible threat of high-tech photocopiers are, themselves, the greatest counterfeiters of all history.
As for drug trafficking, it is not clear how a new design or even a metal (much less a polyester) strip in our money would be anything but a minor nuisance to experienced smugglers. If they can move cocaine or marijuana across national borders without detection, they likely will find ways of doing the same with cash. It only means that they will avoid airport security checkpoints, which they probably do anyway.
If the government were truly concerned about the laundering of drug money, the currency-exchange shops that exist in every California and Texas border town would be closed -- or at least limits would be set on the amounts of cash that can be exchanged. But no such restrictions are made. Even though the shops are known to facilitate the flourishing Mexican border drug trade, there is not even an attempt to require personal identification, regardless of the size of the transaction.
It is a fact, also, that certain governments, such as Cuba and Red China, are active in the manufacture and illegal importation of drugs into our country. They do this, not only for the lucrative cash flow it produces to bolster their sagging "socialist" economies, but also because the widespread use of those drugs is a strong factor in the weakening of America, which they view as a target for ultimate conquest. But so-called diplomats from these countries can travel in and out of the U.S. with an unlimited quantity of luggage that, because of diplomatic immunity, is never opened and never passed through detectors. For all we know, these people could bring in components of an atomic bomb and assemble it on Manhattan Island or Washington DC, and neither our sophisticated early warning radar system nor our entire arsenal of missiles could protect us. Moving a few kilos of cocaine or a few pounds of currency -- even a new currency -- would never be a problem for these people.
If neither counterfeiting nor the laundering of drug money is the reason for revamping our monetary supply, then what is, and why must it be concealed from the American public in the form of half-truth?
The Real Motives
The purpose of this report is to explore the reality of another, more unpleasant aspect of the truth, and it is this: The United States is headed inexorably into an economic disaster of gigantic proportions, and a new currency is the brainchild of a financial/political cabal, which largely is responsible for that disaster. The currency changeover will be offered as a pretended solution to the crisis, when, in reality, it will be a means by which the cabal can further consolidate its control over society. The gravity centers of this group can be found in the central banks of the various nations, the Bank of International Settlements in Switzerland, the financial cartel in London, the World Bank and the International Monetary Fund in New York, and such elite internationally-minded organizations as the Council on Foreign Relations and the Trilateral Commission. The process of consolidating this global control often is described by these people as building a new economic order, or, more precisely, The New World Order.
It is only against this background that one can understand the true reason for a new currency. The strains in our economy are severe and growing. (See "The Components of a Crisis"). Something is going to snap. No one can predict the exact date, but it is going to happen, and the cabal knows it with certainty. Whether a crisis comes in the form of a crash in the stock market or, more likely, a series of runs on American banks, a new currency could make it vastly more easy for the cabal to respond and, at the same time, to further its control.
If the crisis occurs before the new money has been issued, it is plausible that a "bank holiday" will be declared, as it was following the market crash of 1929. Closing on a Friday, for example, will allow time for armored trucks to distribute the new bills to the nation's banks over a three-day weekend. Radio and television announcements could be timed to inform the public that all financial institutions will open on Monday morning and that there will be enough money for everyone.
To appreciate the magnitude of this move it must be realized that, if all Americans went to their banks at 10 AM and demanded their checkbook deposits in cash, and assuming there were enough tellers to handle the crunch, every bank in the nation would be out of money in about two minutes. There simply isn't enough cash in existence to meet the demand. Most money consists only of magnetic impulses in a computer. Only about five percent is in coin or currency, and most of that already is outside the banks in cash registers, pocketbooks, and mattresses. The amount held by the banks is only about one-half of one percent. The amount of currency required to handle a major run on the banks could not be printed in time to meet the demand.
The Treasury's presses already are running full time just to keep up with present demand. It is reasonable to assume, therefore, that, if this scenario is correct, the Treasury or the Federal Reserve would have to commission outside presses to produce a truly fantastic supply of paper currency and have it stored in readiness for that unknown moment when it will be needed almost overnight.
All of this is based on the assumption that the crisis will occur before the new money is released. It is possible, however, that the cabal can keep the world's economy held together long enough that the radically altered currency can be issued before the bubble bursts. In that event, nothing really changes from the preceding scenario except that there may be no need for a so-called bank holiday, which, of course, the cabal would like to avoid. If a run on the banks should occur, a mammoth supply of the new money will already be in place.
It is true, of course, that large amounts of present-style Federal Reserve Notes also could be printed and stored for this purpose, but the new money is more likely because it can serve the following list of other purposes that the present currency cannot:
1. Masking Inflation. The ratio of the exchange between the old and new currencies could be ten-to-one or higher depending on the degree of inflation that is apparent at the time of the switch. If there is little or no inflation, the exchange could be one-for-one, but, with inflation, a multiple exchange is almost certain. In this way, a much smaller supply of money will suffice, and prices of everything will drop in terms of the new currency. This will tend to obscure the reality of inflation.
2. Hiding More Serious Changes. The public will be fascinated by such a spectacular event as a change in the monetary unit, and the media can be counted on to play the story endlessly. There will be press releases, interviews, magazine articles, briefings, speeches, opinion polls, and network documentaries. The nation will be hypnotized by the unfolding drama, and this will tend to divert attention from more important and fundamental changes being made at the same time.
3. Enhancing Leadership Images. Crises are glorious events for politicians. They provide opportunities to step into the limelight and offer solutions and leadership. Never mind that these are the same people whose last "solution" created the new crisis; the public will not tolerate inaction. The bold move of issuing a new currency in immediate response to an economic crisis -- whether it be immediate and dramatic, such as a bank holiday, or long-ranged and generalized, such as inflation or an adverse international balance of payments -- such a move will be offered to the voter as evidence that our leaders are doing something about it.
4. Identifying Troublemakers. The government does not like people to use cash, because that allows them to escape economic surveillance. The majority of those who use cash are not drug dealers or Mafioso. They are ordinary, law-abiding, tax-paying citizens who simply do not like the idea of government agents having the power to snoop into their personal lives. With a sudden switch in currency, many of these people will be caught off guard with substantial cash holdings. Those who bring in large amounts for exchange -- perhaps anything over $500 -- automatically will be suspect as an uncooperative element and placed into the master computer for special attention and future surveillance.
5. Monitoring Capital Movements. All bank transactions are a part of a computer record open to government inspection. This makes it easy to monitor and restrict the movement of funds from one country to another. At present, it is relatively easy for individuals to escape this monitoring by moving their money on their persons to offshore banking havens or for investment in more secure markets overseas. There already are restrictions on how much money can go in or out of the country, but, in the event of a national emergency, those restrictions undoubtedly will be greatly increased. The metallic threads embedded in the new currency, which will trigger detection devices at international terminals, will prevent the average person from taking more than a few hundred dollars out of the country at a time. Criminals, of course, and those with political connections, will find ways to circumvent the program.
6. Confiscating Large Cash Holdings. It is entirely possible that, in time of economic crisis, which is presumed as the trigger event of this scenario, citizens would have to obtain government permission to hold large amounts of currency. Those without demonstrable need could lose almost everything. That may sound unlikely in a free country like America, but it already has happened. In fact, it happened in 1942. In January of that year, one month following the bombing of Pearl Harbor in Hawaii, the United States government issued a new currency for use in Hawaii and made it illegal for anyone to hold more than $200 in cash. Stocks and bonds also were taken "for safe keeping," and stiff penalties were given to those who broke the law. Military police were given access to safety-deposit boxes, and all cash and investment securities were confiscated.
Yes, this was done by our government. The official excuse was that there was an economic emergency in Hawaii. Residents were understandably shaken by the threat of renewed bombing and sharply reduced their consumer spending. Officials charged that they were hoarding money, and this, in their eyes, constituted an economic emergency. Once an emergency was declared, government had a rationale for violating constitutional rights and confiscating private property.
Could this happen again? Judge for yourself. On October 17, 1983, President Ronald Reagan signed an emergency measures document that stated:
While the government has not been particularly effective at stopping our national hemorrhage of high technology to Communist regimes, this declaration of national emergency granted almost unlimited power to federal agents to do whatever they wish. In this case, the problem appears to be more one of resolve than of ability. But the point is that there is ample precedent for the grim scenario projected here.
Have no doubt about the ability of our government to prevent individuals from holding large amounts of cash. Given a national economic emergency of sufficient magnitude to justify closing the banks and issuing a new currency, politicians will be able to accomplish that objective with the mere stroke of a pen.
7. Tapping the Underground Economy. A recent congressional study revealed that about $85 billion in cash is never put into the banks. That represents approximately $1,500 in cash for each household. It is also a fact that $100 bills are the fastest growing denomination of currency and already account for about one-third of the value of all bills in circulation. This is partly due to inflation, which continually reduces the value of large bills and thus makes them more useful in everyday transactions, but mostly it is due to holdings by people who simply distrust the banks. This is evidenced by the fact that, in strike-bound cities, after the paychecks stop, idle workers often are seen making purchases with large denomination bills, mostly $50s and $100s. Some of this, of course, represents an exchange of money without the collection of either income tax or sales tax, and government does not like to be denied those funds. Restricting the holding of cash would go a long way toward the elimination of this underground economy and the restoration of missing tax revenues.
8. Preparing for a World Currency. It is likely that the most important reason for the issuance of an interim currency -- and later, a new currency -- is to get the public used to the concept of monetary change and to the gradual loss of traditional American symbols on their money. This is a necessary psychological transition stage to the ultimate acceptance of an international or world currency. And this is a goal of the financial/political cabal. There can be no New World Order without a New World Currency. But it is no small task to establish a world monetary system all tightly controlled from a central authority. It would be impossible to do it all at once, because that would require the unlikely condition of all nations agreeing simultaneously on its design, denominational units, and relative exchange values. The only practical way to accomplish this is to approach it in stages and to do so one country at a time. The first stage simply would be to induce nations to adopt a similar design.
When one examines the newly-issued currencies of such countries as Argentina, Belgium, Brazil, England, France, West Germany, Italy, Japan, the Netherlands, and Spain, the similarity is overwhelming. There is no clearer proof of an international master plan and a guiding hand. In every case there is the use of pastel colors and, more important, a prominent blank spot on one end of both sides of the paper bills. That's right, a blank spot.
There is no sensible reason or explanation for these voids. When held to the light, the image of a watermark in the paper itself can be seen. Such images, of course, cannot be photographed, which will make these bills more difficult to reproduce by photocopy machines and other camera-related processes. But this will only affect amateur counterfeiters. Sophisticated operators would not be hindered by this feature because they could produce their own watermarked paper (not a particularly difficult process). The public would be prone to accept their bogus bills without question, believing that, if there is a watermark, it must be authentic. The embedding of a polyester-strip overprint is a far more effective barrier to counterfeiting.
Furthermore, even if a watermark were a barrier to counterfeiting, why is so much of the bill devoted to it? A much smaller area surely would do just as well. And why are the blank areas on these bills, regardless of which nation issues them, not only about the same size but in exactly the same location? The inescapable conclusion is that the blank areas likely are in anticipation of some time in the future when it will be possible to add an international symbol and an international monetary value.
If traditional national symbols were to be removed from the world's currencies all at once, there likely would be an outcry of objection. But, if done little by little over a period of time and through a succession of currency revisions, the public will not be alarmed. It is not surprising, therefore, to find that, in most of the free-world's new currencies, the images of the nations' leaders or national heroes are still retained, but look closely at the words. With the exception only of Australia, none of these bills honor the country from which they originate. They do not say England, France, Belgium, or Italy; they say Bank of England, Bank of France, Bank of Belgium, Bank of Italy, and so on -- which should tell us something about who is really running things in the world.
One cannot predict with certainty, of course, that this same practice will be followed with the new American currency, but the probabilities are high, because denationalizing our money is the primary reason for the new issue. With regard to the interim money, Treasury has already announced that the words United States of America placed around the portrait of each bill will be so small as to be visible only under a microscope. As shocking as this may be to most Americans, it still must be a gigantic concession on the part of the cabal, because they would prefer not to have it appear at all. One can be almost certain, however, that the words Federal Reserve System of The United States, or Federal Reserve Note, or some similar description of our central bank will be clearly visible.
Will any of this come to pass? Will there be a national economic emergency? Will new currency be issued at that time? Will it be issued at all? It is always dangerous to make unqualified predictions no matter how strong the probabilities. For one thing, the widespread dissemination of the information presented in this report actually could alter the present balance of forces. Also, as mentioned previously, there is the possibility that the bubble can be held together long enough that the new currency can be issued even without an economic emergency. That is the logic behind the pretended concern over counterfeiting and drug money. If there is no crisis in the near future, then some excuse must be offered.
Finally, there is the possibility that, when the new currency is issued, the call-in of the old currency may be spread over a fairly long time span, allowing both currencies to circulate side-by-side for a while. But, regardless of the particular chain of events, we can be certain that the financial/political cabal will continue in existence, and its goal of world control will remain unchanged. In spite of any minor victories on the side of freedom, therefore, we will never be able to afford the luxury of complacency.
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The Components of a Crisis
• The banking industry is in serious crisis as a result of unrealistic loans to Communist and Third World countries, loans that everyone knows they cannot repay. The default of just one of these gigantic loans could plummet some of our largest banks over the brink of bankruptcy.
• The Federal Deposit Insurance Corporation may be able to bail out one or two large banks, but, if several collapse at the same time and especially if that triggers a public run on all banks to withdraw deposits, the FDIC itself will collapse. At present the FDIC has funds to cover only about one percent of its obligations.
• The savings and loan industry is in an equally perilous position. When real estate values dropped a decade ago, many S&Ls found that they had loaned more money than their houses were worth in the real-world market. The only reason many of these institutions continue to appear solid to unwary depositors is that they engage in dishonest bookkeeping, declaring their assets to be worth far more than they really are. S&Ls are going bankrupt at an unprecedented rate, and the trend is accelerating.
• While the stock market wobbles from one high orbit to another, giving the impression of a booming and healthy economy, it is largely mass hysteria created by hype in the financial journals. There is talk about an expected upturn in profits, talk about predicted growth in world markets, talk about future increases in dividends. But none of this is based on actual performance or tangible value. It is but a modern version of the Great Tulipomania of 1636.
The reality is that our once-great American industry is staggering. It continues to lose both world and domestic markets to foreign competitors; business bankruptcies are at an all-time high; sales are down; profits are being squeezed by costs and taxes; production has been cut back; debt ratios are higher than at any time in history and getting worse. The agriculture industry is in big trouble; the domestic oil industry is all but destroyed; the commercial real estate industry is in shambles. The euphoria on Wall Street is completely out of phase with reality.
• Not to be outdone by the corporations, individuals are also deeper in debt than ever before. With the advent of credit cards, installment plans for consumer goods, instant margin accounts at brokerage houses, and easy second mortgages, the average family today actually owns very little. We are surrounded by material goods, but they are not really our own possessions -- at least not until the objects become old and worn. Under the illusion that we are "buying" something, increasingly we are now merely renting our homes and cars and appliances. These items, in reality, are owned by the lenders, the cabal that created the money and extended the credit. The average American family today will never get out of debt, and the burden of interest payments will follow many of us to our graves. By this process, we are witnessing a return to serfdom, modern in form and more affluent than in days of old, but serfdom nonetheless.
• If American corporations and individuals are in excessive debt, our government is in even worse shape. It is not necessary to repeat the dizzying figures here. What must be kept in mind, however, is that the debt is already so large that, as with Third World debt, it may never be paid off. Yet, if the present trend is not reversed, the servicing of this debt will drain away more and more of our tax dollars until it will consume our total gross national product. This means, of course, that the entire economy will be nationalized -- as it is in the Soviet Union -- and there will be little difference between our two systems except the rhetoric. In the meantime, the syphoning off of America's productive capacity to pay for interest on the debt, not for goods and services, daily increases the likelihood of an economic disaster.
• We are about to see the return of inflation with a vengeance. As interest rates on Treasury bonds come down, fewer investors are interested in buying them, particularly foreign investors. When there are no buyers in a free market, the normal reaction is to raise the interest rate until the bonds become competitive. But this is not a free market. By agreement, the Treasury maintains its low interest rate, and our central bank, called The Federal Reserve System, steps in and buys the bonds. But it does not use money to do it. It uses a bookkeeping entry. To be more accurate, it creates the money out of thin air. This is the primary mechanism behind inflation (defined as an expansion in the supply of money and credit) because it pumps money into the economy that did not previously exist. The Treasury bonds are then classified by the Federal Reserve as "assets," which eventually become the "reserves" at the nation's commercial banks. Finally, these become the basis for creating still more money in the form of loans to business firms and individuals. It is by this bizarre process that the Federal Reserve is now rapidly expanding the nation's money supply.
The fact that prices have not risen accordingly is largely a result of public expectation to the contrary. We have been told that inflation is under control so many times that most people believe it, and, when they believe it, they act accordingly. Just as euphoria in the stock market tends to create the fulfillment of its own expectation -- for a while at least -- widespread public belief that inflation is under control reduces the pressure to raise wages and prices and tends to create the very low rate of increase in the general price level that is expected. But, as with the stock market, reality ultimately must prevail. The money supply now is being rapidly expanded well beyond the rate by which goods and services are expanding to absorb it, and the white rapids of price increases at double-digit rates lie directly ahead.
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The Great Tulipomania
The spectacle of paper fortunes being made -- and then suddenly lost -- in the stock market crash of 1929 and the dizzying ascent of the Dow Jones Industrial Average in more recent times, based as it is on little more than expectation of even greater price increases to come, is not new. The two underlying mechanisms have been with us for thousands of years: the quest for something for nothing, and the human instinct for herdlike behavior.
One of the most graphic historic examples of this phenomenon occurred in Holland between the years 1634 and 1636. It came to pass that a new, rare flower, called the tulip, was discovered in the gardens of some of the more wealthy inhabitants of Constantinople, now known as Istanbul. When the root bulbs of these exotic blossoms were brought into Holland, they rapidly became a status symbol among the wealthy -- much as race horses or rare breeds of dogs are today in our own country -- and those with surplus funds found that an investment in tulips brought them significant social recognition. In the natural course of things, the price of tulip bulbs climbed steadily until they became, not merely symbols of status, but speculative investments as well.
At one point, prices literally doubled every few days, and speculators were seen everywhere amassing great fortunes with no input of either labor or service. Many otherwise prudent people found themselves overpowered by the herd instinct. The temptation of easy wealth was so great that they borrowed against homes and invested their life savings to get in on the anticipated profits. This, of course, pushed up prices even further and tended to create the fulfillment of its own prophecy. Contracts for the purchase and future delivery of tulip bulbs -- a form of today's commodity market -- became a dominant feature of Holland's stock market.
Tulip bulbs eventually became more precious than gemstones. As new varieties were developed, the market became more complex, requiring experts to certify their origin and their grade. Prices soared, and the herd went insane. One bulb of the species, called Admiral Liefken, was valued at 4,400 florins; a Semper Augustus, worth 5,500 florins, was purchased for a new carriage, two grey horses, and a complete set of harnesses. It was recorded that, at one sale, a single Viceroy brought two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two Hogsheads of wine, four casks of butter, one thousand pounds of cheese, a bed and mattress, a suit of clothes, and a silver drinking cup.
Then, one day without warning, reality returned from her three-year journey. By this time, everyone knew deep in their hearts that the spiralling prices bore no honest relationship to the value of the tulips and that, sooner or later, someone was going to be hurt. But, as loyal members of the herd, they feared to be first to break from the trend lest they be wrong in their timing and lose out on profits yet to come. They operated on what today is called the "Bigger Fool" theory, which teaches that, no matter how foolish one is in buying an overpriced commodity in an upwardmoving market, there always will be a bigger fool who will buy it later at an even higher price. So the Dutch stayed with the stampede to the bitter end.
In any herd, of course, there are always a few who will take the lead, and, by 1636, all it took was one or two prominent merchants to decide to sell out their stock. Overnight, the tulip market disappeared, and speculators by the thousands saw their dreams of easy wealth -- and, in many cases, their life savings as well -- disappear with it, Tulipomania, as it was called at the time, had come to an end.
G. Edward Griffin | The New American
October 27, 1986
A new currency is planned. Less than a year ago Treasury officials were steadfastly denying that there was any truth to the rumors, but, then, on March 18th of this year, the formal announcement was released; a new currency is definitely on its way for America.
In a phone call on September 29th, a Treasury Department spokesman matter-of-factly stated that production is now scheduled to begin in January and that the target release date is now March or April of 1987! This seemed to confirm what had long been predicted by monetary analysts Ron Paul and Lawrence Patterson.
But, in a follow-up phone call on October 2nd, Treasury Public Affairs officer Ira Polikoff made the surprising observation that the new currency will be almost identical to the old. The color and general design will be the same, a small polyester strip will be added, and "microprinting" will be placed on that strip as well as around the portrait. The strip will show the denomination, and the print around the portrait will read "The United States of America."
Will metallic thread be embedded to trigger detection devices such as are found at airports? "Not now," said Mr. Polikoff, "but what will be true in three or four months, I cannot say."
What about the addition of pastel colors, watermarks, or other design modifications so conspicuous to the new currencies of Europe and Latin America? "Not at this point in time," claimed Mr. Polikoff.
Unless Treasury spokesmen are blatantly lying (which is possible but unlikely), this is not the big currency switch that has been predicted. Yes, there will be a new money, but it now appears that it is to be but a small, interim step toward a truly radical monetary transformation planned for a later time or, more likely, a later event.
This can make things very confusing. Are we talking about a new money or a new, new money? For the sake of clarity in this report, therefore, we shall use the words interim money to describe that which is planned for release in the Spring of 1987 and the words new money for a more revolutionary currency planned for a later release. It is the new money that is the subject of this report.
Counterfeit Explanation
The official explanation from Washington is that a new, interim currency with an embedded polyester thread is necessary to combat counterfeiting. A second "justification" for a new currency, although not officially part of the Treasury announcement, is that it will put a stop to the clandestine movement of cash associated with drug smuggling.
With regard to counterfeiting, Treasury freely admits that this is not now a problem and that counterfeiting currently is at one of the lowest levels in history -- certainly not the kind of national problem that would justify the massive effort, expense, and inconvenience of changing over the nation's entire currency system. So, what's going on?
The answer from the Treasury Department is that, although counterfeiting is not now a problem, when the next generation of high-tech, color photocopiers arrive, amateur counterfeiters will proliferate. A Treasury Department "Issue Brief," dated July 29, 1986, notes that, over the last ten years, the Secret Service has been able to seize nearly 90 percent of all counterfeit currency before it ever gets into circulation. Then it adds: "Color photocopiers could change this situation by allowing counterfeiting to become widespread and decentralized."
Advocates of a gold-backed currency are not impressed with this explanation. They believe that it is a classic example of a half-truth, which has the effect of a falsehood. They argue that, since none of our so-called valid money is backed by anything of intrinsic value and since it is created out of nothing but paper, ink, and magnetic impulses in a computer, in reality it is all counterfeit, and those who are expressing deep concern over the possible threat of high-tech photocopiers are, themselves, the greatest counterfeiters of all history.
As for drug trafficking, it is not clear how a new design or even a metal (much less a polyester) strip in our money would be anything but a minor nuisance to experienced smugglers. If they can move cocaine or marijuana across national borders without detection, they likely will find ways of doing the same with cash. It only means that they will avoid airport security checkpoints, which they probably do anyway.
If the government were truly concerned about the laundering of drug money, the currency-exchange shops that exist in every California and Texas border town would be closed -- or at least limits would be set on the amounts of cash that can be exchanged. But no such restrictions are made. Even though the shops are known to facilitate the flourishing Mexican border drug trade, there is not even an attempt to require personal identification, regardless of the size of the transaction.
It is a fact, also, that certain governments, such as Cuba and Red China, are active in the manufacture and illegal importation of drugs into our country. They do this, not only for the lucrative cash flow it produces to bolster their sagging "socialist" economies, but also because the widespread use of those drugs is a strong factor in the weakening of America, which they view as a target for ultimate conquest. But so-called diplomats from these countries can travel in and out of the U.S. with an unlimited quantity of luggage that, because of diplomatic immunity, is never opened and never passed through detectors. For all we know, these people could bring in components of an atomic bomb and assemble it on Manhattan Island or Washington DC, and neither our sophisticated early warning radar system nor our entire arsenal of missiles could protect us. Moving a few kilos of cocaine or a few pounds of currency -- even a new currency -- would never be a problem for these people.
If neither counterfeiting nor the laundering of drug money is the reason for revamping our monetary supply, then what is, and why must it be concealed from the American public in the form of half-truth?
The Real Motives
The purpose of this report is to explore the reality of another, more unpleasant aspect of the truth, and it is this: The United States is headed inexorably into an economic disaster of gigantic proportions, and a new currency is the brainchild of a financial/political cabal, which largely is responsible for that disaster. The currency changeover will be offered as a pretended solution to the crisis, when, in reality, it will be a means by which the cabal can further consolidate its control over society. The gravity centers of this group can be found in the central banks of the various nations, the Bank of International Settlements in Switzerland, the financial cartel in London, the World Bank and the International Monetary Fund in New York, and such elite internationally-minded organizations as the Council on Foreign Relations and the Trilateral Commission. The process of consolidating this global control often is described by these people as building a new economic order, or, more precisely, The New World Order.
It is only against this background that one can understand the true reason for a new currency. The strains in our economy are severe and growing. (See "The Components of a Crisis"). Something is going to snap. No one can predict the exact date, but it is going to happen, and the cabal knows it with certainty. Whether a crisis comes in the form of a crash in the stock market or, more likely, a series of runs on American banks, a new currency could make it vastly more easy for the cabal to respond and, at the same time, to further its control.
If the crisis occurs before the new money has been issued, it is plausible that a "bank holiday" will be declared, as it was following the market crash of 1929. Closing on a Friday, for example, will allow time for armored trucks to distribute the new bills to the nation's banks over a three-day weekend. Radio and television announcements could be timed to inform the public that all financial institutions will open on Monday morning and that there will be enough money for everyone.
To appreciate the magnitude of this move it must be realized that, if all Americans went to their banks at 10 AM and demanded their checkbook deposits in cash, and assuming there were enough tellers to handle the crunch, every bank in the nation would be out of money in about two minutes. There simply isn't enough cash in existence to meet the demand. Most money consists only of magnetic impulses in a computer. Only about five percent is in coin or currency, and most of that already is outside the banks in cash registers, pocketbooks, and mattresses. The amount held by the banks is only about one-half of one percent. The amount of currency required to handle a major run on the banks could not be printed in time to meet the demand.
The Treasury's presses already are running full time just to keep up with present demand. It is reasonable to assume, therefore, that, if this scenario is correct, the Treasury or the Federal Reserve would have to commission outside presses to produce a truly fantastic supply of paper currency and have it stored in readiness for that unknown moment when it will be needed almost overnight.
All of this is based on the assumption that the crisis will occur before the new money is released. It is possible, however, that the cabal can keep the world's economy held together long enough that the radically altered currency can be issued before the bubble bursts. In that event, nothing really changes from the preceding scenario except that there may be no need for a so-called bank holiday, which, of course, the cabal would like to avoid. If a run on the banks should occur, a mammoth supply of the new money will already be in place.
It is true, of course, that large amounts of present-style Federal Reserve Notes also could be printed and stored for this purpose, but the new money is more likely because it can serve the following list of other purposes that the present currency cannot:
1. Masking Inflation. The ratio of the exchange between the old and new currencies could be ten-to-one or higher depending on the degree of inflation that is apparent at the time of the switch. If there is little or no inflation, the exchange could be one-for-one, but, with inflation, a multiple exchange is almost certain. In this way, a much smaller supply of money will suffice, and prices of everything will drop in terms of the new currency. This will tend to obscure the reality of inflation.
2. Hiding More Serious Changes. The public will be fascinated by such a spectacular event as a change in the monetary unit, and the media can be counted on to play the story endlessly. There will be press releases, interviews, magazine articles, briefings, speeches, opinion polls, and network documentaries. The nation will be hypnotized by the unfolding drama, and this will tend to divert attention from more important and fundamental changes being made at the same time.
3. Enhancing Leadership Images. Crises are glorious events for politicians. They provide opportunities to step into the limelight and offer solutions and leadership. Never mind that these are the same people whose last "solution" created the new crisis; the public will not tolerate inaction. The bold move of issuing a new currency in immediate response to an economic crisis -- whether it be immediate and dramatic, such as a bank holiday, or long-ranged and generalized, such as inflation or an adverse international balance of payments -- such a move will be offered to the voter as evidence that our leaders are doing something about it.
4. Identifying Troublemakers. The government does not like people to use cash, because that allows them to escape economic surveillance. The majority of those who use cash are not drug dealers or Mafioso. They are ordinary, law-abiding, tax-paying citizens who simply do not like the idea of government agents having the power to snoop into their personal lives. With a sudden switch in currency, many of these people will be caught off guard with substantial cash holdings. Those who bring in large amounts for exchange -- perhaps anything over $500 -- automatically will be suspect as an uncooperative element and placed into the master computer for special attention and future surveillance.
5. Monitoring Capital Movements. All bank transactions are a part of a computer record open to government inspection. This makes it easy to monitor and restrict the movement of funds from one country to another. At present, it is relatively easy for individuals to escape this monitoring by moving their money on their persons to offshore banking havens or for investment in more secure markets overseas. There already are restrictions on how much money can go in or out of the country, but, in the event of a national emergency, those restrictions undoubtedly will be greatly increased. The metallic threads embedded in the new currency, which will trigger detection devices at international terminals, will prevent the average person from taking more than a few hundred dollars out of the country at a time. Criminals, of course, and those with political connections, will find ways to circumvent the program.
6. Confiscating Large Cash Holdings. It is entirely possible that, in time of economic crisis, which is presumed as the trigger event of this scenario, citizens would have to obtain government permission to hold large amounts of currency. Those without demonstrable need could lose almost everything. That may sound unlikely in a free country like America, but it already has happened. In fact, it happened in 1942. In January of that year, one month following the bombing of Pearl Harbor in Hawaii, the United States government issued a new currency for use in Hawaii and made it illegal for anyone to hold more than $200 in cash. Stocks and bonds also were taken "for safe keeping," and stiff penalties were given to those who broke the law. Military police were given access to safety-deposit boxes, and all cash and investment securities were confiscated.
Yes, this was done by our government. The official excuse was that there was an economic emergency in Hawaii. Residents were understandably shaken by the threat of renewed bombing and sharply reduced their consumer spending. Officials charged that they were hoarding money, and this, in their eyes, constituted an economic emergency. Once an emergency was declared, government had a rationale for violating constitutional rights and confiscating private property.
Could this happen again? Judge for yourself. On October 17, 1983, President Ronald Reagan signed an emergency measures document that stated:
I, Ronald Reagan, find that the unrestricted access of foreign parties to the U.S. commercial goods, technology, and technical data constitutes an unusual and extraordinary threat to the national security and hereby declare a national economic emergency to deal with this threat.
While the government has not been particularly effective at stopping our national hemorrhage of high technology to Communist regimes, this declaration of national emergency granted almost unlimited power to federal agents to do whatever they wish. In this case, the problem appears to be more one of resolve than of ability. But the point is that there is ample precedent for the grim scenario projected here.
Have no doubt about the ability of our government to prevent individuals from holding large amounts of cash. Given a national economic emergency of sufficient magnitude to justify closing the banks and issuing a new currency, politicians will be able to accomplish that objective with the mere stroke of a pen.
7. Tapping the Underground Economy. A recent congressional study revealed that about $85 billion in cash is never put into the banks. That represents approximately $1,500 in cash for each household. It is also a fact that $100 bills are the fastest growing denomination of currency and already account for about one-third of the value of all bills in circulation. This is partly due to inflation, which continually reduces the value of large bills and thus makes them more useful in everyday transactions, but mostly it is due to holdings by people who simply distrust the banks. This is evidenced by the fact that, in strike-bound cities, after the paychecks stop, idle workers often are seen making purchases with large denomination bills, mostly $50s and $100s. Some of this, of course, represents an exchange of money without the collection of either income tax or sales tax, and government does not like to be denied those funds. Restricting the holding of cash would go a long way toward the elimination of this underground economy and the restoration of missing tax revenues.
8. Preparing for a World Currency. It is likely that the most important reason for the issuance of an interim currency -- and later, a new currency -- is to get the public used to the concept of monetary change and to the gradual loss of traditional American symbols on their money. This is a necessary psychological transition stage to the ultimate acceptance of an international or world currency. And this is a goal of the financial/political cabal. There can be no New World Order without a New World Currency. But it is no small task to establish a world monetary system all tightly controlled from a central authority. It would be impossible to do it all at once, because that would require the unlikely condition of all nations agreeing simultaneously on its design, denominational units, and relative exchange values. The only practical way to accomplish this is to approach it in stages and to do so one country at a time. The first stage simply would be to induce nations to adopt a similar design.
When one examines the newly-issued currencies of such countries as Argentina, Belgium, Brazil, England, France, West Germany, Italy, Japan, the Netherlands, and Spain, the similarity is overwhelming. There is no clearer proof of an international master plan and a guiding hand. In every case there is the use of pastel colors and, more important, a prominent blank spot on one end of both sides of the paper bills. That's right, a blank spot.
There is no sensible reason or explanation for these voids. When held to the light, the image of a watermark in the paper itself can be seen. Such images, of course, cannot be photographed, which will make these bills more difficult to reproduce by photocopy machines and other camera-related processes. But this will only affect amateur counterfeiters. Sophisticated operators would not be hindered by this feature because they could produce their own watermarked paper (not a particularly difficult process). The public would be prone to accept their bogus bills without question, believing that, if there is a watermark, it must be authentic. The embedding of a polyester-strip overprint is a far more effective barrier to counterfeiting.
Furthermore, even if a watermark were a barrier to counterfeiting, why is so much of the bill devoted to it? A much smaller area surely would do just as well. And why are the blank areas on these bills, regardless of which nation issues them, not only about the same size but in exactly the same location? The inescapable conclusion is that the blank areas likely are in anticipation of some time in the future when it will be possible to add an international symbol and an international monetary value.
If traditional national symbols were to be removed from the world's currencies all at once, there likely would be an outcry of objection. But, if done little by little over a period of time and through a succession of currency revisions, the public will not be alarmed. It is not surprising, therefore, to find that, in most of the free-world's new currencies, the images of the nations' leaders or national heroes are still retained, but look closely at the words. With the exception only of Australia, none of these bills honor the country from which they originate. They do not say England, France, Belgium, or Italy; they say Bank of England, Bank of France, Bank of Belgium, Bank of Italy, and so on -- which should tell us something about who is really running things in the world.
One cannot predict with certainty, of course, that this same practice will be followed with the new American currency, but the probabilities are high, because denationalizing our money is the primary reason for the new issue. With regard to the interim money, Treasury has already announced that the words United States of America placed around the portrait of each bill will be so small as to be visible only under a microscope. As shocking as this may be to most Americans, it still must be a gigantic concession on the part of the cabal, because they would prefer not to have it appear at all. One can be almost certain, however, that the words Federal Reserve System of The United States, or Federal Reserve Note, or some similar description of our central bank will be clearly visible.
Will any of this come to pass? Will there be a national economic emergency? Will new currency be issued at that time? Will it be issued at all? It is always dangerous to make unqualified predictions no matter how strong the probabilities. For one thing, the widespread dissemination of the information presented in this report actually could alter the present balance of forces. Also, as mentioned previously, there is the possibility that the bubble can be held together long enough that the new currency can be issued even without an economic emergency. That is the logic behind the pretended concern over counterfeiting and drug money. If there is no crisis in the near future, then some excuse must be offered.
Finally, there is the possibility that, when the new currency is issued, the call-in of the old currency may be spread over a fairly long time span, allowing both currencies to circulate side-by-side for a while. But, regardless of the particular chain of events, we can be certain that the financial/political cabal will continue in existence, and its goal of world control will remain unchanged. In spite of any minor victories on the side of freedom, therefore, we will never be able to afford the luxury of complacency.
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The Components of a Crisis
• The banking industry is in serious crisis as a result of unrealistic loans to Communist and Third World countries, loans that everyone knows they cannot repay. The default of just one of these gigantic loans could plummet some of our largest banks over the brink of bankruptcy.
• The Federal Deposit Insurance Corporation may be able to bail out one or two large banks, but, if several collapse at the same time and especially if that triggers a public run on all banks to withdraw deposits, the FDIC itself will collapse. At present the FDIC has funds to cover only about one percent of its obligations.
• The savings and loan industry is in an equally perilous position. When real estate values dropped a decade ago, many S&Ls found that they had loaned more money than their houses were worth in the real-world market. The only reason many of these institutions continue to appear solid to unwary depositors is that they engage in dishonest bookkeeping, declaring their assets to be worth far more than they really are. S&Ls are going bankrupt at an unprecedented rate, and the trend is accelerating.
• While the stock market wobbles from one high orbit to another, giving the impression of a booming and healthy economy, it is largely mass hysteria created by hype in the financial journals. There is talk about an expected upturn in profits, talk about predicted growth in world markets, talk about future increases in dividends. But none of this is based on actual performance or tangible value. It is but a modern version of the Great Tulipomania of 1636.
The reality is that our once-great American industry is staggering. It continues to lose both world and domestic markets to foreign competitors; business bankruptcies are at an all-time high; sales are down; profits are being squeezed by costs and taxes; production has been cut back; debt ratios are higher than at any time in history and getting worse. The agriculture industry is in big trouble; the domestic oil industry is all but destroyed; the commercial real estate industry is in shambles. The euphoria on Wall Street is completely out of phase with reality.
• Not to be outdone by the corporations, individuals are also deeper in debt than ever before. With the advent of credit cards, installment plans for consumer goods, instant margin accounts at brokerage houses, and easy second mortgages, the average family today actually owns very little. We are surrounded by material goods, but they are not really our own possessions -- at least not until the objects become old and worn. Under the illusion that we are "buying" something, increasingly we are now merely renting our homes and cars and appliances. These items, in reality, are owned by the lenders, the cabal that created the money and extended the credit. The average American family today will never get out of debt, and the burden of interest payments will follow many of us to our graves. By this process, we are witnessing a return to serfdom, modern in form and more affluent than in days of old, but serfdom nonetheless.
• If American corporations and individuals are in excessive debt, our government is in even worse shape. It is not necessary to repeat the dizzying figures here. What must be kept in mind, however, is that the debt is already so large that, as with Third World debt, it may never be paid off. Yet, if the present trend is not reversed, the servicing of this debt will drain away more and more of our tax dollars until it will consume our total gross national product. This means, of course, that the entire economy will be nationalized -- as it is in the Soviet Union -- and there will be little difference between our two systems except the rhetoric. In the meantime, the syphoning off of America's productive capacity to pay for interest on the debt, not for goods and services, daily increases the likelihood of an economic disaster.
• We are about to see the return of inflation with a vengeance. As interest rates on Treasury bonds come down, fewer investors are interested in buying them, particularly foreign investors. When there are no buyers in a free market, the normal reaction is to raise the interest rate until the bonds become competitive. But this is not a free market. By agreement, the Treasury maintains its low interest rate, and our central bank, called The Federal Reserve System, steps in and buys the bonds. But it does not use money to do it. It uses a bookkeeping entry. To be more accurate, it creates the money out of thin air. This is the primary mechanism behind inflation (defined as an expansion in the supply of money and credit) because it pumps money into the economy that did not previously exist. The Treasury bonds are then classified by the Federal Reserve as "assets," which eventually become the "reserves" at the nation's commercial banks. Finally, these become the basis for creating still more money in the form of loans to business firms and individuals. It is by this bizarre process that the Federal Reserve is now rapidly expanding the nation's money supply.
The fact that prices have not risen accordingly is largely a result of public expectation to the contrary. We have been told that inflation is under control so many times that most people believe it, and, when they believe it, they act accordingly. Just as euphoria in the stock market tends to create the fulfillment of its own expectation -- for a while at least -- widespread public belief that inflation is under control reduces the pressure to raise wages and prices and tends to create the very low rate of increase in the general price level that is expected. But, as with the stock market, reality ultimately must prevail. The money supply now is being rapidly expanded well beyond the rate by which goods and services are expanding to absorb it, and the white rapids of price increases at double-digit rates lie directly ahead.
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The Great Tulipomania
The spectacle of paper fortunes being made -- and then suddenly lost -- in the stock market crash of 1929 and the dizzying ascent of the Dow Jones Industrial Average in more recent times, based as it is on little more than expectation of even greater price increases to come, is not new. The two underlying mechanisms have been with us for thousands of years: the quest for something for nothing, and the human instinct for herdlike behavior.
One of the most graphic historic examples of this phenomenon occurred in Holland between the years 1634 and 1636. It came to pass that a new, rare flower, called the tulip, was discovered in the gardens of some of the more wealthy inhabitants of Constantinople, now known as Istanbul. When the root bulbs of these exotic blossoms were brought into Holland, they rapidly became a status symbol among the wealthy -- much as race horses or rare breeds of dogs are today in our own country -- and those with surplus funds found that an investment in tulips brought them significant social recognition. In the natural course of things, the price of tulip bulbs climbed steadily until they became, not merely symbols of status, but speculative investments as well.
At one point, prices literally doubled every few days, and speculators were seen everywhere amassing great fortunes with no input of either labor or service. Many otherwise prudent people found themselves overpowered by the herd instinct. The temptation of easy wealth was so great that they borrowed against homes and invested their life savings to get in on the anticipated profits. This, of course, pushed up prices even further and tended to create the fulfillment of its own prophecy. Contracts for the purchase and future delivery of tulip bulbs -- a form of today's commodity market -- became a dominant feature of Holland's stock market.
Tulip bulbs eventually became more precious than gemstones. As new varieties were developed, the market became more complex, requiring experts to certify their origin and their grade. Prices soared, and the herd went insane. One bulb of the species, called Admiral Liefken, was valued at 4,400 florins; a Semper Augustus, worth 5,500 florins, was purchased for a new carriage, two grey horses, and a complete set of harnesses. It was recorded that, at one sale, a single Viceroy brought two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two Hogsheads of wine, four casks of butter, one thousand pounds of cheese, a bed and mattress, a suit of clothes, and a silver drinking cup.
Then, one day without warning, reality returned from her three-year journey. By this time, everyone knew deep in their hearts that the spiralling prices bore no honest relationship to the value of the tulips and that, sooner or later, someone was going to be hurt. But, as loyal members of the herd, they feared to be first to break from the trend lest they be wrong in their timing and lose out on profits yet to come. They operated on what today is called the "Bigger Fool" theory, which teaches that, no matter how foolish one is in buying an overpriced commodity in an upwardmoving market, there always will be a bigger fool who will buy it later at an even higher price. So the Dutch stayed with the stampede to the bitter end.
In any herd, of course, there are always a few who will take the lead, and, by 1636, all it took was one or two prominent merchants to decide to sell out their stock. Overnight, the tulip market disappeared, and speculators by the thousands saw their dreams of easy wealth -- and, in many cases, their life savings as well -- disappear with it, Tulipomania, as it was called at the time, had come to an end.
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