[Congressional Record (Bound Edition), Volume 149 (2003), Part 14]
[Extensions of Remarks]
[Page 18736]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     ABOLISHING THE FEDERAL RESERVE

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                        Thursday, July 17, 2003

  Mr. PAUL. Mr. Speaker, I rise to introduce legislation to restore 
financial stability to America's economy by abolishing the Federal 
Reserve. I also ask unanimous consent to insert the attached article 
``The Greatest Theft in History'' by Professor Murray Sabrin, into the 
Record. Professor Sabrin provides an excellent summary of how the 
Federal Reserve is responsible for the nation's current economic 
difficulties.
  Since the creation of the Federal Reserve, middle and working-class 
Americans have been victimized by a boom-and-bust monetary policy. In 
addition, most Americans have suffered a steadily eroding purchasing 
power because of the Federal Reserve's inflationary policies. This 
represents a real, if hidden, tax imposed on the American people.
  From the Great Depression, to the stagflation of the seventies, to 
the burst of the dotcom bubble, every economic downturn suffered by the 
country over the last 80 years can be traced to Federal Reserve policy. 
The Fed has followed a consistent policy of flooding the economy with 
easy money, leading to a misallocation of resources and an artificial 
``boom'' followed by a recession or depression when the Fed-created 
bubble bursts.
  With a stable currency, American exporters will no longer be held 
hostage to an erratic monetary policy. Stabilizing the currency will 
also give Americans new incentives to save as they will no longer have 
to fear inflation eroding their savings. Those members concerned about 
increasing America's exports or the low rate of savings should be 
enthusiastic supporters of this legislation.
  Though the Federal Reserve policy harms the average American, it 
benefits those in a position to take advantage of the cycles in 
monetary policy. The main beneficiaries are those who receive access to 
artificially inflated money and/or credit before the inflationary 
effects of the policy impact the entire economy. Federal Reserve 
policies also benefit big spending politicians who use the inflated 
currency created by the Fed to hide the true costs of the welfare-
warfare state. It is time for Congress to put the interests of the 
American people ahead of the special interests and their own appetite 
for big government.
  Abolishing the Federal Reserve will allow Congress to reassert its 
constitutional authority over monetary policy. The United States 
Constitution grants to Congress the authority to coin money and 
regulate the value of the currency. The Constitution does not give 
Congress the authority to delegate control over monetary policy to a 
central bank. Furthermore, the Constitution certainly does not empower 
the federal government to erode the American standard of living via an 
inflationary monetary policy.
  In fact, Congress' constitutional mandate regarding monetary policy 
should only permit currency backed by stable commodities such as silver 
and gold to be used as legal tender. Therefore, abolishing the Federal 
Reserve and returning to a constitutional system will enable America to 
return to the type of monetary system envisioned by our nation's 
founders: one where the value of money is consistent because it is tied 
to a commodity such as gold. Such a monetary system is the basis of a 
true free-market economy.
  In conclusion, Mr. Speaker, I urge my colleagues to stand up for 
working Americans by putting an end to the manipulation of the money 
supply which erodes Americans' standard of living, enlarges big 
government, and enriches well-connected elites, by cosponsoring my 
legislation to abolish the Federal Reserve.

                     [From USA Daily, May 6, 2003]

                     The Greatest Theft in History

                           (By Murray Sabrin)

       If you have a savings account, your bank probably credits 
     it with interest every month. At the end of the month, you 
     expect the bank to pay you the amount of interest it was 
     obligated to pay you--no more no less. In other words, you 
     would not expect the bank to change the interest it was going 
     to pay you unless your account explicitly allows the bank to 
     readjust the interest rate at its discretion.
       We know the interest rate paid on short-term ``risk free'' 
     deposits are based on the ``real rate'' plus an inflation 
     premium. Historically, the real rate--the rental price of 
     money--is the annual rate that borrowers and lenders agree on 
     is typically 2-3 percent. So if you borrow $100 for a year, 
     you would expect to pay the lender about $103 at the end of 
     one year.
       However, if price inflation is expected to be 3% for the 
     year the loan is outstanding, the lender wants to protect his 
     principal from the decline in the dollar's purchasing power. 
     So, the interest rate on the loan would thus not be just 2% 
     (assuming this is the real rate), but 2% plus an inflation 
     premium of 3%, for a total of 5%.
       Currently the annual inflation rate is about 2.5%. Thus, 
     the risk free rate (the real rate-2%--plus the inflation 
     premium) on savings deposits and money market funds should be 
     about 4.5%. For Americans who seek the safety of savings 
     accounts and money market funds for their hard-earned money, 
     the current average yield of 0.7% on money market funds is 
     well below the current risk free rate. In addition, savers 
     who own short-term U.S. Treasury debt are receiving slightly 
     more than 1.1 % annually.
       What's going on? How can savers be receiving about 3.5% 
     less than the risk free rate on their money market accounts 
     and savings accounts?
       The answer is simple: The Federal Reserve, the government 
     created institution that was founded to ``stabilize'' the 
     value of the dollar and ``smooth'' ``out the business 
     cycle'', which has the legal authority to create money out of 
     thin air, is nothing more than the greatest manipulator of 
     interest rates in the history of the world.
       The FED pumps money into the banking system if it wants to 
     lower interest rates in order ``to stimulate'' the economy, 
     and conversely will take money out of the banking system if 
     it want to dampen borrowing and ``cool off'' an overheated 
     economy.
       For the past two-and-a-half years the FED has been pumping 
     money into the banking system, driving down short-term 
     interest rates to its current levels, well below the risk 
     free rate. In fact, the American people are being penalized 
     heavily for saving. Real interest rates are negative.
       In short, the American people are being ripped off to the 
     tune of tens of billions of dollars per year.
       To put this in dollars and cents, there are $2.2 trillion 
     in money market funds, with an average annual yield of 0.7%. 
     The income from these funds is about $15 billion a year. If 
     interest rates were 4.5%, savers would have nearly one 
     hundred billion dollars in income or $85 billion more than 
     they are currently receiving.
       Moreover, there is $4.61 trillion in the nation's time and 
     savings deposits, earning an average of about 1.0% or more 
     depending on the financial institution your money is 
     deposited in. (ING Direct pays 2.10% online on short-term 
     deposits. The money can be transferred from your checking 
     account to an online account and back. The minimum deposit to 
     open an account is only $1. This is not a misprint.)
       Using the same 4.5% risk free rate, savers should be 
     receiving about $210 billion on their short-term deposits at 
     the nation's financial institutions. Instead, they are 
     earning about $50 billion, for a loss of $160 billion in 
     annual income. In addition, the U.S. Treasury has 
     approximately $1 trillion in short-term debt that is yielding 
     a little more than 1%. Savers holding the federal 
     government's short-term debt are losing approximately $35 
     billion in annual income.
       The bottom line: While the economic debate in Washington DC 
     centers around President Bush's tax cut proposal, which 
     should pass intact because less money in the federal 
     government means more freedom and prosperity for the American 
     people, the Federal Reserve continues to perpetuate the 
     greatest theft in world history. By having the power to 
     manipulate interest rates, the FED in effect has not only a 
     license to print money but also can redistribute income form 
     savers to borrowers.
       The winners of the FED's interest rate manipulations 
     include the nations' financial institutions, business 
     borrowers and government. The losers are anyone who wants to 
     save for the proverbial rainy day and accumulate money for a 
     down payment on a house or other family need.
       Thus, Federal Reserve policy aids and abets the legalized 
     theft of hundreds of billions of dollars per year from low-
     and middle-income families to the economic elites of this 
     country and profligate governments at all levels--all with 
     the approval of the U.S. Congress and the Bush 
     administration.
       After 90 years of manipulating interest rates, it is time 
     to abolish the FED and return the country to the only sound 
     monetary system that is consistent with liberty and 
     prosperity--the gold standard.

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