5 Alternatives to the Federal Reserve

Why the sun will still rise without the Federal Reserve system

Dees Illustration

Eric Blair
Activist Post

Now that Ron Paul is officially testing the 2012 presidential waters, a hot topic will surely be "Ending the Fed."  What used to be seen as a fringe issue may now result in intelligent discussions about how do we end the Fed.

Monetary reform is so vital that it may be precisely what propels Paul into the White House, assuming he gets in all the debates, on all of the ballots, and has an army of computer forensic experts to appeal shady voting machines -- which are inevitable challenges in our so-called democracy.

Joe Weisenthal recently pointed out that Ron Paul may actually have a great shot this time around:

At the time (Paul's 2008 bid), nobody in the GOP really cared about the Fed, and for the most part, Bush’s wars enjoyed broad support. 

Today they’re Obama’s wars, and the Fed is one of the most disliked institutions around, taking daily abuse even from mainstream outlets like CNBC.

Anyone who has even a remedial education about the Fed knows that nearly all of America's economic woes can be directly tied to the fraudulent monetary system run by this private monopoly. Ron Paul has been right about this for over 30 years.  Inherent in the fractional system is increased inflation and taxation which squeezes every worker and small businessman, resulting in a steadily decreasing standard of living for the vast majority of the population.  Also inherent is the Fed spending money (making loans) without Congressional approval or oversight.

As the world's reserve currency, Federal Reserve Notes determine whether people can afford to buy food and fuel on a global scale through commodity price inflation resulting from a devalued dollar. The US dollar is also the world reserve currency for weapons and is used to fund -- with political, economic and literal interest -- both sides of all wars. The Fed has no national patriotism, only a desire for private profits that often come with immense public losses.

Besides resource grabs, the wars in Afghanistan, Iraq, and now in Libya have one thing in common: they each have a new central banking system since their "liberations."  The Federal Reserve was also used as a powerful weapon to remove Taliban control of the Afghan Central Bank. Usury, the charging of interest, is strictly prohibited by the Koran, therefore these nations had very conservative banking structures.  In other words, these countries operated outside of the international central banking cartel that uses debt to enslave populations.  Now they have been brought in line with the cartel at the barrel of a gun, and next comes the wonderful IMF we-own-your-ass loans.  This, oil and banking, is also precisely why Iran is public enemy number one even though they never attacked another nation.

Therefore, the Federal Reserve-led central banking cartel is not only a severe detriment to the US and global economies, it is the fuel for conflict around the world -- not religious beliefs, style of government, or other manufactured differences.  The Federal Reserve system is the cancer that needs removing and should be the primary issue discussed in the 2012 campaign.  Every other is issue seems to be a symptom of this metastasized disease, hence the debate about what type of band-aids to use on the numerous festering tumors is moot without addressing the Fed's function.

Many pragmatic voters will view ending the Fed as unrealistic.  Some doubters may be mesmerized by dollar worship with little chance of seeing an end to the system before it's too late.  Perhaps it won't end until it merges into a global bank with a universal currency.  After all, consolidation of the world is clearly being expedited.

But what do we replace the Fed with before it's too late?  It would probably not be wise to "end the Fed" abruptly, as it would surely cause chaos on domestic and, especially, global trade.  The solutions rest in exactly the opposite of consolidation:  currency competition.  As I wrote in December, the first step is to end the Fed's monopoly power by legalizing competing currencies:

HR 1098: Free Competition in Currency Act of 2011 will essentially do three things: 1) repeal legal tender laws to remove the monopoly control of the Federal Reserve, 2) legalize private mints to issue coins to be controlled by anti-fraud and anti-counterfeit laws, and, 3) remove taxes from precious metal coins to ensure fair competition among new currencies. 

Paul claims that it will provide a smooth transition away from the Fed, pointing out that 'if nobody wanted to use them (competing currencies), they wouldn't have to, and everybody could be happy with the Federal Reserve. But if the situation gets so chaotic that the people are looking for an alternative, they can go over to start operating in another currency.'

Ultimately you don't start by ending the Fed, you start by competing with it, or opting out of it. Here are five alternatives to consider:

1. Gold and Silver:  First, by repealing legal tender laws the State will no longer be able to prosecute violators as domestic terrorists for using silver as an alternative currency.  As a Constitutionalist, Paul supports gold and silver as a viable currency. Indeed, they have proven to be a safe store of wealth against fiat inflation. Gold and silver money have also been a timeless and border-less medium of exchange that would likely be generally accepted for interstate trade.  Paul proposes that transactions for goods or services in gold and silver should not be taxed, nor should the possession of them.  If it were ever to pass, a commodity-based economy would likely become very popular as it will operate outside of the Federal Reserve's debt-based, taxable money system.

2. Local Tender:   Local currencies are already perfectly legal in the United States "as long as it does not look like dollars, as long as denominations are at least $1.00 value, and if it is regarded as taxable income."  In other words, they are essentially tied to U.S. dollars and must be taxed the same. Several communities have adopted alternative paper currencies to stimulate local trade. Many of these currencies have been set up in defiance of the debt-based money system and resemble a barter system. These local tender will obviously face challenges of interstate trade and are, depending on their structure, still somewhat at the mercy of a devaluing U.S. dollars. Under Paul's competing currency act, these local currencies could now be considered "legal" tender, which could conceivably remove their peg to the dollar.  However, it is unclear whether they will share the same tax-free benefits as gold and silver under Paul's plan.  Either way, they provide an important alternative exchange vehicle should the dollar became completely worthless.

3. Credit Unions and State Banks:  Under the current fractional reserve system banks create over 90% of the money in the economy through loans. One way to utilize this power of the banks for the good of the local community is to support credit unions, or by creating state banks modeled after North Dakota.  Credit unions may be structured differently depending on the institution; however, they all seem to loan only to depositors for local projects or businesses.  They are also typically owned by the depositors themselves.  The state bank of North Dakota works similarly in that it only makes in-state loans, fueled by the deposits of the state treasury, and profits go directly back into the state.  Both of these entities offer an immediate alternative to the private banking cartel, and could conceivably print an alternative currency, if needed, that would likely be trusted by depositors.

4. Interest-Free Treasury Dollars:  Interest-free money issued directly by the Treasury, reminiscent of Lincoln's Greenback, would basically remove the for-profit middleman -- the Federal Reserve.  The concept of interest-free money in the U.S. started in Colonial times.  Ben Franklin referred to it as "honest money" and wrote "In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to make the products pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one."  Naturally, the private banking cartel will deplore this idea, as it breaks their control over the government and the economy.  John F. Kennedy was the last president to attempt this on June 4th, 1963 (10 days before his assassination); he signed Executive Order 11110, which gave him legal clearance to create interest and debt-free money directly from the Treasury. What made Kennedy's plan even more secure is that his interest-free money was to be backed by silver bullion in the Treasury.  This would seem to be the best national strategy so long as other local competing currencies are still allowed to exist. Otherwise we are just trading one monopoly for another.

5. Barter: Barter is the oldest form of trade. Simply put, barter is the voluntary exchange of goods and services for other goods and services without the need for currency.  Because money is completely eliminated from the equation, barter naturally replaces money as the method of exchange in times of monetary crisis.  Many local food cooperatives are starting to implement this type of quasi-underground economy based on credits, sometimes tied to currency for easy valuation. These systems encourage participants to produce something for the cooperative and are typically best used at the local level. Many new local currencies are replicated after barter systems, as money is only seen as a medium of exchange, not an instrument of debt or a store of wealth.  Barter systems are quite easy to set up and manage these days utilizing the Internet.

Clearly the impact of the Federal Reserve should be a major part of the 2012 presidential campaign.  And if it is, Ron Paul has a good chance of victory.  However, if we truly believe in the ideas of competition and freedom then each of these alternatives have a role to play in our economic future.

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