End The FED. Get The Gold By Gary North

How can we end the Federal Reserve System? Prior to 2008, this question would have been entirely hypothetical. It is still entirely hypothetical, because the Federal Reserve System is in charge of monetary policy; the Congress of the United States is not. Certainly, the voters of the United States are not. Nevertheless, I wish to indulge myself in a completely hypothetical speculation. I wish it were less hypothetical than it is, but things are better than they were before 2008. “All hypothetical possibilities are equal, but some are more equal than others.”

Let us assume that the voters of the United States know what the central bank is. Let us also assume that they have decided that the nation would be far better off if control over monetary policy were removed from the Federal Reserve System, meaning removed from the cartel of large banks which the Federal Reserve defends. Let us also assume that somehow, by means of political mobilization not presently visible, they convinced the majority of both houses of Congress to pass a bill abolishing the Fed, and the President of the United States signs the bill into law. What should the law look like?

The law would be very simple. “The Federal Reserve Act of 1913 is hereby abolished.” This wording leaves nothing to the imagination. Anyone can understand this. There do not have to be any additional qualifications, exemptions, or anything else. There is no need for an army of lobbyists to recommend the insertion of all kinds of special-interest language.

WHO GETS THE GOLD?

There would have to be a second law. This law has to do with the ownership of the gold that is supposedly stored by the Federal Reserve System on behalf of the United States government. The law would specify that the Federal Reserve System must return all of the gold belonging to the United States government at the official price of $42.22 per ounce. The gold would then be transferred from the Federal Reserve Bank of New York to Fort Knox, Kentucky.

To pay for this gold, United States government would issue Treasury bonds to the Federal Reserve System. Where will the Treasury get the money to pay off these bonds? Here is where the fun part begins.

The Treasury will sell the gold in the form of tenth-ounce gold coins to any American voter at a price of $42.22 per ounce. Every American voter would receive a tax-free option to purchase tenth-ounce gold coins at a price of $42.22 per ounce.

How many coins would each voter be allowed to purchase? This would be determined on a strict mathematical formula. The total quantity of gold would be divided into tenth-ounce coins. This gold would be 90% fine. The other 10% would be hard metal, thereby enabling the coins to be used in circulation. This was what the old double eagles were back in 1933.

Every American voter would receive the same quality of coins. Rich man, poor man, beggar man, thief: everybody gets the same number of tenth-ounce gold coins. It would be about ten coins. There would have to be an audit.

Of course, they could not be sent the coins immediately. The coins must first be minted. Voters would be issued IOUs to their gold coins. They would receive a guarantee of purchase within one year of the transfer of the gold to the Treasury.

The United States Mint could not possibly fulfill this task. It could not produce this many coins. The coins would be produced by private mints. The coins would be produced according to rigorous standards enforceable by the government. There would be no mixing of base metals to such a degree that the coins would be anything less than 90% gold.

The government would pay a small fee per coin to private companies producing the coins. The private mints could lawfully put their own names on the coins, but every coin would have to say “1/10 ounce of gold, 90% fine.”

This would get the government out of the money business. The Mint would cease producing gold coins. The government would cease authorizing gold coins. All that the government would do would be to establish standards regarding the testing of the weight and fineness of the coins. It would enforce these standards in courts of law.

Every American voter would be allowed to sell all of the gold coin options to anyone. In other words, if the price of gold is $1,342.22 per ounce, he would be allowed to sell his gold, pay the Treasury $42.22 per ounce for whatever gold he had received, and pocket $1,000 per once, tax-free.

The reason why I think every American voter ought to be allowed an equal share of all the coins is because that would create considerable political pressure on the government to get that gold out of the hands of the Federal Reserve System and into the hands of the voters. If we are going to do this, we might as well let everybody have a piece of the action.

The government would pay off the bonds with money from the sale of the coins. The Federal Reserve could then buy more bonds or not. The reason why the government should pay the Federal Reserve $42.22 per ounce is because the Federal Reserve paid the government $20 an ounce back in 1933. That money was spent into circulation. The contraction of the gold supply was offset by an increase in the money supply. In other words, the decision in 1933 was to keep the money supply stable. This is a good policy.

The transfer of the bonds to the Federal Reserve would be neither inflationary nor deflationary. The Federal Reserve would be allowed to hold onto Treasury bonds to compensate it for the loss of the gold. This would keep the monetary base from contracting. The goal is not to create mass deflation.