Creature From Jekyll Island by G. Edward

and political disunity.

APPENDIX

593

NATURAL LAW NO. 4

LESSON: Fractional money is paper money which is backed by precious metals up to only a portion of the face amount. It is a hybrid, being part receipt money and part fiat money. Generally, the public is unaware of this fact and believes that fractional money can be redeemed in full at any time. When the truth is discovered, as periodically happens, there are runs on the bank, and only the first few depositors in line can be paid. Since fractional money earns just as much interest for the bankers as does gold or silver, the temptation is great for them to create as much of it as possible. As this happens, the fraction which represents the reserve becomes smaller and smaller until, eventually, it is reduced to zero.

Therefore,

LAW: Fractional money will always degenerate into fiat

money. It is but fiat money in transition.

NATURAL LAW NO. 5

LESSON: It is human nature for man to place personal

priorities ahead of all others. Even the best of men cannot long resist the temptation to benefit at the expense of their neighbors if the occasion is placed squarely before them. This is especially true when the means by which they benefit is obscure and not likely to be perceived as such. There may be exceptional men from time to time who can resist that temptation, but their numbers are small.

The general rule will prevail in the long run.

A managed economy presents men with precisely that kind of opportunity. The power to create and extinguish the nation's money supply provides unlimited potential for personal gain.

Throughout history the granting of that power has been justified as being necessary to protect the public, but the results have always been the opposite. It has been used against the public and for the personal gain of those who control. Therefore,

LAW: When men are entrusted with the power to control the money supply, they will eventually use that power to confiscate the wealth of their neighbors.

594

APPENDIX

(C.) IS M - l SUBTRACT!VE OR ACCUMULATIVE?

Below is a copy of the author's letter to Mike Dubrow at the Public Information department of the Federal Reserve System. In a telephone conversation on February 14, 1994, Mr. Dubrow said that the assumption stated in the letter would be correct if it were not for the fact that the system is under the control of a central bank. The Federal Reserve, he said, would not allow that to happen, because it would be inflationary. The Fed would reduce the money supply to offset the effect of monetary expansion as dollars moved from M-l to M-2 and back to M-l again. In other words, the assumption is correct, but the Fed has the power to offset it—if it wants to. The bottom line is that M-l is accumulative. As such, it is the most meaningful measure of the money supply.

Q. Cdwwui Quffitt

33ax 4646, Weatlake. Viilage QKL 91359

January 19,1994

MikeDubrow

FAX # (202) 452-2707

FederalReserveSystem

WashingtonDC

DearMr. Dubrow,

As we discussed duringourphoneconversation this

morning, I am preparing a paper on the Federal Reserve

System, and an interesting question has arisen. Itisso

fundamental that almost everyone with whom I have spo-

ken thought they knew the answer but, uponanalysis, have concluded they were not so sure afterall.

IS Ml SUBTRACTIVE OR ACCUMULATIVE?

It is my understanding that there are three optional

definitions of themoneysupply:

Ml = currency + short-term deposits.

M2 = M1 + short-term time deposits.

M3 = M2 + insUtutional long-term deposits.

It is clear that, when money is paid out of a checking