Antal Fekete's Open Letter To Ron Paul: "Impeach Bernanke"

IMPEACH  BERNANKE!

An open letter to Congressman Ron Paul of Texas

Antal E. Fekete

April 6, 2011

Dear Dr. Paul:

There are serious questions about the legality of Quantitative Easing. You are among the few who are well-qualified and well-placed to get to the bottom of it.

Most people believe, and the media confirm them in that belief, that the Fed can legally create dollars ‘out of the thin air’ in any quantity, and can do with them as it pleases. This may well be the pipe dream of Dr. Bernanke who is quoted as saying that the U.S. government has given the Fed a tool, the printing press, to stop deflation — but it hardly corresponds to the truth. The Fed can create new dollars only if some stringent legal conditions are satisfied, and then, it can only dispose of them in certain ways prescribed by law.

Contrary to a statement of Dr. Bernanke, made before he became the Chairman of the Board of Governors of the Fed, he could not drop freshly printed dollars from a helicopter, no matter how many reasons for such an action he may be able to cite. Another thing the Fed is not allowed to do legally is to purchase Treasury paper from the U.S. Treasury directly. It must be purchased indirectly through open market operations. If you don’t put the Treasury paper through the test of the open market before the Fed is allowed to buy it, the presumption is that the market would reject it as worthless, or would take it only at a deep discount. The law does not allow the F.R. banks to purchase Treasury paper directly from the Treasury because that would make money creation through the F.R. banks a charade, reserve requirements a farce, and the dollar a sham.

If that were the only problem with Quantitative Easing, it would be bad enough. But there is something else that is even more ominous. The fact is that the Federal Reserve banks can purchase Treasury paper only if they pay with F.R. credit that has been legally created.

F.R. credit (F.R. notes and F.R. deposits) is legally created if it has been issued in accordance with the law. The law says that F.R. credit must be backed by collateral security at the time of issuance, usually in the form of an equivalent amount of U.S. Treasury paper. The procedure is as follows.

The F.R. bank seeking to expand credit takes its Treasury paper, owned outright and free from encumbrances, and posts it as collateral with the Federal Reserve agent who will then authorize the issuing of credit. In other words, if the F.R. banks do not have the unencumbered Treasury paper in their possession, then they cannot create additional credit legally.

There is some evidence that the F.R. banks do not have F.R. credit available to make the kind of purchases Dr. Bernanke is talking about as part of his Quantitative Easing. Nor do they have unencumbered Treasury paper in sufficient quantity that they could post with the F.R. agent for authorizing the issue of additional F.R. credit.
 
The point is that the process of posting collateral first, and augmenting F.R. credit afterwards must under no circumstances be reversed. What the F.R. banks cannot legally do is to buy the Treasury paper first with unauthorized F.R. credit, post the paper as collateral, and justify the illegal issuance of credit retroactively. Nor can they borrow the bond from the Treasury, post it as collateral, and pay for the bond retroactively.

This is an important limitation separating the regime of market-based irredeemable currency from the regime of fiat money involving outright monetization of government debt — the graveyard where the Continental dollar, the assignat, the mandat, the Reichsmark, and the Zimbabwe dollar (among countless others) rest.

At any rate, retroactive authorization of F.R. credit, if that’s what the Fed is up to, would be a violation of both the letter and spirit of the F.R. Act. It would mean converting the dollar into outright fiat money through the back door, bypassing Congress. It would show absolute bad faith on the part of the Chairman of the Federal Reserve Board of Governors, Dr. Ben Bernanke, who certainly knows what the law is. Such a blatant violation of the law would make him totally unfit for the powerful office he occupies. It would call for his immediate and dishonorable discharge by the President, pending Congressional investigation of the matter.

The various violations of the law of which the Fed is accused point to a concerted effort to remove the shackles the law has put on the money spigots lest crooks help themselves to the public purse. These violations are not isolated incidents. They are aiming at the corruption of the monetary order of the nation and the world. Moreover, they would ultimately figure prominently among the causes of the financial instability the world has been suffering from since 1971 and, more recently, since 2008.

Without understanding this fundamental truth, all talk about stabilizing the monetary system and reining in the runaway budget deficit is an exercise in futility.

Yours very sincerely,

Antal E. Fekete
Professor (retired)
Memorial University of Newfoundland
Tel./Fax: [phone]

Note: an identical letter has been sent to Congressman Mike Pence of Indiana

Comments

[Seer]

We're all Mother Nature's (controller of real matter) bitch...

[duncecap rack]

Great letter. You know this brings to mind the call to arms of annonymous. What the hell happened to them? After some brash talk they just kind of vanished off the face of the earth. Anyone know what's up with them?

[High Plains Drifter]

i think they wised up. such actions when they orginate here, would be subject to the homeland security act and all of the script kiddies would be rounded up for sure.

[A_MacLaren]

They're still out there according to this:

http://ampedstatus.org/prepare-for-revolution-the-empire-state-rebellion...

Prepare For Revolution: The Empire State Rebellion Begins on June 14th

By David DeGraw, AmpedStatus Report

Contrary to rumors being spread around, I do not know what our friends at Anonymous have planned for Operation Empire State Rebellion (OpESR). However, I wholeheartedly agree with the goals they presented in their “Communication #1” video. They are very similar to reports I have been writing and the movement we have been calling for on our social network.

In addition to this manifesto, a press release was picked up by Zero Hedge which mentioned our site and directly referenced a list of “Grievances and Demands” that also appear on our social network. The release begins:

“We, Anonymous, would like to offer you the opportunity to join and support our movement. We are a group that formed on the internet – one that knows no constructs or absolutes, and one that has recently grown exponentially…” [Read full release.]

I do not know who issued this press release. For more information on my limited interactions with unknown Anonymous sources you can watch the TV interview I had with Max Keiser discussing this.

When I originally wrote about an “Empire State Rebellion,” I was suggesting the possibility of Americans gathering in lower Manhattan’s Financial District en masse, as Egyptians did in Cairo’s Tahrir Square, to demand that the big banks be broken up. Since suggesting this idea, the report went viral, with many sites either republishing or linking to it. My various email inboxes exploded with people and groups, from across the political spectrum, saying that they wanted to make this idea into a reality. Shortly after that, an Anonymous video calling for an Operation of the same name was released, which has received over 150,000 views on our YouTube page, and an additional tens of thousands of views on other YouTube accounts and video sites as well.

In the second OpESR video, which seems to have many hidden messages throughout, there is a binary code that reveals: “OpESRsixfourteen.” There is also a graphic containing code that reveals June 14th as the launch date for whatever it is they have planned. June 14th is a significant day in American history. It was the day the Revolutionary army was formed and it is the known as Flag Day.

So on this Flag Day, as we once again confront tyranny, let’s all stand up for ourselves in a decentralized manner and launch our own revolt. We’ve been talking with several organizations about turning the “Empire State Rebellion” into a reality by organizing a peaceful mass demonstration throughout New York’s Financial District – from Wall Street to the NY Federal Reserve, to the corporate offices of the six big banks and the ratings agencies. On June 14th, we will launch a massive display of non-violent force with this list of demands: End the “campaign finance and lobbying racket,” “break up the banks,” “enforce RICO laws” against the “organized criminal class,” and order “Ben Bernanke to step down.”

June 14th will also be a day when people who haven’t already moved their money out of the big banks finally withdraw their funds. The silver movement will have a “Buy Silver Day.” There will be many different actions from many different people.

Much more at the link above.

[duncecap rack]

Thanks for the reply. I didn't think I would get such a thorough response. I hope they get some traction.

[slewie the pi-rat]

well, here we have a measured motivate-the-individual to act against the banks in one, specif way.  okey dokey!

i do not care for the implied background of the "plan" and the code and the veiled threat to hack banks, Primary Dealers, or the FED.  the last thing we need is for these clowns to get an excuse to lose 1/2 their records!  also, i can't condone this as a victimless crime of conscience, hacking and whatever to a big bank.  maybe fun.  maybe funny.  maybe a real "message", but this isn't my idea of civil disobedience. 

personal values.  really don't care for this "part" of the deal.

[rlouis]

Silver value of the 1964 quarter is worth $7.41 today.  Seems not enough folks in congress understand what Bernbanks is saying "Hey America, watch me turn your fiat into crap".

Wake up Washington - a billion dollar presidential campaign(?) ... Do you not understand (?) - it's only friggin paper!  Everything [they've] worked for, schemed for and connived for is about to become worthless, all the unspent campaign funds waiting to go home on retirement from Washington... worthless.

TD - Thanks for posting the letter, I think I'll send copies to my "representatives".

[SWRichmond]

http://www.coinflation.com/

[samsara]

Thanks

[John Law Lives]

Ron Paul would be stomped into the ground if he ever presented a real threat to the Fed.

[High Plains Drifter]

they told ron paul to start talking about the FED now because the FED has outlived its usefulness. this is why they are now talking about gold and silver backed money. the gold standard will be just another way to control and manipulate the sheep because the same people who own and run the FED also control most of the PM in this world. back to square one......

[Seer]

"the same people who own and run the FED also control most of the PM in this world. back to square one......"

And there you go!  Govt allows the collection of/is controlled by these theives.

[samsara]

I fear ya might be right. The Fed will go at a time of their chosing.  And the next three moves already planned.

How ever their plan cannot control monkey wrenches like Peak Oil or Earthquakes (unless you haarp that they can.)

Those flash mini crashes sure felt like Unit Testing of Software in the Live Environment.  See how fast they can react to a drop.  Like Terminal Vel.   How did the other programs react?  and on. 

They could act in concert.... Turn out the light when you leave Ben?

[Strike Back]

Meant to reply to Monkeyboy

[spongeBOB]

delelted. wrong thread.

[rosiescenario]

Sure hope no one pays attention to this...it would really screw up the silver trade, Ben is our friend...until the $$$ airlift commenced those silver bars might as well have been tungsten, probably worth more back then if they were....

I figure that eventually Ben will print enough money that even my underwater home rises like Lazarus from the dead.I just hope he prints it faster, as I am old and may run out of time.... Increasing food and fuel costs are a small price to pay given all the other benefits bestowed upon us.

[simon says]

Its not the Fed, its the Federal Govt Silly!  Its not the Federal Govt, its Us Silly!  Though I truly enjoy reading Fekete.

[Seer]

Yup!  Meet "mirror!"

[indio007]

There are some errors in the article. The FED can use Special Drawing rights, gold certificates, gold bullion, or Treasury bonds as collateral...... Oh ya I almost forgot ... RESIDENTIAL MORTGAGES TOO!

Public Law 106–122
106th Congress
An Act
To amend the Federal Reserve Act to broaden the range of discount window loans which may be used as collateral for Federal reserve notes. <<<<<———
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That the
third sentence of the second undesignated paragraph of section
16 of the Federal Reserve Act (12 U.S.C. 412) is amended by
striking ‘‘acceptances acquired under the provisions of section 13
of this Act’’ and inserting ‘‘acceptances acquired under section 10A,10B, 13, or 13A of this Act’’.
Approved December 6, 1999.

What is 10B????

Federal Reserve Act

Section 10B. Advances to Individual Member Banks

a) Any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time or demand notes having maturities of not more than four months and which are secured to the satisfaction of such Federal Reserve bank. Notwithstanding the foregoing, any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, may make advances to any member bank on its time notes having such maturities as the Board may prescribe and which are secured by mortgage loans covering a one-to-four family residence.........

1. Get  Fool to sign Mortgage

2. Print notes to pay seller

3.    ..........

4. PROFIT!!!!!!

[SWRichmond]

Fekete doesn't like the Austrian School.  He has written so often, but not in so many words.  Hence, he probably doesn't like Dr. Paul. If what you post above is correct, and if I am interpreting it correctly, then the letter by Dr. Fekete is a false lead that will give Dr. Fekete something to bitch about.  "See, he didn't do anything about it!"

[Withdrawn Sanction]

Fekete doesn't like the Austrian School.

I dont think that's true.  He agrees w/the Austrians on many points; however, he also takes issue w/for example, von Mises on the real bills doctrine, and w/the LvM Institute and its advocacy of a return to a 100% reserve gold standard.   (This incidentally also puts him in disagreement w/the Chicago School--in particular, Friedman.)  Without a companion real bills system, he argues, such a gold standard would be mostrously deflationary, and I think he's correct on this point, but I doubt whether one in a 100 economists can even see his point let alone understand it.  In essence, however, if one is interested in the history of it, the dispute traces to the disagreements between the so-called banking and currency schools in the mid-1800s.  Regardless though, even in disagreement, Prof. Fekete has, as far as Im aware, always been gentlemanly and scholarly.  

[samsara]

Thanks for the insight.  I have read lots by him.

[velobabe]

m o v e m e n t , bitchez†

[max2205]

I want whatever your smoking if you believe Ron Paul will do ANYTHING

[Savyindallas]

idiot

[Dan The Man]

Doesn't matter...Antal is a VERY smart dude, with a large and influencial following.  This is just a start...and VERY good start.

[PragmaticIdealist]

Although Dr. Fekete's recommendation of posting collateral before QEing would reduce the amount of possible monetization at any one time, the Fed could simply use its available collateral (say $50 billion), purchase $50 billion of securities, and now voila - it has $50 billion of new collateral...

This seems to be hardly a constraint against money printing.

[ronin12]

I think you need to re-read the article.

[Shell Game]

The excruciating slowness of getting this ball rolling is going to be the end of me.

[6_7_42]

This is just stupid.  The money printing is the issuance of debt by the Treasury which is directed by the Congress.  The Fed is just the bagman.

[Bear]

And without the bagman the dope doesn't get delivered

[6_7_42]

My point is that the Fed is one of three players and the least important of the three. The Congress is the drug lord.

[indio007]

And the citizenry are the junkies left wondering why each fix is less effective than the last.

[El Hosel]

  "There are serious questions about the legality of Quantitative Easing"

     Ahhh Legality, I remember it well... Those were the days.

[Diamond Jim]

Why all the crying about Uncle Bermie...he is doing what he has said.....asset inflation...so why are gold bugs going nuts....gold is up significantly; silver freaks..I mean come on...$40; short the dollar and making money; long crude and making money; long wheat and not making any $$$...you'd have to be a loser.   So let's just quit crying and celebrate at the altar of Bernancke........

[I am Jobe]

Screw Impeaching. Hang all the bastards and their family.NUF yakking in the USA.

[honestann]

The only problem is, the "predator club" is a closed system --- all for one and one for all, as it were.  The predators now control the federal government, not just the federal reserve.  They both watch each other's backs.  Neither will ever arrest or impeach or fail to support the other.

They are all predators... every single one of them.  It is way, way, way beyond "unlawful".  They lie, cheat, steal, defraud, destroy, enslave morning to night, every day of the year.

Quite precisely, they are:

predators DBA federal reserve
predators DBA federal government

[Pumpkin]

Impeach?  How about dismember.  That'd make a hell of a pay per view.

[Atomizer]

Nice thought, however you cannot impeach an (illegal) banking cartel member. You have to arrest him during your next round of testimony grilling. On the other hand, you can impeach a puppet member working for the Federal Reserve interests. I believe JFK layed out the ground work many decades ago.

Use the Patriot Act to impeach. This is why Bush JR passed the law. Treason has been committed. You can find him at a basketball court or golf course. Use common sense.

[Seer]

"Use the Patriot Act to impeach. This is why Bush JR passed the law."

Would you mind elucidating?

[Atomizer]

"Use the Patriot Act to impeach. This is why Bush JR passed the law."

Not entirely the reason. Ask yourself, who appointed the Bernank? Who extented his appointment? The active puppet must answer to a series of questions. Always start from the bottom and work upwards. Ben will throw Obama under the bus. The entire process needs to begin immediately for traction to begin. Our puppet in chief is walking on kite string. If one of his T Boone Pickens windmills blows to much air, the puppet will lose his balance and break the kite string suspending his alter ego.

Got it? Now get to work!

[newworldorder]

OK - I'll bite here.

Whom are "we" angry at and for what?

Ron Paul is one of very few voices raised on behalf of the Constitution. There are many others including those at ZH. In relation to the population at large these voices are miniscule and hardly listened to - if at all.

So who's fault is it? Those that may not shout loud enough or the mindless, uncaring, dumbded down masses who could not give a shit about anything that is not on the boob tube.

We want change? Its not going to happen until we hit the kind of unemployment where a father can't feed his family. Short of that its all wishful thinking.

[Hot Shakedown]

Is the Constitution still in force? I thought the US was a Corporation and if so, this entire argument is mute. Right?

[falak pema]

wrong...there are 300 million people in USA to cry "wrong" with all their votes..unless they are deaf, dumb and blind!

[Atomizer]

Some may vaguely remember the events that took place in January & February of this year.

In a nutshell, the US Government took down revenue partnerships to collect fines, assume liquidity and expand their business role.

127 Mafia Arrests In Biggest Roundup In US History | Five Families Involved [Video]

Posted on 20 January 2011

Public Corruption Sting Jewish Mafia Connection

Sun, Feb 20, 2011

Certain members in the US Government have assumed controlling interest in this recent take over. Any good investigative journalist can connect the dots.

[Bansters-in-my-...]

Hang Berrnanke from the neck......

Maybe as side kick or two,just to prove the point.

Whers that Greenspan hiding....? Get him...!!!

[Chinese Busboy]

Nice letter. Prof. Fekete is Canadian, no? He have standing to demand the Bernanke impeachment?

I like impeach Hu Jintao. I write letter.

[BernankeHasHemo...]

Impeaching him should just be a start. After he is removed from office he should be tried, convicted and executed. Parts of his body should be cut up, cured and placed on stakes in various financial centers as a warning to the rest of them.

[Fiat Money]

lol. In history PhD David Starkey's masterpiece 13 hour video survey of English history (focused on kings & queens), "Monarchy" (BBC, Amazon)  he reports of an English king (one of William the Conqueror's descendents?) arriving on the throne, to find that England's economy was in tatters, soldiers and merchants were REFUSING payment in coins from the royal mint of his father, because minters were DEBASING the coins with base metals.   The King ordered an investigation, and, sure enough,  something like 10 of 14 royal minters were found guilty. 

  In typical medieval fashion they were condemned to horrible, public execution: hands cut off (for theft), castrated, & disembowled (for treason, weakening the national economy and thus making England weaker to foreign invaders) before beheading. 

[Urban Redneck]

Don't have a TV , but typical medieval fashion reads like Saturday in the country.  Field dressing dinner (venison) is metaphorically similar to making sausage.  Hunters have the common decency to put their prey down quickly, however, there is probably a large number who might change practice if the state game office started offering tags for central bankers.

City folk tend to be ignorant of what living beyond the 'burbs actually entails. 

[BernankeHasHemo...]

Now is the time for violent revolution.

[thedrickster]

Fed.

[Cursive]

@ Bernankemustdie a/k/a BernankeHasHemo

Now is the time for violent revolution.

Doubtful that the educated amoung us who understand our predicament and what/who got us here would be the place to incite a riot.  The violent demonstrations have already begun in Wisconsin and it seemed to be the responsiblility of SEIU "activists" who don't care about rule of law, just their unfunded promises.

[essence]

Basics.... first steps, everything has a start.

Congress is the lyinchpin, so the first step is .... taking back Congress from the Wall St/Big Banks/MilitaryIndustrialComplex forces that currently own it.

The key is to not vote for those who have enlisted deep pockets to fund their campaigns. Charles Hugh Smith had a great post on ZeroHedge concerning this very topic just recently.

First things first ... just eschew those politicians with Billion dollar budgets (gee, who do we know that is planning on spending one billion to secure his reelection).

[proLiberty]

Either there is total, complete, and utter lawlessness, or the Federal Reserve Corporation is a law unto itself.

[Cursive]

The law says that F.R. credit must be backed by collateral security at the time of issuance, usually in the form of an equivalent amount of U.S. Treasury paper.

I like Prof. Fekete's argument.  I agree with it.  Problem is, we haven't had the rule of law in this country for at least 98 years now.

[Hephasteus]

The original charters of the banks used fractional reserve money creation to create the original banks. They were illegal from the birth. So yes there has been no rule of law for 98 years now. It's been purely illusory.

[Fix It Again Timmy]

The only place you will find "law" today is in the dictionary.

[mberry8870]

This guy is an idiot. He actually wrote this; "Such a blatant violation of the law would make him totally unfit for the powerful office he occupies."

Really?!?!? The Treasury Secretary doesn't pay his taxes. The former head of commerce hid income.

Violating the law is not an obstacle to holding an office.

My bad. Not from this country. Doesn't know our political system. Sorry

[nah]

law is just used differently now... it flames the passions of normal human beings for power until they think they have it

.

and after 4000hrs of paperwork and brainwashing... they dont know how to give it up

[nah]

i think alot of papered people got us into money experiments on children... and if we all had to stand on our 'true' wealth alot new money would appear, a paradigm shift

.

lots of people are prepared to see thru the bullshit and move on... but till then easy money seems to victimize people

.

just the ask libyans

[antidisestablis...]

This should do about as much good as the open letter I wrote to God...Dear God, there are too many dirtballs on your precious little planet here and I want some action taken immediately, or else!"

[dootyfree]

Antal E. Fekete might want to learn how the monetary system actually works.  Study the mechanics of QE, it it merely an asset swap.  There are no more assets in the system then before.  It is merely the changing of numbers in accounts.  stop the fear mongering.

[LudwigVon]

So sad.

[dootyfree]

Why don't you explain to me how QE works then?  I would love to hear your wisdom.

[indio007]

It's more like a liability swap than an asset swap... 

[dootyfree]

incorrect.

treasury = asset

dollar = asset

both are claims against goods and services.

a dollar just has a different time perspective.

Think of it like a checking account(dollar) vs. a savings account(treasury)

[Manipulism]

Dear Mr. Fekete,

you adressed the wrong person.

Obama, Bernanke, Paul are only K A B U K I.

The stringpuller are invisible.

[off-the-record]

All of this is fine, but there is another unlawful missing: Bernanke publicly announced his intent to manipulate market prices.

[SumDumGuy]

If the gov't shuts down do the printing presses stop running?

[KnightsofNee]

How to live a stress free life. Take 250mg of Fuck It All (OTC) twice daily followed by half liter of Pinnicale nightly, put on a Ray LaMontagne CD for the proper mood of despair and eventually pass out. Rinse and Repeat. Living in the US feels like Hospice care and you are terminal and resigned to the fact.

[Dental Floss Tycoon]

"that would make money creation through the F.R. banks a charade, reserve requirements a farce, and the dollar a sham."

Right.  What's your point?

[tomster0126]

Bernanke, why are you such a shady mofo?  This clown has done nothing for anybody...go Kucinich!

www.forecastfortomorrow.com

[sscam2001]

Well if the brits do pull up with an Army and navy bought with those future dollars off our shore, we welcome them and show them our second amendment just like we did before.

[Sheriff Douchen...]

+1 from a Canadian prof!