Revolution or Evolution:  End the Fed, Own or Be Owned

by Dr. Robert D. Crane  

  On Monday, November 17, 2008, the heads of two revolutionary movements met in Arlington, Virginia, to make last-minute plans for a day of rage on November 22nd by demonstrators in 39 cities calling for the abolition of the Federal Reserve System.  They believed that the Fed has been the ultimate cause of the growing wealth gap both within and among nations and for the resulting growth of terrorism and terroristic counter-terrorism throughout the world. 

  Rather than blaming persons and ideologies, like the NeoCons, for injustice, they blamed the underlying system of money and credit that currently gives rise to the concentration of wealth in an elite at the expense of everyone else.  They believe that crimes against humanity have been committed and might be resorted to even more in the future by those who have an existential fear of global chaos and who are convinced that it can be countered only by using force to maintain the present system with all of its injustices.

  These two revolutionary movements, which, in turn, cooperate with and represent a number of other like-minded movements, were headed by two members of the younger generation, the former U.S. marines Adam Kokesh and Debbie Krueger, and by two members of the older generation, Norman Kurland and Robert D. Crane. 

  Debbie is a very young looking mother of five who could not stand to see what had happened to the children in Iraq.  Adam participated in the destruction of Fallujah in Iraq, where the American occupying forces surrounded the city and then destroyed it in order to wipe out the “bad guys” and then blocked access to hospitals so that the wounded would die.  He is known to Muslims for his campaign against David Horowitz’s “Islamo-Fascism Awareness Week” in October, 2007, when he put up a satirical sign at George Washington University, signed Students for Conservato-Fascism Awareness, exposing what he called the racism of attacks on Muslims. 

  Adam is from Rowe, New Mexico, where he attended the Native American Preparatory School.  In 1999, he enlisted in the Marine Corps and in 2004 volunteered for Iraq.  He was discharged in 2006 and immediately joined the new Iraq Veterans Against the War.  He has made headlines regularly, most recently on September 4, 2008, when he interrupted Senator John McCain’s acceptance speech at the Republican Nominating Convention while carrying a sign that read, “You can’t win an occupation?”  Two days earlier he spoke at Ron Paul’s Rally for the Republic in St. Paul and exclaimed, “While it is our responsibility now to resist tyranny civilly, while we still can, there may come a time when we will say to the powers that be, be it with your blood or ours we have come to water the tree of liberty. Who will stand with me?” 

  Norman Kurland was a leader in the civil rights movement in the early days of Selma, Alabama, almost half a century ago, and has been active ever since as a lawyer and investment advisor in promoting broad-based capital ownership throughout the world.  Robert Crane was the first American to study at a German university after World War II, where he spent a year writing a book on the spiritual dynamics of resistance against the totalitarian state.  He ended up leading an ad hoc resistance movement against Communism in Eastern Europe in 1948, celebrated his twentieth birthday in Stalin’s Gulag or prison system, and is perhaps the only person to have escaped twice and survived. 

  Kurland and Crane are among the five founders of Equity Expansion International, an international investment advisory firm, which promotes both equity in the sense of justice and equity in the sense of broadened participation of employees and citizens in productive enterprises.  The two of them, with half a dozen others, co-founded the Center for Economic and Social Justice in 1984 in Washington, D.C., in order to perfect America’s free market economic system through a Just Third Way that would broaden capital ownership by reforming the existing system from within.

  Adam wanted to abolish the Federal Reserve System through a popular revolution in the name of “End the Fed.”  Kurland was willing to keep it in private hands but to reform it through evolution under the banner of “Focus on the Fed.”  Adam said that as a pragmatist he would accept the evolutionary path to “end the Fed as we now know it,” but that people will not protest in the streets to demand mere evolution of a bankrupt system. 

  The path of revolution with a bottom line of peace, prosperity, and freedom through compassionate justice, including abolition of the Fed as a privately owned institution, was supported the same day as the November 22nd demonstrations by the distribution of the November-December issue of the liberal-traditionalist journal, Tikkun: To Mend, Repair, and Transform the World, produced by Rabbi Michael Lerner.  This issue contains a lengthy position paper entitled ‘‘After the Meltdown: Economic Redesign for the 21st Century.”

  After making a good case for the politically correct ideology of “Limits to Growth,” this paper pioneers two politically uncorrect propositions, namely, that long-term growth should come in part through broadening capital ownership to every individual American and that interest-free stimulus for short-term growth should be provided directly from the Department of the Treasury for infrastructural projects.  The argument in this position paper on an economic redesign for the 21st century is that these two revolutionary courses of action can be implemented only by reversing the privatization of money and credit that was first instituted by the Federal Reserve Act of 1913. 

  This position paper by David Korton, author of When Corporations Rule the World and founder of Yes! Magazine, http://www.davidkorten.org, first rebuts Jeffery Sachs’ 2008 book, Common Wealth: Economics for a Crowded Planet, as merely a prescription to fine-tune a failed system of money and credit by band-aid measures.  Korten then attempts to further demolish Sachs’ paradigm of thought by highlighting James Gustave Speth’s 2008 book, Bridge at the Edge of the World, who, Korten says, “recommends a redesign of ‘the operating system of capitalism’ to support the development of local economies populated with firms that feature worker and community ownership and to charter corporations only to serve a public interest.”

  This is followed by a clear explanation of the current system of money and banking, whereby banks and financial institutions leverage their assets by as much as thirty times so that one dollar of real assets can be used as backing for thirty dollars in loans.  This creates 29 dollars of money with no real value at all by simple book-keeping legerdemain.  The financial institutions pocket the interest on the total sum, which must be paid for those who need to borrow money for either investment in productive enterprises, i.e., Main Street, or consumption.  Those who have no money thereby support those who do, which highly concentrates ownership of both real and fictional wealth.  Nowadays almost every informed person “in the street” has come to understand the nature of derivatives and credit swaps and selling-short, which are merely clever ways to multiply debt with no value into more debt with even less value until the giant ponzi scheme collapses and leaves the taxpayer to pick up the pieces by compensating the originators of the scheme for their exploitation of the system.

  Korten begins this section of his position paper by citing Kevin Philip’s book, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.  He observes that in the Wall Street money game, “Players use money to make money for people who have money, without producing anything of value.”  As a result, finance has become the dominant and most profitable sector of the economy, so that one-third of the total U.S. economy has no value whatsoever, consisting only in the buying and selling of debt.  In 2006, such financial sector debt totaled 14 trillion dollars and exceeded even the total U.S. Gross Domestic Product.  He notes, “The Wall Street commitment to an upward redistribution of wealth was so successful that from 1980 to 2005, the highest earning 1 per cent of the U.S. population increased its share of national cash income from 9 to 19 percent.  And most of that gain went to the top tenth of 1 percent.”

  What is the solution?  The first and most revolutionary, and therefore most politically uncorrect, is to limit the creation of money to financing growth in real economic assets, such as plant and equipment and managerial knowhow.  This can be accomplished by introducing a two-tier interest rate, one for production with zero interest, and one for consumption at an interest rate high enough to deter irresponsible borrowing.  Both would be managed through a carefully regulated commercial banking system. 

  Such interest free money for producing real assets could be further restricted to finance private enterprises either wholly or substantially owned by the employees, for which there are already several laws on the books to provide incentives, such as the ESOPs or employee stock ownership plans.

  Still more effective would be what is known as Capital Homesteading, modeled after Abraham Lincoln’s land homesteading, which provided equal access for every American to gain ownership of the principal source of wealth creation at the time, namely, land.  In the modern capital intensive economy, equal access to the production and profits of wealth can be provided by removing the barriers to credit, so that every person can gain personal ownership of productive capital based on future profits rather than on past accumulation of wealth.

  Capital homesteading could provide 7,000 dollars of credit at birth to every American citizen and an equal amount thereafter throughout his or her life for investment in the productive economy.  This would provide enough to cover most of the expenses of private education, universal health care, and retirement, which otherwise would remain unfunded even in the most optimistic projections.  Upon retirement, every person would have an estate worth 600,000 dollars, which would support an annual retirement income of perhaps one tenth of that.  Even this could be supplemented by various means, including Community Investment Corporations and Home Ownership Corporations.

  As indicated in my article, “The Dissolution of Two Party America: Challenge or Opportunity for a Grand Strategy of Paradigmatic Revolution,” http://www.theamericanmuslim.org, November 11, 2008, which gives extensive statistics on the national and global wealth gap, the best summary of what is needed in a producer oriented manifesto is Norman Kurland’s scholarly article, ‘‘A New Look at Prices and Money,’’ published in The Journal of Socio-Economics and available online at http://www.cesj.org/binaryeconomics/price-money.html.  For those without the need for such a condensed summary and for those who need a more popularized introduction, the four best books on economic justice in the capital intensive world of globalization are:

1) Binary Economics: The New Paradigm, by Robert Ashford and Rodney Shakespeare, 1999, University Press of America, which Professor Ashford has spun off into other books, including his book with Peter Challen, Seven Steps to Justice, 2002, with chapters on “Justice for Women,” “The Abraham Society: A Solution for the Middle East,” and “The Kashmiriat Society,” as well as simplified articles, including “Binary Economics,” in Encyclopedia of Law and Society, Sage Publication, 2007;

2) Capital Homesteading for Every Citizen, by Norman G. Kurland, Dawn K. Brohawn, and Michael D. Greaney, 2004, 231 pages, which focuses on the macro-economics of reforming the Fed;

3) In Defense of Human Dignity, Essays on the Just Third Way: A Natural Law Perspective, 2008, 300 pages, by Michael D. Greaney, who is perhaps the world’s leading authority on Roman Catholic teachings about economic justice; and

4) The Modern Universal Paradigm by Rodney Shakespeare, with subtitles ‘‘Tawhidi Economics,’’ ‘‘Shalom Economics,’’ ‘‘Christian Economics,’’ ‘‘Dharma Economics,’’ ‘‘Indigenous ‘Economics,’’ ‘‘Ethical Economics,’’ and ‘‘Binary Economics,’’ 2007, 200 pages.

  The most controversial issue among the revolutionary theorists of the Just Third Way is the use of interest-free loans, repayable and cancellable, for infrastructural projects, which is advocated by Rodney Shakespeare of England. 

  Others go further and advocate the creation of money that is entirely debt-free to fund those infrastructural projects that are not self-financing.  About this politically uncorrect concept Korten writes, “Bank lending at interest isn’t the only way to create money, nor is it the most preferred from a public interest perspective.  There have long been calls from influential economists, politicians, and even U.S. presidents, most famously Jefferson, to replace the private issuance of credit money with a system by which a democratically accountable public institution creates debt-free money. ... For example, it might pay down the federal debt or invest in mass transit infrastructure, solar technology, or public education.  Under this method important public needs can be met without taxation or loan repayment and without the usual expansion and contraction of the economy that results from the expansion and contraction of credit. 

  Still other Just Third Way scholars, led by Shann Turnbull of Australia, recommend the devolution of banking as a key to the devolution of political power by de-nationalizing banking so that individual sustainable communities can devise their own financial solutions to generic problems.

  Many of the issues and options are examined at length in a number of important but lesser known books available only from their publishers, including Joseph Huber and James Robertson’s Creating New Money; Ellen Hodgson Brown’s The Web of Debt; and Stephen Zarlenga’s The Lost Science of Money”; as well as Shann Turnbull’s “Money, Markets, and Climate Change,” http://ssrn.com/abstract=1304083.

  Korten proposes that, “The risk that government might fuel inflation by abusing its money-creation powers can be largely eliminated by placing the power to decide how much new money to issue in the hands of a government-owned version of the Federal Reserve that might function as an independent fourth branch of government much like the judiciary.  The power to decide how to spend the government-created money would continue to reside solely with Congress as part of its overall power to authorize federal spending.  This separation would substantially remove the motivation to abuse the money-creation power.”

  Korten adds: “The potential to mismanage the money supply is always present, no matter how the system is designed.  The advantages of public money issuance include lower taxes, the possibility of eliminating the federal debt, no growth imperative, and a more equitable distribution of wealth.  Although such a proposal would elicit deafening screams from bankers, in the current context their credibility is low and there is little public sympathy for their tender sensibilities.”

  The real issue emphasized now for years by Rabbi Lerner in his many venues, including the magazine Tikkun, is what he calls the spiritual bottom line.  This is common to all the world religions.  This is the pursuit of justice out of awareness of a loving God who in the divine mercy has ordained this as a purpose of human life.

  According to Islamic definitions, justice may be defined as right order in a coherent universe.  Transcendent justice assumes that the universe has purpose beyond its mere existence.  Justice assumes that sentient human beings are part of this order and therefore that every human being by nature seeks justice as a purpose higher than life and liberty, which, in fact, are merely its products. 

  Islamic scholars teach that every animal is endowed with the instinct to live in freedom.  Every human as a free and sentient being has the further instinct to seek one’s own purpose in existence and to become the person that one was created to be.  God knows the identity of this person, so become it.

  Every one of the world religions emphasizes that the pursuit of justice should be the guiding principle in the life of every person, as well as within and among human communities.  The Jewish scriptures in Deuteronomy 16:20 warn, ‘‘Justice, justice, thou shalt pursue.”  Pope Paul VI urged, Si vis pacem, laborate justitiam, “If you want peace, work for justice”.  And the Qur’an states, Wa tama’at kalimatu Rabika sidqan wa ‘adlan, “And the word of your Lord is fulfilled and perfected in truth and in justice.”

  The concept of transcendent justice teaches that there is a common law not only of America but of all humankind, and probably of all sentient beings everywhere in the universe.  There is also a common cult, in the sense of an awareness of the transcendent and of the responsibilities that this awareness entails.  Therefore, there is a common culture.  This has been taught by all the great Western traditionalists, including Christopher Dawson and Arnold Toynbee.  The leader of these Western traditionalists, Russell Kirk, explains their rationale: “At the dawn of civilization, people unite in search of communion with a transcendent power, and from that religious community all the other aspects of a culture flow - including, and indeed especially, a civilization’s laws.” Kirk, Rights and Duties: Reflections on our Conservative Constitution, Spence Publishing, Dallas, 1997, pp. 147-148.

  For most of the world’s peoples the twentieth century was a “dark ages,” when literally hundreds of millions of persons perished from the extremes of secular utopianism.  In the current century even more may perish from both secular and religious fundamentalism locked in combat.  The source of this chaos in the alienation and extremism brought on by injustice continues among the superficial adherents of religion with political agendas of violence.  The great issue of the current century faced now by President Barack Hossein Obama is whether transcendent justice will inform the peoples of the world so that they will be led by leaders who are led by God.