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The "Short Sellers" Nightmare "What lies behind us and what lies before us are small matters compared to what lies within us." –Ralph Waldo Emerson. Gold Bulls express frustration with the lack of exposure to the obvious and deliberate manipulation of the gold and silver markets. Its not that this interference is new, but rather that it is so obvious. While a casual reading of the Briefs in the Hove vs. BIS lawsuit certainly causes one to question motives, looming in the balance is a much larger fiasco that the gold and silver market stratagems are masking and which is threatening to be exposed. These monetary metals exert fiscal pressure in response to imbalances and even though cartels can covertly disperse these pressures temporarily, economic truth will eventually prevail and lay bare the manipulators. We have been afforded a peek inside Enron by Frank Partnoy, a law professor and former Wall Street derivative specialist. He was one of many who will appear before Congressional Committees in the aftermath of the company's disintegration after its transformation from Energy Trader to Hedge Fund. Enron is not alone, and certainly not the largest player in the derivative markets, but of significant size to warrant attention. Major events do cause severe changes in the dynamics underpinning markets and human perceptions of value. So much for the "What Happened?" Pro-gold advocates have been painted with the broad brush of extremism. GATA, (the Gold Anti Trust Action group), has pointed out that there exists collusion on the part of bullion banks, BIS, ESF, IMF, the U.S. Treasury, and Central Banks to suppress the price of gold. The cartel has responded by alleging the accusers are mere conspiracy theorists. Thanks to this tenacious group of gold supporters, we now know the "What Happened" and most of the "How it Happened." Let's bypass this stage of the debate and move on to the "WHY did it Happen". Markets move up and down and fundamental factors will eventually right inequities. Profits are made in both market directions. Considering all the facts that GATA has brought to bear on the metal, the cartel is adamant about continuing the charade. If you are in the gold market for a profit motive, the decades long bear market has run its course and it is now time to become a bull and make your profits on the upside. Were it not gold and silver that was the object of these manipulations, hardly anyone would notice. However, gold is the restraint upon which the frugal keep the prodigal, and this metal is in the initial stages of unwinding decades of deception so deep in both political parties that neither will discuss it. Valuable insight has been gleaned from the Enron caper, one of which is the profitability in writing derivatives, and another is cognizance of the age of the industry. These instruments have nominal values estimated to be in excess of 100 trillion dollars. Putting this in perspective, the total income of the United States in 2000 was 7.95 trillion dollars. Public, corporate and private debts are estimated at 16 trillion dollars and some sources cite a total of over 30 trillion when City, County, State, and Federal governments, corporate bonds, all retirement accounts, unfunded social security liabilities, pensions, etc. are all included. Which ever figure we use, 98% has been incurred since the end of WWII. Assuming the larger total debt figure, this means that since WWII, all the improvements to the railway system, to the highways and interstate highway system, to the vehicle industry, to the airplane industry, the construction industry, the manufacturing industry, the putting of men in space and on the moon, the transistor technology, the computer chip technology, the improvements in the medical and scientific arts, all the labor expended in the past 55+ years, all the raw materials we produced, everything in total, is worth 30 Trillion dollars less than nothing. Is our present economic system built to serve Man or is Man made servant to the present economic system? How else could we do all those things and have such a debt? This is gold's message and in this treatise we will show how this Nation was deliberately and purposely brought to the brink. Once the facts are chronicled, therein will lay the propensity to unite labor, seniors, tax overhaul advocates, raw material producers, manufactures, and investors, all around a central theme. It is hoped that then will come the hue and cry to bring those responsible to account. If anything, the Enron debacle has again shown that the "Government of We the People" has become the "Government for Sale". At the last tally we saw, Enron had "assisted" half of the members of the House of Representatives, three-fourths of the members of the Senate and two Administrations. Countless other entities and PAC's have and continue to steadily buy influence from politicians. Considering all the Committees "investigating" Enron, does anyone investigate how many career politicians and bureaucrats retire multi-millionaires? This treatise will show that these politicians have the knowledge and opportunity to restore the Country, but they lack the will. Perhaps the fear to admit the injustices wrought upon the public is such that they have "thrown their hands in the air" and choose to ignore the inevitable consequences. The title of this treatise bears special significance to the fore knowledge of those in Washington. A "short-seller" is of course a party who chooses to sell a futures contract in anticipation that the price of the underlying commodity will decrease. How many traders are aware of the Statutory provisions in the United States Code that, in certain conditions, the Government can raise commodity prices virtually overnight, requiring traders to pay, as in the case of some grains, a margin call of $29,000 per contract. These are not SEC regulations that can be manipulated, but rather Federal Statutes that can only be addressed by Congress. The Statute is not improper; the system that masks reality and requires the Statute is the problem. Most news today is sound bites, small bits of news that has to be pieced together to form a "whole" story. If you are to understand where we are economically, you must see the "big picture." We have attempted to do that here, and this is not a short treatise for that reason and some material has not been included, however, the material we left out will comprise future (and much shorter) essays. There remains much more to this story yet to be told. Enjoy. History is replete with accounts of deceitful men with ulterior motives who are avaricious and have designed schemes to fleece an unsuspecting public of their savings and freedom. There are however safeguards or early warning signs which signal when misdeeds are employed. An effective manipulator must first confuse the issues and misdirect attention to other parties, causes or forces. The manipulations can be continued while the victims are involved in strife and conflict among themselves. The manipulations will eventually end of course, as they all do, especially when personal ambition is exceeded by physical impossibility. While we do not know which event will ultimately unravel this Grand Scheme, whether it be a derivative meltdown, more Enron style capers, stock market readjustment, large down turn in world economies, or military conflict, we do know that one or more will cause the correction. The 9-11 disaster received blame for a great amount of economic calamity whereas in fact the disaster only revealed market forces that were lurking beneath the surface. When this Grand Scheme is exposed it will be another mega event that gets "credit" for causing the correction. It always seems to happen this way so the seeds of destruction can be re-sown which will bear fruit in yet another generation. By the time you have finished this treatise, these truths will manifest themselves in ways most will have never imagined. In this "modern age" we h ave been lead to believe that our economic system has evolved into a new-age miracle the likes of which has never before existed and modern technology now somehow renders past successes obsolete. Special self- interests expound the "exuberance and resiliency" of the "new" American economy, (to big to fail), and while at times it may spit and sputter, it will continue to march forward and upward forever. Maybe, but then again, as someone has eloquently stated: People seldom get what they want, but rather what they deserve. On the other side of the raven, there stand the "doom and gloomers", who recite equally convincing arguments that the sky is in fact falling and with it personal wealth and liberties. Personally, and the reason for this treatise, is not to become an advocate for either position, while both have fundamental merits. Rather, my purpose is to reveal an aspect of economic reality which has been completely ignored and which could very easily blind-side market participants whether they be investors or consumers. A large degree of the ignorance for past economic truth lies in a lack of understanding of economic principles and deliberate misinformation designed specifically to mislead and deceive a gullible public. Anyone trading commodities or for that matter involved in any financial markets will want to read this treatise for some profound insights which you will definitely not hear from Wall Street or Brokers, although your personal wealth is very much at risk in ways and a magnitude you never dreamed possible. You will want to print this treatise as some material refers to charts and tables on previous pages. Share this information with family and friends. It may be imperative that you take immediate steps to protect your financial health. We unequivocally guarantee revelations that will alter trading decisions. Prologue The source of information for this treatise is taken from the historical record of the United States and all sources are identified so the reader is not asked to take them without examining the information for yourself. John Maynard Keynes' much-revered concept of "deficit finance" for creating investment, which then is somehow supposed to be the engine that moves the economy, does not provide a means to repay the debt. It is sold as a perpetual motion machine, but we have 30 trillion dollars of debt that prove otherwise. Abraham Lincoln stated, "Labor is prior to and creates all capital. We will examine an "earned income" based economic approach which was implemented by the U. S. Congress for monetary stabilization in 1942, its significance to world economics, and why it was shelved in favor of the predicament we find ourselves in today. You may find it disconcerting that the political establishment in Washington knows exactly how to correct the morass in which we find ourselves. While this treatise is of some length, the basic background is necessary for the reader to grasp the significance of the economic principles behind an exchange-balanced economy, how these principles interact with all wealth and how these principles could be implement literally overnight, with major consequences for anyone on the wrong side of a trade. Rather than bore the reader with complicated and mystical theoretical abstractions, we have reduced these economic principles to basic scientific mathematical calculations. The reader can simply "do the math" to see the logic of our founding fathers to create a nation based upon 'Peoples Capitalism'. In a previous essay, I stated there are three questions we must ask ourselves in order to understand our economic riddle: 1. What is Money? 2. What is it Worth? 3. How does it get into Circulation? That essay dealt partially with the first question and we will now address all three simultaneously. Before we begin, some points which may further pique your interest which are currently the subject of much written and verbal communication concerning economic and monetary issues, and a brief comment: * The US Dollar (strong dollar) is going to crash and take the economy with it. * The US dollar and the Euro are competing for dominance. * Total public and private debt is unsustainable. * The US budget is going to experience huge deficits. * A Stock Market crash is immanent. * We are at the start of a bear market in stocks that will last as long as the Bull market (about 20 years). * The "boomers" in the Stock Market, the 'buy and holders', will have no one to sell to when they retire. * The Federal Reserve must continue to inflate the money supply at unprecedented levels. * Large US Banks are on the verge of collapse. * The entire World is on the verge of an economic Depression. Any and/or all of these scenarios could happen, but only if we, by deliberate, conscious choice, allow them to happen. The foundational economic principles of the American economic system were designed to prevent any of the above conditions. Since we are taking about economics, we need to first define what that is; as per Webster's Dictionary- economics: the science that deals with the production, distribution, and consumption of wealth.... In that economics is a "science", it follows that it is governed by laws and is provable. Individually and corporately we determine our financial viability by examining our Balance Sheet items, assets and liabilities, and our Cash Flow Statement. As a Nation we must do the same to see where we have been and where we are headed. By utilizing scientific means we can ascertain the steps needed to correct imbalances as they appear. Obviously, this is not being done today and the ramifications are far greater than we are being told. An economy is "an exchange of goods and services and not a traffic in money". This treatise will show where the "train left the tracks" nearly 50 years ago and how and why the American public and the World has been deliberately deceived. The result of the derailment is coming back to haunt us as the disruption will cause massive social/political convulsions unless quickly reversed. Gold and silver are two precious metals that have both industrial and monetary value and significance. Volumes have been written about these two metals and how special interests have manipulated and orchestrated this market for ulterior motives. The GATA, Gold Anti-Trust Action group, and their loyal army have done the most work in bringing these revelations to the light of day. Yet the public still does not see the picture, or more pointedly, the establishment media does not want to pursue these facts and make them front page headlines. The gold army is 'at the door' of exposing the largest quagmire to ever hit the banking industry. We say quagmire because their practices and methods are calculated and deliberately orchestrated to enslave humanity for global objectives. In this treatise we will explain economic principles using agricultural commodities because the correlation of the basic raw material to consumer products to national income is somewhat more readily visible with food and fiber products than with other raw material products. The effect is the same, just more visible and once the reader sees the connection, then it becomes more apparent why the gold and silver prices are being manufactured and manipulated. The source for the information and facts presented herein are rooted in a previously orchestrated depression, the one of the 1930's. The Raw Materials National Council of Sioux City, Iowa, did extensive research work during that depression era which represented a factual presentation of the United States as a business. This work revealed a Natural Law of Exchange that operates constantly in our Private Enterprise economy and constantly applies to all nations of the world regardless of their economic premise. By persistent and patient application of the science of arithmetic, rather than theory based upon "utopian dreams" or exploitation, basic and constant ratios were uncovered. A much more detailed description of their work is contained on our web site at NorthernLightsReserch.com and we will provide an overview in this treatise. As we are indebted to them for their insights and commitment to p ursuing economic freedom, we have at times quoted their material extensively herein. As a summary of their work, suffice it to say that the relationships of raw material income and farm income to national income had been checked for several years with leading businessmen and economists in the United States. No one has ever been able to successfully refute their analysis or conclusions. When America last operated under a balanced exchange equation, each gross farm dollar translated into a dollar of factory payroll, and the overall national income multiplied according to farm income times 7; the ratio was 1-1-7. Service industries and sales each added to the price but not to the product. (A similar definite ratio exists between all raw material income, adding mining, forestry, fishing, etc., to agricultural income, the national income was approximately 5 times the total, or, a ratio of 1-1-5, using gross income figures for all raw materials. The reason agriculture's ratio is higher is because much more agricultural wealth is consumed (destroyed) each day, breakfast, dinner and supper. In fact, this research was the foundation for National legislation that required their findings to be the basis for 'dollar value determinations' and stabilization during World War II. "With the definite relationship of Agricultural income, all raw material income and factory payrolls to National income, it makes it possible to operate our National economy on the same actuarial basis that we operate Life Insurance Companies. Using the commodity index as a guide, we can determine the price for basic materials in direct proportion to the National Income required to operate the nation as a business, without the need for any debt." Economic Foundations The American people have become a group of specialists and have forgotten that each group is interwoven with every other group in an indivisible economy, with each group a multiple of the complete economy of the United States. As special groups gain advantage over each other they immediately find that other elements of our economy, those which furnish the markets, do not keep pace with them in the consumption of goods and they all fall back in what is usually called a recession. Today, this is being manifested or masked by the tremendous debt carried by consumers and also the necessity to lower prices of goods and even provide zero per cent financing in order to generate sales. In fact a recession is nothing more than an unequal price balance between groups. Utilizing the 1-1-5 ratio, if one sector of the economy is short-changed, the entire economy suffers as a result, and it becomes necessary to "borrow" from tomorrow to pay for today's needs because of the lack of earned income. The research work of the Raw Materials Council proved that the answer to the economic riddle had been obscured by a lot of theory and political philosophy that never has worked in maintaining a stable price level or sustained prosperity. With an ample supply of raw materials and labor, proper pricing of goods and services should automatically create the income to exchange and consume our production. This proper pricing, parity prices, are not price controls, rather parity means price balancing. The consumer price index is established by the competitive selling price of finished goods and it is the changes in this (or similar) index that determine par prices for raw commodities. Parity simply means giving value to money in the form of goods and commodities--units of wealth--not in giving value to these essential things in terms of money. Parity means balance, equal exchange value, without which one party to a transaction is certain to be "shortchanged". It is a simple fact that the financial measure of our economic welfare, whether individual, corporate or governmental, consists of adding up two columns of figures--income and disbursements. Regardless of what our theories may be these two totals tell the story of our economic well-being. Income consists of 1) primary bartering power, which is created by the production and sale of the materials of new wealth--the things which we obtain from the earth, the farms, mines and seas—and, 2) earned income, which is derived from wages, interest and profits. Disbursements include everything on the "outgo" side of the ledger, whether in the accounts of an individual or government. The amount of primary bartering power, or primary income, depends upon two things--the number of units produced and the price received for them by the producer; simply stated: Production x Price = Income. In the processing industries and professions, hours or days of labor times the rate of pay for services rendered, or fees in the case of professions, govern the amount of income. The Raw Material Council's conclusion was: "It is therefore fundamentally necessary that the total annual production of goods and services rendered, times price, plus wages, interest, fees and profits must create an income large enough to pay for all the costs of operating the nation as a business. The total must pay for the costs of government; pay the cost of producing raw materials and for their processing and distribution. Otherwise, we cannot have a sound, solvent economy." (We have provided a mathematical illustration of this principle later in this treatise.) In the past 12 months this Nation has gone from supposedly having a budget surplus to having to inject hundreds of billion of dollars of additional debt into the economy from the Federal Reserve to operate our Federal Government. By all indications, it will again take all of that amount and more of additional debt injection this year to keep the 'ship afloat', plus additional billions of debt for the private and corporate sectors as well. In retrospect, the Raw Material Council's research surrounding the events of 1929 revealed that the depression of 1929 was attributed to the Stock Market Crash, but that was the finale of the show, not the opening act. The opening act was a reduction in raw material prices, starting in 1925 and culminating in 1929. The reduction in raw material prices can be attributed to our financier's desertion of "People's Capitalism" in search of what they thought were higher profits in other lands. Instead of developing the United States, they invested their money in foreign sources of raw materials, sugar plantations, mines, oil wells and so on. After bringing their various projects into production they faced the problem of marketing and turned their eyes to the United States. Through one method or another, tariffs were reduced and evaded by depressing prices in other countries. Raw materials started to flow into the United States, destroying the foundation of our domestic income. The Council's research showed that as little as 2% unregulated imports would destroy domestic markets and exchange relationships. Doesn't NAFA, WTO, fast-tract trade authority and free trade all sound like failed experiments we tried before? It appears our national leaders are implementing trading procedures identical to those of the 1920's, and the results will be much more severe. In that era a larger segment of the population had agrarian roots whereas today the majority reside in cities. In that we know from history what the result will be of employing the failed policies of the past, the question we must ask are WHY are these polices being pursued and for whose benefit? In a Free Trade speech in Brussels in 1848, Karl Marx stated: "The protective system is conservative, the international system on free trade is destructive and for that reason and that reason alone, I am for free trade because it will hasten the day of the economic revolution." What is Money? The Raw Material Council highlighted the fact that numerous research groups, representing various organizations, make little, if any, mention of foreign exchange and its effect on our economy. Money has been represented as a 'mystical creature' that ordinary people know little about. When we look at money as a "medium of exchange" we get a clearer picture of the past, present and future. Recently Alan Greenspan was touting the strength of the dollar versus the Euro and Europeans and made similar characterizations about their medium of exchange in relation to ours. The representations are misplaced. The two Continents could just as well have been exclaiming the supremacy of the Fahrenheit temperature scale versus the Centigrade scale and vice versa. Just because the temperature reading, as measured by the respective scales, goes up or down, it does not mean the measuring device is nearing destruction, but rather, the "environment" upon which the readings are taken is changing. We should look upon money in the abstract in the same way that we consider a pound weight or a yardstick or thirty-six inches. The Bureau of Weights and Measures requires that the exact length of one yardstick to be thirty-six inches and it is irrelevant how many of them there are in the world. Yet, the record of foreign exchange and its measure of value of goods and services has been one of seeming confusion and chaos. "World economy is an exchange of goods and services with money the measuring stick of values". Therefore, if the earnings of nations are to have stability, the value of goods and services must be measured with a stable yardstick. Money came into being as a means of facilitating the exchange of goods produced in an amount above the individual's needs. The merchant gave it as a receipt for goods delivered and the receipt could be used in exchange for other goods. In order for the "dollar" to crash, it must become something that it is not: wealth. Money is a medium of exchange and completely worthless unless we produce commodities for which it may be exchanged. An economy, (Webster's: a system of producing, distributing, and consuming wealth), on the other hand, if not represented by equal exchange, can and do crash. The reason that money has the appearance of wealth is because people don't have enough in sufficient quantity to adequately provide food, shelter and clothing, and the general public today is far removed from the raw material production to provide these necessities for themselves. Normal Period The Raw Material Council's research from the early part of the past Century provided the foundation for the adoption of National Legislation for "regulating the value of money". Just before World War I we had what can be called a normal period of sustained world prosperity. A "normal period" can be defined as any period of five years or more in which we had a sustained prosperity with full employment, a balanced national budget and an expansion of production to take care of the increase in population and to utilize the increase in technological improvement. We have had two such periods early in the 20th century, one in 1910-1914 and the other in 1925-1929. The average price level in either period can be used as a yardstick to measure subsequent price ratios and dollar values. The price levels of both periods were directly or indirectly the result of world prices. The Council's research further indicated that during "normal periods" the inter-relationships between commodities, be it BTU's or calories, also reflected approximate relationships between groups of commodities. For example, 1 oz. of GOLD was equal in value to 10 barrels of OIL. 1 barrel of OIL was equal in value to 2 bushels of WHEAT. During the period from 1910-1914 the price of corn on the farm averaged 57.4 cents per bushel, cotton 12.4 cents per pound, silver (the monetary medium for a large part of the world's population) 57 cents per ounce and gold $20.67 per ounce. The average price level can be called parity or the point of equal exchange for the two commodities and the two metals as monetary measures. The price of gold was the result of an agreement as to the value of gold in maintaining what was called the "gold standard." The price was fixed by government fiat. Silver, (the monetary medium of the nations who had no gold) was allowed to fluctuate on the market along with other commodities, such as the two mentioned. At this same period of time the English pound was valued at $4.87. On this basis an ounce of gold could be exchanged for 166 pounds of cotton while the English pound would buy roughly 40 pounds. We will use cotton as a matter of illustration, although other commodities or weekly payrolls of labor could be substituted for comparison. With the coming of World War I, commodity prices and the price of silver advanced and we had what is called inflation. The value of gold remained unchanged, as the price was fixed at $20.67. On the basis of the average commodity price level in 1910-1914, as 100, commodity prices in 1919 had risen 220 per cent. This meant that in 1919 it took $2.20 to buy the same amount of commodities that $1.00 would buy in 1910-1914. The number of dollars, which represented national income, advanced in ratio to the increased commodity prices and in 1919 our national income was $69.9 billion, as compared to $31 billion during the 1910-1914 period. This was an increase of approximately 225 per cent in total income. Silver had advanced to keep pace with commodity prices and in 1919 was worth $1.25 per ounce as compared to 57 cents per ounce in 1910-1914. The purchasing power of gold lagged behind because it had not increased in value and in 1919 it required roughly 2.2 ounces of gold to buy the same amount of cotton as in the pre-war period. The depression/recession of 1920-1921 in the United States and throughout the world as brought about by the International financiers trying to re-align the price of silver with the old price for gold. This drop of silver prices reduced the purchasing power of the silver nations and commodity prices dropped rapidly. The drop in commodity prices automatically destroyed the income in ratio and in 1921 our national income had dropped to $59 billion from a high in 1920 of $71 billion. This drop in income resulted in bank failures, foreclosures and a large number of bankruptcies. Revision of our tariff structure in 1921 protected us against the low silver price (cheap commodity imports) and in the period of 1925-1929 we had a new "normal period" with the wages paid for labor, industrial prices and farm products in balance. The new price level was 169 per cent of the 1910-1914 level. This new price level was not inflationary because the incomes of our various groups had risen proportionately and assumed a new exchange ratio. Gold had not been revalued and in 1925-1929 an ounce of gold would purchase only about 100 pounds of cotton versus the 166 pounds in 1910-1914 period. This did not affect our prosperity, however, because very few of our population were engaged in gold production. Silver, because of the revaluation by financiers, dropped to 60 cents per ounce in the 1925-1929 period. In our domestic economy, with the increased commodity prices and an increased unit production, we had marked prosperity. With an average of $78 billion of national income during the 1925-1929 period we liquidated some of our war debt and at the same time had enough purchasing power to develop the automobile industry on a large scale and make automobiles part of our living standard. This would not have been possible if prices had been allowed to return to the 1910-1914 level. It is a good example of how a higher price level can bring about prosperity if the prices received by various groups are kept in balance. In 1919 our Public Debt was 27.3 billion dollars and in 1929 that debt had shrunk to 16.9 billion dollars. The 1929 depression was caused by forcing commodity prices to conform to the monetary base of silver and gold at the old 1910-1914 level (60 cents and $20.67 respectively). The new drop in commodity prices threw International exchange into a state of chaos. England was forced off the gold standard in 1931 and substituted a combination of silver and commodities for the gold standard. Her gold was used trying to create a reserve of commodities in order that she might use these reserves to stabilize commodity values. In our own nation the drop in commodity prices created a severe deflation and in 1932 our income had dropped to a low of $39.9 billion from a high of $83 billion in 1929. This loss of $43 billion per year income threw millions out of work and we had the worst depression in the history of the United States. It was merely a monetary condition, as our raw material production in 1932 was quite similar to 1929. After the election in 1932, the Roosevelt administration took some steps to remedy the situation. In regard to foreign exchange they decided to revalue gold from $20.67 to $35.00 per ounce, or 169 per cent of the 1910-1914 level, thus restoring its relationship to the 1925-1929 price level of other commodities. In other words, they felt that with the new gold price, commodity prices would come back to the 1925-1929 normal. If other nations had co-operated and at the same time increased the price of silver to 97 cents per ounce, or 169 per cent of the 1910-1914 level, there would have been a chance of restoring the ratios between money and commodities that existed in 1910-1914. Instead, other nations sold us their gold, thereby removing backing for their currencies and commodity prices didn't recover. The Raw Material Council presented their findings to several sessions of Congress throughout the 1930's. As a result, the U.S. Congress in 1938 required the continuous computing and monitoring of parity prices for over150 agricultural commodities using the 1910-1914 period. After WWII broke out, members of the Raw Material Council again took their research work to the U.S. Congress, specifically to the Banking and Currency Committee, not the Agricultural Committee. The Banking and Currency Committee was created in 1865 and its jurisdiction included the legislation that created the Federal Reserve in 1913 and the establishment and operation of the Federal Reserve banks since that date. Formal jurisdiction of the Committee was defined to include the following subjects: * Banking and currency generally. * Control of price of commodities, rents, or services. * Deposit insurance. * Federal Reserve System. * Financial aid to commerce and industry, * Gold and silver, including the coinage thereof. * Issuance of notes and redemption thereof. * Public and private housing. * Valuation and revaluation of the dollar. (Source: http://www.nara.gov/nara/legislative/house_guide/hgch05.html) The work of the Council was on the monetary end of the economy and their research proved that by manipulating the prices of raw materials, earned income is eliminated, thus forcing people to borrow money to provide for necessities. Banks, fearful of not getting repaid, would not make loans necessary to prosecute the war effort. The Council's work proved that if farm prices were supported at 90% of parity the Nation would have the earned income for stability. The result was a monetization of farm raw materials, the Steagall Amendment to the War Stabilization Act of 1942, (P.L. 77-144). For a brief period of American history, Congress took control of "regulating the value of money" away from the Federal Reserve, but it only lasted about 10 years. As was true of most legislation passed during the War period, the Steagall Amendment carried a "sunset" provision for termination two years after the War ended. The third act of the First Congress was a tariff law to prevent cheap foreign goods and debased foreign currencies from determining the value of American money. It has always been the government's job to regulate that value of money (protect the public), and failure to regulate that value today constitutes gross dereliction of duty of all those in the House, Senate, and the Administrations as well. It goes without saying that winners write the History books and history, or vested self- interests who re-write history, have not been friendly to the parity concept and its purpose. Parity is openly discounted and the Steagall Amendment is given a "brush off" as a short-term measure to deal with farm surpluses. Pundits claim that the Steagall Amendment was implemented to solely assist farm income during WWII, however they fail to explain the fact that Steagall was originally implemented almost six months prior to our entering the War and six months later modified by increasing the parity requirements. Steagall is the reason for the assumption that wars bring prosperity, when in truth, parity prices allowed an equal exchange economy which included servicing the costs associated with the War effort. During WWII the Public Debt increased by about $220.5 billion dollars and that Public Debt started to decrease after hostilities ended. During the localized Vietnam conflict, from 1956 to 1973, the Public Debt increased by about $193.2 billion and has increased exponentially ever since to today's level of $6 Trillion. Given all this negativity, the United States Department of Agriculture is still required to compute parity prices, although the parity computations used today are far different than those under the Steagall Amendment. Law of Markets "Say's Law of Markets said that division of labor sets up reciprocal markets for each of the divisions of labor automatically. Those who farmed, for instance, provide the market for those who made tools-and those who neither farmed nor manufactured were in effect supported as a service industry by the productive elements in society. The justification for the school teacher, the preacher, the policeman, the doctor was seated in the fact that service industries allowed farmers and manufacturers to be even more productive, having had service work taken off their hands. Economists in effect said that since division of labor set up reciprocal markets, and since human wants could not be satisfied, there could be no such thing as under consumption or overproduction or unemployment. We know it has never been quite that simple. Ignorance of equitable exchange between the various divisions of labor has caused recessions and depressions because of the failure to regulate the value of money. Primary production--that is, taking raw materials from mother earth-comes first. You can easily trace man from hunter to farmer. He took food and raw materials from nature, and the equation in terms of bookkeeping was man debited, nature credited. The farmer no longer made his own clothes or made his own tools. He did not build his own farm equipment, but depended on the man in the city to handle that for him. That is what is meant by division of labor. But the only new thing that entered the economic equation continued to be raw materials, farm crops, iron ore, timber, coal, wool for a coat or cotton for a workers clothes-man debited, nature credited! Division of labor aided efficiency, but in a physical sense manufacturing, trades, and services simply added to the price, and not to the raw materials in the product. Except for farming, mining, forestry, fishing, all other equations in the economy read: man debited, man credited- a wash! There never has been and never will be a profit to an economy that does not read man debited, nature credited simply because nature is not paid back. This is quite different from the economics of an individual. An individual can make a profit at the expense of another, but the transaction is still a wash as far as the economy is concerned--man debited, man credited! If prices in exchange are at par, then production in fact sets up the credits for consumption of production (as will be shown in the example in a few paragraphs below). Unfortunately, institutional arrangements-- trading houses, banks, government itself-- have been used not to assure par exchange, but to enhance predatory business profits, and, in the case of government, social programs are implemented to keep the worst effects of predatory profits from showing. That is why we have institutionalized poverty, low cost housing, relief checks, Medicare/Medicaid, food stamps, and government as the employer of last resort." (From "Parity, the Key to Prosperity Unlimited", by Charles Walters Jr.) Earlier in this treatise, it was stated that we have become a group of specialists and each group is interwoven with every other group in the indivisible economy. By way of illustration, we will look at a commodity, wheat, and its final product, a loaf of bread. Obviously, the farmer did not produce the wheat for the loaf of bread all by himself. Labor from a manufacturing plant built his tractor and other farm implements, refineries and truckers supplied his fuel and fertilizers, other laborers supplied his cloths and groceries, still others built his home and farm buildings, while others staffed schools, libraries, law enforcement agencies, hospitals and so on. Although some of these laborers, (the farmer is also only a laborer applying his talents and capital to the soil), may not realize that they are helping the farmer produce the wheat and therefore, in the long run, must be paid by him. The farmer too, may not fully realize how many people helped him produce that bushel of wheat and therefore have earned a share in the price he receives. The farmer and all of his helpers should receive a share of the bread that is the finished product of the wheat. They should get no more and no less than they have coming. Since we use money as our 'medium of exchange', the farmer must sell the wheat for enough so that he can pay his helpers and himself enough so that each can go and buy their fair share of the bread they helped produce. Simply stated: Production times Price = Income The same story is true for all raw material producers -- ranchers, miners, fishermen, lumbermen, etc. None of them did all the work themselves. They all had helpers. The big important difference is that the raw material producer gets the money first. He must get enough not only for himself, but also enough to pay his helpers so that they can buy their fair share of what they helped to produce. Lets now put this information into practical use in a simplistic illustration: A bushel of wheat (a raw material) will produce 70 one pound loaves of bread (a finished product). Today a bushel of wheat sells for almost $3.00 per bushel and one pound loaf of bread sells for almost $1.00. That means we will have to generate an income of $70.00 in order to be able to buy all the bread we are able to produce from a bushel of wheat. 70 loaves times $1.00 per loaf = $70.00. The price of wheat is $3.00 times the trade turn multiplier of seven (Raw Material Council research) equals a national income generated by the bushel of wheat of $21.00; in other words, we are short $49.00 from buying the bread produced from one bushel of wheat. We have a money supply of $21.00 with which to purchase $70.00 worth of bread. Where else can we get the $49? To the rescue comes Mr. Greenspan and his private Banking group, the Federal Reserve. In the last fiscal year they had to pump in hundreds of billions of dollars of public and private debt, in addition to all the tax revenues spent, so we could consume raw material production and service past debt infusions on groceries consumed but not paid for in previous years. These Bankers have job security for the foreseeable future or at least until they acquire title to all the peoples' assets, with the aid of our elected officials in Congress. We can no longer charge groceries at the local store, but rather we have to pay with cash or plastic and Washington "beats its chest" exclaiming to us how "cheap" our food is. Consumers have to finance appliances, furniture, cars, homes, and so forth to mask the huge shortfall in income to consume our food products and other raw materials. If a consumer defaults on loan payments these consumer items can be repossessed. Later in this treatise we will cover today's actual parity price levels for various commodities and their ominous significance in the larger scheme of economics, but for now, we'll state the present parity price for a bushel of wheat is about $14.46, depending upon which index is used. Thus, $14.46 times the trade turn multiplier of seven, equals a national income of $101.22, to purchase $70.00 worth of bread from the one bushel of wheat. Of course under parity, the price of a loaf of bread would rise slightly to reflect an increase in the price of wheat, wages and fuel etc., but the parity price of the bushel of wheat would cover all these costs, with a remainder left over for national savings. This is why the Public Debt amounts decreased in the 1925-1929 period and the 1946-1950 period when we operated under parity prices. ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! 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