How The Federal Reserve Fooled Americans

Salaam,

Here is my promised delivery in regards to post #9 in the following thread: http://www.turntoislam.com/forum/showthread.php?t=40554.

I hope you find this educational and as a wake up call.

“It is the well enough that the people of the nation do not understand our banking & monetary system, for if they did, I believe there would be revolution before tomorrow morning” Henry Ford

"Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation's debt." Congressman Louis T. McFadden, 1933-34 (see link at bottom for full length speech)

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If you would ask any American citizen what the Federal Reserve is, he probably would tell you that it is a government agency that creates all of the money to run the United States. This, unfortunately, is the misconception most American have: that the Federal Reserve is a government agency, probably because the word “Federal” is used in its name. And this is exactly what the Bankers want: ignorance among the population!

In the next few paragraphs, I am going to simply explain what the Federal Reserve is really all about, and how it is being used to control the United States. A good resource book that I am using is entitled “Billions for the Bankers — Debts for the people” by Sheldon Emry.

A private corporation
The first thing that must be understood is that the Federal Reserve Corporation is not a government agency, as most people think. It is a private corporation controlled by the Bankers, and therefore it is operated for the financial gain of the Bankers over the people, rather than for the good of the people.

When our Founding Fathers wrote the Constitution of the United States back in the 1700's, they specifically stated in Article 1 of this Constitution:

Congress shall have the Power to Coin Money and Regulate the Value Thereof.

It was the wish of the Founding Fathers that the power to create and control the money be in the hands of the Federal Congress, and not in the hands of private Bankers who could charge enormous amounts of interest, and who could actually then control the country by controlling the money. They understood the tricks of the Bankers, for what did Mayer Anselm Rothschild, the great European Banker, once say: “Permit me to issue and control the money of a nation, and I care not who makes its laws...” It was their belief that all citizens should share in the profits of its creation, not just private Bankers, and therefore the national Government must be the only creator of money.

So what happened! For several years after the Constitution was signed, the money in the country was handled both legally and illegally, the Bankers having devised all kinds of tricks to try to take control of the nation's money.

The Federal Reserve Act

But the final blow came in 1913, on Christmas Eve, when the Congress passed the Federal Reserve Act, which officially took the power to create the money to run United States away from the Congress, and gave it over to private Bankers, who called themselves the Federal Reserve Corporation. But note: they are private Bankers.

The passage of this Federal Reserve Act authorized the establishment of a Federal Reserve Corporation, with a Board of Directors (The Federal Reserve Board) to run it. And the United States was divided into 12 Federal Reserve Districts.

This new law completely removed from the Congress the right to create money or to have any control over its creation, and gave this function over to the Federal Reserve Corporation. The Fed printed “Federal Reserve Notes”, which are still accepted today as money among the citizens of the country.

But we have to understand that these Federal Reserve Notes, used as money in the country, cannot be considered as being constitutional money. Why, you ask? Because the Congress went against the Constitution of the United States when it passed this Federal Reserve Act, for it specifically states that Congress, and only Congress shall have the power to coin and regulate the money of the country.

Some might ask: “What does it matter if Congress or private Bankers create the money? It is accepted by the people just the same as a medium of exchange with which to perform business transactions”.

Yes, the Federal Reserve Notes are accepted as a medium of exchange by the people of the United States. But this is a debt-money, being interest is charged on every dollar that is created, but the interest is not created!, Let me give an example to illustrate this point.

To obtain the money

Let us say that the Federal Government needs $1,000,000,000 ($1 billion) more, after it collects the taxes, to continue financing its projects. Since it does not have the money, and Congress has given away its authority to create it, the Government must go to the Federal Reserve, which is now in charge of creating the money for the country. But the Federal Reserve does not just give its money away! The Bankers are willing to deliver $1 billion in money or credit to the Federal Government only in exchange for the Government's agreement to pay it back — with interest! The Congress then authorizes the Treasury Department to print $1 billion in U.S. bonds, which are then delivered to the Federal Reserve Bankers.

The Federal Reserve then pays the cost of printing the $1 billion (about $1,000), and makes the exchange. The Government then used the money to pay its obligations.

Now, what are the results of this transaction! The $1 billion in Government bills is paid, but the Government has now indebted the people to the Bankers for $1 billion, on which the people must pay interest! And, of course, the interest is not created!

And, to top it all, on this $1 billion that the Federal Reserve received in bonds from this transaction, it is legally allowed to create another $15 billion in new credit to lend to states, municipalities, businesses, and individuals. Added to the original $1 billion, they could have $16 billion of created credit out in loans paying them interest, with their only cost being the $1,000 they spent for printing the original $1 billion lent to the Government. Is it diabolical? You bet it is!

“Creating” money

We should probably clarify the term “create”. When we use this term, we refer to the process used to bring money into existence. The Bankers create money out of nothing, simply by writing numbers in their ledger books, and then giving loans to the American people with this money, allowing them to write checks on the numbers written in their accounts, and then requiring payment with interest. Money is nothing but numbers, be it numbers in a ledger book, on checks, or on dollar bills. Using this process, most banks are legally allowed to lend out up to 50 times of what they have on deposit, creating the money out of nothing and then charging interest on it. You have to admit that it is quite a racket!.

And the Federal Reserve prints the paper money we use in circulation, the Federal Reserve Notes, by having numbers printed on pieces of paper of little value, since a few cents will print a $1 bill or a $10,000 bill (at the same cost). Money is very cheap to make, and whoever has the legal right to create the money in a nation can make a tremendous profit.

The national debt

The United States has plunged itself terribly into debt since the Federal Reserve Act was passed.

In 1910, before the passage of the Federal Reserve Act, the federal debt was only $1 billion, or $12.40 per citizen. State and local debts were practically non-existent.

By 1920, after only 6 years of Federal Reserve “shenanigans”, the federal debt had jumped to $24 billion, or $228 per person.

In 1960, the federal debt reached $284 billion, or $1,575 per citizen, and state and local debts were mushrooming.

By 1981, the federal debt passed $1 trillion, and was growing exponentially, being the Banker's tripled the interest rates. State and local debts were more than the federal, and with business and personal debts, the total was over $6 trillion, 3 times the value of all land and buildings in America.

In October, 2005, the federal debt reached the $8 trillion mark ($26,672 for each U.S. citizen), and it is continuing to grow wildly out of control. (For the fiscal year 2004, the interest payments on the U.S. federal debt were $321 billion.) And that's only the peak of the iceberg: the total debt (states, corporations, consumers) is over $41 trillion!

Our people have become tenants and debt-slaves to the Bankers and their agents in the land our fathers conquered. Our children and following generations will be paying the debt for ever and ever!

We are coming to a point where, eventually, the Government will own nothing, the people will own nothing, and the Bankers will own everything! We are becoming enslaved by the financial institutions of the nation!

And to think that way back in the 1700's, Thomas Jefferson had warned the American people about such a thing happening. He said: “If the American people ever allow private banks to control the issue of their private banks to control the issue of their money... the banks and corporations that will grow up around them (the banks) will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered!”

It is conquest through the most gigantic fraud and swindle in the history of mankind. And to think that the key to their power and wealth is simply their legal right to create money out of nothing and to lend it out at interest. If they had not been allowed to do that, they could never have gained secret control of the nation.

The Depression

Now it is predicted that a depression is to take place soon in the United States. You might be asking, “Does this have anything to do with the operation of the Federal Reserve?” You bet it does!

Let us go back to the 1930's when some of you probably experienced what they called “The Great Depression”. During that time, America had skilled and willing workers, good farmland, a highly efficient transportation system, industries; all that was needed to form a rich nation - all except an adequate supply of money to carry on trade and commerce.

Few people knew that the Bankers had purposely withheld $8 billion from going into circulation by refusing loans to the population while, at the same time, demanded payment on existing loans, so that money was rapidly taken out of circulation and not replaced.

Because of this control on the money, America was put into deep trouble. Jobs were waiting to be done, goods were available to be bought, but there was no money. Food was thrown into the ocean while people were starving. Twenty-five percent of the workers were laid off. The greedy Bankers took possession of hundreds of thousands of farms, homes, and business properties.

Believe it or not, some of the economic experts of that time blamed the moon for bringing about all the economic hardship. Others blamed the politicians. Still others blamed the consumers for not wisely spending their money. But the truth is: the Depression was purposely brought on by the Bankers through their artificial control of the money.

To the end the Depression, the United States Government borrowed huge sums of money from the Bankers for military equipment, which put a new supply of money into circulation. People were hired back to work, industries began to blossom, farmers sold their produce, and the economy boomed.

The same Bankers, who in the early 30's had no loans for peacetime houses, food and clothing, suddenly had unlimited billions to lend the Government for war purposes. The nation, which a few years earlier could hardly feed its own people, was now producing bombs to send free to its allies. Upsetting? You bet it is! And to think it is all because some private Bankers, who call themselves the Federal Reserve, have the legal right to create and control the money to run the country — as they so wish!

President Woodrow Wilson had this to say about the Federal Reserve: “A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world — no longer a Government of free opinion no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men.”

(Just before he died, Wilson is reported to have stated to friends that he had been “deceived” and that “I have betrayed my country.” He was referring to the Federal Reserve Act passed during his Presidency.)

Unbelievable corruption!

We know the Bankers, the hidden controllers of the countries, purposely instigate wars, financing both sides of the same war, to frighten the people into going billions of dollars into debt for national defense. They even finance Communism, and then turn around and have foreign aid sent to stop the Communism that they financed!

The tens of thousands of young people who are killed, and the hundreds of thousands who are crippled and morally corrupted from war, means nothing to them. In fact, it doesn't even matter who wins or loses the war, as long as all the countries involved are in debt to these Bankers.

It was Henry Ford Sr. who once said: “The youth who can solve the money question will do more for the world than all the professional soldiers of history.” I think you can understand why!

The Bankers purposely try to corrupt the people so it be easier to control them, sweeping away anything that is honorable, such as morals, religion, family, love of country. They encourage drug use, alcohol, *!*!*!*!ography, and crime. And they deliberately prevent real cures for diseases, stir up social and racial unrest, and work to degrade the educational system.

Many of our politicians have become agents of the Bankers, while our two political parties have become their servants. No matter who you elect into high office, Rockefeller and his agents will be running the Government behind the scenes — you can be sure of it! How else could something so diabolical as the Federal Reserve, something so destructive to the national interest of the people, be allowed to continue so long?

We know that the Bankers control all of the news media and information centers, even the financial writers, to prevent people from learning the simple truth about your money system. They blame the people for causing the increase in debt and the inflation of prices, when they know that the real cause is the debt-money system itself.

The ultimate solution

By now you must surely agree that the only real solution to solve our financial problems is to put pressure on the Government to repeal the Federal Reserve Act of 1913 and to demand that Congress again be allowed to create and control the money of the nation, issuing interest and debt-free “United States Notes” as the legal currency. John F. Kennedy had begun to do this very thing just before he was assassinated!

With a reform in the money system, no private Bankers would be able to rob the people. Government banks, under the control of the people's representatives, would issue and control all money and credit. A $60,000 loan made a build a house would require only $60,000 in repayment (with a little service fee), not $255,931.00 as it is now. Everyone who supplied materials and labor to build the house would get paid just as they are today, but the Bankers would not get $195,931.00 in usury.

A debt-free America would mean that mothers would not have to work but could remain home with their children. Juvenile delinquency would decrease rapidly. The elimination of the usury and debt would be the equivalent of a 50% rise in the purchasing power of every worker. The Bankers would no longer be able to steal billions of dollars from the people every year in interest. America would become the envy of the world, being prosperous and powerful beyond the wildest dreams of its citizens.

Take action now!

It is imperative to take action now! You must do your duty as a patriotic citizen. Love of country and concern for your children should make you deeply interested in this, America's greatest problem. The future of the country depends on each one of you.

Order our leaflets (its free) on the Federal Reserve do distribute in your area, either on cars in parking lots or house to house. Speak to the various organizations in your community to alert them about what is taking place.

Write editorials in your local newspapers. Above all, write to your elected representatives in Government, and get others to also write, asking them to work to repeal this Federal Reserve Act.

And last but no least, get down on your knee to pray to Almighty God to free America from the yoke of High Finance, so that it can again become “one nation, under God, indivisible, with liberty and justice for all.”

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Thus, income taxes & the IRS are unconstitutional because they are used to pay these tycoon financial bankers called the "Federal Reserve," which the U.S. Government actually borrowed money from them. We are paying taxes because of debt (interest) owed by the U.S. Government to the Federal Reserve! The income tax became effective in 1913 after the establishment of the Federal Reserve. The "Federal" Reserve is no more federal than Federal Express.

Many cases in the U.S. were brought by people who rejected to pay income taxes. The courts (part of the state & federal government) uniformly rejected their claims. After all, why wouldn't the courts, if they are the ones that actually owe the debt to the Federal Reserve!?? They don't want to pay no interest, so they make the people pay for it. This is illegal, unconstitutional and enslavement on the American people.

Also see:

http://en.wikipedia.org/wiki/Federal_Reserve_System
http://www.afn.org/~govern/mcfadden.html

Salaam,

It was the West that tricked the world when it replaced the gold standard with paper money. Countries that use to own all the gold were once posessors of the wealth. The West created paper dollars (i.e. pounds, Euro, etc)as a prevelant source of value. They used the paper dollars and bought the gold from those countries that owned it. Now they have all the gold in such places as Fort Knox (U.S.A). Then they depreciated the paper dollar through wars. Now the countries who once owned the gold are forced to take more loans with 20% or so interest because their paper dollars depreciated. Thus, they became poor, in debt, and have the shorter end of the stick. These are the tricksters and devils we are dealing with.

Dear TheHumbleWun,
:salam2:

Thanks for your thought provoking post. I have been looking into this subject for quite a while too. Although failure of the paper currency is quite evident to me, yet I have some concerns on gold dinars as the only alternative to it. Since you have better understanding of economics (as far as I can remember about your profession), I want to discuss my concerns with you. May be you have an answer.

My understanding is, that the real wealth of a nation is in its natural or human resources and it may increase or decrease with time. For example, wealth of a nation will rapidly increase if they all of sudden find big fields of mineral oil. Similarly, the wealth of a family will increase if they by their own hard-work manage to build a house. The money, on the other hand is a means to flexibly exchange the real wealth. So ideally, the money supply of a nation should increase accordingly, if their real wealth is increased. Now my question is, how can we make the money-supply of a nation depend ony upon the availability of a precious metal? Should it not be a function of the real wealth of a nation? My second concern is, that the price of Gold can also be manipulated just as paper currencies are over or undervalued. Is it really immune to all the problems of the paper currencies. Thanks in advance for your reply.

Salaam,

You're welcome brother. Let me know if this article helps clear your inqueries.

http://economics.about.com/cs/money/a/gold_standard.htm

http://economics.about.com/cs/money/a/gold_standard_2.htm

I hope brother Taxhonesty can shed some light with his knowledge.

TheHumbleWun said:

Salaam,

You're welcome brother. Let me know if this article helps clear your inqueries.

http://economics.about.com/cs/money/a/gold_standard.htm

http://economics.about.com/cs/money/a/gold_standard_2.htm

I hope brother Taxhonesty can shed some light with his knowledge.

Click to expand...

Don't be a monetarist. Gold standard is terrible idea it is how we got in this mess. Back in the late 1890's there was a run on gold in America sponsored by the House of Morgan which caused a depression because the currency was tied to gold. So Morgan goes to President and says I will call off the attack on the US currency if you turn over the US debt structure.The real coup de taut is taking over the US debt structure not passage of Federal Reserve Act. The Fed act is just a formalized knife through the heart of the American people. If you have a problem with a private central bank running the show. You should nationalize it and annex it under department of treasury. That way the congress and president can haggle over interest rates and the money supply and when things go south the people toss them out on their rear for doing a bad job. Return to activist government measures of the New Deal imitating Franklin Deleano Roosevelt's attack on Wall Street and the banks. Why do we seek New Deal methods instead of crony capitalism and Chicago School Free trade sell outs. New Deal strategies saw the biggest economic expansion in US history for more people and is responsible for creating a middle class and an equitable economic alternative. The New Deal is actually quite similiar economically to koranic methods, so there is another reason. The question then turns on this what is The New Deal? It is a theoretical shift in placing the tax burden on the wealthy, while encouraging job creation through protectionist measures such taxes and government programs, and finally expansion of social programs like retirement benefits, medical insurance, food stamps for the poor etc. An example of shifting the tax burden would be say getting rid of the regressive gasoline tax,the personal income tax for people who earn less than 125,000 dollars, and the sales tax. All the while adding a one percent tobin tax on all securities and exchanges on the NASDAQ, NY stock exchange, Chicago stock exchange, and NYmex. It is estimated that there is 6 quadrillion floating around in untapped speculative income. So lets just tap in to just 1 percent of that. One percent gives access to 6 trillion dollars. Last years budget was around 2 trillion dollars that would give us access to plenty of money to start to pay down the deficit and expand social programs, repair infrastructure, improve the education system, and send some foreign aid out places that need help i.e. The Palestinians, also to places like subsaharan Africa, Lebanon, Iraq, Afghanistan, Pakistan, etc. sort of a New Marshal Plan this time for Middle East and Africa. The New Deal methods is simply traditional American system promoted by people such as Benjamin Franklin, Alexander Hamilton, Henry Clay, George Washington, John Adams, Abraham Lincoln, The Populists of the 1890's, and of course FDR and JFK.


Battling Wallstreet: The Kennedy Presidency by Donald Gibson
Surviving The Cataclysm by Webster Griffin Tarpley
http://www.larouchepub.com/eiw/public/2008/2008_1-9/2008-7/pdf/42-55_3507.pdf
http://www.larouchepub.com/eiw/public/2008/2008_1-9/2008-2/pdf/60-63_3502.pdf

Asalaamu aleikum,

Like brother HumbleOne I am also an Accountant and I enjoy my work and take it seriously. I have somewhat limited knowledge regarding the gold standard. However, I do know that supposedly under this system a person should be able to have their paper money redeemed for gold on demand. I often think of this because the prophet, salla aleyhi wa salaam, told us that any money that is not in the form of gold is ultimately meaningless.

So here is my question on the subject: if a person demanded to have their cash turned into gold would that request actually be honored? And if so, what would the exchange rate be? How is the exchange rate determined, and does it seem to be equitable or not? And if everyone demanded their money to be redeemed as gold, would there be enough gold to fulfill the requests?

I ask these questions because I am interested in paving the way back to using gold as the true currency. I am curious to know how all the details of converting to such a system would break down, considering the errant financial systems that have been put into place in the world. These systems are obviously in desperate need of correction and reform

Thanks in advance!

Wasalaam

Mairo said:

Asalaamu aleikum,

Like brother HumbleOne I am also an Accountant and I enjoy my work and take it seriously. I have somewhat limited knowledge regarding the gold standard. However, I do know that supposedly under this system a person should be able to have their paper money redeemed for gold on demand. I often think of this because the prophet, salla aleyhi wa salaam, told us that any money that is not in the form of gold is ultimately meaningless.

So here is my question on the subject: if a person demanded to have their cash turned into gold would that request actually be honored? And if so, what would the exchange rate be? How is the exchange rate determined, and does it seem to be equitable or not? And if everyone demanded their money to be redeemed as gold, would there be enough gold to fulfill the requests?

I ask these questions because I am interested in paving the way back to using gold as the true currency. I am curious to know how all the details of converting to such a system would break down, considering the errant financial systems that have been put into place in the world. These systems are obviously in desperate need of correction and reform

Thanks in advance!

Wasalaam

Click to expand...

your first paragraph of questions I can only answer from a historical perspective. If turned in your paper receipt you would recieve your gold back. As exchange rate in this case you just picking up what is rightfully yours so exchange rate does not apply. The piece or pieces of paper you turn in is the proof of the amount of gold in storage for you. If everyone went to try and collect their gold someone would be short because of the practice of fractional reserve banking.

Your second paragraph of questions can be addressed simply by saying gold is a finite resource thus the currency can easily be manipulated as was the case in America in the 1800's. You can only have gold as a currency while your population is small as your population grows it becomes impossible to maintain a currency backed by gold because ultimately it will lead to genocidal policies economically speaking. We can also call these policies Malthusian, but ultimately they originate with people like Adam Smith, in the modern sense, von Hayek, The Austrian School, The Chicago School of Economics and Milton Friedman. There is a need for correction but lets go for something works and is not a hand out for Wall street. The problem isn't so much currency as it is a systemic banking crisis. Fundamental problem is that this central bank the Federal Reserve has control of the US currency so how do you get it back. I favor New Deal methods and under the New Deal you would simply take over the Federal Reserve by Nationalizing it. New Deal measures means actively fighting the money changers, financiers,vultures, ticks, bankers etc. ,call them what you will, using government measures. Going back to a gold standard will change nothing these financiers can and have cornered that market, so the currency would be extremely vulnerable. What you want is a nationalized central bank controlling the currency, working in the public sphere, and towards the general wellfare or the good of all the citizens, the idea here is that it would be accountable to the public for the first time. This is a solution FDR would condone attacking the financiers and I believe in my heart of hearts that the prophet ,peace be upon him, agree with solutions to stopping the financiers.

Salaam,

Thank you for the response. I agree that the currency system should be annexed under the Federal Government rather than in the hands of private international bankers. It makes sense that since gold is a unique and scarce commodity, a large population would be limited to it's supply and will ultimately lead to a global warfare & genocide. The same goes to the Federal Reserve who handles the money supply; as they were (and still are) responsible for financing many of the wars for the U.S. The Government needs it's control back as was the wishes of a regretful U.S. president.

I hope you agree that the West still cheated those nations that were once posessors of the gold. Now some of the gold is being resold on it's own stock markets at higher prices but most are kept as a reserve for it's own wealth, while keeping those other nations in debt and in poverty. This is a double whammy.

For my own thorough understanding, I need to do some research and read more about the New Deal, who created it, it's purpose, etc. Maybe it's a good solution of the U.S. only but what about the rest of the world? Would a standardized world-wide currency system work?

Your contributions are always appreciated brother Taxhonesty.

walaakum salaam

why not a muslim currency like the malaysian prime minister suggested !

:salam2:Here is a little example of how the American hegemony and imperialist aspirations rely on the dollar value to enslave the world.So why not a Muslim currency is that so much of an impossible perspective to be thought about!.Given the fact that the majority of oil producing countries are the Muslim ones,why not impose it to bring a little balance in the world political and economical arena and the peace it urgently needs.Instead of being polarized by two economical powers in their hypocritical alliance.When truly they are struggling against each other..

The Invasion of Iraq: Dollar vs Euro
Re-denominating Iraqi oil in U. S. dollars, instead of the euro
by Sohan Sharma, Sue Tracy, & Surinder Kumar
Z magazine, February 2004

What prompted the U.S. attack on Iraq, a country under sanctions for 12 years (1991-2003), struggling to obtain clean water and basic medicines? A little discussed factor responsible for the invasion was the desire to preserve "dollar imperialism" as this hegemony began to be challenged by the euro.
After World War II, most of Europe and Japan lay economically prostrate, their industries in shambles and production, in general, at a minimum level. The U.S. was the only major power to escape the destruction of war, its industries thriving with a high level of productivity. In addition, prior to and during WWII, due to extreme political and economic upheaval, a considerable amount of gold from European countries was transferred to the U.S. Thus, after WWII the U.S. had accumulated 80 percent of the world's gold and 40 percent of the world's production. At the founding of the World Bank (WB) and the International Monetary Fund (IMF) in 1944-45, U.S. predominance was absolute. A fixed exchange currency was established based on gold, the gold-dollar standard, wherein the value of the dollar was pegged to the price of gold-U.S. $35 per ounce of gold. Because gold was combined with U.S. bank notes, the dollar note and gold became equivalent, which then became the international reserve currency.
Initially, the U.S. had $30 billion in gold reserves. But the United States spent more than $500 billion on the Vietnam War alone, from 1967-1972. During these years, the U.S. had over 110 military bases across the globe, each costing hundreds of millions of dollars a year. These expenses were paid in paper dollars and the total number given out far exceeded the gold reserve of the U.S treasury. By then (1971-72), the U.S. Treasury was running out of gold and had only $10 billion in gold left. On August 17, 1971, Nixon suspended the U.S. dollar conversion into gold. Thus, the dollar was "floated" in the international monetary market.
Also in the early 1970s, U.S. oil production peaked and its energy resources began to deplete. Its own oil production could not keep pace with growing home consumption. Since then, U.S. demand for oil continually increased, and by 2002-2003 the U.S. imported approximately 60 percent of its oil-OPEC (primarily Saudi Arabia) being the main exporter. The U.S. sought to protect its dollar strength and hegemony by ensuring that Saudi Arabia price its oil only in dollars. To achieve this, the U.S. made a deal, some say a secret one, that it would protect the Saudi regime in exchange for their selling oil only in dollars.
Throughout the late 1950s and 1960s the Arab world was in ferment over an emerging Nasser brand of Arab nationalism and the Saudi monarchy began to fear for its own stability. In Iraq, the revolutionary officers corps had taken power with a socialist program. In Libya, military officers with an Islamic socialist ideology took power in 1969 and closed the U.S. Wheelus Air base; in 1971, Libya nationalized the holdings of British Petroleum. There were proposals for uniting several Arab states-Syria, Egypt, and Libya. During 1963-1967, a civil war developed in Yemen between Republicans (anti-monarchy) and Royalist forces along almost the entire southern border of Saudi Arabia. Egyptian forces entered Yemen in support of republican forces, while the Saudis supported the royalist forces to shield its own monarchy. Eventually, the Saudi government-a medieval, Islamic fundamentalist, dynastic monarchy with absolute power-survived the nationalistic upheavals.
Saudi Arabia, the largest oil producer with the largest known oil reserves, is the leader of OPEC. It is the only member of the OPEC cartel that does not have an allotted production quota. It is the "swing producer," i.e., it can increase or decrease oil production to bring oil draught or glut in the world market. This enables it more or less to determine prices.
Oil can be bought from OPEC only if you have dollars. Non-oil producing countries, such as most underdeveloped countries and Japan, first have to sell their goods to earn dollars with which they can purchase oil. If they cannot earn enough dollars, then they have to borrow dollars from the WB/IMF, which have to be paid back, with interest, in dollars. This creates a great demand for dollars outside the U.S. In contrast, the U.S. only has to print dollar bills in exchange for goods. Even for its own oil imports, the U.S. can print dollar bills without exporting or selling its goods. For instance, in 2003 the current U.S. account deficit and external debt has been running at more than $500 billion. Put in simple terms, the U.S. will receive $500 billion more in goods and services from other countries than it will provide them. The imported goods are paid by printing dollar bills, i.e., "fiat" dollars.
Fiat money or currency (usually paper money) is a type of currency whose only value is that a government made a "fiat" (decree) that the money is a legal method of exchange. Unlike commodity money, or representative money, it is not based in any other commodity such as gold or silver and is not covered by a special reserve. Fiat money is a promise to pay by the usurer and does not necessarily have any intrinsic value. Its value lies in the issuer's financial means and creditworthiness.
Such fiat dollars are invested or deposited in U.S. banks or the U.S. Treasury by most non-oil producing, underdeveloped countries to protect their currencies and generate oil credit. Today foreigners hold 48 percent of the U.S. Treasury bond market and own 24 percent of the U.S. corporate bond market and 20 percent of all U.S. corporations. In total, foreigners hold $8 trillion of U.S. assets. Nevertheless, the foreign deposited dollars strengthen the U.S. dollar and give the United States enormous power to manipulate the world economy, set rules, and prevail in the international market.
Thus, the U. S. effectively controls the world oil-market as the dollar has become the "fiat" international trading currency. Today U.S. currency accounts for approximately two-thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all the world exports are denominated in dollars and U.S. currency accounts for about two-thirds of all official exchange reserves. The fact that billions of dollars worth of oil is priced in dollars ensures the world domination of the dollar. It allows the U.S. to act as the world's central bank, printing currency acceptable everywhere. The dollar has become an oil-backed, not gold-backed, currency.
If OPEC oil could be sold in other currencies, e.g. the euro, then U.S. economic dominance-dollar imperialism or hegemony-would be seriously challenged. More and more oil importing countries would acquire the euro as their "reserve," its value would increase, and a larger amount of trade would be transacted and denominated in euros. In such circumstances, the value of the dollar would most likely go down, some speculate between 20-40 percent.
In November 2000, Iraq began selling its oil in euros. Iraq's oil for food account at the UN was also in euros and Iraq later converted its $10 billion reserve fund at the UN to euros. Several other oil producing countries have also agreed to sell oil in euros-Iran, Libya, Venezuela, Russia, Indonesia, and Malaysia (soon to join this group). In July 2003, China announced that it would switch part of its dollar reserves into the world's emerging "reserve currency" (the euro).
On January 1, 1999, when 11 European countries formed a monetary union around this currency, Britain and Norway, the major oil producers, were absent. As the U.S. economy began to slow down during mid-2000, Western stock markets began to yield lower dividends. Investors from Gulf Cooperation Council nations lost over $800 million in the stock plunge. As investors sold U.S. assets and reinvested in Europe, which seemed to be better shielded from a recession, the euro began to gain ground against the dollar .
After September 11, 2001, Islamic financiers began to repatriate their dollar investments-amounting to billions of dollars-to Arab banks, as they were worried about the possible seizure of their assets under the USA PATRIOT Act. Also, they feared their accounts might be frozen on the suspicion that such accounts fund Islamic terrorists. Iranian sources stated that their banking colleagues felt particularly hassled as Washington heated up its war of words and threats of military intervention. This encouraged Tehran to abandon the dollar payment for oil sales and switch to the euro. Iran also moved the majority of its reserve fund to the euro. (Iran is the latest target of the U.S., which has interfered by stirring up opposition forces, and making covert threats.)
OPEC member countries and the euro-zone have strong trade links, with more than 45 percent of total merchandize imports of OPEC member countries coming from the countries of the euro-zone, while OPEC members are the main suppliers of oil and crude oil products to Europe. The EU has a bigger share of global trade than the U.S. and, while the U.S. has a huge current account deficit, the EU has a more balanced external accounts position. The EU plans to enlarge in May 2004 with ten new members. It will have a population of 450 million; it will have an oil consuming-purchasing population 33 percent larger than the U.S., and over half of OPEC crude oil will be sold to the EU as of mid-2004. In order to reduce currency risks, Europeans will pressure OPEC to trade oil in euros. Countries such as Algeria, Iran, Iraq, and Russia-which export oil and natural gas to European countries and in turn import goods and services from them-will have an interest in reducing their currency risk and hence, pricing oil and gas in euros. Thus momentum is building toward at least the dual use of euro and dollar pricing.
The unprovoked "shock and awe" attack on Iraq was to serve several economic purposes: (1) Safeguard the U.S. economy by re-denominating Iraqi oil in U.S. dollars, instead of the euro, to try to lock the world back into dollar oil trading so the U.S. would remain the dominant world power-militarily and economically. (2) Send a clear message to other oil producers as to what will happen to them if they abandon the dollar matrix. (3) Place the second largest oil reserve under direct U.S. control. (4) Create a subject state where the U.S. can maintain a huge force to dominate the Middle East and its oil. (5) Create a severe setback to the European Union and its euro, the only trading block and currency strong enough to attack U.S. dominance of the world through trade. (6) Free its forces (ultimately) so that it can begin operations against those countries that are trying to disengage themselves from U.S. dollar imperialism-such as Venezuela, where the U.S. has supported the attempted overthrow of a democratic government by a junta more friendly to U. S. business/oil interests.
The U.S. also wants to create a new oil cartel in the Middle East and Africa to replace OPEC. To this end the U.S. has been pressuring Nigeria to withdraw from OPEC and its strict production quotas by dangling the prospects of generous U.S. aid. Instead the U.S. seeks to promote a "U.S.-Nigeria Alignment," which would place Nigeria as the primary oil exporter to the U.S. Another move by the U.S. is to promote oil production in other African countries-Algeria, Libya, Egypt, and Angola, from where the U.S. imports a significant amount of oil-so that the oil control of OPEC is loosened, if not broken. Furthermore, the U.S. is pressuring non-OPEC producers to flood the oil market and retain denomination in dollars in an effort to weaken OPEC's market control and challenge the leadership of any country switching oil denomination from the dollar to the euro.
To break up OPEC and control the world's oil supply, it is also helpful to control Middle East and central Asiatic oil producing countries through which oil pipelines traverse. The first attack and occupation was of Afghanistan, October 2001, in itself a gas producing country, but primarily a country through which Central Asia and the Caspian Sea oil and gas will be shipped (piped) to energy-starved Pakistan and India. Afghanistan also provided an alternative to previously existing Russian pipelines. Simultaneously, the U.S. acquired military bases-19 of them-in the Central Asian countries of Uzbekistan, Tajikistan, Kyrgyzstan, and Turkmenistan in the Caspian Basin, all of which are potential oil producers. After the invasion and occupation of Afghanistan and Iraq, the U.S. controlled the natural resources of these two countries and, once again, Iraq's oil began to be traded in U.S. dollars. The UN's oil for food production program was scrapped and the U.S. Iaunched its Iraqi Assistance Fund in U.S. dollars. In December 2003, the U.S. (Pentagon) announced that it had barred French, German, and Russian oil and other companies from bidding on Iraq's reconstruction.
How would a shift to the euro affect underdeveloped countries, most of which are either non-oil producing or do not produce enough for their home consumption and development? These countries have to import oil. One of the advantages that may accrue to them is that they are likely to earn more euros than dollars since much of their trade is with the European countries. On the other hand, a shift to euro will pose a similar dilemma for them as dollars. They will have to pay for oil in euros, have enough euros deposited-invested in EU treasuries, and borrow euros if they do not have enough for their oil purchases. If, as is projected, the dollar and euro are in a price band (that is, prices will stay within an agreed upon range), they may not have much of a bargaining position.
Oil for euros would be far more helpful if oil-importing underdeveloped countries could develop some form of barter arrangement for their goods to obtain oil from OPEC. Venezuela (Chavez) has presented a successful working model of this. Following Venezuela's lead, several underdeveloped countries began bartering their undervalued commodities directly with each other in computerized swaps and counter trade deals, and commodities are now traded among these countries in exchange for Venezuela's oil. President Chavez has linked 13 such barter deals on its oil; e.g., with Cuba in exchange for Cuban doctors and paramedics who are setting up clinics in shanty towns and rural areas. Such arrangements help underdeveloped countries save their hard currencies, lessening indebtedness to international bankers, the World Bank, and IMF, so that money thus saved can be used for internal development.

Sohan Sharma is a professor emeritus at California State University in Sacramento. Sue Tracy is a hazardous waste material scientist in Sacramento. Surinder Kumar is professor of economics In Rohtak, Inala.

http://www.thirdworldtraveler.com/Iraq/Iraq_dollar_vs_euro.html

Ps.Thanks akhi humble you are a man of his word ,may allah swt reward you with goodness

taxhonesty said:

The problem isn't so much currency as it is a systemic banking crisis. Fundamental problem is that this central bank the Federal Reserve has control of the US currency so how do you get it back. I favor New Deal methods and under the New Deal you would simply take over the Federal Reserve by Nationalizing it. New Deal measures means actively fighting the money changers, financiers,vultures, ticks, bankers etc. ,call them what you will, using government measures.

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Salaam brother, thank you for your thoughtful response. I agree with you 100% that the problem is not only with currency (although that is a major problem) but rests also with the problem of the banking industry and financial markets as a whole. I mean, the other BIG thing we have been ordered to stay away from in terms of dealing with money is assessing interest on loans, seeking to double and redouble the money thereby, so that is the other main thing I focus my work on as well: staying clear from engaging in such activities myself and calling others to stop engaging in such activities as well. So absolutely, there needs to be a major shift in the way the system functions, one that will be Islamically correct.

I do not know much about the New Deal methods you refer to, perhaps you could elaborate a bit more about that. I would be curious to know the measures that government can take to combat the "financial speculators". My only concern is that this could leave open the door to more government corruption down the road, so how can this be protected against?

Wasalaam

I do not know much about the New Deal methods you refer to, perhaps you could elaborate a bit more about that. I would be curious to know the measures that government can take to combat the "financial speculators". My only concern is that this could leave open the door to more government corruption down the road, so how can this be protected against?

Wasalaam[/quote]


The New Deal is not communism or Socialism by any stretch of the imagination as some would have you believe. A large part of the problem in terms of speculation on stock markets on these things called derivatives which came into their own around 1994. These are monsters used by the world of high finance. Investment banks like J P Morgan Chase , Leehman Brothers, and Goldman Sachs use derivatives to dominate the oil market. I don't know if you remember when oil an all time of around 160 dollars a barrel for crude oil. This was at a time when Saudi officials said there was a glut of oil in the market. This was caused by speculators coming in with their derivatives or hedging their bets that the price of oil would increase and magically it did. The New Deal method would involve simply passing a law that banned these scandalous derivatives. Putting in place a progressive tax system say if you make less than 150,000 dollars than you don't pay anything. Anything over 150,000 dollars and you get hit but there are different brackets. Don't forget a 1 percent tobin tax on all securities and exchanges on Wall street and related markets to tap into the financiers pocket books. Absolutely no sales taxes of any kind! These only penalize the middle class and the poor. Next is to place taxes on foreign goods and place tax incentives for local corporations not exporting labor overseas. Next would be government jobs programs for purposes such as rebuilding infrastructure, staffing airlines, and other vital transportation interests. Last but not least there would be the social safety net services, this includes things like retirement benefits, healthcare, education etc. This is essentially the New Deal.