NAFTAs, CAFTAs, and Feds, Oh My! - Part Two of a two part essay on America's role in economic and political globalization

Open your wallet and take a look at the front of any American dollar bill. At the top you should see the words "Federal Reserve Note." What is the significance of this? And how does it relate to the Iraq War and to the globalization issue in general? These questions I seek to answer in the following paragraphs.

Article I Section 8 of the United States Constitution gives Congress the sole authority "to coin money [and] regulate the value thereof." The reasoning behind granting Congress this power, according to Thomas Jefferson, was the following: "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

The year 1913 marked a drastic change in American monetary policy when then-president Woodrow Wilson signed into law the Federal Reserve Act, ceding control over United States currency from Congress to a Federal Reserve in flagrant violation of the Constitution's Article I Section 8. Since 1913, the Federal Reserve has maintained the sole ability to inflate the value of America's currency by putting more and more dollar bills into circulation. Specifically, the system usually works as follows: Congress decides it needs to spend two billion dollars on something. Since Congress is generally incapable of balancing a checkbook, it goes to the Federal Reserve and asks to borrow two billion dollars from the Fed. The Fed prints the two billion and gives it to Congress, which in turn issues bonds to the Fed, agreeing to pay that two billion plus interest back to the Fed.

An astute reader would notice the madness of such a system. The Federal Reserve essentially pulls money out of nowhere when it prints money. Since new money is being put into circulation, the value of the existing currency drops. Hence, inflation. On top of that, Congress must pay the Fed back for the money it borrowed, plus interest. You might ask why Congress has to pay interest to the Federal Reserve, since the Fed is owned by the same government that is largely run by Congress.

The answer is that the Federal Reserve is NOT owned by the federal government at all, despite what its name implies. Rather, the Fed is owned by a variety of foreign and domestic banks. An exact list of the owners of the Fed is unknown to everyone except the Fed itself - interestingly, even Congress doesn't have a list. Indeed, there has not been one Congressional audit of the Fed since its inception in 1913.

That's not to say that economists don't have general idea of who owns the Federal Reserve; they do. Common consensus is that N. M. Rothschild and Sons Bank in London is the largest owner of the Fed, with banks in Berlin, Paris, and New York being the second, third, and fourth largest owners respectively. But why would Woodrow Wilson hand control over our currency to private, often foriegn bankers? For the same reason as any other politician: he had to please those who financed his campaign for president. His campaign was financed in part by European and North American bankers, and with a Republican-controlled Congress already fond of the idea of a central bank, there were no major opponents of the creation of the Federal Reserve.

Of course, the Federal Reserve is hardly the only bank to create money out of nowhere to loan. Commercial banks do it every day. When you take out a loan to buy a home, pay for college, etc., the bank never actually transfers its own money to you. Rather, like the Fed it merely creates money out of nowhere, then gives it to you.

How can that be, you ask? Let's say for simplicity's sake a commercial bank writes you a check for $500,000 that you then use to buy a house. You take that check and hand it to the people who are selling you the house. They then take that check and decide to cash it. But whoops, the bank that wrote the check never actually had the money in the first place. The Fed then bails the commercial bank out by printing more money and loaning that money to the commercial bank (in the same way the Federal Reserve loans money to the government), effectively inflating the economy. In reality, the commercial bank has a certain amount of reserves, but generally these reserves only amount to 10% of what the bank has lent out. In order to clean out the bank's reserves, you'd have to borrow far more than $500,000, but even for smaller amounts each check printed by the bank inflates the economy bit by bit.

Conversely, if there were no Federal Reserve, the commercial banks could no longer use this practice (called "fraction-reserve banking"). Prior to the creation of the Fed in 1913, the amount of currency in circulation was stable, as it was backed by gold. The federal government, then in control of America's currency, could not produce currency at whim as the value of each US Dollar was fixed to a certain amount of gold. Since there was no way to bail out the commercial banks, you could be sure that the bank actually had the money it was loaning you.

It is worth noting, however, that while nearly every US President since Woodrow Wilson has supported the Federal Reserve, there was one exception: John F. Kennedy. Only five months before his assassination, Kennedy signed Executive Order No. 11110 orderedering the US Treasury to produce currency backed by America's silver supply (backing currency by silver has essentially the same effect as backing it by gold). At first glance, these bills were exactly the same as the Federal Reserve bills, except that at the top of them were the words "United States Note" as opposed to "Federal Reserve Note" on all others. As the value of the Federal Reserve Notes would continue to drop due to inflation, the US Notes, with a fixed value backed by silver, would surpass the Federal Reserve Notes in usage and desirability. Unfortunately the next president, Lindon Johnson, haulted the production of US Notes only months after they were created. Nearly all the old US Notes have since been collected and destroyed by the Fed.

In November of 2000, Sadam Hussein ordered that Iraq sell its oil exclusively for Euros - a drastic change from the 1990's when it accepted only Federal Reserve Notes. The worldwide demand for the American currency then dropped, and so did its value (by as much as 17% compared to the Euro in 2002). Previously, the entire world would eagerly sell goods and services to the US in exchange for its valuable currency, since it was desperately needed to buy oil. The American economy boomed.

The dollar fell out of favor in Iraq, mainly due to rapid inflation in the United States sparked by an elarging federal budget deficit and the resulting increase in currency production. Naturally, the Federal Reserve was not happy with this. Only slightly over two years later, we were involved in an unconstitutional war tangential to the security of the United States. Today, Iraq once again sells oil exclusively for Federal Reserve Notes. But not all is well in for the Federal Reserve Note in OPEC land - Iran and Venezuala have been considering a switch to the Euro since 2005, modeled after Iraq's switch. American foreign policy has adjusted appropriately.
It may prove useful to think of how the situation would differ if America's currency were backed by gold and removed from the Fed's hands. In such a situation, the value of the dollar would remain constant, dependent only on the value of gold and not on the decisions of some Middle-Eastern dictator. The "currency factor" in making war decisions would effectively be removed, assisting the United States in a return to a sane foreign policy.

Now I want to examine America's current trade deficit a bit. Since 1975, the United States has rung up an increasing trade deficit, now at over $850 billion, or 6% of our total Gross Domestic Product. Over $230 billion of this deficit is with China. When we ship Federal Reserve Notes over to China in exchange for goods and services, the Chinese are limited in what they can do with their newly acquired American dollars. They can't buy Chinese goods and services, since nobody in China would want US dollars. They can either buy American goods and services in return (which is rare, since American goods and services are largely more expensive than China's), purchase stocks in American businesses, or buy bonds from the federal government. Increasingly, the Chinese government is taxing the American dollars made buy the private Chinese companies that make the dollars from Americans purchasing their goods and services. With its new US dollars, the Chinese government increasingly is buying US bonds with its Federal Reserve Notes. Essentially, the Chinese government is slowly buying the United States government.

Yet again, a return to the gold standard would solve this problem. Firstly, any US dollars acquired by the Chinese would be easily exhanged for gold, the universal currency. The Chinese would no longer have to spend American dollars on American investments. At first glance, it's easy to think that such a situation would be horrible for America, with our gold reserves and our gold-backed currency flowing out of the nation each year. But with a currency backed by gold, long-term trade deficits traditionally correct themselves. As America begins to ship more money and more gold out of the country, the economy slows down and wages go down, driving production down. Reduced production costs then drive exports up, bringing back in more money and gold, and once again driving up salaries. A quick look at any graph showing the US trade deficit prior to the 1970's would reveal this. Secondly, eliminating the Federal Reserve in favor of the gold standard would also eliminate the federal government's deficit and thus its need to sell bonds. With no Federal Reserve to which to pay interest payments amounting to approximately $300 billion per year, the federal budget deficit would be eliminated. It's no surprise that individual state governments, with no state-equivalent of the Fed, average 5% budget surpluses rather than deficits.

A careful reader would be asking why the trade deficit was under control prior to the 1970's but not now, since the Federal Reserve was created in 1913. Although the Fed was indeed created at that time, remnants of the gold standard existed until 1971, when President Nixon ended the ability to exchange Federal Reserve Notes for gold. From 1913 to 1971, the amount of gold exchangeable for each dollar decreased steadily as inflation ran rampant, but exchangeable never-the-less (this system was known as the Bretton Woods System).

Let's be honest, however - there is so much more behind the march toward globalization than the interests of the international bankers. Take for example the CAFTA (Central American Free Trade Agreement) amongst the United States and several Central American nations. At first glance, CAFTA seems to support unrestricted, unregulated trade between the US and Central America. Unfortunately, by looking deeper into the wording of the treaty and the consequences therein, we can see the government working with certain well-connected multinational corporations. Article 3 of CAFTA states that by 2009, member nations should conform their food and vitamin safety standards as prescribed by the World Trade Organization's Codex Alimentarius (the WTO ment for the Codex to be voluntary - it is CAFTA that mandates it). As of July 2005, the Codex Nutrition Committee has adopted standards barring the sale of vitamins over-the-counter under the pressure of Big Pharma. The drug companies oppose the current availability of vitamins over the counter for two reasons: 1) a sick public is in their best interests for obvious reasons, and 2) requiring a prescription would bring the vitamin industry under Big Pharma's control. According to Congressman Peter Defazio of Oregon, "this would be the ultimate breaching of government into our personal health lives... and not only our government, some beaurocratic, difuse, multinational, secretive government."

Perhaps even more troubling, a so-called "North American Community" is currently in the works, modeled after the European Union and driven by the private Council on Foreign Relations with the cooperation of the governments of United States, Canada, and Mexico. Look at the list of members of the CFR, and one can see a scarily diverse, yet comprehensive list of political and corporate elites: Dick Cheney, Condoleezza Rice, Robert Gates, Henry Kissinger, Alan Greenspan, Jimmy Carter, George Soros, Barbara Walters, John D. Rockefeller, and others. Many banks and other corporations also hold membership within the CFR: ExxonMobile, Halliburton, BP, JP Morgan, Shell Oil, Time Warner, Bank of America, Toyota, Citigroup, and others. You know something's wrong when the likes of Dick Cheney and Jimmy Carter are working together toward a common goal.

That goal, as stated earlier, is an integrated North American Community by 2010. In March of 2005, President Bush privately met at Waco, Texas with Mexican President Vincente Fox, Canadian Prime Minister Paul Martin, and various personal and corporate members of the CFR in order to outline plans for a more unified North America - a "super NAFTA."
In order to fully understand the proposed North American Community, one must first consider the existing NAFTA (North American Free Trade Agreement) treaty. NAFTA, signed in 1993, establishes a supposed "free-trade zone" within North America, eliminating many tariffs between the US, Canada, and Mexico. Interestingly, NAFTA never recieved the 2/3 support from the Senate required by Article II Section 2 of the Constitution, but because it did recieve the support from a narrow majority NAFTA was allowed to move forward with little protest. Under NAFTA, trade disputes are no longer handeled by the nations themselves, but rather by an un-elected, international panel, effectively removing Congress's Constitutional power to regulate commerce across America's borders. NAFTA has been a Constitutional crisis from the start.

There is no end in sight, as the proposed North American Community seems to only further erode the American Constitution and American sovereignty. A cornerstone of the plan is a "NAFTA Superhighway" to connect Mexico, the US, and Canada via a ten-lane highway up the middle of the continent, with spurs into British Columbia and the American Northeast. Traditional border crossings would not be present along the highway, effectively creating a borderless North America. The privately-owned North American SuperCorridor Coalition (NASCO). has thus far recieved over $2.5 million from the US government to plan the highway, and will recieve millions upon millions more to actually build it.

Not only does the tax-payer lose out: millions throughout North America will lose property to Eminent Domain as the three North American governments sieze personal property that sits along the Superhighway's planned route. The winners, as to be expected, are the multinational corporations who will, thanks to the Superhighway, be able to transport cheap workers and goods across national lines with ease. Not to mention NASCO itself, which stands to gain millions.

According to Robert Pastor, director of the Council on Foreign Relation's North American taskforce and brainchild for the North American Community, such a community would be headed by an international government, similar to the European Parliament. Interestingly, Pastor recognizes the Constitutional problems such a government would pose within the United States. To combat this, Pastor claims he would establish a North American Tribunal, "a permanent court [that] would permit the accumulation of precedent and lay the groundwork for North American business law," overriding U.S. Supreme Court on the issue of the Constitutionality of a united North America.

Along with a North American Tribunal, Pastor suggests the creation of a "North American Parliamentary Group" with supremacy over the United States Congress. Since the North American plan's incarnation in 2005, Congress has been largely complacent in their ignorance. Neither the House International Relations Committee nor the Senate Foreign Relations Committee have held hearings on the matter. Further, the latest meeting between the political and corporate leaders of North America in Banff was closed to both Congress and the media. Geri Word of the US Department of Commerce explains the secrecy: "we did not want to get the contact people of the working groups distracted by calls from the public."

The currency issue cannot be ignored, however. According to Robert Pastor, a key aspect of the North American Community is the replacement of the dollar with the "Amero," a common North American currency. The existing Federal Reserve along with its counterparts in Mexico and Canada would be merged and given a monopoly over the continent's currency. With the consolidation of the three North American currencies, the Federal Reserve and its counterparts get a currency that is used widely enough to compete with the surging Euro.

Public opinion in Canada has been against the creation of a continental currency. The US government has managed to keep the public relatively ignorant of the talks of a united currency. On the other hand, the Mexican public is very supportive. A currency backed by the economic powers of Canada and the US would prove to be a boon for the Mexican economy, at the expense of the Canadian and American economies. The average household income for a Mexican family stands at around $7,000 per year, compared to $43,000 in the US and $35,000 in Canada. This should be troubling to Americans and Canadians, since under a fiat currency such as the Amero (fiat currency refers to any that is not gold-backed - the US dollar is fiat, for example) the currency's value is partially rooted in the overall strength of the nation(s) economy. The other major player in determining the value of a fiat currency is, of course, deficit spending that leads to the production of more currency, inflating the money supply. Sadly, the Mexican government is not known for balanced budgets. With such a watered-down currency such as the Amero, workers in America and Canada can expect their purchasing power to fall by as much as 25% to 50%. Once again, I see a return to the gold standard as superior to the current fiat system.

That's not to say that a return to the gold standard will solve all our problems. What America really needs, now more than ever, is a return to Constitutional governance (which would necessarily involve the abolition of the Federal Reserve). Unconstitutional plans for a united North American government must be put to rest - it is time for Congress to stand up to the plate and defend its own existance. Democratic Congressman Peter Defazio of Oregon as well as Republican Congressmen Virgil Good of Virginia and Ron Paul of Texas have proposed bills disallowing the President from involving America further in the various globalist pet projects. With the established elites in both parties loyal to the corporate, pro-globalist interests that fund them, such bills have died in committee. According to Benito Mussolini, "fascism should be called corporatism, because it is the perfect merger of the corporation and the state." If Il Duce is correct, then the people of the United States and North America at large truly do have reason to worry. The way the American government has bent over backwards in spite of its Constitution to please multinational corporations and bankers is troubling at best. Depressingly (and yet not terribly surprisingly), according to our own President George Bush, "the Constitution is just a goddamn piece of paper." The fight for our country, our sovereignty, our Constitution, and our way of life won't be easy, but it will be necessary. It is necessary.