Letter to Sen. Hatch on Federal Reserve

June 10, 2009

Dear Senator Hatch:

Thank you for your response on May 18, 2009 to my letter concerning the Federal Reserve Sunshine Act of 2009 (S. 604). I always appreciate your responses and hearing your opinions on issues. I would like to address some of your comments in your letter concerning the Federal Reserve which I think are in error. I have placed your statements in quotation marks.

“It is the consensus of many observers that the Federal Reserve System is responsive to the needs of the economy.”
• It is the consensus of many observers, including this writer, that the Federal Reserve System manipulates and inflates the money supply, wields excessive control over the economy, and spends taxpayers’ dollars without accounting for them. Rallies at the Federal Reserve branch bank in your own district attended by well over a hundred individuals in January and April attest to discontent by your constituents over the role of the Federal Reserve and its lack of transparency.
• What “many observers” are you referring to? The “many observers” I have seen are dissatisfied with the Federal Reserve.

“Over the last 25 years, the level of inflation has been quite stable and low, even compared to the period before we created the Federal Reserve System.”
• The Federal Reserve System has not been around for 25 years—it has been around for 96 years. Since 1913 the value of money in this nation has been devalued by 2,154%! In other words, in 1913 $10,000 had the same purchasing power as $215,400 today. (Source: Bureau of Labor Statistics inflation calculator)
• The Federal Reserve System is the source of inflation in this nation, not the barrier against it. The Federal Reserve intentionally inflates the money supply under the auspices of “stimulating the economy”.
• Inflation created by policies of the Federal Reserve is a hidden tax on the American people through the devaluation of their hard-earned money.


“Compared with virtually all foreign central banks, the Federal Reserve System appears to be very forthcoming in disclosing policies and open to receiving suggestions.”
• This is not a good argument. Policies of this nation should not be made by comparison to other nations. You help hold the reigns of a Constitutional Republic that has its own standards. Please help us keep this a free nation, not a comparatively less-autocratic one.
• Comparative transparency is not good enough. Complete transparency is the only standard worthy of our nation of elected officials who represent the people.
• Refusals by the Federal Reserve last fall to disclose over $2 trillion in loans demonstrate a concerted lack of transparency.
• The very existence of S. 604 and this letter demonstrate that many observers feel the Federal Reserve System is not transparent enough. If the Federal Reserve is transparent, then it should welcome the passage of S. 604 to prove it is responsibly managing the money supply of the nation.

“[P]rovisions in the Constitution…give Congress numerous power to ‘coin money and regulate the value thereof’…The Federal Reserve System has been delegated the authority to establish monetary policy.”
• The Constitution gives no power to Congress to “establish monetary policy”. The power given to Congress is to “coin money and regulate the value thereof.”
• To “coin money” literally means to do just that—i.e. to mint coins. The Federal Reserve does not “coin money”, but rather “creates money” out of nothing.
• The Constitution gives no power to Congress to establish a monopoly on money. However, through legal tender laws and laws prohibiting private mints, Congress has assumed a monopoly on the money supply in this nation and vested the power of this monopoly in the Federal Reserve.
• It is the Federal Reserve’s monopoly on money that allows it to manipulate and control monetary policy. This sort of control and monopoly is antagonistic to a free society and as previously stated, is not a power the Constitution delegates to the Federal Government.


“I am hesitant to support proposals to further erode the independence of the Federal Reserve System or to intrude on the setting of monetary policy.”
• Hold on a minute! You stated that the Federal Reserve System was created by Congress and receives its powers from Congress. Hence, it can only act under the directions of Congress and is NOT independent.
• You are hesitant to “intrude on the setting of monetary policy”, but by your previous argument it is Congress that has the power to set monetary policy in the first place which it delegated to the Federal Reserve. S. 604 is a legitimate and important act of Congress to audit the system of its creating.
• It is especially egregious that the monopoly over this nation’s money has been given to a group of, in your words, “public and private entities” that you feel should be independent of the government and whose policies should not be intruded upon. To me that sounds like, “Let’s hang the Constitution and be governed by a private body that can set their own policies at will.” To control a nation’s money is the power to control a nation.

“[W]e clearly need to reform our financial markets and refine the powers of the Federal Reserve in order to ensure crises like this don’t happen again.”
• The Federal Reserve did not prevent the Great Depression in 1929 and it did not prevent the depression we are in today. Is it reasonable to expect it to prevent a depression in the future? Former Reserve Chairman Alan Greenspan stated that he never saw the sub-prime mortgage crisis coming.
• A strong case can be made that the currently burst economic bubble was antagonized if not caused by Federal Reserve policies. The answer it not to refine the Federal Reserve or give it more power.
• It is not the role of the government to reform financial markets. They may need to be reformed, but it is not your role to do so.

In short, the Federal Reserve System and the laws protecting its monopoly on the money supply of this nation are unconstitutional, antagonistic to a free society, and a hidden tax on the American people. The Federal Reserve is not transparent and it is keeping with your responsibilities as a Congressman and as a representative of the State of Utah to provide for a more open audit of its activities.

I would ask you to please reconsider your stance on S. 604, the Federal Reserve Sunshine Act of 2009.


Sincerely,
Thomas A. Salt
Springville, UT

Tom, this is an excellent letter which I've shared widely with various members of The John Birch Society as a letter to pattern other letters after as Utahans communicate with Senators Hatch and Bennett about the Federal government's very limited role assigned to it by the constitution concerning money, that being to "coin" the gold and silver brought to it by citizens into coins. Good job on this letter.