Thom Hartmann talks with Stephen Zarlenga, 11 May 2009

Thom Hartmann: Well, a trillion here, a trillion there, and pretty soon, to badly paraphrase the late great senator from, was it Illinois?

Stephen Zarlenga: Illinois?

Thom Hartmann: Yeah.

Stephen Zarlenga: Dirksen.

Thom Hartmann: Everett Dirksen. Pretty soon you're talking about real money. Stephen Zarlenga is with us. He is the director of the American Monetary Institute. He's here live in the studio for those of you watching the webcam you can see him on TV, on your webcam. And he is speaking tonight at 7 o'clock in the First Unitarian Church of Portland. monetary.org is the web site, as Stephen turns off his cell phone, here. Something always good to do before you go on the air.

Stephen, I'm looking at headlines here. You know, Drudge is freaking out, Government borrowing 50 cents for every dollar it spends.... White House: Deficit to top $1.8 trillion. Question from ABC news, headline: Are Taxpayers Bailing Out Troubled Banks Twice? We have a system that seems to be going down in flames, this whole fractional reserve banking system. monetary.org the web site of the American Monetary Institute. Stephen, what are your thought on (a) where we're at, and (b) where we should be going?

Stephen Zarlenga: Well, (a) where we're at, we're in trouble, thanks to a bad system that's been operating really for, not just for decades, not just since the Federal Reserve started in 1913, but we've had very little monetary peace in our country since the beginning. There have been periods where our government controlled the money system and they have been the best periods.

Thom Hartmann: Andrew Jackson was the antithesis of that, wasn't he? I mean, he was elected to office on the campaign to destroy the Second National Bank of the United States, and did so.

Stephen Zarlenga: Well, he, yeah, he had a war with the bank and it was life and death and he survived a couple of assassination attempts, or one attempt with two guns. And he...

Thom Hartmann: And he took out the bank.

Stephen Zarlenga: He took down the bank. He won. Unfortunately, that is one of our monetary lessons of what not to do, also.

Thom Hartmann: Right.

Stephen Zarlenga: Because he and my neighbor, Martin van Buren, who's buried a couple of miles from out headquarters in Upstate New York, they took the power of creating money out of the banks, which must be done, absolutely, must be done because it's outside of our system of checks and balances.

Thom Hartmann:Right.

Stephen Zarlenga: And therefore you don't have a country.

Thom Hartmann: Well, the constitution arguably puts it with the Treasury Department, but it says mint coins, so all the coins in circulation are actual US currency, but the paper in circulation is not because whoever wrote the, well, Madison and buddies, when they wrote the constitution, didn't say coins and specie, or coins?

Stephen Zarlenga: It was understood at the time, and Harvard finally did something valuable in this area and did a study which showed that to coin money meant also the paper. Our colonial period has many examples of fiat paper money.

Thom Hartmann: Right.

Stephen Zarlenga: And in fact that's what built the infrastructure of our country. Until we started using it, the country was in trouble because the Brits and the Dutch did not allow coinage to come over to America. It was against their laws.

Thom Hartmann: Right. And we didn't have that much gold and silver here that we could make our own.

Stephen Zarlenga: No. No, we're not going to make our own, and in fact, the very nature of money, as Aristotle told us in the fourth century BC, money exists not by nature but by law. It's not something that comes out of a mine, it's not something that comes out of a farm, it's an abstract legal power.

Thom Hartmann: Right.

Stephen Zarlenga: So all money is ultimately, all true money is fiat money. And that's what built the colonies.

Thom Hartmann: Right, now I, in reading your work, one of the things that I noted, unless I'm misremembering, but I don't think so, was that you are suggesting that (a) that the Treasury Department should be issuing our money and, if I have this right, and (b) that the value of the money should be defined by the government but it should not be defined by, it should not be an intrinsic value. In other words, we should not go back to gold coins and a gold standard.

Stephen Zarlenga: Yeah.

Thom Hartmann: Why is that? I agree with that, but I know that there are a lot of, particularly the libertarians, this is really big with a lot of conservatives, 'let's go back to the gold standard'.

Stephen Zarlenga: Well, OK, we know how to handle that question with them, and first of all you never did have a gold standard. It was always a fraudulent thing. There were promises to pay gold, it was never really there. But what they've done, and the Ron Paul people especially are tuned into this that we need gold for money, they are confusing an investment with a money. Now, they like gold as an investment, and at certain times gold's a fine investment, other times it's terrible. But you want an investment to go up and up and up. You don't want money to go up and up and up. You want money to be relatively stable. So what you need out of an investment, which might be gold, at a time, and what you need out of money, totally separate. And the Ron Paul people, they understand this when tell them.

And as to the fiat part, any Ron Paul person listening in now will understand the following completely. The problem is not fiat money. The problem is the private issue of fiat money. Then it operates like a tax.

Thom Hartmann: Right, through the Federal Reserve. Right.

Stephen Zarlenga: Like a tax on all of us. Any private issue of money will do that.

Thom Hartmann: Right. And in fact the way that money is issued in the United States, outside of coins, the way that our dollars come into being, is by banks lending things. We have a system where our currency is a function of credit.

Stephen Zarlenga: Ultimately it's primarily banks loaning money. That's what we use as money.

Thom Hartmann: Right. And this seems like a very dysfunctional way to regulate a money system. Shouldn't the amount of money in circulation simply be a reflection of the total number of goods and services divided by a fixed divisor that you know over time?

Stephen Zarlenga: I wouldn't put that kind of a formula on it. I don't think that's necessary. I think a lot of these questions will answer themselves in the system. Now, what we're proposing, Thom, are three changes.

Thom Hartmann: Right.

Stephen Zarlenga: We see the results of the present system as disastrous. It's not only brought down America, it's brought down the whole world.

Thom Hartmann: Right.

Stephen Zarlenga: And the only thing that's keeping things going here is government guarantee and the government bailout. Without that, everything came to a halt. The three things that have to be done, and they should be done together, and in fact if they're not done together they're not going to work, they're going to make reform harder.

The first thing is that the Federal Reserve System is incorporated into the US Treasury, number one.

Number two, banks can no longer create money. Now that is so important. Any system that allows private banking to continue to create money is not reformed. It'll just end us back where we are. It might take a few years, it might take a decade, we'll be back where we are. We cannot allow these people to be in control of our weapons system. What they did to banking and money, why expect anything better in the area of weapons.

Thom Hartmann: Right.

Stephen Zarlenga: Now, those two things, if you just did those two things, that's basically what Jackson and van Buren did, given the institutions of the day, you will create a huge deflation. So you must start to spend new money into circulation. You take, we take away the ...

Thom Hartmann: Which Jackson didn't do.

Stephen Zarlenga: Did not do.

Thom Hartmann: Right.

Stephen Zarlenga: Or my neighbor van Buren. We don't make that mistake. Here's what we do, Thom. We essentially, we learn from history, and what, this book took twelve years.

Thom Hartmann: This book being "The Lost Science of Money" by Stephen Zarlenga who's our guest, who is the director of the American Monetary Institute, monetary.org, and in the minute and a half that we have left can you summarize this?

Stephen Zarlenga: No, I can't in a minute and a half! The three things.

Thom Hartmann: You said the mistake that we would not make. You've already gone through the first two.

Stephen Zarlenga: Yes, right. The first thing, you must put the Federal Reserve into the US Treasury. Second thing, you must stop the private banks from creating money, because as they do that it's like a tax on all of us, and they put the money in the wrong place. They're going to put the money into other bubbles. They can create Wall Street bubbles, real estate bubbles. And the third thing, since you've taken away the power of the banks to create money, you have to put it back in with the government. We do that by the government spending on infrastructure. We start with the two trillion that the engineers tell us is needed. That's $440 billion a year.

Thom Hartmann: Why limit it to infrastructure? Why not say that it gets spent on the commons, period?

Stephen Zarlenga: Well, I think that's the direction it goes.

Thom Hartmann: And we define what the commons is.

Stephen Zarlenga: You see, we include, in infrastructure we include health care.

Thom Hartmann: Right. I consider that part of the commons.

Stephen Zarlenga: We include education.

Thom Hartmann: Right.

Stephen Zarlenga: So the answer is yes, but any system that allows the banks to stay in power is going to lead us back right where we are and we know we can't afford that.

Thom Hartmann: Right. And the banks being in power, you know, one of the principal symptoms of this, I think, is the Geithner/Summers stranglehold on the Treasury Department.

Stephen Zarlenga: Well, I'm glad you're aware of that, not everybody is.

Thom Hartmann: I think there's a lot of people waking up to it. Tim Geithner was the president of the New York Fed.

Stephen Zarlenga: Well, I hope so. Now, I was just in Washington, where I presented the American Monetary Act. Everything I've told you about here is in the American Monetary Act.

Thom Hartmann: You're proposing legislation to solve this problem, it's the American Monetary Act.

Stephen Zarlenga: It's the beginnings of it, the American Monetary Act, and we actually have ...

Thom Hartmann: Hasn't Dennis Kucinich signed off on this with you guys?

Stephen Zarlenga: We're working on it with Dennis.

Thom Hartmann: Not yet. OK.

Stephen Zarlenga: Well, building an Act takes time and it has to be done carefully, and that's what we're doing.

Thom Hartmann: Sure.

Stephen Zarlenga: But we did have official presence in the House office building and an opportunity to address people there. And the first thing I did with it Thom, I said, why do I presume to come here and tell you guys what to do? You've got economists working for you, you've got all sorts of experts.

Thom Hartmann: Right. Stephen, we've got to take a break. When we come back from the break I want to ask you how did our banking system get so broken, what can we do to fix it? We're talking with Stephen Zarlenga, he is director of the American Monetary Institute, monetary.org. For our friends in Portland he'll be at the First Unitarian Church tonight at 7 o'clock. We'll be right back.

...

Thom Hartmann: Now, back to Steve Zarlenga. Steve is the director of the American Monetary Institute. We'll be taking your calls in just a second, here on this. Steve, a couple of, first of all, you shared with me the Green Party platform. Their platform committee has adopted basically a tight version of your suggestion to nationalize the 12 regional Fed banks, create a monetary control board, that you're going to cap interest rates at 8%, things like that.

Stephen Zarlenga: We're doing that, yes.

Thom Hartmann: And create a new money that would be regularly added to the system as population and commerce grow. Question. How do you, you know, you said you want to, instead of loaning money into existence, which is how a fractional reserve banking works, how our current banking system works, and it's loaned into existence by private for-profit corporations, banks who are part of the Fed which is a private arguably not-for-profit corporation. You want to replace that with a government spending money into existence. Isn't that what the Weimar Republic in Germany did in the 1920s?

Stephen Zarlenga: Well, not quite. In fact, not at all.

Thom Hartmann: Educate me.

Stephen Zarlenga: All right. The Weimar, what happened in 1923 was at the insistence of the allied occupiers. The German Central Bank was totally privatized. It had not been until then. But they wanted a "more free market attitude" in the German central bank so they totally privatized it.

Thom Hartmann: So they took a national bank and turned it into the equivalent of our Fed?

Stephen Zarlenga: Yes, yes, even worse, more so. And that bank, people think well they destroyed the Mark in order to avoid reparations damages, but reparations...

Thom Hartmann: That was my assumption always, that they could pay, they had like, in todays dollars, a trillion dollars worth of reparations they had to pay, so they just inflated the currency to pay it off.

Stephen Zarlenga: No, the reparations were due in Dollars, Pounds and Franks.

Thom Hartmann: Oh, they were?

Stephen Zarlenga: Yeah. It didn't help them at all.

Thom Hartmann: Oh. Did they ultimately default on it?

Stephen Zarlenga: It was, yeah, ultimately it was wiped out in that organization in Geneva, the pre-UN organization.

Thom Hartmann: Right, right, pardon my interrupting. So continue your story.

Stephen Zarlenga: No, no. So that was done at the insistence of General Dawes, who got the Nobel Peace Prize and then became vice-president of the United States, and then his bank, the Republic National Bank of Chicago, became the biggest single loss during the Great Depression of the Reconstruction Finance Corp. So that, when people point, and they say, 'yeah, we heard about the wheelbarrow of Marks to buy a loaf of bread, we heard about the Mark wallpaper', but what they didn't hear is that was it was a private central bank that did it.

Thom Hartmann: Just like we have.

Stephen Zarlenga: Yeah.

Thom Hartmann: Well, more or less.

Stephen Zarlenga: Actually, worse, even worse.

Thom Hartmann: Yeah, ours is a little hybridized.

Stephen Zarlenga: So government gets blamed for these things universally, but in fact when you actually look at the history, that's not what happened.

And people assume that groups such as the Austrian School had done their homework, and I could tell you they haven't.

Thom Hartmann: The Austrian School being Hayek and Mises.

Stephen Zarlenga: Hayeck, von Mises. You know, von Mises has the nerve to tell us that his theories can never be disproven by mere facts.

Thom Hartmann: Well, he's been dead for half a century, hasn't he?

Stephen Zarlenga: Not quite, no, no. But I mean, the methodology's so wrong. And now we see this in Greenspan.

Thom Hartmann: Is von Mises still alive?

Stephen Zarlenga: No, von Mises passed away.

Thom Hartmann: Oh yeah, like in the 60s. [1973 - ed.]

cross talk

Stephen Zarlenga: ...or two ago.

Thom Hartmann: Oh, recently? OK.

Stephen Zarlenga: Yeah, fairly recently. Now, the proponent that people would know would be Alan Greenspan; Austrian or Libertarian Austrian.

Thom Hartmann: Sure, or the Chicago School, actually.

Stephen Zarlenga: The Chicago School which, you know, I'm from, I graduated from the University of Chicago, but that was before it went over to the dark side of market worship.

Thom Hartmann: Right, right.

Stephen Zarlenga: And what...

Thom Hartmann: With Mr. Friedman, Mr. Milton Friedman.

Stephen Zarlenga: And even he had some good things in the early years. But when government has control of money, universally we see better results and so this whole fiction about, 'oh, you can't let government control money, they'll go crazy', it's propaganda.

Thom Hartmann: It sure is working for the Chinese.

Stephen Zarlenga: Yes. They have elements that are working quite well. Now, so we overcome that propaganda by study of history. When you actually look at the results, firstly, in our own case, you heard the continental currency, not worth the continental.

Thom Hartmann: Right.

Stephen Zarlenga: What you're not told is that the Brits counterfeited billions while our government authorized two hundred million and printed two hundred million plus replacements. You're not told that.

Thom Hartmann: Right. And it was the British counterfeiting that destroyed the value of our currency.

Stephen Zarlenga: Destroyed it, and still it took us over five and a half years of war against the world's strongest power to within six months of final victory. What's you know, Tom Paine called it a cornerstone of the revolution. Now, the next big thing that the private money gang brings up, 'oh, look at the greenbacks', and what comes to mind? Worthless paper money.

Thom Hartmann: Greenbacks is the the Lincoln administration.

Stephen Zarlenga: Yeah, under, in the 1860s. What allowed us to survive the Civil War and stay as one nation. And again, what they're not told, what they're not telling, or probably because they don't know, is that with the greenbacks 450 million authorized, 450 million created by our government, couldn't be successfully counterfeited because the printing got good, eventually exchanged one for one with gold.

Thom Hartmann: Right.

Stephen Zarlenga: One dollar in greenback was worth a dollar in gold.

Thom Hartmann: So the greenback was a very successful currency. Now...

Stephen Zarlenga: Yes and no. Yes and no.

Thom Hartmann: What's the 'no'?

Stephen Zarlenga: The 'no' is it allowed the banks to keep creating money and that, immediately when the crisis was over, they moved against the greenbacks, and if you let the banking establishment keep any part of the money power, that's all they need to get back the whole thing.

Thom Hartmann: Well, and more recently the Treasury has actually issued currency; United States Notes, the two and five dollar bills that were issued in the 60s.

Stephen Zarlenga: You're talking about the Kennedy stuff, where people say Kennedy that got killed over that.

Thom Hartmann: Yeah, well, I'm not sure that he got killed over it, but, you know, actually, I understand that there was almost a 15 year period that they were authorized, but it was during Kennedy's administration that they actually were printed.

Stephen Zarlenga: Well, it was not a big deal and I think it had to do mainly with silver interests. There's an urban legend about that.

Thom Hartmann: All right.

Stephen Zarlenga: It's not important, and what people say.

Thom Hartmann: Oh, I've got one of those two dollar notes. It says United States Note upon it; it doesn't say Federal Reserve Note.

Stephen Zarlenga: Oh, yea. Yeah, yeah. That's better than what...

Thom Hartmann: It's a step in the right direction, but again, it's not the whole enchilada.

Stephen Zarlenga: You need the whole thing, Thom. This is what we learn from history. None of this is made up by us. We found these case histories which demonstrated each. For example, when Bank of England was nationalized in 1946 at the request of the Archbishop of Canterbury, it's the middle of World War 2, bombs are falling, hundreds of thousands dead, he gives a speech: what should be the servant has become the master.

Thom Hartmann: He's speaking of the banks.

Stephen Zarlenga: The private central bank. The Bank of England was privately owned, privately controlled. And the first thing they did at the end of World War 2, they nationalized the Bank of England. But they didn't go far enough, they allowed the banks to keep creating money. Now at that point in time you had half the money created by government through the Bank of England and half the money created by private banks, same way as it is here. You look now, 95, 97% is created by private banks, and 3, 5% by governments.

Thom Hartmann: Yeah.

Stephen Zarlenga: Same as here. So that's the key: you must remove the, what we call the money power from private banking. It belongs in government. Nobody else can handle it.

Thom Hartmann: We have, Stephen Zarlenga, monetary.org, we have 40 seconds. How do we take on the Geithners? How do we take on these billionaire bankers? Is it just educating a lot of people? I mean, it seems to me that that's the starting point.

Stephen Zarlenga: Well, the way we're doing it, we've got this CD of my presentation in Washington. It's a CD I've narrated so you can hear what I am doing, of the American Monetary Act. You get those from us, we'll make them available at cost. You get a copy of the American Monetary Act in its present form. You give them to your Congress people, your senators, and especially to your local representatives who you can actually get in and see, and when these guys ...

Thom Hartmann: Right. Who, ten years down the road, will be your Congressmen and Senators.

Stephen Zarlenga: Yes. Yes. These guys, when they read title 5, and they see the things that this provides to the local level, they will see, well, that solves out unsolvable problem. They will put the pressure on the Congressmen and the Senators in a way that we can't.

Thom Hartmann: There you go. Stephen Zarlenga, the director of the American Monetary Institute, tonight he'll be at the Unitarian Church at 7 o'clock in Portland. monetary.org is the web site. 45 minutes past the hour. Thanks, Stephen.

Stephen Zarlenga: Thank you, Thom.

 

 

Transcribed by Sue Nethercott.