Audit The Fed And Apportionment

Posted 26 Sep 2009

Friday 25 September 2009 had two significant events.  First, there was a full committee hearing on Ron Paul's bill H.R. 1207 to audit the Federal Reserve.  Second, Chief Judge Edith Jones of the United States Court of Appeals for the Fifth Circuit, directly under the United States Supreme Court and covers Florida, Georgia, Alabama, Mississippi, Lousiana and Texas, issued an order for a three judge panel to hear an issue brought about apportionment regarding the House of Representatives.  Both of these actions, should they be brought to fruition, would seek to restore essential checks and balances found in the United States Constitution and reduce the centralization of power.


Murray Rothbard argues in The Case Against The Fed that because depositors are entitled to demand their deposits at any time and because by its nature fractional reserve banking cannot sustain all depositors demanding their deposits at the same time therefore fractional reserve banking is fraud.

Because of the inherently fraudulent nature of fractional reserve banking bank runs were a common occurrence before the FDIC and Federal Reserve system.

 However, because of the cartel nature of the FDIC and Federal Reserve system individual bank failures are no longer to be feared by depositors because of the implicit guarantees.

These implicit guarantees have been turned into actual guarantees with the $100k limit being increased to $250k, which returns to $100k on 1 January 2010, the FDIC's reserve fund being depleted and the Treasury extending a $500B line of credit to help placate owner's of $13T+ of FDIC insured funds.

This has introduced tremendous moral hazard.  Moral hazard is the economic principle that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.  As a result, people do more due diligence on the movies they watch than the banks they deposit their currency in.

For example, with FDIC insurance the moral hazard occurs often without conscious or malicious action.  Depositors have been trained to seek out the highest yields without regard to the underlying stability of the bank because when there is a bank failure the losses are socialized through increased FDIC insurance premiums, inflated away by the Federal Reserve through increasing the currency supply or a myriad of other fraudulent, deceitful, immoral or often illegal means.  The lynchpin of the current banking system, which is inherently unstable and will fail, is the Federal Reserve.

Consequently, the Federal Reserve is built on a fraud and the attendant effect on the rest of the economy is to distort normal market operations through both the supply and cost of currency.  

This is illegally and unconstitutionally perpetuated through legal tender laws which violate the Constitution in regards to the monetary provisions in Article 1 Sections 8 and 10, the 10th Amendment and confounded the definition of a dollar and serve to centralize power.

But this immoral system, conceived in iniquity under cloak and dagger as explained by G. Edward Griffin in The Creature From Jekyll Island, has been perpetuated for nearly 100 years and despite humanity doing just fine for thousands of years many cannot conceive of an economy should the Federal Reserve be razed.

 Nevertheless, because the system is built on fraud and because sunshine is the best disinfectant therefore the Federal Reserve has strongly challenged any type of public audit, accountability or oversight despite it being in the best interest of American citizens.


As the wretched vampire squid is dragged into the sunlight and revealed for the parasite it is then increased political pressure will be brought to bear on the immoral institution.  Ron Paul's bill, which received a full committee hearing, is the first major step in this direction in a long time.

During the hearing testimony was heard from both Austrian economist Tom Woods, author of Meltdown, and Scott Alvarez the general counsel for the Federal Reserve.  As the general public becomes aware of the tremendous damage this institution and those on Wall Street have done hopefully they will adopt the spirit of the Founding Fathers.

Mr. Alvarez, or should we say Chicken Little, decides to terrorize those who advocate in favor of H.R. 1207.  He testified:

These concerns likely would increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation. ... Higher long-term interest rates would further increase the burden of the national debt on current and future generations.

 Adoption of H.R. 1207 also could disrupt the nation's relationships with foreign central banks and governments, relationships which are helpful in supporting the Federal Reserve's efforts to fulfill its statutory missions, and erect barriers to official cooperation among central banks and governments.  Foreign central banks and governments likely would be less willing to engage in financial transactions with the Federal Reserve if these transactions were subject to policy review by the GAO as H.R. 1207 would allow.

 These transactions, such as the deposit of international reserves and bilateral currency swap arrangements, help support the role of the dollar as the worldwide reserve currency

For example, first comes the audit of the Federal Reserve system.  Next comes the legislation to end it.  Then comes a reenactment of legislation like the Coinage Act of 1792 to prevent future similar behavior which reads:

SECTION 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, * * * every such officer or person who shall be guilty of any * * * of the said offenses, shall be deemed guilty of felony, and shall suffer death.



Bicameralism is the practice of having two legislative or parliamentary chambers.  The United States Congress is modeled after the British system which was composed of the House of Lords and the House of Commons.  The United States Senate is composed of 2 Senators from each state while the House of Representatives is under Article I Section 2 to be "chosen every second Year by the People of the several States".  

Under the doctrine of apportionment the House is to grow as the population grows and it did for the first 130 years of the Republic except in 1840.  But the Reapportionment Act of 1929 limited the size of the House to 435.

Currently, Congress Critters have a constituency of about 700,000 instead of about 50,000 like they did before the Reapportionment Act.  This has served to consolidate power and make the Congress Critters less responsive to The People.  The 17th Amendment was ratified in 1913, the same year the Federal Reserve Act was passed, and provided for the direct election of Senators.

 The eviseration of these two checks and balances in the American political machenirey has made it easier for special interests and lobbyists to influence elected officials.

With the House often gridlocked with 435 members imagine the chaos of getting everyone aligned if there were over 1,300?  Ironically, increasing the number of Congress Critters through proper apportionment would likely have the effect of greatly decreasing the size of government because special interests would have much less influence and control with politicians likely much more accountable to their constituency.  

Therefore, I find this order by Judge Jones for a hearing on the apportionment issue to be extremely interesting and a positive development regarding the decentralization of power.


The auditing of the Federal Reserve system would be very beneficial for the powers of truth and justice.  The Federal Reserve system should be viewed as counterfeiters because they enjoy a legalized counterfeiting franchise and are able to engage in creating new fiat currency with legal tender status and doing so amounts to confiscation through inflation which is a form of taxation without representation or due process of law.  Unmasking these costumed terrorist counterfeiters will bring to light and the conscience of The People the degree to which they are being stolen from.

Likewise apportionment could result in Congress Critters being more responsive to their constituency who could demand the repeal of the Federal Reserve Act and the implementation of legislation like Section 19 of the Coinage Act of 1792.  Humanity has survived and thrived for thousands of years without a Federal Reserve.

 Consequently, auditing and abolishing the Federal Reserve will be a great development for humanity and reduction in the centralization of power.

Disclosure:  Long physical gold, silver and platinum and no position the problematic GLD or SLV ETFs.