Dick Eastman murders Thomas Woods Jr.

March 23, 2013 § 5 Comments

Dick Eastman answers Thomas Woods’ feeble analysis of ‘greenbackism’, to be f0und here:
lewrockwell.com/woods/woods225.htmlEastman vs Woods

Thomas E. Woods Jr.:  A subset of the end-the-Fed crowd opposes the Fed for peripheral or entirely wrongheaded reasons. For this group, the Fed is not inflating enough. (I have been told by one critic that our problem cannot be that too much money is being created, since he doesn’t know anyone who has too many Federal Reserve Notes.)

Dick Eastman: Everywhere around us we see businesses closing for want of demand, for want of consumer purchasing power.  Factories and stores are closed.  And household debt, small-business debt and government debt are in the trillions, while revenue earnings and wage earnings are insufficient to make payments. This is not a problem with the household sector, the business sector or even the public goods sector  — it stems from the financial sector.  The private financial sector has been given the power to expand or contact credit  — and they have found it most rewarding to put us in a deflationary depression.              
Woods (continued):  Their other main complaints are (1) that the Fed is “privately owned” (the Fed’s problem evidently being that it isn’t socialistic enough), (2) that fiat money is just fine as long as it is issued by the people’s trusty representatives instead of by the Fed, and (3) that under the present system we are burdened with what they call “debt-based money”; their key monetary reform, in turn, involves moving to “debt-free money.”
Dick Eastman: “Evidently socialistic enough?” Is that really what you think our objection is?  You are representing yourself as someone who has studied the populist reflationists, yet you don’t know that our objection to the central bank is that it is privately controlled and that the control is all manipulation intended to beggar the household and domestic production sectors and transfer the wealth via interest payments and the taking of assets that were put down as collateral on loans made.  And 2) don’t you know that the populists who have been most vocal against the Austrians are those who do not trust the government to spend new money into existence, but that we favor all new money originating in the household sector in the form of a dividend.  You are only right on your point #3.  We are opposed to “debt-based money” and we do favor parmanent “debt-free” money because such money is not the hostages of the banks or of the rich men who have big deposits, either of paper money or metallic money, which enables them to expand or contract the money supply at will and to their own advantage at the expense of everyone else.   
Woods (continued):  These critics have been called Greenbackers, a reference to fiat money used during the Civil War. (A fourth claim is that the Austrian School of economics, which Ron Paul promotes, is composed of shills for the banking system and the status quo; I have exploded this claim already – here, here, and here.)
With so much to cover I don’t intend to get into (1) right now, but it should suffice to note that being created by an act of Congress, having your board’s personnel appointed by the U.S. president, and enjoying government-granted monopoly privileges without which you would be of no significance, are not the typical features of a “private” institution. I’ll address (2) and (3) throughout what follows.
Dick Eastman: Yes, for a short time the Civil War was funded by Greenbacks  — and the South also was funded by “Greybacks”  — and very successfully  — until, in the North, the Rothschild agents prevailed on Lincoln to fund the war with bond sales, which Lincoln was always willing to do.  The South, following the economics of Jefferson and even more of John C Calhoun, used paper money to great effect. And as for the Austrian Schoolers being shills  — von Mises wrote the English version of Human Action with a Rockefeller grant and von Hayek was hired by the London School of econmics.  Von Hayek attacked Keynes not because of Keynes propensity for deficit spending (for which I oppose his system) but because he was championing the under-consumption and over-saving explanations of the Great Depression and not the Over-Production theory  — and its Austrian variation, the “mal-investment” theory which blames good times on bad times.  My Kitson-Feder-Soddy school knows that good times end because of the inevitable interest drain that comes of having nearly all of the nations money in the form of loan-created deposits. (More on this when you address the subject further below.)   
 
Woods (continued):  The point of this discussion is to refute the principal falsehoods that circulate among Greenbackers: (a) that a gold standard (either 100 percent reserve or fractional reserve) or the Federal Reserve’s fiat money system yields an outcome in which outstanding loans cannot all be paid because there is “not enough money” to pay both the principal and the interest; (b) that if the banks are allowed to issue loans at interest they will eventually wind up with all the money; and that the only alternative is “debt-free” fiat paper money issued by government.
Dick Eastman: You are going to “refute” statements that the trillions of dollars of debt cannot be liquidated by the existing currency in circulation (without fiat inflation)?  Are you going to refute the claim that if the transactions conducted between the household sector and the production sector are all conducted with checks being written or checking accounts being debited by sellers and credited by buyers through  electronic transfer and that these deposits are all created by bank loans and that all of these bank loans must be repaid principal plus interest, that there must be a net drain  – simply because the inflow of loans to the loop between households and businesses is less than the outflow of the equal loan principal plus continuously compounded interest.  Their has to be a net drain  — and the difference can only be made up by foreclosure and seisure of collateral  — the net drain showing itself in the net transfer of collateral assets from defaulting borrowers to creditors. Look around you and try denying the evidence of your eyes.  
Woods (continued):  My answers will be as follows: (1) the claim that there is “not enough money” to pay both principal and interest is false, regardless of which of these monetary systems we are considering; and (2) even if “debt-free” money were the solution, the best producer of such money is the free market, not Nancy Pelosi or John McCain.
Dick Eastman: Nancy Pelosi and John McCain hold their high positions in the US Congress and Senate respectively because the men who set the price of gold, who enjoy a private monopoly of money  and credit creation  have chosen these to politicians to do their bidding, just as they have allowed Ron Paul and Rand Paul to play the roles they have been playing in American politics.  
Now as to your point #1:  Our claim is that there is a built in disequilibrium because of net interest drain  — as shown above.  This does not mean that the financial sector (which includes the privately owned central bank as well as the big players in the securities and currency and loanable funds markets) – as I was saying, this does not mean that conspiracies of financiers cannot temporarily allow a big influx of new lending to create a boom.  And such a boom will be inflationary  — and so nominal interest rates will rise in expectation of this inflation  — and this higher interest rate will actually speed the demise of the boom  — as the inevitable outflow of principal and interest from the loan that created the boom are sucked away. The Moneyed Elite  — who set gold prices and have enough gold to create booms and who also have at their discretion the power to pull gold reserves from gold-standard banks, just as they instruct the Fed to the banks they own to call in loans and restrict new lending to speed a deflationary collapse.   
Woods (continued):  To understand what the Greenbackers have in mind with their proposed “debt-free money,” and what they mean by the phrase “money as debt” they use so often, let’s look at the money creation process in the kind of fractional-reserve fiat money system we have. Suppose the Fed engages in one of its “open-market operations” and purchases government securities from one of its primary dealers. The Fed pays for this purchase by writing a check on itself, out of thin air, and handing it to the primary dealer. That primary dealer, in turn, deposits the check into its bank account – at Bank A, let us say.
Dick Eastman: What you don’t understand is that the money provided by the Fed when it buys securites from the dealers at the New York Federal Rewserve Bank, the only place these operations are conducted, is money that does not reach the loop of American producers and households UNLESS there is investment going on.  And there will be no investment by these obtainers of QE money (from selling securities to the Fed) as long as they can profit from the deflation premium  — waiting until deflation causes mortgage defaults and business failures so that those assets (rental properties and a firms marketable “body-parts” are available from the creditors who have taken possession.  None of that money waters the real economy of domestic producers and the American household.    
Bank A doesn’t just sit on this money. The current system practically compels it to use that money as the basis for credit expansion. So if $10,000 was deposited in the bank, some $9,000 or so will be lent out – to Borrower C. So Borrower C now has $9,000 in purchasing power conjured out of thin air, while Person B can still write checks on his $10,000.
This is why the Greenbackers speak of “money as debt.” The $9,000 that Bank A created in our example entered the economy in the form of a loan to Person B. In our system the banks are not allowed to print cash, but they can do what from their point of view is the next best thing: create checking deposits out of thin air. Banks issue loans out of thin air by opening up a checking account for the customer, whose balance is created out of nothing, in the amount of the loan.
Dick Eastman:  Are you really that obtuse that you make this claim when by simple direct inspection it is obvious to all who think to look that the bailout money to banks and the QE money from open market operations with the Fed has not resulted in either investment in the lower-loop econmy or consumption.  They sit on the money, because that way they cause deflation, a deflation from which they profit mightily as they scavange the wreckage of the deflation-caused depression.
You Austrians cry bloody murder if someone speaks of reflating the economy  — you cry  “Inflation is theft!”  because the creditor interests, who are owed so many dollars in the future, do not want those dollars to have any less purchasing power than they can possibly help.  But when deflation is in the offing  — you Austrian Schoolers see nothing wrong with it  — even though it robs the debtor just as surely as inflation robs the creditor.  This by itself is prima facie evidence that you Austrians are in the service of the creditor class and advocating anti-inflation and eschewing any measure or inclination to prevent or mitigate theft of debtors through deflation.     
Woods (continued):   The Greenbacker complaint is this: when the fractional-reserve bank creates that $9,000 loan at (for example) ten percent interest, it expects $900 in interest payments at the end of the loan period. But if the bank created only the $9,000 for the loan itself and not the $900 that will eventually be owed in interest, where is that extra $900 supposed to come from?
Dick Eastman:   This is an disingenuous representation of the populist greenbacker’s “complaint.”   We are no looking at a single bank, but at the entire banking system.  The flows were are discussing are between sectors, not individual transactions between an indivdual borrower and his bank.  The analysis has to do with flows of money among sectors, with the problem being that there is too much going to the financial sector that is not finding its way back to the household and producing sectors until after a bankruptcy and eviction have taken place.
We are paying attention to what the financial sector — international money men  — gives and what it takes.  It takes much more than it gives.  It gives loans – money from outside the producer and household sectors  — and it requires a bigger amount (principal plus interest) afterwards.
We also take into account the monetary expansion that follows any injection of new funds from outside the loop that results from the fractional reserve banking  — so that at the end of the so-called “multiplier process”  all of the new money ends up as reserves “backing” loans that total a multiple (by a factor greater than one) of the original new injection. 
And we also know that when money is paid back to the banking system, either as payment of principal or payment of interest, there will be a destruction of checking deposits (checkbook money) by the same multiplier amoung — so that all of the loans that that amount of reserves was allowing are called in  — in a deflationary contraction of domestic purchasing power.
We were not born yesterday.
Woods (continued):  At first this may seem like no problem. The borrower just needs to come up with an extra $900 by working more or consuming less. But this is no answer at all, according to the Greenbacker. Since all money enters the system in the form of loans to someone – recall how our fractional-reserve bank increased the money supply, by making a loan out of thin air – this solution merely postpones the problem. The whole system consists of loans for which only the principal was created. And since the banks create only the principal amounts of these loans and not the extra money needed to pay the interest, there just isn’t enough money for everyone to pay off their debts all at once.
Dick Eastman: The above paragraph is nonesense. Working more and consuming less is the Ron Paul and Fox News “austerity” solution — the allowing the economy to go bust to “clear out the mal-investment” as Ron Paul and now Rand Paul say time after time. As a “Greenbacker” (your choice of terms, not mine) I must point out that this “working more” and “consuming less” is exactly the tribute that debt slavery exacts from the deflation system.  People will work more to earn the extra to pay the debt — that is true  — and the creditors who own the corporations who get more labor for less from people under debt-burden compulsion, but guess what?  They will only be working harder to take the money from some other debtor who can’t work any more to make up for the loss.  But no matter how much more the people work to obtain money to make the shortfall caused by the drain of purchasing power from the loop  — the bankruptices and defaults will happen anyway  — all the extra work to pay bills does not create more purchasing power  — it is only a scramble among the people to take purchasing power away from their neighbor who is also caught short by the deflation.
And let’s dispense with this talk about there not being enough money “for everyone to pay off their debts at once.”  We are talking about flows of loans and of debt service payments over time.  That’s two flows, one adding purchasing power and one leaking purchasing power from the domestic real economy (households and production and public goods).  There is no denying that for some length of time in a credit expansion by initiated by Big Finance purchasing power inflow can get ahead of debt service outflow.  But as I wrote above  — the more that happens the higher inflation and the higher interest rates (with added inflaiton premium) will follow.  The interest drain must catch up, and the higher interest rates have gotten in the boom the faster that will happen.  But there is no escaping the defaults and the surrender of real wealth transferred to the creditors no matter how hard everyone is working to avoid the stigma of, NSF checks,  default and bankruptcy.    
Woods (continued):  And so the problem with the current system, according to them, is that our money is “debt based,” entering the economy as a debt owed to a bank. They prefer a system in which money is created “debt free” – i.e., printed by the government and spent directly into the economy, rather than lent into existence via loans by the banks.
Dick Eastman: You are right, that is what we greenbacker’s say.    
In the comments section at my blog I have been told by a critic that even under a 100% gold standard, with no fractional-reserve banking, the charging of interest still involves asking borrowers to do what is literally impossible for them all to do at once, or at the very least will invariably lead to a situation in which the banks wind up with all the money.
All these claims are categorically false.

Dick Eastman: That critic is wrong.  The problem is the same for gold and loan-created-deposit money if there is a fractional reserve system.  Even without a central bank, if there is a fractional reserve system, Rothschild and other big gold holders acting in concert can create booms and deflationary busts as they choose to alternately increase gold reserves or withdraw the reserves  — causing a multiplier effect expansion of credit or contraction of credit respectively.  This was the case in the Great Depression that followed the stock market crash (caused by margin calls and by the Fed calling loans to member banks),  a monetary contraction (deflation)that occured while on the gold standard in conjunction with a fractional-reserve system.

But if there is no fractional reserve system the story is different.  Rothschild and friends in this case control the reserves directly, with no money multiplier to add to the effect when Rothschild provides gold deposits to the banking system or withdraws them.  In this case the deflation is much more severe all the time — deflation to one fifth or one tenth or some other fraction depending on the reserve ratio of the fractional system that is replaced by the 100% system.
But what about that 100% reserve system under a gold standard.  The fact is that Rothschild and friends have just as much control as before  — they can create business cycles just as easily, but with less severe swings in absolute nominal price  — but in terms of real prices — what labor buys of goods, what a firms revenue buys of wages  — the control by Rothschild will be the same.   The banks will still charge interest on loans  — they will just not create new money as the fractional reserve banking system permits and the 100% system does not permit.  And when Rothschild and friends  decides to pull their gold from commercial bank vaults and hoard the gold in their private vaults — they will still create deflation, they will still force banks to call in loans, they will still be able to scoop up the valuable assets left in the wreckage of a crash.
Woods (continued):  It is not true that “there is not enough money to pay the interest” under a gold standard or a purely free-market money, and it is not even true under the kind of fractional-reserve fiat paper system we have now. It certainly isn’t true that “the banks will wind up with all the money.” There are plenty of reasons to condemn the present banking system, but this isn’t one of them. The Greenbackers are focused on an irrelevancy, rather like criticizing Barack Obama for his taste in men’s suits.
Dick Eastman: You make the assertion that it is “not true” that there is inevitable net interest drain — but need I point out that you do not give any reasons for us to accept that assertion  — that unfounded assertion.  Nothing you have said so far supports this conclusion.  You just throw it out there:  “not true”,  ” not even true”, “certainly isn’t true”, but no justification for any it. Then you say we are focused on an irrelevancy.  But you see I have carefully examined every statement you made and addressed it thoroughly  — but nowhere did you give one argument for why or how  the household and production sectors can find money to pay interest and escape inevitable defaults when their medium of exchange flow to them only as loans from the financial  and their debt servicing obligations requires the payment of principal plus interest to that sector.  You described what we say.  You talked about open market operations and fractional reserve banking, but nowhere did you show us how a bucket in which loan pours in and the same amount of loan leaks out plus an additional leak of interest and the bucket’s water line not eventually fall and the bucket eventually run dry.  Do you think your readers are so stupid that they will not notice that you did not prove what you said you would prove  — even that you did not even attempt to prove it.    
Woods (continued):   I want to respond to this claim under both scenarios: (1) a 100% gold standard with no fractional reserves; and (2) our present fractional-reserve, fiat-money system.
In order to do so, let’s recall what money is and where it comes from.
Money emerges from the primitive system of barter, in which people exchange goods directly for one another: cheese for paper, shoes for apples. This is an obviously clumsy system, because (among a great many other reasons I trust readers can conjure for themselves) paper suppliers are not necessarily in the market for cheese, and vice versa.
Dick Eastman: You have accepted a theory of the origin of money.  But how about this:  The boss of the tribe takes people out to gather berries or to make arrow heads or make garments  or supply something — and to ensure obedience he makes the rule, if you do not do your quota you do not eat. From here it is no big leap for the Boss to give tokens  — shells or some piece of skin with his mark on it  — gives it to those who have done their work so they earn their food at the communal meal.  Some may not consume a meal, preferring to save the food token for a day when they are sick or want a personal vacation  — but then someone else may have failed to meet their quota to qualify for a meal  — then that person goes to the person who has “saved” a token and exchanges something of value (an animal skin, or a knife) for the token.  And so money is born.  Von Mises has just imagined one way it could have happened.  His a priori axiomatic method  — is bogus.
  
Woods (continued):  A money economy, on the other hand, is one in which goods are exchanged indirectly for each other: instead of having to be a hat-wanting basketball owner in the possibly vain search for a basketball-wanting hat owner, the basketball owner instead exchanges his basketball for whatever is functioning as money – gold and silver, for example – and then exchanges the money for the hat he wants.
Dick Eastman: I might as well tell you now  — gold is not money.  It is a commodity.  It is the most liquid commodity in barter.  Money is a conditioned generalized reinforcer  — people exert themselves to obtain money merely because of their past learning with respect to that money, they have learned (and consequently have the conditioned expectation) that the money can be exchanged for things worth having. 
And a discussion of the origins of money is only begging the question of whether or not we are cheated when our money is provided only if you commit to paying interest to someone with the power to make money plentiful or scarce in the economy. That is what we are discussing here.   
Woods (continued):  People dissatisfied with the awkward and ineffective system of barter perceive that if they can acquire a more widely desired and more marketable good than the one they currently possess, they are more likely to find someone willing to exchange with them. That more marketable good will tend to have certain characteristics: durability, divisibility, and relatively high value per unit weight. And the more that good begins to be used as a common medium of exchange, the more people who have no particular desire for it in and of itself will be eager to acquire it anyway, because they know other people will accept it in exchange for goods. In that way, gold and silver (or whatever the money happens to be) evolve into full-fledged media of exchange, and eventually into money (which is defined as the most widely accepted medium of exchange).

Money, therefore, emerges spontaneously as a useful commodity on the market. The fact that people desire it for the services it directly provides contributes to its marketability, which leads people to use it in exchange, which in turn makes it still more marketable, because now it can be used both for direct use as well as indirectly as a medium of exchange.
Note that there is nothing in this process that requires government, its police, or any form of monopoly privilege. The Greenbackers’ preferred system, in which money is created by a monopoly government, is completely foreign and extraneous to the natural evolution of money as we have here described it.

Dick Eastman:  All of this is extraneous to the matter in dispute.  The question is about what happens to economies when the tokens are borrowed and when there is a set of individuals with power to inject or extract money (exchange mediation tokens) from circulation and always require an interest payment (tribute) for the use of the tokens.  Whether the big shot owns all of the gold mines, or all of the wampum or an excluisve chartered monopoly from the king to supply money tokens.   Greenbacker’s say you do not have to pay the gold monopolist and you do not have to pay the guy with an exclusive patent from the king.  You can either change the kings mind or find yourselves a new king  — one who will let you have the money you need to get the most from the workers and resources and enterprising inclinations of the people of the kingdom.  Its as simple as that.  You are arguing on behalf of the guy with the gold and they guy with the exclsive charter for prining money and charging interest for its hire. 
Woods (continued): 
And make no mistake: money has to emerge the way we have described it. It cannot emerge for the first time as government-issued fiat paper. Whenever we think we’ve encountered an example in history of a pure fiat money being imposed by the state, a closer look always turns up some connection between that money and a pre-existing money, which is either itself a commodity or in turn traceable to one.
Dick Eastman:  Another assertion, easily refuted by either experiment or an examination of history or a few moments of  thinking.
The fact is that in a nation with no money  — like Cyprus at the moment we speak  — or on many historic occasions where colonies have had to pay their taxes abroad and found that they had no more of the mother’country’s coin with which to transact business.  So what does one do to initiate an effective money system  – to establish the use of tokens to enable market transactions with the tokens becoming money.  All that is necessary is for the government, the coercive authority, to declare a tax which must be paid “or else” and to decree, by fiat, that the particular tokens in question will be accepted as payment in tqxes.  Since everyone needs those tokens to pay taxes — their value is established and they immediately have purchasing power.  I need not go into detail here.   When money vanishes for whatever reason  — a new money can always be established by a government in this way.  Money is sought for the good that it obtains and the aversive treatment that paying it can avoid.  (I have no argument with libertarians on the coercive nature of the state.  You do not have to be an Austrian-School libertarian to know that.)
   
Woods (continued):  For one thing, pieces of paper with politicians’ faces on them are not saleable goods. They have no use value, and therefore could not have emerged from barter as the most marketable goods in society.
Dick Eastman: See above.    
Woods (continued):  Second, even if government did try to impose a paper money issued from nothing on the people, it could not be used as a medium of exchange or a tool of economic calculation because no one could know what it was worth. Are three Toms worth one apple or seven fur coats? How could anyone know?
Dick Eastman: We sell our service or goods for money because we have learned to expect that someone will give us something for it so they in turn can use it to get what they would like from someone else.  This happens quickly and easily once the common use for money (paying taxes or something else) is established.  Again this has nothing to do with the question at hand  –the questions of whether money has to be gold and whether it has to come from people who charge interest for its introduction into circulation.   
Woods (continued):  On the other hand, the money chosen by the market can be used as a medium of exchange and a tool of economic calculation. During the process in which it went from being just another commodity into being the money commodity, it was being offered in barter exchange for all or most other goods. As a result, an array of barter prices in terms of that good came into existence. (For simplicity’s sake, in this essay we’ll imagine gold as the commodity that the market chooses as money.) People can recall the gold-price of clocks, the gold-price of butter, etc., from the period of barter. The money commodity isn’t some arbitrary object to which government coerces the public into assigning value. Ordering people to believe that worthless pieces of paper are valuable is a difficult enough job, but then expecting them to use this mysterious, previously unknown item to facilitate exchanges without any pre-existing prices as a basis for economic calculation is absurd.
Dick Eastman: See above.  Again, this has no bearing on the question of fiat versus “backing” and whether money should come from rich people who monopolize and lend it or from the govenrment as a “thin-air public utility.”   All of this beating around the bush tells me no arguments are going to be coming from you.   

Woods (continued):  Of course, fiat moneys exist all over the world today, so it seems at first glance as if what I have just argued must be false. Evidently governments have been able to introduce paper money out of nothing.

Dick Eastman: See above.    
Woods (continued):  This is where Murray Rothbard’s work comes in especially handy. In his classic little book What Has Government Done to Our Money? he builds upon the analysis of Ludwig von Mises and concisely describes the steps by which a commodity chosen by the people through their voluntary market exchanges is transformed into an altogether different monetary system, based on fiat paper.
The steps are roughly as follows. First, society adopts a commodity money, as described above. (As I noted above, for ease of exposition we’ll choose gold, but it could be whatever commodity the market selects.) Government then monopolizes the production and certification of the gold. Paper notes issued by banks or by governments that can be redeemed in a given weight of gold begin to circulate as a convenient substitute for carrying gold coins. These money certificates are given different names in different countries: dollars, pounds, francs, marks, etc. These national names condition the public to think of the dollar (or the pound or whatever) rather than the gold itself as the money. Thus it is less disorienting when the final step is taken and the government confiscates the gold to which the paper certificates entitle their holders, leaving the people with an unbacked paper money.
Dick Eastman: There is money and there is the token which may be made of metal which is traded as a commodity.  If a commodity taks on the extra duty of money token, that use will reduce its supply for other uses.  Likewise if the commodity is in demand as a factor in production of some good, then its extensive use for that purpose will make the monety token material that much scarcer.  Now if the token is a weight of gold rather than a number stamped on a gold disk  — then commodity use ( a fifty foot high  golden statue of the king)will cause deflation of the metal in its capacity as money.  This is all trivial stuff. We “greenbackers” claim that Rothschild and friends have the power to affect the supply of gold and that for that reeason our money should not be gold.  We also say that with both debt-based (collateral “backed”) money and commodity money  (remember, gold does not really “back”  — it is merely the most liquid commodity of barter  — and when money falls in per unit purchasing value to where it is worth less as money than it it is as commodity  then it ceases to be money.  But of course if that happens than your economy is destroyed and there is no need to discuss economics.  The purpose of this discussion  — at least my purpose  — it to expose the hoax and the scam of debt-based money that requires interest payments simply to have it in circulation  — and the hoax that the guy with the gold mines gets to charge tribute to everybody else for the priviledge of having a money token system.  We don’t need that kind of scam.  That kind of scam  — which you are failing miserably at defending — is a scam that is destroying families and killing people all over the country every minute that I type this and people read it.  
Woods (continued):  This is how unbacked paper money comes into existence. It begins as a convertible substitute for a commodity like gold, and then the government takes the gold away. It continues to circulate even without the gold backing because people can recall the exchange ratios that existed between the paper money and other goods in the past, so the paper money is not being imposed on them out of nowhere.
Dick Eastman: I have trained rats and pigeons to, respectively, press bars and peck keys, to earn food.  And I gotten pigeons to peck to turn on a light simply because when that light is on, pecking another key will obtain access to food (grain from a hopper presented by a solinoid)  — The light that signals that the other key is now effective is a conditioned reinforcer  — and that is what a piece of money is.  I have also seen token reinforcement systems established in facilities for the developmentally disabled — who previously had no working experience with money.  All that has to be established is the contingency of reinforcement.  In the preresence of this stimulus, the token, such and such a behavior, e.g., offering the token in exchange for candy or a toy, is reinforced (that is, obtains the food or toy)  That is all there is too it.  Von Mises and you just over analyzed the problem amking up imaginary situations which you then insist must be the way use of money gets started.  I can assure you from my own behavior laboratory experience, the Mises scenario “ain’t necessarily so.” 
And besides, you are still talking off the point.
Woods (continued):  Free-market money, therefore, is commodity money. And commodity money is not “debt-based” money. When a gold miner produces gold and takes that gold to the mint to be transformed into coins, he simply spends the money into the economy. So free-market money does not enter the economy as a loan. It is an example of the “debt-free money” the Greenbackers are supposed to favor. I strongly suspect that many of them have never thought the problem through to quite this extent. If what they favor is “debt-free money,” why do they automatically assume it must be produced by the state? For consistency’s sake, they should support all forms of debt-free money, including money that takes the form of a good voluntarily produced on the market and without any form of monopoly privilege.
Dick Eastman: You say “commodity money” is not “debt-based” money. Let us test this proposition and see if it is true.  You will agree that gold coins used for buying and selling but also for art and electronics wound be commodity money.  You also will agree that a nation can be using this gold money and doing pretty well.  And you will also allow that someone outside that country can have a lot of gold in his possession which he does not need for keeping himself housed, fed and cloathed etc.  No cannot this rich outside bring his gold into the country and buy things up with it.  Can’t he put it in the local bank so that the local bank will immediatly start making loans to entreprenerus and conumers who come in looking for a loan.  And with all this easy money everybody is selling and hiring and prices are being bid up  – in what we can only call a boom.  Then cannot this same rich foreigner who brought in the gold, also go to the bank and withdraw it and leave the country with it  — so that banks have to call in their loans.  And suddenly there is less money in circulation and suddennly all of that new production going on is not finding buyers at prices that will cover the cost of production  — so tha production falls off, and with it employment and with employment buying falls off even more.  The economy enters a deflationary spiral.  Businesses go bankrupt.  Home loans end with default and the homes are taken over by the bank and put on the market.  And cannot the rich foreigner come back and buy from the bank all of the property that has been taken over by the banks.  And cannot at this point the foreigner with the gold once again make deposits in that nations banks and again start a boom.  And after businesses are built up can he not then demand his gold back from the bank  – causing again a contraction of loans (whether there is fractional reserve banking or not!)  and so the nation is even poorer and the foreigner with the gold owns even more. And so the foreigner opens his own bank.  And he lends to the government.  And pretty soon by his power to supply and withdraw gold reserves he ends up owning and controlling everything.  Soon no one has the means of doing any transaction unless first a loan is secured from Mr. Rothschild — to give Mr. Rothschild his cut of any profit — the cut is called interest.  So in this way Mr. Rothschild has a piece of all of the economic action in that nation.  And no one has money unless they borrow from Mr. Rothschild.
But you say “commodity money is not ‘debt-based’ money.”  Tel that to Rothschild — who is behind the gold standard movement.  Tell a student of the history of the first and second Bank of the United States.  Tell it to any underdeveloped nation during the age of the internatinal gold standard.
The fact is that gold is a perfect device for keeping the supply of tokens small  — and for only one reason  — so higher interest can be charged for it.  It is the great international money lendiers who want a gold system and who do not want nations supplying their own people with money that does not include interest tribute paid to said money lenders.
You did not make your case, but I just made mine.     

Woods (continued):  The free-market’s form of “debt-free money” also doesn’t require a government monopoly, or rely on the preposterously naive hope that the government production of “interest-free money” will be carried out without corruption or in a non-arbitrary way. (Any “monetary policy” that interferes with or second-guesses the stock of money that the voluntary array of exchanges known as the free market would produce is arbitrary.)

Dick Eastman: The Rothschild “golden debt-money” syndicate do not want governments making or managing their own money.  They own the Federal Reserve (through holding companies owning the member banks) and they own all of the other central “reserve” banks in the world  — and they use those banks to “fight inflation”  that is to deflate the currency to make their money monopoly more profitable to them, to increase the value of their denominated IOUs.  They do it with paper money, but with gold they can be assured that no populists in some legislature will be able to “fiat” a bigger money supply  — because the nation is constrained by the gold standard  — the depression and the debt slavery that is the inevitable result of this system is thus insured to be permanent.  And for defending that system was Austrian Economics as preached by von Mises and Lew Rockwell conceived.  And that is why everyone who brings you Glenn Beck or Gerald Celente or Peter Schiff is sponsored by a gold dealer or someone who makes his living from the financial sector.
    
Woods (continued):  But now what of the Greenbacker claim that interest payments, of their very nature, cannot be paid by all members of society simultaneously?
This is clearly not true of a society in which money production is left to the market. The Greenbacker complaint about interest payments in a fractional-reserve system is that the banks create a loan’s principal out of thin air, and that because they don’t also create the amount of money necessary to pay the interest charges as well, the collective sum of loan payments (principal and interest) cannot be made. Some people, the Greenbackers concede, can pay back their loans with interest, but not everyone.
Dick Eastman:  The schemes of Rothschild are the hand behind booms and busts, hyper inflation (to rob the little man of his savings) and then deflation (to keep him dependent on loans to conduct any business at all).   There is no “free market” under this system, except in name.  Only with the greenback system  — money provided free, from thin air,and originating in equal amounts to each person in each household  — so that they can go out and spend  — go out create the household demand  — consumer sovereignty  — that puts people to work and get s entrepreneurs looking for ways to do more and please people more and do it for less  — with enterprise that is sustained by the buying power of the soveeign consumer  — so the good entrepreneur will make his profit and the bad ones will take his loss  — but the entire economy will exit in permenent boom  — because their is no drain of interest to deflate the boom.  The boom keeps on going  — throughout the whole economy  — because it it fed by the social credit dividend that keeps coming and provides money that does not have to be given back  or exact an interest payment.  People will save.  They will lend their savings.  The elected representative can vote for public goods and pay for them with direct taxation  — because the people have the money to pay for public goods  — the govenmrent does not have to borrow from Rothschild and his friends.  This makes sense.  Your argument for the gold standard and for private supply of money (they guys who own the gold mine or the big pile of gold in the vaults from previous “free-enterprise” through finance capitalism.
All of the good we are taught to expect from “free-markets” are impossible with the debtmoney system, and especially with the gold-standard variety fo the debt-money system.  Only the social credit system really serves the consumer and the entrepreneur to make the economy a success and not a debt-slave plantation.     
Woods (continued):  But this is not what happens in the situation we have been describing, in which the money is chosen spontaneously and voluntarily by the individuals in society, and in which government plays no role. Money in this truly laissez-faire system is spent into the economy once it is produced, not lent into existence out of thin air, so there is no problem of “debt-based money” yielding a situation in which “there is not enough money to pay the interest.” There is no “debt” created at any point in the process of money production on the free market in the first place. The free market gives us “debt-free money,” but the Greenbackers do not want it.
Dick Eastman: Yes, you failed to carry your contention  — and in the end you merely repeat what you set out to prove — and you still have not proved it  — while I, on the other hand, have spelled out exactly how the debt-money system robs us, who the gold standard helps in that robbery.
I spend the whole hight  — it is 5:45 as I write these last words  — the rest of the article is done  — I did the illustration first.
Yet I know it is for nothing.  I have rebutted Austrians and libertarians again and again  — and I have sent all of these refutations to Lew Rockwell.  And I know that neither you nor Rockewell nor Gary North  — who send me a form letter saying I was too unimportant to respond to  —   and you will be no different, Thomas E. Miller Jr.  You make your money hanging out the Austr–libertarian shingle  — and if you were to acknowledge the trouncing you just got at my hand here  — thank God, only 60 or so people will see it, right  – thank God that we populist “Greenbackers” are marginalized  == so that 99% of you readers  — of Lew Rockwell’s readers will know that everything you say has been answered decively. You and Rockewell will know  — butr you are not the type to let something like that bother you.
End of story.  5:51 AM  March 23, 2013  Yakima, Washington
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§ 5 Responses to Dick Eastman murders Thomas Woods Jr.

  • michael says:

    Thank you for this article. I am a relative newcomer to this but I must say I was very unpleasantly surprised at the tone of the daily bell articles ‘debunking’ this idea (of debt-free money). The same goes for Thomas Woods. They go out of their way to make clear that they do not take ‘greenbackers’ seriously. Much like debunking 9/11 truth-websites treat the ‘truthers’ or ‘troofers’. As a newcomer to these ideas I was interested to see how Woods or the Daily Bell, or anyone for that matter could or would refute this. They don’t offcourse. I didn’t even need this piece to realise that. I guess they got nothing if this is it.
    Thanks again.

  • Tony says:

    The Austrians are attempting to replace one bad system with an equally bad one. Thank you Mr Eastman for your clarity

  • Drew Thomas says:

    Amazing information. As one who has lost nearly everything to the current system I have searched for answers for more than 5 years now. Thank God for Dick Eastman and Anthony Migchels as well as others like Margrit Kennedy (bless her family). I was sucked into the rhetoric of the Austrians thinking they had the answers for way too long. These Austrians have charisma but look at their arguments closely as Dick has done.

  • Seriously? You think this bafflegab is intelligent speech? I guess it’s because Woods is so unfailingly polite. He cites references, you perform ‘thought experiments’ that have nothing but a (badly formed) hypothesis. You blindly assume the person (because it’s going to be a person, government is people) with the control on the dollar pump is going to be your friend and keep the money supply constant. The person. The GOVERNMENT person. The government person with THE EXACT SAME POWER that you took from the government in the persona of the Federal Reserve. Yes. I can see how that would work splendidly because of course the banksters would never think to have one of their guys appointed to that position.

    The worst part is, you apparently lack any idea of why inflation (and deflation) in a free market is actually a good thing. The easy way to think about it is, all the gold buys all the things. If gold is scare, each ounce buys more. If gold is plentiful, each ounce buys less. So just at the time that everyone has little money, the money they have goes further. At the time when everyone has lots of money (think time to save) each ounce buys less.

    This does of course require the consumer to actually have sense.

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