MONEY

Much  is made of free enterprise and free trade,  but little
attention  is given to the central role governments play  in  the
creation and control of the money supply.

Both  during  the consideration of legislation by  Congress,
and  since passage of the Federal Reserve Act  in  1913,  critics
have  charged  that  turning  the nation's currency  over  to  an
independent  federal agency,  particularly one that is owned  and
controlled by its member banks was not a good idea, and would lead
to  the  corruption  of the  value  of  U.S.  currency,  and  its
transformation  into little more than fiat money.   By and large,
the critics have been right.

There  are twelve regional Federal Reserve banks,  each  the
central  bank for its district.   Member banks must own stock  in
their central bank,  maintain reserves there,  and appoint six of
the nine directors to manage their central bank.

Overseeing  the system is a seven member Board of  Governors
appointed for fourteen year terms by the President.

These  governors,  together  with representatives  from  the
regional  reserve banks,  determine the activities of the Federal
Open  Market Committee,  which buys and sells federal  government
securities to expand or contract the reserve funds of the  member
banks.    

In  addition,  they  set  the  reserve  requirements,  which
controls the member banks' ability to extend credit.

Once  at  16 2/3 % of deposits,  this meant every dollar  on
deposit would support five dollars of credit.

They also set the margin requirements for the stock  market,
thus having influence over stock market speculation.

Long  gone are the dollars backed by gold and silver.   U.S.
currency  today  is  truly  fial  currency,  and  true  to  form,
inflation has followed.

Historically, the worse instances of fiat money running amok
have  been  Germany after World War I and Italy and China in  the
inter-war period of the `30s.

Since  19??,  when dollars could no longer be  redeemed  for
silver or gold,  inflation in the United States has raised prices
600-1500%.

This, combined with an unpayable federal government national
debt of $ ??  trillion,  increasing inexorably at a rate of $250-
350 billion annually; and an annual foreign trade deficit of $ ??
billion for a cumulative trade deficit of over $1 trillion  since
1980, does not encourage faith in the soundness of the dollar.

Baron Jacob Rothschild of France said that he cared not  who
was  head  of the government as long as he controlled  the  money
supply,  and  this power has been relinquished by Congress to the
Federal reserve system and the banking industry.

World  monetary authorities impose strict remedial  programs
on other countries which have such horrendous fiscal records.  It
is not inconeivable that the United States will spend itself into
bankruptcy, forcing the current dollar to be replaced by a "hard"
dollar,  with  all  the  ramifications  this would  have  on  the
people's savings and assets.

This has occurred in Brazil (July 1994),  with a new  "real"
replacing the old cruzeiro.

The  U.S.  Dow-Jones  industrial average is  itself  a  good
indicator of inflation in the United States.   In 19??,  the year
the  dollar became inconvertible,  the Dow Jones was ?.   Now,  ?
years later, it hovers around 3600-3900.

Emphasis  on  the  Dow Jones is a  good  indication  of  the
speculative  nature  of the New York Stock Market.   Composed  of
only 30 blue chip stocks, it gives no information on the value or
prospects  of  the tens of thousands of other stocks on  the  Big
Board, the American Stock Exchange, or NASDAQ.

And in any case, it really just reflects the wishes of those
desiring to buy or sell "blue chip" stocks over a short period of
time, and does not reflect the wishes of the serious investor who
is buying for the long haul.

Compared  to  the total number of shares  outstanding  in  a
company,  the number of shares traded daily is miniscule,  and is
pure speculation, not really directly benefitting the capital  of
the  company  whose shares are being traded,  and in  fact  often
putting  pressure  on  the company to become more  profitable  to
satisfy  the  expectations of the people who have traded  up  the
value of its stock.

For example,  if a solid company with a quality product  and
well-paid  employees has 8% earnings and a 6% dividend on a stock
valued  at a price/earnings ratio of 15,  if the speculators  bid
its stock up to twice its current value,  the earnings drop to 4%
and dividends to 3%.

Its management is now under pressure to increase the stock's
long-term  potential,  and  to increase sales and maybe  decrease
quality, expenses and wage costs to bring its earnings back up to
8%.   This is good for the speculators,  but not necessarily good
for the company, its customers, or its employees.

Another  flaw  to  the  myth of free trade  is  the  use  of
"circuit  breakers" by the New York Stock Exchange,  which  calls
itself the largest free "auction" in the world.

These   circuit-breakers  are  stock  exchange  rules  which
artificially  slow  trading,  and  in some  stock  and  commodity
exchanges even limit the range that a price can rise or fall in a
day.
Money Manipulation