The Return of America’s Anathema, “Taxation without representation is tyranny.”

By Jerry Salcido
Published 07/18/09

As most American school children know, one of the chief complaints that the American colonists had against the mother country was that they were taxed without their consent. “Taxation without representation is tyranny,” a phrase often credited to the revolutionary James Otis, became an American maxim. Colonial Americans were anti-tax to begin with, but to be taxed by a parliament three thousand miles away without any say in the matter was intolerable.

The colonists revolted and after sacrificing their lives and treasure they defeated the pariah which is taxation without representation; and, consequently, the freest nation the world had ever seen was born. Victory, however, was short-lived, as taxation without representation was resurrected and transmogrified a little more than 100 years later, in 1913, in the form of the Federal Reserve System, America’s third and most menacing iteration of a central bank.

Technically, the Federal Reserve has no power of taxation. In fact, it is not even a governmental entity or agency. It is a bank composed of unelected officials who answer to their shareholders… and who once in a while appear before Congress to discuss a whole lot about nothing. How then does the Federal Reserve effect taxation without representation? Through its manipulation of the money supply, that is, through varying degrees of continual inflation. As even Federal Reserve Chairman Ben Bernanke admitted, “Inflation is a tax.”

The problem is that unlike those in 1776, Americans today—courtesy of the fractional reserve banking system led by the Federal Reserve—do not even realize they are being taxed without their consent. One reason for this general dearth of understanding concerning such vital subject matter is the perception that acquiring knowledge of the economics of central banking is equivalent to earning a PhD in quantum physics. Not so; and, if liberty is to return to America Americans must understand that the Federal Reserve is their new King George.

No Representation

To begin, calling it the “Federal Reserve” is a misnomer, because it is not “federal” (or a “reserve” for that matter, but that is not important for our purposes). Nonetheless, it does have loose, somewhat incestuous, ties to the federal government. As one federal circuit court explained it is “composed of both public and private elements.” Committee for Monetary Reform v. Board of Governors of Federal Reserve System, 766 F.2d 538, 539 (D.C. Cir. 1985). The Federal Reserve System was created by Congress’s 1913 Federal Reserve Act, and consequently derives its powers from the federal government. It consists of twelve districts each of which has one Federal Reserve Bank (“Fed Regional Banks”) and more than 5,000 other privately owned banks, that is, your bank. The Federal Reserve System’s powers are distributed primarily among three separate bodies, none of which are composed of elected officials: the Board of Governors (“Board”), the Federal Open Market Committee (“FOMC”), and the Federal Advisory Counsel (“FAC”). The Board governs the day-to-day business of the Federal Reserve and consists of seven members each of whom is appointed by the President with the advice and consent of the Senate. Board members serve fourteen year terms — more than twice as long as U.S. Senators. While the original text of the Federal Reserve Act allowed the President to remove a Board member “for cause,” that is no longer the case. Today Board members may only be removed through Congressional impeachment, a next to impossible process.

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