America's Money Machine

Out of the Pit 265
The Federal Reserve System would thus be returned to near its original
design-as a sort of safety valve against credit explosions-in which
short-term needs would be served by the issuance of Federal Reserve
bank credit only against short-term, self-liquidating commercial paper,
with the credit retired as the exigency passed. Such credit would not be
legal tender, but like cashier's checks, would serve as quasi-credit superior
to that of the discounted commercial instruments. As we have noted
earlier, such a system (in the form of clearing-house certificates) served
well to curtail the 1907 panic.
Implicit in such a reform would be a prohibition against the issue of
Federal Reserve credit against U. S. Treasury obligations, either purchased
or discounted, and the abolition of the Open Market Committee
as well as any authority of the Federal Reserve to acquire, on its volition,
any debt instruments, its credit to be issued only against such short-term
commercial obligations as were qualified and presented for discount.
Whether Americans are prepared for such basic reform of a monetary
system so touted and copied throughout the world as has been the Federal
Reserve System, is questionable. Indeed, it may be questioned
whether a work like this is designed to achieve reform so much as to
witness to a truth.
Efforts to reform institutions or societies by public appeal too often fail
from diffusion. The seed must be drilled rather than broadcast. For the
popular palate the strong vinegar ofverity must be diluted to flatness; the
message must be softened to a coax. Jeremiah, proclaiming to Judah its
impending destruction, was cautioned by the Lord that the prophet's
warning would go unheeded. When Elijah complained that the people
had forsaken the Covenant, thrown down the altars, slain the prophets,
and that only he was left, the Lord rebuked him with the reminder that
there were yet "left seven thousand in Israel, all the knees which have not
bowed to Baal." This is the word of hope. There remain always a Remnant
who are bearers of the word and doers of the deed. If the message
is sent to them in simplicity and sincerity, it will not return empty.