THE CREATION OF FIAT MONEY
According to Article 1, § 10, clause 1 of the United States Constitution:” No State Shall … Coin Money; Emit Bills of Credit; Make Any Thing But Gold and Silver Coin a Tender In Payment of Debt.”
Prior To The Constitution
The history of money is surely as old as the history of mankind, but no attempt shall be made here to elucidate that full history other than to recount certain authoritative works of antiquity which without question affected the concepts of money in western civilization and particularly in English speaking countries, especially the United States. Gold and silver, particularly in coin form, have since time immemorial been the best medium of exchange ever devised. The reason for this is that both are relatively scarce in comparison with other substances which might serve the purpose of a medium of exchange between men, tribes, societies, and nations. In addition to scarcity, the fact that both are metals further adds to their usefulness as money. The Bible is replete with references to gold and silver as money. The Bible discloses land being sold for gold and silver coin, trade and commerce being conducted through the use of this medium, wars being fought to acquire this metal, taxes being exacted in coin and, most importantly, tithes being paid in gold and silver coin. Judas betrayed Christ for the price of silver coins. While mention of gold and silver as money in the Bible is everywhere, no reference to paper as money is to be found.
Virtually every ancient nation and empire used gold and silver coin as money. Those nations that did prospered in trade and commerce. Every ancient nation declined once they went off the gold/silver standard. King Edward IV plagued by impure coins. He was able to perfect the standard of coin of the realm. Henry VI and Henry VIII resumed the practice of debasing the coin of the realm, and they and their Nation suffered for it. A study made concerning debasement concluded that it served no purpose other than injustice and the decision was made against any attempt to debase. “Money is the measure of commerce, and of the rate of every thing, and therefore ought to be kept as steady and invariable as may be.”
According to Sir William Blackstone’s Commentaries on the Laws of England. “Money is a universal medium, or common standard, by comparison with which the value of all merchandize may be ascertained: or it is sign, which represents the respective values of all commodities. Metals are well calculated for this sign, because they are durable and are capable of many subdivisions: and a precious metal is still better calculated for this purpose, because it is the most portable. A metal is also the most proper for a common measure, because it can easily be reduced to the same standard in all nations: and every particular nation fixes on it its own impression, that the weight and standard (wherein consists the intrinsic value) may both be known by inspection only.”
PRIOR TO THE CIVIL WAR
The drafters of the U.S. Constitution were aware of the monetary powers in our national charter. This holds true for those that sat in the state courts and the United States Supreme Court prior to the Civil War demonstrated these principles in their decisions. Supreme Court opinions rendered during this period can be found in the following:
- Calder v. Bull, 3 U.S. (3 Dall.) 386, 390 (1798):
“The prohibitions not to make anything but gold and silver coin a tender in payment of debts, and not to pass any law impairing the obligations of contracts, were inserted to secure private rights.”
“Nothing but gold and silver coin can be made a tender in payment of debts,”
“No state shall coin money, emit bills of credit, make anything but gold and silver coin a tender in payment of debts.’ These prohibitions, associated with the powers granted to Congress ‘to coin money, and to regulate the value thereof, and of foreign coin’ most obviously constitute members of the same family, being upon the same subject and governed by the same policy.”
FROM THE CIVIL WAR TO 1933
With the advent of the Civil War in 1861, experiments with paper money was practiced by both governments north and south of the Mason-Dixon line. This was how the Confederacy funded the war. In Washington, legislation was passed regarding an income tax to control inflation caused by paper money, used to cover the expenses of the war. With the passage of the Legal Tender Act, Congress ignored both the lessons of history and the plain intent of our Founding Fathers. There is no indication anywhere in the Constitution that allows Congress to cause paper money to be issued as legal tender. The Indiana Supreme Court, in Reynolds v. State Bank of Indiana, 18 Ind. 467 (1862), held the Legal Tender Act of 1862 constitutional, only after giving every reason to rule against the act. In so holding, that court stated:
“The convention which adopted the constitution not only did not grant, but they expressly rejected it as a substantive power, and for the distinctly declared purpose of preventing its exercise, by Congress, under any pretext or circumstances whatever. “
Within 2 years of the rendition of the opinion in Reynolds, supra, the Indiana Supreme Court had occasion to reconsider the prior opinion and this time, in Thayer v. Hedges, 22 Ind. 282 (1864), found the legal tender acts of Congress expressly unconstitutional:
“That the power to coin money is one power, and the power to declare anything a legal tender is another, and different power; that both were possessed by the States severally at the adoption of the Constitution; that by that adoption, the power to coin money was delegated to the Federal Government, while the power to declare a legal tender was not, but was retained by the States with a limitation, thus: ‘Congress should have power to coin money’ and ‘no State shall coin money,’ and ‘no State shall make anything but gold and silver coin a legal tender.’ States, then, though they can not coin money, can declare that gold or silver coin, or both, whether coined by the Federal, or the Spanish or the Mexican Government, shall be legal tender.”
A particularly important decision against the constitutionality of the legal tender acts of Congress was Griswold v. Hepburn, 63 Ky. 20 (1865). Here, the Kentucky Supreme Court was required to decide the constitutionality of the acts and the decision made was that the acts contravened the U.S. Constitution:
“The conclusion is plain, and apparently inevitable, that the power to coin money was intended to mean to coin metal as the money of the United States; and the curse of the paper currency of the revolution, the fiscal ruin of the confederation, and the history of the adoption of the Federal Constitution, conduce strongly to prove that, when the people who adopted it delegated to Congress exclusive power ‘to coin money,’ they intended that nothing else than metallic coin should be money, or be a legal tender as money; and it is almost certain that they did not intend to confer on Congress any more or other power to make money, or declare any thing else to be money, or compel the circulation of any thing else as money,”
Before delivering any opinion wherein a challenge to the constitutionality of the Legal Tender Acts was concerned, the U.S. Supreme Court rendered certain opinions in cases related to this issue. In Bronson v. Rodes, 74 U.S. (7 Wall.) 229 (1869), the Court held that, a bond requiring payment in specie coin could not be discharged by paying “greenbacks”:
In the case immediately following Bronson, supra, the Court, in Butler v. Horowitz, 74 U.S. 258 (1869), held the same way in reference to a contract requiring payment in specie. In New York v. Supervisors, County of New York, 74 U.S. 26 (1869), the Court held that legal tender Treasury notes were exempt from state taxation.
The chief architect of the Legal Tender Acts had been Treasury Secretary Chase, who by now was sitting on the Court as its Chief Justice, and it was Chase who wrote the majority opinion in Hepburn v. Griswold, 75 U.S. 603, 625 (1870). The issue in this case involved whether legal tender notes could be used to discharge a debt contracted before the passage of the first legal tender act. Chase noted in the opinion that the legislation adopted by Congress making Treasury notes a legal tender occurred at the height of troubling times and that the motive for the acts was patriotic in nature. Chase analyzed the specific provisions of the Constitution, which granted Congress various powers, and determined there was no express grant to declare Treasury notes a legal tender. There being no such express grant, he then examined specific Congressional powers to determine if any implied power would sustain the acts. He examined the power to coin money, to borrow, to regulate commerce and to declare war, but there he found no method for developing an implied power, which would uphold the acts. He examined the spirit of the Constitution as well as certain prohibitions contained therein, none of which could be useful in supporting an implied power. Finding no support for the constitutionality of the challenged acts, he found them unconstitutional:
“We are obliged to conclude that an Act making mere promises to pay dollars a legal tender in payment of debts previously contracted, is not a means appropriate, plainly adapted, really calculated to carry into effect any express power vested in Congress; that such an Act is inconsistent with the spirit of the Constitution; and that it is prohibited by the Constitution.”
However, Justice Gray successfully located the origin of making paper money in the express grant to Congress to “borrow money;” this was apparent notwithstanding the fact that the microscopic examination of the Constitution by Justice Strong failed to reveal the source of this hidden power. As justification for this holding, Justice Gray relied upon the sovereign powers of European governments, something which was totally new to construction of the American Constitution. It is not the capable works as above described which have limited the scope of the Legal Tender Cases; the Supreme Court determined a limitation on federal “bills of credit” in the case of Lane County v. Oregon, 74 U.S. 71, 77 (1868). The rationale found in both Perry v. Washburn, supra, and in State Treasurer v. Collector, supra, was followed in Lane County, and the Court there held that a state law requiring taxes to be paid in specie coin could not be circumvented by payment in “greenbacks,” reasoning: “There is nothing in the Constitution which contemplates or authorizes any direct abridgement of this power by national legislation.”
The Court has never sanctioned the complete suspension of specie payment, as was plainly demonstrated in Ward v. Smith, 74 U.S. 447 (1869): “Notes not thus current at their par value, nor redeemable on presentation, are not a good tender to principal or agent, whether they are objected to at the time or not,” 74 U.S., at 451-52. Therefore, a federal currency which is not redeemable in specie coin is repugnant to the Constitution.
Perhaps one of the most significant cases regarding Congressional delegation of authority is that of Field v. Clark, 143, U.S. 649, 12 S.Ct. 495 (1892), wherein this issue of authority of Congress to delegate was considered. Although the Court there upheld the challenged delegation, the decision plainly stated that the Constitution prevented a delegation of legislative power by Congress to any person or entity. The Court reasoned that there was a distinct difference between delegation of legislative power, which is unlawful, and authority or discretion vested in some official as to execution of the law, which is permitted.
But, it is 3 cases decided by the Supreme Court in 1935 and 1936 which are of particular significance to the issue of Congressional delegation. In Panama Refining Company v. Ryan, 293 U.S. 388, 55 S.Ct. 241 (1935), the challenged legislation involved Congressional delegation to the President of extraordinary powers over oil, which were virtually dictatorial. The Supreme Court held the purported Congressional delegation to be violative of the Constitution for the reason that the act itself declared no policy, established no standard, and had no rules for action, required no findings of fact and thus empowered the President with unprecedented, uncontrolled legislative power to ***act in whatever way he deemed appropriate.
In Schechter Poultry Corp. v. United States, 295 U.S. 495, 537, 55 S.Ct. 837 (1935), the challenged legislation involved a delegation of authority to industrial trade groups to enact certain codes to regulate trade in the poultry industry. This act was likewise found unconstitutional by the Court, it being stated that “a delegation of legislative power is unknown to our law, and is utterly inconsistent with the constitutional prerogatives and duties of Congress.” In Carter v. Carter Coal Company, 298 U.S. 238, 56 S.Ct. 855 (1936), the challenged act involved delegation of legislative power to private coal producer boards to control the coal industry through codes similar to those mentioned in Schechter. The Court was particularly offended at the attempt to delegate legislative power to a private group and likewise found the legislation unconstitutional. Thus, the rule of the cases demonstrates that, in order for Congress to delegate discretionary power to any entity, the legislation permitting such must set forth a Congressional purpose and policy, a standard for action in conformity with that policy, and guidelines for rules, procedures, finding of fact by the delegate, and administrative procedures which afford due process of law. The delegate of legislative power simply has authority to act pursuant to the authority of the statute and “fill in the details” by following Congressional intent.
In 1907, a money panic occurred which many have concluded was caused by deliberate international gold shipments which affected bank reserves. As a result of the damage caused by this panic, the people of our nation and various politicians agitated for monetary reform. Paul Warburg, a German who immigrated to our country in 1902 and who was an officer of the banking firm of Kuhn Loeb and Company, thereafter proposed a great central bank in the European tradition. Congress established a monetary commission to study this proposal, and the multitude of reports so made can now be found in the Senate and House Documents and Reports of that period. In 1909, the 16th Amendment to the U.S. Constitution, the income tax amendment, was proposed and it was eventually, allegedly, ratified in February, 1913. The income tax is a condition precedent for any fiat currency system. Between 1909 and 1913, the proposed central bank plan began to take shape; finally, the Federal Reserve Act was refined enough to secure its passage and enactment on December 23, 1913. The Federal Reserve Act as promoted to the American public by its proponents gave the outward appearance that the “Money Trust” was being destroyed and was being replaced by a governmental agency which would operate for the benefit of the public. It was necessary that the American people be defrauded and deceived because the Act did not dethrone the “Money Trust” but in fact granted to that Trust theretofore vast and unknown powers. As noted at the beginning of this brief, private groups have always desired to have the power to provide currency to a nation and this act in fact gave the powers of Congress to a private, powerful, financial group.
The Act established 12 privately owned Federal Reserve Banks, the stock in which was to be, and is now, owned by member banks which are likewise privately owned. These 12 private, regional central banks comprised the whole system known as theFederal Reserve System. The only public attribute of this system arose from the fact that the System was to be controlled by a 12 man Board of Governors, 7 of whom were to be appointed by the President. Without question, the System as constructed in this legislation, and now, is totally private, having only some titular “public” heads. The financial powers that sought and obtained this legislation desired a complete privately owned system with enough public facade to render a deceptive appearance. Not only does the legislation disclose the private nature of this System, the federal courts of our nation have now recognized this fact; see Lewis v. United States, 680 F.2d 1239 (9th Cir. 1982).
The original act establishing the Federal Reserve System authorized the issuance of Federal Reserve Notes which were to be redeemed in “lawful money of the United States;” see 12 U.S.C. § 411. In 12 U.S.C. § 152, the only place where “lawful money” is defined, the same is deemed to be gold and silver coin, and therefore the act, then and now, calls for specie redemption of such notes. The fact that such notes were also deemed “obligations” of the United States conclusively shows that the powers of Congress were conveyed to the System, since such powers were ostensibly derived from the Congressional power to “borrow money.” Since the Federal Reserve Act conveyed to a private banking cartel a very substantial Congressional power, the question naturally arises as to whether this legislation is constitutional on this basis. It is unnecessary to consider the infinite, numerous transactions of the System such as its open market operations, discount operations and flagrant, abusive, tortious manipulations of the reserve requirement ratio. Since the only crucial link to the powers of Congress consists of the fact that Federal Reserve Notes are U.S. obligations, analysis can be limited to this one aspect.
Here, Congress in the Act established no discernible policy or purpose insofar as the issuance of such obligations is concerned; there is no standard by which action taken pursuant to such nonexistent policy can be controlled; there are no rules, regulations or procedures to be followed concerning the issuance of these obligations; there are no requirement for finding of facts in reference to issuance of these obligations; and certainly there are no administrative procedures such as public hearings and opportunity to be heard. It appears that the conveyance of Congressional powers to these banks was an outright gift to a very powerful, self interested financial group, subject to no control or restraint by Congress. The Federal Reserve System was given unbridled power to expand or contract the number and amount of outstanding federal “bills of credit.” This legislation is unconstitutional for this reason.
It is “fortunate” that the Federal Reserve System was in place just in time for World War I. The System was successful in creating instantly all the additional credit needed to finance that great conflict. Federal bonds were sold to the System in exchange for credit extended to the government for the bonds. Further, these bonds became the basis upon which Federal Reserve Notes were issued. As the war progressed, the paper currency and credit supply greatly expanded and this directly caused inflation. ( This is a great example of; create a problem (the war), offer a solution (ready credit), control a country. With the successful conclusion of the War, the monetary powers in control of the Federal Reserve System schemed a deliberate, premeditated, intentional contraction of the currency supply.
The new Federal Reserve System had demonstrated its currency expansion abilities and it was now time to test its contraction capabilities. On May 18, 1920, a secret financial meeting of the Federal Reserve Board devised a criminal plan to severely damage the commerce of our nation, particularly the agriculture industry. During this meeting, plans were made which were shortly thereafter implemented to raise severely the discount rate and reserve requirement ratio. The results were predictable and agriculture and its support industries received a severe blow, all for the purpose of reducing prices. Much financial ruin was caused and those who were damaged were without fault. Nonetheless, the System proved efficient at currency contraction, thus laying the groundwork for the Great Depression.
After this criminal and vicious currency contraction experiment, the System engaged in a general inflationary policy, which created the “roaring twenties.” By 1926, 1927, and 1928, newspapers, bank officials, stockbrokers, and even the President and state governors commented on the “good” times and encouraged everyone to enter the stock market because “prosperity was now here.” However, sometime in the spring or summer of 1929, plans similar to those devised on May 18, 1920, must have been made, and these plans were obviously made operational before October, 1929. On October 29, 1929, the speculative bubble caused by the inflationary policy of the “Fed” was burst and the Great Depression was ushered into our nation. Fortunes are made not only by inflationary currency policies but contractionary policies as well. The trick is to know when they will occur; those who knew made fortunes during the Depression, compliments of the System created by Congress.
While the Great Depression was caused by improvident currency and credit contraction, the Federal Reserve System still at that time possessed the same amount, if not more, ability to create credit. In fact, its credit creating potential is endless. The System assuredly withdrew credit from the private sector of our economy to cause the Depression, but its credit creating potential did not remain idle. Between the collapse in October, 1929, and June 1, 1933, the Federal Reserve Banks of our nation used their credit capacity to purchase federal bonds payable in gold. By June 1, 1933, the entire System held virtually all of the United States gold bonds which were to mature between June 1, 1933, and January 1, 1934. This ownership of these bonds put the Federal Reserve Banks in a position to dictate the fate of the nation to Congress, and these Banks exercised that power.
1933 TO 1968
Franklin Roosevelt was inaugurated on March 4, 1933, at a very troubling time in the Depression. On March 6, 1933, Roosevelt declared a banking holiday and closed the doors of the nation’s banks; Roosevelt’s authority to do such was based upon the expired World War I Trading With the Enemy Act, 40 Stat. 411, which authorized the President to prevent hoarding of gold, but which had expired at the termination of that War. Some of the banks closed as a result of Roosevelt’s proclamation never reopened, to the damage of their creditors, and customer depositors. Roosevelt also called an extra session of Congress for March 9, 1933. When the House convened, the 1933 Emergency Banking Act was passed immediately with no copy of the proposed legislation provided to any House member and with only 40 minutes debate. Never before or since was a piece of legislation “railroaded” as this one was. A similar railroad occurred in the Senate, and at the end of the day, Roosevelt’s after the fact legislative approval of his actions which closed the banks became law. In addition to this benefit, the new law enabled the (non-U.S.) Secretary of the Treasury to acquire possession of all gold in the United States. With the new powers conferred upon him,
Roosevelt extended the bank holiday, and on March 10, 1933, issued another Executive Order the objective of which was to divest Americans of their right to possess gold. Thus commenced a war upon gold initiated by an American President. By June 1, 1933, a Congressional Joint Resolution, number 192, was proposed to make it against public policy to pay any obligation in gold. It was during the debate on this resolution that the fact was made known that the Federal Reserve Banks possessed virtually all the federal gold clause bonds to mature within the next 6 months. This resolution was enacted on June 5, 1933, and notwithstanding the fact that it was only a joint resolution, it was accorded the force of law. (House Resolutions are not laws). On August 28, 1933, Roosevelt issued another Executive Order which prohibited ownership or possession of gold except by license. Failure to file the required returns and possession of gold without license were made criminal offenses.
As a direct and proximate result of the far reaching changes made in monetary law in 1933 and 1934, litigation on these points arose. The 3 major Supreme Court decisions made as a consequence were Norman v. Baltimore and O. R. Co., 294 U.S. 240, 55 S.Ct. 407 (1935), Nortz v. United States, 294 U.S. 317, 55 S.Ct. 428 (1935), and Perry v. United States, 294 U.S. 330, 55 S.Ct. 432 (1935). Norman, supra, dealt with a railroad bond payable in gold coin; Norman sought payment of $38.10 on a bond payable in the amount of $22.50, his basis for asking for more arising from the change made in the statutory gold dollar. Seeing the inherent justice in denying relief to a person seeking more than he was entitled, the Supreme Court in Norman denied the relief sought. In Nortz, a plaintiff seeking similar relief got similar judgment as Norman. Nortz had $106,300 in gold certificates and was forced to exchange the same for inconvertible currency of the light standard. Based upon a higher market value of gold than legal value of the same, Nortz instituted suit to recover $64,334.07, the alleged difference between the market price of gold and the legal price. The Court denied his request for unjust enrichment.
In Perry, the issue concerned a federal gold bond and the method of its payment in light of the June 5, 1933, Joint Resolution. Although the Court in Perry held the Joint Resolution to be unconstitutional insofar as it applied to federal bonds, it ultimately determined that Perry had neither alleged nor proven any damage in his breach of contract action and was therefore not entitled to any. In this trilogy of cases, all parties were seeking a gain or benefit as a result of the monetary changes caused by the President and Congress. The Joint Resolution of June 5, 1933, has no significance today because it has been effectively repealed; see 91 Stat. 1229. Since the monetary changes of the 1930’s, the federal government has unilaterally ceased fulfilling its monetary responsibilities required by the Constitution (its Marigold duties) and has allowed the function of providing currency to the nation to be assumed by the Federal Reserve System. The minting of dollars of silver ceased in the 1930’s, and the gold reserves so violently taken from the American people were used to support greater and greater quantities of notes as the gold reserve requirement was lowered over a span of many years.
The Federal Reserve Bank of New York has many tons of gold in its possession beneath the streets of New York City and the further fact that the Federal Reserve Banks claim a lien upon or title to all gold possessed by the government. The “Fed” has provided monumental amounts of credit to the Federal government to finance World War II, the Korean War, and the vast increase in social programs enacted by Congress. The increasing quantities of credit provided to the federal government has enabled it to acquire more and more control over the G.N.P. of our nation.
On the day President Kennedy was buried, the first irredeemable Federal Reserve Notes were shipped from the U.S. Treasury. Shortly thereafter, the Treasury consulted Merrill Jenkins, a nationally renown expert on vending machines, to determine how “slugs” could be used to operate vending machines; Jenkins suggested a “sandwiched” coin. Thereafter, President Johnson used the media to promote the idea of a silver shortage, and soon clad coins came into circulation pursuant to the Coinage Act of 1965, 79 Stat. 254.
Once debased clads had been provided to the nation by the Treasury, the one remaining step necessary to put the nation itself on the “fiat” standard was to prevent redemption of circulating notes with silver. This came in 1967 with the Silver Certificate Act, 81 Stat. 77, which provided that redemption of silver certificates would end on June 24, 1968. On June 25, 1968, the nation was placed on a completely fiat monetary standard; since then, the nation has been floating upon a “vast sea” of paper money and credit.
1968 TO THE PRESENT
The Viet Nam war, or, properly, U.N. peacekeeping action, was financed with Federal Reserve credit; that war began for our society the “endless war for endless peace” proposition of Orwell’s 1984. President Nixon closed the “gold window” in 1971 to prevent foreign redemption of our paper currency with gold. But this did not result in damage to those international holders of currency because the federal government provided compensation via a vast foreign aid program. The scientific art of creating booms ordepressions for our economy has been fully developed by the “Fed.” This organization can now totally control the U.S. economy, and this ability allows it to totally control any particular industry.
Of particular significance presently is the war of the “Fed” against its own kind, private commercial banks. The Fed desires to bring all banks directly under its control and to create out of some 14,000 independent banks a few large industry giants. The fewer the number of banks, the greater the control by the “Fed.” A deposit made into a bank in heartland America can quickly result in credit extended to Red China. There are many other detrimental effects to be noted as a result of the banishment of specie as the only component of our monetary system and its replacement by fiat currency, but such would serve no purpose here. It only needs to be noted that specie coin is “free man’s” money; it is unpolitical and a circulating currency of specie coin cannot result in any governmentally imposed favoritism or benefit to debtors at the expense of creditors. Fiat currency, however, is political money and can be used to favor one group against another or to destroy any group, including an independent sovereign state.
THE IMPOLICY OF THE PRESENT CURRENCY SYSTEM
The U.S. Constitution was adopted, as stated in its preamble, to insure justice and promote domestic tranquility, Ccomparison of Congressional legislation and programs with such standards is beneficial notwithstanding the fact that the preamble’s ideals have no legal import. If an act or program established by Congress conforms with these ideals, the merit of the same becomes readily apparent. However, if any act or program is calculated to promote injustice or is disruptive of popular tranquility, serious attention should be undertaken to neutralize these negative effects. The question of concern here is whether the present currency system of the United States promotes or denies justice and domestic tranquility. Our nation is nothing more than a society of thieves and we steal each other’s wealth, property and labor with something that is inherently worthless. Another serious defect of our currency system consists of the fact that the supply of this purported currency can be manipulated at will by the Federal Reserve System. When the currency supply is deliberately and intentionally decreased by this manipulation, innocent victims are created who cannot repay loans; this results in loss of property through foreclosure.
Perhaps the most reprehensible feature of our currency system arises from the fact that this currency originates by being loaned into circulation. An apt example of this process is a fictional card game. Assume the existence of 4 card players who borrow their playing cards from another person. The players execute and deliver notes promising to repay 13 cards plus 1 in the way of interest in exchange for 13 cards with which to play. This process put into circulation among the players the total sum of 52 cards. However, the aggregate liabilities of all the players is 56 cards, thus it is impossible for all players to extinguish the debt to the card owner. By loaning the cards into circulation, greater liabilities were created than there were cards in circulation. The card owner-creditor will surely acquire the collateral of the players through foreclosure. Our currency originates in the same identical fashion: it is loaned into circulation. Thus, our debt based currency system has created greater liabilities among us than there is currency and credit in circulation.
In reference to the problem of the federal deficit, it must be noted that it plays a vital social role. Since our medium of exchange is loaned or borrowed into circulation, only the aggregate principal of all loans is in circulation. The currency to pay the interest does not exist. To provide the means to pay the annual interest charges the economy of our nation accrues, the federal government via its budget deficits supplies new currency to the economy so that 85% to 90% of the interest can be paid. So long as currency originates via the loaning mechanism, some part of society must bear the burden of providing the currency to pay interest, and this role is being played by the budget deficit. If the federal government is prevented by law from playing this crucial social role, then the private sector will have to assume that duty. It will take just a short time to mortgage all of the assets of America if this should occur. Then, the credit creators will shut down the American economy and foreclose on all of America.
The above are the principle defects of our currency system. This system is not designed to insure justice and promote domestic tranquility. It is designed for the exact opposite. This system is not just unconstitutional, it is anti-constitutional. The last refuge of the American people from sure and swift destruction at the hands of this monetary system is through the judiciary of our nation. And a little known and totally unused law is ready and waiting to be used for this purpose. That law is embodied in the “Supreme Law of the Land;” it is found in Article 1, § 10, cl. 1 of the U.S. Constitution.
John Adams once made a statement, which aptly described the problems facing our nation. “For a brief period in our Constitutional history, the judiciary of our nation understood the true nature of coin, credit and circulation. But when such knowledge became uncommon or forgotten, errors discernible only through history were repeated, the consequences of which we are now suffering. The common law dealt decisively with the topic of money. At common law, money was only gold and silver coin; the minting of gold and silver was performed by the King according to the ancient standard coin of the realm. There was no authority granted by the people empowering the King with the prerogative to debase coin. But, as history has plainly shown, monarchs and other forms of government have frequently tended toward usurpation of power and abridgment of the rights of the people. Whenever this has occurred, it has been necessary for the people to actively reclaim their lost liberties. Although the common law precepts, maxims, and principles of money applied to the early colonial governments of our nation, these governments considered themselves at liberty to violate the same. But, as the common law was nothing more than an embodiment of natural, universal law, the violation thereof by colonial paper money emissions resulted in punishment being administered by natural, universal law. Colonial paper money experiments, which spanned a century, caused economic tribulation for everyone involved.
Shortly prior to the Revolutionary War, the baneful consequences of paper money had surely been perceived, but not to the degree of severity to prohibit it altogether. The Revolutionary War showed Americans that paper money was an evil of the first order to be banished forever from our shores. The paper money experiments of early America and the consequent disastrous results thereof were fresh in the minds of the framers of the Constitution when they met in Philadelphia in 1787, where they determined that a uniform specie currency must be the money of America. To insure this uniformity, they empowered Congress with the right to coin money, made only of gold and silver, and the power to declare a legal tender was expressly left in the possession of the States. Every single written record of this period confirms the proposition that the Constitution absolutely commanded a specie currency and prohibited any governmentally sanctioned paper money. There exist no records of this period that would slightly indicate any contrary intent.
The advent of the Civil War brought the supreme test to government. Although doubting the lawfulness of such a measure, Congress authorized the emission of federal “bills of credit.”
When the Supreme Court finally spoke on this issue, it was through the voice of the very man who devised the legal tender acts in the first place. If there was any man in the country then who knew perfectly well both sides of this issue, it was Chief Justice Chase. Chase had personal reasons to uphold the validity of the acts, yet when he found the acts to be unconstitutional, he demonstrated himself to be a jurist of the highest order. There certainly was never a member of the Supreme Court who was thrust into this position, and there may never again be a similar situation. Chase occupies a special place in the history of American jurisprudence.
While the Hepburn decision followed the common law and all previous case law in America, political intrigue entered the picture for the purpose of a direct assault upon the United States Constitution. The success of this endeavor resulted in new members on the Supreme Court. One of which wrote an opinion which expressly overruled Hepburn. This set a precedent in ways other than the issue of money; it started the trend away from the proposition that the federal government is one of limited powers, the result being tyranny by the federal government. What the Supreme Court did was to amend the U.S. Constitution without complying with Article V.
If a crime against the law and mankind has ever occurred, then it was surely a crime that Congress committed when it established in 1913 the Federal Reserve System. For no consideration and without any restraints being placed upon the grant, Congress empowered the banks to issue notes which were deemed to be obligations of the federal government. After creation, these banks assumed quickly a prominent position in the financial affairs of this nation which they have ever since held. Their power was adversely exercised in 1920 and 1921 and the result was a depression in agriculture. Thereafter, these banks created a boom which ended in the worst economic calamity known to modern man, the Great Depression.
During the Depression, these banks readied a war against the federal government. Gold and silver coins have always been and always will be the enemy of paper money. The friends of paper money during this dark era in our history made certain that gold would never again offend them; the embarrassing predicament in which they placed the federal government was sufficient to cause the federal government to take an action unprecedented in the annals of the history of money. This action was the bold move to divest all gold from the possession of the American citizens and to forever lock it up in the vaults of Fort Knox. All of this occurred during a “national emergency,” and this emergency was the predicate for the actions taken.
The knowledge and experience gained by the central bankers in the 30’s was put to use in the 60’s when a very silent war against silver was conducted, which resulted in the obliteration of all connections between this precious metal and our currency. While the attention of the American public was focused upon the preparations for sending men to the moon, one of the deadliest social diseases ever known to man, fiat money, was introduced to our nation.
Today, the currency system in our country is totally privately owned and controlled; it is manipulated at will and is specifically designed to conquer the American people. The chief bank note
( FRN’s) which this system issues is totally irredeemable. These notes, in addition to credit claims against the Federal Reserve Banks, constitute the reserves upon which the nation’s private banks issue a multiple of demand deposits, which are likewise irredeemable. The issue of all these private banks is plainly unconstitutional. And this entire system has been imposed upon the American people with irresistible force and power. Because of the Fed, our nation has suffered from the identical ills which the framers of theConstitution endured. Inflation is endemic, taxes are constantly rising, crime is rampant, Americans are unemployed, and that great institution, the American family, is about to disintegrate. These are always the direct social consequences whenever any nation has permitted its currency to be debauched and replaced with paper, as history has clearly shown.
The Federal Government has not displayed any inclination to remedy this severe social problem. Further, state governors and legislators are afflicted with a lack of knowledge of the true nature of coin, credit and circulation and are thus impotent to offer redress. However, the judiciary of our nation can remedy it with the perfect solution found in Article 1, § 10, clause 1 of the U.S. Constitution.
- For further analysis see Henry Mark Holzer’s law review article entitled “How Americans Lost Their Right To Own Gold – And Became Criminals in the Process,” 39 Brooklyn Law Review 517 (1973).
- G.Edward Griffin’s “The Creature from Jeckyll Island”