ECONOMIC LIBERTY
By Attorney Lowell (Larry) Becraft, Jr.
October 14, 2008
NewsWithViews.com
Sir Josiah Stamp, a former president of the Bank of England, is
reputed to have said:
"Banking was conceived in iniquity and was born in sin. The
bankers own the earth. Take it away from them, but leave them the power to
create money, and with the flick of the pen they will create enough deposits
to buy it back again. However, take it away from them, and all the great
fortunes like mine will disappear and they ought to disappear, for this
would be a happier and better world to live in. But, if you wish to remain
the slaves of bankers and pay the cost of your own slavery, let them
continue to create money."
Is this statement true? Do we confront this problem today? I say
“yes,” and let me explain.
In times like these in the Fall of 2008 with abundant evidence of an
economic crash coming down on our heads, the lessons of history regarding
monetary debacles of the past are educational, and indeed very important.
One history lesson comes from France. John Law’s paper money experiment
there in the 18th century spanned but a few years during its rise and fall,
yet those events offer an abject lesson about the social destruction
resulting from the use of paper money: France was economically and morally
destroyed.
But, we need not focus on European tragedies because there are several
historical American examples of paper money experiments, some little known,
that were equally as destructive. For example, the Revolutionary War was
financed by a flood of Continental currency that rapidly depreciated in
value until it became worthless. The prostrated economy of young America was
a catalyst for assembling in Philadelphia the convention that drafted the
present U.S. Constitution. That Constitution as understood at the time
mandated a specie currency as a medium of exchange, and the result of this
monetary correction was a revived, vibrant economy.
Those who wanted to establish banking here in this country were hard
at work as the Constitution was being ratified. The reader is directed to
William Gouge’s excellent work, A Short History of Paper Money and Banking,
for a detailed explanation of some of the tragic, horrendous events that
happened in those early days of the banking business in our country,
including the following:
“The bankruptcy of some of the New York moneyed corporations
revealed secrets to the public which led to a legal investigation, and as it
is always the practice of the world to punish unsuccessful villainy, some of
the concerned were severely dealt with. Previous to passing sentence on
them, Judge Edwards made the following observations: ‘During the trials
which have taken place at the present term of this court, we have witnessed
displays of depravity on the part of the agents of moneyed institutions of
the most appalling nature. As common as crimes are in all great cities, yet
this community was not prepared to expect from the class of society to which
the perpetrators of the crimes belonged, a burst of such iniquity. Their
offences have been characterized by breaches of official and personal
confidence; by a course of misrepresentation and deception systematically
pursued, and by injurious and crafty devices which no ordinary prudence
could guard against. Nor was this all. Among the actors in those scenes were
some of the principal agents in the management of moneyed institutions, and
they have been found actually combining and conspiring together for the
accomplishment of their nefarious purposes. From combinations of men of so
much talent, availing themselves of their high standing, it is not
surprising that they should have swept society with the besom of
destruction. When crimes of such character, attended with such destructive
consequences abound, it behooves the tribunals of justice to gather
themselves up to meet the occasion, and to extend, as far as in them lies,
the protecting arm of the law."
On February 25, 1791, Congress chartered the first Bank of the United
States. See 1 Stat. 191, ch. 10. Incidentally, the War of 1812 happened
after the first Bank’s demise. The second Bank of the United States was
created on April 1, 1816, with a 20 year charter. See 3 Stat. 266, ch. 44.
These banks were no different from the others discussed in Gouge’s work and
earned the enmity of Andy Jackson, New Orleans’ hero. This great Tennessean
was elected President in 1828 and, as a mortal enemy of the second Bank, was
instrumental in having Gouge’s work published. Nicolas Biddle was then
president of the second Bank of the United States, the charter of which was
to expire in 1836. Four years before the charter was to lapse, Biddle chose
to ask Congress for a charter extension, which resulted in a political
battle with President Jackson. Congress approved and sent its bill to
re-charter the Bank to President Jackson on July 4, 1832, but he vetoed that
bill the following week. Congress lacked the votes to override that veto,
and the bank was doomed.
Advertisement
In the time leading up to that important Congressional vote and for
several years thereafter, Biddle deliberately contracted the supply of the
Bank’s paper money notes to cause tragedy and ruin for American businesses
and families. In addressing other misdeeds of Biddle’s bank, the book Coming
Battle relates:
“The rottenness of the bank then became known, and a complete
investigation into its management from 1830 to 1836, instituted by the
stockholders, developed an astonishing degree of villainy, corruption, and
rascality that was appalling, and the results of which more than sustained
the charges brought against it by President Jackson and his supporters.
“It was discovered that hundreds of thousands of dollars were
expended by President Biddle in influencing elections, subsidizing the
press, and bribing members of Congress.
“The stockholders, on the completion of this investigation,
instituted a suit against President Biddle in the United States circuit
court at Philadelphia, for the sum of $1,018,000 expended by him for which
no vouchers could be found.
“It was further demonstrated that, from 1830 to 1836, during the
struggle of the bank for a new lease of corporate life, loans, aggregating
more than $30,000,000, were made by its president to members of Congress,
editors of newspapers, politicians of all grades, jobbers and brokers,
mostly without security.
“The career of the United States Bank and its president is an
awful monument of warning on the highway of time to come, an object lesson
to that colossal greed of power, which, to tighten its grip upon the people,
scatters distress and ruin in its train, and which, from its ramparts of
ill-gotten wealth obtained by monopoly and special privileges, defies the
laws of man and the laws of God.”
The paper money experiment of John Law demonstrates the serious
deficiencies of using paper money as a medium of exchange and the harm that
results when it collapses. The pattern evident in that French event has been
followed by many others, such as the hyper-inflation of the Weimar Republic
after WWI, and the present hyper-inflation occurring today in Zimbabwe. The
battle between President Jackson and Biddle’s second Bank of the United
States demonstrates that the people can triumph against the banking beast.
If they don’t, Thomas Jefferson’s warning about banks can become a reality:
“If the American people ever allow private banks to control the
issue of their currency, first by inflation, then by deflation, the banks
will deprive the people of all property until their children wake up
homeless on the continent their fathers conquered. The issuing power should
be taken from the banks and restored to the people, to whom it properly
belongs.”
What we use today as money, our medium of exchange, is basically an
empty promise, created in the same fashion as the banknotes of the “wildcat
banks.” Before the Civil War, a small reserve of gold and silver coins could
support a multiple of that amount in outstanding bank notes. With a mere
reserve of $10,000 in coin, a banker could issue a circulation of $30,000,
$50,000, perhaps $100,000 in outstanding banknotes. But often, these banks
failed in a few years, to the harm of those who dealt with them, depositors,
borrowers and customers alike. To “remedy” the problem of the “wildcat
banks”, the National Banking Act of February 25, 1863, 12 Stat. 665, ch.
58, was enacted; it created national banks and permitted “legal tender
Treasury notes” to be used as reserves.
The Federal Reserve Act, 38 Stat. 251, ch. 6, was enacted on December
23, 1913, and it expanded the banking scheme first set by the National
Banking Act. With this system in place in time for WWI, the federal
government had a ready buyer for its bonds needed to finance that war.
Shortly after WWI, the Federal Reserve Board met and agreed upon a
deliberate contraction of the “credit supply,” consequently crushing
American agriculture and a great many rural banks. This was followed by a
currency expansion during the “roaring twenties”, which ended with a
currency contraction starting in October, 1929, the results of which are
known to most thinking Americans.
Today, the monetary unit we use as currency is the Federal Reserve
Note (“FRN”). Our present-day banks operate no differently from the banks of
the early or mid-19th century, and bank reserves are at best a pile of FRNs.
But most often, bank reserves are nothing but deposits (bookkeeping entries)
held by the banks at one of the Federal Reserve Banks. These reserves
support a multiple of outstanding “notes,” which today are nothing but
bookkeeping entries that we keep in our checking accounts. We assign or
transfer these monetary claims we have against banks to somebody else when
we write a check. Thus the basic monetary unit, the FRN, supports many
multiples of outstanding credit, represented by computer bookkeeping
entries. Most likely, FRNs constitute less than 3% of our money supply. But
furthermore, since all of this credit is “borrowed” into circulation, the
system is designed to transfer wealth to bankers since aggregate social debt
exceeds the amount of credit in circulation.
Credit, the vast bulk of our “money” supply, is defined by 12 C.F.R. §
226.2, as “the right to defer payment of debt, or to incur debt and defer
its payment”; essentially, credits are thus mere promises. When an American
borrows money from a local commercial bank, that bank merely credits the
borrower’s checking account with a bookkeeping entry. That borrower then via
checks drawn on that account transfers various amounts of that credit in his
account to somebody else. Whatever you have in your present checking account
was originally the proceeds of a loan from some American commercial bank, or
the proceeds of governmental borrowing.
In essence, more than 97% of our money supply is nothing more than the
credit promises of our private commercial banks. Simply put, this money
supply does not exist as anything more than empty numbers, ephemeral legal
claims or worse, just a concept. All of this credit is economically unified
so that just a few powerful men can make a decision to either expand or
contract the amount of outstanding bank credit. Carefully timed contractions
of the credit supply are the “harvest” for this monetary mechanism. Some of
our fellow Americans are credit wolves, preying upon other innocent
Americans.
Advertisement
The American economy was vibrant and growing in the early 1830s and
there were no natural impediments to further growth. Yet in those years, the
American economy was harmed through no fault of its own, but instead by the
actions of Nicolas Biddle, who deliberately, willfully and maliciously,
intending grievous harm, contracted the supply of bank notes. Similarly, the
American economy after WWI was poised for natural and healthy growth. By
that time, the power of Biddle was possessed by a small group of men on the
Federal Reserve Board, and in May, 1920, they agreed to deliberately
contract the money supply, bringing ruin to many. The “business cycle” is
really a banking cycle, which expands and contracts business activity on its
own terms. The noted economist Milton Friedman has criticized this banking
cycle in this fashion:
"The power to determine the quantity of money...is too
important, too pervasive, to be exercised by a few people, however
public-spirited, if there is any feasible alternative. There is no need for
such arbitrary power ... Any system which gives so much power and so much
discretion to a few men, [so] that mistakes - excusable or not - can have
such far reaching effects, is a bad system. It is a bad system to believers
in freedom just because it gives a few men such power without any effective
check by the body politic - this is the key political argument against an
independent central bank."
Perhaps an excellent description of this monetary system appears in
the Supreme Court’s decision in Thorington v. Smith, 75 U.S. 1 (1869), a
case that concerned the validity of the Civil War Confederate currency.
There, the Court described that currency in the follow fashion:
"As contracts in themselves, except in the contingency of
successful revolution, these notes were nullities; for, except in that
event, there could be no payer. They bore, indeed, this character upon their
face, for they were made payable only 'after the ratification of a treaty of
peace between the Confederate States and the United States of America.'
While the war lasted, however, they had a certain contingent value, and were
used as money in nearly all the business transactions of many millions of
people. They must be regarded, therefore, as a currency imposed on the
community by irresistible force," Id., at 11.
"Considered in themselves, and in the light of subsequent
events, these notes had no real value, but they were made current as dollars
by irresistible force. They were the only measure of value which the people
had, and their use was a matter of almost absolute necessity. And this use
gave them a sort of value, insignificant and precarious enough it is true,
but always having a sufficiently definite relation to gold and silver, the
universal measure of value, so that it was always easy to ascertain how much
gold and silver was the real equivalent of a sum expressed in this
currency," Id., at 13.
How different is today’s FRN from Confederate currency?
The present American economy is thus completely dependent on a
monetary system created and operated by private commercial banks, whose
unified voice speaks through the Federal Reserve System, and whose “reserve
currency” is no different from Confederate currency. As of this moment, this
system is crumbling, either as the result of accident, or the malevolent
decisions of men controlling this system. Are Americans left without any
remedy and destined to have their lives ruined with no recourse?
The United States Constitution contains several express monetary
provisions. Via Art. 1, §8, Congress is granted the power to coin money and
regulate its value. The States, pursuant to Art. 1, § 10, cannot make
anything other than gold and silver coin a tender in payment of debts. Does
Congress have some constitutional duty to establish a monetary system that
works for the benefit of the American people rather than vested financial
interests?
In United States v. Marigold, 50 U.S. 560, 567-68 (1850), the Supreme
Court was confronted with the matter of whether certain federal laws making
penal the counterfeiting of coins was constitutional. Here, the Court
clearly explained the monetary duties of Congress:
"They appertain rather to the execution of an important trust
invested by the Constitution, and to the obligation to fulfill that trust on
the part of the government, namely, the trust and the duty of creating and
maintaining a uniform and pure metallic standard of value throughout the
Union. The power of coining money and of regulating its value was delegated
to Congress by the Constitution for the very purpose, as assigned by the
framers of that instrument, of creating and preserving the uniformity and
purity of such standard of value * * *.
"If the medium which the government was authorized to create and
establish could immediately be expelled, and substituted by one it had
neither created, estimated, nor authorized – one possessing no intrinsic
value – then the power conferred by the Constitution would be useless –
wholly fruitless of every end it was designed to accomplish. Whatever
functions Congress are, by the Constitution, authorized to perform, they
are, when the public good requires it, bound to perform; and on this
principle, having emitted a circulating medium, a standard of value
indispensable for the purposes of the community, and for the action of the
government itself, they are accordingly authorized and bound in duty to
prevent its debasement and expulsion, and the destruction of the general
confidence and convenience, by the influx and substitution of a spurious
coin in lieu of the constitutional currency."
Has not a powerful monetary consortium, by stealth, conniving and who
knows what else, replaced Constitutional currency with another currency no
better than Confederate “money”? Has not this consortium used its wiles to
persuade Congress to ignore its constitutional duties to the American
public? I say this has happened, to our great detriment.
On Friday, October 3, 2008, Congress and the President rescued our
banking and currency system by authorizing more than 700 billion bux in
public debt to be used to purchase non-performing assets from private
commercial banks for the purpose of “thawing” frozen credit. The real wealth
represented by this amount is astronomic: news reports declare that this
amount equals the value of all homes in several large States. This amount,
in conjunction with the amount of “bux” the Fed has created in recent weeks
and dumped into the “system,” conservatively approaches 10% of our annual
GDP. This problem arises not, however, from the defects in the real American
economy, but instead from the inherent instability of fractional reserve
banking. This new law fails to remedy this banking flaw and only makes it
more profound. What if this amount of real wealth had been used, instead, to
provide a real monetary system beneficial to the American people? In these
troubling times, wouldn’t it be better if Congress actually performed its
duties expressed in United States v. Marigold, supra, and provided the
American people with an existing, valuable currency, a real “dollar” instead
of a fake? When this was done back in the 1790s, prosperity returned to
America.
© 2008 Lowell Becraft - All Rights Reserved
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Lowell (Larry) Becraft, Jr., is a constitutional attorney based in
Huntsville, Alabama, who specializes in criminal defense cases, primarily
involving the federal income tax. His legal web site is:
http://home.hiwaay.net/~becraft/
By Attorney Lowell (Larry) Becraft, Jr.
October 14, 2008
NewsWithViews.com
Sir Josiah Stamp, a former president of the Bank of England, is
reputed to have said:
"Banking was conceived in iniquity and was born in sin. The
bankers own the earth. Take it away from them, but leave them the power to
create money, and with the flick of the pen they will create enough deposits
to buy it back again. However, take it away from them, and all the great
fortunes like mine will disappear and they ought to disappear, for this
would be a happier and better world to live in. But, if you wish to remain
the slaves of bankers and pay the cost of your own slavery, let them
continue to create money."
Is this statement true? Do we confront this problem today? I say
“yes,” and let me explain.
In times like these in the Fall of 2008 with abundant evidence of an
economic crash coming down on our heads, the lessons of history regarding
monetary debacles of the past are educational, and indeed very important.
One history lesson comes from France. John Law’s paper money experiment
there in the 18th century spanned but a few years during its rise and fall,
yet those events offer an abject lesson about the social destruction
resulting from the use of paper money: France was economically and morally
destroyed.
But, we need not focus on European tragedies because there are several
historical American examples of paper money experiments, some little known,
that were equally as destructive. For example, the Revolutionary War was
financed by a flood of Continental currency that rapidly depreciated in
value until it became worthless. The prostrated economy of young America was
a catalyst for assembling in Philadelphia the convention that drafted the
present U.S. Constitution. That Constitution as understood at the time
mandated a specie currency as a medium of exchange, and the result of this
monetary correction was a revived, vibrant economy.
Those who wanted to establish banking here in this country were hard
at work as the Constitution was being ratified. The reader is directed to
William Gouge’s excellent work, A Short History of Paper Money and Banking,
for a detailed explanation of some of the tragic, horrendous events that
happened in those early days of the banking business in our country,
including the following:
“The bankruptcy of some of the New York moneyed corporations
revealed secrets to the public which led to a legal investigation, and as it
is always the practice of the world to punish unsuccessful villainy, some of
the concerned were severely dealt with. Previous to passing sentence on
them, Judge Edwards made the following observations: ‘During the trials
which have taken place at the present term of this court, we have witnessed
displays of depravity on the part of the agents of moneyed institutions of
the most appalling nature. As common as crimes are in all great cities, yet
this community was not prepared to expect from the class of society to which
the perpetrators of the crimes belonged, a burst of such iniquity. Their
offences have been characterized by breaches of official and personal
confidence; by a course of misrepresentation and deception systematically
pursued, and by injurious and crafty devices which no ordinary prudence
could guard against. Nor was this all. Among the actors in those scenes were
some of the principal agents in the management of moneyed institutions, and
they have been found actually combining and conspiring together for the
accomplishment of their nefarious purposes. From combinations of men of so
much talent, availing themselves of their high standing, it is not
surprising that they should have swept society with the besom of
destruction. When crimes of such character, attended with such destructive
consequences abound, it behooves the tribunals of justice to gather
themselves up to meet the occasion, and to extend, as far as in them lies,
the protecting arm of the law."
On February 25, 1791, Congress chartered the first Bank of the United
States. See 1 Stat. 191, ch. 10. Incidentally, the War of 1812 happened
after the first Bank’s demise. The second Bank of the United States was
created on April 1, 1816, with a 20 year charter. See 3 Stat. 266, ch. 44.
These banks were no different from the others discussed in Gouge’s work and
earned the enmity of Andy Jackson, New Orleans’ hero. This great Tennessean
was elected President in 1828 and, as a mortal enemy of the second Bank, was
instrumental in having Gouge’s work published. Nicolas Biddle was then
president of the second Bank of the United States, the charter of which was
to expire in 1836. Four years before the charter was to lapse, Biddle chose
to ask Congress for a charter extension, which resulted in a political
battle with President Jackson. Congress approved and sent its bill to
re-charter the Bank to President Jackson on July 4, 1832, but he vetoed that
bill the following week. Congress lacked the votes to override that veto,
and the bank was doomed.
Advertisement
In the time leading up to that important Congressional vote and for
several years thereafter, Biddle deliberately contracted the supply of the
Bank’s paper money notes to cause tragedy and ruin for American businesses
and families. In addressing other misdeeds of Biddle’s bank, the book Coming
Battle relates:
“The rottenness of the bank then became known, and a complete
investigation into its management from 1830 to 1836, instituted by the
stockholders, developed an astonishing degree of villainy, corruption, and
rascality that was appalling, and the results of which more than sustained
the charges brought against it by President Jackson and his supporters.
“It was discovered that hundreds of thousands of dollars were
expended by President Biddle in influencing elections, subsidizing the
press, and bribing members of Congress.
“The stockholders, on the completion of this investigation,
instituted a suit against President Biddle in the United States circuit
court at Philadelphia, for the sum of $1,018,000 expended by him for which
no vouchers could be found.
“It was further demonstrated that, from 1830 to 1836, during the
struggle of the bank for a new lease of corporate life, loans, aggregating
more than $30,000,000, were made by its president to members of Congress,
editors of newspapers, politicians of all grades, jobbers and brokers,
mostly without security.
“The career of the United States Bank and its president is an
awful monument of warning on the highway of time to come, an object lesson
to that colossal greed of power, which, to tighten its grip upon the people,
scatters distress and ruin in its train, and which, from its ramparts of
ill-gotten wealth obtained by monopoly and special privileges, defies the
laws of man and the laws of God.”
The paper money experiment of John Law demonstrates the serious
deficiencies of using paper money as a medium of exchange and the harm that
results when it collapses. The pattern evident in that French event has been
followed by many others, such as the hyper-inflation of the Weimar Republic
after WWI, and the present hyper-inflation occurring today in Zimbabwe. The
battle between President Jackson and Biddle’s second Bank of the United
States demonstrates that the people can triumph against the banking beast.
If they don’t, Thomas Jefferson’s warning about banks can become a reality:
“If the American people ever allow private banks to control the
issue of their currency, first by inflation, then by deflation, the banks
will deprive the people of all property until their children wake up
homeless on the continent their fathers conquered. The issuing power should
be taken from the banks and restored to the people, to whom it properly
belongs.”
What we use today as money, our medium of exchange, is basically an
empty promise, created in the same fashion as the banknotes of the “wildcat
banks.” Before the Civil War, a small reserve of gold and silver coins could
support a multiple of that amount in outstanding bank notes. With a mere
reserve of $10,000 in coin, a banker could issue a circulation of $30,000,
$50,000, perhaps $100,000 in outstanding banknotes. But often, these banks
failed in a few years, to the harm of those who dealt with them, depositors,
borrowers and customers alike. To “remedy” the problem of the “wildcat
banks”, the National Banking Act of February 25, 1863, 12 Stat. 665, ch.
58, was enacted; it created national banks and permitted “legal tender
Treasury notes” to be used as reserves.
The Federal Reserve Act, 38 Stat. 251, ch. 6, was enacted on December
23, 1913, and it expanded the banking scheme first set by the National
Banking Act. With this system in place in time for WWI, the federal
government had a ready buyer for its bonds needed to finance that war.
Shortly after WWI, the Federal Reserve Board met and agreed upon a
deliberate contraction of the “credit supply,” consequently crushing
American agriculture and a great many rural banks. This was followed by a
currency expansion during the “roaring twenties”, which ended with a
currency contraction starting in October, 1929, the results of which are
known to most thinking Americans.
Today, the monetary unit we use as currency is the Federal Reserve
Note (“FRN”). Our present-day banks operate no differently from the banks of
the early or mid-19th century, and bank reserves are at best a pile of FRNs.
But most often, bank reserves are nothing but deposits (bookkeeping entries)
held by the banks at one of the Federal Reserve Banks. These reserves
support a multiple of outstanding “notes,” which today are nothing but
bookkeeping entries that we keep in our checking accounts. We assign or
transfer these monetary claims we have against banks to somebody else when
we write a check. Thus the basic monetary unit, the FRN, supports many
multiples of outstanding credit, represented by computer bookkeeping
entries. Most likely, FRNs constitute less than 3% of our money supply. But
furthermore, since all of this credit is “borrowed” into circulation, the
system is designed to transfer wealth to bankers since aggregate social debt
exceeds the amount of credit in circulation.
Credit, the vast bulk of our “money” supply, is defined by 12 C.F.R. §
226.2, as “the right to defer payment of debt, or to incur debt and defer
its payment”; essentially, credits are thus mere promises. When an American
borrows money from a local commercial bank, that bank merely credits the
borrower’s checking account with a bookkeeping entry. That borrower then via
checks drawn on that account transfers various amounts of that credit in his
account to somebody else. Whatever you have in your present checking account
was originally the proceeds of a loan from some American commercial bank, or
the proceeds of governmental borrowing.
In essence, more than 97% of our money supply is nothing more than the
credit promises of our private commercial banks. Simply put, this money
supply does not exist as anything more than empty numbers, ephemeral legal
claims or worse, just a concept. All of this credit is economically unified
so that just a few powerful men can make a decision to either expand or
contract the amount of outstanding bank credit. Carefully timed contractions
of the credit supply are the “harvest” for this monetary mechanism. Some of
our fellow Americans are credit wolves, preying upon other innocent
Americans.
Advertisement
The American economy was vibrant and growing in the early 1830s and
there were no natural impediments to further growth. Yet in those years, the
American economy was harmed through no fault of its own, but instead by the
actions of Nicolas Biddle, who deliberately, willfully and maliciously,
intending grievous harm, contracted the supply of bank notes. Similarly, the
American economy after WWI was poised for natural and healthy growth. By
that time, the power of Biddle was possessed by a small group of men on the
Federal Reserve Board, and in May, 1920, they agreed to deliberately
contract the money supply, bringing ruin to many. The “business cycle” is
really a banking cycle, which expands and contracts business activity on its
own terms. The noted economist Milton Friedman has criticized this banking
cycle in this fashion:
"The power to determine the quantity of money...is too
important, too pervasive, to be exercised by a few people, however
public-spirited, if there is any feasible alternative. There is no need for
such arbitrary power ... Any system which gives so much power and so much
discretion to a few men, [so] that mistakes - excusable or not - can have
such far reaching effects, is a bad system. It is a bad system to believers
in freedom just because it gives a few men such power without any effective
check by the body politic - this is the key political argument against an
independent central bank."
Perhaps an excellent description of this monetary system appears in
the Supreme Court’s decision in Thorington v. Smith, 75 U.S. 1 (1869), a
case that concerned the validity of the Civil War Confederate currency.
There, the Court described that currency in the follow fashion:
"As contracts in themselves, except in the contingency of
successful revolution, these notes were nullities; for, except in that
event, there could be no payer. They bore, indeed, this character upon their
face, for they were made payable only 'after the ratification of a treaty of
peace between the Confederate States and the United States of America.'
While the war lasted, however, they had a certain contingent value, and were
used as money in nearly all the business transactions of many millions of
people. They must be regarded, therefore, as a currency imposed on the
community by irresistible force," Id., at 11.
"Considered in themselves, and in the light of subsequent
events, these notes had no real value, but they were made current as dollars
by irresistible force. They were the only measure of value which the people
had, and their use was a matter of almost absolute necessity. And this use
gave them a sort of value, insignificant and precarious enough it is true,
but always having a sufficiently definite relation to gold and silver, the
universal measure of value, so that it was always easy to ascertain how much
gold and silver was the real equivalent of a sum expressed in this
currency," Id., at 13.
How different is today’s FRN from Confederate currency?
The present American economy is thus completely dependent on a
monetary system created and operated by private commercial banks, whose
unified voice speaks through the Federal Reserve System, and whose “reserve
currency” is no different from Confederate currency. As of this moment, this
system is crumbling, either as the result of accident, or the malevolent
decisions of men controlling this system. Are Americans left without any
remedy and destined to have their lives ruined with no recourse?
The United States Constitution contains several express monetary
provisions. Via Art. 1, §8, Congress is granted the power to coin money and
regulate its value. The States, pursuant to Art. 1, § 10, cannot make
anything other than gold and silver coin a tender in payment of debts. Does
Congress have some constitutional duty to establish a monetary system that
works for the benefit of the American people rather than vested financial
interests?
In United States v. Marigold, 50 U.S. 560, 567-68 (1850), the Supreme
Court was confronted with the matter of whether certain federal laws making
penal the counterfeiting of coins was constitutional. Here, the Court
clearly explained the monetary duties of Congress:
"They appertain rather to the execution of an important trust
invested by the Constitution, and to the obligation to fulfill that trust on
the part of the government, namely, the trust and the duty of creating and
maintaining a uniform and pure metallic standard of value throughout the
Union. The power of coining money and of regulating its value was delegated
to Congress by the Constitution for the very purpose, as assigned by the
framers of that instrument, of creating and preserving the uniformity and
purity of such standard of value * * *.
"If the medium which the government was authorized to create and
establish could immediately be expelled, and substituted by one it had
neither created, estimated, nor authorized – one possessing no intrinsic
value – then the power conferred by the Constitution would be useless –
wholly fruitless of every end it was designed to accomplish. Whatever
functions Congress are, by the Constitution, authorized to perform, they
are, when the public good requires it, bound to perform; and on this
principle, having emitted a circulating medium, a standard of value
indispensable for the purposes of the community, and for the action of the
government itself, they are accordingly authorized and bound in duty to
prevent its debasement and expulsion, and the destruction of the general
confidence and convenience, by the influx and substitution of a spurious
coin in lieu of the constitutional currency."
Has not a powerful monetary consortium, by stealth, conniving and who
knows what else, replaced Constitutional currency with another currency no
better than Confederate “money”? Has not this consortium used its wiles to
persuade Congress to ignore its constitutional duties to the American
public? I say this has happened, to our great detriment.
On Friday, October 3, 2008, Congress and the President rescued our
banking and currency system by authorizing more than 700 billion bux in
public debt to be used to purchase non-performing assets from private
commercial banks for the purpose of “thawing” frozen credit. The real wealth
represented by this amount is astronomic: news reports declare that this
amount equals the value of all homes in several large States. This amount,
in conjunction with the amount of “bux” the Fed has created in recent weeks
and dumped into the “system,” conservatively approaches 10% of our annual
GDP. This problem arises not, however, from the defects in the real American
economy, but instead from the inherent instability of fractional reserve
banking. This new law fails to remedy this banking flaw and only makes it
more profound. What if this amount of real wealth had been used, instead, to
provide a real monetary system beneficial to the American people? In these
troubling times, wouldn’t it be better if Congress actually performed its
duties expressed in United States v. Marigold, supra, and provided the
American people with an existing, valuable currency, a real “dollar” instead
of a fake? When this was done back in the 1790s, prosperity returned to
America.
© 2008 Lowell Becraft - All Rights Reserved
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Lowell (Larry) Becraft, Jr., is a constitutional attorney based in
Huntsville, Alabama, who specializes in criminal defense cases, primarily
involving the federal income tax. His legal web site is:
http://home.hiwaay.net/~becraft/