Official transcript of an address to the convention of the National Coalition to Reform Money and Taxes in Denver, Colorado.
Dr. Edwin J. Vieira, Jr., Attorney at Law, received his A.B. (cum laude) in Chemistry, A.M. and Ph.D. in organic chemistry from Harvard University, and a J.D. (cum laude) from Harvard Law School. He is in private practice specializing in constitutional law, labor law and legal-economic analysis. He is currently Executive Director of the George Edward Durell Foundation and President of the National Alliance for Constitutional Money. Dr. Vieira has also been a consultant and attorney for the National Right to Work Committee and National Right to Work Legal Defense Foundation; a member of the Board of Fellows, Public Service Research Foundation; a consultant to the U.S. Department of Labor; and a member of the Advisory Board, Citizens for a Sound Economy. He has been an Assistant Professor of Law at Wake Forest University School of Law and Research Director of the Wake Forest Institute of Labor Policy Analysis. He is a member of the Bars of Maryland, the District of Columbia, the State of Virginia, the United States Supreme Court, the United States Courts of Appeals for the Third, Fourth, Sixth, Seventh, Eight, Eleventh, the District of Columbia and Federal Circuits; and the United States District Court for the Districts of Maryland and the District of Columbia. He has had articles published in the Wake Forest Law Review, Detroit College of Law Review, DePaul Law Review, South Carolina Law Review, Georgia Law Review, the Cato Journal, Law & Liberty, The Moneychanger, Government Union Review, American Economic Foundation Bulletin, The Free Market, The Sound Money Investor, and other publications. He is the author of Pieces of Eight -- the Monetary Powers and Disabilities of the United States Constitution: A Study in Constitutional Law. He has also submitted numerous briefs to the Supreme Court of the United States, including briefs on behalf of appellees and appellants as well as amicus curiae briefs.
Thank you, John. Thank you, ladies and gentlemen.
I am an attorney. And having said that, I can immediately sense a cooling in the audience. So, I'll tell one of my lawyer survival jokes.
What do you do if you find yourself locked up in a room with a rabid Siberian wolf, a spitting cobra and an attorney, and you have a shotgun, but only two shots in that shotgun? What do you do?
Shoot the attorney twice!
All right. All seriousness aside. I'm supposed to talk about monetary reform. But, I sense that there may be some people in this audience who are also interested in tax reform. Somehow, I deduced that from a couple of things I heard this morning. So, one of the things I'd like to touch on, right at the beginning, is that there really is no necessary connection between monetary reform and tax reform. There may be all sorts of desirable political or policy connections between the two; but there's no necessary connection between the two.
I suppose everyone understands that inflation of the money supply is a hidden form of taxation. That's one of the ways in which the government can redistribute real wealth from the citizenry to the state, by changing the amount of money in circulation. But, that's a hidden tax, and it's always viewed as something that's extralegal or extra-constitutional, and it really isn't something that is put forward as part of the taxing system, so we can put that to one side.
Secondly, it's clear enough that one can have a good taxing system and bad money and also, on the other side, that you can have good money and a bad taxing system. For instance, you could easily have, in this country, constitutional money -- gold and silver coin -- and still have the so-called federal income tax, with all of the legal and administrative problems that are involved in that. I mean, that tax is run essentially as a gross receipts tax, and the way they implement that tax has absolutely nothing whatsoever to do with the quality of the money they are collecting.
So, the good-tax/bad-tax, good-money/bad-money connection is not a necessary connection. Probably the only connection between the monetary system and the tax system is the practical one, namely, if you're dealing with a form of money that wouldn't otherwise circulate because of Gresham's law (a form of money that the public really doesn't want to use), the government needs some kind of mechanism to force that circulation. And that mechanism, that has been historically used and is being used today, in fact, in this country, is by "taxing in" that money, i.e. using the bad money as the medium for payment of taxation. And, therefore, people will want to obtain that money in their market relationships, so they'll be able to pay taxes. So, you have a mechanism of forced circulation. But, once again, that doesn't particularly relate to the goodness or the badness of the taxing system; it more or less relates to the goodness or the badness -- the desirability or undesirability -- of holding that particular kind of money.
All right. What do I see, though, as the major problem of monetary reform? I can sum it up in one word: ignorance. There are other words you can add to it, such as apathy and fear. But ignorance is the main one.
I go around the country quite a bit, for various reasons, and I come to hotels, and at some stage in the course of registering at the hotel, the person behind the counter will give you that little form and say, "How do you intend to pay for this?" In fact, it happened at this hotel when I came here and I said, "Do you take Federal Reserve notes?" Well, about 95 percent of the time the answer I get is, "No. We take American Express, Visa, MasterCard." The other five percent of the time (or 4.999 percent of the time; there's always this one wise guy every now and then who knows the right answer), the rest of the time they say, "Well, I'm not sure. Let me check with the manager." When they come back, they say, "No, we take only American Express, Visa, or MasterCard." And then I will take out a Federal Reserve Note, and I'll show them where it's written on the top, "Federal Reserve Note," and they smile a kind of embarrassed smile, you know, and I smile and it's all very funny, except it really isn't, is it? It's quite the opposite of being funny.
That's our major problem -- ignorance of the monetary system to the point that people don't even know what it is they are using as money. They don't even know the name of the thing that they are using as money, let alone what its source is, what its characteristics are, or what its problems are.
That brings us to another problem, particularly if you deal with intellectuals. You have a lot of intellectuals running around now who are discussing monetary reform. It seems to be a very popular subject at many economic conferences, or conferences that are dealing with politics. In fact, I saw, just the other day, some show on CNN. They were talking about the economic reforms that had to occur in Eastern Europe and the Soviet Union, and whether or not the United States should participate in those reforms by providing funds, or by providing food or other kinds of assistance. There was an economist from the federal government, I think, and she was saying, "Well, there's an absolute precondition that has to be imposed before any kind of assistance should go over there, and that is, that these Russian Republics should agree that there would be an independent central bank to monitor and control their currency." So, there's a great deal of discussion about monetary reform all over the world.
The problem we have in this country is that, when you're discussing the Federal Reserve System (which is really the focus all of discussions about monetary reform here), invariably the discussion comes down to the question of whether the dollar should be somehow linked or backed by gold or silver or some other valuable commodity. At least, there's a whole school of thought that brings that up at these discussions. What I've noticed in these discussions is that there's a fundamental and unexamined assumption in all of this debate. The assumption is that the paper currency which the Federal Reserve System generates -- so-called Federal Reserve Notes -- as a matter of fact, or perhaps more importantly, as a matter of law, is a dollar at all. Anyone, certainly, who's been a student of American Constitutional law and history knows that a Federal Reserve Note is not a dollar. It has never even been declared by Congress to be a dollar; and it could never be an actual physical dollar, no matter what kind of statutes or regulations Congress or the Treasury Department might enact.
In fact, it's easy enough to show, and it's impossible to refute, that a dollar is a specific silver coin containing three hundred seventy-one and a quarter grains of fine silver. It's always been that way, at least since the beginning of the American Republic. The Constitution fixes the monetary unit of the United States as this dollar, and it empowers Congress to coin silver and gold coins, the values of which have to be regulated in relation to the dollar. And it very specifically prohibits the government from issuing what the Founding Fathers called "bills of credit" -- what we would call today paper currency that's redeemable in silver or gold. And the Constitution also outlaws any form of legal tender except silver and gold coins. Thus, from the perspective of the Constitution and most of American history, it is really senseless to talk about making the dollar redeemable, or to talk about adopting a silver- or a gold-backed dollar. The very fact that so much debate on the Federal Reserve system focuses on this really senseless point demonstrates how totally ignorant most of the people are about the subject of American money.
Defining the dollar constitutionally is only the first step in explaining the real nature of the problem which the Federal Reserve System poses. You have to look at three other aspects. First, you have to keep in mind that the evolution of the Federal Reserve System exemplifies a typical historical devolution or corruption of monetary systems throughout the world for the last two centuries. This is a devolution from commodity money to fiduciary money to fiat money. I suppose I should offer you some definitions:
Commodity money is a medium of exchange, the units of which are fixed amounts of an actual commodity that has value other than as money alone. Historically, silver and gold coins of known standard weights and designs emerged as the preferred monies of the entire civilized world. Certainly, that was the result at the end of the last century. In the case of commodity money, the actual commodity, the silver or the gold, is both the medium of exchange and the standard of value, that is, the unit of prices. The supply of commodity money is self-limited because of the costs of mining, refining, and coining the silver and gold. That is, new supplies of commodity money will be coined only to the extent that that coinage is economically profitable in comparison to the alternative investments of the capital that would be needed to mine, refine, and coin the precious metals. The market will simply not produce more gold and silver coin than is necessary, compared to all the other uses of that capital.
Fiduciary money is a medium of exchange composed usually of some intrinsically valueless substance, typically paper, which the issuer promises to redeem on demand in commodity money, such as gold or silver coin, or gold and silver bullion. Historically, private bank notes and government treasury notes were fiduciary monies in general circulation, at least prior to the 1930's in this country. In the case of fiduciary money, the paper promise to pay is the medium of day-to-day exchange. That's what people carry around in their pockets, generally speaking. But, the actual money, and the ultimate standard of value, remains the promised medium of payment, that is, the silver or the gold coin. The supply of fiduciary money is also self-limited by the requirement of redemption. That is, if we have a free market system, a system in which contracts are going to be enforced, fiduciary money will be issued only to the extent that the issuer is confident it can satisfy the demands for redemption of that money. I emphasize the condition "in a free market system," because the self-limiting aspect of fiduciary money has always failed whenever the government or some powerful private interest group has been able to step in and license the issuers of the fiduciary money to suspend or to repudiate that promise to redeem.
Finally, fiat money as a medium of exchange is composed of some intrinsically valueless substance which the issuer does not promise to redeem either in a commodity or in a fiduciary money. Because fiat money has no legal connection to a commodity money and, therefore, no real economic cost in terms of production, the supply of fiat money is never self-limiting; and the value of fiat money is always largely a matter of public confidence in the economic or political stability of the issuer. For these reasons, historically, every major fiat money has self-destructed in what is commonly called "hyperinflation," that is, an extreme decrease in purchasing power that is caused either by unlimited increase in the supply of that fiat money by the issuer, or simply by loss of public confidence in the continued value of the money or in the economic or political fortunes of the issuer, or both.
All right. That's point number one. Now you understand everything there is to know about the characters of various forms of money.
Second point: We have to bear in mind that the theory and history of fiduciary money, which is also the theory and history of banking, must focus on the ever-present problem of redemption. Why do I call it a problem? I call it a problem because a fiduciary money is, by definition, a promise to pay a real commodity money. A piece of commodity money in silver or gold coin is itself payment, because it contains a fixed weight of precious metal. But, if you have a unit of fiduciary money, say, a bank note or a treasury note, that is only a contingent, an uncertain payment, because it depends on the ability and the willingness of the issuer to redeem it. And there always exists a temptation for the issuer to renege on the promise. That is, fiduciary money always threatens to become fraudulent money. Not surprising, therefore, the history of fiduciary money has been more or less the history of monetary fraud, both economic and political.
Third point: We have to keep in mind that the danger of fraud in the issuance of fiduciary money is particularly acute in the case of fractional reserve banking. In the case of fractional reserve banking, the bank is always issuing more units of fiduciary money than it has units of commodity money available for redemption, counting on the unlikelihood that the majority of its customers will ever seek redemption at one time. So, modern fractional reserve banking is inherently fraudulent, because it is simply impossible for the bank simultaneously to fulfill all its promises to redeem on demand. The bank managers know that complete redemption on demand is impossible and that, therefore, the promises are false. The bank customers, by and large, are simply ignorant of how the fractional reserve banking system works.
Let me give you an historical example. In 1932, you remember, Franklin Roosevelt ran on the Democratic Party platform to preserve the value of the currency at all hazards. What was the first thing he did when he came into office in 1933? He closed the banks. We're dealing with a real criminal here, but he got away with it. He went on his fireside chat, the first fireside chat he had on radio (some of you may be old enough to have heard this one) and he explained to the American people why the banks had to be closed. He explained to them the fractional reserve banking system. He said, "The money isn't there. The banks cannot pay." I submit to you that, when the President of the United States has to come on nationwide radio and explain to the American people how the banking system in the country really works, those people have not been given full disclosure by their local neighborhood bankers. That was 1933, when you didn't have a National Education Association and an American Federation of Teachers in charge of the public schools, and people were probably quite a bit more educated about their monetary system than they are today.
Now, let's get to the Federal Reserve System. If you want to comprehend the significance of the Federal Reserve System, you also have to recognize there's no such thing as politically neutral or politically independent money. That is what we've always called "bird seed," right? It's put out for you pigeons to eat. But it's not true. Ultimately, money is a medium both for storing wealth and exchanging wealth. Thus, money is a form of property and a mechanism for implementing contracts that transfer property from one person to another. So, even in a free market economy with a limited government, money has a necessarily political character, inasmuch as the degree to which the government protects the money system from private fraud and from public looting reflects the degree to which the government respects and protects private property and the right of contract. So, a free market economy will necessarily have one kind of money; a mixed economy, so-called, will have another kind of money; a Fascist economy will have another; a Socialist economy another; and so forth and so on. But, in every case, the monetary system will accurately reflect the values of the political system. So, once again, the debate over whether the Federal Reserve System ought to be politically independent of Congress is completely misdirected.
Originally, the Constitution made our money independent of all electoral politics by fixing the monetary unit as the dollar, by outlawing bills of credit, and by allowing only silver and gold coin to operate as legal tender. But, the Constitution, of course, is the ultimate political charter of the country. So, instead of making money politically independent or politically neutral, the Constitution actually settled on one very specific political formula for money, that is, a money of intrinsic value, the supply of which the political authorities were not able to manipulate.
The creation of the Federal Reserve System in 1913 did not make Federal Reserve Notes politically independent or politically neutral; it merely changed the political character of the money system by empowering a small, unelected clique of self-styled experts and private bankers to control the supply of Federal Reserve Notes, interest rates, and all the other monetary and banking phenomena. So, as contrasted with the constitutional system, the Federal Reserve System actually politicized money, because it enabled politicians, administrators, and a few very specially selected special interest groups to exercise the very influence over this country's money and banking systems that the Constitution had originally disallowed. People seem to accept the description of the Federal Reserve System as "politically independent" because, although control of the monetary and banking systems has serious political significance, the apologists of the Federal Reserve System have been extremely successful, in the last seventy or so years, in simply removing money and banking issues from the agendas of the political parties, the candidates, and anybody else who is out there on the political platform or in the political arena.
There just is no public political discussion about these issues anymore. Yet it's of vital political importance that no serious political movement now proposes the immediate restoration of our constitutional money system. It's of vital political importance that no serious political movement demands that all paper currency of private banks be true fiduciary monies, that is, redeemable in silver or gold. It's of vital political importance that no serious political movement attacks fraudulent fractional reserve banking. It's of vital political importance that no serious political movement denounces the incestuous relationship between the government and the banking industry through the Federal Reserve, the FDIC, or whatever other alphabet agencies will be coming along, as this system explodes on them. It's of vital political importance that no serious political movement challenges the government's use of the monetary and banking system to regulate the economy and to impose pervasive police-state surveillance on individuals. And it's of vital political significance that the general public is simply unable to devise any kind of strategy for dealing with the Federal Reserve System as a supposed agency of the government. I include here the Congress; they are no big deal for the Federal Reserve System. The Federal Reserve System, when it testifies before Congress, tells Congress what the policy is going to be, not the other way around, all right? Nobody has a handle on this agency. Obviously, a group that could completely excise all of these matters from political discourse in the United States, without complaint by any significant part of the public, must be very, very powerful. How the apologists for the Federal Reserve were successful in stifling political debate, the history books really don't explain very well, and I think with good reason.
What is clear enough is that the Federal Reserve was established to remove the Constitution as the controlling agency in national monetary policy and to guarantee, instead, that certain special interest groups were disproportionately, in fact monopolistically represented in determining that policy, for the special benefit of those groups and at everybody else's expense. Here again, we have to look at this statement on a couple of levels of analysis.
The first level: You could describe the Federal Reserve System as a tool for stabilizing the inherently fraudulent fractional reserve banking system. If you look at it from this perspective, the purpose of the Federal Reserve System is not necessarily to do what the bankers want, but it's always to do what the bankers need. What do I mean by that? Well, let's look at the way a monetary system evolves, or corrupts, from a regime of commodity money to that of fiat money.
If you have a regime of commodity money, the bankers employ the inherently fraudulent fractional reserve system. They expand the supply of fiduciary money, that is, their bank notes and their demand currencies, beyond the supply of commodity money available. This has two effects. Number one, it enables bankers to loan more money than they otherwise would, and that increases their profits. On the other side, it makes the holders of all that fiduciary money unknowing and, I assume, unwilling partners with the bankers in those excessive loans; and so, it spreads the risk of those loans throughout society and indirectly insures the bankers at the expense of the general public.
Because the expansion of the supply of this inherently fraudulent fiduciary money is limited by the possibility of bankruptcy -- that is, lots of people coming forward and asking for redemption, followed logically by the bankruptcy of the banks -- the bankers then go out and support legislation that's designed to insulate the fractional reserve banking system from threats. The first thing they do is to use propaganda and all sorts of disinformation to con the public into believing that the banks are sound. One of the mechanisms for doing that is the so-called deposit insurance schemes, right? "The government will pay. If we fail, the government will pay." (Don't ask us who will pay the government to pay, because it's you who will actually pay.) So, the first con is disinformation.
The second level is that, as we saw in the 1930's and many instances before that, the bankers ask the government to authorize what used to be called suspension of specie payments. That is, the bankers simply refuse to fulfill their promises to redeem the fiduciary money with commodity money. This allows the bankers to stay in business, even though they're bankrupt, which is not allowed for any other segment of the economy, right? Suspensions of specie payments are a key indicator of the breakdown of the free-market economy, because they are a governmentally allowed repudiation of contracts. In effect, they are governmentally licensed thefts.
The third level: To prevent bank runs altogether, the bankers lobby for government permission to repudiate their fiduciary money totally, that is, to convert the fiduciary money into fiat money. Then, there's no problem about bank runs, because there's nothing that they have to redeem. This generally requires that the government activate some mechanism to force the circulation of the fiat currency. The government, for instance, could make that money tender in payment of taxes. People will need it to pay their taxes, and that will force circulation; or, the government could declare that money legal tender for all debts; or, the government could outlaw contracts that are payable in any other form of money, especially commodity money. And you'll notice in the 1930's -- 1933, '34 and '35 -- that's precisely what the government did in that banking crisis. They, in essence, with respect to gold coin at least, turned Federal Reserve Notes into a fiat legal tender currency.
These steps substitute the government or, actually, they substitute the taxpayers for the banks and the banks' shareholders, as the ultimate guarantors of fiat money, in return for which (because there are two sides to this) the banks agree to do two things. First, they agree to monetize the public debt, that is, to buy government securities for duly created fiat money, in effect enabling the government to use the fiat money system as an instrument of taxation. Secondly, the banks agree to cooperate in some kind of cartel or self-regulatory scheme to control the expansion of the supply of fiat money within limits that maintain public confidence. That is, the government and the banks agree to divide the amount that can be looted from the general public by manipulation of the money supply, and to moderate that looting so that the system does not collapse and the public does not catch on.
That's all that fractional reserve banking system is. It's a conspiracy between the public officials and the bankers to loot the American people. The Federal Reserve is simply a very elaborate and complicated device that has been set up to accomplish these simple ends in a highly deceptive way. The Federal Reserve System was the response of bankers and their political cronies to failures in the fractional reserve banking system at the local or regional levels. So, they created a national-level system to regulate it all. It was an attempt, essentially domestically in 1913, and then internationally under the Bretton Woods agreement in 1944, to expand that kind of fractional reserve system, first throughout the United States, and then throughout the world.
I could go into a long historical analysis of precisely how our money has evolved step-by-step. I see Richard Solymn of the Sound Dollar Committee has put up the "Money and Paper Currency in America, Pre- and Post-Civil War" charts over there, which give you a graphic illustration of the changes in the monetary system. Under each one of those pieces of currency on the chart, you will see little exhibits which relate to questions of legal tender redemption, and so forth and so on. You can, pretty much, track that for yourselves, if you want to take some time later on to look at it.
The important thing is to know that real fiat money came into existence in this country only in 1968. You had repudiation of the promise to pay gold in 1933. You had repudiation of the promise to redeem all currency, or any currency, in silver in '67 and into '68. It wasn't until June of 1968 that we finally had, for the first time in this country, a true fiat currency in the Federal Reserve Note. So, this is a fairly recent problem, as historical political problems go. We are looking only at about twenty years of fiat currency and yet, as Franklin Sanders pointed out just a moment ago, in that twenty years we have seen a geometrically accelerating breakdown in the monetary and banking systems.
So, today, we suffer under a regime of fiat currency and unlimited fractional reserve banking. In this system, the Federal Reserve plays a simple, but a very vital role. The public confidence in the monetary banking system weakens because of the effect of overexpansion of the supply of fiat money. That's always the direction in which fiat money goes -- expansion, expansion, expansion. The Federal Reserve jumps in to "restore confidence" (as they say) generally by what they call "fighting inflation." The Federal Reserve may use what the public considers drastic means in this alleged fight. (Remember, at one point when Nixon was in, he imposed wage and price controls with a four percent inflation.) But, the Federal Reserve will never use means so drastic that they precipitate a genuine economic collapse or seriously endanger the long-term interests of the banking cartel, its satellite industries, or its political cronies.
There's a problem, however. Any system of fractional reserve banking suffers from inherent instability that increases over time because, at its base, fractional reserve banking is a kind of Ponzi or pyramid scheme. For that reason, fractional reserve banking is a confidence game, in both senses of the term. The Federal Reserve, the banking cartel and the politicians of the American one-party system operate under the theory that you can fool all the people some of the time, and some of the people all of the time, and that's good enough. Do you want me to repeat that? All of the people some of the time, and some of the people all of the time, and that's good enough. But, they do forget that, as Lincoln remarked, "You can't fool all the people all the time." Over time, some people encourage other people to learn what's going on. And people who have learned tend to act. So, we can expect that the remaining lifetime of the Federal Reserve confidence game will be relatively short, as these things go.
Now let me shift to a somewhat higher level of analysis.
The Federal Reserve System is not simply a control mechanism for the national banking cartel. It is one of the most important mechanisms in a pervasive system of Fascist economic regulations that has been set up in this country, slowly but surely, since the turn of the century. This explains the political independence of the Federal Reserve System in a way that is much more logical than the idea that, somehow, money and banking are not politically important, divisive, or even interesting. If a Fascist administrative state is to regulate the economy with relative autonomy from the electoral public and most special interest groups (and, let's remember, that's the definition of an administrative state: it runs the economy without having to be subject to the whims of the voters), if you're going to have that kind of a state, then the monetary agency has to claim political independence.
In fact, all of the major regulatory agencies have to claim political independence to some degree which, in fact (if you pay much attention to what is said in Washington), they really all do claim, to some degree. Just ask the Federal Reserve. They claim it to the greatest degree. So, the political independence of the Federal Reserve is precisely what one would expect it to claim when they're a part of an anti-democratic mechanism of economic and political control. And the fact that no constitutional branch of the national government -- not the Congress, not the President, and not the Judiciary -- ever disputes the Federal Reserve system's supposed independence proves that those branches, too, have been co-opted as agencies of this Fascist state.
All right. Contemporary political money, and the banking system that generates it, have five major consequences.
First, political money is the prime means by which the government operates a system of hidden taxation through increases in the supply of money, that is, the inflation mechanism.
Second, by operating a system of hidden taxation, modern political money enables the ruling elite of the country to redistribute the nation's wealth from one group to another. The American Institute for Economic Research, Great Barrington, Massachusetts, puts out a little paper every year describing how much money has been redistributed by inflation since World War II. The end of World War II was around 1945. The last one I looked at showed that over six trillion dollars had been redistributed through inflation -- six trillion! When you realize that inflation redistributes wealth in a way that the market would not have distributed the wealth and therefore produces, as a result of that redistribution, less valuable product than the market would have produced, you're talking about a fantastic loss of wealth in the United States -- a minimum six trillion dollar loss of wealth since World War II because of the Federal Reserve System.
Third, by functioning as a mechanism for redistributing wealth, modern political money systematically corrupts the electoral process because it enables politicians to buy votes with promises of new government spending programs made possible only by the banking system's ability to monetize the public debt. Remember in the old days? Look at how the political process worked. The voters would come to the politician and say, "Here's some money. Vote for these programs." Today, it works the other way around. The politicians can generate the money themselves, so they say, "We have the money. Here's the money. Vote for us." All right. We have pork barrel legislation on a vast scale. The only reason they can do that is because they can generate fiat currency without limit, at least over time.
Fourth, by tying the banks to the public debt, modern political money licenses the banks to loot the public treasury, initially by guaranteeing Federal Reserve Notes as obligations of the United States, and privileging those notes as legal tender, and ultimately by providing bailouts to the bankers through the FSLIC, the RTC, the FDIC, and whatever, when the scheme of inherently fraudulent fractional reserve banking collapses. We can see that happening right now, right? Billions, hundreds of billions, five hundred billion dollars for the savings and loan bailout. I don't care what they tell you, it's going to cost five hundred billion, at least. How much is the commercial bank bailout going to cost? How much is the bailout of the insurance companies going to cost? What's the bailout of the pension funds going to cost? Pension Benefit Guaranty Corporation? What's the bailout of those going to cost? Add to that the six trillion that's been lost since World War II.
Fifth and last, modern political money and political banking function as a key mechanism in the scheme of Fascist economic planning that misdirects and wastes resources, and thereby lowers the standard of living of most Americans, for the benefit of the privileged few. My God, communism is collapsing throughout Eastern Europe and the Soviet Union; but we've still got it here! This will be the last bastion of Marxist thinking, here in the United States and, probably, the Federal Reserve will be the last holdout of true Marxism, in these economic regulatory theories.
What can we do about it? Well, if I could prevail on Larry to hand me that little chart I have there. I'm not going to go through this in tremendous detail, because you can't see it from where you are sitting. This diagram shows us a logical scheme. It describes the present system and then a logic tree of choices which you can follow for changes, based on the presumption that whatever is done must be done through a constitutional mechanism. This first level on the chart is the system we have now. It is entirely the product of statutes and regulations, ninety-five per cent of which is unconstitutional. Any change in this system will have to be made by the enactment of new and different and hopefully constitutional statutes. Or, there are some other mechanisms in here which illustrate a reform of the Federal Reserve by institutional changes, or by the possibility of going to some supranational banking cartel or world banking system, a New World Order banking system, and so forth. You can follow this thing through, and the green line will show you essentially the logical development or the logical flow to return the system to constitutional money.
I can give you an outline, or what the steps are, at least, all of which can be documented historically, based upon early instances of American constitutional and statutory law. This is to bring the United States monetary and banking system back into conformance with constitutional law.
Firstly, you have to declare unconstitutional:
1. the Federal Reserve Act of 1913,
2. the seizure of gold coin in 1933, and
3. the outlawing in 1934 of private contracts calling for payment in, or the payment of, gold and silver.
You have to recognize and condemn the basic unconstitutional steps that were taken by the government to establish ultimately this fiat currency system.
Secondly, you have to disestablish the Federal Reserve System and privatize the few politically legitimate and economically useful functions that it has, such as a national clearing house, etc., to the extent that those functions would be legitimate and useful for private banks if they could be continued, but certainly not under the auspices of anything that looks like the Federal Reserve System.
Thirdly, you would definitely have to terminate the status of Federal Reserve Notes as obligations of the United States and as legal tender for all debts. There is absolutely no constitutional justification for the American taxpayer to be the ultimate guarantor for the wild investment schemes of banks, savings and loans, and the other members of the Federal Reserve System.
Fourthly, you have to dedicate to the restoration of the constitutional money system the gold that was unconstitutionally seized from the American people in 1933, that is now held by the United States Treasury.
You know, most of the gold held in Fort Knox and at West Point is what they call "coin melt" gold. It is the ninety percent pure gold that was melted down into ingots, primarily from coins that were seized during the 1933 seizure. Who owns that gold? The people from whom it was stolen own it, right? Because it was illegally taken. The government was engaged in receiving stolen goods. All of that money has to be returned to those from whom it was taken, if they can be ascertained; or it has to be held in what is called a constructive trust, to be used for a purpose related to the restoration of the monetary system -- and that would mean coining all of that gold and getting it out into circulation as quickly as possible, if we can't find the actual owners.
Simply declare voidable all contracts between member banks of the Federal Reserve system and any other parties where the consideration for contracts on the part of the banks was the unconstitutional monetization of debt. What that means is that you collapse the debt pyramid to the detriment of the banks; the banks eat the debts. Thus, it's not the taxpayers who eat them; the banks eat them. The Rockefellers eat them. The foreign shareholders of those banks eat them. If they don't like that, they can go to jail on RICO charges.
You have to re-value, in terms of constitutional dollars, all other outstanding contracts that are now payable in Federal Reserve Notes. There are a lot of honest people out there who were forced by circumstances to conduct their financial affairs on the basis of Federal Reserve Notes, and those contracts can't be voided. Those contracts can't be voidable. The contracts must have some real value attached to them. The real value attached to them would be their value in constitutional dollars. By the way, this was a problem that was solved by the Confederate States after the Civil War. All those contracts in the Confederate States that were not declared to be illegal contracts were re-valued in, at that time, constitutional gold and silver coin, and the system went along just swimmingly. The Supreme Court figured out how to do that at the end of the Civil War; and it can figure out, or be told by statute, how to do that again today.
Immediately, you have to begin the free coinage of gold and silver coin, not the limited coinage they do now (these American Eagle coins), but coining as much gold and silver as people want to bring into the mints. Secondly, you have to adopt all the foreign silver and gold coins as money of the United States -- what Congress did in the late seventeen hundreds, when there wasn't even a mint in this county. Where did the original money come from? They just made a list of all the gold and silver coins that were any good and said, "These have so much gold," and "These have so much silver," and they were made the money of the United States. They monetized all the gold and silver of the world, instantly. Instantly, it could be done. Those people who talk about there not being enough gold or silver in circulation don't know what they're talking about. It's not in circulation because it's not treated as money. When you start saying that it's money, it will start coming out from the coffers and out from under the beds. Finally, you regulate the value of all those coins, and then prohibit the practice of the fraudulent fractional reserve banking schemes and other typical commercial fraudulent practices of those kinds.
In closing, I want to say that this is not a visionary program. It is very difficult politically to put it into effect but it is not, as a matter of economics, visionary because these things happened twice before. They happened once at the end of the War of Independence, when we had the same kind of rotting vegetable currency -- the Continental currency -- the same bills of credit. There was no gold and silver coin in circulation. The economy was absolutely prostrate. Our only friends were the French, and they were soon to be engaged in a revolution internally and a massive world war with England. We were down in the economic and political pits. No problem. All of these steps were taken and there was an economic recovery.
Secondly, all of this happened in the South following the Civil War. The Confederate currency was, of course, destroyed. The country was prostrate, and it was under military occupation when these same steps were taken. They were taken also in the North, I should say in the entire country, with the resumption of the Specie Act in 1875, going from the fiat "greenbacks" back to redeemable or fiduciary paper currency.
This has all happened before, not only in this country, but I can name several other countries where part and parcel reforms have been put into effect. It can be done! The only question is whether the American people (a) want it to be done and (b) have the gumption to make the politicians do it.