RETURN TO CONSTITUTIONAL MONEY
by
Dr. Edwin Vieira, Jr.
August 30, 1991

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.

Thank you.