Why does the United States Need Constitutional Money?
Six Questions on Monetary Reform
“Why does the United States Need Constitutional Money?”: Six Questions on Monetary Reform, Monograph No. 5, published by the National Alliance for Constitutional Money, 1993, by Dr. Edwin Vieira, Jr., page 26 (emphasis supplied).
Why does the United States Need Constitutional Money?: Six Questions on Monetary Reform,Monograph no. 5, by Dr. Edwin Vieira, Jr., Ph.D., J.D.
- Foreword by Richard L. Solyom, Chairman of The Sound Dollar Committee
This Monograph asks and answers six of the most important questions concerning America’s monetary system.
Any thinking person realizes today that something is very wrong with our money. Precisely what is wrong remains largely undefined in most people’s minds, because there has been no meaningful public debate on monetary fundamentals in this country for more than half a century. Thus, the public has been denied crucial knowledge of how our system is supposed to work, and what has gone wrong—and instead has been fed, through the schools and the media, disinformation concocted by the very people who led us into the present mess.
Yes, some concerned citizens have tried, through the courts or by proposed legislation, to resolve the money question and reform the system. All to no avail. The bills die in committee; and court challenges to fiat currency are dismissed as “frivolous” and appeals denied without hearings or meaningful opinions.
Nonetheless, something must be done, because continued use of irredeemable Federal Reserve Notes (and bank-deposits denominated in Federal Reserve units) as our nation’s currency will eventually lead to economic disaster, followed by social chaos and political reaction. A broadly based counterattack to impose constitutional reforms on the monetary and banking systems as a whole is much needed. This Monograph can be an effective tool in such an endeavor.
This Monograph reviews the situation and provides answers which concerned citizens can then use to provoke public debate, thereby molding public opinion on the issue of monetary reform:
1. What is the economic role of money?
2. Why is the relationship between money and government important?
3. Why is the Constitution important to money and banking?
4. What powers over money and banking does the Constitution delegate to the government?
5. Why should constitutional monetary and banking reform be an important issue today?
6. Why should Americans demand restoration of the constitutional systems of money and banking?
Richard L. Solyom, Chairman
Sound Dollar Committee
Why does the United States Need Constitutional Money?
Six Questions on Monetary Reform
Although all too many Americans are unaware of it, whether the United States should return to constitutional systems of money and banking is one of the most important issues facing the nation today. To understand why, several questions need answers:
1. What is the economic role of money?
Unfortunately, people too often confuse “money” with “wealth.” Wealth may, but does not always, consist of money, because wealth need not be capable of performing the special function of money. And even a very large quantity of some types of money —for example, German paper marks from the period of the Weimar Republic in the early 1920s—may be worth very little, precisely because that money cannot perform (or only very poorly performs) the function that money must fulfill to have or maintain value.
Strictly speaking, “money” is nothing more or less than the social medium of exchange. In any advanced economy, people do not barter goods for goods, services for services, and goods for services in direct exchanges, but instead engage in indirect exchange: that is, exchanging some goods and services for money on certain occasions, and then exchanging that money for other goods or services on other occasions. This system of indirect (or monetary) exchanges is far more efficient than direct barter, and therefore maximizes the total social welfare that derives from all exchanges. “Money” is what facilitates this system of indirect exchange.
Monetary transactions determine the “prices” of goods and services, the values of goods and services expressed in the medium of exchange. All prices are economically interrelated, because ultimately all goods and services compete with one another. (footnote 1) Because of this interrelation, prices function as signals to entrepreneurs, indicating how scarce resources should be allocated so as to maximize total social welfare. If money-prices properly reflect the real valuations of goods and services throughout society, then resources will tend to be allocated away from the production of less valuable, towards the production of more-valuable, goods and services. (footnote 2) This will tend to maximize the efficiency and value of all production, and thereby the real material wealth of society as a whole.
Of course, the key condition for the operation and success of this process is that money-prices properly reflect the real valuations of goods and services throughout society. This condition will not be fulfilled if there is what free market economists call “intervention” in the economy through the action of politicians and government bureaucrats, of politically or economically powerful private special interest groups, or of other organized criminal elements.
- ‘Intervention’: The use of force and fraud by government officials.
“Intervention” involves the use of force or fraud to divert the allocation of resources from what society as a whole desires, and what benefits society as a whole, to what the politicians, bureaucrats, special-interest groups, or mobsters want, and what benefits them at the expense of everyone else. (footnote 3) All intervention in the economy to some degree injects non-rationality into the system, because intervention operates by forcing or deceiving individuals into doing what they would otherwise not do in the pursuit of, and what does not serve, their own interests.
Many forms of intervention are designed to interfere with the free formation of prices —the classic example being outright governmental price controls. Because prices fixed through intervention are not rational, in that they do not reflect the true valuations of goods and services by society as a whole, such prices misallocate—that is, waste—scarce resources and diminish total social wealth and welfare, compared to what would have occurred had prices been set by full and fair competition in the free market.
That scarce resources are wasted, and total social wealth and welfare are decreased, does not mean that some individuals and groups do not obtain (or think they obtain) special, unearned benefits from intervention that they would not have received in a free-market economy. Indeed, the primary motivation for intervention is the desire of some individuals and groups to use force or fraud to appropriate for themselves, at the expense of everyone else, more wealth than they could have earned by competing peacefully and honestly in the free market.
Now, because all prices in an advanced economy are expressed in units of money, intervention in the monetary system will necessarily have a pervasive, negative effect on the allocation of resources and the promotion of social welfare. Intervention in the monetary system is comparable to an infection in the body’s blood-supply, which systematically harms all organs that contact the blood, and therefore is potentially more dangerous than an equally virulent infection localized in one organ only.
The central importance of the monetary system to the price-structure, to the allocation of social resources, to the production of all goods and services, and to the distribution of real wealth throughout society teaches three lessons:
First, a society does not enjoy a free-market economy when its monetary system—including the nature of the monetary unit and the supply of money—is controlled or subject to continuous intervention by the government or by private groups colluding with the government.
Second, the shrewdest and therefore the most dangerous public and private interventionists will seek to infiltrate, to manipulate, and eventually to control the monetary system, precisely because the monetary system is at the center of and systematically affects the system of production and distribution of all social wealth.
Third, the most profitable form of intervention in the monetary system is what is known today as “monetary policy”—more accurately described as “legalized counterfeiting:” the ability of the government and private groups acting in concert with it to obtain for themselves, under color of law, new supplies of money without having to invest a commensurate amount of their own real resources or labor in the production of that money. (footnote 4) Legalized counterfeiting requires some pseudo-legal mechanism by which the government, specially favored private groups, or both together can manipulate the supply and purchasing power of money (that is, what money will buy) for their own special benefit, and at everyone else’s expense.
Generally, this manipulation involves increases in the supply of counterfeit money, which decreases the purchasing power of each unit of money, which in turn increases the prices of goods and services in the economy compared to what those prices would have been in the absence of monetary intervention. These increases in the prices of goods and services John Q. Public calls “inflation.” To be accurate, however, the term “inflation” should be reserved only for the expansion of the supply of counterfeit money. Increases in prices are an effect of inflation; legalized counterfeiting is the means by which inflation occurs; and the greed of predatory governmental officials and special-interest groups to obtain unearned wealth is the cause of inflation.
- Legalized counterfeiting can take several forms.
Legalized counterfeiting results in three varieties of monetary theft:
Theft through transactions (“monetary larceny”). New money always enters the economy in a particular place, at a particular time, and in the possession of a particular individual or group. When it does, the holder of that new money (X) purchases goods and services at their then present, low prices. As the new money spreads through the economy, prices of goods and services change, generally upwards, including the prices of the goods and services X bought. X has clearly benefited by spending the new money before anyone else.
But some people in society (A and B) must pay the new, higher prices for the goods and services they need before their incomes increase by their acquisition of any of the new money. Other people (C and D) must pay the new, higher prices without any increases in their incomes. And still other people (E and F) must pay some higher prices before their incomes increase, but also receive those increases while the prices of other goods and services they buy are still low.
The overall effect of the injection of the new money into the economy, then, is a complex redistribution of wealth: X benefits at the expense of A, B, C, D, E, and F; and E and F benefit to a lesser degree at the expense of A, B, C, and D. If X is the government, the effect of the injection of the new money is akin to “taxation” of A, B, C, D, E, and F—albeit “taxation” that is neatly hidden by the complexities of the monetary and banking systems.
If X is a private individual or group, the effect of the injection of the new money is what is deceptively called today “redistribution of wealth”—akin to “picking the pockets” of A, B, C, D, E, and F, who probably have no inkling as to how constantly rising prices of goods and services are related to manipulation of the supply of money, and how some people benefit, and others lose, from this manipulation.
Theft from savings (“monetary embezzlement”). All other things being equal, increases in the supply of money result in decreases in the purchasing-power of each unit of money. An individual (G) who holds a fixed amount of “cash” or is owed debts denominated in units of money before an injection of new money into the economy will find, after that injection (and all other things remaining equal), that his “cash” and the debts he is owed have lost real value as against goods and services.
His monetary wealth has depreciated in substance, even though it has remained unchanged in nominal terms. To the extent of that depreciation, G’s wealth has been redistributed to people such as X, E, and F. If X is the government, and G is some naif holder of long-term government bonds unaided by shrewd financial advisors, this sequence of events can be described as incremental repudiation of the public debt—which, in principle, is unconstitutional, (footnote 21) but nevertheless occurs without significant outcry from the public.
Theft by foreclosures (“monetary robbery”). Finally, if the legal counterfeiters engage, not in credit-expansion, but in credit-contraction (which, in practice, often amounts to a decrease in the supply of money, or an increase in the purchasing-power of money), debtors unable to pay their outstanding loans because their incomes have decreased as the decreasing supply of money in the society depresses economy activity, or unable to obtain new loans because the banks refuse to exercise their special privilege to create more money, face foreclosures and forcible seizures of the real or personal property that serves as the collateral to secure their outstanding loans. If these loans are owed to the banks, the change in the banks’ “monetary policy” amounts to outright expropriation of the debtors.
Of course, that a debtor has overextended himself and defaults on a loan is not, by itself, a valid reason to criticize a creditor who demands his contractual rights to foreclose on the debtor’s collateral. If, however, the creditor is the bank that “created out of nothing” the fiat currency or deposit-currency the debtor borrowed in the first place, other considerations may come into play. First, if the debtor’s present inability to pay is the result of a monetary stringency contrived by the banking-cartel, equity should require that the bank be restrained from taking undue advantage of a situation it created that renders temporarily impossible the debtor’s ability to fulfill his contractual obligations. (footnote 22)
Second, if the banking-cartel’s powers to create money “out of nothing,” as well as to destroy that money, derive from a monopolistic governmental grant, the government can fairly (and in justice ought to) require that the banks use one of those powers for the short-term relief of people disproportionately harmed by the use of the other power. (footnote 23)
Third, if the special privilege the government grants to the banking-cartel to create fiat currency or deposit currency “out of nothing” is itself illegal (as it is under the Constitution (footnote 24)) a loan-contract the consideration for which on the side of the bank was the creation of such currency should be voidable at the option of the debtor, and unenforceable in the courts. (footnote 25)
- 2. Why is the relationship between money and government important?
2. Why is the relationship between money and government important?
In the United States, the relationship between money and government is vitally important, because money has not only an economic, but also a political character. The political relationship between money and government is institutionalized at the highest level of the legal system.
First, the Constitution—the basic legal and political charter of the nation—explicitly delegates to the government certain powers with respect to money, and withholds others. (footnote 26) Obviously, to the extent the Constitution withholds powers from the government (or, in legal parlance, creates governmental “disabilities”), the Constitution depoliticizes money, because it explicitly denies the government (or the process of party and special-interest-group politics working through the government) the ability to take certain definite actions that affect money.
For example, the States lack power to “make any Thing but gold and silver Coin a Tender in Payment of Debts, (footnote 27) no matter what special interest groups, politicians, elected officials, bureaucrats, or judges may desire. Less obviously, but equally truly, to the extent the Constitution grants powers to the government, it also depoliticizes money, because it implicitly denies the government (or the political process) the ability to take actions beyond or in contravention or derogation of the powers actually delegated.
For example, that Congress has the power to “coin Money and regulate the Value thereof, and of foreign Coin” (footnote 28) implies that Congress has no power to “print” or otherwise “emit” money that is incapable of being coined—that is, that Congress lacks power to generate domestic money, or to recognize foreign money, other than actual coin (such as paper currency).
Second, a fundamental purpose of government, at every level, is to protect individuals’ property and liberty. (footnote 29) Money is itself property. Moreover, in a complex exchange economy, money is the medium in which contracts for exchanges of property among individuals express the prices or values of the property exchanged. And the right to make and enforce contracts is a basic element of individual liberty. (footnote 30) Therefore, the constitutional role of government with respect to the protection of property and liberty implies a derivative, protective relationship with money.
Third, the government’s own fiscal operations—that is, the taxing, borrowing, and spending the Constitution allows (footnote 31)—almost exclusively employ money as the medium of payment. (footnote 32) Clearly, in an economy in which governmental taxation, borrowing, and spending are significant in amounts relative to total transactions, the government’s choice of which money it will use will have a decided effect on the use of that money by everyone else. For example, the national government (albeit unconstitutionally) repudiated its promises to redeem paper currency with gold domestically in 1933, silver domestically and internationally in 1968, and gold internationally in 1971. (footnote 33) Since those dates, it has not collected taxes in silver or gold money, borrowed silver or gold money from the credit markets, or spent silver and gold money to pay its debts or make any of the numerous “transfer” payments that constitute the modern “welfare-state” system.
Instead, it has used as money only FRNs (or bank deposits payable in FRNS), which are redeemable in base-metallic coinage, not silver or gold. As a consequence, although American silver and gold coins are in every proper sense still “money,” (footnote 34) and although people may lawfully own silver and gold coins, may enter into so-called “gold-clause contracts” that specify gold or silver coins as the media of payment to the exclusion of paper currency or base-metallic coins, (footnote 35) and may obtain and circulate silver and gold coins denominated in “dollars” that the United States Treasury itself now mints (the so-called “American Eagle” coins (footnote 36))—nevertheless, essentially the only money in general, day-to-day circulation today consists of FRNs (or bank-deposits payable therein) and “clad” coinage. (footnote 37)
This is no doubt in large measure the response of the marketplace to or a reflexion of the government’s use of FRNs and “clad” coins as its media of exchange. And there is equally no doubt that, were the government to begin, say, taxing in silver and gold (and thereby effectively requiring people to obtain silver and gold to pay those taxes), more and more individuals would offer their goods and services for sale at prices denominated in silver and gold; and silver and gold coins would rapidly be reintroduced as monies in general, day-to-day circulation.
Thus, even within the narrow ambit of the government’s constitutional powers and disabilities, the inherently political relationship between government and money is extensive and important. The thoroughly political character of contemporary money and banking renders even more significant—indeed, highly dangerous both politically and economically the relationship between government and money. The modifier “thoroughly” deserves emphasis, because the political character of contemporary money and banking is non- and even anti-constitutional, in that the national government and the quasi-public cartel of private banks that make up the FRS claim powers far beyond any the Constitution, fairly or even imaginatively interpreted, delegates. And, for all intents and purposes, the government and the banks deny that the Constitution imposes any monetary disabilities on them at all. (footnote 38)
First, the relationship between government and money of which most people are at least vaguely aware, and of which most people probably approve without any real thought if they know about it at all, is present-day “monetary policy.” Governmental and FRS officials tout monetary policy” as (and most people likely believe it to be) necessary to “stabilize” the economy through a species of “central economic planning.” The fallacies of these claims have been exploded above. Important to recognize at this juncture is that contemporary “monetary policy” is strongly anti- constitutional in at least two respects.
By manipulating the purchasing-power of money from day to day (over the long term downward), modern “monetary policy” expropriates the holders of money and impairs the obligations of all contracts denominated in or to be fulfilled through the payment of money. That is, modern “monetary policy” radically infringes on rights of property and liberty throughout American society—in the vast majority of cases, with the victims more or less in the dark as to what is going on economically or politically, and without legal recourse even if they do realize their victimization.
“Radically” is the correct adverb, because in principle nothing prevents “monetary policy” from being employed to destroy completely the exchange-value of the FRN or the “clad” coinage, thereby extinguishing the value of all holdings of cash or bank- deposits and of all long-term contracts payable in paper or base-metallic money, “redistributing” wealth on a massive scale, and throwing the whole economy into chaos.
Indeed, since the founding of the FRS in 1913, ostensibly to “stabilize” the monetary and banking systems, FRN paper currency has lost over 90% of its purchasing-power; and even a continued rate of depreciation of 3%, which contemporary markets would likely consider modest, would result in a further loss of 95% of purchasing-power in the next 90 or so years! The effect of this huge, chronic depreciation on private property rights, the fulfillment of contracts, and the economy as a whole should be self-evident.
Furthermore, modern “monetary policy” is an attempt to restructure the American economy—and government—away from the free market and republican institutions towards socialism or fascism: socialism, if the so-called “planning” behind the “monetary policy” is entirely the brain-child of governmental bureaucrats; or fascism, if (as is the case in the United States today) the “planning” is largely the product of “experts” in some private cartel (such as the FRS) exercising special legal privileges in concert with governmental bureaucrats and elected officials.
This follows directly, not only from the structure and operations of the FRS cartel (which fits the classic pattern of a fascistic, or corporative-state, scheme of economic regulation), but also and especially from the perverse effects “monetary policy” has on private property and individuals’ freedom of contract. Private property and freedom of contract are key, indispensable elements of the free market.
To the extent that “monetary policy” denies or interferes with private property and freedom of contract, it destroys or undermines the free market, substituting instead either socialism or fascism. So, the contemporary relationship between government and its cronies in the private FRS banking-cartel, on the one hand, and money, on the other hand, is political not only in the sense that government is exercising powers (legitimate and illegitimate) over money, but also in the sense that the result of the exercise of the illegitimate powers is the transformation of American society from freedom to fascism in a most important particular!
Second, the relationship between government and money of which most people are probably unaware, and of which most people probably would thoroughly disapprove were they aware of it, is the misuse of present-day “monetary policy” as an instrument of hidden taxation. When the banking system “monetizes” governmental debt, and the government spends into circulation the newly created purchasing-power, the effect is a “redistribution” of wealth from society as a whole to the government and its clients that is essentially the same as occurs through direct taxation, but not subject to the normal political checks on taxation, such as free and open public debate. (footnote 39)
In essence, this process amounts to taxation without informed consent on the part of the “hidden taxpayers” (those adversely affected by expansion of the money-supply). Thus, in effect, “monetization” of governmental debt through “monetary policy” amounts to a modern-day variant of taxation without representation—largely over which the American War of Independence was fought! For that reason, the relationship between contemporary government and money is inescapably political, because “monetary policy” enables the government to employ the quintessentially political power of taxation, in the form most offensive to republican sensibilities.
Third, the overall result of all this is a transmogrification of the political system, through which a private group the banking-cartel and the class of professional creditors who traffic in governmental obligations—in effect enjoys a political “partnership” with elected and appointed officials for the purpose of looting the public, by means of a mechanism of monetary manipulation few individuals are even aware exists, let alone understand.
From the perspective of the victimized public, it matters little whether the banking- cartel or governmental officialdom is the “senior partner” in this arrangement of “spend and spend, tax and tax, inflate and inflate, elect and elect.” Whichever is in control, the financiers and their political henchmen share in the spoils surreptitiously plundered from the public.
Political-economic logic, however, suggests that the banking-cartel and its allies in haute finance exercise a dominant influence over the politicians and bureaucrats in the long run. A government that recognizes no constitutional limitations on its monetary powers, after all, does not need to create money through the cumbersome process of requesting an “independent,” quasi-governmental banking cartel to monetize interest- bearing public debt. Rather, the government treasury itself could simply emit legal- tender treasury notes (presumably, redeemable in base-metallic coin just as are FRNS), without the payment of any interest. (footnote 40) That the present system of creation of fiat currency through monetization of interest-bearing public debt continues to exist at all, then, indicates that the government is to some significant degree the captive of the creditors organized around the FRS banking-cartel. (footnote 41)
Further, near-conclusive evidence of this is the failure of any candidate considered by the all-powerful national media to be a major contender for election to high national office to propose abolition of the FRS and transfer of its authority to create money “out of nothing” to the Department of the Treasury (let alone a return to constitutional money and banking!). Apparently, successful candidates realize that the “kiss of death” even for entry into the race for, as well as for election to, office is any suggestion that the FRS should be “nationalized” outright, deprived of its vaunted and valuable “independence,” or simply eliminated altogether in favor of constitutional, free-market monetary and banking systems.
If, in contrast to the mythology of twentieth-century “democracy,” the true importance of a particular institution or issue is how little real public debate about it the arbiters of political power behind the scenes allow, the FRS and its authority to create money “out of nothing” must be among, if not the, most important institutions and issues in the United States today. From the banking-cartel’s point of view, “silence is golden” indeed!
The historical development of the present monetary and banking regime also supports the conclusion that the banking-cartel and its allies tend to control the bureaucrats and elected officials over the long term. After the Civil War, a great political struggle began between a group promoting the monometallic “gold standard,” and a group favoring silver as money (often called the “free silverites,” because they demanded that the government coin all silver brought to the mints). Although their policies were not always well thought out, at base most “free silverites” were monetary constitutionalists, in that they believed that both gold and silver should be equally money of the United States, the relative supplies of which the market should determine through the mechanism of “free coinage.”
The monometallic “gold-standard” party, conversely, was at base anti-constitutionalist in principle, in that the necessary implication of its promotion of the unitary “gold standard” was the notion that Congress has the power to manipulate the monetary system at will. For if Congress may establish a monometallic “gold standard” without constitutional restraint, it may just as well establish a monometallic “copper” standard (as it has to a certain extent with the “clad” coinage) or a nonmetallic “paper” standard (as it has with the FRN).
Revealingly, many of the influential people who promoted the monometallic “gold standard” in the late 1800s then became powerful advocates of central banking (eventually through the FRS) in the early 1900s. One of their recommendations at that time was the centralization of the nation’s gold stock. This was not achieved in the Federal Reserve Act of 1913, but did come to pass with Roosevelt’s “gold seizure” in 1933 when the Great Depression provided the necessary economic crisis.
Since then, the government has (as the saying goes) “gone off the gold standard” (domestically in 1933, internationally in 1971) and “gone off the silver standard” (domestically and internationally in 1964 through 1968), arriving today at the “copper” and paper” standards—or, perhaps more descriptively, the political” standard, because the value of today’s money depends more on political than on economic decisions and events. Extraordinary suspicion is not necessary to see a rather straightforward plan here:
First, the reduction of the constitutional system of gold and silver money to the monometallic “gold standard,” which would allow centralization of control over the precious metal that constituted the monetary “standard.”
Second, the creation of a central-bank cartel, issuing a paper currency originally made redeemable in gold to allay public suspicion.
Third, sudden confiscation of all Americans’ gold coin, repudiation of the promise to redeem the banks’ paper currency, and centralization of gold holdings in the Treasury, on the pretext of responding to an economic crisis.
Fourth, even after the crisis had passed and the economy had fully recovered following World War II, introduction of base-metallic coinage into, and removal of all silver coinage from, circulation. Until,
Fifth, America found herself saddled and bridled with fully political money.
The important lesson here is that, although individual members of the financial oligarchy are mortal and pass from the scene, the institutions they control outlive them, or any segment of the electorate that might coalesce to oppose the puppet- politicians the elitists dress up and parade around as “the people’s choices” in the biennial “free elections.”
Because the members of the oligarchy control those institutions today, they are capable of carefully choosing and training their successors who will control those institutions tomorrow, thereby perpetuating their policies and permitting very long-term plans to be set in motion and brought to fruition. Politicians and bureaucrats, distinguishably, do not hand-pick their successors election after election. Therefore, that the banking and monetary systems of this country have developed according to an obvious plan over a period of about one hundred years indicates that they are the product of something other than the electoral process Americans naively call “democracy.”
- 3. Why is the Constitution important to money and banking?
3. Why is the Constitution important to money and banking?
That the government’s control over money and banking may very well reflect, not popular sovereignty and “democracy,” but instead behind-the-scenes manipulation by powerful self-perpetuating private “wire-pullers” highlights the vital importance of the Constitution to money and banking.
The most important purpose of government is to protect society from predatory special-interest groups—that is, groups with interests distinct from and antagonistic to those of society as a whole that attempt to serve those interests by means of force or fraud. Government is necessary to promulgate and enforce laws to control these groups—by deterrence if possible, by punishment where deterrence fails.
Government, however, consists of only ordinary men—who change not their characters simply because they win elections or receive appointments to bureaucratic positions, but remain ever prone to commit the sin of pride, succumbing to avarice, ambition, and the love of power. And for that reason, history teaches that governmental officials themselves often form predatory special-interest groups. However, in principle these groups are far more dangerous to society than any private criminal gang:
First, predatory governmental officials constitute an organized, coherent body of men one of the purposes of which is precisely to draw resources from society (through the power of taxation, for example) to use for ends that officials determine. Moreover, people in society expect those officials to operate in an organized fashion for that purpose. A private group that formed itself for such end would immediately arouse suspicion and receive careful scrutiny.
Second, predatory governmental officials are centrally positioned to loot society within a defined geographical area. Moreover, people expect those officials to exercise their authority throughout their jurisdiction. A private group that claimed such a territorial prerogative would also be highly suspicious and subject to investigation.
Third, these officials disguise their predation through pretended enforcement of otherwise legitimate powers, such as taxation, regulation, eminent domain, prosecution of criminals, and so on. Moreover, people expect them to do precisely that (in form, if not in substance), and often cannot perceive what is really happening, because they do not understand the law or how it is being misapplied or disregarded. No private group can claim to act on the basis of such authority.
Fourth, in any dispute with private citizens, predatory governmental officials are presumptively “in the right.” If charged with wrongdoing (and if any inquiry occurs at all) they investigate, prosecute, judge, and generally acquit themselves, and have concocted all sorts of “immunity” defenses to shield themselves and their accomplices from liability even when their malefactions are fully exposed. Moreover, people aggrieved but without legal recourse because of the corruption of the courts cannot even defend themselves, because the officials wield a monopoly of “legitimate” force, against which resistance is akin to “treason.” No private group can pretend that self-defense against its aggression is somehow “rebellion.”
Fifth, predatory officials can conspire with predatory private groups to make private predation effective where it would otherwise fail—for example, by licensing specially privileged cartels that a free-market economy would quickly destroy through competition. This “divide-and-conquer” tactic turns one segment of society against others, weakening the resistance that society as a whole could otherwise put up.
Thus, a petty street-corner “stick-up artist” can demand a citizen’s money at the point of a shiv. But even he lacks the effrontery to pretend that he has lawful authority to rifle the citizen’s pockets, that the citizen is making a “contribution” or “sacrifice” for the “public good,” that the robber is performing a “public service,” that he is the citizen’s “sovereign” and after stealing the victim’s money can follow him around endlessly telling him how to live his life in other ways—or, worst of all, that the citizen may not pull out a pistol and defend himself, because to do so would be a crime! Yet, predatory governmental officials misbehave this way ceaselessly and shamelessly.
Thus, to brand criminal officials and private crooks as equally bad is both inaccurate and unfair to the crooks. Official crime is always worse than private lawbreaking—because, whereas private lawbreaking is merely a violation of law, and honestly recognized as such even by the lawbreakers themselves, official crime amounts to “lawless law” or “legal terrorism:” law-breaking that is camouflaged and defended as law-enforcement, for the purpose of denying citizens the protections of law so that they may be more easily stripped of the property the law’s very purpose is to safeguard. Therefore, no criminals are more dangerous, culpable, and needful of being exposed than criminal officials.
The Constitution is the law that controls the making and enforcement of all other laws. The Constitution is thus the law for government. It sets definite bounds on governmental action, by defining what officials may do (their powers) and, perhaps more importantly in a free society, what they may not do (their disabilities). It determines what actions of officials taken (as the lawyers’ saying goes) “under color of law” are, in fact, lawful. Any action of any official that transgresses the Constitution is not and can not be “law,” but is either usurpation (exercise of a power the particular official does not have) or tyranny (exercise of a power that no one has or should have). That is, officials act constitutionally, or as usurpers, or as tyrants—there is no other alternative. (footnote 42)
This is not to say that the Constitution has always been or now is necessarily complete. For example, the formal abolition of slavery required enactment of the Thirteenth Amendment. Neither is it to say that the Constitution is necessarily the best possible system of governmental powers and disabilities that might theoretically be devised. However, it is the supreme law of the land now; and no governmental official acts as an “official” in the true legal sense of that word unless he acts in conformity with the Constitution as it now exists.
Therefore, insofar as anyone claims to be an “official,” exercising “official” powers, he implicitly claims to be following—and therefore to understand—the provisions of the Constitution that pertain to the performance of his duties. If he cannot explain how his actions conform to the mandates of the Constitution, he is at least a charlatan. If he refuses to prove that conformity when challenged, he is presumptively at least an usurper. And if he tries to punish the people who challenge his actions as unconstitutional, he is definitely a tyrant.
This applies just as much to officials who exercise powers over money and banking as it does to any other officials.
- 4. What powers over money and banking does the Constitution delegate to the government?
4. What powers over money and banking does the Constitution delegate to the government?
The only conclusion any careful student can draw from American history is that the Constitution established silver and gold coin exclusively as the money of the United States.
In 1787, the Founding Fathers were deeply concerned, in the most practical possible way, with the role of government in America’s monetary and banking systems. They themselves were eyewitnesses to the raging inflation and business depression—what we today know all too well as an “inflationary depression” or “stagflation”—that followed the emission of “Bills of Credit” (paper money) by both the Continental Congress and the States during the War of Independence.
And they recognized that that inflationary depression was the result of that emission— that governmental “monetary policy” (to use the modern jargon) had led to the disaster. Therefore, confronted with the task of drafting a new fundamental law to control the government, the Founders carefully crafted the monetary powers of the Constitution to prevent repetition of such a calamity, by (they hoped forever) outlawing what James Madison in the Federalist Papers denounced as the “fallacious Medium” and “improper and wicked project” of paper money.
First, in Article I, Section 8, Clause 5 and Article I, Section 10, Clause 1, the Constitution adopts silver and gold coin exclusively as the money of the United States. The standard of value in this system is the “dollar,” as that coin historically existed in the late 1700s, containing 371-1/4 grains (troy) of fine silver. The Founders knew no other “dollar.” Indeed, one may confidently say that, had the members of the Constitutional Convention been presented with a table on which lay every form of coin and paper currency that has circulated in the economy of the United States from the earliest days until today, and asked to identify the “dollar,” each and every one of them would unerringly have identified one, and only one, silver coin as a “dollar.” So, when the Constitution mentions the “dollar”—as it does in Article I, Section 9, Clause 1 and in the Seventh Amendment—it can mean but one thing.
Under the constitutional system, the legal value of all silver coins must be proportional to the weight of silver they contain, in comparison to the dollar. The legal value of all gold coins must be proportional to the weight of gold they contain, in comparison to the dollar, at the prevailing free-market exchange ratio between gold and silver. All silver and gold coins may be legal tender for the dollar-values of the silver or gold they contain. And Congress retains exclusive authority to coin money and regulate its value according to these principles.
Second, in Article I, Section 8, Clause 2 and Article I, Section 10, Clause 1, the Constitution prohibits, implicitly or explicitly, the emission of any form of paper money (what the Founders called “Bills of Credit”). And the latter provision disables the States from imposing on unwilling creditors “any Thing but gold and silver Coin” as a “Tender in Payment of Debts”—which re-emphasizes that Congress may declare only silver and gold coin a legal tender.
Third, in Article I, Section 8, Clauses 1, 2, and 5, Article I, Section 10, Clause 1, and the Fifth, Ninth, Tenth, and Fourteenth Amendments, the Constitution denies Congress and the States any power to seize the people’s silver or gold except through proper means of taxation, and to prevent specific performance of private contacts explicitly payable in silver, gold, or any other monetary medium. And,
Fourth, in Article I, Section 8, Clause 3, Article IV, Section 2, and the Fifth, Ninth, Tenth, and Fourteenth Amendments, the Constitution guarantees individuals free entry into private banking; ensures that private banks may issue their own, non-fraudulent notes and other securities, and deal in deposits of silver, gold, foreign currencies, or any other monetary medium; and outlaws any governmentally sponsored banking monopoly or cartel.
Taken together, these constitutional provisions define a monetary and banking system that reflects and relies on free-market principles:
• The Constitution adopts the type of money the world historically favored—commodity money, money capable of being coined or tendered as coin.
• The Constitution adopts as money the very commodities the quality of which international markets historically recognized as pre-eminent—silver and gold. The Constitution adopts the very unit of money the American market had found most convenient during the 1700s, and would find convenient still today—the dollar of 371-1/4 grains of silver. And,
• The Constitution leaves the ultimate supply of money to the market, too, by implicitly incorporating the system of “free coinage” traditional in Anglo-American law.
Equally true is that the only conclusion any careful student can draw from American history is that, since the Civil War, governmental officials have followed policies that radically diverge from constitutional principles of money and banking.
First, in 1862, Congress emitted the first legal-tender paper currency since ratification of the Constitution. Shortly thereafter, the Supreme Court upheld this emission on the specious theory that it amounted to a permissible “forced loan” from the people.
Second, in 1913, Congress created the FRS, a quasi-public, mostly private banking-cartel that asserts political “independence” from supervision by Congress, the President, the courts, or the electorate—and that is specially privileged to emit its own paper currency, FRNs. Although Congress has declared these notes to be “obligations of the United States,” in complete disregard of Article I, Section 9, Clause 7 of the Constitution it has never enacted a single statute authorizing the dollar-amount of such obligations the FRS can “create out of nothing” and for which the Treasury of the United States—ultimately, the American people as taxpayers—are supposedly liable.
Third, in 1933, Congress declared FRNs legal tender for all debts, public and private, and rescinded the requirement that FRNs be redeemable in gold coin for citizens of the United States.
Fourth, in 1933 and 1934, Congress licensed the President to seize all gold coin held by American citizens, and nullified all private and public contracts that called for payment in gold.
Fifth, in 1965, Congress terminated coinage of constitutional (silver) dollars and authorized the first debased “clad” coinage.
Sixth, in 1968, Congress terminated redemption of any form of United States paper currency in silver coin.
Seventh, although in 1973 and 1977 Congress permitted Americans once again to own gold and to make private contracts payable in silver or gold, nevertheless it continued to refuse to pay or redeem any obligations of the United States in silver or gold coin. And,
Eighth, although in 1985 and thereafter Congress authorized the minting of various new silver and gold coins, these coins do not circulate freely as media of exchange, because their face values are far below their market values.
Thus, since 1968, for all practical purposes the money of the United States has consisted almost solely of: (i) legal- tender FRNs, not redeemable in silver or gold coin; and (ii) “clad” coins composed entirely of base metals. As the supreme law of the land, the Constitution requires that no changes be made in its content except by formal amendments. The monetary provisions of the Constitution have never been amended. Yet officials of the government act as if the most drastic possible amendments have been ratified. Specifically,
• The contemporary “clad” “dollar” coin contains no silver at all, although a constitutional dollar must contain 371-1/4 grains of that metal.
• Silver and gold coins have been withdrawn as the base of the monetary system, although the Constitution provides that “No State shall * * * make any Thing but gold and silver Coin a Tender in Payment of Debts,” and delegates to Congress no authority to do otherwise.
• Irredeemable FRNs (which the Founding Fathers would have denounced as less than “Bills of Credit,” because of their irredeemability) have become America’s currency, although the Constitution provides that “No State shall * * * emit Bills of Credit,” and delegates no power to Congress to emit such “Bills” either. And,
• The FRS, composed of thousands of private banks, ultimately controls the supply of America’s money, although the Constitution provides that Congress alone has power “to coin Money and regulate the Value thereof.”
Who is fooling whom here?! No one. Any clear-thinking person can comprehend that no coincidence whatsoever exists between the contemporary regimes of money and banking in this country and the Constitution. Has paper currency in the hands of present-day politicians, bureaucrats, and self-interested bankers shucked off its noxious character as a “fallacious Medium” and “improper and wicked project,” that caused the Founding Fathers to outlaw it? Or have present-day politicians, bureaucrats, and self-interested bankers, in league against the American people, contemptuously cast aside the Founding Fathers and the Constitution precisely in order to misuse that “fallacious Medium” for their own “improper and wicked projects”? But the answer to these questions is obvious: The present-day monetary and banking systems of the United States are unconstitutional, through and through.
- 5. Why should constitutional monetary and banking reform be an important issue today?
5. Why should constitutional monetary and banking reform be an important issue today?
To judge from the contemporary press and media, monetary and banking reform along constitutional lines is simply not an “issue” in political discourse. (Actually, no reform of any kind along constitutional lines is an “issue,” because the press, the media, politicians, officials, pundits, academics, and just about everyone else—including judges—pay mere lip-service, if any attention whatsoever, to the Constitution.) There is no alternative to constitutional reform, however.
No one doubts that contemporary America is in serious financial difficulties. To contend that these difficulties were caused solely by the absence of constitutional money and honest banking would be to overemphasize the roles of money and banking. The true causes of America’s financial difficulties—and all her other problems that trace back to misbegotten governmental policies—are avarice, ambition, and the love of power in special-interest groups, professional politicians and bureaucrats, and their camp-followers. Yet, no one can doubt that America’s financial difficulties could never have become as acute and menacing as they are had this country adhered to the constitutional principles of money and banking.
Neither can anyone believe that the present regime of non- or anti-constitutional money and banking has within it the methods or the means to tackle these difficulties. No—the present system of money and banking cannot eradicate, or even lessen, but only exacerbate America’s financial difficulties, because the present regime is the problem, everything else being merely a symptom. The present regime of unconstitutional money and banking does not work—but, more than that, it can not work, and will not be made to work.
First, the system of irredeemable legal-tender paper urgency and central-bank credit expansion cannot work, no matter who may be in charge of the monetary and banking authority,” because the system is a species of nonrational “central economic planning.” The problems central economic planning causes central economic planning cannot rectify, any more than dinosaurs could have constructed computers to assist them in avoiding their own extinction, had they known they were threatened. To the contrary: Central economic planning typically “solves” problems by creating new (and usually worse) problems.
For example, to “solve” the problem of ever-increasing prices of goods and services because of increases in the supply of fiat currency (what the public calls “inflation”), central economic planning imposes “price controls.” Then, to “solve” the problem of scarcity of goods price controls cause, central economic planning mandates rationing. Then, to “solve” the problem of the so-called “black market” that comes into being to help people acquire rationed goods, central economic planning imposes criminal penalties on buying and selling in the “black market.” And so on, and so on, and so on ad nauseam.
Central economic planning is a merry-go-round of economic incompetence: The wheels turn, the lights flash, the painted wooden horses go up and down, the calliope plays, and the riders strain to pluck down the brass ring—but everyone simply goes “round and round” in a circle, at a large cost. A real carousel, though, is entertainment, and meant just for fun. The ride is worth the price of admission. Central economic planning, conversely, pretends to be a (even the) way to “manage” a national economy. It is supposedly a serious endeavor. But it is an unnecessary, nonrational trip to nowhere, in which the price of admission is, over the long term, disaster to the economy (even though, in the short term, it advances the careers of politicians and bureaucrats and lines the pockets of greedy special-interest groups).
Second, even were the system of central economic planning embodied in contemporary fiat currency and central banking itself theoretically capable of self-reform and correction, it would still remain a species of monopoly or oligopoly power (that is, a system that excludes most people from the process of decision-making, but subjects them to the decisions made without their consent). Unlike the constitutional system of money and banking—where no one group controls the monetary unit (the silver “dollar”), the type of currency used (silver and gold coins), the supply of money (which arises from “free coinage” of whatever silver and gold the market brings to the mints), or who may engage in honest banking and allied pursuits, under today’s unconstitutional monetary and banking regimes a self-perpetuating clique of politicians, bureaucrats, private bankers, and their cronies runs the show, to the exclusion of everyone else.
Monopolistic power, however, is always subject to abuse, and is usually abused, because its main use (and the source of the profits it puts in the monopolists’ pockets) is abuse. Monopolists infrequently, if ever, apply their power to serve the public good. For, if they did, in almost every case they would first have to dissolve the parasitic monopoly they control, which they never voluntarily do! So one must predict that the monopolists who control America’s monetary and banking regimes will (mis)use their power, not only to the exclusion of everyone else, but at everyone else’s expense. If not now, then assuredly sometime.
- 3. Why is the Constitution important to money and banking?