Last Updated on October 2, 2021 by Constitutional Militia
PART TWO of this Commentary explained that America does not have constitutional money and banking because the Establishment wants the very opposite. In this regard…
(3) Emphasis on inflation—expansion of the supply of legal-tender fiat currency and credit—cannot be exaggerated. Because, being in principle a Ponzi scheme, the pyramid of fractional-reserve banking must continue to swell in base and height, or implode upon itself. The ballooning pyramid, however, stands precariously upside down, on the relatively tiny apex of the real economy, which is forced to support an ever-expanding load of insufficiently productive, or actually unproductive and eventually destructive, debt and speculation. (The swelling “derivatives markets” stand out as egregious examples of this “casino capitalism”.) Thus, the socio-economic structure becomes increasingly top-heavy, unstable, and dysfunctional, subject to recurrent crises, and even self-cannibalistic: racing with accelerating celerity towards its own demise in hyperinflation, depression, or the one followed by the other. And with either result creating social chaos that will culminate more likely than not in a police state—and another politically orchestrated hunt for scapegoats, to turn common people’s wrath away from the real culprits.
To these long-term effects, though, politicians and special-interest groups typically pay no heed. Together, the shortness of human sight and the brevity of human life are the bane of all social stability. Precisely because the acaparadores—the political looters—are mortal, but society is (relatively speaking) immortal, political looting is a paying proposition. If the fatal consequences of their misguided policies inevitably fell on the special-interest groups that promoted them, and on the politicians who enacted them, prudence (or plain fear) would effectively deter most dangerous legislation. Inasmuch, however, as one generation of public officials and their clients can often benefit immediately from some perverse policy, while leaving the next generation of taxpayers and manipulated voters to suffer its inevitable ill effects, then avarice, ambition, and the lust for power will always come to the fore. As long as the political present is a “free rider” on the economic future, politicians and special-interest groups today will always seek to feather their own nests at the expense of other people who live in a distant tomorrow. This is one reason why a firm belief in an immortal afterlife of sure and certain rewards and punishments is so important to society; and why aggressive atheism and agnosticism—especially when officially imposed or promoted—are so destructively antisocial, but so personally profitable to predatory politicians and special interests.
As to money and banking, modern politicians’ only concern during their tenures is to maintain the Ponzi pyramid of fiat currency and credit in some semblance of precarious balance—notwithstanding that the illusion of temporary stability allows for continuing and even exacerbating the very real malfunctions of the system that, carried far enough, must result in its self-demolition, and with it society’s economic and political disintegration. The longer the system continues to “work”, the deeper the grave it digs for society. The Establishment’s notion that it “controls” America’s monetary and banking systems is, therefore, fundamentally delusive and fatally dangerous. At this point in the inevitably calamitous cycle of fractional-reserve central banking and fiat currency, the Establishment no more “controls” those systems than the lady from Niger who rides on the back of a tiger in the children’s nursery rhyme dominates the beast. But, just as she, the Establishment cannot afford to ease its white-knuckled grip on the reins.
c. This sorry situation does not continue because the American people themselves can do nothing about it. No, indeed
(1) Many champions of the free market say that Americans cannot have constitutional money and banking because of the present legal-tender statute: Title 31, United States Code, Section 5103. They contend that it is first necessary to repeal this statute if Americans are to make any headway against the Establishment’s regime of phony rag currency, slug coinage, and Ponzified central banking. This idea is dead wrong.
Americans even now have the rights:
- to make so-called “gold-clause contracts” under Title 31, United States Code, Section 5118(d)(2)—and thereby to avoid the legal-tender law altogether; and
- specifically to enforce such contracts through private arbitration—and thereby largely to stay out of the General Government’s and the States’ kangaroo courts.
Thus, the legal-tender statute is no legal barrier to any individual who wants and knows how to circumvent it, and is willing to bear the rather high economic costs of doing so. And in a society of intelligent and patriotic people the legal-tender statute would prove to be no great economic barrier, either, because the economic burden of avoiding it would decrease in direct proportion to the number of people who took such action. So, believing that the legal-tender statute is always an insurmountable hurdle serves only to confirm people in an ill-advised resignation to the status quo.
(2) Other advocates of sound money excuse Americans’ inaction on the grounds that any major reform must await an initiative from Congress, to which the Constitution delegates the power “[t]o coin Money, [and] regulate the Value thereof”, in Article I, Section 8, Clause 5. This, also, is erroneous. In Article I, Section 10, Clause 1, the Constitution denies to every State the power to “make any Thing but gold and silver Coin a Tender in Payment of Debts”–thus, in that “but”, plainly reserving to each State the power to make such coin “a Tender” within her jurisdiction. And surely with respect to the performance of their sovereign governmental functions of taxation, public spending, borrowing, taking of private property for true “public use” through eminent domain, and adjudications in their courts, all of the States can choose to employ gold and silver as their media of exchange to the exclusion of Federal Reserve Notes, bank deposits, or any other currency. For this result, no Congressional action is necessary.
d. The plain fact is that America does not have constitutional money and banking because the majority of Americans apparently does not know enough to want them, or does not want them enough to demand them. Ignorance and disinterest, of course, must be the reasons in the representative Republic which, subject to pervasive manipulation or not, America still remains as a matter of law. But why is this so?
(1) A large number of Americans actively or passively sides with the Establishment. These Americans are disinterested in constitutional money and banking because they have (or think they have) personal pecuniary interests in unconstitutional money and banking. After all, redistribution of wealth requires not only redistributors, but also recipients of the wealth redistributed. (Ironically, though, many of these recipients are as much the victims of the system as they are its beneficiaries. For example, impoverished people already, or soon to become, utterly dependent on the collapsing Social Security and Medicare schemes.)
(2) Most Americans are woefully ignorant of their legal rights and economic options as to “gold-clause contracts”. And most of those who have informed themselves about these matters shrink from employing such contracts because of the costs of using silver and gold as their media of exchange, including: (i) education costs of the parties to the contracts, their lawyers, their accountants, and so on; (ii) transaction costs of drafting the contracts, and of obtaining, transferring, and storing the gold and silver coins specified as media of payment; and (iii) such regulatory costs as determining how these transactions will be taxed, especially as to “capital gains and losses”, when their values are stipulated in silver and gold, not paper currency. For these reasons, silver and gold coin will not effectively compete with irredeemable paper currency as media of exchange in the marketplace until either:
- large numbers of Americans become willing to absorb the costs necessary to start such a parallel coinage system; or
- a “large player”–such as a government or a major private producer or retailer—comes into the market to lower the costs for everyone; or
- Americans become aware of how such technological advances as private electronic gold currency can greatly simplify the use of specie; or
- governments significantly reduce the regulatory costs associated with the use of gold and silver as common media of exchange; or
- the long-term costs of continuing to employ fiat currency become widely apparent and intolerable; or ·some combination of these alternatives supervenes.
(3) Finally, Americans’ political leadership in the States is to a woefully large degree clueless, visionless, and feckless. Typically, if they consider the subject at all, State legislators supinely defer to Washington, D.C., on monetary policy, with no concern either that the General Government’s decisions are endangering the economic security of their own States, or that their mindlessly robotic reliance on those decisions mocks this country’s federal structure, destroys one of the major checks and balances in the constitutional system, and encourages hubris, irresponsibility, imprudence, and arbitrary exercises of power by the Federal Reserve System and the special interests it serves. So, although (as I have explained in earlier Commentaries) initial reform of the monetary system could begin in the States—and that is probably the only workable route to a peaceable solution—such reform will require very hard slogging.
1. It cannot be simply a domestic crisis. A purely domestic crisis would likely not be bring about an orderly and measured transition in the direction of constitutional money and banking—primarily because the Establishment, desperate to defend its own position, and with many of the high cards of power already in its hand, could and would thwart any change for the better.
In any domestic monetary and banking crisis, Americans could expect not only economic stringencies; uncertainty, confusion, and fear engendered by ignorance; mass hysteria whipped up by the big media; and strident political demagoguery—but also total centralization in Washington, D.C., of control over money, banking, finance, and the stock and commodities exchanges, through an industrial-strength Caesarism that would make Franklin Delano Roosevelt look like Thomas Jefferson. The result being that the Establishment would suppress the use of silver and gold as media of exchange (or even stores of value) in the open markets, and probably would be applauded by a populace that knew no better and cared less. (What would occur in the black markets, though, would likely be something else altogether.)
Even without inventing any novel “emergency powers”, the Establishment, on the basis of existing statutes, regulations, and judicial precedents which could be twisted to rationalize new statutes or regulations, might easily:
- require reporting of all transactions involving money or media of exchange other than legal-tender paper currency or bank deposits;
- impose confiscatory taxes on all transactions involving silver and gold;
- declare “gold-clause contracts” unenforceable in the courts, or illegal altogether;
- confiscate gold and silver coin and bullion from private owners;
- outlaw the mere possession of gold or silver in any form, without some “license” or other special governmental permission; and, overall,
- establish a pervasive and thoroughgoing financial police state of surveillance, regimentation, confiscation, and prohibition aimed at “demonetizing” gold and silver.
That none of these measures would be constitutional would not deter the Establishment, just as the unconstitutionality of similar actions proved no barrier in the past. So, a domestic crisis would be unlikely to generate significant impetus for change in a constitutional direction, but would probably serve merely as the occasion and excuse for the Establishment to demolish what little remains of Americans’ constitutional freedom in the area of money and banking.