By Merrill M. E. Jenkins, Sr., M.R.
I. PREFACE
The magnitude of the present monetary disorder defies description. Advocates of
reform are lost in a maze of treatments for symptoms and concrete solutions are
conspicuous by their absence. In each case the cure proposed is worse than the
disease.
Many agree it is imperative a solution be found if we wish to avoid a cataclysm
in world events. What must be comprehended is the gravity of the situation is
world wide -- what is at stake is not just a panic of the magnitude experienced
in recent history, but also a loss of the facility of trade and exchange so
vital to the very existence of a civilized society.
As hopeless as the situation may appear, it is by no means futile. What is
needed is the leadership that somehow miraculously seems to appear in such times
of crises, to lead us out of this monetary disorder BY REVERSING THE PROCESS
THAT LED US TO WHERE WE ARE TODAY.
Louis N. Basso
St. Louis, MO
March, 1982
II. BACKGROUND AND HISTORY
Archaeologists believe European and Asian tribes routinely met to exchange goods
in the Ural Mountains about 12,000 years ago. A Chinese proverb some years old
says,
"If you collect the money, you disperse the people;
If you disperse the money, you collect the people."
Wage and price controls are over 5,000 years old.
Tax cheating is 4,000 years old.
The first monetary devaluations occurred in Greece, 6th Century B.C.
Emperor WooTi came up with Income Tax around 140 B.C. and Cosimo deMedici
(13891464) thought up the soak the rich plan (graduated income tax).
In the 17th Century, European nations followed an economic philosophy known as
Mercantilism. Mercantilists believed that nations remained powerful and wealthy
amassing gold and silver by selling more merchandise than they bought. They
established colonies and took raw materials and precious metals from these new
lands while selling them goods.
Gold and silver were metals with particularly tenacious resistance to erosion
and required great amounts of labor to mine and refine. Because gold and silver
were fungible (highly divisible without losing value) they were an excellent
medium of exchange. They were particularly desirable in coin form and coins
would command more goods than commodities in noncoin form.
The Chinese used gold cubes as early as 2100 B.C., and the Bible mentions
precious metal coins. The Lydians in West Turkey cast crudely inscribed silver
pellets, the earliest known coins, around 700 B.C. Gold and silver coins were
the most accumulating wealth through time and a preeminent source of
independence. As private property of high value, in small space, gold and silver
were immediately acceptable mediums of exchange for the goods and services of
others.
All manner of barter was possible using highly divisible and stable parity gold
and silver coins, down to the smallest weight. All transactions were immediately
and satisfactorily concluded with the exchange of gold for goods. The people of
any nation were independent of the state as long as they owned gold and
supported government with its use.
A disadvantage of this system was that large quantities of gold and silver coin
were difficult and unsafe to transport. This disadvantage led to the forerunner
of our banking system -- the goldsmiths. People departing on long trips began
leaving their coins with goldsmiths for safekeeping. The goldsmiths in turn
would issue the traveler a receipt. At their destination, a receipt was
exchanged for gold coin by an associate of the goldsmith.
The receipts became so popular people began paying debts with them rather than
gold coin. This marked the beginnings of paper currency and the idea of money
was born.
It is important to note that the true function of the receipts was their ability
to serve as proxy for the gold and silver coins, and they introduced a time
factor to exchanges that differentiated them from actual batter.
Around the same time, people began paying bills with letters instructing
goldsmiths to give coins to the holder of the letter. These letters (which we
now call checks) began another phase in the gradual revolutionary move from
independence to interdependence.
Early paper monies were promissory notes that represented precious metals. They
could redeem gold or silver coins at a goldsmith or treasury. Paper money, which
the Chinese were already using around 1200 A.D., grew rapidly in America.
Several Colonies in the late 1600s issued paper money to pay bills until enough
taxes could be collected in gold and silver coin to buy the paper back. As long
as the Colonists believed the paper would be bought back, or be able some time
to redeem coin, it was accepted. But, if they had doubts, the paper was shunned.
Although paper money problems were well known then, the Continental Congress had
to finance an army and, without taxing powers, turned to the printing press.
"This currency, as we manage it, is a wonderful machine. It performs its office
when we issue it; it pays and clothes troops, and provides victuals and
ammunition; and when we are obliged to issue a quantity excessive, it pays
itself off by depreciation."
Benjamin Franklin, 1779.
The attitude of the average member of Congress was: "why should I vote to burden
my constituents with taxes when it is simpler to have our printer turn out a
wagon load of money, one quire of which will pay for the whole?"
But Congress issued so many Continental dollars that the huge quantity being bid
against much sought after goods and services, soon had prices soaring. In 1780,
one hat and a suit of clothes ran $2,000.00. The cost of flour had reached
$1,575.00 a barrel. A haircut reached $150.00 before the barbers stopped
accepting currency as payment and used it for wallpaper. Congress responded to
all this by printing more Continental dollars which simply made matters worse.
In March of 1778, $1.00 in coin (English, Spanish, widely circulated in the
Colonies) was worth $1.75 in Continental notes. A year later $10.00 in paper
currency was worth $1.00 in coin. By May 1781, the figure soared -- between
$200.00 and $500.00 in Continental paper for a dollar in coin. The public coined
a phrase: "not worth a Continental". For all practical purposes, all money
issued by Government was worthless. A large barrel of rum in Boston was
$8,000.00, and within six weeks the empty barrel was worth $12,000.00. That same
year, 1781, a Boston housewife was lucky to get a pound of rancid salt port for
$375.00. "Legislation on the subject grew bitter; but finally, in June, 1781,
all the legal Tender Laws were repealed." -- The Financial History of the U.S.,
17741789 by Albert Bolles.
"It was finally decided, by the vote of nine states against New Jersey and
Maryland, that the power to issue inconvertible paper should not be granted to
the federal government. An express prohibition, such as had been adopted for the
separate states, was thought unnecessary. It was supposed that it was enough to
withhold the power, since the federal government would not venture to exercise
it unless expressly permitted in the Constitution. "Thus," says Madison, in his
narrative on the proceedings, "the pretext for a paper currency, and
particularly for making the bills a tender, either for public or private debts,
was cut off."
The Critical Period of American History,
17831789 By John Fiske
In 1789, it became rather common knowledge that paper money, defined as a
substitute for taxation, gave every opportunity to the tricky, deceitful person
of any community, to cheat and defraud his neighbors, and all under the sanction
of solemn acts of legislative authority.
"Every lover of his country will therefore be solicitous to find out some speedy
remedy for this alarming evil. There is no possible substitute for the loss of
commerce. Our first grand object, therefore, it its restoration. I presume not
to dictate or direct. It is a subject that will require the deepest
deliberations and researches of the wisest and more experienced men in America
to fully comprehend. It probably belongs to no one man existing to possess all
the qualifications required to trace the course of American commerce through all
intricate paths and to those and only those that shall lead the United States to
future glory and prosperity I am sanguine in the belief of the possibility that
we may one day become a great commercial and flourishing nation. But if in the
pursuit of the means we should unfortunately stumble again on unfunded paper
money or any similar species of fraud, we shall assuredly give a fatal stab to
our national credit in its infancy. Paper money will invariably operate in the
body of politics as spirit liquors on the human body. They prey on the vitals
and ultimately destroy them."
George Washington, 1789.
Establishment of the U S. Mint in 1792 saw the beginning of the end of the worst
period of inflation (fiat - "paper money") this country had ever experienced
till that time.
EXCERPTS FROM THE COINAGE ACT OF 1792:
- Sec. 11 and be it further enacted, that the proportional value of gold and
silver in all coins which shall by law be current as money within the United
States.
- Sec. 16 and be it further enacted, that all the gold and silver coin which shall
have been struck at, and issued from the said mint shall be a lawful tender in
all payments whatsoever.
- Sec. 19 and be it further enacted, that if any of the gold and silver coins
which shall be struck or coined at the said mint shall be debased . . . every
such officer or person who shall commit any or either of said offenses, shall be
guilty of felony and shall suffer death.
In a system known as free coinage the Mint accepted precious metal bullion from
anyone and replaced it with fabricated coin of equivalent worth, because the new
U.S. Treasury, formed in 1789, lacked enough precious metal to issue all the
coin the growing economy needed. U.S. money needs were met by private banks
chartered to operate by state governments. Banks accepted deposits of gold and
silver coin and made loans and payments in their own notes which were able to
redeem the gold and silver coin. The banks had to keep the precious metal coin
reserve on hand to meet redemptions. However, a few years earlier, in 1775,
Scottish philosophy professor Adam Smith had published a book, The Wealth of
Nations, which argued that the source of national power and wealth was not gold
and silver but production of goods. Smith's book became the cornerstone of a new
social science - Economics. His writings and those of his contemporaries,
slowly turned Europe toward improving production and developing interdependent
trade.
The goldsmiths (modern day bankers) had already seen the advantages of issuing
paper in excess of gold coin on hand to be redeemed. In the early 1800s, America
had many honest wellrun banks, but others earned reputations more for fraud
than integrity.
Wildcat banks got their name because they were located in regions so remote and
hostile that wildcats, not note holders, came to their doors. Before state laws
regulated banks, bankers knew they had to keep a certain amount of precious
metal coins on hand to be redeemed upon request of note holders. To assure the
public that reserves were available, vaults were often located where customers
could view the precious metal coins.
But other bankers were not quite as truthful. They would sprinkle gold or silver
coins on top of kegs of nails. In later years when state examiners checked
reserves, some slick operators would ship coins from bank to bank minutes ahead
of the examiner. The banks took in gold and silver deposits and made loans and
payments in their own notes which, as mentioned earlier, could redeem gold or
silver coin.
State bank notes worked well in local areas if people were sure the issuing bank
was in good condition and its notes could redeem coin. Outside their local
areas, notes were often accepted only at a discount (less than face value)
because merchants did not know how honest and scrupulous the issuing bank was.
If depositors feared a bank could not honor all of its outstanding notes, they
rushed to draw out deposits and redeem gold and silver coin before the reserves
disappeared.
Despite panics and failures, statebank notes were widely used during much of
the 1880s. By the early 1860s more than 10,000 separate issues of different
sizes, colors, and designs were in circulation.
The Civil War produced changes that set the stage for today's money system. The
federal government could not raise enough money to pay for the civil war through
bond sales and taxes. As rapidly as the Treasury paid bills with gold and silver
coin, the metal was hidden by the public as private property.
Congress issued paper money -- U.S. Notes -- that was not able to redeem gold or
silver coin. Congress tried to make the notes acceptable by declaring them Legal
Tender which meant they had to be accepted in payment of all private debts. The
government also began chartering National Banks which were given paper currency
they could issue as their own. State banks were stopped from issuing notes. The
public was told that National Banks received currency in proportion to the
amount of government bonds they purchased. No one stopped to think!
THE GOVERNMENT PRINTED THE BONDS AND THE CURRENCY. THE CURRENCY WAS GIVEN TO THE
NATIONAL BANKS WITH WHICH TO BUY THE BONDS.
This particular piece of trickery was to make the public believe that the
currency in circulation was backed by the government bonds held by the bank
issuing them. Remember the currency was given to the National banks to issue as
their own.
The real reason for the deceitful trickery was to divert gold away from public
ownership. In public hands gold is independence; in the hands of any other
authority - the public becomes interdependent on that authority.
Jay Cooke, a Philadelphia banker, was commissioned as a secret agent of the U.S.
Treasury to accomplish this. The public was educated to look at government debt
as a national blessing IF the public could cash-in on it. Government bonds THAT
WERE PAYABLE IN GOLD could only be bought with paper currency (greenbacks). To
get the greenbacks the public would deposit gold. The story was that if you held
gold, the amount didn't increase over time. But if you deposited gold, got
greenbacks, bought bonds, held bonds to maturity, you would then have more gold
(the bond interest plus principal at maturity).
He stated that $1,000.00 in gold invested in five-twenties (bonds) would in five
years be worth $2,000.00. Prudence and self interest, it was said, dictated that
there should be no time lost in subscribing. THE PUBLIC FELL FOR IT: HOOK, LINE,
AND SINKER.
The paper currency became Legal Tender by public compliance. The government
could print bonds and currency as fast as the presses would go and the public
forced its gold upon the authorities to get the bonds and the paper currency.
"Nothing could be more clearly expressed than this." As Mr. Justice Field
observes, in his able dissenting opinion in the recent case of Juilliard vs.
Greenman, "If there be anything in the history of the Constitution which can be
established with moral certainty, it is that the framers of that instrument
intended to prohibit the issue of Legal lender notes both by the general
government and by the states, and this prevents interference with the contracts
of private parties." Such has been the opinion of our ablest constitutional
jurists, Marshall, Webster, Story, Curtis, and Nelson. There can be little doubt
that, according to all sound principles of interpretation, the Legal Tender Act
of 1862 was passed in flagrant violation of the Constitution."
The Critical Period of American History
by John Fiske 1888.
The greenback was then and for years afterwards one of the most hotly and
illnaturedly debated subjects in the financial policy of the United States.
One stop on the way to evil easily leads to others. Though Mr. Chase (Secretary
of the Treasury) was a reluctant convert to the Legal Tender when the first law
was passed on February 12, 1862, it was less than five months, on July 11, 1862,
until a further emission of greenbacks, $150,000.00 was authorized, thus
doubling their amount. The public went overboard for the bonds and the currency
with which to buy them. Questions to Jay Cooke and his answers about the bonds
will help to explain why the public was fooled into compliance.
Question: Do you take only Legal Tender notes?
Answer: Legal Tender Notes or checks upon Philadelphia or New York that will
bring Legal Tenders, are what the Secretary allows me to receive.
Question: Do you sell the bonds at par?
Answer: The bonds are sold at par, the interest to commence the day you pay the
money.
Question: What interest do you pay?
Answer: The bonds pay six percent interest in gold, three percent every six
months, on the first day of May and November at the Mint in Philadelphia, or at
any SubTreasury in New York or elsewhere.
Question: How does Secretary Chase get enough gold to pay this interest?
Answer: The duties on imports of all articles from abroad must be paid in gold,
and this is the way Secretary Chase gets his gold. It is now being paid into the
Treasury at the rate of Two Hundred Thousand Dollars each day, which is twice as
much as he needs to pay the interest in gold.
Question: Will the face of the bonds be paid in gold when due?
Answer: Congress has provided that the bonds shall be paid in gold when due.
Question: Will I have to pay the same tax on them as I now pay on my Railroad,
or other bonds?
Answers: No! You will not have to pay any taxes on these Bonds if your income
from them does not exceed $600.00; and on all above $600.00 you will only have
to pay onehalf as much Income Tax as if your money was invested in Mortgages or
other Securities.
Those who neglect these six percent Bonds, the interest and principal of which
they will get in gold, may have occasion to regret it.
I am, very truly, your friend,
Jay Cooke,
Subscription Agent
At. Office of Jay Cooke & Co.,
No. 114 5. Third St., Philadelphia.
The public was told it was utter folly to hold gold with such a good investment
available. The huge national debt being accumulated was considered by Secretary
Chase to be "small compared with that of Great Britain or France, whilst our
resources are vastly greater." Here was a reference to the economics of Adam
Smith that the wealth of a nation was its potential for production of goods from
resources. The currency was backed by the FUTURE PRODUCTIVITY of the public. The
history of the world may be searched in vain for a parallel case of popular
financial support for a Government accumulated national debt.
"Having once committed ourselves, and having a vast number of agents through the
country, our government loan agency expending vast sums with the newspapers for
advertisements, we felt that we had a right to claim their columns in which to
set forth the merits of the new national banking system."
Jay Cooke.
Gold was steadily advancing in parity with paper as time passed and the
government issued increasing amounts of paper money. The strong guiding hand of
Mr. Cooke no longer dominated the stock exchange and the newspaper press. He
embraced every opportunity to attack those who sought to profit by the traffic
in gold.
"The city of New York, whilst containing . . . many noble and patriotic citizens
and institutions, was undeniably the centre . . . filled with foreigners . . .
and disloyal politicians, it became the centre of speculation in gold and every
species of material and produce while could be turned into gold by
transshipment abroad. This speculation and the rise in the price of specie were
so persistent and continuous that even many good citizens thoughtlessly entered
the trade and thus contributed to the depression of our bonds and currency . . .
the editors I employed were instructed to make constant warfare upon this
speculative disposition and to portray the want to patriotism of those engaged
in it."
Jay Cooke.
"I had on several occasions pleaded with Mr. Chase to allow me to teach these
rebels and greenback slanderers a lesson they would not forget and I told him I
could do this, and at once bring gold down to a fairer level by the use of only
a few millions of the of gold then in the New York subtreasury, returning the
specie at a large profit, if it were required at any time. From an investigation
I had made I was sure that not more than $12,000,000.00 to $18,000,000.00 of
greenbacks were then held by the New York banks, requiring the sale of not more
than $6,000,000.00 or $7,000,000.00 of gold to absorb every dollar of them into
the Treasury and to cause them to rise temporarily above bank credits.
One morning Mr. Chase arrived in New York at a time when I was also there. The
gold men, hearing of his arrival, rushed the price of gold up . . . Although
very nervous and doubtful about the policy of lessening his gold supply by a
single dollar the crisis was so grave that he could see no other way than to
give me authority to carry out my plans . . . Mr. Chase returned to Washington
and I at once, that afternoon, met confidentially David Crawford of the firm of
Clark, Dodge and Company, of which I had once been a member. I knew my friend
David to be a man in whom I could fully rely to keep so vast a secret, even from
his own partners, and that he had the discretion and wisdom to carry out my
instructions to the very letter. We decided to begin sales of gold next morning,
but sell no more on that day than could be the price down to 180, so as not to
create suspicion regarding our plans, although he told the purchasers that he
would require in payment greenbacks, or checks marked good, which would draw
greenbacks."
"The first day we sold $2,700,000.00 and the next morning before anyone had yet
reached Wall Street I carted the $2,700,000.00 from the Sub-Treasury to Clark,
Dodge and Company's office and stored it away under their remotest and most
secret counters; whence it was with as little show as possible delivered rather
late in the day, checks and greenbacks being turned over to me in return. I took
all these to Mr. Cisko, subtreasurer, requesting him to draw all the checks in
greenbacks before three o'clock. In the meantime Mr. Crawford had disposed of
over $2,500,000.00 more of gold and the price fell to 170.00. The same operation
was repeated, the greenbacks being drawn from the banks, and the next morning
when Mr. Crawford began selling, the price dropped so rapidly that by the time
he had disposed of $1,250,000.00 a panic prevailed . . . worthless greenbacks
rose to a premium . . . by this time the fact that the SubTreasury was selling
gold and would sell $20,000,000.00 more if it were required to break up the
conspiracy against the credit of the government, became noised about Wall Street
and the result may be imagined."
"I saw at once that we had gone far enough, and that the power of the nation was
uppermost . . . for some time thereafter it only required my visiting New York
for the whole tribe of government haters to suspend their efforts."
Jay Cooke.
Later Mr. Chase was again forced to call upon Cooke to check the advance on
gold. The sale of gold by the government had no permanent effect, however, on
the gold market. Speculation continued to rage in New York and the price of gold
again resumed its upward course. Chase tried another device, that of meeting the
export demand for gold by selling exchange upon London at a rate below the
prevailing market rate, but this also proved ineffective. In the meantime,
another scheme had been brewing. It was based on the principle that, if the gold
market could not be controlled, it should be destroyed.
The Act to prohibit certain sales of gold and foreign exchange was passed in
June, 1864. It forbade trading in gold futures and all those practices which are
special tools of operators on the market, and it also placed limitations on
dealing in foreign exchange. Aimed at destroying a central market was the
provision which forbade any transaction in gold at any other place than the
ordinary place of business of either the seller or purchaser.
The gold act went into effect at once. The Gold room was closed. But the price
of gold continued its upward flight. Foreign exchanges were thrown into a
hopeless confusion. On July 2, 1864 the Act was repealed. Gold continued to
rise.
On February 27, 1868 Senator Sherman made a long speech saying the Bonds should
be redeemed with greenbacks. "I say," the Ohio Senator declared, "that equity
and justice are amply satisfied if we redeem these bonds at the end of five
years in the same kind of money of the same intrinsic value it bore at the time
they were issued. This logic has captured the people. Even if erroneous, it is
sweeping the country."
The Treasury department had been regulating the gold markets with purchases and
sales in a way which was at first necessary, but which when continued
indefinitely, could not be justified. After the secret sales were abolished, the
Secretary of the Treasury manipulated the markets publicly and the government
was relied upon to correct each slight disorder.
The government efforts to sustain this explosive and inflated paper system, had
so far been marked by great ingenuity, resolution and success. Mr. Cooke's
expertise with printer's ink, showcards, posters, circulars, pamphlets,
handbills and a variety of devices of the types to catch the eyes, impress the
minds and draw the gold from the pockets of the public. All this was done on the
most lavish scale with infinite psychological knowledge and it was a factor of
very great importance in this gigantic fraud the mere mention of its name
terrorized gold holders.
The existence of two standards of value, gold and paper, was rapidly leading the
county to a most serious crisis which culminated on Friday, September 24, 1869.
On this very day, Friday, September 24, 1869, however, the premium of gold had
risen so high that, after consultation with the President, word was sent to New
York as publicly as possible, ordering Treasury agents to sell $4,000,000.00 of
gold and take in that amount on bonds. There was a panic instantly, gold falling
from 162 to 133 in fifteen minutes.
Taking in the bonds they had to take in the currency also as the gold went out.
The amount of bonds used as backing for the currency shrank, and the money
quantity declined. Thus, the money quantity appeared inelastic incapable of
expanding or contracting when necessary. This inelasticity led to money panics
that wracked the nation until 1913, when the banking system was restructured.
This idea of the inelasticity of money was an extension of Adam Smith's new
social science of Economics. Smith had advanced the idea of a Law of Supply and
Demand. Although economists knew for centuries that changes in the amount of
money and how quickly it was spent affected business, they did not discover how
the relationship worked until this century.
In 1911, American mathematician and economist Irving Fisher mathematically
proved that doubling a nation's money quantity would double prices. He believed
economic booms and busts were maladies caused by too much or too little money.
Fisher's combined use of statistics, mathematics and Smith's economics helped
start a new approach to economics known as Econometrics.
Basically modern econometrics uses Adam Smith's Law of Supply and Demand, when
supply of goods exceeds the demand (money), prices fall. When the demand exceeds
supply prices rise.
The Federal Reserve System was created in 1913 to be responsible for making sure
commercial banks do not create so much money that we have rising prices, nor so
little that we suffer from falling production and unemployment. That job is not
easy; indeed, no central bank has been entirely successful in maintaining the
proper balance between too much and too little money.
One problem the Federal Reserve faces is balancing monetary policy with
government spending and taxing actions fiscal policy. Another problem is that
people cannot agree on just how much money is enough.
In the 1950s, another American economist, Milton Friedman, substantiated
Fisher's theories and concluded that changes in the amount of money are a major
influence on our economy's direction and the pace of production, employment and
spending. A stable economy, he said, requires money quantity to increase
steadily in proportion to our ability to produce.
Friedman's views, known as Monetarism, have vastly influenced how we think about
money, and the way the Federal Reserve controls our money. Adam Smith . . . . .
1776 -- Economics, Irving Fisher . . . . . 1911 - Econometrics, Milton Friedman
. . . . . 1950 - Monetarism.
All concepts are based upon the QUANTITY of money vs. PRODUCTIVITY. All are
premised upon the PRODUCERS being INTERDEPENDENT upon a Money Creating Authority
with power to acquire, hold, or redistribute the fruits of the public's labor
arbitrarily.
The Federal Reserve System of privately owned commercial banks creates money,
directs the policies of government and holds the destiny of the people under its
control.
III. SCOPE OF THE PROBLEM
"Money is the most important subject intellectual persons can investigate and
reflect upon. It is so important that our present civilization may collapse
unless it is widely understood and its defects remedied very soon."
Robert H. Hemphill, Former Credit Manager
Monetary Realism is based upon the Law of Competitive Bidding. It is based
upon fundamental principles:
1. A medium of exchange must be production itself, or, an irrefutable claim upon
production.
2. The producers are Interdependent of any Money Creating Authority with
retained right to hold, or distribute the fruits of their labor without
interference.
The purpose of Monetary Realism is to undo the harm of an error made in 1776 and
perpetuated until the present. IT IS NOT THE QUANTITY OF MONEY PER SE THAT IS
THE PROBLEM. IT IS THE NATURE OF MONEY THAT PERMITS THERE BEING A QUANTITY
EXCESSIVE. The observations of Adam Smith, Irving Fisher and Milton Friedman can
be considered valid only to the degree that their observations embraced all
relevant factors.
All the usual ways of explaining the Law of Supply and Demand can be used to
explain the Law of Competitive Bidding. The QUANTITY of money insofar as it
exceeds the QUANTITY of goods and services can be bid in exchanges and the
EXCESS QUANTITY being BID can alter the parity of money in relation to the goods
and services. However, if the competitive bidding was done exclusively with the
goods and services themselves there could not be any excessive QUANTITY. The
gross national product (G.N.P.) is always 100% regardless of the QUANTITY of
units produced or hours of labor performed. If only labor performed or goods
produced were exchanged by those performing and producing, "Inflation" could not
come into being. Being limited to 100% of G.N.P. as the limit of offering
(bidding), the demand being supply could not exceed itself and be an excessive
quantity. This premise is preeminently fundamental and is the base upon which to
understand that precious metal coinage was barter and an absolute opposite to
inflation ("money").
That barter (precious metal coinage production) should ever have been called
"money" was the greatest perversion of language since the dawn of time. Money,
an abstract term and used as a name (money) for a nonentity, allows for the
acceptance of concepts that would otherwise be impossible. Since a nonentity is
given credibility by having a name, its quantity can be increased or decreased
by mental manipulation and physical representation -- "Money" represented by a
physical token, supports the credibility of its existence. At a time when gold
and silver coins (batter) were called money, there was also a nonentity --
Banker's Credit -- represented by numbers in a ledger and used as a medium of
exchange, interchangeable with the gold and silver coin barter.
Nonentity -- money -- must NOT BE confused with notes that represent 100%
redemption of 100% reserve gold and sliver coin. Money, represented by banker's
paper, was not a receipt for the deposit of coin, but banker's letters of credit
were interchangeable with receipts for the actual deposit of coin. Bankers were
able to WITHDRAW coin with the paper that was NOT a deposit receipt. The
banker's credit paper constituted the excess quantity of money that circulated
alongside of, and was as readily acceptable as, the actual receipts for
deposited coin. Using a common symbol ($) for money, eliminated any respective
identity of the specific thing deposited. This, along with a doubleentry
bookkeeping system, facilitated the withdrawal of deposited precious metal coin
by receipts for the deposit of Banker's Credit.
DEBIT
CREDIT
1 unit of gold deposited . . . . was recorded as . . .
$1.00
1 unit of silver deposited . . . . was recorded as . . . . $1.00
1 unit of "credit" deposited . . . was recorded as . . . . $1.00
1 unit of gold withdrawn . . . . was recorded as . . . . $1.00
1 unit of gold withdrawn . . . . was recorded as . . . . $1.00
1 unit of gold withdrawn . . . . was recorded as . . . . $1.00
The common symbol ($) plus the doubleentry bookkeeping device allowed the
banking system to fool the public for many decades into believing: "There isn't
enough gold." By drawing out the precious metal coin and limiting the issuance
of their credit, the bankers were able to create monetary feast or famine. As an
explanation for monetary feast they used Adam Smith's demand exceeding supply.
For an explanation of monetary famine they used Adam Smith's supply exceeding
demand (there isn't enough gold). The "Too much money chasing too few goods"
has, as Senator Sherman said about the bonds in 1868: "captured the people. Even
if erroneous, it is sweeping the country."
It is at best an unfortunate error. That Irving Fisher and Milton Friedman
should have verified and built upon this error is extremely unfortunate. That
econometrics and monetarism have been accepted and used extensively today is
unbelievable, when one considers the reasoning used to support modern money
theories.
"Today, most coin and currency is flat money, money by virtue of government
declaration and public acceptance. Fiat money isn't valuable in itself and
doesn't represent a claim on gold or silver."
"Fiat money is acceptable because people know money's true value is its
purchasing power its ability to buy goods and services."
Federal Reserve Bank of New York Pub.
Today, there is not enough gold or silver coin interchangeable with flat. Fiat
was acceptable originally because it was interchangeable with the precious metal
coin (barter), but now the batter has been eliminated and we are using only the
MEMORY of barter. Modern money is strictly MENTAL. However unbelievable that may
be, it is fact: dollars are makebelieve units of modern, mental money, the
Greatest Hoax on Earth.
"Coin and currency are Legal Tender, money the government says has to be
accepted if offered to settle a debt. But that approval doesn't make cash any
more "real" than checkbook balances."
Federal Reserve Bank of New York Pub.
At present money is an intangible (unreal) medium of exchange that is Legal
Tender (legal to offer) and is represented tangibly by paper and metal tokens.
"Neither paper currency nor deposits have value as commodities. Intrinsically, a
dollar bill is just a piece of paper. Deposits are merely book entries. Coins do
have some intrinsic value as metal, but far less than their face amount.
"What, then, makes these instruments checks, paper money, and coins acceptable
as face value in payment of all debts and for other monetary uses? Mainly, it is
the confidence people have that they will be able to exchange such money for
real goods and services whenever they choose to do so."
Federal Reserve Bank of Chicago Pub.
Modem Money Mechanics, p. 3.
". . . it is the confidence people have . . ." that gives "value" to Federal
Reserve notes, that haven't any value in themselves and cannot be redeemed or
exchanged for anything of value at their source. Federal Reserve notes (dollar
bills) are pieces of paper that serve only as tokens to represent an unreal
(intangible) medium of exchange, and whose only value is their continued
acceptance by people with confidence.
Dollar, which was a word to express a quantity of gold or silver in the form of
a coin, is now a word accepted as a unit of this imaginary medium of exchange -
mental money. These imaginary dollar units are represented by Federal Reserve
notes. A Federal Reserve note is a paper token, as evidence of a created dollar
quantity of imaginary debt, written as a number entry on the books of a
commercial bank. It is printed at the Bureau of Engraving and Printing on orders
of the Treasury, signed by officials of the Treasury, GIVEN to the Federal
Reserve for distribution, and accepted by the borrower as a medium of exchange
for goods and services of value over a thousand times greater than the Federal
Reserve note (dollar bill) itself.
Obtained from commercial banks by borrowing, Federal Reserve notes have no value
as commodities, ". . . a dollar bill is just a piece of paper . . ." (Quote
above). When Federal Reserve notes are used to purchase something of value,
their value becomes that purchasing power. At the time of borrowing, their value
". . . has little but bookkeeping significance . . . ." Their value depends on
CONFIDENCE, and the CONFIDENCE is not guaranteed by anything that the note could
redeem; until a purchase is accomplished the CONFIDENCE in the note (dollar
bill), or the imaginary medium of exchange (mental money) it represents, is in
reality, unjustified.
"Currency backing isn't relevant in today's economy. Currency cannot be
redeemed, or exchanged, for Treasury gold or any other asset used as backing.
The question of just what assets "back" Federal Reserve notes has little but
bookkeeping significance."
Federal Reserve Bank of New York Pub.
I Bet You Thought, p. 11.
Buying and selling with mental money is nothing more than a gigantic confidence
game. Mental money is just a medium of exchange that does not have any value
itself except to the one who gave something of value for its proxy
representative (Fed. notes). Like a poker chip, that value will only be WORTH
something if the money's holder can eventually obtain something of value from
someone else. No matter whether it is Federal Reserve notes, copper-nickel token
coinage or credit cards used in purchases, the dollars they transfer OWNERSHIP
of are only imaginary mediums of exchange (mental money).
Using a medium of exchange that is entirely devoid of any substance permits its
quantity to be limited only by human imagination, but goods and services depend
on human exertion applied to resources over time to come into being. The
producer's willingness to accept mental money for the things he produces and/or
the labor he performs is the key to the system being able to work at all.
"Money works when others are willing to accept it. In a modern economy, this
General Acceptability rests on a nation's ability to keep money's purchasing
power relatively stable."
Federal Reserve Bank of New York Pub.
Money and Economic Balance, p. 6.
"The dollar's value always has been determined by the amount of goods and
services it can buy -- its purchasing power."
Federal Reserve Bank of New York Pub.
I Bet You Thought, p. 11.
Money of unlimited quantity, created at no cost, being bid for the goods and
services of the public that has to work for each and every dollar quantity of
mental money does not guarantee stable prices. Those who create the mental money
and get everything for nothing will always outbid those who have to work for
money.
"Two much money results in excess spending. When consumers, businesses and
governments spend excessively they compete for the available supply of goods and
services and force prices up. When prices rise, the purchasing power of money
fails. To keep purchasing power strong, then, the supply of money must not
increase too rapidly."
Federal Reserve Bank of New York Pub.
I Bet You Thought, p. 11.
It is important to note that the purchasing power is not a result of the
quantity of money available but how much is being spent. As its purchasing power
falls more will be spent (rapidly rising prices cause apprehension and people
increase buying instinctively). The more spent the further it will fall. The
ability of all money users to produce enough goods and services to absorb all
debt being Monetized is the key to a modem money system remaining stable and
holding its value. When money's value is the product or service it will buy,
only those producing and/or performing service can give money value. Only by
producing goods, performing service and accepting money can the public give
money value. It is the public's I.O.U.s that are the debts Monetized into mental
money.
"Commercial banks are important financial institutions because they can create
money -- checkbook money. When we borrow $200 at a local bank to buy a washing
machine we sign an I.O.U. and the banker writes a slip for a $200 addition to
our checking account. No one has any less money on deposit, but we have more.
The banker has bought our I.O.U. with new demand deposits -- checkbook money --
which were created. Bank credit and checkbook money have been increased $200."
Federal Reserve Bank of New York Pub.
Money and Economic Balance, p. 17.
The Banker buys our I.O.U. by furnishing the checkbook money we need as a medium
of exchange to get the washing machine. We pay for it with the money we have
accepted for our goods and services. The banker does not produce goods or
perform services that give money value. The formalities of borrowing and signing
I.O.U.s are an attempt at controlling our spending, so money will keep its
value.
This is a false conception which has been exposed by money's inability to
maintain its value. It is not the quantity of money that gives it more or less
value, it is the quantity being bid for goods and services that raises or lowers
its parity. If the commercial bank could NOT create money to buy I.O.U.s --
UNLESS THEY PRODUCED GOODS AND PERFORMED SERVICES FOR MONEY -- then the money's
value might remain stable.
"A healthy money depends on balancing the growth of the money supply with the
economy's ability to produce goods and services."
Federal Reserve Bank of New York Pub.
Money and Economic Balance, p. 4.
Now, if the above quote read as follows:
"A healthy money depends on balancing the growth of the money supply with the
commercial banks ability to produce goods and services,"
-- everything might balance out!
The quantity of money that people have in their possession came about by someone
working for it. It was paid for by their labor. The imbalance comes about by the
fact that commercial bankers have money they did not pay for. It is monetizing
I.O.U.s that creates FREE money, and this causes the imbalance.
"We . . . make most payments with checks --. Checkbook funds, bookkeeping
entries in banks' ledgers and computers, are mainly created by the lending
activities of the nation's 14,700 private commercial banks."
Federal Reserve Bank of New York Pub.
The Story of Money, Back of Front Cover.
Fourteen Thousand Seven Hundred (14,700) commercial banks creating money, and
not one of them accepting money for any produced goods or performed services.
Fourteen Thousand Seven Hundred commercial banks have created a quantity of
purchasing power so huge it defies comprehension. This huge quantity of money
has been created and is held in a nonbidding state by being invested in various
accepted ways: Pension Funds, Savings Accounts, Series "E" Bonds, Treasury
Bills, etc.
The daily exchange of G.N.P. (fourth quarter '81 ) is equivalent to 8 billion
dollar quantities of mental money. If a lack of confidence in money caused the
Series "E" bond holders to cash in 10% of their eighty billion dollar quantities
of money in any one day -- and bid it for G.N.P. -- prices might well double.
If 10% of 80 billion in Series "E" bonds seems too large a reaction, then look
at 2% of the 370 billions in savings accounts; it also might well double prices
in any one day. The conditions existing today are such that this could happen at
any time. A reaction of this type could trigger an avalanche of spending that
would drive prices upward (money depreciating) explosively. Once a runaway money
depreciation begins there is virtually no way to halt it.
Federal Reserve notes represent a money that is imaginary. Without anything to
be redeemed there is no way by which they can be canceled. This means we have a
game of musical chairs, without the chairs.
"Money creation bookkeeping isn't gimmickry. Far from it. Banks are creating
money based on a borrower's promise to repay (the I.O.U.) . . . Banks create
money by "monetizing" the private debts of businesses and individuals. That is,
they create amounts of money against the value of those I.O.U.s.
Federal Reserve Bank of New York Pub.
I Bet You Thought, p. 19.
For a debt to exist there must be an incomplete exchange; debt is the
undelivered part of an exchange. For the debt to be settled the remaining part
must be delivered. ". . . Banks create money by monetizing the private debts of
businesses and individuals." We are to assume from that direct quote, (above)
that debt (the undelivered part of an exchange) -- by some mysterious process
called "monetizing" -- becomes the delivered equivalent part as well. (Reality
would have named it "mentalizing" money instead of Monetizing" debt).
* Debt as debt is the undelivered part of an exchange.
* Debt as money is the delivered equivalent part of an exchange.
* "Monetized" Debt is an inconceivable concept!
Yet? The Federal Reserve insists:
"Debt is credit."
Federal Reserve Bank of Chicago Pub.
Two Faces of Debt, p. 1.
"Debts are assets."
Ibid., p. 7.
Debts are debts on one side of the ledger. Debts as assets on the other side.
How does one keep books? The debit side is accounts receivable RECEIVED. The
credit side is accounts receivable ISSUED. There cannot be an accounts payable
without a medium that can pay. Bookkeeping no longer determines net worth, but
instead -- net deferred debt. Non-payment of debt forces perpetual accumulation
of debt.
"A large and growing number of analysts, on the other hand, now regard the
National Debt as something useful, if not an actual blessing."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 2.
Since debt cannot be paid, why not say: "Well! We don't think debt should be
paid." Then it is only a small step to where you can say: "Well! In reality debt
is a blessing!" It isn't any greater madness to think and say those things when
you are totally unable to justify the monetizeddebtmadness to begin with.
"Many modem economists believe . . . the National Debt need not be reduced at
all . . . Debt has a deceptive, somethingfornothing kind of charm . . .
spending tomorrow's income for today's goods and services is a legitimate and
valuable practice."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 11.
"Debt -- public and private -- is here to stay. It plays an essential role in
economic processes . . . What is required is not the abolition of debt, but its
prudent use and intelligent management."
Federal Reserve Bank of Chicago Pub.
Two Faces of Debt, p.33.
If there is no intention of settling debt, won't it accumulate to the point
where lenders have to ask to be repaid and a possible United States bankruptcy
results?
"Bankruptcy, in simplest terms, occurs when lenders demand repayment and the
borrower can't make it. What are the chances that a significant proportion of
the lenders of the National Debt will demand repayment?
"Very slight."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 8.
The whole structure of monetizeddebt as money, or debtsasassets rests on the
holders of the evidence of debt (the lenders) never demanding repayment. Only if
debt is ACCEPTED as PERPETUAL can it continue much farther into the future. Does
that mean that if the nonbank public asked to be repaid the United States would
suffer BANKRUPTCY?
"Nevertheless, let's suppose a great number of lenders (holders of government
securities) decided to demand repayment all at once. Could the borrower make it?
The Federal Government, with the cooperation of the Federal Reserve, has the
inherent power to create money - almost any amount of it. This power makes
technical bankruptcy out of the question."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 9.
"This power makes technical bankruptcy out of the question . . ." We cannot go
bankrupt? Debt is now perpetual? Bankruptcy has been eradicated from the books
of natural law! At what price?
"YET THIS POWER ALSO MAKES IT POSSIBLE FOR GOVERNMENTS TO PURSUE POLICIES
THAT COULD HAVE EVEN MORE DISASTROUS RESULTS THAN BANKRUPTCY."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 9.
The power to create money can result in a condition more disastrous than
bankruptcy: MONETARY COLLAPSE! A collapse of ALL CONFIDENCE IN MONEY, a
condition the world has not seen since the Dark Ages.
"The belief is widespread that the current monetary crisis marks the end of an
epoch. It is open to question whether this should be interpreted as the end of
the postwar period or whether -- and this appears to be more probable -- the
loss of confidence in the stability of currencies heralds an historical change."
Credit Suisse Pub. The Monetary Crisis in the
Light of Contemporary History Vol. 31, p. 3.
". . . the current monetary crisis marks the end of an epoch . . ."
"It has happened in other countries. Governments have created too much money and
accelerated inflation to runaway proportions. Soaring prices then reduced the
value of interestbearing securities to next to nothing. Many leaders and
investors were severely hurt or completely ruined."
Federal Reserve Bank of Philadelphia Pub.
The National Debt, p. 9.
Runaway inflation, soaring prices, interest-bearing securities to zero value,
lenders and investors completely ruined. Loss of value due to bankruptcy could
hurt all those invested with the entity going bankrupt -- company, nation or
world, but a loss of all confidence in money itself is tantamount to total
collapse of current means of determining exchange parities.
The public has used monetary exchange parities as the very base for the
distribution of all production. More disastrous than bankruptcy, more disastrous
than total loss of confidence in all money is the loss of the FACILITY of money.
The use of money which was originally called BARTER lifted the world out of
barbarism into civilization. The loss of the FACILITY of money can collapse our
modern world into the abyss of a new dark age.
"Let us face it? There is no international monetary order -- all we have is
disorder, sometimes chaotic disorder."
Swiss Credit Bank of Zurich Pub.
Recycling Petro Dollars,
Vol. 20, p. 3, by Mr. R. W. Schulthese
". . . there is a very real danger of intensified trade protectionism, which
could precipitate a disintegration of the world economy . . . "
Ibid., p. 6
Could this power, to create mental money that can make BANKRUPTCY out of the
question and bring about a new Dark Ages, perhaps, prevent the inevitable
collapse the same way it abolished the natural law of bankruptcy?
"No parliament in the world will ever be powerful enough to override market
forces for any length of time. This basic truth is unfortunately often
forgotten, especially when election pledges have to be redeemed."
Swiss Credit Bank of Zurich Pub. #31,
The Monetary Crisis in the Light of Contemporary History, p. 1314.
"If they are not solved in good time, the price that will have to be paid for
monetary disorder will be too high for Switzerland and for the Europe in which
we live."
Ibid., p. 27
The price will be ". . . too high . . . for Switzerland and Europe" but what
about the price the United States is already paying in part?
"The worldwide supply of dollars has become a flood . . ."
The Monetary Crisis, p. 23.
The Arabs have multibillions, Europe has multihundredbillions, and all
imaginary mental money units as worthless as bad checks drawn on insufficient
funds. What should they do with bad checks written by an entity on the verge of
something more disastrous than bankruptcy. They are buying anything they can get
with them, to be rid of them, before total loss of confidence reduces their
exchange value to zero. They are buying land, buildings, businesses, banks,
arms, anything before the collapse. Anything but things that they produce at
home. Importing too much of the things that they produce would ruin their
nation's economy prematurely.
"The attitude of the average U.S. citizen is quite different since the view of
the relatively minor importance of external trade for his country, he is not
impressed by overseas opinion concerning the U.S. currency."
Ibid., p. 11.
We are being outbid for our own goods, with our own money by foreigners. Like
Argentina that produces beef but cannot afford to eat beef, that is the fate we
are moving toward. A heritage born out of the inherent power of the Federal
Reserve to create mental money. This power must be ended. No one should have the
power to create an order upon the production of others.
WHAT MUST BE DONE NOW IS MORE IMPERATIVE THAN IT WAS WHEN THE CONTINENTAL
DOLLAR WAS ENDED.
IV. PROPOSED REMEDY
THE LEGAL TENDER ACTS MUST BE REVERSED. The holders of Federal Reserve Notes and
claims to demand deposits must be able to use them to bid for the titles to
wealth, still remaining, that were acquired by the issuers of the Federal
Reserve notes, at the time of their issuance. From that same point in time any
bank should be permitted to issue 100% redeemable currency upon 100% deposits of
tangible commodity; just as it now issues cashier's checks. There should be
strict laws against "all" counterfeiting. Certificates of deposit should be
issued, specifying the units and purity of the wealth on deposit, and available
at any time for redemption by the certificate's holder. No individual should
write a check without having made a wealth deposit to cover it. No warehouse
should be permitted to issue certificates for material not in storage! No bank
should be permitted to issue one more unit of certificates than it has deposits
to cover.
Inter-bank currency clearings would function exactly as check clearings do now.
The uniform wealth coinage, fabricated by government, exactly as in the Free
Coinage of the past, would permit coin deposited at one bank to redeem the
currency of another bank. A minimum of actual shipping of coin would be required
occasionally to settle the balance of accounts. The Free Coinage aspects of this
system guarantees an adequate quantity of coin wherever and whenever it is
needed. JUSTIFICATION: Natural Law forces a discipline upon the use of precious
metals coin as BARTER that cannot be matched by manmade law. Value is a human
concept, that is, it is subjective. Parity is the value of something expressed
in terms of another thing!
Since all humans create their own sense of values - nothing has a fixed value
or a constant parity. Currency redeemable in gold coin would represent that gold
coin by proxy, and have the parity of the gold (weight and purity( in the coin
represented. Currency exchange value in relation to commodity of service would
be exactly that of the wealth it can redeem. No one should attempt to fix the
parity of any currency in relation to any other currency or commodity, domestic
or foreign. Natural Law regulates parities in a free market.
Parity changes inspire increases or decreases in production of various
commodities and offerings of services. This Natural Law regulation assures
adequate volume of all goods and services except when shortages develop due to
natural causes. Adherence to the Natural Laws of a free market would permit
complete compatibility to multimetal 100% redeemable currency systems.
A free market is one in which the public is able to exchange production or
services by competitive bidding, open to all, in the absence of any government
restriction and subject only to its own selfimposed restrictions.
In a free market, all commodities must be free to seek their own parities in
relation to all other commodities - without exception -- or the market is not
free.
A free market is only possible with Free Coinage, and government minting is
limited to control over weight, purity and striking of the precious metal they
coin. The quantity of coin produced is limited to the amount of precious metal
brought to the mint by the public for coining, thereby assuring adequate volume
at all times. Natural Law would again be the determining factor.
At present the entire world is using currencies representing monetized debt as
the money. ANY ATTEMPT TO SHUT-OFF THIS MONEY BEFORE THE INTRODUCTION OF 'SOUND'
CURRENCY TO TAKE ITS PLACE WOULD SPELL INSTANT WORLD-WIDE MONETARY COLLAPSE.
"At present, in virtually all modem monetary systems the base consists of either
central bank liabilities, government liabilities, or both. These items are the
ones used to settle inter-bank debt and some circulate as money."
Federal Reserve Bank of St. Louis Pub.
Review, November, 1976 p. 4.
Here at home, the American public must have its U.S. Constitutionally guaranteed
right of contract restored. The Legal Tender Acts must be repealed and the new
'sound' currency introduced. The old irredeemable currency would gradually but
increasingly depreciate until it ceased to be used by anyone. The introduction
of a new 100% redeemable currency put into use, would force out irredeemable
currency by the discount that would expand between the two currencies.
Gresham's Law, which is often cited, states: "Bad money drives out good". It
does not explain that it only occurs when the bad money is made Legal Tender!
Repeal the Legal Tender Acts, as suggested above, introduce 100% redeemable,
100% reserve deposit currency (good money) and it will drive out the bad money.
AS SOON AS ALL THE FEDERAL RESERVE NOTES AND ALL DEMAND DEPOSITS ARE GONE,
THE LEGAL TENDER ACTS SHOULD BE FINALLY ABOLISHED.
The secret of good government, peace and prosperity lies in the ownership of the
medium of exchange. When the people own the currency and coin they use, then
government depends on the public's support for its survival, and the public
directs the policies of government. If any other entity owns the medium of
exchange, that the public is forced to use -- that entity directs the policies
of government and through government, controls the people.
"It is the product of a prodigious collective error which will remain in history
and will eventually be recognized as an object of astonishment and scandal."
Jacques Reuff 1961.
Our right of contract was lost when the words: "This note is Legal Tender for
all debts public and private" REPLACED: "pay to the bearer on demand" on our
currency.
Our right of contract and freedom will return after we have returned to a 100%
coin reserve for a 100% redeemable currency and all Legal Tender Acts have been
abolished.
"Legislation on the subject grew bitter; but finally, in June, 1781, all the
Legal Tender Laws were repealed."
The Financial History of the U.S. 17741789,
by Albert Bolles
Specifically, I propose we do not permit our nation to be sacrificed on this
treadmill to financial oblivion, but that we rescue it now by initiating Federal
Reserve bankruptcy proceedings. Consider the Fed. notes held by their holders as
valid claims upon the remaining wealth in the hands of the Fed. note issuers.
Audit that remaining wealth and auction it off bank by bank, holding company by
holding company, allowing the holders of Fed. Notes to bid freely. Those who
will accept less as a settlement of claim will bid highest. Those who wish
greater settlement of claim will bid lowest. This procedure would guarantee to
all holders, a greater return than if all Fed. Notes were allowed to become
worthless. This procedure would be more equitable than a deflationary exchange
that would rob all Fed. note holders, and allow the bankrupt to retain title to
all the loot gained by their issuance.
IMMEDIATELY UPON A SUCCESSFUL BID, ALL FED. NOTES OR DEMAND DEPOSITS
REPRESENTED BY CHECK WOULD BE DESTROYED UNTIL THE BOOKS WERE CLEAR.
This proposed reversal of the Legal Tender Acts would guarantee the most
honorable and most equitable bankruptcy proceedings under the conditions that
exist. Bank Presidents, as well as employees, who are holders of the monetized
debt currency would be permitted to bid at the auctions. Only that wealth, still
remaining, that was acquired by the creation and initial issuance of the
monetized debt currency would be forfeited by the bankrupt.
That wealth not remaining had been lost forever and cannot be retrieved. No
purpose would be served by retribution. All the irretrievable wealth lost to the
non-bank public should be considered by them as the cost of their education.
Never again should the non-bank public allow themselves to become unaware of
their responsibility to be constantly alert.
It should be realized that it took many generations to develop and perfect this
hoax. The exact purpose or intention of its founding bankers has been gradually
obscured over time and is lost to us today. Whether it was altruistic or
personal greed we cannot punish the original instigators, and it would be
impossible to prove evil intent on the part of the present day perpetrators of
the hoax. Modem bankers are themselves victims of the hoax too. The entire
world's population is to some degree a victim of this money hoax. The
implementation has been so gradual and subtle that very few will accept the
existence of the hoax even now. The bankers actually involved in the hoax are
not aware of the significance of what they are doing.
"I doubt that monetization of debt has been a conscious act on the part of
government or on the part of the Federal Reserve System."
Darryl R. Francis, Former President
Federal Reserve Bank of St. Louis
"I am beginning now to wonder whether I finally grasped the significance of what
we were doing, at the time, and of the causes for the action we were
initiating."
Robert V. Roosa, Former Asst.
Secretary of the Treasury, 1973.
Being unaware of the true significance of what they have been and are doing
assures that it will be doubly difficult for them to accept the viability of the
solution suggested here. Everyone seems to accept that if it had not been for
the mental money we would not have had the progress to date. That is a
misconception easily dispelled.
Everything accomplished to date is the result of the efforts of human beings. To
say that monetized debt made it all possible is to ignore the primary function
of monetizeddebtmoney.
"Inflation, even if correctly anticipated, reduces the wealth of money holders
in proportion to their holdings of money."
Federal Reserve bank of St. Louis
Review February, 1975, p. 19.
Humans built the buildings, humans dug the canals, humans grew the food, humans
built the ships, etc. All the money ever did is expropriate the title to wealth.
Those who did the work very seldom became the owners of the results of their
labor.
Everything that was accomplished during the periods of inflation (monetized
debt) could have been accomplished if wealth had been used as a medium of
exchange instead of money.
When gold and silver coin were the U. S. money of account, it did not matter
that they were called money! Gold and silver is wealth, is produced by human
exertion, is barter per se or a medium of exchange determined by its use.
Loans were made with gold and silver coin. Projects were financed with gold and
silver coin. All manner of sound banking techniques were just as viable and
facilitating as any false medium, but a gold and silver sound medium would have
guaranteed that the general public who did the work would have owned the
benefits derived therefrom. The problems and misery suffered by non-bank public
has never been due to the techniques of sound banking; that belief is a
monstrous misconception. The fault has always been with the nature of the medium
of exchange.
"All the perplexities, confusions and distresses in America arise not from
defects in the Constitution or confederation, not from want of honor or virtue,
as much as from downright IGNORANCE OF THE NATURE of coin, credit, and
circulation.
John Adams
Every economic professor, government advisor, financial advisor, economist of
the Keynesian, Monetarist and even Austrian schools, say inflation is a
CONDITION caused by an excess QUANTITY of money chasing too few goods, and that
the solution is to increase productivity.
It has always been, it is now, and it will always be that, if the NATURE OF
MONEY is anything but production, it will exceed production by whatever they
call that -- non-production -- excess.
Inflation is not a condition. It is a thing. Inflation is an imaginary medium of
exchange -- money -- monetized debt! Inflation is a thing that cannot register
on the five human senses. Money that cannot register on the five senses is
imaginary money -- monetized debt -- that is, inflation per se.
PRODUCTION IN ANY FORM AS THE MEDIUM OF EXCHANGE CANNOT EXCEED ITSELF!
Surrendering real for unreal, wealth for monetized debt tangible for intangible,
in all cases is the expropriation of private property by the creators and
issuers of the unreal, monetized debt, intangible medium of exchange. It is the
nature of it being unreal, and intangible that facilitates the expropriation.
From the first unit to the last, inflation is always 100% fraudulent acquisition
of the producer's wealth by those who do not produce any tangible thing.
This invisible robbery has been going on intermittently for the past 200 years
of United States history. The title to Wealth passing into the hands of the
money creators is equal to the exact amount of money created -- 100%. 1 unit of
"money" is 1 unit of expropriation is 100% inflation. 1,000 units of "money" is
1,000 units of expropriation is 100% inflation. 100,000 units of "money" is
100,000 units of expropriation is 100% inflation.
Inflation is the thing -- monetized debt -- money - imaginary medium of
exchange, is always 100% of the amount issued whatever the actual count of
units.
If the medium of exchange was all produced goods or human labor performed, the
total amount that could be exchanged would be 100%. If any part of the medium of
exchange was intangible the total quantity that could be exchanged would be
100%, of all that had been issued.
The quantity of intangible or tangible mediums of exchange being BID for
production determines the parities of units of production in relation to the
units of medium of exchange (usually referred to as prices). These parities are
determined by the quantity of units of medium of exchange being bid per unit of
production available NOT by the total QUANTITY OF money.
The existence of the imaginary mediums of exchange permits the BIDDING PER UNIT
QUANTITY (of money) TO EXCEED THE PRODUCTION UNIT QUANTITY. If that EXCESS IS
BID the parity of production will rise in relation to units of money.
This could not happen if all mediums of exchange were production. If all mediums
of exchange were production -- which would be all the goods and services
available for exchange -- it could not exceed itself (100%).
When real (tangible) mediums of exchange are removed and replaced by unreal
(intangible) mediums of exchange, their NATURE of being imaginary permits their
QUANTITY to increase as a RATIO in relation to the quantity of units of
production available for exchange; imagination can conceive faster than goods
can be produced or services performed.
The quantity of the intangible medium of exchange is Constantly accelerating. It
is this quantity being bid per unit of goods and services which causes price
escalation. Since no amount of monetized debt can be any amount of debt
settlement, the fraudulent acquisition is constant at 100%.
Prices rise with increased quantity of money being bid per unit of production:
"Money" Increases (Parities) Rapidly Inflation Remains Constant Production
Increases Slowly "Prices" Volume Rising Rapidly
1 unit = 100% bid for 1 unit = 1:1
100 units = 100% bid for 2 units 50:1
1,000 units = 100% bid for 4 units = 250:1
1,000,000 units = 100% bid for 5 units = 200,000:1
The ever increasing price escalation in no way increases the percentage of
expropriate, but the increase in the quantity of money increases the quantity of
fraudulent acquisition. Prices rising expose the fraudulent acquisition but do
not affect the rate of inflation which is constant at 100%.
What makes the truth appear strange and confusing is the fact that no one ever
works for the money per se, but works for what they intend to exchange the money
for. All exchanges are really exchanges of the result of one individual's human
exertion for the result of another individual's human exertion. Swapping the
results of human exertion for the results of another's human exertion even
though money may be used as a medium of exchange does not alter the fact it is
EVENTUALLY indirect barter.
The use of monetized debt represented by Fed. notes as a medium of exchange
allows the prices rising to expose the depreciation of the Fed. notes in their
primary function of expropriating wealth by fraud. The changes in prices
(parities) expose the lowering parity of Fed.-note-represented monetized debt
units in relation to goods and services available. The fact that all goods and
services exchanged for Fed. notes are 100% fraudulently acquisitioned by the
nature of the money itself does not permit prices rising to affect the rate of
inflation.
All that the nonbank public produces and exchanges for Fed. notes is 100%
expropriated by inflation (modern money), there isn't anything remaining to be
affected in any way by price changes. Price changes are the parity ratios
adjusting to the excess quantity of imaginary money units being bid as mediums
of exchange: money is not an end in itself. If money is worth less at the time
of its use in bidding than when it was acquired, it can appear that its
depreciation was injustice, but it does not change the rate of inflation or
expropriation which was accomplished with the money issuance (i.e. 100%).
It is failing to consider the TIME FACTOR that causes the confusion. Money,
being intangible, expropriates by 100% whatever it is initially exchanged for at
the TIME of issuance. After its initial primary function -- that of
expropriating wealth -- has been accomplished with its issuance, its further use
is simply as a medium of exchange and its depreciation as a medium of exchange
can favor the debtor over the creditor, but cannot affect the original rate of
expropriation which is a constant 100%.
If the expropriation of wealth had not been acquiring the ownership of
everything for the issuers of monetized debt; everything would still be there,
but it would be owned by the producers (the nonbank public).
"Money is the most important subject intellectual persons can investigate and
reflect upon. It is so important that our present civilization may collapse
unless it is widely understood and its defects remedied very soon."
Robert H. Hemphill, Former Credit Manager,
Federal Reserve Bank of Atlanta
"Bankers own the earth. Take it away from them but leave them the power to
create money and control credit, and with a flick of a pen they will create
enough to buy it back."
Sir Josiah Stamp, Former President Bank of England
"If, however, a government refrains from regulation and allows matters to take
their own course . . . the worthlessness of the money becomes apparent, and the
fraud upon the public can be concealed no longer."
John Maynard Keynes, Consequences of Peace, 1920
"The prime function of government is the protection of the different and unequal
facilities of man for acquiring property."
James Madison
"No other rights are safe where property is not safe."
Daniel Webster
The NATURE of, "money" is at the root of all our problems. There is not any
undesirable condition in our nation today that cannot be accurately and totally
traced back to the root of all evil, the power to create money.
It is not WHO has the power to create money that is the root of evil. It is the
power to create money at all! There is only one way to abolish the evil of money
creation -- ABOLISH MONEY.
* Money is an abstract term that was applied to batter in error.
* Money is an abstract term for the mental entity that has replaced the barter.
* No person or agency, government or private, shall determine what anyone must
accept as Lawful Tender!
"No state shall . . . pass any . . . Law impairing the Obligation of Contracts .
. ."
U.S. Constitution
* No coins shall ever be minted bearing an abstract monetary term.
* All coin shall bear its commodity specification, fineness of purity, and
weight specification, such as G.9991,000 gr. (Gold .999 Pure 1000 Grains) or
S.999500 gr. (Silver .999 Pure 500 Grains) or .9991500 gr. (Platinum .999 Pure
1500 Grains) or C.999750 gr. (Copper .999 Pure 750 Grains) etc.
* No person or agency, government or private, shall determine how many of any
coins of any commodity shall be coined.
* No person shall be prohibited from bringing metal of the proper coin purity to
the mint for coining free of charge with the costs of minting to be paid out of
general funds of the government.
* No person or agency, government or private, shall set any value or parity
between the coins as minted and any other commodity or between the coins
themselves.
* No person shall be prohibited from fabricating coins of private design, using
the same marking system described above, using any commodity, in any quantity,
but there shall be severe penalties for any improper marking.
* Banking procedures shall remain relatively the same as they have been, except
that all bookkeeping and check writing must specify the commodity and its weight
deposited or ownership transferred.
* All state and federal taxes shall be payable in gold and/or silver coin. All
state and federal expenses shall be paid with gold and/or silver coin as
specified in its contractual arrangements. Checks may be used to transfer
ownership of government coin.
The specifications, as outlined above, would cancel the injustices and
corruptions being suffered daily in our nation and true progress would be
resumed.
FINIS
PRIMER ON MONEY
A. Hein, Jr., M.D. 2. 00 each or 10 for 10.00
TREATISE ON MONETARY REFORM
Merrill M.E. Jenkins, Sr. 3.00 each or 5 for 10.00
ALL WORK & NO PAY
Paul A. Hein, Jr., M.D. 7.00 each
MONEY: THE GREATEST HOAX ON EARTH
Merrill M.E. Jenkins, Sr. 10.00 each
Monthly Bulletin 12.00 per year
All prices include shipping.
MONETARY REALIST SOCIETY
P.O. Box 31044
St. Louis, MO 63131
About the Society
The Monetary Realist Society is a national organization based in St. Louis which
explores the nature of modern money and its role in shaping our lives. The focus
of the Society is education and advocacy rather than direct action. Our goal is
to make YOU wise enough to take YOUR OWN advice and make YOUR OWN waves. The
group is named for the late Merrill Jenkins, a.k.a. the Monetary Realist, who
researched, wrote, and lectured extensively on the subject of money.
Monetary Realists believe that money should be a material thing produced by
people, owned by the people, and traded (bartered, if you will) for other
things, or services. Production and ownership of the medium of exchange by the
people means control of the economy by the people.
In contrast to this is the present monetary system of the United States, and the
rest of the world. Money is an intangible, represented by numbers engraved on
paper notes or written on checks. The numbers do not stand for any fixed amount
of anything. This is worse than a counterfeiter who merely dilutes the value of
other money units. It is worse than a gambling casino which would redeem its
chips only in other chips. It is worse because modern money is created from an
IOU or bond and loaned into existence at interest! This process is known as the
"monetization of debt".
Monetary Realists know that when the sole source of money makes it available to
society only as a loan, that at any given time, more money is owed than exists.
Thus, continuous borrowing Is essential in such a system, with consequent
proliferation of money and/or debt. Such a system must, sooner or later,
collapse, despite the most skillful manipulation.
Monetary Realists also realize that when productive men and women are compelled
by law (legal tender laws) to accept "money" loaned into circulation by a
privileged group, such power exerted by those individuals Is awesome. For those
who can create money, price is, of course, no object. Favored organizations and
individuals will prosper; those less fortunate will have tough sledding indeed!
Monetary Realists demand a freedom of choice in money. They advocate a return to
tangible money and a 100% redeemable currency. Legally we demand repeal of legal
tender laws and for state and federal governments to obey article 1 section 10
of the U.S. Constitution.