Secession: Timing Is Everything

October 31, 2009

by Russell Longcore

Not so long ago, secession was a taboo subject for discussion in polite society. It was almost un-American to thoughtfully consider a state leaving the Union for any reason. Everyone thought that Lincoln’s War settled that issue. But today’s America is a seething cauldron of resentment toward Washington and the “Mobocracy Looter Minions” that populate the District of Columbia and its suburbs.

If you watch any news service for seven days, you’ll learn that the dollar is weak and growing weaker. You’ll learn that other nations are preparing to disconnect from the dollar as the world’s reserve currency. And you’ll learn that America is in big trouble, at home and around the world. (wonder why Chicago didn’t get the Olympics? What countries like the USA right now?)

Over half of the American states have passed legislative resolutions exerting their rights under the Tenth Amendment. That’s nice, and symbolic…and somewhat unusual for slaves to stand up to the plantation owner. But it’s not really necessary.

So when is the best time to actually pull the trigger and secede from the United States?

I believe that states should be making concrete plans right now for secession. States already have intricate plans in place in case of natural disasters and such. Should not a state have a plan in place in case of political disaster?

The United States Federal Government is a dying monster. But is still possesses political might, military might and potency. Dying monsters quite often thrash about and injure those that are too nearby. So at this point in time, while Washington still APPEARS viable, state secession would not seem to be a wise move.

After all, why would a state willingly take the chance of incurring the wrath of Washington? It would be like in the Tolkien movie “Return of the King,” when the good guys presented themselves at the Black Gate to divert the gaze of Sauron’s all-seeing eye. Washington might turn its fury on a seceding state to make an example of it, in order to discourage any other state from trying secession.

Washington is working 24/7 to produce substantive changes in American governance and culture. And, at some point, some state might decide that enough is enough. But I believe that it will take an event that happens outside of Washington to bring about Washington’s collapse.

The most likely event is the worldwide rejection of the US Dollar as reserve currency, and the worldwide use of any other currency as reserve. Even the change of the dollar as the currency of choice of any major petroleum bourse¹ will spell disaster for the dollar.

Iran has already formed an oil bourse, which uses the Euro, the Iranian Rial and a basket of other currencies as the settlement currency for petro transactions. Its first day of trading was Monday, October 26, 2009, on the Free Trade Zone Iranian island of Kish. Iran, having the world’s second largest gas reserves and third largest oil reserves, is trying to play a more active role in oil and petrochemical transactions in international markets.

Between the rejection of the dollar worldwide, and the selloff of US Government securities by nations like China, combined with runaway money printing by Washington and the hyperinflation that MUST follow, the dollar has nowhere to go but down…and precipitously.

The value of the dollar will tumble against other currencies….very soon. It will happen as other nations scramble to get rid of American currency and securities holdings and protect the very survival of their own nations. Washington has been passing bad checks for too long, and the nations are stepping to the pay window.

It is at this moment in time, when the dollar freefalls, that the states will have a golden opportunity to secede. States must do what it takes to assure their own survival, and not as a slave state to Washington. But a secession alone won’t solve anything. The heavy lifting just begins when a state secedes.

First there would have to be a Provisional Government installed until the formal government could be designed and brought into being as a legal entity.

The very next thing that MUST be settled is the issue of money. If a new nation adopts the very same banking environment that America has right now, the new nation will be doomed to fail. The new nation MUST have a 100% gold/silver standard. It must also prohibit by law fractional reserve banking. Both government monopoly on monetary policy and fractional reserve banking are counterfeiting by another name. It must be prevented before it starts.

Monetary policy and banking worldwide is failing. A new nation needs to go another way, and that way is to return to sound money. Most of the other challenges that a new nation would face will be easier if the new nation has money backed with precious metals at 100% reserve. But you cannot counterfeit your way to liberty and prosperity.

Timing is everything. If states secede at the time that Washington is drowning in worldwide debt and the financial markets worldwide cause the collapse of the dollar, Washington may be powerless to stop secession. Ask Moscow how well they stopped the secession of the Western Soviet republics in 1989.

I know I’m getting to be “Johnny One-Note” about monetary policy, but that should tell you how crucial it is. Remember that no nation in the history of the world has survived that counterfeited its money. Not one. Ever.

But also remember that the Byzantine empire, on a gold standard, lasted over a thousand years…until it debased its own money.

1. A bourse is a commodities exchange in oil, petroleum and natural gas.


Non-Aggression Principle and Vice: Where’s The Crime?

October 28, 2009

by Russell Longcore

One of the tenets of individual liberty is the Non-Aggression Principle (NAP), which states that no person has the right to initiate force or fraud against any other person for any reason. When the NAP comes up against criminal law as it relates to vices, both should be tested honestly.

Societies have had an ongoing debate about Crime and Vice over centuries. Much of this perpetual conflict comes from the organized Church, which has formulated moral positions on various human behaviors. If you read Old Testament law, you’ll find a lot of human acts listed with penalties for committing those acts. But you’ll also find that Scriptural penalties are restorative, meaning that they require the perpetrator to make restitution, not incarceration for punishment.

So, in the times in which we live, how does this affect us? Should vices be crimes?

The dictionary defines “vice” as “an immoral or evil habit or practice.” It defines “crime” as “an action or an instance of negligence that is deemed injurious to the public welfare or to the interests of the state and that is legally prohibited.”

The first challenge is in the definition of “vice.” Who makes the determination that any human action is immoral or evil? One man’s vice could be another man’s living. Each person must have the liberty to test every alleged vice to determine of his own judgment and conscience what may be good and what may be evil.

Some folks have a knee-jerk reaction to vices, and believe that they should be prosecuted by law enforcement and the courts. But is this belief founded in law, old traditions, habits or any desire for liberty?

Punishing crime is meant to guarantee to every person the fullest liberty he can realize that is also consistent with the full liberty of others. Government should exist only to protect the liberty of the individual, and protect his life and property from force and fraud. An individual must be free in the “pursuit of happiness,” even to practice vices that others detest. An individual must be free to use his own judgment, his own body and his own property without restriction so far as the use does not interfere with another individual’s quiet enjoyment of his own person and property.

Everyone wants to be protected against violations from other men. But no one wants to be “protected” from himself, since someone else is determining what “protection” is.

So the punishment of crimes can be justified, but the punishment of vices deprives every individual of his natural right to pursue his own happiness, the full use of his body and his own property. These two actions are polar opposites, directly opposed to one another. Criminalizing vice is absurd and a crime of itself. Governments should not be instituted and maintained that commit crimes and prosecute crimes simultaneously.

As the philosopher Sallust said in ancient Rome, “Most men do not desire liberty. Most only wish for a just master.” But masters make the rules that their property live by. Living under such rules and regulations does not cause people to be more virtuous or more free. It makes them small-minded and vicious and eager to make their fellow man suffer. The minds of men are not elevated by such stupidity, but whipped into shape by superstition and the exercise of raw power.

Here is a list of various vices. You may argue that each is a sin, but you cannot argue successfully that any one of these vices should be a crime. That is, unless you are capable of Cognitive Dissonance, which is holding two opposing viewpoints in your mind at once.

Gambling: This is to risk money, or anything of value, on the outcome of something involving chance. There is no force in a wager. If fraud is determined, then prosecution for that fraud is indicated. But gambling has no victim, and therefore should not be criminal acts. Do not be misled into thinking that those who gamble excessively are victims. They should have the liberty to use their resources in any manner they choose, including wasting the resources. Anything less that this level of individual liberty is tyranny. It is the State attempting to protect individuals from themselves. It is massively hypocritical that many States run gambling operations, but criminalize individuals who do the same.

Prostitution: a voluntary exchange of sexual activity for valuable consideration between two or more individuals. There is no force. If the parties begin their exchange, and either one says “No,” further sex would be considered force. If one party infected any other party with a disease, that would be a tortious injury. If one party accepted valuable consideration and did not perform the desired sex act, it would be fraud. So absent intent, force or fraud, prostitution should be entirely legal.

Sex acts in general: Sex acts between two or more consenting adults have no victims. There is no intent to harm, commit force or fraud. If some physical harm were to befall any party, they could seek damages in the courts. So, there is no crime in consentual sex acts.

Marriage: The Bible is full of men with multiple wives, and most are the pillars of the Christian and Jewish faiths. There should exist no law that prohibits polygamy. The laws against assault, battery, force or fraud are in existence to deal with any criminal issues. The civil courts are available to deal with divorce, child custody and support, and the division of assets. Marriage is basically an issue of contract law. But the State has no standing or vested interest in any marriage other than to tax and license it.

Homosexual individuals are free under law to enter into contracts regarding cohabitation and all it entails. If a homosexual can locate a religious leader that will perform a “marriage” ceremony, nothing should prevent that. But the “marriage” should not gain a special legal status, since the State has no standing or vested interest in any marriage other than to tax and license it.

Pornography is sexually explicit pictures, writing, or other material whose primary purpose is to cause sexual arousal. If there is a free exchange of valuable consideration for the pornographic material, then no force or fraud has been committed. If the pornographer uses children, defined as individuals below the age of legal adulthood, who cannot contract for themselves, then there are victims of injury, force or fraud. Those torts should be prosecuted and restoration should be required.

Recreational drug and alcohol use: The use of any substance by a human being to alter his own consciousness is an act without a victim. The user is entirely within his individual liberty to use as little or as much of the substance as he chooses, even to the point of his own death. Mere possession of a substance shows no intent. Private use shows no fraud or force. Recreational drug use should be legal.

Recreational drug /alcohol manufacture and sales: If a manufacturer or grower of any product should manufacture a defective product, there would be fraud and product liability torts could be subject to legal remedy. There is no force in a free exchange of valuable consideration for the manufactured product. So the manufacture and sale by any individual or company of recreational drugs and alcohol should be legal.

Drunk Driving: The mere ingestion of alcoholic beverages should not ever constitute a crime. A person driving a vehicle under the influence of alcohol who causes no harm or damage to another individual or his property commits no crime. There must be a victim for there to be a crime. This person under the influence has not committed force or fraud either. So drunk driving laws are not compatible with personal liberty and should be rescinded.

Counterfeiting is creation of an imitation intended to be passed off fraudulently or deceptively as genuine. The US Federal Government, through the Federal Reserve, prints paper currency that has no redemption value. Genuine currency issued by a 100% gold/silver reserve bank would have 100% redeemability. Fractional reserve banking is also counterfeiting since it creates credit with no underlying value. So counterfeiting is fraud, and should be illegal…even when a nation does it.

Cheating in any form is fraud, which has penalties under criminal law.

Lying in any form is fraud. Perjury is lying under oath in a legal proceeding. So, lying may be subject to criminal penalties and restitution of some form. The trick is how to determine how much lying is criminal and how little is legal.

Stealing is depriving another individual of his property…or even his life… by force or fraud. Restitution should be made, but should incarceration be part of the penalty? What purpose does incarceration serve other than punishment? The prisons are full of prisoners who stole things. Were the victims made whole again?

Gun laws: Many gun laws across America make the very possession of a firearm a criminal act. Some outlaw possession in certain locations, Some outlaw concealed carry of a firearm. But the only determinants of criminality should be intent, force or fraud against another individual. Therefore, the criminality of gun possession is itself criminal.

Conclusion

This author holds the hope that the Framers of a new nation, born of a secession by a sovereign US State, will throw off the shackles of old superstitions and traditions and embrace individual liberty once again.


Writing the New Texas Constitution: Avoiding Inherent Flaws

October 21, 2009

I hear a lot these days about the constitutionality of secession. In this article, I will prove that the Constitution is without authority and that the subject of secession related to the Constitution is entirely irrelevant, and that any states need not concern themselves with the constitutionality of secession.

A constitution, or any document organizing a government, must have authority and validity. But the US Constitution has no inherent authority or validity and has never had either. If we can learn what the US Constitution is and what it is not, we can understand the flaws in the old constitution and then craft a new Texas constitution with authority and validity.

I believe that one of the major reasons that Washington is able to operate as it does, outside the strictures of the Constitution, is because those persons in power know that the Constitution is not legally enforceable. Absent a restraining legal document, they do exactly what they wish and what they can get away with.

The US Constitution has the following words in its Preamble, showing the intent of the Framers:

We, the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the united States of America.

So what exactly is this Constitution?

I think it could only be called a “loose agreement” between certain people at the time that it was written and ratified. It is not a treaty ratified between sovereign states, which would have the weight of law. It cannot be considered a legal contract, since legal contracts have characteristics that the old constitution does not have.

It was ratified by votes in the several states. But ratification in any form didn’t turn it into a legal document with enforceability and authority.

The old constitution’s sentiment seeks to secure blessings to themselves and their posterity, meaning future generation of citizens. But a loose agreement cannot by law or reason bind any future person to its details. Contracts cannot obligate persons who will live in the future, either. They can only obligate persons who are living presently and who sign and receive the contract.

The old constitution is not a legal contract. The Constitution never bound any two or more parties in a legal way, nor did it ever purport to bind anyone. A timeless principle in contract law is that the contract is not valid until the contract is signed by all parties and delivered to the parties, or the representative of any signatory party. Any party may refuse to sign or deliver a written instrument and thus invalidate the contract. The US Constitution was not signed by anyone or anyone’s legal representative. It was not delivered to anyone or their representative. No one in the USA, either alive or dead, has ever signed the Constitution as a legal contract between parties. So how could it be a legal document with binding authority or validity?

Contracts are also voluntary. The parties come together for a purpose, but are free to dissolve the contract based upon the terms of the contract. Even if they leave contrary to the contract terms, there can be consequences, but they can still leave.

Lincoln was completely right in this matter. His position was that, once in the Union, no state can ever leave. And if the US Constitution was an enforceable contract between parties, his position would have been rejected instantly and laughed out of any court in the land. But in light of the unenforceable nature of the Constitution, Lincoln was free to do what he pleased as it related to the Confederate States of America and war. But the Confederate states were also right to secede from a Union that could not bind them. Constitutionality was irrelevant.

Even though the old constitution wishes to bestow blessings and liberty on their posterity, it has no power whatsoever to achieve this goal. Further, it never showed any intention toward future generations other than to offer useful recommendations to their posterity toward the blessings of liberty. If they were in some way able to bind future generations to the Constitution, they would not have bestowed liberty but slavery upon their posterity, since their children would be bound to it from birth, like it or not.

The Constitution is not a perpetual corporation. The perpetuity of a corporation would require that new members voluntarily assent to its laws and by-laws as old members die off. New members must sign on because without their legal signatures, they would not be members and could not vote on corporate issues. There is no evidence whatsoever that the Framers intended the US Constitution to be a corporation’s organizational document.

So we can see that the Constitution is not a contract. It binds no one, and never did bind any persons. We see that all those who pretend to operate under its perceived authority act without any legal and legitimate authority.

Those who support the Constitution fall into three classes:

1. Parasites who see the government as an instrument they can use to further their own desires or increase their own wealth.
2. Credulous dupes. Credulity is defined as willingness to believe, especially on slight or uncertain evidence. Dupes believe that they are “free men” living in a “democracy” in the greatest country on earth. Dupes vote for the very agents who enslave, rob and murder themselves and their fellow citizens.
3. Bystanders who are aware of the evils of the government but are unwilling to place their own interests at risk to work at making a change.

But we voted and elected these Representatives and Senators. They are our duly elected officials, aren’t they?

Are our elected representatives our personal agents with legal authority to bind each of us individually and collectively? No they are not. In order for you to have a legal representative, you must sign your name to a document that gives the representative the power to act in your behalf. This document is commonly known as a “power of attorney.” You must also deliver the document to the agent.

Did you ever sign a power of attorney so that any elected officeholder could make binding decisions on your behalf? Did you authorize any person to obligate you to laws, regulations or the payment of taxes to any governmental body? I know that I have not done so.

And the secret ballot makes the concept of any elected representative acting as your agent even more ridiculous. How could secret voters hire an agent? How could secret voters enter into a power of attorney agreement?

So we see that those persons acting as our elected representatives are acting unlawfully, and that we have both the right and duty to treat them as usurpers and frauds.

Then upon what authority does the Federal Government operate? Who gave them the authority to enact laws, tax, confiscate men’s property and kill other men who resist their machinations?

You could say that voters select their representatives by ballot, and so bestow authority upon them. But in matter of law and reason, this is not true. It would not be upheld in a court of common law. If you and three of your friends voted in favor of a proposal in which a fourth friend would take it upon himself to deprive me of my property or my life, he would be a robber and/or a murderer. If he presented himself at my door to do his work, he would be unable to produce any legal authority to complete his task. Absent legal authority, I should treat him as a robber and murderer and resist his efforts even unto deadly force.

In a courtroom, a judge would ask to see your representative’s written authority to act in your behalf. You would be unable to produce such written authority.

So voting is neither a contract nor a power of attorney. And secret ballots should never be considered legally binding, since no signed contract between parties ever existed. Further, if voters authorize another person to act as their agent, they should do so in an open manner so to accept responsibility for the agent’s acts. That’s called “liability,” and that’s what happens out here in “the real world.” But the US Constitution, in Article I, Sec. 6, says that “for any speech or debate (or vote) in either house, they (Senators or Representatives) shall not be questioned in any other place.” So your agent cannot be held responsible for any laws they make…and neither can you. So, if no one is responsible, who is responsible?

NO ONE.

And let’s return to the subject of legal authority. The Constitution has no legal authority to bind any two or more persons. If it did, you would possess a copy upon which you would find your own signature and at least one other person’s signature. But that document does not exist in any form and has not existed in over 235 years. So, absent that authority, voting is only theater. It is an exercise in making the citizen feel that he is participating in a legitimate government.

The Federal Government in Washington has been illegitimate from its origin. There is no enforceable law to restrain it from any act. It was only the morality and ethics of the earliest founders that restrained them from tyranny. Unfortunately for Americans, that morality and ethical restraint are a quaint memory.

OK. Convinced that the old Constitution is a cruel joke? Then, how can the new constitution be crafted to guarantee legitimacy and legality? If the framers of the new constitution just write one like the old one, it will suffer the same illegitimacy issues as the old one.

Here’s a suggestion on how to write a new Texas Constitution.

Form the new Texas as a Non-Profit Corporation…Texas, Inc. The Constitution can be its laws and by-laws. Each person will be given the option to subscribe to Texas, Inc. and become a citizen. That person would have to be presented with a copy of the Constitution. Each person would have the choice to accept the Constitution in writing. Once accepted, each citizen would be, in essence, a shareholder in the corporation, since a person could not be a citizen/shareholder without signed consent. Each citizen would be issued one share of common stock. That would also mean that those rejecting the constitution could not be Texas citizens. Minors could not be Texas citizens until they were of legal age to enter into a contract, usually eighteen years of age.

Texas Inc. might instead choose a for-profit corporation as its charter entity. In that situation, the general public might be issued one share of common stock when they sign their Constitution. The shareholder/citizens could actually invest their own money in preferred stock. This would provide the new nation with capital. Shareholders holding preferred stock might receive dividends if Texas Inc. makes a profit.

As either corporate structure would be closely-held private corporations, the charter could specify that the stock could not be sold to non-citizens. Only Texas citizens would be eligible to be investors.

The founders of Texas, Inc. would have the right to present the offer of citizenship to anyone anywhere on the planet. They could cherry pick the world for the best and brightest talent! It would be a component of immigration policy.

Voting could be done by proxies, and the citizen could designate his elected representative as his proxy in writing. Or he could vote himself on any issue.

Think this is unworkable? The largest corporations on the planet have been running this way for over a hundred years. GM (pre-nationization), Exxon, Standard Oil, all of the Dow Jones top 30…they all work this way just fine. Many have millions of shareholders, just like Texas Inc. would have.

There are many details that must be worked out that are not listed in this article. But this article was not written to form a new government. It was written to get you thinking about constitutions and how they directly affect YOU.

Thomas Jefferson’s shining jewel, the Declaration of Independence, states that when a government shows a long train of abuses meant to reduce the people under absolute despotism, it is the people’s right and duty to throw off such government and provide new guards for their future security. Texas Incorporated could be that new guard that secures the future of a New Texas nation.

Texas, Incorporated. An idea whose time is come.

© Copyright 2009, Russell D. Longcore. All rights reserved.

Thanks and honor go to Michael S. Rozeff, retired Professor of Finance, for his wise counsel and comment. You can read his brilliance at http://www.LewRockwell.com in the Archives.

For a wider analysis of this constitutional issue, read “No Treason,” by Lysander Spooner, 1870.


The Zero Discount Value of Gold and Dethroning the Dollar

October 20, 2009

by Michael Rozeff

(Editor’s note: I include articles on the gold standard and monetary policy at DumpDC because monetary policy is the first and most important decision any seceding state will make. If they get this wrong, it will mean economic failure for the new nation.)

A truly major change in the global monetary system is beginning to materialize. The dollar is starting to be dethroned. Foreign governments and central banks are going to do the dethroning.

I have no prediction as to how slowly or quickly this process will take. The major dethroners, the Chinese, are on record as favoring a slow process. The transition is already occurring, however. Now that attitudes have shifted among the dethroners, they are likely to keep at it.

The transition will be away from the dollar’s use in international exchange and toward the use of stronger and/or more stable currencies. International deals are being made already in non-dollar currencies or through barter.

The catalyst for reducing the dollar’s role is the insolvent U.S. banking system combined with the massive government and FED efforts to reflate the system. The weakness of the emperor has been fully revealed. Foreign players are going to press their advantages.

The U.S. monetary system has failed. This is not just another stumble. The world is not going to be led forward by a country with problems as large as have surfaced in America.

There may not be any viable heir to the throne, and the present king may remain seated for quite some time. There will be many intervening ups and downs of currencies and gold. But the nobles and court are going to be busy forming new coalitions and jockeying for becoming #1.

This movement is going to be BIG. Entire economies are going to restructure. But my focus here is on one part of the financial side of things, namely, central banking and gold.

Many foreign central banks have supplied credit to the U.S. government. As they move away from that policy, U.S. interest rates will rise and the dollar decline.

The dollar price of gold depends on two factors: the dollar exchange rate against other currencies and the world price of gold in those currencies. A dollar decline raises the price of gold in dollar terms. An increase in the world price of gold, other things equal, increases the dollar price of gold. The world price of gold rises or falls with the extent of inflation of all the world’s currencies.

The world price of gold has risen in the last few years, but gold investors should realize that it is not a one-way street. If the most important dethroning central banks add gold to their reserves while stemming their production of their own currencies, the world price of gold will stabilize and fall. The dollar price of gold reflects both exchange rates and the world gold price.

I believe and argue below that the foreign governments and central banks have intentionally pursued dollar policies for decades that were exactly the opposite of what you or I as rational profit-maximizers lacking in political power would have done. WHY? Apparently they were rational from the point of view of those who did possess political power and certain of their supporters that included exporters.

It is highly pertinent to the price of gold to understand what has been going on and how it now appears to be changing. Why it’s changing now is, in my opinion, partly a matter of political competition. That’s a polite way of saying that other states may be starting to see their way clear to shaking off U.S. superpower dominance. They may be starting to feel their oats. They may feel that power lies in combining against the U.S. in certain ways while cooperating in others. Secretly, they may have tasted blood and be licking their chops. They may be gloating at the American difficulties. I don’t think that “statesmen” are nice guys. They don’t build up massive armies and navies with nuclear weapons because they are nice guys.

It is also partly a matter of economic necessity. Manipulations of economies have resulted in serious economic dislocations and inefficiencies.

How did foreign central banks do the opposite of what you and I, who lack power, would have done?

We will need to understand inflation to grasp that. In popular articles these days, there is massive confusion over inflation (and deflation). I will aim for utter clarity on this matter.

The Federal Reserve Bank in America has to turn its earnings on its U.S. securities back to the U.S. Treasury (in excess of its costs of running the bank.) This means that the government bonds carried as assets have no value to the FED. The present value of an asset with zero cash flows is ZERO. These bonds do NOT back the currency that the FED issues. (Foreign central banks that carry U.S. bonds as assets may be in a different situation, depending on their laws.)

Federal Reserve notes are backed, for all practical purposes, only by the GOLD that the FED carries, which is 261.5 million oz.

The following discussion is aimed at understanding the price of gold in a currency issued by a central bank. This will then illuminate the mystery of what central banks have done over the past 40 years to place the dollar on a throne and in what ways they behaved opposite to what a profit-maximizer would have done.

Suppose that we have a central bank that has a single asset: 250 oz. of gold. It has a single liability. It has issued 750 notes per oz. Each note is dubbed a “dollar.” In this scenario, the dollar is defined as the piece of paper, the note, and not as a weight in gold. The total number of notes issued is 187,500 = 750 x 250. Suppose, further, that the bank stands ready to convert any note into gold if a note holder wishes to redeem it. 1,000 notes bring 1.3333 oz. if this is done.

The price of gold in this situation, expressed in dollars, is and has to be $750 per oz. Actually, the situation is really the reverse. The value of $750 is 1 oz. , since it is the oz. of gold that gives value to the notes issued against it.

I define a new concept called the Zero Discount Value (ZDV) of gold. The ZDV of gold in a specific currency is the total number of currency notes issued divided by the total number of oz. of gold held as an asset against that note issue. Bank reserves that are fully convertible into currency notes also enter the total of bank notes

This definition will help us to define inflation with precision and it will help us to understand the pricing of gold. It will also lead to an understanding of the dollar policies of foreign central banks.

Our hypothetical central bank has187,500 notes (dollars) and 250 oz. , so that the ZDV is $750 per oz.

The ZDV of gold is the value of gold expressed in bank notes under the assumption that all outstanding notes are converted into the bank’s holdings of gold. Even if there is no convertibility, the ZDV is still the same number. It is the value of gold under the assumption that all the notes are exactly 100 percent backed by gold.

The ZDV for a bank changes through time. Why? Because the bank’s holdings of gold and its issue of notes change through time.

I define inflation as an issue of central bank money (notes and reserves) not secured by additional assets of equivalent worth.

Inflation is a note issue that is made without additional asset backing, in this case, gold. Inflation is an increase in bank notes issued relative to the gold held as backing. Let the bank issue another 12,500 notes with no change in gold holdings and no other asset entering the bank’s possession. This issue is inflation. The ZDV is now $200,000/250 oz. = $800/oz. The zero discount value of gold rises to $800 because of the inflation.

Inflation of notes, which is the inflation defined here, has many effects not discussed here such as inflation of various kinds of prices. The single effect being emphasized is that the ZDV of gold, by definition, has to go up when the bank inflates the number of notes that it issues. By the same token, deflation is a reduction in bank notes relative to gold held as backing. In this case, the ZDV declines.

There is no economics or finance in this calculation. It is all definition, but it is clear definition. The economic reasoning comes in when we try to understand how the ZDV of gold and its market price are related.

Suppose we are back to the situation where the bank has 187,500 notes outstanding and holds 250 oz. of gold. The ZDV is $750/oz. Now let us change the scenario. Let us say that the bank no longer allows note holders to convert the notes at the bank and get gold in return from the bank’s tellers. The bank is still in operation. It does not close its doors and repudiate its notes. It suspends convertibility for an indefinite period of time.

Let us suppose that private people can trade notes outside the bank, and that a market springs up on the curb outside, or that down the street is a tavern exchange.

The question is this: What is the price of bank notes? Or the same question put in another way: What is the price of gold expressed in these notes?

If people think that the bank has stopped conversion because it intends to issue more notes or even repudiate the notes altogether, then people will try to rid themselves of these notes. In other words, if they expect inflation of the notes and a rising ZDV, they may bid the price of gold up above the ZDV, which is the same as bidding down the note value by selling notes. This produces a premium for gold. Any premium that may arise will depend in a complex way on expectations and on other factors such as interest rates and other prices. I discuss this case no further.

Let us address the question of the price at which gold will sell when there is no conversion and without this inflation effect which we know raises the ZDV. In other words, let us analyze one thing at a time.

Leaving inflation aside, several factors at a given moment in time restrain the price rise of gold from rising above its ZDV.

If the notes are forced to be legal tender by government law, then such a law will tend to sustain their value even if there is no conversion. The notes will be useful to pay taxes and debts. This factor has an important implication. If the legal tender law is rescinded when a bank is not allowing conversion, the notes are likely to lose value and gold go higher.

The bank might resume convertibility, in which case all those who bought gold at greater than $750 would lose. Central banks do resume convertibility, although it can take a good many years. Buying gold at prices above ZDV near the time when the suspension ends is a losing proposition.

Let gold’s price be $1,000, which is above its ZDV of $750. The bank itself has the incentive to sell out enough of its gold at a rate of 1,000 notes per oz. to absorb all the notes outstanding. Since 187,500/1,000 = 187.5, that will take 187.5 oz. The bank can then own the remaining 62.5 oz. free and clear with no liabilities against them. The bank can put a lid on the price of gold by selling gold, and that will be profitable for the bank but only when gold’s price exceeds the ZDV.

In reality, ZDV serves as an effective moving ceiling on the price of gold. It certainly rises with inflation, but market prices rarely get above the ceiling at any given time. Going above the ZDV is not impossible. Gold did just that in 1980 for a brief time. It appears that when this happened, there was an incentive for arbitrageurs to borrow and sell gold (or simply to sell gold they owned) to receive more dollars than the hypothetical conversion price (the ZDV) warranted.

How does this work? Suppose gold has a price of $1,000/oz. when the ZDV is $750 and the bank owns 250 oz. of gold as backing. By selling 1 oz. at $1,000, the speculator receives notes that are more than worth their weight in gold (if there were convertibility). He receives the equivalent of 1.33 oz. of gold for a sale of 1 oz. of gold. The speculator has a strong incentive to sell gold when its market price exceeds its ZDV.

This completes the discussion of gold selling at above the ZDV. We saw that inflation causes the ZDV to rise over time. We saw that at a given instant in time, the ZDV at that moment acts as a ceiling to the market price of gold.

Will the ZDV also act as a floor?

Let’s now consider the possibility of gold selling below its ZDV. In fact, this is what has happened to gold priced in dollars for MANY years since 1980 when gold entered its long bear market and this situation STILL prevails today even after 8 years of price increases. In U.S. dollars, gold’s ZDV today is over $7,000 an oz. and rising.

The ZDV has not provided a floor to the market price of gold, and yet there are arbitrage forces that are at work to drive market price up to the ZDV.

Suppose gold is $250 an oz. in the market but the ZDV is $750. Let us attempt an arbitrage. We borrow $250 (or use our own capital) and buy an oz. of gold. We take the gold to the bank and try to redeem it for $750. If we could do that, we could then repay the loan and keep a profit of near $500. This shows that there should be some economic incentive that prevents the gold price from falling too far below its ZDV. Is there? If so, why hasn’t it operated? There are years when gold has been 85 percent below its ZDV! What’s the impediment?

The central bank itself could borrow $250, buy an oz. of gold, and then issue 750 notes without raising the ZDV. It could then repay the loan (I neglect interest.) Its balance sheet would then have 251 oz. gold plus 500 notes as assets and 188,250 notes outstanding. Netting out the notes, it has 251 oz. gold and 187,750 notes. The ZDV falls to $748.008. Deflation occurs. The bank has a profit by this arbitrage. If it offers to redeem at $750/oz. , that will use up 250.33 oz. of gold. Its profit is the other 0.67 oz. worth $500.

The FED did not do this arbitrage, despite the fact that gold was very much below its ZDV, or conversely, that dollar notes were much above their fully convertible price in gold. There was and is a strong profit incentive to deflate that the FED spurned. The FED wanted gold dethroned and the dollar placed on the throne. Profits from the source I have outlined were not an incentive for it. It did not want deflation. It wanted inflation.

No speculator could get $750 for an oz. either, because the FED refused to redeem. That is part and parcel of an intentional policy of inflation. It is an essential part of such a policy. Otherwise, private parties will turn in the notes and seek a different money. So that avenue for profit also was blocked.

The private entrepreneur has another option. Use gold to start a competing bank. Issue a competing currency. For $750 in central bank notes, the new banker buys 3 oz. of gold in the market. He keeps 2 oz. as profit. He then issues 750 notes of his own, called the DOLAR, convertible into gold at 750 per oz. As he buys up the gold and sells the central bank notes, he drives the gold price in dollars up. He keeps doing this until the ZDV is reached.

Hence, here is another economic force that operates to make gold’s price converge to the ZDV. Obviously, this avenue has been largely but not entirely blocked. There are barriers to entry that are significant in the form of getting an entire system that uses dollars to use DOLARS. Nevertheless, people like James Turk and his GoldMoney venture are pursuing this option.

Another way is for ordinary people to buy gold and sell the dollar. To spend $250 to buy an oz. of gold when one knows that the ZDV of a note is $750 is to get something worth three times more than the weight in gold of what one has given up. Still, this is not a riskless arbitrage. It relies on the prospect that others will eventually exploit the profit potential that exists when gold is well below its ZDV.

There is another way to arbitrage the difference between the market price of gold and its ZDV when the market price is less than the ZDV. Other central banks can borrow dollars, buy gold, and then issue currencies against it. With these currencies, backed by gold, they can repay the dollar borrowings and still have a profit. They can gain the arbitrage profits in precisely the same way that the FED might have or that private entrepreneurs might have.

MANY foreign central banks have done the opposite. They sometimes have sold gold. They have usually accumulated dollars in substantial amounts in the form of dollar loans. They have not only not competed with the FED and taken advantage of this arbitrage opportunity, they have gone the other way and supported the FED and the U.S. government by their loans. This was one part of the financial side of government-run economic policies.

So when we run through the arbitrage possibilities, we find that most of them have been blocked or spurned.

Central bankers dethroned gold, never fully, by not taking advantage of the profitable opportunity to issue solid currencies that compete with the dollar by buying gold and selling the dollar when gold’s price is far below its ZDV. Instead they chose to act as satellites of the U.S. The central bankers cooperated with governments that geared a major part of their economy’s production for the American market and took dollars in exchange. They lent to the American consumer to finance his consumption of their goods. They weakened and inflated their own currencies intentionally.

This is the situation that appears to be changing. It started changing at least six years ago in Asia, for China has been accumulating gold secretly for at least six years. China recently began a campaign encouraging its citizens to hold wealth in gold and silver. But the situation began changing as early as 1979 with the European Exchange rate mechanism. The euro came into being between 1992 and 2002, and that competes with the dollar.

The arbitrage opportunity pointed out above is a manifestation of an overvalued dollar compared to gold and a world economy with serious distortions in product, labor, and capital markets. They are two sides of the same coin: the financial side and the real economy side. These distortions have built up over decades as many countries manipulated their economies while their central bankers aided and abetted the dollar. A great deal of restructuring lies ahead.

America is down. Is she out? America is capable of putting her house in order. She has great strengths lodged in her people. It is not too late to resuscitate the American economy and revive its vitality. Will the proper policies and radical system changes be instituted to accomplish that challenge? Unfortunately, there are no current signals to that effect being given off by America’s ruling elite. We are seeing the very opposite. Foreign leaders can read these negative signals as well as we can. They are acting accordingly. They are starting to dethrone the dollar.

October 20, 2009

Michael S. Rozeff [send him email at msroz@buffalo.edu] is a retired Professor of Finance living in East Amherst, New York. He is the author of the free e-book “Essays on American Empire.”

Copyright © 2009 by LewRockwell.com.


Texas as a Safe Haven Nation, Magnet For Wealth Preservation

October 19, 2009

by Russell Longcore

The famous (and very accurate) trend watcher Gerald Celente has written about the concept of Safe Haven Nations (SHNs). A SHN is simply a sovereign nation that has implemented laws that protect the wealth and privacy of individuals, and is a place to which people could relocate.

Wealthy people worldwide are constant prey for rapacious predator governments. They are easy targets, since most everyone wants to be a wealthy individual, but many who are not wealthy resent them. And, with predictable regularity, governments create class warfare and class envy, so the lower class supports the government’s efforts to confiscate the assets of the wealthy class.

Wealthy people worldwide are also on the lookout for venues where they can store their wealth securely. Used to be that Switzerland was the “gold standard” of wealth preservation and privacy for the world. But recently, the US and EU governments went after the Swiss, and Swiss bank UBS agreed to disclose the identities of nearly 5,000 American citizens who have secure bank accounts in Switzerland. My understanding is that this disclosure violates Swiss banking law, but they are doing it anyway.

Wealthy people are often willing to relocate to another nation when they are forced to save their own lives. Sometimes, the wealthy have to leave mansions, bank accounts and other assets behind in a predator nation just to save their own skin. Recall Captain Georg von Trapp and the movie “The Sound of Music.” They did not actually walk out of Austria to escape the Nazis, but fled to Italy by train. But ask others from Vietnam, Iraq, Germany, South Africa and Rhodesia (Zimbabwe) about leaving with nothing but the clothes you are wearing.

In the event of a complete collapse of the dollar and the financial tsunami that will wash over the world, immigrating to a new country may be quite difficult, perhaps even impossible. Predator nations will do everything that they can do to prevent capital flight and may even prohibit emigration. Borders may seal tight and travel may be severely restricted.

Texas secession and the formation of a New Texas provides an historic opportunity for Texas to become the newest and most secure Safe Haven Nation. The people who will craft the new constitution for a New Texas should look to the banking and privacy laws of the nation of Lichtenstein for a template.

Nations like Panama, which has outstanding Safe Haven laws, are attracting wealth from all over the world. Others are:

Singapore
Hong Kong
Anguilla
The Bahamas
Bermuda
St.Kitts/Nevis
Cayman Islands

The problem with the list above is expatriation. These are islands and entities of small geographic size. Many have very restrictive immigration laws. So, they are limited on how many people they could allow to emigrate to their shores. Texas, however, is immense. And with an immigration policy based on the free market, could become a worldwide magnet for wealth…and wealthy individuals.

Immigration law will have to be enacted that offers a procedure for an expatriate to either gain dual citizenship or individual citizenship through a fee arrangement.

If a New Texas has no income tax and no inheritance tax, that will be a good start. But it will need to go further to attract wealth from all over the globe as a Safe Haven Nation. Banking law will need to protect the identity of anyone depositing assets in Texas. Texas will also have to refuse to enter into tax treaties with other nations, and then withstand the enormous pressure they bring to bear to comply.

Tax fraud is misleading a taxing entity and should be illegal. Tax evasion is the failure to declare assets, and is open to interpretation these days. Tax avoidance uses lawful means to minimize the amount of tax paid to any taxing entity. Many nations wish to blur the lines between tax evasion and tax avoidance. Texas should promote tax avoidance while offering absolute secrecy for individuals and corporations.

Texas should also create a constitutional law that provides for corporations to have bearer shares and no-par-value shares, as well as to operate with one director, who may also be the secretary, and who may reside outside of Texas. While annual meetings may be held anywhere, a registered office and agent must be in Texas, but no information concerning shareholders or directors needs to be disclosed. The minute book, resolutions, seal and shareholder register must be kept at the registered office. Most SHNs have these laws already.

If you are seeking a Safe Haven nation, you might consider moving your wealth and your family to Texas now. Texas as a US state is the leading economic engine of the USA. Very pro-business, very independent. Lots of wealth already there. If any state of the Union is going to successfully secede, my money’s on Texas.

If you see the writing on the wall in your country (or state), and know that you must expatriate to a new country, the time is NOW to begin preparations. Your plans must be in place and executed before a meltdown in your country or state occurs. After the meltdown, it might be too late. You may become an inmate of Prison Planet.

Secession is the only hope for mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2009, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Governor Rick Perry: Is He The Right Man For a New Texas?

October 18, 2009

by Russell Longcore

Back on April 15, 2009, Texas Governor Rick Perry found himself in front of a microphone at a Tea Party at Austin City Hall, and blurted out words to suggest that Texans might at some point get so fed up they would want to secede from the union, though he said he sees no reason why Texas should do that. Kind of reminds me of the old story of the politician who, upon discovering a nearby parade, ran to the front of the parade so he would appear to be leading it.

But in Lubbock in September, Perry said that Texas “needs to lead, not secede.” So clearly, Rick Perry is not going to be a leader for Texas independence.

In light of Perry’s public statements about secession, would Governor Perry become a friend of secession or an enemy? To whom can Texans turn for leadership in the planning, formation and ratification of a new Republic of Texas? Looks like Texas Nationalist Movement president Daniel Miller is the presumptive go-to guy for that leadership.

Look at some of Perry’s postings at his website about his “accomplishments.”

Agriculture: Perry has accumulated many endorsements for re-election in 2010 from agricultural (and other) special interests. But special interests want government favors, which translates into money flowing both ways. If a New Texas Constitution rejected the old political ways of cronyism, over-regulation, taxation and lobbying, special interest lobbyists would be unnecessary. What would Perry do in such an environment?

Energy Policy: Washington wants to pass Cap and Trade legislation, which would hurt Texas. Perry’s taken a stand against it. Would Perry (a) obey that law if passed, (b) nullify the law if passed, or (c) lead Texas into secession?

Government Reform: Perry and Senator Kay Bailey Hutchison trade barbs about the size of campaign contributions while each is spending money from Washington through legislative “earmarks.” What about Perry’s record as Governor would lead anyone to believe that he would forsake politics as usual and beat the drum for a small, efficient government for a New Texas?

Border issues and the War on Drugs: Perry has spearheaded the quasi-military assault on those crossing the Mexico-Texas border. Hundreds of millions of dollars have been spent by Perry and the legislature to continue a failed policy of “war” on the drug trade. It didn’t work when America tried to ban alcohol sales in the early 20th Century. Law enforcement tried the same kinds of measures to dry up both supply and demand for alcohol. The black market flourished, and organized crime became powerful and wealthy smuggling alcohol into America. The same ridiculous mistakes are being made today regarding recreational drugs. Today’s war on drugs is treating symptoms and ignoring the underlying disease. Legalization of recreational drugs is the only sensible choice for liberty and intelligent crime prevention in Texas. Could Rick Perry reverse himself and embrace this concept?

Education: Perry recently announced that Texas will invest $160 million to expand the scope of Texas Science, Technology, Engineering and Math (T-STEM) academies. Apparently Perry believes in spending lots of taxpayer money to promote public education. Could Perry be counted on to reverse course and reject tax-supported public education in a New Texas?

Higher Education: Big Government wonk Bill Bennett, former Secretary of Education, endorsed Perry for re-election in 2010. When the old guard in Mordor loves you, what does that say about your independence and anti-state stand?

Budget Reform: Governor Perry constantly criticizes Senator Kay Bailey Hutchison for her consistent efforts to “bring home the bacon” to Texas. Sure KBH is a Washington big spender. But would he criticize her if she weren’t running for Governor against him?

Rick Perry is the odds-on favorite for a third term as Governor, a feat no previous Texas governor has done. In light of the way the Texas-Washington relationship works, Perry looks like a great choice for Governor. But the nationalist movement should not look to Mr. Perry for leadership on the subject of state secession. Better to look to Daniel Miller and Congressman Ron Paul, who already share the anti-statist world view.

The big questions about Rick Perry are these: How much tyranny from Washington is too much? Will there ever be a point at which the Texas governor says that Washington has gone too far, and that Texas must now go its own way?

Only time will tell.

Secession is the only hope for mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2009, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Texas Exhales: Judge William Justice Dead at 89

October 17, 2009

by Russell Longcore

Once known and “the most hated man in Texas,” Judge William Wayne Justice has died at age 89 after a long illness. Texans can now exhale, and those who are crafting a New Texas should take the life of Judge Justice as an example of the type of justice Texas doesn’t want and won’t tolerate.

Appointed to the Federal District bench by President Lyndon Johnson in 1968, he became known as a liberal judge whose decisions radically changed law and society in Texas.

Justice did not believe that the US Constitution and the Bill of Rights were static and unchangeable. He advocated the “living constitution” viewpoint that the Constitution should evolve as the society evolved.

Consequently, he legislated from the Federal bench.

His legal decisions covered issues in prison reform, immigration, public education, public housing and voting law.

In one of his more infamous rulings in 1977, Doe v. Plyler, he ordered that undocumented immigrant children had the same rights as US citizens and must receive public education. He also ordered bilingual public education.

Once his liberalism was chronicled and well-known, reformers and social do-gooders flocked to his courtroom to file class action cases. Some of the class action cases, many of which were the largest lawsuits in America, dragged on for decades. And his court decisions changed Texas forever and influenced legal precedent nationwide.

Frank Kemerer, Justice’s biographer and university professor, said that Justice was “perhaps the single most influential agent for change in 20th-century Texas history.”

Likely, Kemerer is right. But Justice’s brand of change did violence to the US Constitution. He should have been impeached and removed from office. But in a tyrannical Federal government that snickers at state’s rights and outright ignores the US Constitution, Justice was a hero.

In the new nation of Texas, Federal judges must be chosen that are committed to strict interpretation of the new Texas Constitution. The judges should be required to sign an affidavit stating their commitment to strict interpretation, and judges should stand for re-election or re-appointment every few years…no lifetime appointments to the Bench. In instances of judicial activism, judges should be subject to removal from the bench at any time.

The New Texas deserves no less than judges who will protect liberty.

Secession is the only hope for mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2009, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Freedom’s Destruction By Constitutional De-Construction

October 16, 2009

By Timothy Baldwin
October 16, 2009

This column is archived at
http://www.chuckbaldwinlive.com/c2009/cbarchive_20091016.html

During the Constitutional Convention, from May to September 1787, delegates from the colonies were to gather together for the express purpose of amending the Articles of Confederation to form a “more perfect union” (NOT a completely different union!). The men that met in Philadelphia, Pennsylvania, were under direct and limited orders from their states to attend the Federal Convention explicitly to preserve the federation and State rights and to correct the errors of the existing federal government for the limited purposes of handling foreign affairs, commerce among the states and common defense.

Yet, during that private and secret convention, there were men who proposed that a national system be established in place of their current federal system, destroying State sovereignty in direct contradiction to their orders. (Jonathan Elliot, The Debates in the Several State Conventions on the Adoption of the Federal Constitution as Recommended by the General Convention at Philadelphia in 1787, vol. 1, 2nd ed., [Philadelphia, PA, JB
Lippincott, 1891], 121) Of course, the public was not aware of this fact until years after the ratification of the Constitution, when the notes taken in the convention were printed and released to the public.

Indeed, those who proposed such a national system of government (e.g., Alexander Hamilton, John Dickinson and James Madison) would not have the people of the states aware of this proposal for fear of outright rejection of the Constitution and for fear that they would remove their delegates from the convention altogether, giving no chance of success for the ratification of a new Constitution. It was hush-hush for good reason. In fact, Alexander Hamilton was so tactful on the subject that he did not even present his nationalistic notions as a constitutional proposal, but only as his ideas of what America should be. (Ibid., 123) Despite these proposals, in the end, it
was a federalist system that prevailed–a union of states and not a union of people, whereby the states retained complete and absolute sovereignty over all matters not delegated to the federal government. The states were indeed co-equal with the federal government. So, what was it about the national system that was rejected during the convention?

The most notable proposal reveals the underlying foundation for all national principles: that is, the national government possesses superior sovereignty to force the states to submit to the laws made by the national government and to negate any State law it deems repugnant to the articles of union. This supreme power was proposed (but rejected) as follows during the Federal Convention: the to-be national government should possess the power to “negate all laws passed by the several states contravening, in the opinion
of the national legislature, the articles of union, or any treaties
subsisting under the authority of the Union.” (Ibid., 207) Hamilton, and his like, would have loved it had this national principle of supreme sovereignty been accepted by the delegates. Thankfully, it was not accepted. In fact, as the convention progressed, what became apparent to those who advocated for this national form of government is that their ideas would never be accepted and ratified.

History proves with absolute certainty that a national government and its assuming principles were rejected, not only by the framers of the US Constitution, but also by those who sent delegates to the Federal Convention and who ratified the US Constitution at their State conventions. More important than the limited powers of the federal government, the people of the states rejected the nationalist doctrine that the federal government had the power to negate State laws that it deemed contrary to the Constitution. (John Taylor, New Views of the Constitution of the United States,
[Washington DC, 1823], 15)

So, how is it that while the people of the states expressly forbade the
federal government from interfering with the internal affairs of the states the federal government can now control nearly every facet of life within the states and the states supposedly can do absolutely nothing about it? Most attorneys who think they know so much about America’s history and the US Constitution would say, “The United States Supreme Court is given the power to say what the Constitution means and that over the years, they have interpreted Congress’ power to reach the internal affairs of a State.” It is
the “living Constitution” idea, simultaneously coupled with nationalistic
doctrine, which proclaims that the actual meaning of the Constitution can change over time, and that such change is constitutional and does not deny the people their freedom protected under the compact of the Constitution.

Interestingly, the “living Constitution” idea is only used when it promotes a constitutional “construction” that expands and empowers the federal government and neuters the State governments. The “living Constitution” idea (advanced by the British Parliament) in fact is the very notion that caused America’s War for Independence. (Claude Halstead Van Tyne, The Causes of the
War of Independence, Volume 1, [Boston, MA: Houghton Mifflin Company, 1922], 235, 237)

The ludicrous proposition of a “living Constitution” begs numerous critical questions involving the very foundation of a free society, not the least of which is this: If the meaning of the Constitution can change over time, why did the Constitution’s framers spend nearly five months debating which words should be placed in the Constitution? More than that, why would the framers be so emotionally, mentally, intellectually and intensely involved in the
question of what form of government we will have: national or federal?

How can it be that the judiciary branch of the federal government, which is not even politically responsible to the people or the states whatsoever (and only ever so slightly to the other federal branches), has the sole and complete power to say that the states have no power to interpret and comport to the US Constitution as they deem constitutional, when that same power was expressly rejected to the national government during the convention? After all, Hamilton and Madison both admit throughout the federalist papers that the states have complete and absolute sovereignty regarding the powers retained by them and granted to them by the people of each State, just as any foreign nation would. Both Hamilton and Madison admit that the only check on power is another independent power and thus, the only real power that could check federal power was State power. They even expected that the states would use their sovereign and independent power to the point of being the voice and, if necessary, the “ARM” of the people to implement a common defense against the federal government.

Both Hamilton and Madison admit that the federal government can never force the states out of existence and can never strip them of their rights and powers possessed prior to the ratification of the US Constitution, except as delegated to the federal government. They even refer to the states’ right of self-defense in this regard to resist federal tyranny. Was this mere “bait and switch” rhetoric to get the people of the states to ratify what they thought was a pure federal system? How can the states possess the absolute sovereign power to check federal tyranny when they are bound to submit to the federal government’s interpretation of the Constitution? The two positions are necessarily incompatible with each other. To say that you have
power, so long as I say you have power is to deny your power altogether.

Quite obviously, in no place does the Constitution grant to the federal
government (in any branch) superior sovereignty over the states. Instead, the Constitution requires ALL parties to it (State and federal) to comply with the Constitution, as it is the supreme law of the land. All the framers agreed that federal government and federal law do not equal the “supreme law of the land.” Both the federal government and the federal laws are bound by the terms to which all must comply. Thus, all parties must be watching each other to ensure each is complying with the compact. And as was admitted by even the most ardent nationalist (i.e., Daniel Webster) of America’s earlier
history, each party to a COMPACT has the sole right to determine whether the other party has complied with the compact.

But over the years, a political idea contrary to our original federal system was adopted–not through open discussion and consent, but by fraud and force. This position states that whatever the federal judiciary rules equates to the “supreme law of the land” and the states must comply therewith, regardless of whether the federal law usurps the power the states retained under the Constitution. What the nationalists were unable to obtain through honest and open debate during the conventions they have obtained through the erroneously construed “supremacy” clause of the Constitution. What the federal government was denied through constitutional debate and
ratification the nationalists have procured through masquerade, subterfuge and trickery.

America has been duped into accepting a national government, not by
interpolation, but by deceptive “construction.” If the federal government has the power to usurp its powers without a countermanding power checking its encroachments, where is the genius in our framers’ form of government?

Was this form of government the form that best secured our happiness and freedom? And if our framers in fact bequeathed to us a federal system, whereby the states were co-equal with the federal government in sovereignty and power regarding their powers, then where comes the notion that we now have a national system, whereby the states are mere corporate branches of the federal government? Where were the constitutional debates on that subject? Where was the surrendering of sovereignty by the states, which can
only be done through expressed and voluntary consent? Where was the right of the people to establish the form of government most likely to effect their safety and happiness? Do we just accept the fact that our form of government can change over time without express and legal action being taken to effect that change? God forbid!

In 1776, the colonies rejected the European (nationalist) form of
government. In the UNITED STATES, the people of the states ardently believed that their freedoms would be best protected if each of their agents (State and federal) possessed equal power to check the other against encroachments of power and freedom. This was the “more perfect union” of the US Constitution. How could the founders have suggested that the US Constitution
was a “more perfect union” as a nationalist system, when the nationalist system was the very system they seceded from and rejected? That is nonsense!

Ironically, the very document that was designed to perpetuate these
principles of federalism has in fact been de-constructed to destroy those same principles, leaving us with the very form of government that our framers and the Constitution’s ratifiers rejected. In the end, if the people of the states do not once again reject this national form of government and assert and defend the principles of federalism–the principles upon which America was founded–then this supposed federal power of constitutional “construction” will in fact be our freedom’s destruction.

**************

Tim Baldwin is an attorney who received his Juris Doctor degree from Cumberland School of Law at Samford University in Birmingham, Alabama. He is a former felony prosecutor for the Florida State Attorney’s Office and now owns his own private law practice. He is the author of a soon-to-be-published new book, entitled FREEDOM FOR A CHANGE.

Tim is also regarded as one of America’s leading spokesmen for State
sovereignty.
Copyright 2009 Chuck Baldwin.


What Would A Truly Free Nation Look Like?

October 15, 2009

by Russell Longcore

“I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.” Thomas Jefferson, 1791

One day soon, the United States Federal government is likely to collapse. The cause will probably be that the rest of the nations of the world will reject the dollar as the world’s reserve currency, and adopt another currency, or a basket of currencies, as their new reserve. This currency move is not just a rumor, but is already happening on a small scale. Once the nations of the world have cast aside the dollar, its value will freefall against all other world currencies.

The US government bond market will collapse simultaneously, as bond values will be heading toward zero. Those holding US bonds will be stuck with something they cannot sell. Unfortunately, that means big institutional investors like banks, mutual funds, insurance companies and pension funds will have instant liquidity problems.

This dollar crisis may also cause American banks to begin a tidal wave of defaults and bank “holidays.” Banks, mortgage lenders and credit card companies would cease loaning money. That will likely mean that one day you might find that your credit cards and ATMs cards have stopped working.

This event could last for weeks or even months. After a few days (hours?), many of those without cash and food will start looting. Society could break down very quickly. Remember New Orleans just days after Hurricane Katrina. And when US Federal Reserve notes start rapidly losing value, you’ll find many merchants that refuse to accept them for payment for goods and services.

Now do you see why I recommend holding gold and silver coins? Not as an investment, but as an alternative money supply. No one will reject gold or silver. Your gold and silver holdings could be the thing that keeps you alive during a catastrophe.

States may look to Washington for a solution, but Washington’s solution will likely be to simply order the Federal Reserve to print more paper money. But folks will already know that paper money is becoming worthless, so won’t want any more of it.

If the US federal government runs head-on into a currency collapse, it won’t be in any better situation than the average citizen. Another problem they will have will be with the active duty military personnel. Soldiers aren’t stupid. Will they obey orders and enforce American laws for Washington when they know they will get paid in shrinking dollars? Massive numbers of military personnel may go AWOL. This could make it easier for states to secede.

American states are standing at a railroad crossing, and a train is coming toward them fast. That is the train of inevitability. They will have two choices. Choice #1 is to stay with Washington like good little slaves. We all talk about secession a lot, but remember that most of the states of the United States were formed after the original thirteen colonies left Britain. So they have always been “owned” by Washington, so to speak. Other than the thirteen colonies of 1776, and the Confederate states of 1865, the rest save Texas and Hawai’i are slave states.

Choice #2 is to secede from the Union and become sovereign nations.

The biggest challenge to state secession, in my never-humble opinion, is not Washington resistance. The biggest challenge to state secession will be from the state politicians already in office. Steeped in Washington-think, and addicted to Federal money, they may naturally default to crafting a new nation in the likeness of Washington. I hope I’m completely wrong, and that liberty lovers will prevail.

So, what would a truly free nation look like? What kind of laboratory of liberty would a state like Texas make?

I realize that many of the characteristics I’ll list here are a far-away dream, but I like to dream big. I dream that all government serves the citizen, not the other way around. I dream that government will exist to protect human rights. I dream that all government would be organized upon the Zero-Aggression Principle, which says that no one has the right, under any circumstances, to initiate force or fraud against another human being for any reason whatever; nor may a person advocate the initiation of force or fraud, or delegate it to anyone else.

The new Constitution should specifically outlaw any central bank. No national currency. Gold and silver will be the only money. Federal law allows private banks to issue currency based upon only 100% reserves. Fractional reserve banking specifically made illegal.

The Constitution would drive governance down to the county level. County courts, county law enforcement, county criminal law.

Unicameral legislature based upon population in counties. No need for a bicameral legislature, one house for the people and one for the states, since this is one nation. Legislative session restricted to 140 days per calendar year. That way, no one uses the legislature as a full-time job.

Constitutional convention can be called for if 50% plus one counties call for it.

Military: Constitution authorizes Navy, an Air Force and Marines. The militia is the Army. As the various branches would only function in defense, they would not need many people. No women in combat roles ever.

5 cabinet bureaucracies are State, Justice, Treasury, Interior and Defense. No other cabinets without a constitutional convention mandate. State is the diplomatic corps. Justice includes the Federal Court system, no lifetime appointments for judges. Treasury collects taxes and pays Federal bills. Interior manages Federal lands, infrastructure like Federal roads, and includes Bureau of Standards and agricultural regulations to keep the food supply safe. Defense manages full-time military, one military academy and militia officers.

Judicial has district courts, one court of appeals and one Supreme Court. Each county has a court. Jury nullification built into the law. Codify not just punishing an aggressor, but making the victim whole again.

No social programs. No Social Security, Welfare, food stamps, rent subsidies, college loans, government scholarships, mortgage guarantees, Medicaid, Medicare. All wealth transfer schemes unconstitutional.

Sales tax will be the only revenue for the government with a constitutionally pre-set limit of 10%. Sales tax collects revenue from all who do commerce, which includes those who do not reside in Texas. No property taxes. No Federal stamp on alcohol, tobacco, petroleum, etc. Counties and cities may assess sales tax to fund services, but must get voter approval. Tax rate increases must be passed in a general referendum with a quorum of voters and a 2/3 majority. No inheritance tax. Government that is not financed by sales tax can be financed by user fees.

No tariffs, excise tax or any other tax. Almost overnight, the Port of Houston would become the busiest port in North America and the prices of consumer goods would plummet.

Term limits on all national elected offices. Two terms maximum.

The legality of Gambling, Prostitution, Alcohol sales and Recreational Drugs to be determined by each county, not the Federal government. The War on Drugs failed with the American ratification of the 21st Amendment in 1933 which repealed the 13-year experiment with Prohibition. Texans have better sense than to keep fighting a failed war.

Traffic laws: No drivers licenses. No car tags and state vehicle registration. Drunk driving only prosecuted if there is an incident of loss and liability. Just driving with alcohol in one’s body does not constitute a crime.

Abortion law decided county by county by citizen referendum.

Law enforcement: Texas Rangers are the only Federal law enforcement agency. All other law enforcement organized at the county level.

No public school: all public schools properties auctioned off to highest bidders. Education privatized. Parents are responsible for educating their own children. No compulsory attendance laws.

All colleges de-funded: If a college or university cannot maintain profitability through its own efforts, it must either downsize or go out of business. With today’s technology, most higher education methods and traditions are outdated and need to change anyway. The free market would force innovation.

No government-run health care system. Force the insurance companies to underwrite without individual ratings for health insurance as well as no denials for pre-existing conditions. Insurance companies already have a long history of underwriting life, health and disability insurance on a group basis without consideration for pre-existing conditions. Allow the free market to determine costs.

Immigration: Except for the Gulf of Mexico, New Texas would be bordered on all sides by other nations. A truly free Texas would be a magnet for people yearning to breathe free. Sound money and liberty would cause a stampede of individuals and businesses to Texas. Happily those who are government handouts junkies would emigrate with lightning speed back into the USA and Mexico. Allowing the free market to regulate immigration would be the best solution. Then, all Texas would have to do is design an immigration procedure and let the market speak.

I cannot imagine a scenario in which the founding mothers and fathers of the New Texas get all of these characteristics into law. But just think of what life would be like if MOST of them happened.

There are two types of people in the world. One wants to live life and not dominate others. This person embraces individual liberty and property rights.

The other want to force people to live life by their dictates. This person wishes to control groups and is the greatest enemy to liberty and property rights.

Which type of person are you?

Secession is the only hope for mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2009, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.


Podcast on Secession, Nullification and Interposition

October 15, 2009

Judge Andrew Napolitano is is a former New Jersey Superior Court Judge and now an analyst for the Fox News Channel. He is the author of many fine books on liberty. In this podcast, he interviews Lew Rockwell about Secession, Nullification and Interposition.

Lew Rockwell is President of the Mises Institute in Auburn, Alabama. The Mises Institute is the world’s leading think tank on liberty and the free market.

You can listen by clicking below:

Lew Rockwell Interview