By Dr. Edwin Vieira, Jr., Ph.D., J.D.
A plan of this type offers no more than a cruelly delusive hope. Consider some of the demerits of this type of plan (the new world currency)-
• First and foremost, the goal is not constitutional in any event, because every form of “redeemable currency” put out through the Federal Reserve System is, by definition, a governmental “bill of credit”, which Congress has no authority to emit, directly or indirectly.
Moreover, the Federal Reserve System is a corporative-state banking cartel indistinguishable from the very types of cartels set up under the National Industrial Recovery and Bituminous Coal Conservation Acts, which the Supreme Court declared unconstitutional, without dissenting voice, in the Schechter and Carter cases in the mid-1930s. Except that the Federal Reserve System is arguably worse, because the monetary and banking cartel influences every form of production and delivery of all goods and services throughout the country, so that the confusion and corruption it injects into the free market is pervasive in a manner in which even the National Industrial Recovery Act was not and could never have been.
The question of constitutionality the key to the whole problem, because, if the Constitution had been faithfully executed all along, America would not be treading water in a monetary septic tank today. And only by returning to the Constitution can Americans hope to extricate themselves completely in the long run. Yet vanishingly few people take much notice, or appear to be at all worried, that, as far as the constitutional aspects of money and banking in America are concerned, Mussolini won the political and economic war—that, in truth, this country now suffers under the Fascist Reserve System.
• Leaving aside questions of constitutionality, and turning to matters of fact, the plan for returning the Federal Reserve System to redemption of its notes in gold retains the fascistic Federal Reserve System’s banking cartel, which will perpetuate factionalism at the heart of America’s economy. In The Federalist No. 10, James Madison pointed out that
[a]mong the numerous advantages promised by a well constructed Union, none deserve to be more accurately developed than its tendency to break and control the violence of faction. The friend of popular governments never finds himself so much alarmed for their character and fate as when he contemplates their propensity to this dangerous vice. * * * The instability, injustice, and confusion introduced into the public councils have, in truth, been the mortal diseases under which popular governments have everywhere perished, as they continue to be the favorite and fruitful topics from which the adversaries to liberty derive their most specious declamations. * * *
By a faction, I understand a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.
Madison then went on to point out what he considered egregious forms of factionalism, starting with “[a] rage for paper money”.
This passage seems to have been penned for the Federal Reserve System and “the financial community” of which it is the cornerstone. For no one can possibly deny that this edifice of financial chicanery serves one very narrow set of very special, very selfish interest groups, largely at the expense of everyone else in society. Neither is it deniable that, together with its satellites and clients, the Federal Reserve System holds the entire country hostage to “the financial community’s” negligence, incompetence, venality, corruption, and even criminality. For, if the System is not exonerated and “bailed out” repetitively from the consequences of its managers’ and clients’ own blunders and sordid excesses—as it has been, serially and under conditions of increasing severity and cost, since 1933—its managers and clients threaten, either implicitly or even volubly as they did before the TARP “bail out”, to take down the entire national economy, and with it this country as a whole, bringing about untold political and social dislocations, disturbances, distress, and destruction. This is the essence of malignant factionalism.
• The plan for returning the Federal Reserve System to redemption of its notes in gold is also economically psychotic: It does not propose to rein in fractional-reserve banking and the destructive Ponzi schemes fractional-reserve practices foster. Rather, it presumes that fractional-reserve banking will continue to operate indefinitely, just as it has in the past, supposedly to be “stabilized” by the Federal Reserve System and a resurrected pseudo-“gold standard”. But, as both theory and history attest, it is primarily fractional-reserve banking that has made a stable “gold standard” of the traditional type unworkable if not impossible.
So the plan is bottomed on the self-contradictions that a system antithetical to a “gold standard” can be stabilized by a “gold standard”, and that a “gold standard” will long remain an integral component of a system the most profitable (albeit economically and socially destablizing) operations of which a “gold standard” constrains!
• The plan for returning the Federal Reserve System to redemption of its notes in gold does not separate fractional-reserve banking from the government, but accepts and even hopes to cement their integration permanently. Because fractional-reserve banking is inherently unstable, this arrangement is triply unsatisfactory: (i) This unnatural coupling destabilizes the government’s finances. (ii) By misusing the government’s monopoly of force in what will inevitably prove a vain attempt to stabilize the banking cartel, it destabilizes this country’s economic and political systems in their entireties. And (iii) it destabilizes even the banking cartel itself, because the protection the cartel receives from the consequences of its own excesses, perforce of its special relationship with the government, encourages and facilitates the bankers’ and their clients’ perpetration of further and more egregious excesses.
• The plan for returning the Federal Reserve System to redemption of its notes in gold, and thereafter administering the national stock of currency and credit on that basis, is in the final analysis a scheme of central economic planning—employing bureaucratic managers to maintain a fixed rate of redemption of paper currency in gold in the face of both ever-changing conditions in the free market, and the tendency to Ponzification of fractional-reserve banks and the rapacious “financial community” allied therewith. But is not the salient economic lesson of the Twentieth Century that central economic planning does not work, no matter how many computers and information-technology gurus are put to the task?
Would anyone in his right mind advocate the establishment of a Federal Bread Board to manage the production and distribution of bread throughout America? If every sensible person would reject this notion for one simple commodity such as bread (which anyone with a cookbook can learn how to bake in an afternoon), let alone for all categories of production in the most complex economy the world has ever known, then on what reasoning should it be accepted for the very special commodity—money—the soundness or unsoundness of which affects the production and distribution of all goods and services throughout the economy, because it is the commodity in which the mutual exchange rates among all goods and services are measured?
On the other hand, if the Federal Reserve System has proven to be such a good idea since 1913, or 1933, or 1971, or perhaps even the last several years, then why should its marvelous principles of organization, control, and concern for the welfare of average Americans not be extended to all other necessary commodities, such as food, clothing, shelter, personal transportation, and health care, to name just a few? Why should not America resurrect and reinstitute the National Industrial Recovery Act?
Why not, indeed? For this is exactly what is going to happen—in fact, if not perforce of some statute—because the tail (the Federal Reserve System) will end up wagging the dog (the rest of the economy). And if the tail is fascistic, so will the dog eventually become fascistic. Central fascistic control of the pricing system through manipulation of currency and credit must eventually lead to central fascistic control of the entire productive system. Which will require para-military police-state repression to keep the bulk of the population in line, as common Americans’ standards of living decline towards second- and even third-world levels.
• The plan for returning the Federal Reserve System to redemption of its notes in gold is politically impractical, if not wholly implausible, because any such reform has to be accomplished at the level of the Federal Reserve System through the General Government.
Now, for various reasons of institutional incompetence, this plan cannot be put into effect through the Judiciary. The Judiciary may be able—although one must doubt that it would ever be willing—to declare some or all of the Federal Reserve System to be unconstitutional or otherwise unlawful; but it cannot prescribe to Congress the substance of new statutes necessary to correct the situation, and certainly cannot compel Congress to enact such legislation. Thus, the Judiciary can suddenly cause chaos within the monetary and banking systems, by throwing a legal monkey-wrench into their gears, but can do next to nothing to repair the damage its own actions would bring about. Knowing that limitation on their powers, judges would likely do everything possible to avoid deciding a case that raises such issues.
Therefore, to be successful, the proponents of the plan for returning the Federal Reserve System to redemption of its notes in gold would need to gain control of or decisive influence over the Executive Branch, so as to be able to use (say) the authority granted in 12 U.S.C. § 95(a) and 31 U.S.C. § 5119(a)—as well as the ability effectively to veto any contrary legislation emanating from Congress.
Or, of greatest value, the proponents of this plan would need to gain control of or decisive influence over Congress, in order to enact new laws that the Executive Branch and the Federal Reserve System would then follow—and, of course, along with this, the ability to override any veto of those new bills, as well as to punish any failure or foot-dragging by the Executive Branch in the execution of these laws.
Furthermore, the proponents of this plan would also, perhaps especially, need to gain control of or to assert decisive influence over the Federal Reserve System itself and its allies in “the financial community”—which and who otherwise could effectively veto or paralyze the execution of any proposed reforms by threatening to create chaos in the markets. Unless, of course, those threats were deterred with credible promises that any such interference would immediately be met with severe punishments—such as are mandated in 12 U.S.C. § 95(a).
13. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935); Carter v. Carter Coal Co., 298 U.S. 238 (1936).
14. In conjunction with fractional-reserve central banking, the suppression of common use of so-called “real bills” in commerce must be identified as another major cause of the problem, which would need to be addressed in any comprehensive plan for monetary and banking reform. On this point, the work of Professor Antal Fekete should be consulted.
15. 12 U.S.C. § 95(a) provides that “[i]n order to provide for the safer and more effective operation of the national Banking System and the Federal Reserve System, to preserve for the people the full benefits of the currency provided for by the Congress through the national banking system and the Federal reserve system, and to relieve interstate commerce of the burdens and obstructions resulting from the receipt on an unsound or unsafe basis of deposits subject to withdrawal by check, during such emergency period as the President of the United States by proclamation may prescribe, no member bank of the Federal reserve system shall transact any banking business except to such extent and subject to such regulations, limitations and restrictions as may be prescribed by the Secretary of the Treasury, with the approval of the President. Any individual, partnership, corporation, or association, or any director, officer or employee thereof, violating any of the provisions of this section shall be deemed guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000 or, if a natural person, may, in addition to such fine, be imprisoned for a term not exceeding ten years. Each day that any such violation continues shall be deemed a separate offense.”
16. 31 U.S.C. § 5119(a) provides that “[e]xcept to the extent authorized in regulations the Secretary of the Treasury prescribes with the approval of the President, the Secretary may not redeem United States currency (including Federal reserve notes and circulating notes of Federal reserve banks) in gold.”
Presumably, this would allow redemption in gold bullion only. See 31 U.S.C. § 5118(b): “The United States Government may not pay out any gold coin. A person lawfully holding United States coins and currency may present the coins and currency to the Secretary of the Treasury in exchange (dollar for dollar) for other United States coins and currency (other than gold and silver coins) that may be lawfully held.” And 31 U.S.C. § 5119(a): “When redemption in gold is authorized, the redemption may be made only in gold bullion * * * in an amount equal at the time of redemption to the currency presented for redemption.”
Edwin Vieira, Jr., holds four degrees from Harvard: A.B. (Harvard College), A.M. and Ph.D. (Harvard Graduate School of Arts and Sciences), and J.D. (Harvard Law School).
© 2011 Edwin Vieira, Jr. – All Rights Reserved