Major Problem: Ignorance
Nature of the Federal Reserve
Politics and Money
Restoring the Dollar II
Constitutional Control Removed
Consequences
Steps to Restoration
...any system of fractional reserve banking suffers from inherent instability that increases over time; because at the base, fractional reserve banking is a kind of Ponzi or pyramid scheme. For that reason, fractional reserve banking is a confidence game in both senses of the term.
Dr. Edwin Vieira, Jr.
Clearly, the Federal Reserve was established to remove the Constitution as the controlling agency in national monetary policy, and to guarantee that certain special interest groups be monopolistically represented in determination of that policy for the special benefit of those groups and at everybody else's expense. There are two levels of analysis on which to consider this fact.
The Federal Reserve System is a tool for stabilizing the inherently fraudulent fractional reserve system. The purpose of the Federal Reserve System is not to do what the bankers want; but to do what the bankers need.
Let us look at the way a monetary system corrupts from a regime of commodity money to that of fiat. In a regime of commodity money, the bankers employ the inherently fraudulent fractional reserve system; they expand the supply of fiduciary money beyond the supply of commodity money available. This has two effects.
One, it enables bankers to loan more money than they otherwise would, and that increases their profits.
Two, it makes the holders of the fiduciary money unknowing, and, I assume, unwilling partners with the bankers in those excessive loans and spreads the risk of the loans throughout society, indirectly insuring the bankers at the expense of the public.
Because the expansion of the supply of this inherently fraudulent fiduciary money is limited by the possibility of bankruptcy -- lots of people asking for redemption, followed, logically by the bankruptcy of the banks -- the bankers support legislation that is designed to insulate the fractional reserve banking system.
They use propaganda and all sorts of disinformation to con the public into believing that the banks are sound. One such mechanism is so-called deposit insurance. "If we fail, the government will pay. Don't ask us who will pay the government." But it is you who will actually pay. So the first con is disinformation.
With their influence, as we saw in the 1930's and many instances before that, the bankers asked the government to authorize what was called "suspension of specie payments" or simple refusal to fulfill their promises to redeem the fiduciary money with commodity, allowing bankrupt bankers to stay in business -- not allowed for any other segment of the economy.
Suspension of specie payments is a key indicator of the breakdown of the free-market economy because that is a governmentally allowed repudiation of contracts. In effect, they are governmentally licensed thefts.
To prevent bank runs altogether, the bankers get government permission to repudiate fiduciary money totally; converting the fiduciary money into fiat money. No more bank runs: there's nothing to redeem.
The government then forces circulation of the fiat currency by some mechanism such as making that to be money for payment of taxes for public expenditures. Or the government could declare that money legal tender for all debts; or the government could outlaw contracts that are payable in any other form of money, especially commodity money. That is precisely what the government did in the banking crisis in the 1930's --1933, '34 and '35. They, in essence, with respect to gold coin, at least, turned Federal Reserve Notes into a fiat legal tender currency. This substituted the government, or the taxpayers, for the banks and the banks' shareholders as the ultimate guarantors of fiat money, in return for which the banks agreed to do two things:
First, they agreed to monetize the public debt; that is, to buy government securities for duly created fiat money, in effect, enabling the government to use the fiat money system as an instrument of taxation.
Second, the banks agreed to cooperate in some kind of cartel or self-regulatory scheme to control the expansion of the supply of fiat money within limits that maintained public confidence; that is, the government and the banks agreed to divide the amount that can be looted from the general public by manipulation of the money supply and to moderate that looting so that the system doesn't collapse and the public doesn't catch on.
The fractional reserve banking system is nothing but a conspiracy between the public officials and the bankers to loot the American people. The Federal Reserve is simply a very elaborate and complicated device that has been set up to accomplish these simple ends in a higher more deceptive way.
The Federal Reserve system was created in response to failures in the reserve banking system at the local or regional levels. It is a national system regulating all; and it was an attempt, essentially domestically, in 1913, and then internationally under the Bretton Woods agreement in 1944, to expand that kind of fractional reserve system, first throughout the United States and then throughout the world.
Real fiat money came into existence in this country only in 1968. The promise to pay in gold was repudiated in 1933; and the promise to redeem all currency, or any currency, in silver was refuted in '67 and into '68. It was in June of 1968 that we finally had, for the first time in this country, a true fiat currency in the Federal Reserve. So this is a fairly recent problem, as historical political problems go.
In only about twenty years of fiat currency we have seen a geometric breakdown in the monetary system, under which we suffer today.
In this system, the Federal Reserve plays a simple but very vital role. The public confidence in the monetary banking system weakens because of the effect of overexpansion of the supply of fiat money. That is always the direction in which fiat money goes: expansion, expansion, expansion. The Federal Reserve jumps in to "restore confidence," by what they call "fighting inflation;" that is, producing increases, and then decreases in the purchasing power of the medium of exchange. The Federal Reserve may use what the public considers drastic means in this alleged fight. Nixon imposed wage and price controls with a four percent inflation. But the Federal Reserve will never use means so drastic that they precipitate a genuine economic collapse or seriously endanger the long-term interests of the banking cartel, its satellite industries or its political cronies.
However, any system of fractional reserve banking suffers from inherent instability that increases over time; because at the base, fractional reserve banking is a kind of Ponzi or pyramid scheme. For that reason, fractional reserve banking is a confidence game in both senses of the term. The Federal Reserve, the banking cartel, and the politicians of the American one-party system operate under the theory that you can fool all the people some of the time, and some of the people all of the time, and that's good enough. But they forget that, as Lincoln remarked, "You can't fool all the people all the time." Over time, some people encourage others to learn what's going on. And people who have learned tend to act.
So we can expect that the remaining lifetime of the Federal Reserve confidence game will be relatively short.
Now let me shift to a somewhat higher level of analysis.
The Federal Reserve system is not simply a control mechanism for the national banking cartel. It is one of the most important mechanisms in a pervasive system of Fascist economic regulations that has been set up in this country, slowly but surely, since the turn of the century. This explains the political independence of the Federal Reserve system in a way that is much more logical than the idea that money and banking are not politically important, divisive or even interesting.
If a Fascist administrative state is to regulate the economy with relative autonomy from the electoral public and most special interest groups -- which is the definition of an administrative state -- it runs the economy without having to be subject to the whims of the voters. In that kind of state, the monetary agency has to claim political independence. In fact, all of the major regulatory agencies have to claim political independence -- which, they really all do claim, to some degree. The Federal Reserve claims it to the greatest degree. So political independence is precisely what one would expect the Federal Reserve to claim, being a part of an anti-Democratic mechanism of economic and political control.
And that no constitutional branch of the national government -- not the Congress, not the President, and not the Judiciary -- ever disputes the Federal Reserve system's supposed independence, proves that those branches, too, have been couped with agencies of this Fascist state.
... by functioning as a mechanism for redistributing wealth, modern political money systematically corrupts the electoral process because it enables politicians to buy votes with promises of new government spending programs made possible only by the banking systemÕs ability to monetize the debt.
Dr. Edwin Vieira, Jr.
Contemporary political money, and the banking system that generates it, have five major consequences.
First, political money is the prime means by which the government operates a system of hidden taxation through increases in the supply of money, the inflation mechanism.
Second, by operating a system of hidden taxation, modern political money enables the ruling elite of the country to redistribute the nation's wealth from one group to another. Greg Barrington, of The American Institute for Economic Research, puts out a little paper every year reporting how much money has been redistributed by inflation since World War II, which ended in '45. The last one I saw showed over six trillion dollars had been redistributed through inflation -- six trillion!
Inflation redistributes wealth in a way that the market would not have distributed the wealth, and therefore produces, as a result, less valuable product than the market would have produced. The United States has suffered a fantastic loss of wealth -- minimum six trillion dollars since World War II -- because of the Federal Reserve system.
Third, by functioning as a mechanism for redistributing wealth, modern political money systematically corrupts the electoral process because it enables politicians to buy votes with promises of new government spending programs made possible only by the banking system's ability to monetize the debt.
In the old days the voters would say to the politician, "HereÕs some money. Vote for these programs." Today the politicians can generate the money themselves; so they say, "We have the money. Vote for us."
Pork barrel legislation on a vast scale is possible because they can generate fiat currency without limit -- at least over time.
Fourth, by tying the banks to the public debt, modern political money licenses the banks to loot the public treasury -- initially by guaranteeing Federal Reserve Notes as obligations of the United States and privileging those notes as legal tender -- and ultimately by providing bailouts to the bankers through the FSLIC, the RTC, the FDIC, and whatever, when the scheme of inherently fraudulent fractional reserve banking collapses. We can see that happening right now: billions, hundreds of billions, five hundred billion dollars for the savings and loan bailout. No matter what they tell you. It will cost five hundred billion, at least. How much will the commercial bank bailout cost? How much will the bailout of the insurance companies cost? What will the bailout of the pension funds cost? Pension Benefit Guaranty Corporation. What will the bailout of those cost? Add that to the six trillion lost since World War II.
Fifth, modern political money and banking functions as a key mechanism in the scheme of Fascist economic planning that misdirects and wastes resources and thereby lowers the standard of living of most Americans for the benefit of the privileged few.
... Such part and parcel reforms have been put into effect in several other countries. It can be done! The only question is whether the American people (a) want it to be done, and (b) have the gumption to make the politicians do it.
Dr. Edwin Vieira, Jr.
Restoration must be done constitutionally. The current system is entirely the product of statutes and regulations, ninety-five per cent of which is unconstitutional. Change will have to be made by the enactment of new and different and constitutional statutes.
I can give you an outline of the steps to bring the US monetary and banking system back into conformance with constitutional law -- all of which can be documented historically -- based upon early instances of American constitutional and statutory law:
First, recognize that the basic unconstitutional steps that were taken by the government to establish ultimately this fiat currency system must be declared unconstitutional:
Second, disestablish the Federal Reserve system and privatize its few politically legitimate and economically useful functions, such as a national clearing house, etc., to the extent that those functions would be legitimate and useful for private banks if they could be continued, but certainly not under the auspices of anything that looks like the Federal Reserve system.
Third, terminate the status of Federal Reserve Notes as obligations of the United States, as legal tender for all debts. There is absolutely no constitutional justification for the American taxpayer to be the ultimate guarantor for the wild investment schemes of banks, savings and loans, and the other members of the the Federal Reserve system.
Fourth, dedicate to the restoration of the constitutional money system the gold that was unconstitutionally seized from the American people in 1933 that is now held by the United States Treasury. Most of the gold is not actually held in Fort Knox -- it is held at West Point. It is called "coin melt" gold. It is the ninety per cent pure gold that was melted down into ingots, primarily from coins that were seized during the 1933 seizure because the government did not have that much gold.
Who owns that gold? The people from whom it was stolen own it, because it was illegally taken. The government is engaged in receiving stolen goods. All of that money must be returned to those from whom it was taken -- if they can be ascertained -- or held in what is called a constructive trust to be used for a purpose related to the restoration of the monetary system, and that would mean coining all of that gold and getting it out into circulation as quickly as possible if we cannot find the actual owners.
Fifth, declare voidable all contracts between member banks and the Federal Reserve system and any other parties where the consideration for contracts on the part of the banks was the unconstitutional monetization of debt. Now what that means is that you collapse the debt pyramid to the detriment of the banks; the banks keep the debts. Thus, it's not the taxpayers who eat them, the banks eat them. The Rockefellers eat them -- the foreign shareholders of those banks eat them. If they don't like that they can go to jail on RICO charges.
Sixth, revalue in terms of constitutional dollars all outstanding contracts now payable in Federal Reserve Notes. Honest people were forced by circumstances to conduct their financial affairs on the basis of Federal Reserve Notes, and those contracts cannot be voided. The contracts must have some real value attached to them. The real value attached to them would be their value in constitutional dollars.
This problem was solved by the Confederate States after the Civil War. Contracts in the Confederate States that were not declared to be illegal contracts were revalued in then-current constitutional gold and silver coin, and the system worked fine. The Supreme Court figured out how to do that at the end of the Civil War, and it can do the same today.
Immediately begin the free coinage of gold and silver coin; not the limited coinage they do now -- the American Eagle coins -- but coining as much gold and silver as people want to bring into the mints.
Seventh, adopt all the foreign silver and gold coins as money of the United States -- what Congress did in the late seventeen hundreds when there wasn't even a mint in this country. Where did the original money come from? They just made a list of all the gold and silver coins that were any good and said, "These have so much gold, and these have so much silver," and they were made the money of the United States. They monetized all the gold and silver of the world instantly. Instantly it could be done.
Those who say there is not enough gold or silver do not know what they are talking about. It is not in circulation because it is not treated as money. Once it is said to be money it will start coming out from the coffers and out from under the beds.
Regulate the value of all those coins and then prohibit the practice of the fraudulent fractional reserve banking schemes and other such typical commercial fraudulent practices.
This is not a visionary program. It is very difficult politically to put it into effect; but it is not, as a matter of economics, visionary.
These steps were taken twice before. At the end of the War of Independence we had the same kind of rotting vegetable currency -- the Continental currency -- the same Bills of Credit. There were no gold and silver coins in circulation. The economy was absolutely prostrate. All of these steps were taken, and economic recovery followed.
In the South following the Civil War, the Confederate currency was, of course, destroyed. The country was prostrate, and was under military occupation when these same steps were taken. In fact, they were taken in the entire country with the resumption of the Specie Act in 1875 going from the fiat "greenbacks" back to redeemable or fiduciary paper currency.
Such part and parcel reforms have been put into effect in several other countries. It can be done! The only question is whether the American people (a) want it to be done, and (b) have the gumption to make the politicians do it.
To see all the wonderful things that Kidogo has in store for you...
Return to Kidogo's World
Reconstructing the Republic:
A Constitutional Battle Plan, by Howard PhillipsRestoring the Dollar, by Dr. Edwin Vieira, Jr.
Remarkable Remedy, by Jean Carpenter
Sockdolager: A Tale of Davy Crockett
and much more ...
Catalog of Essential ePublishing Resources
Kidogo's World: http://www.sonnet.com/usr/kidogo/
This Website designed by WebMaster: Jean Westphal, kidogo@sonnet.com
Backgrounds designed by Bill Lizasoain
Backgrounds Trademark 1996 Jean Westphal
NOTE. Views expressed on this web site
are not necessarily the official views
of the Constitution Party.
The official positions of the Constitution Party
are reflected only in its platform and in resolutions
passed by the National Committee.Please send comments, suggestions, or requests for links to: kidogo@sonnet.com.
(Please put "kidogo's world" in the subject line.)
Last revised: 10 June 2000.