Reading time: 20 – 33 minutes
Usually when conspiracy and money are mentioned in the same sentence most people’s brains automatically shut off at the thought of talking repitles or cloaked figures in dark rooms. While I do not discount talking reptiles, haven’t you seen Gieco’s talking gekko on television, but this broad, deep and complicated article is for those whose brains have not been devoured or turned to mush by conspiring reptiles and will objectively address the fiat legal tender currency and fractional reserve banking conspiracy.
But this conspiracy is far worse than cloaked figures in dark rooms because this is a conspiracy of economics. But what is exciting is that some of the fundamental tectonic plates of economics have begun shifting and what has appeared to the perceptive is actionable, peaceful and extermely effective strategies to harness the ecnomics in favor of the average person’s freedom.
Currency is usually the most widely used medium of exchange in economic transactions. Currency can be composed of either money, money substitutes or illusions. The only significant element for money is that it must be a tangible asset and throughout history there has been a wide range of substances that functioned as money ranging from seashells to salt and giant stones to the King and Queen of commodities; gold or silver.
Money substitutes are merely certificates for money and a common form were silver or gold certificates that operated as currency in various countries and formed the foundation for terms like Dollar, Franc, Mark, Pound, etc. that have since been redefined as they have become illusions.
Illusions are figments of people’s imagination that, as long as they are accepted, maintain some amount of purchasing power. Illusions are usually represented as ephemeral entries in databases or can take corporeal form as little colored coupons like the Federal Reserve Note Dollar, Euro, Yen, etc. Illusions have no intrinsic value and can become worthless. Their only value is in the mass delusion of people’s imagination that they represent real value.
The main cause of the 2008 financial crisis was the loss of faith in debt denominated in illusions. The real and inevitable financial and economic crisis, which will make 2008 look like a calm Sunday picnic, will be the evaporation of trust in the prima donna fiat legal tender currency illusion and world reserve currency the Federal Reserve Note Dollar, through hyperinflation.
LEGAL TENDER
Fiat currency is a medium of exchange used in commerce that has no intrinsic value but does receive legal privileges. Legal tender laws are used to force one of the exchange partners to accept a payment for debt in a form that is against their will. The market interference acts like a price control and supports the market value for the legal tender.
This is how an intrinsically worthless illusion that is the figment of someone’s imagination gains economic value. Because more people are willing to own these illusions this results in an inflation of the legally privileged currency because it can be produced and held in larger amounts than would otherwise be possible without the price control.
This type of price control has many deletrious effects such as (1) a higher purchasing power for the legally assisted currency, (2) a decline in purchasing power and price of competing currencies because of the lack of demand for cash balances even if they enjoy legal tender status such as the $50 1 ounce American gold eagle, (3) exacerbations of the business cycle due to inaccurate interest rate signals and (4) costly logistical efforts to reduce currency risk by exchanging one medium of exchange for a more reliable substitute.
With these nefarious economic effects it begs the questions: Why are legal-tender laws so frequently undertaken throughout history by monetary organizations? Only two rational answers are possible: (1) ignorant political leadership or (2) brazen villainy.
Many apoligists for The State support the first defense. But since political leaders are often surrounded by court economists and enjoy the services of knowledgeable counselors it only makes sense that they are engaged in brazen villainy with the intent to reap personal profits, export the undervalued currency and reduce the real economic effect of contracted debts, a subtle form of sovereign default.
Legal tender laws allow illusions to function as currency which should be valued like the common stock of the governments. The main source of revenue for governments is confiscation through inflation which is a form of taxation without representation. Legal tender laws eliminate all technical obstacles to an infinite debasement of coins or currency. The governments throughout the world are engaged in quantatitive easing and are acting like penny-stocks with no sustainable or rational business model so the only way to ensure the next paycheck is through massive dilution.
FRACTIONAL RESERVE BANKING
Fractional reserve banking is the practice of accepting demand deposits, deposits that can be demanded at anytime by the depositor, while at the same time lending a fraction of those deposits where the loan repayment cannot be demanded at anytime. Usually depositors become genreal unsecured creditors of the bank.
The result is a mismatch of time horizon between the bank’s assets and liabilities which renders the bank de facto insolvent. Because the bank has deliberately and with specific intent engaged in conduct knowing that it cannot meet its outstanding liabilities therefore it has commited fraud by engaging in the practice of a fractional reserve banking conspiracy.
The reserve ratio is the ratio between demands held by the bank divided by total demand deposits. For example, if deposits are $100 and loans are $85 and there is $15 at the bank then the reserve ratio would be 15%. For a bank to not be engaged in fraud it would have a 100% reserve ratio.
This practice of having a reserve ratio less than one also has an inflationary effect because there usually more total demand deposits and loans than underlying currency. In as much as the debt functions as currency, like Auction Rate Securities, Commercial Paper or Money Market Funds, this has an effect of increasing the currency supply. In aggregate, the liquidity pyramid is increased.
THE FIAT LEGAL TENDER CURRENCY FRACTIONAL RESERVE BANKING CONSPIRACY
One likes to think that one man equals one vote. But if that is the case then why do banks receives trillions of dollars in bailouts while millions of people get evicted from their homes on the basis of fraudulent mortgage documents used in sham forclosure proceedings?
Well, as Eric Schmidt, CEO of Google remarked, “Laws are written by the lobbyists.” The lobbyist industry has grown because as a whole it generates a positive return on investment.
Frank Fetter in the 1904 version of The Principles of Economics made two great insights: (1) “The market is a democracy where every penny gives a right to vote.” (page 395) and (2) “So each is measuring the services of all others, and all are valuing each. It is the democracy of valuation.” (410).
When viewing access to lobbyists and political influence through the lens of economics it becomes apparent that the effect of fractional reserve banking conspiracy and legal tender laws has is to create votes out of nothing which dilutes existing voting power.
Thus fraudulent actors engaged in a fractional reserve banking conspiracy are able to use ill acquired gains from criminal activity of the fractional reserve banking conspiracy to fund lobbying efforts that ex post facto legalize their immoral behavior. This vote inflation through merger of bank and state apportions to bankers many more votes than they would otherwise have in a free society or a society where one man equaled one vote.
The usurer has lent his money to one who takes it of his own free will, and can then enjoy the use of it and relieve his own necessity with it, and what he repays in excess of the principal is determined by free contract between the parties. But a prince, by unnecessary change in the coinage, plainly takes the money of his subjects against their will, because he forbids the older money to pass current, though it is better, and anyone would prefer it to the bad; and then unnecessarily and without any possible advantage to his subjects, he will give them back worse money …. In so farthen as he receives more money than he gives, against and beyond the natural use of money, such gain is equivalent to usury; but is worse than usury because it is less voluntary and more against the will of his subjects, incapable of profiting them, and utterly unnecessary. And since the usurer’s interest is not so excessive, or so generally injurious to the many, as this impost, levied tyrannically and fraudulently, against the interest and against the will of the whole community, I doubt whether it should not rather be termed robbery with violence or fraudulent extortion.
As I quote in chapter three of The Great Credit Contraction Thomas Jefferson wrote:
The [Bank of the United States] is one of the most deadly hostility existing against the principles and form of our Constitution. The nation is, at this time, so strong & united in its sentiments that it cannot be shaken at this moment. But suppose a series of untoward events should occur sufficient to bring into doubt the competency of a republican government to meet a crisis of great danger, or to unhinge the confidence of the people in the public functionaries; an institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation or its regular functionaries.
Because of the unfair, immoral and dangerous consequences vote inflation poses to a free society or system of government the Founding Fathers enacted into law restrictions on legal tender such as Article 1 Section 10 of the United States Constitution that reads ‘No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts’.
In addition they enacted extremely draconian penalties for engaging in activities like treason or quantitative easing which is the debasement of the currency. For example, Section 19 of the 1792 Coinage Act reads:
SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death.
Under Section 3 of the United States Constitution it should be noted that “The Congress shall have power to declare the Punishment of Treason, but no Attainder of Treason shall work Corruption of Blood, or Forfeiture except during the Life of the Person attainted.” This means that should a person be convicted of treason and executed then Congress may confiscate the property of traitors but that property must be inheritable at the death of the person convicted.
Therefore, the Founding Fathers used gold and silver not as mere commodities but as essential checks and balances in the political machinery. Additionally, they felt so strongly that tampering with these essential checks and balances posed such a threat to the peace and safety of society and government that they prescribed capital punishment as a strong deterrent to engage in these morally hazardous activities. Thus we see that if bankers were receiving the death penalty instead of bailouts then there would be a quick economic recovery and increased standard of living because moral hazard would be greatly reduced and malinvestments quickly liquidated.
INDUSTRIAL AGE VERSUS INFORMATION AGE ECONOMICS OF VIOLENCE
During the Industrial Age the return on investment from engaging in violence was extremely high. For example, a factory, mine, railroad or skyscraper required tremendous amounts of capital for their construction and the barrier to exit was extremely high. This allowed governments or labor to organize and extort the holders of capital through strikes, collective bargaining agreements and other coercisive tactics.
Additionally, the barrier to exit geographically was likewise extremely high. How easy is it to move a mine, factory or skyscraper? This allowed governments or labor, which derive jurisdiction based on geography, to extort holders of capital through regulations, taxes and other legal tender laws. After all, politics is force and force is violence.
But in the Information Age the return on investment from engaging in violence is falling tremendously and in most cases going negative. While some economists would attribute the decline in violent crime to the legalization of abortion, implying that low-income crime destined babies are the majority being aborted, instead I would attribute it to the fact that engaging in violent crime profitably is getting increasingly difficult.
One reason is the cost of protection in the Information Age is so much lower. For example, if someone were to rob you how much valuable stuff will they get and what is the probability that they will be caught? Even nefarious criminals, whether strutting around in costumes or not, perform mental calculations of value to determine whether their behavior will be profitable. One example for why robberies have declined is like that so much less cash is carried while credit or debit cards can be quickly canceled leading to lower expected returns from the behavior.
Another example that illustrates the extreme disparities between protection costs and violence returns is a pure Information Age technology: encryption. TrueCrypt is free and it takes about 10 or 20 seconds to mount and close a volume which then protects your information against snoops, identity thieves or other nefarious individuals. TrueCrypt and Dropbox make a particularly potent duo. What are the costs to access the information against the will of the encryptor?
Sure, even strong encryption like 256-bit AES or Swordfish which meets Department of Defense standards and is used by TrueCrypt can be broken but it requires thousands of dollars worth of resources and lots of time. This creates an expontially expensive curve for the extortionar in terms of both time and money as you can create 100 encrypted volumes for free in less than 10 minutes for every volume that contains actionable useful information and then if someone were to try and access that information without your consent it would cost hundreds of thousands of dollars. Thus, the cost benefit analysis begins to weigh heavily in favor of the individual using encryption. And the more people who use encryption to protect their information against criminals the more likely it is that criminals will look for easier targets.
One result of the high return on investment from violence in the Industrial Age was the greater use of violence. The transition from the Agricutural Age to the Industrial Age, which took about 500 years, led to the rise of tremendously large nation-states that exercised tremendous amounts of violence because it was profitable and the elites needed their capital assets protected.
An unfortunate side-effect of these economics was that during the 20th century the leading non-natural cause of death was governments; Mao, Polpot, Stalin, Lenin, Hitler, Hiroshima, Nagasaki, Vietnam and etc. What do you expect when violence is so profitable?
But there is a new order of the ages that is rising like the sun and requiring the vampire squids that rely on violence to retreat into the increasingly scarce shadows. And unlike the 500 year transition into the Industrial Age we are already 15 years into a 40-50 year transition into the Information Age because of the rapid relentless advance of technology.
I have found that the number one comment I receive from people who unsubscribe from my email list is ‘No time’. This is probably because they have designed their lifestyle in such a way that it is far too complicated. They probably have too many committments, too many distractions and too much stuff. As Tyler Durden said in Fight Club, “The things you own end up owning you.”
First, simplifying your life is an excellent example of how to starve the vampire squid while increasing your quality of life. The social change of the 1960′s was not caused by the marches or the police dogs, the fire hoses or the riots. The social change of the 1960′s was caused by one thing: boycotts.
Every aspect of our lives have been pervaded by corporations and government. Instead of fresh, simple, wholesome and local food we eat processed, unnatural and packaged or fried food at chain restaurants. Starbucks coffee, Apple computers, Microsoft or Adobe programs, Nike shoes, Gap clothes, etc. paid with Visa or Mastercard with debt denominated in illusions. When not drooling in front of the TV being programmed by lies our time is spent at the mall, or talking on the iPhone or Crackberry while consuming news from CNN or The New York Times being connected by AT&T or Verizon.
Consider that a corporation wants to maximize shareholder value with profits and to do so it will often cut corners, endangering our health and the environment. BP, Bhopal, Valdez, Iraq, etc. It will deceive us to spend our money on its products. It will treat its employees horribly to cut costs and increase production. It will happily make us fat then employ lobbyists to pass laws forcing us to buy their healthcare all the while knowing that by selling fried food devoid of nutrition is good for profits and increased rates of heart disease, diabetes and cancer just mean higher revenues from the sickness industry.
The madness can be stopped. The corporation and government are a hungry beast that we keep feeding. The solution: walk away and let it die from hunger.
There are many advantages to voluntary austerity. By stripping out the unnecessary you are able to make more room for what gives you joy. You will have more freedom, time, room for important things, less worry, more pleasure, develop provident living principles, frugality and most important become healthier. Want to start chopping off the vampire hydra’s heads and simultaneously cauterizing the neck so it cannot grow back? Instead of buying stuff then simply buy gold, silver or platinum with any disposable income.
Second, work towards increasing your location independence. Governments derive their jurisdiction based on geography. Why do you think as the Information Age has risen that banks and their subsidaries, governments, have attempted to make geography more important through KYC (Know Your Client) and AML (Anti-Money Laundering) regulations and laws? The PATRIOT ACT, over a third of which is devoted to financial institutions, could better be called the Cash-Flow Control Act which is primarily aimed at keeping capital in the Federal Reserve Note Dollar illusion.
But the Information Age makes geography far less important than before. To achieve location independence you simply arrange your affairs so that your geography is irrelevant to your ability to enjoy life and conduct business. In desperation as governments become increasingly desperate for revenue they will continue raising income and sales taxes, registration requirements and fees, etc.
So it will become increasingly important to consider the last of four critera in Meredith Whitney’s 600 page report about municipal versus state debt. As Bloomberg reported, “Whitney’s report rates the states on four criteria: the economy, fiscal health, housing and the flexibility to raise taxes.” For those serious about increasing their ‘tax flexibility’ which results in decreasing the ability to have their taxes raised then I highly recommend getting our new report State Income Tax Optimization because you can keep a lot more of your money through proper planning and be better prepared for the future.
Third, begin to use alternative and substitute currencies. Legal tender laws are undergirded by the ability to require someone to use a medium of exchange against their will. GATA has done tremendous work in exposing the central bank gold price suppression scheme, besides the de facto manipulation that results from legal tender laws, which is resulting in the recent CFTC denouncement of the silver price manipulation. There are approximately 100-140 ounces of paper gold or silver for every one physical ounce.
So if you begin acquiring physical bullion you can exercise principles of reverse leverage with the potential for huge profits. If your bullion is unencumbered then you can remain solvent longer than the market can remain irrational.
As you develop a location independent lifestyle you will need the ability to transmit value around the world. So begin using a substitute currency in the ordinary daily transactions that you can. I find GoldMoney a perfect solution to (1) acquire gold, silver and platinum that is held in (2) 100% reserves and (3) can be used in ordinary daily transactions like more expensive alternatives such as Paypal or wire transfers to buy assets, pay contractors, receive payment for services or goods, etc. Even billionaires like Eric Sprott, who was recently interviewed by Eric King, endorse this practice.
I don’t know the exact number but I would bet my number is way beyond 50% in precious metals and I sleep very well at night. I would not be sleeping that well if I were owning government bonds or a mortgage on a building somewhere. It is the one asset that no-one has a claim on so I heartily endorse everyone moving all of their currencies [into gold and silver]. … There are lots of ways to do it to. I think of GoldMoney and I happen to have a small interest GoldMoney that James Turk runs. And I have some of my money there and that is perfect. I get to put my money in the bank and it is gold at the same time. How cool is that?
Fourth, as the economics of violence have changed and because those economics undergird the largest and most powerful institutions the Information Age inspired massive sea-change for society, business and government in favor of peaceful and cooperative behavior will continue to intensify.
Like a hapless idiot that falls into the piranha infested Amazon river or like an iron beam submerged in nitric acid; the current Establishment is being corroded on all sides all at once by this ginormous change in the economics of violence. As a result The Great Credit Contraction has started and cannot be stopped which has resulted and will continue to result in both real and fictitious capital burrowing down the liquidity pyramid searching for safety and liquidity.
The choice you have is to go with the new mega-trend or try or resist it. The economics of the age were not kind to carriage makers, telegraph operators or blacksmiths. Change is not mandatory; you can go extinct. This change in economics coupled with the Internet makes other epics of human history and advances in technology look miniscule.
You can continue getting milked or turned into hamburger by corporations and governments or you can take matters into your own hands and implement simplicity in your life, increase your location independence and use alternative currencies in order to starve the beast to death.
That is where things are going anyway so why give them any extra fruits from your labor? Remember the golden rule: He who has the gold makes the rules. Will you be among those who make the rules in the Information Age?
CONCLUSION
For hundreds of years the fiat legal tender currency and fractional reserve banking conspiracy has been tyrannically oppressing mankind. In the Information Age the economics of violence are radically different so as the world transitions into a new order of the ages there will be significant turmoil and likely greater degrees of violence from desperation. But when the dust settles there will be a much more free, prosperous and peaceful world. The trick will be to avoid becoming collateral damage.
Now we can see the mutually exclusive conclusion Dr. Edwin Vieira asserts: “Thus, the fight over gold and silver as media of exchange is about more than mere money, let alone making money. For it is a fight with only two possible outcomes: either control of their own lives by the people themselves, or control of the people and their lives by political and economic elitists.”
Please tell us what you think!
DISCLOSURES: Long physical gold, silver and platinum and short governments.
More From RunToGold
Email
Print
 |
{ 12 comments… read them below or add one }
Wow ! I’m hoping I get some some CE credit for this education.
The elections last night were somewhat satisfying but after seeing some of the SAME
NEO cheaters get re elected it’s plain to see most of the population will be kissing my ass when we get back to Gold/Silver.
Those folks who don’t make the time for education are deluding themselves.If they think education is too expensive (time) they will most certainly find out how expensive it is to be ignorant.
And yes, I am getting more and more educated as how I can profit from the easiest time in history to take advantage of a demise of Fiat currencies.
The dropbox/cloud idea is great, thanks for the tip.
Tengo un sueno a tirar bastantes parajos en una pais sur de E.U,como Paraguay o Argentina.
Adios y Buenas Suertes Amigo !
Excellent commentary, your best one yet. Very insightful.
Several of us silver bugs believe that a method of contacting everyone in the silver market thru all the “zines”, organizations like GATA, businesses and newsletters like yours, the Doug Casey’s, Kitco’s etc etc and time a mass purchase with thousands of us participating just prior to when the trolls like JP Morgan and Chase;s shorts come due. What do you think of a Silver Tea Party such as this?? Bugs to be worked out but the thought … well the thought seems possible.
nuevo flash, Paraguay y Argentina no están en América del Sur de la UE. Para la UE es posible que desee considerar la posibilidad de Malta o de Montenegro. Estoy aqui en Buenos Aires!
I think it would only drive up the premiums on coins and small bars which the silver trolls don’t deal in anyway as they mess around with the 1,000 ounce bars. Plus, the longer they keep the suppression going the more I will take advantage of by acquiring more ounces at a lower cost. In the current environment, I think it is best to invest in high-cash flow assets and taking the excess monthly cash flow and buying physical bullion while looking for additional investment opportunities. The easiest way seems to be to wire it to GoldMoney every month and gobble up more metal.
Good article Trace. Tammy just got into using Dropbox. she really likes it. unfortunately we have more than 2 gb of data so we are paying the monthly fee.
I like your rebuttal to the freakonomics idea that abortion is saving the world. that idea always seemed sick to me.
Keep up the good work. Nice summary piece.
Trace, do you have thoughts on whether the FBAR apply to GoldMoney?
I would recommend filing the TD 90 F form for GoldMoney. With the additional broad interpretation from the bailout bills and all international wires automatically reported to Treasury and the low cost of filing therefore when weighing it all I think reporting is the best option in case there is grey issue. If you play it right it can be a nice tax deduction (storage fees and interest costs on lines of credit).
The American People Can Close the Fed, Demand United States Notes
Freedom League
When Congress borrows money on the credit of the United States, bonds are thus legislated into existence and deposited as credit entries in Federal Reserve banks. United States bonds, bills and notes constitute money as affirmed by the Supreme Court (Legal Tender Cases, 110 U.S. 421), and this money when deposited with the Fed becomes collateral from whence the Treasury may write checks against the credit thus created in its account (12 USC 391). For example, suppose Congress appropriates an expenditure of $1 billion.
To finance the appropriation Congress creates the $1 billion worth of bonds out of thin air and deposits it with the privately owned Federal Reserve System. Upon receiving the bonds, the Fed credits $1 billion to the Treasury’s checking account, holding the deposited bonds as collateral. When the United States deposits its bonds with the Federal Reserve System, private credit is extended to the Treasury by the Fed. Under its power to borrow money, Congress is authorized by the Constitution to contract debt, and whenever something is borrowed it must be returned. When Congress spends the contracted private credit, each use of credit is debt which must be returned to the lender or Fed. Since Congress authorizes the expenditure of this private credit, the United States incurs the primary obligation to return the borrowed credit, creating a National Debt which results when credit is not returned.
However, if anyone else accepts this private credit and uses it to purchase goods and services, the user voluntarily incurs the obligation requiring him to make a return of income whereby a portion of the income is collected by the IRS and delivered to the Federal Reserve banksters.
Actually the federal income tax imparts two separate obligations: the obligation to file a return and the obligation to abide by the Internal Revenue Code. The obligation to make a return of income for using private credit is recognized in law as an irrecusable obligation, which according to ‘Bouvier’s Law Dictionary’ (1914 ed.), is “a term used to indicate a certain class of contractual obligations recognized by the law which are imposed upon a person without his consent and without regard to any act of his own.”
This is distinguished from a recusable obligation which, according to Bouvier, arises from a voluntary act by which one incurs the obligation imposed by the operation of law. The voluntary use of private credit is the condition precedent which imposes the irrecusable obligation to file a tax return. If private credit is not used or rejected, then the operation of law which imposes the irrecusable obligation lies dormant and cannot apply.
In ‘Brushaber v. Union Pacific RR Co.’ 240 U.S. 1 (1916) the Supreme Court affirmed that the federal income tax is in the class of indirect taxes, which include duties and excises. The personal income tax arises from a duty — i.e., charge or fee — which is voluntarily incurred and subject to the rule of uniformity. A charge is a duty or obligation, binding upon him who enters into it, which may be removed or taken away by a discharge (performance): ‘Bouvier’, p. 459.
Our federal personal income tax is not really a tax in the ordinary sense of the word but rather a burden or obligation which the taxpayer voluntarily assumes, and the burden of the tax falls upon those who voluntarily use private credit. Simply stated the tax imposed is a charge or fee upon the use of private credit where the amount of private credit used measures the pecuniary obligation.
The personal income tax provision of the Internal Revenue Code is private law rather than public law. “A private law is one which is confined to particular individuals, associations, or corporations”: 50 Am.Jur. 12, p.28. In the instant case the revenue code pertains to taxpayers. A private law can be enforced by a court of competent jurisdiction when statutes for its enforcement are enacted: 20 Am.Jur. 33, pgs. 58, 59.
The distinction between public and private acts is not always sharply defined when published statutes are printed in their final form: Case v. Kelly, 133 U.S. 21 (1890). Statutes creating corporations are private acts: 20 Am.Jur. 35, p. 60. In this connection, the Federal Reserve Act is private law. Federal Reserve banks derive their existence and corporate power from the Federal Reserve Act: Armano v. Federal Reserve Bank, 468 F.Supp. 674 (1979).
A private act may be published as a public law when the general public is afforded the opportunity of participating in the operation of the private law. The Internal Revenue Code is an example of private law which does not exclude the voluntary participation of the general public. Had the Internal Revenue Code been written as substantive public law, the code would be repugnant to the Constitution, since no one could be compelled to file a return and thereby become a witness against himself.
Under the fifty titles listed on the preface page of the United States Code, the Internal Revenue Code (26 USC) is listed as having not been enacted as substantive public law, conceding that the Internal Revenue Code is private law. Bouvier declares that private law “relates to private matters which do not concern the public at large.”
It is the VOLUNTARY use of private credit which imposes upon the user the quasi contractual or implied obligation to make a return of income. In ‘Pollock v. Farmer’s Loan & Trust Co.’ 158 U.S. 601 (1895) the Supreme Court had declared the income tax of 1894 to be repugnant to the Constitution, holding that taxation of rents, wages and salaries must conform to the rule of apportionment.
However, when this decision was rendered, there was no privately owned central bank issuing private credit and currency but rather public money in the form of legal tender notes and coins of the United States circulated. Public money is the lawful money of the United States which the Constitution authorizes Congress to issue, conferring a property right, whereas the private credit issued by the Fed is neither money nor property, permitting the user an equitable interest but denying Allodial title.
Today, we have two competing monetary systems. The Federal Reserve System with its private credit and currency, and the public money system consisting of legal tender United States notes and coins.
One could use the public money system, paying all bills with coins and United States notes (if the notes can be obtained), or one could voluntarily use the private credit system and thereby incur the obligation to make a return of income. Under 26 USC 7609 the IRS has carte blanche authority to summon and investigate bank records for the purpose of determining tax liabilities or discovering unknown taxpayers: ‘United States v. Berg’ 636 F.2d 203 (1980).
If an investigation of bank records discloses an excess of $1000 in deposits in a single year, the IRS may accept this as prima facie evidence that the account holder uses private credit and is therefore a person obligated to make a return of income. Anyone who uses private credit — e.g., bank accounts, credit cards, mortgages, etc. — voluntarily plugs himself into the system and obligates himself to file. A taxpayer is allowed to claim a $1000 personal deduction when filing his return. The average taxpayer in the course of a year uses United States coins in vending machines, parking meters, small change, etc., and this public money must be deducted when computing the charge for using private credit.
On June 5, 1933, the day of infamy arrived. Congress on that date enacted House Joint Resolution 192, which provided that the people convert or turn in their gold coins in exchange for Federal Reserve notes. Through the operation of law, H.J.R. 192 took us off the gold standard and placed us on the dollar standard where the dollar could be manipulated by private interests for their self-serving benefit. By this single act the people and their wealth were delivered to the banksters. When gold coinage was thus pulled out of circulation, large denomination Federal Reserve notes were issued to fill the void. As a consequence the public money supply in circulation was greatly diminished, and the debt-laden private credit of the Fed gained supremacy.
This action made private individuals who had been previously exempt from federal income taxes now liable for them, since the general public began consuming and using large amounts of private credit. Notice all the case law prior to 1933 which affirms that income is a profit or gain which arises from a government granted privilege. After 1933, however, the case law no longer emphatically declares that income is exclusively corporate profit or that it arises from a privilege. So, what changed? Two years after H.J.R. 192, Congress passed the Social Security Act, which the Supreme Court upheld as a valid act imposing a valid income tax: ‘Charles C. Steward Mach. Co. v, Davis’ 301 U.S. 548 (1937).
It is no accident that the United States is without a dollar unit coin. In recent years the Eisenhower dollar coin received widespread acceptance, but the Treasury minted them in limited number which encouraged hoarding. This same fate befell the Kennedy half dollars, which circulated as silver sandwiched clads between 1965-1969 and were hoarded for their intrinsic value and not spent. Next came the Susan B. Anthony dollar, an awkward coin which was instantly rejected as planned. The remaining unit is the privately issued Federal Reserve note unit dollar with no viable competitors. Back in 1935 the Fed had persuaded the Treasury to discontinue minting silver dollars because the public preferred them over dollar bills. That the public money system has become awkward, discouraging its use, is no accident. It was planned that way.
A major purpose behind the 16th Amendment was to give Congress authority to enforce private law collections of revenue. Congress had the plenary power to collect income taxes arising from government granted privileges long before the 16th Amendment was deemed ratified, and the amendment was unnecessary, except to give Congress the added power to enforce collections under private law: i.e., income from whatever source.
So, the Fed got its amendment and its private income tax, which is a bankster’s dream but a nightmare for everyone else. Through the combined operation of the Fed and H.J.R. 192, the United States pays exorbitant interest whenever it uses its own money deposited with the Fed, and the people pay outrageous income taxes for the privilege of living and working in their own country, robbed of their wealth and separated from their rights, laboring under a tax system written by a cabal of loan shark banksters and rubber stamped by a spineless Congress.
Congress has the power to abolish the Federal Reserve System and thus destroy the private credit system. However, the people have it within their power to strip the Fed of its powers, rescind private credit and get the banksters to pay off the National Debt should Congress fail to act.
The key to all this is 12 USC 411, which declares that Federal Reserve notes shall be redeemed in lawful money at any Federal Reserve bank. Lawful money is defined as all the coins, notes, bills, bonds and securities of the United States: ‘Julliard v. Greenman’ 110 U.S. 421, 448 (1884); whereas public money is the lawful money declared by Congress as a legal tender for debts (31 USC 5103); 524 F.2d 629 (1974).
Anyone can present Federal Reserve notes to any Federal Reserve bank and demand redemption in public money — i.e., legal tender United States notes and coins. A Federal Reserve note is a fixed obligation or evidence of indebtedness which pledges redemption (12 USC 411) in public money to the note holder.
The Fed maintains a ready supply of United States notes in hundred dollar denominations for redemption purposes should it be required, and coins are available to satisfy claims for smaller amounts. However, should the general public decide to redeem large amounts of private credit for public money, a financial melt-down within the Fed would quickly occur.
The process works like this. Suppose $1000 in Federal Reserve notes are presented for redemption in public money. To raise $1000 in public money the Fed must surrender U.S. Bonds in that amount to the Treasury in exchange for the public money demanded (assuming that the Fed had no public money on hand). In so doing $1000 of the National Debt would be paid off by the Fed and thus canceled.
Can you imagine the result if large amounts of Federal Reserve notes were redeemed on a regular, ongoing basis? Private credit would be withdrawn from circulation and replaced with public money, and with each turning of the screw the Fed would be obliged to pay off more of the National Debt. Should the Fed refuse to redeem its notes in public money, then the fiction that private credit is used voluntarily would become unsustainable.
If the use of private credit becomes compulsory, then the obligation to make a return of income is voided.
If the Fed is under no obligation to redeem its notes, then no one has an obligation to make a return of income.
It is that simple! Federal Reserve notes are not money and cannot be tendered when money is demanded: 105 So. 305 (1925). Moreover, the Ninth Circuit rejected the argument that a $50 Federal Reserve note be redeemed in gold or silver coin after specie coinage had been rescinded but upheld the right of the note holder to redeem his note in current public money (31 USC 392; rev., 5103): 524 F.2d 629 (1974); 12 USC 411.
It would be advantageous to close out all bank accounts, acquire a home safe, settle all debts in cash with public money and use U.S. postal money orders for remittances. Whenever a check is received, present it to the bank of issue and demand cash in public money. This will place banks in a vulnerable position, forcing them to draw off their assets. Through their insatiable greed, banksters have over extended, making banks quite illiquid.
Should the people suddenly demand public money for their deposits and for checks received, many banks will collapse and be foreclosed by those demanding public money. Banks by their very nature are citadels of usury and sin, and the most patriotic service one could perform is to obligate banksters to redeem private credit.
When the first Federal Reserve note is presented to the Fed for redemption, the process of ousting the private credit system will commence and will not end until the Fed and the bankstering system nurtured by it collapse. Coins comprise less than five percent of the currency, and current law limits the amount of United States notes in circulation to $300 million (31 USC 5115).
The private credit system is exceedingly over extended compared with the supply of public money, and a small minority working in concert can easily collapse the private credit system and oust the Fed by demanding redemption of private credit. If the Fed disappeared tomorrow, income taxes on wages and salaries would vanish with it. Moreover, the States are precluded from taxing United States notes: 4 Wheat. 316.
According to Bouvier, public money is the money which Congress can tax for public purposes mandated by the Constitution. Private credit when collected in revenue can fund programs and be spent for purposes not cognizable by the Constitution.
We have in effect two competing governments: the United States Government and the Federal Government (Corp. US). The first is the government of the people, whereas the Federal Government/Corp US is founded upon private law and funded by private credit.
What we really have is private government. Federal agencies and activities funded by the private credit system include Social Security, bail out loans to banksters via the IMF, bail out loans to Chrysler, loans to students, FDIC, FBI, supporting the U.N., foreign aid, funding undeclared wars, etc., all of which would be unsustainable if funded by taxes raised pursuant to the Constitution.
The personal income tax is not a true tax but rather an obligation or burden which is voluntarily assumed, since revenue is raised through voluntary contributions and can be spent for purposes unknown to the Constitution.
Notice how the IRS declares in its publications that everyone is expected to contribute his fair share. True taxes must be spent for public purposes which the Constitution recognizes. Taxation for the purpose of giving or loaning money to private business enterprises and individuals is illegal: 15 Am.Rep. 39; Cooley, ‘Prin. Const. Law’, ch. IV.
Revenue derived from the federal income tax goes into a private slush fund raised from voluntary contributions, and Congress is not restricted by the Constitution when spending or disbursing the proceeds from this private fund.
It is incorrect to say that the personal federal income tax is unconstitutional, since the tax code is private law and resides outside the Constitution.
The Internal Revenue Code is non-constitutional because it enforces an obligation which is voluntarily incurred through an act of the individual who binds himself. Fighting the Internal Revenue Code on constitutional grounds is wasted energy.
The way to bring it all down is to attack the Federal Reserve System and its banking cohorts by demanding that private credit be redeemed, or by convincing Congress to abolish the Fed.
Never forget that private credit is funding the destruction of our country.
In response to Joe’s post, there is an entrepreneur/physician in the Tampa area who has taken on the ambitious task of suing the FED ( http://www.suethefed.com )….working along with a number of law firms in the U.S. who share similar concerns. There are many of us who are concerned about the future of our currency and the destructive influence of the FED. Dr. Davis is a highly successful businessman with credentials that do not need to be enumerated here, but he knows business, and he understands the dollar crisis. I heard him speak once and was impressed. Who would have every thought it would be possible to sue the FED? We need the energy and the influence of business leaders….and law firms who understand how important it is to take a stand to prevent us from falling off the cliff. And they need our support.
The U.S. is trying to run the dollar out, by monetising their debt they are in effect devaluating the currency and also increasing the cost of all dollar denominated assets. Thare don’t seem to be any takers on the dumping of USD reserves around the world yet. Those who hold dollars are looking for an exit strategy in a way that won’t see extreme downward pressures. I can only suggest a move to physical metals. I see more upward potential for silver to at least an all-time high, where gold is already forging new ground daily.
{ 4 trackbacks }