THE PROBLEM WITH BORROWING
CURRENCY INTO CIRCULATION
It
is true that vesting in the hands of a private entity the power to issue a fiat
paper currency gives to that private entity extraordinary power over not only
the economy of a nation but its society as well. While many constitutionalists are acutely
aware of this fact, little discussion has been made concerning an important corollary
of this power. Not only is the power to issue a fiat paper currency extremely
important to the currency creators, but the ability to loan such currency into
circulation gives to them absolute and complete control. The issuing power probably would be absolutely
useless unless the currency so issued is borrowed into circulation by the users
thereof. It is through this process of borrowing currency into circulation that
our creditors, the currency creators, wield complete power over the debtors,
the users of currency. This inherent flaw in our currency system has not received
adequate discussion.
The
most convenient method to demonstrate the inherent flaw of borrowing currency
into circulation is the extremely simple example of a card game. Let us imagine
5 people sitting in a room, and 4 of them desire to play a game of cards. Four
players sit down at a card table, but, although possessing the desire to play a
game, it is noticed that they have no cards with which to play. The fifth person
in the room approaches the 4 players and notices their lack of cards. This
fifth person just so happens to have in his possession a deck of cards, which
he acquired for less than two cents per card. Being a character of predatory
nature, the fifth person offers to loan his cards to the players upon stringent
terms and conditions. This villain makes to the potential players the following
proposal: "I have 52 cards and I will loan each of you players 13 cards
apiece. However, each of you players must execute and deliver to me a promissory
note wherein you promise to repay me 13 cards, plus 1 card in the way of
interest, within one hour. And in order
to afford me protection that I will be paid in full at the end of one hour,
each of you must give me a mortgage upon certain of your real and personal
property." To this "take it or leave it" offer, each player agrees,
they each give to the fifth person the required promissory note and mortgage,
and the fifth person delivers 13 cards to each player. Upon obtaining the cards
necessary to play, our four players engage in their game. However, when one
hour has passed, the fifth person notifies the players and demands payment of
the notes. Each player still only possesses 13 cards apiece, and no player can
repay the principle and interest due to the owner of the cards. The fifth person
then forecloses upon each player and obtains possession of all pledged
collateral.
What
was the fatal flaw committed by our unfortunate card players? This mistake
occurred when they decided to borrow their cards into circulation in order to
play their little game. An examination of the promissory notes they gave to the
fifth person discloses that the aggregate principle amount borrowed was 52 cards;
however, aggregate liabilities of all 4 players was 56 cards, which was 4 cards
more (the interest) than were in circulation. Our fifth person was most
definitely playing with a deck stacked in his favor and he most assuredly knew
that by creating liabilities greater than the amount of cards in circulation,
he would eventually acquire possession of all the collateral of the players.
The
above scenario can be varied in different ways, but the outcome is always the
same. One player can possess enough cards to discharge his note, but invariably
another player will not have such ability, thus allowing foreclosure. Whether
you play the game through the execution of only one set of notes or whether you
continue playing the game by means of continually renewing the notes, the
position of the players never changes - the aggregate liabilities are always
greater than the number of cards in circulation.
The
above simple example is an apt description of our present currency system. The
four card players represent government and industry. The fifth person
represents banksters, and the cards represent our
currency (which is not lawful money). Three of the players, representing
industries, desire to engage in trade and commerce for mutual advantage and
gain. The fourth player, representing government, desires to provide public
goods and services for the other three players. All will benefit and grow by engaging
in trade. However, if such trade is consummated and achieved by borrowing the
medium of exchange into circulation, the banksters
will eventually acquire possession of all the productive facilities of
government and industry.
However,
while our banksters (the Fed and private banks) could
eventually acquire all of our productive facilities through the process of
loaning our currency into circulation, they are not content to eventually take
over through this simple process. Like the cat playing with the doomed mouse,
our friendly banksters desire to manipulate the
currency and add "zest" to their lives. During economic booms
(currency expansions), the banksters load up the
economy with debt; once the targeted society is "loaned up" as much
as possible, the banksters deliberately,
intentionally and with malice aforethought (ask Paul Adolph Volcker)
contract the currency supply. Contraction of the currency supply allows these villains
to foreclose upon collateral pledged by innocent victims. Loaning currency into circulation is an
instrument of silent warfare as is also expansion and contraction of the
currency supply.
The
above example of the card game and its comparison with our present currency
system demonstrates a very simple economic and societal rule of natural law.
Allowing any organization, either a privately owned monopoly or the government itself,
to loan currency into circulation will allow the entity vested with such power
to eventually take over the whole of society. Vesting such power in any entity will also
allow such entity to expand and contract the currency system at will, thus
allowing over a period of time such entity to eventually control all productive
assets of a society through the process of foreclosure. If any entity is vested
with such power, eventually that entity will either foreclose upon all of
society or will make an outright attempt to buy all the productive assets of a
society. Such power should not be vested in any human hands. The power to issue
a fiat currency, combined with the power to loan the same into circulation, is
inherently dangerous and is the chief tool for conquest of a society from within.
PAPER AS A MEDIUM OF EXCHANGE
It
may be generally stated that the American people are cognizant of some grievous
defect or wrong which is the basis of our contemporary social problems and
which is caused by our governmental and political institutions. However, while
sensing the presence of this social malady, many Americans cannot readily identify
either the cause or its consequence, and persons in this rank of society can
only lay the blame at the feet of some ephemeral entity. Other Americans, after
careful study, have come to realize that a great part of our national calamity
is identified with our
monetary system and particularly
with this system's known antithesis to the U.S. Constitution. Of this group,
there are two competing factions; one faction unequivocally asserts that only
gold and silver coin constitute money in our country
and the author hereof is a member of this faction. Another faction, schooled in
monetary and economic thought to a degree, promote the issuance of Treasury
Notes as an alleged cure for our great social ills. It is to this group that
this short memo is addressed.
The
two groups noted above jointly and correctly attack the issuance of Federal Reserve
Notes by the Federal Reserve Banks and intangible credit by our nation's
private commercial banks. Beyond this mutual identity of a single issue,
however, these two factions diverge. While the first mentioned group or faction
challenges paper credit instruments and maintains steadfast allegiance to
specie, the latter group merely wants to take control of the paper money system
away from private interests and vest such control and power in the hands of
Congress. While these advocates have command and understanding of some monetary
issues, they are totally lacking in ultimate understanding of the system if
they advocate as an end result another paper money system.
All
paper money systems use a liability of some entity as a monetary instrument.
But, the use of a liability as a medium of exchange is an extremely dangerous
undertaking. For the entity allowed the right to use its liability as a
monetary instrument, that entity has absolute and total control over the annual
produce and real wealth of a society.
Carried to the ultimate extreme, the entity clothed with such power has
the ability to purchase and reduce to its control the entire GNP of a nation as
well as its productive facilities. Allowing such an entity to exist within any
group of people or nation subjects those people to organized plunder by the entity
vested with such power.
A
simple analogy will demonstrate the validity of this principle. Let's suppose
that a person of great cunning and persuasive ability were upon a ship wrecked
at sea and then were washed upon the shores of a remote island. After
recovering from this unfortunate event, the pirate walks inland and discovers a
primitive society of many people ruled by a king. After a time, the pirate becomes acquainted
with the king and becomes his constant companion. Upon reaching the state where
the pirate has complete confidence of the king, the pirate proposes, for some
great social
purpose, that the king sanction
the creation by the pirate of a great commercial bank which will issue a paper
currency. This is soon achieved and thereafter paper money is everywhere upon
the island. Soon, the pirate's wealth rivals and surpasses that of the king;
the pirate ultimately owns or controls everything on the island and the king
becomes a pliant servant of the pirate.
How
did a destitute, penniless lost pirate in an alien society rise from such
destitution to supreme wealth and power? The answer is simple. His bank issued
bank notes which were used by the island natives as a medium of exchange. Once
the pirate was clothed with the right to have his liabilities (bank notes) act
as a medium of exchange, he could expand and contract his outstanding notes,
and issue endless quantities of such with which he could buy everything on the
island. It is through this process that our pirate acquired wealth and power
and could direct all economic activity on the island.
The
above demonstration is a direct analogy to the
Both
of the above factions recognize the ephemeral nature of our currency and the
interest burden carried by such use. However, the advocates of Treasury Notes
seemed to be fixed in their attack upon the monetary system and only wish to
abolish the burden of the interest. Treasury Note
advocates correctly point out that the interest burden is caused by issuing the
currency into circulation through the loan process, with consequent interest charges.
It is true that if our currency were issued interest free, then we would not
have such burden; this is the primary point of Treasury Note advocates who wish
to abolish the Fed and then empower the Treasury to issue into circulation,
without interest, notes of the Treasury.
However,
suppose that the advocates of Treasury Notes have their way and the Fed is
abolished and such notes are issued interest free. This would eliminate the
interest burden our economy carries which results from loaning currency into
circulation. But, have we destroyed the "pirate?" No, we have not and
we have only changed the character of the "pirate" from a private to
a public one. We will still be using liabilities of an entity as a medium of
exchange and that entity, as noted above, will have power to purchase or control
the entire GNP and all productive facilities. But, making the Treasury, as
opposed to private banks, the "pirate" will not correct our social ills, it will only change the source from which such evils originate.
It
is the making of liabilities a medium of exchange that is causing our great
monetary problems. To cure this problem, we must make something other than a
liability our medium of exchange. This requires an inanimate object for such
use and only gold and silver are capable of fulfilling this purpose.