Column by Paul Hein.
Exclusive to STR
Decades ago, seated at my desk, writing checks, the thought came, unbidden and unexpected, into my mind: Where are all the armored cars?
I was, at that moment, probably only one of thousands—perhaps hundreds of thousands—of individuals writing checks. By means of those written instruments, money was being transferred from one bank to another. If the numbers on those checks represented something--some THING--then where were the armored cars? Thanks to those checks, Bank A might be owed millions by bank B, which in turn might be owed millions by Bank C, which, in turn, was owed millions by Bank A. Someone had to be keeping track of all these debts, and, at least once in a while, the actual transfers of money had to take place; hence the armored cars. One might expect that on the day when the actual transfers took place, the streets would be congested with these ungainly vehicles, but that did not seem to be the case. I did occasionally see an armored car, but I can’t recall ever seeing more than one on any given day, and it was more likely to be at a supermarket or shopping mall than a bank. Could it be that our money was nothing more than numbers on checks, rendering such things as armored cars anachronisms?
The man who could answer that question would be Lawrence Roos, who was, in the late ‘70s, president of the St. Louis Federal Reserve Bank. I wrote Mr. Roos a letter, asking if our money was tangible, and if so, what its physical characteristics (color, density, chemical make-up, etc.) might be. Alternatively, if our money was NOT tangible, how could one tell if he had any? Mr. Roos answered by saying, as best I recall, that due to the technical nature of my question, he was unable to respond at that time. Suspicions heightened, if not verified. Something was definitely fishy!
I had been doing some modest research on the subject of our money, assisted by the late Merrill Jenkins, who styled himself the Monetary Realist, having made himself expert on the subject. As a result, I had learned that, pursuant to law, our dollar bills represented a debt owed by the federal government.
Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank 12 USC 411
Accordingly, I sent a dollar bill to the Secretary of the Treasury, one G. William Miller. I pointed out that my dollar bill represented an obligation of the United States, and requested that he do whatever, by law, he was required to do to satisfy that obligation. I received a reply from Forest D. Montgomery, Counselor to the General Counsel, consisting of five short sentences, the relevant one of which reads, “It (my dollar bill) is not redeemable in gold or silver (I hadn’t asked for gold or silver, or anything in particular) and thus our only obligation in this case is to return your property to you.” My dollar was returned, or perhaps I should say the buck was passed. (You can find Mr. Montgomery’s letter reproduced opposite page 829 of Volume 1 of Dr. Edwin Vieira’s magnificent magnum opus, Pieces of Eight
.) This was enough to convince me that there was no money in our “monetary” system.
I got verification of that belief upon writing to the president of the bank where I had an account, asking him if he could tell me what a dollar was. If money, after all, were intangible, how could there be a unit, or standardized amount, of it? Is there a unit, or standardized amount, of happiness, or frustration? He replied with remarkable candor, admitting that, though he used the term every day, he could not tell me what it was. He asked that, if I continued my research on the subject, I tell him what a dollar was!
But that was over 30 years ago. Today, the great majority of “dollars” are simply numbers in accounts. They may be transferred by check, but also electronically, removing any trace of “stuff” from the monetary system. This, as it happens, pretty much eliminates all privacy in financial matters, but gives those who create the numbers, or transmit them electronically, absolute control over the creation and transmission of “money.” And since these numbers are created only by banks, and then only as loans, the total amount of “money” in existence is insufficient to repay principal plus interest, thus necessitating continual borrowing--at interest.
It is amusing to see the concern displayed by political candidates about what they call the “debt crisis.” To us followers of Merrill Jenkins, this “crisis” was seen as inevitable over 30 years ago. It takes no great economic sophistication to see that you cannot borrow yourself out of debt. The Founders appreciated it in 1789, mandating that no state make anything but gold and silver coin a legal tender. They had lived through the period of the Continental “dollar,” which they printed in profusion to finance the revolutionary war (wars without fiat would be impossible!). When that “dollar” became “not worth a Continental” in 1781, they had learned a valuable lesson, which their successors promptly forgot. Today’s politicians are crying over milk long ago spilt. They are fools or knaves.
I recently asked the Missouri Department of Revenue to explain how the property tax could be assessed in terms of units of non-tangible money, pointing out that Missouri law made the silver coins of the United States a legal tender in Missouri. Nothing else is so designated. The Department’s General Counsel’s answer was to agree that Missouri law made United States silver coins a legal tender in this state, but added that the statute did “not state that they are the only legal tender.” (emphasis his) Gosh, is age 21 the ONLY legal age to drink alcohol, or 70 MPH the ONLY legal speed limit? The bluebird is the state bird, but is it the ONLY one?
It was from Merrill Jenkins that I first learned the function of paper money: the means by which real wealth is transferred from the producers of wealth to the producers of money. As long as people give their services and products for man-created “money,” the scam will continue, with the money-creators growing more powerful and affluent, while the productive among us see their standard of living ratcheted down, and their freedoms compromised. Ultimately, it is a moral issue: Thou Shalt Not Steal!
Justice and freedom are incompatible with fiat.