Tuesday, January 29, 2013

The federal government ONLY POSSESSES those powers delegated to it


It is common for many people, especially politicians and judges, to think of the Constitution in fragmented terms, isolating this part and that part to suit the particular needs of any given situation however, the entire Constitution is, when properly construed, consistent throughout. If we take the Bill of Rights, for instance, those Amendments do not add or subtract anything from the Original Constitution, the fact is that they were already Rights prior to the writing and ratification of the Constitution. The federal government ONLY POSSESSES those powers delegated to it, this fact is evident in Article 1, Section 1 when it declares those powers to be VESTED in Congress. The word VESTED is defined as FIXED, meaning the powers of Congress are cannot be based on any contingency authority except those which are expressly delegated, this, by definition, would exclude the idea that there can be a broad interpretation of implied powers available to Congress.

The structure of the entire Constitution is articulated concisely within the 10th Amendment, it defines the foundation of limited government, it reinforces the doctrine of the federal system that the Constitutional Compact, agreed to and ratified as a Contract between the States, created. It is not merely that the 10th Amendment acts as a barrier against federal intrusions on the liberties of the individual and the authority of the States, the 10th Amendment expounds the entire Constitutional Compact of federalism. Without doubt, the Congress and Supreme Court have used an extremely broad interpretation through the doctrine of implied powers, yet there is no other principle that serves as the foundation of the entire purpose and plan of the original Constitution and it is fully expressed in the 10th Amendment. That principle is that the federal government only possesses those powers that are specifically delegated to it by the Constitution and no others. When the Framers wrote the 10th Amendment, all they were doing was reiterating the entire principle upon which the government of the United States rests.

The Constitutional Compact, created by the States, deputized the federal government and delegated to it certain limited and enumerated powers. Many of the Framers believed that since those powers were indeed limited and were enumerated within the Constitution that the Bill of Rights was unnecessary and could, in fact, cause several issues in the future due to the specificity of the Bill of Rights. They were concerned that the Bill of Rights would be interpreted as the only Rights or that they would be used to limit the Rights of the People and the States through a broader interpretation that there were no other negatives issued against federal powers except those first 10 Amendments. Of course, the 9th Amendment, the sister to the 10th, gave an extremely broader view of the Rights reserved to the People, explaining that there were Rights that were not enumerated within the Constitution, but were nonetheless, just as as exacting as though they were enumerated.

Therefore, since it is completely impossible to list all the Rights of the Citizens of these States united in a Compact of Union, there exist Rights that the government cannot define or legislate to contravene. The fact that there is an absence of those Rights enumerated does not, in any sense or construction, deny the fact that those Rights do indeed exist and are just as inalienable and therefore, un-restrainable as those that are enumerated within the Bill of Rights. Indeed, James Madison stated: ''It has been objected also against a bill of rights, that, by enumerating particular exceptions to the grant of power, it would disparage those rights which were not placed in that enumeration; and it might follow by implication, that those rights which were not singled out, were intended to be assigned into the hands of the General Government, and were consequently insecure. This is one of the most plausible arguments I have ever heard against the admission of a bill of rights into this system; but, I conceive, that it may be guarded against. I have attempted it, as gentlemen may see by turning to the last clause of the fourth resolution.''

The solution to this potential problem is the 9th Amendment to the Constitution: "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people." Of course, the 9th Amendment has been essentially ignored by the Courts, and, I might add by those who, for whatever reason, would deny all manner of Rights to other Americans. This denial of Rights has occurred on both the right and the left of the political spectrum. It is therefore, beyond doubt that the Framers of the Constitution believed and asserted that there are additional fundamental rights, that are protected from governmental infringement, which exist along with those fundamental rights specifically mentioned in the first eight Amendments to the Constitution.

Since the Constitution only conferred those limited powers that are enumerated in the Constitution itself, it was assumed that the federal government could not reach beyond that which was granted to it. The Framers of the Constitution, using the normal rules of statutory construction, insisted that by forbidding the federal government within certain areas, would allow it to act in areas that were not specifically forbidden by the Constitution. The remedy to such a possibility was the 10th Amendment, which is a bulwark against the government using implied powers to deny or restrain the limitation of any of the Bill of Rights. Thus, as a statutory construction or interpretation, this rule, the 10th Amendment to the Constitution, prevents the inference that the Bill of Rights might, in an instance of misconstrued interpretation, imply that the federal government has powers other than those enumerated, and as such, could be used by the government to limit or infringe upon the Rights declared within the Bill of Rights.


Vanhorne's Lessee v. Dorrance, 2 Dallas 304 at 308 (U.S. Cir. Ct. Pa.1795)
"What is the Constitution? It is a form of government delineated by the mighty hand of the People in which certain first principles of fundamental law are established. The Constitution is certain and fixed: it contains the permanent will of the People, and is the Supreme Law of the Land; it is Paramount to the will of the legislature, and can be revoked only by the Authority that made it. The life-giving principle and the death-doing stroke must proceed from the same hand. What are legislatures? Creatures of the Constitution; they owe their existence to the Constitution; they derive their powers from the Constitution. It is their commission ; and, therefore, all their acts must be conformable to it, or else they will be Void. The Constitution is the Will of the People themselves in their original, Sovereign, and unlimited capacity. Law is the work of the legislature in their subordinate and derivative capacity. The one is the work of the creator, and the other of the creature. The Constitution fixes the limits to the exercise of the legislative authority, and prescribes the orbit within which it must move. In short, gentlemen, the Constitution is the sun of the political system, around which all legislative, executive, and judicial bodies must revolve. Whatever may be the case with other countries, yet in this there can be no doubt that every act of the legislature repugnant to the Constitution if ABSOLUTELY VOID."


The Will of the People of each of the Several States


This federal government is federal in name only, it bears not a single strand of resemblance to the system of federalism upon which this Republic was Founded. The functionaries of federalism, created to prevent both consolidation and the resulting tyranny, have all but been removed from this government. This government claims corporate capacity, acting independently of its original duty and authority; it assumes to act with discretion outside the Constitution, providing itself with illicit prerogatives and political emoluments never intended or authorized, all to the detriment of the well-being of this Republic.

This government, acting as a self-formed, self-inferred corporate body, does so with a will and purposeful characteristic not unlike all other autocratic regimes, disguised with all the trappings of federalism, but without the limitations or demands of federalism. Our government was intentionally created as a cumbersome institution, the intention was to put as many obstacles in the way of legislation as possible; the Framers of this government feared the propensity of government to abuse power therefore, they made it as difficult as possible.

Today, we are subject to a myriad of commentaries, various political platforms and interpretations that essentially present nothing more than a simulacrum of Constitutionalism, yet these internal enemies of the Republic are engaged in the overthrowing of the Constitution, administering in its place a shell, a sham, leaving the People with little more than the near-lifeless corpse of Liberty. There is no greater treasonous claim than that of the absolute supreme authority of the federal government demanding, as it were, the allegiance of the Several States under the spurious assertion that the States are subordinate to the federal government and that the powers reserved to the States is limited and restrained under the supremacy of the federal government. Such assertions are simply instruments providing the federal government a mere facade of Constitutional legitimacy, serving only to conceal the acts of usurpation and tyranny in which it engages.

Currently, under this simulacrum of Constitutionalism, the States are reduced to provinces, insignificant monads that are allowed to continue with a limited functionary, but ultimately no real power except that which is, as a matter of privilege, granted by the federal government and administered by satraps. While the People, as the body politic, continues to imagine that the electoral process, that their votes change anything of substance within this government, they should realize that all they are doing is electing officials that become little more than a directory of a corporate autocracy. Only cosmetic changes take place, but essentially the policies remain relatively constant from Administration to Administration. This process has been transformed into a mockery of suffrage and self-government, where authorities other than the People control this country, presenting, as it were, a stage play to benefit the People, causing them to think that they still live under a republican form of government, all the while the imperial policy of a supreme governing body insidiously lords over them. Despotism can take many forms, the one that we are now subject to appears benign, it is anything but.

Under the guise of legal proprieties, this government misleads the People with a fraud that has the outward trappings of legitimacy and has, in a very real sense, deluded the People into thinking that all the images and concepts they have of their country is, in fact, they way the Founders of this country intended, yet the internal workings of this government betray the reality. This government has used every instrument possible to maintain its power, to assert its claim of supremacy and to reconcile the People with their plight as subjects to the “divine right” this government. The People, no longer aware of their position, have been deluded into ignoring the real meaning and import of the Constitutional Compact made between the States as well as, the massive reservoir of power inherent within the States and the People. This government, draining resources from the People in the form of taxes, only to be squandered through excess that provide those in political office with lavish fare which those holding office act with indifference to the Will and Consent of the People.

This government has involved itself in preserving its present existence and the powers it claims are inherently absolute. These usurpers of Constitutional Order, are always ready to use pleaded necessity, they invoke the welfare of the People, the public good or safety, but they do so all in the effort to preserve and expand the power of government. Those within government are eager to subvert the system of federalism, for within such a system, even the definition of the word federal decries the very actions of this government. For, it is absolutely incontrovertible, under a system of federalism, that the States must always be Sovereign, and as such, they are superior to the government they created through such a system because that is the nature of federalism. We must never forget that this federal government is, in fact, the government of the States; the Constitution is the Constitution of the States that acted in their Sovereign capacity.

There is no Constitutional coercion of the States, the States of this Union voluntarily acceded to it as an act of Sovereignty and in accordance to the Will of the People of each of the Several States. Being parties in a voluntary act, they could not, by any measure, be made involuntary parties through ratifying the Constitution, [which they are sole party to] and thereby joining this Union of States. The federal Constitution, as a stipulated Treaty between separate Sovereign States, was an instrument used by the States to settle potential foreign issues, to mediate issues arising between the States. In a very real sense, the Constitution is, as spoken of by many of the Framers, a Treaty between Sovereign Nations that chose to join in a Union based on federalism. Essentially, the Constitution legally displaced what would normally be international law pro tanto. The status, as far as the law of nations is concerned, of the States is Sovereign political bodies, each Free and Independent of the other, though within our Constitution instead of the description being labeled “nations” they are titled States. If this Treaty, this Constitution was annulled, the States would resume their full capacity in terms of their legal sphere of action as actual Nations of the world.


John Marshall, later Chief Justice to the Supreme Court, stated, in Convention: “Those who give, may take away. It is the people that give power,and can take it back; what shall restrain them? They are the masters who gave it, and of whom the servants hold it. Are not Congress and the State legislatures agents of the People?”

James Wilson, who held position in both the federal convention and the convention for the State of Pennsylvania stated what could be considered the most concise statement on the subject: “The SUPREME, ABSOLUTE AND UNCONTROLLABLE POWER IS IN THE PEOPLE before they make the Constitution, and remains in them after it is made...The absolute SOVEREIGNTY never goes from the People.”

Even the nationalist Daniel Webster admitted the fact that: “The SOVEREIGNTY of government is an idea belonging to the other side of the Atlantic. No such thing is known in North America: with us ALL POWER IS WITH THE PEOPLE. THEY ALONE ARE SOVEREIGN; and will erect what governments they please and confer on them such power as they please. NONE of these governments is sovereign.”

There is not a single hint in any of the writings of those who crafted and founded our Republic, that the federal government, nor even the State governments could or would have any inherent power or sovereignty. The States, being the expression of the People residing in those States bear the closest character of Sovereignty, the federal government bears no such character and acts on behalf of the States as merely an deputized agent, nothing more. The assumption is that the only Rights are those reserved to the States, but demonstrated in numerous writings, the People of the Several States are, in fact, Sovereign; as such, it is the People that have the Right of self-government, self-determination and, acting upon that Sovereignty, they can, through the States, recall their authority and power at any time, whether through the Constitutional process or Revolutionary process. Nullification, in its most elemental form is nothing more than the People exercising their Inherent Power as Sovereigns. Ordinaces of Nullification must be enforced with accompanying Ordinaces of Secession, giving the full import and intent of the People to defy all manner and means of illegitimate governance; defending what remains of this Republic and in the process, restoring it. This is, I fear, our last chance to regain this country and restore the Constitutional Republic as it once stood so many decades ago.

The Free, Sovereign and Independent States


When the State of Massachusetts ratified the Constitution of these united States of America the wording was incontrovertible, they are no less valid today than when they were penned:

“That the people of this commonwealth have the sole and exclusive Right of governing themselves, as a Free, Sovereign, and Independent State; and they will Forever exercise every Power and Right, which may not be by them Expressly Delegated to the united States, assembled in Congress;

That all Power, residing originally in the People, and being derived from them, all officers of government are their Substitutes and Agents, and are at all times Accountable to them;

And, finally, that the People of the commonwealth alone, have an inalienable and indefeasible Right to institute government, and to reform, alter or totally change the same, whenever they think their safety and happiness require it.”

Before the Declaration of Independence, the Thirteen Colonies were little more than provinces of the Crown, ruled and governed by the supreme power of the Crown. It is therefore, far beyond belief that the Framers of the Constitution would create a government that would subjugate the States into a similar status as they fought to gain independence, indeed, they did not. Today, the federal government has assumed the position of the Crown, with absolute supremacy that is enforced through various means of coercion and has been enforced, in the past, through the spilling of precious blood.

This government, this regime, changed itself, through force, from a deputized agency into a sovereign, the very thing our Fathers fought so vigorously from which to free this People. This Union   is just that, a Union between Free, Sovereign and Independent States; this Union is not the federal government, indeed, America is not the federal government. The States meet in Congress Assembled, Congress is, or should be, the Voice of the States, not the federal government, nor is Congress employed by the federal government, although that is indeed the perverted functionary of Congress today, corrupted by powers stolen, usurped and the Law abridged.

The States did nothing more than federalize themselves, they did this to create a far more efficient government than that formed under the Articles of Confederation of 1778. In terms of the federal government, the purpose was extremely limited, primarily the purpose of deputizing the federal government was to act as one voice in foreign affairs, to act as a mediator between the States and the Citizens of different States, and it was to act as an agency to act for the common cause of all the individual States, but very little more. The Constitution however, was not perfect in its construction, for it was open to interpretations that gave rise to the heretical stance of implied powers, loosely translating those expressed powers, the delegated authority into a perverted open-ended albatross around the necks of the Several States that created it, entrapping them and placing upon them the burden of federal coercion and forced unity.

The Constitution of the united States was an adjunct to the Constitutions of the Several States, respective of the fundamental Laws of the States themselves. The purpose of federalizing was to avoid consolidation, the very thing that happened during the 1860s with the perversion of every Constitutional edict and principle by the federal government under the hands of corruption and vile treason. Rather than the Union being saved, the Union based on federalism, based on a republican government, was rendered outlaw, the Constitution utterly morphed into a nationalistic shell, a facade hollowed out and rendered ineffectual in terms of original Law.

In the character and nature of federalism as Article VII of the Constitution, inferentially concludes and thus proves the fact that the States, being Free, Sovereign and Independent remain so after ratifying, take notice: “The Ratification of the Conventions of nine States, shall be sufficient for the Establishment of this Constitution between the States so ratifying the Same.”; This ratification, being voluntary in nature and character rather than compulsory, only declared that those ratifying it were the only ones affected by it, thus it only took 9 of those States to ratify the Constitution, but those which did not were not forced to comply, they remained outside of the newly formed government. Had this Constitution and therefore, the Union it created been as compulsory as Lincoln asserted, then the remaining States would have been compelled to join, they were not because that was not the manner and means by which this voluntary Union as crafted.

In the system of federalism, the States would send Ambassadors to the Congress Assembled, those Ambassadors were Senators, the Ambassadors of the People, Representatives. As with foreign nations, so too were the States, sending those who best serve in the interest of the individual States, acting on their behalf and on the behalf of the People of the Several States. Until the perversion of the Senate with the passage of the 17th Amendment, which nationalized the Senate, Senators represented the Sovereignty of the States they served and the Senate itself was to act as a bulwark, preserving the Sovereignty of their respective States. There is ample evidence within The Debates of the Federal Convention of 1787, that the Framers considered the Senate, as well as the House of Representatives, in the manner described.


We must remember that at one time, the Citizens of the Several States thought of their individual States as their countries, the federal government was nothing more than the deputy of the States and the Union was simply the expression of the Association between the Several States. They did not view this country in the terms that arose later, meaning “one nation”, their Allegiance was to their States, they could not swear Allegiance to anything higher than the highest Sovereignty in the Land, which was and is the States. The federal government was merely entitled to obedience under the Constitution to only those powers delegated to it, but that was the full extent of any consideration of the federal government. In fact, you would not have seen the Stars and Stripes fly over any State, only the flags of the individual States flew over them. It was only until much, much later, actually in the late 1800s that the flag of the United States was, somehow, forced upon the States. It was the flag that denoted only the deputized agent of the States and was only flown over federal territories, military installations, and Naval vessels, but not over the Sovereign States, for there was not valid recognition of that flag as being over anything other than federally controlled territories.

Patriotism, another misused and abused term that has been essentially nationalized, just as the flag, was, for the Citizens, toward their individual States, but not a deputized agent of the States.
Long since has such Patriotism been subverted, diverted to a subordinate functionary by the political tricksters preaching the fanatical religion of unionology, bowing down to Washington, D.C. as though to Mecca, sacrificing the Constitution to the doctrine of nationalism. It is absolutely impossible to have two separate Sovereignties, the only Sovereignty is that of the People acting and expressing that Sovereignty through the Several States. A deputized agent that has limited power and limited authority cannot be Sovereign, only represent the Sovereign that deputized it. 

When the British Crown was displaced by Independence, each of the former Colonies were recognized by the Crown as Free, Sovereign and Independent States, not as a nation, but as separate, individual Nations or Republics. Since that event of Sovereign displacement, the People have retained that Sovereign Status, expressed within the States therefore, it is the most fundamental principle that governs These States united, that the Absolute Right is Inherent, not in some deputized federal government, but in the People as expressed through the States where they reside. This principle points to the fact that there is no such thing as a Republic unless the People continue in their Sovereignty and can exercise the Solemn Right of Self-Government. The People, in their Sovereign Capacity never organized anything directly except the governments of the States themselves, the States then, acting on behalf of the People of the Respective States, crafted and delegated certain limited powers and authority to the federal government as a deputized agent but nothing, absolutely nothing more.  


How far we have fallen from this lofty principle of Law and the nature of this Constitutional Republic?

Friday, June 29, 2012

Government Intervention and Control

It is, without doubt, possible to overlook or simply ignore those things which are not very obvious in our daily lives, it is this fact that makes many of the actions of our government possible. Actions of government in the area of economic markets, which, must include the primary economic medium of exchange: money, will always, without exception, create interference within the forces that normally function within the market. It is the sole aim of government to influence not only the market, but also the behavior behind the market through such intervention, such interferences always alter market forces, distorting them and in most cases hindering the natural flow of such forces to the point that the market system is thrown into economic chaos. Like money, most government intervention seeks to direct consumption that would not otherwise be a market directed choice, in a very similar fashion as the government seeking to direct, through legal tender laws, the use of its monopoly fiat paper money substitutes.
As these distortions continue there is a growing amount of economic dislocation of normal resource allocations, direct market signaling systems are misdirected into areas that would not otherwise be present or prevalent in the market itself. Since the aim of government intervention into the market is not simply an economic, but a social interference, directing certain social agendas with a political basis in origin, we can assume from such a conclusion that there is, based on this official aim, a motive to create a controllable society in which the government is the primary source of all economic and thus social forces within the country.
While that might sound a bit conspiratorial, the fact is simply that the character of government, especially when it reaches a particular point in its evolutionary growth, is to assume such a position of bureaucratic control. Such events are not novel to history, but quite common in all large civilizations; Ancient Rome being the most notable and perhaps the most comparable. As in the decaying Roman Republic, our Republic, long lying upon its deathbed, has been subjected to the same type of government mentality. Our government appears to be equally as eager to keep up appearances of one of republican ideas of liberty and freedom, all the while subverting those very vital principles through directing the forces of economic and monetary markets to achieve a social and political goal that is not consistent with the principles upon which this Republic was founded.
As with all government interference and regulation, the purpose appears to be to use such interference and regulation as a means to an end, but not the end itself, for the actual purpose of all interference and regulation is subservient to the ultimate goals of control. While we are sold on the idea that such interference and regulation is protective, the fact is that the goal is an indirect encroachment on the rights of the individual to make individual choices based on his or her own decisions and needs.
This government has assumed an old and ancient ideology, strange as it might sound, as its creed the “Divine Right of Kings”, for Kings of old thought themselves divinely appointed to care for their subjects and to direct the lives of their subjects, whether just or unjust, based on the divine direction they assumed to be correct. For ultimately, this divine right provided the Kings of old with such a degree of divine wisdom that their decisions were essentially beyond reproach and beyond the ability of the King’s subjects to question. Thus, the providential guardianship of the King over his helpless and unknowledgeable subjects presented a degree of power that would not have otherwise been available to the King. The same is true about our own government, especially today. Today, our government assumes essentially what could easily be considered as “Divine Right” over its “kingdom” and operates under the assumption that it knows what is best for its subjects.
This extends, not only to government regulation and interferences into the physical markets, but also this government has, for decades, been on a quest to even control the mental, spiritual and moral makeup of the country; while not directly imposing a government authorized moral system, there are, through the control of economic forces, a degree of control over the ability of the individual to choose what to believe, how to behave and what to think. The government assumes to know what is best, what type of money is best, which type of businesses are best, what type of consumer goods are best. What is good and not good for your body, what manner of speech is proper and correct, what mental attitudes are acceptable to society; it is a means to an end, and that end is and has always been controlled regimentation, conformity and compliance!
In the eyes of government bureaucracy, the ideal would be to remove all determination from the individual to make choices in his consumption of goods and services, in his ability to think for himself, to have a type of censorship that only allows for the individual to think that which is generally acceptable to the whole of society, of course, what is acceptable to the whole of society has been engineered through decades of gradual compulsory regiments, each building one upon the other, all with the goal of a collective conformity of purpose. We talk about the dumbing down of the American public, but we fail to understand that has simply been one of the methodical processes of control that the government bureaucracy has implemented in its quest for placating and thus dominating the independent spirit of the individual. This government has evolved into what other governments throughout history evolved into, that being a Paternal Organization set to develop the public opinion with a defined belief system, one that is ultimately compliant with and supportive of government without the necessity to question its directives.
It is therefore, essential that any hint of free market decision-making be eliminated, for once a person cannot longer determine his own choice in consumption, then the individual becomes essentially a ward of the State. Likewise, the assault on the idea that there is a Right to Private Property is an equally essential component of the overall directive of control. When the government can issue money substitutes that cannot, by definition, be considered the actual real property of the bearer, then the remaining directives become easier to establish. Government intervention and thus interference in economics is the main avenue utilized by government to implement its controls over the population. What has happened and is happening is nothing short of a longer version of a communist revolution; instead of a radical violent revolution, the same effects can be achieved through a gradual introduction of what amounts to communism through incremental government directives, regulations, prohibitions and induction training in public opinion, i.e. “political correctness”.
Never assume that there is not a political and social purpose behind the governments programs, which directly interfere with market forces, whether it is through regulation, monetary creation or manipulation, all are methodologies toward the goal of ultimate control over an increasingly compliant population. It is evident that through such interference into the markets, businesses and entrepreneurs are systematically forced to actually change the way they do business from market induction to government bureaucratic dictates. Business must take its signals from a distorted view of the market, one that is regulated and controlled instead of proper market signals. Instead of obeying market directives, which actually generate a market result, businesses must obey a plethora of government regulations that are so immense that even the regulators cannot adequately discharge their regulatory duties and can rarely properly interpret the very regulations they are responsible to enforce. Far from being a negative for government regulators, such vagueness is necessary for it provides government with a broadness of implementation and an “out” when such policies are questioned.
Such bureaucratic systems are always subject to corruption, this is true anytime actual market forces are interfered with and controlled. Under normal free market conditions, fraud is short-lived due to the fact that there are signals given that alert the consumer early of the possibility of corruption. Under a system where government intervenes and interferes with market processes, fraud becomes easily hidden since the market signaling process is distorted through government intervention and the regulatory processes employed. It is also essential to understand that any system that employs force to achieve a goal will always create an atmosphere where few will profit from many and income distribution is always stratified through such systems of bureaucratic controls and intervention. Government patronages become common place as those with political connections benefit the most.
Opportunities become very limited due to regulated competition that favors certain politically connected corporations, entrepreneurship becomes increasingly difficult to compete in business where regulation is based upon government patronage to the virtual exclusion of those that might build a better mouse trap but are limited in the opportunity to do so because the established mice trap company is protected by official regulatory walls. There can be no possible way to insure an equitable field of opportunity under such systems, as a rule there are those few therefore, who will prosper at the expense of the majority of individuals. As we have seen, risk becomes socialized while profits remain privatized which, is a complete distortion of market principles where risk and profits are always a private combination of business.
It can be observed therefore, that there is simply no possible method by which the bureaucratic regime can exert such power with any degree of fairness or equitable distribution of opportunity. There is the assumption, by those in government, that it is within the power of government to implement changes in the market that will actually produce equitable results, thus the exercise such power under that assumption, but reality points to a very different set of results. Government intervention into the markets is based on certain assumptions. Most bureaucrats tend to view the public with a condescending eye, one that sees the public as needing direction and guardianship. Thus, government becomes the social worker and policeman of the population. It is this attitude that permeates bureaucracy and provides the excuse for more and more intervention into individual lives, organizing the individuals through classifications and groupings, stratifying the population into distinct and separate classes all for the purpose of social control.
Under such bureaucratic systems, normal legal values are tossed aside and replaced with a regulatory mentality that implies the superiority of a “higher law”, this ideology began in this country during the Administration of Lincoln and it has simply ballooned to the point that we are subject to the arbitrary interpretation of “higher law” rather than the actual Law de jure. Social construction is paramount to the bureaucratic regime, and it is employed through a variety of means, but primarily through intervention into the market processes, controlling and directing both production and consumption. Since the advocates of the “higher law” must mete out a form of justice that is rarely equitable, they do so under the pretense of equality and fairness for the public good. Thus, those who advocate free markets, liberty and freedom of the individual are seen and described as opponents of equality and the public good. They are portrayed as greedy and selfish because the assumption is that the public good cannot be advanced under a pure market system where government is not involved with intervention to create what it imagines as beneficial to the “many” rather than the “few”, but the very system promotes exactly the opposite of what the pronounced intention is and how it is promoted. The assumption by government bureaucrats is that all forms of exploitation can be eradicated through government intervention yet, with this assumption there comes a blindness that prevents those in power to understand that they actions create far more exploitation than it can ever eliminate.
Of course, with these assumptions come the efforts to equalize both income and wealth, thus all manner of redistribution schemes find its way into legislation, whether it is through various taxation or programs. Anyone seeking to actually improve their lot, to actually embark on a path of success where income may be considered above average is castigated as greedy and shameful, detrimental to the public good and the equitable cause of “higher law” and “social justice”. It is therefore, the character of interventionism to foster corruption, there is after all, nothing but the arbitrary decision-making process of bureaucrats to determine the application of what might be considered fair and just, for the Law de jure has been neutralized throughout the system.
Essentially, while we all know that the free market doesn’t provide a “free lunch” that is exactly what the government bureaucratic system seeks to provide, all at the expense of the actual producers in the controlled market. The bureaucrats don’t understand that in all forms of market expression, resources are always scarce, thus anytime any good, whether it is a consumable good or even money, the consumption of that good will always, as it must, come at the expense of someone. The government, through its various means of control, does not appear to understand that fact, or if it does understand it, it assumes the power to disrupt such market forces with an artificial construction seeking to replace market principles with a planned system, centralized and consolidated. The government however, can never be an actual producer and can only siphon off productive activity and in the process it ultimately destroys any productive results to the point that the entire economic system eventually enters a state of failure. Not only that, but since the government and its intervention cannot possibly account for actual economic calculation, the system goes into dystrophy, its artificial monetary substitution system loses economic potency, the entire structure enters various stages of decay that befuddle government economists because they have been so indoctrinated into the official government assumptions rather than the economic reality that the market will always seek to restore.
It is therefore, ultimately impossible for such a mercantilist market to remain stable, there are simply far too many distortions created by the system itself to remain viable. Since government intervention cannot adequately reproduce economic calculation, all of its efforts of control over the market culminate in social and economic destruction. As was mentioned in the beginning of this essay, the government is seeking to displace market choice and yet, since all markets deal with the scarcity of resources it is impossible for the government to implement a system where choices are completely eliminated. Since choice determines price or costs within the market, the governments attempts to restrict or limit choice, thus competition, within the market through regulation displaces normal market signaling systems, creating more and more distortions leading to economic dislocations, the misallocation of resources and ultimate economic failures.
As such intervention increases, and it is a natural process of intervention to exponentially increase without much effort, the whole process eventually becomes an exercise in futility, an absolute absurdity. Of course, bureaucrats don’t understand that the entire free market system of private property and the enterprise to achieve wealth is absolutely the best method of bringing about a higher level of living standards far the greatest bulk of the population. The problem, in the eyes of bureaucrats is that they don’t understand that life is life, it is not fair, it is not an equal playing field, nor will it ever be, despite all the efforts of government intervention to transform the system into one where all people have the very same opportunity to achieve the same living standards. The idea of equal opportunity is itself a misapplication of an ideology that simply cannot exist in real life. The ideal that opportunity is a factor of life that can manage, controlled or transformed is fundamentally flawed in its conception, yet government bureaucrats are seeking to equalize something that cannot be equalized or managed.
Though the government assumes it has both the ability and the power to manage and manipulate markets through various types of intervention, it fails to understand that it is the market that creates civilization. Through the interventionist policies of government essentially the government is setting up its own demise. The government appears to believe, at least evidenced by its actions, that there is an alternative to the free market system, but there is none, there is only the alternative of market distortions created by such intervention. Government bureaucrats appear to believe that the markets are the product of human design, and while it is definitely true that the market is the product of human action, it is far beyond human design. Government intentions to manage and manipulate the market defies the fact that the market, just as money, emerged in history as a pure phenomenon of unintended consequences, all in the pursuit of the self-interest of human action throughout the course of mankind’s history. Money, like the market, has no artificial substitutes.
Carl Menger explored the subject of the emergence of money within markets, it emerged as a phenomenon of trade, as did the market itself. Money is simply the most tradable good, the most competitive commodity to emerge to suit the necessity as the most tradable good was gold and silver, history proclaims the success of gold as money through several thousands years of utility. There was no intention to make gold or silver into money, it was simply the competitive nature of the markets making the most useful and efficient choice.
The first and foremost weapon in the governments arsenal in pursuing market manipulation therefore, was real money, it had to be displaced before all other market principles could be manipulated and somewhat managed. Thus the demonetizing of gold and silver were a priority of government interventionists. Without such steps it would be virtually impossible for the government to implement the vastness of social controls, all the while expanding its own scope of power. The incremental revolution that has taken place over the decades is astounding when viewing it for what it really is and how it has progressed. With the advance of this interventionist system, there has been a growing and perhaps more pronounced hostility toward the free market in general and capitalism specifically, this hostility has been intentionally crafted, for without it the systems of control could not possibly continue to be implemented. It is easy to see this hostility around the world, yet it is obvious that such hostility is artificially constructed and is based on a total ignorance of market principles. All one need do is listen to the rhetoric within the public arena to see that it is based on ignorance, but it is exactly that ignorance that is useful to this government.
If you have noticed recently there have been many in the public arena that have heaped praise on the Chinese model of “capitalism” yet, for all the praise, they neglect the obvious and that is that the Chinese model is actually a failure that will be exposed soon enough. Yet, such praise is actually nothing more that ploys to further implement more bureaucratic controls and management over our own economy. These bureaucrats are delusional in their understanding and their faith in the power of their actions verses the power of the market to seek to correct the distortions they create. There are many within our government who actually believe that a mercantilist form of socialism actually represents advancement over the free market, that such a system is superior, at least ethically superior, to any market production that is based upon private profits. Unfortunately for those who hold such wayward beliefs, their system can never function to the degree that success would be sustainable for a long period of time, nor could it produce the necessary standard of living to maintain popular satisfaction. They seek to make their fantasy of a government induced free lunch possible while rejecting the only type of market that can provide a higher standard of living for the masses which is the free market unhindered by government interference and intervention.
Government bureaucrats cannot seem to grasp the grand nature of the free market, that it is essentially unplanned order in the highest degree; since they have no understanding of how something can be unplanned and yet ordered, they seek to place their particular brand of order upon it, but their alternative planned order only displaces market order and creates, in its wake, economic and social destruction. It is, without doubt therefore, these extremely irrational tendencies of government that pose one of the greatest threats to our civilization, in particular our liberty and freedom, as well as our well being. If there is any consolation it can be found in the fact that the system that they have created is rapidly falling into a state of total disrepair, the question will be for all of us, is what type of world will we choose to rebuild after the collapse of this artificial system of control?

Sunday, December 12, 2010

Money Or Money Substitutes?

Within all the disastrous disadvantages of the fiat monetary system that now infects this country and the world, there is one positive element and that is the assurance of its collapse. This forthcoming collapse will force this country and the world to look, once more, to the single monetary building block of economic production: gold. Just as fiat currencies lead to economic collapse so too do such collapses lead to a return to gold money. The reason for that is that nothing else can form an economic foundation, no other form of money, no alternative fiat currency can reestablish economic viability once that system has imploded and consumed itself.
There are suggestions that the IMF or other agencies are considering yet another reserve fiat currency or even a newly established reserve fiat regime, another fiat regime will do absolutely nothing to reverse the effects of the upcoming collapse. There is simply no way to adequately replace a fiat currency with another similar fiat currency, it does not work. There is a very good reason why governments introduce fiat currencies on the back of sound money and that is because the sound money provides a very firm foundation until the fiat regime can take root and be established economically.
The idea that a sudden introduction of fiat currencies into circulation can be achieved without a sound monetary foundation contradicts monetary mechanics, there must be a foundation of asset value to the currency otherwise the introduction of a new fiat currency will fail for there is nothing that can be used to impart a measurement of valuation to the currency itself.
There is also another major consideration when talking about the introduction of an alternative fiat regime and that is the fact that no fiat regime can prevent massive government deficit spending and the accumulation of debt that accompanies such spending. There are simply no budgetary restraints placed on government under a fiat regime.
There are those who suggest that the current dual-tier fiat system be replaced by a single-tier system; their rationale is that if the fiat currency is not directly associated with debt creation and interest accrual as with the dual-tier system then there would be no accumulation of debt, nor interest, at least that is the simplistic assertion. There would still be a necessity for government borrowing, the only difference under a single-tier fiat system is that there would be a division between the issuance of fiat money and the issuance of government fiat bonds, the two would not have the same close association that it currently does under the dual-tier fiat system, but it would not do anything to prevent the dangerous accumulation of debt. The process of simply printing fiat paper money does not mean that it will be any more effective than the system that we now suffer under; in fact, things could easily get much worse since hyper-inflation is indicative of single-tier fiat monetary systems.
The idea that if the government could only issue our fiat money directly without the monetization of debt then there would be no debt, that is a very dangerous misconception about the mechanics necessary to maintain a single-tier fiat monetary system and an operational government. Under a single-tier fiat system, where the government simply issues currency directly into circulation, there is absolutely no system of economic measurement, no means to determine the level of supply or the level of interest that would be associated with any sub-issue lending.
Essentially, the requirements of supply would be completely arbitrary, it would almost be “throw a dart and pick a number” since the mechanisms of determination of needed supply and even demand would no longer be operational. That is one reason why governments abandoned single-tier fiat monetary systems and replaced them with dual-tier fiat systems, it was that the latter provided a bit more stability and a slight degree of direction and the former bought massive inflationary depreciation combined with massive distortions in the markets.
As earlier stated there is one beneficial characteristic that all fiat regimes have in common, they collapse. Fiat monetary regimes always are consumed by the system itself. Such collapses always give rise to sound money and the manner of its introduction can be very simple and, if necessary rapid. If the government politicians and bureaucrats possess any degree of wisdom they will recognize the collapse for what it is and in response all that is necessary is that the government legalize gold money and get out of the way of the market processes that will naturally follow. There is indeed a high probability that this will happen, but it will not be necessarily through legislative deliberation but desperation, there will simply be no other options left for government to consider…the proverbial writing will be on the wall.
As with the rise of fiat monetary systems there will be a similar reversal with the rise of gold money. At first there will be a natural separation of the pricing structure in the economy, this will be disruptive at first however, as the market will express prices in both paper fiat dollars and in a weight of gold. Eventually, the gold money will supplant the fiat paper dollar system as the market determines that asset value is far more efficient in the pricing structure than the depreciating liability value of fiat currency.
There is however, one necessary caveat to the gold monetary system and that is the requirement of a 100% reserve system, without which a fractional reserve gold monetary system would be fraught with similar abuses as the fiat fractional reserve system today. The classical gold system had one problem, otherwise it worked extremely well and that problem was fractional gold reserves. Fractional reserve is a particular problem under a gold monetary system since gold does not behave in the same manner as fiat money, it does indeed lack a certain flexibility, but that is an advantage in that it prevents the abuses of inherent flexible characteristics associated with all fiat regimes.
There are, of course, detractors of the classic gold monetary system, among those detractors are the supporters of the fiat system and also those who, while supporting gold, believe that a gold system must be subject to fractional reserve banking since, according to both groups of detractors there is simply “not enough gold”. What the detractors imagine as a weakness is actually an extremely beneficial strength. The contention is, of course, that a pure gold monetary standard is not possible, nor, according to them was it ever truly possible because of the rigidity of supply verses demand.
Of course, this is the excuse that, in contemporary times, led to the rise of fractional reserve banking in the first place and then to the fiat fractional reserve system later. They claim the need for “elasticity” that can be readily adjusted to meet the needs of a growing economy, yet what they always fail to understand is that even under the fiat monetary system the quality of fiat money is drastically depreciated through such “elasticity” thereby completely diminishing the beneficial effects such “elasticity” is intended to have on the economy.
In other words, inflationary depreciation completely defeats the purpose of “elasticity” of supply. There is no productive economic benefit in the constant expansion of the fiat money supply, in fact the opposite is true, there is a detrimental effect on everything from pricing to wages, from profit to decision-making within an economy subjected to fiat regimes. The degree of distortions created by the system are beyond calculation, even worse is the fact that those distortions interrupt normal economic market processes and therefore, require government intervention and manipulation to maintain the entire system. Without government intervention and manipulation, a fiat monetary system would simply not exist! It is not natural money, and there is no recognition of any asset value other than that which is mandated by government decree.
If we can conceptualize a system under a 100% gold reserve, then we should also be able to conceptualize the restrain that such a system would have on the political economy and the government’s concern about that political economy. Government would find not only find a gold monetary system confining, but the idea of a 100% gold reserve banking system horrifies the corrupt inclinations of government politicians…why do you think we have a fiat monetary system today instead of a 100% gold reserve system? Government hates gold money, but it hates the idea of a 100% gold reserve system even more. A 100% gold reserve system would not only require a high degree of budgetary restrain on government but it would deprive government from the ability to artificially manipulate the credit markets to its socio-political advantage.
The fractional reserve banking system, which is more advantageous to fiat money than it is to gold money, allows the drastic increase of credit creation without the limitations inherent in a gold system, especially a 100% gold reserve system. Additionally, the fractional reserve system allows for the manipulation of interest rates, which, in turn, allows for the manipulation of economic and wealth distribution. This fact is especially true under the fiat regime, but would be almost just as effective if there was a gold monetary system subject to fractional reserve banking. The lower the reserve requirements the greater latitude in credit creation.
Therefore, the greater latitude in the amount of credit creation the greater latitude in the manipulation of interest rates under a fiat monetary system. Thus the government has the instrumentality to manipulate economic “feel-good” booms. There is, within such a system, a very definite illusion created from the idea that an increase in the nominal supply of money always provides the economy with productive gain. What most people are unaware of however, is the fact that as there is an increase in the nominal supply of money there is also a decrease in the nominal effectiveness of the money. The decrease in nominal effectiveness always cancels out the gain associated with the increase in the nominal supply of money.
Unlike government mandated fiat paper currency, gold money is sound for a number of reasons; it cannot be over-issued at will or political whim, because it actually increases and contracts, not by government monetary management, but with the volume of economic activity. In terms of credit/debt, gold money is self-liquidating since it is a double asset on the credit side and the debt side. The supply will always meet the demand within a free market. There is no way that a supporter of government mandated fiat paper money can be a supporter of the free market or the economic freedom for the people associated with such a market. Fiat paper money is controlled and managed; there can be no free market in such a monetary regime because of the manipulative characteristic of the fiat regime.
The disadvantages of a government mandated fiat paper regime far out-weight any possible advantages it may possess, which I can think of none. The combination of a fiat regime with the requirement of a fractional reserve banking system makes the system ripe for massive credit expansion, debt accumulation and ultimately the inevitable collapse of the system. Fiat credit based on a fiat monetary system simply cannot raise all prices simultaneously or uniformly; since the tendency of all fiat regimes is to constantly require the lowering of interest rates to achieve capital growth, the problem becomes a temptation to borrow “easy money”, thus leading to mounting distortions in the economy and massive mal-investments. It appears that one common trait within all fiat monetary systems is that when the mal-investments are finally recognized there is a collapse of the artificial bubble created by the fiat “easy money” credit influx into the market.
The idea that the government can or should be in the money business is not only absurd, but also very dangerous; the consequences of such a government-mandated system always end badly. This government abandoned gold very casually, not actually knowing the consequences of such abandonment. People have seen dramatic results from such abandonment, none of which can be considered in the long-term as beneficial. While it is doubtful that this government would consider returning to a convertible currency regime, it may well find itself with no other option but returning to a redeemable currency system.
While I believe the role of government is very limited when it comes to money, any money, I also believe that the best option at this point is to allow for the private minting of gold coin and the free-market in those coins. It may the only transition that would allow for an abridgement of the inevitable collapse under this fiat monetary system.

Dual and Single Tier Fiat Monetary Systems

Despite all the efforts of governments to substitute irredeemable paper, they have failed to demonetize gold and even though it is not used as legal tender, it still is recognized as money. That is a strange fact considering the immense pressure that has been placed on society by governments to erase the monetary value from gold. In the most widest consideration, given the sum of history, neither men nor governments for that matter, will actually trust anything other than gold as a hedge against economic collapse. That is evident, even today, as we see more and more people purchasing gold, the same is true with many governments and their central banks.
Unlike Fiat Money, notes issued by government, gold needs no endorsements or coercion to be used as money and valued in exchange. Fiat money of any kind always must be forced upon the population, introduced by stealth into circulation by governments who desire to manipulate the power of monetary economics and eventually siphon off the wealth of the productive population. Unlike Fiat Dollars, gold money does not even have to have a government stamp upon it, it does not require legal tender laws or to lay taxation to enforce its use. Gold money does not require the full faith and credit of a government to make it money or to influence the use of it in an economy, there is therefore no compulsion required when gold money is in circulation, it is a desired commodity, whether it is in the form of money or any other form.
Unlike gold money, fiat money is accepted as money as long as there is faith in the government of issue and in the stability of the purchase value of the fiat money itself, the problem, of course, is that eventually the depreciation becomes evident through price inflation, people see their hard labors wasted on a form of money that no longer holds the same value as it did just a few years prior. Additionally, fiat money must rest upon the expectation that the promises made by the government of issue will be kept, once that expectation dwindles through the various foibles of a government that abuses the power of fiat monetary creation, such as the massive deficit spending that usually accompanies all fiat currency regimes, then the currency suffers and people search out other forms of value, particularly gold. History has proven this fact time and time again since at least 20 B.C.; fiat monetary economies always end the same way, collapse. There is evidence however, that fiat currencies were used as far back as the time of the Pharaohs, with equally disastrous results. In a historical context, the Book of Genesis 47: 15 states a very interesting event: “So when the money failed in the land of Egypt and in the land of Canaan, all the Egyptians came to Joseph and said, “Give us bread, for why should we die in your presence? For the money has failed.”
It is indeed a very strange psychological occurrence among peoples and governments who are subjected to established fiat regimes, it tends to make them unwilling to view their irredeemable fiat paper money as anything other than what that fiat paper money really is, nothing more than promissory notes that can never actually be redeemed because the promises of the issuing government always become far too extended for such a redemption. It is strange that people seem to think that government authority and laws can create something out of nothing and call it money, it is this undeserved faith, this belief system that allows fiat money to sustain a degree of value as money, but that too ends when the inflated supply of the fiat regime depreciates the purchase value of the currency and such faith is destroyed.
The degree and depth of faith necessary in government issued fiat money is comparable to the faith necessary in religion, for what else could account for the fact that when people see a piece of paper with the numerals $100 printed on it, that they view it as more valuable as the same piece of paper that simply has $1 printed on it. The ruse is complete, the deception is extensive and the faith that has been built around the fiat monetary system must be of the utmost dedication. The Fiat God commands total faith and allegiance! Talk about idolatry, gold makes no such commands of faith, it is its own promise of payment, and it requires no government seal of approval or legal tender laws to enforce or coerce its usage as money.
The constant hunger of government issues its fiat currency that ultimately devours itself, eating up its own purchasing power. There is no doubt that history teaches from an extensive experience concerning money; perhaps one of the greatest lessons is that government is the premier counterfeiter and can no more be trusted with the power to control money than a thief with the keys to a bank. One must wonder why so few believe the fact that governments and money don’t mix. There is a history however, one of sound money, one which is either completely ignored or partially ignored by most in government and in the population in general. Perhaps the strangest fact is that so many are fooled by the absolute folly of fiat money, even stranger still is the fact that this folly is recurring time and time again without the actual lesson being learned.
Except for a period in the 1860s and 1870s, government relatively kept its hands off money for nearly a century, except for the barest minimum Constitutional requirements of establishing a standard of weights and measures. The laws necessary for various liabilities and for banking were kept to a minimum; the market took care of the rest by awarding the prudent and penalizing the less prudent. It was a century that saw the most incredible increase in widespread prosperity that the world had ever seen before. The reach of government was restricted, its presence in monetary and economic matters was limited and the result of that policy was the unleashing of market enterprise, voluntary and free. Government was not in the money business, it did not create it nor did it control it or the supply, nor did it intrude in the affairs of business except in the case of fraud.
The attempts at fiat money in the early experiences of our country were lessons not soon forgotten, but given the greed of government for both power and spending power it did not take long for those lessons to be laid aside in an attempt to grasp and then unleash the power of monetary creation and control. The first major push toward a government-controlled money came during the Lincoln Administration, the problem of course is that government fiat money cannot compete against gold; the attempt was a complete and utter failure. By the time the Lincoln’s illegal War of Conquest was over the Greenback was valued at 35 cents gold. It represented nothing of value and as a result the market created a two-tier pricing structure, one in fiat money, the other in gold money that continued through the 1870s. Coined money disappeared from the United States, gold was exported for goods while the Greenback swayed with instability and through the process the credit of the government was considered questionable, especially by foreign trading partners.
The search was on and government sought a method to use that would allow it to spend far more than the revenue collected and to do it in a way that would be relatively concealed from the population. Through its search, government also sought to control credit, as the ancillary power of money, for just to control the creation and supply of fiat money would not provide the government with the instrument it really needed and that was a market for its debt. Thus the bond market became the ultimate reality of a managed money supply that would produce a managed economic market to allow the control of the ebb and flow of the economy as needed or in more cases than not, as was politically expedient.
The government, not the market was to become the heart of the economy, with credit money being transformed into the fluidity of economic life-blood. Thus, taking the power of money away from private enterprise and placing its control in the grasp of government as a “proper function of government”. It was government that would determine what the proper supply of money would be, the rise and fall of interest rates and in the process; it would determine the actual beneficiaries of its own managed economy.
The problem, of course, is the ability to trust a government, which sees itself without limitations. To aid government in its unlimited vision, a monetary system was necessary and that system was one that provided few restrictions on the supply of money government could “raise”, the best way around that problem of revenue was a two-tier system of fiat currency since all single-tier fiat systems tend to collapse rapidly from government abuses.
Part of the problem government has always had with gold money is the restrictive character of the money that demands budgetary restraint. Another part of the problem, at least on the part of government, is that a sound money economy punishes abuse, both by government and by businesses. Under a gold monetary system combined with the free-market, there are few places to hide fiscal imprudence. These facts however, while viewed by government and those who are politically connected as problems, are actually beneficial in ways that are really beyond calculation. A sound money free-market economy will always indicate problems of excess and malinvestment, it is essentially the nervous system of a free-market economy and will, when necessary demand a remedy to match the abuses.
While there have always been critics of bankers, there is a huge difference between free-market banking and the type of banking that we are now subjected to under government authority. In the free-market a banker must abide by the necessity of good business practices otherwise the bank and banker will face insolvency. The government, on the other hand, has an unlimited supply of fiat money or at least the power to product an unlimited supply; additionally, the government is not bound by free-market restrictions, nor, as it appears, are the banks chartered by government.
In the free-market, bankers are required to maintain the trust of their depositors, as well as their stock-holders, with the responsibility to keep the bank solvent, the same is not true with government or its banking partners. Under a sound monetary system there is the demand that the banker holds his depositors money in trust, not simply to use it as he pleases under a fraudulent fractional reserve system of divided and unsustainable titles. While it is true that a banker under a sound monetary 100% reserve system can issue credit beyond the deposited funds, he does so at his own risk, for to extend credit beyond the funds held on deposit can ruin his bank and his life, particularly in the cases of outright fraud.
Unlike the current fiat fractional reserve system, under a sound monetary system, integrally linked to the free-market, the banker is limited by the amount of real money he has in deposit, lending at the behest of only those customers who give the banker permission to lend their deposits. If, by either chance or deliberate risk, the banker lends out more than his customers have deposited me must immediately stop lending, but additionally he must call in the outstanding loans. This is one of the benefits of sound money under a free-market banking system, it requires absolute adherence to the highest level of responsibility to the customers of the bank. While such measures are not pleasant, it is a necessary medicine under a sound money free market system of banking.
Unlike free-market money and banking, government is not bound by such limitations, nor is it at much risk since it will rarely, if ever, force a contraction of the fiat money supply, thereby tightening its budgetary belt. Government hates the political consequences of bursting economic bubbles and will always attempt to inflate or re-inflate a bubble. Its ability to create money at will helps the government in its attempt to side step the painful aspects of a collapsing economic bubble. The control of money in the hands of government is the control of society, it is absolutely necessary if government is to retain control and expand its ability to rule without limitation.
Given these facts, it is extremely odd that there are those who laud the Lincoln Greenback or any other single-tier fiat system, for to do so it to laud the government in its unlimited ability to create money for both peace, but especially wartime expenditure. Since wartime expenditures tend to be exorbitant, the ability to wage war under a sound monetary system is limited only to those, which are purely defensive in nature. So too, are internal improvement projects and projects of unlimited entitlement programs, the sound monetary system will simply not allow the novelties of popular political expediency.
Unlike the dual-tier fiat system, sound gold money places limitations on government since the government must abide by the law of the free-market. Sound money prevents the unlimited accumulation of debt always associated with fiat money, additionally, sound money cannot easily be manipulated in terms of supply, nor are interest rates easily manipulated by government for political and social gain, the market determines the rate of interest. Of special note, it should be recognized that under free market sound money system the rate of natural interest is relatively stable compared to the manipulated system of fiat interest rates.
The ability to control government by controlling the money available to government makes perfect sense, it restricts government to revenues raised and since the population is sensitive to taxation, the limitation mechanism is ultimately sound. It also effectively controls the ability of government to accumulate debt, since it must abide by the sound practices of borrowing only that which it is certain of repayment within a reasonable amount of time, the money is, after all, the People’s money, not the governments.
In the early years of the 20th Century, a new innovation was created, the monetization of public debt, this technique unleashed the economic, military and social powers of government in ways never seen before. While it is true that prior to this period the government issued bonds, it did so with the restrictions placed upon it by the limitation that sound money placed on revenues and on its ability to repay those bonds under the sound monetary revenue system. The problem however, was that the government was also limited by the amount of the bond issue the public was willing to purchase. That was another limitation of sound money that government saw as a limitation on its ability to powers, especially when it came to any imperial inclinations of a ruling class of politicians. The solution was to create a dual-tier fiat monetary system that would function through the government’s ability to issue unlimited amounts of marketable monetized securities.
Here is the key to the entire system; the dual-tier fiat monetary system had major advantages to the single-tier system. In a single-tier system the government simply issues fiat money, but that system is extremely unstable and usually collapses within a matter of years. The government required a system that could be sustained for decades and one that would provide it with a virtual unlimited supply of funding and therefore, an unlimited resource of power. In the single-tier system, the government can issue its fiat currency, a piece of paper with all the official seals that promise some sort of redemption, but since such fiat notes represent nothing of marketable value, history has shown that such single-tier systems are usually repudiated as the system deteriorates through rapid inflationary depreciation.
Governments found that they simply can’t issue paper money on a single-tier system, it cannot be sustained nor does it provide government with a relatively stable monetary system on which it can build its empire. It is odd indeed, that there are those who continue to advocate that the government simply replace the current dual-tier fiat system with one where the government simply issues fiat money directly, without the use of debt monetization. The fact is that such a system has been tried throughout history without any success whatsoever.
Thus we come upon the distinct differences between the two types of fiat monetary systems. The dual-tier system provides a degree of stability, but the manner in which it is achieved is ultimately very costly and dangerous. Under the two-tier fiat monetary system public debt is monetized using what amounts to essential two pieces of fiat paper, one being the fiat bond issued by government and the other being the fiat currency note issued by government. The bond is issued and provides a surety of repayment, the problem, of course is that the repayment of the bonds is promised with the very fiat notes the issuance and sell of bonds create. So, the government promises to pay its bonds by the very paper fiat notes created by those bonds. Neither the fiat bonds nor the fiat notes represent anything of actual value in terms of purchasable goods, there is no real asset value to either the underlying bond or the repayment of those bonds with the fiat currency created through the salable issue of those bonds.
Essentially the government states that it will repay its bond issues, but repay it with what? Certainly not anything holding any more value than the bond issue itself. It promises to repay its bond obligations with nothing more than the very Federal Reserve Notes created from the security of those bonds. Thus, in the simplest sense, one piece of worthless paper is serving as security for another piece of worthless paper. The Governments Treasuries secures the fiat money and the fiat money secures the Government Treasuries…have you recognized the folly yet? Thus, the fiat bonds secure the fiat money and the fiat money secures the fiat bonds. Who is the greater fool, the debtor or the creditor? They are equally foolish in their conceit of the system.
The government has no worries as long as the ruse continues to deceive the buyer of its bonds, but it can only last so long before the over-issuance of bonds, combined with massive deficit spending rips the veil from the fiscal Ponzi scheme.
In order to complete this dual-tier fiat monetary system it was absolutely necessary to attempt to demonetize gold. It was essential for Gresham's axiom to be circumvented; otherwise the new dual-tier fiat monetary system would not work. As long as money and credit were related and thus restricted by gold money, the government would not be free to pursue unlimited power; it could not manipulate the sound money supply to an extent that would satisfy its insatiable appetite for domination over the economic and social arenas. The government, if it were to be successful in its powerful desires, would have to eliminate gold money from the economy. History proves that governments hate the restriction of gold money and have, through the centuries, attempted to contain the power of gold money, without much success. You see, there was no way for the system to function while gold was considered and used as money; not only that, but to implement this dual-tier fiat monetary system it was absolutely necessary for the government to outlaw gold altogether until the fiat monetary system was firmly established.
To accomplish this there had to be a stratified repudiation of all debt payable in gold. The first step began, of course, during the Administration of FDR when the domestic public debt was repudiated and private ownership of gold declared illegal in this country. The second step came when Nixon repudiated all foreign debt of this country when he declared that no U.S. Government debt obligations would be paid in gold, at which point private ownership of gold no longer posed a real threat to the pure dual-tier fiat monetary system. This was the crucial moment in time when there was an almost complete seizure of the entire financial economic system of money, banking and credit. With such a seizure, the ability to control and thus manipulate the social policies needed to create a welfare/warfare state was achieved. No longer would the restrictions of gold or the flaws of a single-tier fiat monetary system limit the powers of government. Public debt could be monetized and the repayment of that debt could be achieved through a slight-of-hand structure that paid debt through the very same instrument used to create it in the first place.
The dual-tier fiat monetary system avoided all the pitfalls of a single-tier system, such as the Greenback system, or all the other single-tier systems throughout history that failed within a short period of time. This government fiat money, like all before it, had to be the only legal money allowed in the country, there could be no competition, especially from the most powerful and liberating money in the hands of the People, which is gold money. Governments are limited and thus controlled, when its ability to spend is restricted. Such a restriction came from gold money, its quantity could not be easily increased, nor could it be easily manipulated once in circulation and it became titled money when in the hands of a private individual.
There is such a delusion created by the entire system that government must continually promote the impossible, and that is a perpetual boom through its inflationary fiat monetary policies. While it appears that cheap money and credit offer some sort of immunity from the laws of economics, the truth is that eventually the system is consumed from government excess. It is evident that the last thing our government ever wants to experience is the pain of economic realities created by the system it uses to stay in power and it will use the fiat monetary system to the extreme, if necessary, to maintain its power even if it means such policies will ultimately cause the entire foundation of the economy to crumble.
All the proper functions of money have been suspended, and economic law delayed, by the government’s dual-tier fiat monetary mechanism. It can continue for a while, but eventually all the principles of economic law will bear down upon the fraudulent system. As those principles press against the system, its structure will be exposed, its flaws manifested in economic pain and ultimately economic disaster. At this point in our fiat history the government is attempting to postpone the inevitable and the system itself is exposing the helplessness of the government and, in all its folly, its own insolvency and corruption. The government, with its debased currency, is facing its final repudiation of debt and, in the process, an actual repudiation of the fiat monetary system. The government’s seal, its promises, beautifully engraved on all its fiat obligations cannot prevent the catastrophe that faces this country, and indeed the world. There is no trust in the promises of this government, no matter how the words are engraved on its fiat paper money, no matter how its engraved bonds are promoted as a safe-haven from economic distress.

The Wonders of Fiat Money

Through the decades, it is well known that unlike gold, fiat money holds certain advantages that simply cannot be duplicated with gold money. Unlike gold money, fiat money is not subject to the scarcity of quantity, thus the supply of fiat money is not subject to the same limitations of as the supply of gold. Gold money requires the costs of production, it usually requires labor, private companies and employees to mine the ore; on the other hand, fiat money is relatively cost-efficient, requiring no real production, no refinement, but it does create huge numbers of government employees paid through its creation, as well as massive amounts of hard-earned tax-payer dollars.
Fiat money has no asset value; there is no actual difference in the valuation between a $100 Dollar Bill and a $1 Dollar Bill except in the minds of us who must be coerced through legal tender laws to use them. The surprising advantage to fiat money is that people are willing to accept the same piece of paper and think that just because the printed image on the paper denotes $100 Dollars that it is actually of more value than the same type of paper which denote simply $1 Dollar. Gold does not possess that advantage, since gold is a commodity, each unit value is expressed in a given weight and there is no way for the government to create a ruse within the minds of the people that a coin weighing the same amount could be valued differently as with fiat money. This advantage allows the government and banks to transfer wealth in massive amounts from those who are productive to those who are unproductive, with very little effort. That, on top of the advantage of monetary inflation is a boon for the government in its efforts of massive wealth redistribution.
Recently, there have been several episodes of the government’s fiat money being counterfeited. $5 Dollar Bills have been bleached and the image of a $100 Dollar Bill has been printed on the bleached out $5 Dollar Bill. What an advantage, unofficial counterfeiters can do the very same thing as the official government counterfeiters, making the same type of paper more valuable by simply changing the printed image. These counterfeited bills are accepted at the higher value, goods and services are exchanged for the higher value even though it is printed on a bill that was previously considered a less valuable $5 Dollar Bill. There is really no difference between the two Bills in terms of actual value, only perceived value based upon an image that bears not actual asset value.
Gold holds a particular disadvantage for the government and banks; since it is an asset it conveys a property title to the bearer of that money. Fiat money on the other hand holds no inherent asset value; it does not convey title to the bearer and remains nothing more than a note expressing a government liability. Given that fact combined with the amazing system of fractional reserve banking, fiat money, being free of property title, can be so flexible that only a fraction of it needs be held in actual reserve. This frees up both the government and the banks to get the benefits of full reserve without actually having the full amount of fiat money on hand. Fractional Reserve Banking also gives fiat money the advantage of maintaining the pressures of inflation, for without fractional reserve banking it would not be possible for fiat money to exist, inflation would simply destroy the currency without the mechanism of fractional reserve.
Gold does not require coercive laws to enforce its use as money, this is a particular disadvantage for the government since the degree of social control cannot be maintained as easily under a gold monetary system as it can under a fiat monetary regime. The act of voluntary market exchange is hampered through the fiat monetary system, this gives the government the advantage of manipulation, not only of the fiat money itself, but also of the markets and rates of interest. Since the government can control the supply of the money it can also control the demand, shifting market forces into politically expedient directions; through this process the economy can be relatively managed based on policy rather than allowing it to self-regulate through market forces. The more control the government has over the markets the more control it has over the public, fiat money presents this advantage to government in ways that are simply not possible under a gold monetary regime.
Perhaps the primary problem with gold money is that of public indebtedness, there is a restriction on the amount of public and indeed private debt that can be accumulated under a gold monetary system, especially one that is subject to the requirements of a 100% reserve, thus there is a limitation of credit expansion under a gold monetary system. Since the utilization of public debt has become essential to our modern society, there would be no way for the extension of credit/debt to be expanded to such a degree under a gold monetary system.
While it now appears that expansion of credit associated with public or government debt is natural, the fact is that it is simply a reflection of underlying political expediencies, but not social necessities. Public or government debts are nothing more than anticipated taxes. At one time, government debt was governed by the amount of tax revenues and if the distribution of the holding of such public debt were equal to the distribution of the weight of taxation then any public debt would pose no burden on the society. The problem is that such a view of public debt was always very restrictive on government under a gold monetary system, but that is not the case under the wondrous fiat monetary system, which is not subject to such restrictions.
Under a very restrictive gold monetary system, government debt was very limited and any expansion of government debt beyond the measure of anticipated revenues always resulted in an increased burden of taxation. Since the imposition of such excessive taxation hampers and places a real check on private enterprise there is a very real economic cost associated with higher accumulations of public or government debt, thus diminishing any socio-economic dividend within the economy.
Such restrictions on public debt posed a severe problem for government, in that it did not allow for the expansion of that debt beyond the anticipated tax revenues. Since a gold monetary system poses such restrictions on government due to the necessity of balancing the extension of spending with that of anticipated tax revenue, the budgetary restraint on government proved very prohibitive on any expansion of government and the services it is able to provide. Government was so limited by gold money that there is a long history of political contrivances to evade such limitations.
The economic limitations of gold are very well known; the lack of flexibility in the supply of gold does pose many problems that restrict the expansion of economic growth beyond a certain point. Unlike fiat money, there is the requirement of good business practices under a gold monetary system, where credit is limited and responsible decision-making is necessary.
Gold, unlike fiat currency is not very convenient; it also does not provide a protectionist system where the value of the currency is managed by the government itself or the banking system the government employees to maintain the system. While gold money does not allow for many variables in both usage and derivatives of financial instruments, fiat money does provide both government and banking with a vast array of financial derivative instruments on which to draw wealth. Perhaps on of the greatest advantages of fiat currency is that it allows for the expansion of deficit spending by government without regard to the possible burden of overt taxation on the people and the private sector, thus there are no such restrictions under a fiat monetary system. There is the ability for a government to set a course of unlimited growth and expansion of its reach, its power and its services under a fiat monetary regime, which is simply not possible under a gold monetary regime.
It can be easily determined that the creation of the Federal Reserve System, as well as the eventual elimination of the gold monetary system provided the government with an instrument that completely extinguished the necessity for direct taxation and the social and economic limitations of such taxation. Essentially, the fiat monetary system allowed for Congress to avoid all the unpopularity associated with the burden of rising taxation. At first, the avoidance was achieved by supplementing borrowing by increasing the supply of fiat money, this form of hidden taxation simply diverted productive wealth from the private sector into the public coffers.
Gold monetary systems hindered the ability of government to borrow and would not allow for the expansion of the money supply, which is absolutely necessary to implement the hidden taxation of monetary inflation, thus the advantage of the fiat monetary system is evident. Through the creation of the Federal Reserve System, the government was able to divert monetary power away from the producers into the hands of government, this allows for an almost unlimited degree of monetary power to be concentrated in the government and in the hands of those who are politically connected to that government through the system.
Another advantage to the fiat monetary system, as opposed to a gold monetary system, is that real wealth under a fiat monetary system is siphoned from all except those who are the original holders of the fiat money as it is issued. Thus, the government and those connected to the government though their patronage systems are the primary beneficiaries of the fiat monetary system. This form of hidden wealth redistribution is very essential to the expansive power of the government, for it does not involve the necessity of the consent of the People in order to achieve any socio-political goals desired by the government.
Another distinct advantage of fiat currency is that the government can expand its military might and the scope of that might without regard to budgetary restraint. It would be impossible for this government to have expanded its military or engage in military intervention under a gold monetary system. There would be no possible way for this government to spend as much on its military as all the countries of the world combined on the far less advantageous gold monetary system. Thus this advantage is of supreme importance to the offensive imperialism and intervention of this government. Without the fiat monetary system there would also be extreme restrictions on the government’s ability to provide entitlement programs to various sectors of the population, this gives the political structure a natural support system within the voting public, which allows politicians to retain their seats in Congress since nearly 50 percent of the population receives the benefits of government entitlements.
The advantages of the fiat monetary system also extend to the fact that the irredeemable notes require no real assets to back them, thus the government is relatively free to pursue its policies without the restrictions redeemable currencies pose. Since modern fiat notes are IOUs that make no promise of actual payment, it amounts to little more than a forced loan from the people to the government.
Additionally, since gold monetary systems rarely involve the necessity of a permanent market for government debt, the government cannot reap the benefits normally associated with the government bond market. Fiat money, unlike gold money, is issued solely to meet the fiscal needs of government, and unlike gold money, fiat money has no real relationship to the actual monetary needs of the business sector. In fact, gold money almost always involves good business practices, forcing good decision-making on business as well as government, the lack or distortion of such business practices always tend to be revealed quickly under a gold monetary system while being relatively concealed under a fiat monetary system.
Such restrictions pose a definite problem that is easily diverted through the fiat monetary system, unlike the gold monetary system. Historically, of course, the issue of fiat money usually meets with general popularity, and is politically expedient, because it makes the issuance of credit relatively easy since there are far fewer restrictions on the ratio of actual savings to loans extended, thus the appearance of wealth generation is widely spread throughout the country.
On the other hand, gold money does not allow for the build up and maintenance of illusionary wealth creation, which is based in the fiat system on the extension of easy credit instead of actual wealth creation. Gold money rarely lends itself to the illusion of paper wealth generated by the extension of credit debt accumulation, instead it requires a strict regiment of fiscal discipline in order to create and maintain wealth.
Another distinct advantage that the fiat monetary system has over a gold monetary system is that the fiat monetary system allows the construction of a view of short-term benefits through inflation as a means of artificial stimulation of business; this, combined with the fact that the fiat monetary system allows for the eventual transference of wealth generated in the boom portion of the business cycle to those positioned to benefit from the burst portion of the business cycle. This is of particular importance to those well-positioned business interests closely associated and connected to the government’s patronage. We recently witnessed just such a transfer as the government sought to “save” certain large corporations and commercial banks during the recent Panic of 2008.
In terms of the Federal Reserve System, there would simply be no way for the FED to expand its balance sheet by over 100% within a time frame of a few weeks under a gold monetary system. Additionally, under a gold monetary system there is simply not the flexibility to manipulate the system as it is under the fiat monetary system. There would have been no way possible for the government and the Federal Reserve to bail out the various troubled banks and industries under a gold monetary system. Thus the advantages of the fiat monetary system can be clearly seen in this most recent economic dislocation. It should also be of note that a gold monetary system would not allow for the increased concentration of power and wealth into the political center of Washington, D.C. or the financial center of New York. Gold money would not allow this government to support the privatization of profit with the socialization of risks as does a fiat monetary system, another distinct advantage to fiat money.
Gold money would also not allow for the concentration of power normally associated with money into the hands of those who are closely related to and therefore highly influential on the members of Congress who are generating political and fiscal policy. In other words, the fiat monetary system has the advantage of opening doors and keeping them open, while doing so under the radar of ethical scruples. This is of particular advantage to those within banking and government, for it allows for the most intricately based accounting practices that can be manipulated to conceal almost anything since the entire system is not based on any actual asset valued commodity, but on a paper system of money that was created to be manipulated.
In the book entitled The Economic Consequences of Peace, John Maynard Keynes stated: “Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Since it is almost impossible for gold money to be debauched without the public noticing, it is a distinct disadvantage to those in government and since gold money does not allow for the artificial manipulation of the money supply through inflation, the government cannot steal massive amounts of productive wealth as it can through the fiat monetary system, thus the advantage to government is clear. Based on the government’s own calculations, since 1913, the government has siphoned off nearly 2105.2% of the productive wealth of this country through fiat money inflationary depreciation. That has been very advantageous to the government, filling its coffers, allowing for unbelievable government expansion, making this government the largest employer in the history of the world and it is all made possible through the fiat monetary system.
Perhaps one of the greatest advantages of the fiat monetary system is the fact that it provides the people with the impression that the government generally manages the economy well. Inflation tends to bolster confidence that government can and will do what is necessary when necessary to ensure a stable increase in the value of assets. Thus an increase in the prices of real estate and stocks are viewed as positive aspects of the management skills of the government and the FED. In general when people see the price of their homes increase they feel good, that feeling is a direct result in the inflationary policies of the government, it allows the government to continue stealing them blind through the very policy that they perceive as good economic management.
To correspond to that advantage another advantage of fiat currency is that it appears that wages are increasing, at least the face amount of wages are increasing. It matters not if a persons real wages are decreasing as long as it appear they are earning more dollars per hour, the governments ruse effectively continues. This little advantage also provides the government with a tax benefit, for the more a person makes per hour in the amount of face value currency the more of that money is taxed at a progressive rate, thus this form of double taxation is a distinct advantage to the government since it has directly taxed the earnings of a person and it also indirectly taxes it through fiat monetary inflation. So, a person may feel good to have received a $100 dollar raise a month, but calculated in terms of real wages that $100 dollars only represents an increase of approximately $4.52 per month in purchase value while it is being taxed at a given rate based on the face value of the increase.
Another distinct advantage fiat money has for the government over gold money is that, unlike gold, the fiat money supply available to the government can be increased in order to pay for goods and services without any real cost to the government itself. It is important to remember that this advantage is made possible, not only through the issuance of fiat money, but also through the manipulation of that fiat monetary regime. None of that would be possible without the very close relationship build between government and banking.
Factually, the government is at the center of monetary manipulation, the banks; under government charter operate as both the essential agents of the government, but also as the servant of the government’s political agenda. The government has, through the utilization of the fiat monetary system, created a monetary monopoly, a cartel that simply would not be possible without the direct legislative intervention of the government. The reason for the cartelization of banking is to provide government with a direct advantage in every aspect of political, economic and social spectrums. In fact, along with these advantages, it is not uncommon for those in government to move into banking and those in banking to move into government positions they are now almost interchangeable.
Through the fiat monetary system the government has created a very effective parasite system of monetary economics, keeping the host alive while continually feeding upon it. Thus, with all the disadvantages of gold money is it any wonder why the government has chosen to create and enforce the legal tender of a fiat monetary regime?