Dear Reader,
In yesterday’s Evening Standard, we placed today’s preposterous monetary system under our microscope.
We observed it is utterly untethered from tangible reality.
It is credit all the way down.
Today we track the evolution of the mighty swindle that pried money loose from its golden anchor.
Please observe this $10 banknote, dated 1928:
The 1928 $10 note bears this inscription:
“Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank.”
In those antique days, a fellow could march into a bank, hand the clerk a slip of paper, as illustrated above…
And demand the denominated amount in gold coin — payable on the nail.
The system imposed a reasonable discipline upon banks. It held inflation in checkmate.
Federal Reserve banks were required to keep a 35% reserve of “gold or lawful money” on hand — lest they make a liar of the United States Treasury secretary — in this case, the Hon. Andrew William Mellon.
In effect, the private citizen locked the banking system behind golden bars.
Sorry, No Gold
But one Great Depression, one New Deal and one world war later… we come now to a $10 banknote, dated 1950:
In appearance, it is nearly a perfect twin to the 1928 model — with one infinitely telling exception.
Can you sniff it out?
Recall, the 1928 note claims it is:
“Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank.”
But here reads the 1950 version:
“This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank.”
The fine print disguises a vast mischief: The gold provision was stricken from the record.
The bankers had broken free from their golden prison… and no longer could a private citizen bring them to honest account.
The note offers redemption in “lawful money.” Yet what precisely constitutes lawful money?
‘I Want My Lawful Money’
A certain gentleman — A.F. Davis by name — dispatched the following note to the United States Treasury, accompanied by a $10 note:
- I am sending you herewith via registered mail one $10 Federal Reserve note. On this note is inscribed the following:
- “This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve bank.”
- In accordance with this statement, will you send me $10.00 in lawful money?
The acting treasurer, M.E. Slindee, responded this way:
- Dear Mr. Davis,
- Receipt is acknowledged of your letter of Dec. 9 with enclosure of one ten-dollar ($10.) Federal Reserve note.
- In compliance with your request, two five-dollar United States notes are transmitted herewith.
And so Mr. Slindee began chasing his tail — what the philosophical men call a tautology.
The two $5 Federal Reserve notes bore the identical pledge to redeem in lawful money.
Thus the identical question dangles in the air: What constitutes lawful money?
The Government Gives Up
This Davis fellow would not be so easily shooed off.
He returned one of the $5 bills, again demanding lawful money in exchange:
Finally, Mr. Slindee threw up the sponge:
- Dear Mr. Davis:
- … You are advised that the term “lawful money” has not been defined in federal legislation. It first came to use prior to 1933 when some United States currency was not legal tender but could be held by national banking associations as lawful money reserves.
- Since the act of May 12, 1933, as amended by the Joint Resolution of June 5, 1933, makes all coins and currency of the United States legal tender and the Joint Resolution of Aug. 27, 1935, provides for the exchange of United States coin or currency for other types of such coin or currency, the term “lawful money” no longer has such special significance.
- The $5 United States note received with your letter of Dec. 23 is returned herewith.
In 1963, all promises to redeem notes in lawful money were stricken from United States currency.
The Evolution of a Swindle
Here is, in graphic detail, the devolution of American money:
A Modest Defense of Paper Money
Say what you will of paper money.
Yet in one sense, it is redeemable — if you’ll forgive the expression in the present context.
Like gold and silver, paper money files a claim upon Earth’s resources.
It is woven from cotton and fashioned into linen.
A paper dollar is tangible. A fellow can hold it in his hand, in his wallet, in his mattress.
It cannot be erased at the stroke of a key.
The paper dollar is also anonymous. Once out of your hands, it washes its hands of you.
None of these happy virtues apply to digital money.
If paper money invites abuse… what about digital money?
Bound to Get Into Trouble
Digital money removes all natural checks on monetary production. It has no tangible existence. It is limited only by the discretion of men.
Wispy as fog, slippery as oil, it is conjured into existence… as if by the magician’s wand.
Digital money is therefore the type of money bound to get itself into trouble.
It is the ideal money for ambitious government swollen to ghastly dimensions — its issue being unlimited in theory.
Digital money can also disappear at a keystroke. The bank can freeze you out of it. Every transaction goes on your permanent record.
And if the electricity is out, if the power grid is comatose, how do you purchase your needs with digital money?
Paper money can see you through.
We cannot transact in lawful money as originally defined by statute — gold and silver.
In its absence, I will settle for paper money.
Thus I raise a half-throated defense of paper money today.
Paper money we can at least keep our hands on… and our eyes on.
Regards,
Brian Maher
for Freedom Financial News
