The first step in replacing the Federal Reserve System is for Congress to require the Federal Reserve to buy back all of its paper dollars with silver dollars because Paper alone results in endless inflation. However, inflation eventually runs out of values. When that happens the only viable solution is to return to “a hard money” standard.
To start with, one must keep in mind that money is simply a certificate for hours of work.
The only question, and it is a difficult question, is how to make the change from paper back to gold and silver coins.
Our current, Federal Reserve System of paper money, is the third time our Nation has gone the paper money route. The first time our Nation, as a Nation, went the paper money route was the “Continentals” of our War for Independence The “Continentals” were issued as a debt. (Article VI “All Debts contracted and engagements entered into , before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the
The Second time were the “Greenbacks “ that were issued during our Civil War. The third time is our current experience with the Federal Reserve notes. Each of these times is about 100 years apart, or 4 or 5 generations apart. It seems that it takes three generations to forget the problems of paper money, and one or two more generations to again succumb to the “Siren call” of a “free”paper money system.
Despite all the derivative ways in which money can be handled, such as in various investments, eventually the only use of money is to buy hours of work from someone else.
All un-backed paper money systems (such as the current Federal Reserve System) ultimately fail and eventually have to be replaced by “hard money”, silver and gold. Because with paper money, any time Politicians from time to time “want” money; the temptation to “run the printing presses” overwhelms the politicians. What they leave out is that an additional run of the printing presses is a form of stealing, stealing hours of labor from the workers who worked those hours of labor. Eventually the workers become aware that they are not getting full value for their hours of labor and they use their vote to elect a different set of office holders to office.
Per Ludwig von Mises, “Human Action” , The main advantage to a “hard money” system is that it keeps the politicians from cheating the workers out of their hours of labor. Per Ludwig von Mises, hard money also tends to eliminate corruption. Hard money prevents the politicians from “living off the sweat of someone’s else’s brow”. “Hard money” prevents politicians from stealing someone else’s hours of labor.
Since silver coins (and the supporting gold coins) are extremely heavy, certificates for silver have been known at least since Biblical times. Not only have silver certificates been known for at least a couple of thousand years, silver certificates, paper backed by silver, with silver coins available to be exchanged for the paper on request; and “gold certificates”, backed by gold coins have worked well.
To get from where we are, back to a “sound money system” , there are only two questions; ‘When’ to make the changeover and “How” to make the changeover.
When? Whenever those who are workers, realize that they should change whom they are voting for and they decide that they would like to make the changeover.
Historically, in the United States, the changeover has been made by buying back the paper dollars with silver dollars. At the time of our War for Independence, 1776 to 1789, the, “not worth a Continental”, dollars were issued as a debt against the Continental Congress. Along with the adoption of the Constitution of the United States of America, the “Continental Dollars” were purchased back from the citizens of the United States.
Reference: the Constitution of the United States of America; Article VI Section 1, “All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution as under the Confederation.” and so the “Continental” dollars were bought back at the rate of a silver dollar for a paper dollar, and the ensuing financial well being of the Nation’s workers increased at the phenomenal rate of about 20% per year per year.
At the time of the Civil War, Congress again issued un-backed paper dollars which were printed with green ink on one side, so they were called “Greenbacks”. Along about 1876 Congress passed an Act to buy back the Greenbacks. The “Greenbacks” were purchased back from the people during the years 1876 to 1879. Beginning in about the year 1880 with a money system backed by silver, reportedly, the financial well being of the Nation’s people again increased at the the still phenomenal rate of about 20% per year per year. The “Fed” was formed in 1913. Initially the “Fed” did not issue paper money. All the
dollar bills and five dollar bills from 1913 onward into the 1940’s and later were US Treasury “silver certificates” “payable in silver to the bearer”, or in the larger denominations, up until 1933, gold certificates payable in gold to the bearer, at any bank.
As everyone knows, with out any backing, the value of our paper money has fallen, and in the opinion of some people, the value of our paper money has fallen precipitously.
Ludwig von Mises in his book, “The Theory of Money and Credit” published in 1971 by the Foundation for Economic Education, Part Four, Chapter III “The Return to Sound Money” pages 435 to 460, lists perhaps a dozen or more things needed for a return to sound money.
Included in those things are the following:
1. The first step is an unconditional and absolute prohibition on issuing any additional paper money.
2. The Fed to create a “conversion agency” using “specie” to buy back existing Fed bank notes.
3. During the buy-back period, the “old” Federal Reserve notes can remain in circulation, just that an equal value of Federal Reserve notes are to be removed from circulation and to be destroyed to balance out all newly issued gold and silver coins or certificates.
4. Reestablish a free market in gold.
5. Imperative that the individuals in policy making positions associated with the Fed should be released from their positions, and not hired back into policy positions.
Just Abandoning the
Paper Money Devastates The People
All of the alternate programs that I have seen advocate just abandoning the current paper money, and reverting to gold and silver forms of money.
However, as history shows us, just abandoning the currently circulating paper money devastates the financial well-being of the people. For example:
At the time of the French Revolution, The French revolutionists had seized all of the many properties of the Catholic Church in France.Initially the value of those seized properties were assigned to back the monetary value of the “Assignats” and for the first year or two of that system, when there was no increase of the number of Assignats issued, there were no problems with Assignats.
In January 1790, the value of the first issue of 1,860 million Assignats were equal in value to the seized Church properties. Then January to May 1792, without any appreciable number of added properties, an additional 2,200 million more Assignats were issued. In June to December 1792 another 2,750 million Assignats were issued. In January to August 1793 4,950 more Assignats were issued. In September 1793 to July 1794 another 8,450 million Assignats were issued, for total of about 20,210 livres in Assignats. At about that time it became obvious that the paper money Assignats were not being accepted and that a return to gold and silver must be arranged.
In France the French Revolutionary Government, in effect, simply discarded the Assignats. And the financial well -being of the French people was devastated , and according to some reports, it took about the next two generations for the French people to recover from the financial losses of simply discarding all the paper Assignats then in circulation.
(Reference: “The Assignats” by S.E. Harris, published by the Harvard University Press 1930)
Eliminating the Federal
Congress passed a series of laws that established the Federal reserve system, therefore Congress can pass a law, or laws that requires the Fed to buy back their paper with gold and silver coins, (or fully backed certificates for gold and silver).
One of the uses of the Federal Reserve was for them, directly or indirectly, to print the money needed to to pay for the “Marshall Plan”.
The Marshall PLAN began in April 1948. It was followed by a series of similar “give-aways”. For example, in the mid 1960’s BF Goodrich supplied the “pickle line” tanks for two (in the Philippines and in Turkey) of the five steel mills that were being “given” to other Nations. For another example, in 1998 “we” “gave” a $1,800,000 paper-making complex to Indochina, and at about that same time we gave a 7 billion dollar steel making plant to Shanghai China. The estimates are, that in the years since 1948 we have given 42,000 manufacturing plants to other nations.
Using an estimated cost of a billion dollars per gift, that comes out to be approximately 42 trillion dollars that we have “given” to other nations in the past 63 years. We have very little to show for those give-aways other than approximately 42 trillion in “IOU’s” . Those IOU’s are held by the Federal Reserve Bank.
If the Federal Reserve Bank were to apply the the approximately 42 trillion dollars in “IOU’s”held by them, the Fed would have the resources to buy back all of their paper at the rate of a silver dollar for a paper dollar, and in addition, pay off essentially all of our 13 trillion National debt.
Bill collecting is not “nice” work, and the Fed will not “like” to do that kind of work.
However collecting on loans, (being bill collectors), has always been part of the banking business. Therefore collecting for the IOU’s they hold would be a normal thing for the Federal Reserve Bank to do.
As the experience in France with Assignats shows, merely canceling 42 trillion dollars in credits woulddevastate the American economy for many decades into the future.
Submitted by Robert
Mr. Robert Kingsbury is a WW II veteran who served as a rifleman for General Patton. He is a first-term member of the New Hampshire House of Representatives and a speaker at Camp Constitution.