THE HISTORY OF UNITED STATES MONEY AND ITS RELATION TO THE DOLLAR
Introduction
What we are going to show by this work is the history of money in the United States, as well as its origin and purpose.
We assert that the dollar cannot exist without a measure of value, no
more than the "foot" could exist without the measure of 12
inches.
The paper currency has never for any recognizable period in our history
been maintained at parity with the Value Standard;
and, the paper issued by the Federal Reserve, if that paper could be
held to represent the dollar at all, must represent that
dollar at a given ratio in excess of 400 to 1.
It is our contention, that Federal Reserve Notes are not "Dollars,"
but dishonored promises to pay dollars. This work and the
citations therein mentioned establish the validity of our position.
There are no existing references that may be cited which show
opposing authority.
The Argument
An appropriate beginning is June 10, 1932; in the midst of the great
depression, when the Honorable Louis T. McFadden (R.
Pa.) who was at that time Chairman of the Committee on Banking and
Currency, stated as he addressed the House of
Representatives:
"Mr. Chairman, we have in this Country one
of the most corrupt institutions the world has ever known. I refer to the
Federal
Reserve Board and the Federal Reserve Banks. ... This evil institution
has impoverished and
ruined the people of the United States. ... Some people think the Federal
Reserve Banks are United States Government
institutions. They are private credit monopolies which prey upon the
people of the United States for the Benefit of themselves
and their foreign customers. ..."
Cong. Record, June 10, 1932
Thirty nine years and eleven months later, the Honorable John B. Rarick
of Louisiana addressed the House of Representatives
thus: "Mr. Speaker, the current efforts by our Government to hold down
price increases have served to focus the
attention of thoughtful students on a little discussed facet of our
money system, this system, because of a long procedure of
miseducation and studied silence, is not now understood as it was prior
to the adoption of the Federal Reserve system more
than half a century ago. It is based upon debt; has serious implications
for the future of our country, and invites what may be the
greatest war in history. ...
Every debt Dollar demands an interest tribute from our economy for every
year that Dollar remains in circulation. These interest
costs force up the price of every commodity and service and contribute
greatly to inflation. ..."
Cong. Record, Thursday, May 11, 1972
"But where does the money exist? It exists only in name, in paper, in public faith, in parliamentary security. ..."
Blackstone on the National Debt
1 Blackstone, Sec. 451
"The Creditors property (Federal Reserve Notes
in the current case) exist in the demand which he has upon the debtor,
and
nowhere else; and the dollar is only a trustee to his creditor for
... the value of his income ... in short, the property of a creditor
of the public consists in a certain portion of the national taxes:
by how much, therefore, he is the richer, by so much the nation,
which pays those taxes, is the poorer."
1 Blackstone, Sec. 451
And further, says Blackstone:
"Our national encumbrances very far exceeds
all calculations of commercial benefit, and is productive of the greatest
inconveniences, for, first, the enormous taxes, that are raised upon
the necessaries of life for the payment of the interest of this
Debt are a hurt both to trade and manufactures, by raising the price
as well of the artificer's subsistence, as of the raw material,
and of course in a much greater proportion, the price of the commodity
itself, nay, the very increase of paper ("Money")
circulation itself, when extended beyond what is requisite for
commerce or foreign exchange, has a natural tendency to
increase the price of provisions as well as of all other merchandise,
for as the effect is to multiply the cash of the Kingdom, and
this to such an extent that much must remain unemployed, that cash
(which is the Universal measure of respective values of all
other commodities) must necessarily sink in its own value, and everything
grow comparatively dearer, secondly, if part of this
debt be owing foreigners, either they draw out of the Kingdom annually
a considerable quantity of specie for the interest; or
else it is made an argument to grant them unreasonable privileges,
in order to induce them to reside here."
1 Blackstone, Sec. 452
And further, continues Mr. Rarick:
"Under the Constitution, the Congress has responsibility
of issuing the nations money and regulating its value Art. 1, Sec 8,
Cl. 5, in a recent brilliant analysis of our money system by T. David
Horton, Chairman of the Executive Council of the
Defenders of the American Constitution, able Lawyer and keen student
of basic
American history, he suggests a proven remedy for our current predicament
that will enable the Congress to resume its
Constitutional responsibilities to regulate our nation's money by liberating
our economy from the swindle of the debt-money
manipulators by the issuance of national currency in debt fee form
...
We have a certain amount of non-interest bearing money in circulation,
all of our fractional currency, pennies, nickels, dimes,
quarters, and half dollars. They are manufactured in our mints, and
are paid into circulation, circulate freely, and provide the
government with a valuable source of revenue. From 1966 through 1970
the amount of seignorage paid into the treasury by the
mints amounted to in excess of 4 billion dollars the profit ratio on
this type of currency is 6 to 1, or currency 6 times the cost of
production. The cost ration for Federal Reserve Notes is 600 to 1;
however, during these same four years, 1986 through
1970, 50 billion dollars in
Federal Reserve Notes were manufactured by the bureau of printing and
engraving and turned over to the banks; not one cent
in seignorage was paid over to the treasury. ... Our Debt money system
compels the government to spend more than it takes in,
because this is the only way we can keep the economy going..."
Cong. Record, May 11, 1972
Congress has the power to borrow money on the credit of the United States,
Art. I, Sec. 8, Cl. 2, but Congress must provide
a made in the keeping of the letter and spirit of the Constitution;
the deliberate placing of its citizens in bondage to a private
banking corporation does not follow the mode of establishing justice
as the preamble declares. Other modes are within the
spirit
of the Constitution, and have been accepted by the people, without
bondage (United States Notes).
Questions have been raised as to who owns the Federal Reserve Banks.
"Some people think the Federal Reserve Banks
are United States government institutions, they are not
government institutions, they are private
credit monopolies."
Cong. Record, June 10, 1932, p. 12595
"The Federal Reserve Board, and the Federal Reserve Banks are private Corporations."
Cong. Record, Jan. 24, 1934, p. 1293
"Federal reserve banks are not federal instrumentalities
for purposes of a Federal Tort Claims Act, but are
independent, privately owned and locally controlled
corporations in light of fact that direct supervision and
control of each bank is exercised by board
of directors, federal reserve banks, though heavily regulated, are
locally controlled by their member banks,
banks are listed neither as "wholly owned" government corporations
nor as "mixed ownership" corporations; federal
reserve banks receive no appropriated funds from Congress
and the banks are empowered to sue and be
sued in their own names."
Lewis v. United States,
680 F.2d. 1239 (1982)
"In a second group of Central Banks, ownership
rests entirely in private hands; this group includes the Central
Banks of the United States, Italy, and South
Africa; from most of the Central Banks within this group,
limitations as to who may be stockholders
and as to the amount of their holdings are generally absent. The
United States is exceptional in this regard
since the member banks are the exclusive owners of the Federal
Reserve Banks."
"Money & Banking" (1956)
at p. 374 & 375
Rinehart & Co., Inc., N.Y.
"In reality, no stock of the Federal Reserve
Banks has been sold to either the public or the government, and even
the member banks have paid in only half of
their subscriptions: thus the Federal Reserve banks are owned
wholly by their member banks, each member
bank having paid into its Federal Reserve bank an amount equal to
36 of its own paid-up capital and surplus..."
"The Economics of Money & Banking"
Harper & Bros., 1948
The preamble to the Constitution says it all:
"We the people of the United States in order
to ... ESTABLISH JUSTICE ... do ordain and establish this Constitution
for
the United States of America ..."
Where is the justice, when Congress borrows we the people into debt
to a private banking corporation? Ultimately it is our
money Congress is borrowing. By borrowing it through the banks, Congress
is laying a heavy tax upon us to repay that debt
and the interest thereon; yet, if Congress borrowed the money directly
from us as Congress has done in the past (1862), there
would be no interest due to banks and no need for any heavy income
tax ...
How could it be that a people so dedicated to establish justice would
allow such an act of plunder to be within the authority of
Congress? ...
It is admitted that no government could survive without revenue, but
how does a government obtain the funds necessary to
meet its expenses and pay its debts? The only manner is through taxation.
Our Constitution authorizes Congress to borrow
money on the credit of the United States. The credit of the United
States is its ability to tax ...
The "Federal Reserve Act" of 1913 established or attempted to establish
a new source of money supply. To date Congress has
borrowed from these banks 465 Billions of Dollars, in Federal Reserve
credit. ...
One can only ponder where the Federal Reserve Banks can obtain such
vast sums of "money" to loan. ... The answer is not
readily obtainable. However, in the Federal Reserve's own library is
a copy of a 1939 edition of THE FEDERAL RESERVE
SYSTEM, ITS PURPOSES AND FUNCTIONS, on page 83 Et. Seq.:
"An increase in reserve requirements does not
increase the power of the Federal Reserve Banks to lend or to hold
securities. The lending and investing power of the Federal Reserve
Banks is not derived from member bank reserve deposits,
and larger required reserve balances do not increase that power. The
lending power of the
Federal Reserve Banks, is a statutory power
whereby the Federal Reserve Banks may acquire promissory notes,
acceptances, bonds, and other obligations and give in exchange Federal
Reserve Notes of Credit to the Reserve accounts of
member banks. ... Having such power, their ability to lend and to purchase
securities is not limited by the volume of funds
deposited with them by their member banks. ... Federal Reserve Bank
credit resembles bank credit in general, but under the
law, it has a limited and special use as a source of member bank reserve
funds. ...
"Federal Reserve Bank Credit, therefore, as
already stated, does not consist of funds that the reserve authorities
get
somewhere in order to lend, but constitutes funds that they are empowered
to create. The process of creation is one of giving
the promise of the Federal Reserve Notes and deposit credits ... that
is, Federal Reserve Bank promises or "liabilities" as they
are commonly called, serve in the form of Federal Reserve Notes as
the principal element of circulation medium, and serve in
the form of reserve deposits as a basis for the extension of credit
by member banks."
In other words, the Federal Reserve Banks merely create whatever funds it wishes to loan, without restraint. ...
The Federal Reserve did not have the 465 Billion to loan Congress, so
it merely created it upon the credit of the United States,
giving nothing of value to Congress, but demanding in return value
from the people in the form of interest and, when possible
principal payments.
The interest that the people pay upon the national public debt (creation
and use of Federal Reserve Notes) amounts to a taking
of private property without just compensation, in contravention to
the 5th Amendment.
What have the Federal Reserve Banks done for Congress that Congress could not do for itself?
There would be no objection to Congress borrowing something of value
from the banks, such as lawful money, gold and silver
dollars or bullion, but when the banks create the money, the United
States guarantee the redemption of the paper. The people
pay an interest to the banks, and the banks end up owning all the property
because of their unrestricted inflation of the
Currency; the sanity of this entire process is above our comprehension.
The taking of the wealth of the people to pay an interest tribute to
these private banks for a contract containing no lawful
consideration again makes one wonder what has happened to sanity and
justice for which our forefathers spilled their blood.
During the June 6, 1960, second session of the 86th Congress, at the
hearings before the Subcommittee #3 on H.R. 8516
and H.R. 8627, the Committee on Banking and Currency, lead by the Honorable
Wright Patman, posed several questions to
Mr. Allen, the President of the Federal Reserve Bank of Chicago; at
page 41 we find:
Mr. Patman: Now Mr. Allen, when the Federal
Open Market Committee buys a million dollar bond you create that money
on the credit of the nation to pay for that bond don't you?
Mr. Allen: That is correct.
Mr. Patman: And the credit of the nation is
represented by Federal Reserve Notes in that case, isn't it? If the banks
want
the actual money, you give them Federal Reserve Notes in payments don't
you?
Mr. Allen: That could be done, but nobody wants the Federal Reserve Notes.
Mr. Patman: Nobody wants them, because the
banks would rather have the credit as reserves but that is the modus
operandi if currency is desired.
Mr. Allen: That is right.
Mr. Patman: In other words, when the open market
committee buys a million dollar bond, it doesn't take a million dollars
out of anybody's account; there is no money taken from any bank or
any individual; they create that money on the books of the
banks, the 12 Federal Reserve Banks, to by that bond, don't they?
Mr. Allen: That is correct.
Subcommittee Hearings,
June 6, 1960 @ pgs. 39 and 43
What value are we repaying? There wasn't any money in the banks, and
none was actually loaned to the government, yet the
income tax is laid to return, if possible, the principal borrowed or
at least the interest thereon.
The Income Tax as a tax that must be imposed solely to pay the interest
and, if possible, the principle borrowed from the
banks. ...
The Income Tax is the ability by which the banks tax out of circulation the credit they have created. ...
The Income Tax is only necessary because of our debt-money system; when
the money is borrowed into circulation, there must
be a mode of repayment, that mode is the Income Tax. ...
If the money were paid into circulation as was intended by the issue
of every coin and currency created by our government. ...
There would be no need of the Income Tax. ...
Does any intelligent being, believe for one honest moment that the national debt could ever be paid? ...
As long as there is an interest charge against the Federal Reserve Notes
that debt could never be paid. ... One might pay back
to the bank all the money borrowed, but, if all the money borrowed,
is all the money that exists (as in the case of Federal
Reserve Notes), where would we then have anything to pay interest?
In 1972, the Federal Government borrowed from the Banks 465 Billion
Dollars in Bank Credit at interest amounting to 22
Billion Dollars. In 1973, congress will pay this debt to the Banks;
487 Billion Dollars to the Banks Credit will be due.
Congress must, to pay this debt, tax every Federal Reserve Note out
of circulation. ... at that point Congress would only be
short 22 Billion Dollars. ...
This simple rule of logic is: You cannot give more than you have, or, more than exists.
What must necessarily happen: Congress must renew the debt either by
re-borrowing 467 Billion Dollars (which of course the
bank would not permit) or pay the interest and re-borrow the principle.
The new debt for the next fiscal year is 465 Billion
Dollars, however, now only 443 Billion Dollars actually exists, the
balances of the money, i.e. interest, is now the property of
the bank. ...
Progressing through stages, the second year Congress again goes to the
bank to extend the loan, Congress again owes 487
Billion Dollars, but it now only has 443 Billion Dollars with which
to repay that loan, now Congress is 44 Billion Dollars with
which to repay that loan, now Congress is 44 Billion Dollars short.
... ultimately the banks have all the Federal Reserve Notes
back as its property and the United States is still owing the original
465 Billion Dollars with no way to pay that debt.
The banks have all the money, own all the property, and the citizens
must ultimately borrow from the banks to pay their taxes
just to maintain the interest payment. ...
Even if Congress should attempt to repay the debt in small increments
without borrowing additional funds, the recession that
must follow as the money is taken from circulation would totally destroy
our economy and drastically reduce our ability to pay
any further taxes until that money was borrowed back into circulation.
We sometimes wonder why our elected officials in Washington desire to
spend so much money. They spend more each year
than they receive in taxes; yet, the year Congress balances its budget
and has no need for deficit spending, that will be the year
of total economic collapse of our country will commence; for, it is
these deficits that allow us to maintain a circulating principal
by which we may pay some interest without borrowing from the banks
ourselves.
The following excerpts are from the 1957 Senate Finance Investigation
Committee in which Senator Malone posed several
questions to William McChesney Martin the now former Chairman of the
Federal Reserve Board.
Sen. Malone: The public is catching up with
you, my personal opinion is, for whatever it may be worth, that if
we don't
stop inflation, go back on the Gold Standard, stop the free trade with
low wage nations by refusing to extend the
1934
trade agreement act in June, 1958, and stop this centralization of
power in Washington; if we do not accomplish
these things
in the next two or three years, there will not be another Republican
President in the life of the youngest Republican
voter
today. This is how serious it is, in my opinion. ... What does the
Constitution say about the coining of money
and the fixing of the values thereof?
Mr. Martin: The power is in Congress.
Mr. Malone: Where is it now?
Mr. Martin: The Congress has delegated authority over the money supply to the Federal Reserve System.
Mr. Malone: But we can abolish or amend the Federal Reserve Act any time we want to.
Mr. Martin: That is right.
Mr. Malone: But Congress has nothing to do
with it, unless they amend the act do they? We can talk to you, but
we cannot
do anything through the Federal Reserve Act, your judgment cannot be
questioned for anything done
under the act unless we amend it.
Mr. Martin: That is correct, but the Act itself can be changed at any time.
Mr. Malone: Of course it can, but at the moment,
Congress has not one iota of authority except the authority to
change
the act, in the coining of the money, and the fixing of the value thereof,
do they?
Mr. Martin: Well, Congress decided this was
a problem, that money will not manage itself, so they set up this
means of
handling.
Mr. Martin: .... I think Congress is certainly watching the Federal Reserve System very carefully.
Mr. Malone: I do not think they have watched
it at all, I think this is the first time Congress has looked at it for
24 years. ... I
believe, I actually believe this, that if the people of this nation
suddenly fully understand what the Congress has done to them
over the 40 years, they would move on Washington, they would not wait
for an
election. ... It all adds up to a preconceived
plan to destroy the economic and social independence of the United States.
Now, only is there no authority on the part of Congress to delegate
its responsibility under Art. I, Sec. 8, par. 5 of the
Constitution, but the Supreme Court, in the case of Ling Su Fan v.
US, held, their power to be nondelegatable. See Ling Su
Fan v. U.S., 218 US 302, 54 L.Ed. 1049
Thomas Jefferson once said: "If the American people ever allow private
banks to control the issue of their money, first by
inflation and then by deflation, the banks and corporations that will
grow up around them will deprive the people of
their property until their children will wake up homeless on the continent
their fathers conquered."
I must assert here, that, the power over money rests entirely with Congress,
it is an act of sovereignty, and one strictly
legislative in nature:
"All legislative power herein granted shall be vested in a Congress of the United States."
Article I, Section 1, U.S. Constitution
We the people have to Congress the power to borrow money on the credit
of the United States, and to coin the money and
regulate its value: Article I, Section 8, Clauses 2 & 5 respectively.
Since Congress derives its power from "We the People" and "We the People"
have never amended the Constitution to enable
Congress to delegate strictly legislative power, it must be asked,
where does such authority exist?
The answer is that no such authority does exist; Congress has side stepped
its responsibility; this responsibility pertains to what
must perhaps be the most important function of Congress, creation and
management of the nation's money.
We the people want to know why Congress has forced us to borrow our
own money into circulation at interest with United
States bonded indebtedness? We believe as did President Lincoln, that
if a nation can issue a $5 bond, it can issue a $5 bill.
We the people gave no authority to the Federal Reserve Bank to coin
or create the nations money. We delegated that power
to Congress.
Even if Congress should feel incompetent to manage the nation's money,
it has no power to delegate nor to relinquish that
authority.
The Supreme Court has held some of the powers of Congress to be delegatable,
but no power strictly legislative in nature
Panama Ref. Co. v. Ryan, 293 US 388, 79 L.Ed. 446. Even where the power
was held to be delegatable, Congress was
required to lay a policy and to set up a standard. Avent v. U.S., 266
US 127; Central Securities Corp. v. U.S., 287 US 12;
U.S. v. Chemical Foundations Inc., 271 US 1.
In the statute creating the Federal Reserve System, and in its subsequent
amendments, there appears no stated limitation on the
powers and authority of this corporation.
To constitute a proper delegation of legislative power, Congress must prescribe:
1.A policy
2.A definite standard for administrative action to carry out that policy, and
3.An administrative procedure and action which complies with due process of law.
Field v. Clark, 143 US 640; Hampton & Co.
v. U.S., 276 US 394; Buttfield v. Stranahan, 192 US 470; Union Bridge
Co. v. U.S., 204 US 364; U.S. v. Shreveport Grain & Elevator Co.,
287 US 77; U.S. v. Grimaud, 220 US 506
The "Federal Reserve Act" does not place limitations on the reserve authority, or upon the Federal Reserve banks.
Authority of the Federal Government in general may not be delegated,
without restrictions and safeguards, even when power is
delegatable, control must, at all times, remain in the Congress ...
Panama Refining Co. v. Ryan, 293 US 386, 79 L.Ed. 446.
The "Federal Reserve Act" is without authority; Congress has made an unlawful delegation of power strictly legislative ...
"Delegation by Congress of its essential legislative
functions is precluded by the provisions of the Federal Constitution.
Article I, Section 1, that all legislative powers granted to the Federal
Government shall be vested in Congress and
of Article
I, Section 8, Clause 13, empowering Congress to make all laws which
shall be
necessary and proper for carrying into execution
its general power."
Panama Ref. Co., supra. at 388;
Union Bridge Co. v. U.S., supra.;
Wayman v. Southland,
10 Wheat. (U.S.) 1, 6 L.Ed. 253;
Schechter Poultry Corp. v. U.S.,
295 US 495, 79 L.Ed. 1570;
Knickerbocker Inc. Co. v. Stewart,
253 US 149, 64 L.Ed. 834
It must be understood that the "Federal Reserve Note" is not United
States money, as defined by our Constitution, although it
might be implied by the legal tender at 31 USC 392:
(NOTE: all U.S. Code citations cited herein are those of 1973.)
"All coins and currencies of the United States
(including Federal Reserve Notes and circulating notes of Federal Reserve
banks, and national bank associations) regardless of when coined shall
be legal tender for all debts public and private, public
charges, taxes, duties, and dues."
Our Constitution has declared that gold and silver shall be the money
of the United States. Congress being fully aware of the
will of the people passed Section 311 of Title 31:
"It is declared to be the policy of the United
States to continue to use both gold and silver as standard money, and to
coin
both gold and silver into money of equal intrinsic and exchangeable
value ..."
31 USC 311
The United States can declare Federal Reserve Notes to be a legal tender
in payment of money debts, but the United States
cannot change the standard of value nor make anything lawful money,
but the value of gold and silver.
In the United States, the dollar has been declared to be the standard unit of money - and -
The dollar of gold 9/10 fine consisting of the weight determined under
the provisions of Section 821, of this Title shall be the
standard unit of value, and all forms of money issued or coined by
the United States shall be maintained at a parity of value with
this standard ... (31 USC 314)
Gold has been declared to be the standard of value for the dollar, just
as the inch is declared to be standard of value for the
foot and the ounce for the pound.
In the first "United States Coinage Act" of April 2, 1792; it was declared
in Section 11, that the relative value of the two
dollars, silver to gold, was to be 15 parts silver to 1 part gold.
... Here we see that Congress had established a standard that
being the gold dollar containing at that time 24.75 grains fine, and
to maintain the silver at a parity of value with that standard as
371.25 grains fine silver.
Then of course Congress declared the silver coins of the United States to be a dollar (31 USC 316).
Congress had never, and could never, declare Federal Reserve Notes to
be a "Dollar." What then are these Federal Reserve
Notes? They are not a measure of value within themselves, but only
exist as the representative of value. Our money must have
a measure of value with the gold dollar. Congress declared that:
"The gold coins of the United States shall
be a one dollar piece, which at the standard weight of 24.75 grains
shall be the
unit of value ..."
31 USC 314 and record
of the 42nd Congress, Feb. 12, 1873
"... which coins shall be a legal tender in
all payments at their nominal value when not below the standard weight
and limit of
tolerance provided in this act for the single piece, and when reduced
in weight, below said standard and tolerance,
shall be a
legal tender at valuation in proportion to their actual weight."
31 USC 457 and record
of the 42nd Congress, Feb. 12, 1873
The "Dollar" is the unit of money in the United States, just as the
"pound" is the unit of weight, and the "foot" is the unit of
distance.
What are these terms in themselves without any measure of value? Could
the "foot" exist without 12 inches or could the
"pound" exist without 16 ounces?
If there were never more than 11 inches to measure, nor more than 15
ounces to weigh, would the foot or the pound exist? But
the foot and the pound would exist, but in name only; they would never
be represented by any measure of value.
We know that there must be a measure of value; in order for the units
to be maintained, we know that 12 inches are 12 inches;
and also, that 12 inches represent a foot and that a foot is for all
purposes that which is the measure of its value ...
We might say that a foot is 12 inches, but we must say that 12 inches represent a foot ...
Could a piece of paper then represent a foot? This is a relatively simple
question; of course a piece of paper could represent a
foot by being 12 inches long. ... The same holds true with all units
of measure; the pound is merely represented by 16 ounces,
but 16 ounces merely represent that pound just as a piece of paper
might represent a pound by weighing 16 ounces ...
What is a "Dollar?" A dollar, like the foot and pound, backs a "standard
of value." Congress has said that the standard unit of
value for the dollar is to be gold, 15 5/21 grains 9/10 fine by weight,
and that this gold at this weight is to represent the dollar,
and further that the dollar of gold, shall be the standard unit of
value by which all coins and currencies are to be maintained (31
USC 314).
As early as the second Congress, it was established that the proportional
value of silver to the gold dollar of 15 5/21 grains of
gold 9/10 fine.
We know that the "Federal Reserve Note" does not represent either gold
or silver. There were 67 billion of dollars in bills as of
June 1973 circulating in the form of these "Notes" and at that time
there was only 10 billion Dollars in gold within the
continental United States.
The "Federal Reserve Note" represents no standard of value and is incapable
of representing the dollar. This lack of value is
fatal to its character and the intention of Congress.
What then are "Federal Reserve Notes", if they are not "Dollars?"
Was the purpose and effect of the "Federal Reserve Act" to authorize a new kind of money?
Did the government and the Federal Reserve bank really and in fact contract
by these "Notes" to pay the bearer on demand, or
at any time?
Are these "Notes" really promises to make other promises?
"Federal Reserve Notes" are in many respects similar to the "United
States Notes"; they are both paper; they are both "Notes",
and they both circulate on the credit of the United States. ...
"United States notes are engagements to pay dollars and the dollars intended were the coined dollars of the United States."
Bank of New York v. N.Y. County,
7 Wall. (U.S.) 26
"Their name imports obligation, everyone of
them expresses upon its face an engagement of the nation to pay to the
bearer a
certain sum, the dollar note is an engagement to pay a dollar, and
the dollar intended is the coined dollar of the United States, a
certain quantity in weight and fineness of gold or silver ... no other
dollars had before been recognized by the legislature of the
national government as lawful money."
Bank of New York, supra., at 30
The Supreme court held that the issue of "United States Notes," was
not an attempt by Congress to make dollars, but an
attempt to borrow dollars and to repay that debt.
From the beginning it was intended that "Federal Reserve Notes" would
represent the dollar at a ratio of $1 in "Federal
Reserve Notes" to be equal to $1 in value ... but by 1935; the ratio
of gold to "Federal Reserve Notes" had slipped to 40%
and at that time it was enacted:
"Every Federal Reserve Bank shall maintain
reserves in gold certificates, or lawful money of not less than 35% against
its
deposits, and reserves in gold certificates of not less than 40% against
its Federal Reserve notes in actual circulation."
12 USC 413
as enacted on August 23, 1935
Now the ratio was established at $2.50 in "Federal Reserve Notes" to
be equal to $1 in value; however, this, too, did not last
for long; in less than 10 years, the ratio had changed once more, and
out of necessity the reserve requirements were reduced to
25% (see the "Act" of June 12, 1945, 59 Stat. 237).
The "Act" of June 12, 1945, established a new ratio for the value; at
that time $4 in "Federal Reserve Notes" circulating that the
banks and the government were beginning to become nervous; they then
enacted legislation to attempt to curb the
redemption of "Federal Reserve Notes" by restricting the Federal Reserve
banks from paying out "Notes" of another Federal
Reserve bank (See "Act" of July 19, 1954, 68 Stat. 495).
By 1965, all was totally lost; the ratio of "Federal Reserve Notes"
then circulation and Bank Credit to the value standard was
approaching $400 to $1; that is to say, 400 "Federal Reserve Notes"
to be equal to $1 in value. It was out of desperate
necessity that Congress enacted legislation eliminating reserve requirements
altogether (See "Act" of March 3, 1965, 79 Stat.
5).
By 1968, Congress finally admitted what was known for some 35 years,
that the "Notes" were hopelessly depreciated and no
possibility of redemption existed (See "Act" of March 18, 1968, 28
Stat. 50).
If history is at all accurate, we can soon expect Congress to issue
a new Currency to be used to replace the present Currency
at a discount of approximately 100 to 1 or 100 "Federal Reserve Notes"
for 1 Note of the new Currency. If any less of a
depreciation is maintained at that time, subsequent changes in Currency
must prevail until that level is attained.
This was exemplified as recently as 1780, 193 years ago our Currency
followed the same path and ultimately died in the hands
of those who possessed it.
"Almost the first financial steps of Congress
after the hostilities began was to vote an issue of paper money, and within
a
week of the battle of Bunker Hill, under date of June 22, 1775 authority
was given for an issue of $2,000,000. of bills of
credit, based upon the credit of the States with a careful apportionment
of the amount each colony should redeem between
1779 and 1782. Between that date (June 22, 1775) and November 29, 1779,
a period of about 4 years and a half, forty of
these emissions with a total issue of $241, 552, 780. were authorized,
and there is a strong possibility that more was
surreptitiously put out by the embarrassed treasury
officials. ... In addition to the continental
issues the States put out $209,524,776. in paper notes. ..."
Congress itself did not declare these issues to be a legal tender, but
called upon the States to do so. The Congress lacked
authority under the "Articles of Confederation" to declare "legal tender".
The States acknowledged with appropriate legislation and enacted ...
"That if any person shall hereafter be so lost
to all virtue and regard for his Country as to refuse to accept its notes,
such
person shall be deemed an enemy of his Country."
When depreciation of the bills became so marked that wages and prices
began rapid increases, the legislature was forced to
pass wage and price controls; the first of these were passed in December
of 1776, but, as the depreciation was inherent in the
paper itself, all attempts to support the credit of the bills failed;
depreciation was quickly accelerated.
Valuation of "Notes" as depreciated to money:
1779- January 14 .................. 8 to 1
February 3 ....................... 10 to 1
April 2 .......................... 17 to 1
May 5 ............................ 24 to 1
June 4 ........................... 20 to 1
September 17 ..................... 24 to 1
October 14 ....................... 30 to 1
November 17 .................... 38.5 to 1
1781- January ................... 100 to 1
In May 1781 the "Notes" ceased to pass as Currency. ..
