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Fiat Currency, Central Banking and the True Constitutional Money System

Discussion in 'U.S. Politics' started by Truth-Bringer, Apr 13, 2008.

  1. Truth-Bringer

    Truth-Bringer New Member

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    Most liberals support the Federal Reserve. Yet, private banks, and therefore rich bankers and "old wealth" families, profit from the deal which created a central banking system of private banks under government control. It's basically a corporation granted a monopoly by the government, but subject to more direct oversight by the government. Still, profit is made by rich bankers - there is a reason they lobbied the government for its creation. And the use of fiat currency has created excess inflation which has hurt the poor and working class the most.

    Most conservatives support the Federal Reserve. Yet the creation of a central bank is one of the 10 planks of the Communist Manifesto. And grants more government control over an incredibly important sector of the economy. Not to mention that legal tender laws force everyone to use paper currency that would otherwise be worthless -- which goes against the original intent of the Constitution, history, and common sense by denying American citizens the use of money with intrinsic value.

    What's the truth on the matter from a Constitutional perspective?

    The truth is:

    "The only substances ever declared as money within the U.S. were gold and silver, in coin form, with copper/nickel serving in token capacity only. See: 12 USCA 152 re. "lawful money" and Coinage Act of April 2, 1792, at Sections 11, 16, & 20; re. copper/nickel tokens, see Sec. 9, and 31 USCA 460."

    Original U.S. Constitution

    Art. I Sec. 8 Cl. 5
    [Congress shall have Power ...] To coin Money, regulate the Value thereof, and of foreign Coin, ...;
    Art. I Sec. 10 Cl. 1
    [No State shall ...] make any Thing but gold and silver Coin a Tender in Payment of Debts; ...

    Note that there is no such prohibition against Congress, or any delegated power to make anything legal tender. Congress was originally understood to have no power to make anything legal tender outside of federal territories, under Art. I Sec. 8 Cl. 17 and Art. IV Sec. 3 Cl. 2, but in 1868 a Supreme Court packed by Pres. Ulysses S. Grant, in the Legal Tender Cases, allowed Congress to make paper currency issued by the U.S. Treasury, backed by gold, legal tender on state territory, a precedent that remains controversial to this day, when courts allow paper currency not backed by anything to be considered "legal tender".

    Link

    What took us away from the Constitutional model was the court packing scheme by Grant and the unconstitutional ruling made by that court, which you can read about here.

    Here are the some more detailed views of the Founding Fathers on the Constitutional money system:

    "The founding fathers were concerned about the unrestrained control of the money supply. One thing they all agreed upon was the limitation on the issuance of money,

    Thomas Jefferson warned of the damage that would be caused if the people assigned control of the money supply to the banking sector, "I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country" Thomas Jefferson, 1791

    Many of the founding fathers experienced the damage caused by fiat currency. Most of the revolutionary war was financed by worthless currency called "Continentals".

    # The Continental Currency ("Not worth a Continental") that American colonists issued for the Continental Congress to finance the Revolutionary War was replaced by the US Dollar in 1785 when The Continental Congress adopted the dollar as the unit for national currency. At that time, private bank-note companies printed a variety of notes. After adoption of the Constitution in 1789, Congress chartered the First Bank of the United States and authorized it to issue paper bank notes to eliminate confusion and simplify trade. The U.S. Constitution (Section 10) forbids any state from making anything but gold or silver a legal tender. The Federal Monetary System was established in 1792 with the creation of the U.S. Mint in Philadelphia. The first American coins were struck in 1793. The U.S. Coinage Act of 1792, consistent with the Constitution, provided for a U.S. Mint, which stamped silver and gold coins. The importance of this Act cannot be stressed enough. One dollar was defined by statute as a specific weight of gold.

    # The Act also invoked the death penalty for anyone found to be debasing money.

    # President George Washington mentions the importance of the national currency backed by gold and silver throughout his initial term of office and he contributed his own silver for the initial coins minted.


    # The purchase of The US Mint in Philadelphia, was the first money appropriated by Congress for a building to be used for a public purpose. It was purchased for a total of $4,266.67 on July 18, 1792.

    Link

    Here's the Coinage Act so you can read it for yourself

    "SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death."

    Having said all this, fiat currency has unfortunately always been legal, but only in very limited, defined circumstances. The Founders believed:

    (1) It should be done only in FEDERAL TERRITORIES and not in the STATES
    (2) It should be done ONLY if absolutely necessary and if there was no other option
    (3) It should be done ONLY in WAR TIME and NEVER in PEACE TIME
    (4) It should ONLY be done TEMPORARILY and NEVER permanently
    (5) That it promoted INSTABILITY and not stability
    (6) And James Madison said it was still EVIL even if used in this temporary manner
    (7) And Jefferson once asked if a Constitutional veto could be put on fiat currency even in this limited usage

    The bottom line is that FIAT CURRENCY WAS NEVER INTENDED TO BE LEGAL TENDER. It was never the intention of the Founders to allow the government to force fiat currency as legal tender on the American people. If they wanted to do that, they could have easily done so. Instead, they demonstrated their true convictions by making it illegal to remove gold/silver backing from legal tender and invoking the death penalty for anyone who violated this.
     
  2. Andy

    Andy Well-Known Member

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    difficult topic for me. At one point wasn't there an issue with de-inflation based on the limited supply of gold and silver for coins? This makes logical sense to me given an expanding population with a finite resource for currency will naturally have de-inflation. So how do we resolve that? Also, having paper currency backed by a commodity would be risky since if the notes were called in while the government didn't have enough stock, we could be bankrupted.

    So how do we fix these issues? I don't like fiat currency either, but I'm not sure what a real world fix would be.
     
  3. Truth-Bringer

    Truth-Bringer New Member

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    Not to my knowledge. If someone claimed that, I would want to know their position on the issue. Did they have something to gain from fiat currency or central banking? If so, there's a conflict of interest.

    Also, fiat currency has actually destroyed economies before, as in pre-Nazi Germany.

    Well, first of all, the standard doesn't have to be just gold - it can be any precious metal. We can also expand to include silver, palladium and platinum and anything else with instrinsic value, but fiat currency must be done away with. And we would have enough material available because the debt isn't a true debt. Most of it is "owed" to the Federal Reserve bankers. We tell them to walk away and accept what they've earned thus far, and then sell off federal holdings to pay for the rest as Harry Browne detailed.

    Another refutation of the arguments against a limited supply of gold:

    "Mr. Still claims that it would be a mistake to return to a gold-backed monetary system because most of the world’s gold now is held by the bankers. This is a deceptively appealing argument. First, it is not true. Central banks do hold more gold than any other single entity; but the total inventory of gold in the hands of private citizens, as bullion or coins or jewelry or known deposits in working mines, is much larger. If money were to be restored to a precious-metal base, this largely invisible reserve would be more than adequate to supply the demand. We must remember that the limited supply of gold as a monetary base is an advantage, not a disadvantage. If it were not scarce, it would not have utility as money. The smaller the supply, the more valuable it is. As pointed out in The Creature from Jekyll Island, any amount of gold or silver will work just as well as any other amount. The only difference is how valuable each unit of measure will be. The argument that “we don’t have enough gold in the world” is without foundation, and those who say this do not understand the fundamental mechanics of money."

    Link
     
  4. pocketfullofshells

    pocketfullofshells Well-Known Member

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    land of 10,000 lakes and 2 senators again
    weak as it is, we still have one of the stongest Economies...ever going right now...I am not to concerned that we need to end the Fed any time soon. Adjust trade policy and CEO pay and get stop forcing employers to pick up the health care tab ...and I think we will do fine.
     
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