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I just had a conversation with constitutional lawyer and monetary expert
Dr. Edwin Vieira. I first became acquainted with Dr. Vieira, who holds four degrees
from Harvard and has extensive experience arguing cases before the Supreme
Court, at our recent Casey
Research Summit in Boca Raton, where he spoke on how far off the
constitutional rails the nation has traveled. Here is a summary of what he
told me...
Dr.
Vieira and I covered a lot of ground in our lengthy conversation, most of it
related to the U.S. monetary system - its history, nature, and likely fate. But
in between the details and analysis of how it is that the nation's fiscal and
monetary affairs have deteriorated to the current dismal state - and how the
global sovereign debt crisis is likely to be resolved - a couple of deeply
concerning truths emerged.
Concerning
because, taken together, these truths have set the stage for a full-blown
police state.
The
first of these two truths has to do the nature of today's money. To set the
stage, I present the following excerpt from Dr. Vieira's paper A Cross of
Gold related to the original Federal Reserve Act.
Section
16 of the Act provided that:
Federal reserve notes, to be issued at the discretion of the Federal
Reserve Board for the purpose of making advances to Federal reserve banks are
hereby authorized. The said notes shall be obligations of the United States,
and shall be receivable by all national and member banks and Federal reserve
banks and for all taxes, customs, and other public dues. They shall be
redeemed in gold on demand at the Treasury Department of the United States,
or in gold or lawful money at any Federal reserve bank.
Observe:
From the very first, Federal Reserve Notes were denominated
"advances" and "obligations"—that is, instruments
and evidence of debt. True "money", however, is the most
liquid of all assets, not a debt that might be repudiated, and
certainly not a debt that has been serially repudiated.
And
if Federal Reserve Notes were from the start to be "redeemed in gold or
lawful money", they obviously were never conceived to be either
"gold" or "lawful money". So, because by
definition the only "money" the law recognizes is "lawful
money", by law Federal Reserve Notes were never (and are not now) actual
"money" at all, but at best only some sort of substitute for
"money".
The
monetary conjurers' trick has been, slowly, steadily, and stealthily, to
reverse this understanding in the public's mind. That is, to make the
substitute pass for the real thing, and then remove the real thing from the
operation.
This
subterfuge was not overly difficult to put over. After all, in the term
"redeemable currency", which is the noun and which the adjective?
When people deal with a "paper currency redeemable in gold", the
natural uninstructed inclination is to treat the paper currency as
"money" and the gold as something else. The paper currency, as the
saying goes, is merely "backed" by gold—but of course is not
itself gold. And because the currency is not itself gold, the
money-manipulators can remove the gold "backing" farther and
farther into the background, without affecting the nature of the paper as
"currency" (at least nominally).
Thus,
a "redeemable currency" can be converted into a "contingently
redeemable" or "conditionally redeemable" currency, through
temporary suspension of specie payments (as happened repeatedly during the
Nineteenth Century); and then into a full-fledged "irredeemable
currency", through permanent suspension of specie payments, as with
Federal Reserve Notes after 1933 domestically and 1971 internationally.
Yet,
to the average citizen (whose most serious liability is mental inertia), even
though a paper currency's promise of redemption has been dishonored, it
nonetheless remains "currency".
Thus
one grasps that the so-called "right to redemption" attached to any
paper currency is actually a liability, inasmuch as it exposes the
holders of that currency to repudiation, because they possess only the paper,
not the gold.
Even
in the best of times, the holders of redeemable paper currency are not
economically and politically independent. Rather, they depend upon the
honesty and the competence of the money-managers.
This
is why America's Founding Fathers, realists all, denominated redeemable paper
currency as "bills of credit". They knew that such bills'
values in gold or silver always depended upon the issuers' credit—that
is, ultimately, the issuers' honesty and ability to manage their financial
affairs.
The
unavoidable trouble with "bills of credit", though, is that they
can (and usually do) turn out to be "bills of discredit", when the
holders discover that the money-managers are dishonest and
incompetent—or worse, as is the situation today, highly competent at
dishonesty. Then the holders of the paper currency (if they are sufficiently
astute) realize how unwise it is to allow the gold to be held by the very
people with the greatest incentive, and the uniquely favorable position and
opportunity, to steal it.
But
when the money-managers refuse to redeem their currency, what can the holders
of that currency do to protect themselves? Well, what were they able to do in
1933 and in 1971? Nothing. If the holders of Federal Reserve Notes had
enjoyed an effective, enforceable "right" to the gold that the
Federal Reserve System and the Treasury of the United States promised to pay
in redemption of those notes—that is, if the currency had been
"redeemable" in the only meaningful sense that redemption was
absolutely assured as a matter of law and especially fact—the gold
seizures of 1933 and 1971 would never have happened.
Thus,
the ostensibly "redeemable" character of paper currency of the pre-1933
and pre-1971 type did not protect the holders of that currency.
Instead, it turned out to be the very device used to deceive, defraud,
divest, and dispossess them of gold—proving in the most
palpable manner that a society's acceptance of "redeemable
currency" is the product of confusion and the invitation to inevitable
economic and political disaster.
In
our conversation, Dr. Vieira ticked off eight specific ways in which the
current monetary system is unconstitutional. While I won't go into the
specifics here, the important thing to understand is that, as currently
operated, the federal government has managed to manipulate things to avoid
any constitutional restrictions on its ability to spend.
This,
of course, gives the government free rein to reward favored voting blocs with
expensive social programs, buy fleets of limousines, launch expensive
overseas adventures, bail out well-connected donors, and otherwise spend the
country into ruin.
To
understand why this is so important as a precedent
to the evolution of fascism, view the matter in reverse by considering how
different things would be if the constitutionally mandated requirement that
the government's currency be redeemable in good money - gold or silver - was
still enforced. In that case, the government's ability to spend would be
effectively limited by what it collected in revenues. That, in turn, would
have greatly curtailed its ability to grow into the bloated juggernaut it
has.
In
other words, the American ideal of a limited government would have been hard
wired.
As
it stands, though, exactly the opposite has been allowed to evolve -
unchallenged by anyone, including the Supreme Court. Why has the nation's
highest court chosen not to tackle this clear breach of the Constitution?
According
to Dr. Vieira, it is likely because if they were to void the current system
as being unconstitutional, they would effectively blow apart the U.S. and
global economy. But as they have no authority to even suggest an alternative
system, they are faced with the reality that while they have the power to do
great damage, they have no power to cushion the blow. And so, the Supreme
Court does nothing.
As
a result, the ability of the federal government to continue its insane
spending and rolling out new initiatives designed to win over voters
continues with no legal restraints - the latest example being the health-care
initiative.
Put
another way, in cahoots with the Fed, the federal government is able to wage
war, bail out the banks, foster socialism, and otherwise bankrupt the nation
- to do whatever it wants - largely thanks to its continued operation of an
unconstitutional monetary system.
It Gets Worse...
The
second fundamental truth is that the Supreme Court has been a co-conspirator
and instrument of the government's degradation of individual liberty.
Dr.
Vieira and I spent a fair amount of time on this topic - of how the nation's
highest court could let stand the egregious excesses of recent decades; the
Patriot Act, Guantanamo, institutionalized torture and renditions, domestic
spying, eminent-domain abuses, warrantless searches, etc., etc. In his view,
there can be only one of two reasons that the Supreme Court has been so
accommodating - one is that the justices are incredibly incompetent, and the
other is that they are working within the context of an unseen agenda.
Ruling
out the first, his final conclusion is that they are operating with an unseen
agenda in mind. In his view, that agenda revolves around the rising potential
for widespread social unrest emanating from the nationwide monetary Ponzi scheme. Doing its part to prepare, the Supreme
Court has been establishing the precedents necessary for the government to
cope with that unrest.
Too
radical a thought? Returning to Dr. Vieira's point - ask yourself how else to
explain the Supreme Court's actions. Are they collectively of low
intelligence, or otherwise so stupid as to be unable to understand the
Constitution? Or do they now view the Constitution and the Bill of Rights as
dead letters, freeing them up to respond to the government's overheated
demands for new and previously unimaginable new "emergency" (read
"fascist") powers?
Is
there an alternative explanation?
On
this general theme, Dr. Vieira correctly points out that, in order for a
fascist state to exist does not require the government to actually arrest
anyone - but only that they can arrest anyone. Do you think you broke
a law over the past week? I can assure you that every one of you dear readers
broke a lot of laws. Sure, you may not have realized you were breaking
a law - but, as the old saying goes, "Ignorance of the law is no
excuse."
The Stage Is Set
Unrestricted
in its growth by any constitutionally mandated limits on its ability to
create and manipulate money - the official currency now being nothing more
than IOUs redeemable in nothing more tangible than coins made out of base
metal alloys with inflated face values - and supported by a Supreme Court
that has unequivocally demonstrated a willingness to ignore or sign off on
egregious tramplings of the Constitution, the stage
is set for the U.S. government to evolve into something far more dangerous on
the domestic front.
All
it requires now is a triggering event, and it would be naïve to think
that such an event won't occur. Maybe not tomorrow, maybe not this decade -
but when it inevitably does, the federal government already has all the
precedents it needs to do "whatever it takes." This absence of
legal restrictions on its actions is the very foundation of fascism.
When
I asked Dr. Vieira how the nation has progressed on a scale from 1 to 10
towards becoming a police state, with 10 being a full-blown version, he put
us currently at about 7.
There
really is no investment angle to be derived from this situation - well, at
least nothing new. Owning tangible investments that will hold up in the face
of a continued currency debasement continues to make sense - but with the
caveat that FDR's unconstitutional gold confiscation of the 1930s was let
stand and there is zero reason to think that the accommodating Supreme Court
wouldn't go along with it again. One would hope to see straws in the wind
before any moves toward confiscation would begin. Until those straws start
flying, the precious metals - as well as other tangibles - belong as part of
your portfolio.
And
I'd be remiss if I didn't mention the importance of politically diversifying
your life and your money as one of the few steps you can take to avoid the
serious risk that comes from being "all in" in a single
jurisdiction.
Some
readers have berated me for often writing on what might be considered gloomy
topics. To which I would respond: If you are sitting in a theater and see a
fire breaking out, would you fail to make others aware of it, because you
didn't want to interrupt their entertainment?
Well,
we can see a fire blowing up - the kindling for which has been piled up deep
by a series of out-of-control governments. Unless and until there is something
akin to an "American Spring." this fire is going to spread and
consume even more of the accumulated wealth of the broader public - and maybe
worse.
Do
what you can to protect yourself and your families - then get on with your
life. You may not be able to do much about the bigger-picture trend, but you
can certainly take steps on a personal level to mitigate the ill effects.
Hope
for the best, plan for the worst... but then live life to the fullest.
Limited-time
special offer: Hear Dr. Vieira’s complete speech at the Casey
Summit (along with those of 34 other world-class experts) PLUS receive a
fresh-off-the-presses, lengthy interview with David and Dr. Vieira in your
inbox next week. It’s all in your discount Double-Dip
Crisis Bundle – including the complete Summit CD set and a
subscription to The Casey Report. Full
details here.
David Galland
Managing
Editor, Casey Research
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