Miracle on Main Street: Brother Max/Is Dream Money Lawful Money?

 

Miracle on Main Street: Brother Max/Is Dream Money Lawful Money?

 

 

 

 

 

BROTHER MAX

 

 

we

 

 

Acres the Atlantic, the German federal reserve—a

central bank of issue called the Reichsbank —performed an

experiment in artificial money that devastated the German

people, 1916-1923. Pearl S. Buck wrote a book about it with

Erma von Pustau called How It Happens (New York: The

John Day Company, 1947). Genocide by paper flood is

documented in this book with dramatic eye-witness vivid-

ness.

 

In the beginning days, as the Reichsbank started issuing

paper credit out of thin air, the German press excitedly

called inflation ‘the miracle of German industry!” No

wonder., Everybody had money and credit, just like in

America in the go-go 1960’s. But soon the dream turned

nightmarish. Recalling her brother’s remarks about his

normally thrifty wife, Frau von Pustau describes Germany

around 1919:

 

“Robert first looked puzzled, then he said to me, “You know,

 

Hilde is just how women ought to be. But it’s madness to save

 

nowadays.’ Saving is the very source of wealth and health of a

 

 

sound nation. We were on our way to becoming a crazy, a neuro-

tic, a mad nation.”

 

 

The press cooperated not with the struggling, suffering

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48 THE MIRACLE ON MAIN STREET

 

 

people who looked to their newspapers for answers, but

with the Friends of Paper Money. No attempt was made to

publish or broadcast the one true cause of inflation, to lead

the people to the solution. Unfortunately for them, the

Germans had had no Roger Sherman, no Article I Section

10; they were completely at the mercy of the Reichsbank

and industry (itself indebted to the Reichsbank ) and, of

course, the government (the Reichsbank’s largest debtor).

Please note that the Director of the Reichsbank at this time

was none other than Max Warburg, the brother of Paul,

who created and served as a governor of America’s Federal

Reserve Board. Also note that during much of this period,

our boys and German boys were fighting the bloodiest war

in world history, up to then. Millions of people got killed.

 

The newspapers and radios published all kinds of tips

and hints on how to live with inflation, buying cheaper

cuts of meat, staying cold in winter, just generally reducing

one’s needs in the interests of “conservation” —that kind of

thing, with which you’re quite familiar.

 

“Inflation is a thing which has slipped out of control of

everyone,” the newspapers lamented; as times grew

worse, the media began blaming ‘foreigners,’ gold

speculators, and gold hoarders. Of course, hoarding gold

is just about the only defense anyone has against inflation.

Even in the last frantic days, the press was still terming

inflation “a catastrophe of nature.” Do you see any

similarities between the media then and now?

 

Frau von Pustau says:

 

By the end of the year my allowance and all the money I

earned were not worth one cup of coffee. You could go to the

baker in the morning and buy two rolls for 20 marks; but go there

in the afternoon, and the same two rolls were 25 marks. The baker

didn’t know how it happened. His customers didn’t know how it

happened. It had somehow to do with the dollar, somehow to do

with the stock exchange—and somehow, maybe, to do with the

Jews.

 

Confusion, mass ignorance, debates flaming from all

sides, complicated solutions proposed by experts: “All

 

 

 

 

 

 

 

 

BROTHER MAX 49

 

 

these technical questions made it difficult for anybody to

understand for a long time what was happening,” Frau

von Pustau says. And while no one was understanding,

the Friends of Paper Money were pocketing more and

more of the people’s property.

 

She recalls:

 

When Father came back from vacation, he said that the

workers had discovered the ‘trick of inflation,’ which was to figure

the value of money in gold. Time and again, the workers struck

for the ‘adjustment of their wages,’ paid daily in exact accordance

with the daily mark devaluation.

 

Those who quickly converted to gold were able to sur-

vive the inflation with their resources reasonably intact.

“Quickly converting to gold” is but one step below hav-

ing a redeemable currency. For those who remained igno-

rant of the “trick of inflation,’’ says Frau von Pustau, “‘life

was madness, nightmare, desperation, chaos.”

 

Finally, out of the chaos came the cure. But the cure

became a political game, a long, drawn out affair that

lasted nearly six months as the various factions in govern-

ment and business jockeyed for position to see who would

be given credit for bringing about the cure. Says Frau von

Pustau:

 

The government struggled hard to restore the gold standard.

But the Minister of Finance was the socialist Hilferding. Big busi-

ness was ready, now, to restore the gold standard; but the whole

clique, including the agriculture, peasants, and Junkers wanted to

be given credit for restoring sound and solid money. While this

struggle went on, chaos increased.

 

And prostitution and suicide and every kind of street

crime imaginable. Even unimaginable: it got so bad, accord-

ing to Frau von Pustau, that chunks of meat were butch-

ered from the flanks of horses standing at rest in front of

their wagons and were either sold or eaten on the spot.

 

At length, with a loaf of bread costing billions of marks,

the currency was made redeemable in gold coin and in-

stantly the stormy sea calmed. But enormous damage had

been done, both past and future. For the “honor” of restor-

 

 

 

 

 

 

 

 

50 THE MIRACLE ON MAIN STREET

 

 

ing a sound mark was given to Dr. Hjalmar Schacht, who

was skyrocketed by the media to national heroism, fame

and adulation because of his “accomplishment.” Because

he had “rescued Germany,” anyone Dr. Schacht as-

sociated with would be accorded great public esteem. It’s

history that Hjalmar Schacht chose to associate himself

with Adolf Hitler, becoming the Fuhrer’s chief economic

advisor.

 

 

In 1949, China was drowned in an inflation identical to

the German one, resulting in Mao Tse Tung’s repressive

dictatorship. In 1946, the Hungarian government's central

bank printed the 10-quintrillion Pengo note which, before

the Second World War, would have bought the whole

country; in April 1946, a 10-quintrillion Pengo couldn’t pur-

chase a dozen eggs. With the collapse of the Hungarian

economy, of course, came communist dictatorship. And so

on, globally.

 

A giant step toward an American 10-quintrillion dollar

note was taken with the passage last March of ‘The De-

pository Institutions Deregulation and Monetary Control

Act of 1980.” This Act empowers the Federal Reserve. to

declare almost anything to be money, and compels all banks

to join its system.

 

Truly, as Frédéric Bastiat wrote in the last century,

“Often the masses are plundered and do not know it.”

 

 

 

 

 

 

 

 

The same monetary system that was established on April 2,

1792, is in effect today.”

—Bruce A. Budlong,

Acting Director, Special

Financing Staff, Department of the

Treasury, Fiscal Service

 

 

“The terms ‘lawful money’ and ‘lawful money of the United

States’ shall be censtrued to mean gold or silver coin of the United

States.” ,

 

—12 UNITED STATES CODE 152

 

 

A Il coins and currencies of the United States (including

Federal Reserve notes and circulating notes of Federal Reserve

banks and national banking associations), regardless of when

coined or issued, shall be legal tender for all debts, public and

private, public charges, taxes, duties, and dues.”

 

 

—31 UNITED STATES CODE 392

 

 

52

 

 

 

 

 

8

IS DREAM MONEY

LAWFUL MONEY?

 

 

We

 

 

This may surprise you, but Congress has never de-

 

clared Federal Reserve notes to be a legal tender in pay-

ment of debts. Doubt me? Look at your currency:

‘“,.. LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE.”

4 The word “FoR” is used rather than “IN PAYMENT OF.””

t Was this just accidental? No. It is well-settled in the courts

that lawmakers are presumed to have selected each word

that makes up a statute carefully and deliberately, lest the

statute be considered void for vagueness. We can be sure,

then, that when Congress chose NOT to use “IN PAYMENT

oF,” it did so for a good reason, that good reason being

the hard fact that no debt can be paid in full in the eyes of

American jurisprudence unless paid in gold or silver coined and

regulated in value by Congress, courtesy of Article I Sections

8 and 10. (See “The U.S. Monetary System,” p. 148.)

 

About all a Federal Reserve note can legally do is wipe

out one debt and replace it with itself, another debt, a note

that promises nothing. If anything’s been paid, the pay-

ment occurs only in the minds of the parties—in the

ideasphere — not the real world.

 

It’s important for you to mark well that Federal Reserve

notes are not your government's money. They bear likenesses

of our presidents, they bear the signatures of our Treasurer

and the Secretary of the Treasury, they bear beautiful en-

 

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54 THE MIRACLE ON MAIN STREET

 

 

gravings of our most sacred political monuments, and

even—since the late 1950’s—the pious religious motto “In

God We Trust,” but they are not your government's money. So

when you revile American Dream money, you’re in no

way insulting your government. Federal Reserve paper is

not lawful money, not government money. It is the scrip of

a private corporation partially owned by your local banker.

Whether it’s a $100 bill or a $1 bill, a Federal Reserve note is

intrinsically worth about one cent. Its extrinsic worth is

whatever it will buy from day to day in the marketplace,

just like the 1916-1923 German mark.

 

Is this any kind of money for a stable country to have?

 

Between 1913 and 1963, the Federal Reserve promised

redeemability in lawful money on their notes. But in 1963,

they began issuing notes minus the redeemability promise.

This enabled your banker to issue you a note that said “In

God We Trust” in exchange for your silver dollar, without

his having to exchange that silver dollar back for the note.

An unfair deal, you might say, but who took steps to pre-

vent it?

 

Interestingly, the first 50,000,000 no-promise Federal Re-

serve notes were shipped out on November 26, 1963,

which happened to be the day of John F. Kennedy’s

funeral. A coin dealer friend of mine says, ““You know, they

couldn’t have picked a better day to catch the people off

guard.” 1

 

These days it looks like there’s not enough gold and

silver “to go around.” That’s because there’s so much

paper. Inflation always makes people think there’s a short-

age in precious metals. The reason is simple: Increased paper

increases prices.

 

 

It looks, too, as though we're “off the gold standard,” as

 

 

a banker told me in earnest not long ago. Both this and the

“not enough” assumptions are based on pure hearsay. How

rarely we bother to check things out! How easily we sur-

 

 

 

 

 

1. See Appendix, page 128 ff.

 

 

 

 

 

 

 

 

IS DREAM MONEY LAWFUL MONEY? 55

 

 

render our lives to gossip! Oh, that ideasphere! For

America to be “off the gold (or silver) standard’ the Coin-

age Act of April 2, 1792, which specifies in detail how our

money is to be made, would have to be rescinded or re-

pealed by Congress. Then, a constitutional amendment

permitting the states to make something other than gold

and silver coin a tender in payment of debts would have to

be passed and ratified by three-fourths of the states.

 

As of 1981, neither of these events has happened. God

help us if they ever should happen.

 

 

It is the Federal Reserve’s monetary system that is no

longer on the gold or silver standard. In the Federal Re-

serve’s own published statement:

 

 

Today, in the United States, there are only two kinds of money

in use in significant amounts —currency (paper money and coins in

the pockets and purses of the public) and demand deposits (check-

ing accounts in commercial banks). Since $1 in currency and $1 in

demand deposits are freely convertible into each other at the op-

tion of a bank’s customer, both are money to an equal degree.

What . . . makes these instruments acceptable at face value pay-

ment of all debts? Mainly, it is the confidence people have that they

will be able to exchange such money for real goods and services

whenever they choose to do so.!

 

 

So there you have it: paper and confidence are the

monies in which we conduct our daily commercial trans-

actions, with our friendly banker as our perpetual mid-

dleman. But have the instruments of the Federal Reserve

_ monetary system ever qualified to be the money in which

the transactions of government must be conducted? Let’s

investigate.

 

The government is limited to a special kind of money by

federal statute. For, you see, in order to live up to the

Constitution’s promise of establishing domestic tranquil-

lity and promoting the general welfare, the people in-

 

 

 

 

 

1. Modern Money Mechanics, Dorothy Nichols, published 1975 by the Federal Re-

serve Bank of Chicago. Available from Research Department, Federal Reserve Bank of

Chicago, P.O. Box 834, Chicago, Illinois 60690.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56 THE MIRACLE ON MAIN STREET

 

 

structed their representatives to keep all official accounts

and proceedings in ‘‘the money of account of the United

States.” First legislated in the Coinage Act of 1792, this

requirement is found in current law at Section 371 of Title

31 of the United States Code, which you should memorize:

 

 

31 UNITED STATES CODE 371

 

 

The money of account of the United States shall be expressed in

dollars or units, dimes or tenths, cents or hundredths, and mills or

thousandths, a dime being the tenth part of a dollar, a cent the

hundredth part of a dollar, a mill the thousandth part of a dollar;

 

- and all accounts in the public offices and all proceedings in the

courts shall be kept and had in conformity to this regulation.

 

 

Thus, it is federal regulation that all accounts in the

public offices and all proceedings in the courts must be

conducted in whatever has been declared to be “the

money of account of the United States,” this money being

expressed —or measured —in “dollars.”

 

A dollar, therefore, is neither a coin nor a piece of

paper, but simply the name of the unit by which the

value of money is measured, just as ‘‘quart’’ is the name

of a unit by which liquid is measured. A dealer selling a

car for “1500 quarts” would surely be asked ‘Quarts of

what?”’ Where, then, is the frivolity in asking of a $15

parking ticket, “Fifteen dollars of what?’’?

 

When courts and public offices require you to pay in

dollars, the dollars must—by the above law—be dollars

(or units) of the money of account of the United States. Is

there any doubt in your mind as to what the money of

account of the United States is?

 

 

The Coinage Act of 1792 specifically declared gold and

silver to be ‘’as':money in the United States.” But in 1933,

Congress suspended our currency’s redemption in gold,

and in 1968 suspended the redemption of silver certifi-

cates in silver. (In both cases, the excuse was “temporary

emergency,” as it always is when governments work with

bankers to harvest the people’s property without due pro-

cess.) The cumulative effect of those acts of 1933 and 1968

 

 

IS DREAM MONEY LAWFUL MONEY? 57

 

 

was this:

 

Congress eliminated the money of account of the

United States from the banking system without declar-

ing a replacement, with the astonishing result that

neither our courts nor our public offices are complying

with 31 U.S.C. 371!

 

 

Federal Reserve notes and all those confidence-

building, important-looking instruments of Federal Re-

serve banking may be “money,” all right, but they’ve

never been declared to be the money of account of the

United States, as gold and silver have. They may even be

measured in dollars or units, but not in dollars or units of

the money of account of the United States.

 

Federal Reserve notes can be a tender for debts,

and they may even be “lawful” money, in the sense that

they’ve never been specifically declared unlawful, but they

are not the money of account of the United States that is

measured in dollars in which “all accounts in the public

offices and all the proceedings in the courts shall be kept

and had.” And if you doubt me, just ask any judge or

lawyer or attorney general to show you legislation that

disproves me.

 

In short, Federal Reserve notes are compelling images

charged with charm and enchantment, like movies and TV

and comic strips and stereo and colorful pages in magazin-

es. If you believe that they, or the bank demand deposits

for which they are redeemable, are the money the law

requires us to pay into our government, you’ re living ina

dream world.

 

 

 

 

 

1. This section was changed September 12, 1982, by Public Law 97-258 to read, “United

States money is expressed in dollars, dimes or tenths, cents or hundredths, and mills or

thousandths. A dime isa tenth of a dollar, a cent is a hundredth of a dollar, and a mill is

a thousandth of a dollar.” The change does not affect the meaning of 31 USC 371.

PL 97-258's purpose, according to its own preamble, is to “revise, codify, and enact

without substantive change, certain general permanent Jaws, related to money and

finance...” Thus, if ever a dispute should develop over the HISADING of a part of the

en the original statute must be reverted to.

 

'm being intentionally repetitive about this “money-of-account-of-the-United

Stites hat presenta dace business because there's So much misinformation

we must set right. The dollar is Nor the money of account, it is the Unrr by which the

money of account is measured. Please read and re-read this section until you have it

cold. ;

 

 

 

 

 

A ll the perplexities, confusion and distress in America arise

not from defects in their constitution or confederation, not from a

want of honor or virtue so much as from downright ignorance of

 

 

the nature of coin, credit, and circulation.”

—John Adams to Thomas

Jefferson, 1787

 

 

I have studied finance and economics and international trade

all my life, and now, after these recent events, I have come to the

 

 

conclusion that I know nothing whatever about any of them.’

—Paul Moritz Warburg, remarking

on the Crash of 1929, as quoted

in The Nation, February 3, 1932

 

 

WW. have awakened forces that nobody is at all familiar

 

 

with.”

—John Connally, Secretary of the

Treasury, quoted in The Wall

Street Journal, August 14, 1971

 

 

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