"Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back."
- Josiah Stamp, former President of the Bank of England
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On November 22, 2009 I delivered some remarks after a rally and march at the Federal Reserve Bank of Philadelphia. Following my return from China, this was the first time I had the chance to speak publicly on the transition phase to sound money, and while there are plenty of FED critics, it is still rare to find solid ideas on how best to replace the FED, and furthermore, how such a transition be accomplished. Though stymied by government interventions in the short term, I believe the free market will win out in the long term. For instance, there were probably over 100 people in the crowd I spoke to that possess physical gold and silver. The dollar-denominated prices of gold and silver continue to rise at blistering rates since 2001 as the collapse of the dollar and fiat currencies unfolds.
It is so very important to realize that what we are seeing is not so much the appreciation of gold and silver as it is the unmasking of the devaluation in the dollar by the central banks. My sincere thanks to the late Dr. Murray Rothbard where one day, while sitting in Shanghai skyscraper, a single mouseclick led me down the rabbit hole, and I began to start discovering the truth about the current dishonest monetary system.
"END THE FED.... Then What? - The Transition to Sound Money” is the title of my talk today, and it's a bit of an ambitious undertaking for a half an hour, but it's an important topic since all of us who gathered here to protest the Federal Reserve today need to also have a plan on how best to replace the FED and the fiat monetary system. One note before I begin. I openly acknowledge that my idea is at best a starting point, and I welcome a healthy debate on this topic. I have given this particular topic quite a bit of research since first becoming aware that the dollar was not backed by gold about 2 years ago, and this past summer I attended Mises University, which is one of the very few places in the nation where one can study Austrian free market economics – the other two places being George Mason University in DC, and Grove City College in Pittsburgh.
In this talk I will first address what the goal is – as one must always begin with the end in mind. Then I will briefly discuss several transition ideas that are already present in literature, describe possible issues with each, and then spend the remainder of the time outlining my proposal.
The End in Mind
Simply stated, I believe the end in mind should be to strip the government of its Money Power and return it directly to the people. Currently, a quasi-private banking cartel, the Federal Reserve, controls both interest rates and money production, aka the printing press. There are really only three options available – a “honest” fiat monetary standard, a gold standard – which fractionally-reserved commodity money, or 100% fully-backed commodity money. Let me list why I discard the first two options and prefer the latter.
"Honest" Fiat Money?
Fiat standards, or paper money, are proven to exist only for relatively short periods of time, and as we study history, have never been left unabused by governments. Therefore, I do not believe a widely-used “honest” fiat currency can ever exist. The human temptation to abuse the power is too great, and counterfeiting, via either government or individuals can never be prevented. A prime reason to have sound money, besides facilitating a relatively stable medium of exchange for economic transactions is to impose fiscal discipline on government, a point completely missed by most modern-day politicians and Keynesian economists. There are many fiat standard plans available in literature, such as Dr. W. Cleon Skousen's Monetary Reform plan, but again, I do not believe these will work in practice.
[Skousen, W. Cleon. The Urgent Need for a Comprehensive Monetary Reform.]
[Money Masters. Monetary Reform Act.]
A fiat currency standard can never fulfill the requirements for sound money which briefly are: Money must be durable and not easily destroyed. Money must be portable for convenience. Money must be easily divisible into smaller units. Money must be recognizable and uniform. Money must be reproducible. Money must be scarce, and it must also have a relatively stable purchasing power. Fiat currencies can never truly fulfill the scarcity and purchasing power requirements.
[Towne, Jake. 2008. "The Money Matrix - What Makes Money Money?"]
Return to the Gold Standard?
Next, returning to a gold standard will not work in the long term. If one remembers how the classical gold standard worked, it was really fraudulent money and still gave the government the ability to inflate the money supply. Under a gold standard, a government might hold 100 ounces of gold, but would trade paper slips of receipt money that made say 200 ounces of gold payable to the bearer. So this system, while much superior to today's fiat currencies, has proven fairly robust it is still fraudulent and worse, since government controls the receipts, it is very easy for them to revert to a fiat currency, which is more or less what happened in 1933 when FDR stole the people's gold.
[Towne, Jake. 2008. "Bernanke's Great Lie - The "Gold Standard" and the Great Depression."]
In today's society with information being so widespread over the internet, I contend that a gold standard would be fairly ridiculous, as 100 years ago governments tended to hide from the people how their gold standards really worked. They pretended that every ounce of gold held in vaults was backed by exactly the same amount of receipt money, and when you cashed in a receipt you were given the full amount. In today's world, if it is widely known that a currency is 50% backed by gold, it would simply trade at half the price of gold. If another country's currency is 25% backed by gold on reserve, the exchange rate would simply be equal to the ratio of the weight of gold.
100%-Backed Gold and Silver Money
This leaves us with a 100% backed commodity standard, or honest money. As Murray Rothbard writes in “What Has the Government Done to Our Money?” and “The Case for the 100% Gold Dollar” successful societies have chosen gold – and silver – as money throughout time. This is no accident as money evolved from the marketplace and remember the US government per the Constitution is legally allowed to only use gold and silver as money.
[Rothbard, Murray. 1990. What Has the Government Done to Our Money?]
[Rothbard, Murray. 1974. "The Case for the 100% Gold Dollar."]
[Towne, Jake. 2009. Talk on Constitutional Money.]
While it is possible to have a dual parallel standard of gold and silver, I suggest that gold is more suitable right for the following reasons:
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Gold is presently a major financial market, with market turnover on the London exchange alone of over $20 trillion USD, which is higher than the numbers used for US GDP, and relatively comparable to the world's property, equity, and bond markets. Silver's market cap was just a small fraction of this.
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Gold is still saved rather than consumed while silver is chiefly an industrial metal. Most importantly, there are 60-80 years of aboveground stock of gold as compared to the flow rate, or amount of gold mined each year. Silver's stocks-to-flow rate is just 1.5 years.
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While the ratio in the earth is roughly 8 ounces of silver mined for every ounce of gold, the industrial consumption has resulted in the rather strange-but-true fact that there is far less aboveground stock of silver and gold. There is over 5 billion ounces of gold stock, but just 1-2 billion ounces of silver stock. Put into volume terms the entire gold supply would fit into a cube about 20 meters to a side while the entire silver supply fits into a cube 14-18 meters to a side.
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These above factors, combined with a study of the futures markets and the efforts of the central banks to suppress the spot prices of gold and silver, lead me to conclude that the silver-to-gold ratio, the silver-to-barrel of oil ratio, etc. will likely skyrocket, and not have the potential of stability that gold will offers to the marketplace. However, after the stabilization occurs, silver would be a good candidate for money in a future parallel standard with gold.
[Towne, Jake. 2009. "Silver and Gold ARE Money."]
[Towne, Jake. 2009. "Unlocking the Money Matrix - The Summers Gold Price Suppression Scheme."]
So for the purposes of this talk I will move ahead with the transition to an end goal of the monetary unit being equivalent to gold grams.
I want to add two points, first is that I believe that individuals should be free to trade and exchange as money any mutually agreeable commodity or item as they wish and the government's only role should be to mint money and maintain the integrity, meaning the mass, of the monetary unit and protect the liberties of individuals in cases of fraud. Of course, the government currently holds the monopoly on the privilege of creating money and currently commits wanton fraud, so obviously a better solution will be that of Rothbard's suggestion to allow private firms to compete, as was done in the case of the 'thaler,' a German silver coin made by a 16th century private minter. Thalers were renowned for their uniformity (consistent weight) and fineness, and poor pronunciation later resulted in the Spanish milled 'dollar,' which the American dollar was originally based upon.
[Rothbard, Murray. 1990. What Has the Government Done to Our Money?]
Secondly, since I am doing a lot of talking about coins, and no one wants to carry coins all over the place, I want to add that electronic digitized currency in gold grams or silver ounces is already being done. The vaults of independent bullion banks would hold the physical gold or silver and when you swipe a charge card, this would move the specified weight from your account to the new parties. Obviously, these vaults, or money warehouses, would need to be independently audited to prevent counterfeiting, and customers must always be able to remove their metal when desired.
The Transition to Honest Money
OK on to the transition possibilities. First we must picture the scenario in which the transition to sound money will realistically take place. I believe it is very naïve to assume that magically one day Congress will wake up and decide they have the political will to transition to sound money. Therefore, I believe the need for such a plan will take place at a time when the dollar and Treasury markets are in severe crisis.
Idea #1 - Transition in Slow Reverse
The transition suggestions made by Douglas Gnazzo in his book Honest Money and Edwin Vieira are worth mentioning and studying. Gnazzo points out the transition from the constitutional silver dollar pegged to gold to the current Federal Reserve Note, which is an unbacked IOU of debt, took place slowly and went through phases from mostly commodity-backed by silver and gold to the classical gold standard which was fractionally based on gold, to the gold bullion standard which existed from 1933 to 1971, to a fractional reserved fiat note until roughly the year 2000. Following 2000 until present-day, the fractional reserve system has broken down and no longer exists as I've proven in an article “Yes, Virginia, There Are No Reserve Requirements.”
[Gnazzo, Douglas. 2008. Honest Money.]
[Towne, Jake. 2009. "Yes, Virginia, There Are No Reserve Requirements."]
[Vieira, Edwin. 2009. 90-min Talk on Honest Money.]
[Vieira, Edwin. 2004. Text of Gold Money Bill.]
Gnazzo's suggestion is to slowly transition backwards from the Federal Reserve Note to a 100% commodity-backed gold and silver money. While this idea is worth considering, I do not believe it is viable due to the time necessary and since fractional reserve banking has already broken down – we are off the precipice, so to speak. I do believe that from 1980-2000, such a reversion was theoretically possibly but unfortunately very few people were agitating for this, most especially Congressman Ron Paul of Texas, and it was never seriously discussed.
[1983 Debate Between Congressman Ron Paul of Texas and FED Governor Charles Partee.]
Idea #2 - Transition Overnight
The next idea comes from a member of the Mises Institute, Dr. Thorsten Polleit, and the man who I believe is the most knowledgable monetary economist on the planet, Dr. Jorg Guido Hulsmann, also from Mises. I will refer to just Polleit's idea here, which is a simple one – simply take all of the central bank gold and back the fiat currency with it overnight, thereby making all the money 100% commodity-backed in one fell swoop and limiting the chaos to the people. This idea certainly warrants further discussion, and is in fact pretty attractive. Polleit has a great 1-hour lecture I will link to that summarizes his paper.
[Polleit, Thorsten. 2009. Ending the Monetary Fiasco - Returning to Sound Money.]
Again, I believe the key risks lie from two factors. One, there is overwhelming evidence from groups such as GATA that central banks, including the FED have leased out large portions of their gold to the spot market. Since the central banks carry gold on lease and gold in vaults as a single line item, such a calculation is only possible if valid audit results are available. Central banks claim to possess just roughly 20% of the world's aboveground gold stock, though this number may in reality be less than 12%.
[Powell, Chris. 2009. "Gold Suppression is Public Policy and Public Record."]
[Towne, Jake. 2009. "Unlocking the Money Matrix - The Summers Gold Price Suppression Scheme."]
Second, again I predict that no transition has a possibility of occurring until we have a severe dollar and Treasury market crisis, and the predictable responses of the governments and central banks will be to alter their balance sheets so that the end results are most profitable for themselves to maintain control over their populations. It is also highly unlikely that central bankers will be able to break their habit of using their counterfeiting powers, and for these reasons, I regard changing from the current fiat monetary system to a gold-backing as highly dangerous. If you leave the bankers the ability to create deposits from thin air, one should not be surprised when they exercise this yet again, this time stealing the gold.
Idea #3 - Divorced Transition
On to my plan. Everyone here should understand just how tightly legal tender laws enable the Federal Reserve's money-printing, the federal income tax, the US Treasury market, and our individual lives as parts of the economy. It is an intertwined house of cards where if you remove one card, all of the rest quickly crumble, which is not too surprising since the whole tyrannical system was designed by a bunch of Keynesian economists who, in my humble opinion, can best be described as quacks.
[Hulsmann, Jorg Guido. 2004. "Legal Tender Laws and Fractional Reserve Banking."]
I propose complete separation of the Federal Reserve system from the free market system that will replace it.
So, on one hand, you have the FED. Recall that the FED's power really stem from two abilities – the ability to create money and the ability to control interest rates. Congress should pass a bill abolishing the FED and as quickly as possible install direct congressional oversight of monetary policy. All Treasury debt owned by the FED – close to half of the total – would be immediately canceled. The Federal Reserve Note (FRN) would be replaced with a fiat United States Note at a parity with the FRN. The entire banking system should immediately stop extension of fraudulent dollars with money that does not meet fractional reserve requirements which will need to be reset, since, as I mentioned before, the fractional reserve system no longer exists. Any money creation should be presented as a typical bill and subject to a public vote of Congress. The control of the interest rate should be left to the free market.
On the other hand, we have the free market, completely divorced of this FED mess. Immediately Congress should remove all capital gains taxes on physical gold and silver. Just as was done with the Coinage Act of 1792, the US Mints should be opened to provide free coinage of uniform gold and silver coins. So if anyone has a bar or non-uniform coins, they can be brought to the Mints, assayed and then a set formula of differently sized coins delivered. At the same time as the Mints are opened, legal tender laws should be removed. Merchants, buyers, and sellers would have the ability to decide which forms of payment they wish to accept.
Barring psychological events, the FRNs and new United States Notes would continue to have purchasing power since in a monetary sense they will still be scarce but they will be not compete over the long-term with gold and silver. Following Gresham's Law, the tendency will still be to spend the fiat money first which may possibly result in easing a dollar price discovery for gold and silver (or rather a gold gram price discovery for the dollar!!), and a fairly smooth transition to the free market.
Foreign creditors will be rather unhappy, as the Treasury and Agency debt will likely either be formally repudiated or indirectly repudiated as they could be paid back with notes that are no longer backed by anything. However, I want to point out that the endless enslavement of future generations by tyrannical Congress is an illegitimate debt in the first place. To place blame and burden on future generations holds the same stunted logic as holding newborn Germans accountable for the Holocaust.
[Rothbard, Murray. 1992. "Repudiating the National Debt."]
Also, the federal income tax which plundered $1.2 trillion in 2008 will likely not survive the removal of the legal tender law, so we would be best off abolishing this tax and recall our expensive $1+ trillion dollar-a-year overseas military empire and temporarily issue new United States Notes in the meantime.
[Towne, Jake. 2009. "Income Tax Plank."]
Looking to the Future
Now, what goes without saying is that this period would be fairly chaotic, but as stated previously it is my opinion that it is highly unlikely that any such political process would begin without a dollar and Treasury crisis already in progress, and already caused by the failed monetary policies of the central banks. It is my belief that without the legal assistance of government, the same steps will likely still be followed by the free market via black markets and people simply disobeying government to continue their lives -- but over a much longer period of time. It is also why the more-sudden Polleit plan is in some ways more attractive than my proposal – the cauterization of the central bank and the restoration of sound money could practically occur overnight.
Now, how likely is either the Gnazzo, Polleit, or my plans to be enacted? I would say, in all honesty, the probability is extremely small at current time, but I would also add that the possibilities of the current monetary system surviving for the rest of our lifetimes is much smaller.
The times we live in right now are unlike any before in human history, where the entire world, not just the United States, is on the same unsustainable fiat monetary system. The most probably future I see ahead will be much slower and more drawn out - over years - and possibly even a decade, barring psychological currency events. Expect to see the reverse of the breakdown of the Bretton Woods system. I expect the future to bring financial market instability in bonds, equities, and derivatives, fixed foreign exchange rates, fixed trading windows for gold and the possible introduction of a Federal Reserve Gold Certificate Ratio where the FED pegs the dollar to a trading range based on reinstated US money supply figure (possibly M3).
[Sinclair, James. 2008. "European Central Bank Intervention is Out in the Open." Sinclair's website is updated daily.]
Unfortunately, if history teaches anything at all, even MORE war from the politicians can be expected to occur to distract a population struck by economic unrest and a drop in living standards caused by the parasitic central bank.
[Detweiler, Lance. 2002. "Fractional Reserve Banking as Economic Parasitism."]
[Towne, Jake. 2009. "Afghanistan War Plank." "Iraq War Plank."]
In the meantime, those who have studied monetary history will be accruing gold and silver and hopefully more and more people like myself and yourselves will stand up to educate the rest of America and fight to gain back both our economic and personal liberties.
I happen to be pessimistic in the short-term, but in the long-term there is a future – without the FED - worth striving for. Imagine an America where the family no longer must send both parents to work while sending the children to daycare. Imagine an America where money saved in the present-day worth the same or even more decades later, enabling individuals to pursue retirements or have more leisure time for personal pursuits. Imagine an America where everyone owns what they work for.
The more people that stand united against the blight of the FED, the better off society will be in the long run. The main weapon against the FED is simply educating the public.
[Towne, Jake. 2009. Platform Presentation, slides 26-47 spells out the plan in slide format.]
Happy Thanksgiving! Enjoy your time with your loved ones! Please come to the first-ever "Towne Hall" this Wednesday at the Bethlehem Township Community Center if you are free!!
Jake Towne
Nazareth, Pennsylvania
November 23, 2009
"A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history."
- Mohandas Gandhi
13 Comments
BekaForney
Abolishing the legal tender laws would do a lot to help us head toward a sound money system.
JakeTowne
Due to excess traffic, a couple comments from Monday were lost (including mine). Apologies!!
Ben G.
http://www.telegraph.co.uk/finance/currency/6152204/UN-wants-new-global-currency-to-replace-dollar.html
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http://online.wsj.com/article/SB123780272456212885.html
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http://www.telegraph.co.uk/finance/economics/5051075/A-world-currency-moves-nearer-after-Tim-Geithners-slip.html
Sounds like they could pull off the biggest heist ever? Spend, spend, spend until it's worth nothing and then reset the currency once you have the assets? Haha. Maybe a wild idea, maybe not? A destroyed dollar is a good excuse for the formation of a world currency. I'm sure this is an oversimplification as my economic knowledge is limited, but a shift to a world (fiat)currency would allow an enhancement of the illegitimate control which you describe.
Also, it's clear you advocate a return to a commodity-backed unit of exchange. Instead of just Gold and Silver, do you believe there is a possibility of a wider "basket" currency? As in, a commodity backed by numerous commodities.
I stumbled upon your website by chance. It gives me hope. Keep going!
Ben G.
"As in, a commodity backed by numerous commodities." = "As in, a currency backed by numerous commodities."
Jon
Jake, I really enjoyed reading this. It is great to hear someone really making an attempt to reform money. IMHO, just trying to help, I think you are losing site of things in 4 areas:
1. Money DOES NOT need to be gold (or any commodity) backed in order to hold its value, be scarce, divisable, recognizable, etc. You are falling into a trap by following this path. Instead, money should be valuable "declared by law" (Rome, Plato, and Bank Of Amsterdamn proved this possible for over a 1000 years) . By allowing money to be based on Gold you corrupt the system and make it vulnerable to underhanded manipulations. By having a cleam money, declared valuable only by law, it would have more stability and value because it does not rely on anything else and it is more transparent. STOP following this Gold standard path! (ref. The Lost Science Of Money)
2. Since all world countries follow a fiat (non-commodity) standard, any country who establishes a Gold standard will fall prey to them. This is because FIAT money is superior in many ways. Fiat money systems can respond MUCH quicker and grow much faster (if necessary). In a time of war , a country with a FIAT system will always rule. A gold based system cannot grow fast enough. In fact, against any "honest money" system, FIAT will always RULE in the short term. Any honest money system should have a mechanism to protect itself from FIAT money systems. A Gold backed system would only work if the whole world went along with it. Perhaps the SDR of the IMF should be Gold based (but its not; its a 20% reserve debt based system).
3. Also, you are missing the point that , for money to be in the hands of the people, the money system NEEDS to be in the hands of each state. State governments (NOT the federal government in any form) should have complete control over the money system. State monies should compete with each other in commerce like miniature countries.
4. Finally, outlaw interest and use a dividend based stock system instead where lenders take some of the risk in a loan of money. The current interest based system allows lenders to remove themselves from any risk. Lenders would profit only if the money they lent was profitable in its venture. (The stock market is based on this kind of system.)
JakeTowne
Another comment sent into me via email...........
Committtees need to be formed to study this inside and out. It could be done in 6 months no problem - perhaps less time.
Second - we really don't know the extent of the damage done by this dishonest system; nor the totality of the associated repercussions on an international basis that could occur because the dollar is the world's reserve currency and accounts for about 2/3 rds of all forex transactions; and exactly how much gold is in Fort Knox, the Fed's bldgs., the IMF, etc. All this information must be disclosed and disclosed to the people. Also, education on national television, etc. needs to take place so when the committees' recommendations and findings on gold come out - the people would be able to understand the significance of what they are told. Once again - 6 months and this could be accomplished.
Personally, which is why we need study groups of experts, I believe that any gold in Fort Knox taken from the people by Roosevelt; gold in other depositories, Fed's vaults, etc - belong to We the People. Even a good amount of the IMF gold came from the US, as did many other holdings in the world. There are records. ALL that gold should be returned to the people - on a per diem basis. This is what would form the basis on a national gold currency.
The government cannot hold title to such - the government cannot "own" anything IMO, it is in truth held in trust by the governement for the people - the people are soveregn - not the government. We created the government. We created the Constitution. All these things exist for us - the people - We are sovereign. They are simply instruments that we have ordained to be used to provide for our welfare. All law must be in pursuance of the Constitution or it is null and void, as if never passed; it holds no binding authority whatsoever. Cue Warranto? This is debatable according to most legal authority. I disagree.
When you talk about the gold, or the gold exchange system, you do a good job of explaining the difference. Do not forget, however, that for more than the first half century of our country, there was no gold standard system of any kind - we were on and still are on, a silver standard that includes a bimatellic system of exchange of silver and gold and vice versa. This can only be changed by a constitutional amendment; and was has never occurred. It was based, however, on the WRONG idea of a fixed or legal tender (jurisitic definition) exchange rate of 15-1, rather than according to free market principles of floating exchange rates left to the free market, which is the economic definition of money.
But at least there was not yet any form of paper fiat debt-money. So, in truth - even the original system was not completely honest, although much, much closer to anything ever had in this country since. If the exchange rate had not been fixed - it would have been an honest system. I think it was so intended by most, but not all of the Founding Fathers. This was Hamilton's idea/doing IMO. He left the door to the mint wide open for the thiefs who come in the night. And come they did. From there it was all downhill. They slowly but surely dismantled the system in a progresive devolution - ending with paper fiat debt-money (the national debt ciruclating as money).
So, in the beginning the money was real and honest; but the fixed exchange ratio of the bimettalic currency was dishonest. The two are not mutally inclusive; especially in a fixed legal tender system (which idea is false). That is not how a free market works. This is why gold and silver must exchange by weight and purity alone - honest weights and measures. No other names or units, etc. Then no games can be played therewith. An ounce of gold is an ounce of gold. This is why gold should NOT BACK ANYTHING.
The money should be gold - not back something else. The concept of "backing" anything with gold is false IMO. Completely invalid. I do not agree with any system that wants to back anything - even 100% with gold. There is no need and there is great risk. As your quote says: give the evil one's (and make no mistake - this is about the evil one's) any chance of messing with the system and they will. Take it away from them and in the flash of the eye they'll buy it back with the stroke of a pen or at the point of a sword or at the threat of pushing the button.
I agree with essentially the first half of your article, except or unless where anything I've said above differs with it, which wasn't too much up to that point (50% or halfway). From thence on a differ with a fair amount.
Changing the system overnight will never work as proposed. I don't think the intricacies and complexities of the foreign reserve currency issues are being considered in their full light. The entire world's financial system is dependent on a false monetary system; and if you try to change it over night, it would be like trying to get all the opium addicts in the world to get clean all in the same night. It ain't gonna happen IMO.
Also, recall my plan (which needs to be pulled apart and discussed and changed, etc) calls for the abolishment of the Fed immediately; no more FRN's can be issued; I only allow for the exiting one's to circulate side by side with gold. Let the market decide which it wants to use. You have cut the snake's head off by abolishing the Fed and not allowing any more new debt-money (FRN's) to be issued - but if you try overnight to replace all the existing FRN's in circulation; as well as all the various markets, including forex and the over the counter derivatives markets denominated in large part by the dollar - pandemodium will break out, which mean hell breaks out. And I mean that in the true since of the word pandemonium. Hell, could actually break out.
I estimate that the plan I proposed, which is essentially the same one Ron Paul has propsed before Congress for the last 20 years, is the best starting point I'm aware of. It's not full-proof, just a starting point. It would take about 3 years or so to make the transition out of existing circulating FRN's to gold. People would quickly learn which held value (purchasing power) the best - BUT THIS WOULD ONLY HAPPEN IF GOLD WAS NO LONGER PRICED IN DOLLAR BILLS, AS THIS IS A MISTAKE OF THE HIGHEST ORDER. GOODS ALSO WOULD NEED TO BE PRICED IN WEIGHTS OF GOLD - NOT IN DOLLAR BILL AMOUNTS. An entire new banking and monetary system is needed.
Larry Parks at FAME, Vieira, and Antal Fekete know more about this than the Mises crowd IMO. I believe that Mises and now his followers got several things wrong - like the fact that money is a future good - not a present good. That is wrong IMO and a very big mistake and point that needs addressing. This goes to the heart of what money is versus what debt is; and how in a paper fiat debt based system, money and debt become the same thing.
I have read or heard from very few who understand that real money completes payment (not discharge - two differnt things) for only one of the two people involved in an exchange - the buyer. The seller does not fulfill his needs when he accepts money in exchange - even gold money. He takes it based on faith that in the FUTURE he is going to be able to return to the market and use the gold money to buy something he needs; and that the gold money will be accepted and HOLD PURCHASING POWER when he decides to become a buyer; where before he was a seller.
This is what makes a market: buyers and sellers must have faith that the money in exchange is going to be accepted and hold value. Buyers and sellers must have faith that when they go from being a buyer to a seller and back again that the unit of money and the system is going to still be in place and WORK. This is why/how hyperinflation destroys a currency; especially fiat currencies. All such faith is lost; and in paper fiat land all there is is faith. There is no substance whatsover. But even gold can falter - if man for whatever reason decides he no longer values it and wants to accept it in payment/exchange. Indirect exchange always carries the risk that the money used can go out of favor, as it is accepted according to subjective valuation. If all people were honest, anything could be used as money. Or put another way: without honest men you can't have honest money.
As to your plan - I don't understand how a few of its important issues would be settled: by and according to what specific monetary policy; such as the setting on a new fractional reserve rate, which I'm not sure if I even understand the basic premise. If you stop the banking system from using fractional reserve banking via FRN's; and you replace FRN's with US Gov notes, why would you want to allow or reset the fractional reserve rate by which banking and exchange is thereby done? I'm probably missing or not understanding something, but I don't see how this would work.
Why is just the amount of Treasury Debt "owned" by the Fed to be canceled and not the rest? When you say all FRN's are to be replaced at parity with a US note, do you mean those held by the Fed, the US; or foreign holders as well?
How would you get foreign holders of FRN's (especially large trading partners like Japan and China) to do this?
Let's say everybody in the world agrees to exchange their FRN's for the new Government Note on a one to one basis. What is the purchasing power of this new note? Upon what basis or unit of account is it to be fxed or established?
Even if it is allowed to float, float according to what unit of account or basis?
The main difference (or perhaps only difference) I see between your system and mine is this abolishing of treasury debt owned by the Fed and the replacing of FRN's with US notes (which has been suggested by others - before. It may be a valid idea, but needs more fine tuning due to very complex foreign exchange implications). To try to throw a monetary coup overnight is very tricky business, and could easily result in the complete freezing up of the global financial systems and economies based thereon; it's not far from that to tempers flaring up big time do to resulting defaults, liquidations, disruption of markets and basic needs, etc. It could be like opening up pandora's box. Any set back like this would be used by the bankers to tarnish gold as money and would take decades to undo.
Billy
John F.Kennedy wanted to end the Fed and look what happened to him! Be very, very careful!
Timeswimmer
Consciousness...The whole basis for moneys existence is based on people needing to participate in the sharing of goods and services in what was to be a "fair" way...but is that any longer necessary? With our current science we could provide all the goods and services ever needed by the 6 billion people on the planet, using robots to do the grunt and slavery work, freeing humans to advance the Arts and Sciences for the good of the human family. Every invention that people have been killed about and hidden away could be evaluated for its potential usefulness and introduced into society. If we collectively worked for the good of total society, without the negatives of the NWO, we could have the 1000 years of an enlightened society that is rumored to have happened in the ancient past. Think about it...people teaching because they wanted to teach, students learning what they want to learn vs what can get them paid the highest wages, people researching what inspires them, people showing up at the site of a disaster to help in the ways that they can, even people laying on the beach because that is what they want to do. Even the laziest of humans tends to want to do SOMETHING after a long period of idleness...Education available to everyone/anyone...If instead of having to worry about "the other guy" getting ahead of you, you could focus on what inspires you, experiment with it, record your knowledge discover for others to digest and move on. Paint your electronic picture, dive the reefs, reforest India...whatever floats your boat (or build them)...and guess what? The system of "numbers in your account" that represent nothing is already in place. We the people just have to decide that we are tired of holding each other to a false standard of "accomplishment" based only on Western standards, respect and appreciate each others existence as the Creators expressions and live accordingly.