Why the U.S. Monetary System is Dishonest and Blowing Up

0:00Our next speaker is the author of What Does Mr. Greenspan Really Think? His articles have appeared in The Economist, Labor Studies Journal, The New York Sun, where he's a contributing editor, and he's also the host of The Larry Parks Show. And as I mentioned earlier, he's the reason that we are able to hold this event in this fine facility. Please help me welcome Mr. Larry Parks. What a thrill to be in front of such a big audience. It's so gratifying to see that the Austrian theories are gaining acceptance. When this started, as someone mentioned, you couldn't really get 30 people in a room.

0:46I think we have 325 folks here. This is roughly a 15-minute subset of a talk I've been giving roughly two or three times The main focus of this talk that I give folks is that the system is dishonest, and no amount of regulation is going to cure that defect. And by the way, anyone who would like to see this talk, there's no charge. I'm giving it again next Wednesday. If you give me your business card, I'll see that you get on the invite list.

1:34And the third talking point, which I'll cover right now, is that the system is going to blow up, perhaps while I'm speaking right now. And the reason you can be absolutely 100% certain that it will blow up is because there is no longer any self-correcting mechanism for increasing financial leverage, Increasing Debt and Increasing the Money Supply And any system that doesn't have a self-correcting mechanism blows up. Now what I'm going to do for the roughly 15 minutes that's been allotted to me, I'm going to demonstrate to you some of the dishonesty, particularly I'm going to show you that the monetary authorities have misrepresented the very strong views of the founders, particularly the early presidents. And then I'm going to tell you a brief story about Thomas Jefferson I doubt many of you have heard before, which will give you an idea of the visceral hatred that the founders had for paper money. And then I'm going to show you a misrepresentation.

2:32Again, a misrepresentation is fraud that is so egregious, you have to ask your head, ask yourself rather, how they got away with this. So firstly, the issue that we address is how do you get people to accept legal tender, irredeemable paper ticket, electronic money in exchange for their goods and services. Well, one of the things that they do is they give the bogus money the patina of legitimacy by implying that it had the imprimatur and endorsement of the founders and presidents when, in fact, they condemn paper money. So, for example, here's Thomas Jefferson complaining about paper money. His paper is poverty. It's only the ghost of money and not money itself. He said, but its abuses are inevitable and by breaking up the measure of value makes a lottery of all private property cannot be denied, a very strong statement against paper money, and here they have the effrontery to put Thomas Jefferson's portrait on paper money as if he might have endorsed it when in fact that is a misrepresentation. Again, a misrepresentation is fraud. And here's

3:36the father of our country, Washington writes to Jefferson, other states have fallen into very foolish and wicked plans of admitting paper money. Wicked, evil. I mean the founders The founders were not concerned with economics. They wanted a moral system. And they saw the paper money as evil. And here's another line from Washington. It says, paper money has had the effect in your state that it will ever have to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice. And here's Washington on the paper money. Again, misrepresenting the very clear sentiments of the founders, implying that they would have endorsed this when, in fact, they rejected it. Now, notice also this is not a dollar. I don't know if you can read the little writing underneath.

4:22It's a promise to pay a dollar in silver. And here, James Madison, the father of the Constitution, says paper money is unjust to creditors if a legal tender, to debtors if not legal tender, by increasing the difficulty of getting specie. It is unconstitutional. Now, Madison is the principal author of the Constitution. If anybody knows what the Constitution means with regard to money, it's got to be Madison. He says, for it affects the rights of property as much as taking away equal value and land. And here's James Madison on the paper money. Again, misrepresenting the very strong views of James Madison. And here's Alexander Hamilton, the financial genius of the time. And here he's not complaining against paper money per se, he's complaining against what he calls unfunded paper money.

5:11He says, to emit an unfunded paper as a sign of value ought not to continue a formal part of the Constitution, nor ever after be employed, being in its nature, pregnant with abuses, and here are the key words, and liable to be made the engine of imposition and fraud, holding our temptations equally pernicious to the integrity of government and the morals of the people. Here you see Alexander Hamilton on the paper money. So again, in every instance, they've helped promote the paper money with the idea that it's been endorsed by these founders when in fact they condemned it. Now I want to tell you this story about Thomas Jefferson. My source is this wonderful book. The subtitle of the book should have been the title. It's called Thomas Jefferson and the Problems of Debt. The author, Herbert Sloan, is the head of the history department at Barnard College in Columbia, a very prominent and eminent historian.

6:01So it seems that Jefferson was married to a woman whose father, John Wells, was one of the richest men in the colonies, and he died in 1773. He left a huge estate consisting of plantations and slaves. He made Jefferson and Jefferson's two brothers-in-law the co-executors of his will. In those days, and today as well, if an executive distributes the assets of an estate without settling out the liabilities, the executive becomes personally liable for the liabilities. However, in this case, the assets, which were roughly 20-30,000 pounds, and the liabilities were around 11,000 pounds, the assets were so much greater than the liabilities, and press's two brothers-in-law wanted their share, Jefferson felt comfortable in doing that.

6:46and so he sold the plantations and the slaves, however in Virginia in those days they didn't have enough cash to make this kind of purchase and what they did in today's terminology, you'd have a seller's mortgage or vendor financing and those days the terminology was that the buyer would issue a bond to the seller and over time the buyer would pay off the bond and that's what happened. However in 1776 the revolution started, Virginia issued paper money, they made the paper money legal tender The value of that paper money went to zero, and the people who owed Jefferson the money on the bonds paid him off with the worthless money. But Jefferson still owed the 11,000 pounds to the financiers in Britain, and in his whole life he was never able to work his way out of that debt.

7:31He died a bankrupt. They auctioned off his possessions at Monticello, didn't bring in enough money. Along the way, the Congress tried to help him out. He had a lot of books. They bought his books for $15,000. That became the Library of Congress. and so when Jefferson said that the paper money was a cheat, he wasn't talking in terms of economics, he had been cheated and big time and so had all of the other gentry in Virginia including James Madison who was a large plantation owner, Madison had leased his plantations, the people to whom he leased it paid him off with the irredeemable paper ticket money and the same thing with George Washington and so when they went to the Constitutional Convention supposed to amend the Articles of Confederation, they wrote the When they got to the business about money, they only authorized the government to coin money, not to print money. All of this paper money is unauthorized.

8:24Now I want to tell you now, which I think is just about one of the biggest misrepresentations, and again you have to ask yourself, how did they get away with this? The line that I like, it's a paraphrase from Groucho Marx, as you'll see in a moment, why? Who are you going to believe, me or your lying eyes? Watch for your lying eyes, folks. So very few people in any of the economic school address the issue, what is a dollar? And pretty much everybody has the notion that the Congress can make the dollar anything that the Congress wants to make it. Well, it turns out that the dollar is mentioned twice in the Constitution, but it is not defined in the Constitution. The Constitution is mentioned in connection with the slave tax, which is no more, but much more importantly, it's mentioned in connection with the Seventh Amendment, which guarantees you a right to a trial by jury for any dispute, $20 or more.

9:16Now, if it were true that the Congress could redefine the meaning of a dollar, that would mean that the Congress could rewrite the Seventh Amendment, which is ridiculous. And in fact, for the 7th Amendment to have objective meaning, the word dollar has to have objective meaning. Now mind you, the Constitution is the overriding law of our land. So what is the Constitution talking about when they talk about a dollar? And the answer is, they're talking about the Spanish mill dollar. The Spanish had built mints all over the colonies from the 16th century on, and this coin was ubiquitous. And further evidence of this, when it came to the revolution, which was financed by creating Pay for Money. This is an example of the Continental and notice it says it's a $30 bill. I don't know if you can read the writing in the back. It says this bill entitles the bearer to receive $30 Spanish mill dollars. So it's the Spanish mill dollar that's talked about in the Constitution and when Hamilton wrote the Coinage Act of 1792, the Americans wanted their own dollars. They didn't have to use the Spanish mint and here he defines the dollar as the value of a Spanish mill

10:26What's the value of a dollar? What's the value of a coin? It's specie content. It's silver content or it's gold coin. It's gold content. So here the content of a dollar is 371.25 grains of silver. That is the definition of a dollar. It has never been changed. It cannot be changed. My last point I want to make to you today is this really this incredible misrepresenting that payment promises have not been defaulted. So here is a United States note. It's a promise to pay a dollar. I don't know if those of you in the back can see, but it says, we'll pay to the bearer on demand one dollar. It's not a dollar, it's a promise to pay a dollar. What's a dollar? That's a dollar. Now here's the punch line.

11:11Then they break the promise to pay the dollar, and the broken promise to pay a dollar becomes a dollar. How stupid can stupid be? The dishonest promissory note is misrepresented as being a dollar. So all this stuff that people have in bonds and stocks, what not, are all denominated in dishonest promissory notes. So my line is, if you take a sign that's like a cat and you hang it on the dog, does the dog become a cat? If you take a piece of paper and put the word dollar on it, does it become a dollar? The metaphor that I like, you go to a restaurant, you check your coat, you get a coat check.

12:05They steal your coat, and then when you show up at the coat check, they tell you the coat check is a coat, and you say, no, it's not a coat. So, what's legal tender for a coat? So, what's the difference between our money and the money from the parking game? And as Murray Rothbard used to say, the only difference is that it's all gussied up with seals and signatures. Well, I think I'm right on time. I think I'm even early in this 15 minutes. Again, I want to thank you all for your presence here today. Again, if you'd like to see this whole talk, it's a 70-minute talk. There's no charge. Give me a business card and I'll be delighted to have you attend. Thanks so much. Have a nice day. Thank you very much.