The War Against Specie Money & How we can Win it at Face Value
By Franklin Sanders
Usually I don't talk about this. About all I can do is watch events, recognize, identify, and bite my tongue.
Right now a war is raging, a war over 100 years old, a war to suppress specie (gold and silver) money and replace it with bank money.
It's easy to write off someone like me as a monetary crank. After all, the federal government was after him and there was a long trial and he was acquitted, but you know, where there's smoke, there's fire. And then there was a state trial, and he was convicted. Besides, doesn't he know the economy and finance have progressed so much that they've outgrown silver and gold?
THE FUN OF VICTIMHOOD
Unless you have ever been the victim of a US government persecution (sic -- I did not write prosecution), you cannot even dimly appreciate the bloodthirsty viciousness of the US criminal justice system and its thugs. They identify a victim, ruin his business, destroy his family, scare off his friends, and then, after he has been suitably marinated in sorrow and fear and grief, they indict him. By then, most poor souls plead guilty simply to end the misery.
Almost every reader will resist believing that, because you want to believe that in the US we still have the rule of law.
We don't. The grand jury system designed to protect us against malicious prosecution was hijacked by prosecutors decades ago, hence the famous brag by a US Attorney that he could "indict a ham sandwich." Judges work with prosecutors to suppress evidence and convict victims. Trial juries are denied knowledge of their ancient right to judge the facts and the law. Federal and state agents meet and focus on "troublemakers," whom they then jointly attack. Over the past 25 years, under cover of the war on drugs and the war on terror, the US justice system has become even more vicious and more corrupt.
This is not law enforcement. It's a police state.
WHY THE WAR ON SPECIE?
For the last 75 years or so, the legal system's hefty force has been used to wage war on specie money, to prevent it circulating (violating both law & constitution), and to supplant it with bank money.
Now you will splutter, "That's conspiracy theory!" Or "They can't do that!" and "That's against the law!" but the fact is, they do. And having spent well over a thousand hours in law libraries and the better part of my life studying money, I can testify from bitter personal experience that court after court will rule to suppress specie money in the teeth of the precedents, the statutes, and the constitution. (Think about states levying a "sales tax" on the exchange of paper bank notes for silver or gold money. Of course that will discourage specie circulation, adding that additional cost! Of course it's illegal.) On the banks' behalf, the US government wages war against gold and silver money, to suppress it altogether.
And that alone ought to give you a hint how badly we need it.
Before I recount these battles, you must grasp that money is the jugular vein of the totalitarian state. Specie money belongs to a free people, bank money to slaves. The ability to create money out of thin air confers on the bank/government tyranny its greatest power: unlimited spending. More, over time it augments their power. As long as banks can create money, over time they will surely steal all the property and capital in the country.
There are only two kinds of money: Barter (substance) and Social Construct (symbol). The Social Construct theory says that money is whatever somebody says it is. Therefore money is an abstract, and every exchange is theft, because one side gets something for nothing, and the other, nothing for something. Barter money has value in itself, so that every exchange trades something for something, and no one is cheated. The choice of money determines everything about economy, nation, society, and justice.
Ultimately, that choice determines whether liberty will survive - or not.
Now let's look at three cases where government acts as the banks' enforcer to squash the competition.
THE GOLD & SILVER BANK
Back in 1985, when I was a lot greener than I am now, I opened a gold and silver bank. I realized that the law provides for circulating specie money as a matter of right, but mysteriously we all use bank money instead. Naively, I reasoned that since those rights still existed, I would start a silver & gold bank to interface between those two systems. People could buy silver & gold from me with paper money, and I would deliver or store it. Later if they wanted me to pay bills for them, I would do that, too, liquidating metal out of their account.
Little did I realize that I had pitched my tent in the middle of not one, but two battlefields. One was the federal government's war on privacy, the other its war on banking competition.
In 1984 (fittingly), the IRS had published internally a secret Five Year Plan calling for a computer dossier on every person in the country. Keyed to social security numbers, it would track every single financial transaction for everyone in the country. Instead of privacy, they would spy on you every time you took out a building permit or bought a dog license. They were building a financial police state, and boosted by the war on drugs and the war on terrorism and Republicans (especially, but Democrats, too), that financial police state is now pretty well complete. They haven't quite managed to outlaw cash yet, but not for lack of trying.
Like a goose in a new world, I walked right into that war.
Suspend your disbelief for a moment, and listen: the federal government is ever watchful, ever sniffing the wind for any competition to the banking system, ready to snuff it out. That's their war on specie money, and I walked right into that crossfire, too.
Beginning in 1986 the Nice Government Men gave me the full court press, sending subpoenas to my customers & suppliers (oh, they love that!) and over the next four years ruining my business and frightening off friends and supporters. The IRS even retired an agent and sent him to work for the Tennessee Department of Revenue with one brief: find something to charge Sanders with. (State-federal double-teaming: S.O.P.)
Now honestly, I cannot imagine why they would bother with a piss-ant like me. The most I ever had in deposits was $100,000 -- not likely to supplant Citibank or BoA. And as God is my witness, I never did anything illegal, not even by their standards. Yet from June 1986 through December 1989 they had heaven-only-knows many agents investigating me. They were still tied up until our trial ended 9 July 1991. The seven-month trial alone cost either $950,000 or $1,950,000 (we got two stories). The four year investigation couldn't have cost less than $4,000,000.
And for what? To squash me, the insect? How deep is their paranoia, if they would squander so much time and money on someone so small?
By the grace of God, all 16 defendants in our federal trial were acquitted on 9 July 1991, 1-1/2 years to the day after we were arrested. But every one of them will tell you, the experience of being the federal government's victim nearly destroyed them. Later I was convicted on the hilarious state charge of not charging sales tax on sales of gold and silver money. It's so ridiculous, even now I still have to chuckle: sales tax on money!
THE LIBERTY DOLLAR
Several years ago Bernard von NotHaus started calling me about his Liberty Dollar project. In Hawaii he had run a mint, striking Hawaiian souvenir coins. Now he was striking one ounce "Liberty Dollar" silver coins, and selling both the coins and an elegant "Liberty Dollar" paper note backed by one of the coins stored in Washington state. He wanted to build a network of dealers and merchants around the country who would accept the notes and coins.
At that time silver cost about US$5 an ounce, but Bernard was selling the Liberty Dollar coins and notes for US$10. He planned to keep selling them for US$10 until silver threatened to leap that mark, then issue a new series that would sell for US$20 each. Since anyone could buy silver on the open market for US$5 an ounce, clearly the Liberty Dollar was not an idea whose time had come.
But Mr. von NotHaus is a great promoter, and marketed the coins as a way to replace the Federal Reserve currency in circulation. He must not have slept much, either, because soon he had a wide distribution network, and one or two people a week would call me to inform me what a great idea the Liberty Dollar was. I wished them well. Most were honest and well meaning, but naïve.
After a press release duel with the US Mint in 2006, Mr. von NotHaus began to kick the government wasp nest. Contrary to what governments in sane countries would do, the US government never told him to cease and desist. Further, while the Mint said using the Liberty Dollar was criminal, a Treasury official told media that if merchants wished to accept them, they were free to do so. However, the Mint was still miffed that he was calling his product a "dollar." I checked the anti-counterfeiting statute the government was complaining the Liberty Dollar violated, and their claim had some faint - very faint -- color.
The standard pattern of government persecution played out. They raided Liberty Dollar offices, seized computers, records, and money, including Liberty dollar stock. That's Act One. Then they use whatever they seize to generate an indictment for Act Two. That rolled out on 3 June 2009 when the Acting US Attorney for the Western District of North Carolina (WDNC) issued a press release that von NotHaus and two others from Evansville, Indiana, and one man from Asheville, William Innes, had been indicted on conspiracy and other charges in connection with an alleged unlawful operation to publish, possess & sell for profit, coins in resemblance and similitude to US coins. All four defendants are also charged in the alleged conspiracy with uttering and passing, and attempting to utter and pass, a coin of silver in resemblance of genuine coins of the United States in the denominations of five dollars and greater, and intended for use as current money. The four are also charged with one count of mail fraud, while von NotHaus and Innes are both charged in two additional counts each, with selling and possessing with intent to defraud, Liberty Dollar coins; and with uttering and passing, and attempting to utter and pass, a coin of silver in resemblance of genuine coins of the United States of the denominations of five dollars and greater, and intended for use as current money.
Given all the genuine desperados running loose, ready to slit your throat for a piece of Juicy Fruit, what reason did Acting US Attorney Edward R. Ryan of the WDNC give for this indictment?
When groups seek to undermine the US currency system, the government is compelled to act. These coins are not government-produced coinage, yet purchasers were led to believe by those who made and sold them that they should be spent like US Federal Reserve Notes. Such claims are in violation of federal law."
STOP! Let's unravel this nonsense ere I explode laughing.
First, here's the pot calling the counterfeiter black. The chief counterfeiter of all in the USA is the Federal Reserve system, producing billions, now trillions, of unbacked, unredeemable bank money and currency yearly. They have single-handedly taken the US dollar from its 1913 gold value of about 1/20 troy ounce (exactly 0.048375) to 1/920 of an ounce (exactly 0.0010869 oz) today.
Next, what gall these Liberty Dollar people had, to suggest that anything should be spent like a holy, spotless "US Federal Reserve Note!" Punish these blasphemers!
Third, no one, not any one, has undermined the US currency system quite like the US government and the Federal Reserve. The US government in 1913 gave the Fed power to create money out of thin air and to force the public to receive it as legal tender. The US government in 1934 called in gold coinage contrary to law, and devalued the paper dollar by 41%. In 1964 the government stopped minting silver coin and began uttering worthless cupro-nickel sandwiches. In 1968 the government defrauded silver certificate holders by reneging on its promise to redeem them for silver. Finally, in 1971 it reneged on gold convertibility even for international claimants.
Fourth, nobody with eyes would have mistaken Liberty dollar coins or notes for US government money.
But set glee aside, and ponder a moment the indictment, which also follows the usual government pattern
Act Three will be the trial, and in about 90% of cases, the conviction.
Here's a caveat. There are, as a matter of fact, many honest government agents who try to do a moral job. Probably somewhere there is even a sane, reasonable US attorney (probably rooming with Bigfoot). There are also many bad people in the country, who richly deserve to be indicted, prosecuted, convicted, and set to breaking rocks for a long time. However, you can no longer spot them merely because they've been indicted. They may simply be political enemies of some local or national politician, or naïve souls identified by government agents as "anti-government."
Until 20 years or so ago, the American legal system worked on a principle called "presumption of innocence." That is, the accused is presumed innocent until proven guilty. Unhappily, although the legal system still gives lip service to this principle, the public and juries have adopted the principle, "Where there's government smoke, there must be guilty fire."
Just remember this: merely because someone has been convicted in a government court doesn't mean they actually committed any crime.
NEXT CASE, PLEASE
In 1995 oncologist Douglas Jackson of Melbourne, Florida realized that the Internet offered an opportunity to create a new monetary system. Early in 1996 he began creating a new gold and silver backed electronic currency. He launched E-Gold as a "private, international currency that would circulate independent of government controls, and stand impervious to the market's highs and lows. Brimming with evangelical enthusiasm, Jackson proclaimed it a cure for the modern monetary system's ills and [modestly] described it as `an epochal change in human destiny' and `probably the greatest benefit to humanity that's ever been thought of.'" (www.wired.com/threatlevel/2009/06/e-gold/.)
Since E-Gold allowed customers to open accounts anonymously from any country, it attracted customers -- fast. By 2004 E-Gold had 3.5 million accounts in 165 countries, Internet volume second only to PayPal, and held 3.8 metric tons of gold valued at $85 million
In the course of investigating phishers stealing credit card numbers in 2003, the Secret Service discovered E-gold. Card stealers preferred E-Gold because they could both open accounts and transfer funds anonymously.
Thus in 2004 the US Justice Department began investigating E-Gold. They demanded E-Gold comply with regulations governing money-transmitting services, register with Financial Crimes Enforcement Network (FinCEN), obtain licenses in various states, authenticate customer ID, and file suspicious activity reports. Jackson demurred, insisting E-Gold was exempt because it was a payment system, not a money transmitter.
Then in 2005 Jackson saw the awful light: Ponzi schemers and other criminals were using his system overtime. When he contacted Secret Service, they ignored him. This, too, is standard government procedure, as they were already secretly investigating him. (Think about this: the man contacts them wanting to avoid prosecution and conform his behavior to the law. They refuse to talk to him. Make sense?)
Predictably, Act One of the government pattern unfolded, the Raid. In December 2005 they raided E-Gold's offices, taking records and freezing bank accounts. Jackson began investigating his own operation and discovered he had indeed become banker to criminals. Yet neither the FBI or Secret Service would talk to him, so he went to the US Postal Inspection Service and gave them names, addresses, and transaction records.
By mid 2007, Jackson's tips resulted in breaking up several significant criminal enterprises. Never mind -- in April 2007 the Justice Department indicted him for money laundering and conspiracy to operate an unlicensed money transmitting business. After negotiating for a year and a half, in late 2008 Jackson pled guilty to conspiracy to operate an unlicensed money transmitting service and conspiracy to commit money laundering (Act Three). He was sentenced to 36 month's supervision, 6 months house arrest, 300 hours community service, and forfeiting $1.2 million to government. His two companies were fined $300,000. Part of his plea agreement requires Jackson to make his business to comply with money transmitting service regulations.
At the end, Jackson - visionary or crook, according to who tells the story - is left with the ruins of a business, and fast-growing Internet specie-money competition to the banks is crushed.
SMELL THE COFFEE YET?
Time would fail me to tell of Mauldin and Holland, of Bill Bickett, of John Voss, and of Richard Flowers and other cases, but by now it ought to be obvious that the US government will kill any business that competes with the banking system or offers honest money. Given their power, their might, and their relentless viciousness, that pretty well kills the hope for monetary reform, right?
Wrong. There is a gigantic, perfectly legal loophole to restoring gold and silver money. In fact, it is a fundamental common law and constitutional right, just not quite as convenient as checks, credit cards, and debit cards. Here's proof.
A CRUMMY CASE
On 2 October 2008 the United States Court of Appeals for the Fifth Circuit filed an opinion in case No. 08-20133, Crummey v. Klein Independent School District et al., on appeal from the Southern District of Texas.
Crummey had gone into the Klein Independent School District tax office and offered to pay his taxes with a one ounce - "fifty dollar" - United States American Eagle gold coin. The officials refused to accept it for more than its $50 face value. Crummey sued in US district court and lost.
He appealed, arguing that the legal monetary value of the $50 gold coin is different and worth more than the legal monetary value of $50 in Federal Reserve notes.
Wrong, says the Fifth Circuit. "Regardless of any currency confusion that may have arisen in bygone eras, our present standard is clear: As legal tender, a dollar is a dollar."
Now think about that. Let that sink in, and remember it is not a new principle. Watch.
Crummey's argument conflates the market value of such coins as bullion, or as collectors' items, with the value of the coins as legal tender. Fittingly, the Supreme Court has explained [in Thompson v. Butler, 95 US 694, 696 (1877)]:
A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them.
"As legal tender, a dollar is a dollar, regardless of the physical embodiment of the currency. The legal monetary value of Crummey's $50 American Gold Eagle coin is equivalent to that of a fifty dollar Federal Reserve note."
Now here's an interesting footnote: the Fifth circuit chose not to publish this opinion. Why not? Why but to hide it? Still, that doesn't really matter a bit, because in 1877 Thompson v. Butler set the precedent that still rules today: a dollar is a dollar.
WHAT GOOD DOES THAT DO?
But how will this solve our problem of monetary reform? Nobody will be stupid enough to pay a $50 federal reserve note debt with a gold coin worth $1,000 federal reserve notes!
No, but he will spend the $50 gold coin if the person on the other side of the exchange gives him something worth a thousand Federal Reserve notes.
What happens then? What amount has the seller received? According to the US Supreme Court in Thompson v. Butler and the 5th Circuit in Crummey, "As legal tender, a dollar is a dollar." Therefore the seller received the legal tender value of the gold coin, i.e., fifty dollars.
But nothing in the law requires you to keep accounts in one type of dollars or another. They're all dollars, equal in the sight of the law. If that's so, then when you sell something for a $50 gold coin, you have received only $50, and that's what you report. Then when it comes time to pay taxes, you pay in Federal Reserve notes.
Of course, the IRS will argue against that, although in the end they are wrong. Still they will fight with all underhanded desperation to keep that knowledge from becoming public.
ONE LAST CASE
This comes from the Las Vegas Review Journal, 26 May 2009. "Man faces life in prison for paying employees in gold coins." (I bet the IRS would have paid a million bucks for that headline - and who knows? Maybe they did.)
"Robert Kahre [Kerry], who owns numerous construction businesses in Las Vegas, is standing trial on 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison.
"But attorney William Cohan paints Kahre as an American 'hero' who believes his payroll system helped keep the U.S. monetary system sound, and was also a form of legal tax avoidance.
"Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins' face value -- rather than the much higher market value of their precious metal content -- for federal tax purposes. ...
"Three of the four present defendants were among the nine people tried on similar charges two years ago, [when] no convictions resulted. ...
"According to the government, Kahre and others concocted a fraudulent cash payroll 'scheme' and then peddled it to other Las Vegas contractors. Defendants did not report to the IRS any payments made to workers, 'either at the true amount or at the bogus amount . . . being the face value of the coin or coins,' according to the indictment. [What? How can the amount have been bogus when the law (31 US Code 5103 and 5112(h)) states its legal tender value?]
"Kahre contends his workers had agreed to be independent contractors, so he did not have to withhold taxes for them. ...
"Further, the $50 gold coins and the silver dollars Kahre used for payroll are designated by Congress as legal tender, so people are entitled to value them at their stamped denominations, he also contends. Taken at face value, each defendant's annual coin income placed him below the threshold for filing a federal tax return.
"Earlier cases on the question of how to value gold or silver coins have focused on collectible coins that had been pulled from circulation but still have value as property, according to the defense. Kahre used coins minted after 1985, which are allowed to circulate.
"`It's not whether what Mr. Kahre did was legal under the law,' defense attorney Michael Kennedy told the jury in his opening statement. 'It's whether he believed what he did was legal, in the absence of explicit instructions by the IRS -- on its Web site, in its publications or in response to written correspondence from Kahre -- on how to value post-1985 gold or silver coins.'" [Note the IRA stonewalling questions, another government pattern, as in Jackson's case above.]
THE BOTTOM LINE
Okay, Moneychanger, why are you torturing us with all this? What does all this have to do with us, anyway?
Plenty, if you'll listen. The Federal Reserve & US government have set their feet on a path that very well may destroy the US dollar by hyperinflation. They have massively inflated the money supply to avoid the collapse of a corrupt banking & financial system, because that system is their real master. For one of three reasons, you will have to turn to US legal tender gold and silver coin.
Doesn't have anything to do with you? I'm afraid that in 6 to 18 months, you will understand all too well what this subject has to do with you, and that's why I'm trying to convince you, now, to learn how to do business with gold and silver coin. (To that end, Catherine Austin Fitts and I have created a website, www.silverandgoldaremoney.com that automatically gives you the gold and silver coin equivalent of any Federal Reserve note amount, and tells you how to pay it in numerous gold & silver coins.)
HOW TO START
How do you start? Well, ask everybody you deal with whether they want to be paid in paper, or in silver and gold. Ask the plumber, the handyman, the hardware store, the grocery store, the dentist, the doctor, the mechanic. Just ask - worst they can do is say No. Carry a little silver & gold around with you. When the waitress brings your check, hold out silver in one hand and paper in the other. See which she takes.
Wait, wait! One last thing. What about foreign or privately issued gold or silver coin? At 31 USC 5103 it says that foreign gold and silver coins are not legal tender. Right, but doesn't appear to present a problem. If you don't have legal tender American Eagle gold coins, the seller can by private contract agree to accept some other gold coin at the same rate, although you cannot force him to take them as legal tender. For instance, by the American Eagle standard, a British sovereign with 0.2354 troy ounce of gold would be worth (0.2354 X $50) or $11.77.
And a privately minted one ounce silver round? Well, by the American Eagle standard, that would be valued at one dollar, wouldn't it?
How would I know? Me, I'm no lawyer, so don't listen to me. Check it out for yourself.
Franklin Sanders has edited and published The Moneychanger newsletter and brokered physical gold and silver since 1980.
You can find more of his articles at at www.the-moneychanger.com