Sequester “battle” stems from a broken American monetary policy

The “sequestration” drama over a ten-year, 2.4 percent reduction in the budget is the consequence of a broken monetary system. Photo: Associated Press

WASHINGTON, DC, February 28, 2013 ― The sequestration spectacle, full of drama and threats over a ten-year, 2.4 percent reduction to a $3.8 trillion budget illustrates just how little respect the president and Congress have for the people and their labor. Our monetary policy has been perverted since Democrat Franklin D. Roosevelt (FDR) confiscated the people’s gold in 1934 as a way to give the Federal Reserve more power.

How money would be “coined” and overseen by the government was carefully outlined in the Constitution. The point of sound money policy was to protect the wealth generated by the creation of goods and services. Our money no longer represents any real value.

Until there is a demand for leaders that respect the principles of money, the dollar will continue to decline and the president and Congress will continue to play charades. Unfortunately, the rest of the world is anticipating our fall.

What is the “sequester?”

According to the National Journal, sequestration is $1.2 trillion in automatic spending cuts over the next 10 years to “discretionary” budget items, including defense. Sequestration will not touch Medicaid, Medicare or Social Security, which encompass 60 percent of the overall budget.

The potential cut from the 2013 budget is roughly $85 billion. This is 2.4 percent of total spending.

As of today, according to the National Debt Clock, the national debt is over $16.6 trillion. That equates to just over $52,000 per person, or more to the point, $146,749 owed per taxpayer.

How did the Constitution address money?

Many of the founders hated paper money not backed by some form of weighted precious metal. Their concern was rooted in experience and history. Abuse of money power had influenced the fall of Rome. It had made trade among the colonies nightmarish.

According to David Walbert, money in colonial America was literally in short supply because England controlled the currency. Colonial governments printed paper money or used whatever foreign currency they could get, such as Spanish dollars, to facilitate trade. They made up official values and called it “proclamation money.”

To right this wrong and enable the free society envisioned, the Constitution granted Congress the power to borrow or coin money, but not the power to print it. When an earlier version of the Constitution included a provision to print money, many delegates considered that a deal-killer and expressed a preference to stop the federal experiment altogether rather than include that provision. It was subsequently scrapped. 

The Constitution prohibited the states from printing their own paper money and did not grant that power to the federal government.

David Stedman, author of Our Ageless Constitution, explains that our monetary system was carefully crafted to rely on free market principles and in a form most readily recognized internationally. U.S. money would consist of coins made from silver or gold. The dollar was originally set at 371.25 grains of silver (a convenient measurement in 1700s)

The supply of money was left up to the market based on the “free coinage” provision in English common law, which allowed people to bring metal to the Treasury for free conversion into coinage. The greater the amount of gold and silver delivered to the Treasury, the greater the money supply.

This system enabled an enormous leap of prosperity, almost without interruption until 1862. Civil War pressures resulted in production of “green backs” by Congress, which was later upheld as legal by the Supreme Court.

Congress created the Federal Reserve in 1913. The “Fed” has complete independence from any branch of government and prints its own paper currency, the cash in your pocket, called Federal Reserve Notes. While these “notes” are backed by full obligation of the U.S., from a Constitutional standpoint they have no legal basis. The Constitution has never been amended to address the many contortions Congress went through to create fiat currency.

In 1933, Congress allowed FDR to remove any requirement that Federal Reserve Notes be backed by gold bullion.

In 1934, Executive Order 6102 literally criminalized the possession of monetary gold in the U.S. FDR claimed it was worsening the Depression. He called all of the people’s gold into Washington, DC, paying the traditional price of $20.67 per troy ounce (a troy ounce is just under 10 percent heavier than our usual ounce avoirdupois; today gold is selling right at $1,600 per troy ounce). A joint resolution of Congress, “Abrogation of the Gold Clauses,” voided the gold clauses in all private and public bonds, mortgages, and contracts.

Economist and author Richard Timberlake writes, “Congress then passed the Gold Reserve Act of 1934, which raised the mint price of gold more than 59 percent. The Treasury then had all the gold melted into 27-pound ingots, stored it three floors deep in the ground, and declared that gold was illegal for use as money — thus violating people’s property rights.”

Sixty years later (1985) under President Ronald Reagan, minting of new gold coins was allowed again, but the denomination is far below the market value of gold. It did not reestablish a constitutional monetary system.

How did we get to this dismal state?

Stedman explains that the Federal Reserve System has enabled out-of-control spending and public debt by monetizing the debt. Congress spends more than it gets in tax revenue. The Fed prints money, buys the debt and the government then spends the newly printed money. This lowers the value of the rest of the currency in circulation, and hence purchasing power. It’s called inflation.

This valueless currency ”amounts to a secret tax on the country as a whole, that enriches the recipients of the government’s spending programs,” writes Stedman.

Without the process of an amendment to the Constitution, Congress and America’s presidents have made our money meaningless.

Then why has the dollar not tanked, and why does the stock market keep hitting new highs?

In many ways, the rest of the world still looks to America as the last best hope, or more accurately now the least bad joke. Our consumer power has enabled Communist China to grow into a superpower in spite of keeping their people essentially enslaved.

China, India, Saudi Arabia and the developing world desperately need us to keep spending because it helps their growing economies. They are also enjoying the discounted, sell-out prices of our real estate and companies. According to the LA Times, China’s direct investment in American assets was $8 billion in the first half of last year. They are doing this while hacking into our government and private computer systems and manipulating their own currency to our detriment.

According to a 2011 Pew Research study, 15 out of 22 countries, mostly our European allies, believe that China already has or soon will replace the U.S. as the world’s economic superpower.

Nevertheless, the stock market is booming.

Charles Hugh Smith writes in Business Insider, “Many observers believe the market is responding not to the “good news of recovery,” but to central bank monetary stimulus “easing,” and there is certainly abundant evidence for that as global markets took off in late December as central banks unleashed an estimated $2.5 trillion in free money into the system.”

Our enemies around the world are at the door, salivating while the president compares a meager 2.4 percent reprieve to his annually escalating budget of $3.8 trillion to taking a “meat-ax” to the budget.


Carla Garrison follows current events with one eye on history and the other on the future.  Her goal is to encourage people to know the truth and use it as a call to personal action. Read more Truth be Told.

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Carla Garrison

Carla writes about current issues and events with an aim toward telling the truth, using the writings of great thinkers, dead and living, as well as common sense.

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