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THE STATE ELECTRONIC
GOLD CURRENCY PLAN
PART 1
Dr. Edwin Vieira, Jr., Ph.D., J.D.
April 20, 2005
NewsWithViews.com
Two of my earlier commentaries--DON'T COUNT ON
WASHINGTON TO PROTECT US FROM A LOOMING BANKING CRISIS and CAN AMERICANS
SOLVE THEIR MONETARY AND BANKING PROBLEMS FOR THEMSELVES?--have explored
why this country cannot expect either the General Government or Americans
as isolated individuals to solve the monetary and banking problems the
Establishment has caused. Rather, America needs to find a workable mechanism
that can
* return a significant part of this country
to sound money and honest banking whether or not a monetary crisis ever
occurs, before a crisis breaks out, and surely in case a crisis flares
up;
* educate Americans--economically, politically,
and in particular constitutionally--about the use of gold and silver
as media of exchange;
* encourage, empower, and enable Americans to
use gold, silver, or both as their preferred media of exchange;
* provide a nonpolitical--that is, private, free-market--medium
of exchange actually consisting of (not just "backed" by)
gold, silver, or both, but that government at every level can use for
all public purposes, too;
* create open competition in both private commerce
and public finance between gold and silver commodity moneys, on the
one side, and fiat Federal Reserve Notes and base-metallic coinage,
on the other; and
* offer an alternative to fractional-reserve
banking.
For genuine and lasting monetary and banking reform
to occur:
(1) This mechanism must be capable of operating
and expanding in anticipation of, in response to, and during any regional,
national, or international monetary and banking crisis, in order to
solve or moderate, if not prevent or mitigate the worst effects of,
the crisis in at least the location where the mechanism is already functioning.
This capability is necessary to obviate any supposed need for “emergency”
legislation or other draconian devices in that locale, so that the mechanism
can prove itself there and thus serve as a model for the protection
or rehabilitation of the remainder of the country.
(2) This mechanism needs to be put into operation
well before a crisis breaks out--indeed, the sooner the better. Which
means that it must be capable, both economically and politically, of
being implemented in some significant place in the foreseeable future.
(3) Although this mechanism must be capable of
beginning to function immediately upon adoption, it should be introduced,
not on a "crash" basis, but as a measured, gradual reform
that can be carefully thought through, publicized, put into place, tested,
and perfected while everyone is still thinking clearly and acting calmly.
It must be a mechanism that everyone will come to know is available,
that many people will actually use even in the absence of any crisis,
and that through such use will come to be widely understood and trusted.
(4) This mechanism must be economically viable
from its very onset. If an even theoretically sound plan for monetary
and banking reform proves too complex, cumbersome, or costly to implement
in its initial stages, what will be necessary to avert or address a
crisis will not be accomplished in time.
(5) This mechanism must be capable of interacting
efficiently at all times with the present monetary and banking systems,
yet nevertheless operate outside and independent of, and (most importantly
of all) not suffer from any of the major problems that beset, those
systems. Thus, it must be based on private, parallel, and competitive
currency that consists of actual gold or silver, not mere claims thereto--let
alone a new fiat currency. The depositary institutions that provide
this new specie currency must operate on the principle of "bailment"--whereby
the depositaries hold their customers' gold or silver not as the depositaries'
property, to which the depositors have only a claim for the payment
of a debt, but as the depositors' property, in which the depositaries
can assert no proprietary interest whatsoever. Consequently, the depositaries
cannot engage in the pernicious practice of "fractional reserves",
or claim the special privilege to "suspend specie payments"
(i.e., to assert immunity from their own contractual obligations to
their depositors, while nonetheless remaining in business themselves).
(6) This mechanism must be targeted, systematic,
and institutionalized, rather than dependent upon the uncoordinated
efforts of isolated individuals most of whom will be unaware of, and
unable to cooperate with, each others' activities. It must operate both
extensively and comprehensively—that is, it must immediately involve
a large number of people within a specific geographical area carefully
chosen on the basis of its economic and political significance, then
extend fully throughout that area, then expand into other areas, and
at length embrace the vast majority of citizens throughout the United
States. In monetary and banking reform, "small is not necessarily
beautiful" and is certainly not likely to be effective, because:
(i) no tiny social enclave, no matter how apparently isolated and self-sufficient,
will prove completely immune from the adverse effects of a nationwide
or worldwide monetary and banking collapse; (ii) no such enclave's partial
success in protecting itself is likely to have significant positive
spill-over effects elsewhere; and (iii) no such success in some isolated
enclave can provide a convincing test of the method's usefulness in
larger areas with more complex economies. (Although, of course, if such
is the best that can be done, then the inhabitants of every out-of-the-way
enclave should do it, and let the rest of the country stew in its own
juices.)
(7) For these reasons, this mechanism must be
introduced in a locale that, in terms of geographical area, population,
and level of economic activity, is relatively large and complex, rather
than small and simple. Also, it must initially operate through a major
participant in the market--that is, one with which large numbers of
people financially interact, directly or indirectly, on a regular and
permanent basis, and which continually takes in and pays out significant
amounts of purchasing power in whatever currencies it employs.
(8) This mechanism will need a large degree of
legal immunity from interference by the General Government (especially
the Department of the Treasury) and the Federal Reserve System, which
will undoubtedly claim "supremacy", "exclusive jurisdiction",
and powers of "preemption" as to any new currency. For the
very creation, let alone the operation and success, of any mechanism
for monetary and banking reform will inevitably subject it to retaliation
from the Establishment, fanatically opposed as it is to remonetization
of gold and silver.
(9) Finally, operation of this mechanism must
not be likely to trigger a depression, hyperinflation, or other monetary
and banking crisis when it starts the open competition between gold
and silver, on the one side, and fiat currency, on the other. After
all, the purpose of reform is not to bring down the Federal Reserve
System, come Hell or high water, but to replace it with sound money
and honest banking in as timely, orderly, and inexpensive a manner as
possible. Prudence must be the watchword.
The foregoing criteria for a successful reform
compel the following conclusions:
I. The new medium of exchange should be a private
electronic specie currency unit, itself of gold or silver, and fully
convertible into standard gold or silver coins or bars. At the present
time, the best choice available in the free market is the "goldgram",
provided by James Turk's GoldMoney (at ).
The "goldgram" is a fixed weight of
actual gold, but divisible electronically into very small amounts (0.001
part of a "goldgram", or a "mil"), so that transactions
of almost any size can be easily and expeditiously carried out.
The "goldgram" is transferrable anywhere
over the Internet, making it a truly global currency. But, being entirely
private in origin and operation, it is immune from the systematic political
manipulations that commonly affect currencies emitted by governmental
treasuries or central banks.
Because it is a completely private currency,
the "goldgram" is protected by better safeguards than either
the Treasury's coins or the Federal Reserve System's notes can claim.
First, the "goldgram" is a fixed unit of weight of pure gold,
with no arbitrary "dollar" denomination. This is quite distinguishable
from the Treasury's gold, silver, and base-metallic coins that are all
denominated in numbers of "dollars" which are not only largely
fanciful in constitutional terms, but also exhibit no rational relationship
among themselves in the economic terms of their various purchasing powers
in the free market.
Second, a holder of "goldgrams" owns
a fixed amount of gold, itself a valuable commodity; whereas the holder
of Federal Reserve Notes owns nothing but the Notes themselves, at best
a political debt. True, a holder of Federal Reserve Notes has a legal
right to their redemption "in lawful money". Title 12, United
States Code, Section 411. But no statute mandates the redemption of
Federal Reserve Notes "in lawful money" containing any permanently
fixed amount of any specific commodity. At best, a holder of those notes
is entitled only to their face value in United States base-metallic
coins, which can contain whatever slivers of junkyard scrap Congress
and the Treasury decide to stamp as "money" from time to time--and
which specifically at this time cannot include either gold or silver.
See Title 31, United States Code, Section 5118(b) and (c).
Third, because each "goldgram" is the
depositor's own private property--not a debt owed to him by GoldMoney--the
electronic gold currency system avoids all the problems of Ponzification
inherent in fractional-reserve banks.
Yet, although they are held and transferred outside
the established banking system, "goldgrams" are freely exchangeable
with Federal Reserve Notes and base-metallic coinage, and vice versa.
This provides users of "goldgrams" with outstanding protection,
flexibility, convenience, and efficiency for all their monetary transactions.
"Goldgrams" can function as a truly parallel currency, because
any contract can be made, and paid, in "goldgrams" or fiat
currency, as suits the parties' needs.
The widespread introduction and use of "goldgrams"
in America's economy can cause neither a depression nor an hyperinflation,
either. A depression will not occur, because extensive use of "goldgrams"
will actually increase the supply of true, commodity money by remonetizing
gold (and silver, too, when an equivalent system for "digitizing"
that metal appears). So, even to the extent that "goldgrams"
may displace Federal Reserve Notes and base-metallic currency from use,
the economy will suffer no destabilization. A more sound currency will
simply supplant a less sound currency, by operation of the free market.
No hyperinflation will occur, either, because the supply of monetary
gold is incapable of huge, arbitrary, and especially politically driven
increases. Rather, it is fixed by physical availability, and the free
market's control over its production. Conceivably, Federal Reserve Notes
and base-metallic currencies may depreciate against gold; but, as they
do, gold will appreciate against them.
Of great importance, too, is that "goldgrams"
are freely convertible into standard gold and silver coins and bullion
as part of GoldMoney's normal operations. This qualifies "goldgrams"
for use in all public functions by States and localities that must satisfy
the requirement of Article I, Section 10, Clause 1 of the Constitution
that "[n]o State shall * * * make any Thing but gold and silver
Coin a Tender in Payment of Debts". In selecting "goldgrams"
as her medium of exchange, a State is not "coin[ing] Money"
(which that Clause prohibits her from doing), merely employing a private
gold currency over which she has no control. Neither is the State "emit[ting]
Bills of Credit" (which that Clause also prohibits her from doing),
because "goldgrams" are not anyone's "Bills of Credit"
that only promise to pay, but actual gold that is the very stuff of
payment. And when the State offers "goldgrams" "in Payment
of [her] Debts", she "Tender[s]" such "gold and
silver Coin" as her creditors may desire to receive by automatic
conversion of their "goldgrams" into coinage--so that the
creditors, not the State, fix what shall be the form of the gold (or
silver) that functions as the final "Tender" for the transactions.
II. The last point is crucial, because the major
participant in the market through which monetary and banking reform
initially must operate most likely will be a State. Indeed, reliance
on a State is probably the indispensable key to reform, as PART TWO
of this commentary will disclose.
© 2005 Edwin Vieira, Jr. - All Rights Reserved
Edwin Vieira, Jr., holds four degrees from Harvard:
A.B. (Harvard College), A.M. and Ph.D. (Harvard Graduate School of Arts
and Sciences), and J.D. (Harvard Law School).
For more than thirty years he has practiced law,
with emphasis on constitutional issues. In the Supreme Court of the United
States he successfully argued or briefed the cases leading to the landmark
decisions Abood v. Detroit Board of Education, Chicago Teachers Union
v. Hudson, and Communications Workers of America v. Beck, which established
constitutional and statutory limitations on the uses to which labor unions,
in both the private and the public sectors, may apply fees extracted from
nonunion workers as a condition of their employment.
He has written numerous monographs and articles
in scholarly journals, and lectured throughout the county. His most recent
work on money and banking is the two-volume Pieces of Eight: The
Monetary Powers and Disabilities of the United States Constitution
(2002), the most comprehensive study in existence of American monetary
law and history viewed from a constitutional perspective. www.piecesofeight.us
He is also the co-author (under a nom de plume)
of the political novel CRA$HMAKER: A Federal Affaire (2000),
a not-so-fictional story of an engineered crash of the Federal Reserve
System, and the political upheaval it causes. www.crashmaker.com
His latest book is: "How To Dethrone
the Imperial Judiciary"
Dr. Vieira may be reached at:
P.O. Box 3634,
Manassas, Virginia 20108.
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