– Edwin Vieira Interview with James Turk (Gold Money, June 13, 2011):
James Turk interviews Edwin Vieira, author of Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution
Edwin talks about this book, how it came to be and the new editions. Edwin explains the role that the gold commission hearings and Ron Paul played. He also says how important and urgent monetary reform is for the United States and how the best chance of reform comes at the state level.
They discuss constitutional money in the USA and the authority of states to use gold and silver as legal tender, as well as legal precedent from the Supreme Court. He talks about how several states are contemplating legislation to allow gold and silver as alternative currencies.
Edwin explains the Treasury’s legal obligation to maintain parity between all forms of US currency, about Roosevelt’s gold seizure, the gold reserve act and the abolition of the gold clause. Edwin and James talk about the need for insurance against a currency collapse and how alternative currencies could play that role. They discuss the stark choice that follows a currency collapse: How the US reacted after the collapse of the Continental Dollar by enshrining sound money in the Constitution vs. how Weimar Germany drifted towards National Socialism.
He explains how US states have the legal duty and authority to carry out monetary reform. Given the deadlock in Washington, they must take the initiative to prepare for the coming crisis. Edwin and James also stress the need for a rational currency system which allows for economic calculation, and decry the current fiat, politically driven, irrational monetary system as incompatible with the free market, and a focus of financial instability.
They both talk about the current lack of financial education, and liken the alternative currency initiatives by state legislatures to building lifeboats for the Titanic that is the US dollar. They also talk about the different things that can be done to prepare for the impending collapse of the dollar. They also return to the Continental Dollar and how America’s founding fathers were able to learn from their mistakes by enshrining sound money in the Constitution and how, with today’s technology, we could do even better.
Read Full Transcript :
James Turk: I’m James Turk. I’m a director of the GoldMoney Foundation. I’m pleased to be here today with Edwin Vieira, the author of Pieces of Eight, which is a book that the GoldMoney Foundation just recently republished. Edwin, it’s a pleasure to be here with you today.
Edwin Vieira: My pleasure to be here with you, James.
James: Edwin, I can’t tell you how many emails that I’ve received saying great things about the book, Pieces of Eight. I want to start by talking a little bit about that. I remember reading the first edition of it back in 1983, perhaps?
Edwin: That’s right, I think.
James: And it was a great book. And now the new edition, which came out 20 years or so later. What’s the background for Pieces of Eight?
Edwin: Basically, it derives from the Gold Commission that was held in the early 1980s, and a talk I had with Ron Paul, congressman, really by accident. It wasn’t in relationship to the Gold Commission hearings. And I asked some of the people in his office whether they happened to have a constitutional study of the role of gold and silver in the American monetary system. And they said no. And I said, well, how can you be having the Gold Commission hearings looking to the present role, when you’re not looking back to see what the Constitutional principles are.
And someone said, “Well, if you think that’s so important, why don’t you put something in?” So I did. I wrote a 60-page typewritten study called “Constitutional Principles of the Monetary System.” And it came in at the very end of the Gold Commission hearings, so I didn’t have an opportunity to testify, and it’s lost somewhere in the bowels of Congress where they keep things of that nature.
But then Ron Paul later suggested that that be published. I thought it wasn’t sufficient, so I expanded it and it became a 380-something-page book to which Congressman Paul wrote an introduction. A number of years went by and people started asking for it, and it was out of print. I said, well, I’ve collected a lot of other information on this, let me do a more complete job. So in 2002, I came out with a second, revised edition, which was now 1,700 pages long. And just last year and into this year, we’ve come out with a GoldMoney Foundation special edition of the book. So it’s now available actually on the internet through Amazon.
James: Yeah. We’ve received a lot of requests to have it available outside of the US, but now it can be ordered through Amazon, and the name of the shipper is Auriga?
Edwin: That’s correct. They’re the ones that handle that particular book.
James: So the book will be available, or is available now on Amazon through Auriga.
James: And it can also be ordered through the GoldMoney Foundation website as well.
Edwin: Through the GoldMoney Foundation, that’s right. And then actually those orders I tend to fulfill, especially the international ones.
James: OK. How did you develop this interest in the monetary aspects of money, the legal side.
Edwin: Before I started studying law, I was a chemist, or at least I was studying chemistry. In that particular discipline you have a lot of time, because things are cooking in the laboratory. So I spent a lot of time in the library. I became interested in economics and read a great deal about economics. One thing that you know when you study economics is that money and banking are central to a free market system, positively or negatively. So when I went to law school, I was also interested in the subject, took courses in the law and economics.
James: And this was at Harvard?
Edwin: At Harvard. And one of the things I discovered was that they didn’t discuss those matters. All of those important monetary decisions, banking decisions, at the Supreme Court were simply not treated in any depth. I began collecting information on that myself simply because I was interested essentially in putting it away in a box. And then one day I had a client who was interested in bringing a test case in that subject. And now I began putting the material together to see what we could use in that particular case. And that led me by accident into Ron Paul’s office, because the client knew some people who were working in that office and he brought me in to talk to them during the time the Gold Commission meetings were being held.
One thing led to another, and the next thing I knew I was writing Pieces of Eight, the initial volume. I just continued writing and lecturing and researching in this subject ever since. It’s an essentially endless proposition.
James: How many articles have you written over the years? It must be dozens.
Edwin: Dozens, yeah.
James: I’ve seen you on a number of different websites, New With a View…
Edwin: News With a View. These things are picked up and they end up having lives of their own.
James: And they go viral.
Edwin: Especially now, given the problems we’re having.
James: Yeah. Let’s talk about the problems we’re having. What’s the Constitutional solution for today’s monetary problems?
Edwin: I think the practical Constitutional solution is really two levels. There’s the ideal Constitutional solution, which is we do this through Congress. We spin the Federal Reserve off the government. We no longer make it an official tie between the Treasury and the Federal Reserve?
James: You mean close it?
Edwin: Excuse me?
James: You mean close the Federal Reserve? End it?
Edwin: I’d let them straighten themselves out. I think you run into the problems of rational economic calculation if you want Congress to come in and how say how the bank system should correct its own problems. But you certain spin it off from the Treasury so you don’t have this support that the Treasury gives to the Federal Reserve.
James: Just to use one of the things that I’ve learned from you, just like we have the separation of church and state…
Edwin: The separation of bank and state, absolutely.
James: The separation of bank and state.
Edwin: And then the reintroduction of gold and silver as the official currencies. Because of course in private transactions, people can choose whatever they want as a non-fraudulent currency. But I don’t think that’s going to happen, because of the political deadlock. Actually the brain-dead political deadlock that’s going on in Congress. But I think the basic problem in Washington is that there’s political deadlock.
So you’re not going to see the type of reform, the separation of bank and state and reintroduction of sound money that I’m proposing coming out of either the Republican or Democratic parties, whether it’s Congress of the administration.
The interesting thing in our Constitutional system is we have an intermediate level of government that has many important reserved powers that relate directly to at least currency. Banking as well, but I’m more interested in having some what I would call some scientific currency standard imposed. Because if you don’t have that, you’re still going to have problems in the banking sector.
And what I’m talking about there is state governments. What people don’t realise there is that constitutionally the state governments have the authority as state governments to institute, to adopt, to use their own alternative currency. And the Constitution specifically points out that no state shall make anything but gold and silver coin tender in payment of debts. No state shall make anything BUT gold and silver payment of debts.
But of course if you flip that over to the other side it says, well, the states have a reserve power to make gold and silver a tender in payment of debts. And that in fact was determined by the Supreme Court way back after the Civil War in the late 1800s.
That exact question arose – could the states maintain a gold and silver economy essentially within, say, governmental structure, even though Congress had made legal tender treasury available.
James: This was the greenback that was circulated at the time.
Edwin: Greenbacks, right. At the time they were non-redeemable. And it came to the Supreme Court on two occasions, and the Supreme Court ruled on both that the states, having this essentially residual governmental sovereignty – because of course some of their sovereignty has been transferred to the government in Washington. But having this residual sovereignty, they can choose their own alternative currency. They do not have to follow the directive from Congress.
So we have this alternative mechanism for adopting state-by-state – and then I think it would spread fairly quickly – a sound currency at that level without necessarily having to go for approval, authorisation, or whatever, through congress.
James: So we don’t have the political will in Washington to go back to Constitutional money, in your view. And that’s one that I share with. And given 50 states it’s logical to assume that there are maybe half a dozen, maybe ten states, where there are people there who have the political will to go in the right direction by going back to constitutional money. Is that basically how you see it?
Edwin: Yeah, that’s exactly my point. We have 50 shots there. 50 different legislatures. And my view is that if one or two states adopt a sound alternative currency, then the full force of the market is going to be behind that reform. Other states are going to look at this and say, wait a minute, we could do the same thing to protect ourselves against a crumbling banking system, against a crumbling currency system, and you’ll begin to see it spread like oil on water.
And of course once that happens, once the full force of the market is behind it, then Congress will eventually have to catch up with it.
James: Yeah. I guess it is spreading. The original movement was back in New Hampshire where you were the driving force behind introducing a sound money bill to the New Hampshire legislature. I was very pleased to play a small part in that role.
Edwin: Yeah, that’s right.
James: Unfortunately it got locked in committee and never did see the light of day. But what it did do was it showed the way for other states, that by adopting that type of legislation, maybe they could have more success in their states than New Hampshire did. Could you just sort of trace the history from when you started in New Hampshire to where we are?
Edwin: Well, that’s back about seven years ago, as I recall, in New Hampshire. And that was a problem – what I would call the political neck of the funnel. That particular committee and some of the people on that committee that did not want that shoe to go forward. And they were capable at the time of essentially suppressing politically within the structure by parliamentary means. However, the genie got out of the bottle, as it were, through the Internet. And that idea was picked up in Indiana, it was picked up in Colorado, it was picked up in Missouri, and a number of other places. In Montana, in fact, first it was submitted to a committee, died in committee. Last session it went to the floor of House. I think it lost 46-52. Pretty close. So I would suspect that the next time in Montana there will probably be more political force to see that pass in at least one house, because I can’t imagine the economy’s going to become any better in the next two years.
I know that a similar bill has been proposed in South Carolina. There was a bill concerned with gold coinage as opposed to electronic currency, which I was favoring, in Georgia. Virginia had a bill that didn’t get out of committee in the last session, but it’s going to be put in this fall in the next session. In Texas they’re talking about the same thing.
So there are a number of states with great interest, and it’s gotten to the point at least in one of two of them where it’s come to a vote in the committee, or in Montana as the example, the actual house floor.
So I think, as I said, the genie is out of the bottle on this. And it’s simply a matter of people taking a look around and saying, wait a minute, we have a serious economic problem that can’t be solves in Washington, how do we protect ourselves against it? And here’s at least an approach. Let me not say an answer, but at least an approach.
James: So that’s the core of the idea, if there are problems with the dollar, there’s an alternative currency available for people for use within that state to transact with one another. Because the history has been what when a currency collapses, the economy is destroyed as well. This way the economy can continue with the alternative currency, which of course would be constitution-based money.
Edwin: Right. And I look at this, in a sense, as an insurance policy. I’ve been driving for years and I have yet to hit the little blind girl in the wheelchair in the crosswalk, but that doesn’t mean that I don’t keep $300,000 or $500,000 of personal liability insurance on my car. The same situation here. You set up one of these alternative currency systems of the type I’m proposing, it really is almost costless. No one necessarily has to use it, but it’s there in the event that the circumstances are such that its’ the only alternative.
So it’s an insurance policy. And we have no insurance policies as such in any of the states for a major breakdown of the currency system. And yet we’re facing conditions that would suggest to any prudent person that that’s certainly a possibility.
James: Is Utah the first state that’s developed a mechanism to enable this to happen?
Edwin: Utah is the first one that has passed an actual bill. Their bill recognised the United States coinage, gold and silver coinage, as legal tender in Utah. Which of course it is pursuant to federal law anyway. But at least it’s a recognition by the state, formal recognition. And then secondly they said, well, no one’s going to be required to use it. Although of course if you make a contract in gold and silver, you’ll be required to pay in gold and silver. That’s just the law at the present time.
And the third part of that statute was to eliminate, as far as Utah was concerned, taxes on transactions involving United States gold and silver coin for Federal Reserve notes or vice-versa. So they made a level playing field essentially from the tax point of view with respect to alternative currencies.
Now we still have that problem at the federal level, but at least Utah is showing the necessity for dealing with that. And I think if alternative currencies are adopted in, let’s say, a few states. It would probably have to be more than one.
James: Half a dozen?
Edwin: Half a dozen, let’s say. Then at that stage, the treasurers in those states are going to go to the US Treasury and say, look, we have to make an accommodation here. We have to correct in some way the federal tax approach to this so that our state alternative currencies can go forward.
Because if you don’t do that then we, the states, are going to bring this to the Supreme Court, where we have an ability to bring a case in the original jurisdiction of the Supreme Court. That means directly in the Supreme Court. Which I imagine would be a very high-profile political piece of litigation.
James: What is the authority that enables the federal government to tax what is Constitutional money?
Edwin: Well, they shouldn’t, because this is an exchange. If you assume the Federal Reserve notes are constitutional. Leaving aside the legal questions with those. Here you have an exchange of one form of United States currency, Federal Reserve notes, for another form of United States currencies, the gold eagles or the silver liberties or whatever. So you say, wait a minute. How can you tax that transaction? And the answer is you shouldn’t be able to, because if these things have been called dollars and these things have been called dollars then legally they’re equal.
Now what the taxing people say is, oh, no, there’s an economic distinction between them. A $50 United States gold coin is obviously worth more economically than a $50 Federal Reserve note. And therefore we the taxing authority say that we can tax an exchange here where’s a gain. I guess they give people losses too, but primarily where there’s a gain.
But interestingly enough, this particular question was decided by the Supreme Court, again right after the Civil War, because you had the legal tender greenbacks, irredeemable in gold, circulating side by side with the gold and silver currency.
There was a case called Thompson v. Butler. A gold clause contract was involved. Butler won, and he had a judgment for more than $5,000, payable in gold. He wanted to prevent that case from being appealed, and at the time the rule was that if a case was not worth more than $5,000 in issue, then the Supreme Court did not have jurisdiction to hear the appeal. So Butler reduced the value of his own judgment to exactly $5,000.
Well, that didn’t stop Thompson, he filed his appeal papers anyway. The Supreme Court threw it out and said, “Wait a minute. Yes, we understand that economically speaking, $5,000 in gold is less, or there’s more paper money than in, for $5,000 in gold. However, Congress has chosen, for whatever reason, to call both of them dollars. Therefore, we can’t choose between them. Monetarily, there is no difference.”
So the principle’s already been established, but for some reason – well, I understand what the reason is, income reasons, right, revenue reasons – the taxing authorities take this other position. It will be interesting to see, though, if you had a state with an alternative currency, how that would stand up in the US Supreme Court.
James: Well they would have to go back to the precedent, which is the Thompson versus Butler, correct?
Edwin: That’s right, they have to go back to their own precedent. That precedent simply takes account of the fact that Congress has this authority, and if it calls this a dollar and it calls this a dollar, legally, what’s the difference between the two?
James: Yeah. You know, the thing I find interesting is that, let’s assume I’m going to go to London for a month, and I need £10,000 for spending for a holiday. I buy my £10,000 and I spend $16,000 – exchange rate of $1.6 per British pound. And then three months later I go to the UK and start spending the 10,000 pounds that I bought before, but the exchange rate when I’m there is actually 1.8. So I’m actually spending $18,000 of purchasing power at those exchange rates, which I had actually bought before. But because I’m spending the money, there’s no taxable event there, so I like to distinguish between – am I holding something for spending, or am I holding something for a capital gain?
So the other point of view would be, if I bought the £10,000 with a view to profiting from and speculating on the exchange rate movement, and I sold those £10,000 and got £18,000 back, maybe one could argue that that’s a capital gain or an investment. But the prior example that I used, from spending those pounds, there’s no appreciation there. There’s no taxable event, in my view.
Edwin: I would accept the capital gain concept if you’re taking United States currency and you’re purchasing foreign currency, or vice versa, and playing that market.
James: Playing the exchange rates.
Edwin: Right. Playing the exchange rates there, for the purpose of quote-unquote investment.
James: Or speculation.
Edwin: Or speculation. But if you’re dealing with United States currency versus United States currency, theoretically – and actually as a matter of law – equal purchasing power is supposed to be the standard among all forms of the United States’ currency. In fact, the Secretary of the Treasury is required by law to exchange gold certificates with the Federal Reserve in order to maintain the equal purchasing power of all forms of the United States’ currency. That’s an exact quote.
Edwin: All right? And you know what the standard is, for that exchange? 42 and 2/9 dollars, per ounce of gold.
James: Oh yeah, $42.22.
Edwin: Yeah 42.222222, right, the irrational number. 42 and 2/9. So obviously the Secretary of the Treasury is not doing his job, there, or the Federal Reserve is not doings its job, or the two of them are not doing their job together. So if there is a speculative aspect to different forms of the United States’ currency, we have to trace it back to the Treasury. It’s the Treasury’s problem. So here we have a situation where the Treasury is coming to people and saying, “Look. We’re going to tax you on an appreciation that is caused by the failure of the Secretary of the Treasury to perform his duty.” [laughs] I find that rather ironic.
James: Yeah, it is terribly ironic. Does that authority, to the Secretary of the Treasury, come from the Regulate the Value Thereof clause of Article 1, Section 10?
Edwin: Ultimately, regulate the value thereof of article one, section eight, clause five, of Congress’ power. You can trace it back to the 1933, 1934 legislation, under Roosevelt.
James: Which was? That was the…?
Edwin: Well first they had the gold seizure, and then they removed the gold clause contracts, and then they had the Gold Reserve Act of 1934. That’s the tie-in. All the gold was seized, put in the national gold stockpile, and then they issued gold certificates to the Federal Reserve, so there’s a gold certificate account the Federal Reserve had. Supposedly, the Secretary of the Treasury to maintain this balance by buying and selling gold. Of course the Federal Reserve can also buy and sell gold, and there’s this statutory requirement. It went up to $35 under Roosevelt. It was $35 until 1971, and then you had the series of acts that eventually brought it up to $42 and 2/9, where it’s sat since sometime in the 1970s.
But during that whole period of time, certainly up to when it was $35 an ounce, we had no problem because there was this redemption going on. But when they stopped in 1971, the redemption, now something else had to be done to maintain whatever that equilibrium figure was. Quite obviously it hasn’t been done, because what’s the price of an ounce of gold in the marketplace today? $1500 and something? And that’s bullion, not even coinage.
James: Right. Coinage would have a slight premium because of the fabrication costs and everything involved in… No one has called the Secretary of the Treasury on the carpet, though, for decades. Why not?
Edwin: No, no. Well, I don’t know. Maybe they thought this is one of those losing arguments. But I bring the issue back to the states. If half a dozen of the states set up an alternative currency, and the Treasury then says, “Well, we’re not going to… We’re going to continue to tax this,” or whatever, they’re going to give them some kind of trouble. And the states, they will find, “You don’t want to negotiate this? We’re going to take it to the Supreme Court of the United States.” Original jurisdiction, which means we get in right away. The Supreme Court becomes the trial court. And we’re going to raise this issue, among others. And let’s see where that goes when the public is now finally recognising that you have a collapsing currency. Which way is the Supreme Court going to go when the states are saying, “Well this is the alternative that’s going to save us, economically.” And the Treasury is saying no, on the basis of, essentially, rogue action, because they’re not solving their own statute.
James: Is this actually a way to develop competing currencies, without actually having a specific piece of legislation allowing currencies to compete with one another?
Edwin: Well that’s actually my hope what will happen. A state sets up an alternative currency for its own use, its own citizens’ use, and it’s an alternative currency. I’m not proposing that the states say that Federal Reserve notes can no longer be used or that private transactions couldn’t be made in euros or whatever. This is an alternative currency, and the state, to some degree at least initially, will start using it for its own purposes. And then, once it’s available to people, competition sets in. Because now they’ll actually have a choice. And if they’re watching a crumbling Federal Reserve System and a highly depreciating paper currency, here’s the option. It’s an insurance policy, in essence. And I don’t think it’s really an insurance policy in that sense, in the sense of my hitting the little blind girl in the wheelchair, because I think this is going to happen.
This is essentially a sure bet. Our problem now is we have no such alternative. As you said earlier, if there’s a major currency collapse, then there will be social dislocations, economic dislocations, political radicalism. I mean everything comes of Pandora’s Box at that stage, and we have to be prepared for that.
James: The scary thing is that when there is a monetary collapse, you can go either the right way, like America did after the collapse of the continental, or you can go the wrong way, which is perhaps what Germany did after the collapse of the Reichsmark is the 1920s with the increasing fascism.
Edwin: Well I don’t know you, James, but the only example that I know of where you had a collapsing currency, political instability and so forth, that led to what we would consider to be sound government was the American experience.
James: Yeah. That’s the only one I’m aware of as well.
Edwin: I think the only one in history.
James: Whether we do it again a second time when the dollar collapses or not, only time will tell.
Edwin: Well pretty tough odds, I mean if there’s only… What are the odds on that happening twice? But that one, of course, was done at what we would call the national level. Of course they had the Continental Congress and then they had the Constitutional Convention. They gave us this mechanism through the federal structure, which includes the intermediate layer of the states. So actually, we may be better off in terms of institutional structures than they were, because it’s already there. It’s in the Constitution, the state governments are there, and I think the state governments have quite a bit more of political credibility than the government in Washington. And as we mentioned before, well there were 50 of them. So if some of them want to maintain the ostrich position, well that’s fine, but we can expect that some of the others will be a little more foresighted, a little more prudent. I think once that happens, and you actually have the ability to have competing currencies, because – now the states are a pretty big institution, economically, most of them – they play a fairly large financial role in their economies. Once that’s there, I think the average person knows his own interests. If he has the institutional ability to take that action.
James: Does this also have potential implications for restructuring the political system, putting it back, more like the framers of the Constitution intended? That a true federalist system – rather than a consolidated power in Washington, ruling the country – you have a more confederated type of system where the different states use those powers that have been reserved to themselves, rather than relying on Washington?
Edwin: I think might very well be the beginning of that, because once they recognize that they can take this kind of action – really, that they’re duty bound to take this kind of action to protect their own citizens – but once they recognize that they can do that, and they are not really dependent upon Washington, then there will be other areas of reserved powers into which they’ll move. I think that’s just natural. Right now the problem I’ve seen, practically speaking, is so many state legislators assume that currency reform, alternative currency or competing currency, whatever we want to call it, is not something with in the ken of the state government.
James: They’re just not informed.
Edwin: Right. It’s something reserved, and the Federal Reserve is supposed to handle this, the US Treasury is supposed to handle this. We in the state aren’t supposed to handle this. The first is to point out to them, well here’s the Constitution. No state shall make anything but gold and silver coin tender in debts, here are these Supreme Court decisions. Here’s the ability for you to do it within the context of your legal authority. Here’s your legal duty to do something like this, because ultimately you have what’s called the police power, which is designed to protect the health, safety and welfare, economic as well as medical or what have you, of the population.
So you have a duty, you have the Constitutional authority. There’s a practical way for you to do it, and if you wait, you’re not going to get the kind of action you expect out of Washington. In fact, it’s probably going to be more of the same or worse. So this problem’s not going away, and you people, at the state legislature, you have the responsibility. And the question I ask them – Virginia, for instance, I was talking with some Virginia legislators a while ago – I said, “If the Federal Reserve system collapses, we go into some kind of hyper-inflationary event where the currency becomes next to worthless, what will the commonwealth of Virginia, as far as its government, and what will the citizens of Virginia, use as their currency?”
And then you see the little light bulb go on in their head, because they realise, “Well there isn’t anything else. So what’s going to happen? Oh.” And then the next step is, “Well it’s up to you. You’re in the legislature, you’ve taken this responsibility politically. You’re holding yourself out to the public as having the competence, now let’s see the prudence.”
James: And given the backdrop of continuing financial problems, not just in the United States but globally, it’s giving people the understanding that they need to act, to have that backup safety net just in case.
Edwin: I think so. When you talk about competing currencies, as I like to say, any little girl in Bangladesh that walks by an internet cafe and looks in the window can see people all over the world talking about competition in currencies, alternatives to the Federal Reserve, the Federal Reserve, no longer the world reserve currency, whatever. They have all sorts of different ideas, but they’re all in synchronisation on that particular fact. Something has to be done. Russia, China, South Africa – you run down the list of these countries – Brazil. Why aren’t we thinking about it here, domestically? This is, as it were, the eye of the storm. This is the focal point. This is our Federal Reserve System.
James: Well what’s happening internationally, in my view, is people are thinking about it, and they’re seeing gold reemerging as a form of currency. That’s their protection against what they see as the potential or probable collapse of the dollar, at some point in time, if the US government doesn’t get off of this road of more debt and more deficits and put some discipline on spending. So if people are seeing that internationally, isn’t it sort of logical that the state government should also be seeing gold and silver as the natural alternative?
Edwin: Well that’s the point I make to them. Especially given that there’s the Constitution, what does the Constitution say with respect to their reserve power?
James: Yeah. Well let me ask you – I know you’ve written an awful lot about the Constitutional authorities for state militias. What is the link between militias and sound money, Constitutional sound money and Constitutional militias?
Edwin: Well the purpose, ultimately, of the Constitutional militia, is to maintain every form of what we call today homeland security within each state. Then the militia had certain duties to the national government if they’re called forth by Congress, but leave that aside. But certainly within each state. And one aspect of homeland security has to be economic security. If you don’t have a sound economy forget everything else, right? You’re down the drain. What we don’t have in any state today is a militia structured the way the Constitution really requires. So I have been promoting that revitalisation across the board, because there are a number of things that need to be done. But one of them, of course, is economic security. The reason I promote the militia for that is, if we had a Constitutional militia, every member of it could be required to have one of these alternative currency accounts as part of his militia, homeland security duty.
James: Preparation, just in case.
Edwin: Preparation. He wouldn’t necessarily have to use it if he didn’t want to use it, but he’d have to have it. And secondly, of course you have the businessmen. They’re all members of them militia, too. They would be required, after some number of days after this system was up and running, to post alternative prices for their goods and services in the alternative currency. Once again, they and their customers would not necessarily have to use it, although I suspect they would start using it pretty soon.
But there it would be, and my estimate is, if they pass one of these statutes within 60-90 days, you could have all of this set up. The institutional structure would be there. If people wanted to use it, fine, if they didn’t, that is fine too.
But I expect that the circumstances would be such that they would start using it pretty quickly, and then if you have competition between sound currency and a rotting vegetable currency, if you will, well, regression is always going to work in reverse, right?
James: Yes, the good money will drive the bad…
Edwin: The good money will drive the bad money out of circulation. And then this will put pressure… Because I don’t want to abolish the Federal Reserve. I think it is much too complicated of a problem. But it would put pressure on the banking system and on Congress to restructure their act.
Edwin: Because now the states and the population of the states, and what is that? That is the total population ultimately, right? Other than the District of Columbia. They can walk away from the Federal Reserve System.
Edwin: This is going to be tremendous pressure on that system, and on Congress, to straighten everything out.
James: Well, let’s go back, because I think this ties into the part that we were talking about earlier, separation of church and state, separation of bank and state. Is this how you see separation of bank and state evolving?
Edwin: Well, I certainly see separation of currency and bank, if you will. We are going to have an official currency of gold and silver, we are not going to be using the debt currency coming out of some kind of bank.
James: Because after all, Congress has the power to coin, they do not have the power to print.
Edwin: To print… They do not have the power to delegate some kind of power to a banking cartel made up of private interests.
James: If they do not have the power themselves, they can’t delegate.
Edwin: No, they cannot delegate. That is obvious. We can’t control them, so we will put the reform in at the state level. I think that what you would then see developing in the States is a different type of banking system, one that uses the alternative currency. Probably one that would generate bankers’ acceptance, so they could have their short term credit that is necessary to maintain the economy.
James: Banking in the traditional sense.
Edwin: Yes, banking in the traditional sense, and with a scientifically-based monetary standard.
Edwin: Because an ounce of gold is an ounce of gold is an ounce of gold, wherever you are in the world.
James: Right, which is essentially very important, because that provides the means of communication. Economic calculation, which is the basis of society, in regard to the marketplace, to fulfill their needs and wants.
Edwin: And I don’t see how you can have a rational, a structure of rational economic calculations with a non-rational monetary view.
James: Which is what we have now.
Edwin: Which is what we have now. We have a debt-based political money, which by hypothesis is non-rational, because it is driven by all sorts of political interests which have no eventual tie-in back to the marketplace. There is no actual link, unbreakable link. Whereas gold, gold and silver, there is the unit, there is the market tie, there is the element of rationality, as far as we can get it within a market system.
James: So this actually addresses the point, that I think a lot of people within the country intuitively understand, that the monetary system, as it exists today, serves the interests of certain powers. It does not serve the interest of the broad sweep of the nation. And surely not the middle class, who don’t understand, necessarily, what is going on in terms of the debasement of the currency.
Edwin: I think that is correct. I think a major problem over the years has been the loss of what I call the imperceptive historical mass of knowledge about money and banking. And the willingness of people is almost robotic, to accept ideas and directives of propaganda coming out of Washington. But of course, now the screw is being turned economically. And there is that old saying, attributed, I think, to Samuel Johnson. “Nothing focuses a man’s mind more than his impending hanging.”
Edwin: So as the economic screws continue to tighten down on people, they are going to be looking around for answers, and they certainly are not getting those answers out of Washington.
James: So it is not too surprising to see a Tea Party movement as a consequence?
Edwin: I think that is right, and I think that is going to become one of the issues that breaks up this Tea Party oligopoly. The currency issue. And eventually we are going to get back… Do you remember the turn of the 20th Century? 1890s into all the way into 1913? Money and banking were on the front pages of the newspapers. They were being discussed in union halls by blue-collar workers, right?
This was not something that was arcane that the average person didn’t know about, the average person did not want to get involved in. We have lost all of that political involvement, and as a result, power has gravitated into the hands of a few people, and has left the middle class, essentially, at the mercy of the system.
Edwin: Hostages to the system.
James: I’m sort of optimistic on this point, though, because you are absolutely right. The 20th Century is marked by, I think, the general decline, in terms of people’s understanding of what money is and its importance to society. The internet, I think, is sort of changing that now. Would you agree that the information available on the internet…
Edwin: I think the internet has broken the log jam on that. And then, of course, you have things like gold money coming out, and that kind of technology has been proven, there it is. It works, it is at the cutting edge, we can solve problems very quickly with that kind of technology, because it can be picked up, essentially, off of the shelf and used by the state government. So that as people realise that this is doable, it is not simply some pie in the sky, ivory tower type theorising about why the Federal Reserve is not an effective instrument.
Essentially, we know that there were problems with that. But you eventually come back to the question, or very quickly come back to the question, well what can we actually do to correct this? And now we have it. And the more people that realise that it is doable, the more likely it is that it is going to be done.
James: And the more likely that they’ll understand not only is it doable, but it is really essential to get back to a country which the framers originally put into place for us.
Edwin: That is my ultimate goal. First things first, people tend to look at this problem in short-term economic approach. What’s in it for me? What’s in it for you is financial protection against this tidal wave that is coming in. Next step – state governments begin to reassert their authority. Next step – we actually make the Federal system work. And less power, or power is drained from Washington, and it comes back to the states and the people.
And it can be done first through currency, simply because we have the context now to do it there.
James: In your assessment, we are moving pretty rapidly, in terms of the problems with the dollar and growth of the debt. The federal deficits, we have got national debt issues coming up. They are trying to increase it two trillion dollars to carry it through to the November 2012 election, which, in my view, is just kicking the can down the road, and showing that there is no political will to solve that problem.
On the other hand, we have got states starting to address the issue and recognising that there is a train wreck coming, and maybe they should do something, just in case that train wreck does really hit.
Which is going to come first? Is the currency going to collapse, and we are going to have that train wreck? Or do you think that people will be able to prudently act at the state level and come up with solutions, and maybe even head off that train wreck?
Edwin: Well, I think some states are going to come up with this solution, sooner rather than later. I think it is a hope, because I cannot be a prognosticator. I’m not Nostradamus. Before the train actually hits the end of the track. Whether that will be enough, I don’t know. Except that having that much created, will enable others in the context of the crisis to attempt to shift away. You have to have an example. Somebody has to leave. And that is our difficulty. We are on the Titanic without lifeboats at the present time.
We have got a dysfunctional crew, we have hit the iceberg, help is not coming, and we have no lifeboats. So we are in a worse position, I guess, than the folks on the Titanic were. Except for us, we can create those lifeboats now, before the ship goes down.
Edwin: And if we have a few of them, well, that’s better than nothing. But I have a feeling that, you know, James, you agree with me on this. The market is a tremendous force when we let it act to its full potential. And in this context, provide the alternative currency, and the full force of the free market is going to be behind it, and then it will just sweep politics along with it.
James: Yeah, that is how I have always seen it. And I have always felt that the answers to this problem, like the answers to all problems, are going to come from the market. They are not going to come from government. And that the more alternatives that the market provides, will help get us through. It looks like it is going to be a very difficult time, given what is happening to the dollar. Unless there is political will and political wisdom in Washington to get off of this path that they are on, what I call the path to the Fiat currency graveyard, and do a 180-degree about turn and go back to Constitutional sum money.
And while there is a lot of attention given, for example, to people like Ron Paul and perhaps a few others, they are still in the minority, and unlikely to be able to turn that ship of state around and put it in the right direction.
Edwin: I think that’s right I think at the national level in Washington, the likelihood is probably a negative number, at least in terms of this train wreck agenda that we are talking about. But at the state level, we have the opportunity. The reason I focus on the states is because I suppose, theoretically, what I am talking about could be done by individuals. You could have competing currencies started by individuals or businesses. But the transaction costs are too high, and it does not have enough political visibility. There are certain things that might be done by rogue agents in the Treasury department, or even rogue agents in some of the state agencies to suppress that activity.
Whereas if you bring a state government in at this stage, then you tie the political and the market forces together, as long as it is done on a sound currency basis.
James: This video is going to be seen all over the world, all over the states. Is there any additional comments that you would like to leave with people, as you see things unfolding here? Or what perhaps they can do to protect themselves, or to start examining a movement within their particular state. Is there any guidance you want to share?
Edwin: Well, I think that is exactly the point. Starting a sound money movement in your particular state, or for that matter, your particular country, or wherever. There is a lot of information out on the internet about these alternative currency bills that have been put up. One of the things that I am promoting now is for people to go to their state representatives and say, set up an investigatory commission.
There is a good bill that was written in Virginia on that, so that we can bring some witnesses in front of an official body, get a record, get the evidence, get the testimony, educate some other state legislators, and propose some legislation that the investigatory commission would take back to the legislature and say, “This is what we need enacted.”
James: In other words, first air the problem, and start addressing it. Bring in different people, different points of view. I guess it is really recognition that there is a problem that exists, and secondly, that there is no solution at the moment, if this problem does become worse.
Edwin: And I think proposing the solution to them. It is not simply we have a problem and we have no solution. Here is a solution, do you have anything better? And the answer will be, no we don’t, therefore this will be picked up. Somewhere, at some stage, someone is going to pick up on this. And that is the beginning to the end of our problem.
James: It seems so simple. All somebody really has to do is pick up the Constitution and understand the original intent of the framers was. Understand what they went through with the Continental, and the collapse of the Continental, why they tried to create a common market with a common currency. And then, I would probably also recommend reading the Coinage Act of 1792, which basically puts into practice what the intent was of the Framers of the Constitution.
Edwin: It is amazing how simple it is. Of course, they were rather remarkable people to put an assembly of that type together. But I do not think it is beyond our ability to look back and say, “Well, of course they did it this way, how else would you want to structure this kind of a system rationally?” To limit government control, to maximise individual freedom, to take full advantage of the marketplace, this is exactly what you would put in. Our advantage now is, they were using coinage, they used a bimetallic system why? Because they did not have the information available to be able to change the gold/silver ratio on a minute-to-minute basis.
James: But it gave Congress the power to regulate it and to change the gold/silver ratio so you could be under a silver standard or under a gold standard.
Edwin: It gave Congress the power to regulate it and to do it. We now have the technological ability to make that system work perfectly.
James: And that is the key advantage we have now.
Edwin: That is what we have now. And how foolish we would be if we did not take advantage of that.
James: But I will say that as brilliant as the Framers were, the Continental did collapse. The political will just was not there to get off of this path to the hyperinflation of currency graveyard. The Continental collapsed, and only then did they have the will to get together and create a Constitution and an English system.
Edwin: And you know what is amazing about that? Who were the people that issued the Continental?
James: The Continental Congress.
Edwin: And the Continental Congress were made up of many of the same people who went to the Constitutional Convention, or they came from the various state legislatures that had their own state legal tender laws and paper money And they took a little of what they themselves had done and said “No more, this was a terrible mistake.”
James: Well, that is clear from the debates and Madison’s notes to the…
Edwin: That’s right. And so there is one of the examples. As far as I am concerned, the only example I know of where people who had made that kind of a political mistake did not try to save face and maintain the system and improve the system. They turned around and said, “This was wrong, we are going to correct this for all time by putting in Constitutional limitations to prevent it in the future.”
James: And so it was for 180 years, until we abandoned the wisdom in 1971, and we are now seeing…
Edwin: The 30s really…
James: Well, the 30s really, yeah, OK. That was the beginning of it. The last remnants of the gold standard or the silver standard were ended in 1971. And I guess the tragedy is, is that here we are with the dollar not unlike where the Continental was near its final collapse, and basically, we did not learn from history. We did not read the Constitution, we didn’t understand the wisdom of the Framers, and we are going to have to learn, once again, the things that they went through.
Edwin: Well, I refuse to accept the adage that no one ever learns anything from history, except that no one ever learns anything from history. Some of us have learned something from history, and I think the circumstances are such that we can sell those ideas.
James: Yes. Or help educate.
Edwin: Educate, and at least on a scale sufficient to begin a movement in the right direction.
James: Well, you know, that is the whole purpose of the GoldMoney Foundation. It is a not-for-profit organisation that we founded basically to provide educational material. And with regard to the monetary situation in the United States, there is no better reference work than “Pieces of Eight.” Edwin, it has been a real pleasure to chat with you. I really appreciate you taking the time out, and best of luck to you in the future.
Edwin: Thank you James, it was my pleasure.