Folks seldom think about what they're using for money. Money is a very complicated and little-known subject. This week The Spotlight takes a look at Federal Reserve Notes and other forms of American money. You may be suprised to find out that Federal Reserve Notes were backed by gold for 20 years. After being taken off the gold standard, the notes were still redeemable in "Lawful Money." The Spotlight traces 83 years of the Federal Reserve's funny money.
- A Special Supplement to The Spotlight -
Published in Volume XXII, #6, February 12, 1996
Federal Reserve System's
Funny Money Explained
Since 1913 bankers have cheated the American
people with their fraudulent money.
EXCLUSIVE TO THE SPOTLIGHT
By Andrew Arnold
If you tell the average American on the street that the money in his pocket is no good, then you are liable to get a strange look or worse.
After all, those Federal Reserve Notes serve as a medium of exchange for goods, services and in settlement of debt. And Section 411 of Title 31 of the U.S. Code establishes Federal Reserve Notes as obligations of the U.S. government.
But the closer one looks at today's Federal Reserve Notes, and the sinister creation of debt-based money by banks with literally the stroke of a pen (or today, a computer keyboard), the more likely one is to conclude these notes aren't worth the paper upon which they are printed.
For example, today's paper currency has "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE" inscribed on the note. But the note doesn't tell you who, or what is backing the bill.
From 1878 until 1938, U.S. currency was backed by gold. Before that, dating back to 1792, Congress followed a bi-metallic standard under which gold and silver served as dollars.
When Federal Reserve Notes were originally issued in 1914, the gold standard was in practice. The bills were engraved on the reverse with:
THIS NOTE IS RECEIVABLE BY ALL NATIONAL AND MEMBER BANKS AND FEDERAL RESERVE BANKS AND FOR ALL TAXES, CUSTOMS AND OTHER PUBLIC DUES. IT IS REDEEMABLE IN GOLD ON DEMAND AT THE TREASURY DEPARTMENT OF THE UNITED STATES IN THE CITY OF WASHINGTON, DISTRICT OF COLUMBIA OR IN GOLD OR LAWFUL MONEY AT ANY FEDERAL RESERVE BANK.
While many debate the legality of the Federal Reserve, and consequently the lawfulness of these notes, there is no doubt that in 1914 through 1938 the notes were backed by "... gold or lawful money... " (emphasis added).
In 1938, President Franklin Delano Roosevelt issued an executive order to recall all gold and gold certificates.
A year later, Congress passed the Gold Reserve Act which modified the gold standard with a devalued dollar. FDR then issued a proclamation reducing the gold content of the dollar to 59 percent of what was established by the Gold Standard Act of 1900.
A statement on the front of 1950 series Federal Reserve Notes says:
THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE, AND IS REDEEMABLE IN LAWFUL MONEY AT THE UNITED STATES TREASURY, OR AT ANY FEDERAL RESERVE BANK
A statement at the bottom of the note says: WILL PAY TO THE BEARER ON DEMAND (followed by the denomination).
These notes were known as credit money - paper money backed by promises by the issuer to pay an equivalent value in the standard monetary metal.
Soon thereafter, the Federal Reserve stopped any pretense of backing the notes with "lawful money." By 1963, the U.S. Treasury and Federal Reserve quit promising to pay anything. The 1963 series Federal Reserve Note declares: THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.
This is what is known as fiat money--paper money that is not redeemable in any other type of money.
The problem with today's fiat money is that it is certificates of indebtedness--promissory notes issued as payment for government bonds which fraudulently require taxpayers to pay annual interest.
Yes, that's right. Politicians require taxpayers to pay interest on their own money. No greater fraud can be imagined. As Thomas Edison once said, "if the government can print bonds, it can print currency."
The nation is, conservatively speaking, nearly $5 trillion in debt, and the Federal Reserve creates "money" out of this debt.
Since Congress handed over the responsibility of making money to the central bank, and the dollar has been taken off the gold standard, nothing backs Federal Reserve Notes.
Around the same time bankers ceased redeeming lawful money, Congress was thoughtful enough to add "In God We Trust" to Federal Reserve Notes. Politicians, if not bankers, want money to have some auspices.
The Treasury still creates coins, but no longer prints U.S. Notes, according to a historian with the Bureau of Printing and Engraving. Some old U.S. Notes are in stock. These, combined with coins, are about the only real money left in circulation (which leads to the conclusion that since coins are issued by the Treasury, and thus carry no debt, a one-dollar coin would be a blessing to the economy.
But it is anathema for bankers for that reason. No wonder newspapers and pundits regularly condemn a one dollar coin.)
The philosophical question for the day is: If you own a promissory note to pay nothing, what will you do when the plutocratic powers that create and control our money supply decree that nothing is exactly what you will get?
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