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Tom WoodsOn the January 5, 2014 episode of Exposing Faux Capitalism, I provided a two-hour refutation of Tom Woods’ 2013 presentation paper, “Why the Greenbackers are Wrong.

Here are some highlights:

(2) that fiat money is just fine as long as it is issued by the people’s trusty representatives instead of by the Fed
– It’s not fiat money, since it’s being issued into circulation by the 12 privately-owned Federal Reserve Banks
– Misdirection, since the proposal isn’t to have Representatives and Senators issue money, but to have bankers do it through the U.S. Treasury, under the public trust, akin to the successful Bank of North Dakota.

The Fed pays for this purchase by writing a check on itself, out of thin air, and handing it to the primary dealer.
– Not created out of thin air, but instead, by a bookkeeping entry.

For one thing, pieces of paper with politicians’ faces on them are not saleable goods. They have no use value, and therefore could not have emerged from barter as the most marketable goods in society.
– They do, because of the full faith and credit of the government backing them, which is based ultimately upon the productivity of the people, and the exchange between producers (taxpayers and government).

Second, even if government did try to impose a paper money issued from nothing on the people, it could not be used as a medium of exchange or a tool of economic calculation because no one could know what it was worth. Are three Toms worth one apple or seven fur coats? How could anyone know?
Its value is ultimately determined by the market, and even Lew Rockwell said that not only is the USD a medium of exchange, it’s also money.

This is how unbacked paper money comes into existence. It begins as a convertible substitute for a commodity like gold, and then the government takes the gold away.
– What about the first paper money issued by the Mongols, and what about the United States Notes?

“Free-market money, therefore, is commodity money.”
– Says who? Stephen Zarlenga has documented several other ways that money has arisen, and privately-issued, voluntary, usury-free community currencies have been issued that aren’t commodity-based.

So free-market money does not enter the economy as a loan.
– What about the paper notes issued by banks during the Free Banking Era of the United States? Were they not free-market money, just because they were issued by state-chartered banks?

For consistency’s sake, they should support all forms of debt-free money, including money that takes the form of a good voluntarily produced on the market and without any form of monopoly privilege.
– “They do”, as in me (Jason Erb), Anthony Migchels, George Whitehurst-Berry, Wayne Walton, Tom J. Kennedy and others.

Although the “there isn’t enough money to pay the interest” argument fails, I want to take up a related warning about sound money
– Is gold sound money when it dropped from $1700 to $1200 in 2013?

First of all, no one can expect to print pieces of paper with his face on them and spend them into circulation. Nobody would accept them, needless to say, and as we have seen, it is impossible for money to be introduced ex nihilo in this way. The only kind of money that can emerge on the free market is one that, at least at one time, had been considered a useful commodity. Paper money can come into existence on the free market and without coercion if it serves as a redemption claim for the commodity money, but irredeemable paper money cannot originate without government threats or violence.
– Tom Woods flaunts his ignorance of the success of voluntary, usury-free community currencies, such as Ithaca Hours and mtnHours.

Again, as we saw previously, the pattern is this: a commodity is freely chosen by market participants to serve as money, for convenience paper receipts fully convertible into that money begin to circulate as money substitutes, and finally the government removes the commodity backing from the paper and only the paper circulates.
– In other words, gold doesn’t function directly in a wide-spread way as money.

When Franklin Roosevelt confiscated Americans’ gold in 1933 and gave them paper money in exchange, this money did not enter the system “as debt.” It was a simple act of conversion of specie into paper. (Thanks to J.P. Koning for tracking down that link.)
– If it didn’t enter as debt, why were they still referred to as notes?

the naive confidence in the American political class that the Greenbacker alternative demands is beneath the dignity of a free people.
– By that standard, why trust government with any powers? — In this way, the anarcho-capitalist critics of government-issued money have some credibility on this point, unlike the minarchist critics like Gary North, who still call for government regulation of contracts in his illusory free market gold standard that is just as much a fool’s gold standard as any government-guaranteed gold standard.

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Here is a summary of my November 17, 2013 interview on Erskine Overnight, on the Genesis Communications Network:

2m – Usury redefined from any amount of interest to an arbitrary amount set by law
3m – Actual U.S. federal debt exceeds world’s annual economic production, and derivatives estimated to be over 1000 trillion dollars
4m – Derivatives brought down Wall Street banks, unregulated credit default swaps
6m – States getting around their constitutionally mandated balanced budget requirements
7m – States and federal government should be issuing their own interest-free credit
7m – interest-free United States Greenbacks
8m – Despite more seeming competition in U.S., relative to Canada, top 6 U.S. commercial banks have over 70% of commercial deposits
9m – Bank for International Settlements in Switzerland, founded in 1930, as a bank for central bankers, with around 60 countries as members
15m – Money is supposed to primarily serve as a medium of exchange between producers
15m – Money is actually functioning primarily as a medium of power
18m – 1933 gold confiscation, 1934 silver confiscation, 40% backing by gold, confiscated gold may have been pledged to international interests
19m – Canada’s largest gold bank, Scotiabank, caught not having enough physical gold in their vaults
20m – China and India’s interest in gold
21m – Platinum also a great micro investment
26m – Bitcoins – started in January 2009, don’t know who was behind it, all transactions are public
27m – government plans to tax Bitcoin transactions – income and capital gains
27m – $150 million in total Bitcoins at start of 2013, up to $4.5 billion as of mid-November 2013
29m – Ron Paul Liberty Dollar success, and subsequent government crackdown
31m – Success of the Bank of North Dakota
31m – Bill to study state bank, passed by California’s House and Senate, but vetoed by supposed man of the people, Democratic Governor, Jerry Brown
32m – Local currencies
32m – States prohibited from coining their own currency
33m – States can issue their own interest-free credit
38m – New bail-in provisions, even worse than bailouts
39m – Difference between capitalism and free enterprise
40m – Over 95% of money today is numbers in a computer
41m – Coins are only debt-free money put into circulation by government, currently
41m – Compound interest, compounding the debt exponentially, mathematically doomed to fail, because producers cannot exponentially increase their value to debtors in the long-run
42m – Banks can charge a fee instead of charging usury
43m – Need to cut back unsustainable federal programs, because tax revenues don’t match up with spending obligations
49m – Estimated $16 trillion given to banks by TARP bailout, and $1 trillion went to European banks alone at the hands of the so-called United States Federal Reserve
50m – Out of around 190 countries in the world, only around 30-40 countries had no net debt, or there was no information for them

For more on Erskine, see my articles here.

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United States NotesAccording to the December 2012 report by the U.S. Treasury Dept., out of the $450 million Greenbacks issued during the American Civil War, there is an estimated $239 million still outstanding.

In 2013 dollars, this would be at least $10 billion, according to this inflation calculator. While not significant today, it’s significant that such a huge percentage of the Greenbacks are still in circulation, given that they were ordered to be taken out of circulation in 1971, so there have been many that are being privately circulated or collected.

While there were $500 million in interest-bearing bonds that were issued as backing for them, the money supply grew by a total of $950 million, and the interest-free Greenbacks provided significant funding for the Civil War, when the total debt was $2.7 billion by 1865, and no interest was due, nor will ever be due, on the $450 million issued, and nothing is stopping the U.S. government from returning to directly-issued interest-free currency, other than lack of political will.

As for the validity of the American Civil War, I have publicly stated on my radio program and in a recent public presentation that the States had the right to secede from the Union, and that President Lincoln and the Union were in the wrong. The effectiveness of the Greenbacks, and of any interest-free currency, is something that can be independently judged.

For more on United States Notes, see my articles:

1) Gary North gives the false impression that interest-free United States Notes are no longer valid

2) Gary North deliberately omits the fact that United States Notes are interest-free

3) Michael Badnarik on issuing interest-free fiat money like Lincoln did: “That’d be a step in the right direction”

4) Don’t just blame Lincoln for a national legal tender law — Washington signed one, too

5) The Federal Reserve lies about United States Notes (Lincoln Greenbacks)

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Gary North speaking at the Mises Institute aft...

In his January 22, 2013 LewRockwell.com article, The Crackpot Economist Who Provided Milton Friedman With His Monetary Theory, Gary North states:

“[Irving] Fisher was a crank in other areas. He was a great promoter of eugenics. He wanted the scientific regulation of marriage and birth so as to promote the influence of the white race. Thomas Leonard in 2005 brought this to the attention of mainstream economists in The Journal of Economic Perspectives in an article about the Progressive movement and eugenics. He quoted Fisher’s statement in 1907: “The world consists of two classes – the educated and the ignorant – and it is essential for progress that the former should be allowed to dominate the latter. . . . [O]nce we admit that it is proper for the instructed classes to give tuition to the uninstructed, we begin to see an almost boundless vista for possible human betterment.” He cited Fisher’s textbook on economics.

Gary North has a lot of nerve, given that his own influence, Murray Rothbard, wrote this in his book, The Ethics of Liberty:

the parent should have the legal right not to feed the child, i.e., to allow it to die.

But this, of course, has nothing to do with economics, nor the validity of Milton Friedman’s economic theory, and it is one of many dodgy things Gary North has written, such as when he deliberately omitted that United States Notes are interest-free, or when he gave the false impression that United States Notes are no longer valid.

Why does North have to attack Milton Friedman for the beliefs of one of his influences? Is it because his arguments against Friedman’s theories can’t stand on their own merits?

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Walter WilliamsAustrian School supporter Walter Williams, writing for LewRockwell.com, equated defaulting on one’s debt to theft in his July 31, 2012 article, How Times Have Changed (emphasis mine).

Years ago, spending beyond one’s means was considered a character defect. Today not only do people spend beyond their means but also there are companies that advertise on radio and TV to eliminate or reduce your credit card and mortgage debt. Students saddled with college loans have called for student loan forgiveness. Yesterday’s Americans would have viewed it as morally corrupt and reprehensible to accumulate debt and then seek to avoid paying it. It’s nothing less than theft. What’s worse is there’s little condemnation of it by the rest of us.

We can see a pattern, with fellow Austrian School supporter Gary North calling for a fool’s gold free market standard, whereby the government that he says lies, cheats and steals would enforce contracts, yet it is expected to get completely out of money-issuing, which even globalist David Rothkopf says is a fundamental right of states. Specifically, states have the ability to issue money debt and interest-free, which is the real reason governments are targeted by private central bankers and Austrian School devotees, alike.

I also caught North deliberately omitting the fact that United States Notes are interest-free, and giving the false impression that they are no longer valid.

For Williams to specifically focus on student loan debt is revealing, since it is the very fact that large international banks — like those that Daily Bell founder, Anthony Wile, admitted to consulting for — which are largely responsible for lobbying U.S. and Canadian governments to make it impossible to wipe out your student loans in a bankruptcy. Big corporations, on the other hand, including banks, have no such constraint.

Is it any wonder, then, that fellow Austrian School supporter, Tom Woods, posed the question in an article, Are We Austrians Shills for the Bankers?

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“The World’s Most Listened to Late Night Talk Show”, Coast to Coast AM, with its estimated 3 million weekly listeners, has recently presented the case for sovereign, debt-free currency, over the gold standard.

On May 23, 2010, Joseph P. Farrell, author of Babylon’s Banksters, presented his case. From the show description:

One is a closed system, based on scarce resources, energy or money. The other is an open system, in which energy is in abundant supply, “and where money in turn reflects this by being a creation of the state, and therefore a debt-free instrument of exchange,” he detailed.

Any bank including the Federal Reserve can never issue interest, they can only lend money into circulation, so that there’s never enough money to pay the interest on the principle, he continued. A state, however, can issue debt-free money yet past US Presidents such as Lincoln, Garfield, and Kennedy all ended up assassinated after they tried to change the banking system, Farrell pointed out.

Then, on June 28, investigative journalist Jim Marrs, author of Rule by Secrecy and The Rise of the Fourth Reich, presented his case. From the show description:

He referred to the US as a “zombie nation” because citizens and the country itself are trillions of dollars in debt. JFK ended up dead not longer after he issued $4.2 billion in currency that was printed by the Treasury instead of the Federal Reserve, which in reality is a group of 12 banks that charge interest, he noted.

Read how the illegal Federal Reserve lies about United States Notes (Lincoln Greenbacks), and about private central bank misinformation.

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From the U.S. Treasury Department’s latest numbers of major foreign holders of treasury securities, we see that China owned $877.5 billion and Japan owned $768.50 billion in February 2010.

From their historical data, we see that China overtook Japan as the largest foreign holder of treasury securities as recently as September 2008, the month that the world’s economic system was thrown into turmoil by the collapse of Lehman Brothers and the stock and real estate market.

However, Japan isn’t the second-largest holder of U.S. treasury securities — the privately owned Federal Reserve Bank of New York is. That is, one of the 12 member banks of the illegal privately owned Federal Reserve System of the United States.

From their official numbers on April 21, 2010, they owned $771.57 billion in U.S. treasury securities — $3 billion more than Japan did in February.

Their parent organization, the Federal Reserve, lies about interest-free United States Notes, the currency that Congress issued to fund the Civil War, when the bankers were demanding 20-30% interest.

While United States Notes didn’t benefit the bankers, they clearly benefitted the American people, by not having to pay any interest during their entire lifetime, including to this very day. On the other hand, the Federal Reserve Bank of New York is receiving interest from their $771 billion in treasury securities, and as a member bank of the Federal Reserve, it receives a 6% annual dividend on its stock in the Federal Reserve System, with the proceeds going to private interests.

Even calculating with the current all-time low Federal Funds Rate of 0.25% on all the bank’s $771 billion in treasury securities, that’s nearly $2 billion a year in interest that could be saved by this and future generations, which will be compounded every year, and will reach $15-50 billion when annual interest rates reach a more historically recent level of between 2-6%.

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