Guest Post: Police State Amerika

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By David Galland, Casey Research

Police State Amerika

I just had a conversation
with constitutional lawyer and monetary expert Dr. Edwin Vieira. I first
became acquainted with Dr. Vieira, who holds four degrees from Harvard
and has extensive experience arguing cases before the Supreme Court, at
our recent Casey Research Summit
in Boca Raton, where he spoke on how far off the constitutional rails
the nation has traveled. Here is a summary of what he told me…

Dr.
Vieira and I covered a lot of ground in our lengthy conversation, most
of it related to the U.S. monetary system – its history, nature, and
likely fate. But in between the details and analysis of how it is that
the nation’s fiscal and monetary affairs have deteriorated to the
current dismal state – and how the global sovereign debt crisis is
likely to be resolved – a couple of deeply concerning truths emerged.

Concerning because, taken together, these truths have set the stage for a full-blown police state.

The
first of these two truths has to do the nature of today’s money. To set
the stage, I present the following excerpt from Dr. Vieira’s paper A Cross of Gold related to the original Federal Reserve Act.

Section 16 of the Act provided that:

Federal
reserve notes, to be issued at the discretion of the Federal Reserve
Board for the purpose of making advances to Federal reserve banks are
hereby authorized. The said notes shall be obligations of the United
States, and shall be receivable by all national and member banks and
Federal reserve banks and for all taxes, customs, and other public dues.
They shall be redeemed in gold on demand at the Treasury Department of
the United States, or in gold or lawful money at any Federal reserve
bank.

Observe: From the very
first, Federal Reserve Notes were denominated “advances” and
“obligations”—that is, instruments and evidence of debt. True “money”, however, is the most liquid of all assets, not a debt that might be repudiated, and certainly not a debt that has been serially repudiated.

And
if Federal Reserve Notes were from the start to be “redeemed in gold or
lawful money”, they obviously were never conceived to be either “gold”
or “lawful money”. So, because by definition the only “money”
the law recognizes is “lawful money”, by law Federal Reserve Notes were
never (and are not now) actual “money” at all, but at best only some
sort of substitute for “money”.

The
monetary conjurers’ trick has been, slowly, steadily, and stealthily,
to reverse this understanding in the public’s mind. That is, to make the
substitute pass for the real thing, and then remove the real thing from
the operation.

This subterfuge was not
overly difficult to put over. After all, in the term “redeemable
currency”, which is the noun and which the adjective? When people deal
with a “paper currency redeemable in gold”, the natural uninstructed
inclination is to treat the paper currency as “money” and the gold as
something else. The paper currency, as the saying goes, is merely
“backed” by gold—but of course is not itself gold. And because the
currency is not itself gold, the money-manipulators can remove the gold
“backing” farther and farther into the background, without affecting the nature of the paper as “currency” (at least nominally).

Thus,
a “redeemable currency” can be converted into a “contingently
redeemable” or “conditionally redeemable” currency, through temporary
suspension of specie payments (as happened repeatedly during the
Nineteenth Century); and then into a full-fledged “irredeemable
currency”, through permanent suspension of specie payments, as with
Federal Reserve Notes after 1933 domestically and 1971 internationally.

Yet,
to the average citizen (whose most serious liability is mental
inertia), even though a paper currency’s promise of redemption has been
dishonored, it nonetheless remains “currency”.

Thus one grasps that the so-called “right to redemption” attached to any paper currency is actually a liability, inasmuch as it exposes the holders of that currency to repudiation, because they possess only the paper, not the gold.

Even
in the best of times, the holders of redeemable paper currency are not
economically and politically independent. Rather, they depend upon the
honesty and the competence of the money-managers.

This is why America’s Founding Fathers, realists all, denominated redeemable paper currency as “bills of credit”.
They knew that such bills’ values in gold or silver always depended
upon the issuers’ credit—that is, ultimately, the issuers’ honesty and
ability to manage their financial affairs.

The
unavoidable trouble with “bills of credit”, though, is that they can
(and usually do) turn out to be “bills of discredit”, when the holders
discover that the money-managers are dishonest and
incompetent—or worse, as is the situation today, highly competent at
dishonesty. Then the holders of the paper currency (if they are
sufficiently astute) realize how unwise it is to allow the gold to be
held by the very people with the greatest incentive, and the uniquely
favorable position and opportunity, to steal it.

But
when the money-managers refuse to redeem their currency, what can the
holders of that currency do to protect themselves? Well, what were they
able to do in 1933 and in 1971? Nothing. If the holders of
Federal Reserve Notes had enjoyed an effective, enforceable “right” to
the gold that the Federal Reserve System and the Treasury of the United
States promised to pay in redemption of those notes—that is, if the
currency had been “redeemable” in the only meaningful sense that redemption was absolutely assured as a matter of law and especially fact—the gold seizures of 1933 and 1971 would never have happened.

Thus, the ostensibly “redeemable” character of paper currency of the pre-1933 and pre-1971 type did not protect the holders of that currency. Instead, it turned out to be the very device used to deceive, defraud, divest, and dispossess them of gold—proving
in the most palpable manner that a society’s acceptance of “redeemable
currency” is the product of confusion and the invitation to inevitable
economic and political disaster.

In our conversation, Dr. Vieira
ticked off eight specific ways in which the current monetary system is
unconstitutional. While I won’t go into the specifics here, the
important thing to understand is that, as currently operated, the
federal government has managed to manipulate things to avoid any
constitutional restrictions on its ability to spend.

This, of
course, gives the government free rein to reward favored voting blocs
with expensive social programs, buy fleets of limousines, launch
expensive overseas adventures, bail out well-connected donors, and
otherwise spend the country into ruin.

To understand why this is
so important as a precedent to the evolution of fascism, view the matter
in reverse by considering how different things would be if the
constitutionally mandated requirement that the government’s currency be
redeemable in good money – gold or silver – was still enforced. In that
case, the government’s ability to spend would be effectively limited by
what it collected in revenues. That, in turn, would have greatly
curtailed its ability to grow into the bloated juggernaut it has.

In other words, the American ideal of a limited government would have been hard wired.

As
it stands, though, exactly the opposite has been allowed to evolve –
unchallenged by anyone, including the Supreme Court. Why has the
nation’s highest court chosen not to tackle this clear breach of the
Constitution?

According to Dr. Vieira, it is likely because if
they were to void the current system as being unconstitutional, they
would effectively blow apart the U.S. and global economy. But as they
have no authority to even suggest an alternative system, they are faced
with the reality that while they have the power to do great damage, they
have no power to cushion the blow. And so, the Supreme Court does
nothing.

As a result, the ability of the federal government to
continue its insane spending and rolling out new initiatives designed to
win over voters continues with no legal restraints – the latest example
being the health-care initiative.

Put another way, in cahoots
with the Fed, the federal government is able to wage war, bail out the
banks, foster socialism, and otherwise bankrupt the nation – to do
whatever it wants – largely thanks to its continued operation of an
unconstitutional monetary system.

It Gets Worse…

The
second fundamental truth is that the Supreme Court has been a
co-conspirator and instrument of the government’s degradation of
individual liberty.

Dr. Vieira and I spent a fair amount of time
on this topic – of how the nation’s highest court could let stand the
egregious excesses of recent decades; the Patriot Act, Guantanamo,
institutionalized torture and renditions, domestic spying,
eminent-domain abuses, warrantless searches, etc., etc. In his view,
there can be only one of two reasons that the Supreme Court has been so
accommodating – one is that the justices are incredibly incompetent, and
the other is that they are working within the context of an unseen
agenda.

Ruling out the first, his final conclusion is that they
are operating with an unseen agenda in mind. In his view, that agenda
revolves around the rising potential for widespread social unrest
emanating from the nationwide monetary Ponzi scheme. Doing its part to
prepare, the Supreme Court has been establishing the precedents
necessary for the government to cope with that unrest.

Too radical
a thought? Returning to Dr. Vieira’s point – ask yourself how else to
explain the Supreme Court’s actions. Are they collectively of low
intelligence, or otherwise so stupid as to be unable to understand the
Constitution? Or do they now view the Constitution and the Bill of
Rights as dead letters, freeing them up to respond to the government’s
overheated demands for new and previously unimaginable new “emergency”
(read “fascist”) powers?

Is there an alternative explanation?

On
this general theme, Dr. Vieira correctly points out that, in order for a
fascist state to exist does not require the government to actually
arrest anyone – but only that they can arrest anyone. Do you think you broke a law over the past week? I can assure you that every one of you dear readers broke a lot
of laws. Sure, you may not have realized you were breaking a law – but,
as the old saying goes, “Ignorance of the law is no excuse.”

The Stage Is Set

Unrestricted
in its growth by any constitutionally mandated limits on its ability to
create and manipulate money – the official currency now being nothing
more than IOUs redeemable in nothing more tangible than coins made out
of base metal alloys with inflated face values – and supported by a
Supreme Court that has unequivocally demonstrated a willingness to
ignore or sign off on egregious tramplings of the Constitution, the
stage is set for the U.S. government to evolve into something far more
dangerous on the domestic front.

All it requires now is a
triggering event, and it would be naïve to think that such an event
won’t occur. Maybe not tomorrow, maybe not this decade – but when it
inevitably does, the federal government already has all the precedents
it needs to do “whatever it takes.” This absence of legal restrictions
on its actions is the very foundation of fascism.

When I asked
Dr. Vieira how the nation has progressed on a scale from 1 to 10 towards
becoming a police state, with 10 being a full-blown version, he put us
currently at about 7.

There really is no investment angle to be
derived from this situation – well, at least nothing new. Owning
tangible investments that will hold up in the face of a continued
currency debasement continues to make sense – but with the caveat that
FDR’s unconstitutional gold confiscation of the 1930s was let stand and
there is zero reason to think that the accommodating Supreme Court
wouldn’t go along with it again. One would hope to see straws in the
wind before any moves toward confiscation would begin. Until those
straws start flying, the precious metals – as well as other tangibles –
belong as part of your portfolio.

And I’d be remiss if I didn’t
mention the importance of politically diversifying your life and your
money as one of the few steps you can take to avoid the serious risk
that comes from being “all in” in a single jurisdiction.

Some
readers have berated me for often writing on what might be considered
gloomy topics. To which I would respond: If you are sitting in a theater
and see a fire breaking out, would you fail to make others aware of it,
because you didn’t want to interrupt their entertainment?

Well,
we can see a fire blowing up – the kindling for which has been piled up
deep by a series of out-of-control governments. Unless and until there
is something akin to an “American Spring.” this fire is going to spread
and consume even more of the accumulated wealth of the broader public –
and maybe worse.

Do what you can to protect yourself and your
families – then get on with your life. You may not be able to do much
about the bigger-picture trend, but you can certainly take steps on a
personal level to mitigate the ill effects.

Hope for the best, plan for the worst… but then live life to the fullest