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Economic Liberty From Philadelphia

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No State shall "emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts""

It's worth noting, as Still did, that this is the only place gold or silver is mentioned at all in the constitution.

The case structure in section 10, and section 8, is important.  Still cited noted scholar Robert G. Natelson of Harvard that the final and frustratingly oblique phrase to "coin Money" (Article 1, Section 8) meant to "forge" anything, like in the common saying "to coin a phrase."

During Still's talk, he expressed support for the lawsuit against Treasury initiated by one of the writers on Op Ed news, Cliff Johnson, and the related lawsuit, found here:, to correct statements of misinformation by Treasury and the GAO as to the equivalence of United States Notes and Federal Reserve Notes, to address the lost seigniorage issue properly, and my related petition (exhibit B) to reissue U.S. Notes here.

From Johnson's article, Still also cited Madison's fear of the Money Masters of his day, and how the Founders had to compromise on the paper money issue, by nearing delisting it from the constitution.  However, after much debate, Madison did manage to keep the option for "Public Notes."  This was later taken up by Lincoln to issue the nation's first Legal Tender Law, and the first 3 installments of U.S. Notes, with which to pay the northern troops during the Civil War.

Still also supports the end of fractional reserve banking"yet it is fractional reserve banking that would allow a State Bank to leverage its tax-based deposits for public needs and projects"or, maybe not? 

Ed Sather, former SVP of the Bank of North Dakota, America's only State Bank (founded 1919), was adamant, even under repeated audience questioning, that the BND does not practice fractional reserve banking -- something that did not sit well with most of the anti-fractional reserve crowd.  Sather maintains that the appearance of the BND loaning out the same amount, or less, as it has on deposit, is, in fact, the result of it actually loaning out deposits, and that the bank has to borrow back money if it runs short when deposits are called upon.   Sather, who unlike most of the guest speakers, has actually worked in a bank, nevertheless disagrees with a great deal of scholarly work on the money multiplier effect and on how loans precede deposits and are therefore new money, including statements from central bankers [i], to the effect that banks create money when they make loans.  The frustration with this "bankers' point-of-view" was evident both at the general meeting and at the State coordinators' meeting earlier.  

John Fullerton, another banker turned monetary activist, speaking on day 2, went completely against the Greenback thesis of Bill Still and others at the conference, and claimed it didn't matter who produced the money, so long as a long list of regulations aimed at moving banking away from making money on transactions, and back towards financing, was implemented.  Well, I couldn't let that stand and in the Q&A I asked him why we couldn't have a Land Value Tax (LVT) to dampen the land cycle instead of after-the-fact remedies.  To his credit, Fullerton knew what LVT was, and even identified me as a Georgist (well, a Georgian, but close enough).  But then he backed off "imposing yet another tax" even while seeming to understand this was a Single Tax to end all other taxes.  Of course, he may have forgotten that it was a "mortgage crisis" that originally led to the meltdown, and that this is fundamentally yet another "Land crisis" within the too-predictable 18-year cycle, going back hundreds of years in capitalist history.  The failure to understand the role of Land in economics, is by far the greatest failing of neo-classical economics (what Economist Dr. Michael Hudson calls "Junk Economics").   

After Sather's talk, and again at the end of the 2-day conference, Ellen Brown had to put an end to discussion about fractional reserves to preserve order and to move things along.  (In an article she wrote some time ago, she pointed out that the idea of fractional reserves is obsolete, in that the Fed allows for essentially zero reserves now, loaning to banks through its open discount window, when needed.  This appears to agree with Steve Keen and other more recent economic thought).  It was, she said, not something we were going to be able to agree upon at the conference.  Well, if something as basic as whether banks create money when they make loans, or simply loan out deposits, cannot be agreed upon, what else is controversial?


There were a good number of gold-bugs in the audience, and at least one commodity-basket-based money presenter (a more complicated and arguably more manipulable form of commodity-backed currency than simple gold-backed currency).   Brown, along with Still and other Greenbackers, agrees that basing a currency on a nearly finite commodity like gold, would only result in deflation of the money supply, i.e. a depression.  Of course, it would also make a very small handful of speculators extremely wealthy; interestingly, the arguments for a gold-backed currency come from this sector too!  Bill Still further argues, with new evidence only available in the last 2 weeks, that the remaining supply of gold in Fort Knox has been mixed with 40% tungsten ore (which has similar density to gold), making a mockery of the claim that gold is a stable base for money. 

Rethinking Finance

An interesting display of the economic pyramid was put forward by a Skype-based presentation by Hazel Henderson, founder of Ethical Markets and a PBI board member, at the top of day 2.  She postulates that there is unaccounted for in neo-classical economics, fully half the economic wealth of the country -- given by Nature (what Georgists call Land), plus something she calls the "Love Economy" -- what is provided, mostly by women, free of charge, through nurturing and support.  The Love economy, Henderson says, is worth $16 trillion alone, more than the annual American GDP that is currently counted.  It is not monitizable, (and perhaps therefore ignored by the largely male, white economists).  As an example of how the "Love economy" could be influenced, Henderson suggested that over-population could be dealt with by giving the world's third world women solar panels, so they could learn, so they would then choose to stop having so many children.  She also seeks practical reinvestment of some $120 trillion of institutional money into the green economy: by factoring in externalities, and use of natural resources fully, and treating finance itself as a global commons.   From the transforming finance site:

The TRANSFORMING FINANCE group outlined necessary principles and conditions to operate the shared global financial architecture consistent with 21st century realities.  Their Statement cites many agreements and institutions, global norms and rules that have evolved since Bretton Woods.  It shows how markets for public goods can be expanded by pricing carbon and other emissions and external costs and accounting for un-priced assets, including: ecological productivity, biodiversity and other global commons, as well as social and human capital.

Henderson made the now-familiar observation that the sun's energy dwarfs anything produced from fossil fuels.

However, it is this writer's opinion, as well as many Georgists, that in addition to a pollution tax, natural resources have to be charged for at the raw level -- below the wellhead in the case of oil, or "in situ" in the case of coal etc.  This will remove the speculative element that makes trading in these commodities so profitable, by taxing away the profit from it, not-so-incidentally putting that money back into the public domain, whose demand created the value in the first place.  Without that, the appeal of playing these markets to deep-pocketed speculators, including those in the resource companies themselves, would disappear.  (Just today, a piece on CNBC cited the SEC's questioning of Chesapeake Energy's CEO's for his actions in acquiring personal shares in each of his company's wells.  Investors, who thought they were investing in a Natural Gas development company, sold off the stock on the news that Chesapeake was operating like a hedge fund.  This would have been impossible under a system that rewards production, not speculation on raw commodity price).

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Scott Baker is a Senior Editor/Economics Editor and Writer at Opednews, and a blogger for Huffington Post.
Scott Baker is President of Common Ground-NYC (, a Geoist/Georgist group. He has written dozens of (more...)
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"This is testament not only to the depths of the e... by Ellen Brown on Friday, May 4, 2012 at 8:19:12 PM
"The Fed is a banking cartel that benefits mainly ... by Lance Ciepiela on Saturday, May 5, 2012 at 9:51:28 AM
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