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He will keep “count” of your productivity with notched wooden tal-
lies. He assumes the general function of tally-maker and collector and
distributor of wares. For this service he pays himself a fair starting
wage of ten tallies a month.
Your task is again basket-weaving. The first month, you make ten
baskets, keep one, and trade the rest with the accountant for nine
tallies, which you use to purchase the work/product of your mates.
The second month, you make twenty baskets, keep two, and request
eighteen tallies from the accountant for the other baskets. This time
you get your price, since the accountant has an unlimited supply of
trees and can make as many tallies as needed. They have no real
Chapter 37 - The Money Question

value in themselves and cannot become “scarce.” They are just re-
ceipts, a measure of the goods and services on the market. By collect-
ing eighteen tallies for eighteen baskets, you have kept your basket™s
price stable, and you now have some extra money to tuck under your
straw mattress for a rainy day. You take a month off to explore the
island, funding the vacation with your savings.
When you need extra tallies to build a larger house, you borrow
them from the accountant, who tallies the debt with an accounting
entry. You pay principal and interest on this loan by increasing your
basket production and trading the additional baskets for additional
tallies. Who pockets the interest? The community decides that it is
not something the tally-maker is rightfully entitled to, since the credit
he extended was not his own but was an asset of the community, and
he is already getting paid for his labor. The interest, you decide as a
group, will be used to pay for services needed by the community --
clearing roads, standing guard against wild animals, caring for those
who can™t work, and so forth. Rather than being siphoned off by a
private lender, the interest goes back into the community, where it
can be used to pay the interest on other loans.
When you and your chosen mate are fruitful and multiply, your
children make additional baskets, and your family™s wealth also
multiplies. There is no shortage of tallies, since they are pegged to the
available goods and services. They multiply along with this “real”
wealth; but they don™t inflate beyond real wealth, because tallies and
“wealth” (goods and services) always come into existence at the same
time. When you are comfortable with your level of production ”
say, twenty baskets a month ” no new tallies are necessary to fund
your business. The system already contains the twenty tallies needed
to cover basket output. You receive them in payment for your baskets
and spend them on the wares of the other islanders, keeping the tallies
in circulation. The money supply is permanent but expandable,
growing as needed to cover real growth in productivity and the interest
due on loans. Excess growth is avoided by returning money to the
community, either as interest due on loans or as a fee or tax for other
services furnished to the community.

Web of Debt

Where Would the Government Get the Gold?

Other challenges would face a government that tried to switch to
an all-gold currency, and one challenge would appear to be
insurmountable: where would the government get the gold? The
metal would have to be purchased, and what would the government
use to purchase it with if Federal Reserve Notes were no longer legal
tender? In the worst-case scenario, the government might simply
confiscate the gold of its citizens, as Roosevelt did in 1933; but when
Roosevelt did it, he at least had some money to pay for it with. If gold
were the only legal tender, Federal Reserve Notes would be worthless.
Assume for purposes of argument, however, that the Treasury
did manage to acquire a suitable stash of gold. All of the above-ground
gold in the world is estimated at less than 6 billion ounces (or about
160,000 UK tonnes), and much of it is worn around the necks of
women in Asia, so acquiring all 6 billion ounces would obviously be
impossible; but let™s assume that the U.S. government succeeded in
acquiring half of it. At $800 per ounce (the December 2007 price),
that would be around $2.4 trillion worth of gold. If all 12 trillion
dollars in the money supply (M3) were replaced with gold, one troy
ounce would have a value of about $4,000, or 5 times its actual market
value in 2007. That means the value of a gold coin would no longer
bear any real relationship to “market” conditions, so how would this
laborious exercise contribute to price stability? If the goal is to maintain
a fixed money supply, why not just order the Treasury to issue a fixed
number of tokens, declare them to be the sole official national legal
tender, and refuse to issue any more? The government could do that;
but again, do we want a fixed, non-inflatable money supply? As long
as money is lent at compound interest, keeping the money supply
“fixed and stable” means the lenders will eventually wind up with all
the gold.
Some gold proponents have proposed a dual-currency system. (See
Chapter 35.) The fiat system would continue, but prudent people
could convert their funds to gold coins or E-gold for private trade.
The idea would be to preserve the value of their money as the value of
the fiat dollar plunged, but what would be the advantage of trading
in a gold currency if the fiat system were still in place? Why not just
buy gold as an investment and watch its value go up as the dollar™s
value shrinks? The gold could be sold in the market for fiat dollars as
needed. Again, you can capitalize on gold™s investment value without
having to use it as a currency.

Chapter 37 - The Money Question

The “Real Bills” Doctrine

If using gold as a currency is plagued with so many problems,
why did it work reasonably well up until World War I? Nelson
Hultberg and Antal Fekete argue that gold was able to function as a
currency because it was supplemented with a private money system
called “real bills” “ short-term bills of exchange that traded among
merchants as if they were money. Real bills were invoices for goods
and services that were passed from hand to hand until they came
due, serving as a secondary form of money that was independent of
the banks and allowed the money supply to expand without losing its
The “real bills” doctrine was postulated by Adam Smith in The
Wealth of Nations in 1776. It held that so long as money is issued
only for assets of equal value, the money will maintain its value no
matter how much money is issued. If the issuer takes in $100 worth
of silver and issues $100 worth of paper money in exchange, the money
will obviously hold its value, since it can be cashed in for the silver.
Likewise, if the issuer takes I.O.U.s for $100 worth of corn in the future
and issues $100 worth of paper money in exchange, the money will
hold its value, since the issuer can sell the corn in the market and get
the money back. Similarly, if the issuer takes a mortgage on a gambler™s
house in exchange for issuing $100 and lending it to the gambler, the
money will hold its value even if the gambler loses the money in the
market, since the issuer can sell the house and get the money back.
The real bills doctrine was rejected by twentieth century economists
in favor of the quantity theory of money; but Wikipedia notes that it is
actually the basis on which the Federal Reserve advances credit today,
when it takes mortgage-backed loans as collateral and then
“monetizes” them by advancing an equivalent sum in accounting-
entry dollars to the borrowing bank.9
Professor Fekete states that the real bills system works to preserve
monetary value only when there is gold to be collected at the end of
the exchange, but other commodities would obviously work as well.
One alternative that has been proposed is the “Kilowatt Card,” a
privately-issued paper currency that can be traded as money or cashed
in for units of electricity.10 The nineteenth century Greenbackers relied
on the real bills doctrine when they contended that the money supply
would retain its value if the government issued paper dollars in
exchange for labor that produced an equivalent value in goods and

Web of Debt

services. The Greenback was a receipt for a quantity of goods or services
delivered to the government, which the bearer could then trade in the
community for other goods or services of equivalent value. The receipt
was simply a tally, an accounting tool for measuring value. The gold
certificate itself could be considered just one of many forms of “real
bills.” It has value because it has been issued or traded for real goods,
in this case gold. Some alternatives for pegging currencies to a
standard of value that includes many goods and services rather than
a single volatile precious metal are discussed in Chapter 46.

The NESARA Bill: Restoring Constitutional Money

One other proposal should be explored before leaving this chapter.
Harvey Barnard of the NESARA Institute in Louisiana has suggested
a way to retain the silver and gold coinage prescribed in the Constitution
while providing the flexibility needed for national growth and
productivity. The Constitution gives Congress the exclusive power
“to coin Money, regulate the Value thereof, and of foreign Coin, and
fix the Standard of Weights and Measures.” Under Barnard™s bill,
called the National Economic Stabilization and Recovery Act
(NESARAi), the national currency would be issued exclusively by the
government and would be of three types: standard silver coins,
standard gold coins, and Treasury credit-notes (Greenbacks). The
Treasury notes would replace all debt-money (Federal Reserve Notes).
The precious metal content of coins would be standardized as provided
in the Constitution and in the Coinage Act of 1792, which make the
silver dollar coin the standard unit of the domestic monetary system.
To prevent coins from being smelted for their metal content, the coins
would not be stamped with a face value but would just be named
“silver dollars,” “gold eagles,” or fractions of those coins. Their values
would then be left to float in relation to the Treasury credit-note and
to each other. Exchange rates would be published regularly and would
follow global market values. Congress would not only mint coins from
its own stores of gold and silver but would encourage people to bring
their private stores to be minted and circulated. Other features of the
bill include abolition of the Federal Reserve System, purchase by the
U.S. Treasury of all outstanding capital stock of the Federal Reserve

Not to be confused with the “National Economic Security and Reformation

Act” (NESARA), a later, more controversial proposal said to have been channeled.

Chapter 37 - The Money Question

Banks, return of the national currency to the public through a newly-
created U.S. Treasury Reserve System, and replacement of the federal
income tax system with a 14 percent sales and use tax (exempting
specified items including groceries and rents).11
The NESARA proposal might work, but if the government can
issue both paper money and precious metal coins, the coins won™t serve
as much of a brake on inflation. So why go to the trouble of minting
them, or to the inconvenience of carrying them around? The problem
with the current financial scheme is not that the dollar is not redeemable
in gold. It is that the whole monetary edifice is a pyramid scheme
based on debt to a private banking cartel. Money created privately as
multiple “loans” against a single “reserve” is fraudulent on its face,
whether the “reserve” is a government bond or gold bullion.
Precious metals are an excellent investment to preserve value in
the event of economic collapse, and community currencies are viable
alternative money sources when other money is not to be had. But in
the happier ending to our economic fairytale, the national money supply
would be salvaged before it collapses; and what is threatening to collapse
the dollar today is not that it is not backed by gold. It is that 99 percent
of the U.S. money supply is owed back to private lenders with interest,
and the money to cover the interest does not exist until new loans are
taken out to cover it. Just to maintain our debt-based money supply
requires increasing levels of debt and corresponding levels of inflation,
creating a debt cyclone that is vacuuming up our national assets. The
federal debt has grown so massive that the interest burden alone will
soon be more than the taxpayers can afford to pay. The debt is
impossible to repay in the pre-Copernican world in which money is
lent into existence by private banks, but the Wizard of Oz might have
said we have just been looking at the matter wrong. We have allowed
our money to rotate in the firmament around an elite class of financiers
when it should be rotating around the collective body of the people.
When that Copernican shift is made, the water of a free-flowing money
supply can transform the arid desert of debt into the green abundance
envisioned by our forefathers. We can have all the abundance we need
without taxes or debt. We can have it just by eliminating the financial
parasite that is draining our abundance away.

Web of Debt

Chapter 38

“As for you my fine friend, you™re a victim of disorganized
thinking. You are under the unfortunate delusion that simply
because you have run away from danger, you have no courage. You
are confusing courage with wisdom.”
“ The Wizard of Oz to the Lion

T he Wizard of Oz solved impossible problems just by look-
ing at them differently. The Wizard showed the Cowardly
Lion that he had courage all along, showed the Scarecrow that he
had a brain all along, showed the Tin Woodman that he had a heart
all along. If the Kingdom of Oz had had a Congress, the Wizard
might have shown it that it had the means to pay off its national debt
all along. It could pay off the debt by turning its bonds into what they
should have been all along “ legal tender.
Indeed, the day is fast approaching when the U.S. Congress may
have no other alternative but to pay off its debt in this way. The
federal debt has reached crisis proportions. U.S. Comptroller General
David M. Walker warned in September 2003:
We cannot simply grow our way out of [the national debt]. . . .
The ultimate alternatives to definitive and timely action are not
only unattractive, they are arguably infeasible. Specifically,
raising taxes to levels far in excess of what the American people
have ever supported before, cutting total spending by
unthinkable amounts, or further mortgaging the future of our
children and grandchildren to an extent that our economy, our


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