Jared Emry

All natural and technological processes proceed in such a way that the availability of the remaining energy decreases.  In all energy exchanges, if no energy enters or leaves an isolated system, the entropy of that system increases.  An economy based on endless growth is unsustainable.  There are no exceptions to the second law of thermodynamics.  The Federal Reserve tries to sustain the unsustainable.  The Federal Reserve depends on several economic illusions in order to operate the monetary system.  These illusions are unsustainable.  Today we live in a country separated from its roots.  We live in a country that has denied even the most basic human rights and liberties for a false national security.  There are many manifestations of this denial: from the ignorance bred in the schools to the suspension of the writ of habeas corpus, trial by jury, the incarceration of the Japanese citizens during the Second World War, and the many illegal wars.  However, the root of many of these problems lies directly at the feet of the monetary policy and the closely related direct taxes.  All other issues are paid for from the currency handled by the Federal Reserve, they supply the money.  The U.S. Federal Government is illegitimized by its immoral, impractical, and technically illegal practices concerning its illusory monetary policies.

Several terms must be defined and will be defined through Ludwig von Mises’s book Omnipotent Government: The Rise of the Total State and Total War.  Etatism or statism is a system of sociopolitical ideas which holds no counterpart in older history and is not linked up with older ways of thinking with regards to the technical policies it recommends; a national policy in which the nation strives for autarky for the betterment of the nation without any considerations for the wellbeing of foreigners or other nations and is incompatible with the ideals of free trade; may with some justification be called “neo-mercantilism;” appears in two forms, interventionalism and socialism (27, 53-57, 77, 95-96).  Interventionalism is a national policy of getting involved in other nation’s politics or economics (53).  Socialism is a national policy of denying individual rights to property (70-71).  Etatism is the antonym of (classical) liberalism or libertarianism.  Liberalism is the philosophy of liberty, free markets, limited government, democracy, and parliamentarianism (xii, 37-38, 131-35).  Parliamentarianism is a method of dividing the power in the government to create a balance of oversight and redress.  Chauvinism is a presumption of the superior qualities or achievement of one’s own nation (2).  Patriotism is the desire for good for one’s nation (2-3).  Nationalism is a doctrine recommending a certain type of action and the policy by which the action is consummated with the action being an infliction of harm on another country for promoting the welfare of the nation (2-3, 137-140).  A nation is a soul or moral principle that daily confirms its existence by manifesting its will to political cooperation within the same state.  A monetary policy is the method employed by the state to control the currency.  A monetary system is the currency’s natural habitat, the economic sphere the currency has influence over.  Inflation is the artificial increase in the supply money and credit.  A free market is an economic system that is unregulated or minimally regulated.

First, the illegitimization of the Government through its monetary policies will be shown through the fact America’s currency is not backed by anything substantial.  Second, the illegitimate income tax will be shown as criminal with its relation to the monetary policy.  Third, the American government will be shown to have been illegitimized by dividing the laws against themselves.  Fourth, the idea America requires its military hegemony to be funded by the current monetary policies will be disproven.  Fifth, the proposal economic growth, and the economic hegemony be maintained, can only result from the current monetary policies.

The illegetimization of the Federal Government has only existed since the creation of the Federal Reserve, in 1913, and ends when the Federal Reserve is ended.  After the Federal Reserve is unchartered and abolished, the American government will begin regaining is legitimacy.  The history of the Federal Reserve started with its founding in the progressive era (1900-1940s), but its cause really started just after the American Civil War.  After the War Between the States, the presidents tried to maintain a gold standard for the currency.  The populists desired a more elastic monetary base, silver.  The banks wanted even greater elasticity so they could increase their profits.  They also wanted to socialize their risks.  Their solution was the Federal Reserve.  It was popularized by Jacob Shiff in 1907.  In 1910, a  J.P. Morgan senior partner Henry Davison, John D. Rockefeller’s man in the senate Nelson Aldrich, central banking advocate Paul Warburg, National City Bank vice president Frank Vanderlip, and the Assistant Secretary of the Treasury A. Piatt Andrew came together and conceived the Federal Reserve.  By 1913 their plan had become a reality.  The entire monetary system of the United States was put into the hands of a few major bankers.  From then on, the United States monetary system has done nothing more than serve their interests.  Hans Sennholz called that fateful day “the most tragic blunder ever committed by congress.  The day it passed, old America died and a new era began” (21).  The private banks gained the power to change the monetary base which allows them to cause inflation to give themselves financial liquidity in times of need while insulating themselves from the consequences of their over extension of credit and bad loans.  The status quo of bankers becoming rich at the expense of the nation has remained the same since the Federal Reserve was founded.  The issues surrounding the United States monetary policy is important for every citizen to know because it is ineffective to discuss the American economy without understanding and considering fundamental issues about the money itself (Paul, End the Fed 1).

The first argument is the currency itself is not backed by anything substantial.  The currency is based on the United State Federal Government’s ability to pay off its debt.  In essence it is backed by the GDP or gross domestic product.  The currency is based off the income the Government makes from taxing its people.  The indirect result of this is the U.S. Dollar is backed by the future income of its citizens.  The people have their futures held as collateral by the Fed.  Secondly, the monetary policies are constructed over bogus wealth multipliers through fractional-reserve banking in which $1,000 suddenly becomes an illusory $10,000.  The magic multiplier works by taking money from a depositor and loaning it out.  For example, if a depositor deposited $10 in a bank, the bank would use that money to loan $1 to ten investors who all will hopefully make a profit and add more money to the system.  But who has the money at that point?  The bank has essentially pretended to double the money when the money doesn’t really exist.  If the depositor took back their $10, then the ten investors fail because they never had money in the first place.  These fractional-reserve tactics were the main cause of the Great Depression (12-32).  Fractional-reserve banking is normally too risky for the average bank to practice.  However, the Federal Reserve creates a scenario that allows for the fractional reserve banking by making it profitable regardless of risk.  The Federal Reserve is a central bank that socializes the losses that would typically be placed on the member banks.  The member banks are able to make a large profit by loaning out money.  The risk is gone because more money will be printed by the Federal Reserve if the bank begins to fail.  In an economic boom the member banks are able to loan as much as they want.  In an economic bust the member banks are sustained by the Federal Reserve at the expense of nonmembers.  Ludwig Von Mises explains how it affects the individual,

The clients of the expanding bank receive additional credits, they expand their business activities, they appear on the market with an additional demand for goods and services, they bid up prices.  Those people who are not clients of the expanding bank are not in a position to afford those higher prices; they are forced to restrict their purchases.  Thus there prevails on the market a shifting of goods from the nonclients to the clients of the expanding bank.

(Human Action 437)

The system is designed in such a way that the banks take money from the poor and give it to the rich.  The Federal Reserve allows the member banks to expand and profit on the backs of American workers.

Second, the income tax is essentially an indirect violation of the right to life.  The income tax by nature is the government putting a claim on everything a person has.  In a nation where the government has instituted an income tax the individual’s right to the freedom of disposition disappears.  This form of direct taxation has been part of socialist and communist planning since Karl Marx first observed an income tax is the greatest weapon in the fight for communism (Paul, End the Fed 172).  The tax redistributes the wealth and places collective rights over individual rights.  When a nation institutes such a task, it is literally saying what you own doesn’t belong to you but to the government.  The income tax denies the concept of private property.

The right to private property is just an extension of the right to life.  The right to life is an empty title if the materials needed to sustain life are unavailable.  The materials to sustain life come through labor.  The energy put into the labor is part of the life-force of the laborer.  The title of life is passed on to the materials needed to sustain life.  Therefore, the laborer has a right to the materials he created because he has a right to life.  He also maintains the right to dispose of the materials as he sees fit because he owns them.  This concept also applies beyond mere sustenance.  Whatever work someone puts into something is part of their life and is theirs.  Viewed this way, all rights are offshoots of the original right to life at their fundamental levels.  For example, stealing is a sin because it violates a person’s right to property.  Essentially the act of stealing is taking all of the time and effort, or lifeforce, the person used to obtain an object.  The thief has not only stolen an object but also has caused time the victim could have spent in a better way to be wasted.  The victim only has a set amount of time on earth and must either go without the object of his desires or attempt to get another.  Either way the thief has done irreparable damage by causing the victim to lose a portion of his life to receive nothing.  In a similar fashion all sins man can do to another man all someway relate back to harming someone’s right to life.  Another great example is of this theory comes from the sacrament of marriage.  When two people are married, their bodies become the property of their spouse.  In this way adultery is fundamentally using property without the permission of the owner.  Also by the same logic, since God owns everyone and everything, everything is His property.  He gets to determine how we can use that property.  Violating His holy Word is misusing His property and so He is entirely justified in punishing the trespassers how He might see fit.  In God’s case He has an infinite lifeforce that can never be exhausted.  This theory also highlights virtues.  The virtue of true generosity becomes an act of willingly giving part of one’s life away.  Obedience becomes an act of willingly giving a portion of one’s life to another.  Thrift becomes the act of not wasting one’s life over expensive material possessions.  Selflessness becomes the act of putting other people’s lives above oneself.  The description of the virtues does not change much with the new perspective, highlighting how the theory syncs with traditional views on virtue.

The income tax violates the right to life because it violates the right to property by denying the freedom of disposition.  Property rights are nothing without the freedom of disposition.  If you can’t do anything with something you own, it can’t really be yours.  The income tax specifically targets the freedom of disposition.  Taxpayers may receive compensation in the form of “free” healthcare or “free education,” which certainly may be valued at the same price as the tax, but the taxpayers lose their right to decide what they wanted to spend that money on.  No government can establish a valid claim to the citizens’ lives because the title to one’s life comes from a transcendent authority beyond this world, whether the authority is merely a natural law based on one’s evolutionary desire to live or a deity.  Unfortunately, the United States government decided for itself it had a valid claim on the American people’s lives when the Sixteenth Amendment passed.  Now the government does not respect your right to property; it merely recognizes you have need of some of the products of your labor.  If you take a look at your income tax report you will see the government gives you set allowances to fit what it sees as your needs.  Since the government does not recognize your rights to the products of your labors, there is nothing stopping the government from taking all but what is needed to survive.  The only thing that stops them from taking everything is the fact you don’t produce anything once you are dead.  This can clearly be seen by taking a quick look at some statistics.  In 1913, a person who had no dependents would pay on average $20 for every $5,000 he made.  By 1950, a person in the same situation would have to pay an average of $964 for every $5,000 made.  Unfortunately, the buying power of the dollar also decreased over that span of time and so that $5,000 wouldn’t go as far.  This same trend in the income tax has continued since its beginning and every step has been down the road to serfdom.  Slavery is nothing more than a total income tax.  If one forces another to work with a threat of harm and takes all the person labored for, then that person is being taxed of what they labored for.  The owner of the slaves gives the slaves enough to live on, not because the owner believes the slave has a right to it, but because he needs to make sure the slave can continue another day.  The same principle is the basis behind the income tax (Chodorov 7-14).

Third, any system where the law is divided against itself is illegitimized.  The highest laws are based on a single concept: the right to life.  Murder is a crime because it directly violates someone’s right to life.  Stealing is wrong because it deprives someone of the extension of their life, which is known as property.  All essential, unalienable, natural, human rights are based on the right to life.  Any law, Constitutional amendment, policy, or regulation that conflicts with these basic fundamentals of the law is divided against the law.  This is why any evil the government does in America is said to be “unconstitutional,” even if the evil legally exists within the Constitution.  The United States Constitution enshrines the primary concepts of the natural right and so when people say something is “unconstitutional” they mean it violates those fundamental rights and is therefore evil.  The income tax is a perfect example of this concept.  The income tax has been added to the Constitution in the form of an amendment, but it is still often rejected as being robbery.  The income tax is robbery.  It plunders from one group and gives it freely to the next.  A people who are intent on getting something-for-nothing from government cannot cavil over the infringement of their rights by that government.  If the price demanded for getting something-for-nothing is their rights, the people will gladly accept.  The income tax takes directly from the laborer’s paychecks to create the illusion they received something free from the government when in fact they themselves and their fellow citizens paid for it already.  They may get something of value in return for sacrificing their incomes to the government, but they lose their rights in the process.  In this way, the people are desensitized to the evils around them (Bastiat 1-8).

Fourth, the opponents to my theory that the government is illegitimized by its monetary policy say the government requires the revenue from the Federal Reserve and the income tax.  They say the government requires the money to retain its hegemony and without the hegemony more things like 9/11 will happen (Paul, End the Fed 80-95).  There are several flaws in that line of thinking.  The invalidity of those theories can best be seen when their imperialistic ideologies are contrasted to the ideology behind the American Republic.  “The Framers did not design the American republic for imperial greatness, but when it functions as intended, it produces something even greater than empire: a free society with limited government and the rule of law” (Federici 6).  Empire is defined by one attribute: conquest.  Conquest does not necessarily refer to taking land but could also be the spreading of an ideology through force.  David Gelenter argues for continued American imperialism saying, “America’s participation in World War I was her attempt to act like the new chosen people, to set forth on a chivalrous quest to perfect the world; to spread liberty, equality, and democracy to all mankind” (147).  He continues saying the U.S. “must use the evil of war to spread the good of liberty, equality, democracy” (156).  The central reason behind this claim is nothing more than nationalistic hubris.  It is essentially a claim it is better to be dead than not living in an America-like environment.  This American imperialism, or Americanism, is vastly different from the republic the Framers created.  An America-styled republic, as created by the Framers, focuses on local, modest goals: the family, the soul, the church, the neighborhood, other communities.  It emphasizes the greatness of the common man, the individual, and how he interacts with his society.  Michael Federici sums up this idea succinctly,

What is at issue is the meaning of greatness.  According to one view, of which the Framers were representative, personal moral character is an essential attribute of a certain kind of greatness….  Using power to promote the common good and lead men to virtue makes it consistent with true greatness.  George Washington is a great man because he, unlike most rulers, did not lust for power as an end in itself and was willing to share it and use it for the common good.  George III is said to have called Washington “the greatest man in the world” because he put down the Newburgh Conspiracy; he refused great power because he knew it would be destructive to republicanism in America.  He chose the modest path, a different kind of greatness, the greatness of Cicero and Cato and other men who risked their lives in efforts to save the republic from empire (9).

Imperial greatness is fundamentally contradictory to Republican greatness.  Imperialists measure greatness by how far the ideology spreads, regardless of casualties.  The imperialist version of greatness coincides with power monopolies or hegemonies.  These monopolies can be based off races (the Aryans of Nazi Germany), epochs (the atomic age), or nations (imperial Rome).  The group with hegemony can use their newfound power to deter and coerce other groups with credible threats or promises.  Hegemonies naturally exist in all areas of life and or normally harmless and short-lived.  The problem occurs when the cards are stacked to create a perpetual hegemony for the sake of power; this problem is a central problem to imperialism.  Essentially, power for power’s sake is the measure of imperial greatness.  The greatness of the republic and the greatness of the empire are mutually exclusive.  “To argue for American empire is to argue against the American constitutional heritage; it is to import a pedigree of thinking, politics, and government that is alien to and destructive of America’s constitutional order….  The emergence of the American constitutional order cannot be understood apart from its growing out of opposition to empire” (Federici 10).  America cannot both be the Republic it claims to be and still have the attributes of an empire; they are fundamentally incompatible.

If the Federal Reserve is taken out of the picture, then the government would have to fall back toward its constitutional limitations.  American imperialism would have to decline significantly.  The system of illusory money from policies, such as the fractional-reserve banking, the excessive printing of more currency, and the income tax, has sustained the military hegemony long enough.  The United States has managed to stay at war for roughly seventy-five consecutive years and the wars need to stop for three reasons.  First, imperialism is the cause and effect of the war.  “Empire means conquest, and conquest means tensions, violence, and war” (Federici 10).  The wars are often used as an excuse for imperialistic pursuit of more wars, i.e. the war on terrorism and the war on drugs.  It is a cycle.  America conquered Iraq based on a presupposition Iraq might possibly be infringing on American nuclear hegemony, an entirely imperialistic cause.  The Iraqi invasion greatly increased tensions in the neighboring countries, which lead to an invasion of Afghanistan, droning over Pakistan, Iran, and other countries, and several civil wars throughout the region.  There will probably be a war with Iran soon.  Second, the current wars in the Middle East help cause terrorism and do not solve for terrorism.  By going to war in the Middle East, the military causes collateral damage that can provoke otherwise peaceful people to take arms against the United States.  A peaceful Muslim may turn violent against the United States if a drone accidentally kills his family.  The wars are likely to increase the number of people who want revenge on the United States.  If those few people decide to get their revenge and carry out an act of terrorism, the U.S. Military will respond and kill more people.  A cycle of bloodshed is created that makes the war endless until the entire country is strictly subjugated.  There will always be terrorists in the world because men will continue to do evil things.  Third, the spending required maintaining the military can’t be sustained on a collapsing economy.  The change in the monetary policies will necessarily put a stop to the wars and solve for the harms more efficiently by not causing a hate cycle.  Thus, the end of American imperialism is a good thing not a bad thing.

Fifth, the opponents to my theory also propose without the current monetary policies America cannot maintain its economic hegemony.  Unfortunately America’s economic hegemony is probably already doomed.  “There should be no means of avoiding the final collapse of a boom brought about by credit expansion” (Mises, Human Action 570).  The only two possible outcomes now are based on whether we collapse the economy or wait for it to collapse itself.  If we collapse it now by correcting our illusory system now, we reap the consequences of our actions before the consequences become worse.  If we wait for the economy to have a total collapse later, we will face the full force of an economy being destroyed.  Either option would cause something that would look like a Great Depression, however that is an illusion.  In reality, the illusion of wealth would be destroyed, and America would be left as its true self; the nation would have to go through a kind of withdrawal from the economic high it has been experiencing.  The first option would not be nearly as bad as the second, and maybe the system could be gradually released to try to allow some economic healing on the way down to the economic base, but the current policies will force a cold turkey style of change and cause massive withdrawal.  Ben Bernanke, the man running the Federal Reserve, believes he can avoid this depression through continuing his policies, but the law of entropy shows the futility of such actions (Paul, End the Fed 95-113).  Essentially, America may lose its economic hegemony temporarily, but that is entirely necessary to prevent a worse collapse and to allow the economy to heal naturally.  If it isn’t done, America’s economy won’t be able to heal.  The Congress’s and the Federal Reserve’s illusory money and inflationary policies are destroying the system and will continue to destroy the system.  Historically, every time any nation has tried to use fiat money to grow, it falls shortly thereafter.  For example, the Byzantine Empire had a gold standard for about 600 years.  The currency remained stable the entire time, and their economy thrived.  Emperor Nicephorus III grabbed control over the monetary system and devalued it in order to wage a war with the Turks.  In turn the war with the Turks was his justification for devaluing the currency.  Ironically, the devaluation of their currency created economic chaos which allowed the Turks to win the war (143).  As long as the Federal Reserve remains in control with its magic money, America’s economy will not be improving.  Rest assured, the banking elite will alter the numbers the best they can to make everything appear fine while the economy will be dying.  The longer the Federal Reserve is in charge, the longer the balance will be shifted.

The Federal Government is illegitimized by its monetary policies.  The citizens of any country run by an illegitimized government should protest against the flagrant miscarriage of justice caused by the policies.  In 1 Kings 12, the people of Israel were in a similar situation and protested.  However, one should not stone the Internal Revenue Service Agents like they did to Rehoboam’s Tax Collector (Chodorov 1-2).  There is a better way to change the system.  The Framers left an emergency escape.  Although the balance has shifted in favor of the Federal Government, the balance between the states and the Federal Government still exists.  Although States’ Rights have been diminishing since the Civil War, the states can still repeal the Sixteenth Amendment, the Federal Reserve can be abolished, and a gold standard can be reinstituted.  Unless the states, as we know them, are abolished, the revolution will happen eventually because it is in the self-interest of the fifty political institutions.  The will for change merely needs to be generated.  The individual citizen can contribute to this will by becoming politically active at either the state or the local levels of politics.  Spreading awareness may also be helpful to the cause.  Action should be taken soon before the window of opportunity closes, but the American people must make their tradition for freedom a priority; the American people must want to be free (Chodorov 75-81).

Works Cited

Bastiat, Frédéric. The Law. Irvington-on-Hudson, NY: Foundation for Economic Education, 1950. Print.

Bernanke, Ben S. National Economics Club, Washington D.C. 21 Nov. 2002. Speech.

Chodorov, Frank. The Income Tax, Root of All Evil. New York: Devin-Adair, 1954. Print.

Federici, Michael P. “Imperialism Destroys the Constitutional Republic.” Thesis.

Mercyhurst College, 2007. Imperialism Destroys the Constitutional Republic. National Humanities Institute’s Center for Constitutional Studies. Web. 27 Feb. 2013. <http://www.nhinet.org/federici20-1.pdf&gt;.

Frum, David, and Richard Norman Perle. An End to Evil: How to Win the War on Terror. New York: Random House, 2003. 239.

Gelernter, David Hillel. Americanism: The Fourth Great Western Religion. New York: Doubleday, 2007.

Paul, Ron. End the Fed. New York: Grand Central Pub., 2009. Print.

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Sennholz, Hans F. Money and Freedom. Spring Mills, PA: Libertarian, 1985. Print.

Von Mises, Ludwig. Human Action: A Treatise On Economics. Chicago: H. Regnery, 1966. Print.

—. Omnipotent Government. New Haven: Yale UP, 1944. Print.