Friday, March 28, 2014
“PAPER MONEY” Obligations of the United States Corporation (U.S.)
Congressional Record, March 9, 1933 on HR 1491 p. 83. "Under the new law the money is issued to the banks in return for government obligations, bills of exchange, drafts, notes, trade acceptances, and bankers acceptances. The money will be worth 100 cents on the dollar, because it is backed by the credit of the nation. It will represent a mortgage on all the homes, and other property of all the people of the nation."
Whereas defined pursuant to titles eighteen sections eight: The term "obligation or other security of the United States" includes all bonds, certificates of indebtedness, national bank currency, Federal Reserve notes, Federal Reserve bank notes, coupons, United States notes, Treasury notes, gold certificates, silver certificates, fractional notes, certificates of deposit, bills, checks, or drafts for money, drawn by or upon authorized officers of the United States, stamps and other representatives of value, of whatever denomination, issued under any Act of Congress, and canceled United States stamps.
Whereas defined pursuant to: 18 U.S.C. §8, frns are “obligation[s]…of the United States.” Whereas defined pursuant to: 31 U.S.C. 31§742…”obligations of the United States, shall be exempt from taxation by or under state or municipal or local authority.”
The exemption applies to each form of taxation that would require the obligation, the interest on the obligation, or both, to be considered in computing a tax, except - (1) a nondiscriminatory franchise tax or another nonproperty tax instead of a franchise tax, imposed on a corporation; and (2) an estate or inheritance tax. (emphasis added)
Federal reserve notes are not money until they are monetized and issued by a Federal reserve bank. That those “Federal reserve notes” could be issued by the “Federal Reserve Board,” not by any Bank per se; for a one singular purpose, namely, “for the purpose of making advances to Federal reserve banks and for no other purpose.” To obtain notes, a Federal reserve bank must pledge collateral equal to the face value of the note. Collateral must consist of the following assets, alone or in any combination:
1) Gold certificates,
2) Special drawing right certificates,
3) U.S. government securities, and
4) “Eligible paper,” as described by statue. Federal Reserve notes are obligations of the United States, and have a first lien on assets of the issuing Federal Reserve Bank. Money without backing is worthless. Federal reserve notes are legal tender currency whereas defined pursuant to: (31 U.S.C. 5103).
They are issued by the twelve reserve banks defined pursuant to section 16 of the federal reserve act of 1913 (12 U.S.C. 411) a commercial bank which belongs to the Federal Reserve System can obtain Federal reserve notes from the Federal reserve bank in its district whenever it wishes, but it must pay for them in full, dollar for dollar, by drawing down its account with its district Federal reserve bank. The Federal reserve bank in turn obtains the notes from the bureau of engraving and printing in the United States Treasury Department. It pays to the bureau the cost of producing the notes. The Federal reserve notes then become liabilities of the twelve Federal reserve banks. Because the notes are Federal reserve liabilities, the issuing banks records both a liability and an asset when it receives the notes from the bureau of engraving and printing, and therefore does not show any earnings as a result of the transaction (double entry bookkeeping). In addition to being liabilities of the Federal reserve banks, Federal reserve notes are obligations of the United States government whereas defined pursuant to: (12 U.S.C. 411).
Congress has specified that a Federal reserve bank must hold collateral (chiefly gold certificates and United States securities) equal in value to the Federal reserve notes which that bank receives whereas defined pursuant to: (12 U.S.C. 412). The purpose of this section, initially enacted in 1913, was to provide backing for the note issue. The idea was that if the Federal Reserve System were ever dissolved, the United States would take over the notes (liabilities) thus meeting the requirements of [12 U.S.C.] 411, but would also take over the assets, which would be of equal value. The notes are a first lien on all the assets of the Federal reserve banks, as well as on the collateral specifically held against them whereas defined pursuant to: (12 U.S.C. 412). Federal reserve notes are not redeemable in gold or silver or in any other commodity. They have not been redeemable since 1933. Thus, after 1933, a Federal reserve note did not represent a promise to pay gold or anything else, even though the term “note” was retained as part of the name of the currency. In the sense that they are not redeemable, Federal reserve notes have not been backed by anything since 1933.
They are valued not for themselves, but for what they will buy. In another sense, because they are a legal tender, Federal reserve notes are “backed” by all goods and services in the economy. Frns are both “liabilities” and “assets,” so what are they? Accounting units (double entry bookkeeping). What else could they be? “The issuing bank records both a liability and asset when it receives the notes from the bureau of engraving and printing, and therefore does not show any earnings as a result of the transaction.” This implies that the liabilities and assets inherent in each frn are equal, and therefore the value of any frn is zero. i.e., I have a $100 frn that represents $100 in assets and $100 in liabilities – what is my frn worth? Subtract the liabilities from the assets. If they’re equal ($100 - $100), the answer is zero. So what is my frn? It’s a unit of measure, no different from inches, feet, pounds, tons, and centigrams. It’s an accounting unit. A number. What is the tax on a number? Is the tax on 100,000 more than the tax on $1,000? It depends. 100,000 what? 1,000 what? The tax on 100,000 dollars is clearly more than the tax on 1,000 pennies. The tax on 1,000 dollars and 100,000 pennies is identical. And a tax on 1,000 pennies is greater than the tax on 100,000 grains of sand. The taxable item is not the unit of measurement, but the commodity it describes. Therefore, is the tax on $100 in gold-backed money the same as the tax on $100 frn?
Can people be taxed on the basis of an income denominated in units of measurement that the issuing Federal reserve bank implicitly says are worth zero? If the Federal reserve bank can count a frn as both an asset and liability, can I do the same and also have no earnings to be taxed? There is some supporting law. Defined pursuant to: 31 U.S.C. §742 (which deals with “public debt”): “exemption from taxation. Except as otherwise provided by law, all stocks, bonds, treasury notes, and other obligations of the United States, shall be exempt from taxation by or under state or municipal or local authority. This exemption extends to every form of taxation that would require that either the obligations or the interest thereon, or both, be considered, directly or indirectly, in the computation of the tax, except nondiscriminatory franchise or other non-property taxes in lieu thereof imposed on corporations and except estate taxes or inheritance taxes.” (R.S. & 3701; Sept. 22, 1959, Pub. L. 86-346, Title I, § 105(a), 73 Stat. 622.) [emph. add.] Now consider, whereas defined pursuant to: 18 U.S.C. §8: “obligation or other security of the United States (Inc) defined. “the term obligation or other security of the United States includes all bonds, certificates of indebtedness, national bank currency, federal reserve notes, federal reserve bank notes, coupons, gold certificates, silver certificates, fractional notes, certificates of deposit, bills, checks, or drafts for money, drawn by or upon authorized officers of the United States, stamps and other representatives of value, of whatever denomination, issued under any act of congress, and canceled united states stamps.” [emph. add.]
Posted by John MacHaffie at 2:50:00 PM