By Antal E. Fekete
The superpowers of China,
Russia, and the United States may without knowing it
be racing towards reopening their mints to the
monetary metals. The governments of these countries
are like the heroes of Greek tragedies: they are
drawn to their fate by destiny. There is no way for
them to avoid Kismet, regardless of what they do.
This leads to the question of what is meant by
opening the mint to the unlimited coinage of gold and
silver free of seigniorage charges.
The mint is a monetary institution far more important
than the central bank. It is an ancient and venerable
institution. The central bank is a relatively new
invention, hardly venerable. It was conceived to make
ordinary people absorb the unpaid and un-payable debt
The importance of the mint is not to be found in its
altogether negligible role of coining small change,
the so-called subsidiary coinage which people use to
make small purchases. The mint is all-important
because it is designed to produce real money. The
origin of the mint is intertwined with religion. From
the point of view of political economy, the mint is a
reminder of the fact that, ultimately, real money is
created (and extinguished) by the people and not by
the government, or banks approved by the government.
For example, the US Constitution reserves the power
to create money directly to the people themselves who
convert gold and silver at the mint into the coin of
the realm (and extinguish money by melting it down).
This is a power like habeas corpus that cannot be
delegated, still less usurped. If the government
grabs it, then, in the admirable phrase of Malcolm
Muggeridge, it becomes the power of habeas cadaver.
The mint is the symbol of Constitutional Money, the
only kind not subject to manipulation.
So much so, in fact, that the mint had to be closed
to gold forcibly in order to deny people access to
constitutional money, and in the hope that the
government could usurp their power to create money.
History had to be falsified to conceal the fact of
power-grab. According to the official version, the
mint was never closed down as it continued to produce
subsidiary coins. There were some housekeeping
changes, yes. But nothing major.
This lie was exposed by William Jennings Bryan, the
Democratic presidential candidate in 1896 when he
denounced the power-grab in describing it as "the
Crime of 1873". He was referring to the closing of
the US mint to silver in 1873, the first major
violation of the Constitutionís monetary provisions.
People fell for the obfuscation. They were not
interested in checking out the charges of Bryan. What
crime? What closing? What mint? Lots of silver coins
are in circulation, canít you see? People didnít
understand the difference between the full-bodied
silver coin, the constitutional standard dollar, and
subsidiary silver coins that were not full-bodied.
The nominal value of the full-bodied coin, produced
on account of anybody tendering the right quantity
and quality of metal, coincides with the market value
of its metal content. By contrast, subsidiary coins
are produced on account of the Treasury and their
nominal value is always higher than the market value
of their metal content.
The difference between the two is called seigniorage,
the profit going to the Treasury. There is no
seigniorage on coining the standard dollar, the
coinage of which is unlimited, in contrast with that
of subsidiary coins with limited coinage, which
explains why people accept them in circulation for
the higher nominal value. (The cost of producing the
standard coin, like that of constructing and
maintaining public roads, is covered by taxes.)
The banks are supposed to be a handmaiden to the
mint. After the closing of the mint to gold and
silver the banks became the boss and the mint was
reduced to the status of a handmaiden. This was a
violent revolution, the full meaning of which has
never been explained by our institutes of higher
Slavery works best if people donít think of
themselves as slaves. The mint is the symbol of
freedom. It is the very antithesis of slavery. Yet
imposing slavery on the people is as simple as
closing the mint to gold and silver. People are no
longer free. They have lost their God-given right to
create and extinguish money. They have become slaves
since the government has extorted the right of first
refusal on their produce and savings.
As Keynesians famously boast: "Taxes for revenue are
obsolete". Once closed to gold and silver, the mint
makes taxation for revenue superfluous. It is freed
up for devious purposes. Now, for the first time,
taxation can be used to manipulate the economy and to
manipulate the people. The government can stamp an
entire industry out of existence by taxing it to
death. Less conspicuously, it can boost the income of
one branch of industry, or one group of citizens, at
the expense of another.
The mint, if people can keep it open to gold and
silver in defiance of the machinations of the
government and banks, is both the symbol and
instrument of freedom. Once it is forcibly closed,
freedom is lost and the way to the pauperization of
people is thrown wide open.
I often come across the objection that the government
does make gold and silver coins available to the
people who care to have them. There are officially
produced eagle coins in the United States, maple leaf
coins in Canada, panda coins in China, and koala
coins in Australia. This does not look like the mint
being closed to gold and silver, does it?
People who use this argument only betray their
ignorance and prove how easy it is for the government
to fool public opinion. Gold and silver coins that
governments currently produce are meant to confuse
the issue. They are an eyewash. These are souvenir
coins struck on Treasury account, sold at a premium
prices including seigniorage charges. People may feel
good about having them, especially when gold and
silver prices are buoyant. But their right to
constitutional money has not been restored. The mint
is still closed to gold and silver. The peopleís
right to unlimited free coinage is still being
usurped by the banks. Rather than celebrating, people
ought to be upset that their government stoops so low
as attempting to lead them by the nose.
As I said, the mint is one of the most ancient
political institutions brought about by our
civilization. In the early history of Rome over
twenty-five hundred years ago the mint where gold and
silver pieces were struck was a sacred and inviolable
place. In fact, the mint was housed in the Temple of
Juno (wife of the chief god Jupiter). Our linguistic
heritage shows this most clearly: the English word
"money" is derived from the Latin word moneta, the
surname of Juno.
Vigilance and freedom
Juno Moneta, literally Juno the Vigilant, refers to
the legend that Junoís sacred geese on Capitolium
saved the city from being sacked. With their loud
cackling they alerted the sleeping town that enemy
soldiers had scaled the walls under the cover of
night and are ready to slaughter the inhabitants.
Thus the English word money has a connotation of
vigilance. Vigilance, that is, to preserve freedom
which is inseparable from constitutional money
facing, as it is, constant threat from adventurers
such as John Law, Keynes, Friedman, to name only a
Sad to say, this connotation has worn off completely
by now. People no longer have any idea that their
freedom is being destroyed little-by-little, as their
money has been corrupted.
Compare the mint of Juno to the central bank of the
United States, the Fed, which is less than 100 years
old. During its brief existence it has done more
monetary mischief than all the monetary mischief
perpetrated by governments during the twenty-five
hundred year history of the mint, including the
endless debasement of coinage through the dilution of
The most recent follies of the Fed raise the question
whether it will live to celebrate its centenary, or
whether pig-headed and ham-handed central bankers
will destroy the dollar that was entrusted to their
care in 1913. Already, the dollar has lost 99% of its
purchasing power, and is manifestly in danger of
losing the remainder during the next five years or
so. Quite obviously this could have never happened if
the US mint had been kept open to gold and silver,
which is the reason why the Constitution demands it.
The oldest central bank in Europe is the Riksbank of
Sweden. It opened more than 30 years before the Bank
of England. The early central banks in Europe were
all established in order to fund the unpaid and
un-payable royal debt. The newly chartered banks were
in turn given privileges such as the monopoly of
issuing bank notes, as well as immunity from being
sued in case of non-performance on contracts.
Milton Friedman and his monetarist cohorts completely
misrepresent the relationship between the mint and
central bank. They allege, falsely, that a
price-fixing scheme is involved. In their topsy-turvy
world the gold standard, and the mint, are
institutions negating the free market. In fact,
however, the truth is that bank notes are not money;
they are merely promissory notes whereby the central
bank promises to pay bearer money on demand. Only the
full-bodied coins into which the mint converts gold
and silver on account of anybody tendering the right
quantity and quality of metal constitute money.
You cannot find price-fixing in this process with a
magnifying glass. The charge of price fixing was
planted maliciously by Milton Friedman in order to
denigrate and discredit the gold standard. His
suggestion that the central bank is the creator of
money, and the mint is merely an embellishment,
wholly unnecessary to boot, is a shameless lie.
Friedman is celebrated as the "liberator" of the
dollar by monetarists who consider it a triumph to
have set the dollar free from its golden shackles. In
fact, however, Friedman is the assassin of the dollar
and will be remembered as such.
The fact of the matter is that the central bank is
anxious to keep its notes competitive with
full-bodied gold coins. Therefore it promises to
redeem its notes by paying out gold at the statutory
rate. So it is not the gold price that is fixed. Just
the opposite: it is the value of the bank note that
is fixed in terms of gold. The central bank that does
the fixing has no other way of maintaining the value
of its credit without coercion.
The central bank, of course, wants to get rid of this
restraint. It can, through coercion. The floating
dollar implies coercion through legal tender laws.
Full-bodied gold and silver coins never need legal
tender protection. There is not one instance recorded
in the monetary annals of a creditor ever refusing to
accept the full-bodied coin in repayment of debt.
No doubt, for the central bank to live up to its
promise to pay gold to bearer on demand takes
knowledge, expertise, and discipline. Above all, it
is a great nuisance. When adventurers take over
management backed by other adventurers at the
Treasury, they engineer a default on the promise to
pay out gold and promote the dishonored note as
"money". How do they get away with this highway
robbery? They do because of the coercion of legal
The term "legal tender" did not always indicate
coercion. Originally it was a limited obligation to
ensure smooth circulation of the subsidiary coinage.
For example, the copper could be legal tender up to a
dollar and, the nickel, up to five dollars. When
adventurers took over the treasury, the first thing
they did was to torture the meaning of the term. They
made it an unlimited obligation to accept
irredeemable paper currency in discharge of debt.
After the default, adventurers at the central bank
and the treasury initiated an elaborate check-kiting
scheme whereby the latter issued irredeemable
promises which were accepted by the former, and vice
versa. According to Milton Friedman, the depreciation
of irredeemable currency can be avoided by
restricting the issue through a quantity rule, eg the
note circulation must be increased at a steady annual
rate of, say, 3%.
However, his thesis amounts to saying that
fraudulently issued promises can be given permanent
and enduring value, as though people were too dumb to
understand fraud when they see it. In other words,
Friedman confuses delayed exposure of fraud with
inability to expose it. But what kind of a monetary
system is it that so vitally depends on assuming that
people are inherently stupid?
Historically, no monetary fraud has ever succeeded.
Every attempt to make the currency permanently
irredeemable has been exposed as fraudulent and
consequently collapsed. All irredeemable currencies,
without exception, have ended up in the garbage heap
of history. The irredeemable dollar is different only
in so far as the unprecedented magnitude of the fraud
necessarily takes longer to expose. But longer is not
After all, for the first time in history an attempt
is made to fool all the people all of the time. And
we have it on the authority of Abe Lincoln that this
is not possible.
It is another matter if the irredeemable currency is
stabilized before the final collapse, by opening the
mint to gold (or silver, or both). There are
historical precedents such as the greenback of Civil
War vintage. In that instance common sense and
monetary science prevailed and came to the rescue of
the moribund dollar. Today, both common sense and
monetary science appear to be badly lacking. This
would make the outlook rather gloomy.
Hope in competition
However, there is a ray of hope: international
competition in the monetary arena. Neither the
Chinese nor the Russian central bankers do at heart
believe in constitutional money any more than their
American colleagues. They certainly enjoy their
unlimited power to issue the currency in unlimited
quantities. Nevertheless, they are not stupid.
Both the Russians and the Chinese want to put an end
to American monetary hegemony whereby the US
government can obtain real goods and real services
from all countries of the world in exchange for
irredeemable (read: fictitious) promises to pay. They
realize that the only road to defeating the American
monopoly is the Yellow Brick Road.
They have quietly embarked upon an ambitious program
of remonetizing gold through the back door. They keep
a low profile about it as it is in their interest to
acquire as much gold as possible on the best terms
No matter how you look at it, there is a Gold War
going on in the world. The alignment of the
antagonists is the same as it was in the Cold War.
The name of the game is: who will end up with the
largest pile of the precious yellow? Remember the
adage: "He who has the gold makes the rules."
The competition of the superpowers to acquire gold
will ultimately lead to an infinite escalation of its
price. As unlimited amounts of rubles and yuans are
printed to buy up the limited amount of gold that is
available, the competitive devaluation of currencies
will reach a frenzied stage in destroying the value
of all currencies.
Competitive devaluation is a destructive process.
American, Russian, and Chinese central bankers will
find that their hands are forced by events. After all
the false fits and starts they will hit upon the
winning strategy: the constructive process of opening
their mint to the unlimited coinage of gold. This is
the only logical thing they can do, whether they like
it or not, after the stage is reached whereby
cartloads of paper currencies fail to fetch even one
grain of gold.*
Opening the mint will be the only way to attract all
the available gold and silver in the world to their
shores, benefiting their prostrate banking system
that will be quick to issue gold instruments
acceptable in global trade.
The US will be forced to do the same, but it is
questionable that being a follower rather than the
leader will save the American economy from further
There is no reason why the US government could not
retain monetary leadership in the face of the Russian
and Chinese challenge. All it has to do is to open
the US mint to both gold and silver before they open
theirs. To do this would take fine statesmanship such
as maverick presidential candidate Ron Paul is
offering to the American people.
Unfortunately, a great deal of damage has been done
mainly because the educational system has been
corrupted in exiling monetary science and sound
economics from the curriculum. Keynesian and
Friedmanite economics rule supreme in academia.
Adventurers at the Treasury and the Federal Reserve
take full advantage of the prevailing ignorance.
Bad-mouthing of gold in the financial press continues
If the US government fails to act and misses this
last opportunity to stabilize the dollar, then the
American people will be exposed to excruciating
economic pain. People of other lands will not fare
much better. When their dollar-denominated assets go
up in smoke, they will blame America. Anti-American
feeling in the world will hit an all-time high.
America will lose all her allies in the face of an
increasing number of enemies. And, as famously stated
by Alan Greenspan, America will be unable to procure
war material for its military.
The only way to avoid catastrophe is to open the US
mint to gold and silver while it is not too late, as
advocated by presidential candidate Paul.
Note that I am not prophesying that cartloads of
paper currencies will fail to fetch a loaf of bread.
In fact it is perfectly feasible that the price of
bread, along with other prices of consumer goods,
will fall in the wake of deflation. The process
herein described is not one of hyperinflation. It is
one of competitive devaluation by the superpowers in
order to corner gold.