VIDEO: Coley Testimony - HB3 Constitutional Tender Act

Coverdell Legislative Office Building (CLOB)
18 Capitol Square SW Atlanta, GA 30334

Atlanta, GA

Monday, March 7 · 9:00am - 12:00pm

After presenting testimony, I engaged in a dialog with Representative Bruce Williamson on fractional reserve banking. Bruce Williamson was a gentleman. He opened with a prayer that I would be blessed to hear and concur with any time. The problem we have is that neither Bruce, myself or government are the standard. A good man's character does not make an objectively immoral practice moral or right.

Representative Williamson claimed that Georgia banks don't create money, yet he later said:

I'm not disagreeing with the fact that it expands the money supply, but I don't see that that's inherently unhealthy.

Evidently Representative Williamson doesn't understand that "Expanding the money supply" creates new dollars and is inflation.

When I said that banks create dollars from nothing, Representative Williamson disagreed yet again, stating:

Its not nothing. Its promises to pay that provides the liquidity to shop keepers, to home owners...

And:

All you're doing there is allowing these promises to pay, that when you come to borrow the money to buy the automobile or piece of land or buy new shelving for your hardware store, all the bank's doing is turning around and lending you those dollars... It's not the collateral, its your promise to pay back.

In other words, his view is that the money is not created from nothing, rather it is created because the borrower promises to use his land, labor and capital to produce enough to pay the loan back, plus interest to the banker.  The banker has essentially no skin in the game.

If "its not the collateral", why does the banker take the borrower's collateral if the borrower doesn't pay?

In an honest system, the banker would have to loan out property that actually exists in order to earn interest. In the fractional reserve system, he creates money from thin air and then essentially loans your property to you - and gets paid interest for doing it. The bank brings nothing to the table except the legal privilege to create money.

When you borrow money for a piece of land, the money that you use to pay the seller comes from a ledger entry at the bank which is made because you agree to pay the money back. The only real asset in the transaction is the land. The banker has no equity or asset in the transaction at all. If you default, he gets the land.

Of course that ledger sheet trick works until the bubble pops, particularly when the bubble is combined with Sarbanes-Oxley and federal regulators.

Representative Williamson also stated plainly that leaving the gold standard was a mistake.

It all goes back to fiat inflation. I do not disagree one bit with the fact we should never have gotten off the gold standard. I think Steve Forbes has got it right, but all we are is dealing with the Federal Reserve Notes that our Federal Treasury is [unintelligible] the currency of the nation.

However, the Gold standard simply limited the amount of new money created from nothing by the Federal government. Creating money from nothing is always a problem because the mechanism makes an economy unsustainable. The economy is unsustainable because costless money causes a breakdown in the price mechanism and distorts the allocation of resources.  It also pillages and weakens the producers.  The banks create new money from nothing, much the same as the Federal Reserve. In fact, the banks are able to create nine new dollars for each one new dollar created by the Federal Reserve. Which is bigger? Nine or One?

If costless money is a problem and the banks create more than the Federal Reserve, then the banks are not innocent. They participate in inflating the money supply, or to use Representative Williamson's phrase in "expanding the money supply", which IS inflation. It disproportionately harms the weak and frugal. It enriches those who are granted a special privilege by government (banks) to create new money from nothing - at least from nothing that the banker owns. In the banks view, your property gives them the right to create money that didn't exist in order to charge you interest for using the money.  What a racket.  

There is so much more that can be said and the problems are far reaching and complex, but the bottom line is that fractional and fiat money cause theft and lead to poverty and oppression.

Bill Greene - HB3 Constitutional Tender Act

Coverdell Legislative Office Building (CLOB)
18 Capitol Square SW Atlanta, GA 30334

Atlanta, GA

Monday, March 7 · 9:00am - 12:00pm

Excellent job making the case by Dr. Bill Greene and Representative Bobby Franklin.

My Testimony - HB3 Constitutional Tender Act

Click here for the video and response from the committee.


Coverdell Legislative Office Building (CLOB)
18 Capitol Square SW Atlanta, GA 30334

Atlanta, GA

Monday, March 7 · 9:00am - 12:00pm

Good morning. My name is Shane Coley.

I have studied history and economics extensively.  I was raised in the cattle business, I can operate or rebuild heavy equipment and I am a professional software architect. I am self-employed. I was recently a candidate for state Senate in the 47th District where I carried my home county.  My positions here today match my positions during the campaign.

The laws of Georgia are created and modified by our state legislature.  The legislature is made up of individuals, like you, who analyze legislation in the context of your personal belief system, which makes your belief system very important to Georgians.

The majority of the banking and finance committee members publicly claim to be Christian. Therefore, I will talk about some of the general constraints or limits of the Christian belief system, and then about secular belief regarding theft or stealing.

In at least nine places the Bible tells us about differing weights and differing measures.  In at least four places the Bible says that differing weights and differing measures are an abomination to God.  A Christian must not ignore this.

Here is an example of differing measure:  Suppose I were in the market buying wheat and I had a basket marked one bushel, but the basket was secretly larger than one bushel.  My oversized basket would enable me to steal part of your wheat. 

Differing weights and differing measures deceptively cause theft, which is a violation of the Eighth Commandment, "You shall not steal".

Since 1971, the only way to create a new US dollar is to record an entry in a ledger of the Federal Reserve System, or in a ledger of your local bank.  Producers have to work years for new Dollars that the bank creates instantly with the stroke of a key.

When new US dollars are created in this way, there is no new wealth created, but the purchasing power of all previously existing dollars is decreased.  This is an example of using differing measures to steal labor and property from producers.

This is clearly, undeniably, objectively a form of theft. To support fiat or fractional money is to support theft. 

Some claim that our money system makes us wealthy. This is false. Wealth is the result of production.

Many of us notice that People depend on Production. People eat food and use things. Food and things must be produced. Government Produces nothing and wastes much. Since people depend on production and government interferes with production, there is no way that government has any solutions for us. We must remember that every promise made by a government official has to be kept by a producer. There is no other way.

It is impossible to confiscate a loss. Only profits or capital from past production can be confiscated. It is logically impossible for the creation of new US Dollars to make us wealthy. If I had time, I would prove that creating costless money will first make us poorer and eventually crush our free society.

The reality is that the creation of costless money can only lead to the destruction of a free society.

For those who are not constrained by the Christian belief system, if you oppose theft then you must oppose creating new US dollars from nothing.

Please listen carefully to the following quote from an old banker.

“The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class. The great body of people, mentally incapable of comprehending the tremendous advantages will bear its burden without complaint.”

To the Christians and those who oppose stealing: I respectfully ask that you vote for the Constitutional Tender Act as a small step toward eliminating differing weights and differing measures and theft from our monetary system.

And finally, let’s recall a bit of what John Maynard Keynes wrote in 1919: “while [creating costless money] impoverishes many, it actually enriches some” and also “[Inflation] engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

To those members who hold stock in banks or have otherwise profited from the banking business: Since our loss is your gain, I respectfully ask that you recuse yourself from this vote and from the vote on the final bill.

Bernanke the destroyer

I would call Bernanke stupid, except I believe he and the rest of that bunch know exactly what they are doing. The intent is to destroy the capitalist economic system, leaving a feudal system in the aftermath, populated with serfs and elites. Bernanke believes he is an elite. He is confident you are not.

So talk about the other kind of money…

Let's start this way. Which nations have Sound Money?

The short answer is none. To my knowledge there are no nations on the planet which use Sound Money today.

If no one uses Sound Money, what sort of money is in use?

There are 4 basic types of money.

• Commodity (or natural) money
• Gold, Silver, Butter [This is Good!]
• Receipt money
• Receipt for Gold, Silver, Butter [This is Good!]
• Fractional money
• “Checkbook” money. A Bank with $100 in Assets can loan $1000 in “checkbook” money. [This is Bad!!]
• Fiat money
• Value is enforced through legal tender laws. No backing. If you need more, just run the printing press. [This is Bad!!]

In simple terms, most nations use FRACTIONAL money in an upside down pyramid on top of FIAT money. This means that FIAT money is considered an “ASSET” in the reserves of a bank.

A bank is required through regulation to hold “ASSET” reserves of 10% (or sometimes less). Therefore if a bank has one million dollars in “RESERVES” the bank can loan to its customers ten million dollars in “FRACTIONAL” money, also called CHECKBOOK money.

Most people are unaware of this fraudulent scheme. At this point one may ask: “So why should I care?”

The short answer is because you are being literally robbed of your property through this system.

(There is one other possibility; the net effect at the end of a period of time is that you are either robbing others or you are being robbed. It makes no difference how much integrity you have or don’t have. We will explain this in another post.)

Supply and Demand

Most of us have heard of the law of supply and demand. Generally we understand this law to explain that as supply increases, price decreases. There are also other attributes to this supply and demand relationship. For example, there are distinctions between charting supply and demand curves, as compared to individual behavior in the market, given variations between supply, demand and price. For our purpose we will stick to a simple definition; i.e. as supply increases, price decreases.

Water

If a man sitting beside a wilderness river in the year 1800 attempted to sell water to travelers, he would be wasting his time. However, if the same man had water that was his private property and his storefront was in the middle of a parched desert, he would have a good prospect of selling water to these same people.

Notice that supply and demand are determined not simply based on “world supply”, but based on available supply, at a specific time and in a specific place, under specific conditions. Water cannot be sold at all by the river. Water can be sold for a potentially unlimited price to a thirsty man in a desert.

Purchasing Power / Supply and Demand

At this point let us note that money is also affected by the law of supply and demand. This is true and can be expressed in different ways. A common way of describing the value of money is PURCHASING POWER. For our example, suppose we know that a car in 1965 cost about $3,000 and today costs about $30,000.

In 1965 $3,000 had enough purchasing power to be exchanged for a new car. In 2008 $3,000 has enough purchasing power to exchange for one tenth of a new car. (Price change is not the whole story of what we have lost, but it will do for our purpose here.)

If the money supply had been stable since 1965 (1965 is an arbitrary date) we would be able to purchase a new car for less than $3,000. There are two basic reasons: 1. The overall increase in products and services would cause prices to go down. 2. The increase in productivity would cause prices to go down.

In other words, in a Sound Money system, if you saved $3,000 from 1965 until 2008 you could purchase a new car and have money left over.

Back to Supply and Demand and Money

What can we conclude from the above comments… based on our simple observations?

We said, in simple terms, that “as supply increases, price decreases.” Then we saw that water can be exchanged for either nothing or perhaps a man’s entire fortune, depending on supply and demand at a particular place and time.

We also saw that our money has lost purchasing power over the years because the money supply has increased.

(Note: This increase in the money supply is called inflation. Our dollar today is worth between two and four pennies compared to a 1933 dollar. Inflation of the money supply is the reason that the Continental notes issued by the Continental Congress became worthless. They flowed in the streets like water in a river and became useless as a store of value for use in exchange.)

So if the supply of money increases (i.e. someone inflates the money supply) then the value of all other money already in existence decreases. This is a simple case of supply and demand.

Increasing the money supply

Therefore, in a fiat system, if someone adds one thousand dollars of money to the money supply, then the rest of the money, held by all the people, will be decreased in value by one thousand dollars.

In a fiat system, if someone instantly doubles the money supply without cost, then the value of all money in existence loses half its value.

But is there a difference between paper and gold; between Mr. FIAT and Mr. COMMODITY? Is there a difference between a Fractional or Fiat money system and a Sound Money system?

If either one of two our men double the money supply in one day, then your old money loses value. He may have just transferred half of your purchasing power into his possession. The only question is whether he worked for the new money.

If this is Mr. FIAT, his money comes into existence because he ran a printer and printed hundred dollar bills for two pennies each; he has stolen half the value from holders of old money. He has contributed essentially nothing in exchange for real assets.

However, if Mr. COMMODITY operates a mine and repairs equipment and pays labor and secures and transports gold, then he has incurred costs while adding the new money to the market. Mr. COMMODITY is then a producer and not a thief. Much more can be said about the relationships between his mining operation and the economy as a whole, but the important point is that he has to produce in order to increase his holdings in money or other property.

Printing houses

Think about it this way: Suppose you were a builder. What if you had to compete with another builder who could simply and literally run a printer to instantly produce exactly the same house that, for you, required time, labor, capital and risk to produce? That is a good picture of our monetary system. Printing equity. Printing assets. Printing labor. Printing houses. The paper money is just a step in the middle.

Theft through costless money

Following are two of my preferred explanations of how we are pillaged:

Creating costless money is robbery because, in the first use after creation, the new money implies an exchange of value, when in fact the exchange would be impossible if not for the law of supply and demand, which guarantees that the value of all the money previously in existence is decreased in an amount equal to the face value of the new money, thereby fraudulently transferring value created by actual productivity into the hands of those who use the new money first. In addition, all early users of the new money enjoy a value advantage during the lag between creation of the new money and upward adjustment of prices in the marketplace.

The purpose of inflation is to use NEW MONEY to purchase REAL ASSETS at OLD PRICES, thereby causing a wealth transfer from the people who get the new money last toward the people who get the new money first.