Direct Democracy: Returning Government to the People
Carlton W. Laird
Paperback, 5.5x8.5 in, 128 pages
Wheatmark, April 2007
ISBN: 9781587367007
Description
In America, the world's first modern democracy, we have abandoned the Monroe Doctrine in favor of establishing a military presence in more than a hundred nations around the world. While the United States has earned the dubious honor of being the world's largest debtor, the Pentagon has become, as the late Senator William Proxmire described it, a supermarket with no checkout counters.
Direct Democracy: Returning Government to the People takes a hard look at our country's problems, examining why a once-great symbol of freedom has generated so much hatred that people will sacrifice their lives in terrorist acts against us. Questioning the motives of those politicians who resort to aggressive warfare as a means of settling disputes, Carlton Laird proposes steps we can take to regain control of our own financial and political systems.
About the Author
Carlton W. Laird is the author of Never Vote for the Incumbent and Beware of Talking Snakes: Religion's Failure to Achieve World Peace.
Excerpt
From our nation's beginning and continuing to the present day, boom and bust economies have alternated without a satisfactory explanation or remedy. This phenomenon has been repeating throughout our nation's history. But let's start with a very recent, abnormal event—the 1990s financial bubble. "It is different this time" was the common mantra during this bubble. Then came the wake-up call in 2001 that reminded investors that nothing is forever. Of course, this was not the first time for such an event; in fact, our economy was in recession in 1953, 1957, 1975, 1981, 1990, and then in 2001. Beyond a doubt, we will need to distinguish between cause and effect and probably analyze a bit of history on the evolution of our financial system as it tried to keep pace with the expansion of a growing nation.
The nation's early settlers were plagued with a scarcity of money (Coogan 1982). The new U.S. government began in 1789, and the U.S. Mint started making coins in 1792. Except for a few paper notes issued intermittently by local governments to serve local needs, access to money for the early settlers came from commodities, raised or harvested, and sold to foreign buyers. Payments in these transactions were in foreign coins. Most colonists brought little wealth with them, and many came as indentured servants, meaning they contracted with some business to work for seven years to pay for their passage to America. Benjamin Franklin came as an indentured printer apprentice. Paper money, or currency (as it still is technically called today), was of dubious value due to doubts about the backing or support by whoever had issued it. The word "currency" is broadly and loosely used except in businesses that deal with money. The word "coin" has only one definition; hence, a business dealing in money separates the meaning of coin from paper money with the word "currency." The public may intermix the terms, but that does not make coins into currency.
Today we know that paper money requires the backing, or support, of a responsible government. Obviously, the early settlers lacked a reliable medium of exchange, so it was natural for barter to be a substitute. But barter can pose several problems. For instance, the comparative value of items to be exchanged has to be judged by each individual in the exchange. Whoever is in the greatest need at the moment would likely get the least equity in a barter exchange. But because paper money, or currency, had dubious value unless its financial support could be determined, metal coins remained the preferred medium of exchange for centuries. Even today, a nation that is unable to support the value of its currency will find the value of its money depreciated, with its value marked down and even rejected in financial exchanges.
But coins can also pose problems. There is the problem of safekeeping. For many years, the most desired coin was made of gold or silver, metals that have their own intrinsic value. Another problem is the measure of weight and purity of a coin or bullion to determine its value. Out of this quandary of safety and purity, there evolved the goldsmith and a procedure that is still followed in modern banking. For a small fee, the goldsmith provided safe storage of coins and issued a receipt, or note, to verify the deposit. Of course, whoever held the note could turn it in to the smithy and receive coins in the amount of the value of the note (Coogan 1982).
An alert smithy soon recognized not everyone withdrew coins at the same time. So as the smithy's stored volume of coins increased, the smithy recognized there was very little risk if he issued a few extra notes, though these extra notes were not backed by coins. This practice gave the smithy a side business and additional income. Actually, this side business introduced a practice that banks continue to use, and it is known as "fractional reserves" (A Primer On Money—88th Congress, A Government Pamphlet). This means that paper money issued by banks is only partially supported or backed by money that banks are required to hold in reserve. Coins are used today to make change, the fraction of a dollar, as people do not want to carry the weight of coins in order to do business. And that is the main reason silver dollars were discontinued; the silver dollar is just too heavy for most transactions. But even the continually reduced reserve requirement banks were required to carry was changed in 1971 by President Nixon and will be discussed later.
Smithies were considered trustworthy, but there remained the problem of guaranteeing the designated weight of gold or silver that determined the coin's value. Metal could be chipped or filed off a coin, decreasing the coin's value. This quality control was a huge problem that was not solved until quality control was finally turned over to government to enforce. The problem was eliminated when governments began minting coins from metals of little value, and gold and silver were stored only to meet the reserve requirement set by law. As commerce expanded over the years, the convenience of currency reduced the use of coins.
SOUND MONEY REMAINS ELUSIVE
Despite the importance of having a sound, reliable money system, this problem plagued humans for centuries. The problem often came from corrupt and aggressive government policies that depreciated a nation's money. Wars forced kings to borrow, making a nation's leader indebted to private individuals or other kingdoms. Today, national governments issue bonds that are purchased by individuals, banks, corporations, and foreign nations. The financial dealings that took place to support wars forced kings to levy heavy taxes on their countries' citizens. England also taxed the American colonists and continually increased taxes, as more money was needed to pay for wars with France and Spain. The king of England and the Bank of England recognized the growth in commerce in the American colonies as a good source of tax revenue.
America's early settlers became hard-pressed to meet the taxes levied on them by England. One remedy was for the local governing units to issue their own notes that could then serve as a medium of exchange for local financial institutions. A few chose to issue non-interest-bearing notes that could be exchanged to pay local taxes. England reacted to this by placing an embargo on the colonies right to trade with other nations, added a tax on goods imported from England, and required that tax be paid in species (coins), of which the colonists were already short. Quite likely, the English government was so indebted to the privately owned Bank of England that the bank influenced England's laws in an attempt to force the colonies to borrow from the Bank of England.
In 1751, the English Parliament passed the Currency Act, which banned all New England colonies from issuing any kind of legal tender. This destabilized commerce within the colonies, bringing merchants together to boycott English products. England proceeded to keep pressure on the New England colonies and in 1765 passed the Stamp Act that, in addition to adding a tax on all English goods, required the local taxes levied by the colonial governments to be paid to England rather than to their own state legislatures. This resulted in the formation of the Sons of Liberty, an underground group that used violence and intimidation toward the British Stamp Act agents, causing all agents to resign (The Chronological History of Money, Omni Publications and the Internet under British Government Prohibits New England Colonies From Issuing Money).
In our history of the early settlers, there is the impression the Stamp Act levy passed by the British Parliament on March 22, 1765, was considered "taxation without representation" and this lead to the Revolutionary War. It is more likely that the colony's move to war was an accumulation of numerous oppressive tax levies that brought the colonial states together to decide on collective action against England. Ultimately, that action led to the formation of the Continental Congress that convened on July 6, 1775, for the purpose of boycotting England. Its first action was to prepare a Declaration of Causes and agree to take up arms. The king issued a Proclamation of Rebellion; the colonies responded with a Declaration of Independence on July 4, 1776, that lead to the Revolutionary War.
The hastily prepared Articles of the Continental Congress drawn up in 1773 gave that body the power to contract debt, but it omitted giving the power to tax, the customary method of redeeming, or paying off, government debt. Today we wonder how such a loosely knit organization ever made it. Fortunately for us, it did survive through the long Revolutionary War, demonstrating the trust and the dedication the colonies placed on freedom. This dedication impressed enough foreign individuals and nations to cause them to provide the colonies with the financial support needed to win the war and establish the first real democracy—one that gave all citizens of the newly formed United States the right to vote and participate in their government in contrast to the limited-citizen representation in the early Greek experiment with democracy. No doubt some of the foreign financial assistance given to the Continental Congress was revenge toward England. No doubt past memories held by the early settlers in America of the oppression and lack of freedom guided the participants that drafted our Constitution. The document is unprecedented, at least in that period of history, and remains a beacon to many even today.
On the subject of the loans to the Continental Congress, the Internet provides some documentation of these loans and even a few barely legible copies of the loan agreements. History books give little mention to the subject of financing the Revolutionary War. As unbelievable as it seems today, these early settlers pursued the Revolutionary War for nearly five years in a period lacking communication facilities and a trained, experienced army. The desire for freedom seemed to gain strength and determination as the war continued. Adding to this historic epic was the unusual assembly of people with the knowledge of history and insight into justice that was essential in producing a constitution that would become a model to the world. Of course, these early settlers had fresh memories of oppression by the English government and other Old World-entrenched powers. We became the beneficiaries of our founders' collection of knowledge of Plato, Aristotle, Thomas Hobbes, and John Locke, which came together at a convenient time of history. That unusual collection of knowledge was just waiting to be tried by the early settlers to our shores with first-hand experience with oppression and the hardship of ocean travel and frontier life. What lay before them was a rare opportunity to apply the principles of freedom that earlier decades of philosophers had envisioned. What fell in place was the principle that "opportunity comes to the prepared mind." In addition to the desire for freedom was the need for a document that could suppress the ever-present human drives of greed and power that was entrenched in the Old World.
