DR Exclusive: The Obama Memos (3 of 3)
[Editor’s note: In a series of three memos to President Barack Obama, Sioan Bethel recommends that real US assets be used to amortize or repurchase the US national debt.]
To: President Barack Obama
From: Sioan Stephen Bethel
Subject: Issuance of restricted U.S. Gold Notes: A Regional Gold Standard
A persuasive, perhaps binding, precedent for the creation of U.S. representative money (100s’ billions – trillions) is that, of a single, restricted issue of U.S. gold notes, backed by Gold Bullion fractional reserves with an acceptable cover ratio. The new gold notes, separate and apart from Federal Reserve Notes (fiat money) in general circulation, would be used to amortize or re-purchase significant portions of the U.S. National Debt, fund or reimburse funds for stimulus packages, bailouts, and additional initiatives as warranted. To date, there has been no significant asset-based monetary innovation to address the nation’s financial crisis and chronic financial instability. Gold is a conventional and traditional backing for representative money.
Course of Action
The binding precedent for new, restricted U.S. Gold Notes is provided by the 1922-1923 “stable valued” currencies, price indexed to gold or silver, by the German issuing bodies: Rheinland-Main-Donau, Neckar, Suddeustche Festvertband Stuttgart, Schleswig-Holsteinische Elektrizit, Baver Grosskraftwerk, State of Hamburg (Silver) and the City of Lubek (Swedish Crown) [Attachment].
An issue of U.S. Gold Notes separate and apart from Federal Reserve Notes in general circulation, would function as a means of payment or repurchase of significant portions of the U.S. National Debt, and fund or reimburse funds for stimulus packages, bailouts and additional initiatives as required. U.S. Gold Reserves once covered all dollars in circulation. Now, the amount of notes in a re-issue would be predicated on existing U.S. gold reserves [8,133.5 tons] with an acceptable cover ratio [Attachment]. No doubt, the new issue would be substantial, in the hundreds of billion, if not trillion dollar levels; a significant alternative to present central bank gold sales.
“In light of the history and development of money, however, it would not be surprising if a movement to return to a gold standard were to arise (although whether that would be advisable or not will not be so clear). The study of economics is about the study of cycles, and perhaps there is a decades-long cycle in which societies swing back and forth from a gold standard to fiat money. Because the cycle can last as long or longer than a human lifetime, it is perhaps inconceivable or even nonsensical for a person living in the fiat money era to acknowledge the possible reality of the alternative. So, the return to a gold standard may sound like something from the fringes of reality to the contemporary reader. If it is a cycle though there may be a time in the near future when questions about fiat money increase at the same time that a desire for something tangible also increases.”
-Professor John J. Chung, “Money a Simulacrum: The Legal Nature and Reality of Money”
Targeted, regional gold standards would facilitate parallel time cycles regarding fiat and representative money. In a December of 2008 address before the United Nations, President Sarkozy of France called for the revival of a Bretton-Woods type agreement; a return to an international gold standard. The problem of available gold reserves supporting the present and future expansion requirements of money in worldwide circulation no doubt still exists. The localized use of gold standards, however, by the United States and the European Union, for instance, avoids this dilemma and provides a targeted solution to the financial crisis and provides a new underpinning for long-term financial stability.
Again, the use of gold backed representative money (100’s billions – trillions) requires no additional taxation or borrowing nor risks hyperinflation with excessive issues of fiat money. A measure perfectly suited to the temperament of the American body politic.