First, “to save water,” because the government decided too much of it was literally being flushed down American toilets, low-flush commodes became the law of the land. One result, besides often inadequate waste disposal, was salvaging old “thrones” and a rash of toilet-smuggling from Canada.
Then, “to save energy,” the government decided that incandescent light bulbs must be replaced with compact fluorescents. One result, besides potential mercury poisoning when a compact flourescent breaks, is hoarding of incandescents.
About a year ago, Spokane, Washington, “to reduce water pollution,” banned dishwasher detergent made with phosphates. One result, besides dirty and germ-ridden dishes, has been an exodus to neighboring Idaho to purchase detergent that works.
Now, not content to interfere with our flushing, seeing, and dishwashing, there has been a leak out of Congress that it’s about to pass the “1-Ply” law.
There are two kinds of “bathroom tissue,” better known as “toilet paper”: 1-ply and 2-ply. As their names suggest, the former consists of one thin sheet, the latter two thin sheets (which obviously doubles the efficacy of the product.)
Apparently, “to save the environment” by preventing the felling of too many trees, which suck carbon dioxide and expel oxygen, beginning in 2010 Charmin and other purveyors of “bathroom tissue” will be forced to sell only 1-ply toilet paper.
While all the consequences of this government intrusion into personal hygiene can’t be foreseen, one is readily apparent: By itself, 1-Ply won’t do the job. And using twice as much will create other problems.
But veterans like me who’ve served in primitive places know what to do. In Korea, where real toilet paper was as scarce as a capable company commander, we used newspapers, especially the Stars and Stripes.
Here in the U. S. of A, there are better choices: the New York Times, the Los Angeles Times, and the Washington Post among others.
They’ll get the job done.
And think of the satisfaction.
Tuesday, March 31, 2009
Sunday, March 29, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part VII: Conclusion)
Conclusion
With the executive and congressional branches of the United States government acting like drunken socialists on shore leave, spending everything they can beg, borrow and steal, the gold clause has come full circle.
Readers of Part I through VI, inclusive, of this series know that the gold clause creditor-protective provision in debt instruments was designed to protect against the very massive inflation Obama & Company are inviting with every collectivist/statist scheme they concoct: bailouts, takeovers, subsidies, pork, entitlements, nationalization, tax increases, and more—including, we have just learned, the creation of a Young Pioneer/Blackshirt paramilitary corps.
The background noise you hear is the sound of government presses relentlessly printing money.
Remember, well over a century ago, the gold clause was developed to protect the purchasing power of currency.
Today, as this series of essays amply shows, legitimate creditors who wish to protect their debt from the coming depreciation of currency and currency-denominated assets are well advised to employ the gold clause in debt instruments they lend against.
But giving this advice is by no means the end of the story because there is a more fundamental point to be made here: behind every currency-depreciating event in American history stood the puppet-master government, pulling the strings which caused the problems: for example, legal tender, illegalization of private gold ownership, nullification of the gold clause.
The treatment and fate of gold clauses reveals a much deeper problem. It is the role of government in this nation’s monetary affairs. If we are to free ourselves from the outrageous grip of government control over money, it is necessary for the citizens of the United States to rethink the government’s role in those affairs—and to understand the rationale for government’s animus toward gold.
I have been making this point for some fifty years!
On November 12, 1981, well after re-legalization of private gold ownership and of the gold clause, I testified in Washington, D.C. at the invitation of the United States Gold Commission, one of whose members was Representative Ron Paul.
As I look back on that testimony, it is a fitting conclusion to this series “Protecting Against Inflation By Resuscitating The Gold Clause. (My testimony appears below in Courier font).
Good morning Dr. Schwartz and members of the Commission. As you know, I am not an economist but rather a Professor of Law at Brooklyn Law School in New York City. My field is constitutional law, and I have lectured and written extensively on the legal aspects of gold and the nature and scope of government monetary power. For example, two of my books are entitled, respectively, The Gold Clause and Government’s Money Monopoly.
I must confess to a certain ambivalence this morning because, while I appreciate having been invited to testify before this Commission, at the same time I feel like the lawyer who must tell a court that it lacks jurisdiction.
I have come here to say that despite this Commission's good faith, it cannot discharge its Congressionally delegated task—to ". . . make recommendations with regard to the policy of the United States Government concerning the role of gold in domestic and international monetary systems . . . ." –without first understanding, and then admitting, some hard truths about our Nation. Let me explain.
Dr. Allan Greenspan has written ". . . that the gold standard is an instrument of laissez-faire and that each implies and requires the other." ("Gold and Economic Freedom," The Objectivist, Vol 5. No. 7, July 1966, p.1). Of course, he is correct: economic freedom—more specifically, for our purposes, monetary freedom—is an indispensable prerequisite to any meaningful financial use of gold.
However—and this is the core of the Commission's problem—today there is little economic freedom in America. And almost from our first day as a Nation, there was little monetary freedom; now, there is none.
As to economic freedom, tax laws have redistributed wealth on the basis of need and otherwise removed from productive use capital necessary for reinvestment, diverting it to countless ends disapproved by those from whom the money was taken.
Antitrust and fair trade laws have, contradictorily and impotently, attempted to compel competition and protect consumers from themselves. Instead, such laws have caused business decisions to be predicated, not on marketplace considerations, but on guesswork as to how bureaucrats and judges would interpret unintelligible laws.
Labor laws have created compulsory unionization, with its many attendant problems for unwilling employees and employers—and contributed greatly to America's steady decline as the world's preeminent industrial power.
Wage and hour laws have required private employers to establish pay scales and working conditions mandated, not by the free market and mutual agreement, but by government fiat.
Restraints on the use of private property are commonplace—in the name of zoning and so-called civil rights.
Liberty of contract is substantially restricted—in the name of equalizing bargaining power and the so-called public interest.
To understand our lack of monetary freedom, it is necessary to go back into history.
With the birth of our Nation at the Constitutional Convention of 1787, our Founding Fathers created a new government which possessed expressly delegated powers. Congress was the recipient of legislative power, and in the monetary realm it was authorized only to borrow money, to coin money and regulate its value, and to punish counterfeiting.
The Constitution also expressly barred the states from coining money, emitting bills of credit, and making anything but gold and silver a tender in payment of debts.
Clearly, when the work was finished in that hot Philadelphia summer of 1787, as to monetary affairs at least the delegates had substantially resisted the siren song coming from the unfree and semi-free statist European political systems.
But the resolve of America's leaders soon began to ebb. Less than four years after the Convention, the scope of our government's monetary power divided our Nation's leaders at the highest level.
Congress wanted to charter the first Bank of the United States. The question was whether the legislature possessed the power, and President Washington sought opinions from his Treasury Secretary, Alexander Hamilton, and his Secretary of State, Thomas Jefferson. It is popularly believed that the two disagreed. Actually, on the issue of government power, they were in complete agreement—in principle.
Hamilton held that Congress's few delegated monetary powers were sufficiently broad to encompass chartering the bank, especially if those powers were "loosely" interpreted, and that Congress even possessed extra-constitutional powers beyond those which had been specifically delegated.
Although Jefferson denied to Congress the bank- chartering power, he would have granted it to the states—thus sharing Hamilton's statist premise about the power of government over monetary affairs.
When the Bank Controversy was over, Hamilton's view prevailed. Washington signed the bank bill, and for nearly thirty years afterward few people noticed that the monetary power of Congress had grown considerably.
Congressional power expanded nearly thirty years later, when Hamilton's views about its extra-constitutionality became part of the bedrock of American constitutional law. In 1819 John Marshall's opinion for the Supreme Court in M'Culloch v. Maryland expressly held that in monetary affairs, the government of the United States was, like the monarchs of Europe, "sovereign."
That sovereignty was never more apparent than throughout the Civil War's "greenback" episode, a story too well known to the members of this Commission to recount here.
Suffice to say that in order to fight the war, the northern government of President Lincoln created legal tender and simply forced individuals to accept greenbacks, no matter what they thought the paper was worth.
As usual, the Supreme Court of the United States was a willing accomplice to Congress's usurping non-delegated, extra-constitutional monetary power.
In the first important legal tender case to reach the Court, Hepburn v. Griswold, while a bare majority held that the act could not be applied to a debt contracted before legal tender became law, every one of the justices (majority and dissent) nevertheless agreed on the underlying principle: that Congress possessed a broad monetary power whose outer boundaries were far from clear. Less than eighteen months later, Hepburn was overruled by Knox v. Lee, and legal tender was expressly held to be constitutional.
By the time of the last legal tender case some years later, nearly three centuries had passed since the 1604 English Case of Mixed Money had approved Queen Elizabeth's sovereign power to debase her coinage.
Yet despite the fact that in America we had created a different kind of political system, despite a written Constitution that narrowly circumscribed the power of our government, the foreign sovereign who had been repudiated by the colonists seemed to have been replaced by a domestic one—at least in monetary affairs.
The idea that monetary power belongs to the sovereign was conceived in Europe. If, despite the United States Constitution, that idea was born in America in John Marshall's M’Culloch decision (midwifed by Hamilton's opinion to Washington in the Bank Controversy) and reached its majority in the Legal Tender Cases, then its maturity came in three twentieth century cases.
In Linq Su Fan v. United States, the Supreme Court concluded that attached to one's ownership of silver coins were "limitations which public policy may require," and that the coins themselves "bear, therefore, the impress of sovereign power."
Two months later the Court went even further, at least in dicta. Noble State Bank v. Haskell held that a state bank could be forced to help insure its competitors' depositors against insolvency. In the course of his opinion for a unanimous Supreme Court, Justice Oliver Wendell Holmes actually went so far as to admit that government monetary power was indeed omnipotent: "We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the State in taking the whole business of banking under its control."
Holmes' dictum very nearly became a reality in the early days of the "New Deal," when, in a statist orgy of rules, regulations, proclamations, executive orders, resolutions, decrees and manifestos, America's banks were ordered closed, her dollar was devalued, her gold standard abandoned, private ownership of gold was illegalized, and gold clauses were nullified.
Although only the gold clause issue reached the Supreme Court, when nullification of the clauses was upheld, it was crystal clear that the Court had de facto approved of all the New Deal's statist exercises of raw government power—based on a chain of precedents running back inexorably to Noble State Bank, Linq Su Fan, The Legal Tender Cases, M'Culloch, the Bank Controversy, and thence to the Elizabethan Case of Mixed Money.
Ironically, but not surprisingly, in little more than three hundred years, a round trip had been completed: from an English monarch's unlimited monetary power, to the reposing of identical power in the hands of a supposedly free representative democracy. When the smoke of the Gold Clause Cases had cleared—to the profound detriment of individual rights—the government of the United States unquestionably controlled every aspect of this Nation's monetary affairs: money, credit, banking, gold, the securities business, and more.
In the nearly fifty years since then, that control has both deepened and become considerably more sophisticated (as in the Bank Secrecy Act), emulating other contemporary societies which we rightly disparage for their lack of freedom.
Dr. Schwartz and members of the Commission, I have come to Washington today to say that the United States—its government and its people—can not have it both ways. Either we have monetary freedom and a gold standard, or no monetary freedom and no gold standard, Though mine may be a lonely voice crying in a wilderness of omnipotent government, I emphasize that there is no middle ground.
If this Commission wishes to recommend a gold standard, it must first understand the nature and scope of our Nation's lack of economic and monetary freedom, and then communicate that understanding to the American people. Only then, and in that context, can a gold standard recommendation from this Commission have any real meaning.
Indeed, should this Commission recommend that a gold standard be instituted, and should Congress and the President take the unlikely follow-up step of introducing one, even then, a gold standard resurrected under today's economic and monetary controls would not be worth the paper it was proclaimed on.
Until the government of the United States once and for all pulls out of the economic and monetary affairs of its citizens—whether there be a gold standard or
Not—we cannot have economic, or monetary, freedom.
Without it, what we have instead, as uncomfortable as this may be to admit, are revocable privileges—which are the antithesis of individual rights.
Thank you.
Sadly, my testimony (and others') to the Gold Commission in 1981 fell on deaf ears. After eight months of "study," the Commission, chaired by Anna Schwartz, long-time associate of Nobel Prize winner economist Milton Friedman, rejected a gold-based monetary system.
They did so, essentially, for one reason: Just as the gold clause holds debtor’s feet to the full-value-repayment fire, a gold standard restrains government from creating fiat (i.e. depreciated) currency, with its inevitable consequence: an invisible, but very real, tax which falls on savers and other productive citizens.
By the time enough Americans awake from their Messiah-induced trance and realize that the coming government-created inflation will rob them, and their children and their children’s children, of incalculable value through the depreciation of paper money, it may be too late.
Then they and many others may finally understand that government’s money monopoly is antithetical to monetary, economic and personal freedom—and that the price paid for allowing it is more than we can afford to pay.
With the executive and congressional branches of the United States government acting like drunken socialists on shore leave, spending everything they can beg, borrow and steal, the gold clause has come full circle.
Readers of Part I through VI, inclusive, of this series know that the gold clause creditor-protective provision in debt instruments was designed to protect against the very massive inflation Obama & Company are inviting with every collectivist/statist scheme they concoct: bailouts, takeovers, subsidies, pork, entitlements, nationalization, tax increases, and more—including, we have just learned, the creation of a Young Pioneer/Blackshirt paramilitary corps.
The background noise you hear is the sound of government presses relentlessly printing money.
Remember, well over a century ago, the gold clause was developed to protect the purchasing power of currency.
Today, as this series of essays amply shows, legitimate creditors who wish to protect their debt from the coming depreciation of currency and currency-denominated assets are well advised to employ the gold clause in debt instruments they lend against.
But giving this advice is by no means the end of the story because there is a more fundamental point to be made here: behind every currency-depreciating event in American history stood the puppet-master government, pulling the strings which caused the problems: for example, legal tender, illegalization of private gold ownership, nullification of the gold clause.
The treatment and fate of gold clauses reveals a much deeper problem. It is the role of government in this nation’s monetary affairs. If we are to free ourselves from the outrageous grip of government control over money, it is necessary for the citizens of the United States to rethink the government’s role in those affairs—and to understand the rationale for government’s animus toward gold.
I have been making this point for some fifty years!
On November 12, 1981, well after re-legalization of private gold ownership and of the gold clause, I testified in Washington, D.C. at the invitation of the United States Gold Commission, one of whose members was Representative Ron Paul.
As I look back on that testimony, it is a fitting conclusion to this series “Protecting Against Inflation By Resuscitating The Gold Clause. (My testimony appears below in Courier font).
Good morning Dr. Schwartz and members of the Commission. As you know, I am not an economist but rather a Professor of Law at Brooklyn Law School in New York City. My field is constitutional law, and I have lectured and written extensively on the legal aspects of gold and the nature and scope of government monetary power. For example, two of my books are entitled, respectively, The Gold Clause and Government’s Money Monopoly.
I must confess to a certain ambivalence this morning because, while I appreciate having been invited to testify before this Commission, at the same time I feel like the lawyer who must tell a court that it lacks jurisdiction.
I have come here to say that despite this Commission's good faith, it cannot discharge its Congressionally delegated task—to ". . . make recommendations with regard to the policy of the United States Government concerning the role of gold in domestic and international monetary systems . . . ." –without first understanding, and then admitting, some hard truths about our Nation. Let me explain.
Dr. Allan Greenspan has written ". . . that the gold standard is an instrument of laissez-faire and that each implies and requires the other." ("Gold and Economic Freedom," The Objectivist, Vol 5. No. 7, July 1966, p.1). Of course, he is correct: economic freedom—more specifically, for our purposes, monetary freedom—is an indispensable prerequisite to any meaningful financial use of gold.
However—and this is the core of the Commission's problem—today there is little economic freedom in America. And almost from our first day as a Nation, there was little monetary freedom; now, there is none.
As to economic freedom, tax laws have redistributed wealth on the basis of need and otherwise removed from productive use capital necessary for reinvestment, diverting it to countless ends disapproved by those from whom the money was taken.
Antitrust and fair trade laws have, contradictorily and impotently, attempted to compel competition and protect consumers from themselves. Instead, such laws have caused business decisions to be predicated, not on marketplace considerations, but on guesswork as to how bureaucrats and judges would interpret unintelligible laws.
Labor laws have created compulsory unionization, with its many attendant problems for unwilling employees and employers—and contributed greatly to America's steady decline as the world's preeminent industrial power.
Wage and hour laws have required private employers to establish pay scales and working conditions mandated, not by the free market and mutual agreement, but by government fiat.
Restraints on the use of private property are commonplace—in the name of zoning and so-called civil rights.
Liberty of contract is substantially restricted—in the name of equalizing bargaining power and the so-called public interest.
To understand our lack of monetary freedom, it is necessary to go back into history.
With the birth of our Nation at the Constitutional Convention of 1787, our Founding Fathers created a new government which possessed expressly delegated powers. Congress was the recipient of legislative power, and in the monetary realm it was authorized only to borrow money, to coin money and regulate its value, and to punish counterfeiting.
The Constitution also expressly barred the states from coining money, emitting bills of credit, and making anything but gold and silver a tender in payment of debts.
Clearly, when the work was finished in that hot Philadelphia summer of 1787, as to monetary affairs at least the delegates had substantially resisted the siren song coming from the unfree and semi-free statist European political systems.
But the resolve of America's leaders soon began to ebb. Less than four years after the Convention, the scope of our government's monetary power divided our Nation's leaders at the highest level.
Congress wanted to charter the first Bank of the United States. The question was whether the legislature possessed the power, and President Washington sought opinions from his Treasury Secretary, Alexander Hamilton, and his Secretary of State, Thomas Jefferson. It is popularly believed that the two disagreed. Actually, on the issue of government power, they were in complete agreement—in principle.
Hamilton held that Congress's few delegated monetary powers were sufficiently broad to encompass chartering the bank, especially if those powers were "loosely" interpreted, and that Congress even possessed extra-constitutional powers beyond those which had been specifically delegated.
Although Jefferson denied to Congress the bank- chartering power, he would have granted it to the states—thus sharing Hamilton's statist premise about the power of government over monetary affairs.
When the Bank Controversy was over, Hamilton's view prevailed. Washington signed the bank bill, and for nearly thirty years afterward few people noticed that the monetary power of Congress had grown considerably.
Congressional power expanded nearly thirty years later, when Hamilton's views about its extra-constitutionality became part of the bedrock of American constitutional law. In 1819 John Marshall's opinion for the Supreme Court in M'Culloch v. Maryland expressly held that in monetary affairs, the government of the United States was, like the monarchs of Europe, "sovereign."
That sovereignty was never more apparent than throughout the Civil War's "greenback" episode, a story too well known to the members of this Commission to recount here.
Suffice to say that in order to fight the war, the northern government of President Lincoln created legal tender and simply forced individuals to accept greenbacks, no matter what they thought the paper was worth.
As usual, the Supreme Court of the United States was a willing accomplice to Congress's usurping non-delegated, extra-constitutional monetary power.
In the first important legal tender case to reach the Court, Hepburn v. Griswold, while a bare majority held that the act could not be applied to a debt contracted before legal tender became law, every one of the justices (majority and dissent) nevertheless agreed on the underlying principle: that Congress possessed a broad monetary power whose outer boundaries were far from clear. Less than eighteen months later, Hepburn was overruled by Knox v. Lee, and legal tender was expressly held to be constitutional.
By the time of the last legal tender case some years later, nearly three centuries had passed since the 1604 English Case of Mixed Money had approved Queen Elizabeth's sovereign power to debase her coinage.
Yet despite the fact that in America we had created a different kind of political system, despite a written Constitution that narrowly circumscribed the power of our government, the foreign sovereign who had been repudiated by the colonists seemed to have been replaced by a domestic one—at least in monetary affairs.
The idea that monetary power belongs to the sovereign was conceived in Europe. If, despite the United States Constitution, that idea was born in America in John Marshall's M’Culloch decision (midwifed by Hamilton's opinion to Washington in the Bank Controversy) and reached its majority in the Legal Tender Cases, then its maturity came in three twentieth century cases.
In Linq Su Fan v. United States, the Supreme Court concluded that attached to one's ownership of silver coins were "limitations which public policy may require," and that the coins themselves "bear, therefore, the impress of sovereign power."
Two months later the Court went even further, at least in dicta. Noble State Bank v. Haskell held that a state bank could be forced to help insure its competitors' depositors against insolvency. In the course of his opinion for a unanimous Supreme Court, Justice Oliver Wendell Holmes actually went so far as to admit that government monetary power was indeed omnipotent: "We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the State in taking the whole business of banking under its control."
Holmes' dictum very nearly became a reality in the early days of the "New Deal," when, in a statist orgy of rules, regulations, proclamations, executive orders, resolutions, decrees and manifestos, America's banks were ordered closed, her dollar was devalued, her gold standard abandoned, private ownership of gold was illegalized, and gold clauses were nullified.
Although only the gold clause issue reached the Supreme Court, when nullification of the clauses was upheld, it was crystal clear that the Court had de facto approved of all the New Deal's statist exercises of raw government power—based on a chain of precedents running back inexorably to Noble State Bank, Linq Su Fan, The Legal Tender Cases, M'Culloch, the Bank Controversy, and thence to the Elizabethan Case of Mixed Money.
Ironically, but not surprisingly, in little more than three hundred years, a round trip had been completed: from an English monarch's unlimited monetary power, to the reposing of identical power in the hands of a supposedly free representative democracy. When the smoke of the Gold Clause Cases had cleared—to the profound detriment of individual rights—the government of the United States unquestionably controlled every aspect of this Nation's monetary affairs: money, credit, banking, gold, the securities business, and more.
In the nearly fifty years since then, that control has both deepened and become considerably more sophisticated (as in the Bank Secrecy Act), emulating other contemporary societies which we rightly disparage for their lack of freedom.
Dr. Schwartz and members of the Commission, I have come to Washington today to say that the United States—its government and its people—can not have it both ways. Either we have monetary freedom and a gold standard, or no monetary freedom and no gold standard, Though mine may be a lonely voice crying in a wilderness of omnipotent government, I emphasize that there is no middle ground.
If this Commission wishes to recommend a gold standard, it must first understand the nature and scope of our Nation's lack of economic and monetary freedom, and then communicate that understanding to the American people. Only then, and in that context, can a gold standard recommendation from this Commission have any real meaning.
Indeed, should this Commission recommend that a gold standard be instituted, and should Congress and the President take the unlikely follow-up step of introducing one, even then, a gold standard resurrected under today's economic and monetary controls would not be worth the paper it was proclaimed on.
Until the government of the United States once and for all pulls out of the economic and monetary affairs of its citizens—whether there be a gold standard or
Not—we cannot have economic, or monetary, freedom.
Without it, what we have instead, as uncomfortable as this may be to admit, are revocable privileges—which are the antithesis of individual rights.
Thank you.
Sadly, my testimony (and others') to the Gold Commission in 1981 fell on deaf ears. After eight months of "study," the Commission, chaired by Anna Schwartz, long-time associate of Nobel Prize winner economist Milton Friedman, rejected a gold-based monetary system.
They did so, essentially, for one reason: Just as the gold clause holds debtor’s feet to the full-value-repayment fire, a gold standard restrains government from creating fiat (i.e. depreciated) currency, with its inevitable consequence: an invisible, but very real, tax which falls on savers and other productive citizens.
By the time enough Americans awake from their Messiah-induced trance and realize that the coming government-created inflation will rob them, and their children and their children’s children, of incalculable value through the depreciation of paper money, it may be too late.
Then they and many others may finally understand that government’s money monopoly is antithetical to monetary, economic and personal freedom—and that the price paid for allowing it is more than we can afford to pay.
Saturday, March 28, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part VI)
Limited retroactivity of the gold clause
The gold clause has traveled a long and hard road through the American monetary system. Designed to protect creditors from the debtor-coddling government money monopoly and against the scourge of inflated paper money, the contractual provision served well from the Civil War until gold and its corollaries inconveniently stood in the way of the New Deal’s stranglehold on America’s monetary system.
Then, along with gold itself, the gold clause had to go.
Re-legalization of private gold ownership fueled the hope that the gold clause had, at least by implication, been retroactively resuscitated, but state and federal courts ruled otherwise. (See Chapter Eight of The Gold Clause, entitled "Is the Gold Clause Really Legal?" for one of the more prominent state cases, Aztec Properties, Inc. v. Union Planters National Bank, ruling that the payment of indexed principal runs afoul of anti-usury laws.)
Then the gold clause rose again, with its re-legalization beginning in late 1977.
But what about retroactively?
Maybe.
To explain this tantalizing comment, first I have to explain the legal meaning of the word "novation."
According to Black's Law Dictionary, a novation is the "[s]ubstitution of a new contract, debt, or obligation for an existing one, between the same or different parties. The substitution by mutual agreement of one debtor for another or of one creditor for another, whereby the old debt is extinguished. The requisites of a novation are a previous valid obligation, an agreement of all the parties to a new contract, the extinguishment of the old obligation, and the validity of the new one." (My emphasis.)
In less legal terms, then, a novation is fundamentally the old contract reborn with a new twist or two.
It is through the novation device that only a few pre-New Deal gold clauses have been given effect.
The best explanation of how and why is found in the case of 216 Jamaica Avenue, LLC v. S & R Playhouse Realty Co.(540 F.3d 433), a decision of the United States Court of Appeals for the Sixth Circuit rendered in August 2008. (My annotations within the court's opinion, which appears below in courier font, are bracketed and in bold face. Asterisks signify the omission of at least one entire sentence.)
SUTTON, Circuit Judge
I.
In 1912, Salmon and Samuel Halle leased a parcel of land in downtown Cleveland from its owner, Realty Investment Corporation. The term of the lease was 99 years (through March 31, 2011), and the Halle brothers and their successors in interest retained the option of renewing the lease for another 25, 50 or 99 years (through as late as March 31, 2110).
The lease agreement fixed the annual rent at $10,000 for the first two years, then increased the rent in periodic intervals until it reached $35,000 in the eleventh year, where it remained until the end of the lease.
The lease also contained a "gold clause," which provided that "[a]ll of said rents shall be paid in gold coin of the United States of the present standard of weight and fineness."
At that time and up through the Depression, such clauses commonly appeared in long-term leases "as a sort of price-indexing mechanism to protect a lessor [landlord] from the effects of inflation." [Citing a predecessor case in the United States Court of Appeals for the Eighth Circuit and the Supreme Court of the United States.]
In the early 1930s, as part of a series of measures designed to implement the Roosevelt Administration's overhaul [note the euphemism; "keelhaul" would be a more accurate word] of American monetary policy, Congress withdrew gold from circulation and banned nearly all private ownership of it. * * *
And in 1933, Congress passed a Joint Resolution that declared gold clauses to be "against public policy," barred their inclusion in any future contract and suspended the operation of existing gold clauses by allowing all contract obligations to be paid in paper currency instead. See Joint Resolution of June 5, 1933 . . .(providing that no gold clause "shall be contained in or made with respect to any obligation hereafter incurred" and that "[e]very obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts").
Four decades later, Congress changed course. It repealed the ban on private ownership of gold in 1975.
And in 1977, it amended the 1933 Joint Resolution, providing that the resolution "shall not apply to obligations issued on or after" the amendment's date of enactment. * * * Although the amendment made clear that parties could include gold clauses in contracts formed after 1977, Congress's choice of words (authorizing "obligations issued ... after" the amendment) generated a small stream of litigation regarding the amendment's effect on gold clauses contained in contracts made prior to 1977 but transferred after that date. [My emphasis. This is important. The litigation to which Judge Sutton referred was over gold clause contracts made before re-legalization that were renegotiated after that 1977 event. In other words, contracts where there may have been a "novation."]
* * *
In an effort to clarify the matter [and the limbo status of pre-1977 gold clause contracts renegotiated after 1977], Congress passed a law in 1996 providing that owners could enforce pre-1977 gold clauses only if the parties to a new obligation issued after 1977 "specifically agree[d] to include a gold clause" in their new agreement. [My emphasis] * * *
Just over a year later, however, Congress repealed the 1996 statute.
* * *
So far as the record [in this case] is concerned, the gold clause in this contract never attracted anyone's attention or at least never generated any disputes during the first 90 years of its existence.
Since 1982, when the current lessee [tenant], S & R Playhouse Realty, assumed the lease, it has paid annual rent of $35,000 in American currency. And there is no indication in the record that either the original lessees [tenants], the Halle brothers or the other lessees [tenants] prior to S & R paid more than $35,000 in the preceding 70 years. Nor is there any indication that the previous owners ever demanded more than $35,000.
That changed in 2006, when the current owner, 216 Jamaica Avenue, purchased the land for $845,000, then sought to enforce the gold clause, demanding rent equivalent to the value of 35,000 1912 gold dollar coins. [My emphasis.]
The current lessee, S & R, balked at the prospect of paying several multiples of what it had been paying, prompting 216 Jamaica Avenue to file this breach-of-contract action in federal court . . . .
[T]he [trial] district court ruled for the lessee, refusing to enforce the [gold] clause.
II.
The parties share considerable common ground about how to resolve this dispute.
They agree that the question at hand is whether the gold clause constitutes an "obligation issued ... after" October 1977. * * *
And they agree that an assignment combined with a novation, which substitutes a new agreement for a prior one and releases the obligations of the prior lessee, would suffice to satisfy the obligation-issued-after requirement. What the case boils down to, then, is whether the 1982 transfer of the lessee's interest to S & R amounted to a novation.
[Judge Sutton’s concise and thorough recitation of the facts of the case clearly framed the issue to be decided: Congress had OKd gold clauses subject to an “obligation-issued-after” requirement, an assignment/novation could satisfy that requirement—-so was that what happened when S & R took the lease as a new tenant?]
[There followed in the court’s opinion a lengthy discussion of what constituted a contract of novation under Ohio law. Essentially, it is as defined above].
[The parties agreed that the 1982 assignment was a valid new contract, but disagreed about] whether the owner at that time agreed to release the prior lessee (Halle Bros. Co.) from its obligations under the lease and to substitute the new lessee (S & R) in its place.
[Because under Ohio law consent to a novation need not be express, but could be implicit from circumstances or conduct, the court found there had been consent]. * * *
The terms of the 1982 assignment agreement answer another objection raised by S & R: How could the assignment resuscitate the 1912 gold clause, which no party to the lease had been able to enforce since 1933?
In accordance with the express terms of the 1982 assignment agreement, S & R "assume[d] and agree[d] to perform each and all of the covenants, obligations, and engagements of the Assignor and lessee under said Lease and all other terms and provisions thereof on the part of lessee to be observed and performed after the date hereof." [Emphasis in original.]
The agreement also clarifies that the assignment was made "subject ... to the payment of the rents and the observance of all and singular the covenants, conditions, terms and agreements in said Lease contained." [Emphasis in original.]
The assignment agreement, in short, says it all: It explicitly incorporates all of the terms of the 1912 lease, including the gold clause. [My emphasis.] * * *
[T]he 1933 federal statute did not purport to, and did not in effect, delete the gold clause permanently from the lease agreement. The law, sure enough, made existing clauses unenforceable by providing obligors an alternative route for satisfying gold-denominated obligations, by declaring them to be against public policy and by forbidding their inclusion in future contracts. * * * But it stopped short of voiding or invalidating existing gold clauses, and it did nothing to prevent parties from reviving those clauses after the 1977 amendment. As the Eighth Circuit correctly explained [in an earlier case], "[t]he 1933 act did not magically erase the gold clause from the [pre-1933] lease."
As a final matter, it is worth addressing the parties' respective efforts to cast themselves as victims in this nearly century-long saga.
As S & R sees things, it took on a lease obligation of $35,000 a year and now is being asked to pay several multiples of that. As 216 Jamaica sees things, S & R had every reason to know this risk. The 1977 legislation permitted gold clauses to be enforced; the 1912 agreement contained a gold clause; the 1982 assignment required S & R to accept each of these obligations; and S & R chose not to condition acceptance of the assignment on removing the gold clause.
And, what is more, S & R wishes to pay $35,000 per year for space that is worth multiples of that and wants that option not just through 2011 but presumably for 99 more years-through 2110. The record does not say how much comparable space rents for in Cleveland, but one can certainly assume that it is more valuable than it was in 1912 without having to accept the truth of 216 Jamaica's assertion that it is worth more than 75 times what S & R currently pays for it. As a matter of sheer economics, it is hard to say which party has the sharper elbows.
Either way, in light of this ruling, the parties now know one of the effects of the 1982 assignment. * * *
We can speculate about whether one of the parties and their lawyers were brilliant when negotiating the 1982 assignment of the lease, or just lucky—-and whether their adversaries dropped the ball concerning the until-then gold clause.
But either way, in 216 Jamaica Avenue LLC v. S & R Playhouse Realty Co. an old gold clause lived again, albeit under very limited factual circumstances.
Regrettably, the Supreme Court of the United States has not weighed in on the question of resuscitation, and as time goes by it has less and less reason to do so as debt instruments containing gold clauses fade into history.
But that doesn’t mean that new gold clauses should not be, or cannot be, an integral part of any significant debt instrument today especially with massive inflation just below the horizon.
To be continued.
The gold clause has traveled a long and hard road through the American monetary system. Designed to protect creditors from the debtor-coddling government money monopoly and against the scourge of inflated paper money, the contractual provision served well from the Civil War until gold and its corollaries inconveniently stood in the way of the New Deal’s stranglehold on America’s monetary system.
Then, along with gold itself, the gold clause had to go.
Re-legalization of private gold ownership fueled the hope that the gold clause had, at least by implication, been retroactively resuscitated, but state and federal courts ruled otherwise. (See Chapter Eight of The Gold Clause, entitled "Is the Gold Clause Really Legal?" for one of the more prominent state cases, Aztec Properties, Inc. v. Union Planters National Bank, ruling that the payment of indexed principal runs afoul of anti-usury laws.)
Then the gold clause rose again, with its re-legalization beginning in late 1977.
But what about retroactively?
Maybe.
To explain this tantalizing comment, first I have to explain the legal meaning of the word "novation."
According to Black's Law Dictionary, a novation is the "[s]ubstitution of a new contract, debt, or obligation for an existing one, between the same or different parties. The substitution by mutual agreement of one debtor for another or of one creditor for another, whereby the old debt is extinguished. The requisites of a novation are a previous valid obligation, an agreement of all the parties to a new contract, the extinguishment of the old obligation, and the validity of the new one." (My emphasis.)
In less legal terms, then, a novation is fundamentally the old contract reborn with a new twist or two.
It is through the novation device that only a few pre-New Deal gold clauses have been given effect.
The best explanation of how and why is found in the case of 216 Jamaica Avenue, LLC v. S & R Playhouse Realty Co.(540 F.3d 433), a decision of the United States Court of Appeals for the Sixth Circuit rendered in August 2008. (My annotations within the court's opinion, which appears below in courier font, are bracketed and in bold face. Asterisks signify the omission of at least one entire sentence.)
SUTTON, Circuit Judge
I.
In 1912, Salmon and Samuel Halle leased a parcel of land in downtown Cleveland from its owner, Realty Investment Corporation. The term of the lease was 99 years (through March 31, 2011), and the Halle brothers and their successors in interest retained the option of renewing the lease for another 25, 50 or 99 years (through as late as March 31, 2110).
The lease agreement fixed the annual rent at $10,000 for the first two years, then increased the rent in periodic intervals until it reached $35,000 in the eleventh year, where it remained until the end of the lease.
The lease also contained a "gold clause," which provided that "[a]ll of said rents shall be paid in gold coin of the United States of the present standard of weight and fineness."
At that time and up through the Depression, such clauses commonly appeared in long-term leases "as a sort of price-indexing mechanism to protect a lessor [landlord] from the effects of inflation." [Citing a predecessor case in the United States Court of Appeals for the Eighth Circuit and the Supreme Court of the United States.]
In the early 1930s, as part of a series of measures designed to implement the Roosevelt Administration's overhaul [note the euphemism; "keelhaul" would be a more accurate word] of American monetary policy, Congress withdrew gold from circulation and banned nearly all private ownership of it. * * *
And in 1933, Congress passed a Joint Resolution that declared gold clauses to be "against public policy," barred their inclusion in any future contract and suspended the operation of existing gold clauses by allowing all contract obligations to be paid in paper currency instead. See Joint Resolution of June 5, 1933 . . .(providing that no gold clause "shall be contained in or made with respect to any obligation hereafter incurred" and that "[e]very obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts").
Four decades later, Congress changed course. It repealed the ban on private ownership of gold in 1975.
And in 1977, it amended the 1933 Joint Resolution, providing that the resolution "shall not apply to obligations issued on or after" the amendment's date of enactment. * * * Although the amendment made clear that parties could include gold clauses in contracts formed after 1977, Congress's choice of words (authorizing "obligations issued ... after" the amendment) generated a small stream of litigation regarding the amendment's effect on gold clauses contained in contracts made prior to 1977 but transferred after that date. [My emphasis. This is important. The litigation to which Judge Sutton referred was over gold clause contracts made before re-legalization that were renegotiated after that 1977 event. In other words, contracts where there may have been a "novation."]
* * *
In an effort to clarify the matter [and the limbo status of pre-1977 gold clause contracts renegotiated after 1977], Congress passed a law in 1996 providing that owners could enforce pre-1977 gold clauses only if the parties to a new obligation issued after 1977 "specifically agree[d] to include a gold clause" in their new agreement. [My emphasis] * * *
Just over a year later, however, Congress repealed the 1996 statute.
* * *
So far as the record [in this case] is concerned, the gold clause in this contract never attracted anyone's attention or at least never generated any disputes during the first 90 years of its existence.
Since 1982, when the current lessee [tenant], S & R Playhouse Realty, assumed the lease, it has paid annual rent of $35,000 in American currency. And there is no indication in the record that either the original lessees [tenants], the Halle brothers or the other lessees [tenants] prior to S & R paid more than $35,000 in the preceding 70 years. Nor is there any indication that the previous owners ever demanded more than $35,000.
That changed in 2006, when the current owner, 216 Jamaica Avenue, purchased the land for $845,000, then sought to enforce the gold clause, demanding rent equivalent to the value of 35,000 1912 gold dollar coins. [My emphasis.]
The current lessee, S & R, balked at the prospect of paying several multiples of what it had been paying, prompting 216 Jamaica Avenue to file this breach-of-contract action in federal court . . . .
[T]he [trial] district court ruled for the lessee, refusing to enforce the [gold] clause.
II.
The parties share considerable common ground about how to resolve this dispute.
They agree that the question at hand is whether the gold clause constitutes an "obligation issued ... after" October 1977. * * *
And they agree that an assignment combined with a novation, which substitutes a new agreement for a prior one and releases the obligations of the prior lessee, would suffice to satisfy the obligation-issued-after requirement. What the case boils down to, then, is whether the 1982 transfer of the lessee's interest to S & R amounted to a novation.
[Judge Sutton’s concise and thorough recitation of the facts of the case clearly framed the issue to be decided: Congress had OKd gold clauses subject to an “obligation-issued-after” requirement, an assignment/novation could satisfy that requirement—-so was that what happened when S & R took the lease as a new tenant?]
[There followed in the court’s opinion a lengthy discussion of what constituted a contract of novation under Ohio law. Essentially, it is as defined above].
[The parties agreed that the 1982 assignment was a valid new contract, but disagreed about] whether the owner at that time agreed to release the prior lessee (Halle Bros. Co.) from its obligations under the lease and to substitute the new lessee (S & R) in its place.
[Because under Ohio law consent to a novation need not be express, but could be implicit from circumstances or conduct, the court found there had been consent]. * * *
The terms of the 1982 assignment agreement answer another objection raised by S & R: How could the assignment resuscitate the 1912 gold clause, which no party to the lease had been able to enforce since 1933?
In accordance with the express terms of the 1982 assignment agreement, S & R "assume[d] and agree[d] to perform each and all of the covenants, obligations, and engagements of the Assignor and lessee under said Lease and all other terms and provisions thereof on the part of lessee to be observed and performed after the date hereof." [Emphasis in original.]
The agreement also clarifies that the assignment was made "subject ... to the payment of the rents and the observance of all and singular the covenants, conditions, terms and agreements in said Lease contained." [Emphasis in original.]
The assignment agreement, in short, says it all: It explicitly incorporates all of the terms of the 1912 lease, including the gold clause. [My emphasis.] * * *
[T]he 1933 federal statute did not purport to, and did not in effect, delete the gold clause permanently from the lease agreement. The law, sure enough, made existing clauses unenforceable by providing obligors an alternative route for satisfying gold-denominated obligations, by declaring them to be against public policy and by forbidding their inclusion in future contracts. * * * But it stopped short of voiding or invalidating existing gold clauses, and it did nothing to prevent parties from reviving those clauses after the 1977 amendment. As the Eighth Circuit correctly explained [in an earlier case], "[t]he 1933 act did not magically erase the gold clause from the [pre-1933] lease."
As a final matter, it is worth addressing the parties' respective efforts to cast themselves as victims in this nearly century-long saga.
As S & R sees things, it took on a lease obligation of $35,000 a year and now is being asked to pay several multiples of that. As 216 Jamaica sees things, S & R had every reason to know this risk. The 1977 legislation permitted gold clauses to be enforced; the 1912 agreement contained a gold clause; the 1982 assignment required S & R to accept each of these obligations; and S & R chose not to condition acceptance of the assignment on removing the gold clause.
And, what is more, S & R wishes to pay $35,000 per year for space that is worth multiples of that and wants that option not just through 2011 but presumably for 99 more years-through 2110. The record does not say how much comparable space rents for in Cleveland, but one can certainly assume that it is more valuable than it was in 1912 without having to accept the truth of 216 Jamaica's assertion that it is worth more than 75 times what S & R currently pays for it. As a matter of sheer economics, it is hard to say which party has the sharper elbows.
Either way, in light of this ruling, the parties now know one of the effects of the 1982 assignment. * * *
We can speculate about whether one of the parties and their lawyers were brilliant when negotiating the 1982 assignment of the lease, or just lucky—-and whether their adversaries dropped the ball concerning the until-then gold clause.
But either way, in 216 Jamaica Avenue LLC v. S & R Playhouse Realty Co. an old gold clause lived again, albeit under very limited factual circumstances.
Regrettably, the Supreme Court of the United States has not weighed in on the question of resuscitation, and as time goes by it has less and less reason to do so as debt instruments containing gold clauses fade into history.
But that doesn’t mean that new gold clauses should not be, or cannot be, an integral part of any significant debt instrument today especially with massive inflation just below the horizon.
To be continued.
Thursday, March 26, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part V)
Re-legalization of private gold ownership
For forty years the owners of pre-New Deal gold clause debt obligations didn't receive what they had bargained for: payment in gold coin, gold bullion, or currency measured by the current value (notice, I did not say "price") of gold.
Instead, for those forty years, they received payment in a fixed amount of ever-depreciating paper currency.
For forty years, they waited for something to happen which would check the relentless depreciation of their debt instruments.
Some of us, however, weren't sitting around waiting.
Because I had written the seminal modern article about President Roosevelt's anti-gold machinations (see my 1973 Brooklyn Law Review article "How Americans Lost the Right to Own Gold, and Became Criminals in the Process": http://www.fame.org/PDF/Holzer%20Henry%20Mark%20How%20Americans%20Lost%20Their%20Right%20to%20Own%20Gold.pdf), I was asked to join the vanguard of those seeking to restore the right of private gold ownership and ultimately had a hand in drafting the re-legalization legislation.
We finally succeeded in the mid-1970s. (The fight for re-legalization of private gold ownership is a fascinating story in its own right. But because this series is about the gold clause, the re-legalization tale will have to await another telling.)
Effective December 31, 1974 Americans could once again own gold.
The re-legalization statute provided that "[n]o provision of any law—and no rule, regulation or order—may be construed to prohibit any person from purchasing, holding, selling, or otherwise dealing with gold in the United States or abroad."
Because of tactical considerations surrounding introduction, sponsorship, enactment and executive approval of private gold ownership re-legalization, the statute was silent on whether the gold clause had been resurrected. The legislative history on re-legalization is silent on the subject of the gold clause.
Not surprisingly, on December 9, 1974 the Treasury Department issued a statement which concluded that the New Deal Joint Resolution outlawing the gold clause remained good law, and that existing gold clauses remained unenforceable (see Chapter Six of The Gold Clause for the Treasury’s complete statement.)
A vigorous debate then began about whether re-legalization had breathed life into the gold clauses which Roosevelt had killed forty years earlier.
On March 17, 1975 I wrote a lengthy article for The Wall Street Journal entitled "Can We Restore the Gold Clause?" It garnered national, indeed international, attention and brought to the fore the multi-billion dollar question of whether gold clauses in pre-New Deal debt instruments had been revived. Indeed, my article engendered several well reasoned letters-to-the-editor, one from a man who described himself "[a]s a minor foot soldier for the Treasury Department in what I have come to regard as the 'holy war of the gold clauses' which took place in the 1930s."
The debate raged (see Chapter Six of The Gold Clause).
As a result, I was asked by Congressman Phil Crane to draft legislation expressly re-legalizing the gold clause, "[t]o declare the public policy of the United States and to remove all legal obstacles to the use of gold clauses." My language for H.R. 8324 was brief, and to the point: "Be it enacted by the Senate and House of Representatives of the United States of American in Congress assembled, That the joint resolution of June 5, 1933, entitled 'Joint resolution to assure uniform value to coins and currencies of the United States' (31 U.S.C. 463) [boiler plate language from the legislative drafting service; my language follows] is hereby repealed, and nothing shall prohibit any contractual provision which gives the obligee the right to require payment by the obligor in gold, in gold coin, or in an amount of currency measured by the value of gold or gold coins." (My emphasis.)
Referred to the House Committee on Banking, Currency and Housing, the Crane/Holzer bill languished there.
About nine months later, through the efforts of Howard Segermark, a staff aide to Jesse Helms, the Senator queried Treasury Secretary William E. Simon and Fed Chairman Arthur F. Burns about their official positions concerning re-legalization of the gold clause.
Surprise!
Simon was hostile to re-legalization, standing on the Joint Resolution, because the government was trying "to eliminate gold from the U.S. monetary system."[!] Burns, reminding Helms that the Fed Chairman had opposed private gold ownership re-legalization in 1974, contended that while he might be in favor of gold clause re-legalization, the Federal Reserve Board was split "on the advisability of such action."
That didn’t stop Jesse Helms.
On June 14, 1976 the Senator introduced S.3563, accompanied by a lengthy statement in support of gold clause re-legalization. (See Chapter Seven of The Gold Clause for Helms's statement and the text of S.3563.)
In late August 1976, Helms introduced an amendment to his bill, prefaced with this statement: "My amendment, if approved, would make enforceable gold clause contracts entered into after the enactment of the amendment. It is intended to stand neutral with regard to the enforceability of gold clause obligations issued in the past." (My emphasis.)
Helms's clear intention, which he stated expressly in his remarks, was to leave the retroactivity question to the courts.
But at least as of October 28, 1977 newly created gold clause obligations would be enforceable.
That left open the multi-billion dollar question sof gold clause retroactivity, and what the courts would do about those that antedated the New Deal.
To be continued.
For forty years the owners of pre-New Deal gold clause debt obligations didn't receive what they had bargained for: payment in gold coin, gold bullion, or currency measured by the current value (notice, I did not say "price") of gold.
Instead, for those forty years, they received payment in a fixed amount of ever-depreciating paper currency.
For forty years, they waited for something to happen which would check the relentless depreciation of their debt instruments.
Some of us, however, weren't sitting around waiting.
Because I had written the seminal modern article about President Roosevelt's anti-gold machinations (see my 1973 Brooklyn Law Review article "How Americans Lost the Right to Own Gold, and Became Criminals in the Process": http://www.fame.org/PDF/Holzer%20Henry%20Mark%20How%20Americans%20Lost%20Their%20Right%20to%20Own%20Gold.pdf), I was asked to join the vanguard of those seeking to restore the right of private gold ownership and ultimately had a hand in drafting the re-legalization legislation.
We finally succeeded in the mid-1970s. (The fight for re-legalization of private gold ownership is a fascinating story in its own right. But because this series is about the gold clause, the re-legalization tale will have to await another telling.)
Effective December 31, 1974 Americans could once again own gold.
The re-legalization statute provided that "[n]o provision of any law—and no rule, regulation or order—may be construed to prohibit any person from purchasing, holding, selling, or otherwise dealing with gold in the United States or abroad."
Because of tactical considerations surrounding introduction, sponsorship, enactment and executive approval of private gold ownership re-legalization, the statute was silent on whether the gold clause had been resurrected. The legislative history on re-legalization is silent on the subject of the gold clause.
Not surprisingly, on December 9, 1974 the Treasury Department issued a statement which concluded that the New Deal Joint Resolution outlawing the gold clause remained good law, and that existing gold clauses remained unenforceable (see Chapter Six of The Gold Clause for the Treasury’s complete statement.)
A vigorous debate then began about whether re-legalization had breathed life into the gold clauses which Roosevelt had killed forty years earlier.
On March 17, 1975 I wrote a lengthy article for The Wall Street Journal entitled "Can We Restore the Gold Clause?" It garnered national, indeed international, attention and brought to the fore the multi-billion dollar question of whether gold clauses in pre-New Deal debt instruments had been revived. Indeed, my article engendered several well reasoned letters-to-the-editor, one from a man who described himself "[a]s a minor foot soldier for the Treasury Department in what I have come to regard as the 'holy war of the gold clauses' which took place in the 1930s."
The debate raged (see Chapter Six of The Gold Clause).
As a result, I was asked by Congressman Phil Crane to draft legislation expressly re-legalizing the gold clause, "[t]o declare the public policy of the United States and to remove all legal obstacles to the use of gold clauses." My language for H.R. 8324 was brief, and to the point: "Be it enacted by the Senate and House of Representatives of the United States of American in Congress assembled, That the joint resolution of June 5, 1933, entitled 'Joint resolution to assure uniform value to coins and currencies of the United States' (31 U.S.C. 463) [boiler plate language from the legislative drafting service; my language follows] is hereby repealed, and nothing shall prohibit any contractual provision which gives the obligee the right to require payment by the obligor in gold, in gold coin, or in an amount of currency measured by the value of gold or gold coins." (My emphasis.)
Referred to the House Committee on Banking, Currency and Housing, the Crane/Holzer bill languished there.
About nine months later, through the efforts of Howard Segermark, a staff aide to Jesse Helms, the Senator queried Treasury Secretary William E. Simon and Fed Chairman Arthur F. Burns about their official positions concerning re-legalization of the gold clause.
Surprise!
Simon was hostile to re-legalization, standing on the Joint Resolution, because the government was trying "to eliminate gold from the U.S. monetary system."[!] Burns, reminding Helms that the Fed Chairman had opposed private gold ownership re-legalization in 1974, contended that while he might be in favor of gold clause re-legalization, the Federal Reserve Board was split "on the advisability of such action."
That didn’t stop Jesse Helms.
On June 14, 1976 the Senator introduced S.3563, accompanied by a lengthy statement in support of gold clause re-legalization. (See Chapter Seven of The Gold Clause for Helms's statement and the text of S.3563.)
In late August 1976, Helms introduced an amendment to his bill, prefaced with this statement: "My amendment, if approved, would make enforceable gold clause contracts entered into after the enactment of the amendment. It is intended to stand neutral with regard to the enforceability of gold clause obligations issued in the past." (My emphasis.)
Helms's clear intention, which he stated expressly in his remarks, was to leave the retroactivity question to the courts.
But at least as of October 28, 1977 newly created gold clause obligations would be enforceable.
That left open the multi-billion dollar question sof gold clause retroactivity, and what the courts would do about those that antedated the New Deal.
To be continued.
Wednesday, March 25, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part IV)
The Gold Clause Cases
Chapter Five of my book The Gold Clause: What It Is And How To Use It Profitably is entitled “The Gold Clause In F.D.R.’s Supreme Court.” The chapter’s preface—written nearly three decades ago, long before the "compassionate conservatism" of George W. Bush and the socialist pragmatism of Barack Obama—says this:
"Although it took legislation by Congress to launch the New Deal's war on the gold clause, it would be in the Supreme Court of the United States that the major battle would be fought.
"In our system of government, the United States Constitution is the supreme law of the land, and the Supreme Court is the ultimate interpreter of the Constitution. During its nearly two hundred years of existence, the Court has decided thousands of cases, many of them interpreting the Constitution, and of those, many of great importance. However, only a few mark crucial turning points in America's constitutional history.
"The Gold Clause Cases are among them.
"The Cases are of obvious importance because of the crucial role they play in Roosevelt's entire anti-gold program. They constitute the linchpin of his anti-gold clause campaign. But the wider significance of the Gold Clause Cases transcends both the New Deal's war on gold, and the fate of the gold clauses themselves. The majority decision in the Cases provides a rarely seen example of rank judicial pragmatism at work in one of the areas of congressional power most dangerous to individual liberties: money and monetary affairs. Many of the financial and economic problems which have beset this nation for the past forty years [1940-1980] have been engendered by the premises which made possible the decisions in the Gold Clause Cases. Much that will happen to money and monetary affairs in the future will come from the same premises. Accordingly, an understanding of the Gold Clause Cases is essential not only for anyone who contemplates using the gold clause today, but with anyone concerned with the kind of monetary problem that the gold clause is designed to solve."
Norman C. Norman (who contacted me when my first articles on the gold clause began to appear in the 1970s) was an investor. Understandably concerned about depreciation of the dollars he had available to lend, he purchased a railroad bond containing coupons payable in gold coin "of or equal to the standard weight and fineness existing on February 1, 1930." Ownership of the bond made Mr. Norman a creditor of the railroad.
The coupon's face amount was $22.50. It was payable on February 1, 1934, but because President Roosevelt had devalued the dollar forty-percent against gold Mr. Norman calculated the coupon’s then-value against gold to be $38.10.
Not surprisingly, when Mr. Norman presented the coupon for payment the railroad refused to pay the amount due either in gold or in legal tender measured by the then value of gold.
Exactly what Norman C. Norman had tried to protect himself against as a creditor of the railroad had happened. Fearing currency depreciation, he had bought a gold clause bond. The dollar depreciated forty-percent. Norman invoked his gold clause. The debtor railroad refused to honor it.
Eventually, the case reached the Supreme Court of the United States.
There, the Court ruled that government’s power over financial affairs was extensive enough to justify the Joint Resolution’s abrogation of the gold clause, trump Mr. Norman’s contractual rights, and legalize the theft of forty-percent of his money.
The Gold Clause Cases fill 140 pages in the official reports of Supreme Court opinions. Predictably, many of those pages reek with the same collectivist/statist bromides that permeate other Supreme Court opinions, exalting government power at the expense of contract, property, and other individual rights.
Nowhere is there a more cogent expose of the majority opinions in the Gold Clause Cases than the dissent of Associate Justice McReynolds (reprinted in full in Chapter Five of The Gold Clause).
McReynolds excoriates the majority for its "confiscation of private rights and repudiation of national obligations," adverts to the Founders, and laments that "[t]he Constitution as many of us have understood it, the instrument that has meant so much to us, is gone."
Then he delves into history:
"Congress in 1900 enacted a statute declaring that money value should depend upon the Gold Dollar—25.8 grains of gold. Later, that all Government bonds should contain a contract to pay in gold. Billions went out with that solemn obligation in every one of them.
"During the World War men stood on the streets and proclaimed the advantage of such bonds. 'We are offering you the finest investment known, the solemn promise of the United States to pay you in Gold Dollars. Our country is in danger, freedom is at stake, your assistance is needed; buy that we may survive.' Billions were bought on such assurances. On May 2, 1933, after the Government has commandeered all gold, it nevertheless sold five hundred millions of bonds, containing this solemn promise!
"In 1900 the Government began to receive on deposit Gold Dollars and issue certificates therefore. The Treasury accepted the gold coin. Certificates acknowledged the receipt of gold and promised to return coin upon demand. Millions of such certificates went out; every one bore that assurance.
"In April 1933, under threat of heavy penalties, Congress declared all gold within the United States must be brought to the Treasury and directed the Treasurer to issue for this some form of currency. Millions came in. We left the Gold Standard and refused to recognize obligations. Our currency was depreciated, for all gold bullion received, only paper was offered.
"That was not enough. Notwithstanding the five hundred million gold bonds sold on May 2, Congress on the 12th declared its duty to raise the price of commodities and lower the value of securities. Also, that every dollar obligation, whatever the form, should be equal to every other one. And it gave the President power to depreciate the gold content of the dollar to fifty cents.
"If in that state of affairs the President had reduced the dollar to fifty cents, the holders of gold securities might have been entitled, under their contracts, to the value of the thing contracted for. But that would not have produced the end desired; so another act undertook to destroy all contracts for payment in gold.
* * *
After this effort to destroy the gold clause, the dollar is depreciated to sixty cents. Prices are to be estimated in deflated dollars. Mortgages, bank deposits, insurance funds, everything that thrifty men have accumulated, is subjected to this depreciation! And we are told there is no remedy!
* * *
It is said that the National Government has made by these transactions $2,800,000,000 and that all gold hypothecated to the Treasury may now be used to discharge public obligations! If the dollar be depreciated to five cents or possibly one, then, through fraud, all Government obligations could be discharged quite simply.
"Shame and humiliation are upon us now. Moral and financial chaos may confidentially be expected."
Justice McReynolds's mourning of the gold clause’s demise speaks volumes about what I predict will happen once the Democrats' spending spree translates into substantial inflation--which will enable the debtor-government to pay off its debt with depreciated paper.
But there's still a way out for many creditors, because the gold clause has been reborn. I’ll explain in Part V.
To be continued.
Chapter Five of my book The Gold Clause: What It Is And How To Use It Profitably is entitled “The Gold Clause In F.D.R.’s Supreme Court.” The chapter’s preface—written nearly three decades ago, long before the "compassionate conservatism" of George W. Bush and the socialist pragmatism of Barack Obama—says this:
"Although it took legislation by Congress to launch the New Deal's war on the gold clause, it would be in the Supreme Court of the United States that the major battle would be fought.
"In our system of government, the United States Constitution is the supreme law of the land, and the Supreme Court is the ultimate interpreter of the Constitution. During its nearly two hundred years of existence, the Court has decided thousands of cases, many of them interpreting the Constitution, and of those, many of great importance. However, only a few mark crucial turning points in America's constitutional history.
"The Gold Clause Cases are among them.
"The Cases are of obvious importance because of the crucial role they play in Roosevelt's entire anti-gold program. They constitute the linchpin of his anti-gold clause campaign. But the wider significance of the Gold Clause Cases transcends both the New Deal's war on gold, and the fate of the gold clauses themselves. The majority decision in the Cases provides a rarely seen example of rank judicial pragmatism at work in one of the areas of congressional power most dangerous to individual liberties: money and monetary affairs. Many of the financial and economic problems which have beset this nation for the past forty years [1940-1980] have been engendered by the premises which made possible the decisions in the Gold Clause Cases. Much that will happen to money and monetary affairs in the future will come from the same premises. Accordingly, an understanding of the Gold Clause Cases is essential not only for anyone who contemplates using the gold clause today, but with anyone concerned with the kind of monetary problem that the gold clause is designed to solve."
Norman C. Norman (who contacted me when my first articles on the gold clause began to appear in the 1970s) was an investor. Understandably concerned about depreciation of the dollars he had available to lend, he purchased a railroad bond containing coupons payable in gold coin "of or equal to the standard weight and fineness existing on February 1, 1930." Ownership of the bond made Mr. Norman a creditor of the railroad.
The coupon's face amount was $22.50. It was payable on February 1, 1934, but because President Roosevelt had devalued the dollar forty-percent against gold Mr. Norman calculated the coupon’s then-value against gold to be $38.10.
Not surprisingly, when Mr. Norman presented the coupon for payment the railroad refused to pay the amount due either in gold or in legal tender measured by the then value of gold.
Exactly what Norman C. Norman had tried to protect himself against as a creditor of the railroad had happened. Fearing currency depreciation, he had bought a gold clause bond. The dollar depreciated forty-percent. Norman invoked his gold clause. The debtor railroad refused to honor it.
Eventually, the case reached the Supreme Court of the United States.
There, the Court ruled that government’s power over financial affairs was extensive enough to justify the Joint Resolution’s abrogation of the gold clause, trump Mr. Norman’s contractual rights, and legalize the theft of forty-percent of his money.
The Gold Clause Cases fill 140 pages in the official reports of Supreme Court opinions. Predictably, many of those pages reek with the same collectivist/statist bromides that permeate other Supreme Court opinions, exalting government power at the expense of contract, property, and other individual rights.
Nowhere is there a more cogent expose of the majority opinions in the Gold Clause Cases than the dissent of Associate Justice McReynolds (reprinted in full in Chapter Five of The Gold Clause).
McReynolds excoriates the majority for its "confiscation of private rights and repudiation of national obligations," adverts to the Founders, and laments that "[t]he Constitution as many of us have understood it, the instrument that has meant so much to us, is gone."
Then he delves into history:
"Congress in 1900 enacted a statute declaring that money value should depend upon the Gold Dollar—25.8 grains of gold. Later, that all Government bonds should contain a contract to pay in gold. Billions went out with that solemn obligation in every one of them.
"During the World War men stood on the streets and proclaimed the advantage of such bonds. 'We are offering you the finest investment known, the solemn promise of the United States to pay you in Gold Dollars. Our country is in danger, freedom is at stake, your assistance is needed; buy that we may survive.' Billions were bought on such assurances. On May 2, 1933, after the Government has commandeered all gold, it nevertheless sold five hundred millions of bonds, containing this solemn promise!
"In 1900 the Government began to receive on deposit Gold Dollars and issue certificates therefore. The Treasury accepted the gold coin. Certificates acknowledged the receipt of gold and promised to return coin upon demand. Millions of such certificates went out; every one bore that assurance.
"In April 1933, under threat of heavy penalties, Congress declared all gold within the United States must be brought to the Treasury and directed the Treasurer to issue for this some form of currency. Millions came in. We left the Gold Standard and refused to recognize obligations. Our currency was depreciated, for all gold bullion received, only paper was offered.
"That was not enough. Notwithstanding the five hundred million gold bonds sold on May 2, Congress on the 12th declared its duty to raise the price of commodities and lower the value of securities. Also, that every dollar obligation, whatever the form, should be equal to every other one. And it gave the President power to depreciate the gold content of the dollar to fifty cents.
"If in that state of affairs the President had reduced the dollar to fifty cents, the holders of gold securities might have been entitled, under their contracts, to the value of the thing contracted for. But that would not have produced the end desired; so another act undertook to destroy all contracts for payment in gold.
* * *
After this effort to destroy the gold clause, the dollar is depreciated to sixty cents. Prices are to be estimated in deflated dollars. Mortgages, bank deposits, insurance funds, everything that thrifty men have accumulated, is subjected to this depreciation! And we are told there is no remedy!
* * *
It is said that the National Government has made by these transactions $2,800,000,000 and that all gold hypothecated to the Treasury may now be used to discharge public obligations! If the dollar be depreciated to five cents or possibly one, then, through fraud, all Government obligations could be discharged quite simply.
"Shame and humiliation are upon us now. Moral and financial chaos may confidentially be expected."
Justice McReynolds's mourning of the gold clause’s demise speaks volumes about what I predict will happen once the Democrats' spending spree translates into substantial inflation--which will enable the debtor-government to pay off its debt with depreciated paper.
But there's still a way out for many creditors, because the gold clause has been reborn. I’ll explain in Part V.
To be continued.
Tuesday, March 24, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part III)
New Deal For the Gold Clause
Even though the gold clause was left standing after The Legal Tender Cases (see Bronson v. Rodes, an 1868 Supreme Court decision), it stood on shaky ground.
No gold clause exception which may have survived the Supreme Court rulings in Hepburn, Julliard and Knox was going to withstand the earthquake brought about by Franklin Delano Roosevelt’s “New Deal.”
Almost immediately after his inauguration on March 4, 1933, Roosevelt unleashed his attack on gold.
On March 6, 1933 he unilaterally declared a national “bank holiday,” a euphemism for simply locking the doors of every financial institution in the United States, thus preventing withdrawal of currency and, especially, gold.
On March 9, 1933 Congress enacted the Emergency Banking Act [sound familiar?], granting the new president absolute power over gold and executive orders, presidential proclamations, rules, regulations, and decrees followed swiftly.
By mid-May 1933 steps had been taken to devalue the dollar against gold, and to confiscate virtually all privately owned gold belonging to United States citizens: gold bullion, gold certificates, and some gold coin. (For a thorough historical discussion of the New Deal’s machinations, see my 1973 Brooklyn Law Review article “How Americans Lost the Right to Own Gold, and Became Criminals in the Process”: http://www.fame.org/PDF/Holzer%20Henry%20Mark%20How%20Americans%20Lost%20Their%20Right%20to%20Own%20Gold.pdf).
What had not yet occurred, however, was any overt political or legal move against the gold clause, which still existed in many long-term debt obligations.
Remember what the gold clause provided (See the cover of my book—The Gold Clause: What It Is and How To Use It Profitably—for a photograph of a Western Maryland Railroad Company registered gold bond, issued in 1914.) Like the Western Maryland bond, the gold bonds of that era provided that payment of interest and principal would be made “in gold coin of the United States of America of the present standard of weight and fineness . . . at the option of the holder thereof.” (Forty Year, $100.00, 5%, First Mortgage Gold Bond of The Aurora, Elgin & Chicago Railway Company, in my possession.)
With that kind of a creditor-friendly guarantee, and its implications for soft money, it did not take a clairvoyant to foresee that the gold clause’s days were numbered. The creditor-protection device was wholly antithetical to the New Deal’s gold policies, and speculation about its fate was intense in financial circles.
Interestingly, the principal question was not whether the Roosevelt Administration would attempt to illegalize the gold clause. That was assumed.
The real question was whether Congress possessed the power (or, more precisely, whether the Supreme Court would rule that Congress possessed the power) to abrogate the gold clause.
The New Deal’s frontal assault on the gold clause, and thus on the millions in debt it sought to protect from depreciated currency, began with a Joint Resolution of Congress on June 5, 1933.
The Joint Resolution unequivocally revealed the Administration’s attitude toward the gold clause, condemning it as being “against public policy” and simply expunging it from all existing contracts.
The Joint Resolution announced that gold “affect[s] the public interest, and that gold clauses “obstruct” Congress’s power to “regulate the value of the money of the United States.”
While not widely known even then, the New Deal’s attack on the gold clause was rooted in large part in an explicit congressional intent to engineer a transfer of wealth [sound familiar?]. Indeed, the floor debates reveal that one purpose of the legislation was to redistribute some $200,000,000,000 (two-hundred billion), a lot of money in those days, from creditors to debtors.
Even less known is the plan FDR had concocted if the Supreme Court—where the gold clause question was headed—went against him. The President was prepared to defy the Court, if that’s what it took to destroy the gold clause and American’s ownership of gold.
Before the Supreme Court decided the Gold Clause Cases, Roosevelt had prepared the following statement—just in case:
“I do not seek to enter into any controversy with the distinguished members of the Supreme Court of the United States who have participated in this . . . decision. They have decided these cases in accordance with the letter of the law as they read it . . . . It is the duty of the Congress and the President to protect the people of the United States to the best of their ability. It is necessary to protect them from the unintended construction of voluntary acts, as well as from intolerable burdens involuntarily imposed. To stand idly by and to permit the decision of the Supreme Court to be carried through to its logical, inescapable conclusion would so imperil the economic and political security of this nation that the legislative and executive officers of the Government must look beyond the narrow letter of contractual obligations, so that they may sustain the substance of the promise originally made in accord with the actual intention of the parties . . . . I shall immediately take such steps as may be necessary, by proclamation and by message to the Congress of the United States.”
Unfortunately, Roosevelt never had to make public his intention to destroy gold by attempting to nullify the Constitution of the United States of America. The Supreme Court did it for him, in The Gold Clause Cases—the subject of Part IV of this series.
To be continued.
Even though the gold clause was left standing after The Legal Tender Cases (see Bronson v. Rodes, an 1868 Supreme Court decision), it stood on shaky ground.
No gold clause exception which may have survived the Supreme Court rulings in Hepburn, Julliard and Knox was going to withstand the earthquake brought about by Franklin Delano Roosevelt’s “New Deal.”
Almost immediately after his inauguration on March 4, 1933, Roosevelt unleashed his attack on gold.
On March 6, 1933 he unilaterally declared a national “bank holiday,” a euphemism for simply locking the doors of every financial institution in the United States, thus preventing withdrawal of currency and, especially, gold.
On March 9, 1933 Congress enacted the Emergency Banking Act [sound familiar?], granting the new president absolute power over gold and executive orders, presidential proclamations, rules, regulations, and decrees followed swiftly.
By mid-May 1933 steps had been taken to devalue the dollar against gold, and to confiscate virtually all privately owned gold belonging to United States citizens: gold bullion, gold certificates, and some gold coin. (For a thorough historical discussion of the New Deal’s machinations, see my 1973 Brooklyn Law Review article “How Americans Lost the Right to Own Gold, and Became Criminals in the Process”: http://www.fame.org/PDF/Holzer%20Henry%20Mark%20How%20Americans%20Lost%20Their%20Right%20to%20Own%20Gold.pdf).
What had not yet occurred, however, was any overt political or legal move against the gold clause, which still existed in many long-term debt obligations.
Remember what the gold clause provided (See the cover of my book—The Gold Clause: What It Is and How To Use It Profitably—for a photograph of a Western Maryland Railroad Company registered gold bond, issued in 1914.) Like the Western Maryland bond, the gold bonds of that era provided that payment of interest and principal would be made “in gold coin of the United States of America of the present standard of weight and fineness . . . at the option of the holder thereof.” (Forty Year, $100.00, 5%, First Mortgage Gold Bond of The Aurora, Elgin & Chicago Railway Company, in my possession.)
With that kind of a creditor-friendly guarantee, and its implications for soft money, it did not take a clairvoyant to foresee that the gold clause’s days were numbered. The creditor-protection device was wholly antithetical to the New Deal’s gold policies, and speculation about its fate was intense in financial circles.
Interestingly, the principal question was not whether the Roosevelt Administration would attempt to illegalize the gold clause. That was assumed.
The real question was whether Congress possessed the power (or, more precisely, whether the Supreme Court would rule that Congress possessed the power) to abrogate the gold clause.
The New Deal’s frontal assault on the gold clause, and thus on the millions in debt it sought to protect from depreciated currency, began with a Joint Resolution of Congress on June 5, 1933.
The Joint Resolution unequivocally revealed the Administration’s attitude toward the gold clause, condemning it as being “against public policy” and simply expunging it from all existing contracts.
The Joint Resolution announced that gold “affect[s] the public interest, and that gold clauses “obstruct” Congress’s power to “regulate the value of the money of the United States.”
While not widely known even then, the New Deal’s attack on the gold clause was rooted in large part in an explicit congressional intent to engineer a transfer of wealth [sound familiar?]. Indeed, the floor debates reveal that one purpose of the legislation was to redistribute some $200,000,000,000 (two-hundred billion), a lot of money in those days, from creditors to debtors.
Even less known is the plan FDR had concocted if the Supreme Court—where the gold clause question was headed—went against him. The President was prepared to defy the Court, if that’s what it took to destroy the gold clause and American’s ownership of gold.
Before the Supreme Court decided the Gold Clause Cases, Roosevelt had prepared the following statement—just in case:
“I do not seek to enter into any controversy with the distinguished members of the Supreme Court of the United States who have participated in this . . . decision. They have decided these cases in accordance with the letter of the law as they read it . . . . It is the duty of the Congress and the President to protect the people of the United States to the best of their ability. It is necessary to protect them from the unintended construction of voluntary acts, as well as from intolerable burdens involuntarily imposed. To stand idly by and to permit the decision of the Supreme Court to be carried through to its logical, inescapable conclusion would so imperil the economic and political security of this nation that the legislative and executive officers of the Government must look beyond the narrow letter of contractual obligations, so that they may sustain the substance of the promise originally made in accord with the actual intention of the parties . . . . I shall immediately take such steps as may be necessary, by proclamation and by message to the Congress of the United States.”
Unfortunately, Roosevelt never had to make public his intention to destroy gold by attempting to nullify the Constitution of the United States of America. The Supreme Court did it for him, in The Gold Clause Cases—the subject of Part IV of this series.
To be continued.
Sunday, March 22, 2009
Obama's Judges
It begins!
The fight for the heart and soul of the Supreme Court of the United States began last week when Obama fired a warning shot across the bow of the Republican Senate minority.
Obama has nominated an Indiana political veteran, currently masquerading as a federal district judge, for a seat on the United States Court of Appeals for the Seventh Judicial Circuit.
His name is David Hamilton, formerly counsel to Democrat governor Evan Bayh, now an Indiana United States Senator who is the nominee’s rabbi.
Even though Hamilton had been a staunch ACLU apparatchik before political pull found him a seat on the United States District Court, Obama claimed that his nominee has a "long and impressive record of service and a history of handing down fair and judicious decisions." Indeed, the White House painted Hamilton as a "moderate"—thus moving the goal posts from left to right.
Others have a different view of what they call Hamilton’s "pretty clear leftist political record." Wendy Long of the Judicial Confirmation Network adverted to his ACLU work, asserting that Hamilton "appears to have made rulings that show his willingness to bend the law to reach outcomes favored by his ACLU allies, which are inconsistent with the proper role of a judge under our Constitution."
And where will the Republicans be on the Hamilton nomination, which is doubtless a trial balloon for the soon-to-be first Supreme Court vacancy?
Indiana’s Republican senator, Richard Lugar has been the first to fold: he promises to "enthusiastically support" the nomination—a crucially important endorsement for Hamilton because a judicial nominee, any nominee for that matter, needs the support of his home-state senators.
The Senate Club is yet again accommodating its own, and if the Lugar apostasy is a portent of Republican reaction to Obama’s judicial nominations—especially to the courts of appeal (where most of the federal appellate work is done, and surely to the Supreme Court—the Left-Democrats will sooner than later probably control all three branches of the federal government.
Then, the "Living Constitution "will be in full bloom, its noxious blossoms completing the job of poisoning our nation.
In this regard, a lengthy essay I wrote before the election bears repeating (see http://www.henrymarkholzer.citymax.com/obamas_supreme_court.html). It is reprinted below in its entirety.
***
The fight for the heart and soul of the Supreme Court of the United States began last week when Obama fired a warning shot across the bow of the Republican Senate minority.
Obama has nominated an Indiana political veteran, currently masquerading as a federal district judge, for a seat on the United States Court of Appeals for the Seventh Judicial Circuit.
His name is David Hamilton, formerly counsel to Democrat governor Evan Bayh, now an Indiana United States Senator who is the nominee’s rabbi.
Even though Hamilton had been a staunch ACLU apparatchik before political pull found him a seat on the United States District Court, Obama claimed that his nominee has a "long and impressive record of service and a history of handing down fair and judicious decisions." Indeed, the White House painted Hamilton as a "moderate"—thus moving the goal posts from left to right.
Others have a different view of what they call Hamilton’s "pretty clear leftist political record." Wendy Long of the Judicial Confirmation Network adverted to his ACLU work, asserting that Hamilton "appears to have made rulings that show his willingness to bend the law to reach outcomes favored by his ACLU allies, which are inconsistent with the proper role of a judge under our Constitution."
And where will the Republicans be on the Hamilton nomination, which is doubtless a trial balloon for the soon-to-be first Supreme Court vacancy?
Indiana’s Republican senator, Richard Lugar has been the first to fold: he promises to "enthusiastically support" the nomination—a crucially important endorsement for Hamilton because a judicial nominee, any nominee for that matter, needs the support of his home-state senators.
The Senate Club is yet again accommodating its own, and if the Lugar apostasy is a portent of Republican reaction to Obama’s judicial nominations—especially to the courts of appeal (where most of the federal appellate work is done, and surely to the Supreme Court—the Left-Democrats will sooner than later probably control all three branches of the federal government.
Then, the "Living Constitution "will be in full bloom, its noxious blossoms completing the job of poisoning our nation.
In this regard, a lengthy essay I wrote before the election bears repeating (see http://www.henrymarkholzer.citymax.com/obamas_supreme_court.html). It is reprinted below in its entirety.
***
Last week’s Supreme Court 5-4 decision in Boumediene v. Bush—holding that alien unlawful enemy combatants have a constitutional right to use habeas corpus in American federal courts to challenge their detention—came as no surprise to those of us who have watched the "Living Constitution" virus metastasize since that ideological disease first began to infect the judiciary during the Warren Court era.
Those who subscribe to "Living Constitution" ideology believe that the founding principles of this Nation are passé, that the Declaration of Independence’s ringing endorsement of limited government and individual rights is outdated, that the Constitution’s creation of a representative republic is from a long past moment in history, and that the Bill of Rights is not a restraint on government but rather a source of newly invented "rights."
The "Living Constitution’s" partisans’ high priest was the late Warren Court era Supreme Court Justice William J. Brennan, Jr. According to him, in a 1985 speech, the Constitution "embodies the aspiration to social justice, brotherhood, and human dignity that brought this nation into being. * * * Our amended Constitution is the lodestar for our aspirations. Like every text worth reading, it is not crystalline. The phrasing is broad and the limitations of its provisions are not clearly marked. Its majestic generalities and ennobling pronouncements are both luminous and obscure." (My emphasis.)
Brennan was saying that the Constitution, rather than delegating specific powers to the federal government (Articles I, II and III), respecting state sovereignty (Tenth Amendment), and recognizing the existence of enumerated (Amendments I-VIII) and unenumerated (Amendment IX) rights, instead embodies amorphous "aspirations." Whose aspirations, Brennan did not inform us.
But Brennan did tell us what those aspirations are: "social justice, brotherhood, and human dignity."
We’ve learned the hard way that by "social justice" Brennan meant that the Supreme Court would allow Minnesota to rewrite mortgage contracts to benefit defaulting farmers (Home Building & Loan Association v. Blaisdell). "Brotherhood" would permit law schools to racially discriminate in the name of diversity (Grutter v. Bolinger), and Roe v. Wade would foster murder of the unborn to protect privacy.
After his paean to "social justice, brotherhood, and human dignity," Brennan’s 1985 speech continued: "When Justices interpret the Constitution they speak for their community, not for themselves alone. The act of interpretation must be undertaken with full consciousness that it is . . . the community’s interpretation that is sought. * * * But the ultimate question must be, what do the words of the text mean in our time. For the genius of the Constitution rests not in any static meaning it might have had in a world that is dead and gone, but in the adaptability of its great principles to cope with current problems and current needs. * * * Our Constitution was not intended to preserve a preexisting society but to make a new one, to put in place new principles that the prior political community had not sufficiently recognized." (My emphasis.)
Let’s analyze Brennan’s startling statements piece by piece.
"The phrasing is broad and the limitations of its provisions are not clearly marked." Doubtless Brennan was referring, for example, to Article I “(The House of Representatives . . . shall have the sole Power of impeachment”), Article II (“The executive Power shall be vested in a President of the United States”), Article III (“The judicial Power of the United States, shall be vested in one supreme Court”), Article IV (“No new State shall be formed or erected within the Jurisdiction of any other State”), Article V (“No State, without its Consent, shall be deprived of its equal Suffrage in the Senate”), Article VI (“No religious Test shall ever be required as a Qualification to any Office or public Trust under the United States and Article VII (“The Ratification of the Conventions of nine States, shall be sufficient for the Establishment of this Constitution between the States ratifying the Same”)—and of course in the Bill of Rights, for example, the First Amendment (“Congress shall make no law”). (My emphasis.)
If this "phrasing is broad”"and if these “"imitations . . . are not clearly marked," then nothing in the Constitution and Bill of Rights is—which is exactly what Brennanites want, as they worship their Living Constitution.
"When Justices interpret the Constitution they speak for their community, not for themselves alone. The act of interpretation must be undertaken with full consciousness that it is . . . the community’s interpretation that is sought." Here, Brennan was wrong on two counts. Putting aside what "community" the judges are supposed to speak for (village, town, city, county, state, country, hemisphere, continent, UN, EC, NATO?), proper constitutional interpretation speaks for what the words say and what they meant at the time they were written, and to the men who wrote them. Nor are today’s justices supposed to speak "for themselves alone." Who cares what they think, compared to the Constitution’s words and their meaning?
"What do the words of the text mean in our time,”"Brennan asks about the Constitution. Thus, in the world of the "Living Constitution," the "in our time" requirement that the President be at least 35 years of age should really mean 60 because, after all, life spans are much longer today than in 1787. Or the words "[n]o state shall impair the obligation of contracts" should mean, "in our time," except when farmers need debt relief—as the Court held in Home Building & Loan Association v. Blaisdell.
"The genius of the Constitution," Brennan told us, "rests not in any static meaning it might have had . . . ." "Static," in Brennan’s context, is of course a pejorative term, suggesting that anything fixed and immutable is somehow undesirable—though Brennan would doubtless not see the First Amendment as undesirably static.
"In a world that is dead and gone . . . ." Putting aside the melodrama of this passage, if, as Brennan says, the world of the Framers is "dead and gone"—where government was limited, individual rights paramount, federalism understood, state sovereignty protected—that is all the more reason to now interpret the Constitution in accordance with the principles that ruled in those bygone days.
"But in the adaptability of its great principles . . . ." It is facially contradictory for Brennan in one breath to condemn "static meaning" and in the next to laud "great principles," because if principles are indeed great, like not bearing false witness, their strength is in being "static."
"To cope with current problems and current needs." Immediately after the Civil War, when the Fourteenth Amendment was adopted, there was no "current problem”"about some private land being burdened by racially restrictive covenants, and there was at that time no "current need" for Negroes to move into formerly white suburbs. However, such a problem/need did arise after World War II. Thus, according to Brennan, it was appropriate that the Equal Protection Clause, which was never intended to invalidate concededly valid private land contracts, should be employed to hold unconstitutional judicial enforcement of those covenants. Brennan should have asked the Japanese-Americans who were shipped off to internment camps after Pearl Harbor if they thought the litmus paper of constitutional interpretation should be "current problems and current needs." Or the dead American draftees who perished in Vietnam. Or, for that matter, Negro slaves on the day the Dred Scott decision came down.
"Our Constitution," Brennan concludes, "was not intended to preserve a preexisting society but to make a new one, to put in place new principles that the prior political community had not sufficiently recognized."
Ah Ha! The "static meaning" that Brennan decried earlier in his speech was apparently not intended to be static after all.
Nor, apparently, was it intended that the clear text of the Bill of Rights should preserve the individual rights guaranteed by the Constitution’s first nine amendments.
In effect, Brennan would have us believe that the Constitution was a mere outline for a script yet to be written by judges about "new principles," which the Framers were apparently too dull to have "sufficiently recognized"—"new principles" like sterilizing imbeciles, outlawing capital punishment, inventing "prisoners’ rights," imposing racial quotas, murdering the unborn, restricting political speech, and much more.
William J. Brennan, Jr., like many of his colleagues then and now (today, think Justices Stevens, Kennedy, Souter, Ginsburg, Breyer), and countless other federal and state judges throughout the United States, are not just liberals, which would be bad enough. They are, philosophically, collectivists and statists who believe with the orthodoxy of zealots that "rights" are created by society and its Platonic guardians, the judges, and that through the exercise of government power utopian goals can be achieved without regard to constitutional principles or the moral code that underlay them at the Founding.
In short, Brennan and his ilk are utterly indifferent to the proper role of judges, and see themselves as uber-legislators imposing their personal policy preferences on the unwashed in the guise of constitutional interpretation.
Which bring us to the current election and presumptive Democrat Party nominee [and now President], Barack Obama.
Putting aside that Obama is plainly a white-hating, white-using radical, and probably a Marxist Elmer Gantry, it needs to be said that if the fate of the federal judiciary, let alone the Supreme Court, falls into his hands (especially with a compliant Senate), our Nation will be crippled in its domestic battle against socialism and our foreign war against Islamofascism.
This is not a charge that I make lightly, but rather one rooted in the words of Obama himself.
On July 17, 2007, Obama made a speech in Washington, D.C. to the country’s leading abortion-meisters, "Planned Parenthood." In the words of NBC reporter Carrie Dean, Obama not only "leveled harsh words at conservative Supreme Court justices," but "he offered his own intention to appoint justices with 'empathy'."
"Empathy," according to Webster’s New World Dictionary of the American Language, is "the projection of one’s own personality into the personality of another in order to understand him better; ability to share in another’s emotions or feelings."
Thus, we have been unmistakably warned that Obama will appoint Supreme Court justices who will not honestly interpret the Constitution, Bill of Rights, and Fourteenth Amendment—let alone on the basis of what they say and meant to those who wrote them—but who, instead, will project their own personalities into others to understand them better; justices who can share in those others’ emotions or feelings.
And who might Obama’s empathy-receivers be?
Obama himself told us in that same 2007 Planned Parenthood speech: "We need somebody who’s got the heart, the empathy, to recognize what it’s like to be a young teenage mom. The empathy to understand what it’s like to be poor, or African-American, or gay, or disabled, or old. And that’s the criteria by which I’m going to be selecting my judges." (My emphasis.)
It could not be clearer what this pretender to the presidency [now President] of the United States has admitted.
So much for the classical liberal philosophy that was at the founding’s core and in its fundamental documents. From now on, constitutional interpretation Obama-style is to be through the eyes of whom he sees as society’s alleged victims.
Obama’s confession drops Brennan’s "Living Constitutionalism" into yet a lower rung of hell. His confession reveals that while the Brennanites fed the "Living Constitution’s" voracious appetite in order to achieve the amorphous goals of "social justice, brotherhood, and human dignity," Obama will nurture the beast with what’s left of limited government and individual rights, all in the name of "empathy"—a code word for something much darker: sacrifice of constitutionalism to the needs of society’s perceived victims.
This perversion of America’s essence—individuals as supreme, with government as their servant—is Brennanism squared. While our Nation has been able to survive Brennanism—though with the recent Guantanamo decisions, especially Boumediene v. Bush [and other decisions since], who knows?—we will not be able to survive Obama-appointed Supreme Court justices.
***
The battle over those justices has now begun with the Hamilton nomination, and so far Republican Lugar is AWOL. We’ll soon see how many of his GOP colleagues—Specter, Stowe, Collins, McCain, Graham, Voinovich?—join him in deserting principle in return for pork, earmarks, fellowship and grandstanding.
Those who subscribe to "Living Constitution" ideology believe that the founding principles of this Nation are passé, that the Declaration of Independence’s ringing endorsement of limited government and individual rights is outdated, that the Constitution’s creation of a representative republic is from a long past moment in history, and that the Bill of Rights is not a restraint on government but rather a source of newly invented "rights."
The "Living Constitution’s" partisans’ high priest was the late Warren Court era Supreme Court Justice William J. Brennan, Jr. According to him, in a 1985 speech, the Constitution "embodies the aspiration to social justice, brotherhood, and human dignity that brought this nation into being. * * * Our amended Constitution is the lodestar for our aspirations. Like every text worth reading, it is not crystalline. The phrasing is broad and the limitations of its provisions are not clearly marked. Its majestic generalities and ennobling pronouncements are both luminous and obscure." (My emphasis.)
Brennan was saying that the Constitution, rather than delegating specific powers to the federal government (Articles I, II and III), respecting state sovereignty (Tenth Amendment), and recognizing the existence of enumerated (Amendments I-VIII) and unenumerated (Amendment IX) rights, instead embodies amorphous "aspirations." Whose aspirations, Brennan did not inform us.
But Brennan did tell us what those aspirations are: "social justice, brotherhood, and human dignity."
We’ve learned the hard way that by "social justice" Brennan meant that the Supreme Court would allow Minnesota to rewrite mortgage contracts to benefit defaulting farmers (Home Building & Loan Association v. Blaisdell). "Brotherhood" would permit law schools to racially discriminate in the name of diversity (Grutter v. Bolinger), and Roe v. Wade would foster murder of the unborn to protect privacy.
After his paean to "social justice, brotherhood, and human dignity," Brennan’s 1985 speech continued: "When Justices interpret the Constitution they speak for their community, not for themselves alone. The act of interpretation must be undertaken with full consciousness that it is . . . the community’s interpretation that is sought. * * * But the ultimate question must be, what do the words of the text mean in our time. For the genius of the Constitution rests not in any static meaning it might have had in a world that is dead and gone, but in the adaptability of its great principles to cope with current problems and current needs. * * * Our Constitution was not intended to preserve a preexisting society but to make a new one, to put in place new principles that the prior political community had not sufficiently recognized." (My emphasis.)
Let’s analyze Brennan’s startling statements piece by piece.
"The phrasing is broad and the limitations of its provisions are not clearly marked." Doubtless Brennan was referring, for example, to Article I “(The House of Representatives . . . shall have the sole Power of impeachment”), Article II (“The executive Power shall be vested in a President of the United States”), Article III (“The judicial Power of the United States, shall be vested in one supreme Court”), Article IV (“No new State shall be formed or erected within the Jurisdiction of any other State”), Article V (“No State, without its Consent, shall be deprived of its equal Suffrage in the Senate”), Article VI (“No religious Test shall ever be required as a Qualification to any Office or public Trust under the United States and Article VII (“The Ratification of the Conventions of nine States, shall be sufficient for the Establishment of this Constitution between the States ratifying the Same”)—and of course in the Bill of Rights, for example, the First Amendment (“Congress shall make no law”). (My emphasis.)
If this "phrasing is broad”"and if these “"imitations . . . are not clearly marked," then nothing in the Constitution and Bill of Rights is—which is exactly what Brennanites want, as they worship their Living Constitution.
"When Justices interpret the Constitution they speak for their community, not for themselves alone. The act of interpretation must be undertaken with full consciousness that it is . . . the community’s interpretation that is sought." Here, Brennan was wrong on two counts. Putting aside what "community" the judges are supposed to speak for (village, town, city, county, state, country, hemisphere, continent, UN, EC, NATO?), proper constitutional interpretation speaks for what the words say and what they meant at the time they were written, and to the men who wrote them. Nor are today’s justices supposed to speak "for themselves alone." Who cares what they think, compared to the Constitution’s words and their meaning?
"What do the words of the text mean in our time,”"Brennan asks about the Constitution. Thus, in the world of the "Living Constitution," the "in our time" requirement that the President be at least 35 years of age should really mean 60 because, after all, life spans are much longer today than in 1787. Or the words "[n]o state shall impair the obligation of contracts" should mean, "in our time," except when farmers need debt relief—as the Court held in Home Building & Loan Association v. Blaisdell.
"The genius of the Constitution," Brennan told us, "rests not in any static meaning it might have had . . . ." "Static," in Brennan’s context, is of course a pejorative term, suggesting that anything fixed and immutable is somehow undesirable—though Brennan would doubtless not see the First Amendment as undesirably static.
"In a world that is dead and gone . . . ." Putting aside the melodrama of this passage, if, as Brennan says, the world of the Framers is "dead and gone"—where government was limited, individual rights paramount, federalism understood, state sovereignty protected—that is all the more reason to now interpret the Constitution in accordance with the principles that ruled in those bygone days.
"But in the adaptability of its great principles . . . ." It is facially contradictory for Brennan in one breath to condemn "static meaning" and in the next to laud "great principles," because if principles are indeed great, like not bearing false witness, their strength is in being "static."
"To cope with current problems and current needs." Immediately after the Civil War, when the Fourteenth Amendment was adopted, there was no "current problem”"about some private land being burdened by racially restrictive covenants, and there was at that time no "current need" for Negroes to move into formerly white suburbs. However, such a problem/need did arise after World War II. Thus, according to Brennan, it was appropriate that the Equal Protection Clause, which was never intended to invalidate concededly valid private land contracts, should be employed to hold unconstitutional judicial enforcement of those covenants. Brennan should have asked the Japanese-Americans who were shipped off to internment camps after Pearl Harbor if they thought the litmus paper of constitutional interpretation should be "current problems and current needs." Or the dead American draftees who perished in Vietnam. Or, for that matter, Negro slaves on the day the Dred Scott decision came down.
"Our Constitution," Brennan concludes, "was not intended to preserve a preexisting society but to make a new one, to put in place new principles that the prior political community had not sufficiently recognized."
Ah Ha! The "static meaning" that Brennan decried earlier in his speech was apparently not intended to be static after all.
Nor, apparently, was it intended that the clear text of the Bill of Rights should preserve the individual rights guaranteed by the Constitution’s first nine amendments.
In effect, Brennan would have us believe that the Constitution was a mere outline for a script yet to be written by judges about "new principles," which the Framers were apparently too dull to have "sufficiently recognized"—"new principles" like sterilizing imbeciles, outlawing capital punishment, inventing "prisoners’ rights," imposing racial quotas, murdering the unborn, restricting political speech, and much more.
William J. Brennan, Jr., like many of his colleagues then and now (today, think Justices Stevens, Kennedy, Souter, Ginsburg, Breyer), and countless other federal and state judges throughout the United States, are not just liberals, which would be bad enough. They are, philosophically, collectivists and statists who believe with the orthodoxy of zealots that "rights" are created by society and its Platonic guardians, the judges, and that through the exercise of government power utopian goals can be achieved without regard to constitutional principles or the moral code that underlay them at the Founding.
In short, Brennan and his ilk are utterly indifferent to the proper role of judges, and see themselves as uber-legislators imposing their personal policy preferences on the unwashed in the guise of constitutional interpretation.
Which bring us to the current election and presumptive Democrat Party nominee [and now President], Barack Obama.
Putting aside that Obama is plainly a white-hating, white-using radical, and probably a Marxist Elmer Gantry, it needs to be said that if the fate of the federal judiciary, let alone the Supreme Court, falls into his hands (especially with a compliant Senate), our Nation will be crippled in its domestic battle against socialism and our foreign war against Islamofascism.
This is not a charge that I make lightly, but rather one rooted in the words of Obama himself.
On July 17, 2007, Obama made a speech in Washington, D.C. to the country’s leading abortion-meisters, "Planned Parenthood." In the words of NBC reporter Carrie Dean, Obama not only "leveled harsh words at conservative Supreme Court justices," but "he offered his own intention to appoint justices with 'empathy'."
"Empathy," according to Webster’s New World Dictionary of the American Language, is "the projection of one’s own personality into the personality of another in order to understand him better; ability to share in another’s emotions or feelings."
Thus, we have been unmistakably warned that Obama will appoint Supreme Court justices who will not honestly interpret the Constitution, Bill of Rights, and Fourteenth Amendment—let alone on the basis of what they say and meant to those who wrote them—but who, instead, will project their own personalities into others to understand them better; justices who can share in those others’ emotions or feelings.
And who might Obama’s empathy-receivers be?
Obama himself told us in that same 2007 Planned Parenthood speech: "We need somebody who’s got the heart, the empathy, to recognize what it’s like to be a young teenage mom. The empathy to understand what it’s like to be poor, or African-American, or gay, or disabled, or old. And that’s the criteria by which I’m going to be selecting my judges." (My emphasis.)
It could not be clearer what this pretender to the presidency [now President] of the United States has admitted.
So much for the classical liberal philosophy that was at the founding’s core and in its fundamental documents. From now on, constitutional interpretation Obama-style is to be through the eyes of whom he sees as society’s alleged victims.
Obama’s confession drops Brennan’s "Living Constitutionalism" into yet a lower rung of hell. His confession reveals that while the Brennanites fed the "Living Constitution’s" voracious appetite in order to achieve the amorphous goals of "social justice, brotherhood, and human dignity," Obama will nurture the beast with what’s left of limited government and individual rights, all in the name of "empathy"—a code word for something much darker: sacrifice of constitutionalism to the needs of society’s perceived victims.
This perversion of America’s essence—individuals as supreme, with government as their servant—is Brennanism squared. While our Nation has been able to survive Brennanism—though with the recent Guantanamo decisions, especially Boumediene v. Bush [and other decisions since], who knows?—we will not be able to survive Obama-appointed Supreme Court justices.
***
The battle over those justices has now begun with the Hamilton nomination, and so far Republican Lugar is AWOL. We’ll soon see how many of his GOP colleagues—Specter, Stowe, Collins, McCain, Graham, Voinovich?—join him in deserting principle in return for pork, earmarks, fellowship and grandstanding.
Friday, March 20, 2009
Buckley's Heirs Attack Ayn Rand, Again
The credence, even respect, being given today to Ayn Rand's ideas, as exemplified by her novel Atlas Shrugged, was bound to outrage many conservatives, especially those theists at National Review who, following in the steps of its founder, disdained her because she was an atheist.
Beginning with William F. Buckley, Jr. assigning the Atlas review to the god-fearing, one-time traitor, ex-communist, and professional testifier Whittaker Chambers, National Review through its founder had nothing good to say about the author who argued for a moral--not religious or social!--basis for individual rights and capitalism. Indeed, even after her death, Buckley, in an alleged novel, took swipes at the then-deceased author who has done more for individual rights than the revered (by some) mystical supplicant William F. Buckley, Jr.
So it comes as no surprise that with Ayn Rand's name and her novel being front and center in today's discourse about how close America is coming to the altruist/collectivist/statist abyss, National Review would disinter the spirit of Buckley and attack her yet again.
An online "NRO Symposium" of March 20, 2009 entitled "Going Galt: Ayn Rand's books are booming--but what about her ideas?" presents "a distinguished group of contributors to discuss Rand's newfound poplularity."
"Newfound popularity," indeed! Rand's books have sold more than Buckley could ever have imagined for his tomes even were he in a mystical trance.
As to the "distinguished group," six of the nine contributors fell all over themselves to be snide, condescending, pompous, insulting. Not surprisingly, in the comments of one contributor, the stench of anti-Semitism can be detected.
Somewhere, William F. Buckley, Jr. may be smiling.
But Ayn Rand must be laughing--as her NR-denigrated ideas more and more permeate the culture, revealing the grave deficiencies in much conservative thought.
Beginning with William F. Buckley, Jr. assigning the Atlas review to the god-fearing, one-time traitor, ex-communist, and professional testifier Whittaker Chambers, National Review through its founder had nothing good to say about the author who argued for a moral--not religious or social!--basis for individual rights and capitalism. Indeed, even after her death, Buckley, in an alleged novel, took swipes at the then-deceased author who has done more for individual rights than the revered (by some) mystical supplicant William F. Buckley, Jr.
So it comes as no surprise that with Ayn Rand's name and her novel being front and center in today's discourse about how close America is coming to the altruist/collectivist/statist abyss, National Review would disinter the spirit of Buckley and attack her yet again.
An online "NRO Symposium" of March 20, 2009 entitled "Going Galt: Ayn Rand's books are booming--but what about her ideas?" presents "a distinguished group of contributors to discuss Rand's newfound poplularity."
"Newfound popularity," indeed! Rand's books have sold more than Buckley could ever have imagined for his tomes even were he in a mystical trance.
As to the "distinguished group," six of the nine contributors fell all over themselves to be snide, condescending, pompous, insulting. Not surprisingly, in the comments of one contributor, the stench of anti-Semitism can be detected.
Somewhere, William F. Buckley, Jr. may be smiling.
But Ayn Rand must be laughing--as her NR-denigrated ideas more and more permeate the culture, revealing the grave deficiencies in much conservative thought.
Saturday, March 14, 2009
Al Odah v. United States of America: The Judiciary’s Latest Nail in America’s Coffin
On March 6, 2009 a panel of the United States Court of Appeals for the District of Columbia Circuit rendered a decision in Al Odah v. United States of America—and dug yet deeper the grave into which American national security is being buried.
In the March 10, 2009 edition of National Review Online, NR Contributing Editor Andrew C. McCarthy has written a devastating critique of that decision, its implications, and its likely consequences: “The War is Over: Federal courts have just surrendered in the war against radical Islam.” (See http://article.nationalreview.com/?q=ZDQyYjEzMTg3ZDBjZTA4MzExNjU1MTE2MzkwYTRiMTc.)
Mr. McCarthy’s article is required reading for every American who wants to understand just how imperial the Imperial Judiciary has become—and how persistently and successfully it is usurping control of our national security, thus seriously undermining our nation’s ability to defend itself against those bent on our destruction.
“Discovery,” in both civil and criminal litigation, is the process by which each side shares with the other factual material relevant to the issues in the case. The usual tools of discovery in civil cases are depositions, written interrogatories, and requests for admissions. In criminal cases, most discovery consists of the prosecution informing the defense of constitutionally-required information, such as exculpatory evidence.
As McCarthy explains in “The War is Over,” al Odah was “a mind-numbing technical dispute over ‘discovery’ in litigation . . . . But the discovery in question is the most vital kind, namely, that of classified national-defense information. What is in dispute is how much sensitive intelligence we must share with enemies bent on annihilating Americans . . . .” In other words, “[a]t issue was: In a challenge to the military’s designation of someone as an enemy combatant, what disclosures of classified information must the government make to the combatant about its basis for concluding that he is one of the enemy?”
The answer of the Court of Appeals panel that made this abominable decision was, in effect, that potentially quite a lot must be shared! As McCarthy says, the court held that “the government must surrender anything in its file that might be helpful [i.e., “material”] to an individual combatant’s case” in a proceeding to determine his status. (My emphasis.)
And who decides “helpful”/”material”?
Why, a judge, of course.
Wait a minute!
Did the United States Court of Appeals for the District of Columbia Circuit rule that the government must relinquish to a federal trial judge its entire file on an enemy combatant—including, presumably, information about intelligence “sources” and “methods”—and that a life-tenured, politically unaccountable jurist will decide how much of it to turn over to confessed 9/11 mastermind Khalid Sheikh Mohammed and his co-terrorists?
Sadly, yes. That’s exactly the meaning of the al Odah decision, the roots of which were planted in the Supreme Court’s earlier Boumediene decision (about which I have written previously; see http://www.henrymarkholzer.citymax.com/boumediene_v_bush.html).
As Mr. McCarthy says, in the Boumediene decision “the U.S. Supreme Court ruled—against the weight of precedent, tradition, and common sense—that non-U.S. nationals, held by the military outside sovereign American territory (i.e., beyond the writ of American judges) as prisoners captured in a war authorized by Congress, are nevertheless vested with a constitutional right to challenge their detention as enemy combatants in our courts.”
And who was responsible for Boumediene? Associate Justice of the Supreme Court of the United States Anthony Kennedy. And who was responsible for Kennedy: President Ronald Reagan (who also gave us Sandra Day O’Connor.)
And who was responsible for al Odah?
In one sense, no one.
That’s because the opinion was per curiam—“By the court. A phrase used to distinguish an opinion of the whole court from an opinion written by any one judge” (Black’s Law Dictionary). Not one of the three members of the panel put their names to the opinion, let alone was there a dissent—not even by Judge Janice Rogers Brown, a darling of many conservatives (until now at least).
With Kennedy and four liberals on the Supreme Court, “conservatives” like Brown in the D.C. Circuit, Obama ruling (and appointing judges) from the White House, and Democrats controlling the Senate, Andrew C. McCarthy is likely correct: “The war is over, at least until the next 9/11.”
When that comes, it will be a loud wakeup call indeed.
We must not forget where the blame will lie.
In the March 10, 2009 edition of National Review Online, NR Contributing Editor Andrew C. McCarthy has written a devastating critique of that decision, its implications, and its likely consequences: “The War is Over: Federal courts have just surrendered in the war against radical Islam.” (See http://article.nationalreview.com/?q=ZDQyYjEzMTg3ZDBjZTA4MzExNjU1MTE2MzkwYTRiMTc.)
Mr. McCarthy’s article is required reading for every American who wants to understand just how imperial the Imperial Judiciary has become—and how persistently and successfully it is usurping control of our national security, thus seriously undermining our nation’s ability to defend itself against those bent on our destruction.
“Discovery,” in both civil and criminal litigation, is the process by which each side shares with the other factual material relevant to the issues in the case. The usual tools of discovery in civil cases are depositions, written interrogatories, and requests for admissions. In criminal cases, most discovery consists of the prosecution informing the defense of constitutionally-required information, such as exculpatory evidence.
As McCarthy explains in “The War is Over,” al Odah was “a mind-numbing technical dispute over ‘discovery’ in litigation . . . . But the discovery in question is the most vital kind, namely, that of classified national-defense information. What is in dispute is how much sensitive intelligence we must share with enemies bent on annihilating Americans . . . .” In other words, “[a]t issue was: In a challenge to the military’s designation of someone as an enemy combatant, what disclosures of classified information must the government make to the combatant about its basis for concluding that he is one of the enemy?”
The answer of the Court of Appeals panel that made this abominable decision was, in effect, that potentially quite a lot must be shared! As McCarthy says, the court held that “the government must surrender anything in its file that might be helpful [i.e., “material”] to an individual combatant’s case” in a proceeding to determine his status. (My emphasis.)
And who decides “helpful”/”material”?
Why, a judge, of course.
Wait a minute!
Did the United States Court of Appeals for the District of Columbia Circuit rule that the government must relinquish to a federal trial judge its entire file on an enemy combatant—including, presumably, information about intelligence “sources” and “methods”—and that a life-tenured, politically unaccountable jurist will decide how much of it to turn over to confessed 9/11 mastermind Khalid Sheikh Mohammed and his co-terrorists?
Sadly, yes. That’s exactly the meaning of the al Odah decision, the roots of which were planted in the Supreme Court’s earlier Boumediene decision (about which I have written previously; see http://www.henrymarkholzer.citymax.com/boumediene_v_bush.html).
As Mr. McCarthy says, in the Boumediene decision “the U.S. Supreme Court ruled—against the weight of precedent, tradition, and common sense—that non-U.S. nationals, held by the military outside sovereign American territory (i.e., beyond the writ of American judges) as prisoners captured in a war authorized by Congress, are nevertheless vested with a constitutional right to challenge their detention as enemy combatants in our courts.”
And who was responsible for Boumediene? Associate Justice of the Supreme Court of the United States Anthony Kennedy. And who was responsible for Kennedy: President Ronald Reagan (who also gave us Sandra Day O’Connor.)
And who was responsible for al Odah?
In one sense, no one.
That’s because the opinion was per curiam—“By the court. A phrase used to distinguish an opinion of the whole court from an opinion written by any one judge” (Black’s Law Dictionary). Not one of the three members of the panel put their names to the opinion, let alone was there a dissent—not even by Judge Janice Rogers Brown, a darling of many conservatives (until now at least).
With Kennedy and four liberals on the Supreme Court, “conservatives” like Brown in the D.C. Circuit, Obama ruling (and appointing judges) from the White House, and Democrats controlling the Senate, Andrew C. McCarthy is likely correct: “The war is over, at least until the next 9/11.”
When that comes, it will be a loud wakeup call indeed.
We must not forget where the blame will lie.
Protecting Against Inflation By Resuscitating The Gold Clause (Part II)
The Gold Clause’s Historical Roots
As early in America’s history as the Constitutional Convention of 1787, the fear of paper money and the government’s control over it was widespread. Indeed, the Convention's keynote speaker, Edmund Randolph, railed against "the havoc of paper money" when he attacked the moribund Articles of Confederation.
Legal tender paper money didn’t circulate with official sanction in the United States until nearly a century later. Then, America stood at the top of the slippery fiscal slope whose bottom has now nearly been reached with the advent of the Obama presidency.
In order to finance the Civil War, the United States government suspended gold convertibility, enacted the Legal Tender Laws, and issued an avalanche of paper money backed by an unreliable commodity: promises.
By law, the "greenbacks"—essentially ink-stained paper, colored green on the back side—were made "legal tender for all debts, public and private." Previously useful blank paper, now ruined by having been marred with splattered ink, had to be accepted by creditors in payment of the debts owed them, regardless of whether the creditor wanted them and regardless of how much the paper was then worth.
Although repayment of loan contracts (e.g., bonds, notes, mortgages) had been expressed by the creditors and debtors in terms of gold and/or silver coin, via the Legal Tender Act the government had rewritten those private agreements, forcing paper money of dubious value on creditors while greatly advantaging their debtors.
However, as Obama & Co. will eventually learn, reality intervened, as it always will. The more ink-stained paper the government printed, the less the existing supply was worth. Simple arithmetic illustrates the point: If on Day One the government printed and put into circulation $1,000,000 of ink-stained paper, it was worth whatever it was worth at that time, let’s say X. If a week later the government printed and put into circulation another $1,000,000 of ink-stained paper, the total $2,000,000 would be worth half of the week-earlier value (1/2 X) because there was twice as much of it. And so on, until in modern day Zimbabwe paper money is virtually worthless; the paper is worth more than the "money."
Naturally, the new legal tender Civil War "greenbacks" opened at a discount, steadily dropped in value, and in 1862 launched an inflation rate of twenty-four percent. (Think Jimmy Carter, and soon Barack Obama.)
Within two years, the American dollar had sunk to a third of its value against gold.
Creditors soon learned the meaning of "legal tender for all debts, public and private": take the paper or kiss your debt goodbye. If paper was offered, it had to be accepted, otherwise the debt was exonerated.
This harsh illustration of Economics 101 in action was not lost on creditors, who had loaned full-value dollars but were now forced by law to accept depreciated ink-stained paper in payment of bonds, notes and mortgages instead of gold or silver.
But there was a fly in the government’s ointment: Some of the debt instruments that debtors sought to pay off with depreciated greenbacks were protected, or so creditors thought, with gold clauses. (For an thorough examination of the gold clause, see my The Gold Clause: What It Is and How To Use It Profitably; http://www.henrymarkholzer.citymax.com/books.html.)
Enter the Supreme Court of the United States.
The Legal Tender Cases
The first Legal Tender Case, Hepburn v. Griswold in 1870, involved a promissory note given in 1860, payable in 1862. At both times, the only lawful money in the United States was gold and silver coin. Five days after maturity in February 1862, the Legal Tender Act had become law.
Two years later, the creditor of the still-unpaid note sued to collect it. The debtor tried to pay in greenbacks. Why? Because by then war-time inflation had caused the paper money to depreciate to roughly half its face value. A good deal for the debtor, but a very bad deal for the creditor who in good faith had loaned coin at a fixed value.
The obvious legal question for the Court was whether the creditor had to accept the greenbacks as "legal tender for all debts, public and private" as Congress had ordained, or, implicitly, whether the debt was protected by a gold clause. The underlying question, of course, was whether the Legal Tender Act was constitutional.
A narrowly divided Court dodged the constitutional question, ruling only that the Legal Tender Act could not be applied to the debt contract which had been made prior to its enactment.
As to the Act’s constitutionality—which, though discussed, was not expressly ruled on by the Court— the majority believed the legal tender law to be unconstitutional; the minority thought otherwise.
Significantly, however, the Justices' disagreement was only on the facts. Each side agreed that Chief Justice John Marshall’s 1819 decision in M'Culloch v. Maryland established the constitutional test to be applied: Was the Legal Tender Act "necessary and proper"? The justices' only disagreement concerned how "necessary" legal tender was to the war effort.
Unfortunately, but predictably, there was no concern over whether, in constitutional terms, the Act was "proper."
The ink was hardly dry on the Hepburn opinion when, slightly more than a year later, in 1871, the Supreme Court took another look at the Legal Tender Act. This time, in Knox v. Lee, two of the Hepburn Justices had been replaced by two new members of the Court. They teamed up with the three Hepburn dissenters and reversed the earlier decision. The Legal Tender Act, they held, did apply to contracts made prior to its passage, as well as to those made afterwards. In other words, the Legal Tender Act was constitutional.
Basically, the new majority asserted and the new minority denied, the Legal Tender Act was indeed "necessary" for fighting the war, and thus violated no one's rights. In addition, the majority drew on the notion that since every other nation in the then so-called civilized world had the power to create legal tender, so must the United States—especially, the majority found, since the American Constitution did not prohibit the power. If Justice Strong's elaboration for the Court’s majority of this "not prohibited" constitutional test sounded familiar, no one should have been surprised because that indefensible construction of the Constitution's "Necessary and Proper Clause" had been launched decades earlier by Marshall in the 1819 M'Culloch case.
Justice Bradley's concurring opinion and the three dissents (by Justices Chase, Clifford, and Field) similarly elaborated earlier themes.
More than any other modern case, Knox is the linchpin of the federal government's contemporary monetary powers. After M'Culloch v. Maryland, Knox is the most important monetary powers case in Supreme Court history—and one of the worst examples of government power running roughshod over individual rights, in this case those of the creditors who had loaned money in good faith only to repaid with depreciated paper currency.
Justice Field had fought bravely against legal tender in both Hepburn and Knox, but his battle against it did not end with his comprehensive and eloquent dissent in Knox. Thirteen years later, in the 1884 case of Julliard v. Greenman, Justice Field was back at the barricades, all alone this time, in his continuing but futile dissent against legal tender.
In 1878 a statute had been enacted which, in effect, amounted to a peacetime issuance of legal tender. A creditor sued and the question eventually to be decided by the Supreme Court was:
". . . whether notes of the United States, issued in time of war, under acts of Congress declaring them to be a legal tender in payment of private debts, and afterwards in time of peace redeemed and paid in gold coin at the treasury, and then reissued under the act of 1878, can, under the Constitution of the United, States, be a legal tender in payment of such debts."
Although the answer to this question was a foregone conclusion, how the Court reached that conclusion, and what it was based on, was somewhat surprising.
A strong emphasis of the Court in Hepburn was the emergency nature of the legal tender issuance. The war, the Court stressed, made the legal tender "necessary." In Knox v. Lee, certainly the war had not been far from the minds of the majority Justices. Indeed, conceding the principle of legal tender in Juilliard the plaintiff himself agreed that during time of war Congress could create legal tender currency. Having thus conceded the principle that Congress did, after all, possess the legal tender power, the plaintiff was very nearly inviting the Court to apply that principle to peacetime, thereby erasing the always tenuous war-peace distinction. The Court accepted the invitation, and did so with ease.
With Juilliard, legal tender had become a permanent feature of the American monetary system. The Supreme Court had effectively rewritten the constitutional monetary powers of Congress, and forever altered creditor-debtor contracts.
It would be a half-century later, with Franklin Delano Roosevelt’s "New Deal," when the Supreme Court expressly erased the gold clause (at least for a while).
To be continued.
Tuesday, March 10, 2009
Protecting Against Inflation By Resuscitating The Gold Clause (Part I)
Introduction
By now, it’s becoming apparent that the Three Horsemen of the Apocalypse—Obama, Reid and Pelosi—are hell bent to drive America into penury with their massive infusion of taxpayer dollars into pork, unconscionable entitlements, handouts to crooks, charity to incompetent businessmen, and gifts to favored leftwing causes.
It’s also apparent that, ultimately, the principal way trillions of this newly created debt will be repaid is by the federal government running its printing presses until they overheat—by the “creation” of money, by the deliberate inflation of the dollar.
“Inflation” is “an increase in the supply of currency . . . relative to the availability of goods and services, resulting in higher prices and a decrease in the purchasing power of money” (Encarta Dictionary; my emphasis.) According to Webster’s Dictionary of the American Language, inflation is “an increase in the amount of money in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices.” (My emphasis.)
Of all the consequences that flow from government’s manipulation of paper money, rampant inflation (a “silent tax”) is the most devastating. In self defense, some of the government’s victims have traditionally fled from currency to find refuge in collectibles, various commodities, the precious metals and, especially now, thousand-dollar-per ounce gold.
But because of the nature of the assets they hold, one class of victims, hostages to currency, have nowhere to go: creditors.
Of everyone harmed by inflation, creditors (“a person or organization owed money by another,” Encarta Dictionary) suffer greatly because the money they lend is later repaid in dollars that are worth less because there are more of them in circulation.
One becomes a creditor in two ways: by selling or leasing goods or services to be paid for later, or, like a bondholder, by lending money, to be repaid later.
In many conventional sales transactions, payment is not due or received for at least thirty days. Short term personal loans are rarely less than six months in duration. Residential real estate leases usually run from one to two years, equipment leases to five. Commercial and industrial leases often run for ten years or more. Corporate and municipal bonds have even a longer life. Mortgages are not fully payable for decades. In the eighteenth and early nineteenth centuries ninety-nine year leases were not uncommon.
In each of these cases, the creditor is parting with funds of a specific value at the time the transaction is made, for repayment somewhere down the line. To repeat: Anyone who parts with money today against repayment tomorrow is a creditor, from used car dealers who sell “on time” (i.e., who lend money to borrower/debtor John Doe) to sovereign investment funds which purchase billions in T-Bills (i.e., who lend money to borrower/debtor United States government).
And if a creditor lends $1,000 today, ten percent inflation in a decade will shrink the purchasing power of that money to $386.00. In twenty years, the thousand is worth $149.00, in thirty $57.30, and in forty the $1,000 is virtually non-existent at $22.10. So much for investing and long-range planning.
Inflation devastates capital, more so over the long term.
An unused anti-inflation antidote
But creditors can insure themselves against the government-created inflation that ravages the value of the debts owed them. No creditor need be at the mercy of the government’s manipulation of paper money, thanks to the availability of a simple contractual provision which can be inserted into any debt instrument. It is called the gold clause.
Simply stated, for the moment, a contractual gold clause requires repayment of a debt based on its value when the credit was extended, not based on when the debt was repaid. Thus, the gold clause protects creditors not against default, but against payment—payment by the debtor of today’s loan with tomorrow’s inflated/depreciated money. I’ll explain later how gold clauses work in practice.
If the federal Government’s Money Monopoly (the title of one of my books, see http://www.henrymarkholzer.citymax.com/books.html) is virtually unrestrained, and if the exercise of that monopoly has created, is now creating, and will in the future create, serious inflation, and if creditors can protect themselves through use of the contractual gold clause, the question is why for long periods it has not been used.
One reason (I’ll discuss another in Part II) is because too little is known about the gold clause.
To be continued.
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