Thursday, June 23, 2011

UPDATE 6/21/2011

Today I began mailing letters to seven politicians: Congressmen Tim Murphy, Mike Doyle, Jason Altmire and Mike Kelly, Senators Pat Toomey and Bob Casey and PA State Representative Jesse White.  Other than a few minor differences necessary to personalize them, the letters are identical to the 6/21/2011 letter that I sent to the Senator Pat Toomey.  The Toomey letter is located below this UPDATE.  I also plan to send a mass mailing to many other politicians in order to get them to publicly state their position on the issue of Treasury issued debt free money.

I would like to emphasize three extremely important facts that completely discredit the current public “debate” regarding the federal budget deficit, the national debt and raising the debt ceiling.

1.      The $4.6 trillion that has been raided from the social security, Medicare, civil service retirement, military retirement and other trust funds, has been added directly to the national debt.  This scandal is never mentioned in the public “debate.”  This is why politicians can claim that they must cut social security and Medicare to deal with the national debt.  

2.      The raided $4.6 trillion is what the politicians call intergovernmental debt.  They say: “This is money that the government owes to itself.”  This is not true.  This is money that the politicians owe to the American people. 

3.      This money can be repaid in full without raising taxes or borrowing money from the credit markets.  This can be accomplished by using the provisions stated in the United States Constitution: Article 1, Section 8, Paragraph 5, and the law: the Legal Tender Act of 1862.
We must DEMAND that our political leaders address these three points.  The fact that politicians, the media and academia suppress the truth compounds this monumental and historic scandal.  The truth is revealed in my letter to Senator Pat Toomey.


Post Office Box 815
Coraopolis, PA 15108
June 21, 2011

Senator Pat Toomey 
502 Hart Senate Office Building
Washington, D.C. 20510

Dear Senator Toomey,

You have refused to acknowledge my December 10, 2010, letter, my February 6, 2011, e-mailed copy of that letter and my February 7, 2011, phone call confirming that your Washington, DC, office received the e-mail.  I would like to remind you, Senator, that I have a Constitutional right “to petition the government for a redress of grievances.”  To date, you have denied me this right.

My grievance has to do with the $4.6 trillion intergovernmental debt.  As you know, the intergovernmental debt is the money that politicians have raided from the trust funds and spent.  These trust funds include social security, Medicare, federal civil service retirement, and military retirement.  In the current public “debate” regarding the budget deficit and the national debt ceiling, the fact that this $4.6 trillion is owed to the American people is rarely mentioned.  Until this money is returned to the American people, in the form of cash, (not IOUs), the money is stolen.  Politicians claim that they will repay the missing money out of future tax revenue.  This will only perpetuate the theft.  You don’t repay the taxpayers with their own money.  The money must come from a source other than the victims of the theft.

You should know that you can repay the $4.6 trillion to the American people without raising taxes or borrowing from the credit markets.  And you can use the same revenue source to solve the budget deficit and national debt problems.  How?  Simply follow the instructions in the United States Constitution. Article 1, Section 8, Paragraph 5, states:  “Congress shall have [the] power to coin money [and] regulate the value thereof.”  The word “coin” can also mean create, as in the expression “to coin a phrase.”  Thus, Congress can create money.  There is nothing in the Constitution about the Federal Reserve or a central bank.

As you know, in 1913, in defiance of the Constitution, Congress gave the power to issue money to the Federal Reserve.  Some scholars believe this action was illegal because it was done without a Constitutional amendment.  I agree, but I am not recommending the abolition of the Federal Reserve.  My objective is to tell the American people (and to remind you) that Congress and the Treasury still have the authority to issue debt free money without involving the Federal Reserve.  There is an extremely important distinction between money issued by the Federal Reserve and money issued by the Treasury.  Money issued by the Federal Reserve is based on debt.  In fact, the Federal Reserve Notes we spend every day are responsible for our $14.3 trillion national debt.  Treasury issued United States Notes (Greenbacks) are based on the law as stated
in the Constitution above.  And, unlike federal Reserve Notes, United States Notes carry no debt.

In 1862, at President Abraham Lincoln’s request, Congress directed the Treasury to issue $60 million worth of United States Notes.  Under the authority of the Legal Tender Act of 1862, during the course of the Civil War, $449 million worth of this legal tender currency was issued (The Federal Reserve didn’t exist in 1862.)  This caused no inflation even though the money supply was increased by 25%.  After President Lincoln was assassinated, Congress reduced that amount to $300 million and froze it at that level.  Subsequently, Congress refused to authorize the issuance of any more debt free money.  However, the original $300 million is still an uncirculated part of our national money supply.  The $300 million amount can be increased by Congress and put into circulation immediately.

On June 4, 1963, President John F. Kennedy signed Executive order 11110 (amending E.O. 10289) authorizing the Treasury to issue billions of dollars of United States Notes.  Although the actual amount and the function of the E.O. are debated, the fact that Kennedy was responsible for the issuance of debt free money is not questioned.  After President Kennedy was assassinated, the United States Notes were withdrawn from circulation and no more debt free money was issued.  In 1966, Congress repealed the original 1933 legislation that gave Kennedy the authority to issue E.O. 11110.  In 1987, President Ronald Reagan repealed E.O. 11110 with E.O. 12608.

I don’t want to promote or endorse the conspiracy theories.  However, I mention these historical facts to prove that issuing debt free money is legal and practicable.  The only thing preventing debt free money from reentering our currently debt based national money supply is the United States Congress.

Therefore, I am publicly calling upon Representatives Tim Murphy, Jason Altmire, Mike Kelly and Mike Doyle to introduce legislation authorizing the Treasury to issue United States Notes.   This will be the same currency that was issued by Abraham Lincoln in 1862 and by John F. Kennedy in 1963.  This legal tender currency can be used to pay off the entire $4.6 trillion intergovernmental debt:  $2.6 trillion owed to social security; $317 billion owed to Medicare; $780 billion owed to the federal civil service retirement fund and $308 billion owed to the military retirement fund.  At the same time, the $23 billion funding shortfall of the Pension Benefit Guarantee Corporation (PBGC) can be eliminated.

In addition to this, I am asking you and Senator Bob Casey to support this legislation.  If you choose to withhold your support, please explain your reasons, in writing, and send them to me at: Ray Uhric, Post Office Box 815, Coraopolis, PA 15108.  I will put your letter on my blog site along with my response to your objections.  Then, the public can judge who is really following his Constitutional mandate to “promote the general welfare of the American people.”

The financial markets have nothing to say about repaying the trust funds with Treasury issued debt free money.  This is money that is owed to the American people.  Supplementing our debt based money supply with debt free money is perfectly legal.  And, there is no reason for this action to cause inflation.  The notion that dollars are just another commodity and that increasing the supply reduces the value is nonsense. 
Commodities are things with intrinsic value, such as corn, wheat or copper.  Dollars are just paper.  They get their value from the law as stated in the Constitution above.  The fact that currency speculators can attack the value of the dollar is a clear violation of the Constitution.  That our political leaders would let them get away with it is a scandal.  The size of our money supply and the value of the dollar are determined by Congress.  It’s the law.  It may be ignored by the politicians, but it is still the law     

Forgive me if I am highly suspicious of the motives of conservative politicians who claim that they must attack social security and Medicare in order to deal with our massive national debt.  It sounds like the same old “starve the beast” game plan to me.  A quick check of the historical record will illustrate the fact that Republicans, conservatives and the financial markets have despised and opposed social security and Medicare from the first day these programs were proposed.  Why would the financial markets and the financial services “industry” want to see social security and Medicare destroyed?  That would eliminate the competition, of course.  They want ALL the money for themselves and their shareholders. 

Apparently, the conservative “starve the beast” strategy to destroy social security and Medicare began with the Reagan administration.  Of course, this plan backfired when Congress simply borrowed more money to offset the lost revenue from the tax cuts and to fund the various wars and other government expenditures.  But now, with a $14.3 trillion national debt and the national debt ceiling looming, it looks like the government haters have the so-called “beast” by the throat.  But to the millions of people whose very survival depends on social security and Medicare, calling these great and vital programs “the beast” is a despicable example of conservative Republican spin.

It is interesting to note how the Cold War, tax cuts, the Iraq war, the mortgage meltdown, the global credit crisis, Dick Cheney’s idea that “Deficit don’t matter,” and other policy blunders have put social security and Medicare right where the government haters want it.  The “privatizers” and the financial markets must have been delighted as the politicians, year after year, weakened social security and Medicare by raiding the trust funds. Then, in a vicious and diabolical act of cruelty, they added every penny of the stolen money onto the national debt!  Is this scandalous economic policy really a legitimate way to conduct our nation’s fiscal business?  Is this a viable monetary system or a scam designed to fleece the taxpayers with debt?

Replacing the missing $4.6 trillion with debt free United States Notes can be accomplished in a matter of days.  Supplementing our current debt based money supply with debt free United States Notes will instantly solve the contrived budget crisis and eliminate the “need” to raise the debt ceiling.  Who could be opposed to that?  Obviously, the funding to make social security, Medicare, Medicaid and the PBGC permanently solvent is at the fingertips of Congress.  Politicians say we must endure austerity and slash social security and Medicare to send a signal to the markets (the bond vigilantes) so they will loan us more money and get us deeper in debt.  The only message we should send to the bond vigilantes is: Article 1, Section 8, Paragraph 5, of the United States Constitution.

This letter will be posted on my blog site  If you have any objections to my debt free monetary reform proposals, please send them to me at Ray Uhric, Post Office Box 815, Coraopolis, PA 15108.  I will put your letter and my response to it on my blog site.  This will make our debate a matter of public record.  The American people can then judge the relative merits of our respective arguments.

Thank you for your attention to this vitally important matter.  I await your timely reply.


Ray Uhric

Sunday, June 5, 2011

UPDATE 6/3/2011

On April 15, 2011, I received a response from the Federal Reserve (Fed) to my February 13, 2011, letter.  (To date, there has been no acknowledgement of my correspondence from Senator Pat Toomey, Treasury Secretary Timothy Geithner, MoveOn.Org or Democracy for America.) 

The letter from the Fed was written by a director at the Federal Reserve Board of Governors.  Although the content of letter was predictable and disappointing, I give the Federal Reserve credit for taking the trouble to answer my correspondence.  Their response is important because they have put their position into the public record.  This is rare.  I wish Senator Pat Toomey and Treasury Secretary Timothy Geithner had the courage to publicly state their position regarding the matter of Treasury issued debt free money.

It was no surprise that the Fed official rejected my proposal to supplement our debt based money supply with Treasury issued, debt free United States Notes.  Undeterred, I quickly composed a letter rebutting his position and mailed it on April 19, 2011.  To date, there has been no response.  At the end of my letter, I asked for permission to put the Fed’s letter, with my rebuttal, on this blog site.  It has been more than a month since I sent the letter.  Because I have no way of knowing if I will ever hear again from the Fed, I will publish only my rebuttal. 

When you factor in the Constitutional provisions for the issuance of debt free money, the current debate regarding the federal budget deficit and the national debt becomes a scandalous exercise in stupidity.  I say this because our national debt is nothing but a slush fund for the global bond market and Wall Street speculators.  It is a $14 trillion taxpayer shakedown.  This diabolical scheme to back our money supply with federal government debt is an insult to the intelligence of the American people. 

Here is a question that no politician, including Senators Pat Toomey and Bob Casey, Representative Tim Murphy and many, many others, will not dare to address:  How can we pay off the national debt when our money supply, our “savings” and our pensions depend on the existence of Treasury bonds, bills and notes?   Who dreamed up this ridiculous system?  It was the Federal Reserve, Wall Street and their agents in our government.  Here is another vitally important question.  Why can’t we follow the Constitution and increase our national money supply without piling more debt on the backs of American taxpayers?     

We have been suckered into perpetual dependency on a national debt that threatens to destroy social security, Medicare and our standard of living.  This is the trap that the financial markets and our political “leaders” have thrown us into.  My rebuttal to the Federal Reserve letter below explains how we can escape this trap of debt slavery:


PO Box 815
Coraopolis, PA 15108
April 19, 2011  

/////////////////////, Director
Federal Reserve System
Washington, D.C. 20551

Dear Mr. ///////////////:                                                                            

Thank you for responding to my letter. 

Yesterday, Standard and Poor’s downgraded the outlook for United States Treasury debt.  This action spooked the markets and provoked an immediate reaction from the White House.  It’s a mystery why anyone would pay attention to S&P considering their culpability in the housing bubble disaster.  However, the message of the downgrade was clear.  Reduce the budget deficit or else.  Setting aside the policy blunders that produced a $1.5 trillion budget deficit and a $14.1 trillion national debt, it is obvious that revenues to the Treasury have not kept up with government expenditures.  And there isn’t much chance of this situation changing any time in the future.

States and municipalities across the country (thanks to fraud and blunders on Wall Street) have revenue shortfalls because of reduced tax revenue.  Important government programs are threatened because of budget constraints:  Medicare, Medicaid, the Veterans Administration, NASA, the SEC, the CFTC, the EPA and the Pension Benefit Guarantee Corporation are all underfunded.  $2.5 trillion, raided and spent by the politicians, is owed to the social security trust fund.  And more liquidity is still needed in some areas of the private sector economy.  I could go on at length but I’m sure you get the point:  Our country needs more money in order to function for the benefit of the American people.

As was the case with the Great Depression, in 2007/2008, an unregulated financial sector destroyed a large part of the national money supply. This happened, of course, when the housing bubble burst.  The Federal Reserve valiantly tried to recapitalize the banks and revive the financial markets with low interest rates and “quantitative easing.”  Unfortunately, the result has been mixed at best.  High unemployment and persistent economic problems clearly expose the limitations of conventional monetary and fiscal action when faced with a severe credit disruption.  

We are told by politicians and pundits that the solution to this lack of money is for the American people to make painful sacrifices.  We are told that we must submit to the austerity demanded by the “bond vigilantes.”  And we are told that “America is broke.”  Since it is the Federal Reserve that controls our money supply, I will ask you.  Why is America broke? 

The obvious solution to our economic problems is more money in the national money supply.  But every time I propose increasing the money supply with Treasury issued, debt-free money -- United States Notes -- I get the same knee jerk reaction.  “That will cause inflation and destroy the value of the dollar.”  If there is not enough money, but increasing the money supply will destroy the value of the dollar, apparently, there is something terribly wrong with our monetary system.  This is the essence of my argument. 
I believe the Federal Reserve has painted America into an economic corner with its debt-based, fractional reserve financial system.  Money is scarce but increasing the money supply will increase our already massive $14 trillion national debt.  Is this is a hopeless dilemma?  Fortunately, there is an alternative to this unstable, self-destructive system.  Increasing the money supply with Treasury issued debt-free United States Notes is the only logical solution to our current fiscal crisis and economic problems.  Issuing U.S. Notes is perfectly legal.  This fact is confirmed by the law as stated on the Treasury Department’s web site.               

The main stumbling block preventing sensible monetary reform is the foolish notion that dollars, our medium of exchange, are just another commodity.  This blunder exposes our money to manipulation by the currency markets.  The United States Constitution, (Article one, Section eight, Paragraph five) clearly states that only Congress has the authority to issue, and control the value of, our money.  Of course, in 1913, Congress, in defiance of the Constitution, gave this power to the Federal Reserve.  This blunder is responsible for our $14 trillion national debt. 

In his May 11, 2010, speech, Chairman Bernanke quoted the economist David Ricardo: "It is said that Government could not be safely entrusted with the power of issuing paper money.  Abuse by the government of the power to issue money as a means of financing its spending inevitably leads to high inflation and interest rates and a volatile economy.”  First of all, this statement flies in the face of the United States Constitution.  Second, this statement is an insult to intelligence of Abraham Lincoln (see below.)  And third, the crash of 1929, the Great Depression, the recent housing bubble, the crash of 2007/2008, the Great Recession and many other financial disasters over the years, proves that the ability of the private sector to manage a country’s finances is wildly overrated.

What does the historical record tell us about the relationship between the money supply and inflation?  Beginning in 1862, Abraham Lincoln increased the money supply by 25% with United States Notes, and there was no inflation. 

To counter the disastrous “deleveraging” brought on by the 2007/2008 global credit meltdown, central banks around the world pumped multi trillions of dollars worth of liquidity (money) into the global financial system.  Not only was there no significant inflation, monetary authorities were worried about the threat of ruinous deflation.  It is true that the banks did not, to any great extent, loan this money out into the broader economy.  However, the general consensus among economists and business pundits was that this liquidity injection was highly inflationary.  The lack of significant inflation would seem to discredit the commodity theory of money.    

Many people point to the hyperinflation experienced by Germany in the 1920s as a reason to limit our money supply.  This is a flawed interpretation of history.  War reparations imposed by the Treaty of Versailles and a large external debt weakened the German currency and started the downward cascade in the value of the mark.  Uncontrolled, rampant speculation in commodities caused price inflation.  A small segment of the population actually profited from the hyperinflation.  People with access to strong foreign currencies could buy assets at bargain prices.  Internal and external economic forces (the Great Depression), social instability and the possibility that the Weimar government might be overthrown also drove up prices.  The German government printed more money in a vain attempt to maintain adequate liquidity in the economy.  The massive amount of money in circulation was the result of the hyperinflation, it was not the cause.  Strong government intervention and regulation could have stopped the hyperinflation in its tracks.

Of course, the Nazis had their own interpretation of events.  They claimed that there was a conspiracy by international bankers (with the complicity of the Weimar Government) to steal the wealth of the German people.  And they rode this conspiracy theory right into power in 1933.  

Today, our inflation is not caused by an increased money supply.  The amount of money in the hands of the general population has remained flat.  Today’s inflation is caused by the demand for commodities in emerging market economies and the actions of the speculators who control prices in the commodity markets.  The notion that the Fed is causing the inflation by “running the printing presses” is a myth.  The Federal Reserve’s quantitative easing money went directly to the banks and the financial sector.  It is the speculators in the large money center banks who drive up the price of food, oil (gasoline), gold and other commodities.  And at the same time, they lower the value of the dollar.  For the average American, the money supply remains the same, but his or her dollar buys less.  You might say the Fed is the enabler, but it is the banks and the speculators who cause the inflation.                                                                                                            
Chairman Bernanke, in his May 25, 2010, speech, stated:  “We expanded the scale, scope, and maturity of our lending to provide needed liquidity to financial institutions.”  Unfortunately, Chairman Bernanke’s good intentions have backfired.  The Fed’s actions were a bonanza for the financial sector but they caused a bigger burden for the taxpayers and consumers.  This brings up the question that I have been asking for close to seven years: Why can’t we increase the money supply (liquidity) without loading more debt on the backs of the American people?  Nobody will dare to respond to this question because the answer is too explosive:  Our money is based on debt.  The money supply is increased by increasing the national debt.  This occurs when our government issues more U.S. Treasury debt securities.  This is why the national debt will always increase and will never be paid off under our current monetary system.

Increasing our money supply with debt-free U.S. Notes will not monetize our national debt.  Monetizing the national debt occurs when the Federal Reserve buys U.S. government debt from the private sector in order to increase the monetary base.  Of course, the national debt must be increased in order to provide the initial government debt securities to the private sector.  This peculiar and illogical arrangement reflects the false choice that has made debt slaves of American taxpayers.  Increasing the money supply with Treasury issued, debt-free, U.S. Notes does not monetize the national debt because no debt for currency swap is involved.  Government debt is not a part of the transaction.

The problem of monetizing the debt is at the heart of the current debate over raising the national debt limit.  The government needs more money, but it has to sell debt to the private sector to get it.  In order to make our debt more attractive to the “bond vigilantes,” austerity must be imposed on the American people.  This is a stupid, false choice.  The national debt will never be paid off because it is government debt that backs our money supply.  The austerity and cuts in government spending are just a way to bleed more money from taxpayers and weaken the government.  If Congress and the Treasury would have followed the example of Abraham Lincoln and John F. Kennedy, raising the debt limit wouldn’t be an issue at all:  The government could finance itself, just as the Constitution intended.  Abraham Lincoln and John F. Kennedy had the wisdom and courage to issue debt-free, U.S. Notes.  Tragically, their brilliant monetary reforms died when they were assassinated.  And their deaths cleared the way for our $14 trillion national debt.           

The Federal Reserve is the subject of severe criticism since the housing bubble collapse and the disaster of the Great Recession.  A recent Rolling Stone article: “The Real Housewives of Wall Street” has given the growing number Fed critics even more ammunition for their attack on the central bank.  Fortunately, there is a way for the Federal Reserve to redeem itself:  The Constitution-based, debt-free monetary reform that I propose is the perfect opportunity for the Fed to show that it can do more than load enormous debt on the backs of American taxpayers.

My proposal is simple.  Congress can use the Legal Tender Act of 1862 to authorize the Treasury to replace the $2.5 trillion raided from the social security trust fund with United States Notes.  U.S. Notes can also be used to make up the funding shortfall in the Pension Benefit Guarantee Corporation.  These actions are of no concern to the currency markets because the U.S. government owes this money to the American people.  I understand that this action is the responsibility of Congress and the Treasury department.  However, since no politician or anyone at Treasury will respond to my correspondence and address this issue, it is up to Chairman Bernanke to bring this matter to their attention.  Issuing United States Notes is the only way that the federal government can repay the debt owed to the social security trust fund without raising taxes and increasing the national debt.  (Using future tax revenue to “replace” the money raided from social security only perpetuates the theft.)    Issuing United States Notes will be a precedent setting starting point that will open the door to America’s emancipation from debt slavery.      

I read your April 11, 2011, letter and Chairman Bernanke’s May 25, 2010, speech carefully and objectively.  These are arguments that I have heard (and rejected) many times.  You cite a Congressional mandate to maintain price stability as the justification to restrict the money supply to its current arbitrarily low level.  However, you ignore the fact that Wall Street speculators, using their enormous hoard of cash, can drive up the prices of commodities and manipulate the value of currencies simply to produce huge profits and blackmail the government.  History as shown that this, largely unregulated, free flow of capital has caused tremendous damage to society.  While, at the same time, this blatant manipulation produces no benefit whatsoever.  This dreadful (and at times deadly) situation reflects the shocking weakness and complicity of the political class around the world.  Currency exchange rates, and thus the value of the dollar, are negotiated at economic summits.  And central banks “intervene” in the currency markets, by buying and selling currencies, to gain a trading advantage.  All this illustrates the fact that the value of the dollar and inflation can fluctuate wildly with no increase in the money supply.  The money supply/inflation myth is a red herring designed to keep the world to mired debt. 

The global debt burden is a lash across the backs of the poor and the workers of the world.  This evil explains why loaning money for interest is condemned in both the Old and New Testaments of the Bible and the Koran.  How can this fact be reconciled with the debt/interest based global financial system?  Obviously, there is a moral imperative for government regulation of finance.

It is said that inflation must occur when the money supply is increased because “there are too many dollars chasing too few goods.” This is another false notion that must be debunked.  Of course, the point at which there are actually “too many dollars” is never specified.  It is true that inflation can occur when producers and merchants raise prices when there is increased money in circulation.  This is what I call “greed inflation.”  Greed inflation can be controlled by government action.  Space does not permit a detailed description of what form this government action would take.   However, I have explained it in past web site articles.  My proposals reflect government actions that were recommended by Abraham Lincoln.

Some people will recoil at the thought of government intervention to control greed inflation.  However, letting producers and sellers have complete discretion in pricing, irrespective of labor or other cost factors, is problematic.   This “freedom” is a major cause of inflation, poverty and weak economic growth.  Our current economic problems are a perfect illustration of this fact.  The American people and the American economy need more money.  But the fear of greed inflation prevents the Federal Reserve or the federal government from increasing the money supply.  Greed inflation benefits producers and sellers, but it harms the rest of the population and the country.  You don’t have to be a brain surgeon or a rocket scientist to realize that this is a problem that must be resolved in order to have true prosperity in America.     

I prefer not to engage in a protracted debate about debt-free monetary reform.  I’ve wasted nearly seven years already trying to explain the obvious to people who should know better.  The monetary status quo has led to our current and ongoing fiscal and economic difficulties.  The national debt, our hollowed out economy and the blunders of our business and political leaders are much more of a threat to the dollar than increasing the money supply.  In fact, increasing the money supply with Treasury issued, United States Notes is the best way to strengthen the dollar.

Please give my monetary reform proposals serious consideration.  The disastrous events that began in the summer of 2007 have glaringly exposed the flawed nature of our debt-based, fractional reserve financial system.  Thank you for your attention to this vitally important matter. 

Would you mind if I put your letter and this response to it on my web site?  The debt-free monetary reform issue is too important to remain hidden from the American people.  Please respond to this letter in a timely manner.  Thank you.


Ray Uhric