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END THE FED.... Then What?

- The Transition to Sound


On November 22, 2009 I delivered some remarks after a rally and march at the Federal Reserve Bank of
Philadelphia on the transition to sound money

by Jake Towne, the Champion of the Constitution

Tuesday, November 24, 2009

"Bankers own the earth. Take it away from them, but leave them the power to create
money and control credit, and with a flick of a pen they will create enough to buy it back."

- Josiah Stamp, former President of the Bank of England

On November 22, 2009 I delivered some remarks after a rally and march at the Federal Reserve
Bank of Philadelphia. Following my return from China, this was the first time I had the chance
to speak publicly on the transition phase to sound money, and while there are plenty of FED
critics, it is still rare to find solid ideas on how best to replace the FED, and furthermore, how
such a transition be accomplished. Though stymied by government interventions in the short
term, I believe the free market will win out in the long term. For instance, there were probably
over 100 people in the crowd I spoke to that possess physical gold and silver. The dollar-
denominated prices of gold and silver continue to rise at blistering rates since 2001 as the
collapse of the dollar and fiat currencies unfolds.

It is so very important to realize that what we are seeing is not so much the appreciation of gold
and silver as it is the unmasking of the devaluation in the dollar by the central banks. My sincere
thanks to the late Dr. Murray Rothbard where one day, while sitting in Shanghai skyscraper,
a single mouseclick led me down the rabbit hole, and I began to start discovering the truth about
the current dishonest monetary system.

"END THE FED.... Then What? - The Transition to Sound Money" is the title of my talk today,
and it's a bit of an ambitious undertaking for a half an hour, but it's an important topic since all of
us who gathered here to protest the Federal Reserve today need to also have a plan on how best
to replace the FED and the fiat monetary system. One note before I begin. I openly
acknowledge that my idea is at best a starting point, and I welcome a healthy debate on this
topic. I have given this particular topic quite a bit of research since first becoming aware that the
dollar was not backed by gold about 2 years ago, and this past summer I attended Mises
University, which is one of the very few places in the nation where one can study Austrian free
market economics – the other two places being George Mason University in DC, and Grove City
College in Pittsburgh.
In this talk I will first address what the goal is – as one must always begin with the end in mind.
Then I will briefly discuss several transition ideas that are already present in literature, describe
possible issues with each, and then spend the remainder of the time outlining my proposal.

The End in Mind

Simply stated, I believe the end in mind should be to strip the government of its Money Power
and return it directly to the people. Currently, a quasi-private banking cartel, the Federal
Reserve, controls both interest rates and money production, aka the printing press. There are
really only three options available – a "honest" fiat monetary standard, a gold standard – which
fractionally-reserved commodity money, or 100% fully-backed commodity money. Let me list
why I discard the first two options and prefer the latter.

"Honest" Fiat Money?

Fiat standards, or paper money, are proven to exist only for relatively short periods of time, and
as we study history, have never been left unabused by governments. Therefore, I do not believe a
widely-used "honest" fiat currency can ever exist. The human temptation to abuse the power is
too great, and counterfeiting, via either government or individuals can never be prevented. A
prime reason to have sound money, besides facilitating a relatively stable medium of exchange
for economic transactions is to impose fiscal discipline on government, a point completely
missed by most modern-day politicians and Keynesian economists. There are many fiat standard
plans available in literature, such as Dr. W. Cleon Skousen's Monetary Reform plan, but again, I
do not believe these will work in practice.

[Skousen, W. Cleon. The Urgent Need for a Comprehensive Monetary Reform.]

[Money Masters. Monetary Reform Act.]

A fiat currency standard can never fulfill the requirements for sound money which briefly are:
Money must be durable and not easily destroyed. Money must be portable for convenience.
Money must be easily divisible into smaller units. Money must be recognizable and uniform.
Money must be reproducible. Money must be scarce, and it must also have a relatively stable
purchasing power. Fiat currencies can never truly fulfill the scarcity and purchasing power

[Towne, Jake. 2008. "The Money Matrix - What Makes Money Money?"]

Return to the Gold Standard?

Next, returning to a gold standard will never work. If one remembers how the classical gold
standard worked, it was really fraudulent money and still gave the government the ability to
inflate the money supply. Under a gold standard, a government might hold 100 ounces of gold,
but would trade paper slips of receipt money that made say 200 ounces of gold payable to the
bearer. So this system, while much superior to today's fiat currencies, has proven fairly robust it
is still fraudulent and worse, since government controls the receipts, it is very easy for them to
revert to a fiat currency, which is more or less what happened in 1933 when FDR stole the
people's gold.

[Towne, Jake. 2008. "Bernanke's Great Lie - The "Gold Standard" and the Great Depression."]

In today's society with information being so widespread over the internet, I contend that a gold
standard would be fairly ridiculous, as 100 years ago governments tended to hide from the
people how their gold standards really worked. They pretended that every ounce of gold held in
vaults was backed by exactly the same amount of receipt money, and when you cashed in a
receipt you were given the full amount. In today's world, if it is widely known that a currency is
50% backed by gold, it would simply trade at half the price of gold. If another country's currency
is 25% backed by gold on reserve, the exchange rate would simply be equal to the ratio of the
weight of gold.

100%-Backed Gold and Silver Money

This leaves us with a 100% backed commodity standard, or honest money. As Murray Rothbard
writes in "What Has the Government Done to Our Money?" and "The Case for the 100% Gold
Dollar" successful societies have chosen gold – and silver – as money throughout time. This is
no accident as money evolved from the marketplace and remember the US government per the
Constitution is legally allowed to only use gold and silver as money.

[Rothbard, Murray. 1990. What Has the Government Done to Our Money?]

[Rothbard, Murray. 1974. "The Case for the 100% Gold Dollar."]

[Towne, Jake. 2009. Talk on Constitutional Money.]

While it is possible to have a dual parallel standard of gold and silver, I suggest that gold is more
suitable right for the following reasons:

1. Gold is presently a major financial market, with market turnover on the London exchange
alone of over $20 trillion USD, which is higher than the numbers used for US GDP, and
relatively comparable to the world's property, equity, and bond markets. Silver's market
cap was just a small fraction of this.
2. Gold is still saved rather than consumed while silver is chiefly an industrial metal. Most
importantly, there are 60-80 years of aboveground stock of gold as compared to the flow
rate, or amount of gold mined each year. Silver's stocks-to-flow rate is just 1.5 years.
3. While the ratio in the earth is roughly 8 ounces of silver mined for every ounce of gold,
the industrial consumption has resulted in the rather strange-but-true fact that there is far
less aboveground stock of silver and gold. There is over 5 billion ounces of gold stock,
but just 1-2 billion ounces of silver stock. Put into volume terms the entire gold supply
would fit into a cube about 20 meters to a side while the entire silver supply fits into a
cube 14-18 meters to a side.
4. These above factors, combined with a study of the futures markets and the efforts of the
central banks to suppress the spot prices of gold and silver, lead me to conclude that the
silver-to-gold ratio, the silver-to-barrel of oil ratio, etc. will likely skyrocket, and not have
the potential of stability that gold will offers to the marketplace. However, after the
stabilization occurs, silver would be a good candidate for money in a future parallel
standard with gold.

[Towne, Jake. 2009. "Silver and Gold ARE Money."]

[Towne, Jake. 2009. "Unlocking the Money Matrix - The Summers Gold Price Suppression

So for the purposes of this talk I will move ahead with the transition to an end goal of the
monetary unit being equivalent to gold grams.

I want to add two points, first is that I believe that individuals should be free to trade and
exchange as money any mutually agreeable commodity or item as they wish and the
government's only role should be to mint money and maintain the integrity, meaning the mass, of
the monetary unit and protect the liberties of individuals in cases of fraud. Of course, the
government currently holds the monopoly on the privilege of creating money and currently
commits wanton fraud, so obviously a better solution will be that of Rothbard's suggestion to
allow private firms to compete, as was done in the case of the 'thaler,' a German silver coin made
by a 16th century private minter. Thalers were renowned for their uniformity (consistent weight)
and fineness, and poor pronunciation later resulted in the Spanish milled 'dollar,' which the
American dollar was originally based upon.

[Rothbard, Murray. 1990. What Has the Government Done to Our Money?]

Secondly, since I am doing a lot of talking about coins, and no one wants to carry coins all over
the place, I want to add that electronic digitized currency in gold grams or silver ounces is
already being done. The vaults of independent bullion banks would hold the physical gold or
silver and when you swipe a charge card, this would move the specified weight from your
account to the new parties. Obviously, these vaults, or money warehouses, would need to be
independently audited to prevent counterfeiting, and customers must always be able to remove
their metal when desired.

The Transition to Honest Money

OK on to the transition possibilities. First we must picture the scenario in which the transition to
sound money will realistically take place. I believe it is very naïve to assume that magically one
day Congress will wake up and decide they have the political will to transition to sound money.
Therefore, I believe the need for such a plan will take place at a time when the dollar and
Treasury markets are in severe crisis.

Idea #1 - Transition in Slow Reverse

The transition suggestions made by Douglas Gnazzo in his book Honest Money and Edwin
Vieira are worth mentioning and studying. Gnazzo points out the transition from the
constitutional silver dollar pegged to gold to the current Federal Reserve Note, which is an
unbacked IOU of debt, took place slowly and went through phases from mostly commodity-
backed by silver and gold to the classical gold standard which was fractionally based on gold, to
the gold bullion standard which existed from 1933 to 1971, to a fractional reserved fiat noteuntil
roughly the year 2000. Following 2000 until present-day, the fractional reserve system has
broken down and no longer exists as I've proven in an article "Yes, Virginia, There Are No
Reserve Requirements."

[Gnazzo, Douglas. 2008. Honest Money.]

[Towne, Jake. 2009. "Yes, Virginia, There Are No Reserve Requirements."]

[Vieira, Edwin. 2009. 90-min Talk on Honest Money.]

[Vieira, Edwin. 2004. Text of Gold Money Bill.]

Gnazzo's suggestion is to slowly transition backwards from the Federal Reserve Note to a 100%
commodity-backed gold and silver money. While this idea is worth considering, I do not believe
it is viable due to the time necessary and since fractional reserve banking has already broken
down – we are off the precipice, so to speak. I do believe that from 1980-2000, such a reversion
was theoretically possibly but unfortunately very few people were agitating for this, most
especially Congressman Ron Paul of Texas, and it was never seriously discussed.

[1983 Debate Between Congressman Ron Paul of Texas and FED Governor Charles Partee.]

Idea #2 - Transition Overnight

The next idea comes from a member of the Mises Institute, Dr. Thorsten Polleit, and the man
who I believe is the most knowledgable monetary economist on the planet, Dr. Jorg Guido
Hulsmann, also from Mises. I will refer to just Polleit's idea here, which is a simple one – simply
take all of the central bank gold and back the fiat currency with it overnight, thereby making all
the money 100% commodity-backed in one fell swoop and limiting the chaos to the people. This
idea certainly warrants further discussion, and is in fact pretty attractive. Polleit has a great 1-
hour lecture I will link to that summarizes his paper.

[Polleit, Thorsten. 2009. Ending the Monetary Fiasco - Returning to Sound Money.]

Again, I believe the key risks lie from two factors. One, there is overwhelming evidence from
groups such as GATA that central banks, including the FED have leased out large portions of
their gold to the spot market. Since the central banks carry gold on lease and gold in vaults as a
single line item, such a calculation is only possible if valid audit results are available. Central
banks claim to possess just roughly 20% of the world's aboveground gold stock, though this
number may in reality be less than 12%.

[Powell, Chris. 2009. "Gold Suppression is Public Policy and Public Record."]
[Towne, Jake. 2009. "Unlocking the Money Matrix - The Summers Gold Price Suppression

Second, again I predict that no transition has a possibility of occurring until we have a severe
dollar and Treasury market crisis, and the predictable responses of the governments and central
banks will be to alter their balance sheets so that the end results are most profitable for
themselves to maintain control over their populations. It is also highly unlikely that central
bankers will be able to break their habit of using their counterfeiting powers, and for these
reasons, I regard changing from the current fiat monetary system to a gold-backing ashighly
dangerous. If you leave the bankers the ability to create deposits from thin air, one should not be
surprised when they exercise this yet again, this time stealing the gold.

Idea #3 - Divorced Transition

On to my plan. Everyone here should understand just how tightly legal tender laws enable the
Federal Reserve's money-printing, the federal income tax, the US Treasury market, and our
individual lives as parts of the economy. It is an intertwined house of cards where if you remove
one card, all of the rest quickly crumble, which is not too surprising since the whole tyrannical
system was designed by a bunch of Keynesian economists who, in my humble opinion, can best
be described as quacks.

[Hulsmann, Jorg Guido. 2004. "Legal Tender Laws and Fractional Reserve Banking."]

I propose complete separation of the Federal Reserve system from the free market system that
will replace it.

So, on one hand, you have the FED. Recall that the FED's power really stem from two abilities –
the ability to create money and the ability to control interest rates. Congress should pass a bill
abolishing the FED and as quickly as possible install direct congressional oversight of monetary
policy. All Treasury debt owned by the FED – close to half of the total – would be immediately
canceled. The Federal Reserve Note (FRN) would be replaced with a fiat United States Note at a
parity with the FRN. The entire banking system should immediately stop extension of fraudulent
dollars with money that does not meet fractional reserve requirements which will need to be
reset, since, as I mentioned before, the fractional reserve system no longer exists. Any money
creation should be presented as a typical bill and subject to a public vote of Congress. The
control of the interest rate should be left to the free market.

On the other hand, we have the free market, completely divorced of this FED mess. Immediately
Congress should remove all capital gains taxes on physical gold and silver. Just as was done with
the Coinage Act of 1792, the US Mints should be opened to provide free coinage of uniform gold
and silver coins. So if anyone has a bar or non-uniform coins, they can be brought to the Mints,
assayed and then a set formula of differently sized coins delivered. At the same time as the Mints
are opened, legal tender laws should be removed. Merchants, buyers, and sellers would have the
ability to decide which forms of payment they wish to accept.
Barring psychological events, the FRNs and new United States Notes would continue to have
purchasing power since in a monetary sense they will still be scarce but they will be not compete
over the long-term with gold and silver. Following Gresham's Law, the tendency will still be to
spend the fiat money first which may possibly result in easing a dollar price discovery for gold
and silver (or rather a gold gram price discovery for the dollar!!), and a fairly smooth transition
to the free market.

Foreign creditors will be rather unhappy, as the Treasury and Agency debt will likely either be
formally repudiated or indirectly repudiated as they could be paid back with notes that are no
longer backed by anything. However, I want to point out that the endless enslavement of future
generations by tyrannical Congress is an illegitimate debt in the first place. To place blame and
burden on future generations holds the same stunted logic as holding newborn Germans
accountable for the Holocaust.

[Rothbard, Murray. 1992. "Repudiating the National Debt."]

Also, the federal income tax which plundered $1.2 trillion in 2008 will likely not survive the
removal of the legal tender law, so we would be best off abolishing this tax and recall our
expensive $1+ trillion dollar-a-year overseas military empire and temporarily issue new United
States Notes in the meantime.

[Towne, Jake. 2009. "Income Tax Plank."]

Looking to the Future

Now, what goes without saying is that this period would be fairly chaotic, but as stated
previously it is my opinion that it is highly unlikely that any such political process would begin
without a dollar and Treasury crisis already in progress, and already caused by the failed
monetary policies of the central banks. It is my belief that without the legal assistance of
government, the same steps will likely still be followed by the free market via black markets and
people simply disobeying government to continue their lives -- but over a much longer period of
time. It is also why the more-sudden Polleit plan is in some ways more attractive than my
proposal – the cauterization of the central bank and the restoration of sound money could
practically occur overnight.

Now, how likely is either the Gnazzo, Polleit, or my plans to be enacted? I would say, in all
honesty, the probability is extremely small at current time, but I would also add that the
possibilities of the current monetary system surviving for the rest of our lifetimes is much

The times we live in right now are unlike any before in human history, where the entire world,
not just the United States, is on the same unsustainable fiat monetary system. The most probably
future I see ahead will be much slower and more drawn out - over years - and possibly even a
decade, barring psychological currency events. Expect to see the reverse of the breakdown of the
Bretton Woods system. I expect the future to bring financial market instability in bonds, equities,
and derivatives, fixed foreign exchange rates, fixed trading windows for gold and the possible
introduction of a Federal Reserve Gold Certificate Ratio where the FED pegs the dollar to a
trading range based on reinstated US money supply figure (possibly M3).

[Sinclair, James. 2008. "European Central Bank Intervention is Out in the Open."
Sinclair's website is updated daily.]

Unfortunately, if history teaches anything at all, even MORE war from the politicians can be
expected to occur to distract a population struck by economic unrest and a drop in living
standards caused by the parasitic central bank.

[Detweiler, Lance. 2002. "Fractional Reserve Banking as Economic Parasitism."]

[Towne, Jake. 2009. "Afghanistan War Plank." "Iraq War Plank."]

In the meantime, those who have studied monetary history will be accruing gold and silver and
hopefully more and more people like myself and yourselves will stand up to educate the rest of
America and fight to gain back both our economic and personal liberties.

I happen to be pessimistic in the short-term, but in the long-term there is a future – without the
FED - worth striving for. Imagine an America where the family no longer must send both parents
to work while sending the children to daycare. Imagine an America where money saved in the
present-day worth the same or even more decades later, enabling individuals to pursue
retirements or have more leisure time for personal pursuits. Imagine an America where everyone
owns what they work for.

The more people that stand united against the blight of the FED, the better off society will be in
the long run. The main weapon against the FED is simply educating the public.

[Towne, Jake. 2009. Platform Presentation, slides 26-47 spells out the plan in slide format.]

Happy Thanksgiving! Enjoy your time with your loved ones! Please come to the first-ever
"Towne Hall" this Wednesday at the Bethlehem Township Community Center if you are free!!

Jake Towne

Nazareth, Pennsylvania

November 23, 2009

"A small body of determined spirits fired by an unquenchable faith in their mission can
alter the course of history." - Mohandas Gandhi


Jake Towne is running for U.S. Congress in Pennsylvania's 15th District in the 2010 election as
a citizen unaffiliated with any political parties. Jake also writes
at, and A
novel campaign website where you can comment on articles and start discussions is available
at [Reach the Author Here!]


We the People of the United States, in Order to form a more perfect Union, establish Justice,
insure domestic Tranquility, provide for the common defence, promote the general Welfare, and
secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this
Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of,
rebroadcasts, retransmissions, repostings of this article to your blog or anywhere else in order
to promote the Restoration of our Republic.

Veritas numquam perit. Veritas odit moras.Veritas vincit. Truth never perishes. Truth hates
delay. Truth conquers.

Tu ne cede malis sed contra audentior ito.Do not give in to evil but proceed ever more boldly
against it.

Articles Written


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Published: Tuesday, November 24, 2009
Last modified: Tuesday, November 24, 2009

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Reader Comments:

Posted By: Steven A. Rosile

Date: 2009-11-24 10:05:58

I advocate that the United States monetary unit of account, be it called a dollar or something else,
be defined as one ounce of silver. All prices would be listed as wieghts of silver or gold.

This would be in accordance with the US Constitution at Art. I, sec. 10.

All US coins that contain silver or gold would still be current and usable as lawful money at their
content or weight in silver or gold.

Report violation

Posted By: Steven A. Rosile

Date: 2009-11-24 10:29:26

I chose silver rather than gold because of the possibility of a one to one relationship between
ounce and unit of account and its lower value being more convenient for day to day transactions.
As silver and gold are commodities whose relative value varies, only one or the other can be
used to define the money of account. Gold could be used rather than silver. However, it would
probably need to be at some multiple, say 100 monetary units per ounce, rather than the straight
one ounce to one monetary unit that is possible with silver. I believe that the one to one
relationship is superior but either way will be in compliance with the US Constitution, which is
something we should always demand from government and ourselves.