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A Hard Money Revolt

Tags Gold Standard

03/18/2013Murray N. Rothbard

["Revolution in Minnesota," The Libertarian Forum, August 1, 1969.]


The idea prevails that to favor gold or silver money is to be a mossback reactionary; nothing could be further from the truth. For gold (as well as silver) is the People’s Money; it is a valuable commodity that has developed, on the free market, as the monetary means of exchange. Gold has been replaced, at the dictate of the State, by fiat paper—by pieces of paper issued and imprinted by the government. Gold cannot be produced very easily; it must be dug laboriously out of the ground. But if paper tickets are to be money, and the State is to have the sole power to issue these virtually costless tickets, then we are all at the mercy of this gang of legalized, sovereign counterfeiters. Yet this is the accepted monetary system of today.

Not only is this system of the State’s having absolute control of our money been accepted by Establishment economists; it has been just as warmly endorsed by the powerful “Chicago” branch of free-market economists. Twenty years ago, almost all conservative, or free-market oriented, economists, favored a return to the gold standard and the elimination of fiat paper. But now the gold standard economists have almost all died out and been replaced by the glib, technically expert Chicagoites, to a man scoffers at gold and simple-minded endorsers of fiat paper. The gold standard has died from desertion of its cause by the right-wing and its economists. Numerous right-wingers who should know better yet continue to fawn upon Milton Friedman and his Chicagoites. Why? Presumably, because they have power and influence, and one never finds conservatives lacking these days when it comes to toadying to power.

In the midst of this monetary miasma, there has now come a voice from out of the past, from the Old Right, and it is one of the most heartwarming events of the year.

Two years ago, Jerome Daly, a citizen of Savage, Minnesota, a suburban town just south of Minneapolis, refused to make any further payments on the mortgage which he had owed to his bank. At his jury trial (First National Bank of Montgomery vs. Jerome Daly) in December, 1968 before Justice of the Peace Martin V. Mahoney, a farmer and carpenter by trade, at which the bank tried to repossess the property, Mr. Daly argued that he owed the bank nothing. Why? Because, the bank, in lending him money, had loaned him not real money but bank credit which the bank had created out of thin air. Not being genuine money, the credit was not a valid consideration, and therefore the contract was null and void. Daly argued that he did not owe the bank anything.

In making this seemingly preposterous argument, Jerome Daly was being a far better economist—and libertarian—than anyone knew. For fractional reserve banking—now a system at the behest and direction of the Federal Reserve Banks—is, like fiat paper, legalized counterfeiting, the creation of claims which are invalid and impossible to redeem. Furthermore, Daly contended that this kind of creation of money by banks is illegal and unconstitutional.

Even more remarkable than Mr. Daly’s thesis is that the jury unanimously held for him, and declared the mortgage null and void; and Justice Mahoney’s supporting decision, delivered last Dec. 9, is a gem of radical assertion of the rights of the people and a thoroughgoing assault on the unwisdom and fraudulence and unconstitutionality of fractional reserve banking.

Bewildered, the First National Bank of Montgomery, Minnesota proceeded in routine fashion to file an appeal with Justice Mahoney for a higher court. But the catch is that in order to file an appeal, the plaintiff has to pay a fee of two dollars. Justice Mahoney, O happy day, refused to accept the appeal on January 22 because Federal Reserve Notes, which of course constituted the fee, are not lawful money. Only gold and silver coin, affirmed the judge, can be made legal tender, and therefore the fee for appeal had not been paid. Justice Mahoney followed this up with supporting memoranda on January 30 and February 5, which are heartwarming blends of sound economics and strict legal constructionism, and which also declared the unconstitutionality of the Federal Reserve Act and the National Banking Act, the capstones of our current interventionist and statist monetary system.

There the matter rests at the moment; but where does it rest? We have it on the authority of Justice Mahoney that debts to fractional reserve banks (i.e. the current banking system) are null and void, that their very nature is fraudulent and illegal (in short, that the banks belong to the people!), that Federal Reserve Notes and fiat paper are unlawful and unconstitutional.

Never has there been a more radical attack upon the whole nature of our fraudulent and statist banking system.

Furthermore, with these embattled Minnesotans, their radicalism is not only rhetoric; they are prepared to back it up with still further concrete acts. Jerome Daly has already announced that if any higher court of the United States, “perpetrates a fraud upon the People by defying the Constitutional Law of the United States (Justice) Mahoney has resolved that he will convene another Jury in Credit River Township (where Savage is located) to try the issue of the Fraud on the part of any State or Federal Judge”. Daly adds, moreover, that the Constable and the Citizens’ Militia of Credit River Township are prepared to use their power to back up the jury’s decision and keep Mr. Daly in possession of his land. The people of Savage, Minnesota, in short, are prepared to fight, to resist the decrees of the state and federal governments, to use their power on the local level to resist the State.

Many dimwits in the libertarian movement—and they are, unfortunately, legion—have charged that in recent years, I have simply become a “leftist”. From the literature of Mr. Daly and his supporters, it is quite clear that this is a heroic band of Old Rightists, of people who have not been nurtured on National Review or the lesser organs of current Right-wing opinion. I am equally and eagerly as willing to hail their libertarian action for the people and against the State, as I am such “leftist” actions as People’s Park.

The test, as Karl Hess indicates in this issue of The Libertarian Forum, is action; action now vis à vis the State. Those who side with the liberties of the people against the government are our friends and allies; those who side with the State against the people are our enemies. It is as simple as all that. The problem, as far as the Right goes, is that in recent years there have been zero actions by the Right against the State; on the contrary, the Right has almost invariably been on the side of the State: against the demonstrators at Chicago, against People’s Park, against the Student Revolution, against the Black Panthers, etc. If the test is, as I hold it to be, action, and “which side are you on, the people or the State”, and not the closeness of agreement on the fifth Lemma of the third Syllogism deduced from whether or not A is A, then the Right-wing in recent years—and this means the entire right, from Buckleyites and Randians straight through to phony “anarchists” (or “anarcho-rightists”)—has been a dismal failure. Indeed, it has ranged itself on the side of the Enemy. Thus, in the matter of tax resistance, ten or fifteen years ago the banner of tax refusal was carried by such “rightists” as Vivien Kellems; now the self-same flag is carried by such “leftists” as Joan Baez.

If the “libertarians” of the Right-wing are at all interested in my approbation, there is a simple way to attain it: to acquire one-hundredth of the fortitude and the revolutionary spirit of the New Left resisters against the State; to return to the tradition of Sam Adams and Tom Paine, of Garrison and John Brown, and, in recent years, of Frank Chodorov and Vivien Kellems. Let them return to that great tradition or let them, as rapidly as possible, sink into the well-deserved dustbin of history.

In the meanwhile, all hail to the heroic rebels of Savage, Minnesota, to the perceptive and courageous Jerome Daly and Justice Martin Mahoney.


Murray N. Rothbard

Murray N. Rothbard made major contributions to economics, history, political philosophy, and legal theory. He combined Austrian economics with a fervent commitment to individual liberty.