-- Posted 27 June, 2007 | | Discuss This Article - Comments:

The Wallace Street Journal

By David Bond, Editor

The Silver Valley Mining Journal

Wallace, Idaho – Delivered on our front porch yesterday morning was a baleful reminder that it was 40 years ago this week, Great Society's creator, President Lyndon Baines Johnson, signed legislation finally and forever ending this sad Republic's government's 200-year policy of (more or less) keeping its promises.

LBJ did so by declaring, on or about 24^th June, 1967, that the 120-or-so Silver Certificates we had been dutifully collecting since silver was tossed out of the coinage two years earlier would be, a year hence, just another load of crap, like the paper IOUs the Federal Reserve System had been issuing since 1929.

It was the end of monetary honesty in the United Snakes. LBJ's timing was perfect in that relieving the Treasury Department of the burden of honesty came during a very heady month and escaped notice almost entirely. Let us digress. Here's the news this bit of pecuniary perfidy had to compete with that month: the Arab-Israeli 6-Day War (during which Israeli fighter jets and Israeli warships fire at USS Liberty off Gaza, killing 34 and wounding 171); the Beatles' release of Sgt. Pepper's Lonely Heart's Club Band; the death-sentencing by electrocution of Chicago nurse-murderer Richard Speck; China's first hydrogen-bomb detonation; the Supreme Court's ruling in Loving v. Virginia that ended state laws prohibiting interracial marriages; Thurgood Marshall's appointment as the first African American to that same Supreme Court; race riots in Tampa, Florida and West Berlin, Germany; and the debut of the world's first automatic cash machine (ATM to you newbies) at a Barclays Bank branch in Enfield, England.

Who, with all that other stuff to pay attention to, even bothered to notice that LBJ had just stripped away the last vestiges of United Snakes government honesty? Well, we did, because we'd been saving up our Silver Certificates, never ceasing to be amazed that cashiers in department stores would willingly accept our proffered Fed Note IOUs in exchange for one of their precious Silver Certificates. But in the end we were outsmarted, and LBJ exchanged, with Congress's complicity (duplicity?) and without our consent, our Silver Certificates for Fed Notes. They voided a contract to redeem in silver. They broke their word.

That same year, they issued us a Draft Card, completing in us a smoldering sense of anarchy that lately has manifested itself in libertarianism. The bastards lied. Ergo, absent a return to honesty, they are still lying.

That silver is being whacked in price this week – news this bull loves to hear, because it means there are still some fools out there willing to sell it for US Fed Notes at an even lower exchange rate – only heightens our intellectual curiosity. The bill LBJ actually signed on 24^th June was described thusly in the 26^th July, 1967 edition of the old Kellogg Evening News:

“A bill that would end the redemption of silver certificates for silver metal within one year was signed Saturday by President Johnson. The bill also gives the Treasury the right to declare up to $200 million worth of silver certificates as being lost, destroyed, or held in collections, and thus add 154 million ounces of silver to the Treasury's “free silver” balance.  Silver futures were off sharply today, but interlisted mining shares were slightly higher . . .” the news account read.

The pin-drops that were the overture to this final denouement first fell in 1913, with the creation of the Federal Reserve banking system at Jekyll Island. By 1929, that bank's loan documents (today's Fed Note) had begun to replace gold ounce- and silver ounce-backed certificates issued by the US. Treasury. Yet while Franklin Roosevelt criminalized gold coins in 1933, it was not until 3^rd June, 1965, that Johnson proposed eliminating silver from US coins. His speech to the Congress that day on the topic, the full text of which may be found here, is instructive:

“We are today using one of the few existing silver coinages in the world. Our coins, in fact, are little changed from those first established by the Mint Act of 1792. For 173 years, we have maintained a system of abundant coins that with the exception of pennies and nickels is nearly pure silver.

“The long tradition of our silver coinage is one of the many marks of the extraordinary stability of our political and economic system.

“Continuity, however, is not the only characteristic of a great nation's coinage. We should not hesitate to change our coinage to meet new and growing needs. I am, therefore, proposing certain changes in our coinage system – changes dictated by need – which will help Americans to carry out their daily transactions in the most efficient way possible,” said Lyndon Johnson.

Let's review the 1792 Mint Act. Two units of money (and their derivatives) were therein created by this Act: The Eagle, described as containing “247 grains and four-eighths of a grain of pure gold or 270 grains of standard gold”; and the Dollar, “each to be of the value of a Spanish milled dollars as the same is now current, and to contain 371 grains and four-sixteenth parts of a grain of pure, or 416 grains of standard silver.”

One Eagle was the equivalent of 10 Dollars (or “Units” as the act alternately described them) The composition of the Eagles further was dictated to be 11 parts pure gold, and 1 part a 50-50 silver/copper alloy, to give the coins more resistance to wear.

But what was Johnson's rationale for debasing the coinage? It was the reality of those chickens let loose from Jekyll Island in 1913 finally coming home to roost. Johnson was elected on his “guns and butter” policy of being simultaneously able to afford his Great Society and his hideous Viet Nam war without raising taxes. Well, you can't do that. You can't have more of the same without paying for more of the same. LBJ's answer, with the slobbering concurrence of the Federal Reserve Bank, was inflation. Get rid of the Treasury Notes John Kennedy had issued; debase the coinage, and then debase the currency. But mid-1968, all had been done.

And what was to blame for all this? War? No. The Welfare Great Society State? No. The wanting to have things without paying for them? No. LBJ's villain was . . . Silver. And even worse: Silver hoarders.

Let's continue from the Kellogg Evening News article of 26^th June, 1976: “Through May 1976, a total of 86,869,340.37 ounces of silver have been withdrawn from the Mint for non-coinage purposes, as compared with 139,946,531.06 ounces in all of 1966; 80,423,881.69 ounces in 1965 and 149,258,026.47 ounces in 1964.”

In other words, LBJ's very proposal to demonetize silver, first in the coins and then in the paper, caused a run on the Treasury's stash by people who merely wanted to exercise their contractual rights to redemption of their paper in anticipation of a default on its promises by the United Snakes government. Ironically, back then, the US government couldn't have enough silver in its repositories. Continued Fuhrer Johnson:

“It is necessary for the United States government to have large stocks of silver in addition to the quantity needed for coinage. We need these stocks because our silver coins in circulation must be protected from hoarding or destruction. Protection of the silver coinage will continue to be a necessity since we plan for it to continue to circulate alongside the new coins. Our silver coins are protected by the fact that the government stands ready to sell silver bullion from its stocks at $1.29 a troy ounce. This keeps the price of silver, as a commodity, from rising above the face value of our coins. This, in turn, makes hoarding or melting of the silver coinage unprofitable.”

Johnson went on to cite silver's upcoming necessities in the fields of aerospace and rocket science. Little did he conceive silver's necessity in the fields of computers, medicines, superconductors and automobiles.

What Johnson was doing was in the interests of National Security, after all. First, start a run on silver by issuing base-metal coins in order to keep redeeming Silver Certificates at $1.29 an ounce. Then, again in the interests of National Security, renege on the contract to redeem paper Silver Certificates for real silver by those disinterested in holding paper Fed Notes after the coinage debasement. And all because we needed supersonic jets and moon-shots, and because hoarders are evil. Were it not for the draft card burning a hole in our buttocks, we might have been moved to feel Patriotic. But we were moved instead to sense only Perfidy.

LBJ had made silver a villain and a saviour in the same speech. It was somehow Lady Silver's fault that silver could no longer be a part of our money.  What a review of the ugly events leading up to the final debasement of United Snakes government money does for one's digestion is not altogether healthy. Imagine how Charles De Gaulle and the rest of Europe felt, in 1973, when President Richard Nixon told them their gold certificates were no good, either. And yet we sit here and wonder, post-9-11, post-Iraq, why the whole world hates us?