Part I. Banking and Monetary Reform

Explanation and Details
 

In a battle of knowledge between the lawyer-politicians and the public, the people fight unarmed. An elite group dominates through legal finesse. It holds the high ground, establishing rule with nothing more than technical words written on paper and a few simple principles adopted from Lex Mercatoria, nowhere officially recorded. Its real power emanates from control of America’s institutions, primarily those dealing directly with monetary and fiscal policy. Misuse of this power for its own purposes, with considerable encouragement from voters expecting to get something for nothing, led to the nation’s current economic predicament. The easiest way out of this mess requires new monetary and fiscal policies. Both systems desperately need renovation.

Monetary policy controls money creation. Most of these rules have changed little since 1913 when they were first implemented. Despite the modern appearance of the buildings and shiny new computers of the nation’s financial institutions, our monetary system is antiquated. Modern computers process numbers faster but do not improve the system’s outdated fundamental operations.

The proposed bill, the National Economic Stabilization and Recovery Act, increases the efficiency of the monetary system and immediately eliminates part of the national debt. One way or another, that $20 trillion debt, impossible to pay, must soon be discounted. Under current economic conditions and systems’ rules, this requires either general depression or hyperinflation. Both methods wipe debt off the books; both are painful processes. NESARA proposes a third method. By changing the rules it offers an engineered solution to the problem rather than insisting on additional sacrifice from those who have little more to contribute.
 

Modification of the nation’s monetary system starts with the definitions in Section 1 of Part I, Banking and Monetary Reform. Words often have legal definitions that differ from popular or colloquial usage. “Dollar” is a unit of measurement, specifically, a unit of weight equal to 371 and 1/4 grains. A price of ten dollars is semantically equivalent to a price of ten gallons. Gallons? Gallons of what? Practical applications demand an additional clarification. Individuals usually supply the answer through ignorance in the form of assumed knowledge. Their stock seems unlimited.

Words build sentences. Sentences frame ideas. Ideas lawfully expressed in statutes become law. Changing definitions of words after the fact corrupts the law. The lawyer-politicians make effective use of this tactic with one exception—their attacks on the U.S. Constitution.

In order for it to have reasonable construction the words in the Constitution must be taken at their obvious historical meaning. In 1824 Chief Justice Marshall wrote, “As men, whose intentions require no concealment, generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed our constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said.”[1]

On occasion, the lawyer-politicians, attempting to evade clear constitutional intent by changing the meaning of a word, encounter someone like Justice Mahlon Pitney of the 1920 Supreme Court. He declared that “Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.”[2]

Definitions are important. Misunderstanding the meaning of words used in the proposed bill might result in an incorrect interpretation of the statute’s intent when it becomes law. Furthermore, all definitions must conform to those used in the Constitution. Pay close attention to the specific definitions given for “bills of credit,” “eagle,” “interest,” “lawful,” “legal,” “legal-tender,” “money,” “payment,” “seigniorage,” “specie” and “tender.” All of the ideas found in NESARA are based on the simple legal definitions of a few dozen words.
 

Section 2 of Part I lists some obvious items as likely findings of Congress. The purpose of this section is to state the relevant facts about the issue addressed and explain why a new law is needed. New laws should not be passed without serious justification because their current total volume exceeds the ability of any human to know, let alone comply with all of them.
 

Section 3 of Part I acknowledges congressional control of the United States monetary system. This authority originates with the Constitution, contained in its monetary powers and disabilities:
 

• Article I, § 8, cl. 2 —The Congress shall have the Power …To borrow Money on the credit of the United States[.]

• Article I, § 8, cl. 5 —The Congress shall have the Power …To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures[.]
• Article I, § 8, cl. 6 —The Congress shall have the Power …To provide for the Punishment of counterfeiting the Securities and current Coin of the United States[.]

• Article I, § 10, cl. 1 —No State shall …coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…
   

In Section 4 of Part I Congress exercises its monetary power, directing the United States Treasury to produce three new kinds of currency: treasury credit-notes, standard silver coin, and standard gold coin. Treasury credit-notes “in sufficient quantity to replace all outstanding United States legal tender paper currency of every type” will become the bulk of the nation’s currency. All printing of previously authorized paper currency is now prohibited. Natural circulation and the resultant wear and tear will eventually eliminate the old paper currency, predominantly Federal Reserve Notes, except those items held as collectibles. Existing gold and silver certificates will not be redeemed in specie but are still usable under their current legal tender status. The bill authorizes but does not mandate production of new silver certificates and new gold certificates that are redeemable. It also provides general specifications and limitations for their production along with remedies for failure to meet those limitations.

Congress further directs the Secretary of the Treasury to begin maximum production of standard United States gold and silver coin according to the general instructions provided. A standard design unchanged for thirty years and the marking of all coins produced within a decade with the same date works to limit an excessive exchange value for the coins as collectibles and to promote their circulation.

NESARA opens the public mints to unlimited coinage. Anyone may bring gold or silver bullion to these mints to be coined. A charge, called seigniorage, keeps them self-supporting. It raises the exchange value of the standard coin to a point above the exchange value of its bullion content, another way of protecting its circulation. In addition, seigniorage makes feasible the operation of private mints in competition with government mints, assuring the efficiency of both. The Secretary of the Treasury is directed to promote and regulate such operations.

Notice that unlimited coinage at the national mints of privately owned bullion has the effect of monetizing not just U.S. owned precious metal, but the entire world supply. By honestly following this simple plan the United States will become the monetary capital of the world, its currency immediately acceptable at the published exchange-ratios anywhere on the planet. And this is accomplished at no cost to the government.

The benefits of a moral monetary system extend beyond the borders of any nation. Imagine what would have happened if the United Nations had adopted this plan and obtained its financial support from a small tax on the international trade of its members. Undoubtedly, the world today would be a far different place.

Maintaining three types of currency in simultaneous circulation requires practical solutions to two problems: One is nomenclature; the other is regulation of their exchange-ratios.

The term “dollar” has been corrupted by popular use so far beyond its original constitutional meaning that its recovery seems improbable. Under these circumstances the most appropriate solution is to assign the term “dollar” or the symbol “$” without other qualifiers to designate United States Treasury credit-notes or its subdivisions such as clad token coins and subsidiary token coins of base alloys. In contrast, terminology designating standard silver coin must contain the word “silver” as a qualifier. The term “eagle” seems adequate to identify the new standard gold coin. Specific historical coins can be identified by date and description.

To avoid the problems often encountered with fixed exchange-ratios, Congress directs the Secretary of the Treasury to determine and publish the exchange-ratios between the various currencies. This method, established as a matter of law, discharges Congress’s constitutional obligation to “regulate the Value thereof.”

Treasury credit-notes enjoy a limited legal-tender status as a default medium of exchange. If parties to a mercantile transaction fail to specify a specific medium of exchange, such as standard silver dollars or eagles, the courts must assume they intended to use treasury credit-notes. Of course, as the issuing agent, the government must accept them in payment of all taxes and fees.

Other provisions of this section give the new coinage a distinctive shape, useful for the visually impaired, and specify the method to compensate for abrasion. NESARA also repeals all existing laws authorizing government seizure of precious metals for monetary policy purposes or prohibiting the recovery and use of the bullion content of lawful coin. This enables artists to use either the coin itself or its metal content in their works. It also encourages public enforcement of the regulation of their exchange-ratio because the coins may be melted to recover the intrinsically valuable bullion without penalty.
 

Section 5 of Part I identifies the Federal Reserve Act of 1913 as the Act amended by this bill, using its original provisions for the dissolution and recovery of assets of the Federal Reserve System. In effect, this section transfers all rights and ownership of whatever kind that anyone may have in the Fed, everything from the dust on its chandeliers to the spiders under its foundations, to the United States Government. It assimilates the existing Federal Reserve System into the United States Treasury as the United States Treasury Reserve System and creates a new Board of Governors. The character of this new Board is established by specifying that twelve of its thirteen officers are ordinary citizens representing their districts, a design patterned after the jury system.

To encourage only conservative actions, NESARA reduces the current wide range of sometimes confusing and often conflicting objectives imposed on the existing Federal Reserve System to the single objective of maintaining a long-term, stable exchange value for the new treasury credit-notes. Every action by the new Board of Governors requires an affirmative vote by nine of its thirteen officers.

Some of the Board’s prerogatives are expanded. The existing Federal Open Market Committee of the Federal Reserve System is abolished, its powers and responsibilities transferred to the new Board of Governors. Also, a special account within the United States Treasury Reserve System called the Treasury Reserve Account is established, to be administered at its sole discretion.
 

Section 6 of Part I renames the twelve existing private Federal Reserve Banks as Treasury Reserve Banks, now public entities. It establishes a requisition and accounting method for the Treasury to track the production and distribution of treasury credit-notes. Denominations larger than $100 are allowed, provided their circulation is not public.

All financial instruments held by the twelve United States Treasury Reserve Banks shall be delivered to the Office of the Director of the Board of Governors of the Treasury Reserve System and exchanged for treasury credit-notes from the Treasury Reserve Account at an equivalent face value of one for one. These treasury credit-notes may then be used for the ordinary operating expenses of the Treasury Reserve Banks. This will effectively eliminate or keep the necessary charges for their services very low for an extended period. It also provides one method of slowly releasing them into general circulation, preventing economic shock. Once these funds have been expended, the Treasury Reserve Banks must charge a sufficient amount for their services to remain self-supporting.

As the obligations of the United States are received in the Office of the Director of the Treasury Reserve System, they will be delivered to the Secretary of the Treasury. Appropriate action by the Secretary cancels them out of existence. Notice that all commercial instruments other than those of the United States, such as private commercial paper and the financial instruments of other nations, remain under the control of the Board of Governors of the Treasury Reserve System.

The Office of Comptroller of the Currency becomes responsible for regulation of the United States Treasury Reserve Banks. Except for an absolute prohibition against making dispersals from accounts that contain no funds, they continue normal operations. Their exact status is deliberately left as an open question. The Comptroller of the Currency may operate them under commercial contracts or the current staff might become government employees. It is contemplated that, at some future time, their physical assets and ordinary banking functions might be sold back into the private sector. This option should be kept open. 

United States Treasury Reserve Banks now operate as direct agents of the Treasury. They obtain the standard gold and silver coin from the Treasury as it becomes available. Individuals may exchange their paper currency for coin at the published ratios.
 

Section 7 of Part I compensates the former owners of the private Federal Reserve Banks for cancellation of their outstanding capital stock. They are paid in newly printed treasury credit-notes at the price previously fixed by law. Stock not redeemed in 90 days becomes worthless.

All government obligations, both foreign and domestic, held by the nation’s commercial banks are exchanged for treasury credit-notes, on a dollar for dollar basis, with their district Treasury Reserve Banks. Ultimately, the Secretary of the Treasury cancels the U.S. obligations. The new law prohibits commercial banks from purchasing or holding the income-producing instruments of the United States, or those of other nations, effectively eliminating much of their influence on monetary policy.

These actions amount to a direct reduction of the public debt, and at virtually no cost. To see how this is accomplished, follow the money’s path. The Treasury prints new money, swapping it for the government’s income-producing obligations held by the old Federal Reserve System. When this system is absorbed into the Treasury, it gets that money back, essentially paying itself for its own obligations with a small printing cost. Using this money again, the Treasury buys its income-producing obligations currently held by more than ten thousand of the nation’s banks, either as fractional reserves or for their own investment accounts. The Secretary of the Treasury then cancels these government obligations, eliminating billions of dollars of public debt.

By limiting commercial bank reserves to treasury credit-notes, which produce no direct income, the national economy remains largely unaffected. Most of the exchanged treasury credit-notes rest quietly in bank vaults as reserves, out of the stream of commerce. Because they are not in public circulation, they do not bid the price of consumer goods higher.

Swapping treasury credit-notes for the government’s income-producing obligations is remarkably fair. It prevents taxpayer support of the banks through double use of the same funds, first as income producers for the banks and then as an expansion base for the banks’ monetization of the public’s debt. From now on, commercial banks must earn their living through direct service to the community, not at taxpayers’ expense.

Similarly, the private debt of the American people can be reduced by astronomical amounts simply by requiring repayment of principal on secured loans before a bank begins to earn the monetization-fee and by prohibiting compounded monetization-fees. These rules would only apply to financial institutions that make secured loans on a fractional reserve basis. Such loans are nothing more than monetization of the borrower’s own debt, an extension, not of bank credit, but of the national credit through the bank’s license to create money.

Current loan equations based upon compounded interest:

where:

T = total amount of debt
P = principal; equal to the original investment
i = interest rate per interval, expressed as a decimal
n = number of equal intervals

where:

R = amount of periodic payment
L = amount of the loan
i = interest rate per interval, expressed as a decimal
n = number of equal payments

New loan equations based upon simple monetization fee:

where:

R _r = repayment rate, $ per $ per month
n = number of equal payments, months
f_m = bank monetizing-fee per month, expressed as a decimal
C_f = cost factor for the loan
L = amount of the loan
M_b = base monthly payment
C_b = base cost for the loan

Applying these rules to outstanding loans immediately reduces the private debt of the American people. Lowering the debt-service burden associated with secured loans allows an ordinary working family a modern lifestyle it can afford. It also assures that the banks fulfill a very necessary “public purpose” which, as the Supreme Court noted in 1896, was the reason for their creation by the government.

Banks are compensated for this midstream change in rules in several ways—by a monthly service charge not exceeding 25 dollars, retroactively and on future loans, and by origination fees and points on new loans. Discount points are limited to a maximum of 5 percent of the principal loan amount and reduced proportionally as the annualized rate of the monetization-fee increases. This encourages low rates.

Under these rules, and in the absence of fraud, bank failures and taxpayer bailouts become a thing of the past. It will be almost impossible to suffer loss on a secured domestic loan with the principal paid up front. And, in contrast to the perpetual expansion of compounded interest charges, the new repayment equations always converge to zero under any repayment plan. Defaults occur only if the borrower fails to make the payments specified in the original contract or to arrange for new terms through renegotiation.

The Office of the Comptroller of the Currency is responsible for the day-to-day regulation and normal operation of the nation’s commercial banks. With all regular banking operations controlled from this office, the Board of Governors of the Treasury Reserve System can concentrate on monetary policy.

Several restrictions are imposed by Congress on all financial institutions operating within the jurisdiction of the United States. To avoid the appearance of impropriety they may not grant loans to themselves nor to their directors, major stockholders, officers or employees or to members of their immediate families. To reduce public confusion, and the opportunity for mismanagement of funds, separate accounts of record must be maintained for each type of currency. Converting funds between any two of the three different types of accounts requires the written authorization of the owner.

To avoid legal confusion with credit-note dollar accounts, all such accounts are general warrant deposits—fungible accounts allowing banks to return property like-for-like, and all demand credit-note dollar accounts are strictly custodial accounts. Deposits to other types of credit-note dollar accounts, such as certificates of deposit, require the depositor to be informed about and acknowledge the account contractual status. This helps to avoid confusion with credit-note dollar accounts.

All gold and silver accounts are custody accounts only, the ownership of these funds remaining vested in the depositor. These specie accounts earn no income because they can never be used as fractional reserves for credit expansion or as the basis for loans. A financial institution may even impose service charges for their maintenance. Checkable accounts or travelers checks on gold or silver accounts are strictly prohibited, blocking another avenue for fraudulent activity.

On the positive side, gold and silver accounts help satisfy Congress’s moral and constitutional obligations for creating a lawful currency system. Individuals not wishing to participate in a fractional reserve money system have a clear alternative. If a financial institution fails, the owners of gold and silver accounts receive preferential treatment for recovery of their funds. Such accounts may also prove useful in international trade.

This bill forces no one to use hard currency. A casual look at the figures and that impractical dream of the ‘goldbugs’ evaporates like dew in the hot morning sun. The United States holds a trifle more than 260 million troy ounces of gold as monetary reserves, roughly 28 percent of the world’s total, or about one eagle for every citizen. Selling it at $400 per ounce, above the current market price, raises only a little more than $100 billion. That amount pays approximately five months interest on the nation’s outstanding debt.

What about silver? True, the U.S. Treasury owns more silver than gold but it is worth much less. The world’s total reserve base is only about 420,000 metric tons. Coin all of it into silver dollars, nearly 17.5 billion of them, and sell them at $4 each, a little more than the current market price. The total, $70 billion, will not pay the interest charge on the national debt for four months.

Merely hinting that the United States intended to sell all its gold and silver at market prices would drop their value into the cellar. Mining stocks would plummet. Gold and silver mines would close as their operation became unprofitable. It would be much cheaper to mine the U.S. Treasury.

Monetizing all the nation’s gold and silver will not pay any portion of the national debt. Bank accounts in lawful money will be restrictive, earn no interest and may suffer the insult of maintenance charges. It is most unlikely that specie will return to general circulation. Much of it remained in bank vaults even while the nation was on various metallic standards. Facing these difficulties, why bother with a complex system using three types of currency?

With a cast of characters selected and the stage set, use your imagination and let the play begin.

Suppose Congress instructs the Treasury to sell small-denomination, nontransferable interest-bearing gold and silver savings bonds to U.S. citizens through their bank specie accounts. These bonds are redeemable in 5 to 20 years, interest paid annually, calculated in specie but paid in treasury credit-notes at the current exchange-ratio. Americans could exchange their paper currency for lawful money, deposit the coin in a specie bank account, then convert those funds to interest-bearing gold or silver savings bonds.

This immediately creates a tremendous circulating market for the Treasury’s gold and silver coin, most of which never leaves the vaults. The sale of $50 billion in specie bonds at par removes that amount in paper currency from general circulation. Under the new banking rules, the bonds are nontransferable, thus the bonds never enter the stream of commerce and cannot replace the paper currency. Nor under the new banking rules can the bonds be used as bank reserves. Due to the expansion factor built into the fractional reserve monetary system, the nation’s available currency and credit drops, perhaps by $500 billion.

At the least such a move is sharply deflationary, and probably recessionary. Since the nation’s aggregate of currency and credit is only about $3,000 billion, the government would have to increase the money supply before the economy collapsed. Suppose Congress decides to accomplish that increase by redistributing the proceeds from the bond sales as restricted bank reserves, setting the restricted reserve requirement at 10 percent. State and local governments could borrow funds for infrastructure projects from local banks equal to 10 times the reserve amounts (provided local taxpayers agree to new taxes to repay the loans).

Everybody wins. The federal government, using the bullion now collecting dust at the Treasury, redirects a significant portion of net national production toward rebuilding a crumbling America, new roads, bridges, and other public facilities including water supply and waste disposal plants. Bankers earn a fee for handling the transaction. Voters once again get back into the loop. Proposed projects die without local approval. Lastly, because principal is repaid before the monetization-fee, low debt-service factors on long-term projects keep the cost down and local taxes low.

If this strategy seems vaguely familiar, it should. Jay Cooke would recognize it as the flip side of his plan to finance the Civil War. In this instance the government leverages its gold and silver to generate billions of dollars for much-needed capital improvements. Wise selection of public projects will increase national efficiency, ultimately lowering the nation’s debt. The financing technique employed is an adaptation of the Guernsey plan. It keeps local bankers and voters directly involved where it counts the most, their pocketbooks.

Other versions of this general strategy may apply in international commerce. A foreign nation—China, Russia, India, South Africa—having gold and needing technological assistance and investment capital for infrastructure projects might find both in an American corporate partner. Suppose that the foreign gold is delivered to the U.S., coined and deposited in a gold account. With Congressional approval, those funds are converted to gold savings bonds, the proceeds being designated as restricted bank reserves for a loan to finance a specified project.

Everybody wins again. The foreign partner gets an infrastructure project—a national communications system, power production or transmission facilities, a water or sewage treatment plant, heavy construction equipment, etc.—financed at a very low debt-service burden. An American corporation gets a major international sale, creating local jobs and reducing this nation’s trade deficit. The bank earns its fee and, after loan repayment, the gold is returned with interest, or perhaps recycled into a new project.

When conventional solutions fail, consider creative alternates. Fair deals work for everybody. Foreign aid projects that benefit the American taxpayer while helping others make good sense.
 

Section 8 of Part I imposes a progressive excise tax on the monetization-fee or interest income of all financial institutions or persons who make commercial loans of currency for profit. These provisions raise revenue for the government but also, and perhaps more important, discourage excessive debt-service burdens. This tax is especially appropriate for those financial institutions that use a government-issued license to operate a fractional reserve system.
 

In Section 9 of Part I Congress creates a United States Treasury Credit-Note Exchange-Value Index. This index, initially set at 100, tracks the exchange value of treasury credit-notes. Congress then directs the Board of Governors of the Treasury Reserve to adjust the sum of the nation’s currency and credit to maintain that value, setting the target range between 97 and 103. These provisions eliminate the conflicting goals of monetary policy.

The Board of Governors administers monetary policy through four major regulation tools: 1) by setting the percentage of reserves required of commercial banks; 2) by setting the national discount interest rate, the rate at which commercial banks may borrow funds from their district Treasury Reserve Banks; 3) by purchasing income-producing United States Treasury obligations in the open market; and 4) by impounding and extinguishing funds within the Treasury Reserve Account or by transferring funds from the Treasury Reserve Account to the United States Treasury.

To curb some problems inherent in fractional reserve systems, NESARA provides for new or modified regulation tools.

One of the most troubling problems is associated with the credit expansion and contraction multiplier factor. A 5 percent reserve requirement sets it at 20, the reciprocal of the reserve percentage expressed as a decimal number (1 divided by 0.05 = 20). Most of the trouble occurs during periods of monetary contraction, the Great Depression being a notable example. As the nation’s total stock of money falls, the banks, forced below their reserve requirements, call in loans. To improve their loan/reserve ratio they may call in loans from some of their best, most solid customers. Local bankers do not repossess the family farm out of malice. Heaven forbid they should ride a tractor for a living! They are compelled to act by banking rules they never wrote.

Few people protest a large multiplier factor during monetary expansion, with the economy booming and money flowing freely. But on the downside, good hardworking people get hurt. Unable to pay off their loans, they go broke, slowing down the economy and making a bad situation worse. Engineers call this system nonlinear and describe it as operating with a negative stability factor. People ruined by it call the system an atrocity.

A more charitable attitude blames inadequate design. One set of uniform rules applied despite condition or consequence explains a large part of the problem. To improve the character of fractional reserve systems, change the rules.

Banks that temporarily fall below their reserve requirements, particularly when the cause is a sudden shift in national monetary policy, are not necessarily insolvent. Under NESARA’s rules they are not penalized if they make no new loans until 90 days after their reserve ratio recovers and if they do not call for immediate repayment of any outstanding loans that are performing within normal limits. A bank is declared insolvent only when its reserves fall below 50 percent.

To improve its reserve ratio a bank may borrow funds from its district Treasury Reserve Bank at the national discount interest rate set by the Board of Governors. Each district Treasury Reserve Bank may obtain these funds from the Treasury Reserve Account, paying that account one-half of the interest income earned as a fee for their use. This provides a source of income to the Treasury Reserve Banks, possibly reducing their charges for other banking services.

A fifty-fifty split of interest income between the Treasury Reserve Banks and the Treasury Reserve Account is arbitrary, there being no compelling reason for Treasury Reserve Banks to pay a fee. Other figures in the bill, such as the amount of excise tax imposed on monetization-fee or interest income and the target range for the Treasury Credit-Note Exchange-Value Index, are equally arbitrary. Congress must set the final numbers which should be based on studies of computer simulations of the economy.

The Board of Governors may purchase income-producing United States Treasury obligations from the open market with treasury credit-notes. Their former prerogative of selling these obligations vanished with the requirement to transfer all they receive to the Secretary of the Treasury for cancellation. Buying on the open market adds treasury credit-notes to the economy, increases bank reserves and expands national credit through use of the multiplier factor. It also reduces the national debt because of the cancellation process. But, under NESARA’s new rules, the Board of Governors cannot reverse the process since they cannot sell what they do not have. This prohibits them from increasing the national debt, an option best left in the hands of an elected Congress and its authorized agent, the United States Treasury.

To offset this loss, NESARA gives the Board of Governors a powerful new regulation tool. They may impound and extinguish funds within the Treasury Reserve Account or disburse them in one of several ways, effectively using the multiplier factor to contract or expand national credit.

The Treasury Reserve Account functions as a currency reservoir, acting as a shock absorber during periods of rapid economic change. Part of the national sales tax collection is diverted to this account, making it a potent tool for fine tuning the economy. Control of these funds enables the Board of Governors to execute national monetary policy without the usual abrupt shifts in interest rates or in the reserve requirements for commercial banks.

During periods of national prosperity,—a thriving economy, government revenues increasing and expenditures for public support programs decreasing—funds accumulating in the Treasury Reserve Account could be used to retire part of the national debt. Keynesian economists, those who advocated deficit spending in times of depression, now have the opportunity to test the second half of their theory, using surpluses to pay off debt in times of abundance.
 

Section 10 of Part I provides a method for eliminating the unfair advantage that banks operating on a fractional reserve basis have over other financial institutions, such as limited membership credit unions serving their local communities. NESARA enables them to operate on a restricted fractional reserve basis, either individually or as an association, by meeting certain minimum requirements and obtaining a limited bank charter. Alternately, they may achieve the same objective as a partner with an existing bank.
 

In Section 11 of Part I Congress authorizes new types of postal money orders conforming to the three types of standard currency. A distinctive color for each type helps prevent misunderstandings. Because postal money orders must be purchased with cash, those denominated in silver dollars or eagles are issued only in integer units of standard coin.

Maximum limits are set on each postal money order purchased by type: 1,000 silver dollars, 10 eagles, and 1,000 treasury credit-note dollars. Regardless of type, the fee for each is one dollar. Note that the use of the term ‘dollar’ without other qualifiers designates a treasury credit-note or its subdivisions in clad or base metal coin. Except in unusual circumstances, any United States Post Office within the jurisdiction of the United States is required to redeem postal money orders in the designated currency within three working days of their submittal for collection. Examples of reasonable exceptions include “inability to perform” such as during catastrophic events - fires, earthquakes, storms, etc. - or with post offices located aboard U.S. ships at sea.
 

Section 12 of Part I deals with enforcement of the Act. Willful violation of its monetary and fiscal responsibility provisions resulting in aggregate losses exceeding 5,000 dollars in any 12-month period is a felony. The penalty for each conviction is a fine not exceeding 5,000 dollars, or a term of imprisonment of not more than 5 years, or both. Each conviction for willfully counterfeiting or circulating substandard silver or gold coin earns a fine not exceeding 10,000 dollars, or a term of imprisonment of not more than 20 years, or both. Although not the death penalty imposed by the Founding Fathers in the Coinage Act of 1792, this is definitely enough to get one’s attention.

Other provisions of this section encourage citizen enforcement. A reward of 10 eagles is offered for providing information leading to the conviction of one or more individuals in willful violation of its provisions. The redemption by the United States Treasury on demand in specie of any new United States Silver Certificates or United States Eagle Certificates produced under this legislation is paramount for a moral monetary system. Congress therefore directs that the Treasury shall pay a penalty of 5 eagles for any failure in this regard.
 

Section 13 of Part I simply repeals all previous legislation or any parts of previous legislation inconsistent with the provisions of this part.
 

1 Opinion of Chief Justice John Marshall, Gibbons v. Ogden, 22 U.S. 1, 6 L Ed 23, p. 68
2 Eisner v. Macomber, 252 U.S. 189, 64 L Ed 521 (1920)