

From the Radio Free Michigan archives



ftp://141.209.3.26/pub/patriot



If you have any other files you'd like to contribute, e-mail them to

bj496@Cleveland.Freenet.Edu.

------------------------------------------------





                        The Commercial Credit System



When Congress borrows money on the credit of the United States, bonds are 

thus legislated into existence and deposited as credit entries in Federal 

Reserve banks.  United States bonds, bills and notes constitute money as 

affirmed by the Supreme Court (Legal Tender Cases, 110 U.S. 421), and this 

money when deposited with the Fed becomes collateral from whence the 

Treasury may write checks against the credit thus created in its account (12 

USC 391).  For example, suppose Congress appropriates an expenditure of $1 

billion.  To finance the appropriation Congress creates the $1 billion worth 

of bonds out of thin air and deposits it with the privately owned Federal 

Reserve System.  Upon receiving the bonds, the Fed credits $1 billion to the 

Treasury's checking account, holding the deposited bonds as collateral.  

When the United States deposits its bonds with the Federal Reserve System, 

private credit is extended to the Treasury by the Fed.  Under its power to 

borrow money, Congress is authorized by the Constitution to contract debt, 

and whenever something is borrowed it must be returned.  When Congress 

spends the contracted private credit, each use of credit is debt which must 

be returned to the lender or Fed.  Since Congress authorizes the expenditure 

of this private credit, the United States incurs the primary obligation to 

return the borrowed credit, creating a National Debt which results when 

credit is not returned.  However, if anyone else accepts this private credit 

and uses it to purchase goods and services, the user voluntarily incurs the 

obligation requiring him to make a return of income whereby a portion of the 

income is collected by the IRS and delivered to the Federal Reserve bankers.  

Actually the federal income tax imparts two separate obligations:  the 

obligation to file a return and the obligation to abide by the Internal 

Revenue Code.  The obligation to make a return of income for using private 

credit is recognized in law as an irrecusable obligation, which according to 

'Bouvier's Law Dictionary' (1914 ed.), is "a term used to indicate a certain 

class of contractual obligations recognized by the law which are imposed 

upon a person without his consent and without regard to any act of his own." 

This is distinguished from a recusable obligation which, according to 

Bouvier, arises from a voluntary act by which one incurs the obligation 

imposed by the operation of law.  The voluntary use of private credit is the 

condition precedent which imposes the irrecusable obligation to file a tax 

return.  If private credit is not used or rejected, then the operation of 

law which imposes the irrecusable obligation lies dormant and cannot apply.



In 'Brushaber v. Union Pacific RR Co.' 240 U.S. 1 (1916) the Supreme Court 

affirmed that the federal income tax is in the class of indirect taxes, 

which include duties and excises.  The personal income tax arises from a 

duty -- i.e., charge or fee -- which is voluntarily incurred and subject to 

the rule of uniformity.  A charge is a duty or obligation, binding upon him 

who enters into it, which may be removed or taken away by a discharge 

(performance):  'Bouvier', p. 459.  Our federal personal income tax is not 

really a tax in the ordinary sense of the word but rather a burden or 

obligation which the taxpayer voluntarily assumes, and the burden of the tax 

falls upon those who voluntarily use private credit.  Simply stated the tax 

imposed is a charge or fee upon the use of private credit where the amount 

of private credit used measures the pecuniary obligation.  The personal 

income tax provision of the Internal Revenue Code is private law rather than 

public law.  "A private law is one which is confined to particular 

individuals, associations, or corporations":  50 AmJur 12, p.28.  In the 

instant case the revenue code pertains to taxpayers.  A private law can be 

enforced by a court of competent jurisdiction when statutes for its 

enforcement are enacted:  20 AmJur 33, pgs. 58, 59.  The distinction 

between public and private acts is not always sharply defined when published 

statutes are printed in their final form:  Case v. Kelly 133 U.S. 21 

(1890).  Statutes creating corporations are private acts:  20 AmJur 35, p. 

60.  In this connection, the Federal Reserve Act is private law.  Federal 

Reserve banks derive their existence and corporate power from the Federal 

Reserve Act:  Armano v. Federal Reserve Bank 468 F.Supp 674 (1979).  A 

private act may be published as a public law when the general public is 

afforded the opportunity of participating in the operation of the private 

law.  The Internal Revenue Code is an example of private law which does not 

exclude the voluntary participation of the general public.  Had the Internal 

Revenue Code been written as substantive public law, the code would be 

repugnant to the Constitution, since no one could be compelled to file a 

return and thereby become a witness against himself.  Under the fifty titles 

listed on the preface page of the United States Code, the Internal Revenue 

Code (26 USC) is listed as having not been enacted as substantive public 

law, conceding that the Internal Revenue Code is private law.  Bouvier 

declares that private law "relates to private matters which do not concern 

the public at large." It is the voluntary use of private credit which 

imposes upon the user the quasi contractual or implied obligation to make a 

return of income.  In 'Pollock v. Farmer's Loan & Trust Co.' 158 U.S. 601 

(1895) the Supreme Court had declared the income tax of 1894 to be repugnant 

to the Constitution, holding that taxation of rents, wages and salaries must 

conform to the rule of apportionment.  However, when this decision was 

rendered, there was no privately owned central bank issuing private credit 

and currency but rather public money in the form of legal tender notes and 

coins of the United States circulated.  Public money is the lawful money of 

the United States which the Constitution authorizes Congress to issue, 

conferring a property right, whereas the private credit issued by the Fed is 

neither money nor property, permitting the user an equitable interest but 

denying allodial title.



Today, we have two competing monetary systems.  The Federal Reserve System 

with its private credit and currency, and the public money system consisting 

of legal tender United States notes and coins.  One could use the public 

money system, paying all bills with coins and United States notes (if the 

notes can be obtained), or one could voluntarily use the private credit 

system and thereby incur the obligation to make a return of income.  Under 

26 USC 7609 the IRS has carte blanche authority to summon and investigate 

bank records for the purpose of determining tax liabilities or discovering 

unknown taxpayers:  'United States v. Berg' 636 F.2d 203 (1980).  If an 

investigation of bank records discloses an excess of $1000 in deposits in a 

single year, the IRS may accept this as prima facie evidence that the 

account holder uses private credit and is therefore a person obligated to 

make a return of income.  Anyone who uses private credit -- e.g., bank 

accounts, credit cards, mortgages, etc. -- voluntarily plugs himself into 

the system and obligates himself to file.  A taxpayer is allowed to claim a 

$1000 personal deduction when filing his return.  The average taxpayer in 

the course of a year uses United States coins in vending machines, parking 

meters, small change, etc., and this public money must be deducted when 

computing the charge for using private credit.



On June 5, 1933, the day of infamy arrived.  Congress on that date enacted 

House Joint Resolution 192, which provided that the people convert or turn 

in their gold coins in exchange for Federal Reserve notes.  Through the 

operation of law, H.J.R. 192 took us off the gold standard and placed us on 

the dollar standard where the dollar could be manipulated by private 

interests for their self-serving benefit.  By this single act the people and 

their wealth were delivered to the bankers.  When gold coinage was thus 

pulled out of circulation, large denomination Federal Reserve notes were 

issued to fill the void.  As a consequence the public money supply in 

circulation was greatly diminished, and the debt-laden private credit of the 

Fed gained supremacy.  This action made private individuals who had been 

previously exempt from federal income taxes now liable for them, since the 

general public began consuming and using large amounts of private credit.  

Notice all the case law prior to 1933 which affirms that income is a profit 

or gain which arises from a government granted privilege.  After 1933, 

however, the case law no longer emphatically declares that income is 

exclusively corporate profit or that it arises from a privilege.  So, what 

changed? Two years after H.J.R. 192, Congress passed the Social Security 

Act, which the Supreme Court upheld as a valid act imposing a valid income 

tax:  'Charles C. Steward Mach. Co. v, Davis' 301 U.S. 548 (1937).



It is no accident that the United States is without a dollar unit coin.  In 

recent years the Eisenhower dollar coin received widespread acceptance, but 

the Treasury minted them in limited number which encouraged hoarding.  This 

same fate befell the Kennedy half dollars, which circulated as silver 

sandwiched clads between 1965-1969 and were hoarded for their intrinsic 

value and not spent.  Next came the Susan B.  Anthony dollar, an awkward 

coin which was instantly rejected as planned.  The remaining unit is the 

privately issued Federal Reserve note unit dollar with no viable 

competitors.  Back in 1935 the Fed had persuaded the Treasury to discontinue 

minting silver dollars because the public preferred them over dollar bills.  

That the public money system has become awkward, discouraging its use, is no 

accident.  It was planned that way.



A major purpose behind the 16th Amendment was to give Congress authority to 

enforce private law collections of revenue.  Congress had the plenary power 

to collect income taxes arising from government granted privileges long 

before the 16th Amendment was ratified, and the amendment was unnecessary, 

except to give Congress the added power to enforce collections under private 

law:  i.e., income from whatever source.  So, the Fed got its amendment and 

its private income tax, which is a banker's dream but a nightmare for 

everyone else.  Through the combined operation of the Fed and H.J.R. 192, 

the United States pays exorbitant interest whenever it uses its own money 

deposited with the Fed, and the people pay outrageous income taxes for the 

privilege of living and working in their own country, robbed of their wealth 

and separated from their rights, laboring under a tax system written by a 

cabal of loan shark bankers and rubber stamped by a spineless Congress.



Congress has the power to abolish the Federal Reserve System and thus 

destroy the private credit system.  However, the people have it within their 

power to strip the Fed of its powers, rescind private credit and get the 

bankers to pay off the National Debt should Congress fail to act.  The key 

to all this is 12 USC 411, which declares that Federal Reserve notes shall 

be redeemed in lawful money at any Federal Reserve bank.  Lawful money is 

defined as all the coins, notes, bills, bonds and securities of the United 

States:  'Julliard v. Greenman' 110 U.S. 421, 448 (1884); whereas public 

money is the lawful money declared by Congress as a legal tender for debts 

(31 USC 5103); 524 F.2d 629 (1974).  anyone can present Federal Reserve 

notes to any Federal Reserve bank and demand redemption in public money -- 

i.e., legal tender United States notes and coins.  A Federal Reserve note is 

a fixed obligation or evidence of indebtedness which pledges redemption (12 

USC 411) in public money to the note holder.  The Fed maintains a ready 

supply of United States notes in hundred dollar denominations for redemption 

purposes should it be required, and coins are available to satisfy claims 

for smaller amounts.  However, should the general public decide to redeem 

large amounts of private credit for public money, a financial melt-down 

within the Fed would quickly occur.  The process works like this.  Suppose 

$1000 in Federal Reserve notes are presented for redemption in public money.  

To raise $1000 in public money the Fed must surrender U.S. Bonds in that 

amount to the Treasury in exchange for the public money demanded (assuming 

that the Fed had no public money on hand).  In so doing $1000 of the 

National Debt would be paid off by the Fed and thus cancelled.  Can you 

imagine the result if large amounts of Federal Reserve notes were redeemed 

on a regular, ongoing basis? Private credit would be withdrawn from 

circulation and replaced with public money, and with each turning of the 

screw the Fed would be obliged to pay off more of the National Debt.  Should 

the Fed refuse to redeem its notes in public money, then the fiction that 

private credit is used voluntarily would become unsustainable.  If the use 

of private credit becomes compulsory, then the obligation to make a return 

of income is voided.  If the Fed is under no obligation to redeem its notes, 

then no one has an obligation to make a return of income.  It is that 

simple! Federal Reserve notes are not money and cannot be tendered when 

money is demanded:  105 So. 305 (1925).  Moreover, the Ninth Circuit 

rejected the argument that a $50 Federal Reserve note be redeemed in gold or 

silver coin after specie coinage had been rescinded but upheld the right of 

the note holder to redeem his note in current public money (31 USC 392; 

rev., 5103):  524 F.2d 629 (1974); 12 USC 411.



It would be advantageous to close out all bank accounts, acquire a home 

safe, settle all debts in cash with public money and use U.S. postal money 

orders for remittances.  Whenever a check is received, present it to the 

bank of issue and demand cash in public money.  This will place banks in a 

vulnerable position, forcing them to draw off their assets.  Through their 

insatiable greed, bankers have over extended, making banks quite illiquid.  

Should the people suddenly demand public money for their deposits and for 

checks received, many banks will collapse and be foreclosed by those 

demanding public money.  Banks by their very nature are citadels of usury 

and sin, and the most patriotic service one could perform is to obligate 

bankers to redeem private credit.  When the first Federal Reserve note is 

presented to the Fed for redemption, the process of ousting the private 

credit system will commence and will not end until the Fed and the banking 

system nurtured by it collapse.  Coins comprise less than five percent of 

the currency, and current law limits the amount of United States notes in 

circulation to $300 million (31 USC 5115).  The private credit system is 

exceedingly over extended compared with the supply of public money, and a 

small minority working in concert can easily collapse the private credit 

system and oust the Fed by demanding redemption of private credit.  If the 

Fed disappeared tomorrow, income taxes on wages and salaries would vanish 

with it.  Moreover, the States are precluded from taxing United States 

notes:  4 Wheat. 316.  According to Bouvier, public money is the money which 

Congress can tax for public purposes mandated by the Constitution.  Private 

credit when collected in revenue can fund programs and be spent for purposes 

not cognizable by the Constitution.  We have in effect two competing 

governments:  the United States Government and the Federal Government.  The 

first is the government of the people, whereas the Federal Government is 

founded upon private law and funded by private credit.  What we really have 

is private government.  Federal agencies and activities funded by the 

private credit system include Social Security, bail out loans to bankers via 

the IMF, bail out loans to Chrysler, loans to students, FDIC, FBI, 

supporting the U.N., foreign aid, funding undeclared wars, etc., all of 

which would be unsustainable if funded by taxes raised pursuant to the 

Constitution.  The personal income tax is not a true tax but rather an 

obligation or burden which is voluntarily assumed, since revenue is raised 

through voluntary contributions and can be spent for purposes unknown to the 

Constitution.  Notice how the IRS declares in its publications that everyone 

is expected to contribute his fair share.  True taxes must be spent for 

public purposes which the Constitution recognizes.  Taxation for the purpose 

of giving or loaning money to private business enterprises and individuals 

is illegal:  15 AmRep 39; Cooley, 'Prin. Const. Law', ch. IV.  Revenue 

derived from the federal income tax goes into a private slush fund raised 

from voluntary contributions, and Congress is not restricted by the 

Constitution when spending or disbursing the proceeds from this private 

fund.  It is incorrect to say that the personal federal income tax is 

unconstitutional, since the tax code is private law and resides outside the 

Constitution.  The Internal Revenue Code is non-constitutional because it 

enforces an obligation which is voluntarily incurred through an act of the 

individual who binds himself.  Fighting the Internal Revenue Code on 

constitutional grounds is wasted energy.  The way to bring it all down is to 

attack the Federal Reserve System and its banking cohorts by demanding that 

private credit be redeemed, or by convincing Congress to abolish the Fed.  

Never forget that private credit is funding the destruction of our country.



[Reprinted from `Freedom League', Sept/Oct 1984] 

------------------------------------------------

(This file was found elsewhere on the Internet and uploaded to the

Radio Free Michigan archives by the archive maintainer.




All files are ZIP archives for fast download.


 E-mail bj496@Cleveland.Freenet.Edu)





