Daily Archives: January 16, 2011

28th Amendment – Section 3 Explained

This is as much nuts and bolts as I think we dare put in a constitutional amendment.

Section 3 essentially directs the Secretary of the Treasury:  a) to tally up the gold in the possession of the federal government and the federal reserve system; b) to keep one-tenth of it for the federal government as its own; c) to distribute one-tenth of it to the states, pro rata, to keep as their own; and for the remainder d) retain an amount sufficient to redeem all outstanding federal reserve notes in gold; and e) distribute the balance to banking institutions so as to enable their existing demand deposits to be redeemed in gold.

The dollar amounts of outstanding federal reserve notes and demand deposits will be known with certainty, as will the quantity of gold available and in the possession of the government.  From there it is a simple matter of arithmetic to define the “dollar” in gold terms so that there will be enough gold to satisfy every dollar claim against it.  This is what section 7 of the amendment requires the Secretary of the Treasury to do.

Let me use round numbers just to illustrate the process.  For example, let’s say the outstanding federal reserve notes stand at $1 trillion and demand deposits at $6 trillion.  The Secretary determines that the government has 8800 tons of gold.  The federal government keeps 400 tons and distributes 400 tons to the states, pro rata.  For the remainder, the Secretary just divides the amount of gold on hand into the dollar amount he needs to cover FRN’s and demand deposits and defines the dollar accordingly.

On the numbers given you would have 8000 tons of gold which is 256,000,000 ounces.  This would be divided into $7 trillion and the dollar definition would be roughly $27,300 to an ounce of gold.

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