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NOTE TO USERS This reproduction is the best copy available. UMI THE EVOLUTION OF MONEY LAWS: A THEORY IAN D. SHEEN A DISSERTATION SUBMITTED TO THE FACULTY OF GRADUATE STUDIES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY GRADUATE PROGRAM IN LAW YORK UNIVERSITY, TORONTO, ONTARIO MARCH 2010 Library and Archives Bibliotheque et 1*1 Canada Archives Canada Published Heritage Direction du Branch Patrimoine de I'edition 395 Wellington Street 395, rue Wellington Ottawa ON K1A 0N4 OttawaONK1A0N4 Canada Canada Your file Votre reference ISBN: 978-0-494-64943-5 Our file Notre reference ISBN: 978-0-494-64943-5 NOTICE: AVIS: The author has granted a non L'auteur a accorde une licence non exclusive exclusive license allowing Library and permettant a la Bibliotheque et Archives Archives Canada to reproduce, Canada de reproduire, publier, archiver, publish, archive, preserve, conserve, sauvegarder, conserver, transmettre au public communicate to the public by par telecommunication ou par I'lnternet, preter, telecommunication or on the Internet, distribuer et vendre des theses partout dans le loan, distribute and sell theses monde, a des fins commerciales ou autres, sur worldwide, for commercial or non support microforme, papier, electronique et/ou commercial purposes, in microform, autres formats. paper, electronic and/or any other formats. The author retains copyright L'auteur conserve la propriete du droit d'auteur ownership and moral rights in this et des droits moraux qui protege cette these. Ni thesis. Neither the thesis nor la these ni des extraits substantiels de celle-ci substantial extracts from it may be ne doivent etre imprimes ou autrement printed or otherwise reproduced reproduits sans son autorisation. without the author's permission. In compliance with the Canadian Conformement a la loi canadienne sur la Privacy Act some supporting forms protection de la vie privee, quelques may have been removed from this formulaires secondaires ont ete enleves de thesis. cette these. While these forms may be included Bien que ces formulaires aient inclus dans in the document page count, their la pagination, il n'y aura aucun contenu removal does not represent any loss manquant. of content from the thesis. •+• Canada iv THE EVOLUTION OF MONEY LAWS: A THEORY IAN D. SHEEN ABSTRACT This dissertation proposes a general theory on the evolution of monetary systems. This theory identifies five distinct monetary regimes for six distinct human living conditions. This theory demonstrates that the monetary regime of a particular country at particular times in history is determined by the human living condition in which the mass is living. The fundamental variables that determine the human living conditions are three: the availability and the quality of natural gifts, individual mastery of technology, and the existence of serious conflicts, internal or external. This theory is shown to be powerful enough to explain all the six monetary regimes throughout the US history. The proposed theory predicts that the US monetary system will move to the Social Credit regime, unless a new kind of natural gifts is found in a near future. This dissertation also provides the principles of sound monetary system. However, the feasibility is not determined by human will, but by the human living condition. ACKNOWLEDGMENTS I am grateful for the advice and guidance of Professors Benjamin Geva, G. Thomas Johnson, and Mary Condon. I am especially grateful for Professor Geva for his untiring encouragements and unlimited trust on my ability to reach to the point of final enlightenment throughout the years of my groping. I am also deeply grateful for Professor Condon's close reading of my drafts. Her challenges to my imprecise reasoning provided a big turning point. However, all the defects of this study are solely mine. I also gratefully acknowledge the financial support of York University. I would also like to express my appreciation for Mrs. Maureen Boyce, who always enthusiastically supported and helped me with lots of peculiar interlibrary loan requests. vi TABLE OF CONTENTS Abstract iv Acknowledgments v List of Tables x List of Figures xi 1. Introduction 1 1.1 The Motivation and The Purpose 1 1.2 The Futility ofthe Just Monetary Regime 3 1.3 The Least Unjust and the Most Unjust Regimes 6 1.4 The Question of This Inquiry 10 1.5 A Few Authors on the Evolution of Money 12 1.5.1. Oswald Spengler 13 1.5.2. Bray Hammond 15 1.5.3. Martin van Creveld 17 1.5.4. Evans & Schmalensee 23 1.5.5. Niall Ferguson 26 1.6 The Proposed Theory 28 1.6.1. The Six Different Living Conditions 29 1.6.2. The Matching Monetary Regimes 32 1.6.3. The Three Protagonist Regimes 33 1.6.4. The Two Co-Star Regimes 35 1.6.5. Prima Facie Theory 39 1.7 The Methodology 41 1.8 The Implications of a Successful Testing 42 1.9 The Plan of This Study 44 2. Some Basics on Money and Banking 45 2.1 The Great Confusion 45 2.2 The Two Functions of Money 47 2.2.1. The Anchoring Function 48 2.2.2. The Discharging Function 50 2.2.3. MoneyinLaw 51 vii 2.3 The Relationship between Debt/Credit and Money 52 2.3.1. The Pros and Cons of Credit-based Society 53 2.3.2. The Fundamental Nature of Financial Crises (Panics) 54 2.4 The Obliteration of Money 63 2.5 Money Supply and Prices 65 2.6 The Fundamental Nature of Depression 68 2.7 The Cause of the Concentration of Wealth 72 2.8 The Role of Banks in the Concentration of Wealth 74 2.8.1. Various Theories 75 2.8.2. The True Evil of Modern Banking 77 2.9 TheMoneyLaws 85 3. Literature Review 87 3.1 Was Central Banking Spontaneous? 88 3.2 Is Legal Tender Legitimate? 90 3.2.1. Is Legal Tender Economically Wise? 90 3.2.2. Is Legal Tender Morally Right? 94 3.2.3. Is Legal Tender Legally Correct? 97 3.3 Which Monetary Regime is the Best? 98 3.3.1. Jerome: The Hamiltonian Regime 100 3.3.2. Hurst: The Federal Reserve System 109 3.3.3. Brown: The Spaulding (Chase-l)Regime 112 4. Checking on the Living Conditions 118 4.1 In the Eve of the Hamiltonian Regime 119 4.2 In the Eve of the Jacksonian Regime 122 4.3 In the Eve of the Chase-1 Regime 125 4.4 In the Eve oftheChase-2 Regime 131 4.5 In the Eve of the Federal Reserve-1 Regime 135 4.6 In the Eve of the Federal Reserve-2 Regime 143 4.7 Chapter Summary 146 viii 5. Checking on the Identity of Each Regime 147 5.1 The Hamiltonian Regime (1791-1836) 147 5.1.1. TheMoney 148 5.1.2. TheCause 153 5.1.3. The Controller 155 5.1.4. TheQuantity 163 5.2 The Jacksonian Regime (1836-1862) 167 5.2.1. TheMoney 169 5.2.2. TheCause 175 5.2.3. The Controller 179 5.2.4. TheQuantity 181 5.3 The Chase Regime (1862-1913) 184 5.3.1. TheMoney 186 5.3.2. TheCause 192 5.3.3. The Controller 195 5.3.4. TheQuantity 197 5.4 The Federal Reserve Regime (1913-Present) 203 5.4.1. TheMoney 204 5.4.2. TheCause 205 5.4.3. The Controller 211 5.4.4. TheQuantity 213 5.5 A Summary Table 216 5.6 Identification of Each Regime 217 5.7 The Synthesis of the Findings of Chapters 4 and 5 219 6. Checking on the Implicit Assumptions 220 6.1 The Axioms on the Nature of Human Existence 221 6.1.1. ADetritovore 222 6.1.2. The Prosthetic Animal 228 6.1.3. ASummary 234 6.2 The Axioms on Human Nature 235 6.2.1. The Reversionary Nature 237 6.2.2. The Xenophobic Nature 241 6.3 ASynthesis 247 6.4 Chapter Conclusion , 249 ix 7. Checking on the Future Regimes 251 7.1 The Social Credit Regime 253 7.1.1. The Social Credit Doctrine 254 7.1.2. The Personality of the Social Credit Doctrine 262 7.1.3. The Case of Alberta 264 7.1.4. Checking Forward 266 7.1.5. A Supporting Theory 272 7.2 The Higher Money Regime 276 7.2.1. The Legality of New Money 277 7.2.2. Checking Forward 278 7.2.3. A Supporting Theory 280 8. Conclusion 283 8.1 ASummary 283 8.2 Two Unhappy Implications 284 8.3 The Limitation of This Study 287 References 290 Glossary 305 X LIST OF TABLES Table 2.1. Liabilities and Reserves of Various US Financial Sectors 58 Table 2.2. Comparison of the Crisis of 1839 with that of 1929 69 Table 2.3. The Differences between the Crisis of 1839 and that of 1929 70 Table5.1. The Key Features ofthe Four Major US Monetary Regimes 216 Table 5.2. The Observed Facts ofthe Six US Monetary Regimes 219 Table 6.1. Common Behavioural Tendencies 236 XI LIST OF FIGURES Figure 1.1. The Characterization of the Six US Monetary Regimes 12 Figure 1.2. The Six Living Conditions 31 Figure 1.3. Living Conditions and the Corresponding Monetary Regimes 32 Figure 1.4. The Basic Pattern of Monetary Evolution 33 Figure 1.5. The Proposed Theory Applied to US History 39 Figure 2.1. The Explosion of Base Money in the US since September 2008 56 Figure2.2. Money and Credit 57 Figure2.3. Circulating Medium 59 Figure2.4. Current Credit and Non-Current Credit 60 Figure2.5.