In 1967, Jerome Daly, a citizen of the suburban town of Savage, Minnesota, refused to make any further payments on the mortgage which he had owed to his bank. At his jury trial (First National Bank of Montgomery v. Jerome Daly) in December 1968 before Justice of the Peace Martin V. Mahoney at which the bank tried to repossess the property, Mr Daly a farmer and carpenter by trade argued that he owed the bank nothing. Why? Because the bank, in lending him the money, had loaned him not real money but bank credit which the bank had created out of thin air. Not being genuine money, the credit was not a valid consideration, and therefore the contract was null and void. Daly argued that he did not owe the bank anything.
In making this seemingly preposterous argument, Jerome Daly was being a far better economist (and libertarian) than anyone knew. For fractional-reserve banking -- now a system at the behest and direction of the Federal Reserve Banks -- is, like fiat paper, legalized counterfeiting (the creation of claims which are invalid and impossible to redeem). Furthermore, Daly contended that this kind of creation of money by banks is illegal and unconstitutional.
Even more remarkable than Mr. Daly's thesis is that the jury unanimously decided in his favor, and declared the mortgage null and void. Justice Mahoney's supporting decision was a gem of radical assertion of the rights of the people and a thoroughgoing assault on the unwisdom and fraudulaence and unconstitutionality of fractional reserve banking.
Bewildered, the First National Bank of Montgomery, Minnesota proceeded in routine fashion to file an appeal with Justice Mahoney for a higher court. But the catch is that in order to file an appeal, the plaintiff has to pay a fee of two dollars. Justice Mahoney refused to accept the appeal a month later because Federal Reserve Notes, which of course constituted the fee, are now lawful money! Only gold and silver coin, affirmed the judge, can be made legal tender, and therefore the fee for appeal had not been paid. Justice Mahoney followed this up with supporting memoranda weeks later, which are heartwarming blends of sound economics and strict legal constructionism, and which also declared the unconstitutionality of the Federal Reserve Act and the National Banking Act, the capstones of our current interventionist and statist monetary system.
And there the matter rested. We have it on the authority of Justice Mahoney that debts to fractional reserve banks (i.e., the current banking system) are null and void, that their very nature is fraudulent and illegal (in short, that the banks belong to the people!), that Federal Reserve Notes and fiat paper are unlawful and unconstitutional.
Furthermore, with these embattled Minnesotans, their radicalism is not only rhetoric; they are prepared to back it up with still further concrete acts. Jerome Daly has already announced that if any higher court of the United States, "perpetrates a fraud upon the People by defying the Constitutional Law of the United States, (Justice) Mahoney has resolved that he will convene another Jury in Credit River Township (where Savage is located) to try the issue of the Fraud on the part of any State or Federal Judge." Daly adds, moreover, that the Constable and the Citizens' Militia of Credit River Township are prepared to use their power to back up the jury's decision and keep Mr. Daly in possession of his land. The people of Savage, Minnesota in short are prepared to fight to resist the decress of the state and federal governments, to use their power on the local level to resist the State.
Source: The above is excerpted and paraphrased from "A Hard Money Revolt" by Murray Rothbard (which itself comes from "Revolution in Minnesota," The Libertarian Forum, 1 Aug 1969). Link to the full article can be found at http://mises.org/daily/6384/A-Hard-Money-Revolt
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