AuthorLincoln, Charles Edward Andrew, IV

TABLE OF CONTENTS What Is Money? The Debt--Promise To Pay--Answer To the Question of Ownership 1 I. The Current Mechanisms in the U.S.--and Most of the World--for Monetary Policy 2 A. Historical Analysis of the International Monetary Legal Framework: The U.S. Federal Reserve in the Post-Bretton Woods World 2 II. What, then, is ownership? 10 III. But if we know what money "is," what are companies? Multinationals and Fukuyama 16 IV. The Future of Corporate Law: Shifting Agency and Principles' Lenses Anthropologically 37 V. The Legal Structure of Debt and Market Capitalism 38 Thomas Hobbes wrote in his Leviathan that money exchanging hands, monetary policies, activities, and transactions are the blood of the "Leviathan"--the eponymous subject of the book. (2) Hobbes writes that this Leviathan's "blood" includes the "collectors, receivers, and treasurers; of the second are the treasurers again, and the officers appointed for payment of several public or private ministers." (3) Hobbes, follows this with an analogy of a living man, stating that this "artificial man maintains his resemblance with the natural [man]; whose veins, receiving the blood from the several parts of the body, carry it to the heart; where, being made vital, the heart by the arteries sends it out again, to enliven and enable for motion all the members of the same." (4) Hobbes maintains a parallel between the natural man and what he calls the "artificial man", the state throughout his Leviathan. (5)


    A. Historical Analysis of the International Monetary Legal Framework: The U.S. Federal Reserve in the Post-Bretton Woods World

    Ultimately, the mechanisms of finance in the United States are the accumulation of historical precedents--both legal and non-legal (such as economic, but also social). These precedents have led to the current system, on a continuing and settled basis. The legal and economic systems merging for the best system of an international monetary order can represent a balance of legal realism and legal formalism.

    "Money" is printed by the U.S. government, designated as an official note. Value is correlated with how many of those printed pieces of paper exist. (6) This is the basic concept of inflation. (7) This concept of value and inflation is said to be connected to a commodity--such as how much gold or silver existed in the Federal Reserve's physical locations or Fort Knox. (8) Such systems have been in place since at least Mesopotamia, where clay tablets were used to represent credit, or comparable contracts that seem to resemble modern forms of fiat currency. (9)

    In the United States, the Federal Reserve System is made up of twelve regional banks (10) and a board of governors appointed by the President and confirmed by the Senate. (11) However, it is not under the executive branch of government. (12) The Federal Reserve, in part, controls inflation. (13) Some inflation is essential to economic success. (14) Inflation is a concept of value. (15) Deflation is the inverse. (16) The question presented is whether the key to a little bit of inflation is actually economic success in a post-Bretton Woods system? In other words, does inflation cause economic success or does economic success cause inflation?

    Historically, many of the concepts of finance came from Mesopotamia. Indeed, "[m]uch evidence from Mesopotamia, Egypt, and Ugarit supports the notion that ancient kings commonly did impose general taxes to help finance the provision of royal services." (17) Ancient Mesopotamians had to pay taxes throughout their long history. (18) Around the years of 2500-2000 B.C.E., many of these taxes were applied to various forms of physical property, income, or imposed through import duties. (19) These taxes aimed to support governmental functions that included royal activities, religious temples, and other similar services. (20)

    The Mesopotamian paradigm is notable because it indicates that Bronze Age society found such systems relevant, as we do today. (21) Indeed, the system of commerce and taxation in Mesopotamia does not reflect the graduated income tax system that is currently in existence in the world, but it is surprisingly familiar. (22) Although much has changed since the Mesopotamian era, the modern system of finance and taxation's first changes date back to the 1800s. For example, the Canadian "frontier"--tracing back to the 1830s--illustrates how achieving an understanding of legal structures requires study of historical, political, and economic situations in the Canadian territories. (23) Reformers ultimately mobilized support in various Canadian territories, such as Nova Scotia, to reform such policies. (24)

    Simultaneously, the United States had similar issues, but resolved them in a different fashion. (25) The debate in the United States extended beyond specific states' finances to include the role of gold and silver as a currency instead of bank-lent credit. (26) Moreover, bank panics, deflation, and the rhetoric of Jacksonian Democrats and President Jackson's war against the Bank of the United States did not add to trust of banks and credit. (27) Jacksonian Democrats lobbied for gold and silver as the ideal method of paying for land. (28)

    This system of banking that was highly localized as a result of Jackson's Presidency changed during the American Civil War. The contentious banking issues returned during the Civil War under the Lincoln administration when the U.S. federal government actively sought funds to support the war; this led to Lincoln's signing the Legal Tender Act on February 25, 1862. (29) The Legal Tender Act allowed for the United States to issue "notes" and designate them legal tender for public and private debts--this replaced the specie system Jacksonian Democrats argued for in the 1830s. (30) At the time, Democrats from the remaining northern states opposed the Act, but found the unity of the Union more important and did not stage a large debate against the passage of the Act in Congress. (31) Following the Civil War, the Lincolnian system changed over time from Reconstruction to WWI and WWII. After the collapse of the League of Nations and the post-WWII era, the United Nations started changing the monetary system as technology changed the world system of finance and taxation.

    The system changed after WWII. Currently, the global system of finance is historically the largest on average regarding daily turnover. (32) Indeed, this massive size is due to international trade and financial investment activity being global in nature. (33) Although the modern concepts and practices of the market originated in Egypt and Mesopotamia, the legal groundwork of the modern global foreign exchange markets have their origins in the Bretton Woods Agreement in 1944. (34) The Bretton Woods system sought to promote a uniform global monetary system, reductions in tariffs, and removal of trade barriers. (35)

    Between WWII and 1971, the U.S. federal government's ability to pay its debts, concerned various stakeholders. (36) Despite concerns over the United States' ability to repay its debt and to maintain its creditworthiness, the U.S. dollar remained the world's "reserve currency." (37) Throughout the United States it was largely understood that the U.S. dollar possessed particular strength and came with a reliable security plan enabling its exchange for gold. (38) However, in 1961 such belief was put into action when there was a major run on gold and gold supplies on Fort Knox and the Federal Reserve. (39) As a result, the federal reserves were severely depleted in 1961. (40)

    At the time, the U.S. government thought its international tax policy could help improve its ability to gain revenue. (41) Using tax revenue to pay debts could possibly replace the American federal government's reliance on gold reserves. (42) The notion was comprised of a restructuring of the U.S. tax system, which offered greater incentives to invest within the U.S. versus abroad. (43) Indeed, speaking to Congress, Secretary of the Treasury Clarence Douglas Dillon urged an end to the tax deferral regime because it would allow and encourage repatriation and U.S. corporations' investments in the United States. (44)

    After WWII, the Bretton Woods convention seemed to address the seemingly unstable financial system. (45) The instability of the interwar period was marked by "the collapse of the gold standard, the Great Depression, and the rise of protectionist" domestic measures, and the apparent connections all these failures had with each other. (46) Regarding pre-WWII finance, governments embraced the so-called "Beggar-Thy-Neighbor" policies to address the economic effects of the Great Depression. (47) These "Beggar-Thy-Neighbour" policies included increased tariffs, "currency devaluations," and "discriminatory trading blocs." (48) However, these policies did not improve the overall economic environment for most countries, including domestically. (49) Moreover, such policies added to the instability of international affairs. (50)

    On the other hand, the benefit of the Bretton Woods agreement was that it created a system of fixed exchange rates that directly correlated to the U.S. dollar. (51) This fixed exchange rate allowed free trade to occur at a commensurate standard by which currencies could compare themselves to--the standard of the U.S. dollar. (52) Moreover, those participating and following the rules of the Bretton Woods system also agreed to abstain from trade wars triggered by lowering the value of their currencies--as had been done during the Great Depression. (53) It should be noted that Bretton Woods allowed countries to regulate currencies to the extent that their domestic economies would otherwise risk destabilization. (54)

    The reform of the Bretton Woods system was a response to the "1971 Global Financial Crisis." (55) The 1971 monetary crisis arose...

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