SILENT PARTNERS from L. Reichard White

The following piece was based on an at-the-time unpublished article called Where Governments Come From. We're joining the party after a few points have already been established.

We have already discoverd that we humans operate as small face-to-face groups within today's larger "super-groups" (nations, etc.), and that these face-to-face groups "take care of their own" -- often at the expense of "outsiders."

Further, we've discovered, governments are just like other small groups operating within larger populations, and they, like other small groups, "take care of their own" -- often at the expense of "outsiders."

The "outsiders" in the case of the U.S. Government are "we the people."

Governments are unique in the panoply of small groups in that they try to maintain a monopoly on the use of force, and attempt to get the rest of us to accept their use of force -- and the monopoly on it -- as legitimate.

The essential difference between governments and other sub-groups is that so-called governments think they can force the rest of us to pay their bills thru "taxation," which operates thru implicit and explicit threats of force -- what do you think will happen to you if you don't pay "your" taxes for example?

Further we've discovered that other sub-groups learn the economic advantages of the use of force -- it's easier to extort or "exact" money than it is to earn it -- and these other groups harness the apparent legitimacy of "government" force for their own enrichment in various ways.

Since a major portion of each person's efforts and a large portion of the hours of their lives are spent in "economic" activity -- earning a living, etc. -- it's not surprising to find that groups often harness the apparent legitimacy of government force for economic gain, that is, to produce or enhance gains that happen as a result of "trade."

The result of the entrance of government and it's apparently legitimate force into trade is conflicts among various competing groups to recruit government to help them "take care of their own." Whichever group is successful at recruiting government "wins" at the expense of the other groups, and often, all us other "outsiders" as well.

The most visible manifestation of these conflicts are between governments and they showup and are covered in the media as "trade wars." Currently there are "trade wars" brewing between the U.S. and the rest of the world over the tarrifs imposed by USA Corp. on imported steel, between Europe and USA Corp. over banannas, etc.

While it appears on the surface that such conflicts are between governments, they are really between the interests that have captured the use of the government for their own economic gain. This isn't so obvious, but if we dig a little we can find signs --

"There are over 22,000 corporate lobbyists in the capital. These are the people who are running Washington, D.C." ..."Our country has been hijacked by corporate supremacists who have bought and rented our government right out from under the people." -Ralph Nader, Fox News Channel, 12 November, 20000, 5:10:26 PM

The situation -- moneyed interests vying for government favors -- is the bread and butter for those who are members of the government clique. They get paid in various ways for hiring out the government to the special interests.

With this in the way of an introduction, we're ready to join the article "in progress."

Silent Partners

Now we've seen the most obvious winners in the "trade wars" -- government cliques --- and their suck-ups, brown-nosers and hangers-on. But what about their silent -- and often invisible -- partners? Or is "masters" the appropriate label? There is an incredible amount of in-breeding so it's usually hard to tell. It helps to take a quick look at them back in history before they faded into deep cover [1] - - - and what we find won't be a big surprise - - -

... the robber barons employed a strategy of locking in and stabilizing their advantageous positions by using government authority and regulations to reduce competition, keep prices at very profitable levels, control labor problems, minimize risk, and generally make themselves quite comfortable. They also expanded their scope of operations, including financing and extension of credit, to other countries and used government to aid them in these adventures. [Philander] Knox, of course, was a key man, perhaps the key man, in the [McKinley, Taft, Teddy Roosevelt, etc.] Administration in all of this, both as Attorney General and then as Secretary of State. -condensed from Bill Benson's research report on the ratification of the 16th Amendment, "The Law That Never Was," Volume II (1985), pages 122-135.

"Philander Knox?" you're probably asking, "Who the heck is Philander Knox??"

Well, Philander Knox is a good player to keep your eye on because he was a key operative in many of the so-called "robber- baron" shennigans during this period in history, especially extending from his appointment by McKinley (just before McKinley was asassinated) as Attorney General in 1901. This was a key period in American history because it was at this time that the machinations leading to the faked ratification of the 16th amendment to the U.S. Constitution, the so-called "income tax" were hatched. And Philander Knox, getting his start as a robber-baron legal-eagle with Carneige and Frick, was at the heart of it, as must be any trigger man.

This period of U.S imperialism featured the annexation of Hawaii in the 1890s at the request of American businesses there despite the unanimous opposition by Hawaiians; the taking of Cuba and the Philippines from the Spanish as well as from the native rebels whom the U.S had ostensibly come to assist in gaining their liberty (this included the massive slaughter of a hundred thousand Filipinos by the U.S Army in a war in which the news media was censored. (even William Randolph Hearst, who had helped instigate the war with Spain, was aghast and disgusted.) [2] "The Law That Never Was," Volume II (1985), pages 122-135

But these old industrialists weren't neophyte gamblers -- they wanted practice runs before setting up the "Central-Bank-lends- money-to-the-central-government-and-has-interest-guaranteed-by-government-tax-robbery-of-all-citizens-present-and-future" scam they had planned for here in the good 'ole U.S. of A.

By Philander's time, this scam was old news here. It was first attempted by Alexander Hamilton soon after the First American Revolution in the form of the Whiskey Rebellion:

As Alexander Hamilton, a prime mover behind the intended central "Bank of the U.S." knew, once a government develops a track record for making this sort of thing [in this case, excise taxes on manufacturing whiskey] work, it can borrow money based on demonstrated ability to enforce such exactions, such taxes. The ability of governments to tax in order to pay interest on money they borrow gives those involved in lending that money, usually people who own "central banks," incredible power and wealth. Hamilton, well-known as an elitist, needed to get the untried Federal Government to prove its taxing power so the "Bank of the U.S.", his creature, could be sure of collecting interest on money it planned on loaning to the new government. The Whiskey Rebellion, perhaps largely engineered by Hamilton, yielded that proof. Tax enforcement "proceedures" such as supression of the Whiskey Rebellion and seizures by the IRS loom-stealers and vat-smashers are the main underpinning of the US Treasury bond market, which columnist Vin Suprynowicz and others aptly call "extortion futures."
That governments think they have the right to force you to pay their bills is the essential difference between them and all other organizations, except, possibly, the Mafia. Once they convince others they can force you to pay interest on money they borrow as well, that's the beginning of what Joseph Schumpeter dubbed the "fiscal state." For obvious reasons, people who own central banks WANT governments to borrow and to go into debt and regularly get them to do so. That's the source of the annual federal budget deficit and the "national" debt, and virtually ALL governments have both. The American version of the "fiscal state" now costs us, on average, about 52% of our income, and this will rise to 84% to 94% for those born after 1992 according to unchallenged Congressional testimony and page 25 of Bill Clinton's 1994 Federal Budget proposal, [3] appropriately suggesting the possibility of inter-generational warfare. Some would say this situation has it's roots with Alexander Hamilton, central banking - - - - and in the failure of the Whiskey Rebellion. -ALEXANDER HAMILTON, CENTRAL BANKING - - - and THE WHISKEY REBELLION??, An Excerpt from "WHERE GOVERNMENTS COME FROM" By L. Reichard White

Jefferson put an end to Hamilton's "Bank of the U.S." scam, and "Old Hickory" Andrew Jackson beat back a second similar attempt at great personal cost. But that was then and for Philander and Co,. this was now. U.S. involvement in Honduras and Nicaragua were tailor made for a new test of the more sophisticated scam-to-come:

Then came the Honduras financial crisis of 1909, in which Knox brokered a deal for J.P. Morgan & Company to make huge loans to that country, backed by the full faith and credit of the U.S., and for American bankers to take control of the Honduras taxing authority (to ensure adequate cash flow to make the loan payments). Knox's diplomatic maneuvers resulted in the U.S. Navy being sent to support and give victory to rebel forces in Nicaragua, who then made arrangements, again devised by Knox, to give control of Nicaraguan taxing authority and tax collection to Americans. American bankers then immediately made big loans to Nicaragua, once again guaranteed by the U.S. government, providing a risk-free investment environment for Knox's banker friends. -"The Law That Never Was," Volume II (1985), pages 122-135

How about a little corroboration, particularly to the Nicaraguan ploy?

Under Wilson, the United States intervened in Latin America more often than at any other time in our history. We landed troops in Mexico in 1914, Haiti in 1915, the Dominican Republic in 1916, Mexico again in 1916 (and nine more times before the end of Wilson's presidency), Cuba in 1917, and Panama in 1918. Throughout his administration Wilson maintained forces in Nicaragua, using them to determine Nicragua's president and to force passage of a treaty preferential to the United States. -James W. Loewen, LIES MY TEACHER TOLD ME, (New York, NY: Touchstone 1996), p. 23 & 24

I know all this flies in the face of everything we have been taught to believe about the American Government and I expect you're outraged -- or at least certainly, skeptical. I don't blame you, I was too for quite awhile. So how about a report from the front lines? How about a report from Smedley Butler, the man who finally broke through my personal shell of American Government mythology?

Now in addition to his name, Smedley is hard to ignore; he served in the U.S. Marine Corps for, in his words, "thirty three years and four months," ending up a Major-General and serving, again in his words, as "a high class muscle-man for Big Business, for Wall Street and for the Bankers." He started his service in 1898 at the age of 16 (he lied and said he was 18) and served through 1932, exactly the "robber-barron" period we're discussing.

And here's what he had to say about what he did during that 33.3 years:

War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.
I wouldn't go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.
I spent thirty- three years and four months in active military service as a member of this country's most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism. [4]
I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.
During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents. -- Excerpt from a speech delivered in 1933, by Major General Smedley Butler, USMC, Originally published in Common Sense, November, 1935. Quoted in Felix Greene's The Enemy, Vantage Books, New York, 1971. From the Federation of American Scientists web-site Also available from

For a soldier's eye view of Smedley Butler's career, you can check Smedley Butler from

This all reminds me of Carl Sagan's classic 1988 piece, enumerating the number of times the U.S. Government "racketeered" in foreign countries, and in direct contradiction to George Washington's advice in his farewell address --

Excluding World Wars and expeditions to suppress piracy or the slave trade, the United States has made armed invasions and interventions in other countries on more that 130 separate occasions, including China (on 18 separate occasions), Mexico (13), Nicaragua and Panama (9 each), Honduras (7), Colombia and Turkey (6 each), the Dominican Republic, Korea, and Japan (5 each), Argentina, Cuba, Haiti, the Kingdom of Hawaii, and Samoa (4 each), Uruguay and Fiji (3 each), Guatemala, Lebanon, the Soviet Union and Sumatra (2 each), Grenada, Puerto Rico, Brazil, Chile, Morocco, Egypt, Ivory Coast, Syria, Iraq, Peru, Formosa, the Philippines, Cambodia, Laos, and Vietnam [the list is based on compilations by the House Armed Services Committee]. The Common Enemy by Carl Sagan, Parade Magazine, Feb. 7, 1988 & Ogonyok Magazine (Soviet Union) March 12, 1988.

Of course, there have been a few added to the 130 counted by Sagan -- Panama, Iraq, Haiti, Somalia, etc.

So now that we've gotten several different corroborating sources, I think we can outline the "robber-baron" bankers' standard scam:

1. Set up a "central bank," publicly using any excuse that works -- and all the political support you can buy.
2. Though concealing the real purpose of the "central bank," always remember it's to 1. create a banking monopoly, 2. print paper money for about three cents a bill and "sell" (circulate) it at face value -- and most especially 3., to loan as much money as possible to the central government.
3. Make loans only to governments -- because they have the most dependable income source: Ultimatly, they get their money with threats and at the point of the police gun. [5]
4. Be sure your central borrower has enough taxing statutes and power so you can be reasonably sure the organization will actually be able to extort enough money from its citizens to pay you the expected interest -- with, hopefully, enough left over to run the rest of it's operation. If possible, test the government to make sure its tax collectors and methods are indeed up to the job.
5. If at all possible, move the ultimate taxing authority into the hands of non-residents, preferably your friends who are off-shore. [^^wIRS incorporated in Puerto Rico]

Economist Joseph Schumpeter (1883-1950) recognized this scam -- which came into bloom during WWI and into full flower during WWII -- and called the result, in his book by the same name, Der Steuerstaat (The Fiscal State, 1918). A "Fiscal State" can not only tax you, but can and does borrow against the anticipated taxation of your future labor and even against the labor of your as yet unborn children. The result shows up as a so-called "national debt" and virtually all governments these days have quite a large one, a monument to the ubiquitous nature and success of this "Fiscal State" scam. And it's still being used to this day, currently on Argentina. SEE "Argentina cannot be trusted" by Ricardo Caballero and Rudiger Dornbusch

In the case of the U.S. during Philander's day, the robber-baron bankers had plans to loan Uncle Sam BIG bux -- so they wanted to be sure the U.S. Central Government here had access to BIG tax income to pay the interest. That's what the 16th Amendment and the income tax was all about. And later, during Roosevelt The Second -- to increase the bankers' feelings of security no doubt -- they added F.I.C.A., so-called "Social Security," - - - also a tax - - - which goes into the same coffers as does the income tax. [7] Now two thirds of Americans pay more in Social Security TAXES than they do in income TAXES. Jolly good scam, eh?

One might wonder why [Philander] Knox seemed to be in such a hurry in 1913 to declare the 16th amendment ratified. We can see that it was because of the Federal Reserve Act of 1913. It was important to the banking interests that would be lending money to the U.S government that there be an assured flow of revenue, especially since the robber barons would be removing themselves from the income tax system. Just as an ordinary bank wants to know that a borrower who is given a mortgage has a cash flow adequate to meet the payments, so the banks comprising the Federal Reserve System wanted to be sure the federal government had a dependable method of tax collection in place to provide ample money to pay its debts to them. The income tax and the Federal Reserve are inextricably tied together; it was not mere coincidence that they happened in the same year. The robber barons, their bankers, and Knox had developed this concept and practiced it in Latin America, and in 1913 they were ready to apply it to the United States. - We The People Foundation For Constitutional Education, condensed from Bill Benson's research report on the ratification of the 16th Amendment, "The Law That Never Was," Volume II (1985), pages 122-135.

I know what you're thinking: "L. Reichard, you must certainly be wrong -- the rich don't want to pay income taxes. It must have been the liberals who somehow engineered the income tax to transfer wealth from the rich to the poor, you know, like Robin Hood."

Nope, no liberals involved. Rich man's smoke and mirrors - - -

The 16th Amendment itself was given its decisive shove through Congress in 1909 by Sen. Nelson Aldrich of Rhode Island (co-author of the Federal Reserve Act of 1913), who spoke for the "community of interest" of both [J.P.] Morgan and Rockefeller. This represented and led to an astonishing reversal of attitudes among the old-line big-business conservatives in the Senate, who had long staunchly opposed an income tax. Obviously, something was afoot to change their minds. It was that the robber barons had already figured out how to avoid the proposed income tax, especially through the establishment and use of foundations, the number of which grew from 18 in 1910 to 94 by 1920 and 267 by 1930. The super-rich have avoided the income tax ever since, leaving it to be paid instead by the middle and lower classes. -condensed from Bill Benson's research report on the ratification of the 16th Amendment, "The Law That Never Was," Volume II (1985), pages 122-135.

Now you're thinking, "Now look here L. Reichard, if as suggested by "The Law That Never Was," the sixteenth amendment was never legally ratified, how did it become law?"

Well, that's why Philander was the boy to watch --- he declared it ratified, appropriately by fiat, and then promptly left office. He got away with it because everyone assumed it must have been legitimately ratified by the requisite number of states. Apparently no one checked the records very closely, at least not until Benson and Co.

I know this all seems just too fantastic to believe. When I first heard about "The Law That Never Was," I was skeptical too. Yea. Me. Pollyanna.

But then last year (~2000) "We The People" was holding its second "Citizen's Summit to End the Illegal Operations of the IRS." And it was supposed to be broadcast on C-SPAN as had been the first Citizen's Summit. And the first "Citizen's Summit" had been the most requested C-SPAN event ever -- if you can make that judgement by the all-time record number of tapes C-SPAN sold of that first event. But C-SPAN ditched out -- without any explanation. They didn't cover it at all. Hmm.

What came out of that event, which was held even though not covered by C-SPAN (and the fact that it wasn't covered) is what convinced me there just might be something to all this. Of course, you'll be the judge of that for yourself. And that's as it should be.

How do I know all this? Well by chance, I was privy to a large number of E-mails that were flying back and forth about the situation, including some from Larry Beacraft, the famed non-establishment anti-IRS lawyer, ex-IRS special agent Joe Bannister, and Bill Benson himself. See the following link for a good synopsis of the lack of promised coverage and reasons for it -- and a few surprises:

Finally you may say, "Look L. Reichard, how could you believe such ridiculous and fantastic claims?" I say, given the U.S. Government's track-record of prevarication and skulduggery, currently with leaders to match, how could you believe the USA Corp. shysters?

P.S. The fact the 16th amendment, authorizing the so-called "income tax" on individual citizens wasn't actually ratified is only the tip of the iceberg. Even if it had been ratified properly, you, as an unincorporated American, are still protected from being subject to it in the body of the United States Constitution which states:

"No Captiation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration hereinbefore directed to be taken." -UNITED STATES CONSTITUTION, Article I, Section 9.

How do you reconcile that with the 16th amendment which states:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." -UNITED STATES CONSTITUTION, Article XVI

Article I, Section 9 of the constitution has NOT been repealed and is in effect today. The fact that the 16th amendment seems to contradict Article I, Section 9 is one conceptual path to the truth which you may find very enlightening. The court cases that resolved this apparent conflict give you the big picture. Start with Brushaber vs. Union Pacific Railroad. Hope this tickles your fancy enough to get you to investigate further!

If you want to look into other aspects of this biggest income tax scam, here are a few random links to start you on the path:

The following excerpt from a report on U.S. vs. LLOYD R. LONG (from the first link above) wherein Attorney Larry Beacraft obtained a not-guilty verdict for his client on "willful failure to file" charges gives another path-way for study.

"A not guilty verdict came in the Eastern District of Tennessee in the case of U.S. v. Lloyd R. Long, #CR-1-93-91. The verdict came on October 15th, 1993.
Defense testimony showed a case titled Brushaber v. Union Pacific Railroad wherein it was the unanimous decision of the US Supreme Court that the 16th amendment did not give Congress any new power to tax any new subjects; it merely tried to simplify the way in which the tax was imposed. It also showed that the income tax was in fact an excise tax on corporate privileges and privileged occupations.
The defense then brought out a case entitled Flint v. Stone Tracy wherein an excise tax was defined as a tax being laid upon the manufacture, sale and consumption of commodities within the country; upon licenses to pursue certain occupations; and upon corporate privileges. Mr. Long's attorneys also brought out a case entitled Simms v. Arehns, wherein the court ruled that the income tax was neither a property tax nor a tax upon occupations of common right, but was an excise tax.
The defense then brought out a case entitled Redfield v. Fisher, wherein the court ruled that the individual, unlike the corporation, cannot be taxed for the mere privilege of existing, but that the individual's right to live and own property was a natural right upon which an excise cannot be imposed. Defense also pointed to a couple of studies done by the Congressional Research Service that shows the income tax is an excise.
Next, defense pointed out that in Tennessee Supreme Court case Jack Cole v. Commissioner the court ruled that citizens are entitled by right to income or earnings and that right could not be taxed as a privilege. In another Tennessee Supreme Court case Corn v. Fort the court ruled that individuals have the right to combine their activities as partnerships; and that this is a natural right independent and antecedent of government. -U.S. V. LLOYD R. LONG, Free Enterprise Society News, 300 W. Shaw Ave. #205, Clovis, Calif. 93612, December 1993 edition,


[1] While serving with David Koch on the Libertarian National Committee, I discovered that the Koch brothers hired a publicity firm - - - to keep the Koch name out of the media. return

[2] Read "A Pen Warmed Up in Hell" by Samuel Clemens, otherwise known as "Mark Twain," for a highly inflamatory and very informative account of some of this. He was invited to witness a particularly heinous machine-gun massacre of Filipino tribal women and children in person. -LRW return

[3] According to Clinton's Office of Management and Budget (OMB), if the growth of the federal deficit isn't stopped, children born after 1992 will pay between 84% and 94% of their income for local, state and Federal taxes. -Rep. Donald Manzullo, R-Illinois, C-SPAN, 17 May 1995 ~3:57:40 PM. This figure has been repeated by many others, including John Kasich, R-Ohio, Ross Perot, (FACE THE NATION, 4 Feb., 1996) etc. and is attributed to page 24 or 25 of the Clinton 1994 budget in a section entitled "The Prospects for Inter-generational Warfare" return

[4] When Smedley says "capitalism" he clearly means that system of fascism and central control which is akin to mercantilism -- and antithetical to free markets. SEE Free Trade: The Good, The Bad, and The Ugly by journeyman return

[5] This is why columnist Vin Suprynowicz and others refer to government bonds as "extortion futures," and why government bonds are usually considered "riskless." (Government bonds aren't really "riskless" of course: Russia defaulted on their "sovereign debt" [government bonds] in 1998, and Argentina did the same earlier this year (2002).) return

[6] Economist Joseph Schumpeter (1883-1950) recognized this trend -- which came into bloom during WWI and into full flower during WWII -- and called the result, in his book by the same name, Der Steuerstaat (The Fiscal State, 1918). A "Fiscal State" can not only tax you, but can and does borrow against the anticipated taxation of your future labor and even against the labor of your as yet unborn children. The result shows up as a so-called "national debt." return

[7] See Dis-Mything Social Security by L. Reichard White return