Riot, Rebellion and a Suspected Fake $20 Bill

Last week in Minneapolis, a laid-off, middle-aged man walked into a store and slapped down a $20 bill. Apparently, it was counterfeit.

Local police became involved. Not long afterwards, the guy was dead.

Plenty of articles have described the vicious, disgusting, senseless way he died at the hands (the knee, actually) of the arresting officer.

But take a moment to reflect on that $20 bill. That fake Federal Reserve Note was absolutely a critical link in the chain of tragedy.

An unfortunate man is dead because of something so simple as a worthless scrap of paper, for which “the law” showed up.

Yet in the bigger picture, we live in an economy built upon a system of gargantuan, long-term financial fraud.

With that perspective, today’s riots and destruction have more in common with the nation’s foundation than many might suspect.

At the same time, examining our history highlights some ways out of this mess.

Let’s dig in…

In his younger days, the now-deceased George Floyd was athletic. He played football in junior college. Later, he worked as a rapper and DJ. More recently, he was a security guard until the national shutdown led to his layoff.

Whatever else was going in with his life, there’s no report that Mr. Floyd was churning fake currency from a printing press in his basement. Nothing leaps from his background to indicate that he was an actual counterfeiter or somehow dangerous to the public fisc.

Yet fate is oft cruel. In the case of Mr. Floyd and his $20 bill, somebody called the cops on him. The rest is well documented.

Of course, counterfeit currency is a problem. And yes, so-called “law enforcement” takes an interest in counterfeiting. It’s a matter for the FBI, Secret Service and even local police, at least at the street level.

At St. Paul Research we know a few things about currency; certainly, we study ideas behind the concept of “money.” We write all the time about the dollar, the Federal Reserve, the gold standard, wealth creation and more.

This newsletter — Whiskey & Gunpowder — is named, in part, after America’s “Whiskey Rebellion” of 1791–94. And that event, too, was much about money.

As I’ve explained before, the fundamental issue back then was a national tax on whiskey stills, which farmers used to supplement their earnings. There were no “paper dollars” in those days, so the feds wanted their precious tax paid in “real” money, meaning gold, silver or copper coin.

The problem was that there was little metallic money for people to use — especially in western Pennsylvania, which was then the American frontier.

Money was scarce because the fledgling U.S. government didn’t function very well. It was near-broke and deeply indebted from old war bonds. The federal government lacked so much as a mint, let alone a secure supply of precious metal with which to press coins.

To conduct commerce, many people — including the U.S. government — used coins from Britain, France, Spain and Holland to settle obligations. Otherwise, people bartered goods and services. Occasionally they even used whiskey as currency.

So basically, the federal government demanded that farmers pay a tax with “money” that wasn’t anywhere to be had. It was ridiculous.

Meanwhile, the federal court for Pennsylvania in the 1790s was in Philadelphia, 300 miles away from the Western regions and across the rugged Allegheny Mountains. If anyone sought legal redress, it was a long, hard journey to the front door of the courthouse.

As far as people out West were concerned, it’s fair to say that distant justice was no justice. Even then, the federal legal process was often a one-way street. Outcomes favored the government, or the moneyed, well-lawyered, upper echelons of society.

For example, a legal action might go to court in Philadelphia with no notice to the party out West. The court would enter a “default” judgment against the absent party. After a while, someone might ride up to a distant farm, show the occupant a legal document and announce that there was now a federal fine, lien or other judgment against the owner.

Indeed, for all the historical reverence towards the “Founding Fathers,” the new U.S. nation of the 1790s was not necessarily a place where the common man received a fair shake.

On the other side of the ledger of justice, Western Pennsylvania in the 1790s was a well-armed part of the country (and still is, I’d add). Frontier farmers were the backbone of the “well-regulated militia” of Second Amendment fame.

So when the feds started demanding tax payments for whiskey stills, these farmers didn’t merely write strong letters to their Member of Congress. They rebelled against the newly formed U.S. federal government.

Starting in 1791, they outright refused to pay the tax — and harassed anyone who came to collect it. There were threats, beatings, destruction of property and some tar-and-feathering, but no deaths to speak of.

Then in mid-1794, a group of armed farmers marched on the home of the federal revenue collector, a former Revolutionary War general named John Neville. They surrounded his house. A shot rang out and one Whiskey protester — carrying a white flag of truce, no less — died on the spot.1

Whiskey rebels

Whiskey rebels burn Neville House.

Angered, the protesters burned Neville’s house to the ground. Today, we’d call it a riot; a crowd triggered by a needless death. They took out their immediate frustrations.

As the federal tax fight unfolded, more than a few Western Pennsylvanians concluded that the new federal government back East was not worth the trouble.

The thinking was that the government simply wanted tax money from working people, and in turn delivered little or nothing in the way of benefits. The federal government certainly did not administer much “justice” to common citizens.

A certain “anti-federal” perception grew, and the anti-tax whiskey movement transformed from riot to rebellion.

In fact, several anti-tax organizers sent emissaries to British, French and Spanish representatives. They asked for support to form a new state called “West Sylvania.” They discussed exiting the U.S. union to become part of a different empire.

Back East in Philadelphia, President George Washington brooked none of this, of course. He proceeded to raise troops to put down the Whiskey Rebellion.

There’s more to the story; enough to discuss all day. But suffice to say that the Whiskey Rebellion abated. And American history subsequently tamed and sculpted the facts of those days into a colorful tale of quaint farmers who cherished their liquor.

In other words, history-schmistory.

But a few key points help to frame what happened with the Whiskey Rebellion:

  • In the 1790s, the U.S. was a new nation of unformed federal institutions.
  • The country had no mint and no money. The U.S. Treasury was chronically broke. The national government was indebted, near insolvent and ineffective. Indeed, the feds came across as more harmful than good.
  • The federal legal system was remote and unresponsive to the needs of the everyday people while outcomes favored the moneyed, upper classes.

With this in mind, let’s revisit that counterfeit $20 bill that got Mr. Floyd killed.

A single, fake, worthless piece of paper led to events that literally put Minneapolis to the torch, then set fires across the nation.

Mr. Floyd was busted — and summarily executed, one can argue — for passing a fake $20 bill.

At least, the fake $20 was why he was arrested. That began the process. That’s why one thing led to another, and the man wound up choking with his face in the asphalt.

Of course, “counterfeiting” is a crime; but there’s no evidence that Mr. Floyd printed the note. He just handed it to a store clerk. Frame it as petty theft if you wish…

It’s mystifying that Mr. Floyd and his $20 bill was somehow worth the time and trouble to call out four Minneapolis police officers. We live in a strange world, but wow…

And ironies abound.

Consider the economic crash of 2008, which was based not on $20, but on about $20 trillion. The U.S economy underwent epic levels of financial fraud over several years that cost the nation multitrillions of dollars.

Yet almost no one was ever arrested, let alone went to jail, for mass thievery, waste and spoilage of funds, both before, during and after the crash.

Through that lens, it’s clear that the overall economic harm of the fake $20 bill in Minneapolis is the monetary equivalent of something happening at the sub-atomic scale.

Meanwhile, one can argue that the so-called “money creation” of the Federal Reserve is fake as well. Every dollar emitted by the Fed is arguably counterfeit because every dollar is unmoored to any real standard, least of all to a gold standard.

Modern monetarism is voodoo economics, and this has been the case since 1971 when President Nixon “closed the gold window,” as the saying goes.2

Now, every hour of every day the federal government spends funds it doesn’t have. That’s why we have trillion-dollar federal deficits, along with $25 trillion in national debt. It’s an accounting trick, not a measure of wealth.

The semantic angle is to say that all the spending is somehow “taxpayer money,” as if new spending comes from government taxing away a share of wealth that’s created by working citizens across the land. But that’s hogwash, in large measure, because tax receipts never even come close to approaching expenditures.

The better way to characterize most government spending is that it’s merely unbacked “public debt.” Even then, it’s fake debt that the U.S. economy is incapable of ever repaying. It’s just a decades-long rollover scam, with an initial asset-strip up front when fake currency buys real things.

Thus, it’s easy to argue that the U.S. dollar is already a “fake” currency, unbacked by precious metal or anything else. The dollar remains the world reserve currency only out of post-World War II, Bretton Woods inertia;3 and because no other nation has offered up any substitute.

Obviously, the U.S. has some bad cops running around, making bad busts. Minneapolis speaks for itself. But the U.S. monetary system is a massively failed institution as well.

Our monetary system promotes debt, permits decades-long deficit spending, rewards speculation and promotes asset-inflation. The result is a social and political mess, grounded in distorted monetary and human values.

Not long ago, I discussed how the U.S. is transforming into a “feudal” sort of economic system. We live in a land of massive wealth disparity, in which government monetary policy primarily benefits people who own financial assets. Meanwhile, people who work for wages or live on a fixed income are left to deal with inflation and declining purchasing power on their own.

Now we see what happens in the streets when people witness a clear outrage; a video-recorded event over which there’s enough anger to spark riots. And now we’re back to the days of burning down General Neville’s house, so to speak.

The deeper concern is when riot becomes a mindset of rebellion, based on utter frustration and disdain towards a broken system. That’s where we are right now, socially and politically. 

Looking back, George Washington showed strength towards the Whiskey rebels. He sent out three state militias to quell the insurrection. But at the same time, the federal government showed magnanimity towards the people who revolted.

Among other things, the federal government eased back on the whiskey tax. It also established the U.S. Mint, and a system of sound money. The government placed federal district courts closer to the people — and opened access to justice.

The government also promoted new investment — “internal improvements” — to build a strong country that benefitted more than just a few elite.

To borrow a term usually applied to China, America today is “one country, two systems.” And to be sure, one economic system does work for many people. But the other system has failed people whose numbers now total into the tens of millions. It’s a recipe for disaster…

Still, there’s the kernel of a leadership model for today if politicians care to learn from the past; from the days of Whiskey Rebellion when the new nation almost died aborning.

On that note, I rest my case.

That’s all for now… Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Whiskey & Gunpowder

P.S. – Feel free to forward Whiskey & Gunpowder to friends, family and colleagues. If you received this article from someone and would like to subscribe, click here.  Thank you.

1 Book Excerpt From ‘The Whiskey Rebellion’: The Burning of Neville House, Pittsburgh Post-Gazette

2 At the time, U.S. citizens couldn’t exchange their dollars for a fixed amount of gold. Nixon’s decision prevented foreign countries from getting gold for their dollars, too.

3 See our discussion of Bretton Woods from last July.

You May Also Be Interested In:

Byron King

A Harvard-trained geologist and former aide to the United States Chief of Naval Operations, Byron King is our resident gold and mining expert, and we are proud to have him on board as the managing editor of Whiskey & Gunpowder.

This “old rock hound” uses his expertise and connections in global resource industries to bring...

View More By Byron King