Section 1 voids and declares unenforceable in the United States every existing debt, with the exception of two things: outstanding Federal Reserve Notes and demand deposits. Federal Reserve Notes are debts of the Federal Reserve; demand deposits are debts of banks to their depositors.
The purpose of excepting those two things is that these are what is commonly regarded as “money”. If they, too, were voided then there would essentially be no money. Conveniently, the dollar numbers of each are known with exact certainty at virtually all times by the Federal Reserve, so it would be no problem to ascertain just how many “dollars” are involved. But to give you an idea, there is about $1 trillion of Federal Reserve Notes in circulation, and about $7 trillion in demand deposits, last time I checked. For reasons that will become clear later, it doesn’t really matter what the numbers are so long as they can be ascertained with certainty on the date of ratification.
Other than that, nobody will owe anybody anything. Anything you have before ratification you will have after, so long as it is not owed to you by someone else. Everyone – individuals, banks, corporations, the government – will be instantly solvent. Nobody will have a negative net worth, because as you will see later, the only remaining debts – Federal Reserve Notes and demand deposits – will be covered by gold currently possessed by the federal government that will be distributed precisely so as to cover those obligations.
The effects of this would be very far reaching and dramatic. This much should be obvious. What is not obvious, and indeed cannot be answered in advance, is how things will be priced afterward, everything from how much your job would pay to what a loaf of bread would cost. There would be a period of extreme uncertainty as the market sorted this out, but commerce must go on, and sorted out it will be. I would be interested in anyone’s thoughts on this point, however.
Section 2 abolishes the central bank and prescribes what will happen with the outstanding Federal Reserve Notes, which will be the only vestige of it. As you see in the following sections, a gold standard for the dollar is restored and the federal government is completely out of the banking business, so no central bank would be required or desirable at that point.
I’ll continue explanations in later posts.