Whatever happened to our real money?

Bryan Hyde is a news commentator and co-host of the Perspectives morning show on Fox News 1450 AM 93.1 FM. The opinions stated in this article are his and not those of St. George News.

OPINION – There are many issues that illustrate the difference between individualist and statist, also known as collectivist, thinking in America. But the clearest line of demarcation between the two camps involves how each side regards monetary policy.

This point was hammered home a few days ago when Federal Reserve Chairman Ben Bernanke spoke to an undergraduate class at George Washington University. Bernanke spoke of the futility of the gold standard in today’s world economy while touting the advantages of the nation’s Central Bank in times of economic uncertainty.

The GWU students were understandably awed by Bernanke’s knowledge and status, but their blushing comments reveal that few of them recognized that they were being subjected to collectivist monetary indoctrination.

The first misconception that must be addressed is the false notion that the gold standard involves a rate of exchange between gold coins and paper money. In U.S. history, it simply referred to the fact that the American people had chosen gold or silver coins rather than paper currency as the official money of the nation. This is reinforced by the fact that even the Constitution expressly delegated power to the federal government to “coin” money and regulate the value of it.

Since paper money cannot be coined, it should clear that the power to print money was not among the powers delegated to the federal government.

To further drive the point home, the Constitution contained a clear prohibition to the states against emitting bills of credit, another name for printing paper money. States were also forbidden from using anything but gold or silver coin as the official money. The Coinage Act of 1792 further codified the intent of the framers to use real money rather than paper currency.

Why did the Founders choose gold and silver coin as the official money of the nation? Because they recognized that historically, paper currencies become subject to the abuse of those who hold political power and can be debased through nonstop printing. This debasement of the money supply has been used as an instrument of plunder of the wealth of the citizenry by governments throughout history. Abuse of paper money was part of what led to the Mongol Dynasty being kicked out of China when, despite government demands, the people refused to accept money printed on mulberry bark in the place of metallic money. They knew worthless currency when they saw it.

This was what the Founders sought to avoid by having real money instead of printed money.

Constitutional lawyer Jacob Hornberger of the Future of Freedom Foundation pointed out that U.S. bills and notes came into play as our government began borrowing money. This power to borrow was delegated to the federal government and what it was borrowing was gold and silver coins. As Hornberger puts it, “The government borrows gold and silver coins and promises to repay the money (gold and silver coins) to the creditor. That’s what bills and notes were all about — promises to pay money, and the money was gold and silver coins.”

This approach forced a degree of honesty on the part of politicians in that, when they set out to borrow a certain amount of money, they might have to raise taxes to pay back the debt. Higher taxes predictably got the attention of the citizens who would, in turn, insist that the government limit its spending which would, in turn, limit government’s size.

Only by replacing the nation’s official money from gold and silver with irredeemable paper currency could proponents of unlimited government realize their goal of borrowing as much as they wished. This way they could print as many bills and notes as they chose without actually having to repay their creditors. Of course, the result of this policy is that government spending could increase drastically and government itself could grow as well.

It didn’t take long for the lovers of state power to make even more dramatic moves with even deeper consequences. The Federal Reserve was instituted in 1913, ostensibly to stabilize the monetary system; instead its manipulation of the economy became a prime reason for the Great Depression. In 1933, Franklin D. Roosevelt criminalized the possession of gold, outlawing private ownership of what had once been constitutionally required money. This was part of Roosevelt’s unprecedented efforts to gain greater control of the national economy at the height of the Great Depression. Since the enactment of these policies and others, our federal government has grown unabated and the value of the dollar has shrunk continually.

To better understand how our constitutional system of official money was changed, without a constitutional amendment, to a centralized banking system flooded with irredeemable paper currency, some scholarly effort is required. G. Ed Griffin’s book “The Creature from Jekyll Island” is a great place to begin that that monetary education.

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Copyright 2012 St. George News.

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  • Dexter VanDango April 2, 2012 at 9:28 am

    Babies, birds.. and sadly not a few women.. seem to be captivated by shiny objects. Certain conservatives and libertarians are too. Gold! It’s so purty!

    In a multi-trillion dollar economy does the author really expect America to have to mine and warehouse trillions of dollars worth of gold and silver in order to back America’s daily exchange of goods and services?

    Beside being wildly impractical it’s no doubt impossible.

    Believe in America… not some hypnotic metals that can be manipulated like any other commodity.

  • Kelvin Climb April 2, 2012 at 11:08 am

    Hang on till they quit printing money all together and go paperless like in some places in Europe. All electronic……cause it is more cost effective…..RIGHT

  • urbanboy April 2, 2012 at 11:39 am

    Hah, where’ve u been? nothing’s real these days!

  • Joni Beals April 2, 2012 at 12:40 pm

    The comment above shows a lack of understanding of history. Milton Friedman (Nobel Prize Laureate in Economics) was by no means a metallist, yet in his book “Money Mischief” he states that: “Before 1971, every major currency from time immemorial had been linked directly or indirectly to a commodity. Occasional departures from a fixed link did occur but, generally, only at times of crisis.” In other words, departing from a commodity-based monetary standard, except temporarily in times of crisis, is a “new” idea–an experiement that has lasted less than fifty years! Therefore, this snide “gold-backed” money is an “out-dated” idea, is an uneducated fallacy–an unconservative “throwing out” of past experience, because whatever is “new” is naturally and unquestionably better than the old.

    Furthermore, even though commodity prices fluctuate in any market and can be manipulated by government intervention, the price of money is acutallly stabilized by being backed by a commodity because it limits how much money the government can print. Prices rise when government increase the money supply–this is called inflation. Inflation happens when government prints more money, so you have more money chasing the same amount of goods and services. It is nothing more than a hidden tax.

    The previous author’s comment that it is impossible for “in a multi-trillion dollar economy” to back America’s exchange of services with a commodity is a fallacy, because “how much” money is floating around “X” amount of goods of services doesn’t matter–afterall, Germany once had trillions of dollars floating around one loaf of bread (that’s called hyper-inflation). The real question is how fast is the money supply increasing in comparision to how fast we are producing goods and services. In our current fiat money world, there is absolutely no check on inflation (except for trust in our government and the fed) and there is actually incentive to inflate our money supply (to encourage spending during bad economies in the hope that production will “catch-up” to the money supply, which hasn’t been happening for reasons I won’t get into). Having a commodity backed monetary unit puts a check on the government’s ability to indefinently increase the money supply.

    Checking government’s power is not an archiac idea. Whether or not you’re a metallist, we need a check on government’s ability to arbitrarily increase the money-supply the way it currently does. If we don’t check monetary policy, we can expect to see prices rise across the board, until basic necessities are too expensive for all but the wealthy.

  • Dexter VanDango April 2, 2012 at 3:25 pm

    Joni appears to have made a few interesting and debatable points.

    First, as “just because something is new it ain’t necessarily good” is simply the mirror image of “just because something is old doesn’t mean it’ s necessarily good.” That doesn’t indicate anything.

    But the crux of the debate, unless there is actual physical possession of trillions in gold and silver, any currency will be fictive if the total value of what is valued in stocks, bonds, bank savings and electronic cash does not match the physical reality.

    Are you suggesting shrinking the total economy of America until the amount somehow magically matches the gold we’ve managed to mine so far?????

    An as for the inflation argument, the recent turn down has be one of stagnation not much inflation at all.. so it’s an empty argument.

    The national debt is another more serious argument . Debt can run up under any currency and any administration (..especially ones that start two wars while lowering taxes.)

    Kings and crooked politicians tended throughout history to rob, mismanage or bankrupt nations when gold and silver were the only currency. The last century has been the most stable in history. If you don’t believe me, read about the two or three depressions in American history before Lincoln.. and the two or three following the printing of paper money after Lincoln but under the gold standard… until Nixon wisely got rid of it as archaic and unnecessary.

  • Ray April 26, 2012 at 7:27 pm

    Gold, silver, copper for mankind.

    Historically, gold, silver, and copper were used as monetary based on their
    fair value as exchange medium in fair trade.

    Now, gold and silver are both dismissed from their monetary function. Only copper
    is the only metal still left to be used as money. Even so, the copper monetized
    today is based upon its face value and not upon its fair value. As such, the
    basic form of human ties in transaction is therefore corrupted and not a fair
    trade among us anymore.

    This calculation was intended to bring back the fair trade for the sake of
    just in mankind. Copper will be used as the basic reference, and solely on its
    fair value. In monetary term, USD will be used as unit only because of it
    recognition worldwide.

    Base value = material cost
    Face value = denomination value
    Base value copper = usd 3.71/lb = USD 0.008/g
    Base value nickel = usd 8.15/lb = USD 0.018/g

    US dime face value USD 0.10
    Dime composition copper 91.67% nickel 8.33%
    Dime weight = 2.268g
    Dime copper’s weight 2.268g x 0.9167 = 2.079g
    Dime nickel’s weight 2.268g x 0.0833 = 0.189g
    Dime copper’s base value = 2.079g x USD 0.008/g = USD 0.017
    Dime nickel’s base value = 0.189g x USD 0.018/g = USD 0.003
    Dime base value = USD 0.02 ( only 20% or one-fifth from its face value usd 0.10)

    With a dime, based on its face value you can purchase its base metals 5 times more
    than the dime contents ie copper at 2.079g x 5 = 10.395g and nickel at 0.189g x
    5 = 0.945g.
    10.395g copper x USD 0.008/g = USD 0.083
    0.945g nickel x USD 0.018/g = USD 0.017
    Total 10.395g copper 0.945g nickel = USD 0.10, base value

    Dime 2.079g copper 0.189g nickel = USD 0.10, face value

    Total 10.395g copper 0.945g nickel = Dime 2.079g copper 0.189g nickel. Not a
    fair trade! Solution?

    As such, the dime will be pegged to its face value as unit only, and copper and
    nickel price will be adjusted accordingly. (or else fixed the metal base price
    and issue new coinage with fair value weightage/content)
    Base value copper new = USD 0.04/g
    Base value nickel new = USD 0.09/g

    Further to this, all good will be priced accordingly
    Old silver price USD 1.25/g to new silver price USD 6.25/g
    Old gold price USD 56.25/g to new gold price USD 281.25/g
    Old rice price USD 0.75/kg to new rice price USD 3.75/kg

    With the standardisation of all goods, based on dime unit which transpire on
    copper value, gold and silver can now be used as money again against the fiat
    money. Any price fluctuation for any goods now will solely be on its actual
    fair trade with only stock manipulation rather than purely fiat money price
    manipulation based on credit without stock. Stock manipulation is more easily
    apprehended and therefore more risky for the manipulator, other than the
    lifespan/storage/delivery limitation of the goods. Hopefully in the future, the
    rich with whole lot of gold and silver, realised the agony of safekeeping their
    wealth/fort, will not recreate the same fiat system again, but acknowledge the
    real joy of giving with real goods and not fiat IOU paper.

    With the gold and silver standard back again, foreign exchange will now be
    back to fair barter trade again. Gold and silver as the commonly accepted
    exchange commodities will only exchange hand when the nations traded do not
    have common commodities of interest to barter.

    In monetary unit, the gold and silver exchange rate when in foreign countries
    will depends on the other countries base metal money.

    In Canada, Canadian ten cents CAD 0.10 is 1.75g
    92% steel x 1.75g x USD 0.003/g = USD 0.005
    5.5% copper x 1.75g x USD 0.008/g = USD 0.001
    2.5% nickel plating x 1.75g x USD 0.018/g = USD 0.001
    Therefore, Canadian ten cents CAD 0.10 base value = USD 0.007

    Thus, the exchange rate US dime/Canadian ten cents = USD 0.02/USD 0.007 = 2.8
    ( because the dime base value was based on old price, the same applies to the
    Canadian ten cents. Both must be on the same, either old or new will still give
    2.8 )

    New silver price USD 6.25/g = CAD 6.25×2.8/g = CAD 17.5/g

    In Autralia, Autralian ten cents AUD 0.10 is 5.65g
    75% copper x 5.65g x USD 0.008/g = USD 0.034
    25% nickel x 5.65g x USD 0.018/g = USD 0.025
    Therefore, Autralian ten cents AUD 0.10 base value = USD 0.059

    Thus, the exchange rate US dime/Autralian ten cents = USD 0.02/USD 0.059 = 0.3

    New silver price USD 6.25/g = AUD 6.25×0.3/g = AUD 1.88/g

    Good Day!Pls spiral.

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