Reason | Mar 5, 2021 | 0
Why Americans Are Looking For A Safe Haven From The Dollar
Why Americans Are Looking For A Safe Haven From The Dollar
Thu, 08/27/2020 – 19:05
However, this “mystery” was solved long ago by the laws of economics. The only “mystery” here is why—contrary to centuries of economic wisdom—we allowed centralized paper money to become the dominant form of currency in the first place.
As recent waves of civil unrest and economic turmoil have prompted some to look back in time and reflect on the observations of the Founding Fathers, it seems most have opted to reject them entirely.
Yet among the founders’ many warnings against the institutions that would eventually dominate the modern world are the timeless—and astonishingly accurate—warnings against central banking.
On August 1, 1787, George Washington wrote in a letter to Thomas Jefferson that “paper currency [can] ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” Jefferson also opposed the concept, warning that “banking establishments are more dangerous than standing armies.” James Madison called paper money “unjust,” recognizing that it allowed the government to confiscate and redistribute property through inflation: “It affects the rights of property as much as taking away equal value in land.”
In other words, inflation is a hidden form of taxation. Washington understood this. Jefferson understood this. Madison understood this. And generations of preeminent economists since then—from Ludwig von Mises to F.A. Hayek, to Murray Rothbard—have understood this quite clearly.
And there’s nothing controversial or mysterious about sound money, that is, currency backed by some form of secure, fixed weight commodity like gold or silver. Both have been valued in some fashion for six thousand years and have been used as currency for around twenty-six hundred years. As confidence in the dollar continues to nosedive, the market is not only putting more confidence in gold and silver, but in some cryptocurrencies sharing many of the characteristics of gold.
The presidencies of Woodrow Wilson and Franklin D. Roosevelt are rightfully regarded as some of the darkest years for freedom in America. Often overlooked, however, are the deeply repressive monetary policies introduced by both presidents. In 1838, Senator John C. Calhoun foreshadowed the economic evils that would eventually emerge at the peak of the Progressive Era, explaining,
“It is the nature of stimulus…to excite first, and then depress afterwards….Nothing is more stimulating than an expanding and depreciating currency. It creates a delusive appearance of prosperity, which puts everything in motion. Everyone feels as if he was growing richer as prices rise.”
Seventy-five years later, the autocrats running the Wilson administration dealt two devastating blows to liberty with the Federal Reserve Act and the Revenue Act, forever marking 1913 as a tragic year for liberty. Both laws struck at the heart of property rights by establishing the Federal Reserve System and the income tax, respectively. Then, in 1933, Roosevelt issued Executive Order No. 6102, requiring Americans to surrender much of their gold to the US government. Shortly after, Congress passed the Gold Reserve Act of 1934, artificially raising the price of gold and guaranteeing the government a profit of $14.33 for each ounce of gold it had seized from the people.
Finally, in 1971, President Richard Nixon—like any self-respecting twentieth-century Keynesian—committed himself to finishing the work of Wilson and Roosevelt by closing the gold window, forever divorcing the gold standard from the dollar. Rather than usher in a new era of economic stability, this unnatural union between the Fed and the federal government produced a vicious loop of boom-bust cycles and depressions. The consequences have not only been inflation and devaluation (both of which have stripped the people of their purchasing power and savings); now, every time a depression hits, the government is allowed to do two things: grow its power and tax and spend at will without fear of accountability.
In other words, with every inflation of currency comes an inflation of government power.
With government shutdowns of local economies, the second economic quarter of this year was among the worst in history, with the total debt-to-GDP reaching a staggering 136 percent. As the national debt approaches $27 trillion (with even bigger spending bills in the works), we can expect the days of such flagrant government spending to come to a screeching halt. If we continue on this path, that correction will result in an unprecedented collapse of the dollar and the monetary system. The ultimate danger in this scenario: the government eventually confiscates the vast majority or even all private property in order to pay off the national debt. As German American economist Hans Sennholz once said, “Government debt is a government claim against personal income and private property—an unpaid tax bill.”
This is why a dramatic downsizing of government is key to bringing the US out of this manic, outmoded cycle of depressions and upswings. For the government to fulfill its core function as a safeguard of liberty, we must prevent it from meddling in affairs beyond the boundaries prescribed by the Founding Fathers. This includes a swift withdrawal from the use of paper fiat currency and spending cuts across the board.
Such a sweeping transformation could begin with the state governments, the legislatures of which could override the federal government by passing legislation allowing individuals to use gold and silver currency.
Regardless, if meaningful legislative action is not taken somewhere, we have little choice other than to acquiesce to the gloom and terror of socialism—a system that would devour all in its path and make slaves of once free people for generations to come. Freedom is the natural ability of people to control their own destiny. Sound money has the ability to help keep people free.
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