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.
Copyright 2012 St. George News.