“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” — John Maynard Keynes, The Economic Consequences of the Peace, 1920
If you have the feeling the U.S. economy is somehow out of whack, you’re not alone. The good news is that although it’s not widely known about or understood, the means to put things back into whack is at our fingertips.
The fundamental cause of all our economic problems is that the United States government, in cahoots with the private Federal Reserve banking cartel, have been debauching the currency like sailors in a brothel.
The dustbin of history is heaped with the withered corpses of nations sucked dry and crushed by the false promises of paper money. The United States, in the hands of the Federal Reserve, has built a global empire, and as empires before it have done, now pays in paper to maintain an empire built on gold.
There are those who say the final bankruptcy is as certain as tomorrow’s sunrise. No country has ever survived inflation in the long run without economic collapse, war, or revolution. What has delayed the reckoning in our case is simply that we are the first country in history to export domestic inflation to the world. But the reckoning will come, they say. The orchestra is bigger, but they’re playing the same old tune.
I am of the opinion, however, that the game’s outcome is by no means sure. Though we are a much different people now, this isn’t America’s first brush with the ruinous scourge of paper money. The constitution emerged from just such a crisis. It solved the problem then. It would solve it now.
That document contains the cure for what ails our economy. The law is still in full effect, though much neglected. Nothing need change but our respect for the words of that fundamental law to avoid the disaster that unchecked inflation will eventually call down upon us.
A distinguished national leader writes to a colleague, “The wheels of government are clogged, and we are descending into the vale of confusion and darkness. No day was ever more clouded than the present. We are fast verging to anarchy and confusion.”
Sounds like an observation a modern lawmaker might make, if it weren’t for the big words and proper spelling. George Washington wrote those words in 1786, two years after the colonies had won their war of independence against the most powerful government in the world.
The newly independent states were in an economic mess. The government paid its debts in paper notes called Continentals. The paper chits were not redeemable in silver or gold and depreciated at an alarming rate. Between 1779 and 1781 they went from 8 to the silver dollar to over 1000, finally dying quietly worthless in the last owners’ hands.
Contemporary writers observed some of the more comical and absurd aspects of the scourge: barbershops wallpapered in Continental notes and sailors who had suits of clothes made from them. The effects were not trivial, however. A dishonest unit of commerce spreads moral decay like a virus. Productive work is replaced by unproductive speculation. The conversion of a healthy construction and housing market to a real estate casino comes to mind.
Peletiah Webster wrote in the 1780s: “Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry, and manufactures of our country and went far to destroy the morality of our people.” It’s remarkable how articulate and observant people were who never attended public schools.
In 1787 the leaders of the thirteen newly independent states, amid economic chaos and crisis, gathered to write a constitution for a new central government. They came up with a document that created a severely limited authority with specifically enumerated powers. It contained compromises that would prove troublesome down the road, not the least of which was over the question of chattel slavery. But despite its weaknesses it served the purpose admirably. It set up a government whose primary purpose was to safeguard the freedom and rights of its people, in whom resided the ultimate sovereignty.
Among the most hotly debated and controversial items that was decided at the constitutional convention was whether the new government would be allowed to “emit bills of credit on the United States.” The original draft would have allowed the new government to do so.
To emit bills of credit means to print unbacked money. There were many “friends of paper money” present among the delegates. There are, after all, enormous profits to be had by whomever is in charge of such an enterprise. The problem was, however, and is still, that those profits are the result of subtle, deceptive theft. Fortunately, the delegates were educated, honest men who recognized inflation for what it was and forbid their new government from engaging in it.
In the end, having experienced the ruinous results of dishonest money, the delegates agreed on a constitution that forbid the central government and the states from “emitting bills of credit.” Article I section 8 denied the central government the power to print money. Article I section 10 goes on to try to hammer the lid down on the paper money’s coffin by stating “no state shall make any thing but gold and silver coin a tender in payment of debts.”
Through the machinations of powerful bankers and powerful politicians, however, what the Founders thought was a sealed coffin has become a Pandora’s box. The Federal Reserve is a private entity, and under no constitutional obligation. A self interested Congress granted this private bank the power to lend printed notes to the U.S. government at interest and circulate them as currency in the Land of the Free. In not quite a hundred years under this scheme vast wealth has been confiscated and squandered by the bankers and our own government. It has been used to make us ever more dependent upon them.
It took a year for the states to ratify the constitution. Another year to set up the new government. The effect was immediate. Honest money was a boon to commerce of all kinds. The Pennsylvania Gazette observed in December of 1789, “Since the federal constitution has removed all the danger of having a paper tender, our trade is advanced fifty percent. Our moneyed people can trust their cash abroad and have brought their coin into circulation.”
George Washington himself noticed the difference as well. In 1791 he wrote to LaFayette, “Our country, my dear sir, is fast progressing in its political importance and social happiness.” This is the same man who four years earlier saw looming disaster.
That same year he wrote in another letter, “Tranquility reigns among the people with that disposition towards the general government which is likely to preserve it. Our public credit stands on that high ground which three years ago it would have been considered as a species of madness to have foretold.”
Capitalism cannot work without an honest, constant unit for reckoning value past, present and future. Try to picture the economic chaos that would result from sellers’ deciding on their own what the size of common measuring units should be. How could the economy function if any merchant could decide for himself what gallons, quarts, feet and inches were?
One of the primary functions of government is to oversee the honesty and accuracy of measuring units. Our economic measuring unit is the dollar. A dollar is defined in the Coinage Act of 1792 as 371.25 grains of fine silver
. That law has never been repealed, nor has the gold and silver clause of the constitution. But ask a politician, banker, or tax collector what a dollar is and you will find it is nothing but undefined, child like, confidence, the dream stuff that makes Tinkerbelle fly.
The law that can end the tyranny of economic deception and theft and restore the United States to its former prosperity is in full force and effect today in the U.S. Constitution. To redeem a U.S. economy that is on a collision course with disaster only requires that we the people insist that our leaders obey that law and honor their oaths to defend and protect it.