Tag Archives: gold standard

More states making move to gold, silver as legal tender

gold as legal tenderArizona senators voted 18-10 on Tuesday to pass a measure that would make gold and silver legal for use as tender for payment.

Earlier this month the same legislation cleared the Arizona House which leaves only Governor Jan Brewer’s signature before it becomes law.

While U.S. currency will continue to be accepted in the Grand Canyon State, the new bill allows gold and silver coins and bullion to be used beginning mid-2014.

Utah passed a similar law in 2011. Kansas, South Carolina and several other states are advancing similar bills.

While Utah and Arizona’s legislation is little more than symbolic, other states are eyeing infrastructure projects key to allowing precious metals to be used as legal tender.

Texas legislators are considering a measure to create the Texas Bullion Depository that would store about $1 Billion in gold currently held in a New York facility. The new facility would also function as a place for public deposits which would create a realistic medium for trade similar to blacksmiths’ and bankers’ handling of the precious metal in earlier times. Money could be deposited for one or more “depository notes” which could be traded for goods and services. The person receiving the notes in trade could then turn it in to the depository for gold. The notes would likely be backed by the State government and its gold holdings.

While the U.S. Constitution prevents states from coining money, it also says that states may not “make anything but gold and silver coin a tender in payment of debts” a phrase likely opening the door for states to pass these precious metal currency bills.

The States’ moves are seen as a response to the Federal Reserve’s constant dumping of liquidity into the American economy thereby devaluing the dollar and, as many believe, leading to the collapse of the U.S. paper money.

While some states may be taking action as a symbolic nose-thumbing at the Fed, others are clearly planning for the potential downfall of the dollar.

How Many Times Does America Have to Go Over the Fiscal Cliff Before the Concussion Kills Us?

uncle sam drives over the fiscall cliff


America has gone over the fiscal cliff so often; the concussions have definitely created economic brain damage and lunacy.

First: “Fiscal Cliff” is nothing more than an economic political term for economic idiocy leaders engage in more often than they do with Dominican hookers and interns.

Second: America goes over the fiscal cliff every time the Federal Reserve lowers interest rates to give the federal government an excuse to over lend, spend, and borrow what can never be repaid.

If you are panicking right now, you forgot America has been cliff-diving  for over 200 years and generations of economic brain damage hasn’t taught America one, single thing about printing paper currency and borrowing: Loans cannot be repaid with paper or excessive taxes.

If we paid attention to history, the Federal Reserve wouldn’t stand at attention every time it hears the ca-ching of cash registers ringing the national hymn of Weimar.

Most leaders are more interested in gambling for power than America’s preservation, which is why Obama and Democrats are hyping the fiscal cliff: Make Americans believe the wealthy caused the $16 trillion debt and they must be over-taxed! Only taxation can stop America from collapsing and going over the cliff!

The “Fiscal Cliff” is purposely used as a weapon to destroy the economy and push America to the brink of bankruptcy in order to destroy individual American wealth.

Obama and Democrats are using the “Fiscal Cliff” weapon well. They’ve scared the daylights out of Americans who prefer suffering blind eye concussions rather than understanding that history is repeating itself on a level like never before because of our leaders, not the people.

Example: The American Revolution cost a fortune, and when we ran out of money, the Continental Congress created a new currency: Paper notes known as “Continentals.”


hamilton note

As always, the government over prints paper and people assume the notes are equal to gold coins and paper will back up their means.

“Continental” currency worked as well then as now: The Central Bank over-printed to keep up with“Continental” demands.  But paper is not a redeemable, tangible asset.  As the war accelerated, Congress reneged on its promise to issue more notes, inflation skyrocketed, and Americans were left in desperate need.

Alexander Hamilton, whose ideas were more in line with British government, created another central bank with one currency. The colonies had few banks: Britain controlled banking and prevented rival banks from developing. America needed a way to smooth the progress of government financing to investors and lending to businesses to develop a prosperous American economy. The idea was great, but failed: Hamilton’s Second Bank sent all United States gold [currency backing] to foreign countries during the 1790s.

In Hamilton’s Writings, his December 13, 1790  “Report on a National Bank” to the House of Representatives he stated: “The bank did not have the ability to circulate great sums of money beyond actual gold and silver coins held within the bank’s vaults,” so another rout was taken that pushed America over a fiscal cliff:

The stamping of paper is an operation so much easier than the laying of taxes, that a government in the practice of paper emissions, would rarely fail in any such emergency to indulge itself too far, in the employment of that resource, to avoid as much as possible one less auspicious to present popularity.

 hamilton dollar

Hamilton’s Bank continued printing nonredeemable notes as inflation escalated. By 1812 America dove over the fiscal cliff.

I’ll never understand why we outlawed dueling!

According to the Bureau of Public Debt:

The War of 1812 was financed mainly through the use of borrowed funds. Total public debt increased from $45.2 million on January 1, 1812, to $119.2 million as of September 30, 1815.

America’s banking system was so mismanaged; we dove again: The Panic of 1819.

In his book Andrew Jackson and the Bank War, historian Robert V. Remini wrote that by 1822 America’s economy collapsed: American banks fell and the people lost everything. Anger was so wide-spread, Americans elected President Andrew Jackson, who tore down the Second Bank,  placed money back into individual state’s hands, pushed for gold and silver to remain in America, and sold federal land to pay off the national debt.


destroying second bank

Jackson’s policies never prevented future government borrowing and lending idiocy or the creation of Federal Reserve.

Cheap paper seems to cause convenient amnesia.

By 1846, the United States war with Mexico over annexation of Texas and California cost $64 million, so “Congress authorized the issuing of additional debt to meet these obligations. It is this concept that would later become the basis for the Savings Bond program. By the end of 1849, public debt totaled $63.1 million.”

The War Between the States:

A final official estimate in 1879 totaled $6,190,000,000. The Confederacy spent perhaps $2,099,808,707. By 1906 another $3.3 billion already had been spent by the U.S. government on Northerners’ pensions and other veterans’ benefits for former Federal soldiers. Southern states and private philanthropy provided benefits to the Confederate veterans. The amount spent on benefits eventually well exceeded the war’s original cost.

By the end of the fiscal year of 1899, America paid much of its debt, leaving the country with $1.9 billion in gross debt.

But America elected Woodrow Wilson, who enacted the Federal Reserve, IRS, and borrowed $11.577 billion ($206.186 billion in 2002 dollars), we are still repaying today, to finance WWI, while borrowing further from Americans. This doesn’t include the enactment of the Debt Commission for borrowing funds.

Wilson admitted:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world – no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.

Notice the “unhappy” president never repealed his ruination.*

Next, the “dominant” FDR “civilized” us with government programs and ended the gold standard in 1933,  declaring private ownership of gold illegal, except gold jewelry. I assume marriage had something to do with that decision.

exec order to confiscate gold

Though foreign governments could sell gold to America, President Nixon destroyed the gold standard completely, leaving America on a fiat standard not backed by commodities.

But hey, we have communist China backing worthless paper while manufacturing worthless American products!

Forget the damn cliff, we threw a rope over the highest limb on the tallest tree long-ago and hanged ourselves with our own economic stupidity!

* [Editor’s note: This story may be apocryphal.]

Fiat Money, the Gold Standard, and the Deficit

On August 15, 1971, President Richard Nixon ended the US gold standard for the trading of gold. The Bretton Woods System, enacted in 1946, created a system of fixed exchange rates that allowed all governments to sell their gold to the United States treasury at the price of $35/ounce. To be more precise, Nixon ended the Bretton Woos System, thus severing, for the first time in history, formal links between the major world currencies and real commodities. The gold standard effectively ended in 1933 when President Franklin D. Roosevelt outlawed private gold ownership (except for the purposes of jewelry). Today, almost every country in the world, including the United States, is on a system of fiat money.  [emphasis mine]

So what does leaving the gold standard have to do with the current financial crisis, the Obama administration, the fiduciary policies of both parties, and the deficit? Let’s examine that question.

During the past 25 years, Congress has made as many as fifteen attempts, all failures, to control government spending, aimed ultimately at a balanced budget. The most recent failure is the “super committee.” The budget deficit and the rise of government spending has a very simple explanation: The Obama administration, Congress (both parties), and the Treasury are in possession of several open-ended charge accounts with no limits – “permanent credit card financing.” With its charge cards the Treasury can borrow new credit (money) from the banking system, much of what it needs every year to finance the ever-rising budget deficit. The Federal Reserve has created about $1.7 trillion of new credit (money) with which to purchase Treasury debt. Foreign central banks, such as in China, have created about $2.7 trillion of new credit to purchase U.S. Treasury bonds. This global electronic money-printing exercise has financed almost 30% of the total direct debt of the U.S. Treasury.

Current Federal Reserve chairman Ben Bernanke, in 2002, said, “[T]he US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost.” He also could have added that these fiat dollars, printed by the Federal Reserve, are the enablers of the US budget deficit. Further, because the dollar is the world’s reserve currency, foreign central banks also finance US budget deficits. Domestic and foreign commercial banks supply vast amounts of new credit to the US Treasury because foreign banks define US sovereign bonds as high quality assets for which bank reserves are not necessary.

What, exactly, is fiat money? It is, quite simply, paper money. It has no intrinsic value and serve only as a means of exchange. It is inflationary, it corrupts society’s morals, it leads to over indebtedness, it causes boom-and-bust cycles, and it ultimately leads to a depression. The purpose of government policy makers and their economic “experts” is to keep the fiat money scheme going.

The fiat-money scheme rests with the government’s central bank. The government-sponsored central bank holds the money-production monopoly, and creates fiat money ex nihilo. As Murray N. Rothbard says in his book The Mystery of Banking, it is a form of a form of embezzlement and thievery.

Ludwig von Mises, in The Theory of Money and Credit, said, “Money is the universally accepted means of exchange.” An increase in the money supply does not provide a social benefit. All more money does is reduce the purchasing power of all money. Because a rise in the money supply benefits the money producer most, any rational individual would like to be the among the money producers, or to be the sole money producer. And government is rational. It ain’t stupid.

And here is where the Obama administration enters the picture. Those who are willing to disrespect the principles of the free market, the unconditional respect of private property, will want to obtain full control over the money production monopoly. Once people have been made to think that the government is a well-meaning agent, it will monopolize money production. Having obtained the monopoly of money production, government will replace commodity money with fiat money, and legalized counterfeiting gets started. Admittedly, this has been going on for years, with both parties participating, but the Obama administration, particularly with Bernanke and his quantitative easing, has perfected the practice. Fiat money is injected into our financial system through bank-circulation credit. Banks extend credit and issue new money balances not backed by real savings.

Fiat money makes debt financing very attractive, especially for government. Government economists sing the praises of the advantages of the fiat-money scheme and central banking. And people must be made to think that they benefit from fiat money, that there is actually no alternative to a government-sponsored fiat-money scheme, and that abandoning fiat money and replacing it with commodity money would be economically disastrous.

Fiat money creates collective corruption by allowing government to expand, thereby corrupting an ever-greater number of people who seek jobs, generous handouts, and business opportunities offered by government. People increasingly depend upon government, making their personal career and business success dependent on an expanding government apparatus. And many people even start investing their lifetime savings in fiat-denominated “secure” government bonds. A government default becomes unthinkable and the debt ceiling must be raised. In times of crisis, the printing of ever-greater amounts of money for underpinning government finances and beneficiaries will be cast as the least evil fiscal policy.

Do all of the problems caused by fiat money sound familiar?

The “solution” for the spending problem can be controlled in Congress. All it has to do is “to tear up” government’s credit cards. The solution is authorized by the US Constitution, in Article I, Section 8 and Section 10. The control of the supply of dollars is entrusted to the hands of the people. Congress need only evoke Article I, the constitutional power “to coin money and regulate the value thereof.” From 1792 to 1971 Congress defined by law the gold value of the currency such that paper dollars and bank demand deposits were convertible to their gold equivalent.

The discipline of convertibility to real, universally acceptable commodities, such as gold, would set limits on the Treasury access to its Federal Reserve “credit card.” Under a true gold standard, the Federal Reserve and commercial banks would be required by law to maintain dollar-gold convertibility at the statutory gold-dollar parity rate (whatever it turns out to be), or suffer insolvency. In order to maintain the dollar/gold convertibility, the Federal Reserve and the commercial banks must reduce the quantity of money and credit, including credit to the Treasury, thus controlling government spending increases and, therefore, deficits. Further, there is evidence that the gold standard (convertibility) stabilized the value of the dollar. Under the gold standard, the price level in 1914 was at almost exactly the same level as it was in 1879 and in 1834. But from 1971 until 2011, the purchasing power of the dollar (adjusted by the CPI) has fallen 85%.

The restoration of the gold standard provides a stop to (or slowdown of) government spending, or the government will risk insolvency. So should we return to the gold standard? Well, if you believe that the deficit is this country’s largest problem and must be reined in, you will favor it. Returning to the gold standard may be the only way to force discipline on Congress and unlimited Obama admistration spending.

But that’s just my opinion.