A gold bug’s proposal for monetary reform
Nevada is called the Silver State. We are Battle Born, because in the Civil War both sides fought over the chance to get our silver. Silver and gold coins (specie) were money in the 19th century.
The U.S. Constitution enshrines specie as the money of account for the government. Article one, section eight grants Congress the power to “coin Money, and regulate the Value thereof, and of foreign Coin.” Section 10 forbids the states the power to “coin Money, emit Bills of Credit, [or] make any thing except gold and silver coin a tender in payment of debt.”
The nature of money and government was a big political deal in the 19th century. The Democrats were the hard money party then. Democratic Presidents Jefferson, Jackson, Polk and Cleveland all defended gold and silver coins over paper money.
Then it changed. In 1932, President Franklin Roosevelt forbade the use of specie as money and confiscated the people’s gold. In 1972 President Nixon gave gold money the coup de grace by stopping even the payment of foreign debts in gold.
After Ronald Reagan was elected president, U.S. Rep. Ron Paul managed to pass legislation to make it legal again for U.S. citizens to buy gold and silver, but not for use as actual money. Now we get to watch William Devane pitch gold-backed IRAs.
Several times in recent years there have been attempts in the Nevada Legislature to have Nevada issue silver coins. Bills were debated but never became law.
One time I ran for state treasurer as a Libertarian. In those days, KNPB allowed the minor parties into political debates. Neither major party candidate showed up for the debate, so I had 30 minutes to talk about gold money. I said if I was elected treasurer, I would refuse to remit any Nevada state money to the feds until they showed cause why they forced Nevada to use paper money instead of gold and silver coin.
The producers of KNPB were furious. After that, minor party candidates were no longer allowed into the debates. Sorry, guys.
A long time ago, President Andrew Jackson used the constitutional monetary clauses to discipline the states for the inflation their wildcat banks caused. He issued an executive order to force the states to pay the federal government in specie. Jackson was the last president to leave the country debt free.
If Jackson could discipline the states by the money clauses, why can’t the states discipline the feds?
Gold money forces fiscal discipline on governments. But it is also good for workers. Most of the time, gold money gains value, without even earning interest. Instead of the constant inflation we experience with paper money, there would generally be a mild deflation. Prices would usually go down, not up.
Inflation is a hidden tax, caused by printing too much fiat money. Fiat money is currency that is not redeemable on demand into a specified amount of a tangible commodity, usually gold or silver. Government and big business like a controlled inflation. Because we are such a large wealthy nation, our money loses its value relatively slowly year over year. In some countries, like Zimbabwe and Weimar Germany, state controlled inflation suddenly spiraled out of control and became “hyperinflation.” A paper bill that says its is worth a million won’t buy a candy bar.
This year, Arizona is considering legislation to make gold legal tender. They even invited Dr. Paul in to testify. The constitutional monetary clauses were quoted in the papers. If the bill passes, Mr. Devane won’t be alone in talking about gold.