I highly recommend reading a fantastic article in today’s Wall Street Journal: “Capitalism Needs a Sound-Money Foundation” by Judy Shelton. I also recommend forwarding it to all your friends and acquaintances. It provides the means by which a nation is able to protect itself from the profligacy of its own government, not just with a gold standard but also through a free-market system of competing currencies.
We start with the assumption that excessive federal spending, while good for those in public office, is a very bad thing for the people of a country. More government spending means higher taxes, which leave people poorer. Or it means higher government borrowing, which sucks productive capital out of the marketplace, which depresses real wage rates, which hurts the poor. And it inevitably means resorting to the printing press to print more paper money to finance the excess spending and to pay off the debts. Such inflation of the money supply provides public officials with the means to plunder and loot the citizenry, while making it look like the ever-increasing prices are the fault of speculators, investment houses, bankers, greed, free enterprise, deregulation, OPEC, Big Oil, Big Business, a host of other convenient scapegoats.
When our American ancestors brought the federal government into existence with the Constitution, they adopted a way to protect the nation from inflation: the gold standard. The money that Americans used in their day to day transactions was primarily gold and silver coins. Everybody understood that paper “money” wasn’t really money at all but rather promises by the federal government to pay money — that is, promises to pay gold and silver coins.
The federal government was constrained in its ability to print excessive quantities of bills and notes because it ran the risk of running out of gold if everyone appeared and demanded payment of gold in exchange for their bills and notes.
That sound-money system operated for more than 100 years, and it, along with no income taxation, no welfare, no economic regulation, and no immigration controls, produced one of the most phenomenal periods of increases in people’s standard of living in history.
In her article, Judy Shelton also explores the idea of competing currencies, which entails a free-market system in which government doesn’t establish anything as money, including gold and silver. Instead, people operating in the marketplace would be free to use any currency they wish — gold, silver, paper money, or whatever. This is an idea that the Nobel Prize winning Austrian economist Friedrich Hayek proposed several decades ago. See his excellent essay “The Denationalization of Money.”
Today, as the federal government continues to send our nation down the road to bankruptcy and ruin with its out of control spending on bailouts, foreign wars and occupations, stimulus plans, welfare, the military and military-industrial complex, foreign aid, subsidies, and the like, the American people would be wise to begin reflecting on the same principles, ideas, and philosophy that our American ancestors were thinking about in 1787.
A good place to start would be with the following principle, one that was enshrined in the hearts of virtually every American in 1787: The greatest threat to the freedom and economic well-being of the American people is their very own federal government. A gold standard or, even better, a free market in money, would provide a good start to protect the nation from that threat.
Postscript: I am writing a series of articles entitled “Freedom and Gold,” which will begin appearing in the April issue of our journal Freedom Daily. To subscribe, go here.