The costs of bad monetary policy are hidden, but growing.
If a time machine whisked America’s Founding Fathers from Philadelphia on July 4, 1776, to the Bureau of Engraving and Printing in Washington, D.C.,on Independence Day, 2011, what might they think?
“They would be appalled,” says Judy Shelton, author of Money Meltdown (Free Press, 1994) and co-director of the Sound Money Project at the Atlas Economic Research Foundation, with which I am a senior fellow. “The integrity of the dollar has been utterly compromised by fiscal malfeasance,” Shelton adds. “Monetary policy has become the default mechanism for budgetary irresponsibility.”
Shelton echoes the Framers’ words:
• George Washington wrote to Thomas Jefferson on Aug. 1, 1786, “Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”
• “Paper is poverty,” Jefferson in turn observed in 1788. “It is only the ghost of money, and not money itself.” In 1817, the author of the Declaration of Independence wrote that paper money’s “abuses also are inevitable and, by breaking up the measure of value, make a lottery of all private property.”
• “Paper money is unjust,” declared James Madison, chief architect of the Constitution. “It is unconstitutional, for it affects the rights of property as much as taking away equal value in land.”
• Alexander Hamilton, America’s first Treasury secretary warned: “To emit an unfunded paper as the sign of value ought not to continue a formal part of the Constitution, nor ever hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people.”
“The Founders recognized the perils of legal-tender paper money, which coerces people to accept something that may be inherently worthless — as is the case with our paper money today,” says Lawrence M. Parks, executive director of the Foundation for the Advancement of Monetary Education (FAME) in New York City.
Why did the men who launched this nation disdain paper money? They had watched British colonial governments debauch their currencies and, consequently, impoverish their citizens — including some of the Founders.
For 179 years, the dollar and gold remained linked. But on Aug. 15, 1971, Pres. Richard Milhous Nixon ordered the Treasury “to suspend temporarily the convertibility of the dollar into gold or other reserve assets.” Since then, Washington has created cash as easily as saying, “Shazzam!” The M3 money-supply measure soared from $688.4 billion in 1971 to $10.3 trillion in March 13, 2006, whereupon the Fed suddenly stopped publishing these inconvenient truths. This loose cash has helped Washington boost the national debt from $398.13 billion in 1971 to $14.34 trillion today. The dollar’s purchasing power has slid, meanwhile, even as gold has climbed from $35 per ounce in 1971 to $1,511 per ounce on Thursday.
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http://www.nationalreview.com/articles/270909/founders-were-no-fans-paper-currency-deroy-murdock
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