A Return to the Gold Standard is a Must
Money printer extraordinaire and Federal Reserve Chairman Ben Bernanke is at it again. He and several of his central banking buddies in Europe and Asia are going to lend dollars to non-U.S. banks that lack adequate liquidity to operate. Many of the recipient banks are feeling the pinch because of their exposure to the Greek debt crisis.
Of course this isn’t the first time the Fed has lent our money to foreign banks to stave off their insolvency. In July of 2009, Bernanke testified in front of Congress that the Fed had loaned over $550 billion to foreign banks during the height of the financial crisis in 2008. And thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act a one-time General Accounting Office audit uncovered a remarkable $16.1 trillion in Fed loans to various banks including non-U.S. ones during the same time frame.
Now, it’s bad enough the Fed has and will again use our money to bailout foreign banks that were irresponsible. But, the latest round of foreign bailouts comes at a time when it is being reported that tent cities filled with homeless folks are becoming commonplace across America and some Americans are resorting to dumpster diving to feed their families. Is this what America is coming to? Our central bank helps Greek citizens retire at fifty while our citizens live in nylon igloos while wallowing in trash dumpsters for their next meal? Worse yet, besides Ron Paul, no member of Congress or the Obama Administration has expressed any outrage over the foreign bailouts.
The whole sordid affair is yet another reason why we need to return to a gold standard to protect the integrity of the dollar. As Congressman Paul has stated many times, we must return to the constitutional mandate requiring gold and silver be used as money. Article 1, Section 10, Clause 1 of the Constitution states in part, “No State shall…emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”
Many anti-constitutionalists will argue that the clause only applies to the states and the federal government can use what it wants for money. Thus the current fiat dollar system is legal.
But upon closer examination of history the anti-constitutionalists are proven wrong once again. During the colonial period of our country’s history, the Spanish milled (silver) dollar was the predominant medium of exchange in the original Thirteen Colonies. . In July of 1785, Congress voted unanimously to make the dollar the monetary unit of the United States to emulate the Spanish milled (silver) dollar. On August 8, 1787, Congress resolved that the new American dollar would contain three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver. This measure of silver made the new American dollar equal in value to the Spanish dollar.
At the same time in Philadelphia, the Constitution was being written by many of the same people who adopted the silver dollar standard for the country in the Continental Congress. Thus, these men as well as their Constitutional Convention colleagues were well aware that the silver dollar had become and was the official monetary unit of the United States. As a matter of fact, the term “dollar” is referred to twice in the Constitution – Article 1, Section 9, Clause 1 and in the Seventh Amendment.
Where it is not mentioned is under Congress’ powers in Article 1 Section 8. Additionally, gold and silver are not mentioned there either. The only requirements for money in that section are that Congress has the power “…to coin money and regulate the value thereof…” And a month before the Constitutional Convention adjourned Congress did just that by making the silver dollar with three hundred and seventy-five grains and sixty-four hundredths of a grain of fine silver the monetary unit of the country.
Thus Ron Paul is correct when he says the Constitution calls for the federal government to use gold and silver money. It was implied in Article 1 Section 8 Clause 5 because that is what existed at the time of the writing of the Constitution. Article 1, Section 10, Clause 1 was a reaffirmation of that fact and a prohibition for states to use anything but gold and silver in payment of debts. After all, what’s good for the goose is good for the gander. Why would the states be prohibited from using non-gold and non-silver coins when the federal government isn’t? That would make no sense.
So now that we have ascertained that the current fiat currency system in the U.S. is unconstitutional, so what? The question is, how would a gold and/or silver backed dollar protect our currency from the Fed’s reckless lending overseas? With a gold standard the Fed would be prevented from doing this because every Tom, Dick, and Harry who holds dollars could redeem them for gold. If enough money printing took place, U.S. gold reserves would run dry and the dollar would be backed by nothing -making it worthless. No responsible leader would let this happen. In fact, this system worked well at preventing high inflation and huge debt accumulation until 1971. However, increased spending on the Vietnam War and Lyndon Johnson’s so-called “Great Society” caused the dollar to lose value. Instead of cutting federal spending to remedy foreigners redeeming their dollars at an alarming rate for our gold, President Nixon ended dollar to gold convertibility altogether. You be the judge, since that fateful event in 1971 our national debt has soared and general prices in the U.S. have skyrocketed by 435 percent! It’s no wonder the poor are getting poorer and the rich are getting richer.
And Bernanke’s current lending to foreign banks will only exacerbate the situation. The supply of dollars will continue to increase and at some point soon prices will go much higher. The bankers who represent the rich will be okay while the poor will be devastated by inflation. All because our dollar is not backed by gold. Let’s hope that grocery stores continue to throw away expired food into dumpsters and the price of nylon tents do not increase.
Article first published as A Return to the Gold Standard is a Must on Blogcritics.
Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina
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