The marketing campaign of the United States Treasury Department for the new twenty-dollar bill reminds me of the coercive abuse that government places upon us every day of our lives.
Many years ago, the world’s major currencies were backed by gold. Gold was the metal of exchange and a store of wealth.
In 1933, Franklin Roosevelt took the United States off the gold standard domestically and also outlawed the ownership of gold for monetary use.
Private stocks of gold were confiscated and contractual promises, public and private, to pay or receive gold were nullified, a gross disregard of contracts and private property rights.
The only exception was that foreign governments could exchange their dollars for gold, until Richard Nixon in 1971 stopped the practice.
Today we have a currency system of fiat money that exists because the government says it is money.
There are many implications of these actions, far too many to be discussed in any great depth in this commentary.
One implication does, however, stick out as an essential critique of this system.
If the money supply was backed by gold, it would grow very slowly in that the only things that could increase or decrease the supply would be mining and the loss of that metal respectively.
Today, with fiat money, the government can increase or decrease the supply of money at will. This causes inflation and exacerbates the erosion of purchasing power of the dollar.
According to the United States Bureau of Labor Statistics, since 1933 the purchasing power of the dollar has fallen 1,284 percent.
From 1913, the year the Bureau of Labor Statistics began keeping track of inflation, to 1933, the year domestically the United States was taken off the gold standard, purchasing power of the dollar fell 31 percent.
A consequence of the ability of the government to print money is to allow the government the unconstrained capability to increase expenditures.
The gold standard kept the United States from large burdening debt, which is now plaguing the country.
When the government’s revenues are less than its expenditures, the budget is said to have a deficit. To make up this deficit, the government typically issues securities.
The government, since it has no restraint, monetizes the debt that it issued. Simply, the monetization of the federal debt occurs when the Federal Reserve buys the federal debt with new dollars, which increases the money supply and also erodes the purchasing power of the dollar.
Should we see the day when forces outside the corridors of power generally accept that the gold standard or, better yet, any non-fiat monetary system should be re-implemented, we will see that the government will fight tooth and nail to keep its current system. It understands well that its power is derived from this system.
Therefore, we should put into operation a new non-fiat monetary system and be unshackled from this current oppressive system. ~ Trey Ragan is an economics senior and a member of the economics club.
