America Had to Solve Its Money Problem After Its Independence

The Americans celebrated the new-found independence they declared on July 4^th 250 years ago.  But there were problems in the new Republic. Chief among them was one which returns us to our central theme. George Washington identified it in a word: money.

The Continental Congress had issued fiat money—fake money, backed by nothing, simply churned out by the printing presses of the day.  It was redeemable in nothing, and could be and was printed by the wagon load. In fact, Washington complained that “a wagon load of money will scarcely purchase a wagon load of provisions.”

The British used the fiat Continental currency regime to conduct economic warfare against the rebels. They counterfeited the Continental dollars in huge numbers to accelerate their depreciation and subvert the American economy. Benjamin Franklin wrote, “The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass.”

Another age-old lesson in the difference between real money—gold and silver—and paper money played out right on the stage of the Revolutionary War. The French troops fighting on behalf of the Americans were paid in gold, which they used to purchase goods from American merchants. Americans and their army’s agents had nothing but paper money. They noted that the French money drew goods to them from far and wide, (“the people will go through thick and thin” for the French gold) leaving nothing for American agents to purchase.

Nevertheless, one monetary history cites a woman saying at the time, “What a shame it is that Congress should let the poor soldiers suffer, when they have to power to make just as much money as they choose.”

Two and a half centuries later, the same sentiments—the State can make all the money it wants—are uttered on behalf of every socialist scheme and pipe dream under the sun by popular political figures like Alexandria Ocasio Cortez and Elizabeth Warren. These would-be Gideon Gonos are boundlessly celebrated by the statist media in direct proportion to their cluelessness.

Now we have come once again to a day of reckoning just as the founding generation did 250 years ago.  The value of the money they printed went into freefall.  Their debts were unpayable.  Sound familiar?  Today Washington has $40 trillion in unpayable debt.  Unpayable, that is, by any means other than printing additional evermore worthless currency.  

If America was going to survive and prosper, it wouldn’t be on the basis of funny money.  It would have to be on the basis of honest, dependable money:  gold and silver.

And that is what we will discuss next week in this space as we conclude our celebration of  America’s 250^th Anniversary!

– From REAL MONEY FOR FREE PEOPLE: The American Gold Story by Jim Clark.