What a difference a hundred years makes. In 1909, the money in the U.S. was gold. Not much of this gold actually circulated but the paper dollar was convertible into gold. You could go to the bank and turn a twenty-dollar bill into a twenty-dollar gold piece. Gold had been the world’s money for hundreds of years. It evolved into a medium of exchange in ancient times. Back then the people decided what money was. Said another way, the market decided what was money. The people and the market are one in the same. When you hear left wing politicians heaping scorn on the market system they are really belittling the preferences of the people.
The same left wingers, Marxists and Socialists hated gold. Lenin bragged he would use it for plumbing. In the U.S. the so called progressives of the early twentieth century chafed under the gold standard. It limited their ability to finance the government’s social schemes. The beauty of the gold standard was that the politicians could not create gold out of thin air. It put a brake on their spending. They could not expand the money supply to pay for government programs. If the government ran a large deficit foreign dollar holders would take the governments gold instead. It was a pay as you go system. It reigned in spendthrift politicians and fostered a healthy, growing economy.
However, the labor enemies of capitalism wanted to overthrow the gold standard. They got rid of “sound money,” so they could launch a wide variety of social programs that have evolved into today’s ruinously expensive boondoggles. Once gold was gone they could insist the central bank create all the money necessary to pay for excessive government spending. Budgets could be overridden and money created out of thin air to pay for it. This was the beginning of the end for a stable economy and a responsible culture.
Gold still meets the definition of money; a unit of account, a means of exchange and a store of value. Unfortunately, paper money does not store value because the politicians watered down its value by creating too much of it. This government fiat money is used to pay for the growth of big government. The inflating of money is necessary to pay for socialism. You can’t have sound money and big government. Debasing the dollar is how we pay for the welfare state.
This sorry process won’t end until the dollar becomes worthless, the government is bankrupt and a wide swath of the populace is impoverished. It can only go from bad to worse. How many politicians ever talk about sound money? If anyone talks about a gold standard they come after them with butterfly nets. A few politicians talk about reigning in the deficit but then vote yes for the next big spending bill. We doomed ourselves decades ago when we discarded sound money and replaced it with political money.
The trillions of dollars of government spending and subsidies have managed to dumb down the people , coarsen the culture, vastly increase dependency, promote anti-social behavior, erode freedom, engender financial excess, restrict economic growth and fatten government bureaucrats. It’s the epitome of failure. By destroying the money we are destroying the country. Here’s the bad news: it’s going to get a lot worse.