Return to a Sound Money in the US

cropped-bob-shapiro.jpg   By Bob Shapiro

Germany, after World War I, was forced to pay war reparations that it couldn’t afford. In 1921, it paid 2 Billion gold marks, but in 1922 it couldn’t make the payment, but was allowed to pay “in kind” in coal, steel, etc. In 1923, France and Belgium invaded and took over Germany’s industrial Rurh Valley.

Workers went on strike, and the government printed paper money to feed them. Thus began Weimar Germany’s Hyperinflation. From 1922

until September, 1923, the cost of a loaf of bread went from 163 marks to 1,500,000 marks, over 900 times as much. By November, 1923, it had risen to 200,000,000,000 marks, 133,000 times as much again!

Weimar Hyperinflation Wheelbarrow

In 1913, the US Federal Reserve was created. The official CPI numbers show that a dollar can buy today what would have cost less than 4 cents in 1913. And this is after the major price declines of the Great Depression.

ShadowStats.com has detailed changes to the way the CPI has been calculated since 1980. With the 1980s calculation, CPI now is advancing almost 10% year over year vs the official under 2% number. Using the ShadowStats alternate data, a dollar today buys less than 1 cent compared to a dollar in 1913.

CPINov 14

The relationship between printing and prices is well known. Print more paper money and you get rising prices. While the official numbers    lie to make it seem like less, a trip to the supermarket shows that prices really are going up more quickly. (John Williams at ShadowStats.com expects the we will see Hyperinflation here in the US soon.)

The only way which has been proven to prevent money supply from rising (more printing press paper money), is to use something which can’t be printed, usually Gold or Silver. During the 19th century, prices remained almost unchanged in the US, with minor blips up and back during wars, while America was on a Gold/Silver money standard.

Gold & Silver Eagles

I already have called for the FED to be abolished, and for interest rate suppression to end. As rates are allowed to reach Free Market levels, where borrower and lender can agree on a price of money without government interference, there will be less and less new paper money coming into existence. The money supply will be stable, as new printing of paper dollars gets back to zero.

However, the temptation to ramp up the printing presses will be present unless it is prohibited. Some say that the US Constitution already does prohibit it. Article 1, Section 8 states, “The Congress shall have Power … To coin Money…” and Article 1, Section 10 says, “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Apparently the language in the Constitution needs to be made more clear.

Action Item: End the FED, and end printing press paper money.

  • Abolish the FED, and transfer responsibilities to the Treasury
  • Allow interest rates to rise gradually to whatever rates are set by the Free Market, as the price of money which can fluctuate as the Market requires
  • The US government shall purchase Gold and Silver metal at least until a full Silver and Gold Coin Standard, at current prices, can be re-introduced.
  • A Constitutional Amendment requiring a return of a Silver and Gold Coin Standard as the money of the United Stated, and outlawing any form of legal tender fiat paper money.
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