Time to Separate Money and State
Would a man trust a fox to mind his hens? Would he trust a dog to mind his dinner? Would he trust a thief to mind his store?
Then why would he trust the government to mind his money?
“Man needs more to be reminded than to be instructed,” argued Samuel Johnson.
A man knows his nose squats in the middle of his face. He looks right past it just the same.
Today we remind men of the reason they initially chose gold and silver money — that is, why they initially selected sound money.
Long-suffering readers are familiar with our… diminished regard for paper money.
Paper money — or digital money nowadays — is the great bogeyman of the boom/bust cycle. It inflates bubbles of every model and make.
But men did not choose sound money to block bubbles…
Sound Money Belongs In the Same Class With Political Constitutions and Bills of Rights
Men chose sound money to fortress themselves against government mischiefs and criminalities.
Governments cannot print gold. They cannot print silver. Thus their hands are bound.
The titan Austrian school economist, Ludwig von Mises:
Church and state are famously separate in these United States. We would separate money and state with equal ruthlessness.
For a state minding money is a fox minding the henhouse.
Deny it the privilege, and you deny it its natural rascality.
Consider one example…
Get Lost, King
In 1392, England’s King Henry III was in arrears to the Pope in Rome… and required 1,000 pounds towards satisfaction of his debt. He did not have it.
So old Henry was forced to appear before the citizens of London with an open hat.
Moreover, they refused him.
Can you imagine a president of the United States upon his knees before the citizens of Washington… begging?
And these same citizens instructing him to move along?
When citizens control the purse strings, they control their destiny.
When government controls the purse strings, the government controls the citizens’ destiny.
Did the United States president come before the American people in 2008 and plead for money to rescue the banks?
We do not recall the request. Yet the government got its money from its central bank — trillions and trillions.
The Founders knew…
What Happened to the Constitution?
They knew the excesses of paper money so well… they welded sound money into the Constitution of the United States. Article I, Section 10, Clause 1:
“No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts…”
But no “parchment barrier” could forever constrain men determined not to be constrained.
In 1900, total government spending came in under 3% of the gross domestic product.
Government’s bite was so weak… it failed to break the skin.
But then the 20th century barreled in with its wars… its social movements… and its cranks…
In 1917, Mr. Wilson ordered the doughboys across the ocean… and into the trenches.
Government spending — again, as a percentage of GDP — vaulted near 20%.
The following Great Depression set the government loose, a child amok in a candy factory.
By the end of the Second World War, government spending scaled 45% of GDP — the arsenal of democracy was not cheap.
Government Spending Is Still at WWI Levels
Government spending as a percentage of GDP has averaged roughly 20% since 1980. That is, it has averaged WWI levels.
The figure has run higher at times. It has run lower at times. But 20% is about par.
Now mix in state and local government spending. You will find that total government spending presently nears 40% of GDP.
Now Mr. Biden and mates plan to expand government spending to extravagant — to obscene — dimensions.
It goes without mentioning… we will mention it regardless… that a government constrained by gold cannot spend extravagantly or obscenely.
Not unless it is in possession of extravagant or obscene quantities of gold. The United States government is not.
No Thanks, Says Gold
As we have written before: Gold is a famously uncooperative agent of change.
It resists social uplift. It has the public spirit of an alley cat.
Gold is timid… and turns away from the sound of trumpets.
“You go over there,” gold says. “I’ll stay here.”
“The trouble with gold is that it turns its back on world improvers, empire builders and do-gooders,” as wrote Bill Bonner and our leader Addison Wiggin in Empire of Debt.
“The nice thing about gold is that it is so unresponsive,” they continued. “It neither laughs nor applauds.”
Instead it shrugs its shoulders… folds its arms… and drags its feet.
That is precisely why it could not last…
As we have also explained before…
Only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered passions of the 20th century.
This money is ideal for public service. Unlike gold, it is civic-minded. It has a heart. It follows orders.
Whatever war, whatever boondoggle, whatever swindle it is told to get behind… it will get behind.
Fiat money willingly sacrifices its value for the greater good.
In short: Paper money fuels government as oxygen fuels fire.
This United States dollar has sacrificed some 97% of its value since the Federal Reserve’s 1913 demon birth.
The greatest plummets came after 1971 — when Old Nixon severed the dollar’s last chain link to gold.
One 2021 dollar purchases only 15% of the 1971 dollar. That is, the 1971 dollar did the duty of six-plus 2020 dollars.
Is this the stability the Federal Reserve assumes as its mandate? It is a very strange stability if so.
Which Gold Standard?
Do we propose a return to the gold standard?
The answer is yes. And the answer is no.
We propose a private gold standard, established and governed by the free market. Let the market sort the details.
We would deny the government all say, all influence. We would block every route in.
Economist Gary North:
The private gold standard places the monetary authority in the hands of the citizen. He claps golden handcuffs upon his government. He guards the Treasury.
Take Back Control
But WWI struck the handcuffs from government wrists… and changed the Treasury guard:
They denied citizens their gold coins and veto power over government policy. They never restored it:
It is high time the American people reclaim our gold coins — and our grip upon the nation’s purse strings.
That is, it is high time to remind the government who bosses whom…
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