End of Honest Money
by Bill Bonner: The
Core of American Liberty
not crucify mankind upon a cross of gold.
William Jennings Bryan
of fasting is upon us. No more high living. It's time to cinch up
our belts... to put on a gaunt face and a smug look. Alone among
friends and associates, we will keep Lent.
is Lent that even Google has forgotten about it. When we searched
for it, it proposed "lentil soup."
Lent is meant
to rehearse the 40 days and nights that Jesus spent fasting in the
desert before going public. We remember the lean days with prayer,
meditation and self-denial. No alcohol will cross our lips from
Ash Wednesday till Easter Sunday. (Except on Sundays. And saints'
days. And national holidays. And days that begin the letter "T"
or have a date that is a prime number.)
Yes, dear reader,
we will be true to the church calendar, with a few emendations of
we wish to remember that periods of gluttony and wantonness must
be followed by periods of fasting and correction. Yin and yang must
be kept in balance. Pain and pleasure... good and bad... right and
wrong all must get what is coming to them. Otherwise, the
entire world gets out of whack.
We fast to
remind ourselves that there are hardships... there are lean periods
in life. Not just in our drinking lives... but in our economic lives...
and in our emotional lives too. There is adversity. There is pain
and penance. We fall in line, observing church rituals, so that
we don't fall apart when real adversity hits us in the face. We
endure Lent so we can enjoy Easter.
are a part of life.
your mistakes... or you are corrected by them. No other outcome
But along comes
the doctrine and practice of modern central banking. All these MIT-educated
central bankers have a different idea. They work tirelessly to avoid
correction... to prevent pain... and to bring back the good times
of free-spending revelry. Now they have a program "QE
to Eternity" which promises to keep the economy
pain free forever.
To fully understand
how this came about, we step back to the founding of the United
States of America, in whose Constitution today's central bank money
was specifically prohibited. The states (which had the power then
to mint their own money) were not to "make any thing but gold and
silver coin legal tender in payment of debts."
in The Federalist Papers, described allowing paper money
as "improper or wicked project." And in his 1819 Dartmouth College
v. Woodward decision, Chief Justice John Marshall explained that
paper money had "weakened the confidence of man in man and embarrassed
all transactions between individuals by dispensing with a faithful
performance of engagements."
Not that paper
money was necessarily the work of the devil, but Satan had a hand
in it. When you can counterfeit money and get away with
it it's a hard habit to stop. You are soon hooked on
to paper money greenbacks during the War Between the
States. Five hundred million paper dollars were issued. This led
to higher prices, which pleased debtors. They borrowed in expensive
money; they repaid in cheap greenbacks. Prices in the North rose
75% from 1860-1865.
Cross of Gold?
After the war,
the greenbacks went away. But the desire for cheap money continued.
the largest sector of the economy in the 19th century. Typically,
farmers borrowed to expand their farms during booms, when prices
were high. Then, in the correction, they cursed the bankers who
had lent them money and railed against the gold standard.
Late in the
century, William Jennings Bryan took up their cause as his own.
The rural proletariat had gone bust in the farm crash of the 1880s...
and now found itself so deep in debt it was willing to take up with
a fool like Bryan, if he promised relief.
The roads choked
up with dust when Bryan came to a cow town in the Midwest. There,
he ranted and raved against all that the farm folk detested
often sweating like a hot shower in the summer heat.
not crucify mankind upon a cross of gold," he roared to the approving
hallelujahs of the yokels.
had a ring to it. It was a rhetorical flourish with great power.
Remembered and repeated, it is still today probably more readily
recognized than Lent. But it was empty: nothing more than bombast
There is some
liturgical disagreement about it. But Lent generally ends on Good
Friday, when Jesus was crucified on a cross of wood. Since then,
millions have been crucified financially by paper money (a wood
product). No one has ever been nailed to a cross of gold.
had against gold was the same thing that all paper money pushers
including modern central
bankers have against it. Gold is uncooperative
and stiff-necked. You borrow it and you have to pay it back. The
lender expects to get his money back in real money.
And since the
supply of gold rarely grows faster than the supply of goods and
services for which it is exchanged, prices remain more or less stable.
Debtors are not let off the hook.
from 1800-1913, when America's central bank was founded, by 176%,
says Paul Moreno. New discoveries of gold in Alaska, South Africa
and Australia had increased the money supply significantly. But
that was nothing. In the 100 years since, when paper money was the
stuff most often issued by the U.S. Treasury, prices have gone up
Bryan got his
way after all. Nobody in America suffers from an honest currency.
Nobody pays back as much as he has borrowed. Even contracts with
"CPI adjustment" clauses fail to make the lender whole; the feds
have seen to that too.
bestselling author and founder of Agora, one of the largest independent
financial publishers in the world. If you would like to read more
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Bonnerís Diary of a Rogue Economist.
© 2013 Bill Bonner
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