In early 1983, I wrote Senator Sam Nunn of Georgia
to ask about the redeemability of Federal Reserve
Notes. His reply arrived on March 11 and read (in
part) as posted below.
It would APPEAR that either:
1. Sam Nunn ACTUALLY gets it about what happens when man
(or certain men) play God with “money;”
2. Nunn DOESN’T get it — and some staffer sent this out
without actually READING it or running it by the boss (in
which case said staffer now works for the DC Sanitation
Department.
3. None of the above. Because nearly every American is an
economic illiterate, what possible harm could it do to send it?
In which case, you economic illiterates who read this will mutter
“So what?” and flip back to MTV.
In any event, for the edification of you non-economic illiterates
out there, here it is.
“Dear Richard:
Thank you for your letter requesting information on
redeemability of Federal Reserve Notes for lawful
money. I have enclosed information from the
Congressional Research Service that I hope will be of
assistance.”
The enclosure was 4 pages from something called
“The Gold Standard: Its history and record against
inflation. A Study prepared for the use of the
Subcommittee on Monetary and Fiscal Policy of the Joint
Economic Committee, Congress of The United States.” It
was printed September 18, 1981. I was sent only the
England and U.S. portions of the study. What they
revealed was most interesting. From the England study:
(Emphasis added)
“England has had 350 years of experience with
various forms of the gold standard. She first went on
the gold coin standard, de facto, in 1717. This was
done by Sir Isaac Newton, then Master of the Mint (and we all know what a dumb ass HE was). It
was done by pricing gold at the mint more favorably,
relative to silver, than in the marketplace. An Act of
Parliament in 1816 gave formal recognition to this
‘new’ monetary standard that had been operational for a
century in promoting England to a world power.
“Between 1797 and 1821, England temporarily
suspended the gold standard because of the economic
disruptions of the Napoleonic Wars. With no gold
backing to the currency, the supply of money had no
discipline except that imposed by the Board of
Governors of the Bank of England (analogous to our Fed
of today).
The result was that wholesale commodity prices shot up
nearly 50% in 4 years-a momentous inflation.
The ‘Bullion Committee’ was formed by parliament
to investigate. Their findings read in part as follows:
‘The suspension of cash payments has had the
effect of committing into the hands of the Directors of
the Bank of England, to be exercised by their sole
discretion the immediate charge of supplying the
country with that quantity of circulating medium which
exactly proportioned to the wants and occasions of
the Public. In the judgment of the Committee, that is
a trust which it is unreasonable to expect that the
Directors of the Bank of England should ever be able to
discharge. The most detailed knowledge of the actual
trade of the Country, combined with the profound
Science in all principles of Money and circulation,
would not allow any man or set of men to adjust, and
keep always adjusted, the right proportion of
circulating medium in a country to the wants of trade.’
“Gold convertibility of the currency was resumed
in 1821. It is a matter of record that wholesale
prices came back down immediately to the level
preceding the hiatus in the gold standard.
“England was again off the gold standard between
1919 and 1925. When she resumed gold convertibility it
was on a gold bullion standard where she remained until
1931, when she went off the gold standard altogether in
the midst of the Great Depression.”
Under the United States, we find the following:
“The long period of the gold standard in the
United States was not an economic nirvana. The most
severe inflationary period reaching completion under
the gold standard was from 1897 to 1920. But from
trough to peak, the average annual compound rate
was 5.4%—mild by present experience. And most of this
occurred from 1914 to 1920 when the European war and
its aftermath bore so heavily on the domestic economy.
If we look at the period between 1897 and 1914, the
average annual rate of inflation was 2.6% — enviable
from the perspective of today.”
by
DICK BACHERT (circa 1993)
Norcross, GA
richard.bachert@comcast.net
So we've known this for the past 200 years but somehow we keep thinking we can avoid reality?
Good post thanks!