If we are going to talk about economics, it is essential that we define money. Take out your wallet and look at that $1, $5, or $10 dollar bill. You just think that is money. It is only a money substitute. For something to be money it must first have intrinsic value, then be easily transported and fungible. Paper money fails on the first count, at least that paper money from your wallet.
Some years ago it was redeemable in gold or silver and so represented a receipt for a precious metal. That Federal Reserve note is not redeemable in anything, and it is just what it says a “note”, a legal instrument of indebtedness. You may exchange it for another piece of paper. Granted, you may take that note and purchase a steak dinner with it because the restaurant accepts it as money.
Suppose I printed up a few $20 bills, very artfully done, on official looking paper, and then took those bills and bought a steak dinner with them. Would that newly printed paper now be money? Come to think of it, what would be the difference between my printed paper and that produced by the government. When I print up “money” I am branded as a counterfeiter, but when the govt. does it is legal, yet there may be little or no difference in the final product. By giving the govt. the authority to print pieces of paper that have “value” we have opened a Pandora’s box, as is now playing out before our eyes with trillions of dollars being created out of air (usually now by computer entries). To quote Federal Reserve chairman Ben Bernanke, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Article I, Section 10 of the Constitution says that no state may “make anything but gold and silver coin a tender in payment of debts.” Why gold and silver? Both metals have been valued since ancient times as being stores of wealth, ie. having instrinsic value. Neither the President nor Congress, who are sworn to uphold the Constitution, seem to be interested in enforcing the Constitutional edict.
Likely Related Posts:
- “Is Gold Money?”
- Congressional Hearings To Protect Investors
- Constitutional Money, Or Not?
- Alan Greenspan On Gold As Money
- “Why China Is Right About Gold”