I recently saw a Tik-Tok celebrity predicting economic doom and gloom. To be fair, this same man has been predicting doom and gloom for the past three decades and has mostly been wrong.
Right now, he is calling for a massive financial meltdown because Richard M. Nixon took us off the gold standard back in 1971. What that meant at the time was that foreign nations could no longer redeem dollars for gold from the Federal Reserve. Apparently, over 50 years later, that decision will now lead to our financial ruin.
“Gold,” the Tik-Toker claims “is God’s money.” That statement raises more than a few eyebrows. I grew up in the church and was unaware that God had his or her own money. It certainly adds a twist to the biblical admonition to “render unto Caesar what is Caesar’s and unto God what is God’s.” The Romans used silver coins.
1971 was not the first time that the U.S. was taken off the gold standard nor the first time that portions of the public were enraged by changes to the backing of our currency. In 1933, Franklin Delano Roosevelt suspended the conversion of currency into gold and made it illegal for U.S. citizens to own gold bullion or treasury issued Gold Certificates.
FDR wanted to increase the money supply in order to combat the Great Depression and this was impossible if terrified citizens hoarded gold.
The decision caused so much outrage that a group of businessmen put together a plot to oust Roosevelt and replace him with a retired Marine Corp General named Smedley Butler.
According to the plan, Butler would lead a march on Washington where he would be installed as a dictator. It is unclear to this day, if the “Wall Street Putsch” was real or just imagined. In any event, Butler refused to go along with the idea and instead alerted Congress. Hearings were held. Nothing happened.
In the early days of our Republic, our currency was backed by silver. As the 1800s unfolded we moved towards a system of bimetallism where our currency, issued by local banks, was backed by a combination of silver and gold.
Massive silver strikes beginning in 1851 in Nevada led to an inflation of the currency. So, Congress passed the Coinage Act of 1873. Henceforth, the treasury would no longer use silver to back currency. Signed into law by Ulysses S. Grant, the act effectively put the U.S. onto the Gold Standard and became known as the “Crime of 1873.”
The act resulted in a shrinking of the money supply and a huge six-year long recession that historians now call the Panic of 1873. At the time, it was referred to as the “Great Depression” until that term was co-opted in the 1930s for another massive recession.
For the next four decades, the question of silver became a major political issue. “Free silver” political parties rose up across the nation. Their standard bearer was William Jennings Bryan. He ran for President three times and won Florida in each of those elections.
At the Democratic Convention in 1896, he delivered a famous speech in which he declared “You will not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.”
The issue then and now, is that an expanding currency leads to economic growth. A contracting currency leads to economic contraction. Too much economic growth is inflationary. Too much economic contraction leads to recession.
Scott A. Grant is a local author and frequent contributor to the Recorder. Scott believes Tik-Tok should be banned. He welcomes your comments at scottg@standfastic.com
