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Monetary Reform!

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Author Topic: Monetary Reform!  (Read 14084 times)
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« on: August 24, 2010, 05:37:02 pm »

Since Ellen Brown, Richard C. Cook, Byron Dale, Stephen Zarlenga, and the makers of both The Money Masters and the recently-released sequel, The Secret of Oz, all advocate instituting a modern-day "Greenback" system, and since "Goldbugs" usually cry foul whenever this is proposed, it's worth considering the following excerpt (all emphasis original) from pages 453-65 of monetary historian Stephen Zarlenga's masterwork, The Lost Science of Money:


Thanks to over a century of relentless propaganda, the image of the Greenbacks comes down to us as worthless paper money. But upon more careful examination, on balance they were probably the best money system America has ever had....Demonstrating how far monetary history has been distorted, readers may be surprised to learn that every Greenback printed was ultimately as valuable as its gold equivalent, and became redeemable for gold coinage at full value. Today the Greenback supporters are erroneously presented as merely being pro-inflation or against sound money. What they really wanted was a more honest money system, controlled by government, instead of banks....

They [Greenbacks] were receivable for all dues and taxes to the U.S., except import duties, which still had to be paid in coin. The Greenbacks were payable for all claims against the U.S. except interest on bonds which was still payable in coin. The Greenbacks were declared a legal tender for all other debts, public and private....

Greenback critics argue that they were inflationary and mistakenly measure the inflation against gold, starting at equal to a gold dollar in early 1862, and falling to 36 cents against a gold dollar by mid 1864. So one gold dollar exchanged for nearly $2.50 in Greenbacks. That is often the whole of their analysis and it is very misleading. Actually the Greenbacks did drop against gold; first to 58 cents at the end of 1862, then back up to 82 cents in mid 1863 and then down to a brief low of 36 cents on July 16, 1864.

From that point they moved up steadily, averaging 39 cents for August; 45 cents for September; and 48 cents for October, 1864. They retreated to $0.44 in December, and averaged $0.68 for December 1865. From there they gradually rose to $1.00, at par with gold in December 1878. Greenbacks became freely convertible into gold, dollar for dollar, in January 1879....

Economists mistakenly argue that it was only because the Greenbacks were eventually made convertible into gold by law, that made them hold and increase their value. However, that law was a hard fought political struggle, dependent on the 1868 presidential election. The battle could have gone either way and the actual "resumption" law could not get passed by Congress until 1874, for implementation in 1879. This could not have kept the Greenback from further declines, and start moving it upward back in mid-1864.

What did occur in July 1864 was that our government put a limit of $450 million on the Greenbacks and from that month they started rising (i.e. gold began falling in terms of Greenbacks)....

While the Greenbacks lost substantial value for a period, the nation was engaged in the bloodiest war in its history, in which 13% of the population served in the armed forces and 625,000 died....Is it reasonable to expect that any government in those circumstances could completely protect its citizens from financial and other hardships?

[Economic historian Irwin] Unger has noted that:

    "It is now clear that inflation would have occurred even without the Greenback issue."
And comparing a wartime inflation under a government run money system (the Civil War) to wartime inflation under a private banker run system (WW I), Civil War historian [J.G.] Randall wrote:

    "The threat of inflation was more effectively curbed during the Civil War than during the First World War."....
The fact that the Greenbacks were not accepted for import duties may also have been an important negative factor against the currency:

"Hence it has been argued that the Greenback circulation issued in 1862 might have kept at par with gold if it, too, had been made receivable for all payments to the Government," wrote financial historian [Davis Rich] Dewey.

Also, if interest payments on government bonds had been paid in Greenbacks instead of gold, a large part of the demand for gold would have disappeared.


So the bottom line is that, contrary to popular myth, Greenbacks actually performed quite well (particularly given the extreme circumstances in which they were issued), and would have functioned even better if they had been made receivable for the payment of both import duties and interest on government bonds, and would have functioned better still if they had been issued for the production, rather than destruction, of public goods.
« Last Edit: March 12, 2011, 09:38:36 am by Geolibertarian » Report Spam   Logged

"For the first years of [Ludwig von] Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

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