Name: Speikes, Foster D.
Date: 2/10/2016
Class: Robert Yowell
Sound Money Amendment
For as long as money has existed, governments have sought to control its supply for their own benefit. The ancient Romans, for instance, regularly debased their coins so that, by the end of the 3rd century AD, the actual content of silver had declined to less than 5% purity. The debasement of and inflation of the money supply has historically been a tool of governments to expand their power. In conventional economics, which this paper will assume as a positive background in defending the feasibility of a sound money amendment, the result is a redistribution of real wealth from savers to the government, the banking and finance system, and other
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In other words, schemes of redistribution which are organized to counter the symptoms of government interference in sound money misdirect our focus from a cause (debasement of the currency for government and friend’s benefit at the expense of everyone else) to a “solution” proposed by the same organization which caused the problem! It would be like proposing to solve mob violence by making the Capo di tutti capi police chief. The amendment would therefore be formulated to prohibit government interference in the production of any money supply. All money would be private, with contracts between individual depositors, lenders, banks, and other financial parties being enforced like any other privately agreed contract. This is obviously a political impossibility at the moment, but the contemporary global socioeconomic order is poised for massive reforms in the wake of a collapse of the financial system and/or political revolutions. The regular operation of the global financial order is so thoroughly corrupted by government interference that all three political cultures would be able to agree that a sound money amendment would be an improvement. Individualists would be pleased that restrictions on the financial autonomy of individuals, communities, and other organizations would be removed. At present, financial options for individuals and organizations are substantially restricted due to an
The Gold Standard was the framework by which the value of cash was characterized in terms of gold, for which the money could be traded. The Gold Standard ended up being deserted in the Depression of the 1930s. Friedman felt that,“The gold standard is not feasible because the mythology and beliefs required to make it effective do not exist. This conclusion is supported not only by the general historical evidence referred to but also by the specific experience of the United States” ( “The Gold Standard:Please Stop”).Economists who contradict the Gold Standard may perceive what must be accomplished with a specific end goal to make a centrally controlled paper standard better than a decentralized Gold Standard. Milton Friedman poses the key question: "How can we establish a monetary system that is stable, free from irresponsible tinkering, and
To understand the reason, and perhaps necessity, for the conception of the Currency act of 1764, one must have a grasp of the economic situation in the American colonies prior to 1764. The currency used in the American colonies has always revolved around, specie or the two types of paper currency, legislatively issued legal tender or land bank notes (Finkelstein 39). Foreign specie was far more common than British specie, due to an export prohibition of British specie and an unfavorable balance of trade between the American colonies and Britain that drained whatever British specie
"We must have a currency, not as rigid as now, but readily, elastically responsive to sound credit, the expanding and contracting credits of everyday transactions, the normal ebb and flow of personal and corporate dealings. Our banking laws must mobilize reserves; not permit the concentration anywhere in a few hands of the monetary resources of the country or their use for speculative purposes in such volume as to hinder or impede or stand in the way of other more legitimate, more fruitful uses. And the control of the system of banking and of issue which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instrument, not the masters, of business and of the individual enterprise and initiative "
There was the occasionally belief on behalf of the public that banks would not be able to, or outright refuse to honor their banknotes. This fear, if held by enough of a community, could lead to a run on the
The bank provided credit to growing enterprises, issued bank notes which served as a dependable medium of exchange throughout the country, and it exercised a restraining effect on the less well manages state banks. Nicholas Biddle, who ran the Bank, tried to put the institution on a sound and prosperous basis. But Andrew Jackson was always determined to destroy it (Brinkley, 249). The Bank had two opposition groups: the “soft-money” faction and the “hard-money” faction. Soft money advocates objected to the Bank of the United States because it restrained the state banks from issuing notes freely. Hard money advocates believed that coin was the only safe currency, and they condemned all banks that issued bank notes.
This gives them another level of control over them. This shows how the laws of currency showed the control the government
deflation and people being required to pay their taxes and fees using silver obtained from a
I believe a country that just takes its independence from a super power of the world, they should have one type of money so that every state uses one banknote. I am strongly against the Article of Confederation because it did not allow central government to print one banknote. I believe it creates many problems for all citizens while they try to do business with other states. For instance, I believe when business men from Virginia would import anything from New York, they had to exchange their money before doing business. It will also be an obstacle for the business men who might lose some of their money while they exchange into another banknote. Additionally, when there is limitation that obviously makes less interest businessmen to invest their money, especially a country which is in progress of development and
“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. ” (3) Jefferson knows that a national bank that printed its own money backed by coin is the only answer.
Colonial paper money is perhaps one of the most fascinating aspects of colonial America in the 1700s. The lack of specie in the colonies is a well documented phenomenon and, in New England it’s effect was heavy, and led to the issuance of paper money. This paper will investigate the successful implementation of paper currency as endogenous money to grow colonial money supply and stimulate economic activity in the early American economy. Additionally this paper will argue loss of faith in the governments backing the paper bills, as opposed to a shock to the money supply was the rationale for inflation of colonial New England currency. New England colonial paper currency will be the predominant focus, but this paper will also examine the Pennsylvania pound. New England colonial currency experienced a considerable amount of inflation in the latter years of 1740. This can be attributed in part to large amounts of paper money issuance and the funding of King George’s War. Alternatively, this essay will argue that the bulk of the inflation experienced was due to a loss in faith of the governments backing.
The act stated that its purposes were "to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." After the implementation of the Federal Reserve, several laws were passed to supplement it. Some of the key laws affecting the Federal Reserve Act are the Banking act of 1935; the Employment Act of 1946; the 1970 amendments to the Bank Holding Company Act; the International Banking Act of 1978; the Full Employment and Balanced Growth Act of 1978; the Depository Institutions Deregulation and Monetary Control Act of 1980; the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; and the Federal Deposit Insurance Corporation Improvement Act of 1991. In two of the above-named acts, Congress defined the main goals of national economic policy. These acts are the Employment Act of 1946 and the Full Employment and Balanced Growth Act of 1978. The main goals of the Federal Reserve are economic growth, a high level of employment, stable prices, and moderate long-term interest rates. The Federal Reserve System is considered to be an independent central bank. It is an independent central bank only in the sense that its decisions do not have to be passed by the
The support, which Mr. Franklin’s Modest Enquiry has raised, for a large addition of paper bills, to the current circulating coinage, is alarming in of itself, and, added to the quickness with which the commoner entrusts himself to Mr. Franklin’s opinions, has the opportunity to bring ruin and poverty upon our nation. His arguments for such a hasty addition are hinged upon the fact that this nation is now in want of money. Is this true, fellow countrymen? Are we not a prosperous nation, by the blessings of Him who sanctifies us with His dedications? Do we not receive pilgrims, from the shores of the eastern world, who wish to share in our fortune? The honorable Mr. Franklin no doubt intends well with his illustrious pamphlet; however, I find myself obligated to explain the failings in his otherwise eloquent Enquiry.
A serious shortage of coinage for circulation developed, because people hoarded whatever they had; there was in effect no paper money nor banks as we know them.” Unsurprisingly, borrowers began to claim for a complete cancellation of debts. Lenders, however, were shocked by the loss that they
Mr Liapis’ lecture aimed at money’s performance on a number of unprecedented functions and its properties. More specifically, he discussed the lack of
1. The gold standard and the money supply. Under the gold standard all national governments promised to follow the “rules of the game”. This meant defending a fixed exchange rate. What did this promise imply about a country’s money supply? A country’s money supply was limited to the amount of gold held by its central bank or treasury. For example, if a country had 1,000,000 ounces of gold and its fixed rate of exchange was 100 local currency units per ounce of gold, that country could have 100,000,000 local currency units outstanding. Any change in its holdings of