Economics, Character, and Gold Standard

Economics, Gold Standard, and National Character

Dinner Topics for Tuesday

“It is ordained in the eternal constitution of things, that men of intemperate minds cannot be free.” ~ Edumund Burke 

 Note: As of 2009, "In God We Trust" is still on the new dollar coins, but not on the front. Only on the back. It seems to be a sign of the times--a slippery slope? A reflection of our national character? We ought to keep an eye on the minters. Maybe next time it will be gone altogether. ~ C.D.

“It is ordained in the eternal constitution of things, that men of intemperate minds cannot be free.” These words by Edmund Burke have been the unspoken standard in our civilization since America was founded. By standard I mean a definite rule or principle by which things are measured. Gold or silver standard simply means that paper money is backed by a precious metal of intrinsic value.

Once there was a time when the standard of currency was measured by gold or sterling silver. The pound sterling, which is the name of Great Britain’s currency, comes from its early use of the silver standard. Sterling silver is defined as having a fixed standard of purity or conforming to the highest standard.

Gold Standard

Throughout the nineteenth century, America and Europe experimented back and forth with gold and silver. Seeking more monetary stability, the United States, along with many other nations, accepted the gold standard in 1873. Not long afterward, Silver Certificates were also issued, which could be redeemed in silver dollars and bullion (bulk metal). In 1933 the US discontinued the gold standard and maintained Silver Certificates, which continued until the death of President Kennedy in 1963.  In 1968 President Nixon ended both the gold and silver standard.

The gold standard prevented governments from printing too much paper money, and causing inflation (over-priced goods and services due to too much money in circulation). Governments were also limited in flexibility to create monetary policy and stabilize financial shocks. However, financial shocks are often caused by the very monetary policies that governments like to create. The free market, when left free of interference, will correct itself from time to time. The impact of these corrections can be proportional to the degree of fiscal responsibility exercised by a nation’s citizens and government. Those nations with robust economies tend to keep taxes low and minimize interference with the free market.

Today most nations use fiat money, which is money that has no intrinsic value, and is used only as a medium of exchange.  Our only standard has been the confidence of the world that the US will honor its debts. Our monetary policy is based on our good character—ability to keep promises—to pay our debts. How are we doing?

Without a standard of gold or silver, good character without greed is the only thing that keeps our government from debauching your money by paying debts with printed money. We presently have many elected officials who are now devoted to restoring fiscal responsibility to our monetary policy. It will take a long time to undo the damage of recent years.

To protect long term investments against inflation, you may look into savings of some kind. IRAs and Certificates of Deposit currently yield 3-5 percent, if your bank is giving you a “good deal.” Banks are now investing more in gold, which can yield ten times that much. Some financial institutions lend money to irresponsible people who cannot pay their loans, but reward the frugal with an insulting three pennies on the dollar of their savings.

Character

Some individuals use tax money to support immorality; some huge corporations take tax money that they don’t need. Other multi-million dollar businesses run their production lines around the clock, every day of the year, endangering the safety of their employees for lack of sufficient rest. In a past era, the only businesses which never closed were hospitals and fire departments. Now everyone stays open all the time. Why? Greed. They lose money if they close one day a week so their workers can be with their families.

The government is a product of the people; its character is representative of the national character. In the United States, the government is supposed to be accountable to the people. The people used to be accountable to God.

The silver standard is no longer with us. Nevertheless, “In God We Trust” is still engraved upon our currency. In the modern era, even an age of relativism, the quest for sterling character still begins at home. The true individual worth built in the family circle ultimately influences entire nations.

Sterling character is not measured in money. At the end of the day, it is not what we acquire that matters, but what we become.

Copyright © 2011 by Christine Davidson