Fiat Currency: Bad Idea Since 1776

Our Founding Fathers Foretold of the United States' Ultimate Demise

by Avi Gilburt, on February 25th, 2012

They say paper money has improved the country. . .  not one syllable of this is truth; it is errors from beginning to end.  It was CREDIT which did these things and that credit has failed. . . All emissions of paper for government purposes is not making of money, but making use of credit to run into debt by.

One might initially surmise that these sentiments were penned by a Ron Paul supporter.  However, it was Thomas Paine who penned these words in 1786.  In fact, he went so far as to consider it an act of treason when a government incurs excessive debt “because it operates to take away a man’s share of civil and natural freedom, and to render property insecure.”

In fact, many of our Founding Father’s maintained a similar perspective, which was contrary to the sentiments of Alexander Hamilton, the United States’ first Secretary of the Treasury.  However, since Hamilton was George Washington’s closest political ally, Hamilton’s view carried the day.  This led to the establishment of a national bank, and Hamilton has, therefore, been considered the father of our national debt.  But, what many do not point out is that it is this same Hamilton that also unsuccessfully fought for the United States to appoint and empower a King to run its newly created government.  Unfortunately, those that struck down this idea did not have the foresight to see the flaws in Hamilton’s fiscal perspective.

In an letter dated June 24, 1813 written by Thomas Jefferson, who vigorously opposed Hamilton’s views, Jefferson made it quite clear that excessive debt would lead to “oppression, bankruptcy, and it’s inevitable consequence, revolution.” Jefferson continued that “the unlimited emission of bank paper has banished [Great Britain’s] specie, and is now, by a depreciation acknowledged by her own statesmen, carrying her rapidly to bankruptcy, as it did France, as it did us, and will do us again.”

As we are now several centuries removed from Hamilton’s experiment, we are left with Jefferson’s prescience resounding in our minds and pocketbooks.

To take it one step further, in a speech to the Constitutional Convention in June of 1787, Benjamin Franklin, one of three people who signed the truce with Great Britain to end the Revolutionary War, recognized the flaws within our governmental system, and surmised that it would ultimately end:

In these sentiments, Sir, I agree to this Constitution, with all its faults, — if they are such; because I think a general Government necessary for us, and there is no form of government but what may be a blessing to the people, if well administered; and I believe, farther, that this is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other.

It seems that Franklin foresaw, over two hundred year ago, what Milton Friedman recently noted that "instead of Lincoln's government 'of the people, by the people, and for the people' we now have a government 'of the people, by the bureaucrats, for the bureaucrats.'"

Therefore, as has happened to other great powers throughout history, such as the Syrians, Greeks, Romans, etc., it would seem that the United States’ day of world supremacy may be approaching its sunset.