The Inevitable Demise of The U.S. Dollar – Mason Cregger

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Mason Cregger
The Inevitable Demise of The U S Dollar Mason Cregger


The Federal Reserve needs to stop playing God

Abstract

Money, a common object that most everyone utilizes every day, itself appears to be an abstract concept grounded in a common physical form. If today’s government-issued tender proves to be valueless, then what form must money take to reinstate its previous significance? The answer combines money’s nature and definition. The process of valuation, at least per society, is supposedly subjective, and therefore cannot be applicable across a wide array of people, objects, and ideals. However, money not only attempts, but, by its very nature, provides an outside source of stability for one to understand the relationship of material things to each other through a number. Money, if truly money, must be valuable and attain its value through a physical object, specifically gold and to a lesser extent silver.

The money that a society utilizes, reflects its views on truth, which must be objective, and will be revealed in three areas: global integrity, intrinsic significance, and objective value.

With the fall of the gold standard, money itself has, like objective truth, come under attack, gradually being stripped of its once firm foundation.

Adjusting the Standard

Two small children, a boy and a girl, are sitting in a playroom surrounded by toys, and among them stands a cash register. The boy sits behind the cash register as the girl wanders about the room collecting her items. When she finishes, the boy “scans” her purchases and arbitrarily calculates the total price for the sale. He tells her that it comes out to $100, and without hesitation, she reaches into her Elsa purse and retrieves five greenish pieces of paper with the word dollar written on them. The boy greedily snatches the money away and stows it in his register as the girl, content with her purchases, skips out of the “store.” Reasonably, the girl did not just buy toys from the boy with fake money, it would not make any sense. Why would the boy give up his own possessions for something that cannot be used to buy other things? The answer: he would not; and thus, revealing the pretend nature of both the store and the money. But what if the United States government declared the money these two children exchanged as the national currency? How could something worth essentially nothing spontaneously become endowed with value? Well, if the government declares it so, then it must be. This describes how modern money functions. Unfortunately, the money in every person’s wallet or purse here today is by itself, worthless. What is money?

To understand the present monetary situation, one must first review the historical narrative of the world’s currency systems. In 1879, the United States elected to join the major world powers in unifying all currencies under a gold standard. The period from 1880 to 1914 is known as the classical gold standard. During that time, most countries adhered, in varying degrees, to gold. It was also a period of unprecedented economic growth with relatively free trade in goods, labor, and capital. During this period, the rate of inflation in the United States rarely rose above 1%, and the United States’ economy experienced an explosion in trade, capital creation, and investment. With the world economy so connected and their monetary supplies held to fixed exchange rates, capital naturally flowed between countries with minimal resistance. This connectivity constructed a spider web like world economy where any disturbance in one country’s economy would be felt in every economy. However, the economic unity brought about by the gold standard was ended by the “War to end all Wars, World War I.

Many countries dropped the gold standard to raise the capital necessary to wage, at the time, the deadliest and most expensive war in history. In the aftermath of World War I, the world had changed. With manufacturing decimated in Europe, governments agreed to wait to retie their currencies to its original anchor of gold. The once economically united world was fractured, and the central banks of each country did not cooperate with one another or attempt to thaw relations, leading to economic downturn. In 1925, the British government, the world’s largest economic power, returned to the gold standard, but in the process overvalued their currency. Their money supply had to be shrunk and in doing so pursued a policy of deflation at a time when British citizens needed money to rebuild their homes and lives. These factors accumulated and lead to the biggest economic disaster in the modern era, the Great Depression.

Countries scrambled to return to economic stability. Heavily influenced by John Maynard Keynes, an economist, countries instituted and printed fiat money to encourage spending which, according to Keynes, would stimulate economic recovery. Fiat money allowed governments to directly control their money supply and, in theory, economic growth. The theory posited that by inflating the country’s money supply, people would be encouraged to spend their money as opposed to saving it, thereby glorifying debt. Instead of being labor-driven, the new economy functioned on debt. The world economy did eventually recover, but not due to monetary or economic policy. The sudden onset of World War II provided the jump-start that the world economy needed. After the conclusion of World War II, many of the world’s economic powers held a conference to determine what money should be used as an exchange standard. Ultimately, the world was persuaded to utilize the American dollar, which could be converted to gold at a rate of 1/35th of an ounce per dollar, as the primary currency of exchange. This monetary system became known as the Bretton Woods System. In 1971 the United States ended the Bretton Woods System and the world went to a full fiat system, but the American dollar remained as the currency of exchange. However, printed fiat dollars are completely worthless and reserve any merit hinged on social contract. The word fiat, as defined by Merriam-Webster, means, “an authoritative determination; an authoritative and arbitrary order.” The government determined that money no longer required an anchor yet attempted to fasten it to themselves. In doing so, they undermined the authority of the once universally agreed upon objective standard for valuation, gold.

Objective truth should be commonly agreed upon; however, most come to this consensus unconsciously or unwittingly. Georg Simmel succinctly reasoned this about objective truth in his book The Philosophy of Money,

“Just as we represent certain statements as true while recognizing that their truth is independent of our representation, so we sense that objects, people and events are not only appreciated as valuable by us, but would still be valuable if no one appreciated them (64).”

With all this considered, objective truth must be defined as a set of truths that exist outside of society and will always remain true. A ruler, used to measure distance, represents a simple illustration of objective truth; it is not the ruler’s job to compare itself to the object, but it is the object’s job to compare itself to the ruler. The ruler does not stretch or shrink its units of measurement to accommodate the object subject to evaluation, otherwise how would any measurement be an accurate one? A baseball and the “Green Monstah” cannot both be four inches tall.

Attempts to throw off objective truth can always be invalidated by one simple string of logic. If objective truth does not exist, then how could that statement ever be true, considering it would only be true in the sense of the person who made the statement? If a person rides in a plane, that person’s movement will be governed and influenced by the plane, but by jumping out of the plane the person’s movement, although free of the plane’s influence, will be subjected to the invisible influence of gravity. Objectivity cannot be escaped; every single person must choose which set of objective truths to which they will adhere. Therefore, every value judgment, moral or material, requires an authority or basis for there to be any appraisal whatsoever. Taking this as true, what then should become the standard for money to function properly?

Since its discovery, gold has always occupied a unique position in the human mind. According to Mark Cartwright,

“Gold does not corrode and so it became a symbol of immortality and power in many ancient cultures. . .. The value and beauty of solid gold made it an ideal material for particularly important political and religious objects such as crowns, sceptres, symbolic statues, libation vessels and votive offerings.”

This near universal appraisal of gold’s value has continued to linger in the human mind as evidenced by the language employed when describing something’s worth. Common phrases like “as good as gold,” “it’s the gold standard,” “worth its weight in gold,” or “heart of gold” reveal that gold’s significance has not been flushed out of society’s system yet. James Blakeley also expounded upon this truth, “Gold is forever. It is beautiful, useful, and never wears out. Small wonder that gold has been prized over all else, in all ages, as a store of value that will survive the travails of life and the ravages of time.” When talking about gold’s steadfast purchasing power Peter A. Burshre remarked, “Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today.” Gold has always been highly valued by mankind and has shown itself to be the most stable backing to any currency system.

If gold truly provides monetary stability, then why has society severed the connection between gold and money? The money society utilizes, reflects its views on truth, which must be objective, and will be revealed in three areas: first, global integrity, second, intrinsic significance, and third, objective value. C. S. Lewis, in his book Mere Christianity opens his argument for truth, or the “laws of nature”, by starting from the universality of quarreling.

“Quarreling means trying to show that the other man is in the wrong. And there would be no sense in trying to do that unless you and he had some sort of agreement as to what Right and Wrong are . . . (Lewis 1)”

Therefore, if money reflects objective truth, then it should unify economies not fracture them. During the stint of the classical gold standard era, the world economy did just that. Between the years of 1870 and 1914 the United States saw real wages double (not from inflation), agricultural output triple, and industrial production rise an astounding 682%. Steve Forbes, a prestigious economist, firmly asserted, “Gold remains the monetary Polaris. Every alternative has failed.” Contrast this with the trade wars, currency manipulation, and massive debt brought on by fiat money. Fiat money inherently fractures economies because it places the ability to value currencies in the hands of governments, who have agendas of their own.

Truth is not an ethereal thing; it must carry weight and generate an impact upon those who know it. Otherwise, what good would truth be to people, as people must exist in relationship to truth as stated previously? This also, to be consistent, must be applied to money.

“Nobody will be stupid enough to exchange a value against something that is valueless, unless he is sure of being able to convert the latter into values again. . .. Money could not have developed as a means of exchange or as a measure of value unless its material substance had been experienced as immediately valuable (Simmel 140–141).”

As Georg Simmel explains in his book, The Philosophy of Money, no person would adopt a system of money where the money could not be exchanged for another value or was not valuable in the moment. For most of human history, money has anchored itself to something that all people considered valuable, namely precious metals, gold and silver. With the onset of modernity, governments, for the first time, have unchained money from its trusty anchor and fastened it to themselves. Georg Simmel also elaborates on this,

“The increasing replacement of metal money by paper money and the various forms of credit unavoidably react upon the character of money — in roughly the same way as in personal relations when somebody allows himself always to be represented by others, so that finally he receives no greater esteem than is accorded to his representatives (141–142).”

If today’s money clings to governments for its value, then it is a marvelous thing that a loaf of bread does not cost five hundred dollars, or, for the liking of investors, fluctuate between five and five hundred dollars a week. If money does not possess actual value, then it will then be extremely unstable.

Objectivity creates stability, G. K. Chesterton provides a great example of this in his book Orthodoxy when describing a man that desires to paint the world a certain color.

“If he altered a blade of grass to his favourite colour every day, he would get on slowly. But if he altered his favourite colour every day, he would not get on at all. If, after reading a fresh philosopher, he started to paint everything red or yellow, his work would be thrown away (67).”

The man by adhering to one color could make some progress, but if he alters his favorite color he must start over and he would have accomplished nothing. Money serves as a store of value; moreover, it too must be stable to accomplish its task. When discussing issues with the current economy the term inflation appears regularly. Inflation represents the increase in price of goods and services over time. The gold standard ensured that inflation stayed at very low levels, due to the currency’s gold backing, and, throughout this period, the United States possessed an equivalent value of gold to dollar bills printed. Today the federal government prints money with no backing, so with more money on the market the dollar devalues automatically. The global economy conducts business on a floating exchange system, which means the more money available from the United States the less valuable it will be to other countries (Currency Devaluation and Revaluation). When other countries deem the money of the United States to be less valuable, then the United States dollar drops in value creating a chain reaction causing prices here in the United States to rise. The classical gold standard kept inflation below one percent, but in the new fiat system inflation dangerously rises unchecked. A dollar in 1914 holds the purchasing power of $25.66 today because the dollar has lost its value over time due to the constant change associated with the fiat system. Even in the past five years the dollar has lost about six cents of its value (CPI Inflation Calculator). With no gold backing, money today cannot be objectively valuable and therefore grows wildly unstable.

To conclude the argument, money must be valuable, and it attains its value through a physical object, specifically gold and to a lesser extent silver. The money that a society utilizes, reflects its views on truth, which must be objective, and will be revealed in three areas: first, global integrity, second, intrinsic significance, and third, objective value. “Honest” money as called by Hans F. Sennholz, does not merely affect one’s wallet. Modern governments have instituted a monetary system designed to force the citizen to spend and accumulate debt. With money constantly being devalued, the consumer must spend their money while its value remains highest, which would be at that instant. Considering that this becomes our modern-day precedent for finance, it should then come as no surprise that debt entwines itself with the materialistic habits that plague America. With a gold standard, saving money to purchase something makes sense, as the object that the person desires to purchase will not change in value, because the money will maintain its purchasing power. It makes sense to take on debt in this fiat system, because when someone takes out a loan, as time progresses, the original proportional amount relative to the person’s holdings in cash becomes less. This is not because the person begins managing their money better, but because the value of the loan naturally depreciates in a fully fiat system over time. Then of course, the widespread use of credit cards should not be regarded as revolutionary, but as inevitable, because credit cards give a person the ability to take on debt at will. However, personal debt in a fiat system never affects just the self.

When debt engulfs an individual, that individual becomes financially dependent on someone else. With the accretion of debt, a person does not work for themselves or for their family, they work for the company, government, or loan holder to whom they owe money. And guess who provides the lifeline to those who find themselves in economic hardship — the government, the ultimate perpetrator of this crime. The fiat system, established by the government, is designed for people to spend money, accumulate debt, and, in the end, depend on the government. Financial discernment can help limit some of the effects of the fiat system and allow you to keep at least one hand on the steering wheel. However, the only permanent solution requires the dissolution of the fiat system and the re-institution of either a gold or bimetallic standard. As Hans F. Sennholz remarked,

“For more than two thousand years gold’s natural qualities made it man’s universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper.”

Lasting foundations ought not be built upon shifting sand, but upon solid rock, and, financially, gold must be the rock upon which we stand.

The biggest implication of this thesis is not economic security, but eternal security. The philosophy behind the fiat system presupposes that government can objectively determine what the value of their citizens’ money should be. In other words, the government, specifically the federal reserve, places itself in the position of God. If this thesis proves to be true, then the fiat system employed today reflects a society that regards truth to be subjective and nationalistic; as money today is merely a social contract authored by the government. Widespread societal repentance must occur to save not only our physical lives, but our eternal souls. We must turn to moral and philosophical backbones of society, guiding our thoughts and actions. By pruning toxic philosophies from society, incredible amounts of eternal fruit will be harvested in all areas of life, even in our money.

As always, I thank you for your interest and support, and welcome any questions or suggestions.

-Mason Cregger, writer for The Startup



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