In the year 1900, following two decades of debate about the future of American money, L. Frank Baum wrote “The Wonderful Wizard of Oz,” which served as the template for the greatest of all American movies. The story is about much more than it seems. Beneath the surface, it’s an attack on ruling-class barons who were pushing the gold standard as the key to sound money and banking. In those days, gold was regarded as an industrial plot, while silver was regarded as the working man’s specie that favored agricultural interests.
The theory behind the movie is wrong, in my view. The gold standard was, in fact, sound money, while the silver standard was but a stalking horse for the advocates of dovish monetary policy. The debtors, of which there were plenty in agriculture, pushed silver precisely because they favored devaluation. The winners in the debate were, of course, the partisans of gold.
The victory didn’t last long. The banking panic of 1907 provided the pretext to reorganize the whole of money and banking in the United States around the German model. We would have a central bank codified in 1913, the purpose of which was to guard against banking panics and crack down on wild-cat inflationism from pop-up banks that had fueled a long series of land bubbles over the previous 20 years.
It didn’t turn out that way, of course. The central bank became exactly what the skeptics predicted. Instead of sound money, it created a beast with a penchant for lowering rates and fueling money growth. It also became a money printer for the government, which was very quickly called upon to support the debt incurred by entry into the Great War. It’s entirely possible that the United States would never have entered that ghastly conflict but for the existence of the central bank.
My point in recalling all this deep history is to underscore that issues of money and banking were once absolutely central to American political life. The average person in the 1890s had a strong opinion. Candidates would offer stump speeches on the topic and be expected to weigh in on the great questions of bimetallism, gold standards, and silver standards. Of course, there was no one in those days who favored a purely paper money standard like we have today. After all, they were well-educated.
Following the creation of the Federal Reserve, issues of money and banking slipped out of American public life. It was widely assumed that the administrators at the center had it all under control and that there was no more need for debate. We had the right system, and there was nothing left to reform.
Then came 1929 and the subsequent Great Depression, which kept not going away. Franklin D. Roosevelt came to power in 1933 with the promise of repealing the much-hated prohibition that created such legal and social chaos in the country. People voted for him because they wanted to be able to get a beer at the bar without facing prosecution. What they got instead was a radical reformer who would use all powers of the federal government, backed by cranky new economic theory, to create a series of industrial cartels plus price controls plus public works plus wage restrictions and welfare, the combination of which prolonged the Depression all the way to the end of World War II.
It’s forgotten now, but central to the New Deal was one of his first actions: an executive order that collected all gold in private ownership. Everyone was told to take their gold to the banks to exchange them for dollars. The government printed posters that were distributed to every state and county. They were posted everywhere.
Yes, there were criminal penalties for noncompliance, and, yes, some people went to jail. To be sure, there were plenty of families and estates, particularly in the Northeast. Large amounts were shuffled off to safe locations in a hush-hush way, and that secret was kept for generations until gold ownership was relegalized in 1973.
The confiscation of gold and the subsequent devaluation of the dollar in terms of gold was an incredibly despotic act over which there was no public debate. It happened suddenly and in the midst of an economic crisis, enacted by a popular president. The confiscation was later challenged in court with mixed results. Essentially, the United States had a new monetary system, one nowhere as good as the old one.
Following World War II, we had another monetary reform with Bretton Woods and the global gold-exchange standard. No longer would dollars be convertible to gold domestically but rather all currencies were to be convertible to the U.S. dollar (to the victor go the spoils) and international settlements would be in gold.
That was 1946, but there was simply no way it could last. Having the same monetary policy also requires the same fiscal policy, as Europe has learned the hard way. The entire world on a gold-exchange standard would inevitably face trade imbalances that would drain the gold supply in ways that would panic governments.
That led, of course, to Richard Nixon’s decision to leave the gold standard entirely and embark on yet another experiment, this time with a pure fiat paper money system that economists had warned against for centuries. But this time, they said, the scientists would be in control and do a great job of it. Actually, they did an atrocious job of it, and inflation began almost immediately and continued through 1979. Then, the Fed finally cracked down, just like current Fed Chair Jerome Powell is attempting now.
But not so fast. We live in a digital age of information sharing and plenty of people know exactly what’s going on. We have the example of China to know how control of money through digital technology also allows for full population control. That’s a nightmare and doesn’t belong in the United States. As a result, we’re starting to see a real populist movement develop against this idea.
In South Dakota, Texas, and Florida, lawmakers are already hardwiring the commercial codes to forestall the creation of a CBDC. And I’m seeing this issue rise higher and higher up the Republican agenda. They’re developing some sophistication here to see that the CBDC would be the end of freedom. And people are growing suspicious that the latest banking crisis will be used to bring this system about, just as in the past.
For the first time in my lifetime, issues of money and banking have become major popular issues being discussed in all sectors of society. This takes us back to the way things should be, as it was in the 1880s. It’s an issue that affects everyone and therefore should be a matter of grave political concern.
Can the CBDC be stopped? Absolutely it can. Already, it’s pretty obvious that the Treasury and the Fed are both very nervous about the growing public opposition to their nefarious plans. It’s working. It needs to be intensified. We have to say no to the CBDC. All we need to do is pull back the curtain and take a careful look at who’s really running the system and who favors this supposed reform.
Friends Read Free