Thursday, January 21

The Evil of Fiat Money and the Fed

Written by Jacob G. Hornberger

The headline of a Washington Post article last June read, “She Was the Last American to collect a Civil War Pension — $73.13 a Month. She Just Died.” The article was about Irene Triplett, a daughter of a Civil War veteran who had just passed away.

That, of course, is pretty shocking in and of itself. Who would ever think that a child of a Civil War veteran would still be living in our time?

But what also struck me was the amount of the monthly pension she was receiving — $73.13. That doesn’t appear to be a very generous pension, except that it was — and would have been through the rest of her life had the Franklin Roosevelt regime not have destroyed the monetary system that the Constitution established.

Let’s go back to 1907. The U.S. mint issued a gold coin designed by the famous designer Augustus Saint-Gaudens. It was a $20 coin. It’s called the St. Gauden’s Double Eagle. It contains about one ounce of gold.

That means that Irene Triplett’s father would have been receiving three $20 St. Gauden’s Double Eagles — three coins totaling $60.

That still leaves $13.13.

He would also have been receiving a $10 Gold Indian Head coin, which contained a half-ounce of gold. That would have added up to $70.

He would also have received three silver dollars, each one containing an ounce of silver.

That now adds up to $73. The balance of 13 cents would have been covered with a silver dime and three Indian Head Pennies.

We often hear college economics professors and mainstream journalists say that the gold standard was a system in which paper money was backed by gold. Nothing could be further from the truth. There was no paper money standard in the United States. The Constitution prohibited such a system. The Constitution established a gold-coin, silver-coin standard, one in which the official money of the country consisted of gold coins and silver coins.

Oh sure, there were bills, notes, and bonds. But everyone understood that they were simply promises to pay money, not money itself. The official money was gold coins and silver coins.

That’s why the Constitution authorized federal officials to coin money. At the risk of belaboring the obvious, one does not make coins out of paper. It makes coins out of metal. Moreover, the Constitution prohibited the states from making anything but gold and silver legal tender or official money.

Roosevelt destroyed that system with simply a decree and then a law enacted by Congress. At the risk of belaboring the obvious, the only legal way to change a system that has been established by the Constitution is by constitutional amendment. Thus, FDR’s destruction of America’s founding monetary system was illegal under our form of government.

Now, let’s see where Irene Triplett would have stood in 2020 if FDR and his cohorts in Congress had not illegally destroyed America’s constitutional monetary system. She would have still been receiving three one-ounce gold coins, one one-half ounce gold coin, three silver dollars, one silver dime, and three copper pennies.

Today, a one-ounce Gold American Eagle coin issued by the U.S. mint sells for $2,000 in paper Federal Reserve notes. A one-half ounce Gold American Eagle coin sells for $1,000. A one-ounce silver American Eagle Dollar sells for $33. We will leave the 13 cents aside.

Thus, today, if FDR had not destroyed America’s founding monetary system, Irene Triplett would have been receiving  the equivalent of $7,099. ($2,000 x 3, plus $1,000, plus $33 x 3).

A monthly pension check of $7,099 would not be too shabby. It only goes to show us the wisdom of the Framers in establishing a gold-coin, silver-coin monetary system. They knew what public officials would do with a fiat (i.e., paper) money system. Public officials would just print the money to their heart’s content, knowing that people would exclaim, “Thank you for being so good to us and giving us so many free things.”

But there are those who are made to pay the price for this political folly and monetary debauchery — people like Irene Triplett and her father — the ones on pensions and fixed incomes. That’s why she ended up with a measly monthly pension of $73.13 in irredeemable Federal Reserve Notes.

This post was written by: Jacob G. Hornberger

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at and from Full Context. Send him email.

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