World News: The AtlanticWhy Does Virginia Want a Back-Up Gold Currency?
It's not everyday that a U.S. state starts planning for the demise of the dollar. Today is apparently that day for Virginia. Despite sub-2 percent inflation right now, state lawmakers are worried the Federal Reserve's expanding balance sheet could eventually stoke Weimar-style hyperinflation and want to prepare for the day after such Mad Max monetary mayhem. As Ylan Mui of the Washington Post reports, Virginia's House of Delegates recently passed a bill calling on the state to spend $17,440 studying the feasibility of returning to a metallic money standard should Fed policies or cyberattacks obliterate the value of the dollar. In other words, they want to bring back everybody's least favorite barbarous relic: the gold standard. Now, as far as zombie ideas go, the gold standard is, well, the gold standard. It's not even a solution in search of a problem. It's a problem in search of an even bigger problem. Pegging the money supply to the supply of gold prevents central banks from creating money at will -- that's what its advocates like -- but printing-press-fueled inflation isn't our problem nowadays; the opposite, actually. Inflexibly tying credit to the amount of shiny rocks we can dig up risks leaving us with too little credit when we can't find enough shiny rocks -- and hence turning recessions into depressions due to too-tight money, like in the 1930s. A Short History of American Money, From Fur to Fiat
What do animal pelts, tobacco, fake wampum, gold, and cotton-paper bank notes have in common? At one point or another, they've all stood for the same thing: U.S. currency. Before independence, America's disparate colonial economies struggled with a very material financial hang-up: there just wasn't enough money to go around. Colonial governments attempted to solve this problem by using tobacco, nails, and animal pelts for currency, assigning them a set amount of shillings or pennies so that they could intermix with the existing system. The most successful ad hoc currency was wampum, a particular kind of bead made from the shells of ocean critters. But eventually the value of this currency, like that of other alternative currencies of the day, was undermined by oversupply and counterfeiting. (That's right: counterfeit wampum. They were produced by dyeing like-shaped shells with berry juice, mimicking the purple color of the real thing.) Before independence, America's disparate colonial economies struggled with a very material financial hang-up: there just wasn't enough money to go around. Colonial governments attempted to solve this problem by using tobacco, nails, and animal pelts for currency, assigning them a set amount of shillings or pennies so that they could intermix with the existing system. The most successful ad hoc currency was wampum, a particular kind of bead made from the shells of ocean critters. But eventually the value of this currency, like that of other alternative currencies of the day, was undermined by oversupply and counterfeiting. (That's right: counterfeit wampum. They were produced by dyeing like-shaped shells with berry juice, mimicking the purple color of the real thing.) Newt Gingrich Turns Against the Federal Reserve
When Newt Gingrich addresses the Atlanta Press Club Wednesday, here is what he's going to say: that the Federal Reserve should be audited, and that it should be stripped of its banking powers so that it is focused entirely on protecting the value of the dollar. It won't be the first time that he's spoken out on an issue associated with Ron Paul, one of his rivals for the 2012 nomination. To cite one example, he mentioned the Fed last week in his remarks to the Republican Leadership Conference. But a whole speech focused on it? It sure seems as if the former speaker of the House is making a play for a subset of voters known for dropping money bombs on candidates without a lot of campaign staff. I say that not only due to the subject of this upcoming speech, but because Gingrich talked it up during this appearance on Hugh Hewitt's radio program in a particular way that ... well, see for yourself:
Sinister? Oh no, of course not... unless you think that giving billions to the enemy in wartime is sinister! Gingrich goes on to imply that the Fed played a lawless roll in advantaging politically connected firms during the bailout. The next exchange is kinda bizarre, but shows exactly where he stands:
There are also reports that Gingrich is joining several other candidates in addressing a "gold standard tour" of Iowa. It is difficult to imagine any of this transforming him into a viable candidate. But it's nevertheless interesting that Paul's long-running crusade is becoming a focus for another Republican candidate. If only Gingrich would turn against the War on Drugs and hawkish interventionism too. Ron Paul Asks Ben Bernanke: How Do You Define a Dollar?
What is money? This question might sound a little deep for Congress, but the topic was discussed today in a hearing on monetary policy. Its only witness was Federal Reserve Chairman Ben Bernanke. He endured a second day of questioning after testifying before the Senate on the same topic on Tuesday. But House members often pose more interesting questions, and due to his distaste for the Fed, Rep. Ron Paul (R-TX) tends to ask some of the best with Bernanke is in the hot seat. He wanted to know how Bernanke would define a dollar. The First Paper Money in America Was Issued on This Day in 1690
Over three centuries ago on this day, Massachusetts printed America's first paper money. Before creating bills, Americans used Pine Tree Shillings and other coins as their currency. After the British shutdown a Massachusetts mint, these coins were in short supply.
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