RE-MAKING MONEY: Ways to Restore America’s Optimistic Golden Age

On August 15, 1971, President Richard M. Nixon severed the U.S. Dollar's last remaining link to a gold standard.

This effectively ended the monetary system on which the world's industrial nations had relied for stability since the end of World War II, the Bretton Woods agreement through which other nations pegged the value of their currencies to the U.S. Dollar, and the United States pegged its dollar to gold.

From that "Nixon Shock" 40 years ago until today, the world's paper money has been anchorless, adrift and in decline as a reliable, trusted store of value.

The U.S. and other major nations now deliberately debase and devalue their currencies to make their exports cheaper. Politicians now routinely print unrestrained amounts of paper fiat money to fund warfare and welfare states, stimulate markets in accord with the largely-discredited theory of British economist John Maynard Keynes, and buy votes they need to remain in power.

President Nixon's deconstruction of the dollar, and of the last vestige of the gold standard, unleashed destabilizing forces that today have created a monetary tipping point of no return that threatens to shake down and break down our world's economies, societies and values, including America's.

This SATC White Paper - the second of 2011 - explains what prompted President Nixon's action. It reveals the surprising pattern of falling dominos Mr. Nixon set in motion that has triggered unintended consequences as diverse as today's inflation, Greek riots, Islamist terrorism, soaring debt and unemployment, and stagnant economic growth. This White Paper also shows ways we can reconstruct our currency and economy to restore the prosperity and optimism a once-mighty dollar made possible in America.

Craig R. Smith

"Gold is Money.
Everything else is credit."

- J.P. Morgan
Financier, 1912

The U.S. Dollar died 40 years ago.

Today what we exchange is only a ghost of the once-mighty currency that conveyed American greatness, integrity, success and prosperity to the world.

In August 1971 we abandoned the Founders' Constitutional Bible-based standard of reliable, sound money anchored in silver and gold. We reduced the U.S. Dollar to mere paper that has no intrinsic value.

We ignored Thomas Jefferson's 1788 warning that "Paper is poverty... It is only the ghost of money, and not money itself."

Today this ghost haunts our economy, as do the words of the French social philosopher Voltaire: "Paper money eventually returns to its intrinsic value - Zero."

Today's politically-manipulated paper U.S. Dollar is plummeting towards Zero - reflected in gold's price surging from $1,234 in July 2010 to $1,817 in August 2011. When the dollar crashes, so does America's future as a superpower.

Today's dollar has less purchasing power than two cents - two-one-hundredths - of what the U.S. Dollar could buy 100 years ago.

If we cannot revive or re-create the solid money specified by America's Founders, then their vision of American values and greatness might soon also become a ghost of its former self.

Fateful Decision

"If historians searched for the precise date on which America's singular dominance of the world's economy ended, they might settle on August 15, 1971," wrote investigative journalist William Greider in his book Secrets of the Temple: How the Federal Reserve Runs the Country. [1]

On that day Republican President Richard Nixon issued an Executive Order closing the "gold window," ending the central element of the 1944 Bretton Woods agreement among major Free World countries. In this agreement, the United States guaranteed that our friends and allies (but not American citizens, who had been prohibited from owning gold bullion since 1933 by order of President Franklin Delano Roosevelt) could exchange U.S. Dollars for a fixed amount of gold at the rate of $35 per ounce.

Under Bretton Woods, friendly nations had pegged their currency value to the dollar with assurance, knowing that the dollar had the stability of being pegged to gold in world trade and finance.

With a single unexpected blow, President Nixon cut this last tie that had anchored the Free World's currencies and economic system.

His action weakened the credit, and even more importantly eroded the "full faith" of trusting allies, of the United States.

Ever since President Nixon's action, each major currency - the dollar included - has had to sink or float in the often-turbulent seas of the global marketplace. Each has established its own independent value.

Murdering the Dollar

One could say that President Nixon murdered the U.S. Dollar.

He killed America's gold-standard currency and replaced it with a look-alike impostor fiat paper currency that has no guaranteed convertibility to anything by anybody. In an instant the once "Good as Gold" U.S. Dollar was turned into what one Federal Reserve executive called "an I.O.U. Nothing."

One could, of course, also argue that the deceased pre-1971 dollar was also an impostor which replaced dollars that ordinary people, not only central banks, could convert into a government-guaranteed quantity of silver, the "poor man's gold" advocated as money by progressives such as William Jennings Bryan.

Democratic President Lyndon Baines Johnson slammed shut the window for Silver Certificate conversion to silver dollars in March 1964 and terminated all redemption of dollars for silver on June 24, 1968, killing what Americans had relied on as their dollar.

President Johnson was escalating his martyred predecessor's war against communists in Vietnam, where Democratic President John F. Kennedy had committed the first 16,000 armed American troops into combat.

At the same time Mr. Johnson was pursuing a guns-and-butter policy vis-a-vis this war, he also was building his costly Great Society welfare state at home.

By the early 1960s silver had reached a market value of $1.27 per ounce, and people and nations rushed to reap a profit by converting their silver certificate dollars into the more precious metal. Mr. Johnson acted to halt this drain on U.S. silver reserves.

"The world supply of gold is insufficient to make the present system workable," said President Johnson in 1967.

That system was the last remnant of the dollar gold standard Democratic President Franklin Delano Roosevelt eliminated in 1933 by an Executive Order making it illegal for American citizens to own gold bullion without government permission.

President Nixon reluctantly agreed with LBJ because the U.S. gold reserves stored in Fort Knox were rapidly shrinking.

"By 1971," wrote Greider, "foreign financial institutions had amassed dollar claims totaling $36 billion - double the $18 billion in gold reserves the United States still held for international convertibility.

"If the President let events play out," wrote Greider, "the guarantor of world monetary order - the American government - would soon find its own storehouse empty. Its guarantee to the world would become meaningless by default."

Mr. Nixon shut the last dollar convertibility window for gold, just as Mr. Johnson did for silver. But did President Nixon act quickly enough?

Today Fort Knox's gold supply is under the control of the Federal Reserve Board, a private consortium of banks. The Fed is resisting and delaying a long-sought court order that it submit to at least a partial audit.

The Obama Administration and Democratic majority leaders in Congress have blocked legislation by Rep. Ron Paul (R.-Texas) that would require an independent audit to determine how much gold remains in Fort Knox.

Golden Handcuffs

One of the greatest virtues of a gold standard is that it constrains government spending.

Most politicians always want to spend more, especially when they have a war to fight or new domestic plans to bankroll. If they could simply print any amount of money they wished, their wishes would expand without limit.

But when each printed dollar is convertible to gold, this (at least in theory) means that a lawmaker or president can print only as much paper currency as the government has gold to redeem. This link turns gold into golden handcuffs on politicians, or what University of California Berkeley economic historian Barry Eichengreen disapprovingly called "golden fetters" on politicians' ability to manipulate monetary policy by creating stimulus money out of thin air. [2]

Such constraint on politicians, whether self-servingly wicked or paving a road to hell with good intentions, is an integral part of what America's Founders intended. As Thomas Jefferson said of power-hungry politicians, the people should "bind them down with the chains of the Constitution."

The gold standard is therefore the friend of all who save money and want it to retain its value, of all who want their dollars to be an honest and reliable medium of exchange, and of taxpayers who, like America's Founders, want a limited and frugal government.

This, of course, is why so many of today's politicians hate the gold standard.

Beyond Redemption

Presidents Johnson and Nixon - or, to be technical, the Federal Reserve Board whose chairman is appointed and re-appointed by presidents - ran far more paper money off government printing presses than the U.S. had gold or silver to redeem.

Shortly after Nixon terminated dollar-to-gold convertibility that had been fixed at $35, gold's market price more than doubled to $72 per ounce.

We have been taught to say "gold's price rose" when we see today's stories of gold above $1,700 per ounce, but we can choose another, clearer way of thinking about this.

Gold has been the standard of human money for 5,000 years. It is the yardstick by which the value of paper money is measured, not the other way around.

The same amount of gold that 100 years ago could buy you a thousand board-feet of lumber, or a ton of coal, or a handsome horse will usually buy those same things today.

An ounce of gold will let you purchase an excellent man's suit, and that same ounce of gold 2,000 years ago in ancient Rome could buy an excellent toga.

Gold, in other words, does not change. What changes is the value of other things relative to gold.

When a business reporter tells you that "gold has risen to $1,700 per ounce," what she actually means is that the paper dollar has lost value, and it now requires 1,700 dollars to buy one ounce of gold.

When the dollar was anchored to gold's standard, the dollar retained its value.

But after 1971, when the golden handcuffs were removed from politicians in Washington, D.C., they began printing paper dollars out of thin air.

The power of politicians, however, has natural limits. They cannot outlaw gravity, and they cannot repeal the law of supply and demand.

In the marketplace, dollars are merely another commodity like potatoes or wheat.

When politicians double the supply of paper dollars to give themselves money to spend, this eventually reduces the demand for now-less-scarce dollars more or less by half, just as doubling the supply of potatoes would lead to lower potato prices.

This devalues each and every dollar, including the ones you have earned and saved in your mattress, leaving every dollar able to buy only about half as much as it previously could.

Economists call this devaluation of money inflation.

Some of the consequences inflation can unleash are as predictable as a sunset. Others are unanticipated consequences and can bring surprising ghosts, nightmares and destruction.

Oiling the Money Machine

The U.S. Dollar killed by President Nixon was not an ordinary currency, and its murder started a chain reaction that continues in many of today's crises.

The Bretton Woods agreement had cemented the dollar's status as the Free World's "reserve currency."

This means that oil, for example, gets purchased internationally using U.S. dollars as the global medium of exchange.

When in 1971 President Nixon cut the dollar loose from its gold anchor, the dollar began - and to this day continues - to lose value.

Among those most troubled by this was OPEC, the Organization of Petroleum Exporting Countries, whose members saw their dollars rapidly losing value. They struck back in 1973 by raising oil prices.

"The OPEC price escalation was a direct and logical response to Nixon's fateful decision," wrote Greider. "Oil traded worldwide in dollars and if the United States was going to permit a free fall in the dollar's value, that meant the oil-producing nations would receive less and less real value for the commodity."

In early 1973 America could buy all the Saudi Arabian light sweet crude oil we desired for $1 per barrel.

[ Scientists since then have found evidence that oil is not a "fossil fuel," but is created in vast amounts by another process deep inside the Earth. Oil may exist in huge abundance and could be made available today at pre-1971 Saudi prices. To learn more about this, see the 2005 bestseller Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil by Jerome R. Corsi and Craig R. Smith, available from Swiss America or Amazon.com. ]

In summer 1973 a driver could find premium gasoline for 28 cents per gallon in Houston and 38 cents per gallon in Boston. Americans found it cheap and easy to take Sunday drives and long vacation trips by automobile.

In summer 1973, an American could drive a Toyota Corolla from Los Angeles to Boston, Boston to Miami, and Miami back to Los Angeles, putting 10,000 miles on the odometer for a total gasoline cost of $140.

The New Frontier was about to close. Within months the first OPEC oil embargo had American motorists lined up to take their turn buying suddenly-scarce and expensive gasoline. The freedom Americans had taken for granted suddenly felt confined and our prosperity under siege.

Even before that first oil embargo, the plummeting U.S. Dollar had lost one-third of its 1971 value.

The OPEC countries, wrote Greider, "were grabbing back what they had already lost - and tacking extra dollars on the price to protect themselves against future U.S. inflation."

Americans felt as if an Arabian drilling rig was pumping the money out of their wallets and siphoning off our nation's prosperity to foreign lands.

And for the first time in centuries our self-sufficient nation felt threatened by the power of other nations to cut off a supply of energy on which we had come to depend.

Yet OPEC's higher prices and the financial cost of the war in Southeast Asia were tiny compared to the greed of America's homegrown politicians.

Enriching the War on Poverty

President Johnson's Great Society launched a second war, the War on Poverty. Annual welfare costs that, measured in 2008 dollars, had been $54.6 Billion in 1964 began to rise like a skyrocket.

By 1981 combined state and local yearly welfare costs topped $300 Billion, by 1995 $500 Billion, and by 2007 these costs shot past $700 Billion on a growth line that was almost vertical.

Welfare growth that liberal journalists claimed had been halted by President Ronald Reagan and then by President Bill Clinton instead has kept expanding.

Today it is the fastest growing part of government spending. Look at one visible tip of this giant, deadly iceberg that will sink America's ship of state. The number of Americans receiving Food Stamps topped 45 million in 2011.

Former Wyoming U.S. Senator Alan Simpson, a member of President Obama's National Commission on Fiscal Responsibility and Reform, was attacked by liberals for truthfully saying that the Federal Government's biggest social program is "a milk cow with 310 million t*ts."

And liberal politicians want it this way, because as Irish playwright George Bernard Shaw observed, "He who robs Peter to pay Paul can always depend on Paul's support."

Projecting from government data compiled by economist Robert Rector and colleagues at the Heritage Foundation in 2009, since President Johnson's Great Society agenda became law, America's welfare state has spent approximately $17.6 Trillion dollars to benefit those whom partisan politicians and bureaucrats arbitrarily define as poor.

When John F. Kennedy was president, more than half of every tax dollar went to fund national defense, a government function clearly authorized in the Constitution.

Today more than half of every tax dollar goes for "transfer payments," government policies designed to take dollars from taxpayer pockets and move those dollars into other, more politically favored pockets.

One hates to be harsh, but this represents a vast redistribution of wealth away from productive citizens and enterprises.

Much of this is rationalized as helping America win the never-ending War on Poverty - a war in which liberals have never offered the "exit strategy" and "timetable for withdrawal" they have demanded during all other wars since WWII.

The War's General Welfare

So how is the War on Poverty progressing?

As Rector and his colleagues wrote in 2009, "the military cost to the U.S. government for all military wars from the American Revolution to the present is $6.39 Trillion in 2008 dollars."

With a pricetag of $17.6 Trillion, LBJ's ever-expanding welfare state has since 1964 cost nearly three times more than all of America's wars combined.

And the latest wars in Afghanistan and Iraq? In 2010 the Congressional Budget Office reported that President Obama's failed stimulus program far exceeded the entire cost of these wars.

America keeps fighting the War on Poverty, but poverty keeps winning.

Government policies have caused the number of people dependent on government to rise, not fall, with no end in sight. Perhaps some scholar should investigate whether tax increases to pay for the growing welfare state are pushing more Americans into poverty.

These transfer programs appear to be unconstitutional.

The U.S. Constitution says that government is to provide for the "general welfare." As James Madison spelled out explicitly during the constitutional debates and afterward, this should never be confused with welfare given only to selected individuals out of tax revenues.

By "general welfare" the Founders meant things that benefitted everybody in general, like a new road or town hall all could use. The Founders chose the word "general" precisely to make this clear.

Such welfare also violates the Constitution's Fifth Amendment "takings clause," according to Professor Richard Epstein of the University of Chicago Law School.

To take $100 from one citizen in order to give it to another, he argues, is in principle no different from government taking one citizen's house by eminent domain power so it can be given to another who is more politically favored.

Every tax dollar taken to fund Great Society income transfer programs should, to be constitutional, provide "fair compensation" to the taxpayer.

Therefore, argues Epstein, if you are taxed $100 to pay for your neighbor's welfare check, government should compensate you with $100.

Government Helps Itself

The apparent purpose of the Great Society was not to help the poor so much as to benefit the government and the Big Government political party.

Of every dollar spent in the War on Poverty, for many years only about 20 cents reached the poor. Roughly 80 cents of every dollar went to provide jobs and benefits for government employees - social workers, politically-appointed welfare bosses, and others whose average salary plus benefits at the federal level now average $123,000 per year.

If government wished to help the poor, observed Nobel-prizewinning economist Milton Friedman, it should "give them money" as directly as it could - in a check, or as a "negative income" tax credit paid to them by the Internal Revenue Service.

At the time Dr. Friedman made this point, the War on Poverty was spending the equivalent of $40,000 a year for each poor American. Simply giving each that amount would have lifted them all out of poverty.

But this, of course, was unacceptable to Democratic Party politicians. It would have dismantled their huge welfare bureaucracy, reduced the size and power of government and, worse, given millions enough of a leg up to escape poverty and addictive dependence on government and Big Government politicians.

In devastated inner cities, LBJ's welfare policies have been as destructive as a military war. Young teenage girls continue to be enticed by promises of a monthly check and their own apartment provided by government if they drop out of school and become single mothers.

Many of these young women soon find themselves trapped with a baby, a limited welfare check that gets bigger each time they have another, and little prospect for a school dropout of getting a job that pays more than a tax-free welfare check.

The liberal welfare state drove the proportion of out-of-wedlock births in inner cities above 70 percent and created generations of fatherless children for whom government assumes the role of paternalistic provider.

The Ku Klux Klan or Nazi Party could not have devised a more diabolical plan for destroying African-American families. But Democratic politicians continue to expand the welfare state because its dependents vote for them.

The Obamalaise Stimulus

Those who follow the teachings of British economist John Maynard Keynes believe that government money given to the poor should have a greater "multiplier" effect than President Obama's recent stimulus has had.

The poor, according to Keynesian theory, must spend money immediately to buy necessities such as food. They will rapidly spend welfare checks, and this increases the "velocity" of money in the economy, multiplying its stimulative effect by more than 1.0.

Obama economic adviser Lawrence Summers predicted that the President's $814 Billion Stimulus II plan would have a multiplier effect of 1.5. He was wrong.

Despite stimulus spending of more than $4.4 Trillion to boost growth, the U.S. economy during the first two quarters of 2011 averaged only 0.85 percent growth, a number within the margin of error of zero or even negative growth.

According to The Wall Street Journal, even double this anemic rate of economic growth would be far too slow "to restore broad-based prosperity."

Unemployment has remained stuck above 9 percent - and is closer to 20 percent if we include underemployed, part-time and discouraged workers.

In July 2011 President Obama's Council of Economic Advisors claimed that his stimulus spending had "added or saved" just under 2.4 million jobs, each of which cost taxpayers $278,000. [Y-1]

Obama's "Anti-Stimulus"

In April 2011 the St. Louis Federal Reserve Bank's economist and Vice President Yi Wen published his analysis that trillions spent as stimulus not only failed to boost employment, but also caused investment and hiring to drop. [Y-2]

It was, as we forecast in our 2010 book Crashing the Dollar, an "anti-stimulus" that did far more harm than good, and actually made the economy worse.

The government's stratospheric stimulus spending, Yi Wen was surprised to discover, made many businesspeople fearful of the coming tidal wave of inflation it was creating. This fear caused many to hunker down, cling to their cash, and cut back spending on company expansion and hiring.

The Keynesian Cult

Keynes apparently was more than a little mistaken about stimulus and its multiplier effect, according to new research by economists Ethan Ilzetzki of the London School of Economics and Enrique G. Mendoza and Carlos A. Vegh of the University of Maryland. They studied how it worked in 44 different countries and found that the Keynesian fiscal multiplier can be effective in emerging countries with low debts, fixed exchange rates and closed economies. [4]

In advanced nations like the United States with high debt, floating exchange rates and open economies, Keynesian measures are often much less effective.

Lord Keynes came from an earlier era in which people were productive and saved - a time long before middle-class people lived on credit cards instead of earnings, and long before 71 percent of America's Gross Domestic Product (GDP) became consumer and government spending.

This new analysis of today's spendthrift era of living on credit makes it clear that Mr. Obama's stimulus policies have wasted far more than a Trillion dollars on a wrong-headed left-liberal Keynesian dogma. Obama and Fed Chair Bernanke via QE2 created a process that wasted another $600 Billion in an attempt to stimulate the U.S. economy.

Let's be clear. Today's Neo-Keynesians will never be persuaded by the evidence that they are wrong. For them Keynesianism is a religion that promises them the keys to a heavenly utopia in which government, run by a chosen elite of superior people like themselves, will control all aspects of human society, including the economy.

As True Believer religious zealots possessed by their own "animal spirits," the Keynesians' response to all contrary evidence is that "we didn't spend enough on stimulus."

If only government would tax away everything from the rich - and "crowd out" private businesses by borrowing all the money available from lending institutions - and spend another $100 Trillion on stimulus to redistribute that wealth, they say, a glorious new age will dawn.

To be fair to Keynes, many who today call themselves Keynesians are, in truth, closet socialists who prefer to clothe their ideology in fashionable disguise.

Keynes himself saw stimulus as something to be used temporarily to ease the lows of business cycles and reignite investment and growth. If it becomes routine and permanent, as it is today, Keynesian stimulus is no longer stimulus - it is crony or state capitalism in which government "investment" determines which companies succeed or fail, and in which we return to an authoritarian age in which kings enriched their friends and allies.

John Maynard Keynes also believed that government should never confiscate more than 25 percent of a nation's income in taxes, and that government should not raise taxes during a recession or depression because to do so would make the economic downturn worse and recovery harder and slower. The Obama Administration eagerly violates both these standards and is therefore not Keynesian.

Atlas Is Shrugging

Even if Keynes' theory were correct, recent stimulus is the wrong medicine for what currently ails the American economy. Keynesian stimulus is supposed to create liquidity to lubricate a dry economy, but today's economy is not dry - it's frozen.

Corporations and banks reportedly have been holding back at least $3 Trillion on their books, reluctant to hire or invest because of uncertainties about how President Obama's unspecified tax, regulatory and other policies will affect their future costs of doing business.

In addition to such uncertainty, some corporate leaders may unconsciously be living out the fantasy set forth by philosopher Ayn Rand in her novel Atlas Shrugged - a strike by society's "productive" people, a work stoppage to protest ever-higher taxes and oppressive mandates that force them to pull the wagon millions of others feel entitled to ride in for free.

We may be seeing Atlas shrugging right now in the ongoing slowdown by investors and employers against an Obama Administration that is openly hostile towards business and capitalism.

When this $3 Trillion regains velocity in the economy, and when hundreds of billions of stimulus money now hoarded by recipient entities is again being spent, the economy will be awash in money.

Explosive inflation will likely then send prices through the roof, perhaps leading to hyperinflation like that in Post World War I Germany's Weimar Republic in which prices double every month, thereby turning the United States into Weimerica.

By following a QE2 policy deliberately intended to ignite inflation, Mr. Bernanke and the Federal Reserve are literally playing with fire in a room full of frozen gasoline.

QE3 had already begun by August 2011 by a variety of methods. One came in the Federal Reserve announcement that it aimed to hold interest rates near zero until at least mid-2013, which means that the Wall Street casino will continue to run on essentially free money until after the November 2012 elections.

This artifically-cheap money may be a boon for Wall Street and giant investment firms. It is not necessarily good for Main Street, where small businesses get crowded out for loans by government and other giant powers whose speculative investing swells one bubble after another in an economy tilted towards gambling.

Stimulus money can also speed up inflation, a loss in the purchasing power of money, as more dollars rush to the marketplace to buy an unchanged supply of goods.

This leaves the hard-working productive people in society shafted in at least three ways - by ever-higher taxes, unavailability of loan money for their businesses, and higher inflation (which is really just a sneaky means of invisible heavy taxation, as we explain in The Inflation Deception) that makes everything they buy cost more.

Liberals adore using inflation as taxation because it allows them to blame business for price-gouging when, in truth, the higher prices were created by government debasing the money and imposing the world's highest business taxes here in the supposedly-free market USA. It seems never to bother liberals that inflation is a regressive tax that punishes the poor.

Mr. Obama gave hundreds of billions of taxpayer dollars to giant banks, only to see these banks hold on to this cash instead of lending it to homeowners and other Americans in need of capital.

Back in the 1970s an unfettered government was busy printing tons of money after Nixon severed the dollar's gold tether. This caused the value of the dollar to sink drastically and prices to rise.

Few then saw that this inflation might soon destroy the dollar itself, the world economy, and America as we once knew it.

Looking Back, Looking Out

"Paper money has had the effect in your state
that it will ever have, to ruin commerce,
oppress the honest, and open the door
to every species of fraud and injustice."

- George Washington Letter to J. Bowen of Rhode Island, January 9, 1787

Behind the current economic crisis are four decades and more of cultural and political change that brought us to today's frightening crossroads.

Before we attempt to put America and our crashing dollar back together again, we need to remember what has happened.

This perspective may help you reconsider some right and wrong turns America has taken along the way to where we find ourselves today.

As with the mythic Greek hero Theseus looking for the deadly Minotaur in the dark underground cave Labyrinth of Crete, this is a thread tracing how we got here that may help find our way back to the America we call home.

Rancho Mirage

"From 1971 when [President Richard] Nixon abolished gold backing of the dollar, virtually all of the growth in the Western world has come from the massive increase in credit rather than from real growth of the economy," writes Egon von Greyerz, a former Swiss banker and now financial analyst for Matterhorn Asset Management in Zurich, Switzerland. [6]

"The U.S. consumer price index was stable for 200 years until the early 1900s," he writes. But from 1971 to 2010 this price index "went up by almost 500%."

"The reason for this," according to von Greyerz, "is uncontrolled credit creation and money printing."

"Total U.S. debt went from $9 trillion in 1971 to $59 trillion today," he writes, "and this excludes unfunded liabilities of anywhere from $70 to $110 trillion."

During this period America's nominal Gross Domestic Product (GDP) rose from $1.1 Trillion to $14.5 Trillion, but this does not impress von Greyerz.

"So it has taken an increase in borrowing of $50 trillion to produce an increase in annual GDP of $13 trillion over a 40 year period," he writes.

"Without this massive increase in debt," he concludes, "the U.S. would probably have had negative growth for most of the last 39 years."

The ratio of America's debt to its Gross Domestic Product, he notes, "is now 380% and is likely to escalate substantially."

Prosperity, as those born after World War II grew up believing, was an American birthright to be taken for granted.

A century earlier the British felt this same certitude about the future well-being of their empire.

But now, as we approach the blinding light of day at the exit from the Minotaur's cave, we are beginning to see that much of our prosperity since 1971 has been a mirage, an illusion.

Like a pilot hypnotized by flying through clouds, we thought we were ascending when in fact we were falling and about to crash.

The American dream these past four decades turns out to have been obtained with a credit card whose all-consuming monstrous bill is now coming due and catching us unable to pay.

Perhaps this is what that family friend in the 1967 movie "The Graduate" meant when he told Dustin Hoffman's character that his future could center on one word: "Plastic."

Ever since President Nixon's fateful unleashing of the dollar, politicians ever since have been printing it.

Americans have had to run to keep up with the dollar's declining value. Some have barely kept pace by turning their lives into a rat race. Millions more have fallen behind.

By 2008 it took $5.31 to buy what cost $1 in 1971, according to data from University of Illinois Economics Professors Lawrence H. Officer and Samuel H. Williamson and their MeasuringWorth team of 15 university economists from American universities and Oxford University.

How many Americans today earn more than five times the income they did in 1971? This is what it has taken not to get ahead, but just to stay even with the effects of inflation.

In purchasing power the dollar has bled away more than 81 percent of its value in far less than 40 years.

This drastic weakening of the dollar through both Republican and Democratic Administrations was often ignored by the media during these turbulent years.

This ongoing collapse of the dollar has been felt by working Americans every day as prices increase at the supermarket, the gas pump, and in almost every other part of life.

Our Middle Class, the pillar that upholds and embodies American values, has found itself dragged down with the sinking dollar.

The Politics of Debt

President Richard Nixon is a pivotal figure in the shaping of our times. He rose to prominence as the ardent anti-Communist congressman who brought down Soviet spy Alger Hiss. (When the former Soviet Union's archives briefly opened, they confirmed that Nixon was right: Hiss had taken Soviet orders via a controller in the GRU, the Communist East German secret police.) Because of this, the left in America never ceased trying to destroy Mr. Nixon.

Yet one paradox in our politics is that - because in our two-party system politicians run towards the center while taking their base of supporters for granted - only a liberal like John F. Kennedy could have launched a military attack against Communist Cuba or a war against Communist Vietnam, and only a bona fide anti-Communist could embrace Communist China as Nixon did.

President Nixon decided that we could drive a wedge between Maoist Red China and the Soviet Union by reaching out to China.

Trade cemented this new relationship, and today China is one of our biggest creditors and holders of our debt, enabling credit junkie America to keep feeding our addiction to spending as we turn into what authors Addison Wiggin and Kate Incontrera call "I.O.U.S.A."

President Nixon placed a life-or-death long-term bet that America could turn the People's Republic of China capitalist before we transferred enough wealth to make it militarily superior to us. Thus far it appears that China has become a crony capitalist country but retained its near-totalitarian government.

One breaking point for the Soviet Union was its recognition that it could not remain in competition with Western technology without giving its brightest citizens access to computers and worldwide communications. How long can a totalitarian system survive while allowing such freedom? We shall see.

President Nixon's enemies, and his own willingness to stoop to their tactics to beat them, brought him down shortly after he won a 1972 landslide re-election against liberal Democratic Senator George McGovern.

McGovern was a decent patriot who, like Arizona conservative Senator Barry Goldwater, served as a pilot during World War II. Yet McGovern - who after leaving government and running a business said he wished he had never voted to authorize extreme business taxes and regulations - was a Progressive who helped move his party farther to the left.

In 1974 President Nixon, threatened with possible impeachment, resigned. His Vice President Gerald Ford became president and promptly pardoned his predecessor.

President Ford was a decent person, but he was an old-style rust belt Republican from Michigan whose politics might be called "Democrat Light." By comprise he would agree to pass Democratic legislation so long as it could be made a bit less onerous to business and less expensive to taxpayers.

Ford was, as Newt Gingrich once described centrist Kansas Senator Bob Dole, a "tax collector for the welfare state." Ford had spent so many years in politics in the minority party that, like a fish in a dark cave, he lost or never acquired the vision to see a future in which those with small government conservative views could become the ruling majority.

He famously said: "I'm a Ford, not a Lincoln."

Mr. Ford urged Americans to wear buttons that in bold letters read: "WIN, Whip Inflation Now," and with good reason.

A windstorm of inflation sweeping the land had begun tearing the dollar to shreds.

By election year 1976 it cost $1.41 to purchase what cost $1 in 1971, a 41 percent increase in five years. Worse, however, was about to come.

Jimmy Carter's Malaise

Georgia Governor and Democrat Jimmy Carter won the presidency in 1976. He turned out lights in the White House to conserve energy, preached that America suffered malaise, and faced his own Arab oil embargo.

President Carter is proof of where a road paved with good intentions can lead. Idealism led him to cut off U.S. support for the Shah of Iran, America's strongest Persian Gulf ally, over the alleged torture of 3,000 political prisoners.

The Shah was in some ways authoritarian, but he greatly expanded rights for women, was Americanizing his Muslim nation, kept Israel supplied with oil during the Arab oil embargoes, and was key to American power projection in the gulf. Needless to say, he was a major target for Marxist and other leftist propaganda, especially after a weakened America elected such a weak President.

Mr. Carter's withdrawal of support led to the overthrow and replacement of the Shah by radical Shiite Muslim fundamentalists - who promptly had the 3,000 prisoners, most of them agents of the godless Soviet Union, put up against a wall and shot. They also took American diplomats hostage.

This was a major triumph for radicals of many stripes, including Islamists who turned their faith into a radical political ideology bent on world conquest and creation of a global government ruled by one Muslim caliph. The toppling of the Shah gave such people hope, motivation, and a dramatic event that could persuade others to join their cause.

What soon followed was an Iran-Iraq War that killed more than 500,000 people, a war that never would have happened had the Shah remained in power. This war turned Sunni Saddam Hussein's majority-Shiite Iraq into the fourth most powerful military in the world, setting up the conflicts there that have continued to this day.

What also followed was the Soviet invasion of Afghanistan bordering Iran, another war that would never have happened with the America-backed Shah ruling Iran. Jimmy Carter's response was to wring his hands and withdraw American athletes from the Olympics in protest.

The Soviets were resisted by guerrillas from throughout the Muslim world, among them an eccentric Saudi Arabian millionaire named Osama bin Laden and the warriors he funded and called Al Qaeda,"The Base." This fight persuaded bin Laden that both the Soviet Union and United States were "paper tigers" that could be bankrupted and beaten by using terrorist tactics and strategies.

What bin Laden learned in Afghanistan would be used on 9-11-2001 to kill 3,000 Americans and bring down the twin World Trade Center towers in New York City, symbols of America's might and economic potency in the world.

Oddly, Mr. Carter, whose incompetence led to the deaths of a million people in unnecessary wars, to the oppression of tens of millions more, and to the murder of 3,000 Americans on 9-11, was awarded the Nobel Peace Prize.

The Islamist dictatorship Mr. Carter unwittingly helped install in Iran may yet unleash nuclear terrorism and war on the world, kill many millions more and destroy world civilization.

Inflation exploded under President Carter. Home mortgage and credit card interest rates shot into double digits. The prime lending rate topped 20%.

By election year 1980 it cost $2.03 to buy the same goods that cost only $1 in 1971.

The dollar had lost more than half its purchasing power in only nine years.

For those with long drives to and from work in large and comfortable American cars or pickup trucks, the soaring price of gasoline bit hard into their wallets and dreams.

Gold, meanwhile, surged to $850 per Troy ounce - the same ounce that in 1971 could have been acquired by a foreign nation's bank for $35. That $850 per ounce peak is equivalent to approximately $2,300 in 2011 inflation-adjusted dollars.

This was a harbinger of waning global confidence in the U.S. Dollar - and in other paper fiat currencies.

Measured relative to this surge in gold's price, the U.S. Dollar had fallen in value to approximately four percent of its 1971 value.

President Barack Obama in many ways mirrors the weakness and indecisiveness of President Carter, and Mr. Obama is on track to cost most Americans a much, much bigger piece of their life savings than Mr. Carter did.

The Reagan Revolution

In 1980 Americans voted overwhelmingly to replace President Carter with former California Governor Ronald Reagan. Fearful of our strong new leader, Iran 444 days after they were kidnapped released America's diplomat hostages before Mr. Reagan's inauguration.

Like European nations in today's economic crisis, Mr. Reagan chose to curtail the Carter inflation with austerity, a two year fight that led to a relatively stable dollar and many years of greater prosperity.

President Reagan cut taxes deeply, despite the House of Representatives being controlled by election-chastened Democrats. He restored optimism in the land and confidence in ideals of small government and free enterprise.

Mr. Reagan's foremost goal was to defeat the Soviet Union in the Cold War. He confronted the Soviets by providing Stinger anti-aircraft missiles to Muslim guerrillas in Afghanistan and medium-range missiles to American allies in Western Europe, where green and left-wing political parties were influential in politics.

Reagan would pay a political price, being forced to cut a deal with Democrats to expand social spending and taxes in exchange for more defense spending. Democrats promised to make other cuts in government but reneged on those promises. Government and welfare therefore grew larger under Ronald Reagan, and so did America's debt and deficit.

American power stands on two mighty legs, one military and the other economic. Our wealth was what gave Mr. Reagan victory over the Soviet Union.

When Reagan proposed building a huge anti-missile system, the Strategic Defense Initiative ridiculed as "Star Wars" by the liberal media, the chess-playing Soviet strategists saw that this would introduce uncertainty into their ability to hit American targets with ballistic missiles.

More importantly, they knew that the United States was rich enough to keep enlarging and perfecting such a system - and the Soviet planners knew that they lacked the wealth to counter this. They had been checkmated.

From a different perspective, American poker, President Reagan had raised the stakes to a level of spending they could not hope to match, so the Soviets folded. The U.S. had won, and within years the Soviet empire dissolved into the dustbin of history as its colonies pulled away.

President Reagan carried 49 of the 50 states in his 1984 re-election bid. He could have won 50 but chose not to campaign in Democratic nominee Walter Mondale's home state Minnesota, which Reagan lost by only a few thousand votes.

The liberal media was quick to declare that this astonishing vote of the people was not a mandate for conservatism because Mr. Reagan won with his "It's Morning in America" campaign. It of course was a strong mandate for more of the same that this charismatic leader had been doing.

The Reagan years were in many ways golden for conservatives, but the U.S. Dollar paid a steep price for political compromises, despite the President's efforts to rein in many areas of government spending.

By election year 1988 it took $2.92 to purchase goods that cost only $1 in 1971.

The dollar in 17 years had shrunk to scarcely one-third of its previous buying power, and Middle Class Americans felt the squeeze on their paychecks.

New World Orderer

In 1988 Mr. Reagan's Vice President George H.W. Bush defeated liberal Democratic technocrat and Massachusetts Governor Michael Dukakis by a wide margin.

President Bush was a "prudent" veteran diplomat who skillfully put together a coalition to roll back Saddam Hussein's invasion of Kuwait at a low cost to the United States in money and casualties.

Mr. Bush was in some ways a Big Government conservative who advocated a "new world order" and "a kinder, gentler America," implying that his predecessor and others who shared Ronald Reagan's values were somehow neither kind nor gentle.

"Read my lips. No new taxes," he declared, then felt compelled to open those lips to swallow a tax increase from the Democratic Congress. In 1990 after victory in Kuwait his popularity in polls approached 90 percent, but he lost the 1992 election to Arkansas Governor William Jefferson Clinton in a strange and suspicious three-way race in which Clinton won only 43 percent of the popular vote.

Clinton in fact never won a majority of American votes; he won reelection in 1996 with 49 percent of the vote, but this was enough to make him the first Democratic president since Franklin Delano Roosevelt elected to two terms.

A major factor in Mr. Bush's defeat was a wobbly economy that the liberal media portrayed as worse than it actually was.

In election year 1992 it cost $3.46 to buy goods that cost $1 in 1971, and Democrats running against Bush took as their slogan "It's the Economy, Stupid."

Clinton "Prosperity"

President Clinton ran for office vowing to cut taxes, but weeks into his presidency he called for a huge retroactive tax increase.

Centuries hence historians may write of Mr. Clinton as a great president - a great Republican president who accomplished things even Ronald Reagan could not, including "ending welfare as we know it" (a welfare reform now rolled back by the language hidden in President Obama's finance reform law), trade liberalization, and the turnover of both houses of Congress to Republican control.

Clinton was pragmatic, willing to surrender liberal principle to retain power, and a natural politician who, as Republican Mississippi Governor Haley Barbour said, "could charm the skin off a snake."

President Clinton was promiscuous, one pundit noted, not only in his personal life but also in how he governed. The first Baby Boomer president, he seemed never to have grown up or taken on adult responsibility.

Like many of today's Democratic leaders, Mr. Clinton never held a job in business or had to meet a payroll. His career was always in government, where power is earned or stolen but money comes automatically, or in the university, where abstract utopian ideas and wordplay are often honored above real-world achievements and integrity.

Democrats credit President Clinton with fostering prosperity during his two terms in office. They do not credit some other obvious factors.

Republicans Take Congress

In 1994 an electorate disgusted with Democratic one-party rule in Washington, D.C., turned over both houses of Congress to the Republicans. This allowed Mr. Clinton to talk liberally for six years while firm congressional conservative hands steered American economic policy and gave people the confidence to invest.

President Clinton took office during an economic upswing that had been concealed during the 1992 campaign by a Democrat-backing liberal media.

And Mr. Clinton had ample money to spend that others had earned and set aside. This was the "Peace Dividend" from President Reagan's victory in the Cold War.

Reagan and Bush wanted American defense spending lowered gradually, both to keep the country strong and to avoid economic dislocations in places like Southern California with lots of defense industry jobs.

President Reagan would undoubtedly have preferred that this Peace Dividend go back to taxpayers to spend enriching their own families and reducing their burdens. Their sacrifices, after all, had made Cold War victory possible.

President Clinton instead dove into this pile of taxpayer money like a bear into a honey pot. He gutted America's defense budget, diverting at least $125 Billion a year to spend elsewhere, and not without some liberal Republican accomplices eager to help him - and to help themselves - to the swag.

This looting of the defense and intelligence budgets is largely the source of the fabled "Clinton prosperity." He found a huge credit card that rightly belonged to others. He spent wildly and lavishly with it for things he wanted, running up the tab to then-stratospheric heights.

The other bill for Mr. Clinton's reckless slashing of America's national defense and intelligence capabilities arrived on September 11, 2001.

The dollar continued to weaken during the Clinton years, despite efforts to control spending by the Republican majority in Congress.

In election year 2000 a shopper needed $4.25 to buy what $1 could purchase in 1971. The U.S. Dollar had shriveled to only about 23 percent, less than a quarter, of its 1971 buying power.

This two-bit dollar, a legacy of Nixon's fateful decision, was one reason why hard-pressed Americans were ready for a change.

Bush Gets Gored

In 2000 the American people narrowly elected George W. Bush, despite Democratic attempts in Florida to have Democratic judges permit a selective vote recount and lawyers employed by Clinton's Vice President Al Gore using legal technicalities to throw out military absentee ballots.

Liberals should remember two things about Mr. Gore's defeat.

The first is that he could have won without Florida had he been able to carry his home state of Tennessee. Voters in that state, where people knew Gore best, strongly rejected him. So did voters in Clinton's home state of Arkansas.

The second is that Mr. Gore could easily have won the presidency in 2000 if Democrats in Congress had behaved morally and ethically.

Mr. Clinton became the first elected president ever impeached by the House of Representatives. He should then have been removed from office by the U.S. Senate, but Democrats wavered and then threw everything they could use into blocking the President's ouster.

What would have happened had the Senate removed Mr. Clinton?

Vice President Gore would have become President, and in accord with the Constitution he could have served out the less than two years remaining to Mr. Clinton and then run for two full presidential terms of his own.

In 2000, running as an incumbent president with the Clinton scandals fading in America's rear view mirror, Mr. Gore would almost certainly have been elected.

So by lacking the moral fiber to remove a tainted President Clinton, Democrats gave America eight years of President George W. Bush.

Only months after his inauguration, President Bush and the nation faced the horror of 9-11. This manmade disaster cost America not only 3,000 lives but also at least $1 Trillion in economic losses around the world.

Osama bin Laden had shown that a handful of terrorists armed only with box cutters could cause overwhelming damage to the United States.

President Bush was the grandson of a U.S. Senator and son of a president. He had the benefit of his father's advisors. He successfully prevented another shattering terrorist attack during his time in office and won re-election in 2004 by a solid margin, securing the mandate that ideological opponents said he lacked after the controversy of 2000.

President Bush responded to 9-11 with a new military doctrine of preemption, striking terrorists before they could strike us. In a world of terrorists potentially armed with nuclear or other weapons of mass destruction, we could no longer afford to wait for the certainty of a "smoking gun" if that smoke came from a mushroom cloud over New York City or Washington, D.C.

In Afghanistan Mr. Bush's forces deposed the dogmatic Taliban rulers who had given shelter, aid and comfort to bin Laden and Al Qaeda. Even 2008 Democratic presidential candidate Barack Obama approved this war.

In Iraq Mr. Bush chose to play "Big Casino." Various unstable dictatorial regimes were at risk of falling in the Middle East. They could fall either towards democratic capitalist values or imitate Iran and become Islamic theocracies.

President Bush gambled that he could establish an alternative model to that of Iran, a working successful democracy for other Islamic nations to see as an example of Muslim modernity. It remains to be seen whether this gamble will succeed or fail.

Mr. Bush, like his father, is in some ways a Big Government conservative. He promoted and signed into law a huge prescription drug benefit, one of the largest expansions ever of the welfare state.

He is sympathetic to Latino immigrants, having grown up in Texas and speaking Spanish. His brother Jeb, former Governor of Florida, converted to Roman Catholicism to marry a Mexican; he, too, speaks Spanish. And in elections George W. Bush has gotten upwards of 40 percent of Mexican-American votes, an achievement Republicans may need to replicate now that Hispanics have surpassed African-Americans in numbers and become America's largest minority.

Many conservatives are offended by those who wink at violators of our immigration laws. For these conservatives, the news footage of President Bush riding in a Border Patrol dune buggy near Yuma, Arizona, was reminiscent of liberal Michael Dukakis playing soldier in an Army tank.

In November 2008 voters rejected the Republican presidential nominee who shared Mr. Bush's view of immigration, Arizona Senator John McCain, in favor of a fledgling lawmaker from Illinois, Senator Barack Obama.

President Bush followed a policy of deliberately weakening the dollar to make American exports cheaper abroad. In 2008 the dollar fell to less than 19 cents of its 1971 value and was still going down.

Yet the dollar's continuing downward spiral was, by election time, only one factor in much larger economic, political and social crises that its drop helped cause.

A Financial 9-11

Less than two months before that election, fear of a global economic meltdown and of President Bush signing a bill to stop the collapse of major banks and other institutions filled the news.

This shock at first looked like a financial 9-11, a bolt out of the blue that had taken the world by surprise.

Some analysts, however, had watched these forces coming and converging for a long time and had warned investors to take shelter.

Others suspected that international money might have intervened in American banks and markets as part of a concerted effort to elect Democrat Barack Obama, as we analyze in a balanced way in The Inflation Deception. [7]

Reversing Nixon's Error

"With the exception only of the period of the gold standard,
practically all governments of history have used
their exclusive power to issue money
to defraud and plunder the people."

- Friedrich A. Hayek Nobel Laureate Economist

In 1971 President Richard Nixon cut the U.S. Dollar adrift from its secure gold anchor.

Until we restore our currency's anchor via a new gold standard or some other approach that deters politicians from printing fiat money, our economy and dollar will continue their slippery downhill slide in value and reliability.

Paper money is a faith-based currency, we repeatedly have written. Faith in U.S. paper dollars both here and in other nations declines every time our politicians and the Federal Reserve conjure another batch of money out of thin air.

Here are a few ways that we as a nation and as individuals could help restore money in America that we and the world can believe in and trust again.

A Choice of Currencies...Governmental and Private

With a few exceptions, we are pro-choice.

We believe, for example, that Americans should be free to choose what kind of electric light bulb they use - the safe, mercury-free Thomas Edison-style incandescent bulbs, or the dangerous fluorescent bulbs that emit mutation-causing, cancer-causing Ultraviolet C radiation, bulbs that extremists are about to force all of us to use through government coercion.

Why, when it comes to currency, does the government largely insist that transactions be carried out denominated only in its debased fiat monopoly money?

One answer is obvious, as we explored in The Inflation Deception: Governments steal part of the value of what we earn by printing excess paper money. This modern debasing of money via inflation differs little from the way ancient rulers diluted their coins with base metal or clipped the edges from their gold coins.

We believe that you, as consenting adults, have a moral and legal right to choose the "currency" in which you voluntarily trade with each other.

This coercive money monopoly is a major reason why our cash has lost more than 98 percent of its purchasing power since the Federal Reserve Board took it over in 1913.

Uncle Sam took away our gold and silver, and in their place gave us pieces of paper like those used in the game Monopolyâ„¢. [8]

Restoring citizen choice in money could put an end to the inflation game our politicians are using against us.

Here are three ways to restore choice and competition to the money we use.

Why not let Americans buy and sell in Euros? In British Pounds? In Canadian "Loonies"? Or even in private precious metal "barter currency?" Let a variety of currencies compete.

Americans could embrace a new Global or Regional Currency such as the widely-speculated potential currency the Amero, North America's potential answer to Europe's Euro.

We could try the International Monetary Fund's Special Drawing Rights (SDRs) based on a "basket of currencies," or a similar variant such as the "dey" (a basket based on dollars, Euros and Japanese Yen).

Or we could launch and use various global currencies such as economist John Maynard Keynes' proposed "bancor" or the Economist Magazine's proposed "Phoenix." [9]

At this moment of global economic change, would any other currency be better than today's shrinking and weakening U.S. Dollar? Our dollar remains the world's official "reserve currency," but might soon lose or have to share this now-exclusive status.

Some economic experts already describe gold as the world's new real reserve currency.

Just Say Noah

It makes sense to remember Noah, who brought two of every creature on board the Ark. You should not have to limit your savings or your spending to only one national currency.

The dollar's status as "global reserve currency" - what former French President Charles De Gaulle called America's "exorbitant privilege" - means that we control the supply and distribution of the world's official exchange medium for oil and other key commodities. When Japan buys a barrel of oil from Saudi Arabia, the price is set and payment is made in U.S. Dollars.

Without this special status, the United States would have to pay a premium price to buy whatever other currency is used to price and purchase oil. Today other nations must buy our dollars to purchase oil, which gives us a significant advantage in global credit and trade.

This, of course, gives others gas pains when the U.S. Government and Federal Reserve inflate our currency by running trillions off the printing press - thereby exporting our inflation to them and taxing them to enrich ourselves.

"There could be no more effective check against the abuse of money by the government than if people were free to refuse any money they distrusted and to prefer money in which they had confidence," wrote Nobel laureate economist Friedrich A. Hayek.

"Nor could there be a stronger inducement to governments to ensure the stability of their money than the knowledge that, so long as they kept the supply below the demand for it, that demand would tend to grow."

"Therefore," wrote Hayek, "let us deprive governments (or their monetary authorities) of all power to protect their money against competition: if they can no longer conceal that their money is becoming bad, they will have to restrict the issue." [10]

Or simply have laws passed breaking the monopoly of the U.S. Dollar as the only "legal tender" in America that people were required to accept as payment when taxes and prices were denominated in dollars.

Separation of Money and State

Hayek laid out his argument for the separation of money and state in the 1990 third edition of his brilliant book Denationalisation of Money: The Argument Refined: An Analysis of the Theory and Practice of Concurrent Currencies.

In earlier times, he argued, governments claimed that their monopoly over a nation's money provided a convenient, consistent currency for its citizens.

Today, wrote Hayek, national (and nationalized) money "has the defects of all monopolies: one must use their product even if it is unsatisfactory, and above all, it prevents the discovery of better methods of satisfying a need for which the monopolist has no incentive."

"If the public understood what price in periodic inflation and instability it pays for the convenience of having to deal with only one kind of money in ordinary transactions...," wrote Hayek, "it would probably find it very excessive." [11]

Hayek envisioned a society in which people could choose to make transactions in many kinds of currency, as well as in silver and gold.

"We Don't Care. We Don't Have to..."

Older citizens will remember when each community had only one telephone company that, being a monopoly, charged high rates for often-poor service and even charged customers for connecting their telephone to their own answering machine.

Comedienne Lily Tomlin back then played as one of her stock characters "Ernestine," a telephone operator. "We don't care. We don't have to," Ernestine would tell irate customers. "We're the phone company."

The much more controversial comic Lenny Bruce used to say that, even at its best, "socialism is like one big telephone company," a government monopoly that felt free to ride roughshod over people who had no other choice.

Hayek wanted people to have choice in the currencies they can use. We see the remarkable innovations, benefits and savings that breaking the telephone monopoly and introducing a little free market competition have produced.

Imagine what a country of currencies, each competing for customers, could produce.

The government could also allow private currency. In some ways we already do. The store coupon that is worth $1 if used to buy a particular product on or before a particular date is, arguably, a kind of currency. Some cities and localities issue their own local or regional script "money," just as many did during the Great Depression.

When the U.S. Dollar was strong, our Federal Government showed little concern with such marginal "competitors" to its money monopoly.

As the dollar grows weaker and becomes more debased by reckless, uncontrolled government spending and the printing of trillions of paper fiat dollars by the Fed, the Obama Administration has begun going to wild extremes to crush competing currencies.

"A Unique Form of Domestic Terrorism"

In March 2011 Mr. Bernard von NotHaus, 67, a resident of North Carolina, was convicted of minting and circulating "Liberty Dollars" and "Ron Paul Dollars," which without the permission of the Texas Congressman bear his name and likeness.

NotHaus now faces up to 25 years in prison, fines of up to $750,000, and the forfeiture of 16,000 pounds of "Liberty Dollars" and of nearly $7 Million worth of gold and silver that Federal authorities seized in a raid.

NotHaus has produced items such as "Ron Paul Dollars" - which he calls "a functioning currency...a barter currency" - for approximately 10 years.

According to NotHaus, "we've never said [these items are] legal tender." They are used to trade for things based on their weight in pure gold or silver.

Anne M. Tompkins, the U.S. Attorney for the Western District of North Carolina who prosecuted this case, declared: "It is a violation of federal law...to create private coin or currency systems to compete with the official coinage and currency of the United States." [12] "What's wrong with competition?" asks Fox Business Channel libertarian host John Stossel. "As long as there's no fraud or counterfeiting - which NotHaus has not been convicted of - I would think that individuals should be allowed to use whatever currency they want." [13]

We have no such freedom here, said U.S. Attorney Tompkins:

"Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism. While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country." "We are determined," U.S. Attorney Tompkins continued, "to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government." (Emphasis added.)

Let's ponder this.

The Obama Administration refused to prosecute Black Panther Party radicals who used a weapon to intimidate elderly Jews at a Philadelphia polling place to prevent them from voting, while verbally assaulting them with racist slurs.

The Obama Administration refused to pursue or prosecute organized labor goons who severely beat a peaceful African-American Tea Party activist in St. Louis while assaulting him with racist epithets and violating his civil rights.

The Obama Administration has not lifted a finger to track down and prosecute union thug domestic terrorists who literally threatened the lives of Wisconsin state lawmakers and their families, thereby directly assaulting the people's elected representatives and "our democratic form of government."

Oh, and President Obama has not arrested himself or the Federal Reserve for involvement in the issuing of more than $4 Trillion in fiat dollars unbacked by either precious metals or economic productivity - dollars that, therefore, are already robbing all Americans through inflation in exactly the same way outright counterfeit dollars would do.

Yet an Obama-appointed U.S. Attorney eagerly brought a zealous prosecution against a man whose only crime was to mint a private "barter currency" with a precious metal value at least comparable to United States coinage, and to accuse this peaceful senior citizen of being engaged in "domestic terrorism."

Is the U.S. Dollar now so shaky that the highest priority of law enforcement must be devoted to protecting government's money monopoly, and to prosecuting those who dare to mint a tiny quantity of their own gold and silver coins?

Gold: The Standard

"The return to sound money policies
is of utmost importance. Without sound money
there can be no economic recovery, no prosperity....
Sound money is the cornerstone of individual liberty.
Sound money is metallic money.
It is the gold standard."

- Hans Sennholz
Economist

Gold - the world standard of value since Biblical times - restored stability, reliability and trust in the money of the most advanced nations during the 19th and early 20th Centuries, so why not let it do so again?

Influential economist John Maynard Keynes called gold "a barbarous relic," but as paper currencies keep sinking in value from inflation, a growing number of voices have started saying good things about the merits of gold.

In January 2011, the President of the Kansas City Federal Reserve Thomas Hoenig said that the gold standard is "a very legitimate monetary system" that could help create price stability. [14]

In February 2011, J.P. Morgan Chase announced that its clients were now able to use gold as collateral for some loans. [15]

In late 2010 the President of the World Bank Robert Zoellick made headlines by suggesting that countries consider "employing gold as an international reference point of market expectations about inflation, deflation and future currency values" to create a more stable and cooperative international system of trade and finance. [16]

The University of Texas recently converted a significant fraction of its endowment from dollars to gold, and Mexico followed the gold rush of several Asian nations by buying quantities of gold.

Why are so many turning to gold, specified as money in the Bible, while the value of paper fiat currencies keeps falling?

Under a metal-backed currency, the dollar on average actually gained value from 1823 until 1913. What cost $100 in 1823 would have cost only $63.02 in 1913. [17]

This is deflation, the boogey man Fed Chairman Ben Bernanke fears most. Deflation is the reverse of inflation. In Deflation money gains value.

This means that borrowers - including the biggest borrower of all, the government and its free-spending politicians - cannot repay their debts with inflation-devalued money.

A gold standard is therefore the biggest nightmare of those who want a welfare state whose cost is concealed and funded by inflation.

Gold makes a welfare state's spending harder, yet it also makes a warfare state less likely. The gold standard is a powerful restraint on extreme government spending, whether for welfare or war.

It tells politicians that they can only do what they have enough gold already saved to pay for.

This is why governments usually abandon or put in abeyance their gold standards at the start of major wars - as both sides did at the start of WWI.

As we noted earlier, President Richard Nixon severed the last bit of convertibility between gold and the dollar on August 15, 1971. The gusher of paper fiat money printed to bankroll the Vietnam War, Nixon knew, if redeemed for gold by European central banks as the Bretton Woods agreement allowed, would have drained America's gold reserves at Ft. Knox.

Gold is sober money for responsible grown-ups. Incorruptible by rust or tarnish, gold always shines through when fiat paper currencies are collapsing.

The trouble is, our wild-spending politicians might not be responsible grown-ups. They might prefer to go on freely spending trillions in fiat paper money, and not be seen for what they are when reflected in a mirror of gold.

Under a properly-functioning national and international gold standard, the Federal Reserve would be unnecessary and could be closed down.

The closing of the Fed would lead to the curtailing of inflation.

Golden States

"It is essential that Americans be given
the chance to escape from this system
and protect themselves from possible financial ruin,
by being able to use gold and silver if they so desire."

- Rep. Ron Paul

Before President Franklin D. Roosevelt outlawed possession of gold bullion by most Americans, major business contracts contained "gold clauses." Such clauses said that a contractee owned money could demand to be paid in either U.S. Dollars or, if politicians had debased this currency by over-printing it, in a specified quantity of gold as a safeguard against politicians devaluing our money.

Today we deserve more than the restoration of gold clauses in ordinary contracts.

We deserve a permanent gold clause in the "social contract" that is the foundation of our Constitution.

Gold, says a former member of President Ronald Reagan's Gold Commission Lewis H. Lehrman, could keep the politicians and U.S. Dollar honest by giving us an alternative currency....a way of voting with our feet against a corrupted dollar.

One positive and educational step in this direction is to encourage States to Authorize Gold and Silver As Legal Tender, and Urge the Federal Government To Accept Its Own Gold and Silver Coins as Legal Tender at Face Value.

Why not let Americans use existing gold and silver coins as money?

Fourteen states are considering or have recently considered whether to make gold and silver coins a form of legal tender within their borders.

These states are Colorado, Georgia, Idaho, Indiana, Minnesota, Missouri, Montana, New Hampshire, North Carolina, South Carolina, Tennessee, Vermont, Virginia and Washington State.

Specific details and proposed legislation in these states are available on the website http://www.constitutionaltender.com

A fifteenth state, Utah, passed such a measure, and Utah Governor Gary Herbert signed it into law on March 25, 2011.

This law, which went into effect throughout Utah on May 10, 2011, "recognizes gold and silver coins that are issued by the federal government as legal tender in the state and exempts the exchange of the coins from certain types of state tax liability."

"These actions by state legislatures are mostly symbolic," said George Mason University Economics Professor Lawrence H. White.

"Declaring that people can use a one-ounce federally-minted gold coin at its face value of $50 doesn't really give people a reason to do that," he told ABC News. "But it's a statement by the state legislators that they are concerned by the state of the dollar." [18]

According to longtime Galveston-area Texas Congressman Ron Paul, a Republican who in 1988 was the presidential candidate of the Libertarian Party, America needs "to legalize competition. Restore to Americans their right to use precious metals as a medium of exchange - a simple and reasonable initial step if we believe in freedom."

"If anyone would rather continue to transact in the depreciating dollar, he would be free to do so," wrote Paul, now Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy and Technology and a member of the Joint Economic Committee and House Committee on Financial Services.

Rep. Paul was also a member of the U.S. Gold Commission created by President Ronald Reagan, and has co-authored The Case for Gold, a book about what it documented. [19]

"But anyone who prefers a currency that holds its value and won't become worthless before his eyes just because his government ran the printing press one too many times would have real options." [20]

"Right now, various disabilities make it difficult for gold to be used in market transactions," wrote Rep. Paul. "Sales and capital gains taxes on precious metals should be promptly repealed, and the enforceability of gold clauses in private contracts definitively reaffirmed."

Such new state laws could mean that the buying and selling of gold or silver coins can no longer be treated as a "taxable event," and that therefore no state or Federal sales tax and no capital gains tax on silver or gold coin appreciation can be collected.

This is a grand opportunity for the states to act as the laboratories of democracy, as America's Founders intended.

Chances are that states allowing gold coins as currency would profit from having the most honest money in America. Such states would probably lure investors and successful home buyers.

Would this violate the U.S. Constitution? Presumably not, because the Constitution limits states to the use of gold and silver coins (Article I Section 10), as James Madison discussed in Federalist Paper No. 44. The use of established gold and silver coins as money is precisely what these proposed laws would allow.

These proposed laws would let Americans once again buy and sell using a variety of precious metal coins, as was routinely done in colonial times and in the early days of the American Republic.

Using gold and silver coins - not the states' paper fiat currency - worked well way back then and, with modern instant global communications and readily-available market information from around the planet, would work even better today.

"What other policy for sheltering Americans from the collapse of the dollar is being advanced?" asked Rep. Ron Paul.

"Is there any, apart from the comforting delusions that the Federal Reserve, which is itself responsible for financial mess, can be trusted to put everything right?" wrote Paul.

"How can we be expected to place so much trust in a Federal Reserve System we're not even allowed to audit?" [21]

As Chairman of a powerful congressional subcommittee, Congressman Paul continues to press for impartial audits of the Fed. Fed Chairman Ben Bernanke and the Obama Administration continue to resist Paul's efforts, even though Mr. Bernanke has now held his first press conference in what he says should persuade the public that the Fed is open and above board.

"The Federal Reserve now no longer reports the figures on M3, the total money supply," wrote Paul, who contends that "the real reason we don't get these figures anymore, I am certain, is that they are too revealing. They tell us more about what the Fed has been up to and the damage it has been doing to our dollar than they care for us to know." [22]

If other states follow Utah's lead and begin enacting laws that make gold coins legal tender, will these coins' value be established by their face value or their gold content?

Suppose Professor White is correct and their legal tender value is set at, for example, a gold coin's face value of $50 when its one ounce of gold had a market value of $1,500. (With gold gaining value rapidly, you might want to re-do these calculations with the value of gold on the day you read this.)

Let's say that the Federal Government accepts, either by its action or inaction, that $50 is the tender value of such U.S. coins.

Would you be foolish to use such coins?

None of what follows is to be taken as legal or financial advice. It is merely hypothetical speculation based on how future courts and government agencies might interpret hypothetical future laws defining U.S. gold coins as legal tender in all or parts of the United States.

To the best of our knowledge, the U.S. Government has never renounced the legal tender status of its historic numismatic gold and silver coins. In 1933 President Franklin D. Roosevelt's notorious executive order that made it illegal for most Americans to own gold bullion exempted numismatic gold coins, which remained legal to own and trade.

Consider just a few of the hypothetical possibilities they could create:

What if in 2015, Jack and Jill wish to purchase Ryan and Peggy's home for a never-advertised $300,000?

If they made this transaction in fiat paper U.S. Dollars, with government's lust for taxes having grown, this might subject Ryan and Peggy to a 25 percent capital gains tax of $75,000.

It could force Jack and Jill to pay a 10 percent sales tax of $30,000, as well as lifelong property tax on the value of the property of 6 percent - $18,000 year after year, and increasing from this purchase price baseline forever.

What, however, if this home were purchased using $50 U.S. gold coins as legal tender, the transaction could be done with only 200 gold coins whose market value is $300,000 - but whose face value is $10,000?

If a court ruled that this set the legal tender price of the house at $10,000, then the capital gains tax on its sale would be $2,500 instead of $75,000.

The sales tax on its sale would be $1,000 instead of $30,000.

The baseline property tax on the property would be $600 instead of $18,000.

If that happened, then both buyer and seller could gain significant benefits by conducting such a transaction in gold coins.

Some senior citizens reading this might notice that, even with government having imposed new taxes, the costs in such a transaction seem nostalgic.

These pricetags reflect what homes and taxes used to cost before the huge inflation deception that government cunningly created during the last half-century and more, and continues to use to rob us today.

Imagine some other instances where money changes hands in either paper fiat money or legal tender gold coins:

What might happen if a dying parent converts his $10 Million estate into 6,667 $50 gold coins having a legal tender face value of $333,350?

In dollars, such a transfer might have cost up to half of his estate - his son's or daughter's inheritance - via the Death Tax, the so-called Estate Tax.

If instead, however, government recognized his Will and Trust as transferring only a third of a million dollars of face value in gold coins, the inheritance for his family might then no longer be subject to the Death Tax. Even if it were, this tax might be on a much smaller gold face value amount.

Or imagine restrictions placed on an American citizen carrying $10,000 when crossing the U.S. border, whether coming or departing.

This hypothetically means that a citizen could carry 200 U.S. gold coins with a legal tender face value of $10,000 into or out of the United States and be in total compliance with this restriction.

The market value of the gold in such coins, however, would be approximately $300,000, and if these are high quality numismatic coins their value might be significantly higher than this amount.

What would a Utah citizen whose wages are paid only in $50 U.S. numismatic gold coins owe in income taxes now that the Utah law has declared such coins to be legal tender and not mere objects of barter?

As an unintended consequence of new state legal tender laws, these and other financial transactions, transfers and activities might someday soon bring hypothetical tax or regulatory benefits if carried out via legal tender U.S. coins.

Unless you live in Utah, no such state benefits yet exist. In any event, you should consult with your tax attorney, Certified Public Accountant and other specialists to learn how the governments under which you live define and view these issues.

Would government surrender such huge tax revenues if people bought, sold and otherwise used U.S. gold coins as legal tender?

Our elected public servants might have to, because ultimately our government is supposed to serve the people and do what voters demand.

This is what government teachers have always taught to children in government schools, is it not?

The Do-It-Yourself Gold Standard

"This is the shabby secret of the welfare statists'
tirades against gold. Deficit spending is simply
a scheme for the 'hidden confiscation' of wealth.
Gold stands in the way of this insidious process."

- Alan Greenspan
1966, 21 years before President
Ronald Reagan appointed him as
Chairman of the Federal Reserve

The Bible's Gospel of Matthew tells of an attempt by opponents to "entangle [Jesus] in his talk" by asking whether it was legal to give tribute to Caesar.

If Jesus approved paying such tribute, he would violate Jewish law and lose the support of many devout fellow Jews. If he told listeners not to pay the tribute, he could be arrested for violating the law of the Roman Empire.

"Shew me the tribute money," said Jesus, who then asked his interrogators: "Whose is this image and superscription?" on the coin. They replied: "Caesar's."

"Render therefore unto Caesar the things which are Caesar's," said Jesus, "and unto God the things that are God's." [23]

Those who hold their savings and bank accounts denominated in the paper fiat money of America's new form of government - which in The Inflation Deception we named "Inflatocracy" - government of, by and for inflation - are holding promissory notes from an entity that, as we mentioned earlier, according to the International Monetary Fund is already effectively bankrupt.

U.S. debts are in excess of $120 Trillion in unfunded liabilities, an amount so large that a 100 percent tax on the income of all U.S. citizens would be insufficient to pay it off.

Continuing to hold one's life savings in dollars is essentially the same as investing those savings in the stock of a company on the brink of bankruptcy.

The politicized Federal Reserve Board is already monetizing this debt with devalued paper currency as rapidly as it dares without causing a flight out of U.S. Dollars.

The Fed needs to avoid driving people into other currencies, tangible commodities that politicians cannot print, or what since Biblical times has been accepted universally as intrinsically valuable money that needs no government endorsement: silver and gold.

Gold versus The Welfare State

A silver bullet is widely believed to have the power to kill a werewolf, if such a creature exists.

Gold is the bullet that, without doubt, can kill the very real monster of inflation, which is almost entirely a creature of government paper fiat currency.

This is why economist Alan Greenspan, later to chair the Federal Reserve Board, wrote in 1966 about why so many "welfare-state advocates" have "An almost hysterical antagonism toward the gold standard," which anchors a currency to gold convertibility and thereby handcuffs politicians eager to run the Mint's printing presses.

Welfare-statists, Greenspan wrote, realize that "the gold standard is incompatible with chronic deficit-spending (the hallmark of the welfare state).... [T]he welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes."

"In the absence of the gold standard," wrote Greenspan, "there is no way to protect savings from confiscation through inflation. There is no safe store of value.... The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves."

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth," Greenspan continued. "Gold stands in the way of the insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." [24]

If inflation worries you, isn't it time to diversify a portion of your paper dollar savings into something secure that politically-created inflation cannot devalue and politicians cannot run off a printing press?

The politicians are unlikely to restore a government gold standard. Their power, after all, comes from the Inflatocracy, a political system based on the deceptive printing of paper fiat money and the dependency it creates.

Now you understand why welfarists from FDR to Fed banker Beardsley Ruml saw the end of the gold standard as key to expanding the government and welfare state.

"Gold and economic freedom are inseparable," wrote Greenspan. "[T]he gold standard is an instrument of laissez-faire and...each implies and requires the other."

And the reverse side of this coin is equally true: a gold standard makes it almost impossible politically to sustain a welfare state and to deny citizens economic freedom.

No Inflatocracy can exist where honest money prevents inflation and restricts the printing of more paper fiat currency.

Creating Your Own Gold Standard

If everyone decided to convert his and her paper money bank deposits into metal with intrinsic value and stopped accepting government paper money, wrote Greenspan, then "government-created bank credit would be worthless as a claim on goods." Government fiat money, in other words, could no longer buy anything.

The highway to the socialist welfare state, and to serfdom, is a carpet of government paper fiat money.

The path back to the practical and moral values of America's Founders requires us to restore the precious metal they constitutionally specified as real money.

This is the philosophical difference between a society built on paper promises and a society built on a solid foundation of integrity and gold.

A Fable for Our Times Children have always learned values from stories they are told. We can learn from the traditional and, thanks to Ethel C. Fenig at AmericanThinker.com , from the modern, politically-correct version of one such story:

Once upon a time a Little Red Hen found several grains of wheat in the farmyard. Instead of eating them, she gathered them and then went to her neighbors.

"If we plant this wheat, we shall have bread to eat," she told them. "Who will help me plant it?"

"Not I," the cow and duck and pig and goose all told her.

"Then I will do it myself," said the Little Red Hen, and she did. The wheat soon grew and ripened into golden grain.

"Who will help me harvest the wheat?" asked the Little Red Hen.

Again the other animals refused to help.

"I'd lose my unemployment compensation," the goose told her.

The Little Red Hen herself harvested the wheat, ground it into flour, and then asked who would help her bake it into bread.

The other animals again refused, with excuses.

"I'd lose my welfare benefits," said the duck.

"Then I will do it myself," said the Little Red Hen, who baked five loaves and then showed them to the others.

"And who will help me eat this bread?" asked the Little Red Hen.

"I will," they all replied.

"If you don't give me any bread," added the goose, "that's discrimination."

"No," replied the Little Red Hen. "I made the bread and I shall eat all five loaves." And she did.

The more-or-less traditional children's story ends here, and Ms. Fenig's modern, politically-correct version kicks into high gear:

"Excess profits!" cried the cow.

"Capitalist leech!" screamed the duck.

"And they all painted 'Unfair!' picket signs and marched around and around the Little Red Hen, shouting obscenities."

"Then Farmer Obama came. He said to the Little Red Hen, 'You must not be so greedy.'"

"'But I worked hard and earned the bread,' protested the Little Red Hen."

"'Exactly,' said Barack the farmer. 'That is what makes our free enterprise system so wonderful. Anyone in the barnyard can earn as much as he wants. But under our modern government system, the productive workers must divide the fruits of their labor with those who are not productive. It is only fair.'"

"The Little Red Hen smiled and clucked, 'I am grateful, for now I truly understand.'"

"The Little Red Hen never again baked bread but signed up for all the free stimulus bread, joining her friends the cow, the duck, the pig and the goose."

"And one by one all the bread bakers stopped baking bread, following the example of their friend, the Little Red Hen."

"And soon there was no more bread and everyone was hungry."

"And all the Democrats smiled. Fairness and equality had been established and ruled the land." [25]

America's Founders and modern wise men and women understood this.

"Were we directed from Washington when to sow and when to reap," wrote Thomas Jefferson, "we should soon want bread."

"If government were put in charge of the Sahara Desert," wrote economist Milton Friedman, "within five years we would have a sand shortage."

Why would any sane person put government politicians or bureaucrats in charge of anything?

If we are going to reverse President Nixon's worst mistake, as the Little Red Hen discovered, we may have to do it for ourselves.

Render Unto the Inflationistas

The good news is that Americans can be the traditional Little Red Hen with the pluck to take charge and not wait for others to rescue us.

We can each choose to create our own gold standard, our own store of dependable value that inflation and politicians such as Presidents Barack Obama and Richard Nixon cannot steal or destroy.

Gold can be your and your family's own Declaration of Independence from the Inflatocracy, its invisible taxes and its welfare state.

Render unto the Inflationistas their paper inflat-a-money, and render unto yourself and your family a solid financial foundation of real money such as gold that is inflation-proof and whose value cannot be stolen by the Inflation Deception.

Sources

[1] William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. New York: Simon & Schuster/Touchstone, 1989. Page 334.

[2] Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 (NBER Series on Long-Term Factors in Economic Development). Oxford: Oxford University Press, 1996.

[3] Jeffrey H. Anderson, "Obama's Economists: 'Stimulus' Has Cost $278,000 per Job," Weekly Standard, July 3, 2011.

[4] Yi Wen, "Monetary Policy's Effects on Unemployment," Economic Synopses, Number 10 (2011). Published by the Federal Reserve Bank of St. Louis. URL: http://research.stlouisfed.org/publications/es/11/ES1110.pdf

See also Tyler Durden, "St. Louis Fed Stunner: Admits QE May Lead to Rise Rather Than Drop In Unemployment," ZeroHedge.com, April 30, 2011. URL: http://www.zerohedge.com/print/370688

[5] Ethan Ilzetzki and others, "How Big (Small?) are Fiscal Multipliers?" NBER (National Bureau of Economic Research) Working Paper No. 16479 (October 2010). URL: http://www.nber.org/papers/w16479.pdf

For a slightly earlier version of this paper available on the Internet, go to: URL: http://econweb.umd.edu/~vegh/papers/multipliers.pdf

See also David Brooks, "The Two Cultures," New York Times, November 15, 2010. URL: http://www.nytimes.com/2010/11/16/opinion/16brooks.html?_r=1&ref=davidbrooks

[6] Egon von Greyerz, "There Will Be No Double Dip," Matterhorn Asset Management AG, August 16, 2010. URL: http://matterhornassetmanagement.com/2010/08/16/there-will-be-no-double-dip/

[7] See Craig R. Smith and Lowell Ponte, The Inflation Deception: Six Ways Government Tricks Us...And Seven Ways to Stop It! Phoenix: Idea Factory Press, 2011. Pages 28-33.

See also Kevin D. Freeman, Economic Warfare: Risks and Responses: Analysis of Twenty-First Century Risks in Light of the Recent Market Collapse (Monograph). Cross Consulting and Services, 2009. This can be downloaded from the Internet at no cost from http://av.r.ftdata.co.uk/files/2011/03/49755779-Economic-Warfare-Risks-and-Responses-by-Kevin-D-Freeman.pdf

or at no cost from

http://www.freemanglobal.com/uploads/Economic_Warfare_Risks_and_Responses.pdf

[8] The name and graphic design thereof of the board game Monopolyâ„¢ is a registered trademark of Parker Brothers, a division of Hasbro, Inc., whose corporate headquarters are in Pawtucket, Rhode Island.

[9] Llewellyn H. Rockwell, Jr., "The Inflationist Dream," The Free Market, Volume 23, Number 9 (September 2003). URL: http://mises.org/freemarket_detail.aspx?control=455

[10] F.A. Hayek, Choice in Currency: A Way to Stop Inflation (Monograph). London: Institute of Economic Affairs, 1976. URL: http://www.iea.org.uk/sites/default/files/publications/files/upldbook409.pdf

[11] Friedrich A. Hayek, Denationalisation of Money: The Argument Refined: An Analysis of the Theory and Practice of Concurrent Currencies. Third Edition. London: Institute of Economic Affairs, 1990. Pages 27-28. This can be downloaded from the Internet at no cost from http://mises.org/books/denationalisation.pdf

[12] "Defendant Convicted of Minting His Own Currency," (Department of Justice Press Release), Charlotte, North Carolina: U.S. Federal Bureau of Investigation, March 18, 2011. URL: http://charlotte.fbi.gov/dojpressrel/pressrel11/ce031811.htm

[13] John Stossel, "Starting A New Currency is 'Domestic Terrorism"? FoxBusiness.com, March 22, 2011. URL: http://stossel.blogs.foxbusiness.com/2011/03/22/starting-a-new-currency-is-"domestic-terrorism"/print/

See also Seth Lipsky, "When Private Money Becomes a Felony Offense," Wall Street Journal, March 31, 2011. URL: http://online.wsj.com/article/SB10001424052748704425804576220383673608952.html

[14] Huma Khan, "States Look to Bring Gold Standard Back: Utah is First State to Recognize Gold and Silver as Legal Tender; Inflation Worries Loom," ABC News, April 15, 2011. URL: http://abcnews.go.com/Politics/tea-party-momentum-utah-bill-brings-gold-standard/story?id=13377409

[15] Ibid.

[16] Ibid.

[17] Ron Paul, The Revolution: A Manifesto. New York: Grand Central Publishing / Hachette, 2008. Page 150.

[18] Huma Khan, "States Look to Bring Gold Standard Back: Utah is First State to Recognize Gold and Silver as Legal Tender; Inflation Worries Loom," ABC News, April 15, 2011. URL: http://abcnews.go.com/Politics/tea-party-momentum-utah-bill-brings-gold-standard/story?id=13377409

[19] Ron Paul and Lewis Lehrman, The Case for Gold: A Minority Report of the U.S. Gold Commission. Auburn, Alabama: Ludwig von Mises Institute, 2007. This can be downloaded from the Internet at no cost from http://mises.org/books/caseforgold.pdf

[20] Ron Paul, The Revolution: A Manifesto. New York: Grand Central Publishing / Hachette, 2008. Pages 154-155.

[21] Ron Paul, The Revolution: A Manifesto. New York: Grand Central Publishing / Hachette, 2008. Page 155. See also Arnold Kling, The Case for Auditing the Fed Is Obvious (Monograph). Washington, D.C.: Cato Institute, April 27, 2010. URL: http://www.cato.org/pubs/bp/bp118.pdf

[22] Ron Paul, The Revolution: A Manifesto. New York: Grand Central Publishing / Hachette, 2008. Page 150.

[23] Book of Matthew 22:15-21, The Holy Bible (King James Version). URL: http://www.biblegateway.com/passage/?search=Matthew+22%3A15-21&version=KJV

[24] Ayn Rand, Capitalism: The Unknown Ideal. New York: Signet Books, 1967. Greenspan's essay appears on pages 96-101. An online text of Greenspan's essay "Gold and Economic Freedom" can be found at: URL: http://www.constitution.org/mon/greenspan_gold.html

[25] Ethel C. Fenig, "An Updated Version of 'The Little Red Hen," American Thinker, February 24, 2009. URL: http://www.americanthinker.com/blog/2009/02/an_updated_version_of_the_litt.html

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