To Continue: this is from The Creature From Jekyll Island pp 157 - 165 (in two postings, this being the 1st) Unfortunately...after China, the next place in the world to adopt the use of fiat money was America; specifically the Massachusetts Bay colony. [ This was in 1690 when there was not enough plunder from an attack on the French colony in Quebec to pay the soldiers. In a frantic effort to raise funds, the colony government decided, rather than levying additional taxes, to simply print paper money.] pp.157-165 To convince the soldiers and the citizenry to accept the paper currency, the government made two solemn promises: (1)to redeem the paper for gold or silver coin just as soon as there was sufficient tax revenue to do so, and (2) ABSOLUTELY NO ADDITIONAL PAPER NOTES WOULD EVER BE ISSUED. BOTH PLEDGES WERE PROPTLY BROKEN. Only a few months later, it was announced that the orighnal issue was insufficient to discharge the governments debt, and a new issue ALMOST SIX TIMES GREATER was put into circulation. THE CURRENCY WASNT REDEEMED FOR NEARLY FORTY YEARS Most of the other colonies were quick to learn the magic of the printing press, and the history that followed is a classic example of cause and effect: Governments artificially expanded the money supply through the issuance of fiat currency. This was followed by legal tender laws to FORCE ITS ACCEPTANCE. Next came the DISAPPEARANCE OF GOLD OR SILVER COINS which went, instead, into PRIVATE HOARDS OR TO FOREIGN TRADERS WHO INSTISTED ON THE REAL THING FOR THEIR WARES...Then came discontent and civil disobedience. At the end of each cycle there was RAMPANT INFLATION AND ECONOMIC CHAOS. ...In 1737, Massachusetts devalued its fiat currency by 66%, offering one dollar of new currency for three of the old. The promise was made that, after five years, the new money would be FULLY REDEEMED IN SILVER OR GOLD. The promise was not kept. By the late 1750s, Connecticut had prices inflated by 800%. The Carolinas had inflated 900%. Massachusetts 1000%. Rhode Island 2300%. … It has been shown that, even in colonial times, the classic booms and busts when modern economists are fond of blaming on an unbridled free market actually were DIRECT MANIFESTATIONS of the expansion and contraction of FIAT MONEY which was NO LONGER GOVERNED BY THE LAWS OF SUPPLY AND DEMAND. By this time, coins had completely disappeared from the scene. Some were in private hoards, but most of them had been exported to other countries, leaving the colonies with little choice but to accept fiat money or barter...international trade ground almost to a halt. The experiment with fiat money was a calamity to the colonists, but it was also a thorn in the side of the Bank of England [which had] used its influence with the Crown to forbid the colonies to mint their own coins or to establish local banks .. No one had anticipated that the colonial governments would be so inventive as to create their own paper money. So, in 1751, Great Britain began to pressure the colonies to redeem all of their currency and withdraw it from circulation .. at bargain prices...The decree from the British Parliament, although heavily resented by the colonists, turned out to be a blessing in disguise. The paper notes of the Bank of England never did become a primary medium of exchange .. the colonists merely brought what few fold and silver coins they had our to hiding and returned to a TRUE COMMODITY-MONEY SYSTEM. At first the doomdayers predicted this would spell further ruin for the colonial economy. “There isnt enough money” was the all-too-familiar cry. But there was, indeed, quite enough for, as we have already seen (read the book), ANY AMOUNT IS SUFFICIENT.
Posted on: Sun, 02 Feb 2014 05:58:43 +0000
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