Authored by Jeff Thomas via InternationalMan.com,
Across the First World, and especially in the US, there is a growing awareness that fiat currency, rather than being the solution to economic issues, is actually a cause of them.
There are those who have long predicted that the continuous creation of fiat dollars could result in price controls, savings destruction, looting, riots, and even revolution. A decade ago, such predictions were dismissed as nonsense. Today, these outcomes seem increasingly likely, although there is still a significant number of people who believe that “It can’t happen here.”
A Brief History of Colonial US Fiat Currency
It’s worth mentioning that in the US, it’s not just a possibility – it has already happened, back when the country was founded.
The American founding fathers were considered “visionaries,” and for good reason.
These individuals had firsthand experience with the consequences of using fiat currency. In the 1750s, when the colonies used fiat currency to finance military efforts against the French in Quebec, it led to rampant inflation. England intervened and put an end to the issuance of debt-related promissory notes, prompting a return to using coins.
Prosperity followed as the colonies used unofficial currencies like gold and silver coins from various countries. However, this prosperity was short-lived. When the American Revolution began in 1775, the Continental Congress resorted to printing paper currency to address cash-flow issues, leading to massive inflation and economic turmoil.
Many couldn’t understand why the Congress didn’t just keep printing money to solve the problem. But history shows that excessive money printing only leads to more significant issues.
Post-war, the US faced economic challenges, and the government attempted to force the public to use the depreciated currency through wage and price controls, as well as penalties for not using the Continental Dollar. Dissenters were labeled enemies of the state, a tactic often used by governments when their policies fail.
Today, while Americans haven’t reached that extreme point, it wouldn’t be surprising if dissenters were once again labeled enemies for abandoning the weakening dollar in favor of more stable assets like precious metals.
Money in the US Constitution
Following the 1787 economic crisis, the Constitutional Committee ensured that the state and federal governments were prohibited from issuing fiat currency. The rejection of paper money was a deliberate choice made by the founding fathers to prevent economic disasters like those of the past.
Oliver Ellsworth’s words from that time ring true today: “This is a favourable moment to shut and bar the door against paper money.“
Central Bank Tug-of-War
Despite the clear vision in 1787, efforts were made to establish a central bank similar to the Bank of England in 1790. This led to a century-long struggle over the legitimacy of a central bank that could issue fiat currency, culminating in the creation of the Federal Reserve in 1913.
Today, the US finds itself in a similar economic predicament as in the late 18th century, repeating the mistakes of the past. The choice lies in whether the nation will return to the principles of the American Constitution or continue down the path of government control and economic instability.
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The age-old problem of fiat money persists: when governments print money to fulfill promises, the public bears the brunt through inflation. As confidence wanes, authorities resort to controls and coercion. To protect your purchasing power amidst currency uncertainty, learn from legendary investor Doug Casey’s insights on gold. Click here to access the free dispatch now.