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THE DESTRUCTION OF THE DOLLAR

In the Plowboy Interview beginning back on page 16 of this issue, Congressman Ron Paul places much of the blame for the world's current economic woes on "the deliberate destruction of the dollar", and he (along with coauthor Lewis Lehrman) has traced that destruction, in great detail, in the book The Case for Gold (available for $8.95 postpaid from the Foundation for Rational Economics and Education, Inc., Dept. TMEN, P.O. Box 1776, Lake Jackson, Texas 77566).

We think this publication provides an interesting view of the economic disasters that are affecting us all today. It also reaffirms the wisdom of Daniel Webster, who said many years ago, "Of all the contrivances for cheating the laboring classes of mankind, none has been found more effectual than that which deludes them with paper money. "

Here then, based on Paul and Lehrman's book, is a brief history of the rise and fall of our American currency.

THE HIGH COST OF WAR

To finance our Revolutionary War, the Continental Congress issued paper money in great quantities. As a result, the currency fell, over a period of about 4-1/2 years, from a value of one paper dollar per one gold dollar to about 1,000 to one ... giving rise to the phrase, "not worth a continental".

In 1792, to correct this situation, a bimetallic dollar standard — with the dollar defined as a weight of 371.25 grains of pure silver and/or a weight of 24.75 grains of pure gold — was established, and a somewhat imperfect gold standard remained in effect throughout the nineteenth century ... with the following notable exceptions.

During the War of 1812, the federal government — in flagrant violation of property rights — permitted banks to stop all gold and silver redemption of notes and deposits ... and yet force their own debtors to repay their loans as usual!

The Civil War had an even more damaging impact on the American monetary system. It led to federal expenditures that skyrocketed from $66 million in 1861 to $1.30 billion four years later. The pressure on gold and silver, brought about by an increased public demand for "coin money", resulted in a general suspension of bank specie payments at the end of December 1861. This was followed swiftly by the Treasury's suspension of specie payments on its own notes.

The U.S. government quickly took advantage of the situation. In the Legal Tender Act of February 1862, Congress authorized the printing of "United States Notes" (soon to be known as "greenbacks") and made them legal tender for all debts, public and private. Over the course of the entire war, the money supply rose from $745.4 million to $1.773 billion ... an increase of 137.9%, or an average of 27% per annum. The United States ended the war with a depreciated, inconvertible greenback currency and a public debt that had risen from $64.7 million in 1860 to $2.32 billion in 1866.

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