Can Civilization Survive without Sound Money?

As long as states are around, money will never be sound. But first, some clarity.

Sound money, per Ludwig von Mises, has two aspects: It serves as a commonly accepted medium of exchange, while also making it difficult for governments to meddle with it. We can see immediately that sound money is nowhere to be found in today’s world. All the current rhetoric about banks and their systemic risks are about money that’s subject to political expediency, the kind that brings civilization to its knees.

There is at least one group, however, putting up a good fight. In the US the Sound Money Defense League is working at a state level to bring gold and silver coin back as legal tender. According to their website:

. . . sound money activists are launching exciting initiatives at the state level to challenge the monetary monopoly of the Fed….

From Alabama to Wyoming, states across the U.S. continue to pass legislation to eliminate taxes on gold and silver, establish in-state depositories, protect state taxpayer funds with sound money, and more.

It’s encouraging to see people stand up for a better money and work to get it recognized for the absolute advantages it possesses, particularly against the Fed’s “mandate” to produce inflation. The movement also highlights the Constitution’s restriction wherein no state shall “make any Thing but gold and silver Coin a Tender in Payment of Debts.” Later, the phrase “national emergency” superseded this restriction. But as the League admits:

Ultimately, individual states cannot bring soundness to America’s monetary system on their own. The root of the problem is the Federal Reserve, U.S. Treasury, and Congress who have fully embraced fiat money and abandoned monetary restraint.

An even deeper root is the widespread ignorance of money and banking not just among the public but among the public pronouncements of monetary economists. A quote attributed to Henry Ford that if the public really understood what was going on it would trigger an overnight revolution points to the precarious position of the accepted corrupt narrative. Recognizing this, the federal reserve has bet on Mark Twain’s insight — that virtue has never been as respectable as money — and put economists on its payroll, making “real criticism of the central bank a career liability for members of the profession.”

Thus, anyone asserting the federal reserve system is a naked counterfeiting racket at the center of the economy is routinely ignored or ridiculed.

Can a gold-standard state fund war?

But the situation is even darker than this. “War is the health of the state,” Randolph Bourne famously wrote in his unfinished essay The State, in that it brought “a sense of the sanctity of the State.” And most wars are fought with the printing press running at redline. In American history only the Mexican War of 1846-1848, financed by the newly created Independent Treasury, has the distinction of being inflation-free.

One of the deadliest conflicts in world history was World War I, which prompted Bourne’s essay. Belligerents on both sides abandoned sound money (gold) to fight it, though as Gary North argued “sound money” was no more than a government promise to support it. Government never wants to run out of money while at war, and the kind that rolls off the printing press (or today’s electronic equivalent) is far superior to a limited-quantity money such as gold. 

Rothbard, following Oppenheimer and Nock, defined a state as a predatory organization, in that it produces nothing but instead uses its monopoly of force to sustain and expand itself. Today’s governments are all predators in this sense. War threatens their existence, and everything is on the table to fight it except sound money.

“National security” wasn’t always our foundational principle

During the Writs of Assistance case of February 1761, James Otis, Jr. argued at length against the legality of the writs before a select audience in Boston’s State House. Today writs are called general search warrants, forbidden by the Fourth Amendment. Among those present was a young John Adams who recalled in later years that:

Otis was a flame of fire; with a promptitude of classical allusions, a depth of research, a rapid summary of historical events and dates, a profusion of legal authorities. . . . Then and there the Child Independence was born. … The seeds of Patriots & Heroes … were then & there sown.

Researcher A. J. Langguth in Patriots: The Men Who Started the American Revolution described it this way:

In wig and black gown, James Otis stood up to speak, and something profound changed in America. . ..

The British constitution [had become] only and whatever Parliament said it was. But Otis soared beyond that argument. Every man lived in a state of nature, he said. Every man was his own sovereign, subject to laws engraved on his heart and revealed to him by his Maker. No other creature on earth could legitimately challenge a man’s right to his life, his liberty and his property. That principle, that unalterable law, took precedence . . . even over the survival of the state. (Emphasis added; P. 23)

Otis’s five-hour defense, though it eventually failed, launched him into the top ranks of patriot leaders. Furthermore, in 1764 Otis wrote that “The colonists are by the law of nature freeborn, as indeed all men are, white or black.”

States exist as protection agencies, or to secure our inalienable rights, as Jefferson wrote. Clearly, every state by its predatory nature is a failure, to say the least. Whether he realized it or not, James Otis, Jr. put the rising revolutionary spirit in the right direction. Who among our leaders today would assert the sovereignty of the individual over the state — and mean it? 

Conclusion

With the upcoming Great Default, as Gary North described it in 2011, in which we reach the “final stage of the politicians’ addiction to debt,” states will be threatened by their own inherent faults. “Future generations will elect new politicians who will stiff the trusting, naive holders of government debt,” he wrote. 

North believed in limited government, meaning a limited state. Most libertarians do. But consider a different perspective. Limited governments grow. The future does not depend on a cleansed repeat of past mistakes, brought to us by “new politicians.” It depends on understanding, then implementing, a government based solely on market incentives. In many respects we live under that government now.