Jmaurone's picture
Submitted by Jmaurone on Thu, 2009-05-14 02:36

If you've been interested in my recent posts, you might appreciate this: Securing the Commonwealth:Debt, Speculation, and Writing in the Making of Early America by Jennifer J. Baker.

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atlascott's picture

[public service announcement]

The term "fiat currency" has nothing to do with the Fiat car company (Fabbrica Italiana Automobili Torino).

The only similarity between fiat currency and Fiat cars, for which the acronym "Fix It Again, Tony" surfaced after the first American experience with these marvels of Italian engineering, is that neither of them "go" very well, and not for long.

[end public service announcement]

In conclusion, there is

jeffrey smith's picture

In conclusion, there is absolutely nothing wrong with paper money in and of itself.

But it has been left to the current generation to bring the matter to its ultimate conclusion. At least with paper money, there were pieces of paper actually printed on real presses, given out for people to spend.
Nowadays, most of the money supply is simply computerized book keeping entries somewhere in the Fed.

The Great American Banking Experiment with Fiat Currency

Jmaurone's picture

The Great American Banking Experiment with Fiat Currency
Economics / Fiat Currency
Mar 20, 2009 - 02:47 PM
By: Andy_Sutton

"One of the most common questions that folks who are becoming newly acquainted with terms like ‘fiat money' and ‘fractional reserve banking' are asking is “How did we get here?” For sure, the recent publicity of 21 st Century Tea Parties along with the occurrence of the worst financial crisis in recorded history has people asking questions. In terms of the American obsession with central banking and fiat currency, 1913 is generally identified as the point where the country went wrong. In truth, however, our obsession with funny money has transcended all; including even, the birth of the nation."

You can read the rest at The Market Oracle, but here's the conclusion:

"In conclusion, there is absolutely nothing wrong with paper money in and of itself. It can actually serve a valuable purpose in that it is more portable, easily divisible, and in the case of the grain banks thousands of years ago, was much easier than moving bushels of wheat. However, the predilection of those charged with running these types of operations has been to coerce and conspire to rob the people of wealth through stealth. Whereas it would have been exceedingly problematic to confiscate a farmer's grain without incurring his wrath, it was magnificently simple to inflate his wealth away through the over issuance of grain receipts. The parallels between these early experiments and what goes on today are astounding. We as a people still haven't gotten our heads around the idea of inflation - the over issuance of fiat paper money - and the confiscation of wealth it represents. What could never be done through direct taxation has been done under another name, right under our very noses, and in plain sight."

Nice catch

Jmaurone's picture

Nice catch, Jeff, thanks!


Jeff Perren's picture

I thought of you, Joe, when I read this Powerline post early this morning:

    For the past hundred years the attack on private property has been central to the Progressive assault on the Constitution, beginning with J. Allen Smith's The Spirit of American Government (1907) and continuing most importantly with Charles Beard's An Economic Interpretation of the Constitution (1913).

    Smith and Beard portrayed the constitutional protection of private property by the founders as the weapon of an elite interested in preserving its privilege. (By the time scholars got around to debunking Beard's book in particular -- few serious works of history have been as definitively disproved as Beard's -- the damage had been done.) Today the Progressive assault on property rights continues in the scholarship of liberals such as Obama administration official Cass Sunstein.

    The American Revolution is of course the appropriate place to begin to understand the role of property rights in the American legal order. The American Revolution was in part a rebellion against the feudal order, remnants of which still prevailed in Great Britain. In the feudal order all property belonged to the King; the King retained ownership but conditionally granted the use of property to his subjects.

    By contrast, the idea that men possessed the right to acquire and enjoy property separate and apart from the prerogative of sovereign government was one of the "unalienable rights" grounded in "the laws of Nature and Nature's God" at the heart of the American Revolution. In the founders' view, property rights did not emanate from government. Rather, they emanated from the nature of man, and it was the function of government to protect the rights conferred on man by nature.

    Indeed, Jefferson characterized property rights as "the first principle of association, the guarantee to everyone [of] the free exercise of industry and the fruits acquired by it." As Jefferson's comment suggests, the right to acquire property was the critical right for the founders; it made property rights the friend of the poor by allowing them to earn and safeguard wealth ("the fruits acquired by" work).

    Accordingly, when the founders crafted the Constitution and Bill of Rights, they provided numerous protections of property rights. Congress was authorized to protect the intellectual property of writers and inventors through the issuance of patents and copyrights. The states were prohibited from impairing private contractual obligations.

    Further, putting property on a par with life and liberty, the Constitution prohibited the government from taking property in any criminal case without due process. And in the takings clause of the Fifth Amendment, the government was prohibited from taking private property for public use without just compensation; the government was not even afforded the power to take private property for anything but public use.

    The founders extended these and other specific protections to the property of Americans in the fundamental law of the United States for the sake of freedom. The freedom to exercise and profit from one's abilities without regard to caste or class was in the view of the founders the essence of freedom.

    As James Madison wrote in the Federalist Papers, "the first object of government" is the "protection of the diversity in the faculties [abilities] of men, from which the rights of property originate." In the eyes of the founders, the protection of property rights was a bulwark for the poor in assuring them that the wealth earned with the sweat of their brow could not arbitrarily be expropriated by the heavy hand of government.


    The founders' study of history taught them that majority rule was susceptible to tyranny and that the protection of property rights was an indispensable condition for the preservation of freedom and for the growth of national wealth. The founders observed that tyrannical rule and material scarcity had by and large been the fate of man through the ages. They saw the confiscation of property by government in the name of the sovereign power of the state as an old and sorry story. Through the protection of property rights they meant to forge a new order of the ages. It lies to us to regain their understanding and act on it.

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