“You cannot have real peace and prosperity unless you can absolutely trust the money.” That is a paraphrase of a comment by silver guru David Morgan on Oct. 24, 2014, at the Silver Summit in Spokane, Washington.
When I heard my friend say these words a year ago, it crystallized in my mind what I had understood for more than 40 years. I had just thought about it so concisely.
As many readers know, I present a program titled “The Rise and Fall of Rome’s Money – And What it Means for America Today.” In this presentation I trace the debasement in Roman coinage over the centuries and show how it paralleled the political decline of the Empire. Then I go on to demonstrate that the U.S. monetary system has been regularly debased for the past 150+ years. The decline in the U.S. dollar over the past 50 years or so has accelerated, which ties in with the loss of American influence around the world.
In case you think the decline of the U.S. dollar is a sudden event, let me detail some of the political developments that sent the dollar downward.
At first, the federal government did something smart. After seeing the Continental Currency lose close to 100 percent of its value during the American Revolutionary War, both the Articles of Confederation and the U.S. Constitution did not give the federal government the authority to issue paper money. As a result, the U.S. government did not issue paper money until the Civil War.
In 1792, Treasury Secretary Alexander Hamilton fixed the price of gold at 24-3/4 grains per dollar, or $19.39 per ounce of gold. Then, in 1834 gold was revalued to about $20.67 per ounce. From 1834 to 1878, the world price of gold fluctuated from just above $20 to a peak of $47 per ounce in 1864. Beginning in 1879, the world value of gold fell below $20.67 per ounce, so the U.S. government fixed that price at that level until
To help finance the costs of the Civil War, the U.S. government sold about $250 million of gold to the United Kingdom at a price of $16 per ounce. As interesting side notes:
• The Romans debased their money to pay for wars and welfare program. To help finance the Civil War, the U.S. government issued Demand Notes and Legal Tender Notes that were not redeemable for gold or silver.
• In 1913, Congress established a central bank called the Federal Reserve Bank. Since that time, U.S. banks have been able to issue loans without 100 percent gold or silver reserves backing them.
• On April 4, 1933, Franklin Delano Roosevelt signed Executive Order 6102 directing Americans to turn into the government any gold coins or Gold Certificates they held in excess of $100, to be compensated at full face value with Federal Reserve Notes. Coins of “recognized collector value” were exempt from this compensated mandatory redemption, though virtually all gold coins at that time had no collector premium. Further production of gold coins and Gold Certificates for circulation was halted.
• Thereafter, only other central banks could present U.S. currency to the U.S. government and be paid in gold.
• The Gold Reserve Act of 1934, enacted on Jan. 30, 1934, raised the US government’s price of gold to $35 per ounce.
• In the early 1960s, the U.S. government stopped being a net purchaser of silver and became a net seller.
• Public Law 88-36 enacted on June 4, 1963, repealed the authority of the U.S. government to issue Silver Certificates and authorized the issue of $1 and $2 Federal Reserve Notes.
• In March 1964, the U.S. government announced that it would no longer redeem Silver Certificates for silver dollar coins. Instead, people would receive silver granules. The $5 and $10 Silver Certificates were being withdrawn from circulation.
• The U.S. government ended production of 90 percent silver coins for circulation after those dated 1964 (some were struck in 1965 and 1966 with the 1964 date). Starting in 1965, dimes and quarters were made of copper-nickel. From 1965-1970, the U.S. Mint struck half dollars of 40 percent silver. From 1971 onward, all half dollars for circulation were struck of copper-nickel.
• June 24, 1968, was the final date that the U.S. government redeemed Silver Certificates for silver.
• Once silver had been demonetized, the central banks of France and the Netherlands started aggressively redeeming U.S. currency for gold.
• After U.S. gold reserves had fallen dramatically, President Richard Nixon “temporarily” closed the gold-exchange window to central banks on Aug. 15, 1971. More than 44 years later, this temporary closure is still in effect.
• With the U.S. government burdened with troops stationed in more than 130 nations and a growing welfare system, the U.S. eventually lost its status as the world’s largest creditor nation.
• In 1985, the U.S. Department of Commerce reported that the U.S. had become a net debtor nation.
• Today, the United States is the world’s largest debtor nation. Since the establishment of the Federal Reserve Bank in 1913, the U.S. dollar has fallen 98.1 percent compared to the value of an ounce of gold.
Is it fair to ask if the government of the United States of America will come to the same end as the Roman Empire?
Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns). His Numismatic Literary Guild award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).
More Collecting Resources
• The Standard Catalog of United States Paper Money is the only annual guide that provides complete coverage of U.S. currency with today’s market prices.
• Download The Metal Mania Seminar with David Harper to learn more about the metals market.