April 20, 1935 - Article - Pieces Of Money, by Garet Garrett
When the Chief Justice of the United States Supreme Court had finished giving down the law in the celebrated gold-clause cases, Mr. Justice McReynolds, representing an overwhelmed minority of four, rose in his place, not to read the minority opinion but to put forth his convictions nakedly. Referring to the minority opinion, he said: "We [the minority of four] have written down our views; they will be open for your observation. We assume that those of you who have interest enough in the matter to wish to comprehend it, will find it possible to read it; therefore, I shall not read it extenso." From there he went on, stressing more and more, as he proceeded, the moral implications of what had been done, to the very last sentence, which was: "And the shame and humiliation of itall no one of us can foresee." (pg. 5)
When Senator Glass, holding up his piece of paper, said: "We are on a fiat-currency basis," what did he mean? What is fiat money? The word "fiat" means, "be it done." Fiat money is a piece of paper on which the Government puts its stamp and says, "That is money." If people decline to accept it, the Government passes a law, saying, "This money is money for all purposes, and full legal tender, and it is forbidden for anyone to refuse or accept it as such." (pg. 7)
Comments: The vast majority of people give little, if any thought to the money they use in everyday life. All they care about is that it works. What has happened since the gold standard was repudiated in 1933 and the monetary system put on a fiat basis is that we have been in a process of gradual inflation. To simplify what this does, let's say that every 5 years the dollar is cheapened by one-half. Let's say you are 20 years old and you come into an inheritance of $100,000. Let's say you stash the money in a safe and you figure it will help you in the future when you get old. Well, 5 years down the road inflation has made everything cost twice as much, so that would mean that it would take $200,000 to equal the buying power of the $100,000 you had 5 years ago. In 10 years you would need $400,000 to equal the buying power of the original $100,000. In 15 years you would need $800,000 to equal the buying power of the original $100,000. In 20 years you would need $1,600,000 to equal the buying power of the original $100,000. In 25 years you would need $3,200,000 to equal the buying power of the original $100,000. In 30 years you would need $6,400,000 to equal the buying power of the original $100,000 you originally stashed in your safe. So, when you are 50 years old your money you stashed 30 years ago will be worth l.5% of its original value. In other words, if there were no inflation at all for the thirty years your stash was in your safe, it would be the same as if you got robbed of $98,500 over 30 years by a stash tax. That's how much buying power your stash of money lost in 30 years. This is what planned inflation does. There can be no certainty in saving for the future and this makes the vast majority of the laboring masses dependent on their political masters when they get old. To get an idea of the actual managed inflation that has occurred since 1933, let's compare the average wages from then to now. The average wage earner in 1933 brought in roughly $1500/year. According to the Social Security Administration, in 2004 the average wage earner brought in roughly $35,600/year. However, inflation causes prices to rise also, and if prices rise at roughly the same rates as wages, then what has been accomplished? In addition, the 2004 wage earner has income tax imposed upon his/her wages, so that they don't get to keep the $35,600 they made in a year, but only the allowance the tax laws let them have. The gold clause cases can be read by studying the case of U.S. v. BANKERS' TRUST CO., 294 U.S. 240 (1935). It's only logical that the reason the politicians of the New Deal abandoned the gold standard right away is so that they could do this very thing. The gold standard, figuratively speaking, made them drag a ball and chain when it came to inflation, since the price of gold regulated the value of the dollar. The majority opinion pretty much said that the people robbed by the repudiation the gold standard had no redress against the Government. Justice McReynolds began the dissenting opinion with these words: "Mr. Justice VAN DEVANTER, Mr. Justice SUTHERLAND, Mr. Justice BUTLER, and I conclude that, if given effect, the enactments here challenged will bring about confiscation of property rights and repudiation of national obligations. Acquiescence in the decisions just announced is impossible; the circumstances demand statement of our views. 'To let oneself slide down the easy slope offered by the course of events and to dull one's mind against the extent of the danger, ... that is precisely to fail in one's obligation of responsibility.' Just men regard repudiation and spoliation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No definite delegation of such a power exists; and we cannot believe the farseeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect. Not only is there no permission for such actions; they are inhibited. And no plenitude of words can conform them to our charter." Justice McReynolds ended the dissenting opinion by stating: "Under the challenged statutes it is said the United States have realized profits amounting to $2,800,000,000. But this assumes that gain may be generated by legislative fiat. To such counterfeit profits there would be no limit; with each new debasement of the dollar they would expand. Two billions might be ballooned indefinitely-to twenty, thirty, or what you will. Loss of reputation for honorable dealing will bring us unending humiliation; the impending legal and moral chaos is appalling."