This is a freely edited version of an article by the
monetary economist Walter E. Spahr (1891-1970),
Head, Department of Economics, New
that appeared in the quarterly review Modern
Age, Summer, 1960
instrumentality of human freedom
institutions the gold standard occupies a paramount position as an
instrumentality of human freedom, private property, private enterprise, and
responsible government. The nature of the gold standard should reveal
something as to why it is a necessary and natural companion of human freedom.
specifying the standard gold coin and opening the Mint to its free and
un-limited coinage on private account, the government must stand aside and
let the gold standard perform its functions in accordance with the desires of
the people. The right to private property in gold is established and
respected. The government shall not interfere with the hoarding, importing or
exporting of gold, or with the redemption of non-gold currency into standard
gold coin by the banks. An individual may put none, little, much, or all of
his property into gold. He may convert all of his property into gold and ship
it out of the country without hindrance from the government.
on the government and banks
a person living under a degree of freedom inherent in a gold standard is
disturbed by, or disapproves of, the policies of his government or the
practices of banks, he may protect his property by presenting non-gold
currency for redemption. If a sufficient number of people do this, then the
government and the banks are forced to respect the fears or disapproval of
the citizens. The government and the banks are thus placed in a position in
which they must be careful not to disturb unduly, or to incur the disapproval
of, people with property to protect.
Thus do a
people with a gold standard at their disposal have the power to keep a
checkrein on the fiscal policies of their government.
Thus do they force the banks not to pursue reckless credit practices.
Thus do they obtain and maintain a responsible government and a responsible
The people may
utilize that power wisely or unwisely; but it is a power they must have if
they are to be able to protect themselves from improper government
encroachment or tyranny, and against irresponsible banking.
experience of England
international relations, all individuals are free under a gold standard to
utilize gold as they desire. If their non-gold dollars are not acceptable
abroad, they can remit the equivalent in gold. Since gold is the most
universally acceptable money known to mankind, the individual is given the
widest possible freedom in utilizing his wealth anywhere in the world.
and these practices were illustrated by England’s use of the gold
standard for nearly one hundred years from 1816 to 1914. Her people traded,
invested, and traveled so widely that it was often said that ‘the sun
never sets on British possessions’. The pound sterling became the
dominant international currency and London the principal inter-national
banking center of the world. Respect for and protection of private property
and freedom to trade, travel, and invest reached heights never attained
before or since.
currency – an instrumentality of servitude
When a government inflicts irredeemable currency on the people, the great
rights and freedoms inherent in a gold standard disappear. The government
becomes their dictator free from effective control; it curbs their rights and
freedom as it sees fit. Constitutional government is subverted in an endless
number of ways, and made to conform to the desire of the government to
restrict human freedom.
ability of people to put pressure on the banks and the government through
demanding gold is destroyed. With the destruction of that individual right
the power of the purse passes from ultimate control by the people to unrestrainable control by the government. Such an
arrangement allows, nay, invites, the government to indulge in a spending
the public purse
the government grabs the public purse, its power becomes uncontrollable. Combined with the loss by the people
of the freedom and rights inherent in a gold standard, unscrupulous politicians
can socialize the nation and undermine the republican system of government.
The purchasing power of the currency is impaired. The banks are freed from
the pressures of control which individuals have previously exercised over
them. The quality of integrity in the currency is destroyed. Lacking that
virtue, the monetary bloodstream contaminates the economic, political, and
social system of the nation and fosters widespread corruption. In
international relations, governments which employ irredeemable currency step
in to regulate or control foreign trade, exchange rates, investment, travel,
the amount of currency that may be taken out of the country. The freedom of
private property in international exchange is curbed; the equalizing and
self-correcting influences, characteristic of a gold standard, are impaired
or destroyed. Foreign trade reaches various degrees of chaos.
Under a gold standard a prolonged un-favorable balance of payments, heavy and
persistent losses of gold tend to correct themselves with promptness. But
with government controls under the regime of an irredeemable currency
economic distortions can long persist and become destructive. This is so
because government officials cannot
possibly provide the same level of wisdom that millions of people,
free to trade, travel, invest, and act in their own interest can.
As problems in foreign trade mount, governments find excuses for more
or different controls. A huge bureaucracy is developed to manage these international
problems. There is no foreseeable end to these procedures until a nation
regains the benefits of a gold standard which requires that the government
retire to its proper position of umpire and relinquish its role as dominant
participant and dictator.
currency – a tool of totalitarian governments
All socialist, communist, and totalitarian governments utilize it, because an
irredeemable currency gives them the power that they need if they are to
control the people and deprive them of the freedom inherent in private
property and private enterprise. Having experienced these powers, the
government is taking further steps into socialism and centrally managed
economy. Those in charge reveal that they wish to retain the power acquired
through the use of irredeemable currency and to continue the march toward
more socialism and more government control. Frequent official words to the
contrary are designed to be reassuring or to allay fears; but they have no
important effect in arresting the course being pursued.
national habit-forming drug
A government can take unrestrainable control of the
people either by the use of military force, or by the use of irredeemable
currency. The former is readily under-stood; the latter is a subtle national
drug that is not generally understood, and is readily embraced by its
victims. It is, consequently, a favorite device of modern governments that
desire to bring the people under thoroughgoing control, for it enables the government
to succeed and, at the same time, to have the general, even vigorous,
approval of the great mass of people.
The world is literally drugged with irredeemable currency,
and with government management and dictatorship as consequences. Under this
intoxication there is strong agitation for more and more national spending,
more and more government controls, and more and more debt.
The fact that these are common reactions of the great majority of
people who have been subjected to the use and effects of irredeemable
currency provides no clue as to whether the nation is to be saved from the
most serious disaster into which the present course is likely to lead. Most
unfortunately, mainstream economists have been working aggressively for a
governmentally managed economy, or riding quietly with the tide that is
moving in that direction.
It is useless to expect a mass movement on behalf of a sound currency. The
daily experiences of people are such that they confirm in their minds the
alleged virtues and benefits of irredeemable currency. Like drug addicts,
they do not regard it as a dangerous or undermining narcotic. Even the loss
of purchasing power does not disturb them to any great extent – their
chief response is to try to get more and more of it. The bloating and
distortions of business indexes are readily accepted as evidence of economic
health. Heavy taxes and mountainous debt are not regarded with anxiety. A
frequent or common agitation is for ever more national spending.
If we are to be saved from the ultimate evil consequences of using
irredeemable currency, needed action should come from top national officials.
Such reforms call for statesmanship. The President and Secretary of the
Treasury must be statesmen, act as informed and tough monetary surgeons, men
who can and will persuade Congress to re-instate redeemable currency.
Once that step is taken, the people should experience a breath of
fresh air and be on the course leading to better days – to a better
government that is willing to abide by the Constitution, to greater freedom
for the people; in short, to more responsibility by the government and by the
banks. Optimism should become wide-spread because the money of the nation
would once more have the quality of integrity. The problem of credit-control
should be easier to solve. Business enterprise should expand, domestically as
well and inter-nationally, and on a sounder basis. Gold should flow in from
abroad. Imbalances in foreign trade should rectify themselves. The control of
the public purse would be returned to the people as individuals, where it belongs if human freedom is to be
preserved and responsible government is to be obtained. Then there would be
good grounds for assurance that the republic will be preserved – at
least as long as the gold standard is maintained.
Antal E. Fekete
San Francisco School
all the other articles written by Antal E. Fekete
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