The Case For Gold: A Minority Report of the U.S. Gold Commission by Ron Paul & Lewis Lehrman

Author:Ron Paul & Lewis Lehrman [Paul, Ron]
Language: eng
Format: epub
ISBN: 0-932790-31-3
Publisher: The Ludwig von Mises Institute
Published: 2010-11-06T16:00:00+00:00

1In the late 17th and early 18th centuries, the British maintained fixed mint ratios of from 15.1:1 of silver grains in relation to gold grains, to about 15.5:1. Yet the world market ratio of weight, set by forces of supply and demand, was about 14.9:1. Thus, silver was consistently undervalued and gold overvalued. In the 18th century, the problem got even worse, for increasing gold production in Brazil and declining silver production in Peru brought the market ratio down to 14.1:1 while the mint ratios fixed by the British government continued to be the same.

2The name “dollar” came from the “thaler,” the name given to the coin of similar weight, the “Joachimsthaler” or “schlicken thaler,” issued since the early 16th century by the Count of Schlick in Joachimsthal in Bohemia. The Joachimsthalers weigh 451 Troy grains of silver. So successful were these coins that similar thalers were minted in Burgundy, Holland, France; most successful of these was the Maria Theresa thaler, which began being minted in 1751, and formed a considerable portion of American currency after that date. The Spanish “pieces of eight” adopted the name “dollar” after 1690.

3Since 20 shillings make £1, this meant that the natural ratio between the two currencies was £1 = $4.44.

4Government paper redeemable in gold began in the early 9th century, and after three centuries the government escalated to irredeemable fiat paper, with the usual consequence of boom-bust cycles, and runaway inflation. See Gordon Tullock, “Paper Money—A Cycle in Cathay,” Economic History Review, vol. IX, no. 3 (1957), pp. 393–396.

5The only exception was a curious form of paper money issued five years earlier in Quebec, to become known as Card Money. The governing intendant of Quebec, Monsieur Mueles, divided some playing cards into quarters, marked them with various monetary denominations, and then issued them to pay for wages and materials sold to the govermment. He ordered the public to accept the cards as legal tender, and this particular issue was later redeemed in specie sent from France.

6Donald L. Kemmerer, “Paper Money in New Jersey, 1668–1775,” New Jersey Historical Society, Proceedings 74 (April 1956): 107–144.

7Before Massachusetts went back to specie, it was committed to accept the notes of the other New England colonies at par. This provided an incentive for Rhode Island to inflate its currency wildly, for this small colony, with considerable purchases to make in Massachusetts, could make these purchases in inflated money at par. Thereby Rhode Island could export its inflation to the larger colony, but make its purchases with the new money before Massachusetts prices could rise in response. In short, Rhode Island could expropriate wealth from Massachusetts and impose the main cost of its inflation on the latter colony.

8If Rhode Island was the most inflationary of the colonies, Maryland’s monetary expansion was the most bizarre. In 1733, Maryland’s public land bank issued £ 70,000 of paper notes, of which £ 30,000 was given away in a fixed amount to each inhabitant of the province. This was done to universalize the

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