The disappearance of the 5-cent ice cream cone
When I was a small boy, my mother would give each of us kids a nickel to purchase a good-sized ice cream cone at the parlor near by. Yes, a nickel. Now it would cost $1.50. In 1968, I purchased a new Camaro for $2,700. Today it might cost 10 times as much.
What happened to our money supply? If I had put the nickel under the mattress to spend today it would not pay for the empty cone. Likewise, had I done the same thing with the $2,700, it may not cover the 7.5 percent California state sales tax rate on the automobile. This loss of purchasing power, which some refer to as “legalized plunder,” takes place as central bankers, through the Federal Reserve, decide the value of your money.
Young employees may not notice legalized plunder as, given time and experience, they generally move up through the salary grades. But even then if a salary raise does not exceed the expansion of the money supply, it is but a false raise. Those on fixed incomes - and no longer able to climb the economic ladder - feel robbed when their money does not purchase what it did when they earned it.
The Founding Fathers experienced the baneful effects of the government's reducing the value of its citizens' money when, during the American Revolution, the value of the dollar fell to 7 cents. So in the Constitution they removed the likelihood of that happening again. Article I, Section 8 gives Congress the power to “coin money, regulate the Value thereof, and of foreign coin…” and Article IV, Section 10 directs, “No state shall…make any Thing but gold and silver Coin a Tender in Payment of Debts…” Congress, not a central bank, would keep a tight rein on the value of the people's money by authorizing only gold and silver as money.
Thomas Jefferson believed that the “hard [sound] money view”- gold and silver - would be eroded by the creation of a national bank. He wrote: “The incorporation of a bank and the powers assumed have not, in my opinion been delegated to the United States by the Constitution. They are not among the powers specially enumerated.” A Central Bank, he noted, had specifically been opposed in the Constitutional Convention. Alexander Hamilton, Secretary of the Treasury, wanted the federal government to have the power of an elastic money supply, believing it to be an appropriate function of government although not specifically enumerated; hence the Bank of the United States was created.
Thus began the battle between the two points of view.
The establishment of a national bank encouraged paper money and the resultant expansion and contraction of money, which brought on both the Panic of 1819 and Depression of 1837. Andrew Jackson, supported by the presidents immediately after him, opposed central banking and removed it.
Jackson saw the national bank as “dangerous to the liberty of the American people because it represented a fantastic centralization of economic and political power under private control.” He wrote, “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes...” And, “Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress.” The nation returned to the only constitutionally recognized money as being gold and silver.
The expansion-money issue arose again with Abraham Lincoln, who encouraged the National Currency Acts. These allowed the government to back the Civil War by printing more money, which reduced the value of money not immediately spent. The unsecured money supply ballooned to 137.9 percent, and prices rose by 110.9 percent.
Grover Cleveland was the last president to insist that, at the very least, paper money had to be backed by gold - the gold standard.
After the turn of the century it seemed that neither party cared. Henceforth, money was what government said that it was worth. In 1913, Woodrow Wilson created the Federal Reserve, largely a private entity, to take over all money issues. Wilson and his predecessors (Theodore Roosevelt and William Howard Taft) and his later successor (Franklin Roosevelt) were big on creating fiat money.
Presidents Dwight D. Eisenhower, John F. Kennedy and Lyndon Johnson each heavily inflated the dollar, thus participating in legalized plunder.
Under Richard Nixon the dollar was no longer redeemable in gold. In just four years, Jimmy Carter reduced the value of individual savings by 8.5 percent.
The policies of George W. Bush also drastically affected the cost of living, as so have those of Barack Obama. In the last 14 years prices have at least doubled.
So, should you wonder why ice cream cones are not still 5 cents and Camaro automobiles $2,700, it is because both parties have opted to ignore constitutional safeguards and fund their spending sprees for welfare or warfare out of the pockets of those who merely choose to delay their spending. This is called legalized plunder.
Dr. Pease is a specialist on the United States Constitution and its application to current events. He has taught history and political science for more than 25 years at Taft College. To read more of his weekly articles, go to libertyunderfire.org.
(Posted 7/1/15; Opinion: General)
Would you like to respond to this article? The Westside Pioneer welcomes feedback to "General" items (to appear under this subcategory) at email@example.com. (Click here for letter-writing criteria.)