This would have been true if we were on the gold standard. In theory, if you’re on the gold standard you can’t print more money than can be backed up with gold at the legally set price. However, LBJ wanted to carry on the Viet Nam war and engage in the largest social program ever attempted. (Actually, it was a wealth redistribution scheme, but that’s a whole article.) To do this without raising taxes LBJ printed more money than the US had gold to back it at the then legally set price. Charles de Gaulle, then the head of France, realized LBJ had done this and he started buying dollars and converting them into gold. President Nixon took us off the gold standard to prevent de Gaulle from draining the national treasury. After that, with money no longer limited by the amount of gold you had the money supply growth became exponential. In 2008 Obama doubled the money supply and in 2009 he doubled it again. The government is currently creating 87 billion dollars per week.
One might ask, if the government can create money without taxation, why does Obama want to raise taxes? The answer is to remove wealth from private hands and put it exclusively in government hands and the hands of specially selected cronies.
Thanks for this post. I hadn't known why Nixon took us off the gold standard or how LBJ was financing the Viet Nam war.
Would it be possible for the U.S. to be put on the gold standard again? (I know it would be difficult because of the nature of the global economy.) If so, how could that happen?
“Would it be possible for the U.S. to be put on the gold standard again? (I know it would be difficult because of the nature of the global economy.) If so, how could that happen?”
We use a system called fiat currency. Fiat means the dollar has value because you and I agree that it has value. In essence, a dollar represents some unit of something physical, gold, work, a car, etc. Being on the gold standard only acts as a deterrent to producing more dollars than you have gold. Anything would work, provided you couldn’t produce a lot of it. Remember, the gold has no real value either. You can’t eat it; you can only wear it or look at it.
If you want to produce growth, you could produce more money and “invest” in things. But the things you MUST invest in are self-reducing debt. For example, create money and build a power plant. You sell the power and pay off the debt. At some point the plant is making a profit. (The Obama administration “invested” in things that absorbed the newly created money but did not produce a profit; Solyandra, for example.)
Each time you create money you devalue all the money that is already in existence. But, if you were wise in your use of the money the society as a whole is better off.
Liberals tend to think of money like we exist in a feudal economy. The kingdom has produced 10,000 gold sovereigns. But the king owns 9,000 of them, which he keeps under the bed. All the transactions in the feudal economy must then take place with only 1,000 sovereigns. Obviously if there are 30,000,000 residents a lot of people must barter instead of pay with sovereigns. Presumably, the king uses the sovereigns to maintain the army, build a navy, etc. If he wants more money he must tax; which removes more money from the existing economy. Feudal economies can’t grow.
Today the creation of wealth is totally different than the feudal economy. Take Microsoft. They paid for the development of Window’s 8 only once, but they sell it for a premium on a medium that is essentially free. From an investment of X they have added an incredible amount to the economy as a whole. So, money and wealth are entirely different today. The disaster of Greece and Spain is only because they gave up the power to print their own money.
We could go to a different type of economy. Call it the Petro-dollar. Each dollar is worth a fraction of a barrel of crude oil, or x amount of electricity, or y amount of gasoline. Why don’t we? Well, if we keep the economy we have then liberals can remove wealth from the public’s hands by inflation. Any dollar you made before 2008 is now worth about 30% of its 2008 buying power. We haven’t seen the true impact of inflation yet because people are panicked into not buying; husbanding their wealth for an uncertain future.
No, gold won’t work as liberals will accept no limitation on what they spend.