The warden says ‘The exodus sold.’
If you want a way out …
Silver and gold, silver and gold.
– U2, “Silver & Gold”

“Nothing restrains a central government like sound money.”
– Thomas DiLorenzo

News Item: U.S Mint bans melting pennies, nickels

The motivation for the melting and export ban of U.S. pennies and nickels is the reality that the market value for the coins’ metal exceeds the faith-based denomination value stamped into them by the federal government. “In God We Trust,” indeed.

Why is the federal government in the money business?

True, Article I, Section 8 of the U.S. Constitution states that “Congress shall have power … To coin money, regulate the value thereof, and of foreign coin.”

Many may remember American history lessons mentioning William Jennings Bryan’s famous “Cross of Gold” speech in 1896.

But famous does not mean economically correct, and Bryan (who also led efforts to ban the teaching of evolution and served as the prosecutor in the Scopes “Monkey” trial) advocated policies — the forcible redistribution of wealth through the income tax and inflating U.S. currency — that have been devastating to the individual liberties of generations of Americans.

And just because the federal government granted itself the power to coin money, among other self-authorizations, doesn’t mean that the federal government ought to coin money, or produce any medium for exchanging goods and services.

As economist Murray Rothbard noted in his essay “What Has Government Done to Our Money?” (audio here) private mints have demonstrated their ability to guarantee the fineness and weight of both bullion and coins they issue.

By exempting itself with legal tender laws from the common law rule against imitating something with superior value that would apply to any normal counterfeiter, the federal government has a free hand to inflate the money supply. (Of course, leave it to the federal government to imitate something with inferior value through pennies and nickels.)

And by inflating the money supply, or by devaluing coins, the federal government robs most Americans of their wealth.

To take one example of inflationary effects, real estate in America is not so much going up in value as U.S. currency is going down in value.

Hence, the desire of some entrepreneurs to convert pennies and nickels to higher-valued uses.

Land and metal have real value. Because U.S. currency is not backed by any tangible thing with real value, it must rely instead on coercion and fraud (for example, the “full faith and credit of the United States”) to be useful.

Mises Institute president Lew Rockwell recently summed up why a government would inflate its currency (audio here):

The power to inflate is absolutely crucial to the agenda of everyone who believes in using the government to manage the economy and society. As [Ludwig von] Mises says, they need the power to inflate in order to finance their policy of reckless spending, lavish subsidies, and bribing voters. They also need it for financing their wars, bailouts, and space shuttle trips, and for building their ever-larger palaces to keep comfortable the millions of bureaucrats they employ to make our lives miserable.

Moreover, the political class benefits from the creation of fiat currencies and monetary expansion because of temporary increases in employment and temporary decreases in interest rates. Financing “good times” on a hidden credit card leaves voters more inclined to re-elect incumbents.

Those good feelings could sour if the integrity of U.S. monetary policy is called into question by more and more people, both in America and abroad, and creditors begin calling on their debtors to pay up.

David Walker, Comptroller of the U.S. government’s General Accountability Office has been on a “Fiscal Wake-Up Tour” around the country to speak to anyone who will listen about how precarious the federal government’s financial position has become because of entitlement spending.

But in an economy built on debt, with the U.S. government the biggest debtor of all, don’t expect the federal government and its beneficiaries to correct the problem anytime soon.

Libertarian film producer Aaron Russo has made some concepts related to monetary policy more accessible through his documentary America: Freedom to Fascism. As I’ve read one reviewer write, it’s an important if imperfect film. (For example, Stalin never said that thing about counting the votes, but Russo’s movie attributes the quote to him.) At a minimum, America: Freedom to Fascism helps the viewer gain a better understanding of the nature of the Federal Reserve and monetary policy. (The movie also covers other policies, which I’ll leave the reader to explore elsewhere.)

You can watch the one-hour and fifty-minute movie online by clicking on the “Play” button below.

You can also familiarize yourself with some of these terms and their implications:

• :: Federal Reserve
• :: fiat money
• :: free banking
• :: e-gold

By educating ourselves and acting in ways that reflect our knowledge, friends of liberty can greatly restrict the power of the State if we stop playing the fool to the federal government’s alternatives to gold.

Yours in liberty,
Rob Latham, Chairman
Libertarian Party of Utah