Fiat Money Becomes Worthless
In 1786 George Washington described his biggest worry for the new nation.
I do not conceive we can exist long as a nation, without having lodged somewhere a power which will pervade the whole union in as energetic a manner as the authority of the different state governments extends over the several states.
His thoughts help explain why the founders insisted on sound money at the 1787 Constitutional Convention. Six years earlier the colonies’ fiat money had lost all value. And states were competing to fill the monetary void, each with a different currency based on a gold standard.
Small World of Fiat Currencies
The Group of Twenty (G-20) economies may now be thought of as analogous to the states — with one big difference. Despite some G-20 nations competing to fill the void created when the dollar was taken off the gold standard, none can claim to have anything better. All they offer are different names for the same fiat money.
Recommend Dollar as Sound Money
A commodity-reserve dollar can again be used as a global unit of account, able to eliminate the inflation scare now gripping the G-20 and develping nations worried about dangerous change now taking place. Barack Obama is pursuing a wild-eyed policy to weaken the dollar through hyperinflation of America’s money supply. It’s nothing more than a purely-political plan to stimulate aggregate demand in time for the 2012 election.
In addition to being first in his country’s hearts, George Washington would also be one of the first to support a tradition of sound money, and warn about the worthless fate that awaits the American dollar with Barack Obama’s change.
John F. Chown, A History of Money: From AD 800 (London: Routledge, 1996).
John C. Fitzpatrick, ed., The Writings of George Washington from the Original Manuscript Sources, 1745-1799, 39 vols. (Washington: U.S. Government Printing Office, 1931-1944).