- Whose Mug on the Paper? / interess. Artikel - - Elli -, 24.06.2004, 15:56
Whose Mug on the Paper? / interess. Artikel
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<font color="#002864" size="1" face="Verdana">http://www.mises.org/fullstory.asp?control=1546</font>
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<font face="Verdana" size="2"><font color="#002864" size="5"><strong>Whose Mug on the Paper?</strong></font>
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<p class="MsoNormal" align="left"><font face="Verdana, Helvetica" size="4">By
Clifford F. Thies</font>
<p class="MsoNormal" align="left"><font face="Verdana, Helvetica" size="2">[Posted
June 24, 2004]</font>
<font face="Verdana, Helvetica" size="2"><img alt src="http://www.mises.org/images3/walkingliberty.gif" align="right" border="0">There's
a movement afoot to place a portrait of our nation's fortieth President,
Ronald Reagan, onto one of the denominations of our currency. The last two
changes, putting first Susan B. Anthony's countenance, and then Sacagawea's on
the $1 coin, proved to be failures. The prior two changes, putting President
John F. Kennedy's face on the 50¢ coin, and President Dwight D. Eisenhower's
face on the $1 coin were also failures. While the motivation to put Reagan
onto the currency is understandable, why has the track record been so poor?</font>
<font face="Verdana, Helvetica" size="2">Originally, the money of the
United States was the Spanish (silver) Dollar, or - as pirates referred to
it - the Piece of Eight. Arrr! Gold, originally mostly in the form of
Spanish Doubloons, played a supplemental role, but usually was exchanged at
its market value as distinct from its official monetary value. When, several
decades later, the U.S. government got into the business of minting coins, the
U.S. Dollar featured the American Eagle. Still later, our coins came to be
adorned by the god of Liberty, usually depicted as a beautiful
European-American woman as in the Saint Gaudens relief on modern U.S. gold
coins, and sometimes depicted as a Native American, as in the old buffalo
nickel.</font>
<font face="Verdana, Helvetica" size="2">When, during the Civil War, the
U.S. government issued the first legal tender paper money, prominent
politicians began to be displayed, including, on the $10 note, the then
sitting President, Abraham Lincoln. Notice that this bill also featured the
other two formerly popular symbols on our money, the American Eagle and the
goddess of Liberty.</font>
<p align="center"><font face="Verdana, Helvetica" size="2"><img height="167" alt src="http://www.mises.org/images3/10.gif" width="362" border="0" origname></font>
<font face="Verdana, Helvetica" size="2">By the early 20<sup>th</sup>
century, U.S. currency was more-or-less standardized in its portraiture as
follows:</font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<font face="Verdana, Helvetica" size="2">$1 - George Washington
$2 - Thomas Jefferson
$5 - Abraham Lincoln
$10 - Alexander Hamilton
$20 - Andrew Jackson
$50 - Ulysses S. Grant
$100 - Benjamin Franklin
$500 - John McKinley
$1,000 - Grover Cleveland
$5,000 - James Madison
$10,000 - Salmon P. Chase</font>
[/i]
<font face="Verdana, Helvetica" size="2">Collectively, these men are known
as the"Dead Presidents," although, in fact, three of them never
served as President.</font>
<font face="Verdana, Helvetica" size="2">Regarding our coins, the
transition to Dead Presidents began with the Lincoln penny in 1909, and was
completed with the short-lived Eisenhower dollar in 1971, as is shown below:</font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<font face="Verdana, Helvetica" size="2">Penny 1909
Lincoln
Nickel 1938 Jefferson
Dime 1946 FDR
Quarter 1932 Washington
Half 1948
Franklin 1964 Kennedy
Dollar 1971 Eisenhower 1979
Susan B. Anthony 2000 Sacagawea</font>
[/i]
<p dir="ltr"><font face="Verdana, Helvetica" size="2">The transition of the
symbols on our money to Dead Presidents is strangely appropriate. Originally,
our money was a measure of silver. Later, it was a measure of gold (in
addition, there was subsidiary silver money and a prescribed amount of legal
tender paper money). Paper money, as in the original Federal Reserve Notes,
was not money per se, but was nevertheless useful as a medium of exchange
because it was redeemable for lawful money. But, to make a long story short,
in 1971, the last connection of the U.S. Dollar to gold was severed.
All that is left to our money is the smile of the Cheshire cat.</font>
<font face="Verdana, Helvetica" size="2">Our money, nowadays, has no
commodity value, and has a market value only insofar as the political
authorities that supply it keep it limited in its supply. In theory, our paper
money can have a stable value but, in practice, paper money has always
resulted in inflation. For example, consider our own country's experience with
paper money following the disconnection of our money from gold. During the
1970s, the rate of inflation accelerated from creeping into galloping,
interest rates rose up to double-digits while real rates of return went
negative, our business cycle worsened, the price of energy quadrupled and
there were energy shortages and gas lines. It was a time of diminished
expectations, middle-class stagnation and rising poverty.</font>
<font face="Verdana, Helvetica" size="2">Then, from out of the west, came a
leader who, they say,"restored our confidence." Excuse me,
but our confidence was not restored because Ronald Reagan was such a charming
person but only because, in relation to the late 1970s, some measure of
stability returned to the monetary system.</font>
<font face="Verdana, Helvetica" size="2">The connection of inflation to
capital consumption, and of the lowering of inflation to a resumption of
capital accumulation, contradicted one of the tenets of Keynesian economics.
According to the doctrine of"forced savings," inflation supposedly
favored business, but, correct economic theory indicated, contrariwise, that
this was"a serious blunder" (see Human Action, pp. 548-550).</font>
<font face="Verdana, Helvetica" size="2">Speaking of symbols and money,
this is why Ludwig von Mises favored the Gold Standard because, when he wrote,
it was the symbol of late 19<sup>th</sup> Century economic liberalism
involving hard money, balanced budgets, free international trade, and the rule
of law. But, today, our money supply does not emanate from the market in the
commodity or set of commodities by which our money is defined. Our money
results from political decisions. Thus, our productivity, wages and standards
of living, our money and our wealth, are continually at risk. If good
decisions are made, we will prosper, and if poor decisions are made, we will
suffer.</font>
<font face="Verdana, Helvetica" size="2">Let us consider the major
contributions of our Dead Presidents to what I will call the constitution of
money, including its evolution from being defined as so much gold or so much
silver, to its being nothing but paper money. It can be seen from the highly
stylized summary provided below that some of our greatest Presidents had what
can charitably be described as"mixed records" in this evolution.</font>
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<table borderColor="#196b03" cellSpacing="0" cellPadding="3" align="center" bgColor="#edf9ea" border="1">
<tbody>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">1¢, $5 Abraham
Lincoln</font>
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<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Legal tender paper money;
and, federally-chartered banks.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">5¢, $2 Thomas
Jefferson</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Not particularly noted
for money matters (although he generally favored hard-money);
nevertheless, it should be noted that, as President, he
substantially paid-off the Revolutionary War debt.</font>
</td>
</tr>
<tr>
<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">10¢ FDR</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Devalued the dollar;
confiscated domestic gold; abrogated the gold clause;
redistributionism; deficit-spending; tried to"stack" the
U.S. Supreme Court; and, led the nation during a world war against
totalitarian fascism.</font>
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</tr>
<tr>
<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">25¢, $1 George
Washington</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Not particularly noted
for money matters (although we might suppose he favored the
positions of Madison and Hamilton).</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">50¢ JFK</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Not particularly noted
for money matters.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$10 Alexander
Hamilton</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Defined the dollar as a
measure of silver; instrumental in the state-chartered Bank of New
York and in the federally-chartered First Bank of the U.S.; and,
organized the Revolutionary War debt.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$20 Andrew Jackson</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Shifted the dollar from
silver to gold; issued the specie circular; vetoed the re-chartering
of the Second Bank of the U.S.; paid-off the War of 1812 debt; and,
appointed Taney to be Chief Justice of the Supreme Court and, thus,
endorsed paper money issued by state-chartered banks.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$50 U.S. Grant</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Appointed two associate
justices to the Supreme Court to declare legal tender paper money to
be constitutional; and adopted"grow to gold" strategy to
facilitate resumption and the eventual paying-off of the Civil War
debt.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$100 Benjamin
Franklin</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Foremost proponent of
thrift and self-help enterprises; and, advocate for and main printer
of Pennsylvania's colonial paper money.</font>
</td>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$500 John McKinley</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Defeated William
Jennings Bryan when Bryan emerged as the foremost advocate of silver
agitation and other radical policies during the late 19<sup>th</sup>
century.</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$1,000 Grover
Cleveland</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Last of the hard-money
Democrats.</font>
</td>
</tr>
<tr>
<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$5,000 James
Madison</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Father of the U.S.
Constitution (which made only gold and silver to be legal tender,
prohibited states from issuing bills of credit, and prohibited bills
of attainder and ex post facto laws).</font>
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<td vAlign="top" width="199">
<font face="Verdana, Helvetica" size="2">$10,000 Salmon P.
Chase</font>
</td>
<td vAlign="top" width="391">
<font face="Verdana, Helvetica" size="2">Proposed legal tender
paper money as Lincoln's Secretary of the Treasury; and, as Chief
Justice of the U.S. Supreme Court unsuccessfully argued that it was
unconstitutional.</font>
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<font face="Verdana, Helvetica" size="2">(The Dead Presidents who are
obviously missing from the above list are Woodrow Wilson, who signed the
Federal Reserve Act into law, and Richard Nixon, who closed the gold window.)</font>
<font face="Verdana, Helvetica" size="2">What were the contributions of
Ronald Reagan in money matters, and how do his contributions compare to those
of the other Dead Presidents? Well, on the plus side, he lowered
inflation and cut taxes; and, on the negative side, he presided over growing
deficits.</font>
<font face="Verdana, Helvetica" size="2">To be sure, Reagan did not change
the constitution of money, but operated within the paper money regime to which
we have evolved. His accomplishments, therefore, cannot be projected with much
confidence into the future. They will depend on the continuing support for the
economic policies of sound money, balanced budgets, free international trade
and the rule of law. It is one thing for this support to be forthcoming while
the memory of the stagflation of the 1970s remains relatively fresh. But, what
will happen when the 1970s become part of a history unlived by decision-makers
of the future? Having Ronald Reagan's face on the front of our money
would not be as effective as having gold or silver or something else real
value behind it.</font>
<p class="MsoNormal" align="left"><font face="Verdana, Helvetica" size="2">_____________________________</font>
<font face="Verdana, Helvetica" size="2">Clifford F. Thies is the Eldon R.
Lindsay Professor of Economics and Finance at Shenandoah University</font>
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