The famous libertarian writer, Ayn Rand, wrote in 1960, “America’s Founding Fathers were her first true intellectuals, and so far, her last.” Nothing proves this true more than Benjamin Franklin’s comments regarding the Continental Currency of the Colonies during the American Revolution:

“This Currency, as we manage it, is a wonderful machine. It performs its Office when we issue it; it pays and clothes Troops, and provides Victuals and Ammunition; and when we are obliged to issue a quantity excessive, it pays itself off by Depreciation.” (emphasis added)

By “Depreciation”, Franklin was referring to the steadily shrinking purchasing power of the Continental Dollar, which was inversely related to the amount in circulation. By the end of the American Revolution, the Continental Dollar was almost worthless. The collapse of colonial currency caused such economic pain that the expression “worthless as a Continental” still remains in the American lexicon over two hundred years later.

This inherent fatal flaw of unbridled fiat paper currency, inspired the Founding Fathers to include in our Constitution Article I, Section 10, allowing only gold and silver coin to be used as legal tender in our country. The Founders recognized that governments and especially banking institutions, both private and central, need a natural governor to deny both banking and politics the profligate use of the nation’s wealth for private and nefarious purposes. They wisely concluded that finite qualities of gold and silver serve well to naturally regulate the tendency of governments and banks to endlessly inflate the money supply.


It is blatantly obvious that robust economics and sound money have passed through the looking glass of greed and are as erratic as the Mad Hatter in Alice in Wonderland. For example, European Central Bank Chief, Mario Draghi, last week pledged “to do whatever it takes to preserve the Euro. And believe me, it will be enough.” Obviously, big daddy Mario is completely in sync with bigger daddy Ben Bernanke, at the Fed. Doing “whatever it takes to preserve the Euro” now apparently means promising to dilute the purchasing power of that currency into oblivion.

The ECB fully intends to utilize their crisp new counterfeit money to purchase the insolvent debt of its bankrupt constituent nations.

As well, the Wall Street Journal confidently predicted that the Fed, not to be outdone by their European counterpart, would act to shore up America’s faltering economy. Last Friday’s miserable 1.5 GDP statistic buttresses that idea.

Here in America, the Alice in Wonderland gang is running amok. The March Hare of “stimulus” economics, New York Senator Charles (spend and borrow your way to prosperity) Schumer, got right busy scolding Fed Chief Bernanke: “Get to work, Mr. Chairman.” It appears that Mr. Schumer believes that four years of zero percent interest rates, a promise to keep them that way until the end of 2014, $2 trillion in recent money expansion, and untold trillions more in Fed and government handouts to major world banks and their Wall Street cronies, just isn’t doing very much when it comes to stimulating the economy. To Schumer’s mind, it’s time for Mr. Bernanke to do something truly magnificent and open the floodgates wide to unlimited monetary inflation. But we know what this will look like and what effect it will have on the price of hard assets, especially precious metals. Want proof? Take a quick look at the two charts below detailing the enormous increase in the US money supply and the resultant response to the price of gold.

It is important to understand this: irrespective of what the deflationists continue to espouse, a central bank can create inflation whenever it wishes. It merely requires a firm commitment to destroy the purchasing value of currency, and a government complicit in this objective. This situation is readily coming to a head in Europe and the United States, and in Japan and China.

In light of the world’s central banks obvious intent to inflate away their governments’ irredeemable debt, we recall the words of author Jim Grant, “Gold is an expression of the world’s justifiable distrust of the way our central bankers conduct their affairs.”

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