Swelling Nostalgia For Gold-Backed Money And A Balanced Budget Amendment

After such stunning gains over the last few weeks, the stuff that Ben Bernanke does not regard as money, gold, needed a rest.Â*But if gold isn't real money, what is? Â*Pieces of paper that a private bank and the U.S. Treasury say is real money? There's no magic to money. It works as a medium of exchange and a store of value when its quantity is strictly controlled. That's what's nice about gold. Its quantity is controlled by nature herself. People have been trying to get around it for centuries. Alchemists labored long and hard to turn base metal into gold. None succeeded. The only way you can increase the supply of gold is by mining it, which is expensive and time consuming. Of course, technology helps. But technology tends to advance with the economy itself. So when the economy is growing at 1% a year, the quantity of gold tends to increase at about a 1% rate too. What a miracle! Prices remain stable because <a href="http://www.pittsburghsteelersnfljersey.com/products/NFL-Jerseys-18/Denver-Broncos-425/"><strong>Cheap Broncos Jerseys 2011</strong></a> the quantity of gold increases at almost the exact rate necessary. This is why you can reach about as far back in history as you want, you'll find that gold was just about as valuable a thousand years ago as it is now. In the 19th century, paper money was backed by gold. People had learned their lessons in the panics and bubbles of the 18th century. They didn't trust pure paper currencies. Lincoln fiddled the dollar during the War Between the States, inflating the currency to pay for Union military campaigns but it was put right soon after. Apart from that, for the whole period, from the beginning of the 19th century to the creation of the Federal Reserve in 1913, the dollar was stable and reliable. Â*People trusted it because there was real money (gold) standing behind it. Now the chief of America's central bank says that gold is not money; the dollar is supposed to be money now. And now, the feds don't worry too much about how <a href="http://www.intermilansoccerjersey.com/products/Soccer-Jerseys-15/Chelsea-352/"><strong>Cheap Chelsea Jersey</strong></a> many dollars they issue. Their primary goal is no longer preserving the purchasing power of the buck – it's lost 95% of its value since the Fed was set up. Now, they're more concerned with the stock market, with the housing market, with consumer spending, and with the next election. Can we have confidence in these men? Do they know what they are doing? Did they see the crisis coming? Did they understand what was happening? Have their efforts to fix it been successful so far? Is protecting the value of your money, and the financial health of the nation, their number one goal? Five years from now, which do you think will be worth more? The dollar without gold behind it? Or gold, without the dollar? A few people in Congress are trying to protect the dollar and America's credit. The more the U.S. government spends, they reason, the more dollars it will have to borrow and print. Many of these debt-fighters are determined to hold the line against a debt ceiling increase. Others are hoping to cut a deal that will reduce America's borrowing needs. Â*Still others just want to cause trouble for the Obama administration. The U.S. Senate on FridayÂ*voted 51-to-46 to rejectÂ*a "cut, cap and balance" bill that called for massive spending cuts and implementation of a balanced budget amendment to the Constitution. Â*The House passed the bill 234-to-190 on Tuesday. How this brings back memories!Â*Just out of college, I got a job helping a friend on Capitol Hill. He worked for a group called the National Taxpayers Union. NTU. Frequently calumnied as NUT. Long before the Tea Party, our goal was to reduce the burden of government, to move the nation back towards <a href="http://www.premiernfljersey.com/products/Soccer-Jerseys-21/"><strong>Cheap National Soccer Jerseys 2011</strong></a> the liberty imagined by the founding fathers, and to reduce the power of the jerks in Congress. Â*It was a shoestring operation with no real hope of success. We didn't know it then, but the great tide of history was moving against us. We could swim as hard as we wanted but we still wouldn't get anywhere. At first, we thought we might get big support from very rich business people who had a lot to gain by cutting Washington down to size. We recall our first meeting with one of these people, Jack Eckerd of Eckerd drugstores. A nice man with an earnest desire to make the world a better place, he came to our dump on East Capitol Street. Â*It had peeling wall paper, no air-conditioning, raggy carpeting, and mice. We paid 250 a month in rent.Â*On our desks, we had the essential supplies of the time: Â*a bag of cookies, a pile of letters, an electric typewriter, a bottle of Liquid Paper and a roll of toilet paper. "I see you have everything you need," Eckerd said in good humor. "We could also use 100,000 of your money," we wanted to reply.Â*We rolled out our best chair, a tall-backed office chair on casters with a cracked naugahyde seat. Â*It was a chair that we had found in the alley behind the office. "Here, sit here." Â*Â*Mr. Eckerd took the seat, sat down, and leaned back. In a flash, we knew exactly what was going to happen but were powerless to stop it. Â*Mr. Eckerd had passed the point of no-return. Â*The chair's wheels rolled forward while the seat tumbled backwards. Â*Poor Mr. Eckerd hit his head on another desk on his way down. Pardon the digression. Â*But the balanced budget amendment is exactly the measure <a href="http://www.dabeat.org/bin/cpg/displayimage.php?pos=-183"><strong>Discount running gear: shoes at affordable prices</strong></a> we pushed 35 years ago. The idea came to us from a Maryland state senator, Jim Clark, a descendant of Johns Hopkins. Jim had been watching the U.S. budget for years. He looked ahead. He knew what was coming. And he came up with a way to prevent the U.S. from going broke. Â*"Congress will never do this on its own," he explained. "They like spending other peoples' money. But state legislators typically have to balance their own budgets and they don't see any reason Washington should not be required to do the same thing." The Committee to Balance the Budget was formed. It worked, state by state, getting state legislatures to approve an amendment to the constitution forbidding deficits. How the world might be different if it had been enacted. I left Washington and political activism for the world of publishing in 1980. At that point, the amendment was very close to passage. But then, in came Ronald Reagan and people stopped worrying about deficits. If the Republicans weren't going to worry about debt, the Democrats certainly weren't going to sweat it either. Budgets got bigger and bigger. Deficits soared under Reagan, declined under Clinton, and then soared again under Bush and Obama. Â*NowÂ*here we are, deeper in debt than Jim Clark, who died a few years ago, ever imagined. Overconfidence in Paper Currencies by Bill Bonner originally appeared in the Daily Reckoning.