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Thread: The Money Question: Goldbugs vs. Greenbackers--Ellen Brown

  1. #1

    The Money Question: Goldbugs vs. Greenbackers--Ellen Brown

    Chapter 37 from Ellen Brown's Web of Debt

    Goldbugs Vs Greenbackers
    Why not return to gold as the national currency? Since that question has come up often on this blog, a chapter from “Web of Debt” addressing it is posted below.

    Chapter 37

    THE MONEY QUESTION: GOLDBUGS AND GREENBACKERS DEBATE
    “You shall not crucify mankind upon a cross of gold.”

    – William Jennings Bryan, 1896 Democratic Convention
    At opposite ends of the debate over the money question in the
    1890s were the “Goldbugs,” led by the bankers, and the “Greenbackers,” who were chiefly farmers and laborers.1 The use of the term “Goldbug” has been traced to the 1896 Presidential election, when supporters of gold money took to wearing lapel pins of small insects to show their position. The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers’ gold, having felt its crushing effects in their own lives. As Vernon Parrington summarized their position in the 1920s:

    To allow the bankers to erect a monetary system on gold is to subject the producer to the money-broker and measure deferred payments by a yardstick that lengthens or shortens from year to year. The only safe and rational currency is a national currency based on the national credit, sponsored by the state, flexible, and controlled in the interests of the people as a whole.2

    The Goldbugs countered that currency backed only by the national credit was too easily inflated by unscrupulous politicians. Gold, they insisted, was the only stable medium of exchange. They called it “sound money” or “honest money.” Gold had the weight of history to recommend it, having been used as money for 5,000 years. It had to be extracted from the earth under difficult and often dangerous circumstances, and the earth had only so much of it to relinquish. The supply of it was therefore relatively fixed. The virtue of gold was that it was a rare commodity that could not be inflated by irresponsible governments out of all proportion to the supply of goods and services.

    The Greenbackers responded that gold’s scarcity, far from being a virtue, was actually its major drawback as a medium of exchange. Gold coins might be “honest money,” but their scarcity had led governments to condone dishonest money, the sleight of hand known as “fractional reserve” banking. Governments that were barred from creating their own paper money would just borrow it from banks that created it and then demanded it back with interest. As Stephen Zarlenga noted in The Lost Science of Money:

    [A]ll of the plausible sounding gold standard theory could not change or hide the fact that, in order to function, the system had to mix paper credits with gold in domestic economies. Even after this addition, the mixed gold and credit standard could not properly service the growing economies. They periodically broke down with dire domestic and international results. [In] the worst such breakdown, the Great Crash and Depression of 1929-33, . . . it was widely noted that those countries did best that left the gold standard soonest.3

    Continue:

    http://webofdebt.wordpress.com/chapt...ackers-debate/



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  3. #2
    Quote Originally Posted by bobbyw24 View Post
    Chapter 37 from Ellen Brown's Web of Debt

    Goldbugs Vs Greenbackers
    Why not return to gold as the national currency? Since that question has come up often on this blog, a chapter from “Web of Debt” addressing it is posted below.

    Chapter 37

    THE MONEY QUESTION: GOLDBUGS AND GREENBACKERS DEBATE
    “You shall not crucify mankind upon a cross of gold.”

    – William Jennings Bryan, 1896 Democratic Convention
    At opposite ends of the debate over the money question in the
    1890s were the “Goldbugs,” led by the bankers, and the “Greenbackers,” who were chiefly farmers and laborers.
    From "History of money and banking in the USA..." (my emphasis):

    It should be noted that this first silver agitation of the late
    1870s, at least, cannot be considered an “agrarian” or a partic-
    ularly Southern and Western movement. The silver agitation
    was broadly based throughout the nation, except in New Eng-
    land, and was, moreover, an urban movement. As Weinstein
    points out:

    Silver began as an urban movement, furthermore, not an
    agrarian crusade.
    Its original strongholds were the large
    towns and cities of the Midwest and middle Atlantic states,
    not the country’s farming communities. The first batch of
    bimetallist leaders were a loosely knit collection of hard
    money newspaper editors, businessmen, academic reform-
    ers, bankers, and commercial groups.
    [149]

    With the passage of the Silver Purchase Act of 1878, silver
    agitation died out in America, to spring up again in the 1890s.

    [149] Weinstein, Prelude to Populism, p. 356.
    Lets continue,

    The use of the term “Goldbug” has been traced to the 1896 Presidential election, when supporters of gold money took to wearing lapel pins of small insects to show their position. The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers’ gold, having felt its crushing effects in their own lives. As Vernon Parrington summarized their position in the 1920s:

    To allow the bankers to erect a monetary system on gold is to subject the producer to the money-broker and measure deferred payments by a yardstick that lengthens or shortens from year to year. The only safe and rational currency is a national currency based on the national credit, sponsored by the state, flexible, and controlled in the interests of the people as a whole.2
    If it werent so sad, this would be very funny.

    The fact that bankers had control over the money supply was thanks to a law enacted by Lincoln at the end of the civil war, that centralized the banking and credit system on the banks of New York. Funnyly enough this people overlook this fact, and claim Lincoln is a hero because he created the greenbacks to fight against the bankers. If Lincoln was against the bankers why did he enacted the law that gave them control over the banking and credit system?

    To be fair I will point out that the only explanation I have heard is that he did it to get credit to fund the last part of the war and that he was going to cancel the law after, but then he was murdered. I have to problems with this

    1) Nobody knows what he would have done after the war. I have read someone trying to justify that T.Jefferson was anticapitalist and started like this: "If T.Jefferson would have known the result of capitalism he would have ...". This way I can "demonstrate" whatever I want.

    2) If greenbacks were so great why did Lincoln need the help of the bankers to pay for the last part of the war? It is maybe because they were depreciating very quick as they were being printed, even with the treasury secretaries enacting laws that violated private property and trying to criminalize gold owners to prop up the greenback value? And that depreciation happened in a few years (I will add another comentary with data about this, after the answer).

    The Goldbugs countered that currency backed only by the national credit was too easily inflated by unscrupulous politicians. Gold, they insisted, was the only stable medium of exchange. They called it “sound money” or “honest money.” Gold had the weight of history to recommend it, having been used as money for 5,000 years. It had to be extracted from the earth under difficult and often dangerous circumstances, and the earth had only so much of it to relinquish. The supply of it was therefore relatively fixed. The virtue of gold was that it was a rare commodity that could not be inflated by irresponsible governments out of all proportion to the supply of goods and services.

    The Greenbackers responded that gold’s scarcity, far from being a virtue, was actually its major drawback as a medium of exchange. Gold coins might be “honest money,” but their scarcity had led governments to condone dishonest money, the sleight of hand known as “fractional reserve” banking. Governments that were barred from creating their own paper money would just borrow it from banks that created it and then demanded it back with interest. As Stephen Zarlenga noted in The Lost Science of Money:

    [A]ll of the plausible sounding gold standard theory could not change or hide the fact that, in order to function, the system had to mix paper credits with gold in domestic economies. Even after this addition, the mixed gold and credit standard could not properly service the growing economies. They periodically broke down with dire domestic and international results. [In] the worst such breakdown, the Great Crash and Depression of 1929-33, . . . it was widely noted that those countries did best that left the gold standard soonest.3

    Continue:

    http://webofdebt.wordpress.com/chapt...ackers-debate/
    Stephen Zarlenga? The same guy who says that the free market is something that should have died long ago?

    I could go on and on, but it is funny that this guys only point out to the after-Lincoln period, with the problems created by his laws, and not (for example) at the after-Jacksonian period where you have real free banking.

    But THE REAL PROBLEM is that they have not answered. They can try to blame "the bankster" and look for connections and supositions about what a president would have done, but that is not even that important. The REAL QUESTION and that I have not seen answered is:

    ¿How is the greenback a good monetary system when it lost value at quick rate and it only stoped loosing value when it stoped being printed (wich is obviously the contrary of what they want)?
    Last edited by hugolp; 01-11-2010 at 10:41 AM.

  4. #3
    Here what I promised before, the creation of the greenback (notice how the gold manipulation that we see today and GATA has helped to made public, was tried before by Lincoln's Treasury secretary):

    The U.S. government quickly took advantage of being on
    an inconvertible fiat standard. In the Legal Tender Act of Feb-
    ruary 1862, Congress authorized the printing of $150 million
    in new “United States notes” (soon to be known as “green-
    backs”) to pay for the growing war deficits. The greenbacks
    were made legal tender for all debts, public and private,
    except that the Treasury continued its legal obligation of pay-
    ing the interest on its outstanding public debt in specie.103 The
    103To be able to keep paying interest in specie, Congress provided
    that customs duties, at least, had to be paid in gold or silver. For a com-
    prehensive account and analysis of the issue of greenbacks in the Civil
    War, see Wesley Clair Mitchell, A History of the Greenbacks (Chicago:
    University of Chicago Press, 1903). For a summary, see Paul Studenski
    and Herman E. Kross, Financial History of the United States (New York:
    McGraw-Hill, 1952), pp. 141–49.
    124 A History of Money and Banking in the United States:
    The Colonial Era to World War II
    greenbacks were also made convertible at par into U.S. bonds,
    which remained a generally unused option for the public, and
    was repealed a year later.
    In creating greenbacks in February, Congress resolved that
    this would be the first and last emergency issue. But printing
    money is a heady wine, and a second $150 million issue was
    authorized in July, and still a third $150 million in early 1863.
    Greenbacks outstanding reached a peak in 1864 of $415.1 mil-
    lion.
    Greenbacks began to depreciate in terms of specie almost as
    soon as they were issued. In an attempt to drive up the price of
    government bonds, Secretary Chase eliminated the convertibil-
    ity of greenbacks in July 1863, an act that simply drove their
    value down further. Chase and the Treasury officials, instead of
    acknowledging their own premier responsibility for the contin-
    ued depreciation of the greenbacks, conveniently placed the
    blame on anonymous “gold speculators.” In March 1863, Chase
    began a determined campaign, which would last until he was
    driven from office, to stop the depreciation by controlling,
    assaulting, and eventually eliminating the gold market. In early
    March, he had Congress to levy a stamp tax on gold sales and
    to forbid loans on a collateral of coin above its par value. This
    restriction on the gold market had little effect, and when depre-
    ciation resumed its march at the end of the year, Chase decided
    to de facto repeal the requirement that customs duties be paid
    in gold. In late March 1864, Chase declared that importers
    would be allowed to deposit greenbacks at the Treasury and
    receive gold in return at a premium below the market.
    Importers could then use the gold to pay the customs duties.
    This was supposed to reduce greatly the necessity for importers
    to buy gold coin on the market and therefore to reduce the
    depreciation. The outcome, however, was that the greenback, at
    59¢ in gold when Chase began the experiment, had fallen to 57¢
    by mid-April. Chase was then forced to repeal his customs-
    duties scheme.
    A History of Money and Banking in the United States 125
    Before the Twentieth Century
    With the failure of this attempt to regulate the gold market,
    Chase promptly escalated his intervention. In mid-April, he
    sold the massive amount of $11 million in gold in order to
    drive down the gold premium of greenbacks. But the impact
    was trifling, and the Treasury could not continue this policy
    indefinitely, because it had to keep enough gold in its vaults
    to pay interest on its bonds. At the end of the month, the
    greenback was lower than ever, having sunk to below 56¢ in
    gold.
    Indefatigably, Chase tried yet again. In mid-May 1864, he
    sold foreign exchange in London at below-market rates in
    order to drive down pounds in relation to dollars, and, more
    specifically, to replace some of the U.S. export demand for gold
    in England. But this, too, was a failure, and Chase ended this
    experiment before the end of the month.
    Finally, Secretary Chase decided to take off the gloves. He
    had failed to regulate the gold market; he would therefore end
    the depreciation of greenbacks by destroying the gold market
    completely. By mid-June, he had driven through Congress a
    truly despotic measure to prohibit under pain of severe penal-
    ties all futures contracts in gold, as well as all sales of gold by
    a broker outside his own office.
    The result was disaster. The gold market was in chaos, with
    wide ranges of prices due to the absence of an organized mar-
    ket. Businessmen clamored for repeal of the “gold bill,” and,
    worst of all, the object of the law—to lower the depreciation of
    the paper dollar—had scarcely been achieved. Instead, public
    confidence in the greenback plummeted, and its depreciation in
    terms of gold got far worse. At the beginning of June, the green-
    back dollar was worth over 52¢ in gold. Apprehensions about
    the emerging gold bill drove the greenback down slightly to 51¢
    in mid-June. Then, after the passage of the bill, the greenback
    plummeted, hitting 40¢ at the end of the month.
    The disastrous gold bill was hastily repealed at the end of
    June, and perhaps not coincidentally, Secretary Chase was
    126 A History of Money and Banking in the United States:
    The Colonial Era to World War II
    ousted from office at the same time. The war against the specu-
    lators was over.104, 105
    As soon as greenbacks depreciated to less than 97¢ in gold,
    fractional silver coins became undervalued and so were
    exported to be exchanged for gold. By July 1862, in conse-
    quence, no coin higher than the copper-nickel penny remained
    in circulation.



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