Why the Constitution only allowed money in gold and silver

Article 1, Section 10 states:

“No state shall . . .  make anything but gold and silver coin a tender in payment of debts.”

Here’s why:

The chart is the price index of all commodities for the last 90 years.  You should note that the prices were relatively stable until the early 1970s.  What happened then to push the prices up so much?

Richard Nixon removed the dollar from the gold standard and moved the dollar to being a “faith-based” currency – there was no longer anything backing the dollar except federal reserve intervention in the money supply and interest rates – and thus, the only real value of the dollar was based on people’s faith in it’s value.

And of course, when the fed prints lots of new paper, the relative value of each individual dollar decreases by the percentage of to total money supply that has been printed.  If the fed prints 10% more currency, each dollar is worth 10% less.  That’s inflation.

The faith in the dollar (and in the federal reserve/federal government) is weakening by the day. 

Note also this chart:

The chart is from January 2001 to January 2008. 

In blue is how many dollars it takes to buy a barrel of oil.

In red is how many euros it takes to buy a barrel of oil.

In purple is how many barrels of oil you can buy with an ounce of gold.

Note that if the United States had kept the dollar on the gold standard, oil/gas would cost almost exactly what it did in 2001.

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Published in: on July 1, 2008 at 8:35 pm  Leave a Comment  

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