The Greenback

The history of the dollar and why the gold standard needs to return

When the Kingston Trio came out with their rendition of "Greenback Dollar" with the lyrics saying "I don't give a dam about a greenback dollar I spend it just as fast as I can" today, half of that phrase is actually true. Too many of us continue to spend that greenback ever faster though.  But, what we do care about is why that ever disappearing dollar doesn't afford the things it used to. We do give a dam about every last dime that comes into our possession today.

 

To understand the seriousness of the United States financial status is to trace the history of the dollar or Greenback as it was known during the Civil War. The term greenback refers to legal tender, printed in green on one side and issued by the United States during the American Civil War. Currency at that time was backed up by gold but, when the Civil War broke out the demand for more currency was too much for the gold reserves the United States had. What President Lincoln did by issuance of the Greenback was to put the backing of greenback solely based on the credibility of the U.S. Government. Much like it is today. Those Greenbacks back then was largely what financed the Civil War and subsequently making the first industrial revolution possible.

 Today, our floundering US dollar is precariously close to falling off as the world's reserve currency. The main reason is that we still have our currency solely backed up by the credulity of our government. The Federal Reserve continues to print fresh "Greenbacks" and loans the money with interest it to the US government. It is the interest that is making Wall Street and the Federal Reserve wealthier at the expense of the US economy. Think of the Qualitative Easing the Fed did following the financial disaster of 2008. All that did was enrich the power brokers while main street continues to languish in financial distress. 

 

When Lincoln assumed office he already understood that the outcome of the war would be largely determined by the resources of the North. Lincoln also understood the importance of raising enough funds to effectively carry out the war effort. With this in mind Lincoln on the day after his inauguration nominated Salmon P. Chase to be Secretary of the Treasury. Secretary Chase alone was authorized by Lincoln to act on all matters pertaining to the country’s finances. Chase, like most everyone else at the time, underestimated the severity of the War in terms of its duration and cost.

 

Confronted with the expenses of war, the Lincoln Administration sought loans from New York bankers, most of whom were fronts for, or connected to, European bankers. Given the very high interest rates of 24 to 36 percent, President Lincoln refused to accept the terms of the loans and called for other solutions. Colonel Edmund D. Taylor of Illinois made the suggestion that the U.S. government could issue its own money. Taylor is quoted as saying: "Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes and pay your soldiers with them and go ahead and win your war with them also. If you make them full legal tender they will have the full sanction of the government and be just as good as any money." The express right by the Constitution gives Congress under the Treasury Department the right to print legal tender. We have to remember too that this was in a time of war and the Federal Reserve didn't come into existence until 1913.

 

The idea to print Greenback based on the government's credibility was not Lincoln's idea originally, but with mounting pressure in Congress to accept the plan the President was quick to endorse it. The government could either print its own money or lead the country into to perpetual debt at the hands of European banks. On February 25, 1862, Congress passed the first Legal Tender Act, which authorized the printing of $150 million in Treasury notes. Printed on only one side with green ink.  The bills were soon became known as "greenbacks".  These United States Notes or "greenbacks" represented receipts for labor and goods delivered to the United States. They could be traded in the community for an equivalent value of goods or services. The union used this money to keep the economy stable and help to pay for the war. There are at least two types of notes that were called greenbacks. They were referred to as: United States Notes and the Demand Note.

 

What Abraham Lincoln did was prove that the US government could issue it's own currency and not the major banks that were intent on reaping billions of dollars in interest loans to the government in funding the civil War. The Greenback was proof that Lincoln understood the dangers of having currency loaned to the government at high interest rates. He knew that with interest rates with loaned money would be putting the United States deeper in debt. Sounding familiar, it should because today with the Federal Reserve in play that is exactly what is driving this nations debt even higher.  

Jackson, Lincoln, Garfield and Kennedy all knew the dangers of money loaned to the government with high interest as the real cause of the United States national debt. A debt that will only continue to fester and push this countries ability to prosper further away from becoming a reality. In other words the United States economic and financial stability continues to be in very serious jeopardy. Today, it is also important to note that this nations debt and without the gold standard in play is the main reason why disposable incomes are at all time lows.   

After the battle of Gettysburg Congress repealed the Legal Tender Act and restored the previous gold and silver backed currency loaned by major Banks with interest to the US government. It was the  influence of the banks that swayed congress to repeal the Legal Tender Act. And, just like the Rothschilde's who controlled the Bank of England have now gained control of much of the United States financial policies. Today, it is the Federal Reserve and Wall Street financiers that control the monetary policies of the US and to a great deal too many members of Congress as well. 

 

With the understanding of our banking system we come away with the realization that Americans future is tied to the debt of this nation. A debt that only continues to grow. With past and current wars around the world along the present Administration total ignorance of the financial crisis we are in has put this nation's future very much at risk. It could be arguably said that when President Nixon took the dollar off of the gold standard in 1972 was the financial blunder and is like a death sentence of the US dollar. 

On August 15th was the 47th anniversary of President Nixon's financial blunder. The blunder that severed the final link between the dollar and gold. It has been said that no other single action by Nixon had a more profound and irreparable effect on the American people. Up until that time a dollar was worth 1/35th of an ounce of gold. When Nixon took us off the gold standard was the beginning of the worst 47 years in American economic history. And it looks that the next 40 years will be a continuation of the first 47 years.

What Nixon did was promise by taking this action, the requirement of maintaining the dollar's value in terms of gold would empower the Federal Reserve to use monetary policy to increase the general prosperity of the American people. We were also promised that the manipulation of quantity and value of a dollar would avoid costly recessions, provide high employment and produce economic growth. On the international level we were also promised that the devaluation of the dollar would reduce our trade deficit and improve the overall economy. 

Since 1972 we have suffered numerous recessions and the worst financial disaster since the Great Depression. Our unemployment rates have fluctuated from a high of over 15% to now around 5.5%. The sad reality though wages have plummeted in relation to the cost of living. Our economic performance since 1972 has been dismal compared to the economic boom we had following World War II up until 1972.

Economic growth has averaged just under 3% for the past 47 years. Had the gold standard survived our economic growth would have risen to over 4% or even higher. We have to point out that 4% economic growth rate always yields higher employment and higher wages. A 3% growth rate only maintains the status-quo and a $8.5 trillion smaller economy. All this means that had Nixon kept the gold standard medium family incomes would be 50% higher today, or about equivalent to around $75,000 annually.

This also means that the tax base for all federal, state and local governments would not be experiencing the budget shortfalls that are currently plaguing every budget across the country. The fiscal challenges we currently are facing would be negated and our economic future would be allot more stable and secure. It has been for the past 47 years that the dollar has fallen in value by more than 75% and we still have over $400 billion trade deficit.

When we look back prior to 1972 a dollar then only goes as far as $.20 today. And, with little reason to believe that the dollar will maintain even this paltry value, the average American family is left with no meaningful way to save for their children's education or their own retirement. Millions of Americans today are faced with financial insecurity and little hope that their economic fortunes will turn around.

Having a gold standard is necessary for maintaining the buying power of the dollar. From 1948 to 1967 inflation was less than 2%. Interest rates were low averaging less than 4% which provided a reasonable cost to borrowers and a fair return to savers. Today, inflation rates keep rising every year. It is also interesting to note that had the dollar kept it's value to 1/35th of an ounce of gold a barrel of oil would sell for less than $2.50. The whole notion of the energy crisis and the more intrusive government regulation dictating usage are based on the illusion that the price of oil has gone up more than 30 times when in fact it is the dollar whose value has fallen relative to gold, oil, and all other goods and services over the past 47 years.

The United States has suffered a most debilitating economic and financial crisis since 1972. The deviation from a sound dollar today can and must be corrected if we are ever to regain the economic growth and prosperity similar to what this nation experience for the 30 years prior to 1972. Many of the baby boomer generation have recollections of how their parents handled financial affairs. Disposable incomes were plentiful and that dollar went so much farther than it does today all because the dollar was backed up by gold.

A much different set of circumstances exist today. More sober, more unsettling, and even a more sinister approach has taken over the majority of families spending habits has arisen. The greenback is not worth what it was compared to back in the early 1960's. To restore the value of the dollar and reestablish it's true worth is to have the gold standard reinstated whereby every fiscal transaction is geared to insure that more disposable incomes are available for all. The surest way is to like Lincoln did is to have the Treasury and not the the Bank of New York or today's Federal Reserve print those all important greenbacks, interest free.

To this day having the Federal Reserve solely responsible for printing this nations currency and not the Treasury Department as stated in our Constitution with the gold standard not backing up our currency the American people are held hostage by this nations debt with all the accrued interest each and every one of us has to pay. Consequently the Greenback dollar will only continue to keep Americans disposable incomes from increasing. What is urgently needed is to put the Treasury Department in charge of our currency interest free and not the Federal Reserve where the interest rates for all the dollars loaned back to the US government has only crippled the United States financial and economically.