The Alternative to Inflation

Inflation destroys the incentive to save, especially when there are government ceilings on interest, as with savings accounts. Our tax system—taxing illusionary income—worsens this, and we can expect to see a smaller and smaller amount saved by Americans. Inflation steals from those who still believe in thrift, and robs pensions and retirement funds. How can any reasonable economist promote inflation with these facts staring him in the face?

Money and the Constitution

Legal tender Colonial paper money.

“It is apparent from the whole context of the Constitution, as well as the history of the times which gave birth to it,” said Andrew Jackson, “that it was the purpose of the Convention to establish a currency consisting of the precious metals.”

Morality and Transfer Payments

If for no other reason, inflation should be rejected on the basis of morality. Inflation is taxation by deceit. Government deceives the people as to the tax burden, and who is bearing it. The working and middle classes are gradually impoverished, while the poor are ground further down.

Wealth is transferred to the rich, from the hardworking and thrifty to the conniving and foxy.

Citizen Control of Money

The repudiation of debt through debasement of the currency is an ancient trick for not paying the bills. Default is at least done in the open. Inflation is much more destructive and dishonest, especially when the largest debtor—the government—controls the money supply.

Day of Reckoning

A $100 Confederate note.

The day of reckoning is upon us. The people now recognize the inflation hoax for what it is, and are demanding reform. Congress responsibility is clear, but the choices are varied.

Free Market Money?

Perhaps in the future we need to consider free market money, allowing consumers to decide about their money the way they decide about everything else. Hans Sennholz and Friedrich von Hayek argue for this system. And it existed at one time in our country.

Legal Tender Laws

At the very least, we must repeal the legal tender laws that force people to accept the government’s money, and set up a gold coin standard impossible for the politicians and bankers to debase. We should also end the legal monopoly on banking, allow free entry, and make it an open, competitive business like any other.

An Historical Precedent

Congress made the Greenback notes redeemable in gold in 1879, and the effect of this action can help us plan for a similar action in the future.

By the end of the Civil war, a Greenback dollar was worth less than 50¢ in gold. But as it became obvious that Congress would redeem them in Constitutional money, gold, they became worth more. The government also stopped inflating.

By 1868 it only took $138 in Greenbacks to buy $100 in gold, and by 1874, $111.

The End—or the Beginning

A U.S. $20 gold piece.

Government’s only legitimate reason for existence is to protect innocent life and property from aggression, foreign or domestic. When it deliberately destroys the money, government is acting perversely, by harming innocent life and property. Short of intentional war, inflation is the most immoral act political leaders can commit.

About the Author

Ron Paul, M.D., founder of FREE, Inc., was born in Pittsburgh in 1935. He is a graduate of Gettysburg College and Duke University School of Medicine.

Dr. Paul studied internal medicine at Detroit’s Henry Ford Hospital and obstetrics and gynecology at the University of Pittsburgh. He also served as a flight surgeon in the U.S. Air Force and the Air National Guard.