Founder’s Folio: Heed History Lessons About Money and Inflation
Inflation has arrived with many of its punch indicators.
An overburdened economy fueled by shortages, price hikes, money printing and spending is fueling the modern inflation boom. Almost everywhere we look we see increasing prices for lumber and shelter for food and clothing, not to mention ever increasing product sizes. narrowing.
Will this inflationary trend continue and for what purpose?
Like all of my Founder’s Folio Pieces, let’s take a look at the question in regards to the Framers, the Founding Fathers of the United States. Our government’s monetary policy has far-reaching implications for the inflation we are experiencing and its severity, so what did the framers of the Constitution think about monetary policy in America?
The Framers’ core beliefs regarding the country’s monetary policy supported a reliable and sustained currency that was not based on inflationary practices such as printing, spending, and lending of paper money.
They had first hand experience of the dangers of increasing money printing.
Printing money out of control for finance revolutionary war at the state and federal levels led to incredible hyperinflation during the period of the First Continental Congress: “In 1780, Congress revalued its dollar to only a third of its 1775 value. But the new and improved dollar fell further to the point where, in 1781, it took 167 dollars to match the previous dollar. ”
Benjamin Franklin described the post-war costs to the people as a result of the war as a “progressive tax on them” with a prolonged recession period with economic markers similar to those of the Great Depression.
During the Constitutional Convention of 1787, an amendment was agreed to withdraw “credit effects”, or paper money, from monetary policy. The nation did not want to play with printing money.
Jefferson and Madison’s Secretary of the Treasury Albert Gallatin proclaimed in 1831 that “it necessarily follows that only gold and silver coins can be legal tender.”
Fortunately, the establishment of the Constitution in 1787 helped stabilize the country’s monetary system. The Framers’ cautious forecasting and opposition to unsubstantiated spending money and printing presents an inflation warning that we would be wise to heed as we deal with the modern rampant spending and printing we see today. ‘hui.
Most of the inflation indicators we face today can be attributed to banking monetary policy.
Founding Father Thomas Jefferson was vehemently against fractional reserve bank, declaring: “No one has a natural right to the profession of money lender except the one who has the money to lend.
Jefferson went even further in his scathing criticisms of the dangers of a centralized federal banking system, like the one we have today, calling the Bank of the United States “one of the deadliest hostilities in existence, against the principles and form of our Constitution. . ”
With the passion and fervor felt, let us reflect for a moment on the prudent wisdom of the Framers. They were rightly worried about an uncontrolled printing of federal currency and spending of money.
Today, the consumer price index, which measures the volatility of energy and food prices, is expected to have the most year on year increase this year in decades.
Future lumber prices are up 400% from April 2020, causing new homes to cost extra on average $ 36,000. US Steel is on the rise 270% since August. Consumer prices increased 5% in May, the fastest year-over-year increase since August 2008.
Consider the many lessons of history regarding inflation and its known societal damage that exacerbates income inequality and poverty.
Chris Kenny is the founder of Delaware Live. His Founder’s Folio column explores current events and modern issues in historical context and in relation to those who helped build what America is today: the Founding Fathers. Follow Kenny on social media or read his personal blog The Sword in the Stone at ChrisLKenny.com.