Dr. Shelton’s book proposes a way to get the U.S. government’s budget back on track and end inflation by creating U.S. Treasury Trust Bonds. Generally, when U.S. Treasury securities mature, investors are repaid with money that is borrowed via new issues of U.S. Treasury securities, because the U.S. government spends a lot more than it takes in. The United States is now spending more on debt interest than it is on national defense. Dr. Shelton’s Treasury Trust Bonds would force the U.S. government to be much more serious about balancing the budget, because investors would have a choice of having the bonds redeemed at maturity in either United States dollars or the equivalent amount in gold. To prevent a run on the U.S. government gold reserves, generally thought to be 8,133 metric tons, the U.S. government would have to spend less and take in more revenue.
Dr. Shelton’s book is jam-packed with information. She provides good definitions of the difference between liberty and collectivism and a good explanation of why gold and silver are traditional money. She defines money as three things: a medium of exchange, a unit of account, and a store of value. At best, the U.S. dollar, and the other fiat currencies of the world, are only able to fulfill the first two. As a store of value, fiat currencies are failing miserably. How can anything be a store of value when more of it can be created by printing paper bills or by creating it electronically? (The modern euphemism for printing money is quantitative easing.) By contrast, gold and silver are abundant enough to be used as money, but scarce enough to have value. They are also resistant to corrosion and can be easily divided into small amounts (such as coins) or melted into bars of different sizes. Since there is less gold than silver on Earth, it follows that gold is more valuable than silver.
Dr. Shelton called out Congress for outsourcing its Constitutional mandate to “coin money and regulate the value thereof” to the Federal Reserve. She also called out the fact that U.S. voters have little faith in government to balance the budget and stabilize the dollar, and this is undermining private property, civil rights, rule of law, and liberty. Dr. Saifedean Ammous said the same thing in The Fiat Standard, which I reviewed. She denounced the “scholarly bunkum” that’s backed up fiat money for decades. In addition to the domestic lack of faith in the dollar and the U.S. government, foreign governments are less trusting of the dollar because of the freezing of Russian assets in the United States. Put simply, foreign governments and U.S. citizens are becoming more interested in financial assets that can’t be inflated to death or frozen.
There is a growing movement against government fiat currencies. It’s been widely argued that removing the U.S. dollar from the ratio of $35 dollars to one ounce of gold agreed upon at the 1944 Bretton Woods conference made deficit spending fueled by printing money much easier for the U.S. government and other governments. By contrast, tying currencies to gold – the traditional store of value – makes it much harder for governments to do anything they want. In other words, the budgetary restraint provided by a gold standard would be the key to a less aggressive foreign policy and a less intrusive government at home.
With the U.S. credit rating recently lowered to Aa1, which will cause interest rates on U.S. Treasury securities to go up, thus making it more expensive to borrow, Dr. Shelton’s advocacy of hard money is needed more than ever. Robert Heinlein stated that the United States dollar should be tied to “gold, silver, uranium, mercury, bushels of wheat – something.”
Gold and silver are the traditional forms of hard money. Central banks around the world generally focus on buying gold; they’ve been buying a lot of recently, mostly because of distrust of the U.S. dollar. Russia is the only government that has recently discussed purchasing other precious metals such as silver, platinum, and palladium. Yet it’s worth remembering that much of the silver used in the Manhattan Project came from the U.S. Treasury. Though Dr. Shelton called for Treasury Trust Bonds to be paid in either gold or dollars at the choice of the purchaser of the bonds, it might also be worth considering allowing investors not just the choice between dollars and gold for redemption, but to include silver, palladium, and platinum too. Since these metals also have industrial purposes, a U.S. government reserve of silver, palladium, and platinum would be able to serve two functions: financial backing of the dollar, and a war reserve.
I’ve become more interested in the connection between sound money and liberty over the past few years. There’s still a chance to fix the U.S. dollar, though that chance gets smaller with each passing day. Why is nothing done?
Political polarization is a large part of it. To put the matter simply, Democrats believe in unlimited and unaccountable social spending, and Republicans believe in unlimited and unaccountable military spending. There is more to inflation than that, though.
What if the corporate sponsors of government secretly like inflation because it puts small businesses out of business and makes people more dependent on staying employed, instead of taking sabbaticals or retiring at 50? There is the FIRE (Financial Independence Retire Early) movement, but almost every profile I’ve seen of people living that life are DINKs: Double Income No Kids. Most Americans can’t afford that.
What if environmentalists secretly like inflation because it forces people to drive less, eat less meat, use less natural gas, and even stop keeping pets? In other words, do they want people to be impoverished by inflation to see their goals achieved?
What if various factions in government secretly like inflation because they can then pose as saviors to the many people beleaguered by high prices? Announcing a government subsidy of some kind is music to the ears of many people who have no grasp of economics; all they know is that prices are going through the roof. Buy those votes!! If only they knew that governments and central banks are much more likely to be the culprits than the saviors. Dr. Shelton’s book gets that point across very clearly.