By Patrick Heller – Liberty Coin Service
If you asked the average person on the street if government should be responsible for establishing monetary standards and the issuance of circulating money, I suspect that a very high percentage would agree.
In my judgment, those who think that way would be wrong.
The invention of money was a private sector innovation. Merchants and consumers realized long ago that there was a need for a store of value, a unit of account, and a medium of exchange to facilitate trade. Opportunities for direct barter were limited as a baker would not need an entire ox in exchange for a loaf of bread.
Therefore, the private sector, through extensive trial and error ended up primarily coming up with money in the form of fungible units of gold and silver. There was no need to call these coins by their government denomination as the intrinsic value of the metal was what was important, not the name of the issuer. Issuers were only important to the extent that they developed a reputation for producing standardized quality coins.
Private goldsmiths and silversmiths were the first to coin money. But it wasn’t long before governments got into the act. Still, a wide range of coins traded across national borders. Even in early American history, colonists could come across British, Dutch, French, and Spanish coins and even the occasional colonial issue.
During the American Revolutionary War, the Continental Congress issued paper money promising redemption in “Spanish Milled Dollars, or the value thereof in Gold or Silver.” In reality, the Congress did not have the specie to redeem these notes, so Continental Currency became almost worthless. By late 1781, Robert Morris, the Superintendent of the Office of Finance of the United States, began issuing notes on his personal credit to pay for supplies and other needs of the United States.
At the time, Morris’s credit was stronger than that of the Congress!
When gold was discovered in Georgia and the Carolinas in 1830, the miners were forced to leave their home and make the two-week round trip to the Philadelphia Mint to convert their ore into tradable coinage. That opened the door for Templeton Reid, a jeweler and goldsmith, to offer coinage services to miners in the state of Georgia. Unfortunately, the purity of his coins did not equal US Mint standards and the public ran him out of business in only three months.
Then the Bechtlers issued gold coins in North Carolina and Georgia from 1831 to 1852. Not only did their coins meet US Mint standards for metal content, some issues contained as much as 1% more gold than did government coins! No wonder these coins were accepted at par by North Carolina banks up into the early 1900s.
When the California Gold Rush started, several competent and also some less than reputable private coiners set up shop. In 1860, Clark, Gruber & Co. issued their gold coins in Denver. During the Civil War, the paper money issued by Clark, Gruber & Co. actually traded at a premium to US government paper money!
The important point to remember is that money is valued on the basis of what it can obtain in trade. In 1964, three 90% silver US dimes could purchase a gallon of gasoline just as they could today. On the other hand, it would take most of a roll of 1965-dated copper-nickel dimes to purchase a gallon of gas today!
The value of the US government dollar has declined more than 98% against an ounce of gold since the Federal Reserve was established in 1913. This track record is, unfortunately, all too typical of government-issued money denominated in a monetary unit and not on the basis of the intrinsic value of the coinage.
As governments inflate the supply of a money that is not dependent on the value of its metal content, the citizens are impoverished. In my opinion, it is long past time to restore economic prosperity by establishing and enforcing a separation of government and money.
Patrick A. Heller was honored with the American Numismatic Association's 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com). He is also the financier and executive producer of the movie “Alongside Night” which will be shown in the evening at a theater near the Central States Numismatic Society convention on April 24 (click here to watch the movie trailer, for details about this showing, and to purchase tickets).