The following questions originally appeared in 10/22/65 in the Freedom Press and were answered by R.J. Rushdoony.
Some conservative friends tell me that the answer to our money problem is Lincoln greenbacks. Should the U.S. take over the Federal Reserve and issue paper money as a medium of exchange?
Only a confused conservative would suggest fiat money: it is a radical solution. The Federal Reserve represents a major step towards socialism. Purely government money would represent a total step.
In every other area, the conservative answer is to take civil government out of economics; how can it lead to a conservative solution to put the state in total control of economics by giving it the right to issue un-backed paper money? The surest way to total socialization and collapse is to give the federal government or any international agency of the United Nations or the International Monetary Fund, the right to print money
Paper money is ultimately worthless money unless it is fully backed by gold or silver. Inflation is the increase of paper money beyond the reserve of gold and silver: the more paper money circulates, the more prices rise because the paper money becomes progressively worthless as its gold and silver backing decreases.
The Federal Reserve System was a major step towards the socialism of money. And before conservatives heap all the blame on the money trust for the Federal Reserve Act, let them remember that the deluded conservatives of the day hailed the act as their victory! They believed that they had finally put a rope around the money changers' necks!
The Federal Reserve Act was not only the desire of powerful banking interests, but also of deluded conservatives.
Many banks resisted it. As late as September 30, 1960, only 6,200 banks of exactly 14,000 in the U.S. were members of the FRS, although these exactly 6,200 banks held 72% of all bank deposits in the U.S.
The conservatives made possible the passage of the Federal Reserve Act by their belief in paper money, a very radical belief that "you can get something for nothing," and this belief is the essence of socialism.
Call these paper-money folks by their right name: socialists.
Lincoln greenbacks (U.S. Bank Notes) are debt-free money. Why aren't they better than interest-bearing debt money like the Federal Reserve Notes?
Both are socialistic solutions and destructive of a country. Debt-money is deadly, but it still is tied to gold indirectly and vaguely; the interest is theoretically the pay for use of real money, gold and silver. Our present debt-money is redeemable in gold and silver by other nations and their citizenry they are not interested in irredeemable paper.
If all our money tomorrow became Lincoln greenbacks, all our money would rapidly become worthless because it would simply be green paper, counterfeit money issued by the treasury without any value.
The argument of paper-money men and socialists is that gold or silver, or paper money, is merely a medium of exchange, merely the representation of property.
As an American thinker, William M. Gouge, wrote in 1833 when fighting against the money power, "Money of gold and silver is property -- is wealth. A hundred dollars in silver can no more be considered as the representative of a hundred dollars' worth of flour, than a hundred dollars worth of flour can be considered as the representative of a hundred dollars' worth of iron. Each is the equivalent of the other; but each is real wealth -- not a mere symbol or representative."
Like iron or flour, the value of gold and silver fluctuates with the market, but it does retain a real value. Gold and silver coins from ancient Greece are still worth their weight, but the paper moneys of imperial Germany and tsarist Russia (and the U.S.S.R., to a great degree) are worthless.
Paper money is a counterfeit substitute for wealth which ultimately breaks the nation which adopts it.