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Recently by Gary North: The #1 Historical Question IsUnanswered


The conservative movement is filled with well-meaning people who do not understand free market economic theory. They believe that they hold to free market economics, but they in fact hold to a crude Keynesianism: economic salvation by fiat money.

Inside the conservative movement for over a century has been a hard-core cadre of left-wing promoters of big government. They present themselves as enemies of fractional reserve banking. They use this to get a hearing for their cure-all for banking: a fiat money monopoly that is completely managed by tenured, unaccountable bureaucrats operating under the authority of Congress.

These people are part of a movement called Greenbackism. It has been around ever since the 1870s. Back then, American Greenbackers had their own political party. They merged with the left-wing Populist Party in the mid-1880s. You can read about the Greenback Party on Wikipedia.

The Greenback Party (also known as the Independent Party, the National Party, and the Greenback-Labor Party) was an American political party with an anti-monopoly ideology that was active between 1874 and 1884. Its name referred to paper money, or "greenbacks," that had been issued during the American Civil War and afterward. The party opposed the shift from paper money back to a bullion coin-based monetary system because it believed that privately owned banks and corporations would then reacquire the power to define the value of products and labor. It also condemned the use of militias and private police against union strikes. Conversely, they believed that government control of the monetary system would allow it to keep more currency in circulation, as it had in the war. This would better foster business and assist farmers by raising prices and making debts easier to pay.

Back then, Greenbackers were openly inflationist. They wanted city dwellers to pay farmers more for food than the free market established. They wanted city dwellers to pay more than free market competition established for wages. They wanted the U.S. government to compel these price increases by printing paper money.

Ever since the passage of the Federal Reserve Act in 1913, Greenbackers have attempted to conceal their left-wing platform in order to infiltrate the conservative movement. They have used their hostility to fractional reserve banking as a cloak. What they really want is money officially run by Congress, whether Republican or Democrat. This is why they have always hated money that is redeemable in gold. The government cannot inflate the money supply very much if money is redeemable at a fixed price for gold.

Why do conservatives swallow this witches’ brew of statism and inflation? Because they do not understand monetary theory. On monetary theory, they are Keynesians. They believe what Ben Bernanke believes: that it is possible to avoid inflation, avoid recession, and attain economic growth by having a committee of experts decide how much money to print. The Chicago School economists (monetarists) think the same thing. The debate is about who decides how much money to create after Congress has set up the committee of experts.

Congress today is legally in charge of the Federal Reserve System’s Board of Governors. It is only indirectly in control of the Federal Open Market Committee (FOMC), which is made up of a mixture of Board members (government appointed) and regional Federal Reserve Bank presidents (privately appointed by regional bankers). In fact, Congress is not in control. The FOMC is in control.

Because the implementation of U.S. law is always by the executive branch — this is federalism — all calls for Congress to control money are really calls for committees appointed by the President to control money. But, ever since 1883, employees of the executive branch have been protected from being fired. This was the Civil Service law. So, whenever anyone calls for Congress to control money, he is calling for an independent committee operating under the President to control money. This is what the Constitution provides: a separation of powers. The Civil Service Act began the separation of politics from government: rule by tenured bureaucrats.

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Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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