Human Freedom Rests on Gold Redeemable Money
by Hon. Howard Buffett
U.S. Congressman from Nebraska
The Commercial and Financial Chronicle 5/6/48
Is there a
connection between Human Freedom and A Gold Redeemable Money? At
first glance it would seem that money belongs to the world of economics
and human freedom to the political sphere.
But when you
recall that one of the first moves by Lenin, Mussolini and Hitler
was to outlaw individual ownership of gold, you begin to sense that
there may be some connection between money, redeemable in gold,
and the rare prize known as human liberty.
you find that Lenin declared and demonstrated that a sure way to
overturn the existing social order and bring about communism was
by printing press paper money, then again you are impressed with
the possibility of a relationship between a gold-backed money and
In that case
then certainly you and I as Americans should know the connection.
We must find it even if money is a difficult and tricky subject.
I suppose that if most people were asked for their views on money
the almost universal answer would be that they didn't have enough
In a free country
the monetary unit rests upon a fixed foundation of gold or gold
and silver independent of the ruling politicians. Our dollar was
that kind of money before 1933. Under that system paper currency
is redeemable for a certain weight of gold, at the free option and
choice of the holder of paper money.
Right Insures Stability
right gives money a large degree of stability. The owner of such
gold redeemable currency has economic independence. He can move
around either within or without his country because his money holdings
have accepted value anywhere.
I hold here what is called a $20 gold piece. Before 1933, if you
possessed paper money you could exchange it at your option for gold
coin. This gold coin had a recognizable and definite value all over
the world. It does so today. In most countries of the world this
gold piece, if you have enough of them, will give you much independence.
But today the ownership of such gold pieces as money in this country,
Russia, and all divers other places is outlawed.
of a Hitler or a Stalin is a serf by the mere fact that his money
can be called in and depreciated at the whim of his rulers. That
actually happened in Russia a few months ago, when the Russian people,
holding cash, had to turn it in – 10 old rubles and receive back
one new ruble.
I hold here
a small packet of this second kind of money – printing press paper
money – technically known as fiat money because its value is arbitrarily
fixed by rulers or statute. The amount of this money in numerals
is very large. This little packet amounts to CNC $680,000. It cost
me $5 at regular exchange rates. I understand I got clipped on the
deal. I could have gotten $2½ million if I had purchased in the
black market. But you can readily see that this Chinese money, which
is a fine grade of paper money, gives the individual who owns it
no independence, because it has no redemptive value.
conditions the individual citizen is deprived of freedom of movement.
He is prevented from laying away purchasing power for the future.
He becomes dependent upon the goodwill of the politicians for his
daily bread. Unless he lives on land that will sustain him, freedom
for him does not exist.
You have heard
a lot of oratory on inflation from politicians in both parties.
Actually that oratory and the inflation maneuvering around here
are mostly sly efforts designed to lay the blame on the other party's
doorstep. All our politicians regularly announce their intention
to stop inflation. I believe I can show that until they move to
restore your right to own gold that talk is hogwash.
End in Collapse
But first let
me clear away a bit of underbrush. I will not take time to review
the history of paper money experiments. So far as I can discover,
paper money systems have always wound up with collapse and economic
might like to interrupt and ask if we are not now on the gold standard.
That is true, internationally, but not domestically. Even though
there is a lot of gold buried down at Fort Knox, that gold is not
subject to demand by American citizens. It could all be shipped
out of this country without the people having any chance to prevent
it. That is not probable in the near future, for a small trickle
of gold is still coming in. But it can happen in the future. This
gold is temporarily and theoretically partial security for our paper
currency. But in reality it is not.
we are enjoying a large surplus in tax revenues, but this happy
condition is only a phenomenon of postwar inflation and our global
WPA. It cannot be relied upon as an accurate gauge of our financial
condition. So we should disregard the current flush treasury in
considering this problem.
your government went into the red every year and the debt steadily
mounted. Various plans have been proposed to reverse this spiral
of debt. One is that a fixed amount of tax revenue each year would
go for debt reduction. Another is that Congress be prohibited by
statute from appropriating more than anticipated revenues in peacetime.
Still another is that 10% of the taxes be set aside each year for
All of these
proposals look good. But they are unrealistic under our paper money
system. They will not stand against postwar spending pressures.
The accuracy of this conclusion has already been demonstrated.
and Paper Money
Under the streamlining
Act passed by Congress in 1946, the Senate and the House were required
to fix a maximum budget each year. In 1947 the Senate and the House
could not reach an agreement on this maximum budget so that the
law was ignored.
On March 4
this year the House and Senate agreed on a budget of $37½ billion.
Appropriations already passed or on the docket will most certainly
take expenditures past the $40 billion mark. The statute providing
for a maximum budget has fallen by the wayside even in the first
two years it has been operating and in a period of prosperity.
There is only
one way that these spending pressures can be halted, and that is
to restore the final decision on public spending to the producers
of the nation. The producers of wealth – taxpayers – must regain
their right to obtain gold in exchange for the fruits of their labor.
This restoration would give the people the final say-so on governmental
spending, and would enable wealth producers to control the issuance
of paper money and bonds.
I do not ask
you to accept this contention outright. But if you look at the political
facts of life, I think you will agree that this action is the only
There is a
parallel between business and politics which quickly illustrates
the weakness in political control of money.
Each of you
is in business to make profits. If your firm does not make profits,
it goes out of business. If I were to bring a product to you and
say, this item is splendid for your customers, but you would have
to sell it without profit, or even at a loss that would put you
out of business. – well, I would get thrown out of your office,
perhaps politely, but certainly quickly. Your business must have
votes have a similar vital importance to an elected official. That
situation is not ideal, but it exists, probably because generally
no one gives up power willingly.
are right now saying to yourself: "That's just What I have always
thought. The politicians are thinking of votes when they ought to
think about the future of the country. What we need is a Congress
with some 'guts.' If we elected a Congress with intestinal fortitude,
it would stop the spending all right!"
I went to Washington
with exactly that hope and belief. But I have had to discard it
as unrealistic. Why?
economy Congressman under our printing-press money system is in
the position of a fireman running into a burning building with a
hose that is not connected with the water plug. His courage may
be commendable, but he is not hooked up right at the other end of
the line. So it is now with a Congressman working for economy. There
is no sustained hookup with the taxpayers to give him strength.
When the people's
right to restrain public spending by demanding gold coin was taken
from them, the automatic flow of strength from the grass-roots to
enforce economy in Washington was disconnected. I'll come back to
you heard the President's message to Congress. or at least you heard
about it. It made Harry Hopkins, in memory, look like Old Scrooge
himself. Truman's State of the Union message was "pie-in-the-sky"
for everybody except business. These promises were to be expected
under our paper currency system. Why? Because his continuance in
office depends upon pleasing a majority of the pressure groups.
judge him too harshly for that performance, let us speculate on
his thinking. Certainly he can persuade himself that the Republicans
would do the same thing if they were In power. Already he has characterized
our talk of economy as "just conversation." To date we have been
proving him right. Neither the President nor the Republican Congress
is under real compulsion to cut Federal spending. And so neither
one does so, and the people are largely helpless.
But it was
not always this way.
the people themselves had an effective way to demand economy. Before
1933, whenever the people became disturbed over Federal spending,
they could go to the banks, redeem their paper currency in gold,
and wait for common sense to return to Washington.
on various occasions and conditions sometimes became strained, but
nothing occurred like the ultimate consequences of paper money inflation.
Today Congress is constantly besieged by minority groups seeking
benefits from the public treasury. Often these groups. control enough
votes in many Congressional districts to change the outcome of elections.
And so Congressmen find it difficult to persuade themselves not
to give in to pressure groups. With no bad immediate consequence
it becomes expedient to accede to a spending demand. The Treasury
is seemingly inexhaustible. Besides the unorganized taxpayers back
home may not notice this particular expenditure – and so it goes.
a quick look at just the payroll pressure elements. On June 30,
1932, there were 2,196,151 people receiving regular monthly checks
from the Federal Treasury. On June 30, 1947, this number had risen
to the fantastic total of 14,416,393 persons. This 14½ million figure
does not include about 2 million receiving either unemployment benefits
of soil conservation checks. However, It includes about 2 million
GI's getting schooling or on-the-job-training. Excluding them, the
total is about l2½ million or 500% more than in 1932. If each beneficiary
accounted for four votes (and only half exhibited this payroll allegiance
response) this group would account for 25 million votes, almost
by itself enough votes to win any national election.
direct payroll voters, there are a large number of State, county
and local employees whose compensation in part comes from Federal
subsidies and grants-in-aid.
are many other kinds of pressure groups. There are businesses that
are being enriched by national defense spending and foreign handouts.
These firms, because of the money they can spend on propaganda,
may be the most dangerous of all.
If the Marshall
Plan meant $100 million worth of profitable business for your firm,
wouldn't you Invest a few thousands or so to successfully propagandize
for the Marshall Plan? And if you were a foreign government, getting
billions, perhaps you could persuade your prospective suppliers
here to lend a hand in putting that deal through Congress.
the Forgotten Man
Far away from
Congress is the real forgotten man, the taxpayer who foots the bill.
He is in a different spot from the tax-eater or the business that
makes millions from spending schemes. He cannot afford to spend
his time trying to oppose Federal expenditures. He has to earn his
own living and carry the burden of taxes as well.
But for most
beneficiaries a Federal paycheck soon becomes vital in his life.
He usually will spend his full energies if necessary to hang onto
this income. The taxpayer is completely outmatched in such an unequal
contest. Always heretofore he possessed an equalizer. If government
finances weren't run according to his idea of soundness he had an
individual right to protect himself by obtaining gold.
With a restoration
of the gold standard, Congress would have to again resist handouts.
That would work this way. If Congress seemed receptive to reckless
spending schemes, depositors' demands over the country for gold
would soon become serious. That alarm in turn would quickly be reflected
in the halls of Congress. The legislators would learn from the banks
back home and from the Treasury officials that confidence in the
Treasury was endangered.
be forced to confront spending demands with firmness. The gold standard
acted as a silent watchdog to prevent unlimited public spending.
I have only briefly outlined the inability of Congress to resist
spending pressures during periods of prosperity. What Congress would
do when a depression comes is a question I leave to your imagination.
I have not
time to portray the end of the road of all paper money experiments.
It is worse
than just the high prices that you have heard about. Monetary chaos
was followed in Germany by a Hitler; in Russia by all-out Bolshevism;
and in other nations by more or less tyranny. It can take a nation
to communism without external influences. Suppose the frugal savings
of the humble people of America continue to deteriorate in the next
10 years as they have in the past 10 years? Some day the people
will almost certainly flock to "a man on horseback" who says he
will stop inflation by price-fixing, wage-fixing, and rationing.
When currency loses its exchange value the processes of production
and distribution are demoralized.
we still have rent-fixing and rental housing remains a desperate
For a long
time shrewd people have been quietly hoarding tangibles in one way
or another. Eventually, this individual movement into tangibles
will become a general stampede unless corrective action comes soon.
of free coinage of gold admit that that restoration is essential,
but claim the time is not propitious. Some argue that there would
be a scramble for gold and our enormous gold reserves would soon
argument simply points up the case. If there is so little confidence
in our currency that restoration of gold coin would cause our gold
stocks to disappear, then we must act promptly.
was recently highlighted by Mr. Allan Sproul, President of the Federal
Reserve Bank of New York, who said:
our support (the Federal Reserve System), under present conditions,
almost any sale of government bonds, undertaken for whatever purpose,
laudable or otherwise, would be likely to find an almost bottomless
market on the first day support was withdrawn."
will never be brought into order until Congress is compelled to
do so. Making our money redeemable in gold will create this compulsion.
The paper money disease has been a pleasant habit thus far and will
not he dropped voluntarily any more than a dope user will without
a struggle give up narcotics. But in each case the end of the road
is not a desirable prospect.
I can find
no evidence to support a hope that our fiat paper money venture
will fare better ultimately than such experiments in other lands.
Because of our economic strength the paper money disease here may
take many years to run its course.
But we can
be approaching the critical stage. When that day arrives, our political
rulers will probably find that foreign war and ruthless regimentation
is the cunning alternative to domestic strife. That was the way
out for the paper-money economy of Hitler and others. In these remarks
I have only touched the high points of this problem. I hope that
I have given you enough information to challenge you to make a serious
study of it.
I warn you
that politicians of both parties will oppose the restoration of
gold, although they may outwardly seemingly favor it. Also those
elements here and abroad who are getting rich from the continued
American inflation will oppose a return to sound money. You must
be prepared to meet their opposition intelligently and vigorously.
They have had 15 years of unbroken victory.
you are willing to surrender your children and your country to galloping
inflation, war and slavery, then this cause demands your support.
For if human liberty is to survive in America, we must win the battle
to restore honest money.
There is no
more important challenge facing us than this issue – the restoration
of your freedom to secure gold in exchange for the fruits of your
David Stockman for pointing this out to me. Ed.
Buffett was an Old Right libertarian congressman and businessman
from Omaha, Nebraska. One of his aides was Murray Rothbard. His
son is the oligarch Warren.
© 1948 The Commercial and Financial Chronicle