The 100 Percent Gold Tradition

I therefore advocate as the soundest monetary system and the only one fully compatible with the free market and with the absence of force or fraud from any source a 100 percent gold standard. This is the only system compatible with the fullest preservation of the rights of property. It is the only system that assures the end of inflation and, with it, of the business cycle?[39] And it is the only form of gold standard that fully meets the following argument of the Douglas subcommittee against a return to gold: “An overriding reason against making gold coin freely available is that no government [or banks?] should make promises which it would not be able to keep if the demand should arise. Monetary systems for over a century have expanded more rapidly than would be permitted by accretions of gold.”[40]

While this is undoubtedly a “radical” program for this day and age, it is important to note briefly that this program is squarely in a great tradition: not only in the economic tradition of the classical economists and the currency school, but also in the American political tradition of the Jeffersonians and the Jacksonians. In essence, this was their program. In passing it should be noted that almost all historians, with the notable exceptions of William Graham Sumner and Joseph Dorfman, have misinterpreted the Jeffersonians and Jacksonians as economically ignorant and anti-capitalist agrarians lashing out at a credit system they failed to understand. Whether one agrees with their position or not, they wrote in full and sophisticated knowledge of classical economics and were fully devoted to capitalism and the free market, which they believed were hampered and not aided by the institution of fractional-reserve banking.[41] In fact, it might almost be said that these Americans were unterrified members of the currency school, lacking the almost blind devotion to the Bank of England of their more pragmatic British cousins. Indeed, the currency principle was enunciated in America several years before it made its appearance in England.[42] And such founders of the currency principle in America as Condy Raguet realized what the more eminent British tragically failed to see: that bank deposits are just as fully money substitutes as bank notes, and are therefore part of the broad money supply.[43]

After the Civil War, hard-money economists were preoccupied with battling the new greenback and free-silver problems, and the idea of 100 percent gold virtually faded from view. General Amasa Walker, however, wrote into the 1860s and even he was surpassed in acumen by the brilliant and neglected writings of the Boston merchant Charles H. Carroll, who advocated 100 percent gold reserves against bank deposits as well as notes, and also urged the replacement of the name “dollar” by gold ounce or gold gram.[44] And an official of the United States Assay Office, Isaiah W. Sylvester, who has been completely neglected by historians, advocated a 100 percent dollar and parallel standards.[45] In the present century the only economist to advocate a 100 percent gold standard, to my knowledge, has been Dr. Elgin Groseclose.[46]