The Case for Gold

0:00We want to spend some time tonight talking about the gold standard, but I'm going to emphasize one aspect of the gold standard that I think is very important. I think that would be also very important in the approach that Dr. Grosscliffe has made, and that is the moral case for the gold standard. We've talked a whole lot about the economics, and we can't avoid the economics and bring that into play, because economics is related to a moral standard as well. But I would really like to concentrate on the moral case for the gold standard. You know, in Washington, that's one of the difficulties that we have. I am really about convinced that if you use a moral argument or a constitutional argument for any piece of legislation, it's a sure way to make sure that that legislation fails.

0:55And that's sad, but I think this is true. There's one particular argument they use, and they call it pragmatism. They call it pragmatic, and that is, you know, how's it going to help somebody on the immediate basis? But they don't deal in moral terms, nor do they deal on long term. You know, there was a good example of this occurred right before we left Congress. As many of you know, and if you don't know, this won't be very good news, that at the very end on the continuing resolution, there was an incidental amendment stuck on. And this little amendment was 418 pages. It was stuck on a recommittal motion. That means there's no debate, no amendments, nothing, and it passed.

1:44And it was the law, it was the strong law and order bill. Everybody's for law and order, so how could you vote against it? The truth is, some parts of the bill were very beneficial, but the technique was awful. The technique was, throw it on in, no debate, 418 pages, major revision of the legal code, and inside this had to do with our freedoms to travel.

2:34It was the bill that we defeated five years ago when we had a chance to fight it, and it got to the House floor and we beat it 66% to 33%. You know, we really won the case, this time without debate and without a chance, we didn't do so well. And this bill has a few challenges to our civil liberties. The bill essentially said that if you show an intent to leave the country, you ought to fill out a form. The law and the Constitution says you don't even need a passport to leave the country, but now you will have to fill out a form if you show an intent. If you've shown intent, the government agent can come and look at what you're carrying, look in your wallet, possibly even look in your home, and find out if you have any monetary instruments, including gold.

3:23And if you happen to, and you didn't fill out the forms, you could be fined $250,000. You could go to jail for 10 years, and your neighbor who might have relayed some information to the government could be rewarded by $150,000, and they can search without a search warrant, And they can use wiretapping to boot. Other than that, it was a real good bill. So when they were then, see, it seemed like in Washington they were much more determined to get my vote when I was by myself. You know, if there were 30 or 40, who cares? But if you were by yourself, it was amazing. Instead of you being coming much less important, all of a sudden it became a real issue with And why is he waving a flag and pointing his finger and by not saying a word?

4:09They say, please don't do this. This is looking bad. We need your vote. We want you to come over. And I said, well, there's one section in the bill that says that you can search individuals without a search warrant. I said, that's a, you know, against the Constitution. And the one fellow I was talking to said, he says, you know, he says, I've heard you How do you talk about this? Worrying about currency controls and freedom of movement of people. He looked at me very seriously. He's a good friend and a good conservative. And he said, I don't know why you're hung up on this issue. And that to me is the sad part. I was, and still am, hung up on a few issues like that. I had another little experience a few years back that tells you something about the way the system works and the way the individuals think.

5:07And there was one evening, we were working late, and one of my good friends came and sat down with me. It was after I had been in office out and then back in. And he came down and he wanted to give me some fatherly advice. and the Vice. He had been there for 18 years or so, and he came down and wanted to explain his philosophy, the philosophy that he thought was important in order for me to get reelected so I wouldn't have to lose again and have to leave Congress. And he says, it's very simple, he says, expediency is a virtue and consistency is a vice in politics here in Washington. And he says, this is the way you get to stay. Well, that was back in right prior to the election of 1982 and I always thought it was rather ironic because it was that year my opponent dropped out and he lost his election. So it doesn't always work that way that expediency

6:03is a virtue. But you know I had something else strange come up but it sort of further explains a little bit about the attitudes that exist in Washington. After I lost the Senate race, I went back up, and I had been gone for a while, and we had a very, very crucial vote. As a matter of fact, this vote was lost by one vote. It came down to the wire. It was lost by one vote, and I again was not taking the average position of what the Republican conservative position was. And an individual came over to me, and the argument was this, you've lost the election, so what difference does it make? Why don't you vote with us? And I thought that was about the strangest thing I ever heard.

6:50If I've been there for seven years voting on principles that I've enunciated and stood for and defended the Constitution, they logically believe that then, that even after I lost the election, that this was the time that I should compromise the principles. I never quite understood that, but I guess it tells you a little bit about the system and what we have to confront and what we have to understand in our efforts to turn to sound money and limited government ideas. Another example along this line occurred shortly after the invasion of Afghanistan. You know, we built the trucks with export-import bank money in Russia, the trucks that were used to haul the soldiers into Afghanistan, and our Corps of Engineers built the highway in Afghanistan, and sure enough it was very necessary that after the invasion that we stood tough against communism.

7:49So we decided to register 18-year-old kids and boycott the Olympics. I mean, nobody really talks seriously about cutting off all aid and trade with the enemy, but this was our answer to that problem. And after a while, after a month or two, there was a fair amount of sympathy expressed for the Olympic athletes who did not get to go. So in the typical American constitutional fashion that Congress supposes to follow, they said, ah, what we must do is give them a medal. If we give them a medal, they'll feel good and they'll be okay. So, true to form, and I know most of you have heard the story about Davy Crockett, about not yours to give, and I thought I would try that, but I tried it in a very subtle way.

8:41I wasn't as eloquent as Davy Crockett to get on the House floor and do it, but I went over to one of our very, very wealthy Republican colleagues from New York, and I said to him, I made a proposal to him, I said, look, I've just done a calculation. We can buy all the medals we need for the Olympic heroes if we all pitch in 100 bucks. And this fellow looked at me straight into my eye and he says, you know, he says, I don't think it's worth it. But he voted for the, he voted for the medals. I think there were about two of us that voted against the medal on principle. But that's, that's part of the system that we have to, have to deal with. I believe very sincerely that a defrauded people, if a people is, if a people are truly defrauded by their government, eventually those people, the people will turn against the government.

9:40To me inflation and the destruction of money is fraud and therefore it is not only an issue to be dealt with in economic terms but it is an issue to be dealt with in moral terms as well as the political consequences of what happens when a people wake up and find out that they've been defrauded. And I think that's the issue. I think this is the issue that's going on today. Even though we are living in rather quiet times considering the undermining that has occurred in the monetary system and people are rather complacent, I sincerely believe that those are the serious problems that we have to face. What does it really mean to a nation when the money has been debased and the economy has been ruined and the political structure has been threatened?

10:30And I think this is the important thing that we have to look at. I think there's several points I'd like to make with regards to the gold standard. I think it's important to understand that gold is money not because I say so or you You say so, or Dr. Gross-Close said so, or the Constitution said so. Gold and other commodities are money because the market has chosen that and because we have the empiric evidence of history to show that free people in particular always pick a commodity for money. It's very easy to see this in a more primitive economic society. Society. I mean, where would it be a society where two individuals who are trying to struggle and survive start a system of paper money out of the clear blue? It would be impossible. They would want to trade a commodity or product for another commodity. Somebody has to put some work and effort into it so as an exchange of something of real value that was achieved through real work and labor. So money was a commodity and is a commodity

11:42because it originated that way. It wasn't... Money is... Gold is not money, and gold and silver has not been used because some government dictated it. The governments became involved early in history. Unfortunately, the government did not get involved for the protection and the guaranteeing that those commodities would be honest, but they got involved in a more deceitful, corrupt manner. But I think it's very important to understand the origins of money, to understand the necessity and the insistence that money has to be something of real value and it can't be something concocted out of thin air and forced upon people by governments. Under those conditions, even though at the beginning or for a period of time you get by with this, eventually that system always fails.

12:37I think the paper money standard, which contradicts everything about the gold standard, is promoted by false hopes, by deceit, by fraud, because they're always telling us that if we can only expand the money supply and only drive the interest rates down and only stimulate the economy and only take care of the poor, that great things will happen. In order to do this, they have to do one thing. They really are attacking the concept and trying to repeal the ideas of the work ethic, trying to say that out of thin air we can get wealth, that we don't have to work any longer. This whole notion of running $200 billion deficits per year and to believe that that is the way to prosperity is in some way trying to say that you really don't have to work for what we have.

13:28I don't think that law will be repealed. may be suspended, and there may be some transfer of wealth, but eventually it catches up with us. Samuel Johnson said, the reigning heir of mankind is that we're not content with the conditions on which the goods of life are granted. And the reigning heir is that, I believe, believing that we can get wealth and prosperity without hard work and effort, and that is part of the whole notion about what inflation and the enemies of sound money. The false hopes and the promises are always of the welfare state, which is going to bring heaven to everyone, that we can just make promises to people, and it is this idea of perpetual prosperity is always associated with dishonest money.

14:22So they are using an approach which in some ways is superficially moral because they're always expressing these concerns and these needs of people, but in a very serious, determined way, this is an immoral act because it has nothing to do with honesty, it has to do with deceit and fraud. One of the other reasons that I detest the paper money system so much is because it perpetuates the very system which threatens yours and my freedom, and that is, it is a true friend of the politician in the negative sense of the word. If it's the politician whose desire is to run this country, if we ever want to curtail their power, we have to understand why it is that we have a paper money system.

15:13It is truly for the benefit of the politician who then can go and do whatever he wants because he does not have to act responsibly. I mean, I've always claimed that we only have two problem groups in Washington, two groups in Washington who would like to see inflation continue, and that's the conservatives and the liberals. Other than that, we're okay. It's just that everybody has some spending that they want. I mean, so they want to subsidize the military industrial machine.

16:11The gold standard, the business cycle, laissez-faire, interventionism, methodological individualism, to wringing recessions which are getting worse each time and rapid inflation of the 1970s which will return in the 1980s before this decade is finished. So I believe that this has occurred in a very deliberate fashion.

17:00The deficits now are $200 billion approximately even though this week's last year's deficit was reported at 175 with the off-budget items in all it will be 200 billion and if you want I want to add in the guaranteed loans, which is credit allocation and deficit financing as well. It's well over $200 billion. And I think, again, part of this deceitful system that the people are so sick and tired of is that this past year, as we were finishing up, the proposed deficit for next year is supposed to be $181 billion. But in the very next day after the budget was passed, the budget resolution was passed, they raised the national debt for next year's fiscal year, and they raised the national debt by $250 billion, $60-some billion more than they claim the deficits to be.

17:55Because that means there may be a few cost overruns, there may be a few additional appropriations, there may be some off-budget items. So they are already planning to spend $250 billion next year that we don't have. You can't do that without a Federal Reserve. You've got to have the Fed for that. So even some of the pseudo-gold bugs that are floating around Washington that you must be aware of have no determination nor desire to do away with the Fed. They would like to use gold in a superficial manner, but if they're not willing to attack There's another good reason for inflation, which I think is probably the most immoral, if you can have degrees of immorality, and that is, if you look carefully at our history Since 1913, since the Fed came into existence, you will notice that we have had a few wars.

19:02We had the war, the First World War in 1914. Many historians now today present pretty good evidence to show that maybe we could have avoided that war. Tremendous inflation in that decade with a terrible recession and depression in 1921. In 1921, fortunately, it was not long lived. And then the inflation and manipulation of credit of the 1920s, a serious, devastating depression in the 1930s, a war again in the Second World War, war in Korea, war in Vietnam. The Fed is a friend of this type of system. Not that the Fed creates the war, but the people who find that there are motivations to be involved in wars that are not truly defensive wars, they have to have a Fed.

19:48Matter of fact, the original debasement of money occurred by the kings who were running military machines overseas and couldn't afford it because the people didn't volunteer. They didn't voluntarily give the money to the government and they didn't want to be taxed. So the king would dilute the metal in order to finance his military activities overseas. Fundamentally and morally, it's no different than that. It's just that we do it in a much more sophisticated manner, but it cannot be done without a Federal Reserve system. System. So I believe that a nation should be strong and a nation should defend itself and a nation should not be pushed around and its obligation is to preserve and protect the freedoms that we all cherish, but not under the circumstances that it's being done today because so much of the money we're being spent is being spent on the wrong kind of thing. 65% of our money today is being spent on defending other nations, helping both sides on every war. I mean it's a suicidal course

20:47The Federal Reserve, fiat money, fractional reserve banking, Human Action, man economy, methodological individualism, Human Action, man economy and state, The Theory of Money and Credit

21:17and Security and Providing for our Defense, but it should be used only in the time of National Defense, not for policing the world and fighting at the drop of a hat, fighting wars that we don't win anymore, tragically, with the use of conscription, with the use of the Federal Reserve System to create the money, and with the drifting away from constitutional law and limited government, and this lack of concern for a sovereign nation where we're an internationalist now, We get involved in wars now where we don't even declare war anymore. We haven't declared war in Korea or Vietnam. So it's not surprising that if the nation is not rallying behind an effort to defend itself, possibly then the goal of victory might not be spoken clearly.

22:05And this is precisely what has happened. So I think that we cannot divorce the monetary system from the military-industrial complex. I would say that the one thing that I feel like I have learned from the experience in Washington has been that there is an intertwining of the monetary system with foreign policy. I had an intense interest in the monetary system and in free market economics and went to Washington with a key interest in this and for this reason got on the banking committee. But I think I've been impressed over the years that there is an intertwining of this domestic monetary system with the international monetary system as well as our foreign policy and it's very hard to separate them. I don't believe you can just put your gold standard in the monetary system over here in a corner and solve the problem.

22:55I don't see it that way. I think the monetary system is intertwined with foreign policy as well as especially the concept of individual freedom and what a free nation is all about. And one of the final points I would like to make is one of the most despicable parts about a paper money standard and the Federal Reserve system, and one that gold would prevent, and that is a system of power, a system of power. Has it ever dawned on you to think how much power is put into the hands of one individual who can control the vote in the Federal Reserve system? By what moral right does one individual who can control seven votes decide whether the money supply should be going up next week by four billion or down two?

23:47That is an outrage. And to think that we have sat back and allowed them to do this for all kinds of reasons. I personally don't believe that everyone on the Federal Reserve Board is malicious. I don't happen to believe that. I think some of them are very sincere and misdirected, and they continue the process. But even if you conceded and said every one of them was well intended, by what right do they have? Since we know as free market economists that they can't possibly achieve the planning they so seek, but what right do they have it? They don't have the right. the right so I believe that eventually we will do just as well to argue for the gold standard from a moral viewpoint as from a purely practical viewpoint of preserving our own wealth now there are days when I go back and forth in that argument because some say no the only thing that's going to wake up the American people are their pocketbooks but you know when you look at great

24:47movements in history many times the very negative movements you think about the Youth. You think about the organizations. They do this on beliefs and rallying people together because they want something to believe in. And I think that we have lacked that. We have dealt and we have drifted into seeing things only in the commercial and the materialistic sense. But I believe ultimately in order to win this fight and to win the battle against the money manipulators and win the battle for a gold standard, we will have to present our case in moral terms. We have a Federal Reserve system that is very, very powerful, that determines monetary policy.

25:33But we have a banking system which is nothing more than a big cartel, a legalized government monopoly, where they decide who will be the bankers and who won't be the bankers. They decide who will have this privilege of benefiting from the fractional reserve banking and the expansion of credit. After the Fed creates new money, as it expands and passes through the banking system, somebody else benefits as well. So it is a banking cartel, so it's every bit as important to talk about free market banking as it is to have a sound backed currency or a convertible currency. And it will be necessary to break up that system just as well. Inflation, which is the opposite to me of the gold standard, is immoral because it robs and steals, it's a counterfeit system, it takes from one group at the expense of another, it's an invisible deceitful tax, and it's always done with false promises.

26:29Why we let them get away with this, I'll never know, and hopefully we don't let them get away with it, in that we wake up enough people. I believe that's possible. I don't believe it's going to happen without a lot of pain and suffering before it's all over, but I do believe that periods of time, finally the people do wake up and they can see the folly that they have been following. And yet, this is exactly what we have been doing for years, but several times in our history, the people have rallied and have awakened and talked about and made the monetary issue the key issue. It's an immoral act to destroy wealth. Destroy and to steal wealth. It's an immoral act to take the wealth and the benefit of savings.

27:16Capitalism, as I understand it, depends on work and effort and savings. You know, the other day there was a supply-side economist who claims he's for the gold standard, was very satisfied that savings rate had not gone up because the people who were working didn't put their money in savings. He says, that's no sweat. My stock values went up so therefore I have a lot more savings. I don't buy that argument. I think people have to work and then they have to decide what they need to live on and then they have to save and that becomes true capital. But if we have a system where we tax savings such as we have today, that's going to discourage savings. If we have a system where we destroy the trust of the money, people won't save. And lo and behold, in spite of the so-called tax reductions, which never really occurred, it is at any wonder that savings rates did not go up, they went down.

28:10So therefore, we're back in the same kind of a problem that we've always had. The economy is being stimulated once again by massive expenditures and manipulation of the monetary policy by massive increases in the money supply, in the Money Supply and therefore we're coming out of a recession again, has nothing to do whatsoever with sound money and savings that occur in a natural way. I would think it's an immoral act for anybody to manipulate money, to participate in this fraud, whether they're in the Congress or whether they're in the administration, the Federal Reserve or the Treasury or wherever, realizing that there's enough clear-cut understanding to know that the business cycle comes from a precise action of the Federal Reserve system.

28:57It comes from the fact that the Federal Reserve manipulates the money. They can turn on the boom and bring on the bust. It looks like now we're going to be moving into more perpetual and deepening recessions, if not depressions, because it gets more and more difficult to come out of the recession. Paper money, paper money, the opposite of gold money or commodity money, is there for precise reason. People who want to have power, people who want to manipulate the military industrial complex to fight wars, people who want to satisfy the politicians, people who falsely promise so many things to so many people. But it's a friend of big government.

29:43If you believe in big government, I don't know how you can get away with not believing in paper money and a Federal Reserve system that we have today. The big problem we have today is that there may be a few talking about sound money, but we sure don't have enough talking seriously about reducing the size and scope of big government. And that's what has to happen. The monetary reform, to me, has to be part of a new approach to government. It has to be incorporated into the idea that government is minimal, the individual is very important, and freedom should be maximized. Then the gold standard can act as a check on big government. I don't happen to believe that the Grace Commission is going to do as much good, even though if I was voting on any of those, I'd vote for every one of them.

30:31I don't think the balanced budget amendment is going to do any good. I don't think the flat tax rate is going to do any good by itself. I don't believe the line item veto is a good idea because it gives too much power to one individual and I don't think it'll do any good until the appetites of the people are changed. When the people's appetites who come to Washington and demand to their congressmen vote, vote, vote, it will guarantee that you'll be re-elected. Until that changes you're going to see this system perpetuate itself and the deficits of 200 billion dollars a year I believe in this decade you're you're going to see them four and five hundred billion dollars but we should turn it around and say look this is an opportunity because there will be trouble and people will eventually have to sit down and pay attention and revise the system this is one of the reasons why we've worked hard in trying to get

31:23this new committee together the Council for Monetary Reform and it is one that will monitor and critique the Fed and hopefully we will be participants in the and monetary reform in this decade, because I believe it will come. But I think if we sit around and we don't do what is necessary, I think it would be very bad. One of the things that I am challenged with so often from my letters and from individuals, so many sincere individuals will write and say, look, there are too many groups. You have the Free Foundation, you have the Mises Institute, you have this one over here. Why don't you guys all get together and we'll just take care of it and everything will be okay. I'll tell you what, I think it's great to have more organizations. I think it's very important and very necessary competition in the promotion of ideas is a very good idea.

32:14I think it's very good that it is occurring, but I at times get frustrated because sometimes I think there should be more cooperation. I don't think we should ever compromise our principles, but I do think at times that we should do our very best to cooperate and communicate with other groups. Hopefully, this little committee that we've set up has, at least in my attempt to do this, was to bring as many organizations, as many individuals together with different viewpoints who might represent different ideas on sound money and yet not be a monolithic group. To bring them together in order to have a single voice at some point in time where we can offer an alternative to what we have now. You know, Dr. Gross-Close spent his lifetime essentially promoting, you know, ideas of freedom, particularly talked about sound money and was particularly eloquent on the idea of a moral approach to money.

33:15He was a biblical scholar and I had such high esteem for him. And I would like to quote from Dr. Gross-Close because I think it's very appropriate what he has to say about this issue of money and the efforts that we put forth. He says, efforts to reform institutions or societies by public appeal too often fail from diffusion. The seed must be drilled rather than broadcast. For the popular palate, the stronger vinegar of verity must be diluted to flatness. Flatness. The message must be softened to a coax. Jeremiah, proclaiming to Judah its impending destruction, was cautioned by the Lord that the prophet's warning would go unheeded.

34:01When Elijah complained that the people had forsaken the covenant, thrown down the altars, slain the prophets, and that only he was left, the Lord rebuked him with a reminder that there were yet left seven thousand in Israel, all the knees which have not bowed to Baal. This is the word of hope. There remains a remnant who are bearers of the word and doers of the deed. If the message is sent to them in simplicity and sincerity, it will not return empty. We, I would like to think, are part of that remnant. The remnant is left to thinking about, as clearly as possible, what needs to be done for this country. What needs to be done is in terms of freedom, but in particular in terms of money, because money is the lifeblood of an economy.

34:48I believe when the money is destroyed, we will see a nation threatened, and therefore it is a very, very serious problem. Not because money is something that is used to get us all rich, not something to enhance our material well-being, But it's a method whereby we can communicate with our neighbors and participate in a free market economy. So therefore, I think the responsibility is on us. Yes, it will be difficult. The remnant is small, but I happen to believe it's growing daily. And I think that we have every reason to be optimistic about what's happening. But in the other sense, I think the large majority will never clearly understand exactly what's going on. In terms of revolutions, the individuals who lead know exactly what is happening, and they can lead others. By far and large, the majority will follow.

35:43But we do have to have a strong, strong remnant who clearly sees the way in that we can see what is happening. This is the reason I think the groups like the Mises Institute are so important. You know, some complain about too many programs and too many groups, but 10 or 15 years ago, how many were there? Leonard Reed and a few others, you know, working hard to keep the ideas alive about what freedom is all about and what honest money is all about. And yet today there are many, many more, many, many more professors. And I know a lot of you heard today a lot of the good lecturers that were available to you through the Mises Institute. So there's a lot of room for optimism to see what is happening in this country today, and I am very delighted to see this, because I think that if we can pursue and persist, that our remnant will win out in the end. Thomas Paine said,

36:40those who expect to reap the benefits of liberty must like men undergo the fatigue of supporting it. I do believe we have this obligation, not because we're going to sacrifice ourselves to others and that we have this noble cause to be put on the block as sacrificial lambs. No, I don't believe that. I believe the obligation is to ourselves because it's best for us. I happen to think on a few occasions about the past 10 years. I can guarantee you, if I had not put my 10 years into active political activities, I could have had more Krugerrands under my mattress. But I happen to believe that fighting for and trying to speak for the principles of freedom happens to have a higher priority. And I think this is very important. I think this is necessary because someday it could come. Not only will they inspect us at the borders, they may inspect us without even showing intent to leave our country.

37:34And that is something that we have to stop. In Proverbs it says, Where there is no vision, the people perish. I happen to be very delighted to participate in a group like this and be able to call you all my friends because I do believe very sincerely that you are a group with vision. Thank you very much.