Two forces erode a currency’s purchasing power: inflation and rising debt burdens. Gold and silver guard against both of these. Consequently, throughout history adherence to some form of a gold standard has reliably delivered real economic growth.
A. Hedge Against Inflation
Former Federal Reserve Chairman Alan Greenspan has observed that the abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. In the absence of a gold standard, it can be extremely difficult to protect savings from confiscation through inflation. Deficit spending in the end becomes a hidden confiscation of wealth. Accordingly, he concludes: “Gold stands in the way of this insidious process. It stands as a protector of property rights."26
As quoted in Fortune magazine in February, 2012, Warren Buffett warned that currency-based investments, thought of as "safe," in truth are among the most dangerous of assets, having destroyed purchasing power in many countries even as investors continued to receive timely payments of interest and principal.
Prior to the adoption of the United States Constitution each State enjoyed sovereign authority to issue its own currency. Having witnessed first hand the ravages that purely fiat currencies wreaked on American society with inflation rates approaching 5,000% before, during and after the American Revolution, delegates to the Constitutional Convention were strongly inclined towards restricting emissions of paper currencies in America.27
Accordingly, under article 1 § 8 of the Constitution, Congress is granted power to "coin money, regulate the value thereof and of foreign coin". Section 10 of the same article prohibits states from "coining money or making anything but gold and silver coin a tender for payment of debts." As an exception to a prohibition, specie monetization (recognizing gold and silver coin as legal money) constitutes a reserved state power.
B. Extinguish Debt
Over the past century sovereign debt has soared on the back of purely fiat, paper currencies. Central banks have forced interest rates to near zero in order to make the massive debt service loads even remotely possible. Modern governments’ penchant for cheap money has spread to the citizenry worldwide. Accordingly, because no one really earns significant interest on money any more, we have become a world full of debtors, not savers.
Ultimately, only gold and silver coinage has ever proven to be a truly reliable extinguisher of debt. All other currency is debt. The exercise of exchanging fiat currencies amounts to nothing more than swapping one form of IOU for another.
C. Power Economic Growth
With the notable exceptions of the War of 1812 and the Civil War era, Congress adhered to a pure metallic monetary standard throughout the 19th century. Economic historian Dr. Brian Domitrovic has commented on the remarkable performance of the American economy under the gold standard, not only during the 19th century, but also during periods in the 20th century when monetary policy keyed off the price of gold:
The achievement of simultaneous price stability and economic growth was so outsized that we hardly recognize this kind of heady economic performance as even possible today. Yet this is the real economic record of the gold standard.
These observations underscore the essential role of a precious metal monetary option. Quintric makes that option truly viable.