There’s not a lot to agree with about ISIS, but the organization’s call for currencies using gold and silver is the right move.
“Reports have emerged indicating that the Islamic State is planning to soon circulate its own form of currency in areas under its control, and plans to issue pure solid gold and silver gold dinar coins that it hopes will help devalue Western currencies.”
Even former Fed Chairman Allan Greenspan is talking up gold.
Presently, we are in a deflation trend because people are holding on to their cash. But that could change. Gold and silver are hedges against inflation (an increase in the money supply, which only governments can do, and a loss of its value). Inflation is theft.
There was a time in the United States that gold and silver were the coins of the realm. In fact, the Constitution required it:
“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”
Gold and silver forced governments to live within their constitutional limits. With no legal restraints on governments, governments could manufacture money at will, give the perception of prosperity, buy political favors, create an obligatory welfare class through wealth transfer that came by way of tax levies and fiat currency, and fund unconstitutional programs and agencies simply by manufacturing money instead of digging it out of the ground.
The growth of government can be attributed to getting off the gold standard.
President Franklin Roosevelt, by Executive Order, made it illegal to own gold. Executive Order 6102 was signed on April 5, 1933, by FDR “‘forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States.’ The order criminalized the possession of monetary gold by any individual, partnership, association or corporation.”
The government couldn’t expand its reach with the restraints placed on it if only gold and silver were legal tender:
“The main rationale behind the order was to remove the constraint on the Federal Reserve which prevented it from increasing the money supply during the depression; the Federal Reserve Act required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit (in the form of Federal Reserve demand notes) that could be backed by the gold in its possession . . . . If gold can’t be legally owned, then it can’t be legally redeemed. If it can’t be legally redeemed, then it can’t constrain the central bank.”
When a government issues fiat money (Federal Reserve Notes) not backed by a commodity like gold and/or silver, the limiting commodity (gold and silver) is “driven out,” that is, people hold on to the good money because they perceive it to be more valuable.
That’s why during times of inflation (an increase of the money supply), the price of gold and silver go up. The Federal Reserve Notes are considered to be less valuable by others. As a hedge against economic uncertainty, people buy gold and silver to protect themselves against their government.
For example, silver coins were widely circulated in Canada (until 1968) and in the United States (until 1965 and 1971). The two governments debased their coins by switching to cheaper metals as the market value of silver rose above that of the face value. The silver coins disappeared from circulation as citizens retained them in anticipation of a rise in value in the future.
Silver dimes and quarters stopped being minted in 1964. The Kennedy half dollar was struck in 90% silver in 1964. The following year, this was changed to silver-clad, with the silver content lowered to 40%. In 1971, the circulation coinage composition was changed a final time, eliminating the silver, and using the copper-nickel clad standard common to the dollar, quarter, and dime.
Federal Reserve Notes depend on trust, trust that other people will accept them as money in the future. If the day ever comes when the world no longer trusts the “value” of our currency, it will no longer be worth the paper it’s printed on, and that’s what ISIS is hoping will happen.