One of the benefits of hindsight is getting to listen to, read, and learn from those that have lived before and might, might just have some insight that could help our own lives, if we listen. If our nose is in Legend of Zelda or Zappos or TMZ reading about the problems that a character that used to go by the name of Puff Daddy is currently experiencing then we might miss it, but if we stop and study from the past, we can improve our future. Debt and paper money seem like a problem today, but they have always been a problem. Mike Maharrey writes for MoneyMetals.com “This is nothing new. Government people have been ruining our money for their gain since the Republic’s earliest days. Sadly, most people don’t realize what’s happening. They believe price inflation is due to greedy corporations, Putin’s price hikes, or voodoo.
As Thomas Jefferson warned, “The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause & consequences.”
I can think of no time in history where the general population is more ignorant of money, what it is, how it works, and how delicately we need to treat its creation. Many people are so callous to prices that they order food, and then pay fees to deliver it to their houses, then they pay someone to come in their house and then they pay someone to literally open their mouth for them and put the food in their mouths. At least they haven’t outsourced chewing. Ok, I might have made a little bit of that up, but not much. It is ridiculous how a sandwich can cost $30 when a loaf of bread, a pound of meat, a pound of cheese and all the fixins might cost $20. Well not in Thomas Jefferson’s day, in those days a wench might bring you a sandwich and it might cost you two bits or maybe the sandwich hadn’t been invented yet, but inflation had. Here is Maharrey again,
“In an 1814 letter to Thomas Cooper, Jefferson wrote, “Everything predicted by the enemies of banks, in the beginning, is now coming to pass. we are to be ruined now by the deluge of bank paper as we were formerly by the old Continental paper.”
Just one year later, a depression gripped the United States kicked off by financial panic. This economic downturn lasted until 1821 and is widely viewed as the first boom-bust period in U.S. history.
It was exactly what Jefferson predicted.
The depression was rooted in an all-too-familiar problem – excessive money printing.
The economic downturn came on the heels of the War of 1812, which officially ended with the signing of the Treaty of Ghent on Feb. 18, 1815. After the war, banknotes began to rapidly depreciate due to the exponential increase in the amount of paper in circulation… Whenever the money supply rapidly expands, as it did during the war years, it creates all kinds of malinvestments in the economy. The expansion of credit fueled land speculation in the West, that likely would not have happened in a more sound monetary environment. Historian George Dangerfield argued that the entire postwar American economy was “based on a land boom.”
The Great Depression was preceded by a boom economy as well. There was a boom in stock buying on margin, a boom in consumer spending on credit, and a boom in M2 money creation by the Federal Reserve in excess of 4% each year to add fuel to the fire. M2 is the Fed’s broad measurement for money supply and something that hit at an all-time high in 2021at 26.21% growth rate annualized. In 1943 during World War II M2 grew by almost 18% buying all those tanks and planes and ships. In 2021, Americans bought Pelotons and Netflix accounts.
We talked of all of FDR’s spending, and we forgot that Hoover was spending too. By the start of World War II, the debt had tripled and then the war added to it. Roosevelt was dead and gone though when the inflation genie came to collect and collect he did. The CPI was over 19% in 1947. The money printing of the Depression did not go unnoticed. It was at a time that compared to war, inflation was a walk in the park.
The key problem with the Great Depression was simply too much government interference. In the enabling on the way up, new laws like the Tariffs, and then the reduction in M2 money supply while the economy was clearly going down down down. This is a lesson that every central banker has taken to heart and they will die on the opposite hill of spend spend spend. That’s how we got a 26.1% money growth in 2021 and then Powell took the money supply negative for the first time since the depths of the Depression. This is now the lags that we are facing and walking into. This is the future we are walking into, but I want to make one more point on the depression.
Peter Schiff is a loud economist that loves to use this term, Don’t let the camel get his nose under the tent or he is coming all the way in. FDR put his sniffer in all of our tents and his terrible ideas proliferate still today. He set the precedent of allowing the government to fill our lives and the wealth transfers from the working and producing to the poor and downtrodden. Some of his programs expired or have been done away with it. However, the grandaddy of them all still exists and is the single biggest outlay of government moolah. That’s right Social Security is a $1.5t outlay which will continue to be the largest government expenditure until the interest expense on the debt takes the lead later this year. How did we get the interest expense so high? It is because the government unlimited spending precedent that FDR initiated.
You see Roosevelt the camel started Social Security with a tax of just 1% of the first $3,000 earned in wages. Today it is 7.65% from both the worker and the employer meaning that it is over 15% today versus 1% then. This program is going broke as well. Don’t forget that in the late 1970s the Social Security fund was being depleted so rapidly they started taxing the benefits. So you get taxed on the way in on money that you earn that goes into the fund and then it gets taxed on the way out when you receive benefits in old age as well. When I speak ill of FDR it is with a reason. No man has done more to ruin our Constitution then he did. We are paying for it today with $35 trillion in debt and our Republic will have our own Great Depression due to the legacy of policies that he put in place with government spending. Ours will be a Great Inflation and the collapse of the dollar though as we will be unable to meet our obligations to our debtors and we are already there.
How did he get this enacted is the last thing we need to mention. As we discussed the Supreme Court was using its ability to act as a set of checks and balances against the other two branches of government, but FDR proposed expanding the court in 1937 to get his plans enacted. Remember when Joe Biden talked about that. This from history.com “On February 5, 1937, President Franklin Roosevelt announces a plan to expand the Supreme Court to as many as 15 judges, allegedly to make it more efficient. Critics immediately charged that Roosevelt was trying to “pack” the court and thus neutralize Supreme Court justices hostile to his New Deal. During the previous two years, the high court had struck down several key pieces of New Deal legislation on the grounds that the laws delegated an unconstitutional amount of authority to the executive branch and the federal government. Flushed with his landslide reelection in 1936, President Roosevelt issued a proposal in February 1937 to provide retirement at full pay for all members of the court over 70. If a justice refused to retire, an “assistant” with full voting rights was to be appointed, thus ensuring Roosevelt a liberal majority. Most Republicans and many Democrats in Congress opposed the so-called “court-packing” plan.”
In April, however, before the bill came to a vote in Congress, two Supreme Court justices came over to the liberal side and by a narrow majority upheld as constitutional the National Labor Relations Act and the Social Security Act. The majority opinion acknowledged that the national economy had grown to such a degree that federal regulation and control was now warranted. Roosevelt’s reorganization plan was thus unnecessary, and in July the Senate struck it down by a vote of 70 to 22. Remember that the House and Senate were both strongly Democrat after Hoover getting the blame for the economy and the court packing plan could have easily passed.
Soon after, Roosevelt had the opportunity to nominate his first Supreme Court justice, and by 1942 all but two of the justices were his appointees. One of those judges that swapped sides was Owen Roberts. He was a conservative but switched his alliance shortly before the announcement of FDR going to pack the court when he voted to uphold a minimum wage law’s constitutionality. All of FDR’s programs began being upheld as constitutional. In just a few years however as FDR went into his third and fourth term and kept appointed justices, Roberts himself saw his own opinions overruled by the liberal court as they re-wrote the case law to back FDR’s socialist agenda. He was not alone in turning his back on the Constitution as Chief Justice Charles Hughes also bailed on Americans when the camel had his nose under the pup flap. The Wagner Act and The Social Security Act were the first major items of legislation that Hughes voted to uphold. His reason- FDR’s reelection proved his popularity which had previously been the court’s domain. This marked the end of what was called the Lochner era in which the court struck down 184 unconstitutional statutes. It also marked the end of our Republic as designed.
The failure of these two judges largely delayed the inevitable as FDR’s time in office outlasted the judges time on the bench and his appointed bench would have been able to side with him anyway but it would have taken a couple more years. It isn’t because of his disability that I call him the first sitting president and by sitting on mean on the bench because he controlled the judiciary so strongly by appointing all but two of the 9. He also sat atop the legislative by giving sugar to the country he became popular, and his coattails were covered in Congressmen and Senators. He also sat in the White House. Perhaps what he really sat on was a throne. The precedent left behind by George Washington of 8 years in office was broken so soundly that Congress swiftly passed a term limit for presidents after FDR died. The damage to the Republic was done though and our eventual downfall was secured. I’ve often thought that perhaps a modern court’s reinterpretation of the due process clause and a return to the Lochner era might be the savior that this country’s needs, but I believe it is too late now. The camel called government had gotten its nose under the tent despite our founding fathers’ best intentions. FDR ended the Republic and replaced it with a socialist state. The path would careen into a ditch in 1971 when the now going broke socialist state would be forced to go off the gold standard as politicians couldn’t stop spending money. The broke socialist state stands today with Social Security, FDR’s biggest and longest lasting middle finger to the signors of the Constitution. It will soon be surpassed by another of his policies, behemoth government spending. The interest expense will soon pass the Social Security expense to be the largest expense of the government. Runaway debt and a wheelbarrow of dollars is the legacy of FDR and the legacy policies of the Great Depression. History will not remember them well.
Sincerely Yours,
C Thomas Printer
On this date in history… 8 years ago to be exact, golfer Arnold Palmer died at the age of 87.
Also born on this date …. Nobel winning author William Faulkner.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.
A Nation in Torment by Edward Robb Ellis