Bringing gold and silver back as America's Constitutional money

Sound Money Scholarship Winning Essay: "On Money, Currency, and Government"

Posted on December 6th, 2022 -

The following essay, written by an outstanding undergraduate student at the University of Tennessee, earned the top Sound Money Scholarship award for 2022…

On Money, Currency, and Government

By Chikwem Ihekweazu

Central banking and its consequences have been a disaster for the American economy.

Since the founding of the Federal Reserve, capital formation and accumulation have been increasingly impeded, individual liberty along with regional (i.e., state/local) self-determination have been considerably diminished and suppressed respectively, and indefinite wars have been waged on a colossal scale, by the federal government, yielding nothing.

Since the early 1970s, real wages have stagnated or fallen with the welfare state continuing to balloon into a crisis of astronomical proportions. All the while, personal savings rates continue to decline (falling from around 13 to around 5 percent since the early ‘70s), as forty percent of Americans today are unable to pay for a $400 emergency expense.

These disillusioning economic conditions are largely the result of a fiat monetary system, perpetuated by central bankers in collusion with government. Analysis of the history and policies of the Federal Reserve will reveal its exploitative nature, proving that any case for its preservation as an institution is argumentatively indefensible.


Money is a medium of exchange, identifiable as a market good of high liquidity. Much of its significance lies in the fact that it allows for an infinitely complex division of labor, which facilitates civilizational progress.

For the majority of recorded history, gold and silver were used as money. This resulted in the demand for banks, where money could be stored. In December 1790, less than a decade after the end of the American Revolutionary War, secretary of the US treasury, Alexander Hamilton, submitted a proposal to congress for a national bank charter based on the working principle of the Bank of England.

Hamilton, whose previous efforts included attempting to effectively combine the legislative and executive branches of government, openly described the national bank as “a political machine, of the greatest importance to the state.” This statement proved to be the case as throughout its charter, the federal government was the biggest client of the Bank of the United States.

Credit expansion in addition to the influx of banknotes resulted in high instability, leading to the Panic of 1792. The charter was allowed to expire in 1811, and the Second Bank of the United States met the same fate in 1836 at the height of the Jacksonian Era.

Free banking prevailed until 1862 with the issuance of pure fiat currency (greenbacks) by the Union government, and the imposition of a ten percent tax on private banknotes. This marked the end of currency competition and the beginning of [currency] hyperinflation, resulting in price increases of 11%, 23%, and 27% from 1862 to 1864 respectively.

Until 1913, banking still remained somewhat decentralized with nationally chartered institutions engaging in fractional reserve banking. But as economic development ensued and prices fell (due to laissez-faire), businessmen and intellectuals (including socialists) advocated for a central bank. The former did under the guise of enhancing currency stability and the latter for establishing a provider cheap credit.

However, nothing more than common sense is necessary to regard these reasons as utterly erroneous. Increased savings rates (not spending/GDP) are a primary indicator of a healthy economy. Artificially supporting prices via inflation merely transfers (i.e., steals) wealth from the populous, which discourages and inhibits saving.

Therefore, it is clear that the advocacy for a central bank by businessmen such as J.P. Morgan truly stemmed from the desire for a compulsory monopoly. So, under Woodrow Wilson, the Federal Reserve Act also marked the inauguration of the modern ruling class.


Since its conception, the primary mode of inflation occurred in the form of purchasing bonds and treasury securities, which despite being more sophisticated (and dishonest), is essentially equivalent to the aforementioned greenback system.

And due to the abandonment of the Bretton Woods modified gold standard in 1971, the Fed has the power to inflate substantially and indefinitely.

A consequence of this is the introduction of large distortions to the economy which eventually result in the so called ‘Keynesian Business Cycle’. This intensified ‘boom and bust’ phenomenon, as experienced since the 1920s, always originated from inflation and prolonged due to quantitative easing.

In addition, inflation leads banks to continue extending loans at an increasing rate in anticipation of the trend continuing.

Consequentially, when there is an inevitable economic downturn, the debts can no longer be serviced resulting in a devastating recession. This is what characterized the 2008 insolvency crisis. It is of the utmost importance to acknowledge that, by design, the Fed is an institution that benefits a chosen few at the expense of the citizenry.

To put it plainly, an inherent conflict of interest exists between the Fed and its constituents (big banks), and the government and its contractors. Hundreds of billions of dollars were spent on bank bailouts in 2008 and 2009 alone while four million homes were foreclosed on by 2012.

The Fed’s power to inflate has also tremendously influenced government foreign policy and the waging of war. During the Hundred Years War, King Edward III’s campaigns in France failed due to a lack of funds which came from taxation.

The United States government has engaged in proxy wars and decades long conflicts in Vietnam, Iraq, Afghanistan, etc. in addition to operating several hundred military bases abroad.

Without the Federal Reserve, these fruitless endeavors could only have been funded by direct taxation as was the case for Edward III. But such levels of candid expropriation are politically impossible, and would have resulted in the abrupt end to the aforementioned conflicts soon after their beginning.

The actions of the Fed leading up to and through the major events of 2020 require special analysis due to the unprecedented levels of inflation in conjunction with the exceptional damage it has done to the economy.

Since 2008, inflation continued under the guise of quantitative easing, mostly affecting prices of financial assets such as stocks, bonds, and real estate. But because those prices rose significantly with respect to the cost of living, owners of said assets appeared wealthier.

However, the Fed’s policy response to COVID-19 was to inflate even more while the state and federal governments basically forced citizens to not work, thus producing less goods and services. As of Q1 2022, the Fed owns $8.96 trillion in assets, an increase of $4.24 trillion since Q1 2020, and interest rates have essentially been zero for the same period of time.

Unsurprisingly, the first half of 2022 has been characterized by massive consumer price increases, a trend that is expected to continue for the foreseeable future.

In his essay objecting to the creation of a national bank, Thomas Jefferson described such an institution as an “engine of corruption.” This holds true today more than ever as the US Dollar weakens and the American middle class disappears. A sound [bi-metallic] monetary system allows individuals to save without worrying about losses due to inflation.

The current fiat system forces those with little to no investment expertise to risk their hard-earned wealth in the search for yield via stocks or equities. As time goes on and greater economic woes are inflicted by the Fed, it is inevitable that a powerful movement will be formed with the purpose of its abolition.

Education in the principles sound money is the first and most important step in achieving this.

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