Indeed, what we are missing IS an attempt to maintain the value of a dollar in terms of silver. IF this WAS the attempt we would never have stopped paying out silver/gold.
The US stopped paying out in gold because it ran out. de Gaulle sent a battleship to retrieve France's gold from the FRB of New York. This sparked a bank run resulting in the Nixon Shock and the end of convertibility.
http://www.youtube.com/watch?v=DEbrLJnYUIgWe may have had failure in political decisions in history, yes, but we haven't had failure for trying to define the ratio of silver to 1 dollar.
Have you checked the exchange rates on silver lately? Far from 1 dollar, you can get about 27 dollars for that much silver today.
Aha.
To borrow some of your earlier words, and now we get to the crux of the matter.
Let's say a mother sends a son to the store to buy some eggs and milk. She gives him $10 saying that should cover it. If the son returns with cigarettes, booze, chips and other junk food, and is asked why he doesn't have eggs or milk, do you think he can validly claim it's because he ran out of money?
Matching this analogy to US monetary policy your answer would seem to be 'yes'. But I would say no; the money didn't run out. Instead, stupid and possibly harmful and dangerous decisions were made which were not in line with the original plan.
Things like war and entitlements are favorable to big government because they allow it to maintain power and even expand it. However these things are expensive.
Here is the second sentence from the Wikipedia entry on the 'Nixon Shock':
By the early 1970s, as the costs of the Vietnam War and increased domestic spending accelerated inflation,[1] the U.S. was running a balance-of-payments deficit and a trade deficit, the first in the 20th century.Do you think that things like the Vietnam war or Iraq war were, on balance, good things? I don't know many that do, and yet that's what we got. We got them because as long as people don't feel the cost of such things government can get away with it. But if these are expensive how can government mask the cost? Simple, by monkeying with the money.
Inflating or debasing the money supply is not new to the world. Governments have been doing it for hundreds, if not thousands of years.
The Founders were knowledgeable of this. The Constitution was written to restrain government. The Founders knew the role that money and "legal tender" would play in this restraint as well. In my grocery store analogy one might argue there was not explicit instruction to
not buy cigarettes and booze, so the excuse of running out of money for milk is valid. But we have established the Constitution is quite clear on legal tender. It says the States shall make no thing but gold or silver legal tender. And yet we see that we now have paper money with absolutely no connection to gold or silver as legal tender.
How did this happen? Gradually. The Nixon Shock of course wasn't when we first stopped paying out gold/silver. We reduced and eliminated domestic payments much earlier. Nixon simply cut the last shackle to government spending completely. de Gaulle recognized what was happening with US spending, and understood the monetary role played by gold. Someone else recognized the significance of the events of the early 70s. A young physician named
Ron Paul who had picked up economics from hobby reading saw the distant course the US was taking away from the original plan towards bigger government too, and decided to get involved in politics and warn about it.
Today we have wars, high unemployment, massive debt and an inflated money supply measured in the trillions of dollars. We're likely to go bankrupt. You are right that there probably isn't enough gold and silver in the entire world to back dollars now at the defined rate. But I have to ask: do you consider those inflated dollars and the course we've taken to be what was intended as best for the people? Because that would be the only way we could have a failure of the ability to use the originally defined backing of silver.
You put two of my quotes together, apparently to suggest they contradict each other. But the 27 dollars listed in bold from the second quote represents
inflated and, to be sure, unconstitutional dollars. Big difference.
