SomeVirginia Legislators Worry about Hyperinflation!

Some legislators in the Commonwealth of Virginia are worried about hyperinflation!  See House Joint Resolution No. 557.  Should the Commonwealth adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System?  Could an alternative currency avoid or mitigate many of the economic, social, and political shocks to be expected to arise from hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System?  These are the questions some Virginia legislators are asking.  They’re even proposing to appoint a joint subcommittee to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve!

In my opinion yes, an alternative currency would help to avoid and/or mitigate many of the economic, social, and political shocks arising from a breakdown of the Federal Reserve System.  The thing is, however, that an alternative currency already exists.  It’s called gold/silver, and it’s available in several forms.  Gold and silver have been used as money for thousands of years.  They have proven themselves to be reliable as media of exchange, stores of value, and units of measure for as long as man has recorded history.  And now that the value of the world’s fiat currencies is coming into question, people (and central banks) are rushing back to gold and silver by purchasing record quantities of gold and silver coins in Europe (scroll down to middle of page), the United States, China, and India.

In the United States, the gold and silver eagles that the U.S. mint produces are already legal tender, but you don’t see people spending their gold and silver eagles on the street. (They’d rather pass along their depreciating paper dollars and save up their gold and silver eagles for use when their paper money becomes worthless.)  Even the pre-1965 dimes, quarters, and half dollar coins were 90% silver and legal tender.  So there is already an alternative currency in place that is legal tender.  In short, Virginia needn’t go to the expense of making another “better” currency.

The real problem is that the U.S. government is promoting ignorance through misinformation among its citizens and encouraging them to continue using the paper money rather than changing over to the use of gold and silver as money.  Furthermore, there is an incentive for the U.S. government to have its debts denominated in an inflatable currency, thus allowing it to repay its debts in ever cheaper dollars.  Let’s not forget that the U.S. government is the world’s largest debtor.  Creditors, on the other hand, might consider adding a gold clause to their contracts, requiring their loans to be repaid in gold or silver.  At this time, gold clauses are legal in the United States.

As for the Commonwealth of Virginia, I would suggest that it follow China’s lead and recommend to its citizens to buy an existing legal tender that has already withstood the test of time, i.e., gold and silver.  To learn more about buying gold and silver, click here.

The second thing the Commonwealth of Virginia could do is encourage capital investment.  While gold and silver are money (and it’s always good to have some money), it’s the amount of capital investment per person that will increase the productivity of its citizens.  Capital investment can be encouraged by keeping taxes relatively low and reducing regulatory burdens.  This, in turn, may require a reduction in the size of government.  So, rather than finding something more for the Virginia legislature to do, i.e., developing an alternative currency, perhaps it should do less and eliminate government bureaucracy, government red tape, and government jobs, which would give its citizens an incentive and the ability to be more productive and invest more capital within the Commonwealth.  Barring that, Virginians could stock up on tangible assets—the best hedge against hyperinflation.

Robert Jackson Smith

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