Collins Report

By Bruce Karlson

No one can reasonably take exception to the idea that, at some point, the dollar will be worth nothing. Its sole value, since we abandoned gold, is the backing of the US government, which will not last forever.

An argument can and should be made that ALL paper money is illegal and illegitimate. To wit:

The Constitution, in Article I, Section 8 authorizes the Congress “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures; to provide for the punishment of counterfeiting the securities (bonds) and current coin in the United States.”

The Founders did NOT provide for, and by implication denied, the power to print money.

Our Revolution was funded by paper money, circulated by individual states and the fledgling federal government. It got us through the war but left a mess and set a horrible precedent, still plaguing us today.

At war’s end there was a sea of almost worthless currency and bonds. This became the formula for, and the vehicle by which, spineless politicians “resolved” crises and funded subsequent wars. No paper money, no war!!!

Americans love the “benefits” of deficit spending but don’t care about the results. We’ve clamored for war, healthcare, pensions, etc. and politicians were happy to oblige.

FDR, after running on a platform of balancing the budget, began buying votes, partially decoupled the dollar from gold, maneuvered the nation into war, and prospered politically. Politicians learned that formula well. Skillful management and massive bond sales tamped down inflation during FDR’s war, but the debt remained.

Americans have been properly trained to not look “at the man behind the curtain” but to only stare at the Great Oz. Since the average high school graduate hasn’t studied economics, he just leaves it to Oz.

Oz is a fairly tale not a formula for honest government

Oz has not yet put the nation over the precipice but it approaches. Weimar Germany’s billion dollar notes were long ago and Zimbabwe is far away so, it cannot happen here…can it?

Here is what the Bank Credit Analyst wrote in 2003:

“The only way to avoid a destructive end to the super-cycle of rising debt and illiquidity may be to try and devalue accumulated debts through increased inflation. That will not be a painless process for the markets.” Given that the public will not stand any pain, a destructive end is, unfortunately, more likely.

The dollar has depreciated more than 80% in the past 50 years and we are running up unsustainable debt. The results of continued deficit spending have caught up. All those bills that were put off have come due and we are tapped out.

Wait a minute, there is no problem the Great Oz will simply print some more money, i.e. until it is literally not worth the paper on which it is printed.

Can anyone remember the last time he or she heard the phrase “sound as a dollar”? We now know the reason.

About Bruce Karlson: Born New Jersey, enlisted in the Navy 1960, discharged in 1964, Kean College – BA, Fordham University – MBA. Sold computers in NYC’s financial district, retired 1992. Divorced, two high school aged children. Interests include bridge, history, politics and cooking.

Comments on this or any other Collins Report essay can be sent to kcoachc “at” gmail.com