The Greenbackers as the Largest and Oldest Component of the Eeconomic Underground Promoting Government-Issued Fiat Money

By Gary North

Americans are living in a world of central bank profligacy. This has been true ever since 1914, when the Federal Reserve System opened for business. But the most recent bank-created economic crisis, which began in December 2007, has received more attention than ever before. This is mainly the result of Ron Paul's 2007 candidacy for the Republican nomination for President. He warned that this crisis would happen. He also spelled out the reasons: Federal Reserve policy. Then the crisis hit.

The Federal Reserve lost its immunity from criticism in 2008-9. It will never get it back. It also lost its invisibility. The general public now has some limited awareness of the FED. The FED gets a lot of negative publicity. This to a positive development.

This has also created a problem. Some of the critics of the Federal Reserve System propose a solution worse than the FED itself: the creation of a fiat-money based central bank that creates money out of nothing to pay for government-funded projects. These critics argue that this government-run bank will be able to offer interest-free loans to the public, which will keep the economy running at full capacity.

This is what John Maynard Keynes taught in "The General Theory of Employment, Interest, and Money" (1936). Keynes praised several economically unsophisticated predecessors who proposed schemes for government-created zero-interest money, including the founder of Social Credit, Major C. H. Douglas, and the farmer and former economist for the week-long Bavarian Soviet Republic of 1919, Silvio Gesell. He referred to them as part of the economic underground, as indeed they were. I have given a lecture on this. You can hear it here.

THE GREENBACKERS

In the United States, the largest and oldest component of the economic underground promoting government-issued fiat money has been the Greenback movement, named in honor of the Union's Civil War currency, unbacked by gold and printed with green ink. The Greenbackers have been a separate ideological movement ever since the 1870s. They are influential on the extreme fringes of both Left-wing and Right-wing circles – a unique achievement.

I have been writing about these people for over 45 years. I am the only person in the Austrian School who has published critiques of their position. The first one I wrote in 1965 as a privately circulated essay. I published it in my book, "An Introduction to Christian Economics" (1973). I revised it to bring it up to date as a mini-book published by the Mises Institute: Gertrude Coogan's Bluff. You can download a PDF for free here.

Miss Coogan was the main theoretician of the Greenback movement in the 1930s. Her books are still in print. More recently, she has been replaced by a lawyer, Ellen Brown. I have dissected her book, The Web of Debt (2007) here.

The Greenbackers hate the idea of the gold standard, just as Keynes did. They claim that fiat money will keep depressions from happening, just as Keynes did. They claim that capital – the tools of production – can be obtained free of charge at a rate of zero percent per annum, just as Keynes did.

The odd thing is this: most of the adherents of the Greenback position think of themselves as conservatives. They think of themselves as defenders of the free market. Yet they see all privately owned banking as an economic evil. They trust Congress to set up a government-owned bank with the legal right to print however much fiat money that the government-protected, monopolistic bankers decide.

WHAT'S WRONG WITH THEIR POSITION?

They do not understand the reason why there are interest rates in every society. They see interest payments as an undeserved payment to bankers. The bankers, because they control lending, are exploiting the public. They are able to get something (interest) for nothing (fiat money).

Read the rest here.