Creature From Jekyll Island by G. Edward

1 Paul and Lehrman, p. 23.

2- Roger W. Weiss, 'The Colonial Monetary Standard of Massachusetts,' Economic History Review 27 (November 1974), p. 589.

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THE CREATURE FROM JEKYLL ISLAND

• $19 million in 1776.

• $13 million in 1777.

• $64 million in 1778.

• $125 million in 1779.

• A total of $227 million in five years on top of a base of $12 million is an increase of about 2000%.

• On top of this 'federal' money, the states were doing the same in an approximately equal amount.

• And still more: the Continental Army, unable to get enough money from Congress, issued 'certificates' for the purchase of supplies totalling $200 million.

• $650 million created in five years on top of a base of $12 million is an expansion of the money supply of over 5000%.1

Although the economy was devastated by this flood of fiat money, most victims were totally unaware of the cause. In 1777, the sentiment of a large segment of the population was expressed by the words of one patriotic old lady who said: 'What a shame it is that Congress should let the poor soldiers suffer when they have power to make just as much money as they choose.'2

The immediate result of this money infusion was the appearance of prosperity. After all, everyone had more money and that was perceived as a very good thing. But this was quickly followed by inflation as the self-destruct mechanism began to roll. In 1775, the colonial monetary unit, called the Continental, was valued at one-dollar in gold. In 1778, it was exchanged for twenty-five cents.

By 1779, just four years from its issue, it was worth less than a penny and ceased to circulate as money at all. It was in that year that George Washington wrote: 'A wagon-load of money will scarcely purchase a wagon-load of provisions.'3

The saying 'Not worth a Continental' has its origin in this gloomy period.

1. For an overview of expenditures, see Paul and Lehrman, pp. 26-27.

2. Gouge, p. 28. The naivite of this lady may be humorous, but are Americans any more enlightened today? Would she not feel at home among our modern-day electorate who clamor for legislation to pump Federal-Reserve fiat money into projects to alleviate hardship among the poor and unemployed?

3. Quoted by Bolles, Vol. I, p. 132.

THE LOST TREASURE MAP 313

The true nature of the inflation effect has never been more accurately perceived or more vividly described than it was by Thomas Jefferson:

It will be asked how will the two masses of Continental and of State money have cost the people of the United States seventy-two millions of dollars, when they are to be redeemed now with about six million? I answer that the difference, being sixty-six millions, has been lost on the paper bills separately by the successive holders of them.

Every one, through whose hands a bill passed, lost on that bill what it lost in value during the time it was in his hands. This was a real tax on him; and in this way the people of the United States actually contributed those sixty- six millions of dollars during the war, and by a mode of taxation the most oppressive of all because the most unequal of all.1

PRICE CONTROLS AND LEGAL-TENDER LAWS

It was natural that people struggled to find ways to escape the destruction of their savings, and the two most obvious methods were (1) to regularly adjust prices upward as the value of the money went downward or (2) exchange their goods and services only for gold coins. In response, the colonial legislatures and the Continental Congress did what governments always do to prevent it. They resorted to wage and price controls and to legal-tender laws with harsh penalties for non-compliance. Under one such law, those who refused to accept worthless money were even described as traitors. It declared:

If any person shall hereafter be so lost to all virtue and regard for his Country as to refuse to accept its notes, such person shall be deemed an enemy of his Country.

Rhode Island not only leveled a substantial fine for non-

acceptance of its notes but, upon a second offense, an individual lost his citizenship. When this was declared unlawful by a panel of judges, the legislature reacted by dismissing the judges from office.3

1- Thomas Jefferson, Observations on the Article Etats-Unis Prepared for the

Encyclopedia, June 22,1786, Writings, Vol. IV, p. 165.

F. Tupper Saussy, The Miracle on Mainstreet (Sewanee, Tennessee: Spencer Judd, 1980 P-12. Also see Anthony Sutton, The War on Gold (Seal Beach, Calif.: '76 Press, 1977), pp. 47,48.

3 Jensen, p. 324.

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314 THE CREATURE FROM JEKYLL ISLAND