In May of 2011, I won the Optimist Oratorical Contest in the SWIS (Southern Wisconsin) District. The prompt for the speech was “If I were leader of the free world…”
After winning, I gave my speech to an audience of around one hundred people at the Optimist Luncheon. Sadly, the video recording of it is missing the first portion of the speech, so I have made that portion bold in the script below:
If I were leader of the free world, the first issue I would address would be the monetary system.
This issue is far more important than any other. Why? Because it can make the difference between a flourishing economy, and a great depression. Money is the medium of exchange in the economy, and so, the stability of the money will have a strong influence on the stability of the economy. In this speech, I am going to talk about our current monetary system, its problems, and what I would do to fix them.In 1913, the Federal Reserve was created in the United States. Despite the name “Federal,” it is not in fact a government entity. The Federal Reserve controls the money supply of the United States. Likewise, other private central banks control the currencies of most of the other developed countries in the world.The problems with the monetary system today are mainly based on the fact that the money has no inherent worth. Most currencies were at one time backed by gold or silver–something of value. But, this is no longer the case. The Federal Reserve took many steps to remove the backing, and today, the money is backed by nothing!
Our monetary system today is a system of fiat currency. Fiat currency is money that has no inherent worth, but is valuable because the government says it is money. This presents some problems. Because of the lack of backing, it is possible for the central banks to print up as many dollars as they please, which causes inflation. If you double the amount of dollars in circulation, the laws of supply and demand will cause each dollar to become worth only half as much as before, thereby causing all prices to double.The United States dollar has lost about 95% of its value since the creation of the Federal Reserve, less than 100 years ago. So something that cost $1 in 1913, now costs around $20. Money deposited in the bank at an interest rate under 2% is actually losing value. But because this happened gradually over a long period of time, most people don’t realize it.There is, however, a much greater risk involved with a fiat currency–that of hyperinflation. Hyperinflation is when inflation levels become very high and uncontrollable. One of the best examples of hyperinflation happened in Germany, in 1922 and 1923. Inflation levels became so high, that prices were doubling every other day. At the worst part, a wheelbarrow full of money couldn’t even buy a newspaper. But Germany is not alone in hyperinflation. Since 1944, at least five other countries have had inflation at levels such that it took less than a week for prices to double. In November of 2008, hyperinflation in Zimbabwe got up to 98% every day.The United States has not had hyperinflation since we won our war for Independence, but we have had economic problems. The Great Depression started in 1929, and lasted for over ten years. The length and severity of the Depression were largely influenced by the Federal Reserve. In fact, the chairman of the Federal Reserve, Ben Bernanke, said in a speech in 2002 that, “Regarding the Great Depression. You’re right, we did it. We’re very sorry.”The dangers presented by a fiat currency, and private central banking, are numerous and real. If I were leader of the free world, I would return to a monetary system where the dollar is backed by gold, and I would phase out the Federal Reserve. The United States Constitution even says that nothing except gold and silver are to be money. Throughout history, money that was based on gold lasted the longest, and was the most stable overall. Under a gold standard, there still will be some economic downturns, but throughout history, they have never been as bad as those in countries with fiat money. A gold standard also prevents inflation, and more importantly, hyperinflation.The greatest period of economic growth in this country, the industrial revolution, took place under the gold standard. If we return to a gold standard, we may be able to bring an end to the recession, and have another season of great economic growth.If I were leader of the free world, the first issue that I would address would be the monetary system. I would help to bring stability back to our economy, remove the risk of hyperinflation, and stop devaluing the savings of hard working Americans. Thank you.