Why Progressives Love Government “Experts”

From FEE.org (June 9, 2022):

In twenty-first-century America, ordinary people are at the mercy of well-paid, unelected government experts who wield vast power. That is, we live in the age of the technocrats: people who claim to have special wisdom that entitles them to control, manipulate, and manage society’s institutions using the coercive power of the state.

We’re told these people are “nonpolitical” and will use their impressive scientific knowledge to plan the economy, public health, public safety, or whatever goal the regime has decided the technocrats will be tasked with bringing about.

These people include central bankers, Supreme Court justices, “public health” bureaucrats, and Pentagon generals. The narrative is that these people are not there to represent the public or bow to political pressure. They’re just there to do “the right thing” as dictated by economic theory, biological sciences, legal theory, or the study of military tactics.

We’re also told that in order to allow these people to act as the purely well-meaning apolitical geniuses they are, we must give them their independence and not question their methods or conclusions.

We were exposed to this routine yet again last week as President Joe Biden announced he will “respect the Fed’s independence” and allow the central bankers to set monetary policy without any bothersome interference from the representatives of the taxpayers who pay all the bills and who primarily pay the price when central bankers make things worse. (Biden, of course, didn’t mention that central bankers have been spectacularly wrong about the inflation threat in recent years, with inflation rates hitting forty-year highs, economic growth going negative, and consumer credit piling up as families struggle to cope with the cost of living.)

Conveniently, Biden’s deferral to the Fed allows him to blame it later when economic conditions get even worse. Nonetheless, his placing the economy in the hands of alleged experts will no doubt appear laudable to many. This is because the public has long been taught by public schools and media outlets that government experts should have the leeway to exercise vast power in the name of “fixing” whatever problems society faces.

The Expert Class as a Tool for State Building

The success of this idea represents a great victory for progressive ideology. Progressives have long been committed to creating a special expert class as a means of building state power. In the United States, for example, the cult of expertise really began to take hold in the late nineteenth and early twentieth centuries, and it led directly to support for more government intervention in the private sector. As Maureen Flanagan notes in “Progressives and Progressivism in an Era of Reform,”

“Social science expertise gave political Progressives a theoretical foundation for cautious proposals to create a more activist state…. Professional social scientists composed a tight circle of men who created a space between academia and government from which to advocate for reform. They addressed each other, trained their students to follow their ideas, and rarely spoke to the larger public.”

These men founded new organizations—such as the American Economics Association—to promote this new class of experts and their plans for a more centrally planned society. Ultimately, the nature of the expert class was revolutionary. The new social scientists thought they knew better than the patricians, religious leaders, local representatives, and market actors who had long shaped local institutions. Instead,

Progressives were modernizers with a structural-instrumentalist agenda. They rejected reliance on older values and cultural norms to order society and sought to create a modern reordered society with political and economic institutions run by men qualified to apply fiscal expertise, businesslike efficiency, and modern scientific expertise to solve problems and save democracy. The emerging academic disciplines in the social sciences of economics, political economy and political science, and pragmatic education supplied the theoretical bases for this middle-class expert Progressivism.

The Progressive impulse for expertise-based rule was perhaps exemplified by the Progressive transportation planner Emory Johnson, who advocated for a strong federal executive branch that would be resistant to political pressure while relying on the supposedly “scientific” judgments of government planners and other bureaucrats. Johnson

explicitly took up the question of the role of expertise in the American state…. he maintained that success relied upon what he termed “executive functions.” He sought to empower the federal government’s executive branch as experts’ natural home.1

In the Progressive view, business leaders and machine politicians lacked a rational and broad view of the needs of society. In contrast, the government experts would approach society’s problems as scientists. Johnson felt this model already somewhat existed in the Department of War, where Johnson imagined the secretary of war was “quite free from political pressure and [relied] on the counsel of the engineers.” Johnson imagined that these science-minded bureaucrats could bring a “really economic and scientific application” of policy. [read more]

Why Do Some Countries Stay Poor?

From Peter Jacobsen on FEE.org (Aug. 23, 2023):

Accounting for "The Wealth of Nations."

This week for Ask an Economist, I have a question from a reader named Mark. He says,

“I’ve worked with immigrants that recently moved to the US, and workers still living in their native country and working for me remotely.

My experience is that they’re on average, much harder working and more skilled (even in technical fields) than my American colleagues. The foreigners work hard, making no excuses, grateful for the work, and take every opportunity to better themselves. Americans, on the other hand, demand much higher wages, complain about the work, and make little effort to improve themselves.

Since the people from many of these poor countries are better workers, why are their home countries so poor? Immigrants on average start more businesses and do better in the US than US born citizens. With all their skills and ambition, it seems their home countries ought to be significantly richer than the US cities, yet this isn’t the case. What’s the cause of these countries’ poverty?”

Mark asks perhaps the single-most important question in the history of economic thinking. Why do some countries grow rich while others stay poor?

A Long History of Answers

In 1776, Scottish philosopher Adam Smith published perhaps the most influential work in the history of political economy: An Inquiry into the Nature and Causes of the Wealth of Nations.

This book, usually referred to as “The Wealth of Nations,” tries to answer the question Mark poses. Since then, wealthy countries have grown much wealthier, some poor countries have grown wealthier, but there are a substantial number of countries lagging behind.

Before we get into the right answer, we should spend some time talking about some popular wrong answers.

Economist Bill Easterly has done a great job chronicling some of these wrong answers in his book The Elusive Quest for Growth.

Easterly’s point in the book is simple. Throughout the late 20th century and into the 21st century, the United States and other countries have attempted to trigger economic growth in poor countries. These attempts have failed.

Easterly discusses three failed panaceas which experts believed would trigger development: investment, population control, and education. Before looking at each once, though, consider the unifying theme here. Developed countries tend to have higher levels of investment, lower birth rates, and more education. From this, experts have tried to infer that if these conditions are replicated in poorer countries, then development will follow.

This strategy has failed. It turns out these factors are more a consequence of growth than a cause. Let’s look at each failed panacea.

1. Investment

In the 1950s, experts began to believe that simply having machines and financial capital to take on big projects would make countries rich. This belief, ironically, was based on the (false) success of the Soviet Union. Soviet production numbers were going through the roof, and for decades economists believed they would overtake the US. Why?

The Soviet Union was industrializing through forced savings. By reallocating private resources to large industrial investments, it appeared the USSR was able to shock the economy into early industrialization. It turns out that this growth was illusory, as economist Murray Rothbard rightly predicted, leading to the collapse of the Soviet Union.

But the Soviet Union fooled many economists in the 1950s, so the model of centrally planned growth via investment took off. The belief was that because poor countries were in such dire situations, citizens had no ability to save. Without saving there is no growth. A vicious cycle was preventing growth.

So developing countries could fix this by giving the required investment for countries to have sustained growth. This investment would increase incomes, which would increase savings, and spur on permanent natural growth. Easterly calls this the financing gap approach.

The approach failed, though. Models failed to live up to their predictions, and poor countries were not made rich via air-dropped investments. The reason for the failure is the same reason noted by Rothbard in his analysis of the Soviet economy. Production is a means to the ends of consumption. If your production is not linked meaningfully to the well-being of consumers via the knowledge of prices, profit, and loss, then it will not lead to any sustained growth.

Central planners attempted to create production for its own sake, leading to the misallocation of capital and natural resources. Investment alone is not enough—you must have the right investments.

2. Education

A natural next plan for development experts was education. If increasing production via physical capital was not enough, maybe increasing knowledge or human capital would do the trick. Easterly chronicles how education development policy dominated from the 1960s to the 1990s.

The results did not bear out on this either. Easterly chronicles how study after study finds little to no correlation between education and economic growth. One study shows that as the education explosion happened in poor countries, the growth rate of income in these countries actually fell. This is exactly the opposite of what we’d expect if education theories were true. Another study found that for countries that grow 1% faster than average, education could only explain 0.06% of that in terms of growth in human capital.

Easterly points to several other types of studies which show a simple, consistent result: education does not create economic growth.

……

The Best Answer

So if all these answers are wrong, what is the right answer? Let’s go back to Adam Smith, and take a look at his famous conclusion. Why do countries become rich according to Smith?

“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

Smith is arguing that the ultimate cause of growth in a country stems from its institutions. In other words, the rules that govern your daily economic activity are at the bottom of the different growth outcomes we face in our world.

Another way to frame this is that in order for a country’s economy to grow, the citizens need economic freedom or access to private property rights.

When people have private property, they can use, sell, or rent out their property. This leads to a few results. First, people have an incentive to maximize the value of their property. If you own a house, you want to keep it in good condition because letting it fall apart means you lose some money. Private ownership incentivizes responsibility.

Furthermore, when people are able to sell their goods, prices form for those goods. Prices reflect the value of a good or service relative to other things, and embody societal knowledge about the good. When an oil rig breaks down in the ocean, oil becomes more scarce. We don’t have to be told oil is more scarce to curb our consumption. The rising price causes us to curb consumption whether we know it or not.

Prices also allow firms to do accounting to determine their profit or loss. If a firm makes a profit off of a sale, this tells them consumers valued the final product more than the value of the inputs used to create it. This process of transforming less valuable inputs into more valuable outputs is at the center of economic growth. To paraphrase the economist Peter Boettke: without ownership of the various goods used in production, there can be no markets for them. Without markets for these goods, there are no prices. Without prices, there can be no economic calculation.

So institutions which are economically free are the cause of economic growth. The data bear this out. Economists James Gwartney and co-author Robert Lawson pioneered the Fraser Institute’s “Economic Freedom of the World Index.” The Index measures how free the economies of different countries are and uses that information to examine the connection between freedom and flourishing. What they find fits perfectly with the theory here. Economically free countries are richer and healthier than unfree countries.

Economist Peter Leeson also examines the evidence in a paper titled “Two Cheers for Capitalism?” His conclusion?

“According to a popular view that I call ‘two cheers for capitalism,’ capitalism’s effect on development is ambiguous and mixed. This paper empirically investigates that view. I find that it’s wrong. Citizens in countries that became more capitalist over the last quarter century became wealthier, healthier, more educated, and politically freer. Citizens in countries that became significantly less capitalist over this period endured stagnating income, shortening life spans, smaller gains in education, and increasingly oppressive political regimes. The data unequivocally evidence capitalism’s superiority for development. Full-force cheerleading for capitalism is well deserved and three cheers are in order instead of two.”

In The Elusive Quest for Growth, Easterly has one other insight that merits our attention on this question. Easterly points out how much of the United States government’s focus on development in the late 20th century was really an attempt to win allies against the Soviet Union.

This is extremely ironic, considering that the US government was essentially incorporating Soviet style central planning to attempt to bring about growth in these developing countries.

Instead, it would have been better to follow a US-style pursuit of economic growth. Institutions which enable economic growth are the true driver of wealth creation. Once you enable individuals to freely compete and cooperate, the power of human ingenuity does the rest. [read more]

Food for thought. Lessons the Left never gets--especially the "easy taxes" part.

U.S. Space Command Warns Russia Planning ‘Space Pearl Harbor’ With Nuclear Weapon in Orbit (VIDEO)

From The Gateway Pundit.com (Apr. 18):

Russia is reportedly developing a nuclear weapon designed to be deployed in space that could cripple global communications and cause widespread disruption.

General Stephen Whiting, head of U.S. Space Command, has admitted that Washington is “very concerned” about plans to place a nuclear anti-satellite weapon into orbit.

“They are thinking about placing in orbit a nuclear anti-satellite weapon that would hold at risk everyone’s satellites in low Earth orbit, and that would be an outcome that we just couldn’t tolerate,” Whiting said.

The weapon could be used to destroy large numbers of satellites in low Earth orbit, potentially taking out communications systems, GPS networks and parts of the global internet.

A detonation in orbit could damage or destroy up to 10,000 satellites, roughly 80 percent of those currently in space.

Officials have described the potential attack as a “space Pearl Harbor.”

Whiting said the threat forms part of a broader pattern of Russian activity in space, including widespread GPS and satellite communication jamming.

“The problem with GPS jamming is it’s being done in a way that’s affecting civil aviation in eastern Europe and across southern Europe,” he said.

“When we put at risk civilian airliners full of citizens just trying to go on business or holiday, that’s incredibly problematic.”

The general said Russia is seeking ways to counter what it sees as Western military advantages by targeting space-based systems.

“They look at the United States, they look at NATO and they see an overmatch there of conventional arms,” Whiting said.

“And they believe that novel ways of trying to undermine the United States and NATO, such as by neutralizing our space capabilities, helps them to level the battlefield.”

The proposed weapon would violate the Outer Space Treaty, which prohibits placing nuclear weapons in orbit.

U.S. officials have been aware of the threat for at least two years, with intelligence first briefed to Congress in 2024.

Whiting warned that space is increasingly becoming a central domain for future conflict.

“The next big war will likely be a war that starts in space,” he said.

He also urged allies to increase defense spending in the sector, noting that Britain currently spends less than one percent of its defense budget on space capabilities. [source]

Hope not, then again not surprising. The Chi-Coms are probably thinking along the same lines too.

Another threat in orbit:

‘There are threats in orbit’: Space Force chief sounds alarm over Chinese, Russian space assets

Trump Pardons 9 in Federal Emissions Cases

From Newsmax.com (July 3):

President Donald Trump on Friday pardoned 11 people, including some convicted in federal emissions cases, saying they were victims of what he called the Biden administration's "Weaponization and Stupidity" in punishment for "fixing their car."

Trump announced the pardons in a Truth Social post, declaring that the six had been unfairly prosecuted and imprisoned under then-President Joe Biden.

"It is my Great Honor to have just signed Pardons for six people who were persecuted by the Biden Administration, and were in, or being sent to, prison, for 'fixing their car,'" Trump wrote earlier in the day before the White House made an official announcement. "While I know this sounds ridiculous, it is nevertheless a fact, and part of the Weaponization and Stupidity that our Country had to endure during four long years of Sleepy Joe Biden.

"I AM SETTING THEM ALL FREE, RIGHT NOW!"

Trump's Friday ⁠pardons also included Adam Kinan, ⁠vice chairman ⁠of the Staffing Advisory Group, who ‌had been sentenced to prison in 2006 with business partner and ‌Washington ​lobbyist Jack Abramoff ‌for wire fraud.

The pardons come as the administration continues to roll back federal environmental enforcement priorities and what it describes as politically motivated prosecutions.

"President Trump is the ultimate decider on any clemency-related actions," a White House official told CBS Newsahead of the pardons.

Last year, Trump pardoned Wyoming mechanic Troy Lake, who served seven months in prison for violating federal emissions laws after disabling pollution-control equipment on diesel engines.

"We think this type of case is an example of government overreach," attorney Stewart Cables told CBS. "That's why we are trying to get these pardons."

Earlier this year, Todd Blanche, who at the time was deputy attorney general, ordered federal prosecutors to drop the remaining criminal cases involving aftermarket "defeat devices" used to modify diesel emissions systems, saying the move would "ensure consistent and fair prosecution under the law, as well as to ensure the best use of [Justice] Department resources."

Trump also signed a June 29 executive order directing the Environmental Protection Agency to deprioritize civil enforcement involving emission-control tampering.

According to CBS, Trump is also weighing other clemency requests, including one from music producer Sean "Diddy" Combs, who is serving a federal prison sentence of just over four years at Fort Dix, New Jersey, after his conviction last year on two counts of transportation to engage in prostitution.

He was acquitted of the more serious charges of sex trafficking and racketeering conspiracy.

Administration sources told the outlet no decision has been made.

Grammy Award-winning rapper Pras Michel of the Fugees and Malaysian financier Jho Low are also reportedly seeking presidential pardons. [source]

Good for President Trump. 

Trump drops election integrity bombshells, urges passage of SAVE America Act

From Just the News.com (July 16):

On Thursday at the White House, President Donald Trump addressed the nation and presented new evidence detailing multiple security breaches in elections he said were concealed by a self-proclaimed "shadow government" and the Biden administration.

"Another official inside the FBI wrote that she was running 'a shadow government' to keep intelligence about China's election meddling from becoming known," he said, during a primetime address from the White House.

The Chinese hacked while the Democrats denied

According to Trump and subsequent documents to be released Thursday, in the spring and summer of 2020, the intelligence community (IC) began detecting the Chinese illegal acquisition of voter databases. At the time, the number of voter files was in the tens of millions.

The documents reportedly reveal that there was a concerted and conscientious effort by the IC not to tell the president (Trump at the time), Congress, or the American people.

Because nothing was done by former President Joe Biden's administration to stop the Chinese activities, the number of voter files hacked went from 10 to 20 million in 2020 to roughly 220 million by 2023.

China targets Trump to damage the election

Furthermore, evidence shows that China was activating certain interference methods to specifically target Trump, as the IC was telling Trump and the American people the opposite.

The IC report, declassified and released by former Director of National Intelligence (DNI) Avril Haines, concluded that China did not interfere, as it “considered but did not deploy influence efforts intended to change the outcome of the US Presidential election.”

Since the spring and summer of 2020, on at least five occasions, intelligence reports have revealed that U.S. election voting machines could be hacked by a foreign power because of specific vulnerabilities.

In the summer and fall of 2020, the IC watched a foreign adversary, Venezuela, move from theoretically hacking the machines to creating a practical plan that would accomplish it. The plan was apparently so good that a post-election hand-audit would not have been able to detect that the ballots had been changed.

The same vulnerabilities used to hack the machines and change ballots were recently tested by the Department of Homeland Security (DHS), which determined that those vulnerabilities still existed, according to that July report.

Roughly 278,000 non-citizens were found on voter rolls

To further investigate, DHS purchased 30 voter registration databases, which are available for purchase commercially, that Assistant Attorney General for Civil Rights at the Department of Justice Harmeet Dhillon was unable to compel states to hand over.

DHS was unable to purchase those files from California, New York, New Jersey and a handful of other states. Through their investigation, they found that in mid-sized states, roughly 278,000 non-citizens are currently on voter roles. The non-citizens were identified through foreign social security numbers or foreign drivers' licenses.

Democrats fabricated ballots in Michigan to make quotas in 2020 elections

The Federal Bureau of Investigation (FBI) has also interviewed numerous subjects who were canvassers hired by GBI Strategies. The Democratic National Committee is one of the largest funders of GBI Strategies, a Democrat-aligned voter registration and get-out-the-vote (GOTV) organization.

During the 2020 election, GBI reportedly received payments nearing $5 million from campaigns and committees. These canvassers, who were illegally paid per ballot, were allegedly instructed that if at the end of the day they had not met their quota of ballots signed and received, to sign ballots themselves.

According to the documents to be released, the Biden DOJ blocked the FBI from indicting anyone in these matters for four years following the 2020 election. Reportedly, the FBI and the Michigan State Police never investigated beyond Michigan and slow-walked any further probes.

Amanda Head is White House Correspondent for Just The News. You can follow her here. [source]

Of course, the Chi-Coms wanted Biden to win. Just like Putin wanted Hillary Clinton to win too. Both candidates are easy to manipulate. One other thing, Senate pass the SAVE America Act already.

Other articles on the speech:

• Trump’s Declassified Docs Detail Massive Michigan Voter Registration Fraud
• Thousands of non-citizens registered to vote in NJ due to software error, governor says
• Analysis: The Many Times Noncitizens Popped Up On Voter Rolls
• If the government was a company, it would’ve faced lawsuits for data breach of millions of voters
• Trump’s Speech Sends Beijing, And China-Watchers, Into A Frenzy
• After Birthplace Citizenship Ruling, China Won’t Need Hackers To Meddle In US Elections
• Intel Agency Assessed China Planned To ‘Encourage’ Violent BLM Riots To Hurt Trump In 2020

Transhumanism is a Christian Heresy (and a False Gospel)

From Breakpoint.org (Aug. 1, 2025):

One of the clearest proofs that Christianity addresses the fundamental problems of humanity is the bizarre lengths to which non-Christians will go to address those same problems without Christ. For example, tech billionaire Peter Thiel, former CEO of PayPal, recently went on Ross Douthat’s “Interesting Times” podcast to discuss AI, Mars, immortality, and other light topics. The conversation was genuinely interesting, especially when Douthat asked, “Should the human race continue?” Thiel paused and said “um” and “I don’t know” quite a few times.

“This is a long hesitation!” observed Douthat, laughing nervously.

Finally, Thiel explained that humanity should survive, but that there are problems in need of solving. Chief among those is death, he said, which transhumanists have long hoped to conquer via a “radical transformation” of the human body into an “immortal body.”

The problem with efforts like transgenderism, in Thiel’s opinion, isn’t that they change bodies too radically, but not radically enough: “[W]e want more transformation than that. … We want you to be able to change your heart and change your mind and change your whole body.” Thiel then pointed to Christianity and its doctrines of Redemption and Resurrection as precedent for the transhumanist idea of total self-transformation and conquest of death. Maybe, he hinted, the two philosophies aren’t so different.

Douthat, a Roman Catholic, pushed back, pointing out that according to Christianity, God does the transforming. “The person,” Douthat said, “who tries to do it on their own with a bunch of machines is likely to end up a dystopian character.” Do-it-yourself immortality is, at best, “a heretical form of Christianity.”

Theil’s fundamental assumption, which is foreign to the Bible and Christianity but common among tech futurists and transhumanists, is that our minds are more important and fundamental than our bodies. Our “true selves” are our minds and separable from who we are physically.

Not only is this assumption a rehashed version of the ancient heresy of Gnosticism, it also creepily resembles the philosophy of the evil National Institute of Coordinated Experiments (or N.I.C.E.) from C.S. Lewis’ That Hideous Strength. In the story, Dr. Filostrato hopes to cleanse the world of organic life, replacing trees, birds, and even human bodies with machines. He even proposed something akin to uploading human consciousness.

That’s not to say that transhumanists like Thiel are involved in an intergalactic conspiracy run by demons speaking through a disembodied Head, as in the book. At least not knowingly. But the transhumanist’s urge to overcome human limits, become more machine-like, and live forever is eerily similar. As is their rhetoric.

It’s also notable that, unlike anti-humanists on the Left, transhumanists assume the human race is worth preserving. Elon Musk, for example, thinks it’s our duty to have as many babies as possible, by any means necessary. He also thinks that humans should be the ones to colonize other planets. In a sense, he acknowledges that humans are exceptional, in a way at least similar to how Scripture describes humans.

Yet, his view of human exceptionalism has a “you will be like God” promise to it, and a sense that all human problems are technical glitches to be overcome by innovation and engineering. So, our mortality can be solved through “radical transformation” of our bodies. Our fragile fertility can be solved through IVF. Our lack of knowledge can be solved through AI, and our limits can be overcome by the technologies pioneered by Thiel and others like him.

Theil’s company Palantir was named, without any apparent irony, after the “seeing stones” in The Lord of the Rings that corrupt all who gaze into them.

Humans were made in the image of God and, as such, were made to be like Him and live forever. Death is “the last enemy,” and our longing for immortality is core to who we are. Perhaps this is why transhumanist promises are so compelling. However, we were made to do and receive all this through God, not our own ingenuity.

Transhumanism, it turns out, is indeed a Christian heresy, an ideology that rightly identifies the problems of a fallen world. But it seeks to overcome them with a false gospel of technological godhood, rather than the true gospel of salvation through Christ.

God willing, Thiel’s openness to Christianity and his conversations with Christians will move him to accept his need for Christ. Until then, believers should be fully aware that the transhumanist gospel is a false one. Only Christ can change our hearts, change our minds, and change our whole bodies … not a tech billionaire. [source]

Transhumanists fear death. Their ego (living forever) might come into play too.

Another article on transhumanism:

Our Transhumanist, Sci-Fi Future Has Arrived. But You’re Not Going To Like It

How Bad Were Recessions before the Fed? Not as Bad as They Are Now

From Mises.org (June 28, 2022):

With a recession looming over the average American, the group to blame is pretty obvious, this group being the central bankers at the Federal Reserve, who inflate the supply of currency in the system, that currency being the dollar. This is what inflation is, the expansion of the money supply either through the printing press or adding zeros to a computer screen. It has gotten so bad that in the last twenty-two months, 80 percent of all US dollars in existence have been printed, from $4 trillion in January 2020, to $20 trillion in October 2021.

This is always how recessions start: the expansion of easy money, the creation of bubbles, and heightened prices caused by the devaluation of the currency supply. But recessions occurred long before the Fed’s establishment in 1913.

Were these market failures, as many are taught to believe, or were they still the fault of a central bank or government policy? How bad were pre-Fed recessions? Did they rival the Great Depression or 2008?

The Continental Dollar

During the days of the American Revolution, the Continental Congress convened to figure out how to finance the Revolution. In June 1775, Congress issued six million paper currency notes known as continental dollars in order to pay for the new army and the supplies needed to fight a war. Those who supported the Revolution would jump in line to support this new fiat currency, as it was the patriotic thing to do.

By 1780, the amount of continentals in circulation had reached 241 million, and the continental had done its damage. The patriots who bought into the fiat dollar suffered the most, while people like David Hall, who by order of Congress was permitted to print out fiat bills, and the Loyalists, who kept their gold and silver specie were able to stay financially afloat.

The continental was turned back en masse, as it now held no value. Those who trusted the continental over gold were left with nothing. Certain Founding Fathers, after witnessing people’s livelihoods ruined by fiat paper money, decided to make provisions to make sure this mistake would not happen again.

Article 1 Section 10 of the US Constitution states:

No state shall make any thing but gold and silver coin a Tender in Payment of Debts.

This section would be violated throughout US history, from the Civil War to 1933, when President Franklin Roosevelt confiscated US citizens’ gold and prevented them from exchanging the dollar into gold.

It’s clear what caused the failure of the continental: Congress and printing presses. This, however, would not be the last economic problem that would face America, the next major downturn came in 1819.

The Recession of 1819

After the War of 1812, state-chartered banks and the Second Bank of the United States (SBUS), which was established in 1816, expanded the money supply. Murray Rothbard’s book The Panic of 1819 notes how these state banks expanded the amount of banknotes from $46 million to $68 million in 1815. The problem was that banks printed more paper notes than there was gold specie to back them.

In fact, from 1817 to 1818, the SBUS expanded credit by 57 percent, outdoing the credit expansion in 1815–17, when it expanded credit by 25 percent. This credit expansion caused prices to rise in certain areas of the economy, such as agriculture and shipbuilding. All of these markets received the biggest loans that were granted by SBUS branches and state banks.

Eighteen eighteen spelled trouble for both the state banks and the SBUS: the money supply fell by 10 percent and there was a credit contraction of 41 percent. Foreigners and other citizens started to trade in their banknotes for specie, and many state banks refused to convert paper to gold as their gold reserves ran dry, as did the SBUS reserves.

Thomas Jefferson, who warned against central banking, gave his thoughts in a letter to John Taylor in 1816. Jefferson states:

And I sincerely believe with you, that banking establishments are more dangerous than standing armies; & that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

His suspicion was confirmed when in 1819 a recession ignited by the inflationary policy and agriculture and turnpike workers’ wages fell 60–80 percent.

Despite this bank failure, markets were allowed to handle the recession, or the readjustment period. Because of this, the economy bounced back quite quickly. At the start of the recession, gross domestic product per capita only fell 1.1 percent, but from the latter half of 1819 until 1824, GDP per capita grew 1.5 percent. This was before urbanization, so many still lived on farms. Even though wages fell, the recession was still nowhere as bad post-Fed recessions like the one in 1929.

The Smoot-Hawley Tariff Act of 1930 put a 55 percent tax on all foreign imports, this practically eliminated all exports. Agriculture suffered the most. Tens of thousands of farms were closed and sold for as low as $50. At the beginning of 1920, there were 28,885 banks, and by 1933, roughly fifteen thousand remained, the Federal Reserve Board of 1937 noted that two-thirds of these banks were in towns with less than twenty-five hundred people and that the majority failed.

Wages may have dropped in 1819, but the economy bounced back. It did not drag for sixteen years, nor did thousands of farms and banks fail. [read more]