Prohibition: Gold Is Like Marijuana

Most countries were an accident of geography, or born of conquest. America was different, founded on the radical idea of inalienable individual rights. Despite this, she has had a few outright evil policy regimes.

In the new nation some states continued their sorry practice of slavery, ignoring the right of every individual to life, liberty, and the pursuit of happiness. It was inevitable that this contradiction be resolved. It took about three quarters of a century and a civil war, but slavery was ended.

Decades later, the Temperance movement launched another evil policy: Prohibition. It was so disastrous that, thirteen years later, it too was ended.

Next was the legal framework of racial discrimination in the former slave states. The Supreme Court weakened Jim Crow in Brown vs. Board of Education. 11 years later, this unjust legal framework ended with the Civil Rights Act.

Today, we are decades into a modern Prohibition, the so called War on Drugs. And there’s a growing movement to end it. Several states have already decriminalized marijuana, and many more are working on it.

Evil laws have both moralizing and profiteering supporters. I say moralizing because they appeal to tradition, morality, and social order as a cover for evil. There is no good in obedience at gunpoint.

Profiteers are a lesser problem, once the veneer of righteousness is stripped, because the people grow angry. They get mad when they see injustice. It may take time until they have a reason to look at the issue more closely. For example nondrinkers can overlook what happens to drunks for a while. Special interests can lobby all they want, but they can’t fight the tide once it begins to rise.

acapulco gold

Just one form of Marijuana - Click to enlarge

When enough people understand the issue, change is inevitable. Americans don’t placidly tolerate wickedness, nor cynically seek in on the racket. Evil cannot live in the open here. Americans move quickly to right a wrong, once it’s unmasked.

What has this got to do with gold? Money is subject to another evil legal institution. Some people want to use gold as money, but they are forced to support the dollar.

Gold Prohibition is following the same trajectory. The moralizing peaked decades ago. There was a fervent ideological hatred of gold. It became the scapegoat of the depression, and it was criminalized in 1933. Once it was fully banished in 1971, the moralizers began to lose interest.

When in 1933 Congress made it illegal for U.S. citizens to hold gold, this misguided measure  reduced domestic demand. If we could do the same thing internationally, and enforce it, the price  of gold might well fall rather than rise. But Congress’ writ does not run abroad. A further  reduction in the demand for gold requires that either private people or central banks be induced in other ways to hold less gold.

U.S. citizens were not allowed to hold gold until 1975, while central banks were the only ones that could do gold transactions.
(Source Milton Friedman’s 1968 testimony in congress)

Finally the time was right for Jim Blanchard to start his campaign. He had a plane tow a banner over the Nixon Inauguration in 1973, saying “Legalize Gold.” He held press conferences, in which he held up an illegal gold bar and taunted the government to arrest him. Paralyzed and confined to a wheelchair, he knew the government didn’t want to create a public relations disaster by arresting him.

In 1975, he won. Gold was legalized. A decade later, due to the efforts of Ron Paul, the US Mint was directed to make gold coins once again.

Today the moralizing is hollow. Gold opponents go through the motions, but they are increasingly on the defensive following the crisis of 2008. They cannot blame gold, and their failure to predict it has irreparably harmed their credibility.

A growing number of people are saying, “Allow us to use gold!” If the dollar were truly superior, we wouldn’t have to be forced. We aren’t forced to use smartphones for messages or music, but people stopped using telegrams and vinyl records because smartphones are better.

If people can be allowed to smoke weed for fun, then they can be allowed to use gold for commerce.

 

Keith Weiner is president of the Gold Standard Institute USA in Phoenix, Arizona, and CEO of the precious metals fund manager Monetary Metals. He created DiamondWare, a technology company that he sold to Nortel Networks in 2008. He has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona. In March 2015 he moved his Gold Standard column from Forbes to SNBCHF.com.
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