In 1896, America had a watershed in its electoral and political process, because in that year, the Democratic Party nominated William Jennings Bryan to be the candidate for president.
William Jennings Bryan campaigned on a platform of opposition to the gold standard and in favor of an inflationary monetary policy.
The result of that was that the Democratic Party, which up until that very moment had been equal to and usually superior to the Republican Party in electoral activity,
suffered a major defeat from which it did not recover until 1932.
Woodrow Wilson was elected in 1912 and 1916 as a minority president,
and the Republicans were able to consolidate a huge constituency
taken from the Democrats among the working class voters in the United States.
Now, up until then, the Democratic Party had been the party of the gold standard.
And when Brian and his followers went into the Democratic constituencies, they were laughed out of the halls.
To give you one example, in Milwaukee, which had been a very, very strong constituency for the Democratic Party
The Democratic Party, because it was a city mostly made up of German-Americans who were staunch supporters of the gold standard,
the Democratic congressional candidate, Schiller, was asked if you were going to replace gold with silver, couldn't you replace it with other commodities?
And he said, yes, of course, it could be anything. It could be timber, it could be silver, it could be copper.
And someone in the audience said, how about sauerkraut?
And he said, sure, it could be sauerkraut.
And to a German-American audience, the idea that sauerkraut was a standard of value was laughed out of the hall,
and the Republicans plastered the city with the slogans Schiller and sauerkraut.
And for the first time, and then for decades after, the Milwaukee became a Republican stronghold,
after being decades a Democratic stronghold.
Now what was that tradition that was being betrayed by the nomination of William Jennings Bryan and the substitution of an anti-hard money platform?
Let me quote two quotations from the main journal of the Democratic Party in the 19th century, the Democratic Review.
The Democratic Review held that legislation was responsible for nine-tenths of all evil, moral and physical, by which mankind has been afflicted.
John O'Sullivan, the editor of the Democratic Review, wrote, and as I quote from him, noticed certain Misesian and Hayekian themes already evident decades before they were born,
Quote, the natural laws which will establish themselves and find their own level are the best laws.
The same hand was the author of the moral as well as of the physical world.
We cannot err in trusting to the same fundamental principles of spontaneous action and self-regulation, which produce the beautiful order of the world.
In other words, the pro-gold standard political groups in America had already derived, through their study of the classical economists, a very, very fine understanding of how the economy works and the role of money in that economy.
And part of the tradition which was very strong in the debates in the 19th century were the traditions that had come out of the experiences of the French Revolution and the American Revolution.
If you read the literature, the party literature of that period, the hard money advocates kept referring back to the experiences of the French Revolution and the experiences of the American Revolution.
That experience was the experience of the French Assignats.
People were extremely aware of what had happened during the French Revolution when the French government introduced paper currency,
where the paper currency continued to depreciate year after year.
At one point, one issue of the currency, which was issued in the middle of the French Revolution,
The French Revolution depreciated 82% within weeks after it was issued, and students of French history know that the reason that Napoleon was able to come to power and the reason that he was able to stay in power was that he was an advocate of the gold standard of private property rights enshrined in a new civil code and that the French have been notorious
throughout the 19th and 20th century because the masses of the public in France have wanted hard money.
They knew that experience coming out of the French Revolution and all during the 19th century.
Whenever a candidate or a political movement arose that challenged the gold standard, that movement disappeared completely.
And this tradition continued into the 20th century.
Joseph Salerno referred to Raymond Toncourt's reforms in the 1920s, which were very important.
And this spirit continued on in French political life, even after the brief interlude of the
The Popular Front in 1936, within a year that was replaced again by the followers, successors of Poincaré, and but for World War II, the pro-hard money people would have remained dominant in French political life.
It was World War II that opened the floodgates to Socialism and Communist constituencies in France and it took first Antoine Pinet in 1951 and then again after he, Prime Minister in 1951 and then as Finance Minister under de Gaulle in 1958 to bring a hard money tradition into France.
but the constituencies for hard money are very fundamental in French political life
and they've been recognized as such since the beginning of the 19th century,
in other words, for almost 200 years.
The other tradition that was very much in the forefront in the political debates
Around Brian's Cross of Gold Speech in 1896 was the tradition that led to the American Revolution.
At the end of the 17th and beginning of the 18th centuries, due to a series of worldwide war between France and England,
both governments tried to finance these wars through inflation.
One of the consequences of that in France was the famous Scottish economist, inflationary
economist John Law. Had the government grant him monopoly powers with regard to finance
and currency, he created the Mississippi Company, the resources of which were the still unsettled
Mississippi Basin in Louisiana and this led to a great inflationary craze, the result
of which was of course a great panic and collapse and a recognition that hard money is the very
sound foundation of all political and economic life.
The English experienced exactly the same thing, they similarly gave to the South Sea Company
these powers which led to the South Sea Bubble, the breaking of the South Sea Bubble, the
panic that ensued, strongly enforced in British life the concept of hard money. A new administration,
new Whig administration came in under Robert Walpole and his associates Henry Pelham, Pelham's
brother the Duke of Newcastle and Philip York the Lord Chancellor, the Earl of Hardwick.
They pursued a policy of hard money and low taxes, and that led to a frenzy not of inflation, but of capital accumulation.
And that capital accumulation was the basis of the Industrial Revolution.
But for the policies introduced in 18 and 1720, there would not have been the capital accumulation and the respect for private property, the respect for investment that led to the Industrial Revolution.
And one of the great consequences of that was the policies of the Duke of Newcastle,
who was Secretary of State for the Southern Department, which included the American colonies for 40 years.
And that policy was salutary neglect.
He enforced no mercantilist laws regarding America.
And when no laws were enforced, America flourished. It blossomed. The population in the 17th century
under mercantilism was miniscule. Under salutary neglect, the population burst. Immigrants
came from all over Europe to settle in America. New York and Pennsylvania were two of the
America was the most settled because they were the least restrictive colonies, and the success of America due to this salutary neglect came into collision after 1760 with the government's attempt to reestablish mercantilism, to reestablish taxation, to undercut the freedom that had permitted this great flourishing.
America was the wonder of the world.
These colonies off somewhere where no one knew exactly where were drawing colonists from Europe.
Everyone wanted to move and have a new chance.
And the British new policy after 1760, due to the fact that the British had accumulated
in the Seven Years' War the largest public debt in history and therefore were going to
To milk the colonies to pay for it, led to the American Revolution.
Now the Americans didn't have the best economic ideas, they had better economic ideas but
not the best, and so one of the things some of them did was to conduct the American Revolution
through inflation, through the basement of the continental dollars, and the Americans
came out of that experience with a new lesson.
Not only must you have low taxes and no government interference, you must not have any government
control over the currency.
The solution coming out of the American Revolution was to return to the hard currency concepts.
As Murray Rothbard pointed out yesterday, there were still, as it were, behind the scenes advocates of funding money, Alexander Hamilton for example, and they introduced the first bank of the United States, and then later the second bank of the United States.
The Second Bank of the United States led to the Great Panic of 1819, which was one of the great educational experiences like the American Revolution,
because the American people learned again the importance of hard money, and the consequence of that, of the panic coming out of the inflation,
coming out of the chartering of the second central bank was the New Democratic Party,
a democratic party totally committed to hard money, the Jacksonian party.
And for the whole 19th century that party stood very strongly for hard money.
Now people have asked, how is it possible for a party to have this continuing majority
in the American public on such a complicated issue as hard money.
It's to us difficult to understand.
We try to make people understand better about money and it's very difficult.
And here we have an American public that we would think after 150 years is so much wiser
than those primitive people of that period.
At the least we know that the people of that period did not have the advantage of the public
school system and we now have a population so well educated that the public education
system is so ingrained that and yet we can't make them understand about hard money.
It boggles the mind that the people who had never had the public school experience were
Hard Money Voters in a Majority
How did they get excited about hard money?
They'd march around town, campaigns, bonfires, speeches.
Well, it's because
that wasn't the only issue that confronted them. There were other issues and
those other issues
get, when consistently presented, connected in with hard money.
In fact, one of the other issues was
Private Schools vs. Public Schools
The Democratic Party was the party of personal liberty and economic freedom.
Personal liberty meant the right to send children to whatever schools the parents wanted and
for those parents not to be burdened with the extra payments to support other people's
children going to other schools.
The great debates in the 19th century over private versus public education was something
that every family in America was concerned about.
And those voters, through their, the Democratic Party leaders, were shown that the same principle
of freedom of education was the same principle behind it as hard money, freedom from economic
In the early nineteenth century, the United States found itself with two very, very different
ideological traditions at war, and they had political connotations, political implications.
One was a new theological approach associated with new evangelical churches which saw the
possibility of a new man being created.
That is, the idea of conversion, of rebirth in baptism was seen as something that could
change human nature.
Therefore, most of the religious denominations had a view of human nature that was set, human nature was unchanging.
In the 19th century, new and very, very popular theological movements developed which saw that human nature could progressively develop.
You could have human nature changing, human nature could get much better.
and people then transferred that to using the government to improve human nature.
In other words, the old verities such as supply and demand and the relationship between scarcity and resources didn't have to hold.
That was a mere old-fashioned view of man. Man was driven to want rewards for his work, for instance.
It was a very similar ideology to modern socialist ideology.
That is, for instance, in Cuba, where they say incentives aren't necessary,
material incentives aren't necessary, use ideological incentives,
that Cuba will be the great industrial center of the Western world because,
it hasn't been because people were driven by greed.
Now under Castro, Cuba is driven by non-economic incentives
The same type of ideas were operative at that time, and the democratic party, the Jacksonians, and the people that supported them, the constituencies that held to the traditional religious views, said that you cannot change man through government regulation, through a public school system, through a public school system, through a public school system, through a public school system,
You cannot, as these new groups advocated, use a new monetary system to raise the economy to new heights.
Why be limited to gold? That's an old-fashioned view.
It's part of the old view that men are only motivated by material rewards.
Let's print more money. Let's get the economy stimulated and this will change the economy and also contribute to changing man's nature.
You will have a whole new way of looking at the world. And so throughout the 19th century you had ideological battles between these two cultural constituencies.
One of the many, many examples of those cultural constituencies were the German Americans who stood constantly for human nature as an unchanging part of the world and therefore stood very strongly for hard money, for low taxes, for not using government for internal improvements,
not using the government to form people's ideas and to educate them through the public school system.
You had this constant battle of constituencies.
And up until 1896, the hard-money constituency in the Democratic Party was the dominant constituency.
And when William Jennings Bryan was nominated, this drove those constituencies out of the Democratic Party and into the Republican Party and drove some of the Republican supporters into the Democratic Party.
But the net gain was in the Republican Party.
One of the great mysteries to left-wing historians is that in the 1896 election, the workers,
the industrial workers in New York, Pennsylvania, Michigan, Illinois, Ohio, they were the ones
who gave the Republicans their smashing victory.
How can that be, these socialists ask?
Brian was truly the working man's candidate.
No, that's not what they wanted. They wanted gold. The working men stood by the gold standard.
And this is the great mystery to the left. They don't understand why the workers became
became the mainstay of the Republican Party and kept the Republican Party in power until
1932. It was those same cultural constituencies with their view of human nature, their critique
of government intervention in anything, which gave the Republicans dominance.
Now, there's always a great deal of hubris in political life, and just as the Democrats stupidly nominated William Jennings Bryan and opposed the gold standard,
The Republicans, after World War I, moved in an equally bad direction.
One of the many, many evils introduced by Woodrow Wilson, probably the truly evil president of the 20th century,
because he was the intellectual, he knew what he was doing,
He understood the principles that he was operating from and therefore could create not just pragmatic policies but a total ideology.
And one of the aspects of that was the introduction of prohibition.
And although introduced by the Democrats, who jumped on the bandwagon as its main proponents, the Republicans.
The republicans decided they were going to save humanity from drinks, so they became the main proponents of prohibition.
And all of these constituencies that had swung in 1896 to support the republicans on the gold standard issue, swung away because this was an equally important issue to them.
to them. Gold standard wasn't being challenged by the Democrats any longer, but the Democrats
having put in Prohibition became the main opponents of Prohibition. The Great Daily
Machine in Chicago was founded in the early 1920s by Anton Cermak on the anti-prohibition
issue. In the 1920s Chicago was a Republican city. Mayor Big Bill Thompson was a famous
The New Deal victory was made through the Prohibition Issue, and supplemented by the tariff issue, the Smoot-Hawley Tariff, introduced into Congress in 1929 and passed in 1930, was the final tariff issue of the New Deal.
The Smoot-Hawley Tariff introduced into Congress in 1929 and passed in 1930 was the final nail in the coffin for the Republican Party.
But the main issue had been prohibition and the same constituencies that had supported the Republicans up until the 1920s were driven away by Republican attack on personal liberty.
And the Democrats were able to show, to claim to be a party against government regulation.
They were against regulation through prohibition, and they were against regulation through the
terror.
Once they were elected, of course, then they did something else.
But it took a long time for those constituencies to wake up and to shift back to the Republican
Party.
and that only occurred after the Second World War.
If we look at the political life in America after the Second World War, you will find
that the American voting public, in the nine elections after the war, 1948 through 1950,
at 1980 have voted nine times and in those elections they have elected the Republicans
five times and the Democrats only four times.
In other words, the national administration, the executive branch has been Republican more
than it has been Democratic.
There are many reasons why we don't recognize that, we don't feel that in our bones even
American people have been electing Republican presidents more than Democratic presidents.
They have been electing Democratic Congresses and Democratic legislatures while electing
Republican presidents and Republican governors.
Why is that?
First of all, the main thrust in American politics since World War II has been the huge growth of suburban home-owning.
And those people, many of whom had been Democratic voters in the 30s and through World War II, became Republican voters.
They were voting against the tendencies of the Democrats towards inflation.
As homeowners, home owning has been the single most important educational experience for voters, teaching them the effects of inflation.
It's something they live with every day. They see the value of property changing. They see the taxes on their property changing.
And it is the single most important political fact in American life.
and the Republicans have been the beneficiaries of that. Why have they
been the beneficiaries? Because these voters are voting against the
Democrats. American political life is based on negative reference voting. That
is people tend mostly to vote against. They feel threatened by politicians. Very
Very few people are enthused about politicians, but they are experiencing threats from politicians.
So they vote defensively.
They vote against William Jennings Bryan.
They vote against whoever down the line because they know that these people are advocates
of inflation, of threats to their private property.
They may not like the person they're voting for, but as long as that person isn't as bad as the person they're voting against, they will vote for them.
And therefore, there has been a very, very large political constituency in favor of opponents of inflation.
If you look at American political life, you will see the fact that in major states and in the presidency, the Republicans have occupied the State House or the White House more than the Democrats, while the Democrats have controlled the legislatures.
Democrats have controlled Congress and state legislatures because those are different constituencies.
The President and the Governors are elected by the same constituencies. That is, whole states. The President through the Electoral College, the Governors directly.
Congressmen and legislators are elected by districts that are drawn on the basis of population.
In democratic districts, quite often in urban democratic districts, only 10% of the people vote.
Therefore, we really have a system of not just gerrymanders, but rotten boroughs.
We have congressmen and legislators who don't represent anybody.
Republican districts tend to have 80-90% voting.
Now in the legislative elections that doesn't have much effect due to the rotten borough
system, but those 90% voting in Republican districts way offset the 10% in the Democratic
districts.
And so they keep electing the president, they keep electing the governors while they can't
get legislators because we have a rotten borough system of legislative elections.
Another important aspect of this is the fact that there's been a huge growth in the independent voters.
There's been a shift away from parties.
In the 1980 election, among all voters, the Democrats had 49 percent, the Republicans 19 percent, the independents 32 percent.
That is, people who identified as fully conceiving themselves as Democrats, Republicans, or as not, Democrats and Republicans, and therefore, Independents.
But among the voters under 30 in 1980, 36% were Democrats, 12% Republicans, and 52% Independents.
What it means is that Republican presidents and Republican governors have been and are elected by the independents.
These are people who may even hate the Republican Party, who may not be able to stand the people who parade in front of them claiming to be representatives of this or that point of view.
But these people are voting Republican presidents and Republican governors into office to keep out the Democrats, who are much worse.
It's not that they like the Republican candidates. It's that they hate the Democratic candidates.
And that's one reason that, unfortunately, within the present system these people cannot achieve what they want.
They want. They cannot get a truly hard money political forum. All they can do is keep out the inflationary people.
There is no party that represents what they stand for. If the Republican Party in all that it represents stood for them, they would call themselves Republicans rather than independents.
In politics, demography is destiny.
Those under 30 in 1980 have been joined by another cohort during the past four years.
In another few years, they may be down to 2% people who call themselves Republicans,
and we may have something like 70% who are independents,
and yet these people may still not have a political forum,
A mechanism to be represented in the political system. All they can do is come out every two years, every four years for president and every four years for governor, cast their vote against the Democratic candidate and go home and hope for the best.
So you have a situation where there is a huge hard-money constituency in America, but all it can do is act defensively, keep out the most dangerous inflators, who usually are in the Democratic Party,
Therefore, put the Republican Party into office and then fume every four years because the Republican Party does not do what they voted them in to do.
Maybe we have to fault the public school system that these people have not gone out and formed a mechanism by either getting rid of the Republican leaders
So the good news is that there is a very large and strong constituency for hard money. The
bad news is that that constituency has no political mechanism to fully express its views.
Before we begin to form a question, I'd like to take the privilege of the chair to make one remark.
It seems to me that one of the lessons in Leonard's paper for us is that at least politically speaking, gold and alcohol do mix.
And I wonder how many of us are aware of just how powerful a statement that might be.
We've already got liquor by the drink.
If we got the liquor lobby on our side, we might have a gold standard within two or three years.
Let me comment on that because it's a very, very good remark.
Unfortunately, quite often the liquor lobby, in various forms, for instance, in places where there are limitations on liquor,
The bootleggers try to keep prohibition because they don't want national brands coming in.
They elect the sheriffs who campaign against liquor to the religious communities that don't
want liquor because the bootleggers want to not have the competition of the national brands
coming in.
So there's many facets to this situation.
More importantly, about a year or two ago I was going from the University of Chicago
to Midway Airport and as I went along, leaving Hyde Park and going through a district that
looked much like either Dresden after the American bombing in 1945 or New York City
I crossed the, you know, looked like about a hundred railroad tracks. It was a huge yard.
And then I was in another part of Chicago. And this was in contrast to the other, which
was terribly ugly and destroyed. This was beautiful. And block after block, what did
What I noticed on practically each block there were three things that seemed to go together.
Procure school, a saloon, and a savings bank.
And these were exactly the same political constituencies that I was referring to earlier.
The saloon, the savings bank, and the procure school seemed to be very, very much at the
forefront of those political constituencies.
And those people all had homes, you can see row after row for miles in any direction, of very, very well kept small private homes.
These were homeowners who found the savings bank the most important part of an economic system
because it provided the mechanisms of saving and therefore through saving of purchasing their homes
and using the home purchase as their main form of investment for their own future.
And many of these people in the last decade, decade and a half have been very confused
by what's been happening, not the least by the fact that they invested decade after decade
in not only in their homes but in savings accounts.
And yet, due to the ravages of inflation, those savings don't amount to what they should
have.
And over the years, they've found that these parents have found, rather than appearing
to be very wise and sound investors, due to inflation, they look stupid to their children
because their investments were wiped out by inflation.
In other words, inflation is one of the main sources of social disintegration.
Some people like the populists like Vigory try to separate the economic and social issues.
There's no separation and that's what the 19th century laissez-faire advocates understood.
Personal liberty and economic freedom go together, that the family is destroyed by inflation,
The educational system is destroyed by inflation.
All of these institutions get destroyed by inflation.
If you cannot control the money supply, if you cannot have hard money,
it doesn't only wreck the price mechanisms, estimation of future investments.
It also undermines all the social institutions of society.
And if they're undermined, the whole society is destroyed.
Yes, you had a question.
I just enjoyed picking on that. I was pointing at it. The 20s went on for all of the territories.
The Democrats all remained here. It was the central bank that was debauching.
You had your twenty-nine contracts. By June the 30th, the market is mostly back.
People have started examining what's going on. Then you go on with the so-called long depression.
The Democrats had an achievement between gold and their bank, and obviously you couldn't say we failed, so they're happy to not vote.
You take the rest of the century, what you have in the cards is not a Republican diaspora market.
There is a Wilson because you have a diaspora, a Gold Moose market.
You have Truman because of doing these topics, and at 60 you get to 10.
Johnson, again, it's closer to there, Eisenhower was power. It wouldn't have the power to have president, except for the republicans.
The Republican miscalculation that the Democrats tend to get in except in 32 and 36, so I mean the issue is that the Republican party, like the famous phrase about the feudalist conservative party in 19th century England is the stupid party.
And that's one reason why people don't associate with the Republican Party.
That's why only 12% of people under 30 in 1980 would call themselves Republicans.
The Republican Party, in the rest of the country, being a Republican doesn't, you know, somebody might question your mental state.
And they don't do that with the Democrats.
Now, there are good reasons and bad reasons.
The bad reasons are the press belittles the Republican Party for things that we think they're good for.
But the Republican Party itself quite often makes itself foolish by taking on crusades that have nothing to do with the party.
And it's a danger because President Reagan himself could take on that image thinking he has constituencies that don't exist.
I don't know if I can resist, but there are great weaknesses in the Republican Party where they think they're strongest, they may not be as strong as they think in that, because they're not thinking about it, they can lose it.
like the first agreement in 1929. Now, when we had the crisis in 1929, an official who lost their faith and just jumped out and said, well, we've got to change this, we've got to give it, so we didn't have a revolution at this point.
So they said we got to get on something, didn't take away from that, we're just creating a revolution. Now, we're doing that through our role-players. I think Mr. Newton explained that yesterday.
Now, we read work. We finance both physical construction, we read work, we read all those things. And how are we going to have access to the same gold standard?
How do we get access to the people that implement it? And how do we get access to certain people?
Who makes it? Are we implementing it? Who makes it?
We have to abolish the connection between the government and money, just as we have separation of church and state, we need separation of education and state, and separation of money and state.
and that... we have to put it in those terms, a separation of money and the state before people can fully grasp the dichotomy,
that it's ridiculous to have the government in handling money just as it's ridiculous to have the government involved in theology.