https://ift.tt/2Kl0xsK
Thoughts Inspired By Steve Forbes On Money https://ift.tt/2r8CXrg Last week, Steve Forbes visited The Johns Hopkins University campus. After lunch at the Faculty Club, Steve, Elizabeth Ames, and I retired to the library to tape an interview for a one hour documentary, “In Money We Trust,” that Steve is putting together. The documentary is sparked by Money (McGraw Hill, 2014), a book authored by Steve and Elizabeth Ames. My big takeaway from Money is that Steve Forbes is no James Dean. Forbes is a rebel with a cause. Free-markets and sound money, please. In what follows, I will briefly mention 9 of my thoughts inspired by my reading of Money and my visit with its authors last week. Thought #1: The dedication to Alexander Hamilton signaled right away that Money was going in the right direction. We all know that Hamilton was an extraordinary financial engineer. Among other things, he established a federal sinking fund to finance the Revolutionary War debt. Hamilton also engineered a large debt swap, in which the debts of individual states were assumed by the newly created federal government. Hamilton’s ability to solve the debt problem established America’s financial credibility and gave the new nation a much needed positive confidence shock. We are also aware of the fact that Hamilton was a great contributor to the Federalist Papers — a superb document. Indeed, no less than Milton Friedman once wrote in Newsweek (June 4, 1973) that Federalist Paper 15 “contains a more cogent analysis of the European Common Market than any I have seen from the pen of a modern writer.” What we do not all know, particularly many of those who espouse the sanctity of private property rights, is that Hamilton was a distinguished lawyer who took on some of the most famous property cases in U.S. legal history. After the Revolutionary War, the state of New York enacted harsh measures against Loyalist and British subjects. These included the Confiscation Act (1779), the Citation Act (1782), and the Trespass Act (1783). All involved the seizure of property and garnered wide public support. Hamilton saw the acts as an illustration of the inherent difference between democracy and law. Hamilton took his views to court and successfully defended, in the face of enormous public hostility, those who had their property taken under the three New York state statutes. Thought #2: Speaking of the taking of property and money — right here in the USA, not the USSR — let us not forget the U.S. Congress’ abrogation of the Gold Clauses in June 1933; a confiscation of property that the Supreme Court upheld in 1935. Before that abrogation, private and public bond covenants included gold clauses. Under this system, bond holders received interest and principal payments in dollars that contained as much gold as the dollar contained when the bonds were issued. Well, after April 1933, the U.S. government manipulated the price of gold upward until President Roosevelt redefined the dollar in gold terms under the Gold Reserve Act of January 1934. Overnight, the dollar became 41% lighter. This left gold-clause bond holders out to dry. Because of the Congress’ abrogation of the gold clauses, bondholders could only receive the nominal dollar amounts of interest and principal, as stated on their bonds. They could not receive enough additional dollars to make their payments equal in value to the amount of gold originally stipulated. In short, bondholders were stuck with new “light” dollars, not the original “heavy” ones that had been specified in the original bond covenants. Business via Forbes - Entrepreneurs https://ift.tt/dTEDZf April 29, 2018 at 07:51AM
0 Comments
Leave a Reply. |
Categories
All
Archives
October 2020
|