President Rutherford B. Hayes addressed Congress on December 3, 1877 and warned against trashing the national credit by paying back bondholders who lent dollars to the U.S. government in silver coin, when the only dollar at the time the money was lent was a gold dollar. What would he say today about paying back debt denominated in paper in more paper that is worth even less than the original paper? Would he be surprised that, despite a policy of ripping off creditors and savers, the interest rate paid by the United States government on its long-term debt is under 4%? This story points out that, about 140 years later, President Hayes still looks correct about his warning that payment of debt denominated in gold dollars in silver dollars screws the lender. We can see that as of July 4, 2012, a gold dollar from 1877 has about 3.6 times the buying power of a silver dollar from 1877. Of course a paper greenback from the same time is worth less than either. Rutherford would be pissed. Finally, this story might demonstrate part of the problem with a bimetallic standard of money, where both a fixed amount of gold and a fixed amount of silver get assigned (by fiat !) the same dollar denomination on currency. Our current government has solved this problem by making sure all the currency issued is worthless. We still haven't got a handle on exactly what interests different people had in a bimetallic standard versus a gold standard. Western states with silver miners, and farmers nationwide, wanted silver as unlimited payment, but for two different reasons. Huge creditors and reportedly some moneyed European interests favored only gold for payments in excess of a certain sum. P.S.: We can't believe someone would thumbs down President Hayes!

• published: 05 Jul 2012
• views: 1199