When Vermont becomes a free and independent republic, financial integrity and sustainability will be among its highest priorities. Since it will be free of the Federal Reserve Bank, the U.S. Treasury, and the U.S. Government fiat money printing press, Vermont will be free to choose its own form of currency. At least initially, it might choose the Canadian loony or the Swiss franc.
However, over the long run, Vermont should seriously consider a precious metal based currency such as the gold standard. A country is said to be on the gold standard when it will redeem any of its money in gold and when it agrees to buy and sell gold at a fixed price. A gold backed currency would give rise to a more disciplined, stable financial system based on accountability, integrity, and trust rather than wishful thinking and pie-in-the-sky. The gold standard would check inflation, restrain government spending, and stabilize currency exchange rates among countries that use it. The disadvantage is that it might prevent necessary adjustment in domestic currency supplies and international exchange rates.
For centuries gold has served as a store of value and as a safe haven during periods of uncertainty. Its imperishability and liquidity make it an ideal form of money.
The return of the gold standard could inject a degree of sanity into a global economy which consists of a complex international network of investment banks, hedge-funds, derivative contracts, credit default swaps, exchange-traded-portfolios, and subprime mortgages – an economy which no one seems to know how to fix. It could restrain runaway government spending, government bailouts, stimulus packages, and tax increases.
Is it possible that tiny Vermont might lead the way out of global economic chaos by offering itself as an example of New England discipline and financial integrity?
How might Vermont’s state government pave the way towards the gold standard even before it officially cuts ties with the United States?
First, the state’s Treasurer should begin converting substantial amounts of the state’s cash into gold. Conventional investments in U.S. Treasury bonds should be replaced by investments in gold. The state should start accumulating a stock of gold to be available when the transition to the gold standard occurs. Few investments have performed as well as gold over the past decade. When President George W. Bush declared victory in the war in Iraq on May 1, 2003, on the deck of the aircraft carrier Abraham Lincoln, the price of gold was $320 per troy ounce. By December of 2009 the price was over $1,200 per troy ounce.
Second, the Governor should appoint a Gold Standard Commission to plan the orderly transition to a gold backed currency. The commission should include economists, bankers, business and labor leaders, and attorneys.
Third, as an act of defiance against the federal government, the state of Vermont might begin issuing its own unofficial gold trading tokens to be used by Vermonters as they see fit. Such tokens could easily take on a life of their own.
When confronted by an omnipotent global empire, there are few peaceable options available to a tiny state like Vermont. Two such options are secession and the gold standard.
By peacefully seceding from the Union and embracing the gold standard, the people of the indomitable Green Mountain State could lead the American Empire into disunion.
In the words of President Calvin Coolidge, a Vermonter, “If the spirit of liberty should vanish in other parts of the union and support of our institutions should languish, it could all be replenished from the generous store held by the people of this brave little state of Vermont.”
Thomas H. Naylor
March 1, 2010