Elihu Root Quotes
Long before we wake up from our dream of prosperity through an inflated currency, our gold … will have vanished and no rate of interest will tempt it to return.
At the time the United States was on the Gold Standard and all our money was backed by gold. Root and others were afraid that a Federal Reserve Bank, a proposal that was being debated in Congress, would cause a large amount of paper money to be printed which other nations would obtain through trade and then exchange that for American gold—a process which would deplete the American gold supply. A few years before, William Jennings Bryan had argued that the Gold Standard did not allow America sufficient ability to increase the money supply to serve the growing population and economy. See {640992}.
Elihu Root, 1845-1937, U. S. Secretary of War & U. S. Secretary of State, U. S. Senator (Republican, NY), Nobel Laureate in Peace, 1913
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What Franklin Delano Roosevelt began, President Nixon would in 1971 complete by removing America from the gold standard entirely and ending fixed rates of exchange. There have been those in government who did not understand the modern economics of money and who believed that currency had to have a fixed rate of exchange for gold or silver otherwise it was worthless. Roosevelt had to deal with them as did Nixon later. Even into the 21st century when it had been amply demonstrated that the best currency in the world was the United States dollar precisely because it was backed up by the full faith and credit of the United States Government, there were those who complain that United States money is not sound currency and argue for the return of the gold standard.
Conservatives are surprised to learn that their great economic nemesis was one of the early economists who saw the danger of paper money and government control over the minting of money which is one of their core concerns.
There has always been a fear of inflation and currency debasement by governments. Since ancient times, rulers issued coins and when they were made of cheap metals like copper or iron, the ruler could mint as much as he wanted and when he did so the value went down. By using only precious metals, gold and silver, for coins, there would be a natural restraint on government. Garfield was one of those who believed that we should always have money of gold and silver. The United States would use that principle for the next century even backing its paper money with gold and silver. In the Nixon administration the United States abandoned the gold standard. Today, it is the ability of a country to produce things that maintains value of paper money which has been supplanted in many cases by electronic money.
This is an excellent historical example of how damaging it can be for a country if its leaders do not understand the technicalities of economics and currency manipulation.
Describing the currency situation of the country:
President Richard Nixon, a conservative Republican did not agree with this view as it was he who led America to abandon the gold standard to back its money.
“Pegged” exchange rates are a country’s money where the Government sets the value of the money in terms of some other currency—usually American dollars. The advantage of a pegged currency is that it is stable and does not fluctuate day to day. The disadvantage is that people realize that the value is artificial and other countries will not accept the pegged currency. Worse natives try and get as many dollars as they can because the fear that the Government will devalue and change the rate of exchange of the pegged currency.
The same argument can be made against the modern paper money supply. What Jefferson and most of the founding fathers, with the exception of Alexander Hamilton. did not realize was that the major stability of any kind of money was not only the silver or gold that backed it but the political and legal stability of the nation and the size of its productive economy. Where Jefferson was right however is that all these banknotes at the time were issued by local private banks. The Government had no responsibility for paper money and had no knowledge of how much paper money any bank issues and whether or not they had any silver to back it up. Banks didn’t trust other bank’s notes and would only redeem them at a discount. A $10 note from a South Carolina bank might only be worth $7 in New York and $6 in Boston. The early American monetary system was a mess.
- Born: February 15, 1845
- Died: February 7, 1937
- Nationality: American
- Profession: Lawyer
Elihu Root was an American lawyer and statesman who served as Secretary of State under President Theodore Roosevelt and as Secretary of War under Roosevelt and President William McKinley. He moved frequently between high-level appointed government positions in Washington, D.C. and private-sector legal practice in New York City. For that reason, he is sometimes considered to be the prototype of the 20th century political "wise man", advising presidents on a range of foreign and domestic issues. He was elected by the state legislature as a U.S. Senator from New York and served one term, 1909–1915. Root was awarded the Nobel Peace Prize in 1912.
