"Paper is Poverty": Thomas Jefferson on Paper Money, Hard Currency, and Banks

All this talk lately of banks and bail outs and big government has me reconsidering various aspects of the American financial system. Before this financial crisis I didn't much think about things such as finance or currency. I didn't see any problems with fiat currency, (to be honest I didn't exactly know what fiat currency was, but I thought I did) but now I am coming to see the utter disastrousness of this type of currency system. I am beginning to become a convert to the gold standard. (maybe we can go back in time and nominate Ron Paul as the Republican candidate for the presidency)

I recently came across a post on John Maass's A Student of History entitled "WWJD," what would Jefferson do? As a student of the past I often try to put current events into historical perspective. So, I have tried to adopt WWJD. Though I am using WWJD in a different way than Maass, I have decided to look to Jefferson for some insight (or whatever insight I can glean from his writings) on the current economic/financial situation. I can't exactly be sure what Jefferson would do, but I do know how he felt about paper money, hard currency and banks. Here are some quotes from Jefferson's writings on these subjects.

On paper money vs. hard currency:

"Specie is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war." (1813)

"Paper is poverty,... it is only the ghost of money, and not money itself." (1788)

"Experience has proved to us that a dollar of silver disappears for every dollar of paper emitted." (1791)

On the dangers of paper money:

"That paper money has some advantages is admitted. But that its abuses also are inevitable and, by breaking up the measure of value, makes a lottery of all private property, cannot be denied." (1817)

"The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals... it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted." (1813)

"Private fortunes, in the present state of our circulation, are at the mercy of those self-created money lenders, and are prostrated by the floods of nominal money with which their avarice deluges us." (1813)

On the importance of personal economy:

"The maxim of buying nothing without the money in our pockets to pay for it would make of our country one of the happiest on earth." (1787)

"Every discouragement should be thrown in the way of men who undertake to trade without capital." (1785)

"We should try whether the prodigal might not be restrained from taking on credit the gewgaw held out to him in one hand, by seeing the keys of a prison in the other." (1786)

On banks and banking:

"That we are overdone with banking institutions which have banished the precious metals and substituted a more fluctuating and unsafe medium, that these have withdrawn capital from useful improvements and employments to nourish idleness, that the wars of the world have swollen our commerce beyond the wholesome limits of exchanging our own productions for our own wants, and that, for the emolument of a small proportion of our society who prefer these demoralizing pursuits to labors useful to the whole, the peace of the whole is endangered and all our present difficulties produced, are evils more easily to be deplored than remedied." (1810)

"The banks... have the regulation of the safety-valves of our fortunes, and... condense and explode them at their will." (1819)

"I sincerely believe... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." (1816)

"The principle of rotation... in the body of [bank] directors... breaks in upon the espirit de corps so apt to prevail in permanent bodies; it gives a chance for the public eye penetrating into the sanctuary of those proceedings and practices, which the avarice of the directors may introduce for their personal emolument, and which the resentments of excluded directors, or the honesty of those duly admitted, might betray to the public; and it gives an opportunity at the end of the year, or at other periods, of correcting a choice, which on trial, proves to have been unfortunate." (1803)