“My Dear Colonel Dick: I have long determined to make public the origin of the greenback, and tell the world it is Dick Taylor’s creation. You have always been friendly to me, and when troublous times fell on us, and my shoulders, though broad and willing, were weak, and myself surrounded by such circumstances and such people, that I knew not whom to trust, then I said to my extremity; “I will send for Colonel Taylor; he will know what to do.” I think it was in January, 1862, on or about the 16th, that I did so. You came, and I said to you: “What can we do?” Said you: “Why, issue treasury notes bearing no interest, printed on the best banking paper. Issue enough to pay off the army expenses and declare it legal tender.” – Abraham Lincoln
Thus was born the “Rag Baby,” a commonly used nick-name for the greenback dollar, with which the North’s side of the War Between the States was fought. The rag content of the paper on which they were printed was high, that the term “Rag Baby” was coined. A series of Frank Bellew cartoons were printed in Northern newspapers, the first one showing a baby, obviously made of paper, being born, with the money doctor breathing life into it. The second cartoon showed the doctor holding the Rag Baby in the air, and saying “Bless its dear little heart, it’s as good as gold.” The third cartoon showed the baby having grown quickly, and the money doctor having trouble controlling it. The fourth cartoon showed the money doctor dropping the now huge Rag Baby on a neighbor’s door, and fleeing.
The fifth cartoon shows the Rag Baby getting a Frankenstein type of life, pursuing its money doctor parent. The sixth cartoon has the Rag Baby on top of the money doctor, strangling him to death.
Paper Rag Babies in the form of dollars have killed their value, and strangled the savers of them. Another cartoon showed a lad at the counter of a store, attempting to purchase three cents worth of paregoric with a huge wheelbarrow full of Rag Babies.
The North and South both printed their way through the war, just as America is now doing. Obviously, the price of everything went “up,” as the Rag Babies went “down,” as is the case today, with the dollar’s purchasing power having lost 98% in about 75 years. In the War Between the States, as in Germany in the 1920’s, it happened very fast, due to an extremely rapid increase of numbers in circulation. In the South, the number of dollars in confederate notes, went from zero in 1861, to over a billion, 4 years later. The North’s figures were a bit lower, but the effect was the same both went to zero. Both sides fought the war with un-backed paper money, and the more they printed, the less it bought, till at the end of the war, both were worth absolutely nothing.
Lincoln’s Secretary of the Treasury was Salmon Portland Chase, who disliked paper money, but decided to allow it anyway. He said, “I have felt a great aversion to making anything but coin a legal tender in payment of debt. It has been my anxious wish to avoid the necessity of such legislation. It is, however, at present impossible, in consequence of the large expenditure entailed by the war, to procure sufficient coin for disbursements; and it has, therefore, become indispensably necessary that we should resort to the issue of United States Notes.” Chase founded the Chase National Bank, which David Rockefeller presided over for quite a lengthy time.
In other words, balderdash aside, the politicians didn’t want to pay for the war. “Unable to procure sufficient coin,” is a polite way of saying, “We haven’t got enough gold and silver, so we’ll just print up a bunch of worthless scrip, foist it off on the public, and there’s nothing they can do about it. They’d be foolish to save in it, because it isn’t worth anything except what we say it is. They’ll catch on eventually, but we’ll fight the war with paper, because it will cost us nothing. Of course we’ll keep our own gold. You don’t expect us to mess with worthless paper do you?” “United States Notes,” sounds so awfully prestigious now, doesn’t it? Take your hat off when they pass by. How about “The full faith and credit of the United States Government?” Isn’t that a mouth full? Means absolutely nothing, any more than a fake $10 Rollex watch sold off of a Times Square pushcart. Some things have actual value, and some things don’t. “You can fool all of the people some of the time, and some of the people all of the time, but you can’t fool all of the people all of the time.” How true.
What happened as a result of the Rag Babies? Obviously, everything went up in price, INCLUDING GOLD. Since gold is the enemy of fiat currency, the government became alarmed, and began to sell gold, to keep its price down, and maintain the illusion of value in the Rag Babies. It worked for a while, but as Chase wrote to Lincoln, “The sales which have been made yesterday and today seem to have reduced the price, but the reduction is only temporary, unless most decisive measures for reducing the amount of circulation and arresting the rapid increase of debt, be adopted.” In other words, ’we have to keep some on hand, and can’t sell it all, but if you’ll stop the presses, the price of gold will stabilize.’ Naturally, it is not in a politician’s makeup to do so, and they didn’t on either side.
Cartoonist Thomas Nast, (who created the wonderful Santa drawing we all so cherish) drew cartoons making fun of the Rag Babies, also. One of them, inferring lack of value except by government order, showed Rag Babies having no value, other than by government edict. A wall is plastered with signs and drawings saying, “This is a house and lot by act of the architect.” “This is a cow by act of the artist.” “This is money, by act of cannibals.” “This is money by act of Congress.” “This is not a Rag Baby, but a real baby by act of Congress.”
If there ever was a comparison that made obvious sense and duplicity, other than as a time frame, it is the Rag Baby vs. the dollar. “This is money by act of Congress.” We are printing our way through Afghanistan, Iraq, and heaven only knows where else. We printed our way through Korea, Viet Nam, WW II, WW I, and other little skirmishes around the world. We print our way through everything, because there are no limits on the amount of modern day Rag Babies that can be printed. If an alcoholic had access to unlimited amounts of hooch, how long would it take for him to kill himself? If one smokes 4 packs of cigarettes a day, how long before he dies of lung cancer? If a government can print as much as it wants, to pay for limitless spending, million dollar cruise missiles, welfare and handouts of every design, and subsidies to every cockamamie scheme that a bureaucrat can conjure up, how long before the modern day Rag Baby can go beyond that final 2% of value, and become zero?
If the rest of the Arabs decide to price their oil in Euros, what will that do to the current Rag Baby? If foreign nations decide to continue removing their dollars and dollar denominated investments from America, how long can the Rag Baby dollar have value? It is the time frame that has kept it going. In the days of the War Between the States, the presses inundated both sides with worthless paper so quickly, the decline was obvious from day to day. With the buck, thanks to huge amounts, huge population, plus world-wide use, the decline is not noted on a daily basis, even though it is there. Just like a teeny hole in a dike. There doesn’t seem to be a Dutch Boy to plug it, so it will grow, until ?
As this is being written, the price of gold is down, surely a temporary phenomena. Remember the NASDAQ at 5000? Also a temporary phenomena, as it had to go down. Gold has to go up, as it is the mortal enemy of paper money. The issuers of paper money will do everything in their power to keep gold down, but such efforts are bounds to fail, because as opposed to paper currencies, gold and silver have real, tangible value. Don’t be fooled; gold and silver will reign triumphant. This is merely a great stocking up opportunity! Protect yourself.