In Gold We Trust?

The Federal Deposit Insurance Corporation (FDIC) ran a full-page ad in yesterday’s Oregonian newspaper (page A5). It read:

Insuring deposits up to

Without anyone losing a

For 75 years, the FDIC has been protecting people’s money.

“Protecting and insuring people’s bank deposits. It’s a simple idea that became the foundation of our modern banking system, by creating stability and promoting trust and confidence. And it works. Since the start of the FDIC program, not a single depositor has lost a single penny of insured deposits from a bank failure.”

The ad went on to describe the deposit insurance limits and tell readers where they could learn more about the FDIC.

Now, take a closer look at that $100,000 bill in the ad. It’s a gold certificate. When issued, the government was promising to pay $100,000 in gold coins. That promise ended in 1933 when President Roosevelt took us off the gold standard. The certificates themselves were actually illegal to possess until 1964.

It’s interesting that the FDIC would now choose to advertise its deposit insurance program by reminding Americans that they used to have the right to redeem their paper currency for “real money.”

By claiming that federal deposit insurance “”¦became the foundation of our modern banking system”¦” the FDIC is overlooking the foundation of our “pre-modern” banking system”¦a foundation built on real money”¦ gold.

Throughout history, paper currency has always been devalued by the governments that issue it. We should thank the FDIC for reminding us that in an earlier time our government recognized this fact and stood behind its currency with gold. Perhaps the time has come to consider returning to that “pre-modern” banking system.

To better understand the relationship between governments and money, read Alan Greenspan’s classic article, Gold and Economic Freedom.

UPDATE: The FDIC ran a second full-page ad in The Oregonian on Monday, August 4th, page A6. Only this ad showed bundles of more recent bills, with no promise to redeem for gold. Could it be that my notice of its first ad caught someone’s attention, and led to a more accurate portrayal of the FDIC insurance promise?

Founder and Senior Policy Analyst at Cascade Policy Institute, Steve Buckstein is Director of Cascade’s Government Transparency Project and the Oregon Economic Opportunity Project. Based in Portland, Cascade Policy Institute is Oregon’s free market research center.