An American Lesson in Money—Inflation

America's first experience with inflation occurred during our Revolutionary period. Lawrence W. Reed has written an excellent article on this in the March 2008 issue of The Freeman. An abridged version follows, reprinted with permission.

For six years—from 1775 until 1781—representatives from the 13 colonies (states after July 4, 1776) met and legislated as the Second Continental Congress. They were America's de facto central government during most of the Revolutionary War and included some of the greatest minds and admirable patriots of the day. They included Thomas Jefferson, Benjamin Franklin, John and Sam Adams, Alexander Hamilton, Patrick Henry, John Jay, James Madison, and Benjamin Rush. The Second Continental Congress produced and ratified the Declaration of Independence and the country's first written constitution, the Articles of Confederation. It also ruined the currency and very nearly the fledgling nation in the process, proving that even the best of men with the noblest of intentions sometimes must learn economics the hard way.

Governments derive their revenues primarily from one, two, or all three of these sources: taxation, borrowing, and inflation. Americans were deemed to be in no mood to replace London's taxes with local ones, so the Second Continental Congress opted not to. It borrowed considerable sums by issuing bills of credit, but with few moneyed interests willing to risk their capital to take on the British Empire, the expenses of war could hardly be covered that way. What the Congress chose as its principal fundraising method is revealed by this statement of a delegate during the financing debate: “Do you think, gentlemen, that I will consent to load my constituents with taxes when we can send to our printer and get a wagon-load of money, one quire of which will pay for the whole?”

Reports of the deliberations that led to the printing of paper money are sketchy, but indications are that support for it was probably not universal. John Adams, for instance, was a known opponent. He once referred to the idea as “theft” and “ruinous.” Nonetheless, he and Ben Franklin were among five committee members appointed to engrave the plates, procure the paper, and arrange for the first printing of Continental dollars in July 1775. Many delegates were convinced that issuing unbacked paper would somehow bind the colonies together in the common cause against Britain.

In any event, not even the skeptics foresaw the bottom of the slippery slope that began with the first $2 million printed on July 21. Just four days later, $1 million more was authorized. Franklin actually wanted to stop the process with the initial issue and opposed the second batch, but the temptation proved too alluring. By the end of 1775 another $3 million in notes were printed. Then $4 million more in February 1776, followed by $5 million more just five months later and another $10 million before the year was out.

In the marketplace the paper notes fell in value even before independence was declared. The consequences of paper inflation at the hands of American patriots were no different from what they ever were (or still are) when rampant expansion of the money supply is conducted by rogues or dictators: prices rise, savings evaporate, and governments resort to draconian measure to stymie the effects of their own folly.

Americans increasingly refused to accept payment in the Continental dollar. To keep the depreciating notes in circulation, Congress and the states enacted legal-tender laws, measures that are hardly necessary if people have confidence in the money. Though he used the power sparingly, George Washington was vested by Congress with the authority to seize whatever provisions the army needed and imprison merchants and farmers who wouldn't sell goods for Continentals. At harvest time in 1777, with winter approaching and the army in desperate need of supplies, even farmers who supported independence preferred to sell food to the redcoats because they paid in real money—gold and silver.

Congress cranked out another $13 million paper dollars in 1777. With prices soaring, the Pennsylvania legislature compounded the effects of bad policy: it imposed price controls on precisely those commodities required by the army. Washington's 11,000 men at Valley Forge froze and starved while not far away the British army spent the winter in relative comfort, subsisting on the year's ample local crops.

Congress recognized the mistake on June 4, 1778, when it adopted a resolution urging the states to repeal all price controls. But the printing presses rolled on, belching out 63 million more paper Continentals in 1778 and 90 million more in 1779. By 1780 the stuff was virtually worthless, giving rise to a phrase familiar to Americans for generations: “not worth a Continental.”

A currency reform in 1780 asked everyone to turn in the old money for a new one at the ratio of 20 to 1. Congress offered to redeem the paper in gold in 1786, but this didn't wash with a citizenry already burned by paper promises. The new currency plummeted in value until Congress was forced to get honest. By 1781 it abandoned its legal-tender laws and started paying for supplies in whatever gold and silver it could muster from the states or convince a friend (like France) to lend it. Not by coincidence, supplies and morale improved, which helped to bring the war to a successful end just two years later.

The early years of our War for Independence were truly, as Tom Paine wrote, “times that tr[ied] men's souls” and not just because of Mother Nature [i.e.,harsh weather] and the British troops. Pelatiah Webster, America's first economist, summed up our own errors rather well when he wrote: “The people of the states had been...put out of humor by so many tender acts, limitations of prices, and other compulsory methods to force value into paper money...and by so many vain funding schemes, declarations and promises, all of which issued from Congress but died under the most zealous efforts to put them into operation and effect.”

History texts often bestow great credit on the men of the Second Continental Congress for winning American independence. A case can also be made, however, that we won it in spite of them.

Death by Smoking Ban

In order to get smoking bans passed, it was necessary to create an atmosphere of hatred toward the “enemy,” to work people into a frenzy over a threat to their health, whether the threat was real or not. What mattered was not truth or science but whether the desired result—smoking bans—could be achieved. So truth and science were quickly sacrificed to the-end-justifies-the-means policy of anti-smoking organizations. Michael Seigel, MD, is both a medical doctor and public health official. He has 21 years experience in tobacco policy research and currently teaches at the Boston University School of Public Health. Though adamantly opposed to smoking, he says: “The anti-smoking movement is driven by an agenda—an agenda that will not allow science, sound policy analysis, the law, or ethics to get in its way.”

Dr. Seigel has cited over a hundred anti-smoking groups—including the American Cancer Society, the American Lung Association and the American Heart Association—for misleading the public with fallacious scientific claims. His website, www.tobaccoanalysis.blogspot.com, details an astonishing array scientific misrepresentations, outright lies and hypocrisy by anti-smoking groups. These tactics have proven effective, even as they have become ever more shrill and absurd.

Recently Dr. Siegel ran a Most Ridiculous Secondhand Smoke Claim Tournament. The national championship was won by the St. Louis University Tobacco Prevention Center. Its winning entry introduced the scare of radioactivity from secondhand smoke by the claim it contains plutonium 210, which does not exist anywhere in the known universe. The St. Louis group previously had claimed secondhand smoke contained asbestos. When that was debunked, it issued a correction substituting plutonium 210 for asbestos. The American Cancer Society managed to make the Final Four in this liars tournament with this entry: “Immediate effects of secondhand smoke include cardiovascular problems such as damage to cell walls in the circulatory system, thickening of the blood and arteries, and arteriosclerosis (hardening of the arteries) or heart disease, increasing the chance of heart attack or stroke.” Ridiculous though that statement is, it failed to top the entry of the St. Louis University Tobacco Prevention Center, and ACS was eliminated from the competition.

The U.S. Surgeon's General's Office also figured in the contest with: "Even brief exposure to secondhand smoke has immediate adverse effects on the cardiovascular system and increases risk for heart disease and lung cancer." But it went down to defeat from Action on Smoking and Health, which came up with this whopper: “Even for people without such respiratory conditions, breathing drifting tobacco smoke for even brief periods can be deadly. For example, the Centers for Disease Controls [CDC] has warned that breathing drifting tobacco smoke for as little as 30 minutes (less than the time one might be exposed outdoors on a beach, sitting on a park bench, listening to a concert in a park, etc.) can raise a nonsmoker’s risk of suffering a fatal heart attack to that of a smoker."(!)

That such monumental lies have been instrumental in the passage of smoking bans is a measure of the gullibility and scientific illiteracy of the general public and elected officials. Of course, it is also a demonstration of the dishonesty of the smoking ban activists and the absence of genuine evidence for their cause. As the independent health consultants Littlewood & Fennel testified in their report to the National Toxicology Program's Board of Scientific Counselors, the anti-smoking movement is driven by “avowed anti-smoking advocates determined to somehow prove that ETS [environmental tobacco smoke] is a human carcinogen in the face of irrefutable evidence to the contrary.”

The constant repetition of phony claims about health hazards of secondhand smoke, carried out by a well-financed campaign, has obscured the many studies debunking these claims. For example, the Congressional Research Service concluded: “It is possible that very few or even no deaths can be attributed to ETS [environmental tobacco smoke].” Further, it stated that nonsmokers exposed to pack-a-day ETS every day for 40 years have “little or no risk of developing lung cancer”—much less dying from it. The CRS is part of the Library of Congress and has all the resources of that esteemed institution at its disposal. It is highly respected, nonpartisan, accepted by both Republicans and Democrats as fair and impartial, has no ties to tobacco companies, no regulatory or other agenda, and accepts no outside funding.

Then there was the Congressional Investigation by the U.S. House of Representatives of EPA's report on secondhand smoke. It found EPA guilty of “conscious misuse of science and the scientific process to achieve a political agenda that could not otherwise be justified.”

The American Cancer Society has sponsored at least four studies over the years, all of which failed to find any statistically significant health risk from secondhand smoke, according to the standard cited by its own director of analytic epidemiology. But that hasn't kept the ACS from claiming secondhand smoke is dangerous. The most powerful statistical study ever done on the subject was the Enstrom-Kabat study. It covered 100,000 people for 38 years. The ACS financed it, help set it up, and provided data for it until preliminary results indicated the opposite of what the ACS wanted. It then withdrew its financial support and denounced the study, which was eventually published in the British Medical Journal, one of the world's foremost medical journals. The study concluded: “The results do not support a causal relation between environmental tobacco smoke and tobacco related mortality.”

Statistically, the risk of secondhand smoke is far smaller than the risk of getting lung cancer from drinking pasteurized milk. Epidemiologists use “relative risk” (RR or Risk Ratio) as a means for gauging the severity of risk. The U.S. Surgeon General has stated the RR for secondhand smoke is between 1.20 to 1.30. The risk for lung cancer from drinking pasteurized milk is 2.14. And the relative risk for getting cancer from drinking the municipal tap water that tens of millions of Americans drink every day in thousands of cities across the U.S. is 2.0 to 4.0. But where are all the dead bodies from the millions of people exposed to this far higher risk? Do you know of any? So how can secondhand smoke, which has a far lower relative risk, be killing thousands of people as claimed? In 2001 the International Agency for Research on Cancer, in Lyon, France, reported: “ETS exposure during childhood is not associated with an increased risk of lung cancer. No clear dose-response relationship could be demonstrated for cumulative spousal ETS exposure.... Even exposure to ETS from other sources was not associated with lung cancer risk.”

While secondhand smoke has not been shown to represent a statistically significant health risk, deaths continue to mount from smoking bans. In a recent article in the Journal of Public Economics, researchers set forth evidence that smokers are driving further to where they can smoke, resulting in more fatal accidents involving alcohol. This could be due to driving longer distances to where smoking is permitted outdoors or where enforcement is unlikely, as well as driving across borders to where smoking in bars is legal. The study covered 120 counties, including 20 which banned smoking. It found that alcohol-related fatal car accidents increased 13%. For a typical county of 680,000 people, this is equivalent to about six deaths. And this pattern did not diminish over time. Where smoking bans had been in place longer than 18 months, the fatal accident rate increased 19%. The trend is especially apparent where border-hopping to smoky bars is possible—indicating very strongly the effect of smoking bans on the accident rate. Fatal accidents in Delaware County in Pennsylvania increased 26% after the adjacent state of Delaware went smoke free. And when Boulder County Colorado went smoke free, fatal accidents in adjacent Jefferson County went up by 40%.

There is also another category of deaths from smoking bans. The well-financed campaign of ever more virulent and fraudulent claims of ETS health dangers has spawned a level of hatred that has produced violence and death. We hear reports of deaths of a kind we never heard before the smoking ban campaigns. In Minneapolis, where I live, the Star Tribune carried an article headlined: “Man Charged with Severing Wife's Tongue and Windpipe.” It states the man slashed her throat because she smoked a cigarette to celebrate her birthday. She was in critical condition, and he was charged with attempted murder. We never used to see stories like that, but here are some more:

Utah: A teenager was murdered for smoking in downtown Salt Lake City.

Ohio: Man Beaten To Death For Not Giving Up Cigarette. Ricardo Leon, 23, died.

UK: Nurse stabbed to death at hospital in an outside smoking area.

UK: man killed wife and two sons over her smoking. John Jarvis, 42, stabbed his wife Patricia in the heart and then murdered their sons, John, 11, and Stuart, eight.

Louisiana: Pregnant woman shot over cigarette. 18-year-old refused to stop smoking.

Calilfornia: A 21-year-old woman was stabbed several times early Saturday outside a Carlsbad home when she went outside to smoke a cigarette, police said.

California: Smoker Gunned Down. A gunman fatally shot a man outside a sports bar in unincorporated Hayward as the man took a cigarette break, authorities said Friday.

Illinois: Smoker Falls To Death. Ian Honeycutt, 28, of Glenview, tumbled from a ninth-floor apartment, blown off a window sill by a gust of wind while smoking. His aunt asked him not to smoke inside, police sources said.

Ireland: Eamonn Mulvenna, 20 year old victim died when he fell from a fire escape being used as a smoking area because of the ban.

Canada: A 65 year old smoker dies out in the cold.

Alabama: Smoker Attacked. He was standing in a parking lot, smoking a cigarette when he was attacked.

New York: 60 year old man beaten unconscious for smoking.

Florida: Father Stabs Son Over Cigarette.

New Zealand: Abduction And Rape Of Smoking Woman. The incident proved people would be more vulnerable if they had to go outside and smoke, something Prime Minister Helen Clark had not thought of, he said.

Ireland: Three men had jaws broken as they smoked outside pubs in Sligo, Kilkenny and Dublin.

Colorado: Bar Owner Blames Smoking Ban For Rape. A Pueblo bar owner says the smoking ban that forced his female employee outside is directly responsible for her rape.

Texas: Date Rape Pill Put in Drink, While Going Outside for Cigarette. Maria says she and two other friends stepped outside to smoke a cigarette. She says it was during that time that someone spiked her drink.

UK: A female backpacker fell 100 feet to her death from the roof of a hostel early yesterday. The 20-year-old Canadian plunged six storeys into a lane at around 3am. One theory is that she climbed onto the flat roof of the no-smoking Edinburgh Backpackers hostel for a cigarette.

Colorado: Courtney Chinn, 25, of Colorado Springs was shot and killed in an area near the Anchor Lounge where smokers congregate on September 20, 2003. [It is said] the problem of crime outside of bars where smokers gather will persist.

Africa: Baby sister killed in brothers' anti smoking crossfire. 3 Year Old Girl Dies In Smoking Ban War.

UK: Boy smoker hanged himself. A 12-year-old boy hanged himself with his school tie rather than admit to his parents that he had been caught smoking.

Wisconsin: Girl kills herself after being caught with a cigarette.

Massachusetts: Melissa Pierce and Angela Aiello, after leaving the bar to smoke, were struck in the heads with a metal pipe. Richard Jervah of Lynn was pushed through a plate glass window. Arthur Brestovitsky was stabbed in the chest, face, and arm.

The above examples are from http://encyclopedia.smokersclub.com:80/4.html, which contains over a hundred examples of such violence. We didn't hear stories of these kinds of violence before the smoking ban activists started fomenting hatred with their jihad (holy war) against smoking. It's time for them to admit their lies result in killing far more people than secondhand smoke does (if it kills any at all).

Once again, it is clear that, regardless of the good intentions of the jihadist do-gooders, lying and a policy of the end justifying the means simply do not work. Those tactics cannot make a safer world than truth, science and respect for individual rights--including property rights. Liberty is still the best answer--in fact, the only answer--to a better, safer, healthier society. But some people never learn; they keep trying to prove that force is better than freedom and individual rights. And their mistakes continue to be paid for with the blood and lives of innocent people.

I am a retired environmental consultant. I have never smoked, never owned or worked in a bar or restaurant, never owned stock in a tobacco company or ever received one penny from the tobacco industry or anyone else for my views on secondhand smoke. For more of my writings on this subject, see http://www.amlibpub.com/liberty_blog/2006/07/surgeon-general-trades-integrity-for.html.
http://www.amlibpub.com/liberty_blog/2007/03/unfounded-scares-about-secondhand-smoke.html
http://www.amlibpub.com/liberty_blog/2005/07/secondhand-smoke-and-heart-disease.html,
http://www.amlibpub.com/liberty_blog/2005/07/smoking-ban-of-meeker-county-minnesota.html, (includes a link to my complete testimony at Meeker County.)