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It Can't Happen America? It Already Did!

Politics / Fiat Currency May 01, 2012 - 06:27 AM GMT

By: LewRockwell


Diamond Rated - Best Financial Markets Analysis ArticleTim Case writes: "Sometimes people don’t want to hear the truth because they don’t want their illusions destroyed." ~ Friedrich Nietzsche

If there are two things that can be said with all confidence they are that throughout American history the American public has had and continues to have an enduring commitment to owning firearms. Second is the government’s unerring ability to be the sole cause of economic calamities, regardless of how vibrant the markets.

War and the market place are strange bedfellows. A case in point is the Spencer Repeating Rifle.

On March 6, 1860 the Spencer Repeating Rifle was patented in the United States. This rifle was developed for the sole purpose of brother using it against brother during the War Between the States. In the words of Warren Fisher, Jr. treasurer of the Spencer Repeating Rifle company:

"…In the hands of scouts or sharpshooters, or regular troops – taking into consideration all the elements of range, rapidity of firing, and facility of reloading, the Spencer Rifle is so effective as to render one man with it fully equal to half a dozen men armed with single-loading muskets…"

Of this rifle and in conjunction with testimony of a great many within the Federal Army’s General staff, George Armstrong Custer wrote:

Mr. F. Cheney,

Dear Sir: – Being in command of a Brigade of Cavalry which is armed throughout with the Spencer Carbine and Rifle, I take pleasure in testifying to their superiority over all other weapons. I am firmly of the opinion that fifteen hundred men armed with the Spencer Carbine are more than a match for twenty-five hundred armed with any other firearm – I know this to be true from actual experiment.

Very respectfully, &c.,

G.A. Custer

Brigadier General

(An admonition that Custer seems to have either forgotten or through his arrogance rejected when on June 25, 1876 he pitted his greatly divided and ill prepared 7th Cavalry using slow firing breach loading Springfield Model 1873 45-70 rifles against a greatly superior force; many of whom pressed the battle at the Little Bighorn with Spencer and Winchester repeating rifles.)

In December 1874 George Cary Eggleston, a veteran of the War Between the States, who had fought for the Confederacy, wrote in "The Atlantic" of the events in the South following the war:

"The end came, technically, at Appomattox, but of the real difficulties of the war the end was not yet. The trials and the perils of utter disorganization were still to be endured, and as the condition in which many parts of the South were left by the fall of the Confederate government was an anomalous one, some account of it seems necessary to the completeness of this narrative."

"Our principal danger was from the lawless bands of marauders who infested the country, and our greatest difficulty in dealing with them lay in the utter absence of constituted authority of any sort. Our country was full of highwaymen - not the picturesque highwaymen of whom fiction and questionable history tell us, those gallant, generous fellows whose purse-cutting proclivities seem mere peccadilloes in the midst of so many virtues; not these, by any means, but plain highwaymen of the most brutal description possible, and destitute even of the merit of presenting a respectable appearance…"

The circumstances Confederate soldiers found themselves in upon returning home were a direct result of Federal policy toward the Southern states and the National Bank Notes (AKA National Currency) that were now a permanent fixture in America’s monetary system. This "new" money was liability-money (debt-obligation money) and with it came the real possibility of inflation as Jay Cooke, one of the creators of the national banking system, was acutely aware. At the war's conclusion any money the Confederate government had issued was rendered worthless and the "greenback" dollar wasn’t far behind; the value of which was no more then 35 cents in 1860 gold.

I am sure more than one Southern gentleman desired to own the Spencer rifle to protect his hearth and home during this era, but the 1866 Spencer Repeating Arms Catalog shows the rifle in the 44 caliber retailed for a whopping $45.00.

To a present day buyer this may not sound like a lot but let’s put this in perspective; a frame of reference, which will remain constant throughout the rest of the article.

In 1866, according to, the average weekly wage of working Americans was $41.18, (adjusted to 1866 dollar), with the average work week being estimated at sixty-four hours. The results were an hourly wage of $0.64. With this in mind it would take a worker dedicating everything they earned from 70 hours of labor to purchase a Spencer rifle.

The rifle was undoubtedly obtained by those in the North who had an income somewhere equal to the national average. For the Confederate veterans who needed the rifle but were faced with high taxes, hyperinflation, the need to feed and cloth their families, then rebuild their society, which had suffered the scorched earth military policies of the Northern high command, such an item, for the moment, was far too expensive.

It was also in 1866 that an American icon under the corporate name of "Winchester Repeating Arms Company" came into being. At the same time "Winchester," as the company was to be commonly referred to, began production of the "Winchester Repeating Arm, Model 1866" better known as the "Yellow Boy" which sold to the public at around $45.00.

The Winchester Model 1866 was the standard bearer of repeating rifles until 1873 when Winchester introduced the Model 1873 repeating rifle.

Of the Winchester Model 1873 William F. Cody writing from Fort McPherson, Nebraska said this:

"I have been using and have thoroughly tested you latest improved rifle…While in the Black Hills this last summer I crippled a bear, and Mr. Bear made for me, and I am certain had I not been armed with one of your repeating rifles I would now be in the happy hunting grounds. The bear was not thirty feet from me when he charged, but before he could reach me I had eleven bullets in him, which was a little more lead than he could comfortably digest."

"Believe me that you have the most complete rifle now made." (Emphasis in the original)

W.F. Cody

"Buffalo Bill"

During the intervening years between 1866 and 1873 the hourly wage of American workers steadily increased first to $0.71 and hour in 1867 to $0.89 in 1873. During the same period the work week decreased from 64 hours 62 hours.

In 1870 the Montgomery Wards catalog (of 1870,) advertised the Sharps (?) 7 shot repeating rifle at $50.00 still requiring the American worker to dedicate 59.25 hours a 15% reduction in hours needed to work before purchasing the rifle.

1873 saw Winchester introduce the "Model 73" repeating rifle, however September 1873 ushered in the event known as the "Panic of 1873" followed by its supposed depression.

Historians argue concerning what caused this panic but there is no doubt the following factors contributed to the US economy’s predicament.

  1. Postwar inflation
  2. a large and growing trade deficit
  3. High Tariffs
  4. Reported in the Nebraska Advertiser, September 13, 1877 former Vice President Schuyler Colfax, in a speech entitled "Hard Times Their Cause and Cure" said this: "The chief, though not the only cause, for the panic of 1873, was the overbuilding of railroads, and the enormous amount of money they withdrew from other uses." (The other causes conveniently missing in Colfax’s statements certainly must take into account the state and federal subsidies which resulted in blatant, widespread corruption.)

(To read a fascinating discussion of the corruption during this era, see "The Consolidation of State Power via Reconstruction, 1865-1890" by Thomas J. DiLorenzo)

Regardless of the cause or causes the first indication of a problem occurred on September 8 with the failure of the New York Warehouse and Securities Company. Then Daniel Drew’s firm Kenyon, Cox and Company ceased business a week later.

Jay Cooke, who had been instrumental in establishing the national banking system during the war by marketing government bonds, was next. Cooke had taken control of the Northern Pacific Railroad during the 1860s which had been the recipient of Federal land grants to the tune of 47 million acres. Cooke was so heavily invested in the railroad that once the Northern Pacific Railroad failed, in 1873, when millions of dollars in NPR bonds became unmarketable, it took the financial house of Jay Cooke and Company with it.

With the collapse of Jay Cooke and Company the house of cards began to fall rather quickly. Two other important financial firms closed their doors the same day with 37 more on September 19th. These shocks waves to the financial world set off the Panic of 1873.

There were business failures, some 5000 bankruptcies in the first year, and there were certainly many who became unemployed. Unemployment took place most notably in the railroad industry which was the largest single employer outside of agriculture. Persistent joblessness among the railroad workers eventually resulted in violence during the summer of 1877.

Of course the failing bankers immediately called for a "bail out", but President Grant, to his credit, refused to sign the April 14, 1874 bill that would inflate the currency supply by 100 million dollars. Grant justified his veto stating that the short term advantage of such a bill did not out weight the long term damage it would do to the economy.

President Grant’s veto was important in that it gave the "hard money" politicians the needed impetus to pass the 1875 Specie Resumption Act, which programmed the US to return to a gold and silver standard on January 1, 1879.

President Grant was right. The yearly average wholesale hundred weight price for native beef steers, all weights from 750 to 1800 pounds, as compiled by the Chicago Daily Drover Journal indicates, during the period of 1874 to 1879, they were not as volatile as the prices were during the prosperous expansion years of 1881 to 1890.

Studying this era one is hard pressed to find the "Long Depression" so many historians claim occurred.

Between October 1873 and March 1879 there was no contraction in the money supply. It has been reported that during this period the money held by banks increased from 1.964 billion dollars to 2.221 billion dollars; increasing at an average rate of 2.6% per annum. Furthermore, we have to wonder how a "depression" could possibly result in an expansion (some even go so far as to call it an extraordinary expansion) of industry and real per capita income.

Nor do we see goods chasing dollars in the gun industry of the 1870s. Remington firearms catalog of 1875 shows the Remington’s breech loading rifle, with 24 or 26 inch barrel, sold for $32.00 requiring the general public to dedicate 33 3/4 hours of labor to acquiring one. These prices reflect the value of the US greenbacks which were now roughly worth $0.86 in prewar gold dollars.

Prices had fallen since 1866 but not because of any tightening in the money supply. What had occurred was that under President Grant’s direction the Federal government, through its banking system, hadn’t caused a marked increase in the money made available. The lack of inflation allowed the relatively free-market capitalists to increase production along with economic growth at a rate greater than the rate new money was being pumped into the US economy.

The ensuing prosperity hadn’t resulted in a price change within the Winchester line. The 1876 Winchester catalog shows the least expensive standard New Model ‘73’ Sporting Rifle with 24 inch barrel in the 44 caliber sold for $45.00; requiring the purchaser to contribute his earning from slightly more than 47 hours of toil before claiming it, as opposed to 70 hours in 1866.

What had happened was that wages had increased so that the average consumer was rewarded by having to work 23 hours less to purchase the Model 73 then it took in 1866 to acquire the Spenser rifle at the same price. Even a notoriously under paid sheriff from North Platte, Nebraska, of whom the Republican said was a "worthy and efficient sheriff", found he could own a Winchester rifle. Writing Winchester corporate headquarters Sheriff Struthers remarked:

"I have succeeded in getting one of your guns here that is first-class. It is, without any exception, the best gun I ever shot, and I am safe in saying that I have handled all sorts." (Emphasis in the original)

Alex. Struthers,

Sheriff, Lincoln Co., Nebraska

With the implementation of The Resumption Of Specie Act of January 14, 1875, the miracle of what can transpire in a free market, began to expose itself. Congress had commanded that the fiat greenbacks be redeemed by either gold or silver coin.

The increase in the Federal government’s gold and silver holdings in combination with the ongoing flushing of the fiat dollars from circulation set up the American economy for the decade of the 1880s, which produced an era of remarkable economic growth.

In the intervening years of 1875 to 1880 this action by Congress had a positive influence on American’s lives. During these years American’s cost of living dropped by nearly 15%. This increase in American’s standard of living is emphasized by the average yearly wholesale price of 750 to 1800 pound beef steers being reduced in value by over 17% during the same period.

While wages also declined, they dropped at the much slower rate of just over 9%. When adjusted to the value of the dollar of each respective year and its purchasing power – a consequence of the increased volume of gold and silver in circulation – there was a modest but positive improvement; the hourly wage in 1875 lost ground until 1877 before recovering in 1878 and again in 1879. While the money people had to spend had decreased in volume (up to 1878) their overall purchasing power had increased.

That firearms were beginning to be seen less as necessary tools of the West and more as sporting objects, due to people’s increasing disposable income, can be gleaned from the an article printed in the "Nebraska advertiser" of September 05, 1878 which featured a Mr. Adam Goldie of Shannon County, Missouri.

Adam Goldie was a sharpshooter who many thought could beat the up and coming then later acknowledged reigning king of marksmen, William Frank "Doc" Carver.

The article entitled "The Greatest Marksman Yet" states the 38 year-old Goldie could break "299 glass balls out of 300 in twelve minutes with a forty-four caliber Winchester rifle…A seemingly incredible feat that he performs is as follows: A soda-water bottle is thrown into the air in a certain manner, and before it falls, Goldie will send a bullet down the neck of the bottle and make a hole in the bottom."

At distance Goldie was not a bad shot either. Remember these shooters were shooting with open sights. "…At one thousand yards he will hit the centre of the bulls eye and then send six bullets one after the other hitting the very indent made by the first…"

I don’t know if the shooting match between Goldie and "Doc" Carver ever took place, but an article like this had to spark the imagination of every young man – along with anyone who fancied themselves good with a rifle – to sharpen his shooting skills. Nor would it hurt Winchester sales whose advertising stressed their rifle’s rapid-fire ability and its accuracy.

As the end of 1880 approached Winchester Repeating Arms August catalog reports that the Model 73 had been reduced in price by 33% to $30.00 from $45.00 in 1876. The American buying public now was able, with less then twenty-nine and a half hours of labor to purchase a Winchester, down nearly 58% from 1866.

With the now continuing expansion of railroads, overland shipping costs – moving goods to markets – were continually falling. Technology resulted in large-scale production (and lower cost) of many goods including steel. By 1880 the once agrarian society, which had been so dominant in the U.S. was almost evenly divided between farm and non-farm workers.

The 1880s saw a nearly 13% increase in the average America’s wage.

An example of wages during 1881 comes to us from Webster County, Nebraska paper the "The Red Cloud Chief", of June 02, 1881 in which "Billy the Kid" was hired, in the vicinity of Albuquerque New Mexico, to stop a rash of sheep thefts. Billy’s starting salary, according to the article, was $40.00 a month, but within two days and because of his proficiency with his Winchester rifle was quickly raised to $60.00 a month.

The next day Billy "dispatched" two more thieves and as a result his boss purposed "that hereafter… his salary from the time he entered his employ would be $100 per month, (plus) grub (room/board) and ammunition." This raise, plus room and board, put Billy the Kid’s total monthly income no more than $30.00 short of the national average.

The continuing expansion of the US economy during the 1880s produced a real GNP of approximately 24%.

Thomas J. DiLorenzo from his 1991 paper "The Antitrust Economists' Paradox" explains:

"As with measures of output, not all of the relevant price data are available, but the information that is at hand indicates that falling prices accompanied the rapid expansion of output in the "monopolized" industries. In addition, although the consumer price index fell by 7 percent from 1880 to 1890, prices in many of the suspect industries were falling even faster.

"The average price of steel rails, for example, fell by 53 percent from $68 per ton in 1880 to $32 per ton in 1890. The price of refined sugar fell from 9 cents per pound in 1880, to 7 cents in 1890, to 4.5 cents in 1900. The price of lead dropped 12 percent, from $5.04 per pound in 1880 to $4.41 in 1890. The price of zinc declined by 20 percent, from $5.51 to $4.40 per pound from 1880 to 1890."

And fall prices did! In February 1890 rifles from Winchester had been further reduced by 35% from the 1880 cost to the following: Model 1873 – $19.50; Model 1876 – $19.50; with the newest Model 1886, in a round barrel also retailing for $19.50. These prices represented a reduction in hours the buyer needed to work by 78.28% over 1866 and down 48.35% from 1880. The sportsman now needed only to dedicate less then 16 hours (one and one half days labor) in wages before owning a new Winchester rifle.

To some it may seem like today is light-years removed from the world of the late 1860s and early 1870s.

Have we really advanced that far when property values continue to fall; 100 million out of a population of 242 million Americans, of working age, are unemployed; 15% of the American population needs government assistance just to survive; inflation is running close to 10% making working people poorer by the day; and the value of the American dollar has lost 97% of its purchasing power since 1913?

Are we content with rampant corruption on Wall Street with its deceitful mortgage schemes and reckless looting of the American people? Is it to our advantage when, no longer capable of continuing their criminal scheme and faced with financial ruin, this corrupt system is granted trillions of dollars in bail outs, further impoverishing the nation? Are we better off when rampant crony capitalism, which makes the swindling of Americans out of their future a virtual certainty; is the standard operating procedure among all levels of American government? 

Most Americans aren’t happy with either their current situation or the path that is being taken by government. In a recent Rasmussen Report the headline read "92% Favor Strict Limits on Government to Protect the Individual".

How this is to be accomplished is never mentioned.

Americans have convinced themselves that the only way to solve the continuing federal, state and local debt problem is by the creation of more debt. This lie will only add to their sorrows as the federal debt is projected to reach 20 trillion dollars by 2020 resulting in larger government and with it an escalation of the use of fear to acquire unprecedented powers intended to subject, harass, imprison, and murder citizens of this country.

As we have just seen, anyone who is serious about restoring smaller government MUST begin with the establishment of honest money.

In The Commercial and Financial Chronicle of May 6, 1948 Congressman Howard Buffett from Nebraska makes a strong case for honest money. In his article entitled "Human Freedom Rests on Gold Redeemable Money" Congressman Buffett saw clearly America’s future if it continued with a debt ridden fiat money system.

"…[T]he individual citizen is deprived of freedom of movement. He is prevented from laying away purchasing power for the future. He becomes dependent upon the goodwill of the politicians for his daily bread. Unless he lives on land that will sustain him, freedom for him does not exist…"

Nor was the fact that honest money and freedom go hand in hand lost on the former Chairman of the Federal Reserve, Alan Greenspan, who wrote in his 1966 article "Gold and Economic Freedom":

"…[T]he opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes… But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale…" (Emphasis mine)

For those who continue to remain ensconced in the delusion that "it can’t happen in America" remember this. If your income falls within the medium average family income of most Americans at $46,326.00 a year and you wish to own that icon of the Old West, the Winchester Model 1894, it will cost you $1399.99. You are now committed to dedicating a minimum of 63 hours labor to owning one.

Welcome to the defeated South of 1866 and your future.

My sincere thanks to Abby Mouat at Cornell Publications whose guidance helped me in purchasing the right catalogs for this article. If you enjoy old catalogs for either reading or research Cornell Publications at has available over 3000 titles which they will reprint on acid free paper at more than reasonable prices.

Tim Case [send him mail] is a 30-year student of the ancient histories who agrees with the first-century stoic Epictetus on this one point: “Only the educated are free.”

© 2012 Copyright Tim Case / - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


03 May 12, 12:22
The Crime of '73

My only comment is that you missed the chief cause of the crash of '73 - Congress abolished the free coinage of silver and effectively eliminated the bi-metallic standard that had worked for the country for 90 years. The contraction in money supply forced the Panic of '73.

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