Looking Backward from the Tricentennial

Chapter Thirty-Eight (part 1)

The following evening, while waiting in the parlor for Teara Harper to arrive, Julian watched Ray fidget anxiously. At dinner, he'd made a halfhearted suggestion that he might skip Julian's discussion with the economist. Julian reminded him of their first conversation about the US Treasury and Ray's admission that he didn't know all the details. Tonight, those would be cleared up.

Julian had spent the afternoon with Idabee as she participated in a full committee work session. They met in person, so they could converse without disturbing anyone else's holographic viewing. River Place Towers' virtual conference room was heavily attended; digital avatars stacked a dozen deep in each chair produced multiheaded human hybrids with far too many arms. Julian kept an eye out in case Conner Sulivan appeared among the holographic forms moving about. Reverend Shaver had requested Julian consider the possibility that he's looking to apologize. Julian had.

Like the assembly session, explainer videos prefaced each policy proposal, but here the delegates debated—sometimes fiercely—the merits. Idabee demonstrated how members could submit questions through the committee sage, who, assisted by artificial intelligence, frequently uncovered answers to individual queries without taking up the full committee's time. The discretion made people more willing to ask about things they didn't know. Remaining questions and comments were managed by the committee moderator, Delegate Denton, which he often directed to the head of the subcommittee or investigative panel who'd done the groundwork.

Julian lost interest as the afternoon dragged by. Idabee's conversation kept it bearable, but he saw that his refusal to consider accepting her help in the past still bothered her. Did she regret her decision to resign her assembly seat at the end of the month? When the committee session was over, Idabee left promptly, leaving Julian to return to Ray's condo alone.

Relaxing back into the parlor couch, Julian ran a hand over his scalp for the dozenth time that day, enjoying more texture than had been there in years. His doctor noticed the motion. "How's the hair?" Ray asked.

"For real, that cream smelled foul! But it's working."

"It wouldn't be much of a cure if it didn't," the doctor grinned. The expression faded quickly; there was something on his friend's mind, Julian decided.

A cold front arrived in the room along with Teara Harper. Her robe-clad casualness from their breakfast table discussion was gone; the lines of her suit, crisp and sharp, accentuated her bearing. Having chosen a place on the loveseat across from Julian, the economist angled slightly away from Ray when he touched his palms together in greeting. "Hi, Julian. Nice to see you again," she said.

He reciprocated, thanked her for meeting with him, and summarized what he'd learned so far. "I understand everyone gets a Treasury account, and unconditional basic income is paid into it with Treasury Dollars—debt-free money. But I'm still not clear on all the details of how it came about."

Teara began with questions. "Are you familiar with the Phoenix Cycle?" Julian's confident nod ended abruptly when the economist continued, "and the way our banking and monetary systems were upgraded at each stage?" He quickly shook his head. "Have you heard the phrase 'not worth a Continental'?"

Julian hadn't, but Ray answered. "It was the money they printed during the Revolutionary War, and it became almost worthless—there was some quote about a wagon load of money scarcely buying a wagon load of provisions."

"That's correct," Teara said neutrally, not looking at the doctor, and launched into her explanation.

"The first iteration of the Phoenix Cycle found thirteen of the British colonies forming the United States under the Articles of Confederation. The Congress was authorized to create money—Continentals—but prohibited from creating taxes that would have pulled them back out of circulation! That fundamental flaw led directly to widespread inflation and indirectly to Shays' rebellion a few years later, after Massachusetts farmers couldn't pay their taxes with the currency they'd earned soldiering during the war.

"In 1787, the Framers produced the Constitution, giving the new Congress the responsibility to create money plus the power to tax it back. Alexander Hamilton, Secretary of the Treasury, asked Congress to charter a national bank as part of a multi-faceted solution, which it did. He consolidated debt from the Revolutionary War and increased revenue from tariffs and excise taxes. The bank money it issued wasn't a national currency, but the notes circulated widely, and the government would accept them for payment of taxes. America quickly found its financial feet, although Hamilton was limited in how he could manage the national economy since mailing letters was the fastest form of communication."

There was a brief moment of silence, and Julian wondered why Teara had added extra stress to her final word. When Ray shifted awkwardly on the couch, he considered she intended it as a public/private denunciation of the doctor's faults.

"In the next iteration," the economist continued, "the telegraph had been invented, enabling the Panic of 1857. When banks started to fail because of the speculative loans they'd been making, the rapid spread of the news caused the first national, then international, financial crisis.

"After Abraham Lincoln won the presidency in 1860, demand for government bonds dropped. Bidders demanded interest rates as high as 36%, so Congress passed legislation directing the Treasury to issue legal tender—paper money not redeemable for gold or silver but required by law to be accepted for payments. Greenbacks were base money and our first national currency. Lincoln also signed the National Banking Acts, regulating the banking system from coast to coast as well as could be done with the telegraph.

"Greenbacks, full employment, massive government spending, and supply shortages created inflationary pressures. The United States established the first income tax on the top 3% of earners, imposed excise taxes on many goods and services, and encouraged people to put their money into government bonds instead of making purchases."

"Promoting delayed gratification?" Julian asked.

"You can think of it like that," Teara agreed. "It's one way to address demand-pull inflation—don't pull so hard."

She took a breath before continuing, still not looking at Ray. "Four generations later, Franklin Delano Roosevelt was elected during the Great Depression. The problem then was deflation; the circulation of money in the economy had slowed dramatically. Prices fell in a desperate attempt to entice purchases, crushing many farmers who were unable to recover their production costs. Factories didn't need to produce as much as before, so workers were laid off, which meant they didn't have as much to spend, so factories didn't need to produce as much as before, and so on. The deflationary death spiral drove the unemployment rate in cities like Chicago and Detroit as high as 50%. FDR addressed this problem by taking the US off the gold standard and putting more money into circulation through government spending."

"Wasn't this similar to one of the People's Party's demands?" Julian asked. "To grow the money supply by including silver?" Ray lifted an eyebrow at the obscure knowledge he'd received from Polly Sigh.

"It was," Teara said. "They had made a big deal in 1896 about how deflation was hurting the farmers. However, wheat and corn prices rose just before the election, thanks to poor harvests in India, Australia, and Russia. It negated their most powerful argument, even though the underlying structural problem hadn't been addressed. Then the Klondike gold rush increased the money supply and really took the wind out of the sails of the silver movement.

"America needed a more permanent solution by the time the Phoenix Cycle rolled around. Taking us off the gold standard enabled the economic growth that was so desperately needed, but FDR created powerful enemies when he did so. The administration was also able to enact two Banking Acts, boosting regulations now that the telephone was the fastest form of communication. Unfortunately, borrowing bank money into existence remained the primary method of growing the money supply, which of course led to tens of trillions in unpayable debt by your time."

Julian nodded soberly but inwardly chuckled in anticipation of the next part of the story. The internet was a huge advance from what he thought of as snail mail.

"In the fourth iteration of the Phoenix Cycle, the first American Union legislative package upgraded our money by paying unconditional basic income in base money—sovereign currency," Teara reminded him. "Instantaneous global communication let us upgrade banking as well. Every citizen received a US Treasury account with the ability to transfer funds to any other account, completely separate from the for-profit banking system."