The Only Thing Backing the Dollar Now Is Force | William Watkins

[00:00:00]US national debt has now reached nearly 40 trillion dollars, 39.6 according to the Treasury. Now, that is about $115,000 for every American, but here's a number that stops me. The interest on that debt alone is now running closer to a trillion dollars a year according to the Congressional Budget Office. Now, roughly what the country spends on its entire military just to service what it already owes. Now, my next guest says that this isn't really an economic story at all. It's a constitutional one and it [music] runs straight through the one thing this channel cares about the most, gold. Stay with me.

[00:00:36]All right, welcome back. [music] I'm Jeremy Safford. My guest today is a constitutional scholar, not a markets guy, and that is exactly why I wanted to bring him on the show. Now, he argues that the country quietly walked away from the limits on federal power [music] the founders wrote down and this debt is the bill. Now, there's even a thread in here about the day Washington reached into America's gold and what the Constitution did and did not do about it. William Watkins, author of the brand new book Independent Guide to the Constitution, joining us now. Welcome, Bill. Thanks for making the time.

[00:01:06]>> Jeremy, it is great to be with you.

[00:01:09]>> Um I want to kind of zoom out. I mean, by the end, I want to answer one thing, what all this kind of means for the money in our in our audience's hands, but uh Bill Bill, let's start with um that number, you know, the debt pushing 40 trillion dollars. And and you know, you argue that this is not just years of overspending. It's a constitutional failure. So, just explain a little bit to the audience first, what do you mean by that?

[00:01:31]>> Well, what I mean is this, is we have a Constitution uh few and defined powers given to the national government. The national government cannot act, it should not be able to spend absent pointing to a specifically enumerated power. Unfortunately, we have gotten away from this strict construction of the document where certain clauses, such as the spending clause and the commerce clause, are used as uh what the founders would call a general police power.

[00:02:02]Our government spends and regulates things that it has no independent power to do. And as it has done so, it has piled up debt upon debt, and that's truly why we're in the fix that we're in.

[00:02:17]>> Mhm. Now, take me back a little bit to that original design. There's a long-running debate about this, but the reading kind of you argue is that the the founders didn't hand Congress a blank check, right? I mean, that they they meant to hold it to a specific kind of limited set of powers. Just lay that original design out for me and how that was to kind of supposed to hold the line here.

[00:02:38]>> Well, we have to remember that in exchanging the Articles of Confederation for the Constitution, one of the big arguments that the proponents of the Constitution made is, "Hey, we're not really jettisoning jettisoning the federal system established under the articles. All we're doing is just really invigorating Congress with the powers they already have. This isn't a big deal. The states will still have in Madison's words in Federalist 45, numerous and indefinite powers. The national government few and defined. So, this isn't a real big switch." That was the argument there that the federalists made, that Hamilton himself made, who we often associate and properly so with aggressive constitutional interpretations, his financial bill. But, that is not how the document was sold to the people and the state ratifying conventions. So, my argument is simply to go back to those promises that the federalists made and hold them to it.

[00:03:44]>> Yeah. Yeah, that's interesting. I mean, what was the kind of enforcement mechanism? I mean, if Congress interpreted its own powers broadly, who was kind of supposed to stop it? Was it the courts, was it the states, or voters?

[00:03:54]>> That's a great question.

[00:03:57]One of your primary stopgap measure is the voters and the states.

[00:04:03]But remember also at this time that the states had their own representation in the Senate. So they had a mechanism for self-defense that we don't have today with a popular election of senators. Of course, you also had the courts could step in, but Jefferson and Madison in their Kentucky and Virginia resolutions in 1798 ultimately point to the people.

[00:04:30]Whether it be in convention or out of doors or at the ballot box as the ones who are ultimately responsible for curbing government.

[00:04:40]>> Hmm, that's interesting. And I I you know, I know it's kind of a complex topic, but I'm excited about it because it comes back to sound money. So I'll just give a little bit of context just to the audience. I mean, you're describing the move from the the Articles of the Confederation where Congress kind of lacked reliable taxing and and regulatory authority, I guess, right? And to the Constitution, but Madison then called the new federal powers few and defined, while powers kind of remained with the states were numerous and indefinite. So my question here, Bill, is you know, Hamilton kind of supported it feel felt like a broader spending power from the beginning. Doesn't that suggest today's expansive government kind of arose partly from that unresolved founding era disagreement rather than just, you know, abandoning the the constitutional rule?

[00:05:23]>> One could argue that, but I would argue that if we look at Hamilton's representations about what the Constitution would do, his later arguments as Secretary of the Treasury were essentially just he went back on his original promises to push a program that he thought would benefit the nation. You look at the debates as a whole uh and I think that supported Hamilton in power was much different than the Hamilton in the New York ratifying convention or the Hamilton of the Federalist who again essentially adopted what we would call today a Madisonian argument on the limits of the federal government.

[00:06:07]>> Now, there there was that one moment that you kind of came back to as well in the book. I mean, the the Supreme Court's case in in 1936 called United States versus Butler. And as you read it, that's the case where the court kind of broadened the spending power letting Congress spend beyond that enumerated list in the in the name of the general welfare. In plain terms though, I mean, what changed that day? And why does it kind of still show up in your wallet now?

[00:06:31]>> What changed that day is the New Deal.

[00:06:34]It's uh Franklin Roosevelt's New Deal.

[00:06:37]And how can we as a court uh rubber stamp if you will or allow these programs to go through. A key to that is the spending power. For years, the spending power had been understood in a Madisonian sense. I.e., if you want to spend money, you have to point to an enumerated power. And there's a specific list in Article 1 Section 8. Uh Hamilton, Joseph Story had argued uh you don't really have to point to enumerated power. Congress has the power to spend and as long as it's for the general welfare, uh we're good there.

[00:07:17]The Supreme Court rejected the Madisonian interpretation, went with Hamilton and Story simply because if they did not, they would be in a pitch battle with Roosevelt and imperil the New Deal uh which so many people were supporting.

[00:07:33]>> Yeah. So, I mean, you know, the guardrails came off. And and uh let's talk a little bit about why it matters for anyone holding dollars. I mean, the Constitution actually talks about money in hard terms. It gives Congress the power to coin money and it tells the states they cannot make anything but gold and silver coin legal tender.

[00:07:49]How far have we drifted from what the founders meant by the word money?

[00:07:54]>> We have drifted far afield as you and your viewers know the founders understood real money to be hard money gold and silver as a matter of fact in the debates on the Constitution and the drafting process there are many statements from various founders that finally we have this opportunity to banish paper money fiat money now and forever and gold and silver were to be the money in the United States.

[00:08:27]Unfortunately, especially with the Civil War war between the states, whatever you wish to call it with the greenbacks the Lincoln administration issued we have a major departure there and you know ultimately the Supreme Court upholds that simply not really based on the law but based on national sovereignty and idea if we don't rubber stamp this if we don't approve it we will have uh put the government in a terrible spot after they printed all these greenbacks made them legal tender so they just rolled with it.

[00:09:06]>> Yeah, I mean you know 1933 most people at least that watch this channel kind of know the history but obviously in 1933 Washington called in America's gold and then turned around and revalued it from $20 to $35. Um the part I kind of want to get your read on is the one that still gets argued. I mean how was that constitutional? I mean the government compels people to surrender a hard asset then marks up the price the moment it holds it all. What does that episode tell you about how far the money power can actually stretch?

[00:09:35]>> No, it's absolutely not constitutional.

[00:09:38]Uh uh true reading of that document, you can find no power where government can take uh the people's money in that regard.

[00:09:47]Sure, government can pose uh in um impose excise taxes with the uh income tax amendment, you can tax incomes, uh but it you have to stretch that document so far uh to be able to take the people's gold uh from them. Uh there is no constitutional standing for that. Especially again, it's clear that the framers uh the power to coin money gold and silver. Uh this was getting rid of fiat money which had so plagued uh the states and the Continental Congress uh and the war for independence. They saw the damage that it could do, how it robs um essentially creditors um of their investments, the value of items they've sold, and they were ready to put a stop to it.

[00:10:39]>> Now, I almost want to go back to the greenbacks because it really did begin as a wartime emergency. I mean, how did that emergency power kind of become a permanent federal power to issue, you know, paper legal tender?

[00:10:52]>> Well, you know, you have the Lincoln administration made the decision that it would not let the Southern states go on peaceably. That um you know, actually at the time, you know, there were two waves of secession. The uh Gulf Coast states that on Lincoln's election um seceded, but then Virginia and your other border states weren't going to leave the Union until Lincoln decides he's going to call up troops to force um the Southern states to stay in the Union. So, you have this second wave of secession. With those two waves, you're going to need a lot of money uh to force those states back into the Union. Part of the process for this um is the greenbacks. This idea that we will make them legal tender throughout the country that you can suck whatever specie is out there into the coffers of the national government and use paper money.

[00:11:50]And once you sort of build on that paper foundation, it's a house of cards. You just keep on building until it falls.

[00:12:00]We're ever closer to it falling as you and your viewers know.

[00:12:04]>> So I mean, you know, Bill, is is that the real constitutional turning point? I mean, from from money whose value was tied to metal to to money whose value ultimately rested on government authority?

[00:12:14]>> Yeah, I would I you know, a lot of people want to talk about properly, you know, Roosevelt and taking gold or even Bretton Woods. Those are all in the conversation, but if you don't start with the war in the 1860s and the Lincoln administration's monetary policy, you're missing the full picture.

[00:12:33]>> Yeah, you know, we talked a little bit about 1933 there and then a couple years later the Supreme Court upheld the government voiding gold payment clauses in contracts. So debts no longer had to be paid in gold and then I think it was '71 that the the last link was cut. The US stopped letting even foreign governments trade their dollars in for gold. Just looking at that whole arc, what is the lesson for someone holding dollars today?

[00:12:57]>> Well, I think if you're holding dollars, you have to recognize that there's a great uncertainty that that paper money is really only tied to the coercive power of the federal government to the extent it can cause other industries, other people to hand over things of value. There is nothing tangible backing it like gold or silver.

[00:13:22]It's a bit of a shell game that we just smile and keep playing, but it is but a game. There's nothing of real value behind it.

[00:13:32]>> Yeah, and just to put that kind of drive to into numbers for the audience when the dollar was still tied to gold in 1971, gold was $35 an ounce. Today, looking at the Kitco spot price, I mean it's over 4,100, up almost 2% today. So, I mean a dollar buys a tiny sliver of the gold it once did. That is the erosion at the heart of all of this. And I got to ask you, I mean the clause also names gold and silver. Silver is the kind of the forgotten half. Why why did they both Why did they write both in?

[00:14:01]>> Well, you know, if you look at the time, you abs- absolutely had countries using both metals uh for means of exchange. Both had independent significant value.

[00:14:18]You know, obviously, we could use some sort of other metal but the Constitution mentions gold and silver in a theoretical sense. If you had a metal that had great value, you could use that. A country could use that for coining. The argument would be gold and silver is what the Constitution says. Absent an amendment, we stick with gold and silver.

[00:14:43]>> Yeah, I mean that very first kind of Coinage Law, I think in 19 17 1792 defined a dollar as fixed weight of silver. I mean, when did the dollar stop being a thing you could weigh?

[00:14:57]>> [laughter] >> Oh, you know, it's actually if you look in as a quick aside here, you know, the Bill of Rights indicates that for a dispute over $20, you have a right uh you know, trial in the federal courts.

[00:15:17]You know, good argument that the measure they were talking about would be the Spanish gold dollar was most often what they were referring to. But you know, you're absolutely right. Eventually as you move forward in time uh as you approach the mid-1800s, I think that's a good point that you can start to see things get out of hand.

[00:15:41]>> Mhm. I mean, I guess we should I'm nerding out here Bill, so stick with me. Also the audience should too, but I'll move on a little bit because I want to talk about why it matters now and who's actually paying this bill. I mean, where nearly a quarter of this debt is is held abroad.

[00:15:54]I mean, according to Treasury data, that's foreign investors obviously, central banks, funds, governments with Japan and the UK and China all at the top. They own US bonds that they can trade, sell anytime. And in your writing, you kind of warn about the day they cash in their chips, meaning they start selling. I mean, obviously we've seen a little bit of that with this gold rush, but what would that actually look like and and how worried should investors be about that?

[00:16:19]>> No, it worries me greatly because you you hear it often said, "Oh, we just owe it to ourselves, our great national debt." No, we don't. As you just properly pointed out, you listed the top three holders there, but no, foreign governments. And if foreign governments acted in a concerted matter to as we said cash in their chips, that could absolutely bring a financial crisis. I mean, we've so eroded even our paper dollar and with this recent war in Iran, we've been lucky that essentially the dollar has been the medium of exchange for oil. Thank you, Saudi Arabia. But that that gets undermined and you have China selling off their holdings, we could have a serious financial crisis.

[00:17:09]We could have a Weimar situation.

[00:17:11]>> Now, this is good because you can kind of bring it home for me here. I mean, for someone watching who's not a lawyer or just somebody kind of trying to protect their savings, why should this history really change how they think about the dollar?

[00:17:23]>> Well, I think it should bring home if you had any doubt that the framers had great perspicacity in trying to ban fiat money to keep money honest, to keep it real.

[00:17:37]So government could not via inflation essentially steal the wage of workmen or business owners.

[00:17:46]Unfortunately, that was gotten around as we talked about with the Lincoln administration and others there. But it gives us it puts us in a world of uncertainty there with our holdings. You can work all your life and accumulate all this paper money and it is we're so very close to a financial crisis, the value could be gone for that. Whereas if you had used that paper to buy hard assets or gold and silver, you would have something tangible there.

[00:18:21]So we're all at great risk.

[00:18:24]>> Yeah, do you got an opinion here, Bill, as to whether that gold is in Fort Knox?

[00:18:28]I have to go down there.

[00:18:30]>> [laughter] >> You know, I imagine there is a good there's a quantity.

[00:18:37]How much I would not want to bet on.

[00:18:39]>> You know, here's kind of why it lands on this channel. I mean, for thousands of years obviously when government buried themselves in debt or watered down their money, protected themselves by owning something the government couldn't print, gold, silver. You know, and the founders kind of wrote those two metals into the constitution as the country's money. So help me understand the founders thinking here a little bit. I mean, we talked about it, but what role were gold and silver actually meant to play? And and did they see hard money as any kind of check on the government?

[00:19:07]>> Absolutely, if especially if you look in Jefferson's uh, writings and his economic thought, uh, the idea is that hard money, uh, would force government, for example, if government wanted to get involved in a foreign adventure or a foreign war, you would have to pay for that, uh, rather than just printing, uh, dollars, inflating the currency. To pay for it, you would have to tax the people. They would feel that bite immediately, uh, as the tax gatherer, uh, showed up at their door wanting more of their resources.

[00:19:44]Therefore, the people would use the franchise to limit government, to pull government back from, say, the foreign adventure there. Uh, we've lost that, uh, now with, uh, paper money and inflation and the way we're, uh, Federal Reserve conducts matters.

[00:20:01]>> You, I mean, you brought up taxes there.

[00:20:03]I have to ask you. I mean, in the end, who really pays the bill? Is it higher taxes? Is it inflation quietly kind of eating your savings? Or is it a default?

[00:20:11]I mean, which which one does a government usually reach for first?

[00:20:16]>> They ought to reach for taxes first, but what we've seen in recent years is, uh, the tendency to inflate the currency, uh, to pump more dollars out there. Uh, you know, recent examples, you know, the COVID situation, uh, the government just cutting checks, uh, that it doesn't have the funds for, uh, to essentially everyone in America or whatever stimulus program, um, you want to look at in history, recent history as well. They should, uh, look to taxes first, but that imperils them at the ballot box.

[00:20:54]Then they look to just inflating the currency, and of course, uh, that brings up the last matter you mentioned, uh, when does the great default come? Like, uh, we're a some third world banana republic defaulting on our debts.

[00:21:07]>> Yeah. And I mean you're but I you brought up COVID there. I mean the larger concern is kind of that emergency powers rarely disappeared when the emergency ends, right? I mean normalized it almost felt like they normalized a level of spending and and intervention that then became permanent.

[00:21:23]>> No, it's a ratchet effect. I mean think of best example I can think of of the ratchet effect of government power and economics is rent control in New York City. Uh that was supposed to be a temporary measure uh as veterans came home from World War II. Uh how many people today in 2026 live in rent controlled apartments still in New York City? Uh that government has not parted with that power and it uh and they rarely do as they accumulate powers.

[00:21:55]>> Now listen, I didn't get you to come on to talk about the bond market, but you know this is not just theory this week the 30-year Treasury yield has been trading above 5% and according to Bloomberg part of what's behind that is a worry about debt and deficits along with sticky inflation and a flood of new bond supply. So I mean you know when the market itself starts pushing back on the borrowing, does that feel like the reckoning that you've kind of been writing about?

[00:22:21]>> I think it's a sign of it at least. Uh I mean especially right now as we've got the war with Iran heating up again and you know these missiles, these jets, how much it cost just a day um for this you know piddly little fight we could call it. It's certainly not a D-Day or but just with what we're doing there with the bombing and the sorties, that's a lot of money. Markets are taking notice of that. Uh you add into that uh Iran's grip uh especially now that the Houthis are on board with um limiting uh the Strait of Hormuz and the passage uh of fuel, uh fertilizer, natural gas.

[00:23:07]This is a serious situation. It certainly could threaten world war as great powers seek to reopen things.

[00:23:15]It also could threaten a great economic catastrophe for the United States.

[00:23:21]>> Now listen, you and I have to talk about your book. Because it's been interesting to look at. I mean I find it pretty fascinating this topic obviously and I think our audience will. And before I let you go, you know, for the person watching who finds this persuasive and honesty a little worried. I mean you know, what is the one thing that you tell them to watch for to understand kind of going forward?

[00:23:42]>> Well, going forward the first thing that we have to watch for is keep our eyes on that beacon which is the Constitution.

[00:23:50]That is that will tell us how far we have strayed. That will tell us also how to get back home if we really realize that we are in dire straits. We're in a terrible financial situation. That we have a national debt that we can't dream of paying off. That you know, what are we going to do? So I think the assessment the government would have to make on every individual citizen.

[00:24:17]Forget the illegals.

[00:24:20]It's about $150,000 per person. Considering most Americans don't even have enough savings to make it a month where they lose their paycheck. That's not feasible. We're in a dire situation but constitutional government is an option. We could go back to that beautiful old federal system of few and defined national powers, numerous indefinite state powers, trim, retrench, cut back and life could get back to something manageable.

[00:24:52]>> Yeah. I mean your new book we should plug it too. It's It's the Independent Guide to the Constitution.

[00:24:57]Uh got to ask you last thing here but I mean if if the founders could see the balance sheet today, what is the one thing you think would shock them the most?

[00:25:07]>> [laughter] >> I think the one thing that would shock them the most is they would believe that we had a completely abandoned uh the system of government that they had created and opted to go back to the old British system where Parliament itself was sovereign. Uh it is said that Parliament uh by Blackstone could make unmake any laws it saw fit. Uh it Parliament was the Constitution. They would think that we've adopted that system and unleashed an American Parliament to tax, to spend uh and just wreak devastation on our economy.

[00:25:42]>> Mhm. Yeah, I'm going to not leave it on necessarily that note. I want to talk to you just personally about what gives you hope. I mean, is there any is there still a tool inside the Constitution that could kind of rein this in?

[00:25:56]>> Oh, there's a tool. Um I think I do have hope. Your listeners should have hope.

[00:26:02]And so far as you look at all these great grassroots movements that have sprung up around the country, the homeschooling movement is a great example as people have seceded from government schools, moms for liberty holding local government bodies accountable such as that. Those are things for hope.

[00:26:24]You can build on that in a constitutional sense as people demand that their elected representatives be um senators, house members, what have you have a fidelity or at least support the Constitution as ratified, not this expansive version today. We can build on movements like that and maybe slowly claw back uh some that's that has been taken.

[00:26:53]>> Yeah, well said. What a fascinating time to study this stuff. Well, listen, Bill, I appreciate your time of course today.

[00:26:59]Thanks for coming on Kika. I think people are really interested in this stuff. We'll put the book down, of course you can find out more of the information as well.

[00:27:06]>> Thank you so much.

[00:27:07]>> All right, that was Bill Watkins. A very different way to look at a number that gets thrown around far too casually, nearly 40 trillion dollars. Now, here is what I want to hear from you in the comments. Does the debt get fixed with a vote or does the bond market end up fixing this? Tell me below and if you want to subscribe and have conversations that go past the headline number, hit that button. We do this every day.

[00:27:27]>> [music] >> I'm Jeremy Sadowski for all of us here at Kika. Thanks for watching.

[00:27:48]>> [music]