The Coinage Act of 1792

The Coinage Act of 1792 is the enactment of the laws that support the United States Constitution. It has been amended and added to, but it is still the controlling legal law for our currency and coin. It was even the basis of a great part of the prosecution of von Nothaus. (aside: after reading the text of the jury verdict of von Nothaus's trail in Statesville, NC, I am no longer so certain that the Gov't was being tyrannical. Not sure they were right, but not certain) But that is not why I am writing this. I have discovered that § 19 of the Act authorizes the death penalty for government officials who debase the currency. Wouldn't that be a sensation! Just one trial of a Secretary of the Treasury. We would need to win, of course. But even if he were given clemency instead of actually killed, it would still put the fear of the Lord in the next Secretary.

A Monopoly on Monopoly™ Money

Once upon a time in a land that was not far away...

Almost anyone could make a dollar bill. That's right. All the bill was was a certificate of ownership, a receipt. You still get them now - the difference is that with the common green Federal Reserve Note so common, no one remembers that we used to pass the receipts back and forth. The dollar was not the green piece of paper. The dollar was a round piece of 90% silver weighing 0.77344 troy ounces. Under the US Constitution, the US Congress had the sole power to coin money, regulate the value thereof, and of foreign coin... But the certificates, that was a different story. States, banks, companies, cities could and did circulate specie that could be exchanged for lawful money. It wasn't until the Progressive Government became greedy, coveted it all and formed the Federal Reserve, created Income Taxes, and taxed competing currencies, that the government felt the need to channel all our wealth through their hands in Washington.

Just prior to the Great Depression of 1929, there was somewhat of a standardization of currencies with new smaller bills - the ones that we use today. There were six major types, three of which survived the Depression. The ones that didn't make it were:


The Gold Certificate. Circulated in ten and twenty dollar certificates, each one represented a coin of gold of its nominal value. Private ownership of Gold and Gold Certificates became illegal under President Franklin Delano Roosevelt in 1932.¹


There were two types of National Currency:


The National Bank National Currency, backed by Treasury Securities that your local National Bank of Hometown had purchased with "lawful money" from and then deposited with the Federal Government's Treasury Department in an amount equal to the currency in circulation. This effectively doubled the amount of money in existence. The following quote from a publication of the Friesian School.

If the problem during the Great Depression had really been that there was "not enough money," then it would be surprising that National Bank Notes were suppressed in 1935 -- the bonds that had been issued to secure banknotes were all discontinued. If, however, it is understood that the political answer to the Great Depression was that only the federal government can be trusted with power over the economy, banking, and money, then the move is self-evident. (emphasis theirs)

And The Federal Reserve Bank National Currency, issued by the Federal Reserve bank, this bill was backed by Treasury Securities similarly purchased from and deposited with the Treasury Department. Aside from no longer differentiating the currency and note, this is not materially different than recent Federal Reserve Bank actions. These continued to be in marginal circulation until 1945.



The ones that survived until more recent times were:


As with the Gold Certificate,The Silver Certificate. the Silver Certificate is a receipt for metal on deposit with the Treasury Department. No more certificates could be in circulation than silver coin in circulation and in reserve. It was a natural limit on inflation. C. Douglas Dillon, Lyndon Johnson's Secretary of the Treasury ordered silver coin to cease being minted in March of 1964,several months after President Kennedy's assassination. The bills ceased being redeemed for silver in 1968.²

The United States Note,
the Federal Government's own fiat currency. Originally issued under President Lincoln, they became bound to an existing quantity in 1878 that continued until 1990s, although in the later years they existed in captivity and were not issued out to the banks and public.

And finally, the monopoly on Monopoly™ money. The only currency now in circulation. The one that (with the United States Note aforementioned) purports itself to be a dollar and not redeemable for one, the Federal Reserve Note. Between the Federal Government borrowing money to back them and the Bureau of Engraving and Printing printing them to belong to and be issued by the Federal Reserve Bank, a quasi-independent corporation, the current currency is a Gordian Knot of evasion of responsibility while retaining the benefit of wealth. Unfortunately, it is ultimately redeemable only in itself.

So was this one:


The advantage of having multiple currencies, was the same as the advantage of the backed currencies, stability to prevent runaway inflation, while still allowing the advantage of the fiat currencies, liquidity (ready availability without hoarding) to match the real wealth of the Gross National Product.

Having a monopoly of merely one currency, and a non-government fiat one at that, is that there is no balance on their checks. There is nothing to moderate the ease of debasing the currency. We will all be the poorer for it.

¹’² Gold nominally backed the US currency internationally under the Bretton Woods system until 1971, when President Nixon ceased honoring a run on the US gold reserves by Charles de Gaulle when the pegged price was less than the international price.

Please, Sir, May I Have Some More.

A comment to Mathew's question on another post. I thought it belonged up front and not in the back.

Why do I care so much about money? It is a marker for the worth of my life. I traded some of the limited time out of my life and my labors to someone else. In return they gave me this that I might regain that time and service from yet another person. The Government then comes and says I owe some of my life (in fact more than I am allowed to keep) to them that the politicians might use it to curry favor and buy votes with. There is a word for my labor and life belonging to someone else.

That word is slavery.

Today's illustration is a one hundred dollar United States Note, a fiat currency from before the Federal Reserve had a monopoly on Monopoly™ money.

On Matthew and Money

Matthew Sickinson said in response to a previous post...
Why do you care so much about MONEY?

Because money is life. It is moving part of your life of today to prepare for your future, and paying for the shortfalls of your life in the past. It is a measure and means of responsibility.
You and Marianne and apparently your generation are still relying on your parents to carry you after more than a quarter of your way through your life. Your parents and grandparents had been on their own eight years by this point in their lives.
And now your generation are expecting an entitlement to free medical care to join your free food and lodging. Whatever you get will be taken (ultimately by force or the threat of) from others. The health care that will be given to the young who have chosen to spend their money on Flat Screen Super TVs, Wii games, stupid car modifications, cigarettes, booze, and drugs rather than pay for their own way must be taken from those who have outlived their savings and health. This new health plan is a death sentence for little old ladies like my mother in order to plow under the wild oats sown by those who will not care for themselves.

Whether one is a literal believer in the Divinity and stories of the Bible; Whether you believe it was divinely inspired or written by man to ensure civilized living; there is much wisdom in the precepts and messages of it. It is a plan for living and interacting with others. It is more than mere coincidence that one of most notable passages on charity, I Corinthians Chapter 13, includes as part of that verse 11: "When I was a child, I spoke as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things" (KJV). It is time.

Gold Breaks 1000

1015 actually. The press is so excited! The silver I bought for $14.50 premium (commission) included closed today at $17.41 spot. I am not excited, I am worried. Why? Why am I not happy?

Gold and silver are not investments. They could be, but they aren't at this time. What they are is stores of value. An ounce of Gold will always be worth ... an ounce of Gold. An ounce of Silver will always be an ounce of Silver, no more, no less. Not so for that Federal Reserve Note¹ you are carrying in your pocket.

So why aren't I happy? Because not all of my money is secure in tangible assets. And a gain in Silver or Gold is more than offset by the loss in my savings, my salary, and ultimately, my pension.




¹Note - a memorandum of debt

The Velocity of Money

Cash goes round and round
based on a post by Sabine McNeill

It is August. In a small town on the Florida panhandle, holiday season is in full swing, but it is raining so there is not too much business happening. Everyone is heavily in debt. Luckily, a rich English tourist arrives in the foyer of the small local hotel. He asks for a room and puts a one hundred dollar Federal Reserve note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in a hurry and rushes to his meat supplier to whom he owes $100.

The butcher takes the money and races to his supplier to pay his debt.

The wholesaler rushes to the farmer to pay $100 for pigs he purchased some time ago.

The farmer triumphantly gives the $100 note to a local prostitute who gave him her services on credit. (Bear with me, It's just a parable)

The prostitute goes quickly to Mr. Patel, the hotel manager, to whom she owed $100 for the use of a room to entertain "clients".

At that moment, the rich Englishman is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory, takes back his $100 bill, and departs. There was no profit or income, but everyone no longer has any debt, and the small townspeople look optimistically towards their future.

And the moral of the story?
Cash is ‘real’. An IOU is TRUST.

The Creature From Jekyll Island.

In the past I have recommended a few books. My all-time favorite Atlas Shrugged, Jonah Goldberg's Liberal Fascism, Lester Thurow's The Zero-Sum Society, and Dr. Thomas Sowell's Applied Economics (2nd edition). I am adding another one. Part mystery, part story, part encyclopedic, G. Edward Griffin's The Creature From Jekyll Island (2nd edition)is now at the top of my recommended reading list. The following excerpt from TCFJI includes a quote and its footnote by Alan Greenspan from before the Creature co-opted him.

GOLD IS THE ENEMY OF THE WELFARE STATE
In more modem times, rulers of nations have become more sophisticated in the methods by which they debase the currency. Instead of clipping coins, it is done through the banking system.
The consequences of that process were summarized in 1966 by Alan Greenspan who, a few years later, would become Chairman of the Board of Governors of the Federal Reserve. Greenspan wrote:

The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit....
The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents th# goods purchased by the government for welfare or other purposes....
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.... The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

Unfortunately, when Greenspan was appointed as Chairman of the Federal Reserve System, he became silent on the issue of gold. Once he was seated at the control panel which holds the levers of power, he served the statists well as they continued to confiscate the people's wealth through the hidden tax of inflation. Even the wisest of men can be corrupted by power and wealth.

l. Alan Greenspan, "Gold and Economic Freedom," in Capitalism: The Unknown Ideal, ed. Ayn Rand (New York: Signet Books, 1967), p. 101.

So, Neal Boortz, I don't know if your faint praise is the same for this is the same as the mock faint praise you give Atlas Shrugged to get us to read it, or if you find this a little too "conspiracy theory" for your tastes (I don't), but I find it well documented and believable.

(Mr. Brabson, can this be the 7th grade book report I owe you?)

On the Law

The United States of America. Had a nice ring to it...
It was a unique place. It was a place where the law applied equally to all ... Or at least it was supposed to.
Those men who met in Philadelphia in 1788* made us a republic (not a democracy)where no man was above the law;
and the purpose of the Constitution was to ensure that the government serve us, and not we it.
The city/district is now occupied by people who not just believe that we are indentured to the Federal Government but truly believe that laws do not apply to themselves. They have gotten away with ignoring the 10th Amendment to the US Constitution for a long time.. They are currently trying to circumvent the First and Second Amendments. Through inadequate government schooling and illegal immigration by design - stuffing the ballot box with ignorant voters - they may well accomplish their goal. But there are other laws that will not so easily be thwarted. There are laws of nature and nature's God that are immutable. Just as the Law of Gravity, and Newton's Laws will not be violated, the Laws of Economics are observations of Nature and not creations of a committee or government.
One may think that Obama is now overturning the Laws of Economics, it is not so. He may believe it if he likes, but he is merely diverting them temporarily from which they will spring back with full equalization like a seventh grade algebra problem ... Both sides must match. In some way shape or form there must be balance. It may not be a return quid pro ante, but it will satisfy the equality.

There is precedent. I am neither a fan of Jimmy Carter (despite having been to his home before he was President) nor an enemy of Richard Nixon (my first Presidential vote). But sometimes one must call a spade a spade. Jimmy Carter gets the blame for the massive inflation of the early 1970s, but the truth is that he just had the misfortune to be holding the position when the dam burst. On March 25, 1964, President Lyndon Johnson through Treasury Secretary C. Douglas Dillon (childhood friend of the Rockefeller boys) demonetized the Dollar; releasing it from being bound to scarce Silver starting us on the road to inflation. Nixon then compounded the error through two actions. Because Charles De Gaulle saw our Gold prices as the bargain they were and made a run on redeeming his holdings in our currency (remember, this despite still owing us a tremendous amount of war debt). Nixon reneged on our Gold Standard - Totally freeing us of any real limit on our monetary supply. And when the inevitable resulting inflation hit, he did a very Liberal and un-Conservative thing. He froze wages and prices. It was ostensibly a ninety-day action, but Nixon had other, frankly trivial**, political problems and the ninety days continued for one thousand days through the term of Gerald Ford, and into the term of poor Jimmy Carter who thought (and apparently still thinks) that good intentions are more important than rational thought. Jimmy thawed the freeze, and the rest was inevitable, as the laws of Economics rebalanced the equation. President Carter was followed by President Ronald Reagan who could truly do little but improve the situation. The tools were all there. The economic equation was rebalanced albeit with terrible interest rates. Reagan chose a Chairman of the Governors of the Federal Reserve bank, Alan Greenspan, who cautiously lowered the interest rates a little at a time over the next 18 1/2 years so as not to jar the economy again with a sudden rush of inflation. But he was aided by restraint on the part of the US Congress and/or President through that time. For most of that time, it was a stalemate with one or the other being controlled by a fiscally conservative party. In the last quarter of the George W. Bush presidency, the Congress was taken over by very liberal Democrats, and since President Bush himself was no fiscal conservative, and since both Greenspan and his tactic of reducing the interest rate to control money flow were gone, there was no check to the results of Government tampering with the Laws of Economics.
Just like Doctor Elisio Colli who treated my Penicillin reaction in the days before the allergy was widely known with another shot of Penicillin, our Government has tried to cure the economic ills of our country caused by tampering with and restraining the Free Market by tampering more with and restraining more the Free Market. They do not understand that I, and You are the Free Market.

If we are not free, we are by definition slaves.

There is a clique in Washington right now, who believe that they can comfortably ignore the Laws of Economics due to having seduced a bunch of willing slaves, many even the descendants of slaves whose ancestors cherished their newly granted freedom in the days after the Civil War. But that does not mean that Economics is moot.
It does not mean the the Law of Supply and Demand is no longer valid. It does not mean that the other Laws of Economics have been repealed. And it most assuredly does not mean that any adjustment on one side of the equation will not be met with an equal and opposite reaction on the opposite side of the equation. So, Nancy, Harry, Barack, and even you, Barney Frank, whatever yoke you put on us will not fix the Economy -- not because of anything we chose to do to thwart you. It will not work because you cannot fix freedom by control.




* Yes, it was 1788. The true Bi-Centennial was 1988, not 1976. But that was just one more political distortion from those in Washington who scorn the Constitution that they have sworn to uphold. Treason in Washington, DC is a way of life.
** Trivial in that the Watergate scandal was typical behavior of both parties prior to that time, and if the actions of Al Franken are any indication, still are. Just like the bias of the Liberal Press in the 2008 elections, the anti-Nixon bias of the 1970s Liberal Press foreswore accuracy and truth for political reasons.


John Galt, Where are you when we need you?

As Constant As the Dollar

As Constant As the Dollar
Original photograph by luxomni

These are five of the six kinds of currency in circulation prior to FDR*. Although readily interchangeable for each other, each one really was different. Two of them were anchored in value, because they backed by a coin or block of metal of similar value. In truth, they were a receipt for ownership of that coin or hunk of metal. Therefore it was a "Certificate" of ownership. It was easier to carry and readily transfer the receipt than it was the metal itself. The other bills were promises. "We don't have it right now, it is tied up in other things - i.e. loans or property, but we can get you some metal. Hence it was a promissory note - a United States Note, or a Federal Reserve Note. The last is National Currency. This is a place-holder -- i.e. "We not only don't have it in metal right now, but we don't even have it on loan right now. We will get you some eventually". The purpose is to keep commerce moving. Since "A" will work for "B" and "B" will sell to "C" who will sell to "A" all we need is a barter ticket to keep track of the motion.It self-proclaims that it is exchangeable for "Lawful Money". Ipso Ergo, it is "Unlawful Money".

They were all interchangeable, as was the silver dollar that was really a measured amount of silver (until C. Douglas Dillon, President Lyndon B. Johnson's Secretary of the Treasury ceased redemption in March 1964). Gradually, these bills all have been removed from use, leaving only the Federal Reserve Note in circulation.

To quote the U.S. Department of the Treasury web site, "the [Federal Reserve] notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy." Because that is neither a fixed amount nor relationship, the value is free-wheeling.

But do note that that full faith and credit never seem to work in the public's favor. That 10 cent Pepsi, now a dollar-thirty-nine
-- it wasn't the Pepsi that changed.


*The sixth was the National Bank note or "hometown note" issued by national banks (First National Bank of [Your-town here]) under authority of the Federal Reserve system.

I surprised myself

I have been saying this for a while, but it caught me again. Can it be anything but a conspiracy to keep us stupid?
Ask everyone you know. "Why is gas so expensive?" I have heard the usual litany - "Speculators". "Big oil". "The Arabs".
The answer is , of course, gasoline is cheaper than it was in 1964. Huh?

In nineteen-sixty-four, the Dollar was an instrument called a silver certificate. It equaled and was exchangeable for one silver dollar at any bank. It was also in nineteen-sixty-four that either dollar equaled and was also exchangeable for four gallons of gasoline.

A mere 100 days after the death of President John F. Kennedy President Lyndon Johnson accomplished a goal he had since he was an assistant to Senator Sam Rayburn in the early days of FDR. He demonitized silver and removed the requirement that there be an actual "dollar" for each certificate in circulation. In essence he made the bill the dollar.

Little-by-little, the currency inflated. Now, in 2008, we take those two dollars and see what they buy. The paper one now buys one quart of gasoline - one sixteenth the amount of gas that it bought in 1964. But what of the silver dollar? At today's spot fix for silver and the price I paid for gasoline this very afternoon, one silver dollar would have bought not four gallons of gas as in 1964, but five full gallons of gasoline.

So as you listen to people blame everyone in sight for the so-called high price of gasoline, remember, they are not blaming the groups really responsible for the slipping of our savings and decline of our real salaries, the bureaucracy of the Federal Government and our own Representatives. They are misdirecting us to see the dollar as a constant and gasoline as a variable. But seal up a jar with one gallon of gasoline, and one with a one dollar bill. Come back in ten years and see which one has lost its value.