Liberty Maven

“Money is not an invention of the state. It is not the product of a legislative act.” - Carl Menger, 1871

Originally published January 2, 2010 at http://towneforcongress.com/economy/chasing-gelten-shadows-1

Money is an invention of mankind. Our society refers to the irredeemable scraps of linen and ink as “money,” but in truth the dollar is no such thing. It is merely a currency, a medium of exchange, created by fiat – by government decree and force. The dollar is a phantom I.O.U. note. It is a Ponzi scheme and the central banking system issues new dollar currency whenever it wishes.

Dollars are toxic waste in the literal and fiscal sense. Literally, each dollar bill contains arsenic, cadmium, mercury, thallium, and cyanide and generates dumpster upon dumpster of hazardous waste every day.  Fiscally, the dollar has lost 98.3% of its value as of January 1, 2010 since the creation of the central bank known as the Federal Reserve in 1913. (Note 1) Many Americans are unaware that the electrons and scraps of linen we trade around as currency are mere shadows of sound money.

To see the shadows in our money, we have only to look at it. Look at this old quarter. The one I have is a little worn but it still has a silvery glisten to it and rings when you drop it. Now look at the rim of any current quarter – it is a cheap copper sandwich with a thin plating of nickel on top to make it appear like silver. It makes an annoying tinny sound when you drop it. The quarter was exchangeable in 1916 for about 0.012 troy ounces of gold, or over $13 modern-day dollars. Today it is still exchangeable for over $3just for its silver content. The modern quarter? The “melt” value of its copper and nickel is worth less than 5 cents.

Golden shadows? Look at a new $1 Sacajawea or presidential series coin. It’s copper with a manganese brass cladding to give it a nice, fake golden shine. The melt value of the metal is about 5 cents. Desperate to introduce them into circulation, the United States Mint accepts credit cards and ships direct for free (well, at taxpayer cost) to your home. [The Mint is trying to replace $1 bills, which costs around 5 cents each to print as they wear out very easily over several years, after which it is shredded and treated as toxic waste.]

When originally introduced as a super-cheap placeholder coin for silver and gold redemptions in 1866, the nickel was made of 3.75 grams of copper and 1.25 grams of copper. The dollar’s debasement is so horrendous that nickel’s melt value is now higher than its face value of 5 cents.

Not all that long ago, a single penny actually had purchasing power, unlike today. The melt value of pre-1982 pure copper penny is 2.2 cents.  The modern penny, debased with a zinc core covered with a thin copper cladding, has a melt value of 0.6 cents. The cost of minting a penny puts its cost at over a cent.

Money gradually evolved from societies from barter (or direct exchange) economies to economies based onindirect exchange. Under indirect exchange, Joey sells his chickens’ eggs for money and then either buys, say, a wrench from Bob or saves the money for future use. If one looks at this with an economist’s eye, Joey exchanged his commodity (eggs) for another commodity (money) and then either saved the commodity or exchanged it yet again for another commodity (Bob’s wrench). Hence money is actually a commodity just like corn, copper, or even an Ipod. Sound money is the hallmark of prosperous societies. Fraudulent money impoverishes and enslaves societies and commonly rips them apart in blood-soaked wars.

For money to be sound, it must have the following characteristics. Money must be durable and not easily destroyed. Money must be portable for convenience. Money must be easily divisible into smaller units. Money must be recognizable and uniform. Money must be reproducible. Money must be scarce, and it must also have a relatively stable purchasing power.

Fiat currencies – like the dollar and all other national currencies – can never truly fulfill the scarcity and purchasing power requirements. For example, let’s use our own currency again. In 1964, all dimes, quarters and halves were 90% silver by mass. Four silver dimes in 1964 would buy a good loaf of bread. In 2010, the dimes would certainly not be enough at a bakery, but exchanging at a jeweler or coin shop for its worth in silver would yield $4.85 today – quite sufficient to make the exchange.

For nine straight years from 2001 to 2009, the gold has climbed in price against the dollar with an average annual gain of 17%. Silver gains have also been 17%, but with far more volatility. Most importantly, gold is strengthening against all other national currencies which indicates the entire fiat monetary system is falling apart.

Central banks suppress the price of gold to make their own fiat paper currencies look stronger. While this may seem at first to be a wild-eyed claim, there is plenty of historical precedence and modern-day evidence collected by GATA. Per facts collected from Federal Reserve’s very own archives, the United States government schemed with other central banks to secretly manipulate the gold price from the creation of the London Gold Pool in 1961 until its utter collapse in 1968. Sources for the modern-day suppression of the gold price can be reviewed in my article “The Summers Gold Price Suppression Scheme.”

If you live in Pennsylvania’s 15th congressional district, it is now easy to understand why there are so many full-page newspaper ads asking to buy your gold and silver, and few willing to sell metal. Not only is gold and silver money, but it is the only lawful form of money authorized by the Constitution of the United States, as I reviewed in the below talk.

In his ground-breaking Principles of Economics, Carl Menger noted the Germanic word “Geld” was applied to any goods that assumed the role of money in the marketplace. This word was derived from the verb “gelten” which meant to compensate or pay. (Page 260/328) As society evolved from ‘cattle standards’ and ‘buckskin standards’ to ‘copper standards,’ the ultimate form of “Geld” became - and remains – gold.

Unknown to most Americans, the annual turnover at London gold market alone exceeds $20 trillion dollars – a sum that is far larger then the figures used for US GDP.  As the insane Ponzi scheme of fiat dollars designed by crackpot Keynesian economists spirals into oblivion, dollar holders chase “gelten” shadows as central bankers’ schemes to support the reckless welfare and warfare spending of Congress becomes apparent to all.

Jake Towne

January 2, 2009

Note 1: Under the Gold Standard Act of 1900, the dollar was roughly convertible to 0.048 troy ounces of gold.  The NMA calculates the dollar value of a troy ounce of gold to be $18.92 in 1913.  The London gold fix to finish 2009 was $1104.