Police issue warning over 'Liberty Dollars'


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rick_reno
March 1, 2006, 04:23 PM
Anyone seeing these in your area?

http://www.bonnercountydailybee.com/articles/2006/03/01/news/news01.txt

PONDERAY -- They may look like the real thing, but Liberty Dollars now circulating in the greater Sandpoint area are neither legal tender, nor can they be accepted at banks or deposited in savings and checking accounts.

That means you can stuck holding a bundle of worthless currency the way the Co-op Country Store did when it recently accepted eight silver Liberty Dollar coins for $160 worth of merchandise.

The Ponderay Police Department is not quite calling Liberty Dollars a scam, but it wants area merchants and employees to keep a sharp eye out for silver coins stamped "Liberty" on the face and "$20" on the back.

"No one is required by law to accept Liberty Dollars as payment," said Ponderay Police Chief Mike Hutter. "They're issued by an organization called NORFED, which is an acronym for National Organization for the Repeal of the Federal Reserve Act and Internal Revenue Code.
"The coins are erroneously believed to be legal tender."

Hutter said that NORFED does not guarantee that the Liberty Dollars can be converted back at standard U.S. currency.

"The coins are only worth the current marked price of silver, if you can find a buyer," he added. "In most cases, they're worth half the face value of the coins."

As of Feb. 28, market value of silver was less than $10 per ounce. The Liberty Dollars passed at the Co-op had an assumed face value of $20 for the one-ounce coin.

"People do use them for bartering purposes, but we do want to stress that they are not legal tender," said Hutter.

Legal tender is defined as legal valid currency that may be offered in payment of debt and that a creditor must accept.

NORFED supporters maintain that by purchasing the Liberty silver certificate, buyers not only receive an instrument that is backed by silver, but also declare themselves as members of a movement to repeal the Federal Reserve Act.

They also contend its presence in the marketplace "limits the amount of money the government controls."

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eab
March 1, 2006, 05:07 PM
One of my friends got a bunch of thease about a year or so back. Started using them for money and stuff. His were only worth about $10.00 and said $10.00 on them. I told him he was nuts, course hes one who belives in no federal reserve and that we should have never left the gold/sliver standered. Any way, I would never except one as cash payment. I will take my "worthless" paper money accepted the world over any day of the week.

O.F.Fascist
March 1, 2006, 05:25 PM
I like silver coins, personally I would rather barter silver eagles for near spot price (almost $10 an oz now) than to have a 1oz coin and claim it was worth $20.

Scottmkiv
March 1, 2006, 05:36 PM
The problem with all of these alternative coins is that the face value is way higher than it should be based on weight. Otherwise, I would say they were great.

Lucky
March 1, 2006, 05:48 PM
I'm just guessing, but don't the founding documents of the United States of America define specifically what a dollar is? IIRC from econ it's sort or like drachma, I'll look it up. It might be that these people figure out the constitutionally-defined weight of silver that a dollar represented, and are trying to re-institute it.

If that's what they're doing, then I rather support them.

m-w.com
"
drachma
One entry found for drachma.
Main Entry: drachˇma
Pronunciation: 'drak-m&
Function: noun
Inflected Form(s): plural drachmas or drachˇmai /-"mI/; or drachˇmae /-(")mE, -"mI/
Etymology: Latin, from Greek drachmE -- more at DRAM
1 a : any of various ancient Greek units of weight b : any of various modern units of weight; especially : 1DRAM 1
2 a : an ancient Greek silver coin equivalent to 6 obols b -- see MONEY table

wdlsguy
March 1, 2006, 05:55 PM
hes one who belives in no federal reserve and that we should have never left the gold/sliver standered.

Considering the fact that the silver content in a pre-1965 U.S. dime is currently worth $0.70, I'd say your friend is right.

($9.78 * 0.715 * 0.10 = $0.699)

eab
March 1, 2006, 06:04 PM
The Constitution, does not say what a dollar should equal. It doesn't even mention it.

For the first couple decades we had no centeral bank and there was many independent banks all issuing there own money, then these banks would go under, people would lose there money, it was pretty caotic. Then the central bank was setup to put a end to it. The federal reserve was setup when the goverment put an end to the gold standerd and went to the silver standerd, the silver standerd was taken away some time in 1970. This was done for various reasons. Any way your money is "worth" only what the US goverment says its worth. It delves into politics from here which I am not up to speed on to comment on what I belive is right or wrong and have no feelings on the issue as of now.

Lucky
March 1, 2006, 06:05 PM
In Canada we make most of our coins out of steel now. And the Mint is considering following New Zealand's move to eliminate the penny altogether. If penny's were still made out of copper, which they aren't, the copper content would be worth the same as the coin. The real reason they want to get rid of pennies is because of the expense in minting and moving the damned things around.

But it should be mentioned, that a Federal Reserve Note is not money, it can be exchanged for money, though. Old ones used to say they could be exchanged for the defined amounts of gold, or something along those lines.

This might be why the people minting those dollars are not being arrested, because they are not breaking the law. If they said their coin was worth 20 reserve notes, lol, then it would probably be illegal.

""No one is required by law to accept Liberty Dollars as payment," said Ponderay Police Chief Mike Hutter. "They're issued by an organization called NORFED, which is an acronym for National Organization for the Repeal of the Federal Reserve Act and Internal Revenue Code."

In Canada people are not obligated to take anything as payment. If a store doesn't want to take credit cards, debit cards, cheques, they don't have to. If they don't want to take bills larger than $20, they can just turn you away. If they don't want a bag of pennies, they don't have to take them.


"The Constitution, does not say what a dollar should equal. It doesn't even mention it."

Are you sure? I looked it up, and there is something called the coinage act, from 1792.

ctdonath
March 1, 2006, 06:28 PM
Original text defining a US Dollar in terms of silver (http://memory.loc.gov/cgi-bin/ampage?collId=llsl&fileName=001/llsl001.db&recNum=371): "each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and ten sixteenth parts of a grain of pure, or two hundred and eight grains of standard silver."

Lucky
March 1, 2006, 06:51 PM
"For the first couple decades we had no centeral bank and there was many independent banks all issuing there own money, then these banks would go under, people would lose there money, it was pretty caotic.:

Eab, what you describe is what happens when you allowed banks to operate with 'fractions' of their 'reserve'. This means, in layman's terms, that they don't have the money they are supposed to have. A bank can make money, simply by holding it, paying interest to it's lenders, and charging a higher interest rate to people who borrow it. Right there, a bank could exist and profit. It would provide a service, it would be a hub where people who want to lend money and people who want to borrow money go, and both pay the bank a premium for it's services.

But bankers wanted more money, faster money, easier money. So they lent more money than they had. Yea, that can get chaotic. Just ask Ponzi. Thus after banks toyed with people (ie financially ruined entire areas) every few years, for a long enough time, the public was willing to accept a 'federal reserve'. This is simply a place where all the banks get together, they actually own 'shares' of the FED, iirc. And if one bank is caught with it's pants down, because it was cheating and lending more money than it ever had, the other banks in the fed lend it money to help it out.

Me, I've got some gold, and some silver, but not enough to retire on! Some of it is just paper, anyway, certifying that I own a couple bars in a vault somewhere. Lol. The head of the econ dept I went to told us that his life savings was invested in material things, like old cars. In fact many econ profs seem rather skeptical about long-term investments in paper... Might have something to do with the perpetual failure of 'paper' investments to stand the test of time, in every country of the world...

mp510
March 1, 2006, 06:53 PM
The Spanish Milled Dollaris only about .85 of an ounce (as your math suggests). I know that is about correct, because I own both a spanish Milled Dollar, and modern one ounce Silver Eagles (gov issue).

I don't know the reason behind the arbitrary value, but it helps keep an item stable (if it was real currency) during times when the spot changes.

brickeyee
March 1, 2006, 07:18 PM
"Any way your money is "worth" only what the US goverment says its worth."

Or what you can get for it in trade for goods or services.
The fact that a dollar bill has no intrinsic value is rather secondary to commerce.
It is a standard of exchange. Nothing more, nothing less.
There is simply not enough gold and silver to back the amount of currency required for our economy.

xd9fan
March 1, 2006, 07:27 PM
eab:

I must be crazy then because IMHO there is a golden rule of the ages....."he who has the most gold makes the rules.." The US taking itself off the gold standard was a great way for the federal Govt to get away with increasing the size and scope of their budget and not be tied down by anything. Now the dollar's value is what the US says it is.........pretty hollow. Taking us off the gold standard pretty much caused inflation.

I dont like the Fed reserve....but then I not a big fan of statist centralized planning either.

Lucky
March 1, 2006, 07:45 PM
"The fact that a dollar bill has no intrinsic value is rather secondary to commerce."
-In the movies I see people talk about 'pink slips' for cars. Those pieces of paper have no intrinsic value either...


"It is a standard of exchange. Nothing more, nothing less."
-I think it's slightly more, involving power and control.


"There is simply not enough gold and silver to back the amount of currency required for our economy."
-I don't understand. I'll have to think about that one. Off the top of my head I'd say that would result in price deflation, with no effect on real GDP.

Right now I feel that currency doesn't limit an economy, though, it simply translates values in the place of barter. But the currency itself must not replace value, it must represent value. Ergo the bank must have $1 million of value in posession if it prints $1 million in bank notes, in my opinion (not law). The bank could own cattle or real-estate or apples, but gold seems easier, impossible to counterfeit (unless there is some material which can be irradiated and then decay into gold?), and it doesn't degrade over time (I think).

wdlsguy
March 1, 2006, 07:53 PM
If Washington, DC vanished in a mushroom cloud tomorrow, which would you rather have: $1,000,000 in Federal Reserve Notes, or 1776 ounces of gold? :scrutiny:

Art Eatman
March 1, 2006, 08:02 PM
http://www.kitco.com will give you the going rates for precious metals.

I think silver's up to $9.75 per ounce, today. Gold at $561 or some such.

U.S. "junk silver" has 0.712 ounces per $1 of face value, for dimes, quarters and halves minted in 1964 and earlier. Silver dollars are 0.82 ounces of silver, IIRC.

There is always some group protesting the Federal Reserve and the IRS and some of them do this silver coin "Eagle" thing. Regardless of one's sympathy in philosophic fashion, stay away. Way away. The coinage is worth no more than its intrinsic content. The Fed and IRS ain't going away, either. Irvin Schiff is going away, not IRS.

And this thread is off topic, anyhow. I'm letting it run on account of the warning-value.

:), Art

sithanas
March 1, 2006, 08:11 PM
"The fact that a dollar bill has no intrinsic value is rather secondary to commerce."
-In the movies I see people talk about 'pink slips' for cars. Those pieces of paper have no intrinsic value either...


I have no idea what "pink slips" for cars are. But I agree that the lack of intrinsic value of the dollar is indeed secondary to its effectiveness as a unit of exchange. What is important to its acceptance is the fact that nearly everyone in the world is willing to accept it, and the fact that the United States government has in its possession a very large number of guns.

"It is a standard of exchange. Nothing more, nothing less."
-I think it's slightly more, involving power and control.


The Federal Reserve dollar exists because a system based on a "fixed" currency (like silver notes or the pound sterling) didn't, and doesn't, provide enough control over inflationary and deflationary effects on an economy. The idea of price stability and control was seen as more essential to the country than the guarantee of the value of the currency.

"There is simply not enough gold and silver to back the amount of currency required for our economy."
-I don't understand. I'll have to think about that one. Off the top of my head I'd say that would result in price deflation, with no effect on real GDP.

Definite price deflation. Real GDP, by definition, wouldn't change because since it's "real" it's corrected for inflation or deflation. Having the currency backed by gold/silver would cause problems, however, in the sense that it would significantly limit the ability to control inflation and deflation levels, as well as change money markets significantly.

Right now I feel that currency doesn't limit an economy, though, it simply translates values in the place of barter. But the currency itself must not replace value, it must represent value. Ergo the bank must have $1 million of value in posession if it prints $1 million in bank notes, in my opinion (not law). The bank could own cattle or real-estate or apples, but gold seems easier, impossible to counterfeit (unless there is some material which can be irradiated and then decay into gold?), and it doesn't degrade over time (I think).

Other than the fact that you can't make gold, and that gold doesn't decay (both true), I have absolutely no idea what you just said.

gc70
March 1, 2006, 09:56 PM
Some people insist that paper currency isn't "real money" because it is not specifically mentioned in the Constitution, while coinage is:
The Constitution, Article I, Section 8:

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
For those who feel that way, so be it. For my part, ATM cards and credit cards are also not mentioned in the Constitution, but they work fine for my normal purchasing needs.

Lucky
March 1, 2006, 10:14 PM
Moderator was right, very o/t! Sorry:o

Fractional reserve banking is where a bank lends more money then it has. When they play with the money supply like that, that is a real source of inflationray pressures. You have to draw 3 graphs and stack them up and connect the dots, though, it's quite involved. How can they lend more money than they have? Simple, they print a 'note' (bank note, federal reserve note) and write a value on it, and pray that all the notes they write don't come back at once. As long as people believe your note is worth what it says it's worth, they treat it like money. But it is not money, it's a promise that the money is available.

IRL gov'ts have to choose what economic ill to fight #1 inflation, or #2 unemployment. They almost always choose #1. But in the strict economic sense, there is no point in fighting inflation. It has no real effect on the economy, Real with a capital R, wages and prices all rise and fall together, so you'd always be able to afford the same car and food. There is no need to 'fight' inflation, ergo that argument against gold-backed currency falls on its face. When you see 'rampant' or 'super' inflation, guess what is happening? - 'Brilliant' leaders are making a select few people VERY rich, simply printing money as fast as they can. Whether they are in collusion with the guys who walk around snapping up bargains, that's hard to say.

But never forget, the difference between a $100 bill and toilet paper is often a few days of inflation. (if you have inside knowledge you can make money though, if inflation 'hits' here some day I plan to clean up right along with the big boys, cars and real estate would be affordable to anyone with a couple ounces of gold)

antarti
March 1, 2006, 11:32 PM
There is simply not enough gold and silver to back the amount of currency required for our economy.

Sure there is, at, say, $5,000.00/ounce valuation.

If what you are trying to say is that expansion in the money supply would be restricted (because you could only expand supply by mining more gold), then my response would be that's the whole point of a non-fiat currency.


IRL gov'ts have to choose what economic ill to fight #1 inflation, or #2 unemployment. They almost always choose #1. But in the strict economic sense, there is no point in fighting inflation. It has no real effect on the economy, Real with a capital R, wages and prices all rise and fall together, so you'd always be able to afford the same car and food.


WHOA! That's some dangerous thinking! Lots of folks are on fixed incomes... what do you think happens over time as inflation in prices occurs to them? Wage inflation is NOT a given!

What's your reaction today when you think "I'm gonna have $2 million in my 401K at retirement"? YIPPEEE.

What happens in 25 years (given 2-3% inflation per year) when you retire with that $2 million? Not so cheery now that 50-75% of that is, effectively, gone are you? Hint: It's called robbery!


The Federal Reserve dollar exists because a system based on a "fixed" currency (like silver notes or the pound sterling) didn't, and doesn't, provide enough control over inflationary and deflationary effects on an economy. The idea of price stability and control was seen as more essential to the country than the guarantee of the value of the currency.

This is either the best joke I've heard all day, or you're a central banker.

A "hard" (gold) monetary standard returns us to more traditional boom/bust cycles, where busts are short and steep, and booms ramp up slower and run longer. The last bust under our fiat system was really 1929, and then we were the world's creditor and a far more capable people. Things like the derivative and carry trades are the bane of fiat systems, just wait until those start to unwind.

All that said, passing off $10 in silver as "twenty dollars" is going to land that guy in jail for fraud under any monetary system, no matter who minted those coins or what "sign of the sovereign" is impressed on them.

Lupinus
March 1, 2006, 11:47 PM
this makes me wonder how many people think we would be better off returning to a gold/silver standard.

Frankly, I haven't sat and thought long enough to really make an informed decision.

sithanas
March 1, 2006, 11:55 PM
This is either the best joke I've heard all day, or you're a central banker.

A "hard" (gold) monetary standard returns us to more traditional boom/bust cycles, where busts are short and steep, and booms ramp up slower and run longer. The last bust under our fiat system was really 1929, and then we were the world's creditor and a far more capable people. Things like the derivative and carry trades are the bane of fiat systems, just wait until those start to unwind.

All that said, passing off $10 in silver as "twenty dollars" is going to land that guy in jail for fraud under any monetary system, no matter who minted those coins or what "sign of the sovereign" is impressed on them.

Guilty as charged. I chalk it up to an economics professor who's very fond of the Fed. However, the system does work pretty well.

gc70
March 2, 2006, 12:21 AM
by Antarti:
Things like the derivative and carry trades are the bane of fiat systems, just wait until those start to unwind.Can you explain - in somewhat simple terms?

Herself
March 2, 2006, 12:26 AM
The .22 Long is the Dime of the Future! ...I'd say you heard it here first, but it's old news.

If the Norfed stuff sells for the spot price plus a small, um, can't remember the word, but it covers the minting costs, along with the extra you end up paying for buying small amounts, then it's not so bad. If they're sellin' for 2X what, say, fine silver rounds cost, that's iffy. Why pay for the attractive stamping? What's that get you? Artistic value?

The present price of official (ish) U. S. Mint silver "dollars" and gold "twenties" runs at about 10X the face marking, tracking the actual prices of these commodities closely. And that's what your dollars would be worth in buying power, if the States were still on a hard-money standard: pennies would be dimes and a paperback book would cost 49 cents. Doesn't seem to be happening.

But .22 rounds have about the same swap value thy have always had: not much, but some. My guess is they'd be a pretty stable currency... :)

--Herself

O.F.Fascist
March 2, 2006, 12:28 AM
Since we are on the topic of silver, if anyone is interested in buying 5 silver eagles for slightly less than spot price at the moment check out this thread at fatwallet.

http://www.fatwallet.com/forums/messageview.php?start=0&catid=18&threadid=570148

antarti
March 2, 2006, 01:32 AM
Can you explain - in somewhat simple terms?

I'll explain the Gold Carry Trade (there are many others):

Central Banks like our own held/hold gold. When the gold spot prices were low, Central Banks entered into what are called "carry agreements" with 3rd parties: they "lent out" their gold (or a portion) in return for 1% "rent" on the gold per annum.

The people who pay to "rent" the gold, then sold it, and bought treasuries (returning say 2%-8% depending on currency/country). This depressed the gold price since gold flooded the market. ALSO it depresses the price since the CB "lent" it, it is still on their books as a hard holding! So the gold became 2X on paper, distorting any supply/demand equation.

Everything is/was hunky dory, until the gold price starts escalating (largely due to inflation).

The gold is gone, but since the CB "lent" it, (remember) it is still on their books as a hard holding. The carrier is on the hook for the gold, which is payable on demand to the CB, subject to the terms of their agreement with respect to the carry period.

So, you have large CBs with large gold holdings on paper (not so large in reality). You have gold that can't possibly be returned because it will bankrupt the carrier. The CBs have little choice but to extend carry periods, even as gold price increases, making the situation even more untenable. Sooner or later, those gold reserves may be needed.... they will have vanished.



Derivatives are simply investment vehicles that have no value intrinsic to them. You are trading not a commodity or stock, but a promise. Futures are a good example. You are trading the ability to buy a good at a fixed price in the future, subject to exchange policies and exigencies. So the "paper" you hold has no value, it's not corn that bought, its the ability to buy 10 truckloads of corn at $1 bushel or whatever in 90 days.

There are positions you can take with simple 1:1 leverage, and massively leveraged positions are available too (these are the norm).

Now this isn't so bad applied to corn, but it has been applied to precious metals, stocks, bonds, and even Fannie/Freddie credit of all things! You literally have people betting on the success of mortgages, highly leveraged at that! At some point, this compound leverage becomes a house of cards that whipsaws and falls under its own weight. Applied to anything but commodities, they are leveraged bets on somebody else making a bet, or not. Bad juju.

beerslurpy
March 2, 2006, 02:10 AM
No, theyre not legal tender, but they contain gold or silver which makes them actually worth something. You can always just go exchange them for real dollars.

Lucky
March 2, 2006, 03:36 AM
Actually those are federal reserve notes, what you'd exchange the silver for. And the federal reserve notes are exchangeable for real dollars.:) And a dollar is represented by a weight of silver, a tradition carried over from the Dutch/German Thaler.

Main point is that a federal reserve note isn't a dollar, it could be traded for one, but as defined by US law a dollar is something else. Prior to Breton-woods (and maybe for a while after) they wrote it right on the bills, "this bill can be traded...". The American money I have even lists which federal reserve bank the note came from, San Fransisco, etc.

HankB
March 2, 2006, 09:11 AM
The problem with all of these alternative coins is that the face value is way higher than it should be based on weight.Good point . . . I'm not happy about U.S. currency being backed essentially by, well, nothing, but when some private mint starts putting out precious metal coins with face values much higher than the intrinsic value of the metal, and expects people to accept them as such, I smell a scam.

Thin Black Line
March 2, 2006, 09:22 AM
I will gladly pay face value for Gold and Silver Eagles as marked by the
US Mint ;)

I remember years back when I tried to barter a combination of cash
and a tube of silver eagles to an FFL at their current spot metal market
price and the guy's response was "Why would I want those? I can't
buy anything with them."

brickeyee
March 2, 2006, 09:56 AM
Federal Reserve notes are not exchangeable for metal. Gold and silver certificates were theoretically exchangeable.
Silver certificates have a legend on the bill “silver certificate”, and the words “This certifies that there is on deposit in the treasury of the United States of America xx dollars in silver payable to the bearer on demand”.
The wording changed slightly over the years, with a 1923 large bill saying “…One silver dollar payable…”
Next came United States Notes, then Federal Reserve Notes.
Having gold valued at 2000 and ounce to back the volume of currency needed has no real benefit.
Since there is other market use for precious metals (many that involve consumption and incorporation into products) this adds one more problem to using them to back currency.

While the system may appear to be a house of cards (and to some extent it probably is) keeping ‘Incongruous Assembled’ at arms length from the actual money supply has had a lot of benefit long term. We are unlikely to ever see Weimar Germany inflation of our currency, though the core rate (~2%) remains.

Central banking is a lot like democracy. It may have problems, but consider the alternatives.

Lucky
March 2, 2006, 10:57 AM
Central banking doesn't have to mean money has no backing. But anyway, you could easily see double digit, run-away inflation. Two scary words, for now, 'housing bubble', and that's just one issue ofa half dozen.

Here is what old bills said:
This one says can be traded for legal money or gold,1914
http://www.usrarecurrency.com/WebPgFl/F361802A/1914$100FederalReserveNoteSnF361802A.jpg

I believe that by 1934 private posession of gold had been made illegal, it was treated the same a cocaine is today, so this bill makes no mention of gold.
http://usrarecurrency.com/WebPgFl/G00273192/1934A$500FederalReserveNoteG00273192A.jpg

And here in 1976 the paper is all you get, no mention of trading the bank note for actual currency.
http://usrarecurrency.com/WebPgFl/A00000099A/1976$2FederalReserveNoteSnA00000099A.jpg

I'm not judging, it's just interesting to me.

280PLUS
March 2, 2006, 04:21 PM
:)

http://www.apmex.com/shop/buy/100SILVERBARS.asp

If anyone actually orders, don't forget there's probably shipping costs involved too.

Fred Fuller
March 2, 2006, 08:28 PM
When I was a boy in the late 1950s and early 1960s, one of my favorite things to do was to save enough money to get a dollar silver certificate, then take that to the local bank. I'd slide it across the marble-topped counter and the teller would hand me a nice shiny silver dollar. I still have a small box full of those silver dollars I accumulated as a boy. No chance of swapping the current paper for real money though.

"Note" what the text on this bill says.

All that changed in 1964, when a flap- eared varmint from Texas proclaimed that silver was to valuable to use in coins. A thousand- dollar face value bag of those coins will set you back $7,373 in Federal Reserve "Notes" right now, and a thousand dollars worth of silver dollars (if you can find them) will likely cost you close to $10,000 or more.

Yet in 1963 you could swap all you could carry, dollar for dollar. Remember that next time some DC gasbag blows off about controlling inflation, 'K?

lpl/nc

Pafrmu
March 2, 2006, 08:41 PM
Isn't the current paper money "real money"? Just like my credit card is real money and the money in my checking account is real money.

I can use it to buy real guns and ammo.

:)

Fred Fuller
March 2, 2006, 09:06 PM
Depends on your definition of money.

-----------------------------------------------------------
http://economics.about.com/library/glossary/bldef-money.htm?iam=metaresults&terms=money
Definition of Money: Money is a good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange. Most authors find that the first two are nonessential properties that follow from the third. In fact, other goods are often better than money at being intertemporal stores of value, since most monies degrade in value over time through inflation or the overthrow of governments. (Econterms)
------------------------------------------------------------

I happen to prefer the classical definition, of which a key tenet is a store of value. That means that if it is worth X today, it is still worth X 100 years from now. You seem to look at money only as a means of exchange, which is of course perfectly acceptable to all modern central bankers.

Check back with me in 100 years and see if you still feel the same way.

lpl/nc (we are all Keynesians now on THR)

Pafrmu
March 3, 2006, 12:55 PM
Aren't we all dead in the long run?

Art Eatman
March 3, 2006, 01:37 PM
Lee Lapin, I think LBJ was just forced to face the reality of Gresham's Law. :)

And me, I ain't a Keynesian...

Art

Lucky
March 3, 2006, 01:44 PM
That's only half the quote. The whole quote by Keynes says (paraphrase), 'Yea yea we are all dead in the long run, but that doesn't mean we should act like the short-run doesn't matter.'

And, like Lee Laplin says, economists are very fond of putting their life savings in real things, cars, real estate, etc. I suspect firearms would count too, except that they are unstable as registries mean firearms could be confiscated due to some future law, at a moment's notice.

(we are no longer off-topic, it was just a really circuitous route to the firearms part)

Pafrmu
March 3, 2006, 02:23 PM
I really think that money or non-productive assets (including precious metals) are really a poor store of value.

Which scenario would be more valuable today?

Buying $100,000 in 1906 $ of Gold and selling it today

or

Having a diversified stock portfolio bought in 1906 and sold today?

Well, in 1906 Gold was $50 an ounce I think and well 100,000 divided by 50 is 2000 ounces of Gold.

Well 2000 ounces of Gold at todays prices(approx 565.80) equals $1,131,600.

Not bad.

Well lets see what returns on the stock market would have produced.

100,000 times an average of 10% returns nets 1,378,061,233.

Looks like stocks were 725% better investment than gold.

Looks like you could buy alot more guns with stocks than with gold. (see on topic)

Lucky
March 3, 2006, 03:02 PM
"Well lets see what returns on the stock market would have produced.

100,000 times an average of 10% returns nets 1,378,061,233."

It seems too simplified, I'd argue against it. For one thing, when you lose most of your money you basically re-start at that point in time. So you don't have a continuous period of growth.

The beauty of precious metals is that they survive inflation so well, they're like a hedge against unstable economies. And that's what I believe the economies now are. (the Economist says it over and over, month after month).

Art Eatman
March 3, 2006, 03:16 PM
History lesson: In 1906, a $20 gold coin (Double Eagle) was worth $20.00 at the gold price of $20 and change per ounce. $20.sixty-something? Silver was $1.22/oz.

Roosevelt devalued the dollar to $35 an ounce in 1933, maybe 1934, I'm rusty.

What you could not have done in 1906 was to buy stocks and pitch them back in the closet and then expect any notable return today. The companies mostly no longer exist.

So if you had the 1906 gold and sold it in 1980 for $800/oz and then bought back at $264 a few years back, you'd be doing okay--which parallels what is done with equities: Buy, hold and sell and buy back in with other equities.

Apples and oranges applies to investment behaviors as well as arguments. :)

Art

Zero_DgZ
March 3, 2006, 03:21 PM
Back to the original topic, there are several business owners in my area who accept and trade in these things.

My opinion is they're pretty neato. I have a couple. Haven't spent many of them yet.

The Liberty Dollar organization aren't out to defraud anybody (I forget their official name - I'll look it up later) but they haven't adjusted the face value of their coinage to keep up with spot prices of gold and silver. Back when they were first issued they actually were worth about that much.

They're just barter tokens. The pamphlet that one of the stores gives out about it is actually pretty informative and well written, and explains the motive and the mechanics (and, interestingly, without all the 'rah, rah, your dollars are going to devalue next week and where will you be?' rhetoric). I should nab one next time I go by and post it.

Seems to me that officials that have to make a point of getting all hot under the collar about it should really be seeking something better to do. Nobody starts trading in Liberty Dollars without knowing exactly what they're getting into and why - Unless they just want one for the novelty value.

Art Eatman
March 3, 2006, 03:46 PM
"Back when they were first issued they actually were worth about that much."

Absolutely not. At the time of issue, the price of silver was in the vicinity of $4 or $5 an ounce. Or at the time of minting, the silver had been bought at some $4 or $5 an ounce, which is a nice profit for Herr Bernard von NottHaus.

Silver is now at $10. It would have to double again before these coins have a face denomination = the intrinsic value.

Art

Pafrmu
March 3, 2006, 03:50 PM
Its a hard comparison to make. I could cherry pick a stock portfolio from 1906 that would be worth trillions today or I could pick a portfolio that wouldn't be worth anything today.

On the other hand, what I was trying to illustrate was that you one is better off owning productive assets than non productive ones. If you buy and hold 2000 ounces of gold, after 100 or 200 or 200 million years all you have is 2000 ounces of gold. But if you own a an apple orchard for 100 years you still have the orchard and a large quantity of apples.

Art Eatman
March 3, 2006, 04:14 PM
And that's the nice thing about capitalism, regardless of whether we're using fiat money or hard coinage. :)

Backing up to Post #1: Folks got suckered into thinking some stamped piece of coinage was legal tender at face value. That's fraud. Not only was it not legal tender, its intrinsic value was less than half the alleged value.

Art

Herself
March 3, 2006, 04:20 PM
What Art said -- "I ain't a Keynesian" -- goes double for me.

Metal coins, gold silver and copper especially, are objects of intrinsic worth. The metal itself has value in trade. If the issuer goes belly-up, you're not flat broke. Fiat money doesn't work that way.

If some arbitrary unit of exchange is in use -- dollars or whatever -- and it is not firmly linked to the coin metal, then you get messes like the American Eagle face marking being fictional, or Liberty dollars not trading one-to-one with FRNs (and it sound like they may be very far off at present). Note that if the Liberty Dollar people go out of business, the end-user still has silver; he's lost money but he hasn't lost all his money. That is the difference between a metal-based money system and one based on fiat. Confederate paper dollars aren't worth much at all and then only to a collector; Roman gold coins have always had worth. (Note that even fully-backed paper money won't work if you want it to still hold worth over the next thousand years; the medium of exchange must be the thing itself).

If you have multi-metal coinage and an arbitrary unit of exchange, you get more fun: the prices of the metals relative to one another have to be fixed instead of seeking their own level! (Look up the "Free Silver" movement in the U. S. for an example; "Free silver at 16 to 1!" was the rallying cry). Not really a good idea, especially since the metals are used in manufacturing. Plus clever folks will game the system by swapping one for the other in venues where the exchange rate is not fixed, in whatever direction nets them a profit.

If you've got multi-metal coinage but coins are simply marked by true weight, another problem shows up: what's silver or copper change for a quarter-ounce gold coin today isn't the same tomorrow! That would have been a huge problem not so long ago; today, with the Internet available in most of the First World and a lot of the rest, it's not too difficult to just track spot rates and crank that into the cash register automatically; but it does call for a fair amount of trust or independant verification.
Paper and electronic money under such a system works the same way, with the commodity securing the note having to be specified. As the materials are highly fungible (capable of being divided), on paper or electronically you could do all your transactions in a single metal. In the real world, gold pennies are not of a convenient size.

The worth of gold in terms of what a given weight of it would get you has been very stable over time, from about as far back as we can extract useful data, typically early Rome.

...I still favor the .22 Long Rifle cartidge as a unit of exchange: they're not fungible past the one-round mark but they're small, handy and long-lasting, plus they do have intrinsic worth and utility. :)

--Herself

Herself
March 3, 2006, 04:32 PM
[...]what I was trying to illustrate was that you one is better off owning productive assets than non productive ones. If you buy and hold 2000 ounces of gold, after 100 or 200 or 200 million years all you have is 2000 ounces of gold. But if you own a an apple orchard for 100 years you still have the orchard and a large quantity of apples.
Only if the orchard has successfuly avoided fire, flood, earthquake, disease, insects, war and eminent domain! It's had to be cultivated, picked, markets, all cost of ownership issues that reduce your return on investment. And you've been pretty well stuck to it. You can't emigrate to Inner Slabsideovia and take your orchard along. 2000 ounces of gold, on the other hand, let'see, ummm, 60-odd kilos, 125 lbs... Okay, you'd need a hand truck or at least really good wheeled luggage, but you could haul it right along with you.

The thing about gold, gems, silver, platinum, even copper, is that they're pretty rugged and carry a fair amount of worth in small mass and area. As investements, oh heavens no; you can do far, far better if you have the insight for it, especially on short-term stuff; but as a long-lasting, widely-tradeable, dependable and portable store of value, conductor metals and gemstones are hard to beat.

"Money" and "wealth" are not identical. Like choosing a gun, you should critically evaluate the suitability of a particular tool for the task you intend to accomplish.

--Herself

50caliber123
March 3, 2006, 04:33 PM
someone mentioned Canada's elimination of the penny. Whether jus proposed or actually happening, what does that mean? Say your change back is $17.04. How does it work? Do they round up/down? I think the penny has its place as the smallest value coin. But I also think this is the beginning of the end for paper and coin money. I bet soon the require a national ID card, with money done electronically through it.

Pafrmu
March 3, 2006, 05:10 PM
"Money" and "wealth" are not identical. Like choosing a gun, you should critically evaluate the suitability of a particular tool for the task you intend to accomplish.

I cannot agree more.

Gold, Silver, Wampum etc. are a bad means of exchange and store of long term value.

I would just say that if you were immigrating to Slobnicivia you would be better off bringing a commonly accepted currency there than just gold. If its not stable enough to support currency its not stable enough to prevent someone from "emptying" your handcart without your permission.

jnojr
March 3, 2006, 05:27 PM
Metal coins, gold silver and copper especially, are objects of intrinsic worth. The metal itself has value in trade. If the issuer goes belly-up, you're not flat broke. Fiat money doesn't work that way.

And if someone discovers a huge new source of gold or silver, your stashes of same become devalued overnight.

There's gold in seawater. Someday, someone will figure out how to extract it profitably. There could very well be gold in asteroids... we know there's platinum, iridium, etc. Within 100 years, maybe even within 50, we'll be mining asteroids and sending all those metals back here.

Fiat currency isn't all bad... it's worth is determined by something a little bigger than todays demand for a given item. Even if Washington DC were to go up in a mushroom cloud, that wouldn't mean the death of the United States of America... as long as enough people still had faith in the US, paper dollars would continue to be "worth" something.

Besides, think of the limiting effect the gold standard would have on our economy. There's only so much gold under the control of the US government. Why would we want that to be the upper cap on our growth?

Third_Rail
March 3, 2006, 05:55 PM
There's gold in seawater.

Mhm, there is. A LOT less than originally predicted. So much less, in fact, that it will not be profitable unless gold gets to $15,000/oz or so.

DRZinn
March 3, 2006, 06:30 PM
I should nab one next time I go by and post it.You should; it's an interesting concept.

These "Liberty Dollars" are worth the same as Federal Reserve Notes, in the sense that they're worth what people are willing to trade them for.

Zero_DgZ
March 3, 2006, 06:32 PM
Precisely.

Lucky
March 3, 2006, 06:33 PM
"And if someone discovers a huge new source of gold or silver, your stashes of same become devalued overnight.

There's gold in seawater. Someday, someone will figure out how to extract it profitably. There could very well be gold in asteroids..."

Plausible, sure. But we it is much more likely that a currency, which can be printed without the difficulty of space flight, will suffer the same fates. Not to mention the mind-boggling electronic transactions.

Herself
March 3, 2006, 06:59 PM
Well, gee...

Originally Posted by Herself: "'Money' and 'wealth' are not identical. Like choosing a gun, you should critically evaluate the suitability of a particular tool for the task you intend to accomplish."

I cannot agree more.

Gold, Silver, Wampum etc. are a bad means of exchange and store of long term value.
Can you support that assertion? Bear in mind that the same amount of gold that would buy a fine toga in ancient Rome will buy you a nice suit today!

I would just say that if you were immigrating to Slobnicivia you would be better off bringing a commonly accepted currency there than just gold. If its not stable enough to support currency its not stable enough to prevent someone from "emptying" your handcart without your permission.
I would question why any "commonly accepted currency*" would need "support!"

I'd also wonder why you would sit there next to your handcart and rely on any government to keep "someone" from taking your gold; me, I'd be after stopping the thief. The man who sprint away with 125 pounds of gold and fight you at the same time is vanishingly rare.

* "Currency," is that really the word you meant? It generally refers to coins and is often taken to mean conductor-metal coins rather than the modern base-metal or plastic slugs used in most nations. Might as well be the metal itself!

If you trust goverments, use their money. I don't trust 'em especially, so I prefer tangible assets, genereally ones of a useful nature. Like, for instance, guns. YMMV.

Fiat currency isn't all bad... it's worth is determined by something a little bigger than todays demand for a given item. Even if Washington DC were to go up in a mushroom cloud, that wouldn't mean the death of the United States of America... as long as enough people still had faith in the US, paper dollars would continue to be "worth" something.
Wanna bet? The fact is, those paper dollars are worth a little less each and every day. Today's dollar is your father's dime. A catastrophic event (heavens forfend!) could yank the bottom right out from under. Even a big EMP could do the job. Suddenly, you've got some nicely printed paper, period. Fiat money is only worth anything while there's a fiat; it's really just playing pretend. When the game ends, all debts, savings and incomes are gone.

Besides, think of the limiting effect the gold standard would have on our economy. There's only so much gold under the control of the US government. Why would we want that to be the upper cap on our growth?
What, the limit would be hit and everything would come to a screeching halt? Not likely! Doesn't work that way. The (very elastic, there's more of it every day) limit to gold is a cap on inflation, not growth.

As far as The U. S. Governmnet is concerned, I'm not at all clear why they're even in the loop. They take in income and pay debts, just like any other economic entity; they do not create wealth, that's what We The People do. If various fungible commodities were the medium of exchange, the Government woud be just one coiner among many; or they might not bother to do so at all. The monetary provisions in the Constitution all concern what the government will use to pay its debts, not what means you and I will use to buy and sell.

--Herself

Art Eatman
March 3, 2006, 07:09 PM
There's a similar thread running over at http://www.armedpolitesociety so let's take any further commentary over there, okay?

I think we've done the off-topic stuff long enough...

:), Art

Gifted
March 3, 2006, 11:31 PM
http://www.libertydollar.org/ Straight to the source for alot of it. Some points:
Rather than mess with complicated exchanges rates, they've been trying to keep it simple. $10 dollar piece, for a bit, then if the spot price stays too high for too long, jump to twenty, and hold there for a good while, rather than having to mess with a bunch of mess with fractions of a dollar. Needless to say, it's not 1 liberty dollar=1 reserve dollar, but that was never the point. The point was to have a specie-backed currency. And I got a bit of an impression on the fact that it's negotiable, not legal tender. Legal tender you have to take, you can negotiate LDs. At this point, and possibly in the future, I'd not take them on a one to one basis.

A crux of the matter. currency, whether specie, or fiat, or what, represents value. How do you do that? Fiat money not being tied down(the federal reserve loans rediculous amounts of money to the .gov)is being responsible for a good bit of inflation, but I'd say you do have trouble with specie and having a growing economy. How do you compromise?

And I'd offer a perspective on boom/bust. It's mentioned that independent banks had their own cycles, that were fairly isolated. In 1929, we had a problem that hit the whole nation. Which is better, Missouri going bust for a while, or the whole country? One of the bigger arguments against hte reserve system, is that all the eggs are in one basket now.

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