Hey Rachel, I love your site. I especially love the products that you buy online (esp the Asian fashion). I was wanting to know what are some sites that you order from to the US, because I always search, but never was successful in finding good sites to order from. I saw the PGmall purse that you have, did u do a shopping spree? I have always wanted to do one of those, but never know how to approach it.

Thanks!

I find that, being a guy, the question I generally was asked wasn’t were I lived but if i surfed. I think maybe it’s because they expect a guy that lives in California to be ripped, tan, and the perfect athlete. I suppose then that Baudrillard was right and his ideas are probably magnified by the internet.

I don’t know what to say about Liberty Dollar. I find the cases you bring up to be very interesting; I think I actually understand this one. Being an English major doesn’t seem to help me much lol.

You could use those little containers for the storage of whatever nick nacks–rings, earrings, etc.–that you happen to be wearing before you take a shower or going into the pool; just pop them into the cupcake for safe keeping.

Hi cows!!!~ Mooooooooooooo~~

You can always just use the cupcakes as paper weights or nicnacs!

The history of money in the United States, as it is anywhere, is complex subject. You look at a law and see a functional guide, but it can also serve as a historical marker, showing how a previous law or intention was circumvented.

I read it as follows…

Article I, Section 8, Clause 5
“To coin Money”

The Federal Government does have the power to coin money. This is consistent with the Coinage Act of 1792.

Article I, Section 10, Clause 1
“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;”

States do not have the power to coin money or emit bills of credit.

* Interestingly, it doesn’t say the Federal Government can emit bills of credit.

Regarding the repayment of debts, it specifically excludes anything other than gold/silver; legal tender is not mentioned. Where are these gold/silver coins supposed to come from? Are we to assume this is just an antiquated notion of yesteryear?

Rachel
“How does a competing US currency, or the Liberty Dollar, fit into this wording? Obviously, it does not.”

I’m not about to defend the Liberty Dollar, which I agree shouldn’t have a dollar denomination. The only thing that should be stamped on a coin is the weight and purity/content.

As far as a “competing currency” goes, the monetary base of the U.S. was gold/silver/copper DEFINED by their weight/content and NAMED dollars and cents. 4 quarters = 1 dollar by WEIGHT, 10 dimes = 1 dollar by WEIGHT, etc. The value of money was clearly derived by weight and therefore value, not decree.

Nowadays, a $10 bill is worth 10x as much as a $1 bill. Why? Because the government says so. 10 ounces of silver is still worth 10x as much as 1 ounce of silver. Why? Because it’s 10x as much.

From the Coinage Act…

“Any person could bring gold or silver bullion and have it coined free of charge or for a nominal fee exchange it immediately for equivalent value of coin.”

“Each year on the last Monday in July, under the inspection of the Chief Justice, the Secretary and Comptroller of the Treasury, the Secretary of State, and the Attorney General, the coins were to be assayed and if the coins did not meet established standards, the officers were disqualified from office. Further, the penalty for fraud or embezzlement by officers or employees of the mint was death.”

Again, money = gold/silver/copper = value defined by weight/content. I’m in general agreement with the Act, except when it comes to the terms “dollars” and “cents”, which are unnecessary. I realize that a bi or tri-metallic standard would create multiple prices for the same item, but it’s hugely preferable to using something that lends itself to ambiguity.

Initially: Money = gold/silver/copper coins.

Then: Money = paper bills, backed by gold/silver. Coins still 90% silver or copper.

Then: Money = paper bills, backed by less gold/silver. Coins made of 40% silver and eventually pennies switched from copper to zinc.

Then: Money = paper bills, backed by nothing. Silver eliminated from coins and most copper eliminated.

The trend is pretty clear…our money stopped being money a long time ago and has now become currency. Currency is fine for daily exchanges, but it’s a poor store of value. I don’t think it’s a coincidence that the dollar has plunged in value since 1913, losing something like 95% of its value in that time. As Voltaire said, “Paper money eventually returns to its intrinsic value —- zero.”

So, to get back on track, the Federal Government does have the power to coin money, but does it have SOLE authority? Obviously not, plenty of mints make coins in the U.S., but they don’t stamp “dollar” on them, which is an irrelevant aspect of what money actually is.

@ Justin

I find your post interesting but your definition of money to be somewhat lacking. According to Wikipedia “money is anything that is generally accepted as payment for goods and services and repayment of debts.” According to Webster’s New World College Dictionary Fourth Edition money is “standard pieces of gold, silver, copper, nickel, etc., stamped by government authority and used as a medium of exchange and measure of value” (emphasis added). I’m sad to say I do not own an OED so I can not trace the usage of the word to get a better understanding of what it once meant.

Currency is defined by Webster’s as “the money in circulation in any country” (emphasis added). I am going to guess that the reason the word currency is used to refer to money because it constantly passes between people like “current” in river. So making a distinction between money and currency seems moot.

By the the first definition of money I mentioned above bottle caps or “caps” as used in Fallout 3 are every bit as much money as a gold or silver coin. By both definitions above anything our government prints or mints and calls money is such. In my opinion what we call money, from the oldest known coin to a modern dollar, is all worthless; whether made of gold or silver or any other metal money is worthless. Gold did not become truly useful until the advent of electronics because it is a good conductor of electricity.

Gold was used in the production of money simply because it was rare, making it less likely to be counterfeited, because it looked good, and because it resists corrosion ensuring anything made from it will last a very long time allowing it to pass through many hands.

Whether or not the U.S. government has the sole authority to mint money/currency I can not say. I would say, however, that it would be in the best interest of the country if the government were the only ones who could legally mint it. I would imagine that if any Tom, Dick, or Harry decided to start minting money we would have the same problems which history shows we had when states did mint their own money before the federal government decided it had sole authority to do so.

I don’t mean to focus on the various definitions of money/currency, but rather the practical difference between precious metals and square pieces of paper.

I agree that fiat notes can serve as currency, when ample public trust in them exists, but they can never be considered money. If you accept fiat notes as money, then you must also be accepting of the idea that money can lose all of its value. I’m willing to accept currency losing all of its value (history is filled with failed paper currencies, including our very own U.S. “Continental”), but I reject the idea that real money can become worthless.

If you want to instill enduring value in something, you have to remove counter party risk from the equation. The Roman and Byzantine Empires ultimately collapsed, but their gold and silver coins from that era have maintained their value (at least before they started diluting the content in a misguided attempt to save themselves, which we’ve already done), even if you subtract the historical value. On the other hand, a currency note from the Weimar Republic or U.S. Confederacy is worthless, unless you factor in historical value. If you were a neutral party between two warring nations, would you accept their paper currencies as payment for your goods? I hope not.

I personally don’t see the problem with private mints coining money. Your concern may be that you’re only getting 70% silver instead of 90%, but how is that different from going to the gas station and selecting 93 octane? For all you know, you could be getting 87 octane, but there are anti-fraud laws and inspectors in place to prevent that from happening. Besides, it’s a lot easier to print up a fake bill than strike a fake coin.

On a related note, due to the Federal Reserve Act of 1913, the U.S. Government no longer issues money. All U.S. currency now comes from the Federal Reserve, which is a private institution with a monopoly. I really wouldn’t have a problem with this, were it not for the fiat nature of their issuance. The goal of currency debasement is inflation, which is simply a confiscation of wealth.

“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless.” Thomas Jefferson

@ Justin

I still contend that even gold currency is ultimately worthless. Even without historical value, as you say, gold coins are worth something, but that has NOTHING to do with their being coins or money and everything to do with their being gold. It’s all about perception, and there is an age old perception that gold is worth something, because of the idea in peoples minds that gold has intrinsic value, because it’s pretty and it’s rare. There was an episode of M*A*S*H in which there was a toiletpaper shortage and people were paying outrageous prices for toilet paper. Suddenly a page from the Sears catalog was worth several dollars. If there were a toilet paper shortage worldwide you would see its value go up exponentially because it would be in short supply. To use the example of Fallout 3 again, I had a discussion with my friends as to why Caps were used as currency in the Fallout world. My friend argued that bullets should have been the game’s currency because bullets are useful. But, as with gold, it’s all about rarity. You can’t transmute lead into gold, there is a limited supply of it and that gives it value. People in the Fallout world can’t create new bottlecaps, there is a limited supply of them and they therefore have value. But I dare you to take a gold coin to a tribe in the middle of the jungle and try to use it obtain something from them, they’d probably laugh in your face because gold is useless to them, it is meaningless to them. If you told them that they could use the gold to exchange with other people they might accept it but only because someone else values the gold not them.

What we use for money now is no more or less valuable as a means of trade than gold. We perceive it to have value therefore it does. You perceive gold to have value and therefore it does, fortunately for you most of the rest of the world believes the same. If there is ever an “apocalypse” you’d probably find very quickly that money, even gold, is indeed worthless. Value, like beauty, is in the eye of the beholder, and as my dad once told me, and his family once told him, something is only worth as much as someone else is willing to give you for it.

LOL…like the game Telephone…I know exactly what you mean. But I think that goes for anything that goes around, everyone adds their own spices and in the end it doesn’t look like it was supposed to.

I love those cupcake lip glosses. I got a set a while ago too! But I use them as a decoration mostly, they are too cute…! The solid perfume idea seems great, though.

You say fiat currency is just as good as anything else, but history is firmly against you. Find me a fiat currency that has maintained its value over even one human lifetime (~75 years).

And I think you’re wrong about your hypothetical tribe. The Spanish and Aztecs, separated by an ocean and tens of thousands of years of migration, both recognized the value of gold.

Tian

Hi, Tian! Thank you for the lovely compliments about my diary. =) I’m flattered that you also like some of the items I’ve posted. I would love to share the sites/stores that I visit with you! I don’t meet very many other girls who share the same fondness for cuteness, or Asian fashion.

However, I had to do a PC recovery recently, so I’ve been a little busy and also don’t have access to my bookmarks at the moment. I did receive your e-mail though and do intend to reply. Once I retrieve my bookmarks, I will make a list of the sites/stores that I frequent and e-mail them to you. ^^

As for Asian fashion shopping sprees, there are a few groups on LiveJournal that offer them. They can be expensive though because usually you have to buy a certain amount of items. I prefer to go through individual importers. Usually these are girls studying abroad in countries like Japan as students, who are willing to pick up an item in-store and ship it to you for a nominal percentage of the total cost. I find them much more affordable than sprees! BTW, please only commission a spree from someone who has an established reputation. LJ is a good place to browse because the communities tend to keep track of that sort of thing.

The PGMall purse was purchased from a girl who does sprees and also runs an eBay store. If you are interested in the purse or other PGMall stuff, you can find her eBay store HERE.

Sorry for taking so long to reply!

AOClaus

Haha I can totally relate to that! Most people assume I live on the beach just because I’m in California. XD They’re always shocked that I’m so pale too, since all California girls tan, right? *L* At least I don’t have to deal with the additional expectation of being athletic, though.

Actually, as an English major, I think that you have a bit of an advantage when it comes to understanding this sort of thing! Not just at understanding it, but articulating it better, judging from your most recent posts. Don’t cut yourself short!

That’s a good idea about using them for jewelry. Whenever I remove a ring and put it in my purse I’m always afraid of it getting lost in there. I’ll have to see if I can fit them in the containers!

Ethabella

That is so true… life in general is like one big game of telephone.

I think that is one of the reasons I can’t stand gossiping… D=

Sometimes I think that we operate on the same brainwaves — we like/purchase so much of the same stuff!

Justin
“* Interestingly, it [Article I, Section 10, Clause 1] doesn’t say the Federal Government can emit bills of credit.”

That is because it was preceded by Article 1, Section 8, Clause 5, which already granted Congress the exclusive Power to coin Money. The phrase “bill of credit” only appears in Article 1, Section 10, Clause 1 of the US Constitution, and specifically refers to a bill that has been issued by a state, backed on faith of credit in that state. As a phrase, it exists in the Constitution to further define a limitation. The fact that it is not present in Article 1, Section 8, Clause 5 — which grants Congress the exclusive Power to coin Money — should not be surprising.

If you need further clarification on this phrase and its usage, please see:

Craig v. State of Missouri, 29 U.S. 4 Pet. 410 410 (1830).

Justin
“Regarding the repayment of debts, it specifically excludes anything other than gold/silver; legal tender is not mentioned. Where are these gold/silver coins supposed to come from? Are we to assume this is just an antiquated notion of yesteryear?”

Why would the phrase “legal tender” need to be used, when Congress was granted exlusive Power to coin Money in an earlier section? Obviously, any Money they coin is legal tender.

If you need further clarification as to the definition of legal tender: 31 U.S.C. § 5103

Justin
“I’m not about to defend the Liberty Dollar, which I agree shouldn’t have a dollar denomination. The only thing that should be stamped on a coin is the weight and purity/content.”

Let’s assume for a moment that the US still operated by a gold standard and used gold coins.

If Congress did not have an exclusive Power to coin money, what guarantee would there be in a stamp of purity/content on a coin minted by any Tom, Dick, or Harry? Even when we operated by a gold standard, it was understood that the Power to coin money should be exclusive to the government.

Justin
“As far as a “competing currency” goes, the monetary base of the U.S. was gold/silver/copper DEFINED by their weight/content and NAMED dollars and cents. 4 quarters = 1 dollar by WEIGHT, 10 dimes = 1 dollar by WEIGHT, etc. The value of money was clearly derived by weight and therefore value, not decree.”

“As far as competing currency goes,” beads were used by the Native Americans before (and after) the introduction of gold. Beads had value because — as AOClaus already illustrated — it was the Native Americans who gave them value. Money is an idea and its value in any form is transitory. There is no benefit to limiting the value of money to the value of a single commodity like gold, or beads.

Justin
“Then: Money = paper bills, backed by nothing. Silver eliminated from coins and most copper eliminated.

Q: What backs the value of gold, silver, and copper?
A: Fluctuating demand for those metals, which exist as a single commodity, subject to hoarding.

Q: What backs the value of the USD?
A: The entire productive capacity of the United States, our people, and our resources.

Gold, silver, and copper have been eliminated from our coins because the US economy has grown in value beyond any reserve of gold, silver, and copper that exists in the world. The world economy itself has evolved beyond the need of such primitive representations of money and the limitations that such commodities place on its value. When we discuss the “gold standard”, what we are really discussing is a standard of economics from the Dark Ages. It is outside reason and reality to insist that such a system could ever provide a legitimate basis for the 21st century economy.

I find it ironic that you mention silver as a thing of value.

After the Civil War, our country returned to a union, and a gold standard. This brought about massive deflation, so a silver standard was suggested to bring about inflation. The same arguments that you make against the dollar now were made in the 1890′s against silver. But to you, silver is more “valuable” than the dollar by mere virtue of it being a metal. Do you see the fallacy here?

Because you are so fond of providing quotes, here is one from that era of our political-economic history:

“You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” — William Jennings Bryan

Heh, the San Joaquin Valley looks suspiciously like… England. LOL =P

“BTW, I really want to pre-order the new Poupee Girl DS game. ArGh!! “

http://www.play-asia.com/paOS-13-71-9g-49-en-70-3lig.html

Play-Asia.com ship worldwide – does that help?

I was thinking about something random but related to the currency issue. This might get a little bit into microeconomics vs. macroeconomics.

When you have a $5 bill ($5.00 in U.S. Federal Currency) and you’re at a lounge at school/work/whatever, and there’s a vending machine with a snack you want in it for $0.60. The vending machine doesn’t accept $5 bills, but it does accept $1 bills, so you have to find someone who has change (assume that no change machine is in this lounge.) You ask around, and the only person in the room who has change for your $5 bill will only give you $4.00 in $1 bills, essentially charging you a $1.00 exchange fee. (Most people aren’t that mean, but theoretically it could and probably does occasionally happen to some people.)

When you look at this in macroeconomics, your $5 bill is worth $5.00 in the country of the United States, but you are only in one part of the U.S.: the campus lounge of wherever you’re at, where the vending machine only accepts certain types of U.S. federal currency. To exchange it for a full $5.00 in a form of currency the vending machine will accept, you will have to spend more energy to find a change machine or a friendly cashier somewhere else, than the snack you are hungry for might be worth. (Your hunger can imply a demand level from a microeconomics standpoint.)

So in that kind of situation, it boils down to a decision: are you hungry enough to give in to the bully who essentially charges you $1.00 to let you use the vending machine by taking advantage of its design flaw, or do you wait and try to find someone else who has change for a $5 bill and will be nicer about it? If someone provides competition against that rude person, he won’t keep his monopoly, that’s for sure. Or maybe you aren’t even really that hungry, so will you wait until you can get an even better snack/meal later, maybe on the way home or something?

The point being, U.S. federal money is only ideally used as nationwide currency from the way I understand it. Things on the microeconomics level will often change according to local value, but not on a large scale (microeconomics are micro, macroeconomics are macro, let’s keep it that way.) This is why the State is not allowed to regulate the material face value of currency in the same way that the Federal government can, as Rachel pointed out. If a State did try to create their own currency, they’d probably start a major local money system which might eventually create an economic and political rift between that State and the Federal government, which could eventually play a factor in leading to a very bloody and tragic civil war. Again. (Yes, this did happen once in the U.S., a little over a century ago.) However, the State can still handle taxes differently, as long as they collect and spend tax money according to U.S. tax laws, and individual businesses are allowed to make changes to the sale prices of their products according to supply and demand.

Anyway, one of the other important reasons for even trying to regulate U.S. currency in the first place is to prevent counterfeiters from easily conning and stealing from law-abiding citizens, right? That seems logical enough to me, really.

I would say the authorities may need to step up their regulation methods fairly soon, though. A recent and notable wake-up call: there was a man who counterfeited millions of U.S. Dollars using supplies he bought at a Staples office warehouse. (He was caught, but he did manage to print out a lot of fake money before authorities finally caught him.) I’d search for that article and cite it here, but I don’t know all the formatting codes for this comment blog. @_@

Rachel
That is because it was preceded by Article 1, Section 8, Clause 5, which already granted Congress the exclusive Power to coin Money.

Money does not equal credit or vice-versa.

Rachel
Why would the phrase “legal tender” need to be used, when Congress was granted exlusive Power to coin Money in an earlier section?

Exclusive power?

Legal tender laws in some ways improve the efficiency of transactions, but in the grand scheme of things under a fiat currency, amounts to little more than collective theft.

Lets say we lived on a deserted island and foolishly decided to use sea shells as a form of currency. Within an hour, we both realize there’s far too much currency around that is easily accessible…but instead of abandoning this flawed currency, I (being bigger and stronger) create a legal tender law, which declares that only sea shells I issue (with a special notch) have any value. By doing this, I have gained a tremendous amount of power, because anything I lay claim to has to be purchased with my legal tender sea shells. So you have to acquire my legal tender sea shells through work, while my job simply consists of walking down to the shore, picking up a shell and putting a notch in it. In effect, I’m stealing your labor from you. Oh, and don’t even think about putting your own notches in sea shells, there are penalties for that.

It’s an extremely simplified example, but essentially what we have today. There’s nothing valuable about Federal Reserve notes, they can print as many as they want, but legal tender laws give them a certain amount of artificial value. The only thing companies and individuals can do in defense is raise prices/rates or refuse the currency going forward, although legal tender laws would still force you to accept the currency for any existing amounts others owed you.

Rachel
If Congress did not have an exclusive Power to coin money, what guarantee would there be in a stamp of purity/content on a coin minted by any Tom, Dick, or Harry?

The same guarantee that says your 93 octane gasoline is actually 93 octane. The same guarantee that says your medications aren’t a pure placebo. The government doesn’t issue gasoline or medicines, but they can come down on companies engaged in fraud.

Rachel
“As far as competing currency goes,” beads were used by the Native Americans before (and after) the introduction of gold. Beads had value because — as AOClaus already illustrated — it was the Native Americans who gave them value. Money is an idea and its value in any form is transitory. There is no benefit to limiting the value of money to the value of a single commodity like gold, or beads.

I agree that many things can be considered money, but humanity, over the period of thousands of years, has discovered that things like tulips, sticks, etc. do not work. Rare metals are the only materials that meet all the requirements of money…scarcity, portability, divisibility, durability, easily standardized, etc. Beads actually meet many of the requirements of money, depending on what they’re made from. If standardized beads (meeting the above criteria) existed and could be placed onto a bracelet or necklace to create varying totals, then it would work just fine. If, however, the beads consisted of wood, shells or anything of the like, it simply wouldn’t work. Yes, things like wood have inherent value, but to create sufficient value, you’d have to have so much of it that it would no longer be portable. Value wise, I could buy a car with gold coins that fit in my pocket, but how many tons of lumber would it take?

Rachel
Q: What backs the value of gold, silver, and copper?
A: Fluctuating demand for those metals, which exist as a single commodity, subject to hoarding.

The things I mentioned in regards to the properties of money, but the value of gold comes primarily from scarcity. Silver and especially copper play bigger roles as commodities in the modern world. Interestingly, the nickel is the only piece of U.S. currency worth even close to its face value.

http://www.coinflation.com/

I’m not saying any form of money is perfect, just that some are a lot closer than others.

Rachel
Q: What backs the value of the USD?
A: The entire productive capacity of the United States, our people, and our resources.

That’s the idea, but not the reality. We’re in a recession, production has dropped and we haven’t made any massive resource discoveries, but we’ve more than doubled the number of USD’s in existence. Explain how this is supposed to work without reducing the value of USD’s that people hold. By your theory, the government should be removing USD from circulation to reflect the drop in production.

Rachel
Gold, silver, and copper have been eliminated from our coins because the US economy has grown in value beyond any reserve of gold, silver, and copper that exists in the world.

The Industrial Revolution, a time of tremendous growth and productivity gains, all happened under a gold standard. To say precious metals are a relic of the Dark Ages is insanity, as we’ve only been off the gold standard since 1971. As I recall, we went to the moon in 1969…Dark Ages indeed. The real reason we went off the gold standard is because it limited the size and power of the government.

Even after all this talk, I’m still not sure if you’re arguing on behalf of the original laws or the current laws. The Congress no longer has the power to issue money, that power has rested with the Federal Reserve since 1913, with the switch to pure fiat being made in 1971. The Federal Reserve is a strange, quasi-government/private institution, but in practical terms private and separate from the government. All Congress does is vote to raise the debt ceiling, which they do without fail. Why even have a ceiling?

C Dos Run
Anyway, one of the other important reasons for even trying to regulate U.S. currency in the first place is to prevent counterfeiters from easily conning and stealing from law-abiding citizens, right? That seems logical enough to me, really.

Individual counterfeiters are a blip on the radar. Foreign governments could of course counterfeit currency on a massive scale (as Iran and N.K. have apparently done), but the biggest and most damaging counterfeiters of them all are the ones with legal authority to do so.

Scientifically, Au and Ag are elements and thus immune from counterfeiting. We can turn carbon into a diamond, but only because they’re one in the same. If humanity reaches the point of being able to easily turn one element into another, hopefully we’ll be intelligent enough to come up with a new monetary system.

@ Justin

You’re still trying to argue that gold has value. Gold doesn’t have any more value than sea shells, it’s just a metal. It’s rarity and aesthetic qualities are the only things that make people want it. We could just as easily use platinum as has already been said and as you yourself just pointed out. In fact the beads she pointed out were not made of gold or any precious metal that I know of. It’s also funny that you mention sea shells because there was in fact a community of native Americans that DID use sea shells as currency. And I could go mine gold and essentially make my own money in the way you’re talking about sea shells, though granted it would take more effort. Then again it also takes effort to print the money we use and which limits who can print money, it also takes a certain amount of knowledge to fake said bills. Even those bills printed using materials from Staples don’t have the qualities that a real bill has if you actually pay attention. And, as Rachel has already pointed out, there isn’t enough gold in the world to cover all the money we have or need let alone enough for all the rest of the countries in the world. If gold were still the standard we would have a whole new set of problems brought about by the fact that no one in the world would have enough currency.

Also, I would submit that all money is a form of credit. An easily transferable form of credit used to represent work done. Currency has never been anything more than a transitive state for a complex barter system exchanging work for what we need or want. Essentially everyone in the United States has agreed that, by virtue of the fact that they use money, that their time and effort should be easy to exchange for what they need or want no matter where they go.

And yes inflation is a problem. But inflation was a problem even when we were on the gold standard. The gold standard didn’t stop any other economic down turn, it didn’t stop the depression, and it won’t help us now.

Justin
“Money does not equal credit or vice-versa.”

The above statement is not a refutation of Article 1, Section 8, Clause 5 or the section of my post that you quoted. I also fail to see its relevance to either. However, I will entertain your off-topic tangent.

If your assertion is that the US dollar is a form of credit, and therefore not money, then you are wrong. The US dollar is a federal reserve note, or promissory note. This is not the same as an extension of credit. Whether or not credit itself is “money” is another issue/discussion entirely, which I would rather not engage you in yet another senseless debate about, as it has no relevance to the present topic.

Federal reserve notes are accepted as money and function as money, which makes them money by any definition of the word. More importantly however, they are legal tender, which makes them a form of money accepted in the payment of debts. The same cannot be said of Liberty Dollar gold coins.

If a dollar is not money to you, I would be happy to relieve you of all the useless “paper” in your wallet.

Justin
“It’s an extremely simplified example, but essentially what we have today.”

No, I would not say that this example is analogous, or even remotely similar, to the design or reality.

Justin
“There’s nothing valuable about Federal Reserve notes, they can print as many as they want, but legal tender laws give them a certain amount of artificial value. The only thing companies and individuals can do in defense is raise prices/rates or refuse the currency going forward, although legal tender laws would still force you to accept the currency for any existing amounts others owed you.”

Do you pay your rent, utilities, or ISP in gold coins? No. These are bills that you pay with US dollars. Those US dollars therefore have value. There is nothing “artificial” about that fact.

Being able to print more money (or stop printing money) is a benefit. It gives us the ability to set and control monetary economic policy. When we operated under a gold standard, our money was limited to the existing, limited supply of gold. We suffered deflation and depression because of the manipulation and hoarding of that commodity. Because we print our money, we can expand and contract monetary supply. We can stabilize our economy and prevent radical fluctuations by printing more or printing less.

Justin
The same guarantee that says your 93 octane gasoline is actually 93 octane.

There would be no way to guarantee the purity/content of gold that was minted by anyone with a press. If we had so many different types of gold coins in circulation with new ones being introduced every day, what faith would creditors be able to place in them as a form of payment?

This is a moot point however, as the US government has an exclusive Power to coin money, and people understood the importance of that even when we did operate by a gold standard.

Justin
I agree that many things can be considered money, but humanity, over the period of thousands of years, has discovered that things like tulips, sticks, etc. do not work. Rare metals are the only materials that meet all the requirements of money…scarcity, portability, divisibility, durability, easily standardized, etc.

Gold is a single commodity, which can (and has) been horded, making it in short supply. Other commodities can also have a greater value than gold. That was the case during and after the Civil War, when an ounce of wheat was worth more than an ounce of gold.

AOClaus has also already explained why gold became a commonly used and accepted form of money.

What you are not acknowledging is that “value” and “money” are ideas.

Justin
“I’m not saying any form of money is perfect, just that some are a lot closer than others.”

“Perfect” according to your own imaginary standard of economics.

How is a commodity like gold a preferable form of money, when it cannot sufficiently represent the money that we already have in circulation? There is not enough gold in the world to represent the dollar value of all goods and services exchanged in our economy. What we’re discussing isn’t just an outdated economic system, but one which cannot exist in this country outside of fantasy.

Justin
“The Congress no longer has the power to issue money, that power has rested with the Federal Reserve since 1913, with the switch to pure fiat being made in 1971. The Federal Reserve is a strange, quasi-government/private institution, but in practical terms private and separate from the government. All Congress does is vote to raise the debt ceiling, which they do without fail. Why even have a ceiling?”

Q: Who formed the Mint?
A: Congress.

Q: Who formed the Federal Reserve?
A: Congress.

Congress did not “give up” their Power when they formed the Federal Reserve.
Congress can dissolve the Federal Reserve — which is not “private” — at any time.

Personally, I would rather leave the making of monetary economic policy to the Federal Reserve, rather than congressman meeting every week. If you think that having a Democrat interest rate and a Republican interest rate would make more sense than having a Federal Reserve though, then I can’t say that it sounds any crazier than the idea of returning to a gold standard.

Why wouldn’t gold have value? It’s an very rare element, has many applications and a track record dating back thousands of years. Banks, governments and many individuals hold gold as stores of value, whereas no one is holding sea shells as a store of value.

Lets assume Ken lives inland (where seashells are rare) and Ryu lives on a coast (where sea shells are abundant)…when they meet, the failure of the sea shell currency is revealed, because using Ken’s existing valuation basis, Ryu could easily buy everything in sight with the equivalent of 10 minutes of work at the shore.

Now that the world has been explored, we know what exists and in approximately what amounts. There’s virtually no chance of a precious metal supply exploding overnight due to a new discovery. You could try mining your own gold, but even the biggest mining companies with land rights to gold rich sites and the most advanced equipment have extraction costs of about 400 USD per ounce.

You say it takes effort to print money, but this is simply not true. Almost any government or printing company in the world could reproduce any currency note 99.99-100% perfectly for pennies. Printing anything is a process and any process can be duplicated. On the other hand, no government or mint could create fake gold coins that were convincing, as a simple chemical, conductivity or volume/weight test would expose them.

http://www.newton.dep.anl.gov/askasci/chem03/chem03313.htm

The idea that there isn’t enough of X to account for the value of everything is a red herring for obvious reasons, chiefly that sound money grows in value alongside a growing economy. This works because gains in efficiency get reflected in lower costs, hence prices come down relative to your money, which now buys more. Since we don’t have sound money, we’ve become accustomed to the idea that currency buys less over time. Technology may be the only major industry where efficiency gains have outpaced monetary inflation and resulted in falling prices.

Sound money won’t stop a recession or depression brought about by bad economic policy, but it will prevent politicians from making matters worse in their attempt to “fix” matters.

I’m not sure how many times I have to repeat it, but the theory behind fiat currency has failed time and time again. It has failed in ancient Rome (where silver was removed from the Denari), China (“flying money”), Germany (notes were used in fire places and as wallpaper), U.S. (“not worth a Continental”), Iceland (2008), etc. These were not stupid people, it’s just that an inherently flawed system will eventually fail. On the flip side, I challenge you to find me a single monetary unit of gold/silver that does not have value today. If I had a Morgan Silver Dollar 75 years ago, I could buy myself a nice entree at a restaurant…if I have a Morgan Silver Dollar today (~$14), I can still buy a nice entree. 75 years ago I could buy that same entree with a $1 note, but today that $1 note may only get me a slice of cheese on my hamburger.

Rachel
There is not enough gold in the world to represent the dollar value of all goods and services exchanged in our economy.

The value of U.S. gold can easily match the value of USD’s – it’s called a revaluation and it has happened before. Gold was ~$20 an ounce for almost 100 years, then it was confiscated and revalued at ~$35 an ounce. The government essentially stole ~43% of societal wealth in one fell swoop. Now that the price floats freely against the USD in the market, it has exceeded $1000 an ounce, which is nothing more than an ongoing revaluation.

@J
There’s a chemical test for paper money too. But any chemical test you say could be implemented in gold could be faked.

And as I said several posts ago, Gold has NOT had any practical applications until recently with the advent of electricity. Unless you consider it’s supposed ability to cure disease in the middle ages. Gold doesn’t have value because nothing has value. Humans assign value to object, objects don’t assign values to themselves.

If precious metals do hold their value, because humans perceive it to have value, I ask, after you’ve told us what it costs to mine gold, does the cost of mining gold outweigh its value Would the cost of buying it be worth more than the money?

From my understanding even when the Roman Empire was still around the value of a Denari was based on the value of an “as” not on it’s perceived value in silver. Also, Roman Emperors manipulated the value of their coins in the same way the U.S. government can manipulate the value of the dollar if they so choose.

I will admit that what I’ve probably really been trying to argue is more that the value of any object, including gold, is whatever people make it; that, as i said earlier, anything is only worth as much as someone else is will to give you for it. Or in some instances as much as someone does not think it’s worth, like when we found a 14k gold pocket watch at a garage sale for 5 dollars and sold it for over 100.

AOClaus
There’s a chemical test for paper money too. But any chemical test you say could be implemented in gold could be faked.

You’re not getting it…any government/printing company could perfectly recreate a currency note (the USD is made of cotton and linen)…it’s a manufactured product that costs pennies to make – nothing more and nothing less. No test could expose such a fake because on a materialistic level, it would not be fake.

Let me make this clear…the ONLY reason I’d favor gold/silver/copper coins over currency notes backed by gold/silver is because it prevents the government from unilaterally moving society onto a fiat currency, as the U.S. did in 1971. Obviously credit/debit cards would still be used in society, perhaps increasingly so, which means banks would have to hold your gold/silver and very strict laws would have to exist limiting what they could do with it and preventing the government from ever seizing it.

And as I said several posts ago, Gold has NOT had any practical applications until recently with the advent of electricity.

Money doesn’t have to have an application, whereas a commodity does. For instance, a bullet isn’t money and couldn’t even pass as a good currency. If someone were to make use of a bullet, it’s consumed and can no longer fill the role of currency. Granted, given how far we’ve come scientifically, every element has an application and there’s no getting around that…this isn’t to say gold couldn’t serve as both a monetary unit and a regular commodity, though, as it and other metals already have.

From my understanding even when the Roman Empire was still around the value of a Denari was based on the value of an “as” not on it’s perceived value in silver. Also, Roman Emperors manipulated the value of their coins in the same way the U.S. government can manipulate the value of the dollar if they so choose.

And that downward manipulation was a major factor in the downfall of the Roman Empire. You can’t debase your money and expect no one to notice and act on it.

http://www.tulane.edu/~august/handouts/601cprin.htm

You have this notion that value (sans application) is completely intangible and anything can fill the role equally well. What I’m saying is we don’t even have to enter into such a thought experiment, as history provides us with 1) countless wide-scale examples of fiat currency losing all or most of its value and 2) no wide-scale examples of gold/silver money losing all or most of its value.

I mention wide-scale, because obviously if you’re in the desert and dying of thirst, a gallon of water has more value to you than all the gold in the world. I think it’s obviously we can’t consider such limited-scale examples in a global marketplace.

Dural is a very obvious troll and you are both wasting your time.

Marek

Justin/Dural may be a lot of things, but I do not think that he is a troll. To his credit, he has actually brought up this topic once before. He appears to genuinely believe in what he posts.

However, I do agree with you that this has become a pointless argument rather than a debate. If Dural’s comments in either of my entries have made anything “obvious”, it is that no amount of reason or explanation will change his mind. He has moved beyond forming his own conclusions about an economic system that he doesn’t fully understand, to forming his own belief about the one economic principle which he believes he does understand: gold. He has adopted the belief that gold possesses an infallible intrinsic value greater than any other commodity, beyond the limitations of supply and demand, making it a superior form of money and therefore a secure basis for any modern economy. There is no way to deconstruct this belief with practical economics or historical perspective, because there is no way to rationalize with a person who has such an irrational belief in the first place. So, point taken…

I didn’t realize he had brought this topic up before. I will say, however, that it was at least entertaining.

For the sake of moving on, I’m just not going to argue with him anymore.