Posted on 03/08/2013 4:37:29 PM PST by BfloGuy
Thank you. I did not know about the Coinage Act.
Nonetheless. There will be no differentiation made between checkbook money and actual dollar bills when the purchasing power of the dollar starts to drop. It is not a legal issue; it's psychological.
When your money consists of nothing more than the government's say-so, the faith in money is psychological.
But that is where a very powerful economic law, Gresham’s Law, comes into play.
Simply put, “bad money pushes out good money.” When currencies compete, everybody wants to spend the weaker of the two and save the stronger. And while virtual money can be doubled or trebled with the push of a computer keyboard button, the government *cannot* make more paper money, or even higher denomination bills.
Even if they made $500 or $1000 bills, they would be useless, because nobody could make change for them.
So here are two forms of dollars. Having cash that is completely under your control at home in a safe place, means that you can act quickly no matter what happens.
Virtual money is under someone else’s control, made worse by yet another recent change in the law, so that bank customers cannot even demand “demand accounts”, if the bank doesn’t want to, or has orders not to, relinquish them.
The public seems to be reaching this conclusion as well, because home safes and strongboxes have been flying off the shelves for several years now.
There is a way to see the virtual vs. physical split from an objective viewpoint as well, by understanding the behavior of ‘scrip’. Scrip is a non-legal tender complementary currency that is very tightly controlled as to its value and the price of things purchased with it.
It was created hundreds of times in the US during the Great Depression, and kept local markets and local government functioning when the US dollar had severe deflation and shortage.
The expression at the time was “You could buy a pound of hamburger for a nickel, but nobody had any nickels.” So scrip filled that gap. For example, if a pound of hamburger cost 1 scrip, no matter what the dollar did, it still cost 1 scrip. People bought their scrip with dollars, and could use whichever currency gave them the better deal.
Importantly, on the local level, scrip actually helped to stabilize the dollar.
http://en.wikipedia.org/wiki/Scrip
Once again, there is no difference between checkbook dollars [what you call -- not incorrectly -- virtual money] and paper dollars. They spend the same. People use them in the same way.
Paper dollars have no more purchasing power than the others. You are trying to make a distinction where none exists.
There is one scenario where you might be right. If an electro-magnetic pulse from a nuclear bomb destroys all of our electronics [wiping out trillions of dollars instantly], then paper dollars might become relatively valuable.
But that's not even certain, because the only reason green pieces of paper have any value at all is the confidence of individuals that they will be accepted as payment. After a nuclear attack, I'm not so sure such confidence would exist.
Instead of trying to defend paper fiat money, go study up on why gold would be a better currency.
> Once again, there is no difference between checkbook
> dollars [what you call — not incorrectly — virtual
> money] and paper dollars.
Ah, but there is. You control paper money in your possession. You do not control checks, credit or other instruments. Other people, corporations, and the government does. Any of them can simply refuse it to you.
Likewise, when you purchase something, whoever sells it to you does not have to take credit, debit, or checks. But once the transaction has been made, they *must* take paper money.
Right now, many banks and major retailers are trying to phase out personal checks, because they are expensive to them to process. This leaves credit and debit, which are totally in the province of the issuers and underwriters. If they decide to withdraw your credit they can, and there is nothing you can do about it.
If there is a bank holiday, you might have a million dollars in the bank and have access to none of it. If there is a “cash run” on banks, they would be emptied of paper currency in just a few hours. They would be unable to provide funds except virtually, to *another* such institution. Not you.
While the government might effectively cause hyperinflation, and say that virtual money is the same as paper money, it cannot back that argument. If a retailer is willing to sell you $10 worth of merchandise for cash, yet refuses a check for $10,000, it is all the difference in the world.
After the stock market crashed in 1929 my grandmother had a loan on three houses, rented two out and lived in one. She also had quite a lot of money in the bank. Her bank closed and she did not ever get her money back, but the bank sold her notes on the property to another bank that stayed in business so eventually when she couldn’t pay her payments the houses were foreclosed on.
My grandmother went from being pretty well off to being a penniless, homeless widow with 4 children practically overnight.
“Even if they made $500 or $1000 bills, they would be useless, because nobody could make change for them.”
I know a lot of people, including me, that carried a $1,000 bill in their wallet especially for emergancies in the 1950s.
The car owner gave me one for weekend expenses for the race car in 1957 and by the end of the weekend it was spent.
Exceptions are made for illegals for a variety of laws to include no insurance on vehicles...I am sure a law of some sort would be passed to make them exempt from any law restricting cash.
$500 and $1000 bills have value only as collectibles, and require substantial identification, including a thumbprint, to spend today, except among collectors. Most retailers would just refuse the sale in exchange for them.
What I am talking about is an attempt by the government to reissue them as currency to support inflationary or hyperinflationary policies. Right now, because of shortage, our paper currency is de facto 95% deflated, but our virtual currency is under powerful inflationary pressures.
So even with printing $1000 bills, they would still have to print them in the billions just to make the paper currency on a par with virtual money. On or about 6 billion $1000 bills, which is about two years full production. Assuming no more inflation to the virtual currency in the meantime.
And nobody could make change for them.
I can see why they are such profound advocates of a “cashless” society, because if cash was no longer used, they imagine infinite spending and endless devaluation.
If that were the case, then you'd be right. But that situation doesn't exist and if we reach that point, then all confidence in the government -- and therefore its money -- will have been lost.
Paper dollars are intrinsically worthless. Their purchasing power is based on faith alone. I wish you luck hoarding your paper dollars. I really wish you'd sell them for some gold, though, instead.
“I am sure a law of some sort would be passed to make them exempt from any law restricting cash.”
There would have to be an exemption for them; as more of the leftist northeast is left with only welfare parasites and illegals, there would be no other way to transact business.
Banks aren’t making the case for the cashless society with their security breaches, either.
Sorry, I know way too much about gold to want any appreciable amount. For me it is just a metal. As a thing of value it is far too hard to convert, so in many practical ways it is no more valuable than paper money.
For those who embrace it, though, I strongly recommend that they become learned about scrip, as it is one of the most effective ways to retain gold’s value and convertibility—not by being backed by gold, but by being a very controlled currency that is stable independent of gold. That is, it can make change for gold, and provide it access to the rest of the market.
Stability is the great secret of gold, but only backing something else. It has no great stability when it is used as a currency. The best demonstration of this was the transition, in Weimar Germany, from the hyperinflated fiat currency Papiermark, to the gold backed non-public currency, the Rentenmark, to finally the also gold backed Reichsmark, which even survived the war.
Gold itself could not have done that, but by backing currency, it could.
It’s not really necessary to horde cash, beyond a certain amount, but mattress money can be particularly good insurance against government perfidy.
Study some real economics. Start here. You are trying -- as we all do at one time or another -- to figure out economics without the benefit of those who have gone before us.
And, also, don't be so quick to dismiss people who are offering you sound advice when you don't have any idea of what you're talking about.
Now that’s just aggressive talk. You have no idea of my background or experience as relates to gold, which I would hazard to guess is a lot greater than yours.
I also know it is pretty fruitless to argue with a gold bug, so I’ll pretty much end it here. Good luck with your shiny yellow metal.
I find your theories about the difference in purchasing power between paper money and electronic money unconvincing and I have explained why.
You might find interesting a book that deeply influenced my thinking on the topic of money: The Theory of Money and Credit by Ludwig von Mises.
Your background makes no difference to me at all and I hope you don't find my book suggestion too "aggressive".
All banks are government agents here in the states. All are mandated reporters of transactions above what about 9k and other regular transaction of large amounts. Seems as though these days 1K is a large amount.
They also are mandated to report to the government any on line transfes above the 6 permitted per month.
My bank connects any money order with my account. I cannot get one without giving account numbers.
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