The coming currency devaluation

Gold-Eagle.com ^ | Oct 10, 2003 | Cliff Droke

[Starwind]

After repeated warnings from currency analysts and market advisors (including yours truly) that the U.S. currency system is on the verge of becoming a blocked, two-tier system we now have confirmation that the country is one step closer to realizing this. When fully implemented, the new U.S. dollar will mean a "banana republic" type currency and across-the-board devaluation.

According to a CNN/Money news wire report of Oct. 7, the new U.S. $20 bills will be released this week at banks across the country. Meanwhile, the Fed and its Bureau of Engraving and Printing (BEP) will hold a nationwide series of publicity events as part of a $33 million campaign to let the world know of the new bills and to acclimate the public to their strange new appearance.

The new $20s are peach-toned with the presence of blue ink, making it the first time in almost 100 years that a mass-circulation U.S. note has prominently contained a color besides green and black. They also contain an embedded vertical plastic strip and color-shifting ink, whose appearance changes from copper to green as the bill is tilted against the light. Below is what the front of the new $20 bill looks like (from the BEP website).

So what is the significance of this change of color in the U.S. $20 note? Well according to the Feds it is designed as a deterrent to stop counterfeiters. But accordingly to currency analyst Lawrence Patterson, who authored the 1994 monograph titled "Currency Recall", which accurately forecast the new multi-colored notes, the new colored money is part of a two-tiered currency system that will have drastic implications for investors and non-investors alike here in the U.S.

Patterson calls the new notes "crayola currency" and claims they will circulate domestically while the normal green currency that we've grown accustomed to will circulate offshore all over the globe. According to commentator Terry Savage, "Two-thirds of the U.S. paper currency is circulating in foreign countries." With the coming two-tiered currency system, foreigners will continue to be allowed to use the greenback while U.S. citizens will be stuck with the "crayola currency" which cannot be exchanged.

Patterson forecasts the coming use of foreign exchange controls for the U.S. dollar domestically, which would prohibit Americans from transferring capital to any other world currency. Again, this is discussed in Patterson's now-classic monograph "Currency Recall" (which I've read and highly recommend to students of currency policy and investors seeking to retain the value of their investments).

Patterson states, "I want every one...to think carefully about this...because we are coming very, very close to the end of the freely convertible domestic dollar. They cut in value could be as much as 50%...I believe those holding gold bullion bars offshore and bullion coins domestically will be very surprised to find that special regulations will prohibit them from profiting."

He further maintains that coin dealers are under a strict Treasury regulation and must report your sales of some coins but not others. The rule is as follows: Coins with a premium above 15% do not have to be reported. In addition to the 1099 report, filed by the coin dealer, you have to declare any capital gains as well."

He continues, "The existence of this rule, I believe, indicates an intent to outlaw the ownership of bullion coins altogether! However, the rule will not remain at 15% necessarily and could be changed to a higher percentage, which is unknown at this time. Obviously, you do not want to own any investment coins with a premium of 15% or less and better stay at the 25% or 30% level to be safe." Patterson points out that complications for the government would clearly arise should numismatic collectibles be forcibly confiscated since the bullion coins' value can be determined by the London gold fix, but not so for collectibles. "The price of the collectible coin may or may not be easily determined as numismatic valuables are routinely auctioned off at prices of not only tens of thousands of dollars, but hundreds of thousands of dollars per item," he observes. "It is difficult to imagine just how this would all be sorted out by the bureaucracy to come up with a calculation of compensation that would relate to the market value." He advises staying in the "safe zone" and exchanging bullion coins not needed for emergencies (such as food or gasoline shortages, et al) for numismatic coins with higher premiums.

Obviously, the introduction of the new peach-colored $20 bill is a test on the American public to see how they respond to the drastic new changes. The CNN/Money article states that the BEP has launched a multi-million dollar promotional campaign aimed at gaining public acceptance of the new currency. For example, the twenties are being featured on game shows, including "Wheel of Fortune" and "Jeopardy," sporting events, like ESPN's college football telecasts. The bills are also part of some consumer product tie-ins, according to CNN/Money, and pictures of the bills will be on the side of bags of Pepperidge Farm Goldfish. If the government succeeds in getting the American public to accept the bills, the other remaining denominations will obviously follow and plans will proceed for the blocked domestic dollar.

[Starwind]

The book Currency Recall: The Coming Monetary Reorganization of the United States by Lawrence Patterson is at Amazon.com.

Anybody know this book/Author...have a link to the monograph?

Some strong statements made that need verifying.

[Starwind]

hedgetrimmer posted this article on another thread, and it is well worth reading and discussing, I believe.

Anybody got any further info on what the article claims?

[Support Free Republic]

Hi mom!

[Alter Kaker]

This is simple absurdity to anyone of economic knowledge. New design does not mean new currency. Are there two quarter systems? Old quarters circulate overseas and 50 state quarters circulate only in America? Of course not. The sky is not falling, not on America, not on Israel, not on anybody.

[glorgau]

Or it could just be that the reason is the stated one - to deter counterfeiters. Also, there is a bunch of narco cash that has to be flushed out of the hiding places in this world.

[Starwind]

New design does not mean new currency.

Clearly it is new currency distinguishable from the old, and if they can't be exchanged as has been contended:

foreigners will continue to be allowed to use the greenback while U.S. citizens will be stuck with the "crayola currency" which cannot be exchanged.

It seems a further restriction on our ability to take our cash where we wish and spend it as we wish.

Presumably there would be some mechanism to take cash on a foreign trip, but the article seems to imply a lot of reporting might accompanying such an exchange (at customs?). It is not to hard to understand how this can be used to 'track' bringing cash resulting from foreign bullion sales onshore.

The point of the post was to vet this article. Might you have any information to support your viewpoint?

[Mike Darancette]

Wow, the depth of paranoia in this article is amazing.

[agitator]

Bills were introduced over several years (95-97 IIRC) to introduce a dual currency ostensibly to reduce counterfeiting & money laundering by Leahey & Kerry. There was to be no currency recall - however - careful reading of the bills indicated that exchange of old money for the new "domestic" money was to be on a dollar for dollar basis; exchange of the old or new "domestic" money for the new "external" money would be by *value*.

It was clear to me at the time that this represented a dual currency system where the "value" (or exchange rate) of the two currencies were *not* linked.

Knowing how the value of the (alleged) dollar is in proportion to how much it is inflated by greedy politicians with their fingers on the printing presses, it is not inconceivable that we might wind up with the Rubles while foreign settlements between governments and multi-nationals would be conducted with dollars as we know them today.

This is not my imagination, the bills existed at the time and I didn't read them incorrectly. I recently looked for copies of them and found incomplete portions of them on the web but not the original text - the offending portions of which were in the last couple of paragraphs.

[tonyinv]

Not to mention terrorist money. Wasn't there hundreds of millions of dollars found in Iraq? I say force everyone to exchange the old greenbacks for the new bills.

This would force the money into the banking system wouldn't it? I dont know, just guessing.

Hasn't a collapse of the menetary system been predicted since day one?

[Starwind]

There was to be no currency recall - however - careful reading of the bills indicated that exchange of old money for the new "domestic" money was to be on a dollar for dollar basis; exchange of the old or new "domestic" money for the new "external" money would be by *value*.

It was clear to me at the time that this represented a dual currency system where the "value" (or exchange rate) of the two currencies were *not* linked.

These seem contradictory statements. Could you please clarify? If domestic and foreign bills exchange at a "dollar for dollar basis" wouldn't their value in fact be linked and equivalent? Could you give an example of what you meant by exchange by "value"?

[Alter Kaker]

Clearly it is new currency distinguishable from the old, and if they can't be exchanged as has been contended:

This happens every year for American government, no matter if new design or not. As old bills return to banks, they are exchanged by government for new bills. You cannot ask for old bill.

It seems a further restriction on our ability to take our cash where we wish and spend it as we wish.

Existing bills will be legal for use in America for ever. I do not understand concern.

[Gatún(CraigIsaMangoTreeLawyer)]

This article does not make sense. Sitting here in Panama, we use U.S. paper currency. (Panama has none of its own. There is a special treaty between the U.S. and Panama about this that was passed early in the 1900s.) Bills wear out. The old ones are flown back to the U.S. for destruction and new ones are flown in which means the old ones will be replaced by the multicolored ones. Therefore, all $20 will eventually be replaced by the new ones all around the world. Maybe someone can explain it to me.

[nopardons]

American paper money, has historically changed, from time to time. Bills printed 100 years ago, and more, are useable as legal currency. When such bills go through a bank, they are NOT " traced " and as legal tender, they are valued at face value...whether backed by gold, silver, or neither.

The government's current change, in the way paper money looks, is to deter fraud/counterfitting.

[Starwind]

This happens every year for American government, no matter if new design or not. As old bills return to banks, they are exchanged by government for new bills. You cannot ask for old bill.

The article was not clear on this point (perhaps the book/mongraph is) but it would seem to imply the Treasury would print and maintain two sets of currencies - a domestic (new design) and a foreign (old design) US bill set (the old/exising design) but the two would not be exchangable. Worn-out new-design domestic bills could not be exchnaged for old design bills and worn-out old design foreign bills could not be exchanged for new-design domestic bills.

See agitator's post #8 for some hints at prior attempts in congress to establish a dual currency system.

[kingu]

Events marking the first purchases with the new $20 notes were held today in more than 30 U.S. cities. Later this month, the issue of the new $20 bill will be marked by international events in dollarized economies and in countries where U.S. currency is widely held, such as Russia and countries throughout Latin America.
-- From a government press release

The new twenties are the only 20's being released by the Federal Reserve system for one month, then we go back to the standard recycling of whatever comes by along with additional printing of 20's to replace those that are destroyed.

You're welcome to buy all the gold you want, I'm sure the gold market people would love to have a nice pop so they can sell their positions in anticipation of the next major gold sale in December.

[lelio]

Wasn't there hundreds of millions of dollars found in Iraq?

That's my guess for why the new $20 was introduced: boatloads of counterfeits out there.

Now that would be an interesting terrorist plot: bring in a billion fake $20s into the US and leave them in suitcases for someone to find. You'll start a craze to find the next suitcase full of dough and people will wonder if they are carrying fakes. I'm surprised something like this hasn't happened already.

[Starwind]

Bills wear out. The old ones are flown back to the U.S. for destruction and new ones are flown in which means the old ones will be replaced by the multicolored ones. Therefore, all $20 will eventually be replaced by the new ones all around the world.

See my post #14 re maintaining and circulating two sets of currencies, and agitator's post#8.

Maybe someone can explain it to me.

I'm looking to figure out what's true and isn't myself.

[nopardons]

What's TRUE, as opposed to people on FR, who imagine that they are " experts ", because years ago, they read some bill/s that were proposed, but NEVER enacted, is that banks get OLD paper currency from abroad and send them NEW stuff. At one time, bank employees were allowed to but the OLD bills, for face value, as " keepsakes ", curriosity items, whatever.

Old American paper money, that is worn, is redeemable at any bank. The government destroys worn out and defaced money.

These are the FACXTS and NOT the tinfoil, that some here pass off as " fact ".

[Starwind]

Bills printed 100 years ago, and more, are useable as legal currency. When such bills go through a bank, they are NOT " traced " and as legal tender

I agree we are told they are legal tender for all debts public and private, so I wonder how this would work.

But if a distinguishable new currency were introduced for domestic use only, and by law, not exchangable with the old-design currency circulating only outside the US, both could be "legal tender", just not exchangable without explaining where one got the currency they had.

Then there is the issue of exchange rate. Presumably they'd be $1 to $1, but then I assumed the Fed would never induce inflation either. Agitator in post#8 seems to suggest otherwise.

[Starwind]

You're welcome to buy all the gold you want, I'm sure the gold market people would love to have a nice pop so they can sell their positions in anticipation of the next major gold sale in December.

LOL! Thank you no, I'm not interested in trading gold.

[Centurion2000]

Are there two quarter systems?

Yep, 1964 and earlier coins ..... and the crap minted since.

[kingu]

But if a distinguishable new currency were introduced for domestic use only, and by law, not exchangable with the old-design currency circulating only outside the US, both could be "legal tender", just not exchangable without explaining where one got the currency they had.

Such a plan does not exist, the article writer is hawking gold. The 'author' he's quoting was the editor of 'Crime News' in a 2001 story. This is just the typical scare tactics that gold marketers use to bump the price of gold so that the traders can get out of the market just before one of the major sales by countries divesting themselves from large hoards of gold. The next major sale is in December, which means these traders have to bump the market so they can have some form of profit before the bottom falls out again.

[nopardons]

I doubt that agitator has ever worked in a bank or knew anyone who worked in currency. I, OTOH, know both.

What those here, who revel in being frightened to death by imagined shadows, don't know, fills volumes and WHY anyone ever believes them, is beyond me.

The new paper money is being made to foil fraud and counterfitting, which has once again become a HUGE problem. It has NOTHING at all, to do with a two tiered money system.

[Gatún(CraigIsaMangoTreeLawyer)]

Thank you. But somehow, there is still something wrong. Unfortunately, my brother the banker just left on a two-week vacation and I won't be able to speak with him until he returns so I can share his comments with all of us. The acid test during his absence will be if we start to get multicolored bills here in Panama. I'm not saying you're wrong. I am saying that I'm not satisfied with our comments yet.

[Gatún(CraigIsaMangoTreeLawyer)]

Ref post #23. I agree with you.

[Starwind]

the article writer is hawking gold.

Well he's doing a terrible job of it.

From the article: I believe those holding gold bullion bars offshore and bullion coins domestically will be very surprised to find that special regulations will prohibit them from profiting.

Seriously, do you think he's encouraging people to go out and buy gold because they'll profit from it?

The author may be a crackpot about a dual currency, but then you can't argue he's shrewdly selling gold either.

[nopardons]

Thanks. I don't talk about things I don't know much about/nothing at all about, unlike so many here. I've stated facts . Your brother the banker WILL concur with what I have posted. :-)

[calljack]

Most of the "money" in the world is in electrons not cash.
How much "money" are you worth??
How much "cash" do you have??
Most of the money in the world exists only in ledger entries
in bank accounts anyway.

[wardaddy]

Bump.

I am a bit concerned about rising mortgage rates. I've gotten lazy and spoiled. I have a bank board review on 11-9 for a big (for me) package and I fear they will raise the ceiling on my balloon with equities obviously rebounding.

Can't have it all can we?

[Starwind]

The acid test during his absence will be if we start to get multicolored bills here in Panama.

If the author is correct, you won't ever see multicolored US currency in Panama - only in the US (I presume you're not referring to the canal zone?); Panama would continue to see the existing 'greenbacks', and said greenabcks woul dbe minted anew to replace worn out bills; Panama would not receive the muitcolored currency to replace worn out bills.

I am saying that I'm not satisfied with our comments yet.

Me neither.

Perhaps you can persuade him to post (or let you post) his comments upon his return?

[Gatún(CraigIsaMangoTreeLawyer)]

On a lighter note, and I'm serious, the Panamanian public has not been educated on the new change. I can see the population refusing to accept these new bills thinking they are phony. I dread walking into a supermarket and trying to pass a new twenty off. But then I again, note to self, don't worry..use credit card. Don’t leave home without it.

[agitator]

Read my post again. If you were to exchange existing dollars for the new "internal dollars," that exchange would be one for one; $1 old for $1 new "internal" money.

When you went to exchange old or new "internal" dollars for the new "external" dollar, that was to be done by value, i.e., implying that there could be different values (purchasing power) for the "internal" dollar vs. the "external" dollar.

In otherwords, you're going on vacation to Ecuador (which uses dollars as currency) and it might take $50 US "internal" dollars to buy $35 US "external" dollars to take with you.

Considering how politicians enjoy theft by the defacto devaluation of our currency by printing too much of it (where they get to spend the new money before you get it), and considering how certain elements of govt think it's the duty of American citizens to transfer the product of their work to every third world ____hole for no good reason, with a dual currency with a floating exchange rate between them they would be free to inflate our new "rubles" without affecting the value of the external dollars.

That would mean they could steal the value of our "rubles" without interfering with international settlements based on the dollar, or mucking around with the long term planning of multinationals using the external dollar.

[nopardons]

Not " most " money is in " electrons "; that's how it is transferred though.

My personal wealth and where it resides, is none of your business.

[agitator]

P.S. Mind you, I'm talking about bills that are now 5-7 years old and I know of no such bills currently introduced. I'm only referring to what I read at the time and suggesting the potential danger *if* a dual currency system were to be introduced.

[nopardons]

Use your credit card, if you are worried. Eventually, everyone, everywhere will get the hang of it all. LOL

[Gatún(CraigIsaMangoTreeLawyer)]

No need to ask my brother now because your statement was correct.

[nopardons]

You knew that was coming and NO, we can't ever have it all.

[Starwind]

I can see the population refusing to accept these new bills thinking they are phony.

Actually that would be the same concern of the US Treasury. The US population can accept a new bill. But there are many countries (Oil producing countries) on whose acceptance of the dollar and US currency we don't want to jeopardize.

Hence why the old currency would continue to circulate internationally.

If not being able to exchange that old currency with the new US domestic currency (except at borders and banks) and that helps track drug profiteers, so be it. But if the exchange rate is not one to one, how does it get set and that would seem to lead to problems.

But US bills in commerce internationally, isolated from US commerce domestically except by customs exchange (ostensibly) will lead to each currency having a different value because they no longer flow freely among those two different markets.

[nopardons]

Thanks and yes, it was. :-)

[Capitalism2003]

Buy silver.
Buy gold (silver is a MUCH better value in my opinion.)
Put it in a safe place and forget about it.

Then rest easy at night.

[Starwind]

P.S. Mind you, I'm talking about bills that are now 5-7 years old and I know of no such bills currently introduced.

Understood.

[Fledermaus]

100% correct, this article is total BS.

[Gatún(CraigIsaMangoTreeLawyer)]

The monetary treaty was a separate treaty from the Canal treaties with Panama so it's still valid. I have a copy of it somewhere; but in which box, I don't know.

Yes, okay, I'll ask my brother about this on his return and I will share it with all of you.

Were you ever in the Canal Zone? It was a wonderful place.

[Hank Rearden]

Or it could just be that the reason is the stated one - to deter counterfeiters.

As long as the old design (the one from years ago, not the most recent update) is still valid currency, why not just continue to counterfeit that? It's been done many times.

[Starwind]

The monetary treaty was a separate treaty from the Canal treaties with Panama so it's still valid

Hmmm. That's an interesting wrinkle. Presumably then, by treaty Panama would circulate the new currency, but if as the author contends the new and old currencies are not 'exchangable' that would put additional constraints on Panama to enforce same, as well as your point about the population accepting the new currency.

[Gatún(CraigIsaMangoTreeLawyer)]

Starwind, keep in mind that my brother will verify what nopardans stated.

[Starwind]

Starwind, keep in mind that my brother will verify what nopardans stated.

Independently confirmed facts are always welcomed.

[Fledermaus]

You keep referring back to post #8 like it has merit. It's parnoia bunk.

Do you think all money last forever? Would the writer of this ridiculous article make the same case for the new quarters with each state on the back?

It's obvious a lot of people do not understand how money works. The Federal Reserve, along with setting interest rates, also sets the limits on the money supply. The money supply is also measured in many ways in the form of M-1, M-2 money, etc.

The Treasury knows how much new printed money it sends out and the banks work with them to capture and destory old money. Just look at every bill we have today. Every single one has a year printed on it. They also have the signatures of the Secretary of the Treasury and the U.S. Treasurer. These change every single year.

In no way does the Treasury devalue money based on the year it was printed. If you have a cigar box full of $100 bills with a date of 1968 on them, they are still worth $100 if you deposit them into a bank. The bank will normally take that bill, especially if worn (that's an entirely different criteria) and send it to the Treasury for destruction. I don't know what the date determination the Treasury currently has, even if it's a written rule, but they do this constantly.

You can also send any bill you have that has been destroyed, say, in the wash, burned somewhat, ripped up, etc. and if the Treasury Dept. can conclude enough of the bill still exist, and it's a low percentage in many cases, they'll replace it dollar for dollar. They have ways, even without the serial number, to determine what bill it was.

And that brings up the fact of the serial number. They aren't there only to stop counterfeiting, those numbers are used to track how much cash, or M-1 money, is in circulation.

This process is one reason certain money become collector's items. I have a $2 bill (the ones with Jefferson on them) minted in 1976 that I got on the American Freedom Train that traveled around during the Bi-Centennial. It's also postmarked from the city I got it, in this case Little Rock, as they did this in every city. It's still worth $2 and the currency hasn't collapsed. Actually, I could probably get more for it on e-Bay with the Freedom Train postmark.

I also wonder if the writer of this article got all bent out of shape when, years ago, the government started redesigning all money over the $1 bill.

[Gatún(CraigIsaMangoTreeLawyer)]

I'm hitting the sack. It's almost 3:00 a.m. here in Panama (We don't go by daylight savings time.) I'll catch up later.

[Fledermaus]

P.S. The author is only basing his claims on the fact we are now putting color into the currency. As I just pointed out, they change the currency all the time.

Also, his claim that 2/3rd's of our currency is held overseas means nothing considering we in the U.S. use checks, direct transfers, and credit/debit systems more than cash.

And the fact that others in the world are using our currency isn't going to make a difference. It's still money we know is in the M-1 definiton and even it all eventually comes back to us to be exchanged. Do you think every $100 bill we found in Iraq is going to be handed out? No. That money goes to a bank and will be exchanged for newer currency or credits.

But, like in third world countries that drive older American cars, they use older American currency to really run their economies. You can go practically anywhere in the world and pay with our dollars without exchanging them for local currency. Because those people know our dollars have real value. But they to will sooner or later put them into a financial system that will lead them back to us to be exchanged with newer bills.

The way this article was written, you'd think we all are still using bills and coins from 1780.