Dollars and Sense

Everywhere we look, people are making money, it seems (except, perhaps people who have spent their money on real estate.) But it seems that pieces of paper – stocks, bonds, certificates, promises – are worth more every day or at least every week.

However, we may well ask ourselves whether this is really credible. Is everyone you know working harder, driving faster, learning something new every day? Or could it be that the money we use is easier to find?

Once we ask this question, then answers are not hard to find. The first Congress defined the standard dollar, making it the same as the silver dollars already circulating, and then made the gold coins with one-fifteenth as much metal. When gold coins disappeared and silver rolled into the mint, Congress cut the gold down to one-sixteenth. And that has been the history of U.S. money – degradation (with the solitary exception of the “trade” dollar, which was slightly more valuable than a standard dollar.) Now, the coins that look like silver are actually only copper, the ones that look like copper are actually only zinc, and the nickel, which is really, truly nickel, cannot be exported (outside the United States, it would be melted down to make gas turbines or other exotic products.)

Obviously, if we measure in currency – the money we use for cash transactions – then the amount of money we own may increase, or even decrease, without our actually being richer or poorer. And if we pay debts in currency, then the creditors will receive less, or more, than we actually agreed to pay.

One might have thought that this was not a new idea, even in 1787: everyone knew that when Spain explored South America, they seized literally tons of gold, so that their coins suddenly became more plentiful; everyone knew that, during the War of Independence, the States had printed so much money that the notes were, to put it politely, discounted.

And indeed the delegates to the Convention understood it perfectly well; they delegated to Congress the power to COIN money, but reserved to the States the power to define the legal tender – from only gold or silver coin. This should have been an ideal system; when new sources of gold were discovered, the “gold” States (perhaps, those that traded with Britain) would have seen high profits and the “silver” States (perhaps, those that traded with China) would have been depressed. The opposite would have occurred if silver were found, perhaps in a copper mine: people would have known that the additional money was the cause of the phenomenon.

But what actually happened was that the States – usually so eager to dictate how citizens should educate their children or treat their employees – made no decision at all: only Colorado, Missouri, and Nevada confined their coins to gold and silver. (And these States, de facto, ignore their own statutes!) Consequently business enterprises keep their accounts in Federal Reserve Accounting Unit Dollars: if the currency becomes less valuable between January 1st. and December 31st., inventories are over-estimated, depreciation is under- estimated, and therefore profits (and taxes!) are exaggerated. This goes on year after year – and thus while people may believe that they are getting more and more wealthy, in fact they arrive at retirement age and find themselves hard-pressed, or worse.

If you live somewhere other than Colorado, Missouri, or Nevada, you could play Paul Revere and awaken your fellows to the impending danger by campaigning to enact a legal tender law that does specify GOLD or SILVER coin. Every day, the radio and the television tell us that the dollar is equal to so many pounds stirling, or euros, or yen, or renminbi; but we are entitled to demand that the Congress “regulate” the value of foreign coin, rather than allowing it to vary from day to day, hour to hour. (Congress is usually eager to “regulate” what you eat or drink, what drugs you can purchase, where you travel, how you educate or punish your children – why should they not “regulate” something that the citizens would actually like to know?)

Suppose one far-sighted State – New Hampshire, perhaps – did adopt the 90%-gold “double eagle” as its legal tender; what would happen? Then a New Hampshire business might find that, instead of having a profit of 2-1/2 per cent for the year on paper, really it had a loss of 1/2 per cent. Obviously, quite a number of New Hampshire businesses would shut down: bad! But, lo and behold, plutocrats in other States would see the difference between New Hampshire and their own State, and would invest in New Hampshire: good! Because U.S. taxes are predominantly on transactions, the amount of taxes paid by New Hampshire to the U.S. would be reduced: again, good! The Congress might actually see what was happening, and revert to taxing property – this would mean that U.S. taxes would be equal PER CAPITA in every State: unbelievably good!!

Do not be afraid that, if you owe someone one thousand silver dollars, you would have to stagger into hir office carrying fifty pounds of silver coins; the law of contracts does not require “specific performance,” you can pay by a check or a draft or a wire transfer, so long as it is, that day, worth as much as a thousand silver dollars.

Is it really worth while making the effort to keep honest accounts? Yes, it is! Any society that does not have a system for telling whether it is doing right or doing wrong is, sooner or later, bound to fail. And that is just what is wrong here and now; people see bigger and bigger numbers all around them, and suppose that all is well, when in fact the amount of wealth that is actually disposable – not already committed to fulfil some obligation – is steadily diminishing. This is a campaign that could very well preserve the republic . . . and is to the disadvantage of no-one except the tax collectors!