"WHAT IS LAWFUL MONEY?"
are German savers up to? They are hoarding cash in mattresses,
closets, bank savings accounts and anywhere they can get their hands on
it in a hurry, even if some German banks have already
interest rates. In other words, some Germans are willing to put
spare cash in banks and PAY THE BANK for the service!
The chart abive is quite spooky, in our opinion, for it is a graphic
illustration of the national debt over time. Not the money the U.S. is committed
to spend on unfunded liabilities but the funds it has borrowed to pay
"But we only owe it to ourselves," politicians used
to tell us. Yes, but it is so staggering WE will not pay
it. But it will crush the living standards of future citizens who
will inherit the burden. The world will learn that the ancients
had it right when they said "All debt must be eventually paid, either
by the borrower or the lender."
The big question right now is, "How many
trillions of dollars of debt will tower over our economy until the
sheer weight of it crashes down? Or, will the debt pile up beyond
trillions, quadrillions, quintillions, sextillians, and so on?"
One sextillion dollars, by the way, is shown as:
There is no evidence in the history of
all of humankind that any money unit could survive as a medium of
exchange were it able to it achieve such stupendous numbers.
what you owe and you'll know what you own." ~Benjamin Franklin
What a lot of hooey that old fashioned advice sounds like today. That
was Ben dishing out advice in the 18th century when the idea of
spending money one did not have hadn't developed among the hoi
palloi. Why, we might still be reading by candlelight, cooking in
open fireplaces and traveling in horse drawn buggy if the idea of
living beyond one's resources had taste of it when the federal
government issued fiat currency to support its pricey military
expenses. Think of it! Print up and spend paper IOUs to pay
military expenses with the vague promise of someday redeeming the notes
in real money.
Incidentally, any reader who has tucked away an old
U.S.Note (as opposed to the Federal Reserve notes) is holding a
descendant of the old "greenback dollars" the federal government issued
to help pay its military bills in the Civil War.
This chain of thought was prompted by
this from Bloomberg news;
auto debt has continued to expand, ticking up to $1.32 trillion in the third
quarter -- an increase of $50 billion from a year earlier, according to
the latest data from the New York Fed. The percentage of car loans in
serious delinquency -- with owners behind on payments by 90
days or more -- also rose to 4.71% from 4.27% the previous year."
A $50 billion
increase in auto debt in a single year doesn't seem like much until you
lay it out in millions
of dollars. It totals 50,000 million dollars. Ben would be
appalled. He would have been delighted with all the gadgets advances in
technology have produced, but would have been disappointed that average
people were so eager to stay in hock all their lives in the belief that
money inflation would continue forever and they would somehow always be
able to meet their bills.
political gossip and partisan squabbles do not affect average
people's lives as much as hated ROBO CALLS. Think
it. Even if you're sharp enough to recognize even the deviously
clever the robo call may be you are still wasting time.
We grant some of them are downright
funny. Recently we got one from a 'grandson' who wanted to know
if we had heard of his auto accident that morning. intrigued, we
asked what happened. The pitch began and I interrupted to ask
which of our grandsons this was. He replied, "You don't recognize
your own grandson's voice?"
'"We have a lot of grandsons," we
explained. "Not one of them has
a foreign accent!" (Click.)
Congress at long last has heard
consumers' complaints about the hated robo calls and voted to do
something about it. The House voted overwhelmingly to try to dwork on it. The bill
goes to the Senata, and, if approved, to the president's desk.
If the government's
"Do not Call" program is an example of fighting robocalls we are not
hopeful much will change..
This is contrary to the advice of
European economists who are pushing consumers to 'get out there and
spend that extra cash.'
The savings trend seems to
date back to the early 1920s when Germany was clobbered by wild
hyperinflation. The German mark fell to worthlessness by
Thrift Day establishing the motto "Never spend more than you
number of consumers are constantly encouraged to live beyond their
means, but apparently the echoes of several generations ago still
influence German habits and, for now, they're trying to set aside some
cash for that proverbial "rainy day."
this be a question?)
notes are not money, although they are declared, by law, to be 'legal
tender." This is made clear in 12 U.S. Code Section 411.
"Federal reserve notes, to be issued at the discretion of the Board of
Governors of the Federal Reserve System for the purpose of making
advances to Federal reserve banks through the Federal reserve agents as
hereinafter set forth and for no other purpose, are authorized. The
said notes shall be
obligations of the United States and
shall be receivable by all national and member banks and Federal
reserve banks and for all taxes, customs, and other public dues. They
shall be redeemed in
on demand at the Treasury Department of the United States, in the city
of Washington, District of Columbia, or at any Federal Reserve
bank." (Underscoring, ours.)
This is current law. Google 12 U.S. Code
section 411 for a copy. The Federal Reserve notes in your
pocketbook or sugar bowl are obligations of the United States to the
Federal Reserve System. Which means we are using IOUs for money,
but since those IOUs are declared to be legal tender they are accepted
in the marketplace and for taxes. They are, by defination, fiat
currency deriving legality because of the signatures on each note by
the U.S. Treasurer and the Secretary of the Treasury.
THE MAIN QUESTION: If U.S. paper
currency can be redeemed in lawful money what the heck IS "lawful
Presenting a $10.00 note for redemption
and accepting two $5.00 notes or ten ones is merely swapping iOUs for
other IOUs of different face values. They are all legal tender
but not lawful money
under the present U.S. Code.
So . . . how does one swap a
Federal Reserve Note for Lawful Money?
Until 1965 paper notes could
be traded for silver coins, mostly dimes, quarter dollars, and
half-dollars. But the domestic plug was pulled in 1965 and the
formerly silver coins were pulled from circulation with base-metal
slugs substituted. They still circulate today, made mostly
of copper with a thin veneer of nickel applied to give them the
appearance of silver. Still, U.S. coins still contain a bit of
intrinsic value. Paper notes do not. They come off the
presses at the U.S. Bureau of Engraving and Printing upon orders of the
Federal Reserve System. The Fed pays the cost of production, plus
overhead. A skidload of $100.00 notes costs the same as a
skidoload of $1.00 bills.
Coins, on the other hand,
are not printed. They
are minted by the
U.S. Treasury Department
and the central bank pays face value for them. (!) Because they
have some minor intrinsic value they are as close to "lawful money" as
one can get.
Oddly engouh the minor
coins, the cent and nickel, are the most costly to produce. The
cent is made primarily of cheap zinc with a thin veneer of copper to
give the appearance of the pre-1982 cent which was about 98 percent
copper. The market metallic value of the present nickel is about
80 percent of its face value and costs the mint more than 5 cents to
manufacture. The cent also costs more than face value to mint and
one might wonder why these two minor coins are still being made since
the taxpayers are losing money on the process.
mid-August, 1971, foreign nations could trade their paper U.S. dollars
for gold at the U.S. Treasury at the rate of $42.22 per troy
ounce. The gold window closed August 15th, 1971, and the dollar
has floated as a fiat currency ever since.
prompted by the success of South Africa's 1 troy ounce gold Kruggerand,
the U.S. began minting and selling a gold Eagle coin containing 1 troy
ounce of pure gold. The face value is $50.00 but this
bullion coin retails for about $1,500.00.
there we have it. A clear definition of the noun "dollar" is
difficult to establish. The U.S. has drifted far from the
definition of money established by the Constitition and the Coinage Act
of 1792. How long we can bobble along on this uncertain sea of
confusion about the nature of currency and credit we cannot
guess. One thing is certain; of the trillions of U.S.
dollars afloat in the world only a fraction exist in the form of
coins. Paper currency is next with respect to dollar volume with
$100.00 notes exceeding the $1.00 note in number. Most of the
money supply, however, exists as electronic blips in the bowels of
As far as
money is concerned the world seems to be skating on rather thin
'I'm tired of
freeloading billionaires.' ~Sen. Elizabeth Warren
Senator Warren is among the present front runners in the pack of
candidates seeking the Democrat Party nomination for U.S.
president in the 2020 election. She is keenly aware that a spirit
of envy of the very rich exists among the voting majority and she's
playing it to the hilt. "Take from the rich and give to the
poor" has wide appeal. Always has.
It galls Warren to see people pile up considerable net
worth and her Socialist turn of mind persuades her the accumulation of
wealth is 'unfair" to those who have neither the knack for accumation
or the ambition.
We are reminded of the furor prior to
the turn of the 20th century when a member of the Vanderbilt family
accumulated an enormous land mass hear Asheville, North Carolina, and
constructed the magnificent Biltmore House. People remarked that
it was totally unfair that one man could personally own such real
estate - failing to consider the employment that the project
provided. Today the property is still in private hands and is a
major taxpayer in Asheville. Moreover, it still provides valuable
employment for large numbers of people.
The vast Vanderbilt fortune began, by
the way, when a teenage Cornelius Vanderbilt began a modest ferry
service across New York harbor from Staten Island to Manhattan.
He was known as "Commodore" for the rest of his life. He parlayed
his little boating service into a major enterprise and later became a
railroad magnate. Ms. Warren may not be familiar with his knack
for money accumlation and investment but would surely insist the
government should have taken his "surplus" and given it to people who
were having trouble making ends meet.
Accumulating wealth should not be condemned.
Ill-gotten gains are another matter. A wealthy drug cartel leader
would be described as dealing with ill-gotten gains. Cheats in
business and industry should be examined under the law, and we
presently have plenty of official agencies charged with doing that.
‘No One Believes
Anything’: Voters Worn Out by a Fog of Political News ~N.Y. Times
Paying attention to the impeachment inquiry and other developments
means having to figure out what is true, false or spin. Many Americans
are throwing up their hands and tuning it all out, reports the New York
Although we look askance at the leftist slant of the Times' opinions
and reporting we don't disagree with the above observation. We're
confident the barrage of media political coverage will increase to a
suffocating level over the next 12 months. Moderators and their
guests will chatter as fast as vocal apparatus will let them in the
assumption listeners hang on to and absorb every word...every
opinion. (We can only guess what Edward R. Murrow would say if he
heard a liberal chatterbox on NPR ask an obscure guest from academia
or liberal think-tank "So...what's your opinion of how the
impeachment inquiry will play out?" Since when does the exchange
of liberal opion pass as 'news coverage'?)
We'll survive. We're not so sure the growing
number of media outlets will...particularly newspapers. We note
our local paper will cease publication of a Saturday print edition on
Saturdays commencing in January.
reason to worry about the stability of their
income stream. it rarely seems to live up to the illusion of a
retirement we imagined when we were young. Even indexing the payout to
the Consumer Price Index does not seem to erase the erosive effect of a
The late economist Ludwig von Mises wrote this in February, 1950:
a pension of $100 a month means a rather substantial allowance.
What will it mean in 1980 or 1990? Today the Welfare Commissioner
of New York City has shown 52 cents can buy all the food a person needs
to meet the daily caloric and protein requirements. How much will
52 cents buy in 1980?"
Nearly 70 years have passed since Mises raised the issue
of the depreciating dollar. Fifty two cents today won't even buy a cup
of coffee let alone supply one's daily caloric and protein needs. And
what will the dollar buy thirty years hence? No person on earth has a
So what does a bloke or blokess do about it?
Restricting outlays to NEEDS and postponing certain wants
is a good starting place. Those 7 year car loans are crazy. So is the
pricey house bought in the belief the price will always go up.
And quit trying to buy happiness with credit cards.
Happiness is elusive. Finding contentment is hard enough
and it, too, is elusive when a tower of debt hangs over one's
"The US Dollar
will collapse soon," declared Russia's Vladimir Putin.
calumny is THIS? Everybody knows the U.S. dollar became the
world's reserve currency with the adoption of the Bretton Woods
Agreement at the end of World War 2. What could possibly dislodge
the Almighty Dollar from its lofty position? Why, the world
prices almost everything used in international trade in U.S.
dollars. What could possibly take its place?
This graph shows the game changes over several hundred
was King of the Hill in the 15th century, followed by Spain.
Traces of the Spanish "Piece of Eight" appear in the U.S. Monetary Act
of 1792 when the size and weight of the new U.S. dollar were copied
from the old Spanish milled dollar which was popular in Colonial
America. (This silver coin was valued at eight reales, or bits.
and a haircut, two bits.")
currency rose to the top spot in international trade for a time,
followed by dominance of France in the 18th century. Great
Britain ran the show during late 18th century, through the 19th century
and into the 20th. After WW1 the U.S. muscled its way to
dominance to fill the increasing vacuum caused by the weakening British
pound. Bretton Woods confirmed monetary trends and the dollar as
been the world's reserve currency ever since.
Now comes Vladimir Putin to say the U.S. is using the dollar as a
political weapon, imposing sanctions and what not. He thinks this
is causing countries around the world to seek a different currency to
serve the reserve function.
So, whose turn next? The European Union? Russia? China? Bitcoin?
Why not GOLD? Almost all central banks have some stowed in their
vaults. Each troy ounce consists of 480 grains of pure gold and
the measure is not about to change. Individual nations can
calculate their money units in fractions of the troy ounce and get on
with business, letting the markplace calculate prices based on the
age-old laws of supply and demand.
U.S. has been leaning to the political
left for nearly 90 years.
In the 2020 election voters may be tempted
jump into Socialism in a really big way!
Thanks to the strong leftist tilt in
popular media and a high percentage of colleges and universities,
easily beguiled American youth hear the siren call of Socialism and may
march to the polls a year from now to vote for it.
In an editorial on the subject the New
York Post writes: "Last
year, Brooklyn College’s Mitchell Langbert found that, among
51 top-tier colleges, 78% of the departments had zero, or almost zero,
Republicans. Democratic profs outnumbered GOPers in every single field
at every school. The overall ratio: 10.4 Dems per Republican. At
Wellesley and Williams, it topped 130-1."
Of Money Muddles and Modern Times
question of the money muddle is still on the minds of a small group of
worriers who think debauching the currency was a bad idea and is
leading to financial chaos. It was summed up on the Internet in a
comment by an anonymous citizen who signed his name "Fred."
"Two choices: inflate the debt out
of existence or go back to hard money. Which do you expect?
"The dollar has already lost 98+
percent of its buying power since the advent of The Fed after being
stable for 100+ years. No way the bankers who run the world can
go back to sound, hard money after working for 150 years to destroy
it. ~ Fred"
Fred gets an "A" for being brief. And he's right to suspect that
bankers will not be at all interested in returning to the discipline of
a dollar defined, as it is by Constitutional mandate, as a certain
of silver and its equivalent in gold. These were the monies of
the U.S. Constitution and they've been abandoned. The mandate
concerning money was not Constitutionally AMENDED...it was merely abondoned in a manner of which the
general public was not aware.
So, the general expection seems to be that monetary inflation will
continue to rule. We believe this will continue to be the course
politicians and bankers will follow, but it will fail. There has
never in all of history been
an episode of money inflation that did not
end in pain and frustration.
Old-time economists like Von Mises, Hazlitt, Hayek, Rothbard, and many
more wrote convincingly in favor of sound money but they were not able
to catch on with the general public . Inflalting the money supply
is believed to
somehow wipe out poverty. It never has.
from the left - opinions from the right.
Mix them all together to create an awesome plight.
Is compromise the answer? Do cool heads still prevail?
Or, do the texting masses just prefer to rant and rail.
The Fed cannot admit it. There's
little it can do.
Quantitative Easing was only helpful
to a few.
It wants inflation higher. It will
"make things come alive."
But the Fed is strangely failing
no matter how it may strive.
We'd like to see sound money return to save the day
With long forgotten lessons coming into play.
It's contrary to the experts. They tell us "take on debt!"
But we suggest the opposite. Stay solvent and you're set.
Pay no attention to the windbags when
No debt and some savings is what
we all should seek.
Let's erase all this confusion. Let's
bring back common sense.
Restore the Constitution and
celebrate its eloquence.
are the people so restless?
"Chile is the most stable and wealthy
South America. Catalonia is the most prosperous part of Spain. Paris is
hardly a hellhole of repression. And Hong Kong is the freest city of
China. If the beneficiaries of freedoms and democratic rights come to
regard them as insufficient to produce the political, economic and
social results they demand, what does that portend for democracy’s
Buchanan surely recalls the tale of Benjamin Franklin's response to a
person who asked what kind of government the Founders had created in
that hot ummer of 1787.
A republic," he responded. "If you can keep it."
Now - a republic is not the same thing as a democracy. Since the
late 18th century the United State of
(a phrase coined by an Englishman, Thomas Paine,) morphed from a
representative republic into a democracy with all the trimmings of
quasi-socialism. As John Adams and other early U.S.
Statesmen knew very well experiments with democracy always led to
turmoil and collapse. They were well aware of Scot professor
Alexander Tytler's "Cycle of Democracy."
Drawing from the history of the Athenian Republic he concluded that
democracies had a life span of little more than 200 years. He
described the cycle as a circular illustration.
Starting at the top and working in a clockwise direction the Cycle of
Democracy progresses from bondage to liberty and abundance. From there
it runs on to apathy and dependence, a condition one can sense
in the present world.
For more on the Cycle of Democracy Google Alexander Tytler. (Mind the