Saturday, April 12, 2008

by Free Market Duck

Will the real $50 please stand up?
(Oct 10, 2007)

How can the United States, the most financially, technologically, and militarily advanced nation on the planet have two -- or three or four -- contradictory definitions for its U.S. dollar?

Boise, ID – In 1986, the U.S. Congress authorized the U.S. Mint to stamp gold and silver coins and sell them to the public. Two basic types of coins are minted: (1) proof set coins for coin collectors and (2) bullion coins for anybody for whatever reason. These coins are struck in the following denominations and metal content:

  1. American Eagle $50 One-Ounce Gold, .916 fine.
  2. American Eagle $25 Half-Ounce Gold, .916 fine.
  3. American Eagle $10 Quarter-Ounce Gold, .916.
  4. American Eagle $5 Tenth-Ounce Gold, .916 fine.
  5. American Buffalo $50 One-Ounce Gold, .9999 fine.
  6. Walking Liberty, $1 silver Eagle, 1 troy oz, .9993 fine.

As of October 2007, the mint proof coins sell for hundreds – or thousands – of Federal Reserve Notes (FRNs or “dollars”), depending on the mint year and mint location. The bullion gold coins sell for whatever the current price for 1 troy oz spot gold happens to be that day, plus a slight markup of, say 5-10%.

So, herein lies the conundrum.

The 1986-2007 American Eagle gold coins and 2006-2007 Buffalo $50 gold coins are lawful U.S. money authorized by the U.S. Congress. Each gold coin states its weight and measure and face value. For example, the American Eagle $50 gold coin says “1 oz. fine gold - 50 dollars.” However, the market price for the American Eagle $50 gold coin at any local coin dealer or U.S. Mint costs about 790 Federal Reserve Notes or 790 dollars. (Look in your wallet. Each FRN says “dollars.” That’s our first contradiction.)

So what is the true value of the $50 gold Eagle: $50 or $790? Do we have two different monetary standards going on in the U.S., paper Federal Reserve Notes that say “dollars” and American gold coins that say “dollars” but the two types of “dollars” are not equal? That is, “50 dollars” in Federal Reserve Notes do not equal “50 dollars” in American gold coins?

Why is this a problem, and what does it really show about how the U.S. Government and private Federal Reserve bankers have been robbing the people for the last umpteen decades?

Here are several examples of the problem.

The IRS says I can give $11,000 per year per person to anybody I want without incurring a gift tax or the recipient incurring income tax for the $11,000. So, let’s say I give 10,000 in paper Federal Reserve Notes to my first grandson. Lucky him. Then, let’s say I give 200 American Eagle $50 dollar coins, which equal 200 x $50 = $10,000, to my other grandson. Is the IRS going to claim that I gave my 2nd grandson $158,000 in Federal Reserve Notes because each $50 American Eagle can be sold down at the local coin dealer for 790 Federal Reserve Notes per coin (200 x 790 FRNs = $158,000)? Thus, my 2nd grandson owes income tax and I owe a gift tax because I chose to use the American Eagle $50 coin as legal tender instead of Federal Reserve Notes?

On the other hand, if I take my $50 gold Eagle to Albertson’s grocery store and buy milk, eggs, and bread and hand them the $50 gold Eagle, they will give me change for 50 Federal Reserve Notes. If the IRS rules in the above example that 200 American Eagles = $158,000, then the government should make Albertson’s Grocery store give me change for 790 Federal Reserve Notes, not for 50 FRNs when I pay with an American Eagle gold coin.

Let’s say I fly to Germany and I’m carrying 200 American Eagle $50 coins in my briefcase. Just before we land at Munich, do I fill out the white declaration sheet that I am not carrying more than $10,000 in U.S. currency or do I claim I am carrying $158,000 in U.S. currency?

If my employer pays me in $50 American Eagle coins, say 200 coins this year, did I earn $10,000 or $158,000? The IRS and my accountant will want to know. In the first case, I’m living at the official poverty level. In the second case, I’m doing OK. Buy myself a Mercedes Benz.

Obviously, a dollar does not equal a dollar in the current U.S. monetary system. It depends on the face value of the money you are holding and we have two different and conflicting monetary standards going on in the U.S.

The big question is: what is the true definition of a Federal Reserve Note or a “dollar” and how did we get to this ridiculous point?

The answer is: very slowly and very tricky.

First, Congress illegally authorized a private central bank called the Federal Reserve to control and regulate our money so Congress could spend deficit money without taxing the people. Second, the Federal Reserve switched to a “fractional reserve” system in which it could issue more paper than the gold held by the U.S. Treasury. Third, the Federal Reserve convinced FDR to confiscate everybody’s gold coins and bullion in 1933. Fourth, President Nixon cut all dollar ties to gold in 1971. Fifth, the Federal Reserve has been hyperinflating our non-collateralized paper money and credit like water for the last 36 years and Congress is spending earmarks and pork like drunken sailors on shore leave.

Now that Americans can own gold again and Congress authorized – who knows for what reasons -- the minting of new U.S. gold coins in 1986 without thinking about the current Federal Reserve Note funny money system already in place, the dummies arbitrarily assigned face values to the gold coins, almost in a direct ratio of weight and measure: $50, $25, $10, and $5. (Note that the ratio of gold in the $10 coin to the $50 coin, 25% or One Quarter-Ounce, should have made the face value $12.50, not $10, but what do the goons in Congress know about standardized weights and measure for money?)

In other words, instead of moving onto a gold monetary standard, the Bozos in Congress simply thought it would be nice to start minting gold bullion coins for the public without reference to their face values vis a vis the existing market price for gold or any correlating face value to our current Federal Reserve Notes. A $50 American Eagle does not equal 50 Federal Reserve Notes. So will the real $50 please stand up?

If the dinkleberries in Congress and the IRS and the U.S. Treasury and the private central bankers of the Federal Reserve and President Bush claim that there is no meaning, no definition, or any numerically significant monetary relationship between the number of dollars stamped on the American Eagle gold coins and their face values relative to our current FRNs, then they could have just as ridiculously stamped the “square root of two” on the One-Ounce gold coin, “20 million” on the Half-Ounce gold coin, “the Integral of F=ma dx/dt” on the Quarter-Ounce gold coin, and “Have A Nice Day” on the One-Tenth Ounce gold coin.

After all, that’s just about how much most Americans understand about the nature of money and credit in the U.S. anyway, isn’t it? Unless, of course, they have read Parts 1, 2, 3, 4, & 5 of my articles: “Wherein Lies the Value of Today’s Paper Money?” – FM Duck

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