Great Analogy of the US National Debt

Discussion in 'Budget & Taxes' started by Shiva_TD, Mar 3, 2012.

  1. DivineComedy

    DivineComedy Well-Known Member

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    I think that part is ridiculous.

    I do not want to give the impression that a commodity can never be regulated.

    When FDR's people showed up and offered to pay my maternal grandfather to turn under his crops he told them they were "nuts."

    Taking Gold out of circulation in any other form but authorized coin, we could regulate the value of a Gold coin, in effect creating a closed loop: preventing its ownership in raw form and only mining it in government mines, preventing its transfer to foreign powers, preventing its importation by citizens, and amending the Constitution to prevent States from paying debts in raw Gold to anyone other than the US government.

    What is the purpose regulating value? The purpose is to establish a Unit that has value; value regulated so that such and such units purchases such and such things or services.

    To have fair commerce the Unit of exchange for things or services has to have a weight and measure of value that can be regulated.
     
  2. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    The above refers to "price fixing" by government and it doesn't work. The government has tried to fix prices and if they are too high then a black market is created. If they are too low then it requires government subsidies which means the price is still based upon fair market value because the subsidy has to result in the producer profiting or the producer simply stops producing and switches to something else. We see this with subsidized ulitilities (e.g. electricity) where the "consumer's" monthly bill is lower but they have to pay additional taxes to pay for the subsidies. In the end the electricity costs the same because the market drives the prices.

    Gold cannot be "taken out of the economy" because it's an essential metal as a commodity. People often forget this simple fact. Gold is the most versital of all metals and the only thing that limits it's usage in industry is it's rarity that makes it expensive. We use other metals as a substitute because they cost less but gold would be the perferred metal to use. It is the fact that gold has more uses than any other metal and the fact that it is rare that results in it's high value. We have other elements that are even more rare than gold but aren't worth as much because of a lack of demand for them.

    For example, astatine is a (radioactive) metallic element that has no commercial uses that I'm aware of and is worth virtually nothing. Even Mercury, which has many industrial uses and is more rare than gold isn't as valuable because it doesn't have nearly as many commercial applications as gold. Gold is valuable because of it's potential uses in industry and it's rarity. Without the commercial uses it wouldn't be valuable even though it is rare.

    But let's assume that gold was completely removed from the market. No biggie, if gold didn't even exist then other commodities would replace it as money. Silver is one but even ping pong balls could become "money" if they are a generally accepted commodidity in exchange. Tulips were once "money" as well as sea shells and beads. Money is nothing more than a commodity that is commonly accepted as a medium of exchange in the barter system and the free market is a barter system.

    Understanding what money really is makes a lot of difference in understanding what lawful money is. Lawful money is nothing more than the government ensuring that the "money" is an accurate amount of the commodity that is used in exchange. We can count a dozen eggs but the amount and purity of gold in an unregulated coin could vary dramatically which is why it is controlled as "lawful money" by the goverment.
     
  3. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    One more post on "legal tender currency" (i.e. Federal Reserve Note) and "legal tender lawful money" (American Eagle coins)to try and show the differences.

    While highly unlikely the States can call for a Constitutional Convention and, with the concurrence of 3/4th of the States they can desolve the United States completely by voiding the US Constitution completely. Not likely but certainly possible based upon Article V of the US Constitution and the federal goverment could not prevent this from happening.

    Instantly 31 USC § 5103 that establishes legal tender becomes void as it is a federal law and the dissolution of the federal government would void all federal laws.

    Federal Reserve notes no longer must be accepted under the law. There is no requirement because no one has to accept them and we can assume that most people wouldn't. They are no longer backed but the United States government because that government no longer exists. The "Federal Reserve note" becomes worth nothing more than the paper it's printed on because no one has to accept them anymore. How much is that piece of paper worth? The piece of paper has no intrinsic value and wouldn't generally be accepted by anyone for any commodity or service.

    American Eagle coins no longer must be accepted under the law either. Just like Federal Reserve notes the goverment doesn't require their acceptance because the federal government doesn't exist. These gold and silver (and platinum) coins, just like a Federal Reserve note are only worth that which they are made out of. There are literally thousands of uses for the gold, silver and platinum and it would be in high demand. These coins have value because they are rare commodities in very high demand by industry. They have the intrinsic value of being a commodity and virtually anyone would accept them because of the intrinsic value of the gold, silver, and platimum that they are made out of.

    It is the intrinsic value of "money" that makes it valuable as a medium of exchange. It is the gold, silver, and platinum in American Eagles that makes them valuable in the free market and not the fact that it called legal tender under the laws of the United States.
     
  4. DivineComedy

    DivineComedy Well-Known Member

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    Regulating the value of Money has everything to do with "purchasing power," because purchasing power has everything to do with living and living has everything to do with Work.

    When a Roman Emperor had all references to making Gold removed from the Library it potentially took from civilization the knowledge of electroplating, but its purpose was not to regulate the dissimilar metals it was to regulate the value of the exchange of a Unit of Caesar for an amount of work, its purpose was to regulate purchasing power.

    In a total collapse water and food have more value than gold in the short term. Ever see the movie where Jimmy Stewart shows up at the dock and sees all the prices marked up on the food and supplies previously purchased? http://www.imdb.com/title/tt0044413/

    It is true "Gold cannot be 'taken out of the economy,'" it is a strategic asset. And having Money that has value in a collapse is perfectly understood by those in occupied territory where some still had Confederate paper or Archie Comic Book Gold.

    The ultimate purpose of using a substance of intrinsic value as money is to have comparable wealth some time after a collapse.

    With regard to the debt, and our potential collapse, having money that is backed by a variety of substances is better than all eggs in one basket.

    Hell, after a total collapse, in the short term, a 180 Grain Jacketed Hollow Point probably has more value than its weight in gold.

    Understanding what Work really is makes a lot of difference in understanding what lawful money is. Lawful money is nothing more than the government ensuring, though regulation of its value, that the "money" is an accurate representation of Work done. When "Lawful money is nothing more than the government ensuring that the 'money' is an accurate amount of the commodity that is used in exchange," the variable Work is taken out of the equation; you get Jimmy Stewart looking really angry when Work is no longer equal to Force * Distance, and you do not want Jimmy Stewart getting angry.
     
  5. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    The US government does not regulate the "value of money" related to commodities or services and never has. That requires "price fixing" where a commodity is pegged to a certain amount in dollars (e.g. $10 equals four gallons of milk). The only "value" that the government can regulate under law is money's relative to itself (e.g. fifty ounce of silver equals one ounce of gold when coined into US American Eagle coins).

    Federal Reserve notes are not "backed" by anything today. A person can take a Federal Reserve note to the Federal Reserve and it won't give the person anything for it (except another promissory note that it won't redeem either except in Federal Reserve notes). If the Federal Reserve complied with Title 12's statutory requirement to redeem Federal Reserve notes in "lawful money" then a $50 Federal Reserve note would be redeemable in a $50 American Gold Eagle coin which is "lawful legal tender money" in the United States.

    A $50 American Eagle is "money" because it doesn't promise anything and cannot be redeemed in anything. It can be traded on the free market for other commodities which is what money is. A common commodity that can be traded for other commodities.

    Simply think back to the California gold rush. People exchanged gold dust and nuggets for commodities because "gold was money" but it was not "lawful legal tender money" produced by the United States government. Today a person can accept a Canadian Gold Maple Leaf coin as "money" in transactions for commodities even though it isn't "legal tender lawful money" in the United States. The laws don't prohibit it. Title 31 doesn't state that foreign coins are money but instead it states they are not "legal tender" which requires mandatory acceptance under the law for all debts public and private.

    A free market economy is based upon the exchange of commodities for commodities or labor for commodities. When we go to work we exchange our time for commodities. I work so I can exchange my labor for electricity, my house, gasoline and my car and those are all commodities. The "paycheck" or the "Federal Reserve note" are merely promises that I will receive those commodities. When, by printing more Federal Reserve notes, the exchange value of my labor is diminished the Federal Reserve is stealing commodities from me. "Inflation" (the discounting of the exchange rate of a promissory note) is theft and always had been theft because it diminishes the value of labor expended related to the commodities that labor traded for.

    With all of this I would like to get back to the point of the national debt because we have a fundamental problem. The US government "borrows money" when it issues a Treasury note, which is also a promissory note, but it does not receive "money" in exchange. Instead is accepts another promissory note (Federal Reserve notes) and this is basically a form of "check kiting" because it is one promissory note replacing another promissory note replacing anothe promissory note ad infinitum. At no time does "money" change hands but instead it's the endless transfer of promissory notes. It is fraud under contract law because everyone is promising "money" but no one has the money to fulfill the promise. No one can collect the money promised because none of those issuing the promissory notes have the "money" to redeem the promissory notes they're issuing.

    The national debt could never have risen to $15.2 trillion if the Federal Reserve had to give "lawful money" (i.e. US minted gold and silver coins) to the US Treasury in exchange for the Treasury Notes. Instead the Federal Reserve notes are just a promise of "lawful money" where the Federal Reserve has no intention of fulfulling the promise by providing the actual "money" to our government.
     
  6. DivineComedy

    DivineComedy Well-Known Member

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    You previously said: "What doesn't make sense in that law is that a $10 American Gold Eagle has 1/4 ounce of gold so five $10 American Gold Eagles contain 1.25 oz of gold while the $50 American Gold Eagle only has 1 oz of gold." That could be explained by they are not taking about regulating "an accurate amount of the commodity" when talking about "regulating the value."

    Since we have zero power over the amount of the commodity in foreign coin, therefore, "regulating the value" has nothing to do with its metal content.

    If Jimmy Stewart paid for the supplies using gold coin of a set face value, it does not matter if gold went up or down, the face value represents his compensation for work not any commodity price.

    Say for instance you had some Krugerrands, and the Congress did not want to ban them (because we like gold) but wanted to make them worth less than the equivalent weight and measure of our coin, its legal tender could be set lower than an equivalent American coin just out of spite.

    When we exchange Work for money we are not trading in commodities we are trading work for a symbol that represents the amount of Work. That amount of Work does not change with commodity prices, it changes with technology and evolution, and it is dangerous to set the amount of value of Work based upon one commodity price.

    You said, "Title 31 doesn't state..."

    When you say stuff like that I am lost, I have to go digging, so I want a quote of the specific thing with a link if possible.

    Like this:

    "United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts."
    http://www.gpo.gov/fdsys/pkg/USCODE-2011-title31/html/USCODE-2011-title31-subtitleIV.htm

    "(9) A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of fine gold." (ibid)

    "Thus, the phrase 'money of account' did not mean, by itself, that dollars or fractions of dollars must be equal to something having intrinsic or 'substantive' value. This concept is supported by earlier writings of Thomas Jefferson in his “Notes on the Establishment of a Money Unit, and of a Coinage for the United States” (1784), and the 1782 report to the President of the Continental Congress on the coinage of the United States by the Superintendent of Finances, Robert Morris, which was apparently prepared by the Assistant Superintendent, Gouverneur Morris. See Paul L. Ford, The Writings of Thomas Jefferson, vol. III (G.P. Putnam's Sons, 1894) pp. 446–457; William G. Sumner, The Financier and the Finances of the American Revolution, vol. II (Burt Franklin, 1891, reprinted 1970) pp. 36–47; and George T. Curtis, History of the Constitution, vol. I (Harper and Brothers, 1859) p. 443, n2. The words 'or units' and 'and all accounts in the public offices and all proceedings in the courts shall be kept and had in conformity to this regulation' are omitted as surplus." (ibid)

    "If we determine that a Dollar shall be our Unit, we must then say with precision what a Dollar is. This coin, struck at different times, of different weights and fineness, is of different values."
    http://oll.libertyfund.org/?option=...title=756&chapter=86330&layout=html&Itemid=27

    {scroll down the page to find it}

    Since "This coin, struck at different times, of different weights and fineness, is of different values," therefore, we cannot "say with precision what a Dollar is."

    It might be interesting to pick that thing of Jefferson's apart, and I will leave it to someone else to find the "1782 report to the President of the Continental Congress on the coinage of the United States by the Superintendent of Finances" to see what they saw. I could be wrong in my making of arguments based upon logic instead of history and they could be wrong in their interpretation of real English.

    I cannot stand reading stuff like that on this screen, so if you have e Reader thingy, and have that same problem, relevant stuff may be in here:

    http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php?title=756&Itemid=27

    We probably should read that stuff anyway. I read all of Abraham Lincoln's stuff, but not all of Jefferson.

    It is somewhat clear that the intent is to have some intrinsic value of a Dollar, but to have precision in what a Dollar is it cannot shift with one commodity price.

    At one time an "acre" was a specific amount of work, not an arbitrary division of land. Money is not a specific amount of a thing, but represents all Work.

    Certainly though, and I agree, you have a point that Federal Reserve Notes should be backed by something of intrinsic value, and if done so it would effect the ability to have debt above that amount in reserve, but I think that to have precision in what a Dollar is it should not be just one commodity but several for a diversified portfolio. And by that I refer to what Money is in "Commentaries on the laws of England: in four books, Volume 1" by Sir William Blackstone, page 276, "it is a sign, which represents the respective values of all commodities." Such that a man pushes a mass so far he can say with precision what a Dollar's worth of work is; Work's true value is not just one commodity but several that make up the economy. Lawful Money is not just an intrinsic value of one commodity, it cannot be, it is a "sign" a Unit representing the intrinsic value of all commodities. It just so happens that by taste you want your coin to be Gold, to have intrinsic value of one commodity, and yet to "say with precision what a Dollar is" it must represent all commodities or all Work.

    If Money "represents the respective values of all commodities," then it is reasonable that our debt could exceed the amount of Gold in reserve. I think placing a limit on our debt, by not having our Money represent the respective values of all commodities but of one, such as Gold in reserve, for this single purpose and only with regard to the debt, is a practical one. I do not think that it is practical to fix the value of money at one commodity.
     

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