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Define the “dollar”

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  • Sat, Oct 03, 2009 - 12:42am

    #1

    BungeeBones

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    Define the “dollar”

In his article “What is a Dollar?”  http://edwinvieira.com/ Dr Edwin Veira gives a 30 page history and the legal definition of what a “dollar” is that I would say is beyond refute. And if one has even the most basic understanding of English grammar it is also irrefutable that a Federal Reserve Note, though denominated in dollars, are not dollars. Correct use of English grammar would require acknowleding that they are indeed notes and not dollars. A note is a promise to pay and the precursor to the modern Federal Reserve Note was a promise to pay a dollar but was not a dollar in and of itself.

 

Mr. Martenson’s arguments all use the Federal reserve Note synonomously with the term dollar and with the term money. A major point of his presentation involves teaching about the US debt. Given that the Federal Reserve Note has not been redeemable for dollars for some 45+ years, what do we actually owe Federal Reserve Notes or dollars (i.e. 1 oz. silver coins asDr Eeira points out). Mr. Martenson correctly points out debt is a result of a contract but also there are certain legal requirements that must be met for a contract to be valid. There are a number of them but the one I want to focus one is the requirement that their be a “meeting of the minds”.

It is difficult to say who we actually owe the debt too but let’s personify this by saying we owe it to the Chinese, Arabs and other foreign entities. When they loaned us “Federal Reserve Notes” that said we were going to pay them back dollars did they believe they would get payed back 1 oz silver coins or Federal reserve Notes not backed by anything? Obviously they knew they would get paid back federal reserve notes not backed by anything is the obvious answer.So, if our goverment nationalized the Federal Reserve Bank, created all the Federal Reserve Notes that we owe, and paid off our debt then our creditors would have been paid off with exactly what the terms of the contract stated and our nation, our childre, and grandchildren would indeed be debt free. 

 

It doesn’t sound like Mr Mortenson would be in favor of that proposal and the only other alternative, unfortunately, is to continue with the status quo (a fiat currency based on perpetua debt). But as one born in 1958 which puts me at the end of the “boomers” I have to say why do I and generations behind me need to be enslaved because someone (something) doesn’t want to punch a few keystrokes and add some zeroes to the end of bank balances to pay the debt off? I say that because our fiat money system is really electronic now and does not require physical printing of Federal Resrve notes any longer but merely accounting entries. As one on whom this so called debt is being placed upon I must ask the question … If all that has been required to “make” money was to print it (earlier days) or add entries with a computer (later days) how could they not produce enough to pay off the debt? Did they forget? Fall asleep? Have a bad keyboard? Mouse? Let’s give them the benefit of the doubt andso, lets fix that issue and create the funds out of thin air now and rectify the situation.

 

“Oh no!” they would say, “You can’t do that, it would ruin our savings!”. To them I’d have to say you are one of the priviledged few who have saved but if you have saved worthless paper then you obviously believe in fiat money and have reaped your own colamity. Why did you lweave your savings invested in worthless paper? Which brings us back to the issue of sovereign entities such as China, the Middle eastern countries, japan, and a host of other foreign governements that hold our worthless paper. Are you going to try to convince me they were unaware it was not backed by anything? sorry, that won’t work.

 

Mr. Martenson says he would not want the US to default on its debt. The above action would not be a default, they would all have been paid in full. And it would not spell the demise of the dollar either but it certainly would ruin the masquerade the Federal Reserve Note has been able to maintain for so long, which is really the root of our problem. Most Americans receive way too much “money” from thin air to give it up so the likelihood of the above happening is very unlikely.

 

So, on an individual basis then, now that you know the legal definition of a dollar let me ask you the same question the IRS asks you –  how many dollars did you make last year? Now they couldn’t possibly expect that you made any dollars but really want you to report  Federal Reserve Notes as dollars. Well, simply be honest and say that you did not make any dollars. I think they could, at best, acknowledge that a FRN is not a dollar but could require you to report their equivalent dollar value (as they do with receiving goods or services in lieu of wages). If they did pursue that then take your yearly income in FRNs and divide it by approximately $17 (the cost in FRNs to buy $1 in silver minted by the US mint). Thay ask you for dollars, ttell them in dollars, not in FRNs.

 

But you would owe taxes on that amount if your income fell withing the amounts of the tax tables but guess what? The IRS is required to accept FRNs as payment for all debts public and private. You could (and they would be required by law) to accept you tax payment in the form of FRNs as they do everyone else’s (at face value). You would have met your lawful tax burden.

 

 

  • Sat, Oct 03, 2009 - 03:58am

    #2
    Peak Prosperity Admin

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    Re: Define the “dollar”

Bungee,

I love your prescription on taxes!  

As for printing our way out of debt with a few keystrokes, the only problem with that is it would bankrupt just about every business in the country.  All savings, as you point out, would vanish through hyperinflation.  You can tell them it’s “their own fault” all you want, but how will that help the ravages of closed businesses and unemployment that will follow.

I think the Fed’s real strategy, which Chris presented through a link in last weekend’s “weekend reading” is to slowly devalue the dollar over time.  Basically, it’s what you want, just spread out so “no one notices”.  I don’t think we have that long – i.e., I don’t think the U.S. economy, due to the debt, can last long enough to “slowly” devalue the dollar.  I think within 12-18 months, devaluation will become hard and heavy.  The final prescription will be somewhere between what you describe above and what the Fed is trying for, IMO.

The Fed has the deck stacked in its favor.  Since we’ll be well along in deflation by then (again, that’s my opinion, likely to only be shared by three people and maybe one cat and two dogs on this site) interest rates will be close to nil.  I am not talking about short term rates – those are already pretty much nil.  I am referring to 10, 20 and 30 yr bond yields coming down much further as the economy continues collapsing and offers ever fewer places to park money other than government bonds.  Printing money in that scenario just drives the cost of borrowing lower – the nirvana and impossible dream of every money-printing whore.  

They will as usual, overplay their hand, and as soon as there is anything even remotely more promising than government infinity-year bonds paying 0.00001%, you will see that bond bubble pop like nothing that’s ever been seen.  That would be when it would be a good time for the Fedsters to leave town, because their gig (and the country) will be up.

  • Sat, Oct 03, 2009 - 07:59am

    #3
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    Re: Define the “dollar”

“They will as usual, overplay their hand, and as soon as there is anything even remotely more promising than government infinity-year bonds paying 0.00001%, you will see that bond bubble pop like nothing that’s ever been seen.”

Short term rates can be held at zero indefinitely. The fed simply needs to ensure there are more $ in reserves than can be lent out. Would need to be coupled with tight regulation of banks mind you.

Longer rates could start going up strongly in the event of a recovery however under these circumstances first the fed would stop issuing bonds (their existing borrowing would remain at the previous price of zero).

They then, in the face of recovery, have two options, firstly reduce borrowing in line with the recovery and start selling some of those assets it has aquired to the private sector, and start releasing federal employees into the private sector and cut their deficit that way.

The japanese have issued an amount of debt that cannot possibly be paid back, yet the markets don’t seem bothered about that. Why not? Why do the japanese continue to lend their money to their government? Government borrowing beyond the ability to be paid back is the same thing is printing money.

Why hasn’t the yen imploed?

 

 

 

  • Sat, Oct 03, 2009 - 04:31pm

    #4
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    Re: Define the “dollar”

[quote=scepticus]

Why hasn’t the yen imploded?

[/quote]

Because the QE is being neutralized by debt deflation?

  • Sat, Oct 03, 2009 - 05:59pm

    #5
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    Re: Define the “dollar”

What I am “thinking I’m seeing” is that all the ‘bubbles” are really like suds and are all inside another bigger bubble but I haven’t heard that one really referred to as a bubble. What I am referring to I’ve started calling the fiat money bubble. A major part of any bubble is people’s denial of it, even as it crumbles down around them. And that is a major point of what I am trying to get across. It is not a colapse of the dollar we are about to see but a colapse of the fiat money system. The more we keep calling it the pending colpase of the dollar the more we confuse everyone in my opinion.

 

Once a person wakes up to the pending collapse of the FRN they may try to look back and figure out how it happened. It happened with the collapse of the dollar at Brenton Woods when our government backed FRNs with dollars and then we ran out of real dollars in the 60s and 70s.

 

 

  • Sat, Oct 03, 2009 - 06:34pm

    #6
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    Re: Define the “dollar”

Hi BungeeBones,

Your legal argument has a small flaw.  Actually a large-ish flaw.  The “legal tender” laws require a person to accept amounts tendered in federal reserve notes as a payment equivalent to the number of dollars owed.

Don’t forget where your federal reserve notes came from.  Suppose your employer agrees to pay you $100 for one week’s worth of labor.  You perform this labor.  At the end of the week your employer owes you a debt of $100.  Accordingly, your employer tenders payment in the form of 100 FRN, which you accept as payment in lieu of actual dollars, and in settlement of the original debt of $100.

When the Internal Revenue Service, or your state Dept. of Internal Revenue, or your county, or your town, requests taxes payable on $100 of income, you must tender payment on the full $100 received.  Why?  Because when you accepted 100 FRN in discharge of a $100 debt, you have taken the legal position that you received $100 in value, and can thus be taxed on $100 in value.

You cannot accept a FRN as equal to the value of a dollar when it was given to you, and then report a different and lower value to the government.  This would be equivalent to accepting 32 bushels of strawberries in satisfaction of a $100 debt, and then reporting the bushels as having a lower value for tax purposes.  The government could thereby obtain a conviction for fraud: you accepted 100 FRN in full and complete satisfaction of a $100 debt at the time they were given to you, and you then turned around and assigned those FRN a lower value when you figured your taxes. 

  • Sat, Oct 03, 2009 - 08:44pm

    #7
    Peak Prosperity Admin

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    Re: Define the “dollar”

Hello BungeeBones,

Great stuff…it is very refreshing to see someone offer solutions through monetary reform. 

BungeeBones wrote:

So, if our goverment nationalized the Federal Reserve Bank, created all the Federal Reserve Notes that we owe, and paid off our debt then our creditors would have been paid off with exactly what the terms of the contract stated and our nation, our childre, and grandchildren would indeed be debt free.

You’re hitting on the general solution – we should once again create our own money which we’ve called the dollar…a return to our constitutional and legal money prescriptions.  Instead we borrow FRNs from a private banking cartel, which we use as money.

Many Americans believe in the US without understanding our major economic and government policies. Collectively, American’s trust in our government to ethically create and manage money is so pervasive that few of us ever give this multi-trillion dollar issue a moment’s thought.

To put this in another perspective, the US Bureau of Engraving and Printing (BEP) has two buildings, one in Washington, D.C. and one in Fort Worth, Texas.  Imagine each building has two halves: both print pretty pieces of paper.

In one half, money [FRN] is printed; in the other half, US Treasury Securities (T-Bills, Notes, and Bonds; they are auctioned to the public every week as loans to whoever buys them and are repaid with interest).

The solution is to eliminate the “US Treasury Securities” side of the building, it could be better used as an expanded emplyee cafeteria.  The government does not need to borrow from private banks.  We do it by choice and in violation of our constitutional law.  Instead of issuing bonds, we should print money.

I think Thomas Edison summed it up best in 1921:

“If our nation can issue a dollar bond, it can issue a dollar bill.  The element that makes the bond good, makes the bill good also…Both are promises to pay, but one fattens the usurers and the other helps the people.  If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt.”

Back to your post –

BungeeBones wrote:

But as one born in 1958 which puts me at the end of the “boomers” I have to say why do I and generations behind me need to be enslaved because someone (something) doesn’t want to punch a few keystrokes and add some zeroes to the end of bank balances to pay the debt off? I say that because our fiat money system is really electronic now and does not require physical printing of Federal Resrve notes any longer but merely accounting entries. As one on whom this so called debt is being placed upon I must ask the question … If all that has been required to “make” money was to print it (earlier days) or add entries with a computer (later days) how could they not produce enough to pay off the debt.

Yes!  Let’s do it…our privately owned and controlled debt money system is a crime against humanity – it is slavery.  

One small correction that I respectfully offer is that FRNs do have backing.  They are solely backed by the productivity and property of the people of the U.S.  If and when the U.S. goes bankrupt (again) it will be our collateral that is taken.

So, here is what I suggest:

  1. We owe the private Fed around $4 trillion dollars, we could send them digital dollars to repay our debt.  The money would extinguish the debt and disappear in the process.
  2. Let’s say that the intragovernmental debt is around $6 trillion, we could issue the money to repay the loans to social security, medicare, etc.
  3. The foreign debt could be repaid the same way, but over a longer time period.

Not bad – most of our national debt extinguished in 15 minutes and we get back our social security trust.

The final step would be to eliminate the private banking monopoly to create money.  And no more fractional lending.  The banks would be required to borrow, not create, money from the government at a low interest rate (e.g. 1%).  This cash stream would eliminate the need for any income tax.

Larry

  • Sat, Oct 03, 2009 - 10:09pm

    #8
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    Re: Define the “dollar”

So, here is what I suggest:

  1. We owe the private Fed around $4 trillion dollars, we could send them digital dollars to repay our debt.  The money would extinguish the debt and disappear in the process.
  2. Let’s say that the intragovernmental debt is around $6 trillion, we could issue the money to repay the loans to social security, medicare, etc.
  3. The foreign debt could be repaid the same way, but over a longer time period.

Not bad – most of our national debt extinguished in 15 minutes and we get back our social security trust.

The final step would be to eliminate the private banking monopoly to create money.  And no more fractional lending.  The banks would be required to borrow, not create, money from the government at a low interest rate (e.g. 1%).  This cash stream would eliminate the need for any income tax.

Larry

I love fairy tales with happy endings but my guess is that about 5 minutes after these steps the USA would be in a race with Zimbabwe to see which country was able to destroy their currency faster.

Why must this be the case?  I think we all agree that Americans have been living beyond their means for the past 20-30 years.  If their was a simple painless solution to this problem it would mean that we can undo this damage quickly and painlessly.  If that were the case, Americans should be proud of their accomplishment of living well beyond their means without ever having to pay the piper.  I personally think this is very unlikely.

It has taken decades to get American and the rest of the world into the current mess and it is going to take a long time to get us out of it.  If anybody thinks that there is a simple solution to this problem, I don’t think they have thought about it very clearly.

  • Sun, Oct 04, 2009 - 03:39pm

    #9
    Peak Prosperity Admin

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    Re: Define the “dollar”

I think, but am not quite positive, that your legal tender perspective is flawed.

 

I have not researched what the “tender” part of legal tender because the word “tender” in common usage does not have a meaning anywhere near the context the word is used on the FRN. SO it appears one would have to do some legal research to come up with the accurate legal definition of what “tender” means but my hunch is the conditional phrase attached to the legal tender clause (i.e. “for all debts”) holds a key to an understanding that is quite different tha n yours.

 

if you came up to me and wanted to purchase something I had and you offered me x number of FRNs the legal tender clause in no way forces me to having to accept your FRN as paper. You are not indebted to me. I believe if I extended you a payment plan, however, then you could “tender” FRNs as payment and I would have to accept the tender.

And I am confident I could elimnate  that the legal tender status in an installment contract merely by specifically stipulating the type of payment that was due. We could negotiate to have payment be x dollars in silver, x dollars of gold, x ounces of silver, x ounces of gold, or copper, corn, soybean or any other innummerable number of items and commodities. Having once negotiated such a contract you wouldn’t be able to later substitute a different payment method.

Your points about wages, labor, accepting payment in FRNs, etc are all the result of contractual arrangements also. In fact I am attempting to get paid from my employer in silver dollars as we speak. Will he do it I do not know but if I agree to work for $1.00 per hour (in silver) how much did I earn in dollars? 1. I have legal filing requirements that say I must file when I receive over a certain amount of what? Dollars. If they mean FRNs they should simply say so. Now, lets assume I have a high paying job and instead of $1 in silver I get $20 per hour in silver. The number of dollars I earned would be over their filing requirements so I would have to file a return. Again, how many dollars did I earn? The actual number of dollars I received. So I then look up my tax liability and see I owe $5000 according to the chart. Do I owe $5000 silver dollars? No, and they would not even accept the payment in that manner. So I send in FRNs with face values stating $5000 total and they are required by their laws to accept that as payment.

 

The only possible argument I could see them making is one similar to the requirement that if I receive something other than money I have to convert it to a cash value and report the cash value. So, I ask you what is the cash value of a dollar? How many dollars did I get paid and did I report them? Yes. Is a dollar worth more than a dollar? How can that be — that a dollar is worth more than a dollar? Their whole argument. trying to get me to convert a dollar into dollars would quickly descend to mindless, totally irrational, insane conversation. The only sane conversation would be that they wanted me to convert my dollars into FRNs and report them as dollars. But that is not what the law states.

 

So the conclusion is that the “legal tender” clause is a one way street and does not require us to decalre or report FRNs as dollars. The history shows the FRN never replaced the dollar it merely forced acceptance in lieu of the dollar. But the silver dollar is still our legal, national currency.. It is terrible that such educated people as doctors, lawyers, legislators business people etc everyday write laws and contracts referring to dollars when they really mean FRNs. If the fed was dismantled it would have absolutely no bearing on any of the laws or contracts. The dollar would still be in existance so, technically, the means for you to pay those obligations are still available. They merly got multiplied by an astronomical 1600 or more percent .

When it comes to employers though, I’m of the persuasion now that if my employer pays me in FRNs, and he reports it as dollars then he is the liar. The essence of the legal tender clause was the fact that, at the time, they were redeemable for dollars. It would be equivalent to a statute saying they had to accept your check.  knowing that there would always be money there in the account. But things have changed and that note is no longer redeemable. They defaulted on the obligation atttached to legal tender clause. We don’t have toreport dollars as FRNs.

 

Getting paid in silver dollars greatly simplifies the legal argument but if was able to take my check to a bank or a coin dealer and cash it for silver dollars then that was my income for the period. If I got paid in FRNs (cash) and took it to the coin dealer to redeem for silver dollars it would cost about $16 FRNs per dollar but it again still represents my earnings for the period. Dividing your income (in FRNs) by the current price (in FRNs) of a real, legal dollar is the amount you should report. That is your true income in dollars.

  • Sun, Oct 04, 2009 - 03:45pm

    #10
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    Re: Define the “dollar”

Hi Goes,

If I could summarize your point you are saying why don’t we just keep the fiat systme going but manage it better. Is that a fair summary?

 

Unfortunately, fiat systems never work so that becomes wishful thinking. The current manifestations are the expected result of fiat systems. They always end up here.

There is a strong addiction to it however and unfortunately for the western world the US has gotten them all addicted to it too. This is a global issue, not just a US issue. IF, as I say, fiat money is the path to destruction then the entire westwern world is already on that path. Someone stole the handle and the train won’t slow down until it reaches the end of the track.

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