Posts Tagged: ‘gold bullion’

Monetary Hyper-Inflation Is Already In Progress (Updated)

February 8, 2009 Posted by Rich Vermillion

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Monetary Hyper-Inflation Is Already In Progress

I would say that (regrettably) most of the U.S. and global public is blatantly ignorant of the nature and dangers of “hyper-inflation” when it occurs. Worse yet, most have no idea of its cause. This is a dangerous fact, and let me take just a moment to explain what it is, why it is dangerous, illegal, and thus unbiblical, while utilizing both a very alarming chart and video embed in the process. Then I will link you to a few relevant resources that will give you the “big picture” of what is not just going to happen…but what is already in progress in the U.S. monetary system and global economy.

The Term:

First, hyperinflation (which term does NOT always need the hyphen, and from here on will not include it) is defined by Dictionary.com in-part as:

A very high level of inflation that tends to result in the breakdown of the monetary system, the hoarding of goods, and difficulty in achieving real economic growth. The classic case of hyperinflation occurred in Germany during the 1920s. Hyperinflation, which tends to motivate people to own real goods, adversely affects security prices.

However, the above definition—though the common understanding—is VERY misleading. It focuses more on the felt effects or perceived results of monetary hyperinflation and not its true cause. This common “definition” emphasizes the sudden explosion in prices of goods and services as the currency collapses in value. However, a better definition would be:

Hyperinflation: The massive inflation (increase) of the supply (quantity) of a currency by a central bank or government, which debases the per-unit value of the currency.

Or in other words, hyperinflation of the money supply is “turning on the printing presses” and increasing the amount of money in circulation to such a degree, that supply/demand dynamics debase (devalue) each unit of the currency at a hyper-deflationary pace. The more money in circulation, the less each unit of money is worth.

The eventual result of the hyperinflation of the money supply is that the markets begin to realize the flood of currency, and then adapt their prices accordingly. This eventually results in the hyperinflation of prices wherein “street prices” can double and even triple (or more) within a single day for goods and services in the marketplace.   -Rich

As bizzare as the above scenario might sound to the average person unfamiliar with monetary history, the fact is that this very set of circumstances has happened MANY times within the Twentieth Century in localized areas within every major section of the globe (Europe, Asia, the Americas, etc.). It is even occurring NOW in places of the world such as Zimbabwe. (I will give you a few links in a moment to give you some examples.)

Nevertheless, it is a fact that hyperinflation has never occurred before on a GLOBAL scale—but it is about to do so, and the process has already begun.

Broken Laws:

The Bible, of course, condemns such devaluation of the money supply as it causes tremendous harm to both individuals and society as a whole:

You shall not have in your bag true and false weights, a large and a small. (Deuteronomy 25:13, AMP)

Diverse weights are an abomination to the LORD, and dishonest scales are not good. (Proverbs 20:23, NKJV)

Those who are behind this practice are using “false weights” as they perform their crimes. I call these things “crimes” because they are in violation of God’s law, as well as all earthly moral, “natural”, and common laws. In the United States, it is also in violation of the U.S. Constitution—which is the “supreme law of the land”—making it a criminal offense of “constitutional proportions” within that jurisdiction.

I state that they use “false weights” because the ones who get to use the new money FIRST (i.e. those running the proverbial “printing presses”) get to use the money at TODAY’S value. Those who are further down the line find the money has already debased as the market has adjusted to the increase in the money supply, and thus, worth a lower value per unit. So Deuteronomy’s edict above is clearly violated in that the one with “the bag” has “unbalanced” the proverbial scales. There is “one large weight” to the money when they printed the new dollars, and one “small weight” to the dollar’s value once it gets into their hands of the rest of society.

Who are these criminals? Well, you can answer that with another question: Who determines the money supply? Generally, it is the central bankers in cahoots with the government. In the United States, that would be the Federal Reserve (which is really a private institution, and no more a part of the government than the shipping company Federal Express) and the U.S. Federal Government. So then who is to blame for the consequent hyperinflation in prices once the market reacts? The same criminals who caused the monetary supply hyperinflation.

What these criminals do, however is attempt to pass the blame off on the “free market” and “forces beyond their control.” They will even try to convince you that they are trying to “alleviate the crisis” and portray themselves as the proverbial “knights in shinning armor” riding forth to slay the “inflation dragon.” However, the OPPOSITE is actually true—they caused the hyperinflation problem, and its terrible results on society. So their propaganda is no more than “smoke and mirrors” intended to camouflage their guilt and self-serving agendas. The reality is that they used “false weights” for their own profit and gain, and destroyed the U.S. currency in the process.

Most people do not realize how serious a problem this really is. However, when it costs a million dollars or more for a single loaf of bread (as it did in Weimar Germany back in 1923, and does in Zimbabwe today) they will realize only too late what a tragic affect on society the greed of these culprits has caused. But do not fear, my friend, you are NOW being properly forewarned—and that is the first step to becoming properly prepared… so please continue reading…

Honest Scales:

The reality is: In a truly free market, with proper and honest “weights and measures” and a commodity-based monetary system (i.e. physical gold, silver, semi-precious metals like copper, and/or paper-money 100% redeemable for either gold or silver) hyperinflation COULD NOT happen at all:

  • The limitation of the money-supply to only the amounts of PURE gold, silver, and semi-precious metal money in circulation, would prevent monetary hyperinflation. (Note: the pure content of the commodity within the coinage would have to be accurately marked, and protected under penalty of law, as well. Otherwise, the government could debase the currency by debasing the coinage with baser metals and reducing their purity, as the ancient Roman government loved to do. Better yet, keep coinage a private industry and get the government out of the money-business completely, except to ensure accuracy of purity claims by private mints and bullion bankers.) Such limitations prevent the government and central bank from “turning on the printing presses” and oversupplying the monetary system. If commodity-backed and fully redeemable paper money is also used (e.g. a gold or silver “standard” monetary system), then the printing of “paper” is limited by the amount of commodity in the warehouse to back it (as long as the laws are enforced, of course).
  • The enforcement of the law of “honest weights and measures” throughout society would prevent fraud, and thus further protect the markets from criminal activity that could cause shortages and/or inflationary pressures. This l would include the requirement of 100% bank reserves for customer deposits, because banks can artificially inflate even a commodity-backed monetary system through fractional reserve banking. If we require the banks to keep 100% of their depositor’s money in the vault (since a “demand deposit” is always still the property of the depositor) then the banks cannot expand the effective monetary system through “fiduciary media” in the form of bank loans, checks, and “digital” transactions.

(Note: To learn more about how fractional reserve banking can expand the money supply regardless of the actions of government and central banks, download this chapter from Jesus Huerta de Soto’s outstanding book, Money, Bank Credit, and Economic Cycles. The entire book is available in both English and Spanish at www.jesushuertadesoto.com. For the English version, click “libros” in the left menu, then “money…” when the submenu appears. All chapters are then listed for individual download in PDF format.)

So in effect—though they pass “laws” to try to “legalize” their immoral and unbiblical activities—the actions of the government and central banks are in violation of both God’s laws and all sound legal principles. (Note: Actually, this includes all bankers in general because of credit expansion practices, but most bankers with in society fail to realize the illegal and immoral nature of their daily activities). These criminals “print money” and spend it at the current market value, and thereby increase the money in circulation, which causes the unit value of money to diminish for everyone else in society. Thus, the bankers and government profit at the expense of everyone “lower on the food chain” within the financial system and society as a whole. Thus we can clearly state:

Hyperinflation is a crime propagated upon a nation by its government and bankers (especially the bankers of the central bank), and NOT an accidental or unavoidable consequence of “market forces” as they would have you believe.

Further, the most concerning fact concerning hyperinflation is this: It has already begun in the United States of America, and will soon spread throughout the world. Do you doubt that? Let’s look at the facts…

A Crime in Progress:

Remember in the above definition that hyperinflation begins FIRST in the monetary supply, then when the markets realize what is going on and confidence in the currency erodes, it begins to manifest SECOND in the marketplace by a rapid increase in the prices of goods and services. With that in mind, look at the following chart produced by the St. Louis Federal Reserve concerning the Adjusted Monetary Base (i.e. supply):

Notice the near-prefect vertical line to the far right of the graph. That is the explosion in the money supply since only September, 2008—which exceeds anything that has ever been done in the history of the FED since its inception back in 1913. Also, do you notice any similarity between the above monetary-supply chart and the following monetary-supply chart from the most infamous hyperinflation of the Twentieth Century—Weimar Germany in the 1920s?

weimar_currency

To put the above chart into an understandable light, by late 1923 it took 200 BILLION (with a “B”) German marks to buy a single loaf of bread at the bakery.

Since the monetary supply has ALREADY begun to hyperinflate, it is only a matter of time before the markets loose confidence in the U.S. dollar and prices begin to hyperinflate as well.

This is a short-fuse time-bomb ticking within the U.S. and global economy…and about to explode. Moreover, the U.S. government and Federal Reserve (and the individuals running both) are FULLY to blame.


More Research:

Now for more clarity regarding this topic, I recommend the following links where you can find additional data:

Be informed, avail yourself also of the data within the right-most Financial Column found on every page of this blog, and do NOT be afraid. Rather, keep in mind the following VERY important truth:

This is an economic time for the properly informed and positioned to PROFIT beyond their wildest imaginations, while those who stumble forward without taking these issues to heart will suffer tremendously.

The Bible puts it this way:

A prudent man sees the evil and hides himself, but the simple pass on and are punished [with suffering]. (Proverbs 22:3, AMP)

The key is to take these things seriously, to do your due diligence, and get in position to profit rather than to suffer.

Again: Hyperinflation in the United States has already begun in the monetary supply, and will soon begin in the prices of the marketplace. Since the U.S. dollar is the “world’s reserve currency” and sits as reserves backing most of the other paper currencies of the world, hyperinflation is likely to spread rapidly on a global scale. Gold and silver is your best and most secure way of protecting your savings and preparing for the economic tsunami that is soon to come.

Stay informed, and get prepared.

Lastly, please post your comments below.

In Jesus,

-Rich

_________________________

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Forty to One: The ‘Odds’ Favor Gold and Silver

November 4, 2008 Posted by Rich Vermillion

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THERE IS A MYSTERIOUS DYNAMIC at work in Western gold and silver markets in that “paper” precious metals seem at times to be falling in price, while “street” prices for in-your-hand bullion is constantly rising. The real fact of the matter is that the “spot” prices reported on the Internet and elsewhere are regarding bullion futures contracts, and not actual physical gold and silver. Those prices do NOT include additional costs like fabrication and delivery… and they certainly do NOT contain the “premiums” being charged on the street for the real thing.

The people on the commodities exchanges (from where we get “spot” pricing of gold and silver) are simply trading paper around. Consequently, these figures are misleading—especially with Western central banks manipulating the markets (with the aid of their cohorts) in order to prop up their worthless currencies. Even though an increasing number of investors are requiring physical delivery of the bullion their “paper” contracts promise, the exchange rates still reflect fictional pricing dynamics at best.

In the Western nations: On the “street” there are shortages of both gold and silver bullion in any form, but especially coins, ingots, and small bars.

Therefore, dealers in the West are finding that they have FORTY buyers for every ONE seller who is willing to part with their precious metals in exchange for declining paper currencies (see the article further below).

Meanwhile, in other parts of the world like the Orient and Middle East, gold is readily available in shops. As the following picture (sent me by one of my friends) of a “gold souk” in Dubai clearly shows, the “on the street shortages” are a Western phenomena alone as the Western economies collapse themselves from their own debt weights:

Gold in abundant display within a Dubai shop window

Gold in abundant display within a Dubai shop window

 

Gotta Have It

So with the shortages here in the Western nations as people scramble to acquire real money in the form of gold and silver, the dealers are tacking higher and higher premiums on the REAL gold and silver to reflect the true supply/demand dynamics they see every day in their shops—even while the “paper” traders play games within the commodities markets.

But remember: When the dollar and Western economies collapse, “paper” bullion with be worth no more than what their then-undeliverable promises are printed on.

The only real protection against the Economic Tsunami that is to come is physical gold and silver in hand. Period. Those wise enough to realize the biblical and historical truth of that statement will well-position themselves to be recipients of the coming wealth transfer. Those that do NOT, will find themselves suffering the loss that the wise then inherit. (Hint: Proverbs recommends you be counted among the wise, and not among the foolish who inherit destruction.)

Moreover: To confirm what I have stated above and in other articles, consider the data revealed in the following article excerpt about what is happening today in the gold and silver markets. I will pick up below it with my final comments and recommendations:

The New Gold Rush: Supply of Coins Tight at Tucson Stores

By Dan Sorenson
Arizona Daily Star, Tucson
Sunday, November 2, 2008

http://www.azstarnet.com/sn/business/265218.php

The price of futures contracts for gold surged to more than $1,000 per ounce earlier this year, then dropped back before surging again as the financial crisis rocked stock markets in September. Then the price of gold futures started slipping again.

In October, Bloomberg News reported, the price dropped 18 percent, the most it has in a single month since 1980. Gold for December delivery closed at $718.20 an ounce Friday on the New York Mercantile Exchange.

Your college Econ 101 course may not help you understand the latest gold coin rush.

Banks have been on wobbly knees, the stock market has been plunging, and 401(k)s are as deflated and sad as four-day-old party balloons.

But, oddly, gold has been both falling in price and in short supply for those looking for a safe haven during the stock market storm. Some Tucson dealers say gold coins are scarce at best, even as gold—and silver—prices are falling.

There is even more complexity within that scenario, local dealers say.

Retail gold coins generally sell for the current price of the metal they contain, plus a “premium”—the dealer’s fee—on each coin. Of late, the premiums have risen significantly to reflect the shortage of supply of some denominations, the dealers say.

“I get 10 to 20 calls a day, ‘Do you have any gold or silver?’ We don’t have any, and we can’t get any,” said Peter Spooner, a coin expert at American Stamp & Coin, 7225 N. Oracle Road.

“There are people who are selling their stocks to get into gold and silver because they fear we are going into a tremendous depression,” said Spooner. Yet, he noted, the “price of paper (futures contract) gold is dropping while the price of owning actual hold-in-my-hand gold is going up” when the seller’s premium is added.

Historically, it would be cheaper to buy an ounce of gold in one coin than to buy an ounce as four quarter-ounce coins. But the price for an ounce of gold is actually cheaper if you buy it as four quarter-ounce coins than in a single 1-ounce coin—if you could find one, said Brett Sadovnick, owner of Tucson Coin & Autograph, 6470 N. Oracle Road.

In this case, a classical supply-and-demand situation is at work: There’s more demand for the 1-ounce coins than the quarter-ounce and other smaller coins, so it’s driven up the price of the 1-ounce coins.

 

Buyers Might Be Newcomers

Sadovnick isn’t quite sure why buyers are fixated on the 1-ounce coins. Gold is gold, purity being equal.

It could be that the buyers driving the demand for the 1-ounce American Eagle coins are newcomers fleeing the wild uncertainty of the stock market for the relative calm of the world’s longtime favorite precious metal. Maybe they feel better about owning the hefty full-ounce American Eagle, rather than a handful of smaller gold coins—half-, quarter-, or tenth-ounce — that weigh just as much. Sadovnick isn’t sure.

“I’ve been a coin dealer in Tucson since 1998, a professional since 1974. I haven’t seen a situation quite like this,” said Sadovnick. Not even the crazy precious metals roller-coaster days of early 1980—when gold hit $850 an ounce for one day—compares, Sadovnick said.
And it’s not just gold, he said.

“I placed an order a month ago, 1,000 1-ounce silver bars. I paid him spot (the spot price), plus $2.50 an ounce premium,” Sadovnick said. That order might not arrive until January.

“Three months ago I could have bought it from them for the price of silver, plus $1.50 an ounce, and I would have had delivery in a few days.”

Even Jim Ganem, owner of the venerable Arizona Stamp & Coin, 4668 E. Speedway, is baffled.

The shop is the only Tucson dealer mentioned on the U.S. Mint’s Web site as dealers of American Eagle coins, and Ganem says he can’t get any Eagles, or anything regularly. He said the U.S. Mint sent out a notice saying it isn’t making the coins because even they can’t get the gold blanks to stamp.

 

40 Buyers to One Seller

Ganem said hedge funds are dumping billions of dollars worth of gold contracts they hold, driving down the price of gold. But to actually get gold, not just a contract, buyers are having to pay a premium—a higher premium than he can recall in the past.

Some of those contract holders are asking for the gold they represent, instead of just trading in the paper. But that gold is disappearing in an instant on the spot market, said Ganem. He said he gets a few chances a day to buy gold that becomes available, but that it disappears in a matter of minutes.

“Typically,” he said, “we’re running 40 buyers to one seller right now coming into the store to purchase. People don’t want to be in the stocks, real estate, and they don’t trust the banks—three typical havens for large amounts of money. The other one is metal.”

One would think the skidding stock market and real estate decline would be driving up gold and silver prices. And while it did initially, in September, the price of precious-metal futures plunged in October.

An industry expert in Phoenix said the gold market isn’t behaving in a traditional manner.

David Henry of Arizona Coin Exchange Inc. in Phoenix is a wholesaler who sells to coin and precious metals retailers. He said most people who buy paper gold, contracts, never physically possess the gold, choosing instead to resell the contracts, hopefully for more than it cost them.

“You can get it, physically, but it’s complicated,” Henry said.

Physically possessing gold is an entirely different mechanism, Henry said, something that is done for security—a way to safely hold value, often for a very long time.

Unfortunately, he said, this is an occasion for a “Perfect Storm” scenario.

The price isn’t high enough to bring sellers into the front door of coin and precious metal shops, and the main source of new gold, the federal government, can’t deliver.
Spooner said the vagaries of the current gold market don’t change his view of gold.

“I don’t present gold as an investment,” said Spooner. “Buying a half- to 1-ounce piece of gold every month is like insurance… like portfolio insurance. In economic turmoil, it’s a flight to safety.”

 

Decline in Gold Futures

The price of futures contracts for gold surged to more than $1,000 per ounce earlier this year, then dropped back before surging again as the financial crisis rocked stock markets in September. Then the price of gold futures started slipping again.

In October, Bloomberg News reported, the price dropped 18 percent, the most it has in a single month since 1980. Gold for December delivery closed at $718.20 an ounce Friday on the New York Mercantile Exchange.

As you see in the article above, these artificially low prices on the commodities exchanges are merely illusions. So the key is to obtain gold and silver anywhere you can while the prices are relatively low (though dealer premiums are so high) while you still are able to do so. Once the dollar collapses nobody will part with their silver/gold… except when they may be buying up all your worldly possessions in return.

So let me be blunt: Buy gold and silver bullion in any form—but especially coin form—anywhere you can get your hands on it—while you still can. You can move your IRAs and 401(k) offshore outside of the USA and UK into gold and silver (see my note at the bottom of this article about AFE). Even sell your sports gear, Longaberger-basket collection, jet ski—and even a few of your TVs and iPods if you have too—to get liquid with your money, and then buy all the gold and silver you can obtain. And let me add: Do so VERY QUICKLY.

As I have said before in other blog posts, I also highly recommend you take a firm look at Joseph Wealth Systems (JWS) as a reliable supply source for gold bullion coinage. While the dealers in the Western nations (like the ones in the article above) are desperate for precious metals coinage to meet the phenomenal demand, JWS is reporting a fully-fluid coin supply that is still abundant in the face of the increasing demand. Their prices for their gold shekels and quarter shekels are also very competitive with the increasingly high-premium coin prices being found through other dealers (and again, you can actually GET coins!).

Add to this fact that you can become an online gold coin merchant yourself (if you so choose) and you can readily understand how JWS can be a very lucrative source for your gold coin acquisitions. (Note: JWS does not offer silver coins at this time, so you will simply have to get silver anywhere you can find it.)

Lastly, I highly recommend you study the information I provided for you in my blog article God’s Money and Private Coinage. That article will help you to see both the biblical/historical aspects of owning gold and silver as bona fide REAL money, while also providing you an understanding (through an excerpt from Murray Rothbard wise counsel) in the benefits of owning privately minted coins.

God bless you as you earnestly seek God’s Wisdom… and not merely the gold and silver He created.

In Jesus (Yeshua),

-Rich

___________________________

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God's Money, and Private Coinage

October 24, 2008 Posted by Rich Vermillion

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I FULLY agree with Robert Kiyosaki’s assertion that “gold and silver is God’s money, because He made it.” This is a biblical fact clear in many places, but is especially interesting to note from the account of original paradise in Genesis chapter 2:

The LORD God planted a garden eastward in Eden, and there He put the man whom He had formed. And out of the ground the LORD God made every tree grow that is pleasant to the sight and good for food. The tree of life was also in the midst of the garden, and the tree of the knowledge of good and evil.
Now a river went out of Eden to water the garden, and from there it parted and became four riverheads. The name of the first is Pishon;
it is the one which skirts the whole land of Havilah, where there is gold. And the gold of that land is good. Bdellium and the onyx stone are there. (verses 8-12, NKJV)

Back then, the gold and precious stones were apparently laying on the surface of the ground and easily obtained. However, after the fall of man the curse came, and Adam was banished from such a highly provisioned state into one in which he had to work with great toil to obtain the things he needed and desired (Genesis 3).

Nevertheless, throughout 5,000 years of recorded human history around the world, gold and silver have both proven to be true and pure money. The labor man invested in their farms and industry could be readily converted to gold, silver, and other coin (such as copper or bronze for smaller transactions), which themselves were made through much labor and toil.

Intrinsic Worth

The metals had to be first found in the earth’s crust (which was an effort in and of itself). It then had to be mined, refined, and then fabricated into transactional shapes such as coins and bars. (BTW: Even gold and silver jewelry was (and still is) considered “money” among the eastern people in the Bible lands and beyond.  An earring could be taken off to buy goods or pay for services—see Judges 8:22-28—and the very same thing happens in various parts of the world today.)

So the high labor-content of gold, the slightly less labor-content of silver (about 1/12th to 1/15th as much, historically), and the various lesser-yet labor-content of the baser metal coins, gave them their true intrinsic value for purposes of exchange in 5,000 years of human economies.

So not only did God Himself say that “gold is good” in Genesis; the very nature of the metals (making them appropriate for molding into various shapes and sizes) and the labor invested in them, made them perfect for exchanging the product of people’s labors (e.g. grain, manufactured goods, services) for something that would be a reliable storehouse of those labors. Real money has intrinsic value, and thus, is a stable medium of exchange.

Thus, precious metals (and the baser metals) have always been a reliable storehouse of wealth and fruit of righteous labor, and have historically been “inflation proof” when used in a monetary system. Except during times of shortages due to famines or war, prices remained the same for hundreds and even thousands of years… or actually went down over time due to technical advances and increases in efficiencies.

Today, governments want us to be under their patronage, and have sold us “worthless paper” for our labors rather than real and free money. The “labor content” of paper notes is virtually zero in comparison, so there is no longer any intrinsic value to them. Governments convinces people to accept paper instead of gold and silver by first backing them with promises to exchange the paper for gold or silver on demand. This enabled people to carry much lighter paper, and still have the value of the precious metals that backed them, so they went along with the idea.

However, governments were then limited in how much they could print by the amount of precious metals they had in vaults to back the “cash.” This meant that they had to show fiscal responsibility and spend within their means (something governments tend to have a real problem doing). So they then detached from gold and silver standards, and began the inflationary monetary policies we see across the globe currently.

Today, people are so used to the effects of monetary inflation (i.e. rising prices) that they have come to think that is “normal” and to be expected—even though the USA has experience such inflation only since 1913. But because generations have passed since the true gold standard of 1913 was abandoned (and its subsequent pseudo-type was abandoned in 1971) people have long forgotten the many years of price stability. The idea that something a thousand years ago could cost the same amount today is such a foreign thought that they often cannot even fathom the concept.

But historically, all paper currencies’ purchase-power eventually return to their true intrinsic value—somewhere near zero. And now that the world’s “paper” monetary schemes and economies are obviously collapsing, people are finally taking the time to study and learn about the only true moneys with intrinsic worth—gold and silver.

Private Coinage

To learn a bit more about the concept of precious metals in the form of private coinage (i.e. verses government minted coinage, or printed paper) from an economists viewpoint, let me recommend you read the following marvelous article. It was posted today on the Ludwig von Misses Institute’s website, and is a short excerpt from Murray M. Rothbard’s marvelous book, What Has Government Done to Our Money? (which I myself own). For your convenience, I have posted it again here, and have provided additional related information of value below that.

[This article is excerpted from chapter 7 of What Has Government Done to Our Money? An MP3 audio version of this article, read by Dr. Floy Lilly, is available here.]

The idea of private coinage seems so strange today that it is worth examining carefully. We are used to thinking of coinage as a “necessity of sovereignty.” Yet, after all, we are not wedded to a “royal prerogative,” and it is the American concept that sovereignty rests, not in government, but in the people.

Click image

Click Image

How would private coinage work? In the same way, we have said, as any other business. Each minter would produce whatever size or shape of coin is most pleasing to his customers. The price would be set by the free competition of the market.

The standard objection is that it would be too much trouble to weigh or assay bits of gold at every transaction. But what is there to prevent private minters from stamping the coin and guaranteeing its weight and fineness? Private minters can guarantee a coin at least as well as a government mint. Abraded bits of metal would not be accepted as coin. People would use the coins of those minters with the best reputation for good quality of product. We have seen that this is precisely how the “dollar” became prominent – as a competitive silver coin.

Opponents of private coinage charge that fraud would run rampant. Yet, these same opponents would trust government to provide the coinage. But if government is to be trusted at all, then surely, with private coinage, government could at least be trusted to prevent or punish fraud. It is usually assumed that the prevention or punishment of fraud, theft, or other crimes is the real justification for government. But if government cannot apprehend the criminal when private coinage is relied upon, what hope is there for a reliable coinage when the integrity of the private marketplace operators is discarded in favor of a government monopoly of coinage? If government cannot be trusted to ferret out the occasional villain in the free market in coin, why can government be trusted when it finds itself in a position of total control over money and may debase coin, counterfeit coin, or otherwise with full legal sanction perform as the sole villain in the marketplace? It is surely folly to say that government must socialize all property in order to prevent anyone from stealing property. Yet the reasoning behind abolition of private coinage is the same.

Moreover, all modern business is built on guarantees of standards. The drug store sells an eight-ounce bottle of medicine; the meat packer sells a pound of beef. The buyer expects these guarantees to be accurate, and they are. And think of the thousands upon thousands of specialized, vital industrial products that must meet very narrow standards and specifications. The buyer of a 1/2 inch bolt must get a 1/2 inch bolt and not a mere 3/8 inch.

“It is surely folly to say that government must socialize all property in order to prevent anyone from stealing property. Yet the reasoning behind abolition of private coinage is the same.”

Yet, business has not broken down. Few people suggest that the government must nationalize the machine-tool industry as part of its job of defending standards against fraud. The modern market economy contains an infinite number of intricate exchanges, most depending on definite standards of quantity and quality. But fraud is at a minimum, and that minimum, at least in theory, may be prosecuted. So it would be if there were private coinage. We can be sure that a minter’s customers, and his competitors, would be keenly alert to any possible fraud in the weight or fineness of his coins. [1]

Champions of the government’s coinage monopoly have claimed that money is different from all other commodities, because “Gresham’s Law” proves that “bad money drives out good” from circulation. Hence, the free market cannot be trusted to serve the public in supplying good money.

But this formulation rests on a misinterpretation of Gresham’s famous law. The law really says that

money overvalued artificially by government will drive out of circulation artificially undervalued money.

Suppose, for example, there are one-ounce gold coins in circulation. After a few years of wear and tear, let us say that some coins weigh only .9 ounces. Obviously, on the free market, the worn coins would circulate at only 90 percent of the value of the full-bodied coins, and the nominal face value of the former would have to be repudiated. [2] If anything, it will be the “bad” coins that will be driven from the market.

But suppose the government decrees that everyone must treat the worn coins as equal to new, fresh coins, and must accept them equally in payment of debts. What has the government really done? It has imposed price control by coercion on the “exchange rate” between the two types of coin. By insisting on the par ratio when the worn coins should exchange at 10 percent discount, it artificially overvalues the worn coins and undervalues new coins. Consequently, everyone will circulate the worn coins, and hoard or export the new. “Bad money drives out good money,” then, not on the free market, but as the direct result of governmental intervention in the market.

Despite never-ending harassment by governments, making conditions highly precarious, private coins have flourished many times in history. True to the virtual law that all innovations come from free individuals and not the state, the first coins were minted by private individuals and goldsmiths. In fact, when the government first began to monopolize the coinage, the royal coins bore the guarantees of private bankers, whom the public trusted far more, apparently, than they did the government. Privately minted gold coins circulated in California as late as 1848. [3]

Notes:

[1] See Herbert Spencer, Social Statics (New York: D. Appleton 1890), p. 438.

[2] To meet the problem of wear-and-tear, private coiners might either set a time limit on their stamped guarantees of weight, or agree to recoin anew, either at the original or at the lower weight. We may note that in the free economy there will not be the compulsory standardization of coins that prevails when government monopolies direct the coinage.

[3] For historical examples of private coinage, see B.W. Barnard, “The use of Private Tokens for Money in the United States,” Quarterly Journal of Economics (1916-17): 617-26; Charles A. Conant, The Principles of Money and Banking (New York: Harper Bros., 1905), vol. I, 127-32; Lysander Spooner, A Letter to Grover Cleveland (Boston: B.R. Tucker, 1886), p. 79; and J. Laurence Laughlin, A New Exposition of Money, Credit and Prices (Chicago: University of Chicago Press, 1931), vol. I, pp. 47-51.

On coinage, also see Mises, Theory of Money and Credit, pp. 65-67; and Edwin Cannan, Money, 8th ed. (London: Staples Press, 1935), pp. 33ff.

As I Conclude This Post…

In addition to the above Rothbard book, I highly recommend Good Money, by George Selgin, for an outstanding and interesting history of private coinage during the Industrial Age in Great Britain:

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Become informed, and become economically empowered by putting yourself on the gold and silver standards. Obtain gold and silver anywhere you can get it, and believe God to prosper you and make up the difference during the economic tsunami that is ahead.

God bless you and you learn and obey His Word,

-Rich

_______________________________________

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Robert Kiyosaki on Gold, Currencies, and the US Economic Collapse

September 26, 2008 Posted by Rich Vermillion

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This is a “must-watch” educational supplement to the other information available on this website. The video below is both informative and timely, especially given the current global and US economic conditions (please note the Financial News feed to the far right of your browser window).

Just in case you are not familiar with the man, however, the following biographical excerpt might help shed some light on who he is before you watch the clip:

Robert Kiyosaki is an investor, businessman and best-selling author. His books, Rich Dad Poor Dad, Rich Dad’s Cashflow Quadrant, and Rich Dad’s Guide to Investing are all best sellers. His ventures have allowed him to retire early, and his teachings are followed all around the world….

In 1985 Robert Kiyosaki founded an education company that taught business and investing to thousands of students all over the world which proved very successful. In 1994 he retired at the age of 47. Even after retirement Robert continued with real estate and business investments, and wrote the book Rich Dad, Poor Dad, which hit bookstores in 1997.

…Robert has since written four more bestsellers under the “Rich Dad” brand and to date has sold more than 12 million books (in 29 different languages)….

Robert Kiyosaki has a profound message for those wanting to improve their financial lives. That message is: “With every dollar in your hand, you have the power to choose to be rich, poor or middle class.”

(You may read the above full biography online by clicking here. Moreover, Robert’s best-selling books and the Rich Dad Advisor Series books are all over Amazon and in virtually any bookstore.)

In addition to the biographical information above, let me note here that Robert Kiyosaki professes to be a Christian. (However, please also note that his profession does not prove that he is a Christian; I have not been able to personally confirm that he is truly born again.) He has described himself as a Presbyterian and occasionally references Scripture within his books. Beyond the testimony of his own public profession, however, the following video will readily attest that Robert seems to have a firm grasp of both the biblical and economic ramifications of the current financial trends:

Also, for two real good sources of gold & silver globally please note also the Gold Coin Referral graphic to the far right or click here.

Blessings to you, as you pursue and obey God’s plan for your life.

-Rich Vermillion

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