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"No
legal tender law is ever needed to make men take good money; its only use is
to make them take bad money." (Stephen T.
Byington)
The
U.S. dollar has changed from being a paper certificate for a tangible asset
to a fiat currency - a paper note declared legal tender. By looking at the
history of American paper money one can clearly see the distinction.
The
following image shows two one-dollar bills from different years.
At a
glance, the two bills appear similar, but look closely.
The
wording on the first bill, a 1957 Silver Certificate, reads:
THIS
CERTIFIES THAT THERE IS ON DEPOSIT IN THE TREASURY OF THE UNITED STATES OF
AMERICA ONE DOLLAR IN SILVER PAYABLE TO THE BEARER ON DEMAND
This
statement is completely missing on the second bill, a 2003 Federal Reserve
Note.
The
U.S. dollar is defined by the 1792 Coinage Act as being
equivalent to 371.25 grains of pure silver. One troy ounce is equal to 480
troy grains. The market value for this amount of silver today is US$13.6125.
So while they both read as being ONE DOLLAR, the second bill represents a
devaluation of 93% in real terms from the 1957 bill!
These
Silver Certificates began to disappear from circulation during the 1940s and
1950s because they were immediately shredded once redeemed for silver due to
a diminishing store of silver bullion in the treasury vaults. Silver
Certificates were officially abolished by Congress on June 4, 1963 and all
redemption in silver ceased on June 24, 1968.
Up
until the late-1920s, higher denominations of issued U.S. currency were gold
certificates.
The
bearer could redeem their dollars for "twenty-five and eight-tenths
grains of gold nine-tenths fine," as per the Gold Standard Act of 1900.
Constitutional
Legality
There
is some question as to the constitutional legality of the Federal Reserve
Notes we use today.
"No
state shall...make anything but gold and silver coin a tender in payment of
debts." (U.S. Constitution, Article I, Section 10)
The
justification is done through a loophole whereby it is the Federal Reserve
that produces the currency, not the individual States.1 The changing of the
dollar from being a silver certificate to a Federal Reserve Note has enabled
the production of additional money, that is, in the words of former Federal
Reserve Chairman Alan Greenspan, without limit.2
Inflating
the money supply causes a transfer of wealth from existing holders of money
to the first recipients of the newly created money through the process of
devaluation. It is, in essence, a form of theft.
"...the
U.S. government has a technology, called a printing press (or, today, its
electronic equivalent), that allows it to produce as many U.S. dollars as it
wishes at essentially no cost." (Governor Ben S.
Bernanke, Deflation: Making Sure "It"
Doesn't Happen Here)
What
we today regard as U.S. legal tender is not legitimate dollar bills. There is
no longer any paper currency or fixed concept of value known as a
"dollar bill". We carry and transact business with Federal Reserve
Notes, and they merely represent the concept of a dollar bill.
Notes
1 The
Federal Reserve was established through the Federal Reserve Act signed into
law by President Woodrow Wilson a few hours after being passed by the Senate
two days before Christmas on December 23, 1913.
2 "And
in the case of a central bank of a fiat currency regime, such reserves can be
created without limit." Taken from a speech given by Alan Greenspan
before the World Bank Conference on April 29, 1999.
Mike Hewitt
Editor
DollarDaze.org
Also
by Mike Hewitt
Mike
Hewitt is
the editor of www.DollarDaze.org, a
website pertaining to commentary on the instability of the global fiat
monetary system and investment strategies on mining companies.
Disclaimer: The opinions expressed above are
not intended to be taken as investment advice. It is to be taken as opinion
only and I encourage you to complete your own due diligence when making an
investment decision.
©
2007 DollarDaze
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