Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

What Has Government Done to the U.S. Dollar?

Currencies / Fiat Currency Nov 18, 2009 - 10:48 PM GMT

By: Mike_Hewitt

Currencies

Best Financial Markets Analysis Article"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 (click to enlarge).

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 notes are 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.

By Mike Hewitt
http://www.dollardaze.org

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.

Mike Hewitt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules