Monday, June 22, 2009

Coin Clipping Gone Wild!

At one time in history when money was made out of gold and silver, clipping or shaving small amounts of precious metal from coins was regarded as a serious crime. In England the practice was even viewed as treason and a capital offense. Those convicted of coin clipping met gruesome public executions.

Although states frowned on individuals who clipped their coins some governments occasionally did the same thing by alloying their precious metal coins with metals of less value. It was sneakier method of achieving virtually the same type of fraud but on a far more massive scale. Rome frequently resorted to the sordid practice and often ran into serious economic problems as a consequence when the debased coinage would not be accepted as payment.

Today, of course, there is no precious metal left to either clip or alloy with cheaper metals. Every last fractional ounce of precious metal has been clipped away, so to speak. Stealing the intrinsic value of our money was never the end game but only a prelude. It was like being being given the keys to the safe holding the nations entire wealth. Money and credit could now be created out of thin air.

We rely entirely on money substitutes or digital equivalents with no intrinsic value. Small time coin clippers have been put out of business. It might make more sense to remove metal from roofing nails than from government issued tokens. Unfortunately, when governments are not limited to circulating gold and silver units of known weight and purity or paper notes backed by the same, they gain unlimited power. Economies and lives are placed at the mercy of career politicians and central those who control the money substitute printing presses.

Inflation, or a large increase in the supply of money substitutes, obviously steals value from what we are forced to use for trade and savings. Making the evil scam appear wholesome requires routine blessings from exalted high priests called economists. Blackboards are regularly filled with complex equations that few can understand proving that some inflation is always good. My high school math teacher had a good way to describe impressive looking but bogus proofs handed in by students. He said that they were filled with fudge factors.

We now rely on faith based money. Economists tell us that money with intrinsic value (sound money) is archaic and unnecessary. Americans have an abundance of faith - perhaps a little too much for their own good. A little healthy skepticism would go a long way to getting this nation back on track.

1 comment:

Isaac said...

AH, but fiat currency does have intrinsic value. For example, Federal Reserve notes can be used to help stoke a fire in a burn barrel, although other sorts of paper are superior for this purpose. And a handful of coins can be loaded into a sock and used to bash a parasitic goon's head, as Aleksandr Solzhenitsyn said should have been done in the early stages of the communist revolution in Russia. So you see there is value in this stuff they've tricked us into calling money. It's just a good idea to trade it as fast as possible for more useful things like food storage, ammunition, precious metals, and comic books.