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This article was written by Hurley Coins president Declan M. Hurley and syndicated from his political-news website, FDL Review. The original article, which contains citations, can be found here: http://www.fdlreview.com/2020/03/editorial-nancy-pelosi-and-role-of-money.html.
The U.S. House of Representatives and the U.S. Senate have each proposed their own coronavirus-response legislation. Broadly speaking, the Senate bill is supply-side, focusing on relief for corporations, and the House bill is demand-side, focusing on relief for the public.
Speaker Nancy Pelosi's proposal, called the Take Responsibility for Workers and Families Act, would give each American $1,500 (though there are restrictions on payouts for those making more than $75,000 annually). To enact these payouts, the bill calls for the creation of a digitalized dollar. Forbes reports,
"The bill establishes a digital dollar, which it defines as 'a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal Reserve Bank or ... an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).' Additionally, a digital dollar wallet is identified as 'a digital wallet or account, maintained by a Federal reserve bank on behalf of any person, that represents holdings in an electronic device or service that is used to store digital dollars that may be tied to a digital or physical identity.' ...
"The Federal Reserve banks themselves would also make available a digital dollar wallet to any U.S. person eligible for the payments as well. Additionally, the U.S. Postal Service would aim to help unbanked individuals and/or those without proper ID to establish their identity be provided a digital dollar account, and would set up ATMs for customers to access their funds."
In considering this proposal, it is important that we understand the nature of money: It is a utility that represents tangible goods and services. It would be inefficient for a farmer to trade eggs for a stapler from Office Depot, but these parties are able to transact because money serves as their common denominator.
Money used to be denominated in gold or silver. This was only natural: People did not trust that if they accepted fiat currency, i.e. money not backed by precious metals, they would be able to purchase another person's goods or services in the future. In other words, they would be stuck with worthless, unusable banknotes.
The U.S. Constitution carefully established the relationship between money and value. Article One, Section Ten notes, "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts." The U.S. government followed these words to the letter, producing only metallic coinage until the Civil War (with a lull during the War of 1812, when it issued a small amount of bond-like currency).
In 1861, the U.S. government started issuing legal-tender notes, i.e. fiat currency that traded for a discount relative to gold dollars. The Treasury also cranked out demand notes and gold certificates, paper money that was redeemable for metallic dollars at par. Silver certificates -- paper money redeemable for silver dollars -- were introduced near the turn of the century.
The key is that paper money (aside from legal-tender dollars, which were worth less than metallic dollars until they were effectively pegged to gold in 1879) represented tangible value. A farmer trusted that if he received a $20 gold certificate for a shipment of eggs, he would be able to use that note for home improvements. Undergirding the farmer's confidence was the 0.96 ounce of gold that backed the $20 gold certificate.
There was functionally no inflation in the 19th century, but the linkage between money and value started to deteriorate after the turn of the century. While some ascribe the death of money to the creation of the Federal Reserve System, in its early years, the Fed actually created dollars backed by gold. Series of 1928 Federal Reserve notes read: "Redeemable in gold on demand at the United States Treasury or lawful money at any Federal Reserve Bank."
It was not until 1933, when Franklin Delano Roosevelt delinked the dollar from gold and abrogated gold dollar-based contracts, that the value of the dollar started to plunge. By 1950, the dollar was worth only 54% of what is was worth in 1933. Roosevelt, however, allowed for the "gold window," wherein foreign governments could exchange their dollars for gold.
The collapse of the dollar as an exchange for value was furthered by Lyndon Johnson's cancellation of the silver standard in the 1960s and Richard Nixon's nullification of the gold window. By 1974, the dollar was worth 63% of what it was worth in 1974, and by 1984, the dollar had lost 70% of the value it held in 1964.
The cumulative effect of Roosevelt, Johnson, and Nixon's policies is obvious: After seeing no slippage between 1800 and 1900, the dollar lost more than 95% of its value between 1900 and 2000.
Today, "money" is paper with no inherent value. However, the U.S. dollar retains functional value because it can be easily converted for goods and services from providers worldwide.
Providers are willing to accept dollars because they, in turn, can convert the dollars for the goods and services of others. This relationship is predicated in the globe's trust that the U.S. government will not produce additional money in the absence of a concurrent increase in goods and services, maintaining a careful relationship between supply and demand.
Now, the House wants to increase the money supply without an increase in national production -- all with a few clicks on a keyboard. They want these dollars to be born digitally, issued digitally, and held digitally, and there would be no clear linkage between these dollars and tangible goods and services. Worse yet, it is unclear whether the production of these digital dollars would end with the coronavirus pandemic.
It is not surprising that there has been a massive rally in the price of gold, the ultimate store of value. The yellow metal is now worth $1,623 an ounce at the time of writing, up from $1,378 a year ago. In other words, the value of a dollar has plunged from 0.073% of an ounce to 0.062% in 12 months.
Goldman Sachs predicts that the price of an ounce of gold will reach $1,800 in the next twelve months, declaring, "We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now."
A digital dollar would only allow for the continued debasement of our currency. What America needs is a policy that would solidify the dollar as a mechanism for exchanging and retaining value over the long term. The farmer who accepts $20 for eggs now should be confident that his $20 will buy an equivalent amount of home-improvement supplies in 20 years.
Stable money was the norm in the 19th century. There is no reason that our 21st-century policymakers -- who have second-to-none advanced degrees and complicated computer models -- cannot figure it out.
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Since our inception in 2013, Hurley Coins has advocated for a system of honest money in the United States, which can be brought about through the implementation of the gold standard.
There are $1.59 trillion worth of U.S. Federal Reserve notes in circulation. These notes are backed by nothing but the guarantee of the Fed, which is not a government organ but instead an independent agency mostly free of political oversight.
Reining in the excesses of the Federal Reserve and backing the currency with gold wouldn't be a restraint on economic growth, but it would serve the purpose of limiting the issuance of currency to the amount of specie present.
Hard money would reduce fear of inflation, which comes as a result of weak currency, and give the citizenry the satisfaction of knowing that their dollars have real value.
Hurley Coins is proud to endorse the efforts of Alex Mooney, a Republican congressman from West Virginia, who proposed H.R. 5404. The legislation wouldn't eliminate the Federal Reserve, but it would scale back its monetary manipulation and tether its efforts to the gold reserves of the U.S.
The Federal Reserve has the power to wreak havoc of Zimbabwean proportions, and Rep. Mooney's efforts -- if successful -- would hamper potentially disastrous ambitions.
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Confederate States paper money collecting is an oftentimes misunderstood numismatic subset, but it is one worth knowing a bit about.
The government of the Confederacy existed for only four years, eventually dismantling at the end of the Civil War (or the War Between the States). However, in that short time, they produced over seventy distinct issues of paper money in denominations ranging from 50 cents to $1,000.
The first four types of Confederate notes were printed in early 1861. At that point, the Confederate States of America's capital was still in Montgomery, Alabama, and this was reflected by the notes, which boldly read "Montgomery."
The bills' denominations were relatively high: $50, $100, $500, and $1,000. They were interest-bearing and backed by the biggest asset of the Confederacy: King Cotton. Since they were printed in minuscule quantities, they are extremely rare and collectible.
In October 2015, Heritage Auctions sold a mid-grade $1,000 note--which has portraits of U.S. President Andrew Jackson and Southern statesman John C. Calhoun, a career politician from South Carolina--for over $76,000. This is not an inflated number, either--only 607 were printed, and only He knows how many survived.
In May of 1861, the Confederate States government moved to its second capital, Richmond, the capital city of the Commonwealth of Virginia. There, the Confederacy's fiscal planners set off to develop the economy of a country that would be ravaged by hyperinflation and destruction over the course of the next three years of its existence.
While the Confederacy's various 1861 issues were diverse as far as the vignettes, portraits, and artistic elements present, 1862 marked the beginning of a standardization of Confederate paper. While designs changed throughout the course of that year, several individuals were essentially assigned to denominations:
1862 also bore one of the most popular (and inexpensive) Confederate notes ever printed: the Type-41 $100. On the obverse is John C. Calhoun, Lady Confederacy, and a vignette of slaves hoeing cotton. These notes start at $50 in Good/VG and are relatively cheap even in Choice Uncirculated.
In 1863, the designs of Confederate States paper money were fully standardized, and a 50 cent note--which depicted President Davis--was introduced.
Production of the paper money exploded, causing the value of the Confederate States dollar to slide considerably in comparison to specie (gold) and the Union dollar. This trend was exacerbated by the Union's string of battlefield victories after Gettysburg, which reduced the level of confidence of Europe (and the citizens themselves) in the Confederacy.
By 1864, the Confederate States dollar fell into absolute disarray as Keatinge & Ball, the Confederate States' currency manufacturer, pumped out millions after millions of notes that were backed by nothing.
For example, over nine million Type-68 1864 $10 notes were produced--even today, they only fetch $25 each in average condition.
It is also worth noting that the Confederacy reintroduced the $500 denomination in 1864. These notes have a portrait of General Thomas "Stonewall" Jackson, C.S.A., who died in 1863 and held heroic status across the Confederate domain. They also have a vignette of the flag of the Army of Northern Virginia, commonly recognized as the "Confederate flag," and the Confederate States seal of arms. Today, these bills start at $250 in Good condition.
While the market for Confederate States paper money was stagnant for the century that followed the end of the Civil War, it picked up a few decades ago and it has been booming ever since. As I mentioned prior, 1861 Montgomery issues fetch large sums, but regardless, many issues are extremely affordable.
For someone starting to collect Confederate States paper money, I would recommend buying five different issues:
As always, buy the best condition that you can afford.
If you are looking to do some more research on Confederate States paper money, a quick Internet search yields a great amount of results. Wikipedia has a wonderful page on the Confederate States dollar, which shows illustrations of all of the issues and the Type numbers associated with each one. You can actually see the notes I spoke of in this blog.
Before you make any purchases, verify the authenticity of the note by comparing its serial number to the spreadsheet of those known to be counterfeit at http://oldcurrencyvalues.com/fake_confederate_money/.
I would also recommend purchasing Pierre Fricke's Collecting Confederate Paper Money, a hefty hardcover book that was published in 2008 and republished--with updates--in 2014. While it does cost about $40 through Amazon Prime, it is extremely well-researched and has beautiful full-color illustrations.
Have a great Christmas and lots of fun collecting Confederate paper money.
Declan M. Hurley