Our next topic is that of seigniorage, which is a silent weapon used historically by governments repeatedly legally plunder the populace. Let’s start by defining it followed by several examples.
Seigniorage – Revenue or profit taken from the minting of coins, usually the difference between the value of the bullion used and the face value of the coin. In economics literature, the term is frequently used as a synonym for monetary expansion. Root of the word means a French feudal lord, and refers to the lord’s right to confiscate, or steal, money from the people.
The Lord’s Right to Steal – An Abbreviated History of Coin Clipping
As we saw earlier, governments often use ‘legal tender’ laws to force everyone to use their legal tender money, and only their legal tender money, as money. Note when I use the term “law” in this case, I mean law by decree, but it could also be common law. However, these laws were preceded by at least two very important steps.
Michael Phelps and other American athletes are bringing back loads of Gold, Silver, and Bronze Medals from the Beijing Olympics. A young libertarian economist asks if it was worth it.
I confess that due to being an athlete and loving competition myself, I greatly admire the athletes. Their abilities represent the human potential, and in a way every world record set pushes at our limits. However, surely a darker way of looking the Olympics is similar to Dan Clore’s article “A Libertarian View of the Olympics” as just a nationalized bread-and-circus event or an opiate for the masses. Surely some of the events are graded in a subjective manner – while one can run a marathon with a certain indisputable time, the same cannot be said of diving or synchronized swimming, or this jump-rope-tossing-and-dancing event I saw.
A special live event and screening of a documentary on fiscal responsibility entitled I.O.U.S.A. was held this evening. Ron Paul had a small part in the movie (actually two), but it was one of the more crowd pleasing moments of the entire movie. Paul’s clip showed him questioning Greenspan and telling him that if a doctor had the same failure rate at meeting his goals, patients would die. Then silence and everyone staring at each other, including Greenspan, all dumbfounded. Hilarious. The packed theater thought so too as the crowd laughed heartily and loudly.
The movie as a whole took great pains to be non-partisan and was quite successful. Ron Paul was the only Presidential candidate in the movie painted in a positive light. In fact he was utilized as an expert, especially during the discussion of the Fed and it’s power. The unflattering moments were saved for George W. Bush in the final part of the movie on the “leadership deficit”.
Bill Clinton received some positive air play for balancing the budget in the late 90’s. I was pleased that they then accurately added Social Security and Medicare to the budget equation showing the surplus being wiped out.
This afternoon WashingtonPost.com had a Q&A session with Bob Barr. I found it somewhat annoying that he didn’t answer all the questions (or they weren’t included in the transcript) when someone asked a two- or three-part question, but nonetheless it could serve well for those not too familiar with Bob Barr. Oh, and the closet Libertarian purist in me cringed when he called for “some form of a consumption type tax” in lieu of the IRS and payroll deductions.
Today’s article at the Ludwig von Mises Institute , written by Thomas E. Woods, Jr., discusses the tragic even 75 years ago during the Great Depression, thought it would be a good and proper thing to confiscate all monetary gold from American citizens.
It’s been 75 years since the federal government, on the spurious grounds of fighting the Great Depression, ordered the confiscation of all monetary gold from Americans, permitting trivial amounts for ornamental or industrial use. This happens to be one of the episodes Kevin Gutzman and I describe in detail in our new book, Who Killed the Constitution? The Fate of American Liberty from World War I to George W. Bush. From the point of view of the typical American classroom, on the other hand, the incident may as well not have occurred.
A key piece of legislation in this story is the Emergency Banking Act of 1933, which Congress passed on March 9 without having read it and after only the most trivial debate. House Minority Leader Bertrand H. Snell (R-NY) generously conceded that it was “entirely out of the ordinary” to pass legislation that “is not even in print at the time it is offered.” He urged his colleagues to pass it all the same: “The house is burning down, and the President of the United States says this is the way to put out the fire. [Applause.] And to me at this time there is only one answer to this question, and that is to give the President what he demands and says is necessary to meet the situation.”
Don Harrold publishes a financial advice newsletter online, including some free content such as videos. He spoke with Ron Paul via telephone regarding a recent exchange Paul had with Barney Frank during a hearing about the Federal Reserve. Very interesting stuff. Video is embedded below.
“We make money the old fashioned way. We print it.”
– Art Rolnick, former Chief Economist, Minneapolis Federal Reserve Bank
Subject: How big is the money supply?
The value of your money depends on the amount of money in circulation. Is it possible for you, as a layman, to learn and understand how large the money supply is, and whether it’s growing or shrinking?
Probably not. There are many measurements of the money supply, and there seems to be no consensus about which measurements are best. These measurements go by the names M-zero, M1, M2, M3, and MZM. There’s even something called the “True Money Supply,” devised by Murray Rothbard, and reported at the website of the Ludwig von Mises Institute.
The “True Money Supply” page will also give you numbers for M1, M2, M3, and MZM, but the numbers are only updated through April, and the M1 measurement, for some reason, is only current through February of 2006.
Well, you could try the Federal Reserve instead. They ought to know, right? Well, there are problems there too. The Fed doesn’t report M3 anymore, which some people think is the best measurement. The Fed also provides two different numbers for M1 and M2, one seasonally adjusted, and one not, without explaining what the seasonal adjustment entails. Worse still . . .
Money gradually evolved from societies from barter (or direct exchange) economies to economies based on indirect exchange . Under indirect exchange, Joey sells his chickens’ eggs for money and then either buys, say, a wrench from Bob or saves the money for future use. If one looks at this with an economist’s eye, Joey exchanged his commodity (eggs) for another commodity (money) and then either saved the commodity or exchanged it yet again for another commodity (Bob’s wrench). Hence money is actually a commodity just like corn, copper, or even an Ipod , if you follow the literal definition. This is a truth that few seem to recognize or fully appreciate its implications.
Open your wallet and take a look at the money you have inside. Hopefully you have some metallic coins and slips of paper (actually its linen). Take a closer look. At the top in large letters it reads: ‘FEDERAL RESERVE NOTE.’
The Federal Reserve is the central bank of the United States. It issued the money you hold in your hands, although the Department of the Treasury actually printed it. Although it has the word ‘Federal’ in the title, the Federal Reserve is a private bank or company delegated the power by Congress to manipulate the money supply. It is no more ‘federal’ than Federal Express or Wal-Mart for that matter. More on this later.
Now, far more curious is the use and definition of the financial term ‘note.’
Note - A written promise to pay a specific sum of money on a certain date. A written pledge to pay.
Interesting. A ‘Note’ is actually a form of Debt, i.e. you are owed its worth by the United States government. The linen also has text “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.” ‘Legal Tender’ is a legalese that means money that cannot be refused by law when you are paid or go to buy something.
But what is this note for debt actually worth ? A common fallacy is that the worth of the dollar is indirectly tied to the gold at Fort Knox. Dead wrong! Another is that the dollar is tied to the nation’s GDP/GNP/purchasing-power parity. There is some truth to this, as the dollar’s worth ‘floats’ or fluctuates with the exchange rates of other currencies like the Euro and Yen, but what is a dollaractually worth ?
This series will seek to explain what I’ve nicknamed the Money Matrix. We will first discuss what money really is or should be, then educate ourselves on why the current global monetary system is intrinsically flawed. As we proceed, taboo topics or not-well-understood time-bombs like the Federal Reserve, financial derivatives, and hyperinflation will be discussed. The last part of the series will seek to provide basic understandings of US big government finances such as the national debt, social security, the income tax, the trade deficit, etc. My goal is to explain this as simply as possible and how the current global monetary policy is morally wrong, so please ask any questions as probably both you and I will learn something further.
However, anything I write will just be tidbits of a greater truth, what I write will not be a substitute for thorough understanding. With that end in mind, I’ve included an online source list with comments at the end of this letter for you, the Reader, to peruse.
For your reference, this column really started with my outrage and personal search for truth concerning the morally wrong American wars of invasion or the “War on Terror,” but in a way I now believe I have been treating just a particularly egregious symptom, not the disease itself. Like Neo choosing the pill of reality, I believe I have at last come in contact with the walls of this ‘Matrix’, and having ripped a hole in it, and at long last can peek out and gaze at a reality for the first time from the outside in. I see how this Matrix has enslaved (or controlled, take your pick) all, and constrained mankind from our full potential. I see how this Matrix has enabled more wars and strife for our world, and I will now oppose it, rid of my ignorance. However, make no mistake, history is littered with battles of free men against this Matrix, and the wreckage of defeat is strewn throughout the sands of time, as well as the modern day. (To clarify the ‘Money Matrix’ idea, I believe it just consists of people and groups with their own motives, ideas, beliefs, resources, and desires, not some type of wacko conspiracy. These people (just like I) are just acting out life in their vision which may include “for the greater good of all” or for more self-centered reasons.)
Liberty Maven
Money gradually evolved from societies from barter (or direct exchange) economies to economies based on indirect exchange . Under indirect exchange, Joey sells his chickens’ eggs for money and then either buys, say, a wrench from Bob or saves the money for future use. If one looks at this with an economist’s eye, Joey exchanged his commodity (eggs) for another commodity (money) and then either saved the commodity or exchanged it yet again for another commodity (Bob’s wrench). Hence money is actually a commodity just like corn, copper, or even an Ipod , if you follow the literal definition. This is a truth that few seem to recognize or fully appreciate its implications.
