What's What?

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April 13, 2009

The talk nowadays is all about the bailouts, the bonuses, the mounting debt, the recession, the hoped-for recovery, etc. Yet the terms used in these discussions are never defined, perhaps because everyone thinks they know what the words mean. That's unfortunate, because, in my experience, almost nobody knows what the words mean; and ignorance of the terms makes you susceptible to manipulation by those who use them. And if those who use them are themselves unaware of their meaning, we have, not communication, but the multiplication of confusion.

Consider the simple term 'money.' It must be used hundreds of times each day by TV commentators alone, but, of course, they never tell you what the money is. And the reason they don't, although they probably don't realize it themselves, is because they can't. The dictionary gives, as a first definition: '1: something generally accepted as a medium of exchange, a measure of value, or a means of payment.' Note that money is 'something.' Some THING. What thing? We hear the term 'paper money,' but it hardly requires an economics degree to realize that if paper were money, there would be ten times as much paper in a TEN as in a ONE . Of course, a piece of paper can be a 'note,' or promise to pay money, but our present bank 'notes' contain no promise to pay anything to anyone, and, should you be silly enough to take one to the bank for redemption, you'd be laughed at. So while it might be understandable--if not technically correct--to refer to a genuine note--one promising redemption in money--as being money itself, to accept a phony 'note' as money merely encourages the counterfeiter to print more of them. The counterfeiter stays out of jail, because the government declares it legal to tender his bogus notes; and in return, the government can borrow as much of it as desired, with no expectation, not to mention possibility, of repayment of the principal.

It is common to hear people say that Americans use dollars, just as the French use euros, the British pounds, etc. Again, deplorably sloppy use of language. To say Americans spend dollars is tantamount to saying Americans drink ounces. The term 'dollar' is a unit of measure, as everyday speech confirms. 'How much is this book,' we ask, or 'How much money (sic!) do you have?' So: if 'dollar' is a monetary measuring unit, does it measure by weight or volume? And, most importantly, what is the 'money' that it measures? If, as we've seen above, there is no money in our 'monetary' system, then the term dollar is an anachronism. When we actually used money in this country--prior to June 1968--that money was silver, 90% pure; the dollar was 412.5 grains of it. When struck, the dollar contained 416 grains of standard silver; when its weight dropped, through wear and tear, to 409 grains, it was withdrawn from circulation and melted down. Precise and logical--but bad news for bankers. Silver was'and is--difficult and expensive to obtain from the ground. Ditto for gold. Banks make money by charging interest on loans, but in the era of money, they could only loan the gold and silver they had'if they were honest and prudent. How much more profitable to loan imaginary 'money,' and collect interest on it. (Yes, I know the interest is as ephemeral as the principal, but so long as people will yield their goods or services for it, the ploy will be played out.) And how does one know if the numbers in checkbooks, or bank accounts, represent actual units, or dollars, of money, or mere arithmetic entries? Today no one seems to know or care, and the money creators--the bankers--are making the most of it. This apathy/ignorance has made it possible for money--actual wealth--to be removed entirely from our system, leaving only bank credit (i.e., 'checkbook money') and the various paper and base metal devices in its place.

When all is said and done--so what? Most Americans, I believe, are satisfied with the status quo, although admittedly on the basis that their satisfaction is rooted in ignorance. (Henry Ford is said to have remarked that if people knew how the banks operated, there'd be a revolution.) There is, however, largely thanks to the Internet, a remnant among us who recall the rule of law'even as it pertains to money. The Supreme Law of the Land, for instance, prohibits the use of anything but gold and silver as a legal tender by the states. Nor does it authorize the Congress to have any role in money 'creation,' but only in the coining (NOT printing!) of money, and, since the states cannot make a legal tender of anything other than gold and silver coins, and are prohibited from coining money, the money coined by Congress must, logically, be gold and silver. Were this Constitutional mandate obeyed by those who have sworn to do so, we would not be in our present economic crisis.

Nor, for that matter, would we be able to wage war here and there across the globe, at enormous cost. Only a printing-press-based 'money' can support such enterprises. On a less grandiose scale, people signing contracts involving 'dollars' would actually know what they were signing. Ditto for tax forms, which require signing under penalty of perjury, and demand the 'true, complete and correct' evaluation of income in terms of undefined 'dollars' of no stipulated value. And, finally, a silver or gold money would mean that savings would retain--even possibly increase--their value, in contrast to the inevitable drop in value of an ever-increasing volume of fiat. It is hardly an exaggeration to say that the decline of value of your life's savings represents a decline in value of your very life--at least in material terms. The loss of worth of savings is a form of theft, albeit subtle and seldom recognized as such.

Words do have meaning. Indifference to that fact can be, and with respect to the coming economic debacle, will be, catastrophic. And all because we allow our politicians and bankers to use words like 'money' and 'dollar' without any reference to a monetary standard.

Paul Hein is semi-retired from the practice of medicine (ophthalmology) in St. Louis. His book All Work and No Pay should be available soon from Amazon.com.

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What's What?

by Paul Hein