Reagan Will Disgrace US Currency

[Doug]

U.S. Mint to Introduces New Dollar Coins Bearing the Images of America's Presidents in Feb.
11-19-2006 11:36 PM
By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON -- Can George Washington and Thomas Jefferson succeed where Susan B. Anthony and Sacajawea failed? The U.S. Mint is hoping America's presidents will win acceptance, finally, for the maligned dollar coin.

The public will get the chance to decide starting in February when the first of the new coins, bearing the image of the first president, is introduced.

Washington, John Adams, Thomas Jefferson and James Madison are scheduled to grace the coin in 2007, with a different president appearing every three months.

The series will honor four different presidents per year, in the order they served in office. Each president will appear on only one coin, except for Grover Cleveland, who will be on two because he was the only president to serve nonconsecutive terms. To be depicted on a coin, a president must have been dead for at least two years.

Read the rest here.

[Barbara Fitzpatrick]

Most presidents were pretty disgraceful, and while Reagan is up there, W leads the pack by several furlongs in a 5 furlong race.

I'm glad they're pushing the dollar coins. I just wish they'd bring back the $5, $10, and old-fashioned $20 double-eagle coins. They save us taxpayers a mint, costing only twice as much to make as bills, but lasting 7 times as long. I'd never carry flimseys if I had a choice.

[Doug]

I always ask at the bank for the Sacagawea dollar coins. I have passed hundreds of them around town. I don't know why people don't like them.

[Hogeye]

The US is starting to get the old third-world inflation flu. How long before it needs to put out a $5 coin? BTW, I sell silver rounds for $15 (for now), in case you want some real money.

The thread on fiat money suddenly fell silent after I showed historical prices of everyday items in terms of gold compared to dollars. I guess that convinced everybody.

[Doug]

The US is starting to get the old third-world inflation flu. How long before it needs to put out a $5 coin? BTW, I sell silver rounds for $15 (for now), in case you want some real money.

DOUG
I have real money. Any currency accepted is as "real" as any other.

The thread on fiat money suddenly fell silent after I showed historical prices of everyday items in terms of gold compared to dollars. I guess that convinced everybody.

DOUG
How does that make gold anymore "real" than dollars? What do you say when the price of gold falls? It's no longer real?

[Dardedar]

What do you say when the price of gold falls? It's no longer real?

DAR
I think for Hogeye, reality could be said to... fluctuate.

[Hogeye]

Real money = hard money = commodity-based money = warehouse receipt money. As opposed to: fiat money = money which is not backed by a commodity = money whose "value" depends on decree (fiat) rather than commodity backing. You may want to reread the earlier thread, so you can recall the terminology.

(Whether the underlying commodity gains or loses value wrt other commodities is irrelevant.)

BTW, I donated a book to the Fayetteville Public Library called What Has Government Done to Our Money? Billy Bob sez check it out. Or read it online here.

[Barbara Fitzpatrick]

You didn't convince anyone, Hogeye. We just got tired of an "is so-is not" discussion. Anything accepted by society as money IS money. Silver rounds have no more inherent value than paper or strings of beads. You can't eat it, drink it, breathe it, or wear it. Money is a concept of "equal value" solely for commerce sake and as such, takes whatever physical form as is agreed upon by the society using it.

[Hogeye]

My last message in that thread listed the prices of some things in gold and in dollars, to see which was more stable over time. This was in response to the claim that gold was not an inflation hedge. (Darrel had cherry-picked a gold spike in 1980 to "prove" otherwise. Darrel even denied that price inflation was caused by monetary inflation - "too much money being printed up"!)

The result was that (from 1900 to 1999) the price of spring chicken inflated 1314% in dollars, but only 5% in gold; beef inflated 4390% in dollars, but only 231% in gold. From 1935 to 2006, unskilled labor in dollars inflated 2500%, but only 43% in gold ... with similar results for a quart of milk and a house.

Suddenly, upon being presented with hard evidence, people fell silent. I assumed everyone was convinced on that point. I mean, this is Econ 101 stuff.


I don't see that you're disagreeing with me, Barbara, with your assertions about money. You are right that "anything accepted by society as money IS money." What I am arguing is that hard money is more sustainable than fiat money, and that fiat money leads to hyperinflation and/or bankruptcy. I agree that "silver rounds have no more inherent value than paper or strings of beads," obviously, since I hold the "subjective theory of value" which says that nothing has intrinsic value. Value depends on marginal utility, the "scissors" of utility and subjective desires of people. I agree with you that "money is a concept of 'equal value' solely for commerce sake, and as such takes whatever physical form as is agreed upon by the society using it," except for the "soley" part. In addition to commerce, money is useful for investment, debt accounting, and as a savings medium.

[Doug]

The result was that (from 1900 to 1999) the price of spring chicken inflated 1314% in dollars, but only 5% in gold; beef inflated 4390% in dollars, but only 231% in gold. From 1935 to 2006, unskilled labor in dollars inflated 2500%, but only 43% in gold ... with similar results for a quart of milk and a house.

Suddenly, upon being presented with hard evidence, people fell silent. I assumed everyone was convinced on that point. I mean, this is Econ 101 stuff.

DOUG
How does that prove anything except that if you want to buy hamburger, pay in gold?

And since the price of gold is given in dollars, how can beef at, say, $3.00 a pound, not be worth $3.00 in gold? For the amounts to disagree, you'd have assume that someone selling beef for $3.00 a pound would NOT ask for $3.00 worth of gold for the same amount of beef. It is not clear that this makes any sense. Who makes such sales?

[Hogeye]

How does that prove anything except that if you want to buy hamburger, pay in gold?

It doesn't even prove that! It proves that if you lived in 1900 and expected to buy a burger in 1999, you're better off caching gold coin rather than paper dollars. More generally (the point I was making): gold held its value (in terms of other commodities) better than dollars. Put another way: gold was a better inflation hedge than dollars.

And since the price of gold is given in dollars, how can beef at, say, $3.00 a pound, not be worth $3.00 in gold? For the amounts to disagree, you'd have assume that someone selling beef for $3.00 a pound would NOT ask for $3.00 worth of gold for the same amount of beef. It is not clear that this makes any sense.

At any given time, beef at $3/lb. is worth $3 in gold. But we are comparing different times. When we compare the price of beef 99 years later, we find that it cost only 5% more in terms of gold, but 1314% more in dollars. Not surprising, since the price of gold in dollars went from $20.68/oz in 1900 to $278.88/oz in 1999.

Put another way: You are Rip Van Winkle in 1900. You are about to go to sleep for 99 years, and know that you will want to eat 10 one lb. hamburgers when you wake up. (The 1900 price of beef is 10 cents per pound.) Should you put $1 worth of gold in your pocket, or one paper dollar? Answer: $1 worth of gold. If you saved the paper, you'd be lucky to get even one burger.

[Betsy]

I remember back in the 80s when there was a big brou-haha about how our paper money wasn't really backed by anything, and Fort Knox didn't have near enough gold to actually support the amount of paper money out in the world, and people started buying up gold coins and putting them in their safety deposit boxes for the day when paper money fell worthless. Of course, I never had the money to do that, so I just had to hope for the best. (so far, so all right). That may be a bit extreme, but I think I understand where Hogeye is coming from on this one.

[Dardedar]

This was in response to the claim that gold was not an inflation hedge. (Darrel had cherry-picked a gold spike in 1980 to "prove" otherwise.

DAR
More distortion and confusion from the hoggy one.

Darrel even denied that price inflation was caused by monetary inflation - "too much money being printed up"!)

DAR
You mis-remember, that was Doug.

A flashback to set it straight:

:
HOGEYE
So now you know: The US dollar has lost value wrt gold. Gold is undoubtably a better inflation hedge than dollars.

DAR
Look at the graphs above [now below]. Yours or mine it doens't matter. People who invested in gold in 1980, or any year since, did not have a good inflation hedge. For the most part people who hide their money in gold took a bath. If they bought toward the end of 1980 they got wiped out bigtime ($700-800 down to $300-400). If they invested in this hedge it at any time between latter 1980 and now (that is, the last 25 years) they are in the hole.
The stock market averages about 12% per year but is risky. Real Estate is much better. During most of my lifetime, gold, not so good. That's the past, future may vary.

DAR
So, my claim was in response to Hogeye's specific claim: "Gold is undoubtably a better inflation hedge than dollars." During my lifetime, as I was specifically speaking of, this has often not been the case. I gave several counter examples, and this graph:



link

BETSY
I remember back in the 80s when there was a big brou-haha about how our paper money wasn't really backed by anything, and Fort Knox didn't have near enough gold to actually support the amount of paper money out in the world,...

DAR
Right, it's not even close and hasn't been for a long time. As I pointed out in that other thread:

"Another comparison: three trillion, all the gold ever mined, is about 1/3 of just the US's debt, or about 1/4th of just the US's yearly GDP (about 13 trillion). That is, all of the gold ever mined is exceed by 2.8 months of the US's GDP. People who pretend we should be on a "gold standard" or currency should be backed up with gold are living in the past. Those days are long gone, and with good reason."

BETSY
and people started buying up gold coins and putting them in their safety deposit boxes for the day when paper money fell worthless.

DAR
See my chart above. If you bought your gold in the early eighties you got hosed. There are far better investments and inflation hedges than gold. For example, I purchased my house in 1990 for $37,000. Today it's probably worth $130,000. In 1990 an ounce of gold was about $400. Today it's about $627 but that is after a long spike since 2001 because of a moronic president and some 9/11 effect no doubt. In the late nineties it went down to about $250.

See:



link

During my lifetime gold has been a risky and mostly poor investment. That was my point.

[Barbara Fitzpatrick]

Hogeye, AT&T stock from 1900 to now has the same kind of "hedge" qualities. I can take you back to 1620 when a steak dinner at the famous Delmonico's in NY cost 6 cents. If you want to claim anything is superior, please keep your frame of reference within the bounds of reality. Darrel is going for an "in our lifetime" framework and that's a pretty good one to go by, since any other wanders into the realms of fantasy. FYI - investment, debt accounting, and savings are all part of commerce.

[Doug]

Put another way: You are Rip Van Winkle in 1900. You are about to go to sleep for 99 years, and know that you will want to eat 10 one lb. hamburgers when you wake up. (The 1900 price of beef is 10 cents per pound.) Should you put $1 worth of gold in your pocket, or one paper dollar? Answer: $1 worth of gold. If you saved the paper, you'd be lucky to get even one burger.

DOUG
It costs the same in terms of your income. Few people invest in dollars. (Although some do.) Most people use dollars for purchases and paying bills.

The beef costs the same in 1999 in dollars and in gold in terms of what you would pay if you worked at a job in 1999. Here's what you are overlooking. The cost of BUYING $1.00 worth of gold in 1900 costs you much more work in 1900 than it does in 1999.

You could just as well say that real estate is "real" money because it went up in price too.

Some collectible paintings, glass, toys, etc. are worth more in 1999 than in 1900. Does this mean they are "real" money too?

[Betsy]

I don't know, but I think we're getting off the point here. Plus it's getting awfully muddy. Some of the analogies posted could be easily shot down, although the real estate analogy might be worth examining in this context.

[Dardedar]

Hogeye, AT&T stock from 1900 to now has the same kind of "hedge" qualities.

DAR
Actually, it should be pointed out that the idea of investing in dollars as a hedge against inflation doesn't make sense (unless you are talking about bouncing around in currency markets to make money). Having paper currency and storing it in the matress as a hedge against inflation would very rarely make any sense.

Hogeye says:
"You are Rip Van Winkle in 1900. You are about to go to sleep for 99 years,... Should you put $1 worth of gold in your pocket, or one paper dollar? Answer: $1 worth of gold."

DAR
Gold was bad (14x according to Hogeye's numbers), hoarding the dollar would be just ridiculous. And the gold price over this time is artifically screwed up anyway because of government interference (that's why I went from 80's to now). Better: $1 in 1900 at 5% interest, compounded, gives you $131 one hundred years later (130x). If you can get 10% compound interest on your one single dollar it will get you $13,780. Now there is a hedge. What did the one dollar in gold get? $14, and even that was manipulated by the 80's spike. If you stopped before the 80's spike you got didly. Might as well go with the dollar in the mattress. If you played with gold in the last 25 years, you had more chance of losing (even in just raw dollars never mind inflation) than winning unless you have held into the last two years (then you are a little ahead in raw dollars).

D.

[Doug]

BTW, I sell silver rounds for $15 (for now), in case you want some real money.

DOUG
Can you bring one to the next meeting? I'd like to take a look at this real money.

[Hogeye]

Darrel's graph makes my point: that gold is an inflation hedge. Gold now is higher than it has been in his lifetime, unless you bought it in 1980. (Gold is well over $600/oz now.) It is puzzling why Darrel would write, "During my lifetime, as I was specifically speaking of, this has often not been the case," when the graph clearly shows otherwise. I deduce that he is thinking of short term investments.

A. If you had bought gold at any time in Darrel's lifetime except around 1980, it would be worth more in dollars today than when you bought it.

B. If you had bought gold at any time in Darrel's lifetime, and sold it 5 years later, you may or may not have made a dollar profit.

Both are true. I'm making claim A, while (I think) Darrel is making something akin to claim B.

(A little humorous irony re the graph from the-privateer.com: it's a hockey-stick! Darrel rejects this hockey stick.)


There seems to be some misunderstanding of my position. I am for hard money, money backed by something, as opposed to fiat money. Gold is just one of many commodities, one we happen to have used as an example. I have never said that gold is the only commodity that can or should be used to back money. Obviously, I am against a "gold standard" as enforced by the US in the past, or a bi-metal standard as imposed in the past. I'm am for free banking. Let the market decide what things are used for backing money.

Thus, those that suggested land, or AT&T stock, or whatever held value better than fiat money (i.e. were a dollar inflation hedge) are agreeing with me.

Doug, you are correct that if you spend your dollars quickly enough, then you avoid getting hurt by inflation. But that observation does not deny the fact that gold/silver/land/houses/whatever held value better than pretty pieces of paper. You are also right that many people save in non-dollar denominated instruments. In general, the more wealthy have more of their savings in non-dollar instruments, while the poor have more of their savings in dollars and dollar denominated instruments. E.g. Poorer people tend to have a larger percent of their savings in bank accounts than the rich. Thus, inflation tends to hurt the poor more than the rich.

Speaking of land-backed money, that was one of Lysander Spooner's ideas. I'll be talking some about Spooner's "land bank" on Saturday.

Darrel's observation that putting dollars in your mattress does not hedge against dollar inflation is correct, but trivial.

Gold was bad (14x according to Hogeye's numbers), hoarding the dollar would be just ridiculous.

This is puzzling. The value of gold in terms of dollars increase to 14 times its original value, and this is bad? Put another way, in terms of gold, the dollar lost 13/14ths of its value over the time period. Also: Darrels seems to be thinking that the gold prices given are some government fixed price. In fact, we used the London market price. It is true that government policy affected the price of gold, but govt policy also affected the price of land, sugar, housing, and many/most products, so the observation is of little relevance. And of course, govt policy affected the dollar dramatically - it inflated the hell out of it. His last comparison is kind of ridiculous: He wants to compare saving a dollars worth of gold to saving a paper dollar, and arbitrarily wants to give compound interest to one but not the other!

[Dardedar]

Darrel's graph makes my point: that gold is an inflation hedge.

DAR
A bad one, as I have shown, with several examples. Why do you ignore the specifics?

Gold now is higher than it has been in his lifetime, unless you bought it in 1980. (Gold is well over $600/oz now.)

DAR
You say not to cherry pick and then you cherry pick just the last two years out of my entire life. Even then it's a crappy hedge against inflation, unless if you also cherry pick the year you got in! Then it's so so, but that would be ridiculous.

It is puzzling why Darrel would write, "During my lifetime, as I was specifically speaking of, this has often not been the case," when the graph clearly shows otherwise.

DAR
Read the last sentence in the post you are referring to. It's all carefully explained.

I deduce that he is thinking of short term investments.

DAR
Let me put it this way. If you can't look at a graph and cherry pick retroactively when you got in and got out, gold has been a risky and very poor hedge against inflation during my lifetime. If you look at my big white chart you will see that from '81 to '05 (forget the bump) gold was tending downward, the lows lower and the highs lower.

Gold was bad (14x according to Hogeye's numbers), hoarding the dollar would be just ridiculous.

HOGEYE
This is puzzling. The value of gold in terms of dollars increase to 14 times its original value, and this is bad?

DAR
Over a hundred years? Yes, terrible. Compare it with 130x or 13,000x. And if you take out the 80's artificial bump (which you would not know in advance), it's MUCH worse of course. Here is a little history on the value of your inflation hedge. From goldprice.org:

"For over one hundred years from 1800 through to 1970, the cost of gold remained fairly stable with a very gradual rise from 19 US dollars an ounce to 38 US dollars an ounce."

HOGEYE
His last comparison is kind of ridiculous: He wants to compare saving a dollars worth of gold to saving a paper dollar,...

DAR
This has been your comparison and yes, I am seeing how ridiculous it is and should have just pointed it out to begin with. People don't invest in dollars as a hedge against inflation so the premise of the claim is absurd and any conclusion derived from it would have to be "trivial" in the extreme.

and arbitrarily wants to give compound interest to one but not the other!

DAR
How do you get interest or compound interest on an investment in a chunk of gold!?

D.