Posted on 05/11/2011 8:42:31 AM PDT by SeekAndFind
I'm ok wit dat.
Mrs. Ghost bought 500 oz at $300 with inheritance from her mother.
I better stay on her good side; my investments have, ahem, not done so well.
As long as I do not have to pay of any current debt I have with Gold backed dollars but can still use FRNs’ I am good with it.
So how do I go to the bank hand in my $10 and demand payment in gold? That is one 800th of an ounce. A speck of gold dust. 1$ worth of gold at $8000 and ounce becomes just as theoretical a creation as the Fed funny money we have now.
Keep in mind that an 800th of an ounce will typically be good for small purchases like a cup of coffee or a newspaper ($2 today).
If you want a paper money for smaller transaction ($0.20 - but why?) your gold foil strip could be 1 mm by 1 cm. Sealed in a nice clear hologram window.
Except that .1 gram is not $3 it is $28.248. When your smallest bill is a 30 you need to revalue your currency not just go to a gold standard. So what we need to do is issue “New Dollars” or “Gold Dollars” that are worth 10 old dollars. That way the penny becomes a workable monetary unit again. And the price of gold goes from $8000 to the ounce (which is an unworkable amount) to $800 and ounce, still high but at least a workable amount.
I think you are on to something with the penny, but I think dropping a zero would be too “third world” and a more politically plausible plan would be to drop the penny and nickle, and add a few higher value coins and higher value notes per my old plan:
Given that there has been ample inflation on the order of 10 since the last change, and we have an excessive array of confusing coins and low-value currency, it is time for a practical simplification.
First, denominations need to proceed in a proportional way without large value ratios or crowded ratios. The classic 1-5-10-50-100... progression with ratios of 2.0-5.0 is ideal as a minimum, with denominations of 2, 20, etc. being optional for important valuations.
Second, we want to avoid coins of such low value that they are more trouble than they are worth. Economic waste occurs with the extra time wasted dealing with needlessly small coins. A dime is worth less than a minute of labor at minimum wages, and no currency transaction requires anything smaller than this denomination. The penny and the half-cent served well as the smallest denominations when their values were that of today’s dime. (Note to any economic imbeciles: electronic transactions are often conducted in smaller units than our smallest coin, and that cash registers have been “rounding” - without bias up or down - to the nearest small coin for sales tax purposes for generations. Google sales tax rounding if you have doubts and read a few articles).
Third, we want to set the coin/currency transition at a practical level that avoids our wallets being overstuffed with small bills, or our pockets with too many coins. Coins should be suitable for purchases like a magazine, a coffee, a lunch, or a brief cab ride.
Fourth, the ratio between the largest and smallest coin should be limited to a practical factor. Consider that the economy functions effectively with coins at 0.05, 0.10, and 0.25, with pennies treated as trash, and larger coins generally not used. That is a factor of 5 between the largest and smallest coin. A factor of 10-50 may be ideal, and a factor of 100 (as in actual current coinage) is excessive.
Fifth, we need bills of adequately high value for large cash purchases (consider the largest Euro note has a value of about 6.5 times that of the largest US note.)
Sixth, coins should be sized approximately proportional to their value for ease of recognition and use.
The proposal:
Coins:
$0.10 (slightly smaller than the current dime)
$0.50 (slightly smaller than the current nickel, larger than the penny)
$1.00 (slightly smaller than the current quarter dollar, larger than the nickel)
$5.00 (slightly smaller than the current half-dollar) Or it could be set at $2 to avoid overlap with a $5 note.
Currency Notes:
$5 (optional)
$10
$20 (optional)
$50
$100
$500
Our current 6 coins are replaced with 4.
Our current 7 notes are replaced with 4-6.
If you want to talk about making coins out of silver or gold, I’m even more enthusiastic:
$1000 gold coin (1 oz)
$500 gold coin (1/2 oz)
$100 gold coin (1/10 oz)
$20 silver coin (1 oz)
$10 silver coin (1/2 oz)
$2 silver coin (1/10 oz)
$1 copper or base metal coin (1/2 oz)
$0.50 copper or base metal coin (1/4 oz)
$0.10 copper or base metal coin (1/10 oz)
I agree that 1/8000 of an ounce of gold is not a practical measure - yes, it could be done, but think about the cost of making it into thin strips and embedding it in money: its just not practical.
Here’s what you do: Declare that gold is now valued at $8,000 per ounce and silver at $500/oz. (restoring the old 16:1 ratio). That backs the currency and stops the chaos of the moment, thereby allowing the economy to begin to recover by restoring confidence. Concurrently, you announce that at a date certain, say 3 or 6 months later, ALL current US currency and coinage will cease to be currency (though they will likely be collectible), but that they can be turned in for [name of new currency] at a ratio of 1:387. Effectively, you will have a gold- and silver-backed currency with the gold in it valued at $20.67/oz. and the silver at $1.29/oz. (exactly where they were before FDR seized the gold in 1933). Additionally, all bank, brokerage and other financial balances (including our debts) will be adjusted in the same manner. Finally, ALL contracts will be modified to reflect the change in currency (and people will automatically have the right to state future contracts in terms of ounces of gold or silver).
As an aside, all new currency and coinage would be barred from having the image of any person born after 1800 on it to remove politics from that area - use Founding Fathers or a generic Lady Liberty as was done for much of our history, and go back to changing the coinage every 25 years to keep collecting a vibrant hobby that would earn lots of seignorage for the government as older coins were removed from circulation and replaced with newer ones.
There would be an end to speculation in gold and silver, as they’ll have a stable value in terms of the new currency...and there would necessarily have to be an end to taxes on any gains on the sale of gold or silver. Gold and silver will be money, and you couldn’t be taxed on the exchange of them for cash or each other any more than you can currently be taxed for exchanging a $10 bill for 2 $5 bills.
What does all of this do? Well, it backs your currency with gold and silver, just as the Founders wanted. Second, it restores practicality to the use of the physical currency - silver can be used for smaller transactions, and we can once again have gold coins. Ironically, all of the old “junk silver” coinage and the common date gold coins from yesteryear could once again be used as circulating coinage (though I think it likely that most would still stay in closets and vaults as collectibles). Initially, since this would necessarily be done after a currency/financial crisis, people will hoard the new coins - but eventually it will become inconvenient and people will revert to using paper bills, cards and electronic transactions (just like now), with the only difference being that we’ll have a stable currency and (necessarily) limited power for government.
Yes, I know, doing a “reverse split” on the dollar would look Turd World. But face facts, we ARE Turd World when it comes to our finances. Going to a gold/silver standard would restore fiscal sanity, and it is completely practical.
Declare that gold is now valued at $8,000 per ounce and silver at $500/oz. (restoring the old 16:1 ratio).
The actual market ratio is now a bit over 40. So if your plan were implemented, I’d buy silver elsewhere, trade it in for gold, sell the gold elsewhere for (cheap) silver and more than double my money with each cycle. The equivalent happened in the early 70s, which is why Nixon closed the gold window (folks were pulling out gold, and trading for cheap dollars overseas - lather, rinse, repeat.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.