MONEY

Money is one of the most common things in the world. Everybody has at least a little of it, whether they work for it, steal it, or get a monthly check from the government. For almost everybody, it's a necessity required for procuring such essentials as food, clothing, shelter, and favor. Almost anything can be purchased with money, including all nature of merchandise, stocks, bonds, respect, and at least a facsimile of love and friendship.

Having lived my entire life in a society driven by money, I know a little bit about its characteristics and worth. The most notable and enduring characteristic of modern money is that it's worth is always less today than it was yesterday. And it will be worth even less tomorrow. Since this writer is an American, the money he refers to is the good old American dollar — now in the form of Federal Reserve Notes and copper-nickel coin.

I qualify this as "modern money" because this declining purchasing power of the dollar was much less pronounced in former times, even of the Federal Reserve era. There was a time when the dollar was fairly stable in value because it was officially tied to a fixed proportion of precious metals for relatively long periods of time. That was when the dollar was officially defined as so many grains of pure silver, or an ounce of pure gold had a fixed dollar price of $16.00, or $35.00, etc., and dollars could be redeemed in either gold or silver coin at a bank or the Treasury office. This "fixed" value, however, has never been fixed for very long, or even very realistically during times when it was officially so pegged, especially since 1933, the year when Americans lost their right to own monetary gold or gold bullion.

My first acquaintance with the value of money was at age four or five (circa 1946-47), when I learned that I could take six cents to the corner drug store and buy an ice-cream cone — an amazing thing. Six cents were a nickel and a penny to me — I'd accept no dimes or quarters. Two nickels wouldn't do it either. Not even six pennies would do it. I had to have a nickel and a penny or I wouldn't go. I knew nothing of silver or gold. All I knew was that a nickel and a penny would procure an ice-cream cone. That was almost sixty years ago. Ice-cream cones have appreciated in price considerably since then.

Just today Pridger and his wife stopped by the local Dairy Queen and got a medium sized milk shake and small cup of ice-cream. $4.47!!!! Back about 1955 a bigger shake cost thirty cents at the Tasty Freeze. A cone was probably about ten cents at that time. So, in terms of shakes and cones, our money has depreciated to about a tenth of its former value in fifty years.

During the summers a few years later (just before the nation started debasing its silver coinage with nickel-clad copper), I worked in the hay fields, hauling hay for a neighbor from the field to the barn with several other boys. In the field we threw the bales up onto a large hay wagon, then rode the wagon to the barn. Then we threw, or otherwise lifted, the bales high into the loft, stacking them high into the gables.

It was hard and hot labor. Each of us were paid a penny per bale. Two thousand bales thus stacked in the barn during the haying season (two or three cuttings), earned each of us $20.00. It took about twenty hours of hard labor to move that many bales, and it was accomplished over a period of two or three days. Our net earnings were thus about a dollar an hour. Us kids didn't know anything about income tax then. We were paid in cash — crisp one dollar bills, fresh from the bank — and it was all ours.

The time came when I thought I'd best go out into the world and seek my fortune. I was a senior in high school, but not doing too well academically, and was fed up with the "system." I was too smart for it, and figured I'd better get out while I was still smart enough. It was the autumn of 1959, and I'd managed to squirrel away $20.00 of my previous summer's hay money.

Today a child would be considered a fool for quitting school, and a double fool for thinking he could get very far on $20.00. In fact, there were those who thought that way back in 1959. Be that as it may, I started out with $20.00 dollars in my pocket with the intention of becoming a bohemian artist and poet in down in fabled New Orleans. Failing that, I thought, I'd go off to sea.

Twenty dollars went a lot further back in 1959 than it would today. Transportation didn't cost me anything, of course. I hitch-hiked to the Crescent City. When I arrived in the big city I was advised to get a room at the YMCA. Surprisingly, they turned me down, saying I was too young or some such ridiculous thing. But this misfortune saved me a considerable of money. The WMCA rooms were $2.50 per night and the hotel I was forced to put up in was only $1.50 per night (which was later reduced to $1.00 per night by the lady who ran it). The hotel, called The Ritz, was nicely located too — right in the French Quarter, where I wanted to be. Try getting a hotel room in the New Orleans French Quarter today for a dollar or dollar-fifty per night!

My first job in New Orleans was as a busboy in a nice restaurant called the Diamond Jim Moran's La Louisiane. The wage was $4.00 per day, plus tips that usually averaged another $4.00. Thus I made about a dollar an hour, on average, like I had in the hay fields. But this was steady work. What's more, I got two good free meals per day to boot, and all the hig grade leftovers I had a desire to eat. Thus, earning $8.00 per day, more or less, board furnished, and room only costing a dollar a day, I felt I was rolling in money.

Of course, being young and brilliant, I wasn't satisfied. I still wanted to be an artist. Failing that, of course, I wanted to become a swashbuckling sailor. Finding it difficult, if not impossible, to get a berth on a merchant ship, I eventually settled for joining the Navy.

As a Seaman Recruit I made a salary of $78.00 per month — some $162.00 less than I had made as a busboy. But both room and board were furnished, and I eventually got to see the sea, as well as part of the world. By the time I got out of the Navy, three years later, and having advanced through the ranks to a third class petty officer, I was making about as much as I had been making as a busboy.

I will add one more thing about my Navy days. It was then that I first became aware of income tax. A dollar or two was deducted from each check I received. This baffled me. I worked for Uncle Sam, and Uncle Sam paid me, but I had to immediately pay some of it back. It didn't make any sense. I was told that I was helping to pay the costs of government, including the cost of the armed services of the nation.

It was beyond me why Uncle Sam simply didn't just pay me a dollar or two less per month and keep the money he needed, without going through the extra ridiculous rigmarole of Indian giving. Besides, I thought, wasn't Uncle Sam the one who printed the money in the first place? And couldn't he simply print as much as he needed to pay the troops and sailors?

That was my first inkling that there must be something fishy — or at least downright mysterious — about how the government conducted its business. But I didn't give it much thought back then. I never missed the dollar or two that Uncle Sam insisted on taking back. I never saw it, and the money left over was more than enough to satisfy my modest needs.

Filing my income tax return consisted of merely returning a simple IBM card. Trying to figure out whether I'd underpaid or overpaid my income tax never occurred to me. I figured Uncle Sam must have already figured that out.

In fact, I'd made so much money while in the Navy that I'd managed to save about $1,000.00. After returning home for a month or so, I returned to the west coast to seek my post-service fortune, now armed with a Merchant Mariner's document which I'd procured while still in the service.

By the time I got back to the coast, I still had more than $900.00 in my savings account. I took $50.00 of that and made a two or three month sojourn down into Mexico, where beer was only a Peso (eight U.S. cents) a bottle and "apartment" rent was only $4.00 per month.

After that little excursion south of the border, I got serious about getting a berth as a merchant mariner. In 1963 San Diego a large breakfast in a decent restaurant cost about fifty cents, and a flop-house bed was $1.50 per night. Yet I knew it was time to get a job.

Since this is an essay on money rather than an autobiography, I'll return to the subject at hand. My point in the foregoing is that today's money simply isn't nearly as good as the 1959-1963 money was. Eight dollars a day would scarcely support a rabbit these days, but it had once put me in what I considered tall clover — but only because I was frugal and insisted on living well within my means.

So, what has happened to the dollar in these past fifty or sixty years? Simply stated, through combined debasement and inflation, it has lost at least 90% of its value in that time. We now have ten cent dollars in terms of the 1960 values.

CURRENCY DEBASEMENT AND INFLATION

Debasement and inflation are two separate phenomenon, and I guess I should make the distinction clear. Debasement occurs when value is removed from currency by reducing the amount of precious metal in the coins comprising or otherwise representing that currency. This is done by making smaller coins of the same face value, shaving gold or silver from the coins (whether by the issuing authority or otherwise), or replacing those metals with metals of lesser value.

Debasement is also accomplished through "devaluation" of a currency against the standard that it's value is measured. Replacing silver coins with nickel-clad copper was a blatant instance of debasing a national currency, though the coinage itself retains some small intrinsic value as nickel or copper. So was revaluing the dollar from $16.00 to an ounce of gold to $35.00 per ounce. Removing gold backing entirely, and reducing the currency to a purely fiat status, was the ultimate debasement, 

Inflation occurs when too much currency is placed into circulation (that is, more than a stable market can handle) — or, as it is most often expressed, too much money chasing too few goods and services. This inevitably causes both prices and wages to increase, and a phenomenon popularly known as the "wage, price spiral." Though inflation is always the result of poor fiscal and monetary policy on the part of the governing or money issuing authority, the wage, price, spiral is almost always blamed on organized labor's demands for higher wages.

While debasement is next to impossible with a purely fiat currency (because there is really nothing to debase except the quality and appearance of coins and notes or, perhaps, the public faith itself), inflation can occur whether a currency is species or fiat in nature. For example, if a rich goldfield comes on line and floods the world with an over abundance of gold, its value, intrinsic though it may be, would decline in proportion to other commodities and trade goods in the marketplace. This, of course, has happened several times throughout history.

Though wholesale debasement of silver currency was begun in 1964, the dollar had been debased before. For example, when Franklin D. Roosevelt, as an emergency measure, called in the nation's gold in 1933 at $16.00 per ounce, and (having got his hands on the nation's gold) announced that it was henceforth worth $35.00 an ounce. In other words, in one fell swoop, half of the value of all the dollars in the world were slashed in half in terms of gold. And, of course, gold was the undisputed international measure of monetary values at the time, and had been for many centuries.

In spite of this huge devaluation, the dollar continued to be considered "as good as gold," for another forty years. Americans couldn't get any of their gold back with dollars, but foreigners could redeem any dollars they had for gold at any time.

THE ULTIMATE DEBASEMENT

Since president Nixon finally slammed the gold window shut in 1974, all relationship between the dollar and gold has been increasingly officially repudiated. The same has been true for silver, which finally completely ceased to be a component of our coinage. At that time the official price of gold was set at $42.00 (a 20% devaluation of the currency), but this relationship rapidly became merely an official fiction. The dollar was no longer convertible to gold through the Treasury. The value of both gold and silver in terms of dollars is now determined strictly by the vagaries of the marketplace, and the once sacrosanct "gold standard," (and "silver standard"), which had held a preeminent positions in monetary matters for centuries, has become history, at least for the time being. This was the ultimate debasement in terms of monetary tradition.

The price of gold and silver now go up or down, sometimes rather wildly, according to demand in international markets. But the linear trend is only one way, and in spite of having been officially divorced from "money" there continues to be a definite correlation between the value of gold and the dollar. Roughly speaking, the value of the dollar can be determined by its relative value in terms of gold. Gold remains a meaningful indicator of monetary values and the historical trend in the value of the once almighty dollar.

Gold has been hovering around $420.00 lately (February, 2005), so lets use that figure as the unofficial gold price.

Using this as our current measure, the relationship between $16.00 an ounce gold, circa 1913, and $420.00 an ounce gold today, also tends to be the relationship of the purchasing power of the dollar at those times in terms of the basic essentials of life and the products of basic industries. $16.00 is only 3.8% of $420.00, thus we now have about a four cent dollar, and it takes a dollar to purchase the four pieces of candy that cost only 4 cents in 1913. If you go into old turn of the twentieth century Sears or Montgomery Wards catalogs, you'll find that price comparisons between then and now tend to uphold this thesis.

As I grew up in the 1950s, my old Pappy had a good job as a welder on the railroad. He attained an hourly wage of about $3.50 an hour. This was probably typical union scale of the day for skilled industrial labor (1% of the value of an ounce of gold). If gold held the same relationship to an hour's labor today, the industrial wage would be $42.00 an hour.

If we assume I was making about a fair "minimum wage" at $1.00 an hour in those days (1/35th of an ounce of gold), today's minimum wage should be about $12.00 an hour, in terms of $420.00 an ounce gold ($420/35) — over twice what it actually now is. In fact, in the devastating wake of the de-industrialization of the nation, $12.00 an hour is now considered a decent industrial wage.

As detailed above, my personal experience in the matters of the costs of living tells me that this ratio is pretty close to correct, if not downright conservative. Where I might have left home with only $20.00 in my pocket back in 1959, I can guarantee that a young adventurous lad today wouldn't be nearly as well equipped with ten times that amount. If such a lad is fortunate enough to find a job at minimum wage, his purchasing power would be about half of what my $1.00 an hours was worth in 1959.

While wages have not kept up with the combined effects of monetary debasement and currency inflation, prices in general have kept up, and the purchasing power of labor has declined markedly.

THE GOLD STANDARD

There continues to be many die hard gold bugs who insist that gold and/or silver, species, is the only real and viable basis for any currency, thus the only real money. They believe that the dollar must be tied firmly to gold or silver in order to avoid the natural inflation that seems to be a characteristic of fiat currencies.

Perhaps this is true in the strictest sense. Gold is still the only indestructible money that continues to be universally valued as money or a "store" of wealth, whether coined into money or not. While the American dollar has declined from 100 cents to 4 cents in a century, gold has held its own and now trades for $420.00 an ounce.

When America went off of the gold standard, the whole world went off of the gold standard. Well, maybe, almost. If truth be known, it was the the U.S. dollar, and other national currencies, that were demonetized — this to facilitate a truly elastic and "flexible" circulating currency system, wonderfully suited to manipulation by the major central banks and international financiers.

Demonetizing gold did not mean that governments got rid of their gold hoards. They still hoard it, though they don't actively trade with it as commonly as they once did. One might say that gold is still the de facto backup, if not backing, for much of the world's great national treasuries, but is is no longer "fixed" in value against circulating currencies. We still allegedly have our gold at Fort Knox. If gold has been really been demonetized, what purpose would that hoard serve?

Remarkably, American Gold Eagle coins and silver dollars are once again being minted. But their face dollar value bears no relationship to their value in terms of Federal Reserve Note dollars.

The United States Mint has gone into the business of marketing specie coins to the public for profit as another means of raising government revenue. We can now purchase newly minted silver dollars (which contain a full ounce of silver), for about $10.00 each — a considerable profit markup from the actual silver content.

The gold standard, in some form, may be resumed once again someday, if the present system collapses — which appears more "when" rather than "if."

Ironically, it was the international money power (that mysterious, rascally cabal of "eastern" and London bankers!), that usually promoted the necessity of gold-backed currencies. They were the deadly enemies of a purely fiat money system. But they devised "fractional reserve" banking which gave them the magical ability to loan out and collect interest on many times more in paper than the gold they held in their vaults. But, having gained total, unchallenged, and almost unchallengeable, control of all the major world currencies, they are more than content with fiat money. Of course, it isn't because it is fiat money — much more importantly, it's because it is debt money, over which they have gained a monopolistic control.

But let me not devolve into international conspiracy issues here. I think I can write about money without it.

The reason always given for being against fiat money is because it was "inflation money". Look what happened to the Revolutionary War Continental script, Lincoln's greenbacks, and etc., etc. This same reason has always been given, whether by the financial interests, patriotic hard money Americans, or bought and paid for (or duped, or economically illiterate), politicians.

The ongoing conventional wisdom is that fiat money cannot be kept in check or limited in issue to reasonable and necessary amounts. Only gold or silver backing is able to put the controlling reign on a national currency. And, true enough, gold or silver backing and convertibility instills a discipline in monetary affairs that cannot be avoided without danger of early detection and collapse.

But guess what? Today we have a purely fiat currency. But not only is it a purely fiat currency but a debt currency to boot! Our government is going into debt just as if it had to purchase gold and silver to back every dollar in circulation. In fact, it's going into much deeper debt much faster than it ever did when the dollar was convertible to gold or silver.

There were three primary problems with the gold standard, and they both apply to the silver standard as well.

First, the government has never had a automatically available gold or silver supply with which to back up the national currency. Every ounce of gold or silver in the national Treasury had to be purchased before it could be placed there. And it had to be purchased from private parties, mines, gold hoards of Europe, etc., at the going market price — even if that price happened to be far above the official price in terms of the currency being backed up.

Now this raises the old chicken and egg controversy. If gold is the basis of money (is, in fact money), and the government hasn't got any, how does the government buy it? Well, we all know where government gets its money. Taxes, of course.

The United States were born of the thirteen original British colonies rather than on a deserted island. An agricultural and booming shopkeeper economy, as well as foreign trade were already well established. There were colonial currencies, British pounds, and Spanish gold and silver circulating, and an already established system of taxation. And there were foreign governments and individual financiers willing to extend credit.

But what if the new nation somehow had been born in true isolation? Had that been the case money would have had to have been created by the government. The people, lacking any other convenient means of trading except barter, would have embraced it as a convenience to facilitate internal trade and exchange. The real wealth of the nation, of course, would be produced (as was actually the case), by the farmers who harvested the food and fiber, and craftsmen and tradesmen who fashioned the abundant raw materials from field, forest, sea, and mine, into the necessary items of public consumption and comfort. Perhaps no gold would be found, but nobody really needs gold. The money issued by the government would serve nicely as a circulating medium of exchange — a purely fiat currency, with no more backing but the full faith and "credit" of the nation.

This word "credit" remains important, for the only way the government could provide a sound and honest currency would be through its own credit among the people, rather than among the international creditors known as the money power. Government issued money would be spent into circulation in the case of the salaries of public officials, military and naval forces, and public works. And it would also be loaned into circulation, at small interest, through a banking system or direct loans to states and municipalities.

Today our money is strictly a fiat money. That is, it is a script and token currency with no intrinsic value. It's value as a circulating medium of exchange is given its sanctity by government fiat. But it is not only fiat money, but "debt money." This means that its very existence generates more indebtedness than there is money in circulation. It's an impossible situation, made to work for the profit of the money men who live off of the interest, while debt accumulates beyond any hope of repayment. This effectively makes everybody a fractional slave to a parasite class which lives from the interest – made inevitable, perpetual, and ever-growing.

That fractional slavery, which is a hidden debt-slavery, gradually increases – and our national debt is the measure of that growing debt-slavery. At present, every man, woman, and child in the nation is bound to about a $26,000.00 share of that debt. Applied only to the gainfully employed wage earners of the nation, the debt is probably three times that amount per worker – much more than a year's wages for most of them.

The creditor class has been expanded to no only include the "money power" and professional creditors, but the but the debtor class itself as well. To the extent that "we owe it to ourselves" (and "our" percentage is pretty insignificant), we too are parasites – feeding off our our own body politic, consuming the life blood of our children and grandchildren.

If we are going to have a strictly fiat money system, it should at least be an honest money system without the Ponzi scheme, and self-consuming, attributes of the current system.

The Federal Reserve System has never been audited, and probably will never be audited. To do so, in an honest manner, would expose the dishonesty of the system under which every man, woman, and child in the nation labors.

One rationale for keeping the present system in place is that "bankers" are intrinsically more honest and capable than public servants and elected officials. Thus we have a system that "has served us well" since 1913. But if the bankers who run the system ever had their "system" subjected to the kind of scrutiny that we routinely focus on our public servants and elected officials, maybe we'd find that bankers are not intrinsically more honest and capable than those over whom we have a veto power through the elective and hiring processes.

John Q. Pridger