Hopefully, your policeman friend was also a lawyer, giving added weight to his opinion.
I would bet the policeman’s “personally seen” story is apocryphal, but perhaps based in fact. You started the sentence with “Constructing a slug to fool a vending machine…” and ended it with the cop witnessing a merchant getting cited for…WHAT? Counterfeiting?
samclem:
What do you have against high school kids? I think that they are an excellent, perhaps the premiere source for a cite when you want to imply that somebody doesn’t know what they are talking about. In cased you missed it, the implication is that this knowledge is so common, so accessible, and so universally accepted that your average high school kid takes it for granted. Not to insult any high school students out there, but the further implication is that this somebody isn’t as knowledgeable as a high school student.
I would be embarassed if my claims were so easily refutable.
But yeah, you did cover yourself, by conceding you might be wrong.
You’ve asserted that it’s actually semantics whether it was Roosevelt or Nixon who abolished the gold standard. I don’t think so. It goes to credibility.
I am familiar with Roosevelt’s role in our currency structure, and feel very confident in my assertion that it was Nixon. There are lots of cites (some by large authorities than high school students) to back me up on this , as well as almanacs, encyclopedias, economic texts and such.
Roosevelt had a part in one of the steps away from gold that I described in my OP. Again, I didn’t bother to attribute it to him because it is relatively minor and I had no intention on writing the the definitive text on monetary history here. The formal step away from the gold standard was under Nixon, and is so recognized by the world at large with the exception of yourself and possibly this guy in Moose Lake, Michigan who also thinks that aliens are controlling his brain.
Still, if you’d like to argue it, I’d love to hear it. A simple assertion ain’t worth doodly squat. In a similar vein if you would like to assert that money and currency are in fact the same thing, perhaps it would be useful to tell us why. That way we could share in your wisdom and become wise ourselves.
Just saying it’s so doesn’t cut it.
I stand corrected on the placement of my discussion on why money and currency are not the same thing (I got this from a macroeconomics text BTW so I feel I’m on pretty firm ground.) It is however, pretty early on, and I doubt you’d have any trouble finding it if you actually cared to respond .
And the “Missing The Point” award goes to… ::drumroll::… SamClem!
Sorry, bro, but you’ve got to realize that the OP wasn’t meant to be taken completely literally.
“Backed by Gold” meant “Backed by all the precious metals”… just Gold being the most precious of them at the time. “Currency” refers to the individual bill, while “money” refers to the use of another item to signify value (generally).
Not to seem like I’m saying you were wrong (you really weren’t)… it just seemed like you were nitpicking a whole lot.
I’d cite him for theft. And if coins are legal currency (currency defined as per my ‘contract in force’ statements), I’d be surprised, but not shocked. I’ve repeatedly heard that little tale, but perhaps it isn’t as true as I thought it was. And, Scylla, you make a strong argument, and a good point, but it really only addresses why we should stay away from the barter system. The dollar in my pocket, assuming it’s paper, has very little value if considered as a piece of inked paper. That is, the individual contents, if sold seperately at market prices, would have a value of less than $1US. The value comes from the fact that the US Federal Government backs the currency with ‘full faith and credit’, a legal term that means the US Federal Government will keep up its end of the bargain (honoring the note as legal tender for all debts public) as long as we keep up our end (honoring the note as legal tender for all debts private), both ends being enforced as Constitutional law. The Constitution is a contract, as per Locke’s thesis of governmental power deriving from a just contract with the people. The US Federal Government derives from the contract termed the Consitution, which in turn enumerates among the powers of the US Federal Government the power to print money, money being another contract, a contract that derives its power from the contract called the Constitution. That got pretty long-winded at the end, but I think it explains things well. The government is actually pretty interesting when you find out that the very money you use derives its value from contract law.
Thank you Spoofe.
BTW samclem’s link is mainly pertinent to the Euro, but it also states that the gold standard was formally abandoned under Nixon (the early 1970s).
Since samclem seems unwilling to tell why himself, his claim to Roosevelt’s abandoning of the gold standard is probably based on the fact that the exchangeability of US dollars for Gold was suspended under his presidency. Again, I described this in the OP, I simply didn’t credit Roosevelt (why should I have?) We still maintained the gold standard, we just weren’t exchanging. I consider this to be a pretty lame-assed argument, and hope he’s got something more, though I doubt it.
Nitpicking is one thing. I generally don’t mind that too much, but when it’s also just blatantly false and arrogant it does tick me off.
Re the merchant policeman story:
No he’s not a freakin’ lawyer for chrissakes. Did you think that he possibly was, or were you going for an “imperious” cheap shot? I have no idea what the merchant was cited for. The story may well be apocryphal, I don’t care. I thought it was an interesting aside and germaine to the discussion.
Derleth:
Thanks for the thoughtful reply.
THere is a cath-22 there though. The dollar is legal tender for all debts public and private, and the Government must honor it. But, in what fashion? How?
It is honorable only in and of itself. THe only fashion in which the government stands behind a dollar is by asserting that it’s a dollar. Put another way, the only promise that the government is making is that it won’t start printing a new form of money and refuse to exchange or “honor” the old for the new on an equivalent basis.
Put still a third way, if you go to a federal reserve bank and ask them to honor a ten dollar bill, they might give you a five (probably one of those funky new ones,) and five ones. They certainly won’t cough up a couple of milligrams of gold like they used to.
I don’t think I missed the point.
SPOOFE said
Sounds like they are the same to me, using your definitions.
My undertanding of the gold standard was this: until 1933 the Federal Gov’t fixed the price of gold at $35 an ounce by agreeing to sell an ounce of pure gold for $35 to anyone who wanted it. I’m hazy on what exactly Roosevelt did to end this system but I thought he stopped the federal reserve from selling gold to just anybody, although the gov’t maintained a huge gold and silver reserve (i.e. Fort Knox, the New York Reserve Bank etc.) and continued to gaurantee other nations an ounce of gold for every $35 in U.S. currency they wanted to exchange. What exactly did Nixon do? Did he abandon the gold standard altogether and allow our currency’s value to fluxuate on the international currency exchange markets? BTW the last time I checked, gold was hovering at around $300 an ounce although I can remember it going as high as $890 an ounce during the Hunt brothers attempt to corner the gold market back in the early 80’s.
Let me clear up a little confusion here with regard to the “Gold Standard”
Roosevelt prohibited the posession of Gold coin, notes and contracts. That is by May, 1933 all gold coinage had to be turned in to the government. Paper money was redeemable on demand at a bank for gold coinage, the problem being that banks didn’t have near enough gold. At the time, gold’s “price” was around $20 an ounce. After confiscation was complete, then the “price” was raised to $35 an ounce, netting the government a hefty profit. Note that the fine incurred for non-compliance was $10,000, a hefty sum in those days.
The law was designed to prevent “hoarding” gold by American citizens. Also note that when you or I posess gold, it’s “hoarding”, but when the government does it (Fort Knox) it isn’t.
After World War II, the major economic powers gathered at Bretton Woods, (new hampshire?) to hash out a common economic policy. What was decided was that the U.S. Dollar would be the “reserve” currency. An ounce of Gold would be worth 35 pieces of paper with George Washington on it. While it was still illegal for Americans to posess gold itself (jewelry excepted) other countries treasuries were able to exchange their U.S. Dollars for gold, and they also pegged their currencies to the dollar. Treasury stood ready to buy or sell gold at $35 dollars an ounce, thus defending the price of gold, and maintaining a stability in world markets.
Unfortunately, the Vietnam war, coupled with unprecedented welfare and social spending at home, flooded the world with paper dollars. France, in particular, made several “runs” on the U.S. Treasury gold holdings, and depleting our stock. What President Nixon did was close the “Gold Window;” that is, no longer could other countries exchange their dollar holdings for gold, and the fixed exchange rates became history. What followed was a series of devaluations of the dollar, Oil price shocks, Recession and general economic malaise for almost 20 years.
Alan Greenspan, a gold-bug from waaay back, has since provided credibility to the dollar by making it, once again, as “good as gold.”
Scylla I am sorry that my posting style on this topic came off as imperious. I have this problem in person, so why not here? It isn’t personal. I just come off that way.
Perhaps I got started on the wrong foot, by reading one of your first sentences in the OP
“Money is a concept. It does not actualy exist.” To me, so is a paper dollar. And then you went on to say that money is tangible things that are useful(hope I’m not putting words in your mouth). Which is it–money does not exist or it is a tangible, useful object?
I assumed, wrongly or not, that when you talk about being on the “gold standard” you are saying that our money was redeemable in/or backed by gold or some tangible thing. Exchangeable to the average American, not someone in some far-off land.
After 1933, an American citizen was not allowed to go to the bank and demand anything of value(gold coin) for their piece of paper. To me, that means that we were no longer on the “gold standard”. The fact that a Frenchman could go to his bank with an American bill and get gold in return is irrelevent. Americans were no longer on a gold standard,IMHO.
As an aside, I recently read some of a book by Milton Friedman, especiall the parts concerning the period of the '30’s and Roosevelt’s recall of gold. The guv’mint had plans to recall silver at the same time, but never acted on it, thinking that it was too minor to bother with.
one of your final comments in the OP was this
I don’t understand why this is “lunacy”. You are right, it is convenient and works. What is the alternative? Return to a gold standard(which never worked)?
Scylla, the honoring part comes in when we may pay our debts using said dollar. If the governments, local, state, and federal, accept the dollar as payment for taxes and fees, they’ve just honored that dollar. If the shopkeeper down the street accepts our dollar as payment for a bunch of peas, he’s just honored our dollar. Why are dollars honored? Because it’s in the Constitution that the currency the US Federal Government produces is valid, and that the Feds have the right to print said currency. Exchanging pieces of paper for pieces of paper does little good. Even if you buy bonds or CDs, what you’re buying is financial concepts that will, over time, increase your store of little pieces of paper, hence increasing your purchsing power, an important concept in the land of finances. Money can be next to worthless and still work because just having money does you no good. If you want to get somewhere, you must spend those little pieces of paper, and they must be honored as payment for debts due to contract law. I hope that helped.
Perhaps I should clarify a sentence:
What I meant was this: The value of the dollar in your pocket, when viewed as so much ink and paper, can be next to nothing and the dollar will still be good because the dollar is not the concept at work here. The dollar is simply a shorthand method for keeping records. It is shorthand for the full faith and credit of the US Federal Government, which is bound by contract to honor it as payment for debts just as much as we are. Collecting pieces of paper does nobody any good. Gaining purchasing power is the goal here, which is why we give our pieces of paper to banks so they accrue interest. Again, I hoped that helped.
Thank you Tedster for the info.
That said, I would like to point out the obvious with regard to any paper currency which is not tied to any precious commodity (such as gold or silver). The US dollar is no more valuable than Monopoly money. When you are playing the game Monopoly, 750 bucks will buy you Boardwalk and Park Place, another 2 grand will put hotels on both of them. When you are not playing Monopoly, Monopoly money is useless. When you are playing the game called the US economy (which is a part of a larger game called the World Economy) 750 bucks will buy you a nice stereo, another 2 grand will get you enough music CD’s to keep you humming for years.
You might want to argue that our economy is not a game, but I wouldn’t recommend it. Like all games our economy has rules which when broken carry penalties (as Bill Gates is just now finding out) and it requires a certain suspension of disbelief. If you scrub toilets for a living then you exchange your hard work for a stack of worthless paper under the ASSUMPTION that your landlord will accept that same stack as a rent payment. The reason I am making this point is that this game can end at any time and a thinking person (such as yourself (I hope)) needs to be prepared. It has been estimated that there are at least 2000 dollars* in existence for every dollar of goods and services available for sale (note that not every US dollar is represented by a paper bill that you can hold in your hand, 95% of US money is just numbers in various bank computers). That is, if everyone decided to spend all of their money at once then supply and demand would dictate an average price increase of 200,000%.
You might think that this scenario could never happen, you would be wrong. It’s called an inflation panic and it has happened in the not too distant past in countries like Mexico. What happens is that the annual inflation rate (as reported by the government) starts to increase rapidly, 10% one month, 20% the next, 50% the month after that and so on (a 50% annual inflation rate is not that uncommon in the third world). This news is very disturbing to investors and poor people alike. Everyone who owns paper currency or paper investments like stocks or bonds realizes simultaneously that these paper collections are rapidly becoming worthless. Investors all try to sell their stocks and bonds and literally put all their money into canned food and shot guns. Poor people rush out to spend their paychecks as soon as they get them because they know that by next week the price of everything will have gone up dramatically. These actions only drive the inflation rate higher and cause the more level headed people to panic. The end result of such a panic is the complete collapse of an economy.
How does one know when the economy has collapsed? You are hungry, you see a man on the street with a loaf of bread in his hand, you offer him 2000 dollars for it and he sneers and says it’s not for sale as he pumps the 12 gauge in his other hand like Linda Hamilton in Terminator 2. That is when you know the game is over. (So much for “This note is legal tender for all debts, public and private”.) As a thinking person you need to see this scenario coming at least a year in advance because once it starts there is nothing you, the gov’t, or anyone else can do to stop it. The United States recently bailed out Mexico, there is no economy big enough to bail out the United States.
I don’t predict such a panic in the US any time soon but I just thought I would throw in my 3 cents (inflation).
*I read the 2000-to-one statistic some years ago and can’t vouch for its accuracy, if anyone has a more accurate figure please respond.
samclem said:
“Scylla I am sorry that my posting style on this topic came off as imperious.”
Apology accepted.
Then:
“The fact that a Frenchman could go to his bank with an American bill and get gold in
return is irrelevent. Americans were no longer on a gold standard,IMHO”
But we were. The value of the dollar was fixed to a certain amount of gold. THat’s what a gold standard is.
"I don’t understand why this is “lunacy”. You are right, it is convenient and works. What is the alternative? Return to a gold standard(which never
worked)? "
I said “seeming lunacy.” On the face of it trading a car for a piece of paper is kind of silly isn’t it?
No, I do not advocate a return to the gold standard (though it did work quite well for an extended period of time.)
I like the system just the way it is.
All that I’m trying to show is that US currency has no value other than that derived from the confidence of the world at large that it will continue to work. In short, the belief that it works is alone what makes it work.
Derleth:
Again well said. Actually though (and I hate to say this, you are wrong.) You are not legally bound to accept dollars as payments for goods and services, if you don’t want them. You are perfectly free to barter if you choose. If the government decides to put a road through your house and buys it from you in exercise of emminent domain, you can not pay off the government in dollars and keep your house. That debt can only be paid with your house. What the dollar is, is legal tender for all debts that are payable in dollars. The value of a dollar itself remains changeable and undefined.
BTW, not that it proves anything but it might be nice if I let you folks know that in the real world I am a Financial Consultant, Registered Investment Advisor and a money manager. Before this I worked as a trader for a Wall Street firm. I have a major in Finance and a minor in Economics.
This of course does not mean that I might not screw up and post an innacuracy by mistake, but I feel that I’m on pretty firm ground.
Just a minor clarification on this thread, while posession of gold coin, bullion, and Notes were illegal in the U.S. from 1933 to 1975, it was not possible for the average “frenchman” to redeem his U.S. Dollars for gold.
This was done strictly by Central Banks, that is, the Banque De Francais (or whatever they are called) could redeem their notes through the U.S. Treasury, it wasn’t something that could be done by the average citizen.
Scylla, the fault is, perhaps, mine. The dollar bill is legal tender for all debts payable in dollars. Eminent domain is a different fowl altogether, and is not really a ‘debt’, per se. What I meant with my previous postings is this. Wal-Mart cannot say: “The US dollar is worthless here. From now on, you may only buy Wal-Mart things with Wal-Mart dollars. And may the gods help you if you’re caught passing fake ones!” If Wal-Mart said that, the Feds would say: “No way, Jose. The US dollar is legal tender for all debts, public and private. Which leaves your little scheme swimming a few feet below the outhouse.” The US Federal Government wants a monopoly on currency production. Of late, (since, I think, the Civil War) not even states can print their own cash. That’s why the little clause is there. Good old restriction by enumeration.
SarumanRex: Good show. You explained things well, and added a good explanation of what happens when the house of cards comes tumbling down.
What a facinating question.
Tell you what…
This question needs to be studied at length.
So, all of you send me all of your money to me.
And I will study it.
At length.
In Rio.
Now, that sounds fair, doesn’t it?
I’ve been following this little sub-thread with some interest.
The difference between this Wal-Mart scenario and what happens in every casino I’ve ever been in is, to me, subtle at best.
The dealer at the blackjack table inside Caesars Palace will not accept US currency for placing bets - he’ll only accept “Caesars Palace dollars.” You can get them, in exchange for US dollars, at that cage over in the corner. The exchange rate is fixed: 1 US$ = 1 CP$.
And, yes, may the gods help you if you’re caught passing fake chips. (Common sense suggests to me that it might be a crime, but I’m not sure exactly what it would be - not counterfeiting, right?)
The key point, I guess, is that the dealer and the guy in the bank cage are really part of the same organization. Caesars isn’t trying to start up an entire underground economy based on their casino chips - that’s the last thing they want, in fact. They want their chips to be worthless outside of the casino.
Viewed from a few miles away, Caesars Palace still runs on the US dollar.
It’s still not obvious to me that a business cannot refuse payment in US currency. I’ve rummaged through the SD archives, and all I find is what looks like disagreement on the matter. This thread (http://boards.straightdope.com/sdmb/showthread.php?threadid=12681) went on about the legality of merchants refusing to accept bills larger than $20, for example.
I don’t know…it strikes me as quite a stretch to contend that a business (or myself) must accept paper US currency as payment if it’s offered. Is a “checks only” payment policy really flat-out illegal?
I know from a law course I took that a buyer and seller can agree on any kind of transaction they want. They can exchange goods for goods (bartering), goods for services (fix my grill and you can eat free burgers for a month), or the usual goods and/or services for cash (credit cards and checks are the same as cash for the purposes of this thread.) The important thing is that they both agree on what the transaction will be. A merchant could refuse to accept American cash, or only accept bills smaller than a fifty, or refuse service to anyone for any reason (other than for reasons of race, religion etc.)
The only time you can force someone to enter into a transaction of any kind against their will is with a court order. Only a court can force you to accept cash or any other kind of payment. My law teacher mentioned a case where a woman’s ex-husband was ordered by the courts to pay his back alimony (several thousand dollars). That guy tried to pay his debt with a dump truck full of pennies which he dumped on her front lawn. She sued and the judge ruled that no one should have to accept more than 25 pennies as payment for anything.
In regard to your question about what law is broken by producing fake casino chips, I believe it would be larceny. It’s the same as if you stole a real chip from the dealer when he wasn’t looking.
Man-1 has goat. Man-1 wants cabbages.
Man-2 has cabbages. Will trade cabbages for goat.
Man-1 only wants 2 cabbages. Goat is worth 10 cabbages.
Man-1 has no choice, exchanges goat for 2 cabbages. But also gets piece of paper that says he is allowed to later receive 8 cabbages.
Piece of paper is money.