What's US Dollar, Anyway?

Don Stott
Ok Guys, I defy you to tell me, "What is a dollar?" You can't define it? It's sort of like trying to define a circular stairway without using your hands, I guess. Maybe a dictionary will help? Webster's New World Dictionary 3rd College Ed. says the dollar is: "The basic monetary unit of the U.S., equal to 100 cents; symbol $." 100 cents? What then is a "cent?" From the same dictionary, a cent is : "A monetary unit of the U.S, equal to 1/100th of a dollar, penny." Are we going around in circles? A dollar is 100 cents, and 100 cents is a dollar. Not satisfying. Let's look elsewhere. Black's Legal Dictionary gives almost the same exact definition of the dollar, that is 100 cents, etc.

Well, how about silver dollars, which are no longer made? Can we measure the buck by checking the contents of old silver dollars? Silver dollar coins were made from 1794 on, with various interruptions. The silver dollars were 90% pure silver and 10% copper, to make them strong. Each silver dollar had .7736 of an ounce of pure silver in it. At today's silver price, a silver dollar has $9.90 worth of silver in it, so it is not a good investment tool, as silver dollars usually more than twice that in today's market. From 1804 to 1836, no silver dollars were minted, as there was a severe silver shortage. When the "Comstock Lode" was discovered in Virginia City Nevada, in 1850, there was plenty of silver for silver dollars, and tons of it was shipped down hill to the Carson City Mint, which produced thousands of them till 1893, when the "crime of '93" was committed, causing the mint to finally run out of silver by 1904, and production ceased. Production resumed in 1921, stopped again in 1928, and then resumed again for two more years, in 1934 and 1935. That was it for the silver dollar… those made of silver anyway. Mints in New Orleans, Philadelphia, Denver, and San Francisco, also made lots of silver dollars.

Based on the extinct silver dollar, the buck may be said to represent .7736 ounces of silver, but that's absurd of course, because the dollar is a Federal Reserve Note, and is backed by nothing, and represents not much more than debt owed by the US to the Fed, which created the buck out of nothing, and paid the treasury to print them. This is another fraud, of course. The Fed LOANS dollars to the Treasury, and the Treasury (Bureau of Printing and Engraving) prints them for the Fed, which loans them to the Treasury! The big hearted Fed pays for the printing, so all is not a total loss. (That's a joke son). Title 31, Subtitle IV, Chapter 51, Subchapter 1, defines legal tender as: "UNITED STATES COINS AND CURRENCY ARE LEGAL TENDER FOR ALL DEBTS, PUBLIC CHARGES, TAXES, AND DUES. Foreign gold and silver coins are not legal tender for debts." (Note that the law does not say that US Gold and Silver Eagles are not legal tender! Get the point, or do I have to draw a diagram?) Note also that the word "dollar" is not used in the title, so we can find no adequate definition of the dollar there. The Bureau of Engraving's web site says "The BEP prints billions of Federal Reserve Notes for delivery to the Federal Reserve System each year. These notes are produced at our facilities in Washington D.C. and Ft. Worth Texas." (They don't seem to produce dollars, but only Federal Reserve Notes, or FRNs.

Black's Legal Dictionary says the FRNs are a, "Form or currency issued by Federal Reserve Banks in the likeness of non-interest bearing promissory notes payable to the bearer on demand. The Federal Reserve Note is the most widely used paper currency. Such reserve notes are direct obligations of the United States." The U.S. is "obliged" to do what?

Title 18, Part 1, Chapter 1, defines it. "The term "obligation or other security of the United States," includes all bonds, certificates of indebtedness, national bank currency, Federal Reserve notes, Federal Reserve bank notes, coupons, United States Notes, Treasury notes, etc, etc. Federal Reserve notes are legal tender currency notes. The twelve Federal Reserve Banks issue them into circulation pursuant to the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. Federal Reserve Banks obtain notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks and obligations of the United States Government."

Now for a court's opinion: "Bank notes are the representative of money, and circulate as such only by the general consent and usage of the community. But this consent and usage are based upon the convertibility of such notes into coin, and the pleasure of the holder, upon their presentation to the bank for redemption. So long as they are in fact what they purport to be, payable on demand, common consent gives them the ordinary attributes of money." Westfall vs. Braley, 10 Ohio 188, 75 Am. Dec. 509: If a note cannot be exchanged for silver or gold, the court said, it has no "attributes of money."

Quite obviously, the dollar, .7736 ounce of silver, for all practical purposes no longer exists. It has been replaced by the Federal Reserve Note. Although the bill at the bottom, still says "One Dollar," at the top it is titled a " Federal Reserve Note." It is redeemable in 100 cents, and 100 cents is redeemable in one dollar or Federal Reserve Note. Since it is the "dollar" which so far is the world's 'reserve currency,' it behooves the Fed to stay with the title of "dollar." The same old picture of George Washington is still there, and on the reverse the Masonic symbol of the pyramid, the Great Seal of the United States, and lots of fine engravings, fancy paper which is supposedly non-counterfeitable, and of course, "In God We Trust." It all seems so nice! So genuine, and historic! So strong and dependable!

I hate to spoil your illusions, but it is merely a piece of paper, which for all practical purposes is pure counterfeit. The difference between FRN's printed in some private print shop or duplicated on a color copier, is merely who turns them out! The buck has become so worthless, that it isn't even being printed on the fancy new papers on which the hundreds and fifties are being printed. So puny that one will buy maybe a quart of gasoline. Not to bore you, but when I was a lad, you could get five gallons of gasoline for a dollar. I bought a new Mercedes in 1961 for 3700 of them. If one placed $3700 in a bank at 1% interest, compounded quarterly, for 45 years, you would have $5801.41. Try to buy a new Mercedes for $5801.41, which is what you would have if you had SAVED IN DOLLARS FOR THE PAST 45 YEARS. Had you saved in dollars, you would be at the point at which you would have actually been de-capitalized, and be able to buy no car at all. A new Mercedes would cost at least ten times what you would have, if you had placed the cost of a new Mercedes in a savings account in 1961. As an aside, when you deposit your dollars in a C.D. in a bank, they compound your interest QUARTERLY, but when you borrow from a bank, or get a mortgage, your interest is figured MONTHLY and daily even, for partial months.

The dollar is but a shadow of its former self, and it hasn't aged well. While it hasn't developed wrinkles and sags as does the human body as it ages, it has but a pittance of its former strength and viability. How long will the dollar remain the 'reserve' currency of the world? How long will gold and oil be priced in dollars? Just as long as the world desires it, accepts it, respects it, and wants to use it. Kuwait just stopped taking dollars for their oil, in spite of the fact that we saved them when Saddam invaded. We here in America have no choice in the matter, as we must use the FRN dollar to buy stuff. The world has the choice, and since most oil seems to be gotten from Arab or Muslim nations, or at a minimum from those who no longer respect America, will oil and gold eventually be priced in euros? No one knows, but if the dollar ceases to be the world's 'reserve' currency, it will not be good for us here at home, as I am certain all consumer prices will rise dramatically…in FRN dollars. That's why I constantly urge you to cease saving in dollars. I guess it's like a worn out record, but I really do wish you'd cease and desist. Protect yourself! - Thanks to Court Jones, who assisted in the research for this!

May 24, 2007

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com

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