Ron Paul on Legal Tender Laws

[algernonsidney]

The bottom line is that despite the rightwing populist rants of Dr. Ron Paul and other traditional conservatives, there are many alternatives to Federal Reserve Notes -- and you do not have to barter potholders for gasoline (though, of course, you are free to do so.)

I don't know of any rants from Doctor Paul on this issue. Everyone knows that there are alternatives. People have created alternatives all the time.

What Doctor Paul and others object to is a federal monopoly whose use is required. Nobody should be forced to accept a form of payment that they don't want to accept. Some business refuse American Express. Some refuse Discover and Diners Club. Some don't take credit cards at all. It's no different from a business refusing to take dollars.

I may be over-reacting--it seems like the whole base of your arguments here is simply to discredit Doctor Paul.

[Michael Stuart Kelly]

Nobody is forced to take dollars. I am perfectly free to open a barter store and refuse dollars for my wares.

I merely cannot use the courts for settlement and exclude dollars.

Michael

[algernonsidney]

Nobody is forced to take dollars. I am perfectly free to open a barter store and refuse dollars for my wares.

Michael, there was a raid on the Liberty Dollar headquarters. The Feds have also been harassing E-gold.

I suppose nobody could stop us all from using Euros or Swiss Francs. It is obvious that the Feds are trying to restrict our choices.

[Mindy Newton]

Nobody is forced to take dollars. I am perfectly free to open a barter store and refuse dollars for my wares.

I merely cannot use the courts for settlement and exclude dollars.

Michael

But can you refuse to accept my tomatoes as payment? How do I know before I go to your store what sort of money or goods to bring? If you try to give me origami figures instead of change, and I don't want it, but you don't want to give me my money back, and the ice-cream I bought is melting, what do we do? I thought legal tender solved all that.

= Mindy

[Michael Stuart Kelly]

Mindy,

I merely stated a legal fact. I didn't say it was right or wrong.

What makes a dollar a dollar is that it is currency issued by a private banking cartel (The Federal Reserve) that has nothing short of a constitutional contract (monopoly) with the USA government, with a law granting this script the status of legal tender in USA courts.

That sounds weird to people who think the Fed is a government branch or that the USA issues currency, but these are not the facts. The USA Mint prints paper currency and mints coins and for the Federal Reserve, not the USA government.

As to your tomato currency, you are free to demand payment in tomatoes and refuse dollars. You will be fine so long as you do not grant someone credit. In that case, if the person defaults—does not deliver the tomatoes—and you sue him in a USA court, he can use dollars to settle the court case. In that case, you must accept dollars. But that is a result of using the courts, not a result of the initial trade agreement.

That's on the buyer's end. On your end, since you, Mindy, have no system of courts, there is no way you can use your tomatoes for payment to anyone who does not want to accept them. Should the USA government issue an emergency measure and grant legal tender status to tomatoes, people will be able to pay, say, lawsuit settlements like alimony and damages, and government charges like taxes and court fees in tomatoes.

But don't think the USA government only accepts dollars. It merely accepts them as one form of payment. If you practice tax evasion and have no dollars, the IRS will ultimately take as much of your stuff like land, car, etc, as it determines. Then it will mark your account as settled and paid in full, even though it was not paid in dollars.

Michael

[BaalChatzaf]

But don't think the USA government only accepts dollars. It merely accepts them as one form of payment. If you practice tax evasion and have no dollars, the IRS will ultimately take as much of your stuff like land, car, etc, as it determines. Then it will mark your account as settled and paid in full, even though it was not paid in dollars.

Michael

Not quite. The assets will be sold (most likely at auction) and any shortfall in receipts will be charged against the taxpayer in arrears. The government does not keep the assets, rather it converts them into cash which is used to reduce the shortfall from the taxpayer.

Ba'al Chatzaf

[tjohnson]

Another interesting application of the consciousness of abstracting is given in

our attitude toward money, bonds, titles to property, . Money represents a symbol

for all human time-binding characteristics. Animals do not have it. No doubt bees

produce honey, but these products of the bees do not constitute wealth until man

puts his hands on them. Money is not edible or habitable. It is worthless if the other

fellow refuses to take it. The m.o reality behind the symbol is found in human

agreement. The value behind the symbol is doctrinal. Fido does not discriminate

between the different orders of abstractions. If we copy him, we worship the symbol

alone. ‘In gold we trust’ becomes the motto, with all its identifications and

destructive consequences. Smith should not identify the m.o reality behind the

symbol with the symbol. It is amusing, when not tragic, to see how the so-called

‘practical man’ deals mostly with fictitious values, for which he is willing to live

and die. When he has the upper hand and ignorantly plays with symbols,

disregarding the m.o realities behind them, of course, he drives civilization to

disasters. History is full of examples of this.

Emphasis mine. We moved away from bartering because of it's inconvenience. The problem is not using symbols to represent wealth the problem is abuse and ignorance in the use of these symbols.

[tjohnson]

There's something worse than fiat money. It is money created out of thin air with debt.

People are saying the 1.2 trillion dollars were lost on the stock market Monday when the bailout bill didn't pass. What does that mean?

When I lose 10 dollars, this is because someone else gets his mitts on it. So who got the 1.2 trillions dollars?

Nobody. That's who. It just disappeared, like it never existed.

What does that say about our currency when 1.2 trillions dollars can up and disappear in a single day?

Ghost money?

Michael

Suppose you have x people and they deposit y dollars in a bank. Now the bank has y dollars but early on it was recognized that people don't want their money all at once, they only want access to it and a safe place to keep it. So it became obvious that here was a mechanism that could encourage economic growth because if the depositors were no using the money why can't the bank lend it out to someone who needs a lot for some capital project, like building a bridge or something. Eventually it was discovered that you could lend out even more than you have on reserve as long as people didn't make a run on the banks. This is how money gets created and it is necessary to fund large projects that could not be done otherwise. The money is literally created overnight but it is the new work done that represents the wealth behind the newly created money. When a piece of real estate is "flipped" and a bank finances the purchase for a highly inflated price where is the increase in wealth? It is the same property how did it grow in value over night? This is the kind of abuse that leads to periodic economic crises.

[BaalChatzaf]

When a piece of real estate is "flipped" and a bank finances the purchase for a highly inflated price where is the increase in wealth? It is the same property how did it grow in value over night? This is the kind of abuse that leads to periodic economic crises.

"Flipped houses" are sometimes distressed properties that are fixed up by the "flipper" and sold at a price that compensates for the labor of improvement. So sometimes "flipping" is "flipping and fixing" which is a net creation or increase of utility.

Ba'al Chatzaf

Edited October 2, 2008 by BaalChatzaf

[syrakusos]

The USA Mint prints paper currency and mints coins and for the Federal Reserve, not the USA government.

Small point, but the Mint makes coins. Paper money is the work of the Bureau of Engraving and Printing. The two URLs (mirror sites?) are www.moneyfactory.gov and www.bep.treas.gov.

The BEP also is responsible for postage stamps and other fiduciary instruments. However -- however -- this work, like much of the paper money, is contracted out. The site refers to the Fort Worth facility. Look at your money. FW in the lower right of the face means "Fort Worth." Nominally a government operation, I consider that arguable.

Speaking of looking at your money, does everyone know the 12 Federal Reserve Banks and how to find them on your money?

Did you know that since Nellie Tayloe Ross -- first woman to serve as governor of a state -- was appointed to be Treasurer of the United States by President Franklin D. Roosevelt, every treasurer has been a woman?

Speaking of coins, do you know which are struck at the West Point Mint?

Here's a toughie: You are given a US $5 gold coin with a D mintmark. Where was it struck?

Chris mentioned the Spanish dollar of colonial and later times -- legal tender under US Law until 1857 -- what other "dollar" coins circulated in the American colonies before independence and federalism? (Since no one thanked me for the link to Spanish Coins on American Money, should I assume that everyone already knew all about that, or is it that facts are boring and theories are fun to aruge, especially in the absence of facts?)

Final question -- 10 points extra credit, short answer -- in 1800 and again in 1802 republican senators supported a bill to close the U.S. Mint. Why?

Edited October 2, 2008 by Michael E. Marotta

[syrakusos]

The m.o reality behind the symbol is found in human

agreement. The value behind the symbol is doctrinal.

What does m.o. stand for? Did I miss that?

Also, unfortunately, as nice as K's theory sounds, GS's bobbling the ball on the "flipping" of properties shows a gap between theory and practice. I wonder how one would live according to the theory of general semantics... probably about the same as according to objectivism or scientology... Makes you wonder (at least it makes me wonder)....

Edited October 2, 2008 by Michael E. Marotta

[tjohnson]

"Flipped houses" are sometimes distressed properties that are fixed up by the "flipper" and sold at a price that compensates for the labor of improvement. So sometimes "flipping" if "flipping and fixing" which is a net creation or increase of utility.

Ba'al Chatzaf

Point taken, but I was trying to draw attention the damage that unregulated speculation can have in an economy. It is similar to various "pyramid" schemes that you see every once in awhile.

[tjohnson]

What does m.o. stand for? Did I miss that?

Also, unfortunately, as nice as K's theory sounds, GS's bobbling the ball on the "flipping" of properties shows a gap between theory and practice. I wonder how one would live according to the theory of general semantics... probably about the same as according to objectivism or scientology... Makes you wonder (at least it makes me wonder)....

It stands for multiordinal, which means basically 'existing in multiple orders of abstraction'. The word 'reality' represents many things to many people and so is considered (by Korzybski) to be a multiordinal term.

[Mindy Newton]

[quote name='BaalChatzaf' post='57882' date='Oct 2 2008, 10:22 AM'.

Point taken, but I was trying to draw attention the damage that unregulated speculation can have in an economy. It is similar to various "pyramid" schemes that you see every once in awhile.

Can you make out a case against unregulated speculation?

= Mindy

[tjohnson]

Can you make out a case against unregulated speculation?

= Mindy

I'm not quite sure what you mean. I am stating that speculation can drive prices far above their "true" value and if we borrow money to pay these inflated prices then we are creating "bad debt", so to speak. This is fine as long as the process doesn't stop but unfortunately it always does. I think this is more or less what happened in the real estate market.

[syrakusos]

... speculation can drive prices far above their "true" value and if we borrow money to pay these inflated prices then we are creating "bad debt", so to speak.

Well, all I know of Alfred Korzybski's work is what I got from A. E. von Vogt's The World of Null-A, in which Gilbert Goseyn ("go sane" -- get it?) discovers mutliple layers of reality in his non-Aristotlean utopia. But, ignorance of the substantive subject matter is never a barrier to discussion here on Objectivist Living. So, allow me to ask, GS, just how are you reacting to the symbol of "true market value"? I mean that sounds like an Aristotlean fallacy, the idea that there is some true price and we can know it. Would general semantics not lead to you the higher truth that price (so-called) is merely an abstraction devoid of specificity. Prices fluctuate instantaneously in every market with every transaction.

This so-called "mortgage crisis" was known to mortgage bankers from the Summer of 2006. By October 2006, the failures and defaults and debts and lack of earnings and write-downs were the stuff of column inches in banking periodicals. So, a general semantic perception of the symbol called "the economy" would open the door to an expectation of changed reaction to that symbol, i.e., a symbolic "downturn"in the symbolic "economy."

I mean, that's what I would predict from what little I know...

Edited October 3, 2008 by Michael E. Marotta

[Mindy Newton]

... speculation can drive prices far above their "true" value and if we borrow money to pay these inflated prices then we are creating "bad debt", so to speak.

Well, all I know of Alfred Korzybski's work is what I got from A. E. von Vogt's The World of Null-A, in which Gilbert Goseyn ("go sane" -- get it?) discovers mutliple layers of reality in his non-Aristotlean utopia. But, ignorance of the substantive subject matter is never a barrier to discussion here on Objectivist Living. So, allow me to ask, GS, just how are you reacting to the symbol of "true market value"? I mean that sounds like an Aristotlean fallacy, the idea that there is some true price and we can know it. Would general semantics not lead to you the higher truth that price (so-called) is merely an abstraction devoid of specificity. Prices fluctuate instantaneously in every market with every transaction.

This so-called "mortgage crisis" was known to mortgage bankers from the Summer of 2006. By October 2006, the failures and defaults and debts and lack of earnings and write-downs were the stuff of column inches in banking periodicals. So, a general semantic perception of the symbol called "the economy" would open the door to an expectation of changed reaction to that symbol, i.e., a symbolic "downturn"in the symbolic "economy."

I mean, that's what I would predict from what little I know...

Well said, Michael. Impressive shift of metacontext. You transliterated your perspective on the perspectives imbedded in GS's subcontext like a pro! :cheer:

= Mindy

[Brant Gaede]

... speculation can drive prices far above their "true" value and if we borrow money to pay these inflated prices then we are creating "bad debt", so to speak.

Well, all I know of Alfred Korzybski's work is what I got from A. E. von Vogt's The World of Null-A, in which Gilbert Goseyn ("go sane" -- get it?) discovers mutliple layers of reality in his non-Aristotlean utopia. But, ignorance of the substantive subject matter is never a barrier to discussion here on Objectivist Living. So, allow me to ask, GS, just how are you reacting to the symbol of "true market value"? I mean that sounds like an Aristotlean fallacy, the idea that there is some true price and we can know it. Would general semantics not lead to you the higher truth that price (so-called) is merely an abstraction devoid of specificity. Prices fluctuate instantaneously in every market with every transaction.

This so-called "mortgage crisis" was known to mortgage bankers from the Summer of 2006. By October 2006, the failures and defaults and debts and lack of earnings and write-downs were the stuff of column inches in banking periodicals. So, a general semantic perception of the symbol called "the economy" would open the door to an expectation of changed reaction to that symbol, i.e., a symbolic "downturn"in the symbolic "economy."

I mean, that's what I would predict from what little I know...

Nice post. There is market price at any given time, place and transaction. "Value" implies something intrinsic, but all valuing is subjective. I can imagine a situation where I would be willing to pay a thousand dollars for a canteen of water--even more! The value would be my very life. I can imagine a situation where I'd pay $5 for a box of bullets to kill myself. My life would have no value unless my suicide would be an expression of anger and revenge for those I left behind, but that wouldn't be life as a value but death.

--Brant

Edited October 3, 2008 by Brant Gaede

[tjohnson]

I mean that sounds like an Aristotlean fallacy, the idea that there is some true price and we can know it. Would general semantics not lead to you the higher truth that price (so-called) is merely an abstraction devoid of specificity. Prices fluctuate instantaneously in every market with every transaction.

That's why I enclosed 'true' in quotation marks - to indicate that there was no true value. But just because there is no "true" value does not mean that the price is not inflated. One can conclude that the marketplace is in need of adjustment without knowing the exact amount of the adjustment.

[syrakusos]

... but all valuing is subjective. I can imagine a situation where I would be willing to pay a thousand dollars for a canteen of water...

That gets us back to the topic, "Ron Paul on Legal Tender Laws."

That gold has objective value is one assertion, from Ayn Rand. That gold has intrinsic value is a different claim, entirely. I pointed out above that an economics professor offered to exchange his quarter for someone else's dollar. No takers. What if you had to make a phone call? Then the coin would be worth a dollar or more. In that class, we went through a few such exercises and thought experiments to get people past the idea that there exist true value, instrinsic worth, absolute price, and so on.

When I said that the dollar is backed in gold at the market price, the reply was that the dollar could also be said to be backed in tractors -- but I poiint out that this is true -- indeed,it is -- only to the extent that the issuer of the dollars accepts them in exchange for tractors held by the issuer of dollars. And you can do that, pay for (many but not all) U.S. Government goods and services with Federal Reserve Notes.

Realize that in the 19th century, the U.S. government would not accept U.S. government silver coins in payment for import duties. Those had to be paid in gold. Silver coins were "legal tender" by law but not acceptable for all government fees. (The "Specie Circular" is another famous example.) Now, that might be a bad law -- I believe it is -- but it sheds a light on what "legal tender" means. Legal tender does not necessarily mean that even the government issuer will accept it. So, again, that is another hole in the fabric of the declamation on Dr. Paul's blogsite.

Value is always subjective and the call for a gold dollar is better rhetoric than it is sound economics. How about Time Dollars? What about a currency -- just one of several kinds -- that was payable with some minutes or hours of the President's time? Mike Hoy of Loompanics once quipped about wooden nickels, good for a beer at the White House. Why not? One of the political collectibles people pursue is passes to the Senate or House chambers, especially for historical events like the Impeachment Trial of President Clinton or Pres. Andrew Johnson. The government certainly has the ability to create all kinds of fiduciary instruments -- see a few posts back -- and some of them will gain in value over time. Gold is good stuff, to be sure, but it is not the only medium of exchange or the only store of wealth or the only unit of account. Legal tender laws actually recognize those facts, facts denied by Dr. Paul's weblog.

Edited October 3, 2008 by Michael E. Marotta

[BaalChatzaf]

That's why I enclosed 'true' in quotation marks - to indicate that there was no true value. But just because there is no "true" value does not mean that the price is not inflated. One can conclude that the marketplace is in need of adjustment without knowing the exact amount of the adjustment.

That is another way of saying you don't like how the market is behaving.

Ba'al Chatzaf

[syrakusos]

... A few weeks ago the price of gold went down to 750-800 dollars an ounce, but world-wide it was almost impossible to buy physical gold at the market price ...

I owe you an apology. Today is October 7. I received in the mail LIBERTY'S OUTLOOK, the newsletter of Liberty Coin Service of Lansing. (The late Bill Bradford founded LCS in 1971 and then sold the company and moved on to launch Liberty magazine. LCS is now owned by Patrick A. Heller. With an MBA from the University of Michigan, Pat actually grew up in Africa because his father was with US-AID, another story entirely.) For the first time in 14 years, the newsletter reported that the store was OUT OF STOCK on these items:

• US 1/10 ounce Gold Eagles
  
• US 1 ounce Gold Eagles
  
• Australia 1 ounce gold Kangaroos
  
• China 1 ounce gold Pandas
  
• South Africa 1 ounce Krugerrands
  
• UK Sovereigns
  
• Germany 20 Marks
  
• Engelhard 10-ounce silver ingots
  
• US 1 ounce Platinum Eagle
  
• US 1/2 ounce Platinum Eagle
  
• US 1/4 ounce Platinum Eagle
  
• US 1/10 ounce Platinum Eagle
  
• Any other 1 ounce Platinum coins
  
• Canada 1-ounce Palladium Maple Leaf
  

As of a week ago, they still had French and Swiss 20-franc gold, 1/4 and 1/2 ounce Gold Eagles, Austria 1 and 4 Ducats and other coins as well. So, there is still gold out there, but the most popular items have found new homes. Also, while common sovereigns, BU and circs both, were reported out of stock, the same flyer included a sheet selling PCGS-graded Year 2000 Sovereigns and Half Sovereigns at "near bullion" prices that average out to about $900 per ounce when gold was at $878-908 worldwide overnight.

The same flyer also said that despite the London fix, prices across the counter both buy and sell were higher by about 1% to 2% over the market postings -- small, but measurable.

Apparently, I lucked out living in a smaller town, closer to a local dealer who had just come back from a couple of venues where he was able to buy from the public. So, I got my one coin.

Anyway, Brant, just to say, you were right.

Edited October 7, 2008 by Michael E. Marotta

[Brant Gaede]

I was just passing on current news. The primary speculation was that dealers were unwilling to sell their high cost inventories at below their cost. The real contretemps was the existence and nature of any gold standard.

The question is the availability of physical gold right now. Is your latest info already obsolete?

If anybody is interested I can obtain the name and phone number of a good dealer that Bill Fleckenstein has had good results with.

Thanks for the apology.

--Brant

[syrakusos]

The question is the availability of physical gold right now. Is your latest info already obsolete?

If anybody is interested I can obtain the name and phone number of a good dealer that Bill Fleckenstein has had good results with.

I had to google William Fleckenstein ("hedge fund manager from Seattle").

I point out only that the shortage of physical gold was more substantial than my perception of it.

While sold out of many popular items, both Liberty Coins and the US Mint have plenty of gold in other forms. And, again, at that very same moment -- as noted in my Post #21 -- it was possible to acquire 30 tonnes of gold as the SPOR Gold Trust did.

Also, as you note there was a difference between the London Spot price ("the market price") and the levels over-the-counter (retail buy and sell), but it was only a few percent. I remeber back about 10 years ago when gold fell to $250 per ounce, dealers were holding their prices by raising the margins on common coins like the US $20 and UK Sovereign. Markets adjust.