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 Post subject: Why Politicians will always hate Gold
PostPosted: Mon Jan 24, 2011 7:00 pm 
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Why Politicians will always hate Gold

The problem with using units of gold and silver arose when people started violating the two laws. For example, counterfeiters introduced coins minted from other metals and polished with gold or silver. But such crimes were still not potent enough to damage the overall money supply. The money supply was damaged when institutions and/or organizations entrusted with minting the coins violated the two laws. For example, when Roman politicians discovered that raising taxes to finance their wars resulted in public discontent, they resorted to counterfeiting. Any silver coin that made its way back into the Roman Treasury had its edges shaved off, and these shavings were used to mint new coins,[8] which the Roman government would use at its own discretion. When people noticed this, they started reeding the edges of the coins. A coin missing the reeding could thus be differentiated as “clipped.”[9] Undeterred, Roman politicians resorted to debasing the currency, increasing the proportion of copper in the coins. In 54 A.D. a denarius was 94 per cent silver. Almost 200 years later, the silver content had been reduced to 1 per cent.[10] The quantity of denarii increased, but their value plummeted, resulting in inflation. We thus see inflation as a natural by-product of violating the two laws. On the other hand, modern day economists see inflation as inherent but manageable, such that it can be tamed into delaying its cataclysmic effects.

Nevertheless, politicians were still tempted to break the two laws and the invention of the printing press gave them the opportunity to issue legal tenders or fiat money. The use of legal tenders has been traced Kublai Khan,[11] a tyrant who ruled Central Asia in 1270 A.D. Kublai Khan wanted money to finance his wars but did not want to create unrest by raising taxes. So he invented paper money. If he needed to pay in gold, he would simply write the amount in gold on paper and sign his name on it. Anyone who refused to accept the money was punished. When George Washington wanted to finance his war, he introduced the Continental dollar as legal tender. This currency was destroyed by inflation, and to avoid the deleterious effects of such forms of money in the future, a statement was added to the American constitution when America became independent. To quote Article One, Section Ten of the U.S. Constitution,

No State shall enter into any Treaty, Alliance or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payments of Debts; Pass any Bill of Attainder, ex posto facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.[12]

But even such measures did not stop further use of legal tenders. During the American Civil War, politicians on both sides broke the two laws once again by issuing legal tenders to finance their war machines. Both these forms of money, the Confederate Dollar and the Greenback Dollar were destroyed by inflation.[13]
Banks were supposed to be Warehouses of Gold, not Houses of Cards

Going by Maybury’s narrative, people invented money warehouses, which became banks. A person could deposit his gold or silver coins in a bank for safekeeping. He would then be issued an IOU by the bank for the amount of gold or silver coins. He could redeem the IOU for gold or silver coins from the bank whenever he wanted. And thus, the IOUs became banknotes. The most popular banknotes in circulation were aptly called silver certificates. Unlike today’s Federal Reserve notes, they had no legal tender statement. The statement on them read as:

This certifies that there is on Deposit in the Treasury of the United States of America One Dollar in Silver Payable to the Bearer on Demand.

http://www.cabaltimes.com/2011/01/08/th ... nt-of-war/

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 Post subject: Re: Why Politicians will always hate Gold
PostPosted: Tue Jan 25, 2011 12:13 pm 
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It's a darned good thing the state of Nevada cannot issue Letters of Marque.

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