Synchronicity is an odd thing. Sometimes you are hit with an idea or concept so many times over the course of a month or so, you start to wonder whether the universe is trying to tell you something.
Fran Porretto the resident Curmudgeon over at Eternity Road had a side comment about the price of gas recently. When he first started driving gas cost about 30 cents. 3 real silver dimes, which by the weight of the dimes, and the exchange rate of the day, he calculated should equate to $4.35 in todays dollars with the current silver price so we are still receiving a break in the cost of gas. A similar sentiment was expressed to me last week by my agent over at midas resources when he indicated that Gold keeps us honest, and what an ounce of gold buys doesn't change. In a nutshell it's not the price of gold which fluctuates it is instead the value (or devaluation) of the US dollar.
From the end of WWII up until 1971, the value of Gold did not fluctuate. It was fixed at $35 and you could walk into any bank and demand (in theory at least) your 1/35 of an ounce of gold. This was established by the Bretton Woods monetary system put together by the allies and the fledgling International Monetary Fund at the end of WWII. The US government was supposed to back each and every dollar with a gold reserve. This was a lie, the US government had been printing more money then it had gold reserves (we had less than 22% in reserve near the end), started importing more than exporting, and even worse, was caught at doing it. This started a number of other nations to demand payments in Gold instead of US dollars, and in late 1971 the entire system collapsed as unsustainable and Nixon moved us off the gold standard.
This moved the dollar to fiat currency. Fiat currency essentially means that the money is worth something because the government says it is. Domestically its an easy thing for a country to maintain, because everyone is accepting the set of rules which says that this piece of paper with dead guy number one is worth approximately 1 loaf of bread, that one is worth roughly the cost of a lap dance, and that other one there can buy you a decent dinner. This makes the dead guys happy, because they get their picture spread around, and it makes the lap dancers happy because it's hard to keep gold coins in a G string.
When all is said and done, it requires everyone to buy into the idea that the dead guys pictures are worth a loaf of bread, lap dance etc. Terry Pratchett recently introduced the concept to Discworld in Making Money. Moist Von Lipwig, conman extraordinaire comes up with the concept that the city backs the currency and sells the idea to the populous at large. It makes a fun read, and gently introduces the concept of currency and banking to the reader. Surprisingly the average citizen is perfectly fine making the transition from gold coin to unbacked paper, but the average citizen, even in the corrupt city of Ankh-Morpork, has little skepticism making the transition, but the wealthier members of the city are more skeptical.
Similarly in the real world, little protest from the common person was raised, until a few years went by and inflation hit our economy like a brick wall. It took a few more years to get things back under control. When you are basically able to print as much money as you want, a certain amount of restraint is called for on behalf of the government. This restraint took the form of credit backed currency. The money supply has been pegged to a limited based on government borrowing, unfortunately our government has been abusing this system lately as well (the term spending credit like a drunken sailor is bandied about a lot), causing some concerns on the whole about the future of the US dollar.
This has been reported all over the place, in more detail than anyone can stomach. Here is one of earliest ones I came across but there are many others. Currently the US dollar is at an all time low against the Euro and near its all time low against an once of gold (835).
Supposed you had the opportunity to switch what currency you needed back to a gold or silver standard. Would you? The concept started floating around in the late 1990s as a form of net payment system. Instead of digital US dollars, you are trading micrograms of gold. eGold was the poster child for this movement but many others followed suit. Early articles about this system commented on its uniqueness and radical new concept, which is surprising since it represented a return back to the asset based currency we originally used. Recently the articles have turned ugly. eGold has been portrayed as a system used by criminals and pedophiles to pay for their illicit practices, guilty of money laundering mail fraud and just about everything you can imagine. These allegations may very well be true, but they may also be a reaction to folks starting to question the wisdom of using pictures of dead guys as a method of payment.
Which brings me to Liberty Dollars. Liberty Dollars (and others like Phoenix dollars etc) have taken the eGold standard to the next logical step. Instead of electronic transactions only, they have created a paper currency, redeemable for copper, silver and gold, which are worth a fixed amount of an asset and have a suggested equivalent to us dollars printed on them. The 1 oz silver note has a suggested 20.00 value, 1 oz gold note is 1000.00 etc. The notes are 100% asset backed according to the their website, which also maintains a list of merchants willing to accept Liberty notes at face value.
The reaction of the Federal Government was mixed. Early on, when questioned about it they viewed it as a form of barter (read not regulated) and paying for things with liberty dollars were much the same as trading that 1977 Kiss Tour Commemorative coin for something. The company states quite clearly these are not legal tender, but only representation of trade goods. Then more and more people started buying the notes. In 2006 the US mint issued a warning that it was illegal to use liberty dollars. In March of 2007 Liberty Dollars issued a lawsuit against the federal government's claim that the use of Liberty Dollars is a federal crime. This case is still pending, but there are several supporting documents issued prior to the mint's warning from the US mint that Liberty Dollars represent barter and nothing more, so the case is seen to have merit.
Then on 11/14/2007 the FBI and secret service raided and seized all of the assets of Liberty Dollars
The Liberty Dollar offices were raided by agents of the Federal Bureau of Investigation (FBI) and the United States Secret Service on November 14, 2007. Bernard von Nothaus, the owner of Liberty Services, sent an email to supporters saying that the FBI took all the gold, silver, platinum and almost two tons of Ron Paul Dollars. The FBI also seized computers, files, and froze the Liberty Dollar bank accounts. That email linked to a sign up page for a class action lawsuit to recover the assets. At the same time, all forms on the web site relating to purchases of Liberty Dollars became nonfunctional.
Copies of the email letter and the warrant documents have been posted to the web site. The seizure warrant was issued for money laundering, mail fraud, wire fraud, counterfeiting, and conspiracy.
A local paper, the Evansville Courier Press, has reported the email, but has stated: "FBI Agent Wendy Osborne, a spokeswoman for the FBI's Indianapolis office, directed all questions on the raid to the Western District of North Carolina U.S. Attorney's Office. A spokeswoman there said she had no information on the investigation. Bernard von NotHaus, the group's monetary architect and the author of the e-mail, did not immediately respond to a message seeking comment."
The Associated Press quoted von Nothaus on Friday, November 16, 2007, as saying that the Federal government was "running scared right now and they had to do something … I'm volunteering to meet the agents and get arrested so we can thrash this out in court."
Hmm Money Laundering Mail Fraud... Sounds very similar to the statements made about eGold - all we are missing is the charges of supporting pedophilia. So why would the US government have a problem with asset backed currency? Do they feel threatened by the idea that the common folk may decide that dead guy currency really is just presidential fan art?
Watch this case, it is very under reported by the mainstream press, but still worth tracking.
