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THE COST OF FIAT MONEY
It was from America
that the plain ideas that men ought to mind their business, and that
the nation is responsible to Heaven for the acts of the State –
ideas long locked in the breast of solitary thinkers, and hidden
among Latin folios – burst forth like a conqueror upon the world
they were destined to transform, under the title of the Rights of
Man . . . and the principle gained ground, that a nation can never
abandon its fate to an authority it cannot control.
-- Lord Acton
(1834-1902)
-- The History of Freedom and Other Essays,
1907
Commerce
is entitled to a complete and efficient protection in all its legal
rights, but the moment it presumes to control a country, or to
substitute its fluctuating expedients for the high principles of
natural justice that ought to lie at the root of every political
system, it should be frowned on, and rebuked.
-- James Fenimore Cooper
(1789-1851)
-- In the American Democrat,
1838
Andrew
Jackson would never recharter that monster of corruption. Sooner
than live in a country where such a power prevailed, he would seek
an asylum in the wilds of Arabia.
-- Andrew Jackson
(1767-1845)
-- The President, speaking of himself and the Second Bank of the
US, 1834
“Seigniorage” [pronounced
seen´ yer idg] is “any profits or charges arising from
the minting of gold and silver coins from bullion, usually the
difference between face value and intrinsic value.” For example, if
you took a 100 troy ounce bar of silver to the mint and got back
only 97 ounces in coin, you would have paid a 3% seigniorage. More
generally, seigniorage is what you pay for using somebody else’s
money.
You may have heard the
term “free coinage.” Thinkers in the 17th and 18th century
contended that minting standard coin was an act of government so
needful to commerce that no charge should be made for it. That
would also encourage greater coinage. Thus when the young United
States set up a mint it made no charge for minting bullion silver or
gold into coin.
SEIGNIORAGE IN THE
GROCERY STORE
Standing in the grocery
store a few days ago, that seigniorage idea hit me like a ton of
bricks. I watched the fellow in line ahead of me swipe his card
through the electronic reader to pay for his groceries. Earlier in
the day I had been at Tractor Supply buying electric fencing
supplies. I had two boxes of 50 each plastic step in fence posts.
The cashier had a hard time finding the price. Finally she found
it, $1.69 each, and checked out everything else. It amounted to
$289.00. She asked me anxiously, “Do you still want them?”
Yes, I allowed, I still
wanted them. What really surprised her, though, was that I
paid cash.
Later, standing in line
at the grocery store it hit me: everybody in the country uses
credit cards. Everybody in the country pays the credit card
companies huge seigniorage every time he buys
anything. In fact, we pay them whether we use their money or
not.
Think about it. The
credit card company doesn’t charge you anything when you use it, but
Visa and MasterCard charge the retailer three percent or so.
Now the world being what it most surely is, the retailer will not
pay that charge, but will shuck it off on you. Over time he
raises prices to shift the 3% burden onto the customer.
Once he’s done that,
he’s actually getting a three percent bonus every time a
customer uses cash. Why? Because he raised prices three percent to
cover the seigniorage he must pay the credit card companies, but
he doesn’t have to pay them seigniorage when you tender cash.
UHHH – WHAT DID I
BORROW?
Now keep following the
trail of the money, because the seigniorage we pay to credit card
issuers doesn’t stop there. Do you pay a yearly charge for your
credit card? If it’s American Express, you pay $25 or $50 or more
if you want the prestigious Platinum Card. And even if you don’t pay
a fee for your Visa or MasterCard or Discover, you surely pay
interest when you owe them.
But
(he asked in bewilderment) what is the interest
for? Not for money that you borrowed from them, because you
didn’t borrow any “money.” They never gave you gold, silver, or
even Federal Reserve notes (legal tender). They loaned you their
credit, which just happens to pass in the United States as
money. You must pay them seigniorage for using their money
(credit). Then for the privilege of using their money and not
paying them back immediately with some better money (bank
deposit electrons from your checking account or currency), you pay
more and greater seigniorage, although they call it
“interest.”
And don’t forget the
seigniorage for using bank credit money. That’s what you
borrow when you take out any bank loan. They create it out of thin
air, but you pay out of real sweat.
THE TRUE COST
Here, then, is a hidden
cost of not using gold and silver money: we must pay a huge
seigniorage on every transaction. Remember, we have a common
law, constitutional, and statutory right to gold and silver money,
but the federal government refuses to mint and circulate gold and
silver freely. Worse still, it has granted a monopoly to
create money out of thin air to the Federal Reserve banking cartel.
Federal Reserve? Yes,
let’s not forget the Federal Reserve’s seigniorage. The
Bureau of Engraving & Printing prints the currency bills and charges
the Fed nine cents each. For a $100 bill, that is a cost of
9/10,000 of the value of the bill or 0.09 percent. Let’s be
generous and say that all the rest of the Fed’s administrative costs
– Alan’s salary, his secretary, his limo, somebody to wash windows
at the Fed Building in Washington, cost of laundering the money
bags, tips at central bankers’ suppers, etc. – amounts to
another 91/10,000, so that the total cost of running the whole Fed
scam is one percent of the bills they issue. That amounts to a
seigniorage of 99%. (Actually, they don’t even pay that,
because they create the money out of thin air to pay for the
printing. So in truth their seigniorage is 100%.)
Look at it this way:
Since the Federal
Government has shirked one of its few legitimate functions –
minting and circulating gold and silver coin – you must use some
private corporation’s money. You can choose either Visa or
MasterCard, at a seigniorage of 3% plus “interest,” or you can
choose Federal Reserve notes at a seigniorage of 99%. Lucky you.
Man!
Aren’t you glad we don’t have to wear out our pockets carrying
around gold and silver coin? What a drag! Too expensive to
use that stuff!
-- F. Sanders
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