Currency as Debt: A New Theory of Money
Gold and Silver Coin
 

My Dear Friend,

As I have written in previous letters, currency is a public utility. We can view currency as grease that is used to lubricate the wheels of trade and commerce. The biggest problem with money systems is not with the substance used as currency, but with variations in the currency’s exchange value, that is, inflation and deflation.

Some people believe that using gold or silver coin is an absolute requirement for a sound currency, but as we have seen, substance is not the driving force. Societies can use seashells, buffalo chips, even paper scrip as the early colonists did. The key to providing a sound currency is ensuring the total quantity of currency in circulation equals the total need for currency. The quantity of currency in circulation must match the availability of goods and services. Free markets determine the amount of goods and services created and exchanged, thus markets establish the need for currency.

Few people understand that using commodity currency, such as gold and silver coin, does not change the definition of currency, or the purpose of currency—that is, currency only serves as grease to efficiently exchange wealth (goods and services). Historically, gold and silver coins effectively served this purpose. The reason for past success is that control of the quantity of currency in circulation was a public function. Production of commodity coins typically did not outpace the production of goods and services because:

1. production of gold and silver is labor intensive,
2. production of goods and services was relatively stable, and
3. the rate of producing gold and silver typically matched the rate of production of goods and services.

As the amount of goods and services increased, so did the total amount of usable gold and silver through mining and refining.

There were exceptions of course, such as the gold and silver rushes, but those exceptions were short-lived. During such unique periods, people mining gold and silver experienced a rapid increase in wealth because they suddenly had an excess of currency to purchase goods and services; but the effect quickly dwindled.

Remember, people refer to gold and silver coins as commodity currency for a reason; they have uses other than as currency. Gold and silver coins exhibit intrinsic, tangible, commodity value. If a person holds a gold or silver coin with the intention of melting the coin for industrial or personal use, the coin has no exchange value as currency, only a commodity value. Conversely, if one intends to use the gold or silver coin as currency, the coin itself contains no recoverable commodity value for the owner, but represents that person’s future claim against the wealth of the entire society. At any one moment in the time domain, a gold or silver coin can be either a future claim or a commodity, depending upon the intent of the holder. Owners may choose how to use the coins, but can never simultaneously exercise both options.

Stability and dependability secured the popularity of gold and silver coin as currency. The limited human production of these metals regulated the volume of coins in circulation. In a largely agrarian society, the division of labor is low and most people are self-sufficient. The need for currency in such a society is much lower than in today’s world. In an agrarian society, the use of a commodity currency is a reasonable method to ensure monetary stability and dependability. In a modern society with a high division of labor and large volume of commercial activity, the need for currency, and thus the volume required, quickly exceeds the practical use of gold and silver coin.

Gold and silver coins remain important in modern monetary policy to maintain a tie between the world of concepts and the physical world, but their exclusive use as currency is no longer reasonable. Gold and silver coins were successful in the past for good reasons and we should not ignore those reasons. In today’s market gold and silver coins should remain a viable choice as currency. However, regardless of that past success, when used as currency, gold and silver coins nonetheless remain debt instruments, mere tokens of unclaimed wealth.

With all due regard and affection,

Your friend
 

Editor’s Note:

To better understand the concept that the currency represents unclaimed wealth, please read Back to Basics—The Nature of Money.

To understand how NESARA restores the national currency to being a true public utility, please read the following portions of the bill:

• Part I. Banking and Monetary Reform, Section 2 Findings
• Part I. Banking and Monetary Reform, Section 3 Congressional Control Of The United States Monetary System

To understand how NESARA establishes honest and moral characteristics for the national currency, please read Part I. Banking and Monetary Reform, Section 4 Provisions For United States Currency (Note: Section 4B, the characteristics necessary for Congress to lawfully define United States Treasury credit-notes).

To understand how NESARA maintains stable purchasing power and maintains a stable exchange value of all currencies in circulation, please read Part I. Banking and Monetary Reform, Section 9 Regulation Of The Exchange Value Of Treasury Credit-Notes.

To understand the implications of restoring the national currency to being a public utility, please visit the What’s In It For Me? section.
 

Genesis 13:2