Money: Substance or Symbol?
Part II: Seceding From The Monetary System
To secede personally from the monetary system, every one of us must stop thinking of money, and start thinking of wealth.
About 650 B.C. a new technology arose in Lydia, in Asia Minor. It was destined to change the entire world. It was called “coinage.” Until coinage, every transaction paid in copper or silver or gold required different sized ingots to be weighed out, after they had first been tested for purity. Using metallic money was slow, and risky. Direct barter was more efficient, but it limited trade.
The object of economic activity was not piling up money, but building wealth. Wealth might be slaves or land or goats or sheep or cattle or ships, but whatever it was, it was real and could produce more real wealth.
Then Came Coinage
Then along came coinage, and the object shifted away from building wealth to piling up money. Although the money itself was metal, coinage took wealth to another level of abstraction. Coinage was not wealth itself, but an abstraction of wealth.
This abstraction nearly did the Greeks in. They were quick to adopt every new technology, and so they quickly adopted coinage. Within about 50 years, by 594 BC, the money abstraction had so pervaded the Athenian economy that the commonwealth’s life was threatened. Spurred by easy credit, farmers had pledged their lands and even their wives and children to borrow. They quickly lost farms and wives and children, and many were even sold into slavery themselves. To save Athens, in 594 Solon instituted the “shaking off of burdens”, cancelled much of the debt, freed those enslaved by debt, and forbade using selves, wives, and children as collateral. Athens was saved.
What had happened? The Greeks had been so enamoured by money, the abstraction, that they forgot wealth, the reality. Along with wealth, they forgot even greater obligations owed to the commonwealth, to their forefathers, and most of all, to their wives and children and to themselves. They were enslaved by an abstraction.
Same Story, Different Time & Place
Today we find ourselves in a similar situation, where greed for abstract money has blinded our society to real wealth, and to all other values.
So the first step you must take to secede from the monetary system is to stop thinking of ‘wealth” as abstractions like financial assets, stocks, bonds, dollars, and start thinking about wealth as “productive assets” like businesses and farms that can produce and keep on producing without constantly feeding them more and more expensive inputs.
The next step necessary to monetary freedom is that you must make that movement as a community in the local economy. You cannot merely save yourself by running off and hoarding silver and gold, because every economy is a network of individuals and transactions. All by yourself you can’t have an economy, only have a hermitage. We must rebuild our own local economies first, or we can’t rebuild anything else.
Your motivation here must be love, not mere sentiment or affection, but the determination to do justice by every man. Part of loving your neighbour is helping him succeed, and helping to create and keep an environment where you can prosper together.
Finally, our first rule must be, whatever replaces the present monetary system must work. It must make us more prosperous, not less. We can’t just impose something on ourselves and others for blind ideological reasons. Rather, if we are going to change anything, it must be a change for the better.
Using Gold and Silver As Money
There are numerous “community currency” ideas, old and new. They may be good or bad, workable or not, but I won’t speak to any of those because they are all variations of the symbolic money theory. On the other hand, gold and silver money has worked for 4,500 years of recorded history.
Classical economics demands that money serves three functions: store of value, standard of value, and medium of exchange. Presently, silver and gold perform the first function very well, but politics keeps them from performing the other two. Both the standard of value function and the medium of exchange function are critical to monetary freedom.
A money serves all these functions when it is our numeraire. The numeraire is simply the money we think in terms of, our common denominator. If you live in France, you think in francs – well, you used to. Now I suppose you think in Euros. If you live in England you think in pounds, and in the US you think in dollars.
We must replace the dollar as our numeraire with silver and gold. Let them become our standard of value and they’ll soon become our medium of exchange.
Standard of Value
A standard of value means, what is something worth in terms of that measure? We must think in terms of ounces, and not of “dollars.”
Imagine a piece of property, 58.5 acres, asking $155,000. Allowing $75,000 for barn and house, that’s $80,000 or $1,367.50 an acre. In 1999 the same acre cost $750, so the price has nearly doubled.
But in dollars, not in silver. What if, at the end of May, 1999, you had converted your dollars into silver? Silver then cost $4.973/oz. At the same time, comparable land where I live was $750 an acre, or 150.8 ounces of silver per acre. At the end May 2006 silver was at $13.013, so the land that costs $1,367.50 an acre today only costs 105.09 ounces of silver. In other words, the price of land where I live, although it has nearly doubled in dollar terms, has fallen over 30% in silver terms.
Land’s price has not risen in gold terms, either. At the end May 1999 gold stood at $270.40 an ounce, while land was $750 an acre, so an acre of land cost about 2-3/4 ounce of gold (2.774 oz exactly). At the end May 2006 gold traded at $657.50, so the land that costs $1,367.50 an acre today only costs 2.08 ounces of gold an acre. In other words, the price of land where I live, although it has nearly doubled in dollar terms, has fallen over 25% in gold. (to 74.9%).
These examples easily explain silver & gold’s recent superiority as a “store of value.” If you had been planning to buy land and counting on dollars to store your value, you would have lost about half your value while you were waiting. With silver and gold, your money would have gained over 25% in value.
Metals v. Stocks
The metals’ standard of value function offers even more information about true value when we compare it to stocks. In nominal dollar terms stocks don’t appear to have done too badly in the last 7 years. In fact, they stand just about exactly at the same place they stood in August 1999.
But what happens when you value stocks against silver and gold? You can see that they have dropped 58% against silver and 60.5% against gold. It doesn’t matter how much the White House’s Plunge Protection Team has managed to manipulate stocks in dollars, valuing them in silver and gold reveals how terribly stock values have dropped since 1999.
This demonstrates the numeraire function of money. We have to learn to value things not in paper dollars, whose value jumps up and down so often that trying to nail down a value in dollars is like trying to shoot skeet off the back of a bass boat in a thunderstorm. Rather, we have to learn to value things in terms of silver and gold, which will yield either a steady, or a steadily declining price.
I can calmly forecast that because presently both silver and gold are in a “primary uptrend” or bull market that will last another five to ten years at least.
Medium of Exchange
But our project to free ourselves seems stumped when we come to the “medium of exchange” function. Why? Because by political manipulation silver and gold have been demonetized. I can’t take my 100 ounce silver bar or gold coin down to the grocery store and buy bread with it directly. First, I have to find somebody willing to exchange it for paper dollars, then take the dollars to the grocery store to buy bread. The inconvenience alone keeps me from using silver and gold as money, and it was intended that way.
But what if it isn’t inconvenient? What if people in a local economy began to accept silver and gold among themselves, every day, as they buy and sell to each other?
Here is the key to your shackles: you free yourself, and deny the Tapeworm use of your wealth, when you use gold and silver coin to store value and exchange directly.
This is the great secret of the American system, not only concerning our rights to sound money but most of the rest of our “stolen” rights as well. They aren’t really stolen: we are fooled into renouncing them voluntarily.
Beyond all question (I say on the authority of years of study) you have a common law, constitutional, and statutory right to gold and silver money. In fact, the notes of the federal reserve bank, or any other bank, are not “money” under current law, they are “notes.” A “note” is not money but an obligation to pay money. They may be “legal tender”, but they are not money.
But wait! If they’re legal tender, that means that legally we are forced to accept them, huh? Not at all. That’s the catch. You can stay out of the legal tender system by specifying in advance what form of payment you will accept. Legal tender only operates by default, when no specification to the contrary is made. However, you are free to contract for specific payment in any form you desire: silver, gold, goats, fava beans, you name it. You merely need to make that known by contract or public announcement.
What stands in the way of your monetary freedom? Two things: ignorance, and laziness. Ignorance, because you don’t know how to use silver and gold as money, and laziness because it’s easier to use paper money or credit cards. Now I may be able to help you with the ignorance, but the laziness you’re going to have to take care of yourself.
Okay, so I’ve convinced you, but now how do you start using silver and gold every day? First, it’s nothing but a simple exchange rate problem. In the US we have a huge internal market, so few of us have ever dealt with foreign currencies. But there are people all over the world who live near national borders – probably a lot of them in Washington state near Canada – who deal in diverse currencies everyday.
If they can do it, you can do it.
For most daily transactions, you’ll be using silver. Today an ounce of silver brings about $12.00. Ten silver dimes, which contain nearly three-quarters of an ounce, cost about $8.75. The smallest generally available gold coin, a 1/10 ounce, costs about $68.
How can you learn what those exchange rates are? That’s what the Internet is for. You can go to the sites of the futures exchanges and look up prices, or you can go to my website , scroll down the home page to the yellow banner that says, “Download Free Portfolio Calculator,” double click on that, and fill out the pop-up form. That will automatically add you to the list to receive my free daily e-mail commentary, which includes the prices of dozens of items and spot gold and silver.
To make life easier for you, Catherine Austin Fitts and I have put together a website. All you need to do there is enter the spot gold and spot silver price and the amount you want to pay in dollars, hit the update button, and it will immediately tell you how much silver, or silver and gold, you need to pay that dollar amount.
Before too long, you won’t even need that website calculator. You’ll be making those calculations in your head, and then you’ll stop thinking in dollars altogether and begin thinking in silver and gold.
Then you and your neighbours can keep your wealth at home, circulating in your own local economy, blessing and enriching one another.
Think about it. All you have to lose is – your chains.
Franklin Sanders has been brokering physical silver and gold since 1980 and trading metals even longer. He publishes a monthly financial newsletter, "The Moneychanger." In 1993 he wrote Silver Bonanza for Jim Blanchard, and in 2004 published Why Silver Will Outperform Gold 400%. For more information visit his website , where you can sign up for his free daily gold and silver market commentaries. He lives on a farm near Dogwood Mudhole, Tennessee amidst a mob of children and grandchildren.
i.Consider the bank of England, founded in 1694. By 1749 the government owed the bank £9 million (2,118,600 ounces of gold). The total value of all gold minted in England from 1216 to 1760, about 550 years, was only £41,071,727. In about 50 years the Bank of England held a claim on nearly a fourth of that. See,, Federal Reserve Bank of St. Louis Review, April 1984, Vol. 66, No. 4, p. 15, “A Private Central Bank; Some Olde English Lessons” by G. J. Santoni. For British mintage figures, see Silver Bonanza by James Blanchard and Franklin Sanders, page 41. Jefferson, Louisiana: Jefferson Financial, Inc., 1993.
ii. CRS Publication 96-672-#, pages 11 & 12. Here’s more in the same vein: “The lack of backing, however, has no bearing on the suitability of Federal Reserves notes as currency. Money exists to facilitate exchange, functioning as a “medium” or middle part of a transaction. In a modern economy, every time someone purchases something, he engages in half of an exchange: one thing of inherent value has changed hands, with the buyer getting what he wants, but the seller [is] still looking to get something of value in return. Money is a token given the seller signifying that he is still owed something of value. A transferable IOU is ideal for this purpose.
The government creates money out of nothing in order to purchase goods and services of value [The banks create money out of nothing in order to purchase assets of value, and the banks create most of the money. In fact, the government creates none at all, and didn’t when Mr. Woodward wrote this, as he would have known if he hadn’t been an economist.] The note that it pays with is basically an IOU...
“Debt makes good money because the debt of one person or institution is an asset to whomever it is owned. Consequently the debt can be used for exchange by the creditor (the individual who holds the debt), and then in turn by the person who receives it, and so on [the game of hot potato I described above] When the chain of transaction comes round to the original issuer (the debtor), the debt can be cancelled against whatever obligation one has toward the issuer , and the series of exchanges becomes complete."
Consequently, Federal Reserve notes and other paper money are indeed “unbaked” IOUs. The fact that they are IOUs is the very thing that makes them suitable to be money.
iii. “Modern Money Mechanics: A workbook on Bank Reserves and Deposit Expansion. Federal Reserve Bank of Chicago. Originally written by Dorothy M. Nichols in May, 1961, revised June 1992 by Anne Marie L. Gonczy. Page 3.
vi. Letter to the Secretary of the Treasury Albert Gallatin (1802); later published in The Debate Over The Recharter Of The Bank Bill (1809). Wikiquotes
If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace. We ask not your counsels nor your arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that ye were our countrymen.
What is liberty without wisdom and without virtue?