Coinage Act of 1873

[reddirtcoins]

I have read about this for many years and still come back to, I don't think I like the gold standard because I think people today forget or don't know about 1873.
Now give me some slack as I am only trying to connect the dots between silver and gold. I always seems to fall back to The Crime of 73. This is where the G2S ratio changed.

http://en.wikipedia.org/wiki/Coinage_Act_of_1873
http://hoohila.stanford.edu/workingpape ... -89-12.pdf
http://www.micheloud.com/FXM/MH/crime/index.htm

For those who have a better grasp on this subject please chime in. I also know many other have been here before me.. "The Wonderful Wizard of Oz"

[68Camaro]

Not sure what you're asking. It was what it was. Are you asking about the ramifications?

The US was (and still is, technically) literally on a silver standard per the Coinage Act of 1792, which had never been fully repealed, combined with the wording in the Constitution about the dollar. The silver dollar is still the prime currency, even though minting of circulating silver dollar coins stopped (illegally, many would argue). However several acts (the last being 1873) also made gold equivalent in value to silver at a specific ratio - initially 15:1, then 16:1. This forced a de facto bi-metallism, which really isn't workable for any length of time; the problem with fixed bimetal ratios - at least when metal is minted at par value, which was the intent - is that they are inherently unstable, and eventually one metal dominates the other and causes the coins of the other type to be hoarded and melted.

People talk about the US being on a "gold" standard from the 30s until Nixon stopped the dollar/gold relationship, but there was no constitutional basis for it. We've been operating with unconstitutional money for so long that people have stopped questioning it - most people don't understand money period, especially our politicians, who have proven to be especially gullible to those other powers that know that fiat money is power (for them). I admit that I don't understand some finer points myself - it makes my head hurt - but I know enough to know that paper without backing is worthless.

In the early 20th century the country started down the slippery slope toward fiat money, which allows bankers to control the amount of currency in circulation and liquidity available.

The solution really is non-fixed (e.g. value floats) gold and silver. Salinas of Mexico has proposed a form of floating metal with which the government supplies a guaranteed base value but allows coinage to rise and fall above that base to whatever value the market will bear. That is the most reasonable solution, IMHO.

[reddirtcoins]

That helps..
"The US was (and still is, technically) literally on a silver standard per the Coinage Act of 1792, which had never been fully repealed"
But to me it still seems like we might only go back 1/2 way... which is where "the slippery slope toward fiat money" began but, I guess that is better than nothing.
I'll go back a little further 1792 and focus more there.. maybe that is where I'm having my problems...

Thanks.

[68Camaro]

Your problem may be that you are trying to understand the illogical? Much of what has been done with coinage over the history of the country has been at least somewhat illogical, so if you're trying to understand the logic of it, you can't. There are some things that make a bit of sense, and many things that were done for a purpose, but there was also much that was done for political power or economic greed (which has a selfish logic unto itself, but can't be found in the words of the acts themselves).

[PennyPauper]

We've been operating with unconstitutional money for so long that people have stopped questioning it - most people don't understand money period, especially our politicians, who have proven to be especially gullible to those other powers that know that fiat money is power (for them). I admit that I don't understand some finer points myself - it makes my head hurt - but I know enough to know that paper without backing is worthless.

Well put.

[Lemon Thrower]

i do agree with OP that 1873 was key.

yes, we were on a bimetalic standard. that is unworkable if govt fixes the exchange rate between the two metals. its possible they were set out of line intentionally to create an arbitrage with europe and to foment a future crisis that then would have to be fixed. they fixed it by demonetizing silver, which caused the GSR to spike. they basically use the same strategy - fixed exchange rates - to get us from a gold standard to a paper standard.

interestingly, the period from 1873 to the fed in 1913 is 40 years; FDR confiscation +20 years, nixon, +38 years, and we are now 42 years since nixon. FDR's confiscation was on May Day; nixon was in august iirc.

anyway, any analysis of the GSR that does not go back prior to 1873 is faulty. Nicholas Nassim Taleb in his book, Fooled by Randomness, gives a good illustration of how looking at incomplete data will steer you to the wrong conclusion. suppose you have a farmer and a turkey. every day for 3 years the farmer feeds the turkey, and the turkey increases in weight. if you were to chart it, it would be an almost perfect correlation with over 1000 data points. Until the turkey becomes the farmer's thanksgiving dinner in year 3. the data goes off the chart. so if you look at the chart prior to thanksgiving in year 3, you would draw the wrong conclusion.

if you think it is unlikely that gold and silver were manipulated 100 years ago, read the wiki entry for fiat tender cases which were decided immediately after the civil war. if you study history and law, the country went from being a union of separate states to a washington-based empire as a result of the civil war, whether intentional or not. not saying a specific law provided for this, rather that this is what actually happened.

[johnbrickner]

Now you've got my interest up. I've got a 100 yr old+ book falling apart about this coinage part of our history. Hummm, no idea where it is right now. Have to start looking.

[Lemon Thrower]

the definitive, and i mean definitive, work on the subject is called Pieces of Eight by Edwin Vierra. Its $200 bucks and the size of 2 phone books. but you can just google "legal tender cases" and "crime of 73" and learn a lot much more easily.