Money, Bona Fide
or Non-Bona Fide
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Money, Bona Fide
or Non-Bona Fide

Table of Contents
Preface

Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14

Chapter 6
Value of Money
or
Purchasing Power of Money

With the present money system now used in the United States, there are two “purchasing power values” applied:

  1. A general value
  2. A particular value

THE GENERAL VALUE

Because the money (medium of exchange) we use today is not evidence of a claim for specific goods or services or for any goods or services (If it were that fact would be written on each bill.) even though we assume that it is evidence of a claim for any goods or services being offered for sale and because the amount of the face value issued may be more or less than the amount necessary to buy at normal prices the goods and services being offered for sale, the general or average value of our dollar, for the purchasing of goods and services, is determined by the number of dollars (dollars which are available to those who want the goods and services) in circulation in relation to the quantity of goods and services being offered for sale at a certain time.

For example, if there were 1000 bushels of wheat being offered for sale and there were, at the same time, exactly $1000 in circulation, the owners of which wanted to purchase that wheat, then the average dollar would buy one bushel of wheat. If there were exactly $500 in circulation, the owners of which wanted to purchase the 1000 bushels of wheat, the average dollar would buy two bushels [p. 60] of wheat. Or if there were $2000 in circulation for the purpose of buying the wheat, the average dollar would purchase bushel of wheat.

We see then that the general or average value or buying power of the dollar is arrived at by dividing the number of dollars in circulation into the quantity of goods and services being offered for sale at a certain time. But because all the buying and selling within a country, in everyday practice does not take place at a certain instant the changes in the average value or buying power of the dollar do not exactly follow the above suppositions.

However, generally speaking, if the number of dollars in circulation decreases and the amount of goods and services being offered for sale remains the same, then the buying power of the average dollar will increase. (The same amount of goods and services will be obtained for fewer dollars.) If the number of dollars in circulation increases and the amount of goods and services remains the same, then the buying power of the average dollar will decrease. (More dollars will be required to buy the same amount of goods and services.) Also, if the amount of goods and services offered for sale is increased and the number of dollars in circulation remains constant, then the buying power of the average dollar will be increased. (The same number of dollars will buy more goods and services.) In like manner, if the amount of goods and services being offered for sale is decreased and the number of dollars in circulation remains constant, then the buying power of the average dollar will be decreased. (Less goods and services will be offered for the same number of dollars.)

So we see the general or average value or purchasing power of the dollar goes up and down according to the amount of money in circulation in relation to the amount of goods and services being offered for sale but not necessarily in the same proportion because all sales are not made at the same time. If the money supply is increased by 20% and the amount of goods and services remains constant (usually there is some increase in the amount of goods and services being offered for sale when the money [p. 61] supply is increased) the buying power of the average dollar will decrease but, because all sales do not take place at the same time, it may decrease more or less than the 20%.

THE PARTICULAR VALUE

The particular value, or buying power of the dollar for each sale, is determined by agreement between the buyer and the seller. That particular value may be higher or lower than the average or general value for the nation as a whole. The particular value is the price paid at each of the individual transactions. It may vary with each sale. It will be determined by negotiation and agreement between each buyer and seller.

In many cases, especially for items with small value, there takes place what may be called silent negotiations. One person offers something for sale at a certain price. If the prospective buyer is satisfied with the price, he pays the price and buys the item. If the buyer thinks the price is too high he says nothing, but refuses to make the purchase. In both cases there was a silent negotiation.

Yesterday the writer bought a name brand of regular gasoline from a service station for 27.9 cents per gallon, including 11 cents tax. A few miles from that service station, another service station was selling the same company’s gasoline for 32.9 cents per gallon. The gasoline was the same in both places. The same United States money was used in both places. But the buying power of the money was worth about 18% more at one station than at the other station. Who determined the buying power or the value of the money in that case? It was not the government. The government said it would buy or sell gold for $35 an ounce, but that did not have any effect on the buying power of the dollar for the buying of that gasoline. The value or buying power of the money used to pay for that gasoline was set by the service station operator and the buyer. It was a mutual agreement.

A person will discover the same thing when he is driving from one part of the country to another. His money will not have the same buying power in all places. [p. 62]

Let us take some other examples. Generally speaking, a person will pay more for a dozen eggs in the winter than in the spring or summer. Yet the eggs have about the same food value at all times. Fruit, such as watermelons, strawberries, grapes etc., have about the same food value the year around but the price varies according to the seasons and the location of the market as well as the supply. The same principle applies in all buying and selling. The particular value, or buying power of the money, for each transaction, will be determined by mutual agreement between the buyer and seller. Sometimes there will be spoken negotiation and at other times silent negotiation.

We should also note that those who lend money charge different rates of interest at different times, but the borrower gets the same dollars for the same period of time. So moneylenders may talk about a stable dollar but the buying or paying power of the dollar, in the payment of interest, will also be determined by mutual agreement between the lender and the borrower.

It is not so important to have a stable buying power in the dollar, as it is to have a medium of exchange that will facilitate the exchange of goods and services with reasonable justice. It is just to pay more for strawberries and watermelons at Christmas than on the Fourth of July.

We have learned that the particular value or buying power of money is determined by agreement between the buyer and seller. Now let us see who determines the general value or general buying power of money. We have leaned that the general value of buying power of money (medium of exchange) goes up and down according to the amount of money in circulation in relation to the amount of goods and services being offered for sale at a certain time.

Those then, who have the power to increase or decrease the amount of money in circulation, have the power to raise and lower the general value of money. They have the power to raise or lower the general price level of all goods and services.

Note: Those (the banking system and the federal government) [p. 63] who, at the present time, issue the medium of exchange are not the same persons who are producing and distributing the goods and services, but they are issuing all of the medium of exchange for all those who produce and distribute goods and services. Thus we see that persons who do not produce or distribute goods and services have the power to raise and lower prices for those who do.

When goods and services are exchanged by barter, the value of the items exchanged is determined by the two parties making the exchange. A third party has no authority, in justice, to set the value or price of the items exchanged.

The act of buying and selling is bartering indirectly. Therefore, a bona fide medium of exchange would and should give to buyers and sellers the same right to determine the value of their goods and services as would exist for them in direct bartering. There would be an average or general price level but it would not be raised or lowered by those who were not producers or distributors of goods and services.

The United States Constitution gives Congress the power to regulate the value of money. Congress has set the price of gold and pretends that it is the same as regulating or setting the value of money. We all know that this is just not so. We know the price of gold has not been changed by the government since 1934, but the general buying power or the value of the dollar has decreased from one to five times, since 1934, when it is used to buy goods and services other than gold. So when Congress sets a price for gold, it is not regulating the value or buying power of the dollar for anything other than gold.

We know the general buying power or general value of the dollar depends upon the number of dollars in circulation in relation to the amount of goods and services being offered for sale, at a given time. Therefore, Congress would fulfill its duty regarding the regulating of the value of money by permitting only bona fide money to circulate. It should not permit inflationary money (bank credit and Federal Reserve notes) to be issued. Inflationary money destroys the value of all money, just as much as counterfeit [p. 64] money does while the counterfeit money is in circulation. Therefore, the Congress should prohibit anyone from issuing inflationary money, just as it prohibits the issuing of counterfeit money.

PRESUMED VALUE

A presumed value is a value that we think money possesses, but that it does not. For example, for many years, before 1933, most people in the United States presumed that they could get gold for their currency. They could not; there just was not enough gold available for that purpose. After 1934, they could not even get gold for their gold certificates. They presumed their money was as good as gold, but it was not. Before 1965, most Americans believed or presumed their silver certificates would always be redeemed with silver. They presumed that they would serve as good money for years. But now the government will no longer redeem them for silver.

We should always remember that a certificate or claim, even if it is money, does not give the bearer the right to anything other than the thing for which it is a claim. We can say bona fide money is a claim for the thing for which it will be redeemed. For example, when we had silver certificates, the certificate was evidence of a claim for a certain number of silver dollars. It was not a claim for any goods, such as meat or potatoes. The people who possessed meat or potatoes could, if they so decided, sell their meat or potatoes for the silver certificates but they were not obligated to do so. The government, on the contrary, was obligated to exchange silver for silver certificates because it agreed to do that when it first issued the certificates. The silver certificates were a claim for silver dollars or the amount of silver contained in the silver dollars. (The silver dollar that weighs 412.5 grains, at .900 fine equals 371.25 grains of pure silver.) Most people presumed or believed (because of their limited knowledge of the market price of silver) that each silver dollar had a market value of one dollar’s worth of silver. The truth is that for many years the silver in each silver dollar was [p. 65] worth less than fifty cents. The market value of the silver in the silver dollar did not approach one dollar until about 1965. Why is it, then, that for all those years the silver dollar or the silver certificate would buy one dollar’s worth of goods or services, when it would only be redeemed for less than fifty cents worth of silver? The answer is that the United States government accepted it for the payment of one dollar’s worth of taxes; that is what gave it its one-dollar value.

Note that about as soon as the silver dollar and the silver certificate were worth more than their face value in silver, they were not used as a medium of exchange; they were hoarded or sold for a profit. They disappeared as a medium of exchange.

Tax credit certificates or certificates of credit would never be hoarded, because they would never be redeemed for more than their face value. Also no one could have a monopoly on the issuing of them. They would never have to be borrowed. They would never cause inflation. There would never need to be a shortage of them.

A bona fide certificate of credit used as a medium of exchange is a document giving evidence that the bearer has a just claim on some wanted goods or services for which it will be redeemed. Note: It is a claim for some goods or services that exist at the time the certificate is issued. Most of us presume that if we possess money we will have a just claim for some goods or service anytime in the future. That is not completely true. If the medium of exchange (certificate of credit) is bona fide it will be evidence of a claim for some goods or services that exist at the time the certificate is issued. It would not be honest for a person to issue a claim for goods or services which do not yet exist. If any claims (certificates) are issued for which goods or available services do not exist, such claims would not be bona fide claims even if they were issued by the government.

Those who say we must have a money (medium of exchange) with a future stable buying power are not giving us true and complete information. The only way money can have a future stable buying power is when the [p. 66] power of government makes it so. And even then it can do that only for a limited time and amount of goods. It also is generally done without justice.

When the government buys and sells gold at a set price, the buying power of the dollar is set only when it comes to the purchasing of gold. The buying power is not set for the purchasing of other items. So it is not true to say the dollar has a stable buying power for all goods, when it is stable only for the buying of gold. And even with all the power of government, the price of gold could not be maintained because the government could not continue to sell gold below the market price after its supply of gold became too small.

We sometimes are told that gold has a stable value. History teaches us that whatever stable monetary value gold has had has been the value given to it by government. If governments would not give a fixed value to gold, its value would be determined by supply and demand, just the same as other commodities. Counterfeit money is money created and issued by an unauthorized person. Those who accept it presume it to be valid money. While it is in circulation it is inflationary. It causes an increase in the general price level. The counterfeiter thus steals from all others who use money. The counterfeiter gets something for his counterfeit money, which he did not earn. (When a person gets something, which he did not earn, someone else earned that something but did not get it.) However, if and when someone detects the counterfeit money as counterfeit, then the possessor can no longer use it as money. The possessor then suffers the total loss. The counterfeiter then stole from that person.

People presume inflationary money has real value even when it does not. If it had real value it would not be inflationary; it would not cause an increase in the general price level. For instance, if the federal government issued money (tax credit certificates, notes or coins) and paid them into circulation for goods and services but did not at the same time levy a tax of equal value, then that money could be inflationary money. [p. 67]

One more type of non-bona fide medium of exchange which people presume to have real value but does not, is inflationary bank credit.

That portion of inflationary government issued money as well as that portion of inflationary bank credit cannot be distinguished from the non-inflationary government issued money or bank credit. They both appear alike. At present both are legal.

The effect on the general value of money by the use of inflationary money is the same as the effect that takes place when counterfeit money is used, until the counterfeit money is discovered to be counterfeit. It is true the inflationary bank credit is destroyed at the time the loan for which it was issued is paid off. The inflationary effects then no longer exist. But if the opportunity presents itself and it almost always does—the bank will make another inflationary loan, leaving the effects the same as if that loan were being continuously renewed.

Note: There is a difference between the government setting standards for weights and measures and the setting of standards to measure values or worth in dollars and/or cents. Weights and measures are used only to determine the quantity of items. The value or worth of an item varies with time, place, and the purpose for which it may be used. A certain item may serve a very useful purpose for one person and thus be very valuable to him while the same item may be of no value or worth to another person because he may have no use or desire for it.

      Therefore, the government or any other third party cannot, with justice, set the value or price for which an item is to be sold. At the time of the transaction the price or particular value of an item is set by mutual agreement between the buyer and the seller. [p. 68]

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