Wednesday, January 03, 2007

Melting pennies and nickels is now illegal

The American currency (US dollars/Federal Reserve notes) is the most sound money in the world! ...Hey, you; quit laughing. But, it's laughable. Since 1971, when Richard Nixon separated the money from gold (or any precious metal), there is no limit on what the Federal Reserve can print. And they print, and print, and print, and the money inflates.

Inflation means there is more money in the market, and thus, the value of the dollar goes down. For example, the only thing you can buy, hypothetically, is bails of hay. There are 1 million bails of hay, and 1 million dollars in circulation. That means, in the free market, a bail of hay is worth $1.

Let's say there is a storm approching, and you have lots of hay with nowhere to store it. You decided to sell 10,000 bails for $10,000. You hunker down with your $10,000 to ride the storm out.

During that night, the Federal Reserve prints a million more dollars. That makes 2 million dollars in circulation. But, there is the same million bails of hay. When you attempted to buy some hay, now a bail of hay cost $2. Twice as much for the same bail of hay--the only difference is now the Federal Reserve inflates the money supply by twice as much.

Now, there is evidence in the real world. The metal value in nickels and pennies exceeds the face value. That means some smart businessman will hoard pennies and nickels, melt them down, and sell the metal for a profit.

To prevent this, the U.S. mint has enacted a ban on melting pennies and nickels. If they don't, there will be a shortage of nickels and pennies from the "greedy capitalists". But, the real reason why the metal value exceeds the face value is the Federal Reserve prints fiat-paper money without end, and the money inflates, and the value of the money (including coins) goes down. It's another classic case where a government-induced "crises" results in more attacks on the economic liberty of the American people. But the average person wants to thank the government for protecting him/her.

In earlier times, people used gold and silver coins as tender. When Nixon closed the gold window, all we have is fiat money, and inflation occurred. When that happens, gold and silver coins were scarce, and none today. And no wonder; I have an American Eagle 1-Troy oz. gold coin, and the face value is $50. But, a 1-Troy oz. of gold is around $625! I would have to be a fool to spend it at its stated amount! And that's what happens (but to a small degree) when metal value exceeds face value. And you can thank Nixon (and presidents and Congress after him) for devaluing our currency. Thanks!

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