A Dollar’s Worth? . . . Is it still your Money?

Probably not too many readers will remember the saying, “Good as Gold”!  Yet, there was a time in the past when those three words referred to the value of the US Dollar.  Then, the piece of paper that denominated the value also carried the statement that the paper was redeemable in gold at any bank, the US Treasury or any Federal Reserve office.

At that time, a dollar was a dollar.  A paper certificate could be used in commerce certifying that the paper  was redeemable in the actual metal stated.  The coin represented would  contain a specific amount of actual gold together with other metal necessary to make it  durable enough to withstand repeated handlings.  This was also true for silver coins as noted on the Silver Certificate.  The important point here is that, true to the Constitution, the certificates issued did represent the metal coinage and were redeemable in the metal specified.  This gave confidence to the recipient that the “paper” was real, despite the widespread attitude that “paper money” wasn’t money at all.

When in 1913 the Federal Reserve was created, those in charge were determined to achieve an elastic currency, one the sum total of which could be expanded or contracted at will.  To forestall public concern, the Fed originally issued gold and/or silver certificates, each defining the redeemable feature important to the unsuspecting public.

Ultimately through several steps, the Fed moved from the gold and/or silver certificates to the present paper which says, Federal Reserve Note.  Notes legally are promises to pay, nothing more.  They do not convey an actual monetary value.  Thus, the paper currency subsequently and presently issued by the Federal Reserve is nothing more than a promise.  There is no indication of any gold or silver on deposit in the Treasury to support the value of the note being printed.

When the Federal Reserve was able to remove the gold or silver certificate and replace it with a note which was neither redeemable in precious metal or exchangeable for anything of value, the point long sought by many bankers and financial artists had been achieved.  They had a fully elastic currency without any backing whatsoever.   The only support it had or has is the confidence people exhibit in the government of the United States. 

So what is a dollar worth?  Name whatever figure you want and you can rest assured that it is wrong.  The acceptance of the piece of paper by the merchant or tradesman from whom you want either product or service is the only thing giving it value.  Rather scary when you think about it.  Instead of being, as it once was, “As Good As Gold”, it is now as you may have read, “not worth the paper it’s printed on.”

However, the United States is not the only country running on fiat money.  Most other industrialized nations have succumbed to the same approach.  While many countries have gold and/or silver in their vaults, they do not use it to support their currency since they have cut all ties between their paper and the precious metal previously used to substantiate the value.  They, as we, are running a “confidence game.”

Where it will end is not predictable at this time though there is a lot of speculation.

So what is a dollar worth?  And is it still your money or is it just government paper?  There’s more to the story for another time.  Comments, questions, suggestions welcome.  Reach me at constitutionviews@gmail.com  © Copyright 2014 Hillard W. Welch