Wednesday, December 7, 2011

Capital Gains on Inflation

The first step to re-establishing gold and silver as an alternative currency is to remove capital gains tax from gold and silver transactions.

Gold and silver prices fluctuate in relation to our current common currency. If you sell gold, you are required to pay capital gains tax. In some places you have to pay sales tax.

The cost of this extra tax work makes the use of gold and silver in trade untenable.

Goldbugs argue that the "capital gains" of gold are an illusion created by the devaluing of the currency.

CoinInflation reports that the current price of silver in a silver dollar is $25. So, if you held a silver dollar from 1964 to present, you would have to pay capital gains on $24.00.

However, the price of the silver dollar tracks other baskets of goods. You used to be able to get a haircut and shave for two bits (a quarter). A quarter of $25.00 is $6.25.  Most barbers these days charge $10 for a haircut.

A basic meal at a sit down restaurant cost two bits as well. It is hard to find a meal at a sit down restaurant for $6.25.

Entry level wages used to be around a dollar a day. Today's minimum wage is around $60 a day.

Since silver is tracking the price of goods, there is a strong argument that gold and silver have not increased in value. One is paying a "capital gains tax" on inflation.

It is an ugly affair. The central authorities devalue the currency by printing dollars. They then tax the people on the inflation that they created. They are taxing the inflation that they created.

This institutionalized dishonesty benefits the rich as the cost of the middle class and poor.

There is a strong argument that the capital gains associated with gold and silver are the result of the devaluation of the currency.

The argument for reviving gold and silver as alternative currencies focuses attention on the inherent dishonesty of the Federal Reserve system.

Sunday, December 4, 2011

An Alternative Currency

The gold standard is a losing argument.

"Standard" is a synonym of "regulated." With the gold standard, countries tried to regulate the economy by controlling gold. The regulators failed.

The enemies of freedom use the failure of the gold standard to project the failure of their regulations on an inanimate object.

The wise goldbug recognizes that attempts to regulate the economy by manipulating the price of price metals are doomed to failure.

Rather than arguing for a return to the gold standard, the wise argue to re-establish gold and silver as free floating alternative currencies.

Re-establishing gold and silver as alternative currencies would create a more diverse economic landscape in which commoners could easily place their cash holdings into precious metals.

Re-establishing gold and silver as alternative currencies would also facilitate free trade as people can trade in the commodities without the complications of national currencies.

Re-establishing gold and silver as alternative currency is simply a matter of removing certain taxes and restrictions on the trade in gold and silver.

The Founders of the United States used gold and silver as currency. They were trading in worn pieces of eight that were of different sizes and of dubious origins. The primary goal of the first coinage act was to set standard weights for the coins; so that people could trade in confidence.

Gold and silver were traded as currency up unto the heady days before the Civil War when it was outlawed and heavily taxed.

Allowing people to trade gold and silver as currency would, arguably, lead to a more diverse economic landscape and greater economic stability.

Having more than one currency in play would help Americans become more savvy in their personal finances as people would face on a regular basis decisions about which currency to hold. Greater economic awareness would help improve the conditions of the middle and lower classes.

Friday, December 2, 2011

Gold and Fractional Reserve Banking

Bankers, and the ruling elite, love fractional reserve banking. With fractional reserve banking, bankers lend multiples of the dollars held in savings.

In the case of gold, bankers would lend out multiple bank notes for the gold they have in reserve. This works great in boom times. It makes them even boomier.

When the market spooks and people run in to redeem their gold certificates, they discover that the bank doesn't have sufficient reserves to cover the notes and chaos ensues.

Banks that use precious metals to back a fractional reserve currency almost always fail.

Our progressives friends love to point to the failure of gold banks using fractional reserve currency and claim it as proof that precious metals cannot work as a currency.

Goldbugs should point to this failure as indication that fractional reserve banking fails.

Central banks printing a fiat currency provide some relief for banks using fractional reserve lending. When a run on a bank occurs, the central bank can simply print up a pile of notes. This externalizes the failure of fractional reserve banking on society at large.

The fact that our unstable system of fractional reserve lending works better with fiat currency than with gold does not mean fiat currency is intrinsically better than hard currency.

The fact that fiat currency allows banks to temporarily mask a corrupt money supply has proven a major defect in that it turns depressions into recessions or into periods of hyper inflation.

Advocates of precious metal currencies need to argue against fractional reserve lending.

For that matter, the reason I am interested in reviving precious metals as a currency is that I realized that fractional reserve lending magnifies business cycles and leads to economic harm to the people at large.

I am not attracted to the glitter of gold. I am attracted to gold to the extent that it is a more honest currency that fiat money.

Fractional reserve banking multiplies the debt of the people and has proven itself, time and time again, to be toxic to a society. Re-establishing gold and silver as currencies directly challenges the financial structures built around fractional reserve lending.

Thursday, December 1, 2011

The Gold Standard Failed

The gold standard failed.

The reason for this failure has more to do with "standard" than with the word "gold."

"Standard" is a synonym of the word "regulated."

Using gold as the backing for a nation's currency leads directly to attempts to regulate the economy by manipulating the price of gold. These attempts to regulate economies through buying or selling of gold quickly slammed against harsh economic realities.

Fiat currencies allow extra room to manipulate the economy. If you can convince people that inflation is all well and normal, then the introduction of fiat currencies greatly expand the ability to manipulate the economy.

The history of fiat currencies is bleak, with a large number of deep recessions and currency failures. The extra room that fiat currencies give to manipulate the economy has not led to niravana.

The problem is clearly not the backing of the currency but the attempts to regulate the economy.

Proponents of the free market need to be wary of any discussion involving the term "gold standard." This term implies attempts to regulate the economy by governments and central banks holding large amounts of gold.

A free marketeer must start from the position that the price of all items fluctuate.

Advocates of the regulated economy will goad people into conversations about the gold standard and then start slapping you silly with evidence that shows attempts to regulate the price of gold systematically fail.

When a progressives successfully draw a goldbugs into defending the "gold standard," they manage to draw the goldbug into the corner inwhich the goldbug is forced to defend economic regulation.

The goldbug who understands the nature of this trap can take the data progressives use to attack the "gold standard" and show that it was the attempts to regulate gold that led to economic turmoil and not an inherent property of precious metals.

Wednesday, October 26, 2011

Move Your Bank Day

Thugs on the left are engaged in a peoples struggle demanding that people take their money out of X bank and put it in Y bank. (MoveYourMoneyProject.

I used to believe that Savings and Loans were good things and banks evil. Then the Federal Savings and Loan Insurance Corporation (FLSIC) imploded and I learned that Savings and Loans were every bit as corrupt as banks.

The problem is not the business structure, but the fractional reserve system created by the Federal Reserve.

The FLSIC was a federal insurance company that socialized the risk of private companies. The result was a large number of risky loans in overbuilt communities that all came crashing down on the taxpayer.

The move your money movement is based on the naive notion that it is the business structure of banks that causes economic problems. Banks use a corporate model while credit unions are buyer's co-ops.

I would have sympathy for the Move Your Money movement if it had a sound reason to move money. But, the problem is the systemic debasing of the currency caused by fractional lending of the Federal Reserve.

Fractional Reserve lending is as likely to take out a credit union as it is to take out a bank or savings and loan.

It is always wise to diversify. But moving money out of an institution for a political statement is apt to do more harm than good.

ADVERTISEMENT: If you are diversifying, it is probably good to have some money on hand in physical or gold coins.

Why, there just happens to be a Buy Gold page on this site with affiliate ads.

If you want to get your mortgage or your savings out of the system, you might try the Lending Club. The Lending Club coordinates person to person loans.

Monday, September 26, 2011

Open Source Exchange

I did not get very far writing articles for the Utah Monetary Summit.

A twitter conversation reminded me about how much I dislike the University of Utah and I lost my appetite for writing.

Readers of this blog might remember a few years back I wrote about stock market reform. I suggest the best way to start a general discussion of market reform would be to launch an open source project to create a new exchange.

I called the project the Open Source Real Time Exchange.

Even if the exchange never became a reality, the act of creating a model would help spawn a discussion about market reform.

The second proposal I had for the Utah Monetary Summit was to launch an Open Source project to create an exchange for gold and silver.

Specifically I was interest in creating a project that developed an open source exchange for trading shares of precious metals stored in Nature's Vault.

Such a project would intrique young idealistic minds.

Imagine the excitement of working on a project that combined open source development, the protection of natural resources along with financial reform!!!!!

People would love the idea.

I've been treated like dirt by Utahans for so long, I simply cannot imagine any scenario in which I could communicate a very simple yet compelling idea.

The meeting starts in a few hours and I am sitting here unable to sleep and feeling like I am about to get sick.

Saturday, September 24, 2011

Nature's Vault

You may not know this, but I just happen to be an "eco-jabbering meadow muffin."

Give me a chance to jabber about ecology and I will jabber all day.

My primary objection to reviving the gold standard is that I really dislike the environmental damage done by cyanide-leeching gold mines.

If you could make a gold-backed currency without having to dig it up, I would go for the gold standard.

The fact that my local store is willing to accept Federal Reserve Notes which are backed by nothing less than promises of an independent central bank suggests that people are happy to trade in abstract monetary units.

IMHO a bank note that referenced physical gold in the ground would be a step above a currency note backed by a promise.

My first proposal for the Utah Monetary Summit is a thing I call "Nature's Vault." In this program, one would issue currency backed by mineral resources in an environmentally sensitive area.

The program would buy up the mineral rights for an area, then issue currency based on the estimates of the mineral resources of the area.

I believe that such a currency would be valued by environmentally minded investors seeking a way to hedge their investments ... without the environmental damage done by mining.

How Motivation Affects the Process

I will be going to the Utah Monetary Conference on Monday. If I get any time this weekend, I will write up some proposals on how to make the monetary conference successful.

I don't know the people running this conference. All I know is that there is interest in Utah in minting precious metal backed currency.

The end form of the program will be determined by the motivations of the people engaged in this effort.

If it is a bunch of Machiavellian wanks seeking a way to leverage off the investments of others. Then they will create another ugly, captured exchange like Bernie Madoff's NASDAQ.

If it is people sincerely looking to provide a sound money. Then the conference could lead to great good.

Much of American banking law and practices were created by powerful insiders seeking a way to leverage off the American people. The whole concept of financial leverage is one in which a central group leverages off the people at large.

Fractional reserve lending is a game of leveraging. When a bank can lend multiple dollars for each dollar saved, then the rich bankers can leverage off the people at large.

This has two negative effects. First it devalues the money of the people who actually produce in a society. Second, the process of fractional lending multiplies the debt of a people and eventually reduces an entire society into a state of default.

So, the biggest question I have going into this conference is: Are the people running the conference sincerely looking to create a sound alternative to the leveraged systems, or are they just a bunch of power players trying to find ways to use the anger in the nation to leverage their way onto the playground?

Anyway, I will place my proposals for a real sound money on the site I will post a discussion of each of the proposals on this blog.

The proposals will be written for an audience that is sincerely looking for a sound currency alternative to the Federal Reserve and the captured central exchanges that dominate the American financial market.

Thursday, September 22, 2011

Hammering Silver

Silver was hammered today ... falling some ten percent into the $36/troy-ounce range.

The spot price of silver is determined on centralized exchanges where the price is manipulated by future contracts and margin requirements ... and only loosely related to real world demand.

The hope that people can escape the ravages of currency manipulation by buying gold and silver falls to the wayside when one realizes that the price of the precious metals is held captive to the same corrupt centralized financial structure as the rest of the economy.

Precious metals simply have on degree of separation from the rest of the insanity.

Monday, September 19, 2011

On The Gold Standard

Several months ago, I was asked one twitter if I favored a return to the gold standard.

The answer is "No!"

The great flaw of the gold standard is that the standard leads governments and political rogues to manipulate the price of gold and other precious metals.

One need only follow the spot price of gold and silver for a few months to realize that the central exchanges setting the spot price are highly manipulate.

The Coinage Act of 1792 turned out to be greatly flawed. This attempted to set the ratio of silver to gold at 15 to 1. This ratio fluctuates. It is currently something like 44 to 1, though no-one knows why.

I favor a sound monetary policy. I prefer the price of the common unit or currency to be set to a basket of goods.

I would favor a program that accepted trade in silver and gold as legal currency.

Apparently, Americans were trading old silver pieces-of-eight as legal tender into the 1850s when such trade became illegal.

My ideal system would be a sound money system with a common currency based on a basket of goods that allowed people to trade in physical precious metal coins at the precious metal value. (The basket of goods might include precious metals and fuel).

Accounting, taxes and such would be done in the common currency. One simply has an option to use precious metal coins as legal tender.

I favor this because I think it would create a more dynamic market.

There would not be an obligation to accept coins just as there is not an obligation for businesses to accept checks or credit cards.

For that matter, I would expect that most mainstream businesses would avoid trading coins. Allowing people to use coins as legal tender is more likely to help sole proprietorships and companies operating on the fringe.

Having multiple types of legal tender on the market would make for a savvier consumer. People who carry both precious metal coins and dollars would develop a better understanding of the way that prices fluctuate.

Attempts to revive the gold standard would restore the paradigm in which governments tried to regulate precious metals. Simply allowing people to trade precious metal coins at spot price would make for a more robust economy.

BTW: While I was at LPAC, I used one of my two silver dollars to buy books. I am now down to just one silver dollar. I bought a number of silver quarters on eBay.

Utah Monetary Summit

I registered to attend the Utah Monetary Summit. This summit will discuss the possibility of using gold and silver as legal tender.

The summit is next Monday, so I will spend the week working on gold related projects.

I have several really cool gold related ideas in the works. I hope to get some interesting posts and programs online this week.

Wednesday, August 17, 2011

Grubbing the Gold

Leftists love to ridicule people who invest in precious metals ... yet it is one of the first things grubbing leftwing politicians grab at.

The People's hero Hugo Chavez is nationalizing the gold industry in Venezuela. The article reports that the Socialist nation has $29.1 billion in gold reserves as Chavez proves once again that socialists are far more interested in amassing wealth and power than in caring for the people.

Monday, June 27, 2011

Four quarters is less than a whole

The Coinage Act of 1792 attempted to set the ratio of gold to silver.

The California Gold Rush flooded the market with gold changing the premium of gold to silver, creating a run on silver. So, in 1853, Congress reduced the size of small silver coins. The quarter shrunk from 6.68 grams to 6.22 grams. The dollar remained the same.

After 1853, the two-bit coin (the quarter) no longer had two bits of silver. In 1857 Congress forbade the use of foreign coinage in trades, effectively ending the use of pieces-of-eight as an international monetary supply.

The mint later raised the weight of the quarter back to 6.25 grams. 20th century coinage has the oddity that 4 quarters weigh 25 grams, while the dollar weighs 26.73 grams. 4/4 < 1. I am working on a project which calculates the price of two bits. I've been in a quandary about whether I should use the weight of a quarter of dollar or the weight of the quarter (the two-bit coin) for my calculations.

I finally decided to use the weight of the quarter as written in the 1792 coinage act. It is closer to the weight the US Founders would have experienced in colonial days. The Coinage Act says a quarter will "contain ninety-two grains and thirteen sixteenth parts of a grain of pure [...] silver." There are 480 grains in a troy ounce. A bit weighs 92.8125/480 troy ounces. At market close on 6/25/2011 a troy ounce of silver sold for 34.73. So, two-bits is $6.72.

I wonder if I could get a shave and a haircut for two-bits?

Tuesday, June 7, 2011

An International Regulatory Regime

The price of silver went up. It then went down again.

Bloomberg reports that this fluctuation resulted in cries for the United Nations to stomp a regulatory boot down on the throats of investors in silver and gold.

"Commodity markets need international oversight, more transparency and intervention to deflate bubbles because increasing speculation means prices are no longer driven by supply and demand, the United Nations said."

A contemptuous unnamed Marxist at the United Nations sniped:

“Contrary to the assumptions of the efficient market hypothesis, the majority of market participants do not base their trading decisions purely on the fundamentals of supply and demand,” the UN agency said. “They also consider aspects which are related to other markets or to portfolio diversification.”

I know for certain that the writer is a Marxist because he has the market backwards. Marxism is based on skewed visions of the market.

The idea of the free market is that people are engaged in an ongoing process of adjusting their portfolios. As billions of people actively adjust their investments, they end up providing better information than one gets from a top down regulated market or in a fully socialized economy.

In the free market people make decisions based on their immediate surroundings. These personal decisions create a market that adjusts to global supply and demand better than a planned economy.

The unnamed Marxist in this post projected an absolutely absurd assumption onto the free market. The participants in a free market do not base their decisions on global analysis of supply and demand. They make their investing decisions based on their personal situation.

Global demand is determined by a summation of all of these individual decisions. The price of silver goes up when people feel it is better to have their cash in a precious metal than in a fiat currency.

The snit at the United Nations has the efficient market theory backwards.

The second idiotic assumption that the writer makes is that precious metal markets are not regulated.

The markets are highly regulated.

The "spot market" that people cite when pricing precious metals is produced by centralized exchanges like COMEX.

When I buy a coin at the coin store, the clerk looks up the price at the central exchange. The central exchange does not look at my purchase. The price I pay for coins is directly affected by the spot market. There are several degrees of separation between my local purchase and the centralized exchange.

The people on these exchanges are trading highly regulated contracts and futures. The regulations include short selling and margin positions.

When we look at the spike in silver prices we see that in the build up to the bubble the regulators at the exchange had very loose margin requirements.

The regulators at the exchanges tightened the margin requirements which reduced the money on the table for the trades. The tightened margin requirements led to a steep drop in prices.

The bubble was a direct result of the regulations in place.

The spike in prices is better explained as a result of actions of the regulatory regime, than as the result of a failure of the free market.

Saturday, June 4, 2011

Coins as an Anti-Investment

There are many pundits writing about gold and silver as an investment.

I find that coins are better understood as an "anti-investment."

The reason to buy coins is because you want to take some money off the table to be held in physical form.

As the proud new owner of two silver dollars (one just happens to be in the coin pocket of my jeans at the moment) I've determined that coins are something different from a typical investment.

Perhaps it is better to think about coins as an anti-investment. My two coins are an asset that I am holding off the active market.

Pulling money out of the market is a good thing. Disciplined investors routinely pull money out of risky investments into cash positions when they feel uncertain about the market. Taking a cash position when the market appears overheated is not an investment. It is a decision to back away from investments.

Buying physical coins is like a cash position twice removed. One buys physical coins to pull some assets out of the active trading market.

I am now bullish on precious metal coins, but I am not thinking of them as an investment. I think of the coins in a more fundamental way. I see them as something that I own which retains more value than the other things I own. My jeans will grow old and wear out. The coin in the coin pocket was minted in 1879 and will likely be holding value as a silver coin in 2079 ... when my jeans are decomposing in the landfill.

As I hold this coin, I am thinking at a more fundamental level than I think of other investments. This precious metal coin holds value through time as it is traded, hoarded or carried about.

Wednesday, June 1, 2011

The Coin Pocket

Have you ever noticed that jeans often come with a secure coin pocket stitched into the right front pocket?

I've never used the secure coin pocket for normal change (pennies, nickels and dimes). Coin pockets were designed for securely holding coins and are too awkward to use such small change like pennies and dimes.

To tell you the truth. I had forgotten that my jeans even had a coin pocket.

The Utah Legal Tender Act has people talking about a return to a day when people carried around real coins made of something valuable like silver or gold.

Two months ago, I bought two silver dollars. I wanted to test to see what it would feel like to wander around with real coins.

As mentioned, I had forgotten about the coin pocket. Even worse, there are holes in my front pockets; So, I slipped the large silver dollars in my back pocket. If you were wondering about that inch and a half circular object in my back pocket ... it was a silver dollar.

I felt stupid carrying a silver dollar in the back pocket, and forgot about the experiment.

While mending my jeans, I remembered the coin pocket that I never use. I went and grabbed my two silver dollars, and slipped them into the coin pocket. I discovered that the pocket and coins were a perfect fit. While it is an effort to dig pennies out of the pocket, the silver dollar roles smoothly in and out of the pocket and I appreciate the secure design of the coin pocket.

It finally dawned on me that jeans were designed in a day when people routinely wandered around with large silver coins in their pockets for use in commerce.

Imagine a hundred years ago when people were paid a dollar a day (back then, a dollar had the purchasing power of $100.00).

Workers would be paid in silver coins that they would stuff in the coin pocket of their jeans and head out for a night on the town. They most likely used the coin pocket for the dollars, and front pocket for change.

By stuffing an 1879 Morgan Dollar into the jeans, I felt connected to the past.

I checked the price of silver. Silver dollars are worth just about $30 per coin today. The two coins in my coin pocket are valued at $60. That is a lot more than I dare carry in my wallet. Of course, it is alot easier for pick pockets to get at the back pocket than the coin pocket.

This idea of returning to the day when people used silver coins may not be as awkward as it first seems. The very clothes we wear were designed for such an idea.

Two coins feel great. I wonder how three coins would feel in the coin pocket? eBay is the place I would buy the coin; so I will shamelessly end this post with an eBay ad for Morgan Dollars.

Monday, May 30, 2011

What Is a Two-Bit Diner?

A Two Bit Diner is a restaurant with a special priced to the two bit coin.

A bit is one eighth of a silver coin. A two bit coin is a quarter of a silver quarter. The old US silver quarter contains 0.18084 troy ounces of silver. The price of silver varies. When the spot price of silver is $38.70 per troy ounce, the "melt value" of silver quarter is $7.00.

The price of silver is dynamic. To be true to the gimmick, a two bit diner would periodically look up the price of a silver quarter and change the special.

Many restaurants have taken to preparing dishes from local seasonal ingredients. One could combine the changing of the two bit special with the changing of ingredients to create a more compelling special.

Sunday, May 29, 2011

One Pieces of Eight and the Two Bit Coin

In colonial days the common folk did their reckoning in pieces-of-eight. Pieces-of-eight were large silver coins cut into eighth which the folk called "bits."

A bit was a substantial piece of change. One could buy a pint of ale for one bit, a plate of grub for two bits and a bed for the night for four bits.

In the Coinage Act of 1792, the United States weighed the pieces-of-eight in circulation and took their average to create a monetary unit called the US dollar. The US dollar is often symbolized with a barred S as follows: $

The Americans sought to create a decimal based currency with new coins. The larger coins matched up well. A dollar equaled a piece-of-eight. A half dollar was equal to four bits and the quarter equal to two bits. New coins included the silver disme that was worth a tenth of a dollar and a penny worth one hundredth of a dollar.

In this new coinage, four bits equaled 50 cents. Two bits equaled 25 cents. The bit equaled an awkward 12.5 cents. So, the coinage act included a half disme worth five cents and a half penny. In practice, proprietors used to reckoning in bits were known to accept a disme as a short bit, accepting the loss of the odd bit as the price of doing business.

The old common currency was legal tender through 1857 when Congress finally outlawed the use of foreign currency, making the dollar the sole legal tender of the land. Later acts set the dollar as a fiat currency with built in inflation.

In 2011, The Utah Legislature passed a symbolic statement called the Legal Tender Act which doesn't do anything because Federal laws regulate currency.

On passage of the law, I looked up the current price of silver. The price of silver changes daily. I discovered that a silver quarter was worth about $7.00 and the silver half dollar was worth about $14.00.

I was astounded to realize that a basic meal at a diner was still worth two bits.

So Utah's Legal Tender Act of 2011 led me to ask the question: "What is the best two bit diner in Utah?"

A two bit diner is a restaurant with a special that could be bought for the two bit coin (a silver quarter.

Saturday, May 28, 2011

The Two Bit Coin

Long ago, the common folk traded goods and services using a coin known as a bit.

A bit was one eighth of a larger coin known as pieces-of-eight. Get it? Pieces-of-eight were worth 8 bits. The most common pieces-of-eight coin was the Spanish Dollar.

In computer programming, a bit is a single on/off switch. Eight bits combine to make a byte which is the standard measurement of storage capacity.

In colonial days, a bit was a substantial piece of currency. One might buy a pint of ale for a bit, a meal for two bits and a cheap hotel for four bits.

On passage of the Coinage Act of 1792, the mint weighed a number of the worn and shaved Spanish dollars circulating in the colonies and set that weight in silver (412.5 grains) as the United State's dollar. The US dollar was made of a 90% silver 10% copper mix. It became customary to denote the dollar with the symbol $.

The Coinage Act sought to create a decimal system for currency calculations. The act created a monetary system with silver dollars, silver quarters and silver halves along with strange new coins called the disme, a half disme and penny. The copper penny was valued at one percent of a silver dollar. The disme (commonly known as a dime) was set at a tenth of a dollar.

The quarter and half dollar fit into common reckoning well. The quarter was worth two bits. The half was worth four bits. The bit coin itself was problematic. A bit was worth 12.5 cents. Proprietors of the day were known to accept the new disme as a short bit and to accept the loss of the odd bit as cost of doing business.

The Spanish dollar was recognized as legal tender in the US up to 1857. The system of reckoning in bits existed alongside the new dollar system for quite some time.

In the round down program, I suggest that proprietors of today round down cash transactions to the nearest quarter (the two bit coin).

Today's quarter is worth substantially less than the two bit coin of old. A silver quarter sells on ebay for about $7.00. While the deflated quarter in your pocket is only worth a penny candy, the old two bit could still buy a meal.

Friday, May 27, 2011

TV Coin Shows

I've watched several of the coin shows on cable TV.

Apparently when the used cars sales union finds a dealer who is sleazy beyond their lowest standards, they kick 'em out and dealer starts hawking absurdly overpriced coins on cable.

I hope no-one is falling for their overpriced cons.

BTW, if you are buying any item as an investment, you need to find a forum where people buy stuff back. Cable TV is the worst posible forum for any investment grade purchase because it is a one way medium.

A local coin club, coin shop or coin show would be best avenue for investment.

Thursday, May 26, 2011

Coin Production

The US Mint reports that Coin Production is going at a staggering pace in 2011.

In 2009 the Mint produced 2,354 billion zinc pennies and 86.64 million nickels.

The rapid devaluation of the dollar in the last two years means that the older (pre 1982) copper pennies contain 3 cents worth of copper and the nickel contains 7 cents of nickel.

Entrepreneurs are running sorting machines to pull all copper pennies from the market, and collectors are hoarding nickels. They sell bags of pennies as copper bullion indicating contempt for the coin.

From January thru April the US Mint produced 1.454 billion zinc pennies and 223.92 million nickels. Dime production also increased but not at the rate of nickel.

I find no fault for people saving nickels. You can track the future devaluation by the calculating the melt value of the nickel at

The absurdity is that the mint is producing, at a loss, billions of coins which will soon go out of circulation when they change the formulation for all coins in the upcoming years.

Wednesday, May 25, 2011

Pennies Are Toxic

I confess, a primary reason that I started the Round Down US project is reports that the new zinc pennies are toxic.

The United States Mint switched from copper pennies to a copper coated zinc mix in 1983. When the copper coat gets breached the the zinc can leach out and cause Zinc Toxicity. Zinc toxicity can cause illness in children and is fatal to dogs and parrots.

Apparently there also problems with plants and fish when they become exposed to concentrated zinc from a dissolving penny.

I've noticed that zinc new pennies, when damaged, turn sharp and ugly. When they sit in the dirt for years, they start to dissolve.

I often find worn zinc pennies in playgrounds and gutters. As so many people just toss out pennies, it is absurd to be using them.

The mint is reworking the composition of coins. Instead of the people being led by the government, I would rather the people lead the way and round down first.

The Dollar Is The New Penny

The Dollar is the New Penny.

The Federal Reserve was established in 1913. The Federal Reserve is a nexus of central banks that control the US monetary supply by lending out money.

The Federal Reserve has an inflationary monetary policy. Inflation devalues the money in the market. As we approach the centennial of the Federal Reserve, we find that there is roughly a 99% devaluation of the dollar.

The 2013 dollar has about the same purchasing power as the 1913 penny.

As the the nation's currency devalues, small coinage falls ouf of favor. So, in celebration of the Federal Reserve centennial, I thought it would be fun to run a campaign in which merchants stopped accepting small change and round transactions down to the nearest quarter.

Experience taught me that one needs to buy the domain name before starting the project.

So, I bought the domain name RoundDown.US and put together a teaser site. I will make the push for this project in 2012.

I intend to write to state legislatures and ask that they develop tax tables rounded to the quarter.

Friday, May 20, 2011

The Fate of the Penny

The mint produces coins based on demand.

Retailers demand a large number of pennies because sales tax tables force them to calculate all sales to a penny.

As such, the fate of the penny is in the hands of the state and not the hands of the mint.

As the centennial of the Federal Reserve approaches, state lawmakers could make a statement about the devaluation of the dollar by creating a tax table that rounds to the nearest quarter.

Businesses, eager to reduce transaction costs, would adopt the new tax table because they would only need quarters in their change drawers.

Businesses would return unused change to the mint for redistribution. So, even if only a few states developed tax tables rounding to the quarter, we would see an end to the production of dimes, nickels and pennies.

Calculating to the quarter would benefit consumers as consumers would no longer need to deal with piles of pennies building up in jars and falling under the driver seat.

Utah loves to make symbolic political statements. So, I am writing letters to Utah representatives to consider adopting an alternative tax table that rounds transactions to the quarter.

Thursday, May 19, 2011

My Hoard of Silver Dollars

Having joined the ranks of "Hawkers of Gold," I decided that I should take the plunge and buy a precious metal coin. I cannot afford a gold coin; but a silver dollar is still within my reach.

Anyway, two cull grade dollars from I prefer "cull" to the collector quality coins as I prefer coins that were actually used in trade. I have little interested in the coins that have been hoarded by collectors or banks in unciculated quality.

I received a 1925 Peace Dollar and an 1879 Morgan Silver Dollar in the mail yesterday. The average of the two dates is 1902. It is so cool to have coins that have been around for a hundred years.

My pocket scales says the Peace dollar weighs 26.61 grams and the Morgan 26.46. The Morgan Dollar lost a percent of its mass in its life as a coin. The Peace Dollar lost half a percent of its mass.

These aren't the first two silver dollars I've seen, but they are the first I've owned.

Because I own the pieces, I feel free to flip them. I should have bought three ... then I could juggle coins.

As for the purchase: I liked the selection of coins. I found their interface a bit confusing. It took me several minutes to find the section of the site that allows me to buy individual coins. I love the way they divide the silver dollars into the categories of below cull, cull, almost good and good.

My biggest complaint with the APMEX was the shipping costs. The shipping and handling costs for my two coin order was $12.95. More outrageous than the fact that they charged $12.95 to ship the coins, they spent that much shipping the things. The coins arived in an oversized box stuffed with expensive packaging.

To the web site's credit, APMEX's primary market is folks spending thousands of dollars on coins. Small fries like me are a nuisance.

Of course, a person who matters might be aquiring coins in small quantities ... or might run a test order before a real order.

If I were running shop selling coins online, I would have a path for selling packets of one or two coins to appease the rabble ... even if my primary market was people who could afford a whole roll of coins.

The US Mint charges $4.95 to ship a packet with 10 quarters. So it should be possible to reduce the shipping cost on small orders.

Because of the high shipping costs, my investment in two silver dollars will not return a profit until silver tips $55 an ounce. Assuming I have to pay shipping to sell the coins, my investment won't realize a profit return until silver hits $60.00 an ounce.

Excessive shipping fees aside, I am having fun owning two silver coins.

The next challenge is figuring out how to dispose of them. My goal is to become a "hawker of gold" ... not the owner of gold.

Wednesday, May 18, 2011

Hawking Gold

Representative Anthony Weiner has a great deal of contempt for "hawkers of gold."

His feigned comtempt pushed my estimation of coin dealers up a notch.

I've been investigating the possibility of becoming a gold hawker.

The problem I see with coin hawking is that one is trading money for money (like for like). Trading makes more sense when one trades unlike things. For example, trading labor for food. I can see a restaurant adding a sizeable mark up to the food they sell because they are adding value and providing something folks with labor to sell may not have.

I could see trading my skill and time for a purse of silver.

But, trading one form of money for another form of money is purely a speculative play.

For trading to benefit the buyer in a speculative play, the margin on the trade must be very low ... too low to support a large number of sellers.

Imagine a coin dealer charging a modest 5% mark up. Well, the price of the metal must rise more than 5% for the transaction to provide a speculative profit for the buyer.

The internet increases efficiency.

Unfortunately metal coins are heavy and shipping costs expensive. Shipping costs can add another 10% to the transaction.

It will take several years of inflation before the investment covers the mark up of a coin dealer and the cost of the transaction.

Regardless, I think it is good for people to have a few precious metal coins on hand; So, I created a page listing Online Coin Shops. I bought coins through each of the dealers. The shipping costs put a limit on how much I would buy through the dealers.

My favorite place for hawking gold is eBay. I like trading on eBay because I am trading directly with other collectors. Sadly, the listing fees and shipping costs put a damper on my gold hawking activities.

It would be a hoot to make some money on the gold hawking page. I fear the transaction costs associated with buying money online make gold hawking an untenable long term business.

Tuesday, May 17, 2011

A Tale of Two Pennies

It was the best of change. It was the worst of change. To Franklin it was a token of wisdom. It will be discarded in an age of foolishness.

This is the tale of two pennies … a coin of paradox and conflict with a heart of copper and a future of zinc.

The copper cent piece was created in the Coinage Act of 1792. At the time, the penny had about the same purchasing power as today's dollar.

The US Founders disdained the old world practice of putting images of royalty on coins. The first US pennies showed images of Lady Liberty. In 1859, the penny bore a Native American motif.

At the dawn of the progressive era, Teddy Roosevelt sought to revamped American coinage to glorify the nation's leaders. In 1909 the Lincoln penny became the first common US coin to bear the image of the US president.

In 1913, the United States established the Federal Reserve and the US gradually moved from sound money to a fiat money and inflation.

Since 1909, the penny has undergone two major design changes: The first change occurred in 1959. In celebration of the Lincoln Sesquicentennial, the US Mint changed the reverse of the penny from bunches of wheat to an image of the Lincoln Memorial.

In 1982, the purchasing power the US dollar had eroded to the point that it cost more than a penny to produce a penny; so, the mint quietly changed the formulation of the penny from copper to a zinc-copper mix.

(NOTE: In 1965, the mint changed the composition of dimes and quarters from silver to clad copper. This led people to hoard all silver coins, and many collectors began hoarding the wheat pennies. Wheat pennies were a rarity by the late 60s.)

The humble Lincoln penny went through two major transitions. There was a much celebrated cosmetic change of the reverse in 1959. There was downplayed change from copper to zinc in 1982. The next change in the penny's future is likely to be oblivion.

My supposition is that, in the long run, the change in metal composition will have a bigger impact on the price of coins than the cosmetic change of the reverse.

This supposition is a bit hard to test. There are some rare dates among wheat pennies. An unsearched roll of wheat pennies would have a large premium over an unsearched roll of memorial copper pennies. Buyers would be hoping to find a rare coin. Testing the market demand for zinc pennies is hard, as the coins are still in circulation.

A proper test would pit several low grade rolls of 1950 wheat pennies against low grade rolls of 1960 copper pennies, against similar rolls of 1980 zinc pennies. I suspect that the difference between the selling price of the copper and zinc pennies would be greater than the difference between the price of the 1960 Memorial and 1950 Wheat pennies.

I thought of trying this experiment on eBay. My problem is that listing and shipping costs are greater than the price of the coins.

I might try this experiment in a few years … after pennies are pulled from circulation.

(NOTE, the mint made the change from copper to zinc mid way through 1982. You need to weigh coins to determine their make up. This brings up the important point. The first step to collecting coins is to buy a digital pocket scale !)

Monday, May 16, 2011

But, She Did Put the Bank in Peril

Enterprise News reports of a bank teller being fired for accepting rolls of dimes that actually contained pennies ... a common scam.

The scam only cost the bank fifty bucks.

On further reading, we discover the teller was really fired because she refused to sign a paper acknowledging that she put the bank in peril.

Both the teller and newspaper reporter thought the term "in peril" was excessive.

In my experience, the warning letter was not excessive.

This article brings me back to the discussion of coin regulation.

The monetary supply is highly regulated. Financial institutions that do anything to misrepresent the value of coins is in peril.

If a bank regulator found a stack of pennies in a dime roll, the bank would find itself in a regulatory hot seat. It would be in peril.

The bank did not understate its case.

The same thing happens when a paper writes an article on a murder suspect and fails to use the word "alleged." Failing to use the word "alleged" puts the newspaper in peril. The alleged murder suspect could sue the paper.

What is amazing about the American media is that it routinely calls for greater and greater regulation ... but balks at the fact that regulations have effects on the regulated businesses.

I wouldn't fire an employee for making a $50.00 mistake. I would fire an employee if the employee refused to acknowledge that the mistake created regulatory peril.

The Art of Measurement

The heart of coin collecting is the weight of the precious metal in the coin. Coins are minted to precise dimensions and bear the marks of governments to help simplify the exchange of precious metals.

Despite the historical significance of the marks, the real meat of coin collecting is the amount of precious metal in the coin.

Since the mass of the coins is of primary concern, the very first step one should take before buying coins is to get a scale.

The first step in buying a scale is to figure out the precision of the scale.

Coin collectors often measure the specific gravity of a coin. This involves measuring a volume of water that is several times the weight of the coin. A silver dollar weighs 26.73 grams. A troy ounce weighs 31.1034768 grams. Your coin scale should be able to weigh a mass several times this amount. You want a scale that can measure 100 grams or 200 grams.

Precision matters. To weigh coins, you will want a scale that can measure to a hundredth of a gram. When shopping for coins, you will often find pocket scales listing dimension like 200g x .01g or 100g x .01g.

Food scales (those used for cooking) usually have dimensions like 1000g x 0.1 grams. These scales don't have sufficient precision to measure the specific gravity of coins.

You can find pocket scales that measure to the right precision for under $20.

I trolled the Internet for scales. I found the best deals on eBay

Saturday, May 14, 2011

Journalistic Fraud

I was Googling around for information on detecting forged coins and stumbled upon an interesting piece of journalistic fraud.

A piece titled "Coin fraud prompts reform efforts" by a propagandist named Dan Browning appeared in a second rate hack paper called "Star Tribune" from Minnaepolis.

I had hoped the piece would give me some ideas on how to detect fraud and forged coins. Instead of news, the piece was partisan nonsense.

Apparently, a partisan politician named Anthony Weiner (D-NY) dislikes Fox News. He launched an investigation into its advertisers. As a result of the investigation, Representative Weiner wanted to pass a silly new law called "The Precious Coins and Bullion Disclosure Act" that would create additional laws to go after his enemies.

The law did not pass. So Weiner responds:

"There is this sense among my Republican colleagues that this is somehow an attack on Fox [Television] and their hawkers of gold, so I think their inclination is to defend it," Weiner said.

What a joke. Weiner is so arrogant that he included a partisan snipe in his attempt to claim his law wasn't a partisan snipe.

The rest of the article is a sick joke as well.

Dan Browning wants us to believe that the coin industry is "unregulated," and claims to be on "a mission to bring regulation to the coin industry."

The truth of the matter is that coins are one of the most regulated items in history.

I know that coins are regulated by governments because coins have regular sizes, with regular weights and bear the stamps of the government that authorized the minting of the coin.

Coins are part of the monetary supply. The government is very strick about anything to do with money.

The idea that coins aren't regulated is a laugh. Coins, by their nature, are highly regulated.

As the stated thesis of the article is an idiocy of the highest degree, I can see no purpose to this article other than as an attack on political enemies labeled "hawkers of gold."

The article fails to mention that the biggest hawker of gold and coins on this planet is a government agency called the US Mint.

The US Mint not only is the agency that produces American coins, the Mint has strict oversight over "gold hawkers" who wish to resell golden eagles and silver eagles. Only a few coin dealers in each state manage to get approval to hawk the gold sold by the mint.

As for the rest of the article.

Anthony Weiner wants "coin dealers to disclose the melt value of the coins they sell, along with any fees and markups on their products."

Weiner fails to mention that the US Mint aggressively markets "presidental dollars" to children. These coins have a deceptive gold colored coating and a melt value of under 7 cents a coin. I logged onto the to find that the US government just released a proof set of the "Andrew Johnson" coin with a "First Spouse medal" for $14.95. Shipping and handling is an additional $4.95.

The United States Government is deceptively hawking a set of two gold colored coins with a melt value of fifteen cents for twenty dollars! That is a 99% mark up!

The set has a legal tender value of $1.00, but the purchasing power of this coin will diminish with time.

The US Mint (a government agency) is producing one of these overpriced sets for every president! Children are being duped out of some serious dough to buy the full set.

Before Representative Weiner starts going after businesses reselling products from the US Mint, he should look at his own house. The US Mint is guilty of the offenses for which he condemns others.

Anyway, I was extremely disappointed with the attack journalism of The Star Journal. I filed this piece of nothing by Dan Browning in the category of Journalistic Fraud.

Just as a forgery is a useless piece of metal fraudulently masquerading as a coin, Dan Browning is clearly a propagandist masquerading as a reporter.

Extra Legal Economy and Coin Deals Gone South

Apparently, much of the current coin dealing in the US takes part in the "extra-legal" economy. This unfortunately state of affairs means that an interest in coin collecting can draw people into risky situations.

The Journal Star reports on a coin deals gone south in Nebraska.

In the first deal, a coin collector met someone at a coin show. They arranged a coin deal worth $27,000 and agreed to meet in the parking lot of a bar. The deal was a set up for a robbery.

In a second case, a coin dealer agreed to meet people in a city park and was attacked on arrival in the park.

These stories horrified me.

But, I am not sure if I was more freightened by the robbery than by the thought of people meeting strangers face to face to engage in a business transaction at a personal level.

Apparently, a primary reason for owning precious metal coins is to have something to barter if our system of fiat money ever went south, in which case we would have to return to direct transactions with each other.

Relearning the art of face to face transactions is probably a good thing.

For example, one thing we should learn about face to face trading is: Never accept the invitation to trade coins in the parking lot of a bar.

Sunday, May 8, 2011

Ready to Start Blogging

In March, the Utah Legislature passed the "Legal Tendar Act" as a symbolic statement for a hard currency.

I registered the domain to explore ideas around currency.

As I studied the market and the rapid rise in silver and gold prices, I got the distinct impression that people investing in precious metals in April were like sheep being led to slaughter.

Sure enough, the corrupt and captured exchanges where prices are set changed the margin requirements and manufactured a massive pull back in gold and silver prices. This manufactured pullback benefit the hedge funds with massive short positions on precious metals. CoinUpdate talks about the manipulation.

Anyway, the manipulations led to a 35% correction in the price of silver ... and I actually feel comfortable returning to the effort I was making on UtahGold.US.

Saturday, April 30, 2011

Auctioning Off The Fine Silver

The price of silver and gold is on the rise; so, I thought it would be fun to talk about precious metals and inflation.

Are commodities really rising or is the value of the dollar falling?

Before doing any blogging on the topic of precious metals, I thought it wise to scour the house and rid it of any precious metals that might be hanging about.

Happily, I discovered that I was gold free.

I discovered, however, that I had an old coin collection that three loose silver dimes, war nickels, and a quarter collection. I also had a few buffalo nickels.

The quarter collection was in two Whitman Folders. It had three silver quarters and twenty four clad quarters. I didn't want to give a nephew a book with a bunch of empty holes that were expensive to fill, so I decided to auction it off: eBay auction.

I am hoping the auction will fetch the melt price of the silver plus the face value of the clad coins. The melt value of the silver is $26, and the face value of the clad coins is $6 (6+26 = 32). Shipping will cost about $5.00.

My plan is to use the winnings to buy a gram scale

I wish to use the gram scale to create an interesting product for a future blog post.

I am doing just a day auction for coins. Here's hoping I bring in enough to buy a scale.

Thursday, April 21, 2011

Utah's Gold Standard!

On March 25, 2011, Utah Governor R Herbert signed the Utah Legal Tender Act which is theoretically a step to re-establishing our ability to trade gold and silver coins as legal tender.

It doesn't really do that as state and federal tax laws makes using silver coins at the value of the silver extremely difficult.

The law appears to allow people to trade old gold and silver coins at the face value of the coin. So I could trade a silver dollar that contains over $36 in silver as a dollar.

The fact that the law doesn't seem to actually do anything doesn't matter to me. I decided to use the new law as an opportunity to blog and neither laws nor reality seem to impede people in exercising their God given right to blog.

Afterall, a global discussion about the differences between silver coins and fiat money might awaken people to the damage our leaders have done to our nation during this progressive era.