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CactusLand
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Gold and the Fed
Jan 8th, 2014 at 5:26am
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Hi,

I wanted to introduce myself, this is my first post here, and I thought a good way to do it would be to put a link to my latest article, Gold Will Break Below $960 Its in the Script

http://www.thecactusland.com/2014/01/gold-will-break-below-960-its-in-script.htm...

It discusses how fiat money is destroying liberty, and gives some examples of how. Look forward to your feedback.


  
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Shiva_TD
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Re: Gold and the Fed
Reply #1 - Jan 8th, 2014 at 9:01am
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Only one flaw in the argument and that is, according to the Gold Bullion Coin Act of 1985 one dollar equals one ounce of silver contained in an $1 American Silver Eagle or 1/5th ounce of gold contained in a $50 American gold Eagle (or 1/40th of an ounce in a $10 American Gold Eagle because Congress can't add).

Congress, under the authority of Article I Section 8 Clause 4 authorizes the "coining" of money and the regulating of the value of that money.

Federal Reserve notes are issued under authority of Article I Section 8 Clause 1 which allows Congress to borrow on the credit of the United States. A Federal Reserve note does not establish the "value of money" which only related to the coinage authorized by Congress which today are American Eagle coins.

According to the IRS a $50 Federal Reserve note and a $50 American Gold Eagle are worth exactly the same amount.

The current laws require redemption of Federal Reserve notes on demand in the "lawful money" (i.e. American Eagle coins) upon demand.

Quote:
Federal reserve notes.......... shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.


http://www.law.cornell.edu/uscode/text/12/411

The problem is that the law is not enforced so Federal Reserve notes, like any promissory note, are being discounted in the market. As noted the "discount rate" does vary over time and has gone from almost $2,000/oz to the current $1,250/oz ($50 American Gold Eagle buy price on Apmex this morning).

As noted the fundamental "value" of an ounce of gold hasn't changed much over time even though the world gold supply has basically doubled since 1950 (as has the world population).

Of course we can, under US law, use the gold standard for any voluntary contracts. Payments of a financial obligation can be defined in the "lawful money" of the United States so long as the contracting parties agree. This fact does introduce some really advantagous tax possibilities. How many people know, for example, that if they purchase an American Eagle coin it is a financial loss they can claim on their income tax form? Of course if they sell it they have to also declare the profit but what if they just keep it as a hedge against future inflation or use it to purchase a new Mercedes in gold coins (my local Mercedes dealer will sell for gold coins based upon the market rate of exchange because it realizes a "loss" on the sale of the car for tax purposes).

It is an interesting topic but, as noted, in truth when "dollars" are being referred to it literally relates to American Eagles and only figuratively refers to Federal Reserve notes. The "Federal minimum wage" actually refers to American Eagle Coinage although these wages are paid for with discounted Federal Reserve notes.

  
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