Friday, November 30, 2012

Worthless US Dollar on Display

Congress has been engaged in a recent debate over whether or not to end production of the paper US dollar in favor of a $1 coin. This may get hard money proponents excited initially but a closer look shows that this debate offers no solutions to the crippled US dollar and simply displays how worthless it has become.

From Yahoo!:
"Congressional auditors say doing away with dollar bills entirely and replacing them with dollar coins could save taxpayers some $4.4 billion over the next 30 years."
The reader may be asking his or herself: How will replacing something that's supposedly worth $1 with something else that is supposedly worth $1 be any cheaper? Great question. The simple answer is that the US dollar is not backed by anything - it costs more money to make the money than the money is actually worth!
"Several lawmakers were more intrigued with the idea of using different metal combinations in producing coins.

Rep. Steve Stivers, R-Ohio, said a penny costs more than 2 cents to make and a nickel costs more than 11 cents to make. Moving to multiplated steel for coins would save the government nearly $200 million a year, he said."
When one thinks of money, they usually think of something that is actually worth something to someone else; historically, gold and silver has been used as money throughout the world. However, the US dollar is money because the government says so. The US uses a fiat currency system ("fiat" literally meaning "a decree"), printed at will by the Federal Reserve and US Treasury with  inflationary consequences. This argument in Washington over how to make fake money cheaper simply underscores the fact that the money we use today is not worth the paper or metal they are printed on.

Of course, no one in Washington has used the opportunity to talk about the value of the US dollar. Instead, those in Congress are debating the pros and cons of having paper or metal in one's pocket.
"Rep. Lacy Clay, D-Mo., said men don't like carrying a bunch of coins around in their pocket or in their suits. And Rep. Carolyn Maloney, D-N.Y., said the $1 coins have proved too hard to distinguish from quarters."
This aspect of the discussion would be hilarious if it was not so frustrating. Here is a novel idea: How about letting the market and the consumer decide what form of money is most preferable? To do this, competing currencies should be introduced to insure that the most effective and valuable medium of exchange is available.

In the end, it does not matter if the US dollar is made of paper or metal if it is going to be backed by nothing but a government decree and a Federal Reserve system that puts it in a constant state of inflation. Making US fiat money with different materials may save Washington a few bucks but this debate misses the larger point of why the US dollar is devalued to the detriment of the consumer and the ultimate risk of total collapse.

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