06 October 2008
Silver Content
The attacks of 9/11 should have taught me something about the weather. It is vastly powerful but not sentient; there is no caring in the gentle breeze or the fine high-quality sunshine of early autumn. It appeared there would be time for a long walk in the sunshine, and a session on the Hog to see if I could really learnt to ride the20thing.
It looked like it was going to be an exceptional Sunday, and the big steel crucifix on the roof of the Assembly of God across the street. The sky behind it was cloudless as the light came up. I pecked at the weekend mail, and thought about the nature of relationships and love, and the chores of the day to come.
Of course the phone rang, before the sun was truly up, and of course, the conversation was about money. I had just come to the end of a rather unpleasant legal struggle over a hundred thousand dollars.
Actually, it was about $86,060.15, though by the time the lawyers got done with it there was another ten or fifteen grand spread around Fairfax County. The settlement involved divesting the content of a retirement account in its entirety and transferring it to The Complainant. The emotion of it has drained away, for the most part.
I have compartmentalized the idea that more than a year’s labor, a hundred thousand rectangles of green, has blown out through the window of Big Pink and into the Fall zephyrs.
The deal was sealed and validated by the Court months ago. There was plenty of money in the account to settle it in full, and I continued to dump money into the account to keep it that way.
That was about the time that things started to go south. Despite putting more than a thousand a month into the account, the value was declining. I became a daily visitor to the investment firm’s web page to see where my money was going. By the time the paperwork came through to actually transfer the money, it was less than the agreed amount of the settlement by a few thousand.
I sighed, wrote a check for the difference, and dropped it in the mail.
It was over, I thought, but of course it was not. The money transferred on Black Monday, the worst day up to that point in the market crisis. According to the call, the brokers who had taken my money had misplaced it. The implication, of course, was that I was liable (if not responsible) for the shenanigans of the financiers but also for the continued decline in the value of the stocks.
I politely expressed disinterest in money that had ceased to be mine, and made preparations to get on with the rest of the da y.
I could not get the concept out of my mind, though. What is money but an idea?
I remember vividly when the linkage to reality ceased. It was 1964, and the event was the introduction of the Kennedy Half Dollar. The United States adopted a silver standard based on the "Spanish milled dollar" in 1785. This was codified in the 1792 Mint and Coinage Act, and by the Federal Government's use of the "Bank of the United States" to hold its reserves, as well as establishing a fixed ratio of gold to the US dollar.
This was, in effect, the first known American use of the concept of a derivative silver standard, since the bank was not required to keep silver to back all of its currency. Remember those golden Autumn days in school that smelled of chalk and old wax in Junior high school? The teachers tried to interest us in the great struggle over the Bank of the United States, and the Independent Treasury Act of 1848, which legally separated the accounts of the Federal Government from the banking system.
There were crises of currency in 1853 and 1857, when the free banking era of international finance began. American banks suspended payment in silver, rippling through the very young interna tional financial system of central banks. In 1861, the Civil War resulted in the suspension of gold and silver to service the public debt incurred to combat the insurrection.
William Jennings Brian railed against the Wall Street Fat Cats in his “Cross of Gold” speech at the 1896 Democratic National Convention in Chicago. The speech electrified America- the issue was whether to endorse the free coinage of silver at a ratio of sixteen to one unit of gold. This would have increased the amount of money in circulation and aided cash-poor and debt-burdened western farmers.
In the throes of the Great Depression, FDR signed Executive Order 6102, which ordered people to turn in their gold to the government at payment of $20.67 per ounce. While there were exceptions for use in the dental and jewelry trades, private ownership of the precious metal was prohibited.
There are those who argue that all the shenanigans of the New Deal were simply a sideshow to entertain as the basic market reconstituted itself over time to become the arsenal that provided munitions for the great war against fascism, but I don’t know. That is about the time that money and monetary policy ceased to be intelligible to ordinary mortals like me. 20
Yawn.
What I did know was that when the Kennedy half-dollar shipped from the mint in 1965, it was a sliver-clad wafer of copper; by 1971, there was no silver in it at all. Nor was there in any of the other coins in circulation, and even the lowly penny is only copper plated zinc.
My Great Aunt used to send us $2 dollar bills on our birthday, and they were actual silver certificates. They said so right on the paper, though the Treasury had rendered the words irrelevant.
It seemed a good idea at the time, and it wasn’t until I had walked and ridden the big bike and watched the Redskins kick the Eagles butts that I had someone explain exactly what had been going on behind the monetary structure, and that there is maybe $50 trillion dollars in shadow transactions that still threaten to unravel.
It was all by intent. It was permitted by law. The potential liability is four times the gross domestic product of the United States.
One of the commentators suggested that was an optimistic view of things. I shrug ged before I went to bed. If that is optimism, I decided I needed to catch up on some sleep in preparation for what is to come.
More on that tomorrow. I have to get off to work in order to dump money into a retirement account that is worth less than nothing.
Copyright 2008 Vic Socotra
www.vicsocotra.com