Chapter Five – Functions of Money

The greater the purchasing power of our money – the greater is our wealth

Debasement of the currency by inflation results in a loss of purchasing power

Loss of purchasing power means loss of wealth

Money has four (4) basic economic functions

1. Medium of exchange
2. Measure of value
3. Standard of value
4. Store of value

Barter or direct exchange has three (3) basic weaknesses

1. Mutual coincidence of wants between traders is necessary
2. Differences between various goods complicated direct exchange.
3. Properly dividing and distributing different goods between parties was problematic

Indirect exchange overcomes the above three defects of barter

A subjective value system determines the usefulness of goods one to another

Goods of less utility or value exchange for goods deemed to have more utility or value

Neither utility nor value are intrinsic – both are extrinsic characteristics

Value is the comparison of the utility of one thing to another

In every exchange there is a ratio of two numbers or quantities

This ratio represents both value and price

The common medium of exchange (money) is the measure of value

The standard of value is that which is most likely to continue to exchange in the future, at the present ratio or value, thus retaining its purchasing power

Money is a store of value into the future by retaining its purchasing power

This facilitates turning savings back into income in the later years of life

As a common medium of exchange and measure of value, money transfers value through space in the present

Money as a standard of value transfers value through time

Money as a store of value transfers value over time

Money has a juristic or legal function as well: it is that which is used to discharge debt

This juristic function of money is referred to as legal tender

 

The Money Power – Chapter Six

Money is a representative unit-of-value of goods that are exchanged

Money is a receipt for the value of other goods

The purchasing power of money is literally the power to purchase

The power to coin money is not the same as the power to emit money

The power to issue money is the power to create money

Congress was never granted the power to create money

Congress was granted the power to borrow money

If Congress has the power to create money, why would it ever need the power to borrow money?

Money is private property – it is not the property of the State

The State should not have the money power – the power to create money

The money power is one of the unalienable rights of We The People

The people are Sovereign and the State is subservient to the people

Power tends to corrupt and absolute power corrupts absolutely

The money power should reside with the people for whom it exists – and by whom it exits

There exists a natural separation of money and State

Legal tender laws force obedience that bridges the separation of money and State

We The People must demand that our unalienable right to the money power be returned to us

 

Problems With Debt Money – Chapter Seven

The five most important attributes or functions of money are:

1. Medium of exchange
2. Measure of value
3. Standard of value
4. Store of value
5. Legally accepted means of payment of debt

A sound monetary system is one in which the money-unit performs all of the above functions

The main problems with the present day U.S. Federal Reserve Notes or dollar bills are:

• Legal tender status for Federal Reserve Notes should not exist, unless approved by We The People by a constitutional amendment.

• The State approved monopolization of the credit and money supply by the Federal Reserve should not be allowed without the approval of We The People.

• The lack of a non-political free market unit-of-account without forced legal tender laws using the power of the State for enforcement.

• The unit-of-measure-of-value and the means-of-payment are presently two different things.

• The former is a measure, like an inch or a pound; the latter is either a commodity or a credit instrument. They should be the same entity.

• The use of fractional reserve lending should either be abolished or approved of by the people through a constitutional amendment, including full disclosure to the public on exactly how it works, and a choice if the people want to use it or not.

Besides, the five (5) original functions of money, to be Honest and Sound Money the money-unit most also perform the two following roles as well:

1. Unit-of weight
2. Unit-of-Account

The unit-of-account is a unit of measurement of market value. Goods for sale in a market are priced using a unit-of-account. Value is measured by the seller and communicated to the buyer as a price denominated in the unit-of-account.

When the value of a good is accepted by common consensus, to measure or compare the value of other goods, or when its value is used to denominate the payment of debts, then the commodity is said to be functioning as a unit-of-account.

A debt instrument or an IOU should not be used as a unit-of-account

In a free market the unit-of-account is simply a unit-of-weight

The unit-of-weight is simply what it says: a unit-of-weight of a specific finesse of silver or gold per the Constitution and the Coinage Act of 1792

No other names should appear on the money-unit other than its unit-of-weight

The unit-of-weight is the purest and simplest standard. The Constitution calls for gold and silver coin, according to honest weights and measures

The Coinage Act of 1792 defines the standard weight to be 371.25 grains of pure silver

The Silver Dollar Is Defined as the Constitutional Dollar

Honest Money Has The Following Attributes:

• The unit-of-money is the same as the unit-of-weight

• The unit-of-weight is in accordance with the Silver Standard of the Constitution

• The unit-of-weight is the same as the unit-of-measure

• The unit-of-weight is the same as the unit-of-value

• The unit-of-weight is the same as the unit-of-account

• The economic and juristic definition of money is the same unit-of-weight

All aspects of money are the same: a unit-of-weight – no other names are on the unit-of-weight – only its weight and finesse

Both the rates of exchange of silver and gold must float freely according to free market dynamics

A constitutional amendment is needed for the above

 

Fractional Reserve Lending – Chapter Eight

Reserve requirements have long been a part of our nation’s banking history

Depository institutions maintain a fraction of certain liabilities in reserve in specified assets

The Federal Reserve can adjust reserve requirements by changing required reserve ratios, the liabilities to which the ratios apply, or both

The largest amount listed is 10% percent, which means that the banks get to loan out 10 times the amount they have on reserve

If more than 10% of depositors demand their money at the same time, it will be found out that the banks do not have that amount of money on deposit

The banking system appears to be solvent – but it is not liquid – it cannot be – it is impossible because of fractional reserve lending of money they do not have

This is why the words “emit bills of credit” were prohibited in the Constitution

This is why Congress stipulated a system of honest weights and measures – of silver and gold coin – of Honest Money

Because of fractional reserve lending, the bankers get to lend out that which they don't have

In addition they get to charge interest on it

Creating money by fiat does not create wealth – it creates DEBT

By Douglas V. Gnazzo