Why do individuals accept and use USA monetary tokens as money in their everyday lives? Why isn't gold or another real substance used? Does the USA actually prohibit the exchange of labor and other goods for gold and silver, and if not, why don't we see such exchanges occurring?
Thanks.
Egon
Egon: Alright, that was a good round of responses. I'll try to summarize the points which currently make partial sense to me: -USA Legal tender policies prohibit contracts which require either of the parties to surrender gold
Alright, that was a good round of responses. I'll try to summarize the points which currently make partial sense to me:
-USA Legal tender policies prohibit contracts which require either of the parties to surrender gold
This is not the case. The gold clause prohibition was ended circa 1976. If you want to denominate a contract in gold nowadays, you can. As always, check with a lawyer before you engage in any business which can get you sued by your competitors or their cronies in gov't.
-USA monetary tokens have an officially enshrined "legal tender status," which apparently means that all individuals must accept the tokens in exchange for any other goods rendered (thank you, Snowflake, for the wikipedia link)
Yes, but legal tender is not very important nowadays because Federal Reserve Notes (FRNs) already have a complete currency monopoly. Where legal tender status matters is where you have multiple currencies of varying quality co-circulating. The legal tender status has a price-fixing effect, "one copper-diluted coin minted by the king is exactly equal in value to a standard pure gold coin at par." Usually, the king will exercise self-restraint and dilute the coins just slightly enough to prevent outright rebellion but still pocket a handsome premium from the debasement.
-The USA imposes tax disincentives on the exchange of gold, including "capital gains" taxes which affect gold
Gold is not singled out for special treatment by capital gains tax laws but it suffers with every other commodity.
-Contracts requiring the exchange of gold are not enforceble in USA federal, or state courts
This is simply false, as far as I understand the law since 1976.
Do I consider USA monetary tokens to be something other than dollars? The answer is yes. A USA monetary token (or a Union monetary token or federal monetary token, whichever you prefer) is any physical object which legally represents the imaginary substance which the USA declares into existence as money. USA monetary tokens include pennies, nickels, dimes, quarters, John Fitzgerald Kennedy 50 cent pieces, and green pieces of paper with various numbers printed on them; however, these tokens are not actually, as far as I can ascertain, the substance which is theoretically exchanged in modern commercial transactions. A "dollar" is not a piece of paper or a substance or medium of itself per se; it is a measurement of mass or weight similar to a "gram" or "ounce." The Confederation of Columbia (that is, the federation of states under the Articles of Confederation and Perpetual Union, 1781-1788, also ambiguously referred to as "the USA"), originally defined 371.25 grains of fine silver as a "dollar" of silver. In other words, back then the word "dollar" was merely a substitute for "371.25 grains," a measurement of mass or weight (I'm not sure which one right now). Documents (pieces of paper) printed up by states and private corporations represented their holders' entitlements to specific quantities of gold or silver. In other words, if I, say deposited 500 grains of fine silver into my neighbor's vault for safekeeping, s/he would manufacture a slip of paper or receipt enshrining my entitlement to withdraw the substance upon demand (I realize that this explanation may be painfully long and obvious for some, but I'm just making sure that we're on the same page here). In this circumstance, the piece of paper, or "token," is not the good itself but rather represents my claim to a particular substance completely separate from the token. Similarly, in today's market, the pieces of paper which we call "dollars" are not the actual "dollars." These pieces of paper only represent specific quantities of a hitherto unnamed and imaginary substance which I have denominated "Usonian Farcia" (my introduction of a new term is a result of there being no other term previously advanced for the imaginary substance represented by the tokens which most people term "money"). Thus, a green piece of paper with a picture of George Washington and the number "1" on it represents one dollar of Usonian Farcia. I hope I've made it clear by this point that such paper is not the substance being exchanged. (If this is confusing to anyone, or if someone thinks I'm outright incorrect, I would be happy to clarify any points of confusion or contention.)
Good luck with all that.
Mises Pieces suggested that the USA actually "prevent private citizens from creating contracts that specify remuneration in the form of gold." Does the term "private citizens" mean only USA citizens, or does it also include USA "residents," or does the prohibition apply to all exchanges made on USA territory, regardless of the citizenship or residency of the participants? Also, does the prohibition extend to all real substances, such as silver, aluminum, salt, etc. or just to gold?
Mises Pieces is mistaken, as far as I can tell. Otherwise, the commodities exchange and futures markets and gold ETFs simply could not exist.
scineram stated, "Dollar and dollar denominated assets are money. There is not much more to it." The statement leaves me perplexed and there is not much I can do to clarify my misunderstanding. Moving on.
Sure there is. The Austrian definition of money is: That good which acts as a medium of indirect exchange. If you want clarification, I recommend this article for a brief, accessible introduction to the Austrian conception of money.
Smiling Dave said, "if you pay in gold both sides have to pay tax ." I need to clarify the meaning of this statement before I can say that I understand it. What kind of "tax" has to be paid? Is there a special federal tax on the exchange of gold for other commodities, or is Dave just referring to state sales tax? Does Dave's statement mean that if I, a USA citizen, walk into the restaurant of Matthew, another USA citizen, located in Seattle, and exchange five grams of my gold for one of his sandwhiches, then I must surrender a part of my gold to the Union, and that Matthew must also surrender a part of his sandwhich (or some other commodity including USA tokens)? Also, does this "reflexive" tax apply to exchanges involving substances other than gold (say, iron for bread)? Sorry if I seem naive or nitpicking in this post, but I'm really just trying to understand this, and the truth is, I don't. ... Clayton B mentioned "capital gains tax on gold and other commodities." What does this mean? How is such a tax levied and in what circumstances? Clayton B seems to be alluding to the existence of a federal sales tax when s/he states, "notes are the only duty-free asset one can hold. Any other asset must be valuated at market price (as denominated in FRNs) and taxed upon sale." Am I misreading Clayton B's post?
...
Clayton B mentioned "capital gains tax on gold and other commodities." What does this mean? How is such a tax levied and in what circumstances? Clayton B seems to be alluding to the existence of a federal sales tax when s/he states, "notes are the only duty-free asset one can hold. Any other asset must be valuated at market price (as denominated in FRNs) and taxed upon sale." Am I misreading Clayton B's post?
So, the current tax law on barter is that any goods exchanged in barter must be valuated at their "fair market value" and the recipient of each good must report this FMV as income on his income tax. For example, let's say you exchange a TV for my sound system. The TV has a FMV of $500 and the sound system has a FMV of $350. You must, under current tax law, add $350 to your income tax in the "Other Sources" field and I must add $500 to my income tax under the "Other Sources" field. However, if I simply purchased the TV from you for $500 in FRNs, only you would need to add the $500 to your income and the exchange would have no tax consequences for me.
To see why this is a problem for gold, imagine that you have a car you want to sell for $5000. I can pay you with 5 gold coins or with $5000 in FRNs. If I pay you in gold coins, then it is a barter transaction, not only must you report the $5000 in gold coins as income at their FMV but I must report the FMV of the car as well, which is $5000. If we had used FRNs, the transaction would have no tax consequences for me, as I would merely be buying, instead of bartering. So, the tax consequences have doubled by using gold coins instead of FRNs, right off the top. In addition to this, let's say you hold onto the gold coins for 1 year. In the course of a year, the Federal Reserve increases the money supply and the dollar-value of the gold goes up by 5%. When you exchange them for something else, their FMV will now be $5250. You will have to pay capital gains tax on the $250 "profit", which is no profit at all as long as it is due to expansion of the money supply.
Clayton -
Saying that a piece of paper is a dollar is like saying that a receipt is a kilogram. A dollar is a unit of weight measurement for some kind of substance, just as a kilogram is a unit of mass measurement. Once again, a piece of paper represents, but is not of itself, one dollar of the imaginary substance which has no name. Also, how could you say that you have $500 dollars in your checking account when there is no physical paper sitting in a box at the bank (which there is not)? The imaginary substance which serves as our money is declared into existence by banking organizations under the auspices of the directorate of the Federal Reserve (someone correct me if I'm wrong here). It is only partially represented by paper and coins. The rest is purely imaginary, existing only on a digital listing inside a bank's computer. The existence of imaginary money in what is termed a checking account in the USA, among several other things, should be proof enough that the "dollar" is not a piece of paper. This is only one of several points which I have brought up in the course of this thread.
A dollar is a unit of weight measurement for some kind of substance,.... that was a definiti9on and still is for some i guess. does the govt use a different definition now?? is a dollar a broadly defined unit of a currency?? the paper manifestation included in that definition.
as to why do individuals accept the original 'whatever the" us paper token is question....does te poster accpet any type of paper and coin tokens, from the us or otherwise???
if so why? that may answer part of the question.
For those who haven't been following this post, my question has already been answered.