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Saw your post and link to website. I did not understand the distinction between coin "dollars" and reserve note "dollars." Are some advocating coin reserve over notes for reserves. Why is the coin considered money and the notes are not. In effect are they not both controlled by the Federal Reserve Bank? Thanks for any information. Scott R.


We are talking about two basic kinds of "money" here. MONEY where the units used in trade have a high intrinsic value due to the difficulty of obtaining, rarity and desirability of their content. These are generally the coins, but only where the coins have a high value content like gold or silver with some alloyed metal to make them more durable.

Fiat "money" is everything else. Today's coins, because they are made with cheap materials have no appreciable real value. They have value only until the public no longer accepts them. "Honest" paper money is simply a receipt for the actual precious metal coinage. The bank is a warehouse. The central banks, long ago found out that they could issue more paper than they had coin. Not all the receipt holders wanted their coin at once.

Through inflation and deflation and pretty much every other kind of socio-economic upheaval, precious metal coinage has maintained and will maintain its value because its quantity is held constant or rises gradually due to increases in supply. In times like Imperial Spain the supply of gold increased dramatically from the new world discoveries. The resulting gold glut meant that each unit of gold could be traded for less than before. This is classic inflation. The Black Death that wiped out so much of Europe’s population also caused inflation by artificially causing a gold glut by reducing demand. A side bar is that the Jewish population was largely unaffected because the Biblical sanitary laws they followed tended to keep their communities rat-free.

When coin was precious metal, inflation was generally held in check, however, supply and demand make the value of money fluctuate like that of any other commodity. When people found that they could make "acceptable" "money" by simply printing it, all HELL broke loose. The power of arbitrarily printing money at the hands of government was one of the powers that was severely limited by the Constitution (now generally ignored). When the banks go down from Y2K, there will be an incredible drop in the money supply which will cause its value (what it can be traded for) to shoot up.


In the initial phases of the INCREDIBLE COMING CASH CRUNCH, U.S. fiat money will still be accepted by many. This means Federal Reserve Notes, and the "Johnson Funny Money" base metal coins that currently circulate. Precious metal coins will always trade at or near their "melt value." My recommendation is to have U.S. fiat currency in your inventory for the initial stages and a supply of precious metal coins for the long term with any "numismatic value" or collector coins for when things return to "normal." There is a possibility that melting of coins during Y2K may make the collector coins even more valuable after Y2K, but you may have to wait twenty years or more. Even today Roman coins are relatively cheap.

Precious metal coins trade independent of their denominated face value. Fiat coins will come to trade at the price of their metals, too (that of nickel, copper, aluminum, and zinc).

Some of the best explanatory writing on the ins and outs of money has been done by Harry Browne, even though he and his affiliated organizations are still in the dark on Y2K. Try How You Can Profit from the Coming Devaluation or You Can Profit from the Coming Monetary Crisis that were written back in the early 1970's. Then you can go into something tougher like Franz Pick's The Triumph of Gold.

I hope this helps. Thirty-five years or so ago I learned "money and banking" from an Argentine inflation victim, and that has given me some rare insight on these issues. It has served me well. Dr. Beckwith told of how his wealthy family invested large sums in whole life insurance and annuities to provide for his education. When he cashed in the contracts, he was able to buy part of a pair of shoes with the proceeds. They should have bought gold.

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