« Arab Kings Buy Record US Government Bonds | Main | Federal Reserve Wants To Fight Inflation, No, Join Inflation »



I well remember the dollar debasement of 1965 -- the year the silver in U.S. quarters and half dollars was reduced from 90 percent to about 40 percent. (The silver content in coins was reduced yet again in the early 1970s, and for the same reason -- to up the seignorage [the difference between a coin's melt and face values, which appears as a credit on govt. books] and help finance the Vietnam war without having to raise taxes much in the short term.)

It wasn't enough -- eventually LBJ had to call for a 10 percent income tax surcharge in 1968, which Congress did approve. Even that wasn't enough -- war spending fed inflation so much that Nixon had to impose wage and price controls for years, and then abandon the $35/oz. gold price.

The 1965 debasement caused elderly folks, who'd seen a thing or two in their day, to start hoarding the 1964 and earlier coins.
And sure enough these older coins disappeared from circulation in quantities sufficient to cause a coin shortage by 1967-68!

I remember older friends of my parents, who were about 20 years older than them (and thus in their prime workforce years during the Depression), being very worried by the 1965 debasement and immediately beginning a substantial hoard. (If they were as savvy as I think they were, they sold it in the mid-1970s when the Hunt brothers, those Texas cronies of the Bushes, Perot, and the rest of the military-industrial-oil crowd, tried to corner the silver market and pushed that commodity's price to previously unseen levels.)

Elaine Meinel Supkis

Mark, you are right. We hoarded all silver, too. There was even a penny shortage for a while. And yes, people melted coins (obviously) which is why there are laws against this. Like all laws written so a government can cheat people, the law is dead wrong. This is why I warn people holding gold coins to beware: they can get jerked around by the law in a heartbeat and they will be jerked around brutally if the Fed needs to do this to stay afloat.


"I was very irritated to see the near-Japanese level of the interest rates being offered for my savings."

Interest reflects risk. Your savings aren't at risk, hence the squat-diddly interest rate.

Back in the days before the Great Debacle in the 1980s, S&Ls were managed by the "3-6-3 Rule": pay 3% on deposits, charge 6% on loans, and be on the first tee at 3PM.

Neuro Artist

That is not unlikely at all. After all it did happen before that gold was confiscated. Here is an interesting scenario: the short sellers are unable to physically deliver the gold they have sold on the exchange (after going bankrupt following a steep rise in the gold price), the gold price plumets on the exchange (since the buyers don't know if they are going to get delivery), the physical gold sellers will not know what price to charge, since there is no functioning gold market price setter any longer. The goverment decides to 'help' the physical holders off their gold by offering the last bid price on the 'market', which they just print some new notes for, and they make it illegal to privately hold and trade gold (not so difficult since there is no functioning gold market anyway, they can use that excuse anyway).

Elaine Meinel Supkis

Smith, do you deliberately do stupid or is this sincerely the result of some strokes or other brain damage?

If my money in savings is LOSING PURCHASE VALUE, I am being robbed.

Thank you.

Neuro Artist: you are correct. If I wanted to make lots of money here, all I have to do is have a solution that is fake and the gold solution is just that: utterly hopeless in the end.

It is much worse than mere money games: whoever is holding physical gold and I emphatically include in the mouth like I have a gold bridge that was put in just before the price of gold shot up. It is worth several thousand dollars. Heh.

The Nazis yanked out this gold! The Khamer Rouge bashed this gold out of people's mouths with rocks! I mean, people with guns and power will steal gold literally from one's mouth. So hanging on to gold when things go bad works only if you have your own militia. Ask the Iraqis about this!


Elaine, do you deliberately do stupid or is this sincerely the result of some strokes or other brain damage you incurred back in the fun-filled Sixties? If your money in savings is losing purchasing value you need to find a HIGHER-PAYING INVESTMENT than a savings account.

(I'm surprised I have to tell you this.)


So, how many of those CDO's paying a higher rate of interest do you own, Smith? None? No doubt you have figured out how to beat the 10 to 12% inflation raging across America with your better investments.

I personally do not believe there are any safe investments in the current situation. They all have serious flaws, even the gold coin ones, which will be yanked from the poor at gunpoint.

This is why I keep as little money in the bank as possible. On my income, it is not too difficult, I admit. But still, if I did have more money, I would spend it. Quickly.

Not Student

it seemed that the People is in a bind.

If you put money in the bank, you get robbed by the low interest rates. If you seek higher returns on risky financial schemes, you risks losing all your savings. If you don't trust in saving nor investment, you spend, thus playing right into the hands of the elites who want Americans to be the ultra consumers (Think force fed livestock before they are slaughtered).

In all cases, the Elites (Certain Sachman to be certain) wins and the people lost. I can see no way out.

Ain't a pretty sight.

I agree with Elaine that the only FAIR thing to do now is to increase interest rates, but that will cause a serious meltdown in other financial instruments like all your beloved CDOs and Wall Streets. So it's hard to tell which is the greater evil.

Actually the SANE thing to do is for the American consumers to reduce their consumption rates to global PPP average, but that will likely cause global depression and might destroy USA as a viable economy model. It might be better in a LONG run, but I doubt many people can stomach that.

Not Student

of course I forgot to mention the obvious: Increase the income tax for the riches! Those CEOs that rake in millions a year should be taxed exponentially higher that the poor who get by with less than 50,000 a year.

But since they control the government, it is not going to happen. And there will be further tax cut for THEM. So you have a upside down system over there.

Elaine Meinel Supkis

And close down all those British Crown tax havens and arrest Bush and Cheney and Halliburton executives, etc. Terminate their rule!

Note my next article is all about tax havens and how both the Repubs and Dems protect them, alas.


">So, how many of those CDO's paying a higher rate of interest do you own, Smith? None?"

Correct. There are other investments besides CDOs.

"This is why I keep as little money in the bank as possible."

So where do you keep it then - in a coffee can under the tool shed?

"They all have serious flaws, even the gold coin ones, which will be yanked from the poor at gunpoint."

We're not paranoid or anything, are we?

"...the poor who get by with less than 50,000 a year."

"Poor" is "getting by" on less than $50K/year? Yep - that's just scraping by, all right...


Well, in my case, "spend" means food, housebills, and debt payments with the occasional gift or whatnot thrown in.

My coffee can is not hidden, but it does not contain much in the way of higher denominations.

As for paranoid, being humiliated in a court of law is a great way to find out just how powerful the government is and to what extent it will go to get its way.

Elaine Meinel Supkis

Smith must live in one of those poor, depressed red states.

Smith, $50,000 a year in NYC buys a small closet and eating hot dogs from street carts.

The comments to this entry are closed.

Blog powered by Typepad