The Art of Clipping Coinage
by Sol Palha
with Alan Lunt, John Tyler & Art Soukup

February 18, 2004

Sure of their qualities and demanding praise, more go to ruined fortunes than are raised.
Alexander Pope 1688-1744, British Poet, Critic, Translator

In the good old days when payment for goods were made in Gold, people still tried to find ways to cheat the system. Merchants and other crooks would look to shave some of the gold of the coins or replace some of the content with lead etc.

It seems the need to rob and cheat each other is wired into us and as time passes by, we just seem to perfect this art. Most individuals are not really looking to help their fellow brothers; rather they would be only too happy to bury them as soon as possible.

The feds have taken this simple principle, turbocharged and modernized it They simply starting backing the US dollar with less and less gold, until they found out that the world was dumb enough to believe that Gold was useless. They then removed the Gold standard completely and the world did nothing. Technically one could argue that the US dollar is still backed by Gold. The problem is finding out how much Gold is really stored in Fort Knox, for all we know more Gold than stated has been sold of and/or replaced with lead bricks. Even if all the Gold were to be there, the price of Gold would have to go up several thousand dollars to truly back the US dollar.

The Feds have just found a clever way of clipping gold coins. Instead of slowly stealing a little bit at a time, they just went for the jugular and took it all. The worst part is the masses sit in frozen stupor and actually clap their hands and praise these arrogant swine’s.  If you think the world is going to wake up anytime soon, you are in for a rude awakening. Wait for my follow up essay that will deal with two-topics investor sentiment and the average Joe’s out look on Gold. (I spent about one month on the road, mostly in Florida collecting data on investor sentiment). The average person has no idea of what Gold truly represents and so it is going to be a long slow protracted battle.

One thing most people forget and on occasion it slips my mind to, is that the Feds are a group of very evil, very smart and ruthless individuals. So do not think they will just bow down and drop dead. They have had the luxury of studying many worthless paper currency blunders that were committed in the past and have now perfected the Art of Defrauding and Robbing a Nation and its people of all their assets. In another follow up article I will also speak of a tool that the Feds have come out with that could be Gold’s nemesis.

In the end the only group of people that will win any battle are non-biased investors and that means you should not be a bear, a bull or bug for that matter of fact. You should simply be a cold calculating investor. Forget about all this “let's stand together BS and fight to the end principle.” The only thing left standing will be the marker on your grave. In the market you do not stand together, because ”it’s the winner take all principle” that prevails. Those that try to stand together will simply find themselves in the sights of a plethora of machine guns. A market means that at the end of the day for every dollar won, someone has to lose a dollar. So no matter what camp you think you are in, no amount of happy clapping will get you into the promised land, unless you open your eyes and your mind and learn to trade in an unbiased way. There are a few good times to win, but there is always a good time to lose and the market is riddled with the bodies of losers who thought they would end up winners.

Victory has a hundred fathers but defeat is an orphan.
Galeazzo Ciano

Clipped Coinage
by Alan Lunt

Clipping coinage, or debasing a currency is the art of the modern age. Little do the perpetrators realise that time after time throughout history each attempt has ended in failure. Before milling was placed around the edge of gold coins people used to shave the coins, reducing the gold content of each coin making them less desirable to hold. Clipped coins were recognised as bad money and they were discounted. In Germany the cunning money makers added lead to the gold, ostensibly to increase the money supply, that failed when the result of that clipping of the gold content lead to hyperinflation. In Spain when the new gold arrived from the new world the influx of money reduced the value of gilder. In fact each time people have "made" money they have killed it's value.

Enter the age of the Central Banker. These men and woman have one task to perform and that is to increase the monetary base. By increasing that base they encourage debasing of the currency thereby causing inflation. Governments are not immune from encouraging their bankers to print money. The added money can be spent by Government on "much needed social programs". Finance ministers surely know that they are stealing the savings of their constituents by inflation reducing the value of money. It is a tax, there can be no other conclusion. An insidious eating of the value of money gnaws at the core of a sound economy. It creates an "incentive trap". The incentive is to spend now and not save a bean, as the bean looses value, or as most people see it prices rise. It drives people to borrow money as they fear prices will get away on them if they hold off from purchasing: be it stocks, property or consumables.

All this "pushing to purchase" has created a credit society. The most important thing a person can have is a credit record. How ludicrous. I know of people who have millions, they never borrowed anything, yet they are deemed to be a credit risk because they have no credit record.

???????

A new age is dawning, it is a slow bloomer, but debt will become a dirty word as the Kondratiev Winter starts to bite. As people become unable to pay off the debts at ever increasing interest rates the money lenders will start to fail. The initial indicators will be misread, but bad policy by lending institutions will start to be recognised. As an example the West Pac Banking Corporation was flush with liquidity, their advertising ploy was to paper the walls of the banks with posters proclaiming "How Landlords Get Wealthy". The subtle message was that if you were renting you should be buying and not contributing to your Landlords wealth. The message also suggests that prices never fall and interest rates never rise. How stupid is that? Is it greed that drives people to leverage themselves to the hilt, or is it fear? Fear of being left behind or greed for the potential gains. Either way it is the unacknowledged knowledge that inflation will eat away at the core of their finances if they do nothing. We have been conditioned from when all vestiges of a monetary standard were wiped internationally in the early 1970's. The chronic inflation that followed is still remembered by the baby boomers, the values of saving were whipped from all thought processes and not passed down to the next generation. Oh the web that has been weaved.

What happens when the word "value" is not tied to the word "debt?" Value is something that is intrinsic and lasting, not something to be debased at the whim of socialistic morons. The message is clear, we need to be re-educated to the true meaning of the word inflation. Rising prices is a result, not the cause. The cause is clipping of the currency, printing money. Look no further than your elected leaders. According to David Bond,  and if history is any guide, the life-span of a fiat currency since Roman times, from naissance to collapse is about 30 years. New Zealand coinage came into decimal currency on 10th of July 1967. Copper/Nickel. Next to valueless. Units of exchange that have no base. Clipped currency.

As the renowned economist Ludwig von Mises warned us decades ago: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." [Human Action, Regnery, 1966, p. 572.]

The entire world economy rests on the consumer;
if he ever stops spending money he doesn't have on things he doesn't need - we're done for.
The Mogambo Guru
Professor Richard Dougherty

The time to worry has past; the time to plan is NOW.

© 2004 Alan Lunt
Guest Contributor at the Tactical Investor
Email

The Holey Dollar
by John Tyler

No folks, I did mean “Holey” rather than “Holy”, although the dollar is given God-like status by many.

The dollar I refer to is a more historical example of clippage. The new governor of the Colony of New South Wales, Lachlan Macquarie, in the year 1809 inherited a difficult money problem (has there ever been a simple money problem except not having enough?). There was just not enough money around. As soon as a silver dollar surfaced, it was traded for the essentials of survival in a new land, and exported away by the trader for a huge profit. As a result, there was no coinage in the colony, and the troops had to be paid in rum!

Like the present day USA, the colony of New South Wales , needed imports to survive. Unlike the USA however, the defiling quality of the monetary printing press was yet to be discovered, so Macquarie hatched a cunning plan.

Macquarie imported 40,00 silver Spanish Dollars, and had a convicted forger punch out the center of the dollar to create a lower denomination coin, the “Dump”. This was over stamped with the colonial crown, and the internal rim of the now “Holey Dollar” had “New South Wales “ stamped.

So we see the use of a forger make 1 + 1=3, and at the same time devalue the currency to anyone who had previously been exporting  the silver currency for profit. The guarantee of government also became the alchemical philosopher’s stone, creating value from more common elements. This friends, was done by the USA when the dollar/gold link was severed.

The great irony is that to collectors, a Holey Dollar is now worth $100,000 and a dump $40,000.Who knows what gold will be worth after it has been “clipped” from the dollar?

An example of a “Holey Dollar”.
Only 350 survived as they were recalled to the smelter’s pot.

© 2004 John Tyler
CEO www.infognome.com
Consultant to  www.trader007.com

Webster's 1913 Dictionary
Definition: \Spe"ci*e\, abl. of L. species sort, kind. Used in the phrase in specie, that is, in sort, in kind, in (its own) form. [The king] expects a return in specie from them'' [i.e, kindness for kindness]. --Dryden. {In specie} (Law), in precise or definite form; specifically; according to the exact terms; of the very thing.