How to Explain Fiat Currency to Silverbugs

by: Otto Rock August 28, 2008 | about stocks: SLV    

Otto Rock

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1) Show them a 1923 Silver Dollar (I have one right here). 
 
2) Ask them how much silver is contained in the coin. 
 
3) Congratulate the first one that says 24 grams (precisely it's 26.7g and 90% pure silver = 24.03g). 
 
4) Ask them how much the contained silver is worth today (making sure you're not talking about its collector's value; my example has been valued at around U$300, but a truly perfect mint example of the "freedom dollar" can go into the thousands). 
 
5) Congratulate the first one that says "over ten dollars" (in fact, using today's $13.76 London silver fix and doing the necessary calculations, it works out at U$10.63). 
 
6) Ask them how much it seems the silver in that dollar has risen in dollar value in the 85 years since it was minted. 
 
7) Congratulate the first one that says "over 90%" (90.6% if my quick math is correct, but there are a couple of variables), and then go on to say that apparently, and according to the pretty empirical evidence shown by that silver coin, it sure looks like the dollar has lost 90% of its value in the last 85 years.  
 
8) Ask them to look around. Check the room, the street where they're standing, the city and the people. Ask them whether there has been a general improvement in the standard of living in the last 85 years, considering the economy, healthcare, education, technology and any other measurement by which we tend to gauge that thing called "progress".  
 
9) Ask them why they think the financial system will collapse if the hated fiat dollar loses another 90% of its worth in the next 85 years. 
 
10) After a few minutes, I will guarantee that you need to tell one of them, "No, it's not a trick question."

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This article has 34 comments:

  •  
    Aug 28 08:11 AM
    Ask them, especially if they are younger than 50, if they are willing to pay the national debt, or even the interest, from their taxes????

    You will probably get a blank stare, cause they don't understand!!!
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  •  
    Aug 28 09:40 AM
    Why not ask what is the Federal Reserve & What has been the effects on the USA?, from the time Prsident Wilson sold His Nation Out? Then Quote Wilsons own words! Then you will get a blank stare!
    Reply | Link to Comment
  •  
    Aug 28 09:52 AM
    Ask them if the Federal Reserve is a federal or private institution. Ask them if you can buy a good suit with the value of an ounce of gold today as you could once upon a time.

    Ask them if they know what the real rate of inflation is or even the nominal, federally announced rate of inflation (5.6 percent) and if they can make that with the interest on a Treasury bill.

    Ask them if they want to be duped by the federal government (no offense meant to our great and wonderful fovernment).

    Ask them if they want to bail out all the banks that are set to fail in the coming months.

    Ask them what they think a better standard of living is. More and bigger TV screens? Or affordable health care, affordable housing, honesty in government and markets, a decent future for their kids?

    Actually, we're talking about precious metals bugs. They already know the answers to these questions, so never mind.
    Reply | Link to Comment
  •  
    Aug 28 10:48 AM
    While you are at it, just for laughs, see if the can name the currencies of Europe or Asia.... I saw a routine similar to this on one of the late night talk shows and I couldn't stop laughing at the inane answers to what appears to be very, very simple questions.
    Disturbing.
    Reply | Link to Comment
  •  
    Aug 28 11:16 AM
    Excellent post. Of course the usual dour complainers will all appear to wax hysterical about the admittedly high mational debt..but these same morons never manage to compare their lot in life, standard of living, opportunity, quality of life, etc etc etc etc to the REST of the planet's inhabitants.
    Reply | Link to Comment
  •  
    Aug 28 11:18 AM
    Then ask them, "how many fiat currencies have survived longer than 50 years?"

    (This is not a trick question).
    Reply | Link to Comment
  •  
    Aug 28 11:20 AM
    PS. Our clock started ticking in 1971.
    Reply | Link to Comment
  •  
    Aug 28 11:24 AM
    the point is well taken, but the past is not the future. the great standard of living we have enjoyed (and fought for) was not the result of fiat currency. i would argue that we enjoy the things we do in spite of the feckless leadership we have subjected ourselves to over the past 40 years. it is the policies of this most recent period - the actions of an already rich and now arrogant nation - that worries me.
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  •  
    Aug 28 11:30 AM
    Whats disturbing,is the amount of our Nations youth,have never been taught the Real History of this Great Nation,nor have a clue about what the Fed Repersents! Its not a matter to be taken with a grain of salt! It will be the Youth,that will pick up this broken Nation, after the Fed has completed its final move! Will they be smart enough to forget the lies higher ED Teaches?
    Reply | Link to Comment
  •  
    Aug 28 11:43 AM
    sure, I can live with another 90% in another 85 years. That's about 1% a year. Oh wait, I remember gas and food costing less than half of what it does today in the late 90s. We better slow it down. We shaved off near 50% in the past 10 years. We'll hit your mark 60 years early.
    Reply | Link to Comment
  •  
    Aug 28 12:12 PM
    Banks are failing left and right and this country along with it's citizens are up to their red necks in debt and there are still arguments about the wonderful standard of living we enjoy????
    I could enjoy a better standard of living starting today if I was willing to charge up to my limits on all the credit cards I could apply for!! Even more so if I were like the Fed and could print my own money when necessary....
    Pretty soon it all catches up to you... this is what is happening and most of this country just doesn't get it. Pay backs are H*ll.
    Reply | Link to Comment
  •  
    Aug 28 12:23 PM
    MikeL:

    What absolute drivel you pathetic moron.

    Why AREN'T we comparing today's American's situation to that of Americans 100 years ago when there was NO Inc Tax, NO IRS, NO private unaccountable Fed or it's usury interest expense and parabolic unpayable debt. I say stiff the Fed and it's shareholders - Abolish the Fed now, the bastards have made several lifetimes of wealth for themselves - put em in the wall.

    And w/o the above there would have been no being used by the Brits and Rothchilds all to hand them a chunk of Palestine, nor bailing out the limey bastards allowing the pound to have it's pre-war pre-inflationary value restored.

    The NY/London banking elites have been robbing the world for a century now, history's bloodiest ever. You see what greedy bastards do when they have unlimited credit card central banks to indebt generations of the yet unborn.

    They are ALL criminals and traitors to freedom - period.
    Reply | Link to Comment
  •  
    Aug 28 03:19 PM
    9) Ask them where they would prefer to store their wealth if the fiat dollar loses another 90% of its worth in the next 85 years.

    10) After a few minutes, I will guarantee that you need to tell one of them, "No, it's not a trick question."
    Reply | Link to Comment
  •  
    Aug 28 03:50 PM
    9) Ask them why they think the financial system will collapse if the hated fiat dollar loses another 90% of its worth in the next 85 years.

    UH, ok, I'm a silver bug. But I DO NOT think the financial system will collapse if the dollar loses another 90% of it's value in the next 85 years. So, there is clearly something about silver and fiat money that you do not understand.

    Furthermore, the assumption in the question is that the dollar has lost only 90% of its value in the last 85 years. That may be true for silver only, but is not true for the value of the vast majority of things. It is closer to the truth that the dollar has lost about 98-99% of it's value since 1913, as many things cost 100 times as much. And still, the financial system has not collapsed. This implies that silver can rise 10 times, just to catch up with past inflation, nevermind future inflation, so once again, the person who is asking the question has a lot to learn.

    Furthermore, we silverbugs do not fear "financial armageddon". Only those in paper do. We sincerely believe that the economy will get better if paper money collapses 100% of the way, and that the financial system would be greatly improved, and the economy greatly improved, with the return to honest money, so once again, the question is greatly flawed.
    Reply | Link to Comment
  •  
    Aug 28 06:17 PM
    Ask them when was the last time that the silver dollar was the same price. It was 28 years ago in 1980. Thus silver has not gone up for 28 years. What a wonderful investment.( grin)
    Reply | Link to Comment
  •  
    Aug 28 07:59 PM
    We're 60 trillion dollars in debt. I guess that doesn't matter. We're this far in debt because our government uses credit instead of money to buy everything.

    Sure, things are relatively grand now - it's grand when you're spending money on credit cards, it when you run out of credit it gets miserable.

    I'd also like to point out that when my mother started working in the 1950's, she was paid minimum wage. That was $1 an hour, or, on the gold standard at the time, $20 an hour. Has life really improved? Why? Because you have a flat screen tee vee?
    Reply | Link to Comment
  •  
    Aug 28 08:28 PM
    CLH, I'm not even 28 yet. So I could care less who paid what for Silver in 1980.
    Reply | Link to Comment
  •  
    Aug 28 08:44 PM
    Otto proves once again that his skull is impervious to facts and reality.
    Reply | Link to Comment
  •  
    Aug 28 10:54 PM
    If you are truely interested in learning more about the history and potential future of our fiat money then you absolutely should visit this site:
    chrismartenson.com

    Watch his presentation called "The Crash Course". I found it very eye opening.
    Reply | Link to Comment
  •  
    Aug 28 11:05 PM
    First off genius, your Morgan went up 906%, not 90% (or else it would be worth $1.90). Google "how to calculate simple percentage."

    Let's use an example of four 1964 silver quarters (that equals one dollar, Otto) that silver is worth $9.95 today or 895% more in just 44 years.

    1) Ask Otto if he has any idea how to calculate the annualized return on the silver contained in the coins.

    2) When you get tired of waiting, tell him it's 5.36% (not to shabby for throwing quarters in an old coffee can). The 30 year treasury yield is 4.57% right now. That means the dollar has been losing 5.1% annually (take a pre-algebra class if you want to know how to figure that out).

    The good old days of the dollar only losing 5.1% annually are gone forever. You see Otto, there's this monetary phenomenon called hyperinflation (wikipedia can tell you more). It's what happens when a government with a fiat currency pretends it can solve it's problems buy simply printing more money. Do some research on Zimbabwe.

    What you still fail to understand is silver and gold bugs actually don't want anything like that to happen. It is the storm track we are on and manipulating PM only fools people who can't do math or reason, and that is accelerating our demise.

    This is like trying to explain calculus to a five year old. What am I doing?

    Good night, all

    Goodbye, Otto
    Reply | Link to Comment
  •  
    Aug 28 11:43 PM
    Otto, you suck at math - too bad you so don't rock.
    Reply | Link to Comment
  •  
    Aug 28 11:51 PM
    Truth hurts
    Reply | Link to Comment
  •  
    Aug 29 12:49 AM
    ask them if they know how many zeros are in a trillion!
    Reply | Link to Comment
  •  
    Aug 29 09:42 AM
    One does not have to believe the financial system will collapse to be a silver bull, one just has to believe the supply/demand fundamentals are strong. The digital age has just begun, and the vast majority of all above ground silver mined over the last 500 years has been consumed in the last 100 years. Silver is a stategic metal with many many industrial uses - it's the most conductive metal in an electrical/digit age. It also jst happens to be seen as money by many.
    Reply | Link to Comment
  •  
    Aug 29 09:43 AM
    You want to talk about standard of living?

    As a child, when I got sick a doctor would come to our house and treat me. The home visit cost about $10. Today, you go to the doctor's office at the appointed time and wait for thirty to forty minutes before they put you in a cubicle where you wait and wait and wait. If you don't have any insurance like myself, you don't even get an appointment unless of course, you agree to pay immediately.

    My elderly mother recently severely injured her head and fell into a coma. Life support was withdrawn and she died without further treatment within one day. Her medicare summery reflected a bill of nearly $8,000 for an ambulance drive and a one day stay in the hospital without treatment.

    Now that's what I call a great standard of living.
    Reply | Link to Comment
  •  
    Aug 29 11:14 AM
    xsuddensam,

    but your doctor now has all these fancy high tech tests to confirm that you have a sinus infection. Sure, they charge you $1000 bucks to find it out, but you gotta be sure right? Heh, you can diagnose a sinus infection by pressing on someone's sinuses with your finger, yet people think they need a fancy machine to show them. Furthermore, once they do, they have all kinds of drugs to treat them. Meanwhile, the Hindu's developed a method god knows how long ago to deal with them. You pour salt water through your nasal cavity. All of this should cost around 2 bucks at most.

    The standard of living in this country if awful compared to decades ago. A husband and wife both have to work full time to make ends meat. We watch our retirement accounts go up in flames with inflation and a crazy stock market. Oh yeah, and that whole housing bubble thing. Way to make it impossible to buy a house. Good job Greenspan. How well did Rome do when they removed all the silver from their coins? Right now, we are in the process of removing the Zinc from our pennies. With the track we are on, we'll be calling our pre-1982 pennies copper dollars, because they'll have a dollar in melt value.
    Reply | Link to Comment
  •  
    Aug 29 01:14 PM
    MikeL:

    That's "hysterically&quo... not "hysterical"

    From a dour complainer and moron
    Reply | Link to Comment
  •  
    Aug 29 02:07 PM
    what does this article and all the commentary have to do with our true current and future financial dilemmas?

    it does not state clearly specific problems and why so.

    it does not educate well on issues.

    it alludes to something esoteric, provides questionable value, leads to negative reaction. perhaps that's its intent?
    Reply | Link to Comment
  •  
    Aug 29 02:32 PM
    The only reason are standard of living is as "good" as it is (and that's debatable... there's a lot of people out there with nothing), is because the US has been on what amounts to a 30-year credit card binge.

    The old mystics used to say "as above, so below." If the citizens of this country think its ok to finance themselves into oblivion by endlessly purchasing things they don't really need with money they don't rally have, then why wouldn't the government do the same?

    I'm a silver bug. I've been one ever since the day that I walked out my front door and noticed that my neighbors that make half as much as me have a standard of living twice as high as mine. How could that be? It's easy, my wife and I don't use credit (although we have a mortgage).

    This can't go on like this. And now everyone is out of cash from their freaking HELOCS, and waking up to a mega-hangover and realizing that we, as a country, really don't have a whole lot left that's ours. Our banks are failing and our industry is shot.

    That's what this whole gold and silver thing is about: If you want to spend money, you need to have money. Period. It might not be glamourous, but it keeps everyone honest.
    Reply | Link to Comment
  •  
    Aug 29 03:04 PM
    marxbites:

    We can do without the epithets, thank you!
    Reply | Link to Comment
  •  
    Aug 30 12:46 AM
    xpatUSA...you are right. It's not nice to call a person for instance a pompous arrogant ignorant egotistical aH-, even when it fits someone like for instance otto the rockhead perfectly. The problem is finding the right words to describe what he's done and how he's acted here here in a way that is not demeaning. But I'll think about it. It would be easier if he'd titled his little sarcastic and ignorant diatribe, "How to Prove to Silverbugs that I am a Pompous, Arrogant, etc etc etc" and then we could have had a civil discussion, b/c we would have agreed on at least SOME facts.
    Reply | Link to Comment
  •  
    Aug 31 11:47 AM
    Otto Rock, You must be the Blind Man who grasped the Elephants Tail and Proclaimed it to be a Snake.

    Not a very sophisticated misdirection there Otto but perhaps you could get a job spreading falsehoods for one the Presidential Campaigns running a paper shredder.
    Reply | Link to Comment
  •  
    Aug 31 12:03 PM
    PS Perhaps you should run for office, you remind me so much of President Bush. The truly ignorant, trying to talk down to the well informed.
    Reply | Link to Comment
  •  
    Oct 20 06:46 PM
    No people will probably give you that blank look because they can't believe how stupid you are.
    Reply | Link to Comment