“Shucks Paw, gimme a chaw er terbaky.” Well it isn’t really that way, but I love to talk about funny money. Red Dog Money, and Blue Pup Money, are actual facts of history. Unfortunately, I cannot find any of either to photograph, so I cannot illustrate them, but they did exist. This was in the days when banks could issue money. New York banks issued dollars, just as the fed does now. It was very common for banks to issue money with their names on the bills. They had to have adequate reserves to cover the issuance, quite naturally, and in the case of New York, the free system of banking, wasn’t quite so free. Banks in New York State, which wanted to issue money, had to approach the State Comptroller for permission. The Comptroller required issuing banks to deposit securities to the state, to be certain that the dollars were covered, and that a responsible party was issuing them. When approval was obtained, the dollars that bore the certification of the Comptroller or his officer, had a large red seal affixed to their backs.
These notes became known as “Red Dogs,” or “Red Dog Money.” The public didn’t take to them too well, and hence the name. The dollars were good, and were backed by securities, physical cash, and even gold. Compare that, with today’s “money,” and you would give anything to return to those days of no inflation, no fiat money coming out of DC by the box-car load, and with nothing to back it. Today, the issuance of currency, is by the fed, (Treasury Dept), and no one else. Gives them a chance to steal from you. After all, when you keep surplus assets in their currency, you are at their mercy, just like any business, which enjoys a monopoly. Wouldn’t it be nice, if you had a monopoly on something that everyone absolutely had to have? You could charge what you pleased, and everyone be hanged. A monopoly on gasoline, oranges, cement, or hot dogs even, would place you on easy street. Why do you think bank issued dollars had to go? They had to go, because they were cutting in on the profits. The fed has a monopoly on the creation of “money,” and it is playing out just as we all thought it would.
Back in Red Dog days, the public shied away from bills with the red seal, because they weren’t issued by Uncle Sam. Today, we’d love to be able to pick and choose our “money.” This brings us to Gresham’s Law. Sir Thomas Gresham, was the founder of the Royal Exchange in London, in 1566. His law states, quite simply, that “bad money drives out good money.” The Red Dogs, were good money, but they were not popular, because of that red seal, making people think they weren’t really good. In Michigan, the same thing happened with bank issues of dollars. They were required to have a large blue stamp on them, and became known as “Blue Pup Money,” and equally, weren’t appreciated or favored by the public.
Gresham’s Law, has always applied. Typical of it, was when the US Mint ceased making dimes, quarters, and halves out of 90% silver. The silver coins disappeared like magic, but of course are still in existence, being sold in “bags” of $1,000 face value. “Silver Certificates,” also disappeared when the dollars ceased to be redeemable in silver. I sent in a silver certificate dollar to the treasury many years ago, and received back, a little coin envelope containing a few grains of silver. I’ve still got it.
Throughout history, Gresham’s law has applied over and over again. It appears as if the Euro may make huge headway against the dollar, as months pass, because the dollar has plummeted against it. Why has the dollar fallen against the Euro? Because of the huge increase in its numbers, which cuts its purchasing power. The Euro is supposedly backed 15% by gold, but I doubt this is true. If so, where is the gold stored? If it is indeed backed by gold, even by only 15%, that will give it credibility, and make Gresham’s law apply.
Gresham’s law, applied easily to the one dollar coins which the foolish Mint has issued. The Susan B. Anthony coin, was almost exactly like the quarter, and was mistaken for a quarter so many times, that the public simply refused to use them. There are millions in storage, and no one knows what to do with them. Then, bureaucratic brainpower once again went into high gear, with the Sacajawea gold colored dollar coin. China Marts dispensed millions of them, and naturally no one wants them, so chalk up another goof of the Mint, paid for by the taxpayers. Gresham’s Law took them off the market like magic, and with no legislation of any kind. The public considers them “bad money,” and they have disappeared. They aren’t any worse than paper dollars, but there is no place for them in cash register drawers, vending machines won’t take them, and they are a dreg.
Canada, long ago did it right, and eliminated paper dollars and two dollar bills, with $1 and $2 coins that have little inserts in them, and the Canadian public has accepted them, even giving them cute nick names. Paper money lasts but a very short time, whereas coins last as long as 18 years, in steady circulation, saving the issuer a lot of bread. The US Mint has goofed many times, and has passed up opportunities galore. The Perth Mint, in Australia, as an example, produces a new coin each year, with a different animal on it. The year 2000, was the year that the dragon appeared. They’re all gone now, and sell for a premium to collectors. 2001, was the Snake, and 2002, the Horse. There are an estimated 6,000 2002 Horses left, and are priced the same as the US Gold Eagle. When they are gone, probably this fall, they will become collectible, besides being worth their weight in gold. The 2003 Australian coin is the Ram, of which there are still a lot left. If the US Mint had any brains, other than fog, they would have done just as Australia has done, and created a huge collector’s market for their Gold and Silver Eagles. One could have bought a bullion coin, and it would have automatically turned into a collectible after a few years, as do the Australian animals.
Another case of Gresham’s law, are the best gold buys of all, and they are the Mexican 50 Peso, and Austrian 100 Corona, which are just 50 cents over spot, as opposed to the Gold Eagle being about $14 over spot. The reason they are so cheap, (Gresham’s Law) is because of their weight, which is not exactly one ounce. Both are extremely beautiful, but not one ounce, which most buyers prefer. The Mex 50 weighs 1.2057 ounces, and the Austrian 100, weighs .9802 ounce, or 100 grams, hence the appellation “100.” To find their prices, merely take spot price of gold, multiply by their weight, and add 50 cents. Great buys of beautiful coins, and far more gold for the buck, than Gold Eagles. I do believe that one should get the most gold and silver for the least dollars.
A hundred years ago, J.P. Morgan saved the US economy, which had about fizzled, thanks to goofs by the US Treasury, which was selling bonds for dollars, converting them into gold, and then re-selling the same bonds again, thereby depleting the treasury of gold, with alarming rapidity. People were acquiring gold, and trading in their dollars with ease and simplicity.
Gresham’s Law again. Any less than 5 million ounces of gold in the treasury, a hundred years ago, was considered horrible, and a threat to the US dollar’s omnipotence. There is no gold the US vaults now. The Mint buys gold and silver on the open market every week, to make their coins. They don’t take it out of Ft. Knox, or any other place, because they have none. All they have, is a supply of cut trees made into tons of paper, with barrels of ink to feed the presses. The presses turn out billions of dollars and hundreds of thousands of checks; neither of which have any backing, other than, “The Full Faith and Credit of the US Government.” Isn’t that re-assuring? Protect yourself!