Protecting Yourself from the Inexorable Decline of the US Dollar

Free Baron von NotHaus!

Free our money!

Poor Mr. NotHaus. He thought he was doing something good…something that needed to be done. His idea was to mint silver coins, which he called Liberty Dollars, or simply Liberties.

These were real coins, with real value. In fact, their value has been going up. Silver has been the big star of the latest hard money drama; compared to gold – which has also gone up nicely – silver is at its highest level since 1984. And compared to itself, it is as high as it has been in 30 years.

Silver has now gone mainstream. Even Jim Cramer advises listeners to buy the physical metal. They would be glad if they had. Almost nothing has outperformed it.

Compare Mr. von NotHaus’s money to the money issued by the US Treasury Department. The Treasury’s dollars have no precious metal content – none. At best, their content comes from trees and cotton plants, with a scrap value that is probably negative. Meaning, if it loses its value as money, you’ll have to pay someone to haul it away.

The record on that point is clear. Go back to when the Fed was set up to protect the value of the dollar in 1913. If you want to buy the same things, you’ll need 50 times as many dollars today as you have back then. Since 1971, when the last traces of gold were removed from the dollar-based monetary system, the feds’ money has lost value even faster.

The past is prelude. The feds are working hard to make the dollar worth even less in the future. Given the Fed’s current enthusiasm for debasing it, in a few years, the dollar may have no value left.

Even state governments – hardly visionaries – are looking for ways to protect their citizens from the feds’ fast-disappearing cash. A dozen are considering measures to coin their own money. Smart families are setting up their own reserves of real money – gold. Nobody trusts the dollar over the long term.

So, who do the authorities haul to the hoosegow? The guy who mints honest money in tiny quantities…or the guy who puts out $2.2 trillion in “paper” money that is sure to lose its value quickly?

Go ahead…take a guess.

Poor Mr. von NotHaus got taken to court…and may be taken to prison…for competing with the feds’ monopoly on issuing money. The Constitution – Article 1, Section 8, Clause 5 – gives Congress the power to issue money. Apparently, it makes it a federal offense to compete.

According to the Wall Street Journal report, that provision was cited in paragraph 33 of the indictment against Mr. von NotHaus and then later removed from the charges against him. What was left to convict the man on, we don’t know. But the court did so. And now he must appeal…or face penalties, possibly time in jail…and possibly a long time.

But what about the rest of us? Are we sentenced too? Will we be forced to pay the price for the feds’ goofy monetary policies?

Your editor is now flying back from California. He has no Internet connection, but he has a copy of Barron’s and The Wall Street Journal with him. Alas, he will have to read them.

Among the ideas we found in Barron’s was an article on gold. As background information, throughout the entire 11-year bull market, as far as we know, Barron’s never counseled its readers to buy gold. On the contrary, it generally discouraged them. Whenever it mentions gold, it talks about it as though it were some sort of crank market phenomenon…a marginal investment for the marginally insane.

As Michael Santoli put it in this week’s issue – gold is “not terribly useful.” He quotes a fellow named Jeffrey Christian who believes gold buyers are in for a “gut check” – a drop in the price of 15% to 20%.

He may be right about that. Every bull market has its countertrends and back-stepping. We’d be delighted to see the price 20% lower. “Buy the dip,” we’d tell you.

But as to the usefulness of gold, Mr. Santoli is dead wrong. Yes, gold is useless – most of the time. And, as anything but money and jewelry (a form of money in many countries), it is useless all the time.

But sometimes it is almost essential. When the other money – the feds’ money – goes bad, you need some good money to protect yourself. That’s the role gold has always played; it is natural, uncompromised money.

It does nothing – but it hides no mistakes.

It holds no press conferences – but it tells no lies.

It makes no promises – and never delivers less.

And anyone who bothers to mint coins of gold or silver is doing the world a favor.

Free Baron von NotHaus!

Bill Bonner
for The Daily Reckoning