Jeffrey Tucker

You can find a coin shop in nearly every town in the United States. The proprietor is unlike any you will find in any other store. He is unusually steeped in history, intensely aware of the larger context of the passing economic and political scene. This is because if it is a good shop, you will find the whole history of modern life on exhibit, and learn more from looking than you find in a multivolume history.

There they are on display: coins from all lands. Why are they worth more than the coins in your pocket? Because they are old? That’s part of it. There are some new coins here that are also just as valuable as the old ones.

What is critical is that they are made of gold and silver. You can pick them up and tell the difference. They are heavy. Stack them and let them fall on each other and they make a different sound from the coins that usually rattle around in your pocket.

It strikes everyone and anyone immediately. Somehow these coins are “real”; the coins we use today are not. But what does this really mean? And what does it imply?

The value of the coins amounts to far more than their marked value. Even dimes before a certain date sell for 10 and 15 times face value. The larger coins can be quite expensive.

What is real here is their substance, not the printing on the outside. This is the opposite of modern coins, the substance of which is completely irrelevant: All that matters is what is printed on the outside.

So the use of the term “real” here parallels how we use this term in any other context. Reality TV is said to provide the unvarnished truth about what people really do. We say someone should “get real” if we suspect that his thought or behavior is a mask or a blindfold obscuring a more-obvious truth.

So it is with coins. The new coins we use in transactions are not real. They are wearing a mask, a disguise, one put on by the state. More absurdly, the state tells us not to look at the reality, but rather to trust God that all is right with the money in the realm.

The old coins, in contrast, are precisely what they say they are and, therefore, have nothing to hide. There are no invocations that require a leap of faith. The truth is found on the scale and is told in ounces.

The gold ones are, of course, the ones you really want to hold. Their value reflects the metal content. Melt them, restamp them, make them into jewelry and they are still worth no less than the market value of the metal.

And who decides what the values of these old coins are? The coins might bear the likeness of a politician. They might bear the name of the nation-state. But these pictures and slogans are merely interlopers on the real point. What you hold is valuable not because some legislature, Treasury Department or central bank says it is valuable. Its worth was and is dictated by the market, which is to say, the choices and values of human beings. No government can add to or take away this value except by physically manipulating the coin itself.

Not only that. If you dig deep enough in the coin shop, you might run across coins that were not minted by governments at all, but by private manufacturers. In the early years of the Industrial Revolution, this was the way coins were made in Britain. Not by the Royal Mint, but by entrepreneurs no different from any other. George Selgin tells the whole story in his aptly named book, Good Money.

It turns out that making money is a business like any other, not something that only governments do. In a free world, it would be done entirely by private enterprise. The same is true of exchanging money. Some of the world’s first great fortunes were made this way, profiting from the buy/sell spreads in coinage markets. Today, the business is the same in some respects, and one can see the appeal of it all. Bless those who sustain it and believe in it.

So long as this good money is in your hands, it is your independent store of wealth. There are no taxes due, no withdrawals required, no forms to fill out. It is the physical embodiment of independence. It gives you freedom. It secures your rights. And because this coin is valued not by the nation-state, it rises above it and extends beyond it. Its value is recognized the world over, and not because the U.N. has proclaimed it, but rather because it is something everyone on the planet agrees on.

Geographic mobility is only part of it. Look at the dates on the older coins: 1910, 1872, 1830, 1810 and earlier and earlier. They are still beautiful because they are durable. Their value is not diminished over time, as with just about everything else we know about; rather, it increases over time. And by its very nature, gold protects your investment from the depredations of modern life.

How they inspire the imagination! What was the world like when such coins served as money? The economy wasn’t managed by some central authority. It managed itself from within, by the buying and selling decisions of economic agents themselves. The coins were selected by the market to serve as the facilitator of exchange, the things by which we were permitted to rise above the limits of barter.

They made possible calculation between goods and services that were as widely diverse as the whole of the human project, and reveal what was profitable and what was not. So these coins made it possible to organize the world’s resources into lines of production that served society in the most-efficient way.

And how did the politicians figure into this mix? When they got their hands on these coins, they could do terrible things. But it was rather difficult for them to get them. They had to demand that the citizens fork over the coins or else, which is to say, they had to tax people. You have to have a pretty good reason to do this. Or the lie you tell has to be pretty darn compelling. You can only tell fibs so many times before people catch on.

If this is the only money that circulates, the aspiring leviathan state faces a serious limit on its capacity to expand — a limit imposed by physical reality and the unwillingness of most people to give up something for nothing.

This is why every state is so anxious to see money substitutes circulate widely, preferably in the form of paper that can be made at will. If that same state can get banks to cooperate in creating more paper than can be redeemed by gold and silver coins, it can begin to habituate the population to the idea of a “fiat” currency, that is, money invented out of whole cloth.

Even better for the state is a system that completely separates “paper money” from its historical roots in good money. Then there are no limits at all to how much money it can make to fund itself and pay its friends, even if that means that money in general becomes ever less valuable.

And here we have the short history of how money came to be destroyed and how the modern world came to host the ghastly leviathans that dominate it. Here is the basis of destructive and unnecessary wars that last and last, the character-shredding welfare state and the swarms of bureaucrats who run our lives in every respect. It all comes down to the way money was destroyed.

You can tell from looking at the dates on coins that all of this happened surprisingly recently. The process began in the early 20th century with the cartelization of the banking system so that banks could loan money out of deposits they promised to pay on demand. The government’s own debts would be paid no matter what. This helped with the war — taxes don’t cut it when it comes to funding global war — so the financial system was encouraged to set aside its usual concerns over stability, since it was now guaranteed not to fail.

The process continued with the attack on gold during the New Deal under the influence of people like John Maynard Keynes, who believed that paper money would usher in a new utopia of a government-managed economy. So desperate was FDR to have people stop trading good money that he demanded it all be turned in; he said this was necessary to stop the Depression. Then the paper money revolution was furthered by people like Milton Friedman, who believed that a pure paper money would somehow bring about a stable price level — through a formula that may have looked good on paper but failed to account for the realities of politics.

In the end, we ended up on the other side of the great divide between freedom and tyranny, all symbolized by the contrast between the coins of the past and the coins of the present. It is reality versus fiat, independence versus dependence, value that lasts versus value that is the whim of the transitory political class.

You discover all of this when you walk into the coin shop.

Have a conversation with the proprietor, who tends to be of a type: perhaps a bit crusty, but highly knowledgeable and independent-minded. At his office, he lives amidst this history. He is surrounded by the truth about money that most people never discover. He is daily faced with the beauty of what once was, and perhaps, too, he imagines the possibility that it could be again. He is not usually the despairing type, either. He sees the difference between what is permanent and what is transitory. If you take the time, you can learn from him.

If you trade with him, you can enter into his world of knowledge and partake in the ancient truth about money, politics and civilization. Owning these coins helps grant some sense of independence to you, too. You will possess a store of wealth not subject to wild bubbles, state-manufactured inflations and political whims. It is a kind of privatized secession.

Is it any wonder that people who enter this world think differently from others? Their blinders are off. They see what is real and true. They no longer believe in the great modern lie that the state is our wise master, in whom we should trust our very lives. The owner of gold and silver coins is just a bit less attached to the state than others. And should a time of great crisis come and you look among the survivors, you can be pretty sure that pre-eminent among them will be those who love the coin shop as much as I do.

Regards,

Jeffrey Tucker,
for The Daily Reckoning

Joel’s Note: So what about the price of the metal in those coins then, eh? Up…down…neither?

There has been much ado about various predictions for the price of gold in 2012 that have recently appeared in these pages. “Flat for the year,” reckoned Bill just last week. “A buy, perhaps now more than every,” countered Eric Fry. “Gold stocks will have a great year,” added Chris Mayer, tossing his stock-picker’s hat into the ring.

What to think, Fellow Reckoner? Well, we’ve gathered some of the brightest minds in the business to discuss just that in a special webinar presentation to be aired at 11am this Thursday.

In short, our handful of experts reckon they’ve discovered a price anomaly that could deliver investors hefty profits even if the price of gold goes nowhere for the year. But, judging by a few charts we saw them forwarding around this morning, the opportunity to cash in on this anomaly may be closing even faster than they first expected. If you’d like to sit in on the webinar (it’s entirely free), please let us know here. And do so quickly…even virtual rooms get crowded.

A version of Jeffrey Tucker’s essay, above, appears in his excellent book, Bourbon for Breakfast: Living Outside the Statist Quo.

Jeffrey Tucker

I'm executive editor of Laissez Faire Books and the proprietor of the Laissez Faire Club. I'm the author of two books in the field of economics and one on early music. My main professional work between 1985 and 2011 was with the MIses Institute but I've also worked with the Acton Institute and Mackinac Institute, as well as written thousands of published articles. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is tucker@lfb.org

  • Pete Cottier

    Hi. I’d be interested in listening to the webinar, but I didn’t see alink to register. Could you advice please.

    Thanks
    Pete

  • Bankstaparadise
  • gman

    “the opportunity to cash in on this anomaly may be closing even faster than they first expected.”

    hurry while supplies last, eh? talk about history. I don’t know which is older, prostitution or the “hurry while supplies last” hustle. and notice how what is being sold is not just gold or just an inside track, but rather insider status. an appeal to both greed and pride. hard to beat that.

    folks. there is only one sure-fire way to generate wealth. and that is work. like the bible says, “every man under his own vine and his own fig tree.” everything else – taxation, infestment, speculation, gambling, absolutely everything – is merely a way to claim or accumulate or otherwise control another man’s work.

    to substitute another man’s work for your own.

  • John

    If this were true it would be impossible for businessmen to earn ten times more than their employees in profits, while still paying descent salaries. Bill gates for example makes at least ten times the rate of his employees, but still pays them a descent salary, so I don’t agree gman. However, I guess good old bill made so much from his own intellectual property and not from the evil profession of “speculating” – so you could have a point. But investing in gold is not really speculating, its like investing in property or anything else.

  • gman

    “However, I guess good old bill made so much from his own intellectual property”

    I hear he/microsoft stole most of what they sell. no idea if it’s true or not, wouldn’t be surprised either way.

    anyway. factually it’s almost impossible to become wealthy by your own efforts. serious wealth acquisition requires siphoning off, however you do it, the wealth generated by the work of many others. that’s how governments do it. that’s how gamblers do it. that’s how the mafia does it. and that’s how infestors do it.

    “But investing in gold is not really speculating, its like investing in property or anything else.”

    if you are buying it for the specific purpose of buying low / selling high then it most certainly is speculation of the infestment variety.

    if one buys a down property, fixes it up and makes it habitable, then turns around and sells it for a higher price, that is investment.

    if one buys a property, waits a few months for an anticipated price rise to take place, then sells it for a higher price simply because demand is higher, that is infestment.

  • Matt

    gman – that’s a riot. The old “work hard” chestnut. yeah, that really works out for everyone. The point isn’t to not work, it’s what you’re working for. If you’re transferring your work into worthless bits of paper that degrade with inflation then you’re a fool.

  • Mr. Hayek

    John,

    One does not “invest” in a gold coin. Rather, it is a currency exchange, like swapping dollars for yen. In this case (dollars to gold), one is exchanging temporal, worthless trash for eternal money.
    (why temporal worthless trash? Compare what 100 FRB “dollars” would buy in 1913 vs. 100 FRB “dollars” today, 99 years later… Do the same for 1 ounce of gold.)

    Now, if you buy farmland, *that* is investing.

  • gman

    @matt

    read it again.

  • Tom Sawyer

    There is not enough gold on the planet to back the dollar with gold let alone any other currency. There has been about 166,000 tons of gold ever mined in mans history. That wouldn’t pay off the US debt. If our dollar had been backed by gold all along much of what you see would not exist. The US unlike Europe is a currency issuer not a borrower. Some may not like these facts but facts they are.

  • le petomane

    I hate to be a party-pooper but gold was once found lying on the surface of the earth.
    Now, a viable mine may be deep underground, extracting a few flecks of gold per tonne of earth which is poisoned with the vilest chemicals to extract the gold and then shot down into the deep ocean where no-one can see the result or it’s contained above another piece of earth which poisons that.
    There will always be a sufficient number of greedy or careless or insecure morons in the world (present company excepted),so it is vital for civilization that those who are not so inclined understand and overpower those who are so inclined. In the case of the USA, the battle appears to have been lost.

  • le petomane

    The debate is excellent though, very interesting.

  • The InvestorsUpsideDownMortgage

    gman does one of two things:

    Stuffs mattresses with paper to thwart infestors.

    Cashes paper Social Security checks to thwart workers.

  • Bruce Walker

    Back to the article at hand, most local coin dealers are like money changers in the temple. They don’t have much appreciation for the history of the coins, and it’s a good thing they don’t. As any coin dealer will tell you, the sure road to disaster is to become emotionally involved with your inventory. It clouds the dealers judgement about what an item is really worth. Most successful coins dealers, buy low and sell high, with the spread dictated by volitility in the market and the length of time the dealer thinks he a coin he is purchasing will remain in inventory. It’s really that simple, no nostalgia or sentimentallity about the past driving the business. Rather, generate as many transactions as quickly as possible to create as much income as possible which is then diversified into many other investments way outside the coin or bullion business.

  • ken

    I believe it was Henry Ford that increased the wages of his employees so they could afford a car.

    Seemed to work for him! He sold thousands. If he kept the money he might have sold one… Might have been bad for business… hmmmmmmm Wonder what today’s young geniuses in management would think about that?

  • taxxee

    When you are old and unproductive you better have something to trade with that the young and capable want. Or you better hope you have extracted a promise from the powers that be that they will provide you with the coin of the realm to help preserve your dignity. Try to do both.

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