Monetary Realists, knowing not so much what they've been taught, but what they've learned with their eyes open and ears tuned, see things clearly, without peering through a haze of misinformation masquerading as knowledge. Like the boy in The Emperor's New Clothes, they make observations which seem to cause frustration and annoyance to those public figures to which they are directed. A case in point is the word "dollar," the definition of which has been sought by Monetary Realists for decades.
Some years ago Paul Volcker, of the Federal Reserve, was lecturing in St. Louis. A Monetary Realist (not your author) was in attendance. At the conclusion of Mr. Volcker's remarks, questions were invited, and the Monetary Realist asked, "Mr. Volcker, in your remarks you used the word "dollar" twenty-six (or whatever) times. Can you tell me what a dollar is?" There was a remarkable silence. Volcker said nothing. The silence grew protracted; it was embarrassing. "Well, sir, can you tell me what the yen is, or the mark? You mentioned them as well." The silence continued. Eventually, the host made some excuse and hustled Mr. Volcker from the stage.
Over twenty years ago I wrote a letter to the head of the St. Louis Federal Reserve and asked another simple question: is our money tangible? If so, I asked, what are its physical characteristics? If not, how can you tell if you've got it? A brief note was received in reply, stating, in effect, that due to the "technical nature" of my question, the president (of the bank) was unable to answer at this time. He hasn't answered since.
On discovering the ease with which federal officials can be reached via the internet, I recently decided to try again, and on September 6, 1998, sent this message to the Treasury Department: "How is the word "dollar" defined in U.S. Law? Can you give me the citation? Thanks." The answer received was from "Customer Assistance," and read, "Thank you for your recent inquiry. The Office of the Comptroller of the Currency (OCC) examines national banks to assure their safe and sound financial condition and to ensure their compliance with federal banking laws, rules, and regulations. The dollar is defined as a currency bill and monetary unit of the United States, equal to 100 cents. This Office does not have information on the specific cite in the federal regulations. You may try contacting the Federal Reserve Bank at 202-874-4700. We trust this is responsive to your inquiry."
Well, not quite. I replied, on September 14: "Dear Customer Assistance: Thank you for your letter. You write that the dollar is a currency bill. Does that mean it is an IOU? An IOU for what? You also say it is a monetary unit. A unit is a standardized amount used in measuring. What does the dollar measure? Of what is it a unit? Thank you." This time I received a response from an actual person with a name, Angela Willis, a Customer Assistance Specialist. (Customer Assistance@CAG@COC) "Thank you for your recent inquiry. Please contact the Federal Reserve Bank for any other questions you may have. Thank you."
I responded: "I would like an answer from the government. Isn't the Federal reserve a private bank?" Ms. Willis replied: "Thank you for your recent inquiry. The Federal Reserve Bank is the central bank of the United States Government. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. We trust this is responsive to your inquiry."
Wow! Talk about pulling teeth. I tried again: "I'm sorry, but your answer is NOT responsive. The question was, and is, "what is a dollar?" Don't refer me to a private banking cartel for the answer to what surely must be defined in U.S. Law. After all, if there is no definition of the dollar, how can a person measure his income in dollars and swear to the government that the answer is "true, correct, and complete?" Congress is given authority to regulate the value of the dollar. What is its value? Don't tell me it's 100 cents, and then define the cent as 1/100th of a dollar. Please try again. It's a simple question, isn't it? Thanks."
Ms. Willis, was, I fear, losing patience with me. "Thank you for your recent inquiry. We have tried to direct you to the agency that could be most responsive to your inquiry. The Office of the Comptroller of the Currency regulates national banks. This agency does not have regulatory authority over actual currency, although our name may make you think otherwise. If you have issues dealing with the national banking system, please feel free to request our assistance. We will not respond to any other inquiries regarding the definition of a dollar."
In other words, the U.S. Treasury either doesn't know, or won't tell, what a "dollar" is. Moreover, in taking this evasive stand, it tries to distract the questioner with irrelevant references to the Comptroller of the Currency, and a disingenuous disclaimer that it (the Treasury) has no "regulatory authority over actual currency."
Back in 70s I asked the dollar question to the Internal Revenue Service. After all, you must swear to the value of your income in "dollars," testifying that your evaluation is "true, correct, and complete," under penalty of perjury, although, having taken no oath, you couldn't have committed that crime. Surely, therefore, the IRS would know what a dollar is. How else could it determine the accuracy of the return? The reply from the IRS was remarkably straightforward: "The term "dollar" is not defined in the Internal Revenue Code." I wrote back, requesting a definition from any portion of the United States Code, and am still awaiting the reply.
About the same time I wrote a letter to the president of my bank, and asked him what a dollar was. He sent me a very nice, rather rambling letter, in which he concluded that he really couldn't tell me, but if I found out what it was, would I let him know?
It is experiences such as these which give Monetary Realists, and others, I am sure, grounds for the gravest cynicism about economic matters. The silly platitudes mouthed by President Clinton about the Russian economy, for example, deserve nothing but contempt. When a people work for "money" which is so ephemeral as to defy description, measured out in units which cannot be defined by the country's monetary authorities, the problem transcends political parties or economic policies. The rot is in the roots, not the branches.
In the days of tangible money, or sound money, or even just plain money, as opposed to "credit," the dollar was easy to define: 412.5 grains of standard (90% pure) silver in coin form. The 412.5 grain figure was an average; the coin weighed 416 when minted. When, through wear and tear, its weight fell below 409 grains, it was no longer a dollar, but could be used in trade for a value in proportion to its weight. In general, banks culled out the worn coins and returned them to the mint to be recast. What a simple system! A bank official, asked to define "dollar," could do so in a sentence, without reference to the Comptroller of the Currency, or bank regulations, or "authority over actual (sic!) currency." Moreover, he could do so without making a fool of himself by attempts to mislead, confuse, or deceive. He wouldn't even have to piously reiterate "Thank you for your inquiry" every time he gave a long-winded response that had nothing to do with the inquiry.
Money is one of the basics of society. Is it extreme to suggest that without sound money there cannot be a sound society? And if the money is inherently dishonest, what does that say of the people who issue it, or even of the people who accept it?
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