What is a US dollar?

[Pointedstick]

I think you are a bit out of date. It is true that FRNs used to promise to pay some specific number of dollars to the bearer on demand, e.g., https://en.wikipedia.org/wiki/Federal_R ... r.898a.jpg  promised to pay 10 dollars in gold to the bearer on demand.

Current "FRNs", e.g., https://en.wikipedia.org/wiki/Federal_R ... series.jpg are not payable in dollars. They are not payable at all. They aren't even defaulted notes, as the 1914 note above is, because they don't even promise to pay anyone anything.

Which is why they aren't notes; they are scraps of paper with "nnn Dollars" printed on them.

Of course, the "Federal Reserve Bank" is as "Federal" as "Federal Express" and has no reserves, but let's not get into that just yet.

The big question remains: so what?

[Libertarian666]

I think you are a bit out of date. It is true that FRNs used to promise to pay some specific number of dollars to the bearer on demand, e.g., https://en.wikipedia.org/wiki/Federal_R ... r.898a.jpg  promised to pay 10 dollars in gold to the bearer on demand.

Current "FRNs", e.g., https://en.wikipedia.org/wiki/Federal_R ... series.jpg are not payable in dollars. They are not payable at all. They aren't even defaulted notes, as the 1914 note above is, because they don't even promise to pay anyone anything.

Which is why they aren't notes; they are scraps of paper with "nnn Dollars" printed on them.

Of course, the "Federal Reserve Bank" is as "Federal" as "Federal Express" and has no reserves, but let's not get into that just yet.

The big question remains: so what?

One conclusion is that the current "monetary system" is completely unmoored from reality and its continued existence for any significant period of time should not be taken for granted.

[Pointedstick]

One conclusion is that the current "monetary system" is completely unmoored from reality and its continued existence for any significant period of time should not be taken for granted.

OK, but we already know that. We all know it's a house of cards, but it's a house of cards that we and many throughout the world have no practical choice but to accept and utilize for some to most economic transactions, which provides a pretty strong mooring even if the theoretical and philosophical underpinnings are sketchy.

[Mark Leavy]

Indeed.  But this is the way it is with all social constructs.  I don't know why "money" would be an exception.

Thanks for pointing this out Tenn.  This is something that I have never articulated as succinctly as you just did.

[Hal]

OK, here is my understanding courtesy of Jim Sinclair....

A Dollar is basically common stock of a country, so you own a share of USA corporation.
Just as you cannot "cash in" a share of a company (Eg Take in your IBM shares and redeem them directly for computers), nor can you redeem your dollars directly for gold with the Fed. You can only exchange your stock with other people. A bit like exchanging bank cheques with each other but never cashing them in

For a more detailed explanation on money, listen to this

https://www.youtube.com/watch?v=WfXnFJL ... i4&index=5

Taken to its logical conclusion then, you could say the PP consists of 25% "money" (ie gold)  and 75% equity!!!

Actually I found this was a very good question to ask, and had pondered on it for some time when I first heard about the PP.

[Libertarian666]

One conclusion is that the current "monetary system" is completely unmoored from reality and its continued existence for any significant period of time should not be taken for granted.

OK, but we already know that. We all know it's a house of cards, but it's a house of cards that we and many throughout the world have no practical choice but to accept and utilize for some to most economic transactions, which provides a pretty strong mooring even if the theoretical and philosophical underpinnings are sketchy.

While it is true that people in the US have very little choice as to the transaction unit that they use, I personally rely on the "US Dollar" ($) as little as possible for investments. In fact, I have a net negative position in the $, and not by chance.

[Pointedstick]

Sure, more power to ya.

[Snoopy]

As a self-confessed curmudgeon/old fogey, my definition corresponds to that of the United States Coinage Act of 1792, which states a dollar is:

"to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure silver"

Nothing more, nothing less.

[economicsjunkie]

A US Dollar allows you to discharge tax liabilities imposed upon you by the US Treasury, which are always denoted in US Dollar.

[Libertarian666]

A US Dollar allows you to discharge tax liabilities imposed upon you by the US Treasury, which are always denoted in US Dollar.

Sure, but that still isn't a definition. For that, you would have to say "A US Dollar is a(n) _____________ that allows you to do...". What goes in the blank?

[Hal]

Ok, could not find anything for the current USD definition except as described as a Federal Reserve Note

FRN definition: http://www.investopedia.com/terms/f/fed ... e-note.asp

Dollar definition pre 1965: http://wiki.mises.org/wiki/United_States_dollar

so the blank would be... "A US Dollar is a(n) _Legal Tender___ that allows you to.." extinguish a public or private debt, or meet a financial obligation.

See: http://www.investopedia.com/terms/l/legal-tender.asp

Basically anything the government declares from Clam Shells to rolls of toilet paper........


Update:  On pondering this definition, it basically says " The Government has declared its citizens will use "X" as legal tender, and if you do not, you will be fined/punished."

See: https://www.mises.org/library/short-his ... ults.  Really surprised that your ears were cut off if you didn't use the "continental currency" in the late 1700's !!!

Out of curiosity - what would happen to a business owner now if they refused to accept Federal Reserve Notes as payment?

[economicsjunkie]

A US Dollar allows you to discharge tax liabilities imposed upon you by the US Treasury, which are always denoted in US Dollar.

Sure, but that still isn't a definition. For that, you would have to say "A US Dollar is a(n) _____________ that allows you to do...". What goes in the blank?

Token.

[Libertarian666]

A US Dollar allows you to discharge tax liabilities imposed upon you by the US Treasury, which are always denoted in US Dollar.

Sure, but that still isn't a definition. For that, you would have to say "A US Dollar is a(n) _____________ that allows you to do...". What goes in the blank?

Token.

Ok, but a token denominated in what unit? If you buy a subway token (assuming they still have those), it is good for one ride, so the unit is "rides". A US dollar is a token denominated in __________.

[economicsjunkie]

Sure, but that still isn't a definition. For that, you would have to say "A US Dollar is a(n) _____________ that allows you to do...". What goes in the blank?

Token.

Ok, but a token denominated in what unit? If you buy a subway token (assuming they still have those), it is good for one ride, so the unit is "rides". A US dollar is a token denominated in __________.

To put it in the same terms as your subway token example:

A US Dollar is good for discharging one US Dollar of tax debt, so the unit is "US Dollar".

[Libertarian666]

Token.

Ok, but a token denominated in what unit? If you buy a subway token (assuming they still have those), it is good for one ride, so the unit is "rides". A US dollar is a token denominated in __________.

To put it in the same terms as your subway token example:

A US Dollar is good for discharging one US Dollar of tax debt, so the unit is "US Dollar".

So a US Dollar is a token denominated in units of the US Dollar?

That is a circular definition, which doesn't actually define anything.

[Pointedstick]

What are you trying to prove here? That a dollar is just unbacked scrip, a piece of paper that only has meaning and value because of historical inertia and threats of violence from the U.S. government? Everybody already knows that.

[Libertarian666]

What are you trying to prove here? That a dollar is just unbacked scrip, a piece of paper that only has meaning and value because of historical inertia and threats of violence from the U.S. government? Everybody already knows that.

I seriously doubt that "everyone" knows that. I suspect that a lot of people think that there really is such a thing as a US dollar in the real world, although they can't define what it is.

Which was the point of the thread.

[Xan]

One conclusion is that the current "monetary system" is completely unmoored from reality and its continued existence for any significant period of time should not be taken for granted.

OK, but we already know that. We all know it's a house of cards, but it's a house of cards that we and many throughout the world have no practical choice but to accept and utilize for some to most economic transactions, which provides a pretty strong mooring even if the theoretical and philosophical underpinnings are sketchy.

Indeed.  But this is the way it is with all social constructs.  I don't know why "money" would be an exception.

Not only does this apply to the US dollar, but it applies to gold as well.

[Pointedstick]

Everyone knows that a Dollar is just a token, a unit of exchange, a piece of paper or an electronic impulse that you can use as currency. I don't think I've ever known anybody outside of conspiracy theorist types who believe that there is some kind of tangible objective value behind a Dollar. That's why it's a fiat currency. That's what a fiat currency means. It's not backed by anything. There's no basic, fixed unit of value you can exchange it for. It's "backed" by nothing more than the promise that it won't become unusable for its purpose as a medium of exchange. Of course eventually it will, but this has happened to all currencies throughout human history. No form of currency lasts forever, no matter what form it took.

[Libertarian666]

Everyone knows that a Dollar is just a token, a unit of exchange, a piece of paper or an electronic impulse that you can use as currency. I don't think I've ever known anybody outside of conspiracy theorist types who believe that there is some kind of tangible objective value behind a Dollar. That's why it's a fiat currency. That's what a fiat currency means. It's not backed by anything. There's no basic, fixed unit of value you can exchange it for. It's "backed" by nothing more than the promise that it won't become unusable for its purpose as a medium of exchange. Of course eventually it will, but this has happened to all currencies throughout human history. No form of currency lasts forever, no matter what form it took.

Except gold, of course.

[Pointedstick]

Except gold, of course.

What countries still use gold as currency?

[economicsjunkie]

So a US Dollar is a token denominated in units of the US Dollar?
That is a circular definition, which doesn't actually define anything.

That's a circular definition indeed. But I didn't propose it. The one who wrote that sentence is unfortunately you.

[economicsjunkie]

That's what a fiat currency means. It's not backed by anything. There's no basic, fixed unit of value you can exchange it for.

That's not true. Fiat money means it can be exchanged against the "service" of discharging debt imposed upon you out of nowhere by the US Treasury. As a result there's virtually universal demand for it at any point in time.

[Pointedstick]

Ok sure. I meant a tangible thing.

[Libertarian666]

So a US Dollar is a token denominated in units of the US Dollar?
That is a circular definition, which doesn't actually define anything.

That's a circular definition indeed. But I didn't propose it. The one who wrote that sentence is unfortunately you.

No, I wrote the sentence with a blank in it. You're the one who filled it in with the word "token".

Hope that helps.