Kephapaulos
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I know that the money "produced" from the federal reserve system is fiat money, but does that apply more to the dollar bills as opposed to coins? Is it worth it more to have coins than paper money then? Is there a catch with the coins though?
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"Non nobis, Domine, non nobis; sed nomini tuo da gloriam..." (Ps. 113:9)
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| Posted Dec 14, 2011, 6:38 am |
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TKGS
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All money is worth what it is because people will accept it in exchange for things of actual value.
Paper money has no intrinsic value which is why it's buying power fluctuates due to so many different factors. Modern coinage is essentially the same. The value of the metals in modern coins, even the penny (in the U.S.) does not even come close to approaching the stated value of the coins themselves.
Frankly, it does not matter if you hold your money as paper money, coin, or bank balance sheets. The value thereof will fluctuate according to a great many factors beyond your control.
As for gold, it is not even money in modern economies, for its "value", as we have seen over the past few years, fluctuates wildly as well. Its use in our economic system is more like stocks with the exception that it cannot go completely bankrupt and be worth nothing. Gold is simply no longer money--this can be proved by taking a gold bar to any retail store in the world and trying to buy goods with it--it has to be converted to the local legal tender (usually something easy to do) before you can buy anything.
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| Posted Dec 14, 2011, 11:56 am |
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SeanJohnson
formerly Seraphim
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| Kephapaulos said: | | I know that the money "produced" from the federal reserve system is fiat money, but does that apply more to the dollar bills as opposed to coins? Is it worth it more to have coins than paper money then? Is there a catch with the coins though? |
Well, yes and no:
1) Fiat currency derives it's value from public confidence, which in turn is derived from the government's promise that it will suffice for "all debts, public and private."
2) But when inflation reduces this purchasing power (i.e., it takes more of the dollars to satisfy the debt), possible completely, then the money is only worth the paper it is printed on.
3) With coins, they will be affected in the same way (i.e., they will lose their purchasing power just as paper currency does; after all, they are but denominations of these same paper bills), however unlike paper, they will never be worth zero, because the base metals of which they are themselves comprised still have market value.
4) In some cases the "melt value" of the metal exceeds the "face value" of the coin (such as is currently the cased with nickels and pre-1982 copper pennies).
5) This explains why some people have begun hoarding these coins (i.e., They anticipate greater value once the government is forced to change the metal content of these coins, just as they did with pre-1964 dimes/quarters, because when the melt value exceeds the face value, the mint produces them at a net loss.
6) Changing the content of the nickel has already been proposed, and once they do so, their value as collectibles will further increase their melt value and/or numismatic value.
7) In other cases, the face value far exceeds the melt value of the coins (e.g., dimes and quarters).
8) So a long-winded way of saying inflation will affect both Federal Reserve Notes and coins, though differently (and because of their content, not their origin).
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Romans 5:20 "But where sin increased, grace abounded all the more."
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| Posted Dec 15, 2011, 12:09 am |
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