Remembering The Fed's Definition Of "Sound Money"

Tyler Durden's picture

Nothing quite like hearing it from the printer's mouth. From a 1961 FRB of Chicago paper: 

“In the United States neither paper currency nor deposits have value as commodities. Intrinsically, a dollar bill is just a piece of paper, deposits merely book entries. Coins do have some intrinsic value as metal, but generally far less than their face value. What, then, makes these instruments - checks, paper money, and coins - acceptable at face value in payment of all debts and for other monetary uses? Mainly, it is the confidence people have that they will be able to exchange such money for other financial assets and for real goods and services whenever they choose to do so."

It is handy to be reminded every now and then that the only thing people transact in is symbolic confidence in the truly stable financial system.

Modern Money Mechanics

h/t Nobull

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tradewithdave's picture

The sound... a voice crying from the internet

Dave Harrison

B9K9's picture

Your analysis is but a walking shadow, a poor player that struts and frets its hour upon the stage. And then is heard no more: it is a tale told by an idiot, full of sound and fury, signifying nothing.

Here's all you really need to know: all species seek to maximize pleasure over pain. It is simply too much work for too little reward for those gifted with leadership qualities to continually attempt to guide and husband society in constructive, rewarding ways.

So what happens? Weaker, subsequent generations of "leaders" emerge who no longer have a stomach for the fight, nor wish to experience the constant aggravation of helping maintain a society which understands there is no free lunch. So they give in to defeat, and let the money-men run their time proven scams by providing them with a short-term mechanism (ie a central bank) that allows them to simply pay off the sheep.

Of course it all eventually ends in tears, but the objective, much like musical chairs, is to not let it happen while on your watch.

Now I'll be the first to admit, that like Charlie Brown and the football, history is replete with men filled with conviction who again and again attempt to craft a sustainable, morally just world. Egypt, Greece, Rome, Britain, the United States, et al had their respective periods in time where great men were attracted to the concept of governance, who practiced & applied it at the highest levels of skill, and society flourished as a result.

But it is utterly unsustainable; and the jackals hiding in the shadows, waiting with infinite patience, are there with a solution, when leadership eventually becomes exhausted and cries out "no mas"! So they set up the central bank, and governent begins the process of simply paying off any and all complainers with the mere flick of a pen.

But the bankers, who have been running this same scam for at least the last 5-6,000 thousand years, know something that the weakling "leaders" don't comprehend: what happens when the jig is up.

You know, ZH has a lot of excellent analyses and smart posters, but very few appear to realize that events we now see transpiring aren't any great surprise to those who put this all into play many generations ago. After all, the designers of the system knew fully well what they were doing - they are the ultimate students of history. They KNOW that if they just wait, ALL societies eventually tire of productive work and come asking for the loan.

And that's when they smile to themselves, knowing that all men eventually seek the solace of the devil incarnate on this temporal plain. No one asks to be born; some get lucky and show up just when republics are formed, or when the money is first printed. Some, like ourselves, get to eat the shit sandwich at the end of the party. Just know where you are in the cycle, and know how to survive when the bankers launch their final solution.

Sean7k's picture

Hey B9, nice to see ya. 

Unfortunate that you have to say the same thing all the time. Still, it is gold.

Bay of Pigs's picture


Yeah, a real shit kicking gold is taking according to Robot. What's that, less than 1% from all time closing highs?

FWIW, the GOLD/XAU ratio shows the miners are now past the Helicopter Ben Zone and are now in the WTF Zone. Highest since March 09.


BlackholeDivestment's picture

...ooooooh, now I get it B9K9, that was a peanut.

Shameful's picture

But that's the real trick isn't it?  Don't get from here to a "sustainable population" without a lot of death.  Haven't heard a sure fire plan to duck the great culling, well for us guys with the misfortune to be born poor but aware of the world.

Agree mostly, but I think the jackals as you put them have a more active hand and help steer things without wholly relying on human nature, which of course they are masters of.

nuinut's picture


Your reasoning is excellent, but as you yourself note ("ZH has a lot of excellent analyses and smart posters, but...") working from a flawed assumption results in a flawed conclusion.


Your reasoning is based upon this premise:

Here's all you really need to know: all species seek to maximize pleasure over pain.

which I believe, with all due respect, to be incorrect. I think it should be replaced with this:

All forms of life inherently seek equilibrium (balance), also known as peace, on all scales.

All action by all life is aimed at one thing only, which is to achieve this balance, this sense of peace. The drawing of a breath momentarily achieves this; when the equilibrium from this is lost it is the exhalation that restores it. This process can be seen at all scales in all life, the action to achieve balance (the sensation of satisfaction/peace), the momentary attainment, and the next action to restore it.

Consumer has feeling of "need"; consumer makes purchase which requites this feeling (resulting in "peace"); consumer experiences the return of feeling of "need".

All action is based on value. Everything is an instrumental value, instrumental in the attainment of the only inherent value: peace, which is actually the feeling resulting from a state of balance/equilibrium.


I find your comments to be the most visionary and valuable on ZH, but I think you are working from a flawed premise, making your views cynical. If such a premise were sound it would be applicable at all scales throughout existence, but it cannot be or life could never have evolved at all.

sherryw's picture

Nunuit, Both you and b9 are right. It's the level of awareness the separates the two. The less aware seek pleasure, the more aware seek balance.

AldoHux_IV's picture

+1 Agree.

Only thing I would add would be that no matter what history has taught us, the constant pursuit to balance out inequities helps keep this dynamic tension we call life in harmony.

chumbawamba's picture

Yes, we've identified the reality of the next level up in the societal control structure, the meta level if you will.  We know we are really mere automatons in a game run by an invisible elite that control the levers of government and society around the globe.  We have tantalizing hints of who they are, but everything is rumor, innuendo, conspiracy.

I say that's all irrelevant, because the important thing is that we now know the reality.  The problem is to figure a way out of the illusionary labyrinth that everyone voluntarily imagines before us.  The labyrinth contains the luxuries and rewards in life we yearn for as well as the punishments awaiting if we step out of line.  But even though the details in the labyrinth are suggested and fed to us during our entire lives (the fictional narrative) the construct of the labyrinth itself is of our own creation, of our own energy.  It is each of us who at any time can simply exit the labyrinth by the simple act of refusing to believe it exists anymore.  To refuse to believe is to simply decide to take your own life into your own hands, as is your individual right to do as a solitary and unique being in this Universe with rights unto yourself, born free by the divine virtue of God.  You are a being of free will, free to choose to use your energy for good or for ill, and free to enjoy the consequences of your choices.

Government is a fiction that you choose to accept.  Its power comes from the consent you as an individual bequeath upon it and your willingness to accept it as an authority with power over you.  But without your consent its "authority" is fictional, as it ultimately only comes from superior ability to inflict pain or death.  For when you withdraw your consent, as is your right even within the context of this republic by virtue of its very founding document ("Governments are instituted among men, deriving their just powers from the Consent of the Governed." - DoI, 1776) you become "free", but not truly, for you are still trapped within the clutches of a society inhabited by zombies that are threatened by your status being outside the system.  Thus we can only truly regain our sovereignty when a sufficient number of others do so simultaneously, so that our rights will literally be self-reinforcing.  Strength in numbers.  United we stand, divided we fall.  Do these themes seem familiar?

You see, the error of the Founding Fathers and the myth of their heroism is that they were not forceful enough in emphasizing that each of us individually truly is a sovereign.  They were not sufficiently enlightened to realize that the ultimate flaw of a republic is that it is still based up the State.  For if the State ever turns despotic, we are entrapped.  The protection of our individual liberty being handed over to the State exposes us to a dangerous organism that at any time can be infected and become a psychopath.  It is a precarious balance between trust in the self and faith in the group.

Since we can never truly trust the group to ensure our individual liberty and to not become psychopathic, we can never truly ever trust its protection to others.  So the first order of individual liberty is to reject the State and take on the philosophy and means of protecting your own liberty.

The second order of individual liberty is then focusing your effort on destroying those who would usurp it, for we can never truly be free if we are hunted all our lives.  Yes, we may be free in the wilderness or the diaspora, but the Earth is our dominion as free beings and we have the right to travel to where we are welcomed by other free beings.

We must destroy the sorcerers who project reality upon the masses, who will do all in their power to destroy us and keep us from curing the masses of their madness.  We are sorcerers in our own right imbued with the knowledge and wisdom of our own true Freedom.  We incant our powerful spells by exposing the truth, actively speaking out about it, writing about it, disseminating, evangelizing, breathing unto them the air of righteousness until it captures in their heart and ignites a spark, and they awake.

Awake, brothers and sisters, awake!  You must awake!

I am Chumbawamba.

THE DORK OF CORK's picture

Excellent post B9K9 - these guys make Satan himself look virtuous , he was but a fallen angel , misunderstood and all that.........

I get a feeling that the Banks continued to develop the Basel Byzantine Maze because MMT might have just been working using convential securities , we cannot have that can we.

Anyhow the relative simplicity of the US monetory system stands in stark contrast to perhaps the ultimate Banking modern art - the Euro system , the connecting dots of various central banks some officially owned by their respective states while some including their outside mother Hen The Swiss national Bank is completly private.

Its a truely extraordinary system - the most striking fact that has come to my attention is that while the Governor of the Irish central bank takes direction from Frankfurt all liabilties ultimately fall back to Dublin.

Its a magnificently dastardly construction, this Euro.


 Google : Central bank given 'Formal Comfort' by Noonan.....The Irish Times

And there was this simple Irishman thinking ELA was the banks problem......

RockyRacoon's picture

Wow.   It's like old ZH week.   Some heavy hitters have arrived to comment.

Wish I were as eloquent as the old-timers.

straty01's picture

You only go back 5-6000 years.


Do you think the pyramid creators had need for money? Indigenous tribes do not need money. Nobody ever talks about harmony in total. To focus on 'money' is extremely narrow. You were not born to make money and when you die I am sure you will not care either.

So there is no shit sandwich, there is a choice, you have free will so use it.

tradewithdave's picture

Au contraire, mon ami.  You willingness to substitute my "analysis" for "life" and for your choice of playwright's failed attempt to equate a shadow with life itself is the point indeed.  For He came that we may have life and have it more abundantly.  He is the way, the truth and the life.

Like you and I, Nicodemus never asked to be born either, but he did ask Jesus directly what the requirement is to see the Kingdom's eternal plain.  The Good News is the price has been paid for "the loan."  Redemption is yours freely and no amount of work is called for.  Come to the table and eat and drink and you will never be hungry or thirsty again. 

To open the door, or not open the door... that is the question.       

Dave Harrison

medicalstudent's picture


was that poetry, or just diction in action?


Instant Karma's picture

Interestingly, in 1961, the face value of silver coins was much more than the silver content. Today, the silver content is worth 20x the face value. 

virgule's picture

The nature of money has changed since this text was written. In 1961, the gold window was still open. Today, it's fundamentally different, and it's not clear at all if all the economic concepts applicable to sound money still apply to debt-based fiat.

I'd be careful before embracing openly this text, as it may be (now) more a case of wishful thinking than present reality.

Manthong's picture

"Face value" is the caveat in that argument.

I am more equal than others's picture

Julie Andrews singing on the mountain top '...the hill are alive with the sound of money...' then the baron shows up and sez 'bitch... dat be minez' then open hands bitch slaps her keeping the strong pimp hand on her.  Dats how wez roll in da Street.....

Bam_Man's picture

It goes "KA-CHING"!

That's why it is called "sound money".

equity_momo's picture

Just dont be transacting in anything other than FRNs otherwise you're part of their problem and they will take action against.

I love the smell of liberty in the morning.

Cow's picture

it's interesting that having private money is illegal.  Only Federal Reserve Notes are allowed, yet the Federal Reserve is a private organization.

slewie the pi-rat's picture

the US Mint has been making gold and silver coins since 1789 or so.  nothing to do with the FED.  congress, extremely busy taking corporate donations, has turned it over to the executive branch/treasury.  kinda like war, if you follow. 


Conrad Murray's picture

I love the smell of liberty in the morning.

It's time to get in the streets people. MENA is doing their thing, and Europe is starting to get rolling. Are we going to let them show US how to protest? Yea yea, the sheep don't know better and won't get off their asses...unless they see other's doing it. The rage is in the air, just talk to anyone you know and see how angry they are( ). All it takes is a few leaders to show the masses the time is now.

Gubbmint Cheese's picture

exactly - what is the intrinsic value of a dollar bill?


dukeland's picture

There maybe some value -- toilet paper? But, it would hurt my butt, so really no value.. you are right

A.W.E.S.O.M.-O 4000's picture

How about snorting some grade "A" Peruvian flake through a tightly rolled C-note my friend?


OK, you got me. Some cheap Meth through a taped up single. But these are hard times man!

SheepDog-One's picture

The fractional reserve fiat banking system is falling apart. Everything going on today is just desperation to keep it going, because the people who run it only know how to live by loaning out worthless pieces of paper to others at interest. But its all falling apart regardless of their attempts to prop it back up.

buzzsaw99's picture

Yep. Those who clamour for revolution should chill out, get some popcorn, and enjoy the show. The system will collapse upon itself very soon imo.

snowball777's picture

About 6 cents (the cost of the ink, paper, and anti-counterfeiting tech).

carbonmutant's picture

Which is why the transition from paper money to credit cards has worked... so far.

TruthInSunshine's picture

There is a reason why Casinos force little plastic chips upon those who dare enter.

'Oh, I'll double down with a couple more of these black and white chips, dealer.'

Sean7k's picture

Austrians have known this since 1920 and before. Nice reminder for all the Keynsians though. Too bad most people were taught Keynsian socialism. Re-education is a bitch...

SheepDog-One's picture

Re-education for most will have to be taught the hard way, most of them wont survive their re-education.

Azannoth's picture

Could not have said it better

JR's picture

Ron Paul, in a conversation with Lew Rockwell regarding his presidential bid, “is challenging the economics of government power and dollar destruction, as exemplified by John Maynard Keynes,” says Rockwell. “He wants to reverse Nixon’s dictate that ‘we are all Keynesians now,’ and make that ‘Austrians.’”

JailBank's picture

Paper money is worth soemthing. Apparently unlike PMs I can eat.

gwar5's picture

My favorite. Guess the author before looking at it:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."


Alan Greespan, 1966. Excerpt from his essay "Gold and Economic Freedom"

Korrath's picture

Ok, that was a genuine surprise.  Thanks for posting it.

RobotTrader's picture

Hoenig now saying easing should stop immediately.

No wonder PM stocks are getting absolutely smoked.

baby_BLYTHE's picture

He can say anything he wants now that he is off the FOMC.

Same with Greenspan, the false libertarian, claiming he now wants to go back to the Clinton tax rate.

buzzsaw99's picture

greedscam is a pimpco whore.

slewie the pi-rat's picture

+ 4 makeover/avatar, b_B

greenspan is false just about everything.  is he even the real greenspan, any more?... 

lieutenantjohnchard's picture

but that's good for you. remember, you're short the market having shorted with both hands once 1300 broke as you said you would. and since the market looks determined to drop quite a bit as you said it would you'll be able to quit your part time 1099 processing job, and go back to your life as a retired, urban gentleman, given the sea of profits you'll be making on your short.

Arius's picture

got to admire the fight of the bulls...these people really deserve to keep their jobs even if they will lose money...keep gambling others people money...

lieutenantjohnchard's picture

it's the stuff robottradar wishes he had so he could be one of the beautiful people - as he sees the world - and hang out in the hampton's with those he so envies.