The Three Biggest Lies the Government Is Telling You

by Charles Goyette

Recently by Charles Goyette: I Wouldn’t Hire Ron Paul…

Government lies are legion.

So many are its lies, that narrowing them down to three of the most important is a demanding task. But our current crisis has been chiefly enabled by monetary policy, fiscal policy, and the global military empire. So I have chosen to focus on lies about each: the Federal Reserve, the orchestrator of monetary policy; the U.S. budget, the accounting of government fiscal policy; and a few of the Empire’s war lies. I am sharing just a smattering of this astonishing record of duplicity in these areas, for life is short, or at least far too short to recount all of the state’s lies about each.

Lie #1: The Federal Reserve Is a Bank

Practically everything the government says about banking is a lie. Central banks are not banks. The Federal Reserve, the central bank of the United States, is not a bank.

A bank is a company in the free economy that competes with other banks offering willing customers a safe place to make deposits and earn an interest rate return, while also competing to offer loans from those deposits to willing borrowers.

Central banks are government-created bureaucracies that do nothing of the sort.

The Federal Reserve is typical of central banks. It is not a free market institution in which people willingly make deposits. Instead, it wields monopoly power over actual banks. In place of managing deposits and loans of its own, it creates money out of nothing by a variety of means including debt monetization, in which it buys government debt by simply creating a credit in the account of a commercial bank with nothing more than a booking entry. This is an act made possible only by the state’s grant of a legal monopoly empowering the central bank to do what, if done by a private bank, would be a crime called counterfeiting.

Central banks thus have the ability to unilaterally boom and bust their economies at will. And they have done so throughout their history, either to the benefit of the commercial bank cartels, in response to political pressure, or because of outright economic ineptitude .

Writing at Lew Rockwell.com about the myth that the Federal Reserve is a “bank,” and independent, finance professor Michael Rozeff describes a central bank as a government’s “fiat money bureau.” “It is held up by the force of government law and power. It is imposed on the public.”

The representation of them as actual banks produces confusion in which central banks are said to earn “profits.” For example, a January, 2012 Federal Reserve press release reporting its “earnings,” announced $76.9 billion in 2011 net income. This was described in the New York Times and the Financial Times as the Fed’s “profits,” just as though it were the annual report of any commercial bank’s profits.

Yet in what sense does the Fed show a “profit” or have “earnings”? It is as inappropriate as describing the collections of the Internal Revenue Service as “profits.”

Where are these Federal Reserve “profits” derived? They are the result of printing new dollars to buy assets; that is, they are the result of diluting the purchasing power of every dollar you or anyone else has. It is not any different than a dairy watering down 100 gallons of milk to sell 110 gallons. It is fraud. But it is a fraud legalized by act of Congress.

But the Federal Reserve is not alone. Another non-bank is the World Bank which loans money to governments and government enterprises. The World Bank has been a useful place to pasture failed U.S. government warmongers like the disastrous Vietnam War Secretary of Defense Robert Strange McNamara and Iraq war co-author Paul Wolfowitz. Both were named World Bank presidents even as their deadly wars raged on.

The World Bank gets almost all of its money by way of the International Bank for Reconstruction and Development (IBRD),( also not a bank), which gets its money from taxes, the largest share coming from the American people. The IBRD also sells World Bank bonds, but they too are guaranteed by taxpayers.

American tax dollars go to other multi-national organizations such as the Asian Development Bank, the African Development Bank and the Inter-American Development Bank.

None of which are banks.

Lie #2: War Lies

Governments and politicians lies incessantly about war. They lie about the cause of war. They lie about the threat of war. They lie about the cost of war. And they lie about their lies about war.

Governments lie relentlessly about war. Just in the last fifty years the people have been lied to about U.S. government wars from Vietnam to Iraq.

The Gulf of Tonkin incident, a purported attack on U.S. ships by North Vietnam off its coast, was used by President Johnson (an “unprovoked” attack he told the nation) to win legislative authority, the Gulf of Tonkin Resolution, for a war in Vietnam. But it was an incident that did not happen and Johnson knew it even as he escalated Vietnam into the full-blown blood bath it became. “Hell,” he told his secretary of state just a few days after the resolution passed, “those dumb, stupid sailors were just shooting at flying fish!”

Lying is so intrinsic to the nature of government, that even the truth about old lies is concealed to protect new lies. In 2001, a National Security Agency study found that officials had actually doctored documents in covering up the truth about the Tonkin Gulf incident, the bogus war pretext that led to the needless deaths of millions of human beings. But the new report of that old cover-up was itself delayed for years for fear that it’s release would cast doubt on the intelligence that the Bush administrations was using to justify an invasion of Iraq.

In the case of the Iraq war, not only did defense Secretary Donald Rumsfeld lie about knowing where the non-existent weapons of mass destruction were in Iraq (“We know where they are. They’re in the area around Tikrit and Baghdad and east, west, south and north somewhat.”), in a later exchange with my friend former CIA senior analyst Ray McGovern, Rumsfeld even denied he had made such a claim.

“Simply stated,” Dick Cheney said of the mythical WMDs in August of 2002, “there is no doubt that Saddam Hussein now has weapons of mass destruction.” “We know for a fact,” said White House Press Secretary Ari Fleischer in January of 2003, “that there are weapons there.” “We know that Saddam Hussein is determined to keep his weapons of mass destruction,” said Colin Powell in February of 2003, “is determined to make more.”

The government can be counted on to lie about the costs of war. Lawrence Lindsey, a Bush administration economist, was fired for suggesting in advance that the Iraq war would cost $100 billion to $200 billion. Although estimates in the trillions of dollars would have been closer, Rumsfeld called Lindsey’s estimate “baloney.”

The government tries to conceal spending by keeping it off the budget books with supplementary, appropriations and emergency measures. It even spreads war costs off of the defense department budget and into the budget of other departments such as state and energy.

I have written more about government’s war lies in my new book Red and Blue and Broke All Over: Restoring America’s Free Economy, but must finish the point here with a reminder of the government’s lies about the case of Jessica Lynch, and about the way the government lied about the killing of Pat Tillman and even lied about lying about its lies about his death.

Private Lynch was a 19-year-old clerk when her company was ambushed in Iraq after taking a wrong turn. She suffered injuries when her Humvee overturned and was taken by Iraqi soldiers to a nearby hospital. Although she suffered injuries when her Humvee overturned, “U.S. officials” reported that Lynch had gone down fighting and had been both shot and stabbed in action, and later even slapped around as he was interrogated on her hospital bed.

The truth is she had no such wounds. She had never fired her weapon, and, by her own account, was well cared for in the Iraqi hospital. Although the Iraqi doctor who had cared for her tried himself to turn her over to the Americans, the Pentagon, with a propaganda campaign in mind and camera’s rolling, staged a dramatic raid from helicopters to “rescue” Lynch. The video was edited up in no time and released by a Pentagon anxious to have a heroic feel-good war narrative to relate. But of course the Pentagon refused a request to release the full video of the “rescue” to clear up discrepancies in its account.

While the Pentagon is perfectly capable of lying on its own initiative, members of congress pressured the Pentagon to award Lynch the Medal of Honor, even before an investigation was complete, saying it would be “good for women in the military.”

Pat Tillman, killed in action in Afghanistan, was posthumously awarded the Silver Star, a combat honor given for valor in action against an enemy. But there was no encounter with the enemy. Tillman was shot to death by his fellow soldiers. This was carefully concealed with fraudulent accounts of the incident.

Senior commanders’ prints were all over the cover-up about Tillman’s death. General John Abizaid approved the Silver Star despite knowing within days of Tillman’s death that he had been shot by “friendly fire.” Lieutenant General Stanley McChrystal cited Tillman for actions “in the line of devastating enemy fire,” but the very next day sent a confidential memo about the fratricide to senior government officials including Abizaid warning them to protect themselves and President Bush from embarrassment in the episode.

Tillman’s family charged the military with repeatedly lying to them about his death and about its investigation, as it delayed accounts of his friendly fire death until after a nationally televised memorial service orchestrated by the Bush administration. By one account, his fellow soldiers were even told to lie to the family at Tillman’s funeral.

Tillman’s enlistment in the army after the 9/11 attacks was a national sensation. A good looking NFL player, Tillman gave up a multi-million dollar football career to join up. Thanks to his popularity, he was like a recruiting poster for the military. His father claimed that it was this usefulness to the military that helped drive the cover-up. “They purposely interfered with the investigation, they covered it up. I think they thought they could control it, and they realized that their recruiting efforts were going to go to hell in a handbasket if the truth about his death got out. They blew up their poster boy.”

Apparently the original cover-up, in which his comrades even burned the evidence of his body armor and uniform, was itself covered up. Lt. Gen. Philip Kensinger was censured by the army for lying to investigators about Tillman’s death. Pat’s mother, Mary Tillman, said that Kensinger was just a scapegoat. “There are a lot of people who played a role in this and they are getting off without any punishment.” She singled out Lt. Gen. Stanley McChrystal and Gen. John Abizaid by name.

The government not only lies about war, it routinely lies about its lies about war.

Lie #3: The Real U.S. Debt

This may be the most brazen and transparent lie of all, the one about the U.S. national debt, now over $15 trillion dollars. It is a number that hides the severity of our situation.

Washington acts as though that is the real debt of the nation. Politicians posture for weeks at a time about it, devoting long debates to raising the ceiling on this visible portion of the national debt.

And yet the real federal debt is much, much larger and like an iceberg below the water line, most of it is hidden out of sight. And like the Titanic, Republicans and Democrats have the country headed for a tragic collision with economic reality.

Each year the federal government makes new promises and takes on trillions in new financial obligations that do not show up in the visible, official national debt. The persistent growth of these hidden debts each year far outpaces the increases in the visible debt. In 2010 for example, the visible federal debt grew by an astonishing $1.5 trillion. But the hidden debt – out of sight and without debate – grew by more than $5 trillion!

When a private business takes on an obligation to pay something, it is required to report it as a liability. It shows up on the books. Not so for the state. This allows politicians to blithely make promises without adequate revenue to pay for them. It is easy to understand why this practice should persist. Giving things to constituents feels good. Making them pay for those things causes politicians to suffer pain. Like most living creatures, politicians like to feel good and avoid pain. So when they add to the obligations of the state, when politicians make commitments for the future or promise entitlements like Social Security and Medicare to win re-election, the means to pay are often inadequate. But there is no such thing as a free lunch, which is to say, that the cost will have to be borne eventually by somebody. For the time being though, the preferred political expediency is keeping the costs, the liabilities, off the books.

Unfunded liabilities are the difference between a program’s projected costs and its projected revenues, both valued in today’s dollars.

Medicare and Social Security both have promised benefits that outrace revenue streams. They are the largest components of the government’s unfunded liabilities, the hidden debt of the nation. But there are other federal retirement programs with not merely inadequate funding like Medicare and Social Security, but with no revenue streams of their own at all. Among them are retirement programs for military and federal workers.

In September 2011, USA Today analyzed dozens of overlapping programs for retired federal workers. It reported that despite the existing debt crisis, Congress continues to add to the promised benefits, so that retirement programs now have a $5.7 trillion unfunded liability.

The newspaper sums up its report on the retirement programs this way:

Private employers are legally required to put money into pension funds to match retirement promises. Private pensions have $2.3 trillion in stocks, bonds, real estate and other assets. State and local governments have $3 trillion in retirement funds.

The federal government has nothing set aside.

The total unfunded liabilities of the U.S. government have been calculated with a number of present value and discount models. Results of the shortfall from these methods range from about $70 trillion to $120 trillion dollars. For a family of four this represents a liability between $900,000 and $1.5 million. (You can follow the debt as it adds up at www.USdebt.org.)

What does the state say about its unfunded liabilities? Here’s a response from the Congressional Budget Office, which answers, “… no government obligation can be truly considered ‘unfunded’ because of the U.S. government’s sovereign power to tax – which is the ultimate resource to meet its obligations.”

That is utter hooey. It conjures up an absurdity in which the government could meet its obligation by sending you a Social Security check, even as it raises a tax to take 100 percent of everything you get from Social Security. The reason that is an absurdity is that it is a two-step process to do what the government will do in just one step. By means either overt (legislative act) or covert (currency destruction), it will unilaterally reduce its “obligation,” leaving millions of people betrayed.

Because it is the government. And it lies about its obligations.

Just like it lies about everything else.

Copyright © 2012 Charles Goyette

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One needs to divorce from the everyday actions of the government.

Defending the Last Free Place on Earth

by Jeff Berwick
The Dollar Vigilante

Previously by Jeff Berwick: Day of the Dead State

Today was the day the internet went semi-dark.

Sites like Reddit, Wikipedia and thousands of others went dark in protest of the latest attempt at a violent terrorist attack on the internet, the so-called Stop Online Piracy Act (SOPA). Here at The Dollar Vigilante (TDV) we didn’t go dark. We figure we’d be one of the first sites taken offline if/when SOPA is enacted so why give them what they want.

And what is it they want? They want to heavily regulate the internet and have the power to shut down any website. It’s a cyberwar going on, says Joseph Lieberman in this interview. Well, yes, there is a war, but it was one started by the US Government. Surprise, surprise.

But was there a cyberwar before valiant Joseph Lierberman rode up on the scene? Has anyone been shot? Did your laptop explode in your hands? What’s the worst thing that’s ever happened to you on the internet? Spam?

How many wars go on in the minds of these people? A harmless plant, marijuana, somehow in their world evolves into a brutal War on Drugs that kills hundreds of thousands per year. An emotion… terror… somehow turns into a War on Terror that has killed over a million people and resulted in a massive loss of freedom and liberty in the US, including the cancellation of the Bill of Rights. And now, the internet… the thing you are on right now… peacefully, without problem, they consider to be an ongoing Cyberwar and try to proclaim the GOVERNMENT needs to protect us from it!

If there EVER were some serious problem on the internet there will be one group of people and one group of people only who will deal with it and be able to deal with it: the internet community of programmers… they number in the millions. They already found a way to hack around Wikipedia going dark for 24 hours.

ANARCHY REIGNS ON THE INTERNET

The internet is the most perfect example of an anarchic environment. In some ways it is like America 300 years ago… a new frontier, initially free. The internet is, for the most part, completely uncontrolled and unregulated since it was invented by Al Gore. It has only been in recent years that the grey hairs of congress have even figured out what it is and have begun to try to “protect us” by making it worse.

Many socialists and Keynesians scratch their head at why the internet/tech business is one of the only businesses to still be thriving in the US. Silicon Valley is still teeming with life. And even though the US Government tries to keep out the world’s best and brightest, they still find ways around it. In this one case, they are considering building a tech incubator community off the shores of California.

The reason the internet/tech business still creates wealth and jobs is precisely because the governments of the world still haven’t figured out how to suck the blood out of them like they have in nearly every other industry through endless legislation, rules and regulations. Of course it is no wonder that some of the most succesful of the internet world, Peter Thiel, Steve Jobs and Jimmy Wales are commited Libertarians – they understand the enemy they are up against.

SHAMELESS FASCIST PANDERING

And, par for the course, in the US, this legislation only exists thanks to the fascist “lobby” interests. Established companies lobby the government to enact all sorts of legislation to protect their business interests… and that is exactly how SOPA came into being. After envelopes stuffed with cash from the Motion Picture Association of America (MPAA) found their ways into the pockets of people like Leibermann.

Using the old, “I know you are but what am I” tact, the MPAA had the gall to state recently that by going dark to protest the attack on their businesses, sites like Wikipedia were “abusing their power”.

Note to the MPAA: Wikipedia and others are USING their power. The MPAA and the US Government are ABUSING their power by attempting to force people at gunpoint (laws/jails) to adhere to what you want them to do.

Big difference, MPAA.

Not to mention it was people like the MPAA who did everything they could to outlaw VHS tapes… and later DVD players because they had the nearsightedness to not realize these would become billion dollar moneymakers for them. And the same is happening now.

Apple iTunes, including iBook store and AppStore, is expected to grow at a rate of about 39 percent over the next 3 years and may contribute about $13 billion in revenues in fiscal 2013, according to an analyst at Global Equities Research.

This is a huge new market for the likes of the MPAA… yet they are doing everything they can to kill it using violence and coercion. In a way it is a small microcosm of democracy… the people who participate in democracy inevitably enact rules and laws that seal their own fate.

SELF POLICING

But, doesn’t the government need to protect creators of intellectual property? Here at TDV we are a provider of IP (our newsletter is 100% IP) and we don’t look to the government to ‘protect us’. We believe in the power of the free market to regulate itself through things like http://creativecommons.org/.

Many people ask us, what would happen if someone started a website and copied all our material and claimed it as their own? The answer is simple. Everyone would call them thieves and they would be known as charlatans and would lose respect amongst their peers.

It’s that simple.

CENSORING AND KILLING THE INTERNET

The real reason the government wants to censor the internet and talk incessantly about the need for an internet kill switch is for the same reason Egypt had an internet kill switch… and China has the “great firewall”… because they know 2012 will be the year of massive protests, riots and turmoil in response to the US being sold out from underneath the people and they know that the people will organize themselves via the internet.

HOLD ON TO THIS FREEDOM

Like the founding of America, we’ve yet again been given another chance to flourish. These chances only seem to come along very rarely. Before the founding of America, the last time there was an attempt at escape from the control of the state was nearly two thousand years ago with Jesus the anarchist.

And, for thousands of years, many people have been awaiting a return of “the savior”. The savior could be the internet. Jesus, in many ways, was the top anarchist of his time, fighting against the depredations of the state for freedom.

Fight against any and all government control of this space. This space doesn’t even exist physically. It exists virtually, but it is just as important as any locale in terms of your ability to access information and to make free your mind.

You’ve been able to access information you never thought even existed thanks to the internet. I know I have. And the governments of the world don’t like this. Fight to retain this ability. If we lose this, all is lost.

Sadly, the internet is the last free place on Earth. We have to go virtual to escape government oppression at this point. And if we lose this, there is no hope for humanity. If we retain it, the future will be full of prosperity and peace unlike any we’ve ever known. If we lose it? We don’t even want to think about it.

Reprinted with permission from The Dollar Vigilante.

January 21, 2012

Jeff Berwick [send him mail] is an anarcho-capitalist freedom fighter and Chief Editor of the libertarian, Austrian economics grounded newsletter, The Dollar Vigilante. The Dollar Vigilante focuses on strategies, investments and expatriation opportunities to survive & prosper during and after the US dollar collapse.

Copyright © 2012 The Dollar Vigilante

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Don’t believe that Congress tabling SOPA/PIPA is the end of the fight. http://burndownthefreakingmission.com

Mass Inflation Ahead – Save Your Nickels!

by James Wesley, Rawles

Recently by James Wesley, Rawles: Rolling Back Civilian Disarmament Laws in America

I’ve often mused about how fun it would be to have a time machine and travel back to the early 1960s, and go on a pre-inflation shopping spree. In that era, most used cars were less than $800, and a new-in-the box Colt .45 Automatic sold for $60. In particular, it would be great to go back and get a huge pile of rolls of then-circulating US silver dimes, quarters, and half dollars at face value. (With silver presently around $30 per ounce, the US 90% silver (1964 and earlier) coinage is selling wholesale at 22 times face value – that is $22,000 for a $1,000 face value bag.)

The disappearance of 90% silver coins from circulation in the US in the mid-1960s beautifully illustrated Gresham’s Law: “Bad Money Drives Out Good.” People quickly realized that the debased copper sandwich coins were bogus, so anyone with half a brain saved every pre-’65 (90% silver) coin that they could find. (This resulted in a coin shortage from 1965 to 1967, while the mint frantically played catch up, producing millions of cupronickel “clad” coins. This production was so hurried that they even skipped putting mint marks on coins from 1965 to 1967.)

Alas, there are no time machines. But what if I were to tell you that there is a similar, albeit smaller-scale opportunity? Consider the lowly US five cent piece – the “nickel.”

Unlike US dimes and quarters, which stopped being made of 90% silver after 1964, the composition of a nickel has essentially been unchanged since the end of World War II. It is still a 5 gram coin that is an alloy of 75% copper and 25% nickel. (An aside: Some 1942 to 1945 five cent coins were made with 35% silver, because nickel was badly-needed for wartime industrial use. Those “War Nickels” have long since been culled from circulation, by collectors.)

According to www.Coinflation.com, the 1946-2011 Nickel (with a 5 cent face value) had a base metal value of $0.0733 in February, 2011. That was 146.7% of its face value. Because of the global recession and the fact that both nickel and copper are primarily industrial metals, the melt value of a nickel declined to just $0.0516 in October, 2011. I predict that as inflation resumes – most likely beginning in 2012 – the base metal value of nickels will rise substantially, regardless of the weakness in the industrial economy.

The Root of the Problem

It is inevitable that any country that issues a continually-inflated fiat paper currency will run into the problem of their coinage eventually having its base metal value exceed its face value. When this happens, it is one of those embarrassing “emperor’s new clothes” moments. Unless a government takes the drastic step of lopping off a zero or two from their currency, this coinage problem is inevitable. In essence, we were robbed by our own government when silver coins were replaced with copper sandwich coins in the 1960s. I predict that essentially the same thing will soon to happen with nickels.

Helicopter Ben Bernanke will inflate his way out of the current liquidity crisis. through artificial lowering of interest rates, massive injections of liquidity, and monetization of the Federal debt. That can only spell one thing: inflation, and plenty of it. Mass inflation will mean much higher commodities prices (at least from the perspective of the US currency.)

In February, 2010 it was announced that the Obama administration had endorsed a change in the metal composition of pennies and nickels. And then, in November 2010, President Obama signed “The Coin Modernization, Oversight, and Continuity Act of 2010“. Then, in late 2011 came news of the introduction of H.R. 3694 (the Saving Taxpayer Expenditures by Employing Less Imported Nickel ACT – aka the “STEEL Nickel Act” . I predict that this will be signed into law in 2012 and the U.S. mint will begin producing debased steel nickels in late 2012 or early 2013. Once this change is implemented, you will then have to manually sort the “old” from the “new” debased nickels! But for now, there is still an open window of opportunity, during which time SurvivalBlog readers can salt away countless rolls, bags, and boxes of nickels.

Within just a few years, the base metal value of a nickel is likely to exceed two times (“2X”) its face value. (10 cents each.) The nickel will then begin to disappear from circulation. (Gresham’s Law is unavoidable.) Unlike the mid-1960s experience, the missing nickels will not cause a crisis, since pennies will suffice for making small change, and most vending machines now use dimes as their smallest purchase increment. Meanwhile, most bridge tolls and toll roads have inflated so that tolls are in 10 or 25 cent increments. The demise of the nickel will hardly cause a ripple in the news.

Unless the Treasury decides to drop the issuance of nickels entirely, the US Mint will within the next three years be forced to introduce a “new” nickel with a debased composition. It will possibly be stainless steel, zinc (flashed with silver) or possibly even aluminum.

Why Not Pennies?

You may ask, why not accumulate 95% copper (pre-1982 mint date) pennies? They already seen a spike in their base metal value to 2.2 cents each. But unfortunately, pennies have two problems: confusion and bulk. They are confusing, because 95% copper pennies are now circulating side-by-side with 97.5% zinc pennies. They are also about four times as bulky (per dollar of face value) as nickels.

With nickels you won’t have to spend time sorting out pre-1982 varieties. At present, visually date sorting pennies simply isn’t worth your time. Although I suppose that if someone were to invent an automated density-measuring penny sorting machine, he could make a fortune. As background: The pre-1982 pennies recently had a base metal value of about $0.0295 each.) Starting in 1983, the mint switched to 97.5% zinc pennies that are just flashed with copper. Those presently have a base metal value of only about $0.0067 each.

Pennies are absurdly bulky and heavy to store. Nickels are also quite bulky, but are at least more manageable than pennies for a small investor’s storage. (Storing pennies would take a tremendous amount of space and constitute a huge weight per dollar invested.)

The biggest advantage of nickels over pennies is that there is no date/composition confusion. At least for now, a nickel is a nickel. Even the newly-minted “large portrait” nickels have the same 75/25 cupronickel composition. But that is likely to change within just a couple of years. The US Mint cannot go on minting nickels at a loss much longer. My advice: start filling military surplus ammo cans with $2 (40 coin) rolls of nickels.

The standard U.S. military surplus .30 caliber size can is the perfect size for rolls of nickels. They will hold $188 of rolled nickels per can. Any larger containers would be difficult to move easily. (Avoid back strain!) Cardboard boxes are fragile, and lack a carry handle. But ammo cans are very sturdy, have an integral handle, and they are relatively cheap and plentiful. They are available at military surplus stores and gun shows. The current difference between a nickel’s base metal value and its face value is fairly small, but trust me, it will grow! Someday, when nickels are worth 4X to 8X their face value, your children will thank you for it. Consider it an investment in your children’s future.

In December of 2006, the US congress passed a law making it illegal to bulk export or melt down pennies and nickels. But once the old composition pennies and nickels have been driven out of circulation, that is likely to change. In fact, a bill now before congress would remove pre-1982 pennies from the melting ban. In any case, once the base metal value exceeds face value by about 3X, an investor’s market will develop, regardless of whether or not melting is re-legalized. Count on it.

What if Uncle Sam Decides to Drop a Zero?

As previously noted in SurvivalBlog, inflation of the US dollar has been chronic, cumulative, and insidious. So much so that turns of phrase from old movies like “penny candy” and “its your nickel” (to describe the cost of a call on a pay phone) now seem quaint and outdated. When inflation goes on long enough, the number of digits required to express a price grows too large. (As has been seen with the Italian lira, the Zimbabwean dollar, and countless other currencies. One whitewash solution to chronic inflation that several other nations have chosen is dropping one, two, or even three zeros from their currency, in an overnight revaluation, with a mandatory paper currency exchange. The history of the past century has shown that when doing so, most governments re-issue only new paper currency, but leave the old coinage in circulation, at the same face value. This is because the sheer logistics of a coinage swap would be daunting. Typically, this leaves the holders of coinage as the unexpected beneficiaries of a 10X, 100X.or even 1,000X gain of the purchasing power of their coins. Governments just assume that most citizens just have a couple of pocketfuls of coins at any given time. So if a currency swap were to happen while you are sitting on a big pile of nickels, then you would make a handsome profit. To “cash in”, you could merely spend your saved nickels in the new currency regime.

How To Build Your Pile of Nickels

How can you amass a big pile-o-nickels? Obviously just saving the few that you normally receive as pocket change is insufficient. Here are some possibilities:

1.) If you live in a state with nickel slot machine gambling (such as Nevada or New Jersey), or near an Indian tribal casino with nickel slots, go to a casino frequently and buy $50 in nickels at a time. Do your best to look like a gambler when doing so, by carrying a plastic change bucket with a few nickels in the bottom.

2.) Obtain nickels in rolls from your friendly local bank teller. Most “retail” banks are already accustomed to handing over rolls of coins to private depositors because of collector demand for statehood commemorative quarters and the new presidential dollar coins. Ask for $20 or $30 of nickels in rolls each time that you visit to do your normal banking deposits or withdrawals. It is best to ask for new “wrapped” (fresh Federal Reserve Bank issue) rolls. This way, you might have the chance of getting rolls with valuable minting errors – such as “double die” strikes. These are usually noticed and publicized a few months after the fact, and can be quite valuable. You will also be assured that you are getting full 40 coin rolls. (Getting shorted with 38 or 39 coin rolls is possible with hand-rolled coins.) If the tellers ask why you want so many, you can honestly tell them: “I’m working on a collection for my children.” (You need not tell them how large a collection it is!)

3.) If you live in or near an urban area and you operate a business, you can effectively “buy” rolled coinage at face value from your commercial bank. (They generally will not do any business with anyone unless they have an account.) It might be worth your while to on paper start a side business with “Vending Service” in its name, and have business cards and stationary printed up in that name. Have that “DBA” business entity name added to your commercial bank account. At a high-volume commercial bank you could conceivably buy hundreds or even thousands of dollars worth of nickels on the pretense of stocking change for a vending business. Depending on your relationship with the bank, they may waive any fees if you ask for a few rolls of coins. Be advised, however, that if you ask for any significant quantity at one time, they will probably charge you a premium. (Down in the small print of your account contract, there is probably wording something like this: “Coin Issued – Per Roll: .03 Currency Issued – Per $ 100: .08″ Before you cry “foul”, be aware that the Federal Reserve actually charges your bank a small premium when they obtain wrapped rolls of coins. (Most folks have held to the convenient fiction that a paper dollar was the same as a dollar in change. Obviously, it isn’t.) In effect, your commercial banker will just be passing along this cost to you. Unless they charge you a heavy fee, then don’t worry about it. Ten years from now, when a $2 roll of nickel is worth $16, you’ll be laughing about how you obtained $4,000 face value in nickels at just a small fraction over their face value.

4.) If you know someone that has a machine vending business, offer to buy all of their excess nickels once every month or two, by offering a small premium.

5.) If you operate a “mom and pop” retail business with a walk-in clientele, put up a small sign next to your cash register that reads: “WANTED: Rolls of nickels for my collection. I pay $2.25 per 40 coin ($2) roll, regardless of year!” Once the nickel shortage develops (as it inevitably will), you should raise you premium gradually, to keep a steady stream of coin rolls coming in.

An Aside: Nickel Logistics

Nickels are heavy! Storing and transporting them can be a challenge.

In October, 2011, it was reported that Texas hedge fund manager Kyle Bass had invested $1 million to buy 20 million nickels. It was not reported where and how he had them stored. That is a lot of weight!

Some SurvivalBlog readers and I have done some tests:

$300 face value (150 rolls @$2 face value per roll) fits easily fit in a standard U.S. Postal Service Medium Flat Rate Box (This is the USPS “FRB1″, with dimensions 11″ x 8-1/2″ x 5-1/2″). Full of Nickels, it weighs about 68 pounds. They can be mailed from coast to coast for less than $25. Doing so will take a bit of reinforcement. Given enough wraps of strapping tape, a corrugated box will securely transport $300 worth of Nickels. At ULINE you can get a corrugated to fit inside the corrugated Medium Flat Rate Box, to reinforce it. It is item #S-4517. It measures 10″x8″x5″. These boxes presently cost 54 cents each in lots of 25.

The standard US .30 caliber ammo can works perfectly for storing rolls of Nickels at home. Each can will hold $188 of nickels in rolls. You can stack the nickel rolls vertically (on end, standing up) four to a row across the width of the ammo can.  (Think of like stacking one shotgun shell on top of another.) Each of the two layers takes 11 rows of 4, plus one odd row of 3.  That makes 47 rolls per layer equaling 94 rolls total.  This makes for $188 of coins per can.  The larger .50 caliber cans also work, but when full of coins they are too heavy to carry easily.

If you buy more than a few hundred dollars worth of nickels, do not over-stress your house. Do not store them upstairs or in an attic. Storing the boxes or ammo cans on a concrete slab floor is ideal.

Conclusion

I’ve already had some ridicule, with e-mails accusing me of “hoarding.” So be it. Let me preemptively state that I realize that money tied up in coins will not benefit from the interest that a bank deposit would earn. But foregoing interest is not a major concern. Why? Because I think that it is a fairly safe bet that commodity price inflation will outstrip the prevailing interest rates for at least the next five years. In five years, the circulating nickel as we now know it, will be history, and it will be treated with nearly the same reverence that we now give to pre-’65 silver coinage.

We saw what happened when clad copper dimes, quarters and half dollars were introduced in 1965. We should learn from history. Something comparable will very likely soon to happen with nickels. You, as a SurvivalBlog.com reader, are now armed with that knowledge. You can and should benefit from it, before Uncle Sugar performs his next sleight of hand trick and starts passing off silver-plated steel tokens as “nickels”.

January 18, 2012

James Wesley, Rawles is a former U.S. Army Intelligence officer and a noted author and lecturer on survival and preparedness topics. He is the author of Patriots: A Novel of Survival in the Coming Collapse and is the editor of SurvivalBlog.com – the popular daily web journal for prepared individuals living in uncertain times.

Copyright © 2012 Survival Blog

Except for the storage, I would prefer a little cash stored as nickels over a bank account with virtually non-existant interest. http://burndownthefreakingmission.com

The Case Against Driver’s Licenses

by Eric Peters
EricPetersAutos.com

That little plastic laminated card you’ve got in your wallet or purse – you know, the state’s permission slip for operating a motor vehicle? Ever stop to reflect how peripheral the driving part of a driver’s license is?

Because, of course, a driver’s license is in fact our national ID card.

It’s impossible to function in modern society without this national ID card – even if you never get behind the wheel of an automobile. You can’t open a bank account, cash a check, visit the doctor, vote, board an airplane or even get a job without one.

Or at least, it is very difficult to do these things without one.

And none of these things, as such, have anything to do with the operation of a motor vehicle.

If it were merely a driver’s license, the main issue would be whether we’re sufficiently competent to get behind the wheel. There would be a meaningful test of one’s ability to handle a car. An actual road test on an actual road, in traffic – not the perfunctory drive around the cones in the DMV parking lot (and even that is only required of new/first-time applicants in most states) preceded by a sixth-grade-level written (well, touch-screen video) test of one’s knowledge of The Law.

A medium-smart baboon could pass this test with a little coaching. Few ever fail it – baboons or otherwise. Most of us snicker at the absurdity of it. But it is only absurd from the perspective that assumes they are testing our ability to drive.

Rather, the object of the exercise is ascertaining our identity – in order that we may be kept track of via the interlocking system of data acquisition, indexing, recording and cross-referencing that is the Matrix of modern society.

It is about information – and control.

If it were not, “driver’s licenses” would not be linked to one’s Social Security number – the government-issued ear tag every calf (oops, citizen) is issued at birth. The SS number, in turn, is the number the government uses to make sure you pay your taxes, to keep track of where you work (and how much you earn), where you bank (and how much you have in the bank), where you live, whom you marry, whether you have children (each of them to be issued their own ear tag in turn) and so on – all of which, again, have nothing to do with your competence as a driver.

But just try to get a “driver’s license” without presenting your Social Security card. There will be much wailing and gnashing of teeth. Red Flags will be raised.

Even if you have an SS number, they will also likely want your birth certificate, a document (also with your SS number) from your bank, or your mortgage holder, or something along those lines. Then, having presented these documents, they will obtain “biometric” information from you – a fingerprint in some cases or merely a special photo that maps your face so that the Panopticon (those cameras that are increasingly everywhere) can register your presence and record your presence wherever you happen to be – which most of the time, of course, will be somewhere that’s not in your car.

I go too far?

Then consider the fact that even non-drivers must obtain what amounts to the same national ID card in order to be able to do the things mentioned up above. They must show up at the Department of Motor Vehicles and provide the same items – SS number and other documents confirming that number. They will then be biometrically cataloged, just like the other cows (er, “drivers”).

No one escapes the national ID card unless they are “off the grid” – a person who exists outside the system, as a de facto (if not de jure) outlaw.

Too far again, you say?

Then try to cross the border, or board an airplane without your national ID card – or (lately) even attend a professional football game.

Your ID will be demanded.

Even a person merely walking down the street, having committed no crime, can be compelled to produce his ID upon demand. And if that person lacks an ID, that person will very likely be arrested on the spot and held until his identity is ascertained.

Remember the opening scene in the original Rambo? It all begins when Stallone’s character is accosted by a bully cop who demands to see his ID. That was 1982 – when for the most part only “drifters” such as Rambo got racked up for not having ID. Today, we must all have our IDs. Or else.

This is the reality of 2012 Homeland America.

You must have permission to move. You certainly do not move freely.

Even if you are walking.

Reprinted with permission from EricPetersAutos.com.

January 14, 2012

Eric Peters [send him mail] is an automotive columnist and author of Automotive Atrocities and Road Hogs (2011). Visit his website.

Copyright © 2012 Eric Peters

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