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Resistance to devalued money

Wednesday, 27th July 2005

Let’s measure using something not usually thought of as a standard of measurement: money.

Yep. Money is a standard of measurement. You want to buy a car, hire a maid, order take out… what you are doing is asking what the value of the item is in terms of pesos.

I’m a coin collector, specializing in Spanish, American, and Philippine coins. One of the first things I learned is that peso is (literally) Spanish for weight. In fact, the basis of every currency in the world (Pounds, Lira, Dollars, Shekels, Yuan) except for the Euro was once a legally-defined unit of weight of gold or silver.

Money used to be much more complicated than it is now. People used to make any kind of coin they wanted. Sovereigns, reales, ducats…  none of them directly equivalent to each other except for the fact that they were all made of the same metal.

So the only way businessmen, who used these coins in daily transactions, could tell how much they profited or lost was to record the value of those particular coins in standards of measure. Also called monies of account.

Pounds, pesos, dollars, are monies of account. They are theoretical monetary units (in the same sense that an inch or kilogram is theoretical) in which accounts were kept and that in earlier times did not actually correspond to coins in circulation.

The peso and centimos are examples of monies of account. A real fuerte coin was worth 12 centimos, while a peseta coin was worth 20 centimos. How come? Because pesos and centimos were legally defined weights and measures of gold or silver. A coin could only be worth a peso if it had a peso’s weight of silver. No calculators, just scales.

The actual coins issued be they pesetas, reales vellon, escudos, pesos fuertes, or real fuertes are monies of exchange.

This was a headache for accountants until someone got the bright idea of making the monies of exchange to the same specifications as the monies of account. The weird amount coins were removed from circulation and only specific coins issued, each divisible with each other by weight. If a coin was worn out (weighed less than specified standard), it was melted into new coins.

1867pesorarafilipinas

So how is this nice bunch of numismatic trivia an issue for Resistance?

Simple.

We are being robbed by the Bangko Sentral ng Pilipinas because they no longer maintain our peso as a standard for the measurement of value and they don’t have the decency to tell us about it.

Everyone complains how expensive things have gotten over the years. But do you ever wonder why? The government and the rebels both want us to believe that prices increase because of laws of supply and demand or because of exploitation by greedy businessmen. Nothing could be further from the truth.

I submit to you the idea that prices increases are nothing more than an illusion because there is no agreed upon standard of value with which to base the value of goods and services. Things aren’t really expensive… your money is just worthless!

Ask yourself… what is the legal definition of a peso? If you sold me a hamburger for a fifty pesos and I gave you a piece of notebook paper with the words "Fifty Pesos," how could you prove in a court of law that what I gave you wasn’t a peso or even fifty of them?

What Act of Congress, codified into civil law in the Philippine Republic, defines exactly the nature of the peso since it is a theoretical money of account?

The answer is nothing. There is no such law on the books… TODAY.

But once upon a time there was.

According to Wikipedia (http://en.wikipedia.org/wiki/Philippine_peso), the March 2, 1903 Coinage Act for the Philippines:

formally defined the Philippine peso in the US Code under Title 48, Chapter 5, Sections 1141-1156 as a weight of measure equivalent to 12.9 grains of pure gold, exactly half the gold content of the US dollar, as defined by the US Coinage Act of 1849.

Gaudens_lg

In short a Philippine peso is legally defined as 12.9 grains (0.026875 troy ounces) of pure gold. Doesn’t matter if its a coin or a fork or mickey mouse figurine… as long as it is pure gold and at least 0.026875 troy ounces, then you have a peso. (Shown is a $20 gold coin, equivalent to P40)

http://www.coinsite.com/content/Articles/PhilippinesMinor.asp

http://www.bohol.ph/article34.html

1904spesopcgs62

The problem with this system is that 12.9 grains of pure gold doesn’t exactly make for the biggest coins in the world. So the US government decided to solve the problem by making silver coins of equivalent value. (See the US-Philippine silver peso, 357.75 grains of pure silver) More problems started in 1906, when the price of silver sky rocketed. Suddenly, the coins were worth more in the melting pot than at face value.

Once again, enter the government. Instead of allowing the coin to circulate freely, thus pushing prices down, government decided to maintain the fiat parity rate and shrink the coin so that once again, the silver content would equal the 12.9 grains of pure gold. This intervention would give the government an excuse to do more weird things to the money in years to come… like create imaginary pesos.

As you click on the links in Wikipedia, you notice the mentioned sections in the US Civil Code read "omitted in view of recognition of Philippine independence." Sounds reasonable. US territory, US law. No more US territory, no more US law.

But wait… the NEW Philippine law which legally defines the peso is NOWHERE on the books! Which is just weird because Philippine Civil law takes great pains to legally define what years and months are (for the sake of contracts, incarcerations, etc.). Actually, they just retained what US law defined a year or month to be. But the peso? Nada!

Think about it…

  1. In 1914, the price of a new Ford Model T was P1,700.00 (45.6875 troy ounces of gold).
  2. In 2005, the price of a new Totota 2.4E A/T Camry is P1,325,000.00 (55.65864 troy ounces of gold).

That’s a difference of only 9.97114 troy ounces of gold or P237,390.36 in today’s money.

Not much of a price difference really, if you figure in all the extras the Ford Model T didn’t have, like seat-belts, air conditioning, stereo, etc.

And yet you are supposed to think that things were much cheaper back then, and that things are expensive today because greedy people who the government will protect you from, as long as you pay a little bit more and obey a little bit more…

If there is nothing wrong with the prices or goods, then the fault must lie with the money itself.

Weights and measures help determine ‘how much’ an something is, compared to an agreed upon standard. The markings on a ruler let you know how long something is. The markings on a scale let you know how heavy something is, and so on.

Before rulers and scales can work, there must be a common standards agreement. A measure is of no use to anyone if there is no standard as to what an ‘inch’ is or what a ‘pound’ is. My inch must be exactly the same as the hardware store’s inch which must be the same as the architect’s inch, etc. My peso must be the same as your peso.

Can you imagine trying to build a house where the agreed standard lengths change daily? What was an inch today was a half-inch yesterday is tomorrow’s double-inch. What happens when the plan says one inch? Which standard do you use?

Having a peso that changes from day to day makes it easier for the government to hide a lot of dirty tricks. Anyone who has ever had the misfortune of trying to purchase something from a wet market will readily understand what I’m saying.

More on that soon…

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