Consent, Coercion & Legal Tender: Understanding Money & Banking, Part 6

June 8, 2008 by  

Late last night I released Part 6 of my Understanding Money & Banking video series. Titled “Consent, Coercion & Legal Tender“, it deals only with currency (as opposed to credit). In particular it focusses one of the key differences between paper bank notes and gold/silver coins: the source of the value of each.

Subtopics include:

  • consensual trade and gold coins;
  • how paper is turned into money;
  • the nature of “legal tender”;
  • legal tender and the role of government; and
  • agreement vs. consent.

I strongly recommend to everyone – including economics majors – that they watch the series in order, starting with episode 1, rather than just jump directly into episode 5 (see episode descriptions below). The reason: my conceptions, descriptions and terminology may differ considerably from that which you have read in economics texts. This is not to suggest that the economic texts “have it wrong”, per se. However, it has been my observation that many works of economics betray an ignorance of the nature of money, of banking, and of the mechanics of basic financial transactions such as the making of a deposit, the borrowing of money, etc. Hopefully, these videos will provide some useful insights to non-economists and economists alike, whether amateur or professional.

For those who have already watched episodes 1 through 4, jump right in (note: the video will be available world-wide within a day or two, if you cannot access it yet in your area…youtube videos take a while to propagate around the globe):

Paul McKeever’s “Understanding Money and Banking”, Episode 6:
Consent, Coercion & Legal Tender


The Understanding Money & Banking series explains money and banking from the perspective of a lawyer with knowledge of economics, rather than from the perspective of an economist. The result is a rare, if not unique, opportunity to learn – in more precise terms – about the nature of money and of banking.

Episode 1, titled “What is Money?“, started with the basics that you will rarely, if ever, read in any book on economics. Topics covered include: the definition of “money”; the essential difference between money and that which is not money; key differences between “currency”, “debt”/”credit”, and “money”; the relationship between money and the use of force by government; the nature of cheques and of debit card transactions; the mechanics of how dollars/pounds really “change hands”.

Episode 2, titled “Anatomy of a Bank Loan“, gives you a rare insight into what is actually happening, mechanically and legally, when someone borrows money. Also discussed: the nature of credibility, and what one is actually buying with interest payments.

Episode 3, titled “Counterfeiting and the Quantity of Money“, discussed the relationship between prices and the number of dollars of which ones country’s money supply is comprised. Also covered: the relationship of productivity to the value of a dollar; the effects of increasing the total number of dollars; the essential reason that counterfeiting is a crime; who are the victims of counterfeiting?

Episode 4, titled “The Crafty Counterfeiter’s Motto“, addresses the nature of current practice of increasing the supply of dollars as the economy grows (a practice that, during a period of economic growth, fights price deflation, even while falsely portraying the effort as one aimed to control price inflation). The central issue: is it wrong to take that which a person never knew they had coming to them in the first place?

Episode 5, titled “Inflation, the Gold Standard, and Fractional Reserve Banking“, challenges the view of some that inflation is simply the result of government expansion of the currency supply, and the view that “if we just returned to a gold standard, we would not have inflation”. Topics include: the nature of “gold standard”; useful vs. useless gold standards; hyper-inflation in history; fractional reserve banking; 100% reserve requirements.


One Response to “Consent, Coercion & Legal Tender: Understanding Money & Banking, Part 6”

  1. Martin Brown on September 11th, 2010 4:34 pm

    As a contractor I recieve payment after a job is completed to the satisfactory of the builder. I sent an invoice to the the builder for the work completed.I was told of the date my payment would be ready and called to arrange to pick it up. i spoke to the business owner and he said that his secretary was on holiday for three weeks and she had forgot to make up my cheque. I called all my crediters to notify them and that I would be late with my payments. I called my insurance relay to them that the automatic debit might not clear and I would send two months payment just in case. I sent off two payments in the form of personal cheques and assumed everything would Ok…Five weeks later I received by mail the return of my payments with a letter stating they refused payment because I had agreed to the automatic debit. An attempt to debit my account for 70.16 cleared one payment and the other did’nt clear . The month that this NSF took place my account was still active with over $4000.00 in deposits during this time. The fact that a debit of $70.16 occured between deposits is unusual so I was charged 45.00 for the misshap and received a letter stating my Insurance was cancelled for non payment, I had tried to get insurance from an other ins co and they refused me due to the fact that the last insurance co cancelled my policy for non payment yet they refused payment. When a company refuses payment and then states that you did’nt pay and incriminates you where does “legal” tender come into this senario? I thought that in the corp world it was illegal to refuse payments that would result in putting a person in harms way! The law of cause and affect so in affect their actions in refusing the payments caused me great harm. Not being able to aquire Auto Ins has cost me my source of income my home , my retirement and 13yrs of hard work. so you tell me how this could happen all for $70.16 cents…

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