Shinplasters

Paper money, over the years, and in all lands, have taken all forms and designs. These designs are universally created to instill trust. Things are no different now than they were when paper was first invented. Paper, printed with impressive designs and engravings, have always been used when the real things (gold and silver) are scarce or absent. Historically, the fancier the design, the more acceptable these currencies became; at lest until they became worthless, as all of them have. Governments have always gotten themselves into holes they are unable to raise themselves out of, and as a last resort, they begin printing stuff on paper, mulberry leaves, or even rocks, which portend, or pretend to have value, but of course don't. Fancy words such as the "full faith and credit of the …," have been common usage of the lexicon.

During WWII, American soldiers bought anything they wanted with candy bars and American cigarettes. Prisoners can get what they want by proffering sex, various edibles, or other tangibles which other prisoners desire. Barter has always been convenient between two parties, even when the current currency has some value. The only true, historic money, have been gold and silver. Unfortunately, gold and silver bullion have suffered from a prolonged and gratuitous campaign of malignant persecution from the bankers, stock hosanna howlers and other flat earth prophets, such as the index and mutual funders. Getting back into history a bit, the improperly called "Civil War," had its share of paper money pushers, hoping to get acceptance and resultant purchasing power. One of these efforts was the so-called "Shinplaster."

In most wars, metals become scarce, as they are used to make guns and bullets. During the Revolutionary War, the government printed square paper notes, which soon became valueless. The Constitution prohibited the states from issuing currency, but during the War of Northern Aggression, they did it anyway. The North found itself in such a predicament. No metals to make coins, but as usual, trees which could be cut and turned into paper…as today. There soon became a torrent of official, unofficial, and private notes. Since stamps were issued by the federal government, they were often used as 'money,' since their value was a bit more certain than other paper notes. Everyone was issuing 'money,' it seemed. Railroads, roads, utilities, manufacturers, associations, and banks issued 'money,' and there didn't seem to be any limits to their number or worthlessness. Bank notes were the most widely accepted, and were similar to checks today. Bank notes were good only till the bank went broke, and then their notes were worthless as well.

Businesses issued promissory notes, also called "shinplasters," since there was no metal available for even private coinage. The term came about because the paper on which these were printed, was of such an inferior quality, that it could be mixed with water and plastered on your shin to keep you warm in winter. The shinplasters were printed in all sorts of tiny denominations, such as ten cents, five cents, etc. No metal, no coins, so a paper dime was printed. A ten cent shinplaster had nothing in back of it, and was just a piece of paper with ink on it. When local businesses printed them, they were used for purchasing things at the store which issued them…a sort of barter in a way. They weren't any good in "Brown's Store," if "Green's Store" issued them, and a few miles away, maybe in another town, shinplasters might be worthless. They actually began to be issued in 1837, which began what was called the "free banking period" (unregulated) of history.

US notes, (Northern), were known as 'Greenbacks' and in the South, there were of course the confederate dollars. Northern Treasury Secretary Salmon Chase urged dishonest Abe to issue fractional dollar paper shinplasters to save metals. The Greenbacks were of dollar denominations, and shinplasters were in cents. The last date recorded for shinplasters was 1874. The first treasury shinplasters were labeled 'postage currency' and later became labeled as 'fractional currency.' The shinplaster sort of slowed people hoarding stamps as money. Can you imagine the utter confusion which existed during that war, and especially in the North? There was no record of a Southern shinplaster. No sound money, even from the government, no way to save, no way to accurately price merchandise or food. Just confusion.

In Canada, 25 cent 'shinplasters' were issued in the 1800's and early 1900's, and in Australia shinplasters or calabashes were often circulated in towns of the bush. They were private IOUs like the Northern US privately issued ones were, and were widely circulated. Is it improper to today call the dollar a 'shinplaster?' Probably not, as the dollar today, has the same backing as did the shinplaster. Nothing. It has nice engravings, as did the shinplasters, and as the shinplasters, even have the heads of Presidents engraved on them. They became wallpaper eventually, or bathroom tissue perhaps, because people's confidence in them waxed cold, and they were no longer acceptable. It is 'faith' and 'law,' which give the shinplasters of today, purchasing power. The law says the dollar is 'legal currency' and it is so. But if the faith in them declines, they will cease to have value, regardless of any legal tender laws. It has happened before, and will again. After all, the dollar has already lost 98% of its purchasing power of a few decades ago.

Legal tender laws say we must use dollars, but laws cannot force value. If laws could force value, we could still buy a quart of milk or loaf of bread for nine cents. If legal tender laws could force value, we'd still be able to buy a new three bedroom, brick, oak floored, basemented, high ceilinged row home in Philadelphia for $2500, as hundreds of thousands bought them for during the 1890's. If legal tender laws could force value, a new Ford would cost under $700, as they did in 1940, and I could get a haircut for a quarter. On it could go with comparisons. "You can lead a horse to water, but you can't make him drink." I can write this stuff with sheer logic, historic facts, and obvious eventual results, but it is impossible to make people abandon their dollar savings, if they don't want to do it. Dollars seem to be so 'secure,' that it is absolutely incomprehensible to consider them to become totally worthless, even though they are virtually so now. I took my wife, daughter, son, and two grandchildren to dinner Saturday night and it cost $200. Resurrect your grandfather and tell him that, and he will want to go back to sleep again, so absurd will it be to him.

Slow motion movies allow the viewer to get details often missed with standard speed. It is "instant replays," which football referees use to be certain they are accurate in their calls. (Too bad Monday's Yankees game 2nd base umpire didn't use it. They might have won). By looking backwards at prices, and realizing how much the dollar bought a decade ago, two decades ago, fifty years ago, etc, it is like a slow motion realization of a currency failure. Two cent newspapers and ten cent trolley rides? Of course, and just think back, or go to newspaper morgues to see how far the mighty dollar has fallen. Why continue to save in them? We are stuck with a failing device to measure our net worth in; namely dollars. Other measuring devices such as inches, miles, pounds, ounces, acres, temperatures, or numbers must remain steady or nothing could made, and civilization would collapse. Dollars, which are one of the most important measuring devices, shrink in value, purchasing power, or worth daily, yet 99% of Americans still save in them. I have no idea why! They've become modern day shinplasters. Protect yourself.

P.S. Just been informed of a very limited (30,000) edition of a .99999 (five nines!) pure gold coin from Canada. Encased in a hard plastic case, and it's beautiful. So pure that even a finger smudge would ruin its five nines purity. I've bought some for myself. They won't last long and will have a nice future value. About the same price as a Buffalo. I'll send you pix by e-mail if you wish. They've also made 8 only - 100 kilo 'coins' at about $2.5 million if you've got any spare change around!

May 10, 2007

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com