Need help on Executive Order 11110

[LT for the Truth]

I had a discussion with a friend about EO 11110. Its my understanding that Kennedy wanted to introduce the US Note, which was interest-free. Wouldn't this undermine the FRN? He's under the belief the order had nothing to do with the Federal Reserve. I'll post an excerpt from his email:

First, know Gresham's Law... bad money chases out good money (sometimes called race to the bottom).

So, if US Notes are good money, why would anyone use them? Instead, they would hoard them.

Second, all US currency at the time (greenbacks, silver certificates, gold certificates, federal reserve notes) was redeemable in silver. All of them!

Third, Kennedy wanted to avoid debt, but not because he cared about sound money. He wanted to avoid Congress.

What am I missing here, if anything? How could I respond? Thanks in advance

[hugolp]

I had a discussion with a friend about EO 11110. Its my understanding that Kennedy wanted to introduce the US Note, which was interest-free. Wouldn't this undermine the FRN? He's under the belief the order had nothing to do with the Federal Reserve. I'll post an excerpt from his email:



What am I missing here, if anything? How could I respond? Thanks in advance

You are not missing anything. You just have common sense.

First, know Gresham's Law... bad money chases out good money (sometimes called race to the bottom).

So, if US Notes are good money, why would anyone use them? Instead, they would hoard them.

This is just plain false. What would happen is that FDR would disappear because people would try to use silver certificates. FDR would keep loosing value until they disappear. But people would use silver certificate to buy things. Why should they stop buying things? It is true that people would probably save a bit more with honest money, wich is a good thing. This depresion would be a lot less deep if people had savings.

Second, all US currency at the time (greenbacks, silver certificates, gold certificates, federal reserve notes) was redeemable in silver. All of them!

This is plain false, and shows you how little he knows about the subject. If he is suggesting that you could still buy silver with FDR he is trying to fool you. A silver certificate equals a certain amount of silver, a fixed amount. You could buy silver with FDR but at that time price. But if you hoard FDR and you go and try to buy silver (or whatever) 20 years later you could not buy any similar amount but much less. And that is because FDR are not backed by anything and suffer high inflation.

Third, Kennedy wanted to avoid debt, but not because he cared about sound money. He wanted to avoid Congress.

I dont think this makes any sense, but it would be interesting to ask him to explain more of this theory just out of curiosity.

Hugo

[scooter]

You could buy silver with FDR but at that time price. But if you hoard FDR and you go and try to buy silver (or whatever) 20 years later you could not buy any similar amount but much less. And that is because FDR are not backed by anything and suffer high inflation.

I could buy silver with Franklin Delano Roosevelt?

[hugolp]

I could buy silver with Franklin Delano Roosevelt?

haha I dont know why I used FDR instead of FRN.

Hugo

[LT for the Truth]

A silver certificate equals a certain amount of silver, a fixed amount. You could buy silver with FDR but at that time price. But if you hoard FDR and you go and try to buy silver (or whatever) 20 years later you could not buy any similar amount but much less. And that is because FDR are not backed by anything and suffer high inflation.

Hugo

thanks a million, Could it be said that before 1971, the FRN was backed by silver but the price went up or down in relation to the money supply?