Wednesday, April 11, 2012

Money - The dollar vs. wooden nickel

I am not what you would call a genius by any means.  Although, I do typically read information that smart people write about.  I believe this has helped me out with any mental deficiency that I may have.  However, every now and then I will have a stroke of genius that may in fact be an original thought.  Like my $2 for a debt free America article.

Usually when I do receive these moments of enlightenment they come when I am in the bathroom  I believe this is also when Emmett Brown came up with the idea of the flux capacitor after bumping his head in the bathroom.

Although I will not start a new blog...Deep Thoughts, while sitting on the toilet...the bathroom is a great place to sit and think.  Many would agree that your voice sounds much better if you sing in the shower.  Heck, I'd go even further and say almost everything is better in the bathroom...but I won't go there.  Not yet!

Today was no different.  After taking a brutal intellectual beating from my CPA Regulation practice tests, I thought of something that just didn't make any sense to me.  I'm sure most of you are not aware, but I'm not a big fan of fiat currency.  You know...those paper dollar bills that says Federal Reserve Note on them.  It's a long story for another day as to why I don't like them.

People like these green backs.  Especially the ones that have a higher denomination such as $100.  Now, why do people like paper or fiat currency so much?  Take for instance the wooden nickel.  The old saying goes something like, "Don't take any wooden nickels, or don't accept any wooden nickels."

So, here is my question to everyone...why is it acceptable to use paper dollar bills, but not acceptable to use a wooden nickel?  There is a company called Old Time Wooden Nickel Co. that produces wooden nickels.  You can go to site and learn all sorts of history about wooden nickels.  If you watch the video don't believe that that metal isn't worth much in scrap metal  It probably would be worth at least $50.  If you look at the prices of some of those wooden nickels, you'll notice that they cost more than a nickel.  In fact, some of the nickels including shipping costs over $1 per wooden nickel.

Last time I checked...paper was made out of wood.  Why do we not use wooden nickels then?  Ah, yes...our dollar bills are made out of cotton and other fibers.  Surprisingly not much information about wooden nickels is available if you search with Google.  Wikipedia says that some banks and the chambers of commerce issued wooden nickels with expiration dates and were used after the Great Depression.  Wikipedia says these wooden nickels are also popular in geocaching.

I do find it odd that a renewable resource like wood or cotton costs more than a nonrenewable resource like nickel and copper used in our current nickels.  Perhaps it has to do with the supply and demand for paper verse non-precious metals.  I guess that the value of our paper currency would increase when supply of cotton becomes scarce.  If we stopped printing dollars and started making all currency in coins would that increase the costs of all metals?  I think it would.  Fortunately for the banks people aren't going to demand thousands of dollars in quarters to pay for goods and services.  People don't even want to use the $1 coins.

I'm not certain if people will understand what I'm trying to say in this article, but I will leave you with this important lesson.  Watch the movie Karate Kid II.  Pay specific attention to the man charging people for how much their vegetables weigh.  This man was essentially the person taxing the town for leasing the land.  On top of that, they were purchasing the food produced at a heavy discount because the people trusted the man.  It is a important story about freedom, standards, duty, honor and accountability.  Perhaps if you understand the story in Karate Kid II, you'll understand why some people have a hard time getting ahead.

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