Liberty Watch has posted an excellent article about the rapidly growing in fame legal case in which a Las Vegas businessman was not found guilty for paying his employees with old US gold coins, which the businessman and his employees valued at face instead of their Federal Reserve note value.

One hundred sixty-one counts were lodged against numerous persons, but the jury delivered zero guilty verdicts. Three defendants were acquitted, but two other defendants were partly acquitted as the jury hung on one count each. The jury also hung on all counts faced by the businessman and two associates, resulting in mistrials. The government has not yet revealed whether it will re-file charges.

The results are especially fascinating because hard money advocates long have said that a $20 gold coin, regardless of when minted, has a monetary value under law of only twenty dollars. They aver that if an employee is paid a Double Eagle ($20 gold coin), he has an income of $20, not the number of Federal Reserve notes (FRNs) for which the coin could be converted, now at more than $800.

At the heart of the issue lies the fact that there is no law that differentiates among monies minted of different materials of varying intrinsic values. Before 1934, the Treasury turned out $20 gold coins and $20 gold certificates, which circulated as money because they could be converted at any bank into $20 gold coins. Over the years, through machinations only possible because of the force of government, gold certificates were replaced by FRNs. Still, Congress has made no distinction among old gold coins, base metal coins, and paper money.

Consider this: two copper-nickel fifty-cent pieces have much greater intrinsic value than one paper dollar. Still, they command the same value as money. So, why does a government-issued $20 Double Eagle have to be valued differently, for income tax purposes, while there is no difference between two half-dollars and a paper dollar?

The IRS was supposed to notify the judge in late October if the agency intended to retry the defendants whose cases were hung. The government waffled, indicating they would pursue another grand jury and issue superseding indictments.

It is my guess that the IRS will pursue the issue. The last thing the IRS wants is workers being paid in pre-1965 US 90% silver coins and those workers filing tax returns at 10% of what they would have filed if paid in FRNs. Still, it would not be a major financial problem for the government because there are not enough pre-1965 US 90% silver coins and old US coins to make a dent in the government’s income tax revenue. For the IRS, though, I’m sure it’s a “matter of principle.”

Most investors buy gold because of what the Federal Reserve System, the Fed in today’s lingo, does, which is inflate the money supply with paper money. Sadly, the history of paper money, when not linked to gold or silver, is printed until it is worthless. Yet the average college graduate, and even the nongraduate who regularly reads Establishment publications such as The Wall Street Journal, readily accepts any and all Fed actions. To them, increases and decreases in the money supply, or raising and lowering interest rates, are part and parcel to the Fed.

After all, we’re told, it’s the Fed’s mandate to “manage the monetary system,” making sure that there is “adequate liquidity,” that interest rates are “right” to keep the economy growing. The Fed is so ingrained in the public psyche that most Americans think that world commerce would not exist if the Fed and the world’s other central banks did not exist.

The only Establishment knocks you will hear against the Fed are whether the Fed is “moving in the right direction” or “moving fast enough.” No Establishment figures question the Fed itself, just as nowhere in Establishment publications will you read about the dangers of central banking. To learn about the how the Fed truly works and the dangers inherent in central banking, you have to go to such organizations as www.mises.org, the world’s premier proponent of Austrian Economic Theory.

At mises.org you can find publications and articles that explain the most esoteric aspects of Austrian Economy Theory. Some of the writings are for economists, but some are for laymen. For starters, I recommend a few short books, such as The Case Against the Fed, The Case for a 100% Gold Dollar, and What Has Government Done to Our Money?, all of which were written by the late Murray Rothbard. Rothbard’s seminal work is America’s Great Depression, which is an excellent expose of the Fed’s culpability in causing the Great Depression. Hans Sennholz’ Age of Inflation is also an excellent primer on inflation.

Of course, there are numerous websites that relentlessly attack the Fed, but for investors seeking to be educated about money and central banking www.mises.org is the site. Another site is www.lewrockwell.com, appropriately named after Lew Rockwell, who also heads mises.org. The difference between the sites is that mises.org sticks with Austrian Economic Theory and criticisms of other economic theories while lewrockwell.com gets political with some articles. Lewrockwell.com also links to interesting articles completely unrelated to either economics or politics, which makes the site interesting.

A frequent contributor to lewrockwell.com is Gary North, who is a huge critic of central banking. In my August 24th post, I linked to a North article about the Fed’s culpability in the subprime mess. Since then, lewrockwell.com has posted two additional Gary North pieces on the Fed, The Moral Hazard of Central Banking and The Ultimate “Success through Failure Manual.” Despite North’s wanderings, both are educational. (When North wanders, skip to the next section.)

According to analysis of a Gold Field Minerals Services (GFMS) release, gold purchases in India are up to 300 tons this year, more than double the gold purchased in India this time last year. India is the world’s largest consumer of gold, using 600 to 700 tons a year. However, Indian production of gold is only about two tons a year, which means India pulls a lot of gold off the world market.

Also bullish for gold, according to a resourceinvestor.com article, “there are 34.2 million ounces left in forwards, loans and options, with a negative mark-to-market of $8 billion” still left to be unwound. GFMS said that the net gold de-hedging in the second half of 2007 will be between 1.5 million and 2.5 million ounces globally. Newmont Mining, the world’s second largest producer, is one of the major players in the on-going de-hedging. Annual gold production is about 80 million ounces. See GFMS release for a detailed report on de-hedging.

For years, gold producers were delighted, even bragged, about being short gold. Now they are closing out their short positions, a move that puts upward pressure on the price of gold.

In another resourceinvestor.com article, Gene Arensberg, in his biweekly Got Gold Report, paints a really bullish picture for gold. One observation:

Fundamentally gold remains on very solid ground. Want some examples? Well, the Chinese have a love affair with yellow gold. A little less than two billion Chinese can legally own gold again and can even buy it through their government-sponsored banks. They may not buy much per capita, but there are a bunch of per capitas’? in China. That’s probably going to end up being demand on steroids in the not-too-distant future.

Arensberg makes other interesting points about the gold market. His Got Gold Report looks at many aspects of the gold market and is excellent reading for investors who want to be closely attuned to the gold and silver markets.

Meanwhile, Gary North has written a piece on the Fed. For persons trying to grasp the idea of central banking, it is a good read. I noted my thoughts on Gary North’s qualifications to write about the Fed and money in my August 24 post. In today’s economy, it is nearly impossible to invest successfully without understanding the functions of the Fed. As North sees the Fed, it is an “immoral hazard.” Murray Rothbard called the Fed a counterfeiting machine. When you understand the workings of the Fed, you know why Rothbard was so critical of the Fed and central banking.

Finally (I couldn’t pass up this one.), lewrockwell.com has posted a 1959 National Review article about “funny money,” as a visitor to the Chase Manhattan Bank Museum of Moneys of the World in New York Rockefeller Center describes the exhibits. This is a humorous and an enlightening piece on money.

“Understanding money is the key to restoring a sound economy,” wrote Congressman Ron Paul in Mises and Austrian Economics, his personal view on the great economist and the theories of Austrian economics that Mises helped formulate. Likewise, understanding money is the key to being able to withstand the chaos of currency debasement and inflation.

It seems odd that one would state that “understanding money is the key.” After all, doesn’t everyone know what money is? Actually, no.

Those who sat through college Econ. 101 may remember that money is a medium of exchange, a store of value, and unit of value used to measure relative worth of goods and services. But, I can almost guarantee, that the average person does not know why gold and silver are the ultimate forms of money. Wikipedia, the free online encyclopedia, while discussing why dollars are poor money, provides little insight into the importance of basing a monetary system on hard assets.

The best writings on money and the importance that gold and silver play in sound monetary systems are by students of the Austrian School of economic theory, many of which are affiliated with the Ludwig von Mises Institute, Auburn, Alabama. Visitors at the Institute’s website will find a plethora of publications about money and economics, so many that their heads will spin trying to figure out which to choose.

Luckily, Bob Murphy, a holder of a Ph.D. in Economics from New York University and an Adjunct Faculty Member at the Institute, just wrote an excellent piece for lewrockwell.com about money and the Federal Reserve System. (You really can’t get away from discussing the Fed when discussing today’s money.) In his piece, Murphy lists some of the excellent books on money and economics, with links to sources where they can be purchased.

Murphy’s piece is well worth the time it takes to read. Further, read a few of the books recommended, and you’re on your way to becoming educated about money. Then, you, too, will know why “understanding money” is the key, not only to a sound economy but also to avoiding losing “the fruits of your labors” to currency debasement and inflation. At CMIGS, we like to think we do our little part by explaining why gold bullion coins are the best investments for the times.

Gary North posted an excellent treatise on money and central banking on lewrockwell.com. It’s an important read because it furthers knowledge about money and central banking, subjects that most college graduates know little about because the topics have not been taught in most American universities for decades, perhaps now nearly a century. If you do not understand money, how can you use it wisely?

Although North calls for “greater transparency” at our central bank, the Fed, I don’t doubt that if asked he would call for its abolition, as has presidential candidate Ron Paul. Insomuch as doing away with the Fed would require a much greater knowledge of money and how central banks corrupt monetary systems, North has done us all a favor by sharing his knowledge with us.

As for Ron Paul’s statements calling for doing away with the Fed, they have fallen on deaf ears for most Americans because they have no understanding of money and central banking. Actually, most people hearing Paul’s statements laugh, for they have been indoctrinated into believing that the Federal Reserve System is as much as part of our country as the Constitution. Nothing could be further from the truth. The Constitution’s framers knew well the dangers of central banks and fiat money monopolies.

If you study money and the Fed, and you will have an epiphany: the Fed is not only not needed, it is a cancer. Start with North’s article, and then order a copy of the late Murray Rothbard’s The Case Against the Fed. And while you’re ordering, get a copy of Rothbard’s What Has Government Done to Our Money?, which now includes Rothbard’s The Case for a 100% Gold Dollar.

All are short books, and I promise anyone who buys and reads them will have greater knowledge of money, our monetary system and the Fed than 99% of today’s college graduates.