Using Silver Dollars (Part 2)
Liberty Eagle Silver Dollars are Dollars. They are US Legal Tender Money – Congress says so. But, Americans don’t use them as money because, until now, there has been no mechanism to facilitate it.
I previously wrote detailing a simple Exchange facility along with Accounts where individuals and businesses could store and use these Silver Dollars. Today, I’d like to explain my suggestion which would allow businesses to Invoice their sales using Liberty Eagle Silver Dollars.
First, a little background. Manufacturers sell their products in several ways, including selling to a wholesaler, to a retailer, or to the ultimate consumer. Many will sell only through one method, while others will use multiple chains of distribution.
In one interesting way, a company may use a direct sales staff to market its products, will take orders and arrange delivery from its own warehouses, but has all the billing and payments handled by a number of separate distributors/wholesalers. These frequently are smaller companies selling a product with a technological edge. The business needs a technical staff to make the sales, but it doesn’t want to use up its resources handling a lot of billing, so it in effect hires wholesalers to do this.
The company actually sells its products to the wholesaler, who then sells them to the consumer. To the consumer, this chain of activity is all but invisible, as the invoice merely tells the consumer who to pay and where to send the check. The wholesaler doesn’t physically touch the product, but once it’s shipped, the wholesaler owns it until they are paid by the consumer.
This system is in use today for Paper Dollars. Let’s see how this can be adapted to facilitate the use of Silver Dollars.
There are two money transactions going on here. First, the ultimate customer is billed and pays the wholesaler. Then the wholesaler aggregates its sales for the manufacturer and pays for the products.
The two transactions may both be denominated in Paper Dollars, as in the current all Paper Dollar system, but that’s not required. It’s also possible for the consumer to be billed and pay in Paper Dollars, while the wholesaler is billed and pays in Silver Dollars.
As an example, Company A, the manufacturer, markets and takes an order from a Customer. The order includes an invoice from Company B, the wholesaler, in Paper Dollars – $1000. The consumer pays Company B, which alerts Company A of the payment receipt. Company A then issues an invoice to Company B, denominated in Silver Dollars using the Exchange mechanism.
Assuming the Exchange Rate is $1 Silver for $20 Paper, Company B deposits/transfers the Silver Dollar amount ($1000 / 20 = $50) into Company A’s Account.
So, why would a business choose to use Silver Dollars rather than Paper Dollars? The answer lies in the favorable tax treatment which Silver Dollars receive from the IRS.
Remember, Congress says that both Paper Dollars and Silver Dollars are Dollars, even though Paper and Silver Dollars have different purchasing powers.
Consider a manufacturer with $10 Million in sales. The current sale, if it all were in Paper Dollars, would be $1000, but in Silver Dollars, it is only $50, reducing the annual sales to $9,999,050.
If the cost of doing business comes to $9 Million, the company would pay taxes on $1 Million in the all Paper world, but would pay taxes on $999, 050 in the Silver world.
Sales $10 Million $9,999,050
Costs $ 9 Million $ 9 Million
Profit $ 1 Million $ 999,050
Taxes $ 250,000 $ 249,762.50
(eg 25% Tax Rate)
Though the purchasing powers of the sales are the same, there was $237.50 (Paper) more kept by the business using Silver Dollars for this sale. With sales using this method on $1 Million ($50,000 Silver), almost all the tax liability would be removed, raising the Bottom Line Profit Value by about 25%.
This business would have more capital available to expand its business, hire more workers, and improve its product. The three Natural Constituencies of all businesses benefit:
- Customers get more, better products at lower prices
- Employees get more jobs at better pay
- Shareholders earn more and own a growing company
We’ll see in later articles how businesses (and individuals) can use the Silver Dollars for everyday commerce (Bill Pay). And, we’ll discuss other Cambi Money Services modules including: Payroll, Point of Sale, Investments, and Money Management.
Robert (Bob) Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is http://us-issues.com