The term fiat money refers to a currency that has value solely because a government or central authority has declared it to be legal tender. Fiat money is not backed by a physical commodity like gold or silver but rather by trust and confidence in the issuing authority. Fiat money is indeed created by central banks through various monetary policy mechanisms. Fiat money could be looked at as fake money. Central banks, such as the Federal Reserve (often referred to as the Fed) in the United States, have the authority to create new money by expanding the monetary base through actions like open market operations, where they buy government bonds or other assets.
The Fed was formed in 1910 on Jekyll Island
In 1910, a group of influential bankers, economists, and politicians, including representatives from major financial institutions, met on Jekyll Island, Georgia, to develop a plan for reforming the nation’s banking system. This secretive meeting laid the groundwork for the eventual creation of the Federal Reserve System. The Fed’s primary objectives are to promote stable prices, maximize employment, and maintain the stability of the financial system. The Fed’s primary objective today is to keep the system intact for as long as possible with fake money.
The Fed is not purely a government entity
The Federal Reserve Bank is not a purely government entity, nor is it a purely private institution. It operates as an independent entity with both public and private elements. The Federal Reserve System was created by the US Congress with the passage of the Federal Reserve Act in 1913. It was established as the central banking system of the United States and is responsible for conducting monetary policy, regulating and supervising banks, maintaining financial stability, and providing various financial services.
While the Federal Reserve is subject to oversight by Congress and its leadership is appointed by the President of the United States, it is structured to be independent of direct political control. The Board of Governors of the Federal Reserve System, which is responsible for the overall direction of monetary policy, consists of seven members appointed by the President and confirmed by the Senate. The Federal Reserve Banks, on the other hand, are regional banks that form part of the Federal Reserve System. They are owned by member banks within their respective districts and operate as quasi-public institutions.
The Bretton Woods System was torn down in 1971
The Bretton Woods system, which was an international monetary system established in 1944, effectively ended in 1971. Under the Bretton Woods system, countries agreed to fix the value of their currencies in relation to the US dollar, which, in turn, was pegged to the price of gold. The International Monetary Fund (IMF) was created as part of the Bretton Woods system to help stabilize exchange rates and provide financial assistance to member countries. However, in the late 1960s and early 1970s, economic pressures and imbalances, particularly related to the US trade deficit and the Vietnam War, put strains on the Bretton Woods system. The US dollar was under significant pressure, and other countries began to question its convertibility to gold at the fixed exchange rate. The Fed was given free rein to print fiat money.
President Nixon rips down the gold standard
In 1971, President Richard Nixon announced a series of measures, including the suspension of the dollar’s convertibility to gold. This effectively ended the Bretton Woods system and marked the transition to a system of floating exchange rates, where currencies are not fixed to one another. After the end of the Bretton Woods system, the global monetary system evolved into the current framework where exchange rates fluctuate based on market forces, and central banks use monetary policy to manage their respective economies. The central banks of the world now rely solely on fake money to support a system based on debt. The debt and the money printing have now gone exponential.
The joy ride with debt will end very badly
In 2014, foreign central banks stopped being net buyers of US Treasuries. The Federal Reserve (the central bank of the United States) has indeed been involved in the purchase of US Government bonds, specifically through a policy known as quantitative easing (QE). QE is a monetary policy tool where the central bank buys government bonds and other securities from the market to inject liquidity into the economy and stimulate economic activity. According to Ben Bernanke in 2008, this QE buying would be temporary. Kind of similar to Nixon saying the elimination of the gold standard in 1971 was also temporary.
The Fed’s money printer is keeping credit markets alive
The United States deficit refers to the difference between the amount the government spends and the revenue it collects in a given fiscal year. When the government spends more than it collects in revenue, it results in a budget deficit, which adds to the overall national debt. It’s important to note that discussions around the US deficit and national debt are ongoing, and there are various perspectives on the appropriate fiscal policies to address these challenges. The government, policymakers, economists, and experts continue to analyze and debate the best approaches to manage the deficit and ensure the long-term fiscal sustainability of the United States. Greater deficits only add to rather than fight the inflation problem.
Fed’s money printer is often used metaphorically to refer to the Federal Reserve’s ability to create and inject money into the economy through various monetary policy tools. One of these tools is the purchase of government bonds or other assets, which increases the money supply and provides liquidity to the financial system. The aim is to strike a balance between providing necessary liquidity and managing the potential risks associated with monetary policy actions.
MMT is another theory and excuse for fake money
Modern Monetary Theory (MMT) is an economic theory that challenges conventional views on government spending, budget deficits, and monetary policy. MMT argues that countries that issue their own currency, like the United States, have the power to create money and are not constrained by revenue or borrowing when it comes to financing government spending. It suggests that governments with sovereign currencies can always fund their spending obligations by creating new money. I can run a business and buy nice stuff by using unlimited fake money too.
QE is just feeding a system addicted to debt
Quantitative easing (QE) is a monetary policy tool used by central banks to stimulate the economy when conventional monetary policy measures, such as lowering interest rates, have become less effective. QE involves the central bank purchasing government bonds or other financial assets from the market, thereby injecting money into the economy and increasing the money supply. The use of QE as a monetary policy tool became prominent during the global financial crisis of 2008–2009 and has been employed by several central banks worldwide, including the US Federal Reserve, the European Central Bank, and the Bank of Japan. QE has inflated an “everything bubble” that is in the process of an “everything pop.”
Rate hikes make Uncle Sam’s debt even more expensive
It’s important to note that the impact of interest rate hikes on different sectors can be nuanced and depend on specific market conditions, the overall economic environment, and the effectiveness of monetary policy actions. Furthermore, central banks often consider a range of factors when deciding on interest rate adjustments, including inflation expectations, employment levels, and overall economic stability. Overall, while rate hikes aimed at combating inflation can have implications for bonds, banks, and small businesses, the ultimate goal is to maintain price stability and foster sustainable economic growth over the long term. Rate hikes this year to fight inflation are gutting bonds, banks, and small businesses.
Gold is the only form of real money
Gold cannot be printed or created in the same way that fiat currency can be produced by central banks. Gold is a naturally occurring precious metal that is mined from the earth. Its supply is limited and its value is determined by market forces such as supply and demand.
The ability to create or control the supply of gold is not in the hands of any specific entity like the Federal Reserve. This is in contrast to fiat currencies, which can be created or expanded by central banks through various monetary policy tools, such as open market operations, reserve requirements, and quantitative easing.
Physical gold is insurance and wealth preservation
The limited supply of gold and its historical use as a store of value have led some individuals and investors to view it as a hedge against inflation, currency fluctuations, and economic uncertainty. Gold has been used as a medium of exchange and store of value for centuries and continues to hold a significant place in the global financial system and investment portfolios. Gold is often referred to as a “currency insurer” because it has properties that can help protect wealth during times of financial instability.
To save this rotten financial system created by the Fed, much more fake money will be created out of thin air. With all of this fake money added to the system, the value of our dollar will suffer. The Fed has to maneuver around the debt situation that has gone exponential. The numbers are astronomical and eventually mean financial system doom. Kicking the can down the road for decades must have consequences.
Converting the system to a digital system will not fix these problems. Changing the system may just delay the inevitable outcome for our money. Our money is dwindling and the Fed and all their shenanigans will only make it worse. The Fed will try to save the system and kill the currency with more fake money. The system may be saved temporarily, but our money will lose significant buying power. Of course, this happens gradually then all at once. We are getting close to the “all at once” period.