Money by definition is a medium that can be exchanges for goods and services and is used as a measure of their values on the market. Money includes among its forms a commodity such as gold, an officially issued coin or note, or a deposit in a checking account or other readily liquefiable account. Money is also the official currency, coins, and negotiable paper notes issued by a government.
Regardless of how we define money, the Federal Reserve Note, better known as the US Dollar, is supposed to be strong. Our money is supposed to be trusted. Our money is supposed to represent the time and labor that we put into it. The dollar is the world’s reserve currency. Our money is not supposed to be dwindling in purchasing power. $1.00 in 1913 is not supposed to be worth $.03 today. If the politicians and bankers have their way, it will be worth much less ten years from now. You can’t print unlimited money and expect there to be no consequences.
The Gold Standard before 1913 ruled where money was strong
Our financial system was once ruled by the only form of real money, gold. Gold coins existed in the late 1800s and early 1900s here in the US, but people mostly used paper banknotes and bank transfers just as they do today. Gold coins comprised a little less than 20% of the total currency. Most of these gold coins were used more as a savings instrument and not used actively for everyday expenses. Everyday expenses were paid by mostly silver coins and paper banknotes. A $20 gold coin and a $20 bill were both worth the same. Both the $20 gold piece and the $20 bill bought a man a nice suit.
The Federal Reserve Bank was formed in 1913 and the dollar decline started
A few attempts were made to centralize banking. The Panic of 1907 exposed the chaotic banking system here in the United States. In 1908, Congress passed the Aldrich-Vreeland Act to establish the National Monetary Commission. Soon after in 1913, the Federal Reserve Bank was formed at Jekyll Island. The new banking system would
use good governance, best practices, and scientific methods to create an institution to help heal the many rifts that have been present from the beginning of the republic. Thomas Jefferson saw this movement in the 1700s as problematic for our money. He was absolutely correct as the formation of the Federal Reserve banking system was the initial stop to see $1.00 worth $.03 today.
In 1933 FDR makes it illegal to hold gold coins, bullion, or certificates
Remember folks in 1933 our money was still backed by gold, 1/20oz per every dollar. On June 5, 1933, the United States went off the gold standard, a monetary system in which currency is backed by gold, when Congress enacted a joint resolution nullifying the right of creditors to demand payment in gold. This was done by Executive Order 6102 by FDR. Keynesian economic theory said to fight off an economic downturn, it would be necessary to inflate the money supply. Gold certificates were eliminated, gold ownership by US citizens was now seen as a criminal offense, our dollar was devalued to 1/35oz of gold, and most importantly the government could create more money supply. Twenty years after the Fed was formed, our dollar was now worth about $.80. There was still a lot of purchasing power to be lost because of future debt and money printing.
Bretton Woods replaces the gold standard with the US dollar as a global currency
The Bretton Woods agreement of 1944 established a new international monetary system. It replaced the gold standard with the US dollar as the global currency. The system was made possible by a promise from the US Treasury to redeem dollars for gold at $35 an ounce. Keynesian economic policies enabled governments to dampen economic fluctuations, and recessions were generally minor. Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. A new reserve asset was invented called the “Special Drawing Right” or SDR. The SDR was created and given the value of 0.888571 grams of fine gold, the same value as the dollar in July 1944. With more banking games in the fold, $1.00 now has about $.60 of purchasing power. The US was the only nation that could print the globally accepted currency.
Nixon closes the “gold window” and the dollar starts a steep descent
In 1971 President Richard Nixon closed the gold window and completely stripped the US dollar of any pegging to gold. The Bretton Woods Agreement was ended and the modern-day fiat currency system was born. All currencies could now float in value against one another. President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value. All central banks could now print money at their own discretion. Our dollar at this time was worth about $.35. With all countries printing money, the fiat system of money takes our purchasing power away dramatically. This is the same fiat experiment that started 52 years ago, that is blowing up today.
The government keeps spending and debt grows exponentially
President Reagan took office in 1980 and we had about $800 in federal debt. 43 years later the US national debt is $31.5 trillion. The spending has been out of control for decades. That’s what happens when you give the fox the keys to the henhouse. Instead of making the correct hard decision, politicians spend money that we don’t have. The system is addicted to debt now, and this debt continues to erode our purchasing power. $1.00 in 1913 is worth about $.10 by 1990. Money needs to be printed just to pay the interest on our debt today, which is about $3 billion a day and growing. Debt will continue to grow until the system collapses.
Greenspan, Bernanke, Yellen, and Powell are a disgrace
Remember the 1960s and the early 1970s. A father could be a carpenter, have a home, a stay-at-home wife, three kids, and retire at a reasonable age. Well, what the hell happened? Money printing went exponential and debt became fashionable, easy, and necessary to live and have nice things. The media promoted having nice things. The US became a consumer nation based on money printing and debt. Wall Street took over from Main Street. How can we generate huge paydays but not make a damn thing? Well, Alan Greenspan, Ben Bernanke, Janet Yellen, and Jay Powell have taken care of that. Our dollar is now worth $.03 and I guess headed close to zero. Central bankers and politicians have ruined our money. It’s been 110 years since the Fed was formed, but we are getting awfully close to the big climax.
There aren’t many guarantees in life, but there are a few. Our fiat money will always buy less in the future. Politicians will constantly spend to win votes. Central bankers will be forced to print more money and further ruin our purchasing power. The ship is going down folks; the question is “are you going to lose everything you have during that process?”
Physical gold is the only form of real money since the Roman Empire. It has always had value. It holds your purchasing power and builds wealth over time. Our fiat dollar is worth $.03 of what it was worth 110 years ago. When it goes to $.01, which means you have lost 66% of your purchasing power from this point. Wouldn’t it make sense to convert that paper guarantee before it happens to your dollars? Politicians and central bankers will make sure that our dollar is almost worthless sometime in the future. That future is closer than you would think.