“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.” - Aristotle
In 390 BCE (Before the Christian Era) cackling geese warned the Romans of an imminent attack by the Gauls. This saved the Roman treasury, causing them to erect a shrine to the goddess of warning, whose name happened to be Jumo Moneta…hence, the origin of the term "money." The expression "not worth his salt" comes from ninth century India, where salt was so scarce that soldiers were often paid in salarium or "salt money." From the Latin salarium comes our modern word "salary." When the Anglo Saxons invaded Britain in the sixth century, they wore metal rings and ornaments known as schellingas, which became the British "shilling." Paying a fee comes from the German vieh for cattle and is pronounced "fee." Long ago, some Germans would pay their rent in cattle, or in other words, they "paid a fee (vieh)." "Shell out" comes from the time when scarce ornate seashells were used as money.
About three thousand years ago, man invented what has become known as "money" to do several important things. Among them were to store value, and have a common way of transferring effort, profit, invention, or something of value, into a common, compact, valuable, durable object that can be easily traded, without actually bartering physical goods. Gold and silver have been the most common forms of money for thousands of years, and in reality still are actual, genuine, money. Hammurabi was king of Babylon, and responsible for the greatness of this fabled 2100 BCE third world power. The Hammurabi Code was the most famous of ancient codes of law, and dictated that only silver be used as money. Other things have been used, such as papyrus, mulberry bark, foodstuffs, salt, spices, and various objects of value at any given time in history. The Chinese actually made coins out of salt. Our Constitution says the "states" may not make money or coin out of anything other than silver or gold. Unfortunately, the Founders wrote "states" rather than "federal government," and the consequence of that slip has allowed our federal government to produce basically ever more worthless "money."
"The owl and the pussycat went to sea, in a beautiful pea green boat. They took some honey, and plenty of money, wrapped up in a five pound note." Think about it! Their MONEY was obviously gold or silver, and the five-pound note was being used as wrapping paper!
"Money" is supposed to be valuable, isn’t it? It was until 1964, when the last silver coin was minted, 1968, when the last dollar ceased to be convertible into silver, and 1971, when Nixon removed the last vestige of gold backing from our paper currency. Before that, our coins were actually valuable. They were made of gold and 90% silver. U.S. paper currency was backed by gold and silver supposedly held under armed guard in Fort Knox, Kentucky. From 1792 till 1968, a paper dollar was redeemable into 371.25 grains of silver. The contents of Ft. Knox haven't been audited in 50 years, and many say there is nothing there. In 1916, the U.S. Government held 70% of the world's gold, and today it supposedly holds but 23%, assuming there is indeed any gold in Ft. Knox. Federal statute 80 years ago specifically stated that paper currency was not to be placed into circulation or replaced, unless an equal amount of gold or silver was in the treasury to back it. "Silver Certificate" or "Gold Certificate" was imprinted on the paper money, and it was redeemable in those metals. Pre-1965 money couldn’t be issued unless the government had gold or silver from which to make coins, or gold and silver to back the dollars. I have a packet containing 371.25 grains of silver issued by the government in exchange for a one-dollar silver certificate. For a couple of years after 1965, a government mint struck a few 40% silver half dollar coins, called "clads" in the trade, with far less than the previous 90% silver in pre-1965 coins.
As late as 1940, the U.S. Government demanded gold from Britain as payment of war materials bought from us. British Pound Sterling could not be used as payment. Of course they never paid in full…only a small fraction.
The Coinage Act of April 2, 1792 specifically stated the gold and silver content of each dollar, half-dollar, dime, etc, and even the copper content of pennies. The act has never been repealed, and is still in effect. In Section 19, it is stated that if any officer or employee shall debase the coinage, they, "shall be deemed guilty of felony, and shall suffer death." Government has continually debased the dollar, and made fake coins, and now they are virtually worthless, but none has yet been declared a felon or suffered death.
"Gold is money…that's it." - J.P. Morgan
Perhaps you have noticed that real silver dollars from the 1880’s are far more plentiful than any minted since. The reason is that America had a bi-metallic monetary system prior to the War Between the States. That war was paid for with huge debt, and paper money not backed by anything. After that tragic conflict, holders of the debt wanted America to go to a strictly gold standard, arguing that silver was too "soft," partly because silver was beginning to come out of Colorado in huge amounts. The paper debt holders wanted to be paid with compact gold. That effort to go strictly gold, rather than bi-metallic went on for decades, the government generally buying 16 ounces of silver to one ounce of gold, minting millions of silver dollars, halves, quarters, and dimes, plus gold coins, and storing the rest to back the paper currency. In 1893, President Grover Cleveland repealed the Sherman Silver Purchase Act, and the fed drastically slowed in its silver purchases for coins. That ended the life of dozens of Colorado "ghost towns," and virtually ended mass production of the silver dollar. The election of 1896 pitted the fire breathing 36 year old Nebraskan, William Jennings Bryan against William McKinley. McKinley sat on his front porch in Canton, Ohio and answered questions, while his campaign manager Mark Hanna sent vice presidential candidate Teddy Roosevelt on speaking tours, and received millions from the "gold bug" Wall Streeters, northeastern bankers and moguls. Bryan, who was later to brilliantly defend in the Tennessee "Scopes Monkey Trial," gave over 600 rousing speeches in 27 states urging the bi-metallic system to be made law again, saying, "...You shall not crucify mankind on a cross of gold." Bryan raised but $300,000, while McKinley had $3.5 million. McKinley won only the northeast, where population was still concentrated, but that gave him the election. Sounds like the election of 2000! Even so, Bryan got a million more votes than any previous winner, won all the states south of the Mason-Dixon Line, and all but five states west of the Mississippi. From then on, the government would buy little silver. Bryan dropped dead shortly after the Scopes trial, which has been brilliantly portrayed in the Academy Award winning 1960 film, "Inherit The Wind," a must to watch on videotape. (Don't watch the remake, get the 1960 one!)
As an aside, Frank Baum wrote "The Wizard of Oz," which was based upon the gold vs. silver arguments. "Oz" was ounce of gold, and the Wizard was William McKinley, the "wizard of gold." It was made into a superb film years later, the satire having been lost, but the film will endure forever. Dorothy was on the wrong side!
In the late 1800's, George Washington Miller founded the "101" in Oklahoma. It was a large spread, and became the first theme park in America. The "101" featured cowboys, broncos, roping, fake bank robberies, and wild Indians. Miller printed his own currency which employees were urged to use. Miller's printing press money was called "bucks," hence the nickname for the dollar of "buck."
The paper money was still backed by gold and silver, and the halves, quarters, and dimes were still made of 90% silver. It held its value then, and would have held it even better, if the dollar's backing hadn’t been gradually reduced over the years, beginning with the Presidency of Franklin Delano Roosevelt. (FDR) The consequence of having money with no actual value, is that it becomes worth less and less, the more of it produced and printed. Historically, those two words "worth" and "less" have been combined into one word, "worthless," to describe the eventual condition of an unbacked currency when inflation has begun. Without doubt, it is at an advanced stage here in America. The simple fact is that the dollar has lost 90% of its purchasing power since 1950! Unbacked currencies can become worthless quickly when crooked politicians make citizens lose faith in their currency, as happened in Russia in August of 1998. The consequence of currency having no backing, is that there is virtually no limit as to how much of it that can be produced. The more of it there is, the less it is worth. The more of anything there is, the less they will be worth, whatever it may be. Once again, those who may read this who are under the age of maybe 45, don’t realize just how far our dollars have been devalued.
The word "dollar" comes from the German "thaler," which was a 16th century silver coin. "Dollar," in America, came to mean a twentieth of an ounce of gold, and actually was equal to a twentieth of an ounce of gold, until FDR performed one of the largest grand larceny jobs in history. Until 1933, gold was priced at $20.67 an ounce, and the dollar was worth almost exactly a twentieth of that. Roosevelt and his Democrat Congress made it actually illegal to own gold, and notified everyone to turn in their gold coins and receive paper bills for them, or face a $10,000 fine. This would be over $100,000 today. When that was completed, he raised the price of gold to $35 an ounce, thereby stealing billions from American citizens. Their dollars instantly lost 40% of their redeemability and value in gold. Naturally, government was unable to control human action, regardless of their laws, so millions of gold coins were not turned in, but secreted into closets, bureau drawers, basements, and are now very valuable. Realizing a "golden" opportunity, foreign minters began reproducing old U.S. gold "double eagle" ($20) coins in the 1970's, and they are virtually undetectable to an untrained eye, so buyer beware. Ownership of gold by Americans was illegal for almost 40 years, if you can imagine an outrage such as that. During that time, foreigners could not only own gold, but could exchange their American dollars for gold...which they did...until Richard Nixon put a stop to that in 1971. Who knows how much gold is left in Ft. Knox? Is there any? The last inventory was under Eisenhower, and there are stories and witnesses of huge, heavily guarded trucks leaving Ft. Knox in the early 70's. Roosevelt and his Democrats poured forth a litany of lies explaining that move, which the luminescent lunkheads of Foggy Bottom have yet to equal for its sheer pomposity. Americans have since been stolen blind on a continual basis, as their currency loses value every day...thanks to inflation. According to Fortune Magazine, in the past 55 years, there has only been one year when the dollar hasn't lost value.
When the value of legal tender goes down in value, due to there being too much of it in circulation, prices go up…in that currency. A loaf of bread, automobile, or gentleman's suit doesn't actually change in value. Only its price changes...in dollars, francs, yen, lira, or pesos...as the value of the currency decreases. Currency losing value is known as inflation, and is caused by the money supply being increased by government to pay its political and bureaucratic bills. Another consequence of government inflating the currency supply, (decreasing its value) is that it becomes stupid to save in that currency, dollars in our case.
A more or less typical case of printing huge amounts of, and inflating a currency that became worthless after the backing had been removed, was Germany, which removed the gold backing from the mark in 1914, so they could print more to finance the war they started. The value of the gold-backed 1914 German mark was about 25¢, or 4 marks equaled one American dollar. When the backing was removed, monsoons of marks came off the presses, and the decline began. By 1923, the mark had lost all value, the ratio being 1 trillion marks to one dollar. A man buying a cup of coffee in a restaurant might pay 5,000 marks, and by the time he asked for a second cup, it had gone up to 10,000 marks. The presses were running night and day in Germany. It took a wheelbarrow full of marks to buy a loaf of bread. Eventually they were used for starting fires, and toilet paper; literally! Today, in Russia, worthless rubles are being used to make roofing materials and also toilet paper. These rubles have become valueless in less than three years!
This happened in Germany because of the severe penalties imposed after WW I. Germany was forced to pay huge reparations for the damage that it had done during the war. The “Treaty Of Versailles,” which ended the war, specified under the "Young Plan" that Germany was to pay "288,000 marks an hour for 59 years." The Bank of International Settlements administered the "Young Plan". Germany had lost the war, was broke, so they did what the treaty called for, and the presses rolled night and day, paying the required number of marks. Clever! Of course it ruined the value of the mark, but Germany had followed the dictates of the treaty. It also ruined the German citizenry and gave rise to Adolph Hitler, who became German Chancellor on January 30, 1931. Many of the reparations they paid were from loans from America, which were never repaid of course, and some say might have helped us into the great depression. That same Treaty of Versailles, besides forcing Germany to pay reparations, created Yugoslavia from several previously independent nations with different languages and customs, awarded territories to other nations, changed borders, and was responsible for WW II, and the recent turmoil in Kosovo, Bosnia, and Serbia.
When America removed all backing from the dollar, the slide began, greased with ink. History shows that no nation ever beginning to inflate, without exception, has ever stopped, until total collapse occurs. America has had three failed paper currencies already. The first one was the so-called Continental dollar, which lost all value after the Revolution, giving birth to the expression, "not worth a continental." The South's Confederate dollars, and the North's Greenback dollars, which came to be humorously called "rag babies," became worthless after the War Between the States.
"The wads of worthless paper money were growing heavier in the pockets of the nation, but there was less and less for that money to buy. In September, a bushel of wheat had cost eleven dollars; it had cost thirty dollars in November; it had cost one hundred in December; it was now approaching the price of two hundred - while the printing presses of the government treasury were running a race with starvation, and losing." - from "Atlas Shrugged" by Ayn Rand.
In America, government measures the money supply by three "M" figures, which measure the money in circulation. To show how far down the road to total inflation America has come, look at the "M" figures for a 20-year period.
| M1 | M2 | M3 | |
| 1979 | $362 billion | $1500 billion | $2100 billion |
| 1999 | $1500 billion | 4600 billion | $6390 billion |
(M1 is total currency in circulation plus checking deposits and traveler's checks. M2 is M1 plus small savings accounts and money market funds. M3 is M2 plus CDs of over $100,000 plus repurchase agreements.)
In 1921, there was $55 in circulation for every man, woman, and child in America, and in 1999 there was $32,000! In 1921, that $55 was in gold and silver coins, plus paper dollars that were backed by, and convertible into those metals. Now, coins are made of cheap metals, and nothing backs the paper dollar. Even pennies are no longer made of made of copper.
If you are receiving 3% interest on your savings, and the money is losing its value by a government stated inflation rate of two percent a year, you aren't breaking even, because taxes must be paid on the interest earned, even if in actuality you make no profit at all. Note that in this chapter I have tried to refrain from using the term "money" when referring to pieces of paper with ink on them, because our dollars have no real value. To me, "money" has actual value, is itself a store of value, is desirable, and universally recognized for value. Gold and silver owe no debts. Think about that statement. Paper money is usually called a "note," meaning the issuer of that paper owes you. When you borrow from a bank, you sign a "note," meaning you affirm that you owe the bank the sum you borrowed, plus interest. The Federal Reserve issues "Federal Reserve Notes," which phrase is printed at the top of your dollar bills, meaning they owe you something, but no one knows what! Gold and silver owe nothing, because they themselves are valuable, and best fill the definition of "money." Not only money in America, but around the world. Gold has no race, national boundaries, or time limits. Gold is accepted and convertible into any currency, in any nation in the world.
Politicians love to give fake 'benefits' to voters to secure their re-election...with ever decreasing valued dollars of course. On ABC's Sunday morning "This Week" show of August 18, 1996, Senator Chris Dodd, (D-Conn.) who was then head of the Democratic party, likened belief in the gold standard, (honest money) to the lunatic fringe. Naturally, Senator Dodd, because ever increasing amounts of unbacked paper money keeps you and other hacks in those highly paid, prestigious Senate offices decade after decade, and in your case succeeding your equally misinformed, disgraced father, Senator Tom Dodd.
Have you noticed that the Olympic Medals are termed "Gold" and "Silver" for first and second places? People would laugh themselves silly if the medals were denominated in dollars. Then there is "Gold Medal Flour," "Gold Bond Powder," and gold as a prefix of any award or product that desires its quality to be thought of as being of the highest magnitude. Vitamins are called "Centrum Silver," and even the Lone Ranger's bullets were made of, and his horse named..."Silver." The term "sterling" derives from the name Easterling, an Estonian family that used to stamp their name on silver bars. Today, "sterling silver" is 92.5% pure.
Government likes to say they have inflation under control at 2% a year, but even at 2% inflation, the dollar will be worth less than 80¢ in ten years. Under Jimmy Carter’s inflation, it would have been worth less than 50¢ in 5 years. According to Albert Sindlinger, a world famous economist and columnist who lives in Wallingford Pennsylvania, inflation is more like 12%. He says that in figuring inflation, government doesn’t include the increases in local taxes, insurance, medical costs and a lot of other services. Sindlinger says the government mostly measures products, and I question whether they do that with even a smidgen of accuracy. According to the Wall Street Journal of February 2, 1992, the elderly spend twice as much on health care as they did before Medicare: $1,589 per year in 1961, vs. $3,305 in 1991. These increases in costs are not counted as part of inflation.
In 1988, I bought two new Chevrolet Suburbans for 4-wheel drive "Jeep" tours in the Colorado Rockies. They cost $16,510.16 each then, and in 1998, over $37,000, with virtually the same specifications. They even looked virtually the same, had the same engine, transmission, and body style. Over 115 % inflation in ten years? A box of Wheaties in the super market in July 1998 was priced at $3.56, and it was half that in 1988. In my town, a home in a development named English Gardens sold in 1988 for less than half of what that same home sells for in 2000, and in 1988 it sold for three times what it initially sold for when new in 1972. An ad for a grocery store in 1988 had a 16 Oz. Woolite selling for $1.79, and that same store today sells it for $4.79. Have homes doubled in dollar prices since 1988? Yes, and other consumer goods such as lumber, building materials, and clothing have at least doubled since then. In September 1996, butter abruptly jumped from $1.25 to $2.00 per pound, and in September of 1998, to $3.39. On December 3, 1996, government bureaucrats and parsimonious "officials" decided that the "CPI,"(consumer price index) was too high by a third. 'Why, we aren't having that much inflation, and prices haven’t gone up that much,' they announced to eager reporters, who usually never question anything. Whereas before we were supposed to have 3% inflation, now it will proudly only be 2%, which saves the feds from paying a trillion dollars in "COLAS" (cost of living adjustments) to the citizens on Social Security, again defrauding them. Not only were they wrong by 400% before, but in order to sanctify their questionable rectitude, they now make it 600%, and no one can do a thing about it.
Government "CPI" figures are supposed to be an indication of inflation, but they don't include "food or energy." Ludicrous! Energy is basic to every facet of our lives as is food, but they aren't counted!
Assets stored in dollars, even with interest added, would have not broken even since 1988, and long before. Government, which causes inflation by continually increasing the supply of those dollars, would never admit to that figure. You judge, but few have had their wages double since 1988, and we all feel this strange squeeze on our pocketbooks. Research some old newspapers in your local library’s microfilm, and prove the above for yourself. In 1980, American workers had the highest salaries in the world, and in 1996 we were 11th.
In 1965, an American worker making $5,000 a year was doing extremely well. I bought a brand new Mercedes in 1962 from Bowman Motors at 7600 Georgia Ave. NW in Washington D.C., for $3,600. The worker today, at $25,000 a year, is no more valuable, nor is the Mercedes more valuable. I was in the theatre business for eleven years, operating six movie theatres. In 1963, my evening admission prices were 75¢, and today, in most places, it is ten times that, and more in some places. Movies are the same, only the "money" is worth less. I can think of no clearer explanation of inflation: Prices aren’t up, the currency value is down. The reason it is down is because there is so much more of it. Again: The more of anything there is, the less they will be worth, and that includes unbacked "money," and stocks, which are continually issued by corporations.
Another interesting economic fact, which most find difficult to understand, are shortages. Actually, there can be no shortages unless government controls the prices of the items. Think about this illustration: Is there a shortage of Model A Fords? No. But if the government came in and said, 'Those Model A's only sold for $350 in 1931, and it is outrageous for you to ask $10,000 for a $350 car. We are going to control the prices of Model A's, and from now on, no one can sell a Model A for any more than its $350 original cost.' Guess what? There would then be a shortage of Model A's, because no one would sell theirs. Want more? Remember the gas shortages in the 1970's? Lines at the pumps, and no gas available. The reason given was that those nasty Arabs had raised the price of crude oil to the sky, and little was available. Nothing could be further from the truth. Those cliquish OPEC (Organization of Petroleum Exporting Countries) Arabs raised the price of oil from $1.80 to $40 a barrel, and wanted to sell it to one and all. When OPEC raised their crude prices, the price of gas went up in proportion...naturally. There was plenty, but it was expensive. Republican President Richard Nixon actually did what I said about the Model A's, saying, 'These prices for crude are outrageous, and we are going to institute price controls so the public won’t get screwed by the big oil companies and rotten Arabs.' Nixon did, and the supply went to virtually zero. Why should an oil company sell gas for less than it cost them to produce or buy? They simply stopped pumping and refining it, and America waited in line. Government...by controlling prices...created shortages.
223 years ago, General George Washington and his 12,000 valiant forces at Valley Forge were starving and freezing, with rags tied around their worn out boots. Washington wrote, in a letter to Governor George Clinton, dated February 16, 1778, "There has been little less than a famine in camp. A part of the army has been a week without any kind of flesh, and the rest for three or four days. Naked and starving as they are, we cannot enough admire the incomparable patience and fidelity of the soldiery, that they have not been ere this excited by their sufferings, to a general mutiny or dispersion." They wore tattered clothing, and even ammunition was in short supply. A few miles away in Philadelphia, no one was hungry or cold. The British were warm and well supplied, because they had ships coming up the Delaware River to re-supply them, plus whatever they could steal. The reason Washington and his men were denied the supplies they needed, was because of a scarcity...created by government. The infant government, then moved to York, Pa., had decided what they would pay for warm clothing, food, and ammunition for the brave troops, and the predetermined rates for purchases were below the market price. Why should a farmer or merchant sell something to government at a price less than it cost to produce? Price controls almost cost us America. Not only were the prices too high, but the infant government had printed so much paper money that it was becoming worthless pretty quickly anyway, and finally became totally worthless, as all paper currencies in history have…eventually. Thankfully, Washington and his men, greatly assisted by France, turned the tide with a brilliant maneuver when they crossed the Delaware in June of 1778, and marched to Monmouth, New Jersey. Imagine how close it was. (Washington's brilliant feat is re-enacted each year.) If you are ever near Philly, go to Valley Forge and look at that field of pain, imagining how miserable Washington and his men were in the dead of that winter of 1777-1778. With rags tied around worn out boots, ragged clothing and little food, 2500 died of starvation and cold. Picture government, and the fools who thought they could save money by controlling prices; thereby almost costing us our land. A new book just issued, titled "The Real George Washington" is an absolutely must read for all thinking, patriotic Americans. Buy it! Read it!
As a child, my parents bought a new 1940 Plymouth for $660. Today, a new Plymouth will cost thirty times that, and usually a lot more. While it may ride smoother, have more power, and an automatic transmission; its body parts will be of thinner metal, and the workmanship will be poorer, while actual weights will be about the same. Thirty times the price of 60 years ago, means the "money" is worth a fraction of its former substance, and has not been a store of value, as it is supposed to be. I own a 1941 Plymouth half ton, flatbed pickup, which I restored in 1973. That truck cost Mountain States Telephone & Telegraph Co. a bit over $400 when purchased new. The truck has no rubber moldings around its doors to keep the air out, and never did have any. The doors fit so well, that even at highway speeds rubber is not needed, as no air leaks in, nor can you hear rushing air. Today, a new pickup would cost a minimum of forty times the price of my truck, or more, and it would be of no higher quality or heavier. The value of our money has gone down that much. My parents bought a six-bedroom home in Washington D.C. in 1936, at 1811 Kenyon St. NW for $3500. It was brick, had high ceilings, wonderful craftsmanship, three bathrooms, two ornate fireplaces, a butler's pantry, full basement, garage, lovely yard, and was in an excellent neighborhood of tree-lined streets and 100% single family dwellings. To remark that a similar sized home of much lower quality in a similar neighborhood would cost forty times that much, is far too low, indicating even more inflation. The dollar has not been a store of value, but homes and antique autos have. Inflation reached a government figured, shocking 13% during Jimmy Carter's Presidency, meaning that your currency lost 13% of its value each year. The "prime rate" went to 21% under Carter.
According to the U.S. Bureau of the Census, the following are the average prices paid for new cars in the following years:
1970 - $3542
1971 - $3742
1972 - $3879
1973 - $4051
1974 - $4439
1975 - $4949
1976 - $5414
1977 - $5811
1978 - $6382
1979 - $6861
1980 - $7591
1981 - $8929
1982 - $9853
1983 - $10,527
1984 - $11,220, which was when this newspaper article was clipped.
Even by those government figured auto price statistics, we had 317% inflation during that 14-year period, over 22% per year, not counting the various safety features which became compulsory, adding to cost. In 1975, you could get a new Cadillac for 230 ounces of gold, and today, you can get two new Cadillacs for 230 ounces of gold and still have $3600 left. According to the August 30, 1997 Denver Post, the average price of cars in 1996 was $21,750. Have values gone up? Of course not, the "money" value has gone down. The buck mounted a toboggan slide when FDR took office, and the grade stiffened with the final removal of all backing. Where is the bottom of the hill? Ask an elderly German.
Two ounces of gold bought a fine man's suit a hundred years ago, and still will. The comparisons can continue almost endlessly. Gold and silver have value because they are scarce, require effort and capital to produce, are beautiful, virtually indestructible, universally recognized for value, compact, easily held and transported, and have been real money and a store of value for five thousand years. Gold and silver are actual money, whereas dollar bills are "legal tender," and have no actual value of any kind. Legal Tender laws mean you are forced to trade with dollars, not because of their value, but because government says you will use them. Throughout the entire world, not one single currency is backed by gold, or anything else. All are worthless. What would happen if the world got wise and realized that all this paper and bookkeeping entries were basically worthless, and backed by nothing? What would happen is that Gresham's Law would take effect in a massive way. Sir Thomas Gresham was the founder of the Royal Exchange in London in 1566, and his law states quite simply that, "Bad money drives out good." If, or rather when this happens, it will be a worldwide revolutionary occurrence, with all paper money being burned like piles of trash, which happened in Germany in 1924.
Eliminating the dollar's backing, and use of gold and silver in coinage was done for purely political reasons. It was done so government could spend more, and not be held accountable by the citizenry, a first rate 'smoke and mirrors' job. After all, they kept the appearance of the coins and bills the same, so the average guy on the street is totally unaware of the process of theft by government...known as inflation. When politicians allowed this to happen, one hopes they were not consciously stealing, but surely must have decided that giving government more power and ability to spend, would allow it to 'help' everyone a little bit more. Politicians and bureaucrats reasoned that more 'programs' and 'benefits' would raise everyone's living standards, and make everyone happier. They assumed no one would notice the difference if gold and silver were removed from coins, and backing from dollars, because government could pass out more 'benefits.' The consequences of that are hideous. Savings are at an all time low, prices go up continually in dollars, and the financial insecurity we all feel is irrefutable. Various paper currencies are traded around the world every day...none of them having any value of any kind. Smart people keep their surplus assets out of currencies. They buy precious metals, antiques, property, or tangible things of just about any kind, to keep out of paper currencies. That 1941 $400 Plymouth truck is now worth $18,000 in current dollars, and it is not for sale. Can you blame me? The truck will continue to "go up" in dollars, whereas if I took the eighteen grand, what would I use for a truck? Pieces paper with ink on them have no tangible value, whereas sterling silver flatware, gold coins, a home, guns, antiques, art, old vehicles, or even a stack of fireplace wood, are all tangible items with real value that will "go up" in dollar price, as the dollar "goes down." A friend of mine owns a 1936 Packard twelve-cylinder car that hasn't been driven since 1951. It sits in his garage...on blocks…going up in dollar value every year. He's 84, and realizes that the car is far better than having dollars in a bank. He paid $500 for it, and has been offered $25,000, but he'll wait, thank you!
Economics is the essence of rationalism and logic. It isn't difficult to comprehend what has, and continues to happen to our money. Money is purely a function of faith. Maybe that's why banks used to look like fortresses or great huge temples; to give their customers faith. And speaking of banks, notice the haughty advertising they utilize, telling would be depositors of their "strength" and "assets." More balderdash. Look at one of their financial statements, and you will see that deposited money is loaned out almost immediately, and that other than owning their building and a few dollars to handle daily transactions, their "assets" and "strength" is an illusion.
The English word "credit" comes from the Latin credere, meaning, "to believe." Unbacked paper money is an act of faith, spurred on by laws requiring us to use it. The expression "Full faith and credit of the U.S. Government" invented by the bureaucrats, is an absurdity. Faith in silver or gold? Of course, but faith in government or its fiat money? Not me.
We must use paper dollars to buy things, and most of us have a checking account in which to store those dollars for use upon demand. The banks proudly display richly imprimatured signs, indicating that the FDIC, or Federal Deposit Insurance Corp insures your deposits up to $100,000. Sounds really impressive, doesn’t it? If we ever had another run on the banks, as happened during the great depression, our dollars would be safe, correct? Would you place your insurance with a company that had perhaps 1% of your policy’s value in assets? Probably not, because America's insurance companies, it is said, control or insure 82% of U.S. assets, making them very wealthy, and certainly able to pay listed beneficiaries for claims against their insured items. Those previously mentioned insurance companies do not include the FDIC however, because that institution has about a penny on deposit for every hundred dollars worth of 'insurance' your bank says they have. In 1985, the FDIC had $1.20 for every $100 of 'insurance,' and it decreased, until by 1991, it had but 18¢, and by now, I am certain it isn't more than a penny, or perhaps a nickel for every $100 worth of 'insurance,' supposedly protecting your deposits. If worse ever comes to worse, and it certainly will, the presses are probably well oiled and full of paper to print the government's way out of its difficulties, probably with a new currency, a-la-Germany in 1923. When the presses roll, as they currently are, with ever-increasing output, the dollars will become worthless very quickly, and prices in dollars will go to the sky. The FDIC will have performed, but the results will be as happened in Germany. Here is a quote from Walter Levy, an internationally known oil consultant who was born in Germany. "My father was a lawyer, and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a twenty year policy, and when it came due, he cashed it in and bought a single loaf of bread." In 1999 the fed printed $200 billion "extra" paper dollars for the Y2K eventuality. There is also a new one-dollar coin that is gold colored, but I guarantee you has no tangible value, and it tarnishes easily.
Do not buy those 'whole life,' and other insurance policies that supposedly have savings built into them. The above could easily happen to you. The best insurance to buy, if you think you need it, is "term" insurance, because any other type fails to take into account the inevitable inflation that will get worse and worse, regardless of how government attempts to hide it with fake figures.
The world is awash in paper, not gold and silver.
"Paper money eventually returns to its intrinsic value…zero." - Voltaire
In order for money to be what it was intended to be, namely a store of value, it must first have some value. Neither the dollar nor any other currency in the world has actual value. The Swiss supposedly have enough gold in their vaults to back up every single Swiss Franc, but the Swiss Franc is not officially tied to, nor backed by that gold, and the Swiss have been selling a lot of their gold recently. The Swiss Franc is in the same boat as the rest of the world's currencies, which are merely pieces of paper with ink on them that are used in exchange, because of the various "legal tender" laws on everyone’s books. Such laws do not give value or confidence, other than from sheer habit. When governments print money with no backing, other than the force of legal tender laws, there is no value. When governments increase currency supplies by various convoluted methods, as is done in America, or simply print the money outright to pay their bills, the result is the same: no actual value. In Russia, the ruble has become rubble, and in Mexico a few years, ago the peso lost 90% of its value, because it was printed without limit. In America, our dollar has but a small fraction of its value of a hundred years ago. The dollar has lost its value because of various clever legal devices such as the privately owned Federal Reserve System, 'fractional reserve' banking, and allowing virtually unlimited increases in the money supply.
The privately owned Federal Reserve Bank hires the U.S. Treasury to print up some 'money. ' The Federal Reserve actually pays the Treasury for the cost of the printing only. They do NOT pay $1 for each $1 printed. The Federal Reserve then turns around and loans out that 'money, at face value,' to banks that have exhausted their deposits. Banks are then loaning Federal Reserve 'money' to you, and you must repay full dollar value plus interest, even though the Federal Reserve has created that 'money' out of thin air…except for the cost of printing it!
In order for money to be restored to value and be a store of wealth, America must return to the so called 'gold standard,' meaning backing its currency with real gold, and making coins out of silver and gold once again. Banks must not be allowed to loan money they do not have...now isn’t that a radical thought? An audit must be done at Ft. Knox, to see what really is there...if anything. The sign of a healthy nation is valuable money, not "legal tender," even if it is close to being the world’s best such fraud. The dollar's pseudo value exists because it is the world's commodity trading vehicle, not because it has any real value. Critics say that silver and gold will leave the country if the paper is backed, but that is not necessarily so. Currently, U.S. silver coins and U.S. gold coins are incredibly valuable in paper dollars, so where is the threat? If we have money that is actually backed by something valuable, how can it harm us? How can it harm anyone to have something valuable?
It is obvious that legal tender, commonly called "money," (dollars) are decreasing in value in direct proportion to the increase in their supply, which has no limit. If a national crisis comes along, such as a war, massive demands on dollars by foreign nations cashing in their bonds, or even Medicare, Medicaid, and Social Security getting hit hard, as they will, the dollar supply will quickly zoom to the heavens, making a candy bar cost $10 or $20, or ? No paper money in history has ever retained its value. For those of you who have a surplus of dollars, do not store them in dollar denominated items such as savings accounts, certificates of deposit, treasury notes, or bonds of any kind. The reason is really quite simple...you will be a loser. Better to buy some antiques, old cars, guns, original art, rare books, or whatever will make you happy. After you have satisfied yourself with interesting things, buy gold and silver, the reason being that unlike antiques or other nice things, gold and silver are easily stored, require no maintenance, and are easily converted back to the dollars you must use to buy things. You will have 'hedged' or protected yourself and your assets. As dollars lose value, tangible things go up in dollar prices, and when you need dollars to buy something, you sell your 'hedges.' Gold and silver are easily converted into dollars, whereas an antique dresser or a Model A Ford might not sell instantly.
Life is a journey we all must trod. It can be difficult at times, and to negotiate it successfully, a great deal of thought is required. Financial thought is one of the most important, and one that most fail at miserably, because few ever realize that the paper currencies of the world are basically worthless, and assets stored in them will surely fail. If you were starting out on a trip where water was scarce, would you carry your supply in a leaky container? Of course not! But storing your surplus assets in dollars is just as silly as storing water in a bucket with a hole in it! Some say that 'gold doesn't pay interest, and it is silly to store savings in gold.' It is purchasing power that is important, not the number of dollars you have. Gold and silver have never lost purchasing power, whereas the dollar has lost 90% of its purchasing power since 1950! That's why I am in business…I am a precious metals broker…to supply you with gold and silver…and have been in business since 1977. The price of gold fluctuates because of manipulation by the IMF, and the various bullion bankers, but the "buck"' doesn’t do anything but go down. If gold's prices were averaged on a moving average line, it would seem to go up at the same rate as the dollar has gone down.
Keeping that mortgage is an option, as you are paying a fixed amount per month in ever decreasing valued dollars, a hedge in itself. As your home's price "goes up" in dollars, the payments in dollars remain the same. No wonder mortgages are usually transferable. The one problem might be that if and when it 'hits the fan,' you might not have a source of dollars if your job is lost. With no income to pay that mortgage, you may find yourself in dire straits. My home is free and clear.
When you buy precious metals, be sure you get the most gold or silver for the least amount of dollars, which means do not buy rare coins. Values of rare coins are a matter of opinion, and they sell for many times their content in gold or silver. The most economical way to purchase silver and gold is in one-ounce coin form, commonly called "bullion coins." As this is being written, I prefer the American silver and gold "Eagles," Canadian Maple Leafs, or South African Krugerrands. As an aside, the name "Krugerrand" was named for Paul Kruger, an early South African hero, who till his death thought the world was flat. The 'rand' is like 'dollar' in South Africa. You should buy your metals through a broker, just like you buy stocks or real estate, the reason being the broker makes no profit or markup on the item; only his commission. Retail stores often mark up their merchandise 30% or even 50%, whereas a broker usually charges but 3% or less for precious metals. The transaction doesn’t require you to give your Social Security number either...get it? Never allow anyone to 'store' your metals for you, because it is an excellent bet they haven’t stored anything, but are using your capital. You want to physically hold and store the metals in your own home, not a safe deposit box. If you die, that safe deposit box is sealed for probate. Let your kids have the gold and silver without paying inheritance taxes on it.
Silver requires more storage space, and tarnishes, but its price in 2000 has been at, or below its cost of production, whereas the price of gold has been more than its cost of mining, refining, and distributing. There is an old rule among metals brokers, (call me, toll free, 1-888-786-8822 Web site -coloradogold.com), that the ratio determines which metal to buy. If the ratio between gold and silver is over 40 to 1, buy silver, and below, buy gold. This ratio is based on the cost of production. Suppose gold is $295 and silver $5.30: the ratio is 56 to 1, a time to buy silver. Don't worry about gold or silver ceasing to have value, because they won’t. I own an AD 79 Roman Denarius, which is made of silver. Both gold and silver have been actual money for thousands of years, as opposed to pieces of paper with ink on them, which in 100% of the times in history became useful only to start fires or take to the bathroom.
Above my desk is a wonderful full color cartoon from the comic strip, "The Wizard of Id." The king is on the balcony talking to his serfs below, and saying, "Remember the GOLDEN RULE! Whoever has the gold, makes the rules."