For 179 years, America’s currency was backed by silver and gold. During this era of sound money, the rise in the over-all prosperity of the citizenry of the United States was meteoric. The poorest immigrants enjoyed upward economic mobility. If you are wondering why living standards for most Americans are now declining, look FIRST to the Federal Reserve’s debasement of the U.S. dollar.
Until 1971, the dollar was real money because it represented tangible value. Today, the dollar has no intrinsic value; it has been a “fiat” currency since gold-backing was completely removed Aug. 15, 1971.
This $1,000 bill was as good as gold: “One thousand dollars in gold coin payable to the bearer on demand.”
Before the U.S. dollar was first debased, it was possible to exchange paper dollars for gold dollars at the bank. For almost 150 years, the dollar was 100% redeemable in gold. According to organic U.S. law , $1 was equivalent to 1/20th oz of gold. Anyone could have demanded a $20 Gold Piece for a $20 bill [U.S. $20 coins below]:
A $20 coin now costs $1,340, instead of $20. It takes more than 60 times as many dollars to buy the same amount of gold. That means our grandparents and great-grandparents could have purchased at least 60 times more goods and services than we can in 2017 (with the same number of paper dollars).
Over time, gold retains purchasing power: The gold dollars above [$1 coins] can buy about 68 times more ‘stuff’ than the paper dollars in your pocket!
From 1792 until 1971, the value of the dollar was stable throughout the world. Before the green-back’s tie to gold was severed, the United States had trade surpluses and balanced budgets. During the era of sound money, trade imbalances were settled with gold. Today, America settles staggering trade deficits with ‘printing-press-money.’
FEDERAL RESERVE DOUBLE WHAMMY
Money-printing is a double whammy for savers. Not only is the dollar continually losing purchasing power, the Federal Reserve’s artificially low interest rates have destroyed people’s ability to achieve yield. For 100 months, holders of U.S. Treasury Bonds have been unable to earn enough interest to compensate for the eroding value of the dollar. Yield-starved retirement funds are on their way to needing a bail-out.
The Federal Reserve’s Zero Percent Interest Rate Policy [ZIRP] is made possible by massive money-printing. In today’s “globally synchronized environment,” financial repression is coordinated (with Negative% Interest Rate Policy in Europe and Japan). The chart below illustrates why the life-span of fiat money (currency backed by nothing) is predictably short:
Image of Federal Reserve Adjusted Monetary Base courtesy of ZeroHedge.
The French philosopher Voltaire wisely noted that all fiat currencies end up returning to their intrinsic value: ZERO. Since the day credit froze around the globe [Aug. 9, 2007*], U.S. debt has more than doubled and the dollar has fallen dramatically against gold.
On the first day of the worldwide debt-crisis [Aug.9, 2007], the spot price of gold was $662/oz [London p.m. fix]. The price of 1 Troy oz of physical gold is now $1,335 [new American Gold Eagle and Canadian Maple Leaf below]:
The high price of gold is signaling the world’s declining confidence in the dollar-reserve system. We named our website “YouShouldBuyGold.com” because there is no better way than gold to protect your savings from currency debasement. Before money-printing shifts into high-gear, exchange paper currency for “monetary metals.” There is no third-party risk when you take possession of physical silver and gold coins.
Submitted by Denise Rhyne
* Schumpeter blog at economist.com; Aug. 9, 2012, Associated Press.
Gold-backed currencies are “hard” currencies. “Fiat” currencies have no intrinsic value. In the past, the existence of national hard currencies discouraged countries with fiat currencies from wildly inflating their money supplies. When nations debased their money, people could flee from the fiat currencies, and flock to available hard currencies. That changed with the bombings of Iraq and Libya [U.S./ NATO invasion of Libya, March 19, 2011]. For the first time, not one national hard currency exists anywhere in the world.
Since gold convertibility was suspended in 1971, the dollar has retained its reserve-currency status because of the dollar’s forty-year monopoly in settling OPEC oil trades – THE PETRO DOLLAR SYSTEM: http://www.youshouldbuygold.com/gold-the-petro-dollar-and-us-foreign-policy/].
WEIMAR – first DEFLATION then INFLATION:http://www.youshouldbuygold.com/weimar-first-deflation-then-inflation/
“Inflation: An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices. The rise in prices is caused by an increase in the volume of paper money issued.” Webster’s New Twentieth Century Dictionary, George W. Ogilvie, unabridged, USA, 1904.