Editor’s Note: This is the second installment of “How safe is your money?”
Ron Paul said there are two types of fiat currencies: ones that have collapsed and ones that are going to collapse. The average fiat currency lasts 40 years.
We have been off the gold standard as a pure fiat currency for 44 years. We should consider ourselves lucky to have our fiat currency outlast the average. However, when you consider the fact that virtually all global transactions occur in U.S. dollars, it's not such a strange thing that it has lasted as long as it has. It's not an easy thing for 7 billion people who have become accustomed to buying and trading only in U.S. dollars to switch to something new, especially when you consider virtually all trading infrastructure and trading platforms are in U.S. dollars. However, as we'll see later, new trading platforms and infrastructure are being built, as I write, to establish a new world reserve currency that will be backed by gold, not debt.
We have been "normalized" to this inflationary effect we have been living through since 1913. It is not normal. It is the exception.
From the beginning of this country until 1913, with a few exceptions, there was essentially no inflation.
There were a few periods like during and after the Civil War when we had to inflate the money supply, which caused temporary price inflation, and few times where huge gold and silver strikes, like the Comstock silver load, caused temporary declines in the value of these metals. But essentially a dollar in 1913 could still buy the same goods and services as it did in 1791. Compare that to what a dollar buys today.
Imagine a cat burglar, every single day, year after year, sneaking into your house and stealing most of the change in your pocket. It's not that much money and so you may not even notice it. The Federal Reserve is that cat burglar, but multiplied by 300 million.
Through inflation of the money supply they are effectively stealing a tiny bit of money from every single person in this country every single day. But most people don't notice it, and in fact through a massive propaganda campaign the majority of people have been convinced that this small amount of inflation is a good thing.
The Federal Reserve and their mainstream media lap dogs are always saying how mild inflation (2 percent annually) is a good thing because it means a recovering and robust economy. Never mind the fact that 2 percent inflation is outright theft of 2 percent of your money.
Mild inflation can mean a strengthening economy but only during a time of real economic growth, when people have lots of money and demand constantly outstrips production, not Federal Reserve money printing induced, anemic inflation, which is what we have today. I'm betting that the Federal Reserve chairwoman, Obama and most members of Congress do not shop for their own groceries and probably have no idea that ground beef is now twice as expensive as it was in 2008, along with many other food staples.
The Currency Act of 1791 made it a capital offense to debase the currency.
Of course, back then the currency was gold and silver. The method of debasing the currency back then was much cruder, but just as effective.
People would scrape a tiny bit of gold or silver off of the edge of hundreds of coins and when they saved up enough they would sell it for melt value. Eventually these coins had to be removed from circulation and remelted, costing the treasury, and hence the taxpayers, money. They solved this problem by minting new coins with the familiar serrated edge we see today to make it easier to spot a debased coin.
My point is that in 1791 it was a capital offense to debase the currency, but since 1913 the Federal Reserve has been doing it with impunity by using a different method of debasement. They are simply creating money out of thin air.
Creating money out of thin air and putting it in circulation is monetary inflation, which is debasement of the currency and results in price inflation. In fact, Ben Bernanke, former Federal Reserve chairman, got his picture on the cover of Time Magazine as Man of the Year in 2009 for being the pre-eminent master champion currency debaser of all time. How times change.