What is a dollar really worth?

Discussion in 'Money, Investing & Precious Metals' started by lotsoflead, Apr 17, 2011.

  1. lotsoflead

    lotsoflead Well-Known Member

    837
    7
    A great read for anyone who don't understand the Fed, thr Federal reserve, the Gold standard.
    What is a dollar really worth? « Mind of Matthew

    In the history of mankind, the average lifespan of a currency has been about 200 years. Guess how old the US dollar is? A little over 200 years. We are in prime territory for a CCM (complete currency meltdown), so get ready for some fun facts.

    The Romans were the first civilization to come up with a real, viable currency. Prior to them, civilization bartered for goods and services. The Romans changed that with a currency that could be exchanged for goods and services instead of having to give away something of your own. Guess how long it lasted? About 200 years. It is likely the single thing that brought the Roman Empire down. Their money meant nothing anymore and the kingdom collapsed. This very same thing has happened hundreds of times since then and it will happen again. Two more recent and documented cases are in Germany and Brazil, not to mention the former USSR, but we’ll get there.

    Originally, the US dollar, and most foreign currencies for that matter, was based on what we all know as the Gold Standard. One dollar could buy you exactly one dollar’s worth of gold. I believe it was in 1914, two economic guys devised a new plan and decided that to grow the economy, the dollar should be able to buy you 40 cents worth of gold. Strange, don’t you think? So from that time until 1972 when Nixon was president, the US economy operated under this new standard which was a combination of their names, which pardon me, but escape my memory. In 1972, by himself, with no approval from Congress or economic advisors, Nixon decided that the dollar shouldn’t be backed by any tradable commodity, so he got rid of the gold-based backing all together and created the Dollar Standard, which is pretty much how all currencies have traded since. Those countries that did not move to the Dollar Standard, crumbled within decades as they could not compete in the world market anymore. That’s the power that the largest economy in the world has.

    So now, the dollar is worth just what the government decides it’s worth. As well as how it trades, but that has been manipulated, too. Did you know the US dollar has always had a credit rating of AAA, the highest credit rating a currency can be given. Just within the past couple of years, just after the bubble of 2008, the banks were going to downgrade the dollar to a AA rating, something that has never happened before. Obama and his infinite wisdom (don’t get me wrong here, I am a big Obama fan) sent economic ambassadors to the crediting banks and what happened? They were somehow “convinced” to keep the dollar rating where it was. What does this rating mean? It’s a rating that demonstrates our ability to borrow and payback. Since its inception, having the highest rating it could have, the dollar has always been strong, saying to the world, we are worth investing in. Had it been downgraded as planned, the world view of the dollar would have changed forever.

    Fun fact #1: Printed money accounts for only 15% of the wealth in this country. The rest is just numbers in computers. More on this later.

    Did you know that the Federal Reserve, say that name to yourself again, the Federal Reserve, is a PRIVATE bank. It has no ties to the government except that the government is obligated to borrow through the Reserve and they are obligated to do so at a 6% interest rate. The Federal Reserve was created in 1913 by a group of 6 wealthy and influential men who presented their ideas to stimulate the economy to the government who agreed and so became The Fed. It was supposed to last only 20 years, but in 1933, we were in the middle of The Great Depression and FDR decided it wouldn’t be good to break those ties during that time, so The Fed, and rules around it, remain to this day. Take a look at a dollar bill. The only mention of the government you’ll see on it is a signature of the Secretary of the Treasury, who basically signs off on the deal with the Reserve. But right at the top, it says very clearly, “Federal Reserve Note.” Again, a private bank, wholly owned and not publically traded by who knows.

    Fun fact #2: The government has on hand at any given moment of any day a little less than $15 billion. It takes a little more than $13 billion per day to keep the country running. Without the ability to borrow, the government would last one day before folding.

    How did we get to a point where all of our economy is just numbers in computers without even the backing of the paper it’s printed on? Banking regulations have changed throughout our young history, but as it stands now, lending works like follows. You go deposit $100 into your bank for safe keeping. That bank is allowed to loan out 90% of what you deposit. So they loan Joe Smith $90 and he goes to deposit it in his bank. That second bank can now loan out another $81 from his deposit. The next $72. And on down the line. Basically, creating money out of thin air with nothing to back it. Seems a little odd to me. But that’s how it works.

    We all know what a Ponzi scheme is. It’s where you gather the money of others and loan it out or pay off other customers. You can only do that for so long until the time everyone wants their money back, but then it’s too late. You’ve over extended and loaned out what wasn’t yours to loan out. Sound a little bit like our banking system? The US economy has been called the greatest Ponzi scheme in all of history. I think I might agree.

    Fun fact #3: After the fall of Germany in World War II, they went through a CCM. On one day, you could buy an egg for maybe 2 marks. The very next day, an egg cost $87 TRILLION marks! Talk about inflation. There are pictures documenting children using “bricks” of printed marks to build forts with for fun. They were worth so little, children were using bricks of them for forts.

    How much longer can we last? One researcher has tracked economies since the Roman Empire and found a distinct pattern outlining 7 phases in the life of a currency. He says we are in the beginning of the 7th phase for the US dollar and will likely face a CCM in 6 to 30 months. The dollar is dying.

    Gold, silver, precious stones… those things always have value. That’s why burgeoning economies are based on them. What has always happened it happening now. The price of gold is steadily climbing. Soon, supply and demand will kick in and the price of gold will fall through the floor, bringing the dollar with it. A complete currency meltdown. The only thing that will have any value at that point will be the gold and silver and other commodities, as well as goods and services made by companies. That will still have value, so stock is a nice hedge against the impending doom. But the dollar will be worth nothing and will become irrelevant. History shows that when this happens, the economy will have to switch back to a pure Gold Standard and begin to rebuild wealth where there really is some; not just numbers in a computer.

    Fun fact #4: Brazil went through a CCM in recent history. Their rate of inflation reached over 80% PER DAY. That meant that the dollar you earned on your first hour of the work day was worth less than 80% of what it was when the day was over. They have documented photographic proof of store keepers re-pricing items on the shelf throughout the entire day. By the time they reached the end of the store, it was time to begin re-pricing back at the front of the store again. All day. Because of an 80% inflation rate per day. They eventually went back to the pure Gold Standard and rebuilt.

    Speaking of rebuilding… the recent tragedy in Japan has huge implications for the US economy. Japan has always been the biggest trader in US treasuries and bonds. However, considering they must now rebuild half their country from Tokyo to the north, they no longer have the ability to buy and sell our currency. In fact, they need their own money to get the rebuilding going. So we are about to see them sell off US treasuries and bonds to get back to their Yen. The market will become flooded. The prices will drop. Thus sparking the end of the dollar as we know it. Watch it happen.

    So anyway, I’m certain there is more. But, I can’t remember it all right now. It’s late and I haven’t slept, but keep these points in mind

    - The average lifespan of any currency since the beginning of modern banking is 200 years. Our dollar is older than that. We are poised.

    - The US banking system creates money out of nowhere. Always has. It can only be extrapolated so far until the dollar fails. Ponzi scheme.

    - The dollar is backed by nothing. Not gold, not silver. Nothing. Just the world’s belief and faith that our economy will hold.

    - The US has no government banking system. The Federal Reserve is private, just like any other bank. The US must borrow on a daily basis just to stay afloat.

    - CCMs have always happened since there has been money. All the way back to the Romans. Over a dozen times in just the past few decades. Germany, the USSR (which led to the break-up of the country), Brazil, and Mexico, just to name a few.

    - Japan’s sell off of US treasuries and bonds, which will happen, will drop the dollar to worthlessness.
     
  2. BillM

    BillM BillM

    2,001
    21
    Excellent

    This was an excellent article ! you have a good grasp on the meaning of wealth and currencys.
    :congrat:
     

  3. dnsnthegrdn

    dnsnthegrdn Member

    22
    0
    Yes, thank you. I am sufficiently scared now. Ha ha.
     
  4. TheAnt

    TheAnt Aesops Ant (not Aunt)

    1,499
    5
    Good article, sounds about right. I'd say at this point the only reason the dollar has NOT failed is because of its status as the worlds reserve currency. Once China, as the worlds largest economy (if not yet, soon), goes through with its plans to move away from the US dollar as a reserve currency that will spell the end of the dollar. The reason they dont do this immediatly is that they stand to lose quite a bit of wealth when this happens cause they own dollar denominated assets. They will dump these assests until they cannot sell them any longer then they are virtually worthless anyway so they will dump the dollar completely.

    I am no economist and if Ive completely made a fool out of myself feel free to correct me. :)
     
  5. Norse

    Norse Well-Known Member

    135
    1
    Paper money can be rendered worthless at anytime.

    Unless you run out of butt wipe that is, then it can be quite valuable.
     
  6. Jimmy24

    Jimmy24 Member

    803
    2
    For your reading pleasure...

    China-Russia currency agreement further threatens U.S. dollar - International Business Times

    Jimmy
     
  7. TheAnt

    TheAnt Aesops Ant (not Aunt)

    1,499
    5
  8. Immolatus

    Immolatus Just getting started. Always.

    1,810
    2
    All of the BRICS nations have discussed this, theres nothing really stopping them from doing it independetly from the rest of the world (EU and US). If they (not to mention the oil producing nations in the middle east) stopped using the dollar, we would be in a world of hurt.
    I have seen it posited that its not actually the oil that we are protecting by being in perpetual war in the middle east, its the dollar. If they (mainly the House of Saud) fell to anyone not so sympathetic to the US, the assumption is that they would immediately stop accepting dollars for oil, and that would be the end. So yes, we are protecting the puppet govts, and the oil, but its really all about the dollar as the reserve currency.
     
  9. Jimmy24

    Jimmy24 Member

    803
    2
    You nailed it.

    Jimmy
     
  10. Elinor0987

    Elinor0987 Supporting Member

    364
    0
    I've seen pictures of people during that time using bricks of cash to heat their homes in the winter. They did that because their currency had become so devalued from hyperinflation that it was cheaper to burn the money than it was to buy wood and coal.

    The most disturbing example of their currency devaluation that I've read about happened in the Weimar Republic. One day a man was on his way home from work and had just got paid. He was carrying a wheelbarrow full of cash. Two men approached him and the man was robbed. While the man was laying on the ground after the assault, the two men dumped out the money and took off with the empty wheelbarrow.
     
  11. VUnder

    VUnder Well-Known Member

    597
    5
    To put it in real perspective what our government has done to us. Used to be that a twenty dollar gold piece, which was an ounce, was worth twenty dollars. Roosevelt outlawed gold and people turned in their ounces of gold and got twenty dollar paper. How many of those twenty dollar papers will it take to buy an ounce of gold right now today? Imagine how much your money would be worth on a gold standard. Confidence is the only thing that keeps the dollar as the world reserve currency. Right now, our government does not convey confidence to the rest of the world.

    When other countries buy their oil, Germany, Britain, China, etc.., they have to buy US dollars with their currency and purchase the oil in the Middle East in US dollars. We enjoy lower fuel prices because we are the reserve currency. Their currencies have to go against the dollar, but the dollar goes up against nothing. If the dollar is dropped as the reserve currency, then we will have to buy whatever currency is the new reserve, and doing that with worthless dollars will get expensive overnight.

    Prices at the pump will at the very least, double overnight. If the dollar is falling, no other country will invest in out dollar so that we can buy oil. If they buy/accept our dollars, they will lose money. Obama has already said on tape and film that electricity prices are going to triple. Kinda like having a friend strung out on crack, it gets a lot worse and very unlikely to get better.

    Most banks keep thirty to forty thousand cash on hand, in an average town. That will not last ten minutes if there was a run on the banks. Probably just the bank workers getting some cash will deplete the banks cash on hand.

    Keep your cash out of the bank. Cash your check and maybe leave some to do some over the phone purchases, but keep cash on hand. If electricity goes, bad storms, emp, or whatever, cash will be all that talks. Buy gold rings, diamonds, silver, copper, aluminum, brass, bronze, steel. See, if our economy collapses, metals will still hold value because of world demand. Just like if you owned a million barrels of crude if the US economy collapsed, the oil would still have value. Now, if the US economy collapsed and you had enough money to buy a million barrels of oil, but no oil, your US dollar would only buy you a few barrels of oil on the world market because the dollar will be worthless.

    As soon as I was able to get on my own, I worked and hauled in junk. I couldn't do it when I was young, because my parents protested. But, now I am getting twenty times what I got for steel when I was younger. Really it has went up ten times more than it was. I get twenty because I have enough that they come here to get it, and I save having to load and haul it too, so maybe more than twenty times actually. I pull the copper and brass and bury it for later.

    I don't want to be taken wrong, I am just giving advice. Money is what you need to get rid of. Buy things that have value on the world market. If you buy some copper today, let's say it is 3.00 a pound. The economy collapses, the copper you just bought will bring 3,000 dollars because of hyper inflation. Now, the three dollars you didn't buy a pound of copper with, will not buy a copper penny weight of copper. So, you are better off having your money in the copper, which has a price held by the world market. If you can't buy gold, you can always buy poor mans gold, or any traded metal. Having your money invested in something real that can still be sold, will be your hedge against inflation. Say you had a ton of copper, you could sell it off and then be better adjusted to deal with hyper inflation, instead of having 500 bucks that can't buy a nickel.

    A lot of people cannot understand these things, and I am trying to explain in layman terms, and I am a layman, too. There is plenty I don't understand, but I do understand this.

    When hyper inflation comes, you want to have something to sell before you buy. In Zimbabwe it was thousands for a loaf of bread. Who was better off, the one with the goods or the one with the cash? The one with the store just adjusted his prices and retained his wealth. The one that had only cash when this happened, lost his wealth, he didn't have a "hedge" or something to bridge the gap from high to low value.

    Yes our involvement in the Middle East is to keep our dollar as the reserve currency. Guess who has one of the largest lithium deposits in the world? Afghanistan, that is why Government Motors Volt car Obama wanted to go there. We are toast if the Saudis drop the dollar as the reserve currency. It will turn us inside out and flip us upside down, and the whole world will follow, they just don't know it yet, they are too concerned with wanting us to fall.
     
  12. VUnder

    VUnder Well-Known Member

    597
    5
    Under the rules of the UN, what we are doing to China is considered an Act of War. So, if they really lose money, expect them to come and see us about it.
     
  13. VUnder

    VUnder Well-Known Member

    597
    5
    So, would you be better off with cash or a wheel barrow to sell? This is a prime example of what I was trying to explain in post #11.
     
    Last edited: Sep 10, 2011
  14. BillS

    BillS Well-Known Member

    4,570
    119
    When hyperinflation hit in Germany prices increased regularly by a factor of 10. So it would be like if bread was $1 in Jan., $10 in Feb., $100 in March, and so on.

    Our destruction as a nation will be immediate once the dollar is dropped as the world's reserve currency. We import 70% of our oil. Once OPEC no longer accepts dollars as payment for oil our economy will immediately collapse. People won't be able to get to work. Goods won't get transported. People who don't have jobs won't be able to buy food that might not even be in the store anyway or the goods are at prices they can't afford.

    When the dollar is no longer the world's reserve currency all the dollars currently held by foreign countries will hit our economy. It's estimated that 90% of the dollars in existence are held by countries who use them to buy things from each other or use them to buy oil.

    So we'll either have inflation that rises to the point of hyperinflation or with the sudden loss of the dollar as the world's reserve currency we'll suddenly have hyperinflation and a collapse of the economy. There's speculation that the government might institute price controls and that will result in empty store shelves. I think if there's food in stores that people can't afford we'll see flash mobs in grocery stores taking food and leaving the stores without paying. Grocery stores everywhere might close if that happens.

    So basically what I'm saying is that there's a good chance that the collapse could come suddenly with very little warning. That's a good reason to have all you need as soon as you can get it.
     
  15. VUnder

    VUnder Well-Known Member

    597
    5
    BillS, very good points. People don't realize that we are just one day away from collapse. Our government stays just one step ahead of the game. But, it is still just one step. I don't know about you, but I like to look a little further down the road than that. I wish our leaders looked a little further also. The whole thing is based on thin air and instant gratification.
     
  16. Clarice

    Clarice Well-Known Member

    983
    1
    It's coming my friends. Prepare for the worst and Pray for the best.
     
  17. HozayBuck

    HozayBuck Well-Known Member

    3,183
    16
    What's a buck worth?

    Well right now our little homestead will sell you 4 free range eggs for a buck... SHTF... nada....

    After the SHTF who knows what an egg will bring...what will a round of 308 bring?

    Until things settle down I'd say nothing will be selling...

    Most commercial ammo right now is a buck a round..

    I did hear that China wanted to by the LA Dodgers for 1.5 billion...true? who knows.. hell I don't even know if the Dodgers are in LA...

    Spend your dollars while there are things you can buy...
     
  18. Viking

    Viking Well-Known Member

    2,280
    79
    In the spring of 2001 my wife and I went to an off shore conference and met and talked to G. Edward Griffin as well as a few others that helped set us on a path of self reliance. The most effective thing we did was to get totally out of debt and make as many preparations as we could afford to meet the challenges that are going to hit us like a huge brick. G. Edward Griffin wrote a book on how the Federal Reserve (fiat money) was set up by world bankers and put into action in 1913, the book is titled "The Creature From Jekyll Island". His website is Reality Zone Home Page sign up for his free newsletter. I suspect from things I've been reading and hearing that the Chinese are going all over the world buying or loaning money for mining and oil development and I suspect they are probably here in the USA taking our debt bonds and flipping them (before they become worthless) for tangible properties, perhaps mining operations, oil leases, business and what remains of our factories.