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.