Easy Credit led to speculative bubbles that help those associated with financial markets become rich through information schemes associated with conflicts of interest and insider trading. These bubbles eventually burst when investments associated with Fiat Money and Debt Based Currency are overwhelmed by service to interest costs.
Under the U.S. Constituton, the Congress and the Federal Treasury are supposed to be in charge of the money supply. Money should be based on the public's interest and interest earnings associated with borrowing should also serve the public good, because the currency is supposed to belong to the people.
If money were directed towards the public good, then high priorities such as Infrastructure and Health Care could see more investment. Instead money is being directed to the Derivatives Casino Economy that is tearing down the fabric of our society. The United States must get back to becoming a productive, value added society. Currently, we are an Imperial society that has become addicted to destruction through consumption. We are no longer have a "fix it" society. We have become a wasteful, throwaway society.
Money is supposed to be a means to exchange goods and services that have real value. Much of our economy has been stifled, because of the huge percentage of our currency (and thus our economy) that is focused towards markets that carry no intrinsic value. The United States Treasury has printed dollars in association with the U.S. Central Bank (the Federal Reserve) that has only benefitted those associated with the U.S. Financial system. This money has been siphoned from the real, productive economy where tangible goods are produced.
The current Debt Based Monetary requires the economy to continually grow exponentially in order to keep solvent. It also requires people to utilize credit to fast forward purchases. In a period where financial institutions are facilitating easy credit, people will tend to purchase many items that they could have waited to purchase or really don't need. This tends to stoke the hot economy, but also tends to exacerbate economic slowdowns, because people have overextended themselves on credit, while borrowing for future purchases. Look at the effect that takes place when sales fall drastically. Positive or negative economic momentum has a tendency to feed off of itself under this Debt Based system.
There are alternatives to the current Debt Based Monetary system. Look at bartering. Bartering allows the market facilitation of trade without currency being involved. Bartering is a legitimate system, but the government wants to curatil bartering, because it is nearly impossible to tax such exchanges.
The real economy is limited to available tangible resources and connected to actual needs, while the current debt based monetary system is based upon speculative expectations of future resources that may or may not ever come into existence. This speculative momentum tends to lead to wild swings of markets, where what appears to be unlimited growth eventually falls victim to the natural law of limited resources, and supply and demand. Eventually a crash that matched the rapid expansion occurs followed by the market eventually establishing an equilibrium. When an economy gets into an exponential growth phase of the currency, then one can see that the currency decouples from reality due to unrealistic expectations and worst of all the value of current real assets diminish. This is what happens during a hyperinflationary scenario.
The current monetary system is designed to help banks achieve profits and does not take into account what serves the public's interest or the natural law of resources. The public have become victims of the casino economy that is directly attributable to derivatives. Derivative investments are basically attached to nothing tangible, because market movements are not tangible resources.
If one invests in a professional football team, then they have a direct interest in the outcome of that team's success. If one invests in the final score of a football game, then they have no direct link to the resources invested or derived from that football team and thus all they are doing is gambling. That is essentially what a derivative investment is -- betting on movements in the market, be it commodities, stocks, or indices.
If one buys a stock in a company, then they have made a direct investment to become an owner in that company. Any other investment related to that stock is a derivative and many of those investments have negative effects on the health of that compant. That is the reason why gambling related to sports is discouraged, because it tends to lead to actions that can ruin the fairness, trust, and competiveness associated with the enterprise of the sport. These derivative markets must be regulated with common sense measures to ensure that they are not becoming impediments to the health of viable corporate and governmental entities and markets in general.
When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. — Napoleon Bonaparte
The supply of money drives the business cycle. And control of the supply of money is necessary to ensure an orderly method of market exchange for goods and services. Too much money chasing constant or diminishing resources creates inflation, while constant or diminshing money chasing too many resources creates deflation. The monetary system must maintain balance and it is historically clear that the current system has not been a good system to achieve the balance we need and it has not benefitted the general populace.
Over time we have seen the debasement of our money. This has happened before historically. Debasement is the practice of lowering the value of currency (associated with inflation). It is particularly used in connection with commodity money such as gold or silver coins. A coin is said to be debased if the quantity of gold, silver, copper or nickel is reduced.
For example, the value of the denarius in Roman currency gradually decreased over time as the Roman government altered both the size and the silver content of the coin. Originally, the silver used was nearly pure, weighing about 4.5 grams. From time to time, this was reduced. During the Julio-Claudian dynasty, the denarius contained approximately 4 grams of silver, and then was reduced to 3.8 grams under Nero. The denarius continued to shrink in size and purity, until by the second half of the third century, it was only about 2% silver, and was replaced by the argenteus.
In the United States our money used to be physically attached to the precious metals Gold and Silver. The Eagle is a base-unit of denomination issued only for gold coinage by the United States Mint. It has been obsolete as a circulating denomination since 1933. The eagle was the largest of the four main decimal base-units of denomination used for circulating coinage in the United States prior to 1933, the year when gold was withdrawn from circulation. These four main base-units of denomination were the cent, the dime, the dollar, and the eagle, where a dime is 10 cents, a dollar is 10 dimes, and an eagle is 10 dollars. The eagle base-unit of denomination served as the basis of the gold quarter-eagle, the gold half-eagle, the eagle, and the double-eagle coins.
From 1837 to 1932, the Gold Eagle carried a weight of 16.718 grams with a 90% gold/ 10% copper composition. This means that the coin carried a weight of .48375 troy ounces of gold, which was a $10 coin. The U.S. also issued a Double Eagle that carried a weight of .9675 troy ounces of silver, which was a $20 coin. That means that money was directly tied to a stable gold price of $20.67 per ounce during this time period.
90% Silver coins remained in circulation until 1965. The Silver Dollars that most of us have seen (the Morgan Dollar and the Peace Dollar) had a fineness of .900, giving a total silver content of 0.77344 troy ounces (24.057 grams) per coin. These coins were minted off and on for general circulation from 1878 until 1935.
By the early 1960s, the value of silver had risen to the point that it became worthwhile to melt down U.S. coins for their bullion content. U.S. silver coins (those of 10-cent value and above, which contained 90 percent silver through 1964) began to disappear from circulation, leading the U.S. (Coinage Act of 1965) to introduce layered composition coins made of a copper core laminated between two cupro-nickel outer faces for the 1965–present coinage years. The Kennedy half dollar design, however, continued to be minted silver-clad composition from 1965 to 1970, although the silver content was reduced to 40 percent. To find the value of the silver in a half-dollar, multiply the current market price for silver by 0.36169 for 1964 issues, and by 0.1479 for issues from 1965 to 1970 (This is the weight x 90% silver composition).
Here is a chart that shows the value of the coins based on $1200 per ounce Gold and $20 per ounce Silver (click spreadsheet to enlarge):
This should show you the loss of purchasing power that is associated with our present Legal Tender, Fiat Currency. I don't think we can ever go back to a standard associated with Gold or Silver, but we have to attach the currency to something in order to bring it back under control.
I think that most of us that understand the Federal Reserve System (created in 1913) believe that the central banking system does not work. It only works for those private interests that control it. The money in this country should be a tool of the government and that is the people. The great divide in this country has come from the separation of the currency from the people. In my opinion, the next great leaders of this country will be the people who bring the monetary system back to the people and represent the interests of the people over the interests of the fat cat financiers.
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