Debt in Your Pocket
Debt in Your Pocket
Debt in Your Pocket
Through the recent fiscal crisis, it has become increasingly obvious to the average individual that money can be and has been generated out of thin air. Even though the complexity of the Federal Reserve and central banks all over the world is beyond the scope of this article, it is important to obtain an basic snapshot of what money is.
Our Currency is Debt
In a speech in the Senate in 1833, Daniel Webster stated, "We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people."
All types of paper money are pieces of debt. They are obligations of each issuing entity to make good' on a guarantee to repay. As an example, The Federal Reserve, which is a private entity, prints money or issues digital currency that it then lends to the U.S. government. This is required to be repaid with interest. Not many people understand this connection between the Federal Reserve and the government. Saying "the government is printing more money" is a misguided assertion. As each new stimulus or bailout is signed into being, the debt related to money creation becomes an exponentially increasing issue.
Good Money
Legal tender legislation has been created to assign value to our currency as a medium of exchange. Good money, although, does not need legislation. Coins and forms of bullion made of precious metals have value based on their metal content. For thousands of years, silver and gold have been used as money. Although their value may have short-term fluctuations in relation to various currencies, the purchasing power of precious metals stays fairly consistent over the long-term. Purchasing power is the ability to buy the same goods or services in the future as you can today. We have been indoctrinated to think that inflation is a natural thing, but really the increase in prices we see is the purchasing power of our dollars being withered away. One way to preserve your purchasing power is to buy silver bullion or gold bullion.
In the 1950's all dimes, quarters and half dollars were made of 90% silver. Three dimes would buy a gallon of gasoline at that time. Did you know those same three 1950's dimes (based on their metal value) would buy a gallon of gasoline at today's prices? That is how good money preserves purchasing power. Although cleverly disguised, our money today is made of no silver at all. Instead there are many other ways to invest in silver.
Bad Money
Although ancient Rome used silver as money, they still found a way to inflate their monetary system. Corrupt money began to circulate because small pieces of silver were clipped off the edges of coins, melted down and used to make new ones. How similar is this to what is happening today? Since 1933, the dollar has shed over 97% of its purchasing power because as more and more is created, value is in essence clipped' from it. This has gained momentum in the past 100 years because there is no relationship at all between the dollar and any kind of valuable asset.
Gresham's Law
Under legal tender laws, bad money drives out good money. This means that most of the pre-1964 coins that are 90% silver have steadily been collected and removed from circulation. It is a rare occurrence to receive change back that contains any silver. If you do, don't drop it in the parking meter downtown!
As the separation continues to expand between good money and bad money, it is important to see that our monetary system affects every one of us every day. Since money impacts all of our lives it would be prudent to follow the advice of long-standing federal judge Robert Hemphill who said, "Money is the most important subject intellectual persons can investigate and reflect upon." I encourage you to investigate.
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