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The lack of complete understanding of this subject goes to show the extent the Federal Reserve has gone to make this subject too complicated for the average person to understand.
The truth is we do not have a simple fiat currency; we have in fact a DEBT BACKED currency.
We would be far better off with a fiat currency.
A fiat currency backed by the goods and services of the country is just as viable of a monetary system as gold or commodity backed currency, provided that currency is produced by the Treasury WITHOUT DEBT.
A DEBT BACKED currency carries with it built in inflation in the form of interest.
The Federal Reserve receives interest on every "FRN dollar" it produces.
Therefore as soon as a "FRN dollar" is printed, it is worth less than 100 cents.
This insures perpetual inflation and perpetual debt for the citizens of the United States.
When you combine the built in devaluation of DEBT BACKED CURRENCY with the government’s deficit spending, you have a condition of spiraling debt increase and currency devaluation. This effect is often concealed statistically by other foreign governments participating in the same practice at the same time.
The bottom line is that this practice eventually leads to higher and higher taxes to pay for the countries debts to its creditors. Ask yourself now who is the greatest creditor of the United States? Yes the Federal Reserve.
The collapse of this type of system comes when the taxes are increased continually on working people and small business and become so burdensome, they revolt.
Moderator cut: please do not cut and paste - links only
Again and again, the law dictionaries define a dollar as being composed of 100 cents and CANNOT be defined as " PROMISSARY NOTES, bonds, or other evidences of debt". The implications of this last statement should give you much to ponder.
Given the last statement about "Again and again, the law dictionaries define a dollar as" you'd think Black's would be a good reference for that as well, instead of switching to other sources. Seems kinda suspicious of selective definition culling.
Last edited by vter; 02-02-2011 at 10:19 AM..
Reason: orphaned material
A currency "backed by debt" is a currency backed by a nations goods and services, after all the debt derives its worth from these goods and services. Anyhow, people like to demonize debt and they apply every day understanding of debt to monetary systems. It doesn't work.
And yes, the FED intentionally made the monetary system complex so average people can't understand it. Let's ignore the fact that every macroeconomic textbook in the country describes the FED and how the dollar works...
I think most college-educated ppl will admit that the USD is worth nothing more than the ink it's printed on. We all know there's no gold in Fort Knox backing it up and that at a moment's notice hyperinflation could explode forcing us to carry shopping bags of bills to buy our next mocha double latte with extra foam at Starbucks. But life's too short to ponder every doom & gloom scenario. So until the Chinese stop investing in Treasuries & buying our dollar-denominated assets, I'll keep on cashing my paychecks :]
Its not what backs your money that's important but WHO controls its quantity is very important which right now is private for profit banks. Getting it back in the government and issued without debt and with quantity controls is the solution and must be done now. Gold backed money is not a acceptable solution and even some central bankers like Greenspan and others are calling out for some type of gold linked money which is a intentional distraction and would not change who controls the power to create our money.
The point of this thread is to define what money is. If you want to argue economics, it is important to know the basics. In order to do that, we have to understand that the monetary system fundamentally changed in 1913 and common perceptions about what money or dollars are changed also.
There is apparently some people who are opposed to people discussing this issue, which I must confess raises questions in my mind about their motives.
In order for a republic to rule itself competently, the people need to posses the knowledge of the basic issues.
A "dollar" is one of about 100 arbitrary units of currency, that possess interrelated exchange value through general consensus of people who exchange things. It is what is called "portable wealth", so it is not necessary to take pigs to the market in order to bring home shovels or textiles.
There are very few "dollars". I think there are about 1,000 dollars printed paper money in existence, per capita in the USA. People measure their wealth according to how many dollars it would take to buy or sell goods or services that they want or have, and the actual wealth of the nation is measurable in the hypothetical dollars of the aggregate value, not the number of dollars in existence. A person who owns wheat that he can sell for a million dollars reckons that he has something of a million dollars value, and therefore that he has wealth, irrespective of whether the dollars exist or not. Dollars are simply a metric.
If the US changed to the metric system, the distance from Chicago to New Orleans would change from 800 miles to 1300 kilometers, but the amount of space between them would remain the same and they'd both still be in the same place they are now. Similarly, with dollars, the value of a commodity remains the same, regardless of the system of measures that is in place.
The dollar, named after the thaller or tholar of old, was originally based on the Spanish milled "pieces of eight", which were our first currency. Two of these pieces, or "two bits", made up a quarter. The Constitution defines a dollar as 371.25 grains of fine silver; as such, we certainly don't have Constitutional money! Since 1913, we have had no real "dollars"; we have had Federal Reserve Notes that are denominated in "dollars" but are not actually dollars in themselves.
The so-called "dollar" is not money; it is a currency, just as the Yen, Euro, Yuan, Ruble, Ringgit, etc are all currencies. NONE of them are "money". Money is a store of value as well as a currency to effect transactions, and none of the currencies in the world right now are "money".
Since you asked what "money" is, I would reply that historically (like about 5,000 years) it has been gold and silver. Even Federal Reserve Notes were backed by gold until Roosevelt confiscated the people's gold in 1933, and Nixon stopped the international conversion in 1971. Between those 2 dates, the 90% silver in our coinage was removed after 1964, with a few coins continuing to be 25% silver for a few years later. Now, there are no precious metals in our coinage, and no precious metals backing our (or anybody else's) currency.
This is the way the central bankers want it. All Federal Reserve Notes must be borrowed into being, and since the interest on the borrowings has not been produced, these debts are un-payable. They are un-payable anyway, as no government - federal, state, municipal - and no individual has the currency to pay off these tremendous amounts of debt.
Sovereigns and monarchies across the globe, as well as central banking families, are the ones who benefit directly from this state of affairs. Un-backed paper currencies have been tried as "experiments" several times throughout history, and always with the same result: failure. The average age of these currencies when the went kaput was about 35 years. If you count 1971 as the year that our currency became totally un-backed, we are almost at the 40-year mark for the Federal Reserve Note. It's longevity has been enhanced by the fact that presently it is the world's reserve currency. It will not remain so for very long; when it no longer is, it will fail also.
Just look at a chart of the USD from 1970 to present. Need I say anything more?
One problem with debt is that we are then dependent on others (mostly foreign governments). Our founders warned about debt and the consequences it could cause.
The value of a dollar is only worth what people believe it to be. As soon as people start to think it is being devalued they will look for other forms of money to substitute the barter/exchange process.
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