Part 2: The Creature from Jekyll Island
A key to understanding our fiat money system is to understand the metal known as gold. First, some history. The main reason that metals were used in the past as commodity money is that they meet all of the requirements:
- They can be conveniently traded
- They are not perishable
- They can be divided into smaller units
- They can be precisely measured
The monetary unit of a country should be measurable and constant. Since metals are subject to assay in weight and purity, they are perfectly suited for this purpose. An ingot of metal is either 99% pure or it is not.
The Federal Reserve claims it can stabilize prices. Of course, any sane person knows if this is its main purpose, it is a complete and total failure. But the beauty of a gold standard is that prices become automatically stable. The free market does its job.
Let’s compare gold to Federal Reserve notes. These are highly ornamental–they have seals and signatures. The government pays its expenses with them. The population, of course, is forced to accept them. They can be produced in limitless quantities. Yet they cost absolutely nothing to make. They are backed by nothing. Warlords of seven centuries ago used similar fiat money to fund their empires.
The American Continental Army used “certificates” to fund its supplies and payroll costs. In 1775, the money supply was $12 million. The following five years saw an increase of $425 million–over 3500%. The states followed their lead and by 1779 the money supply had expanded by 5000%.
Inflation self-destructed the process almost immediately. In 1775, paper Continentals were traded for one dollar in gold. In 1777, they traded for a quarter. By 1779, they were worth less than a penny. You’ve heard the phrase “not worth a Continental.” Shoes were selling for $5,000 a pair and a suit of clothes cost $1 millions. George Washington wrote, “A wagonload of money will scarcely purchase wagonload of provisions.”
Does this sound familiar? In the last 100 years the dollar has lost more than 90% of its value. It’s happened through inflation, the hidden tax. Fiat money is paper money without precious-metal backing. Politicians can increase spending without raising taxes. It is the cause of inflation.
Wall Street at the turn of the last century–the internationalist bankers–wanted a “lender of last resort” that could create unlimited amounts of fiat money. Thus the cartel “The Federal Reserve System” was born. They didn’t call it a central bank, which it was. It had to sound like a government operation. The word Reserve was chosen to make it sound fiscally responsible. The word System helped avoid any reference to a central bank. The 12 regional branches were used as a cover to make it appear decentralized. But, in effect, it operates exactly as a central bank, modeled after the Bank of England.
All of this high-level showmanship created a very dangerous U.S. central bank, owned and controlled by an international cartel. The public became a victim of deception. Even small banks today are brought under its rulership. These amazing revelations and more are brought out in my latest book. Amazingly, of course, you simply have the ancient form of partnership between political scientists and private international bankers. Their responsibility is deliberately vague. They divide power behind closed doors. They have no accountability. It’s a pretense on its face: you must fully understand how this system operates before you can completely protect yourself.
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