There is nothing federal nor reserve about our Federal Reserve system. Just two words used to fool we the American public that this is something that it’s not. We quit backing our money with valuable assets, like gold, and replaced it with confidence instead. Since then, money is only worth as much as one believes it to be.
History proves gold to be the most stable of all precious metals used for trading. But rather than carrying around heavy coins made of a precious metal, paper money (notes) was used instead. Each note represented a certain quantity of gold on hand and the serial number verified it. Of course not all money was backed by gold as other precious metals were used. But in those cases the values had to be converted to gold. For example, so many ounces of silver equals one ounce of gold.
If it wasn’t bad enough to quit backing our money with something, our Federal Reserve system allows our government to borrow “pretend money” with fake loans from private banks and then pay them back with real interest. Actually some money does exchange hands but the vast majority of these loans are strickly on paper with no money actually changing hands.
So say you are one of these banks. The US borrows money from you, which you don’t have, but you give them a loan on paper saying that you did. Then the US Treasury walks over to their computer and adds in the loaned amount for government spending. They pay you the interest on the note but as far as paying back the principle (which you never gave them) they just simply delete that amount from their computer marked as “paid in full” which means the interest has been paid. Then they hit you up for another loan.
Don’t you wish the government would pretend to borrow a few billion from you?
World history also has numerous of cases when a treasury claimed to have more precious metals than they really had, meaning they printed more notes than they could back up. This always led to inflation and eventually serious trouble. So why did they do it? Short term greed.
It’s true that supply and demand does control prices, however all products pretty much maintain a traditional relationship to gold. The purchasing power of gold really doesn’t change. I’ve written about this before showing how the gold price of gasoline hasn’t changed in a hundred years. In reply to my article, Aaron Graves provided his homework and proved that gas is actually cheaper (slighty) now than it’s ever been. All that has changed is that our dollars are worth less in gold than ever before.
Wages also have a traditional relationship with gold. If you look at the history of unskilled, semi-skilled, skilled and professional wages, you’ll see each type basically makes the same amount in gold per year. Changing any of the wages-to-gold relationships can and does alter the overall economics and balance of society… and not always for the better. But who looks at any of this? No one in Washington that I know of. They still think the Federal Reserve is the cat’s meow.
Speaking of wages, the truth is that a job is nothing more than someone working for money aka earning a living. On the other hand, investing is when someone puts a portion of their money to work for them and that’s the key in becoming wealthy. Plus it creates more jobs giving others the very same opportunities.
For economic strength and stabilty, our money must be backed by something of value. If we don’t dump the Federal Reserve and go back to the gold standard we will not only end up destroying our dollar but our society as well.