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Opinion

Monopoly money and the Federal Reserve

Editor's note: This opinion was originally written in 1999 and published in a local newspaper and reprinted on Edgefield Daily in 2005.

A column by the Editor
web posted May 16, 2014

OPINION – “In God We Trust, Federal Reserve Note, The United States of America, This Note is Legal Tender for all debts, public and private”. These are the phrases imprinted upon our money. What is inauspiciously missing since 1964 is the all important phrases that gave our “money” its value, “The United States of America will pay to the bearer on demand (the value on the Note 1, 2, 5, 10, ect.) Dollars” and “is redeemable in lawful money”.

Wonder why?

The Federal Reserve acts as a Central Bank for the government. The Treasury stores the real money (gold, silver, ect.) held by our government and issues receipts to the people for commerce and trade. That is what a “Federal Reserve Note” is, a receipt issued by the government backing our paper dollars with the gold, silver, and other precious metals held in its vaults and their global worth comparatively.

What happened?

As a Central Bank, the Federal Reserve has to remain solvent in order to stay in business, thus also the government. When a bank takes deposits, gold and silver (real money) and prints paper receipts (dollars) to its owners (the people) and it is redeemable upon demand, there are no problems. However, banks and government as a rule are greedy.

These institutions want more and decide to loan deposited money in the form of  Loans out as well in hopes all those who have made deposits will not want their real money all at once. This is what is known as a “run on the bank” in the banking industry.

When unscrupulous banks loan more money than they actually have in reserves (also falsely increasing the amount of money in the economy resulting in inflation) and the people demand payments for their receipts, it cannot pay and it summarily is forced to close.

The bankers keep the profits they made personally by conducting bad business practices, the creation of the FDIC (Federal Deposit Insurance Corporation) passes the loss to the taxpayer, and the people lose in the end in the form of increased taxes rather than default of the bankers or investors losing their money gained from risky schemes to pay off the debt. We pay for their mistakes.
 
This is what happened to the Federal Reserve, or the governments “Central Bank”. It had loaned the Peoples “real money” (gold and silver), to the government and through bad decisions, corruption, and wasteful spending, there wasn’t enough to cover “redeemable in lawful money” anymore and it had to borrow more “money” from the Federal Reserve to pay its “debt” through bonds.

Rather than restore itself, the government simply removed this guarantee and rather than tighten its fiscal belt, it simply printed more “money” and has continued to do so ever since. If the government needs more money, it simply prints it and infuses it into the economy and its value drops respectively. This is known as inflation and you now see why it is such a hot topic to the government.

Inflation is the hidden tax the government collects by increasing the amount of “money” in the economy and therefore reduces the value of those dollars which you have in possession. You need more money to buy the same goods or services due to the influx of this new money. The thrifty, which saved their money, see this decrease in value and therefore need to save more new money to equal what they previously held, thus paying this hidden tax. In addition, they also pay income tax on their labors trying to equal their previous holdings, which was devalued by government tinkering with the money supply in the first place.

Think of it this way. Suppose we are playing a game of Monopoly. The amount of land available to be owned (just as in our nation) is fixed.  There is a fixed amount of “money”. Each player has some of that money and not long after play begins, each feels the pressure of gaining property, debts, and income. Skillful bargaining and getting the most for your dollar is the rule, all things are equal. Those who spend foolishly or take dangerous risks are not in the game long. This is a free enterprise system at its best.

Now, imagine taking the money from a separate unused game and inserting it into our current game’s economy.  What happens is a natural law of balance. Everyone (the bank included) has more “money” (double in fact) and therefore bidding for properties also doubles as everyone enjoys the new found wealth. No property has gained value; the money has simply diminished in value. Not long after, all will agree to double rents as well to keep the bank from having the money sitting idle and confiscating the funds from the game since the purpose of the game is accumulate wealth not have it confiscated by the “Central Bank” in mortgage and interest.

It doesn’t take a genius to figure out that you are all right back where you started before adding wealth to the game. You have twice as much money, it is worth half as much, and you have to work twice as hard to get it.

You lose, not the bank. Since the money is less valuable you need to borrow more. More money loaned collects more interest and that is good for “the bank”. The fact that the money is created from debt not real money is a transaction, not a concern. This also creates inflation.

What this spells for a government is disaster. We see this now in the form of government deficit spending and not enough backing for our dollars. It is time to restore the guarantee behind our dollars and stop this game the Federal Reserve and our Government is playing with our real money. In the end, we will all lose and those who directed this ultimate failure will be laughing all the way to the bank. But what form of “money” will they use?

One must know there can only be four forms of “money”, Commodity, Receipt, Fractional, and Fiat.

Commodity “money” is generally gold, silver, platinum, and titanium. (Our first form of “money”) However, during times of conflict in a nation or globally, tobacco, sugar, and the like have also been used and still are to extent. It is one in which a stable basis of value is derived by all accepting its true value. This reaches a balance too as each decides one commodity’s value based on another. It is the only “real money”.

Receipt “money” is one that is guaranteed by storing the Commodity “money” (gold, silver, ect.) and issuing a piece of paper (a receipt or “Note”) to its owner and will redeem the “note” for the “real money” whenever the holder demands it. Governments have done this since banking began. This is a good system as long as the real money is there and the people can trust those who oversee its safekeeping. This was our old form of money prior to 1964.

Fractional “money” (our form of money until the boom of the 1980’s) is money that is backed in part by real money held in storage and the rest by the government’s ability to tax the remainder from its citizens (in 1964 it was approximately 54% real assets, 46% due through taxation). Yet, there is more paper money in circulation than there is commodity money to redeem upon demand. As more money is printed, the fraction of its value in real money is diminished through inflation.

This process, every single time used in past governments, resulted in total failure of the economy it was started to preserve. The fraction of value in real money eventually went to zero due to inflation and distrust of the government issuing it caused political and civil unrest. Economic collapse was absolutely inevitable and that gave way for the creation to the next step to prevent unrest, Fiat “money”.

Fiat “money” is fake “money”, just like that in our game of Monopoly. It has no backing other than the insistence of the Government that its value is to be accepted by all at face value without ever being exchanged for “real money” held by the government issuing it.

These governments then decree that, under penalty of imprisonment, one must accept it as legal tender. It has no value and it is the last step in the collapse and overtaking of a society throughout history. Time after time this happens and without fail the society collapses into submission. This is our present money.

Only by the reinstitution of a “gold standard” were past governments restored to a stable economy and prospering government. Even in Colonial America before the forming of the United States was instituted did we see this nearly unfold. That is why our money was coined in silver and gold prior to 1964. This is clearly outlined in the Constitution and is our only “real money”.

However, governments of the world are also in the same shape. Thus the creation of the “World Bank”, or the IMF (International Monetary Fund), was needed and it began rushing to the rescue loaning its own Fractional “money” (based upon the governments backing it with promises of raising the funds by taxation in the event of a “run on the bank”) to those countries who have reached the final stage of this process and can’t pay it’s debts due to the lowered value of its “money”. The IMF too is well on its way to being “Fiat money”. In reality, it already is, for the IMF has no “reserves” only “promises to pay”.

We must regain our own control over our National Reserves. We must not allow the creation of money from nothing more than a printing press and a decree by government and return to our place as the median for exchange in the World. The redistribution of our money to the rest of the world in the form of loans never repaid will create a global collapse economically.

As one must question the soundness of these statements, they are factual and are well known within the government. As Alan Greenspan testified in 1967:

“In absence of the gold standard, there is no way to protect savings from confiscation through inflation.” He continues, “There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. The financial policy of the welfare state requires that there will be no way for the owners of wealth to protect themselves.”

He closes with the most frightening statement yet, “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

He was promptly appointed Chairman of the Federal Reserve in following years and has never commented on this fact again.

Our country has seen this process unfold and yet has not noticed nor understands where it is taking us for lack of history. We see the confiscation of property rights, freedoms, and liberties while growing a welfare state. Such a government is what America has fought against throughout her history. Collapse will be our destiny under these actions and it is not by accident. It is the plan of corrupt governments throughout history and as such, will repeat itself if we do not learn from history. Those who hold the gold will be those in control. I want to redeem my “money”.






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