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Happy fiat Day!

Today, August 15, 1971, is the 50th Anniversary

Way back in 1971, Nixon decided to take the dollar off the gold standard. However, that is not where the story really starts. It really begins in 1944 with the Bretton Woods conference, otherwise known as the United Nations Monetary and Financial Conference, where 44 nations met in New Hampshire to agree on the new International monetary system as outlined by John Maynard Keynes and Harry Dexter White. The plan was to fix the exchange rate and tie the exchange rate to the US dollar, which was back by gold.

Until 1971, countries could exchange their currencies for gold, usually stored in the US to avoid the hassle of transportation. However, under Lyndon Baines Johnson and the ‘Great Society’ programs, the US began spending at an alarming rate and began running budget deficits. Other countries became concerned that the US was spending more than it had in gold reserves, so they called for their gold. That is when Nixon ‘temporarily suspended the convertibility of gold’ on August 15, 1971.

Gold-backed currency creates a discipline in spending. A country cannot spend more than what it has in actual gold. But without gold-backed currency, a country continually runs a deficit, and in fact, the US has never had a surplus since 1971. By removing the gold backing of the Bretton Woods conference, all money around the globe became fiat in an instant. In other words, the US government decreed to the world that pieces of paper with no value would be called money, and everyone must accept it.

Since 1971, the US government borrows money from the Federal Reserve (which is neither Federal nor a reserve). The Federal Reserve then prints the money and loans it to the government. The US gives the Federal Reserve an IOU (or more commonly known as a Bond). The US government and the Federal Reserve then work together to sell the IOUs to other countries or US citizens. The loans must be paid with interest, but the government can’t pay the loan nor the interest back, so it borrows more money from the FED to pay off the first loan. This has been going on for 50 years.

The problem arises because inflation robs the buying power of individuals. Households that were once single earners have now become two earners, and when that doesn’t work, they are forced to take loans to cover basic expenses. That creates anger and resentment, which leads to the demand for ‘welfare’ programs, increasing the amount of money that must be borrowed into existence. Thusly, inflation continues to rise, and more people become disenfranchised as inflation continues to rob their wealth. Eventually, when enough people lose faith in the US government, the scheme will fail.

It is inevitable that the participants of the monetary scheme will stop buying American IOUs, leaving the FED as the only buyer of US debt. That will mark the beginning of run-away inflation, as seen in Zimbabwe and other countries. Fiat currencies historically have always ended in disaster. However, this is the first time in history that all the world went to fiat currency at the same time. No country on the planet has real money; it is all fiat currency tied to the US dollar.

So what does all of this mean? With fiat currency, the government controls how it is spent and arbitrarily decides the value. Real money gives power to the people because the government can only spend what it taxes. Real money keeps the government from creating money out of nothing. The people actually see the taxes on real money, while inflation is the invisible tax not voted on by congress. Fiat currency is theft. It is taxation without representation, and it only benefits the schemers. Real money has real value that is determined by the labor it takes to produce it. Gold and Silver have been real money since the beginning of civilization. Take time now to educate yourself on money before the collapse.

Happy Fiat Day!

For more on this topic, see the following documentary:

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