Has The Perfect Moment To Kill The Dollar Arrived?

Brandon Smith, Contributor
Activist Post

The idea of “collapse”, social and financial, comes with an incredible array of hypothetical consequences ranging from public dissent and martial law, to the complete disintegration of infrastructure and the devolution of mankind into a swarm of mindless arm chewing cannibals. In an age of television nirvana and cinema overload, I have found that the collective unconscious of our culture has now defined what collapse is based only on the most narrow of extremes. If they aren’t being hunted down by machete wielding looters or swastika wearing jackboots, then the average American dupe figures that the country is not in much danger. Hollywood fantasy has blinded us to the tangible crises at our doorstep.

The reality is that collapse is not a singular event, but a process. It is a symphony of doom, composed of a series of exponentially more powerful crescendos. If the past four years since the implosion of the derivatives bubble have proven anything, it is that catastrophe has the ability to drown a nation slowly like a river of molasses, rather than sweep it away like a flash flood. That said, almost every recorded collapse of modern societies in the past century has been preceded by a primary trigger event; a moment in which the mathematical certainty of failure becomes clear, even if the psychological certainty is muddled.

The Moral Hazard of Modern Banking: How Banks Create and Destroy Money

The Money Lenders by  Quentin Metsys - 1466

Robert Bonomo, Contributing Writer
Activist Post

Much has been said about both the moral hazard of banks being bailed out and people bailing out of mortgages. The major question raised was, Would this ‘bailout’ contagion infect the integrity of our economic and political system?  But far more interesting and much less discussed are the mechanics of modern banking and their moral implications.

During the housing boom trillions were loaned out in mortgages creating a housing bubble and the eventual collapse of the financial markets. But where did all that money come from? The vast majority of people think that banks borrow money from the Fed or depositors at one rate, lend it at another and make a spread. This concept is completely false. Banks create money, loan it out, make their margin through compound interest, and destroy the same money that they created as it is paid back.

Why Use Gold As Money?

David Redick
Activist Post

History shows us that when countries use a valuable commodity for money they have zero or low inflation; zero or minor cycles of economic panic or depression; and more peace, liberty, and prosperity (smaller governments).

For example, the number of grams of gold needed to buy a barrel of oil has been very steady over the years. A key benefit of using gold as money is its value stability.  Even better, Econ 101 tells us that a commodity such as gold in limited supply, and with increasing demand for it (growth of the economy), will APPRECIATE in value. This has huge importance because it kills the "there is not enough gold" argument, and gives a positive incentive to save and avoid debt.

Thus, we would expect all countries to use sound money, except the politicians want more money than they can get by just taxing, especially for wars. They want a way to create money "out of thin air." Fiat money ("face value" decreed by the government, not redeemable for gold; we call ours Federal Reserve Notes) serves this purpose. Even when some level of redeemability (exchange for precious metal) exists, governments often suspend it before, during, and after wars, which the US did for the Revolutionary, 1812 and Civil wars, after which it must be pushed to restore it -- often with less value.


The two key reasons for using a commodity as money are to:  
A. Limit excess expansion of the money supply (inflation; loss of value) by the government (you can’t trust them).
B. Provide a market-based store of value. The commodity could be wheat, iron, diamonds, or pearls, but the market (users of money) usually chooses gold because it works best.

To achieve broad use, commodity coins must be made of, or contain, a material that is: 
1) Rare, with a low amount in existence now and limited new supply.
2) Malleable, so can be made into coins.
3) Stable physically and chemically; doesn't break, rust, or rot (can be stored; lasts through much handling).
4) Easy to identify (recognize), and determine purity and amount.
5) Difficult or impossible to counterfeit.
6) Homogeneous in content (a melted chunk is the same throughout).
7) Divisible into pieces (diamonds and pearls aren’t).
8) High value per ounce (not bulky to handle or store).
9) Acceptable to most sellers (familiar and recognizable).

This approach allows the use of representative paper notes ("claim checks" for gold), or base-metal tokens, so long as they are marked to show the amount of gold they can be redeemed for by any bearer, on demand.

The market of money users has decided that gold fits the above requirements best, but silver and copper can have a role in parallel, with no fixed ratios set between them as to value per gram (i.e., no bi-metallic standard). It is interesting to note that gold is not "consumed" as are other commodities, including silver and copper. Thus, except for wear, over 90% of all gold mined in history still exists (even if buried in a tomb). Silver and copper supplies and costs are more volatile than gold (more new production, are consumed for industrial use, etc.), so are less attractive, but usable. When gold is used as money, it has no "price" anymore -- weight is the unit of account. This will take some getting used to as we evolve to pricing in weight of gold.

History
From its origin until 1913, the US used a combination of foreign and domestic coins and local "bills of credit," had two failed central banks, Continental and Greenback paper dollars (both became worthless), and various runs and panics in a turbulent banking system. The unconstitutional Federal Reserve System was created in 1913 and had a monopoly on creation of "legal tender" money. It was secretly planned by bankers and politicians, for bankers and politicians. At first, anyone had the right to trade-in their Silver Certificate paper dollars for a silver dollar (this ended in 1968), and deal in gold for transactions. In March, 1933 (his first month in office) FDR took those rights from mere people, and only nations could redeem paper for gold. In 1971 Nixon ended this right for nations when he abrogated the 1944 Bretton Woods Agreement due to our serious financial problems ( a. We were running out of gold because France, England, and others were redeeming the US dollars accumulated in Europe due to our postwar spending and loans there, and b. The US was poor after spending on Vietnam and LBJ's 'Great Society', etc.). With no link to gold, the US could make dollars out of thin air as needed, and did we ever! Prices started their 'hockey stick' shaped rise a few years later as the effect of excess money creation and spending trickled to the world economy. Within in a few years, all nations worldwide ceased redeemability, even the prudent Swiss floated the Swiss franc (SF), but have been less abusive than others; hence while 1 US$ = about 4 SF in 1961, it is now about 1 US = 1 SF, so they only inflated by 2.5 while by 2008 the US inflated by 10; 4 times more!


Where We Are Today
The US has been the worst abuser among developed nations (older countries remembered their lessons from past monetary failures). The US has created so much new free, fake money since 1971 that the US dollar has lost about 80% of its purchasing power since then (this excess expansion of the money supply is called monetary inflation, like a balloon) with its consequent price increases (due to loss of the dollar's purchasing power) called price inflation. Check prices of common commodity items (that are not imported, subsidized, cheaper due to new technology, or under price control), such as a pizza, a restaurant meal, or even a car. Good examples are:

1. A room at a Motel 6 cost $6 in the 1950s, but is now in the $50 range in 2010 (same type of room and service)
2. A family car cost about $2,000 in the ’60s, but is now about $20,000 in 2010.

There is your 8 to 10X loss of USD value since the late 1940s (when the post-war big-spending started)!  This ties-in with the over 95% loss of the dollars value since the Fed started! The only reason we can get away with our worldwide spending and borrowing is because the USD is the world's reserve currency (any person or bank will take and keep it as if "good as gold") and we can create new money to pay our bills. The dollar is viewed as a share in USA, Inc., the world's strongest economy, which sadly is fading (faster since 2007), as we continue the long abuse of our economy (by spending, taxing, and harmful intervention by the Fed and government) and money (by excess expansion of the supply). The era of US world dominance is ending, as it does with all empires (Rome, Spain, England, France, etc.). When (not if) the dollar loses its reserve currency status, there will be a 50% or more loss in value in a few days, and prices at Wal-Mart will triple!

Politicians and bankers love an unending supply of cheap money, but such fiat systems always fail. It is part of the pattern for all failed empires in history, and the Empire-USA is now entering the failure phase. To avoid a chaotic crash, we must reduce spending (including our role as the world’s policemen and bully), and convert to a gold-money system! The gold we own could be used to back all existing US dollars, and allow redemption of paper for gold. This would amount to about 2/10,000 ounce per dollar (or less if the Fed is lying about how much we have), and imply a price of about $50,000 per ounce. Thereafter, prices would be in weight of gold(grams, milligrams). All nations would soon convert to gold money, or sellers would not accept their trash paper. Variable foreign exchange valuations would end between countries using gold. The IMF, World Bank, BIS, G-20, and all other meddling government groups would fade and die (good). Time is short (1 to 10 years) before the big crash starts.

Write, call and visit your Senate and Congress persons to urge support of this new system. Most now prefer hyperinflation (print money to pay bills), or default (ignore debts), but that causes more damage and has no future benefit. Despite the pain and losses the conversion to gold may cause, the damage is far less than an uncontrolled crash, and there is a bright future afterward. Let’s get started.

David Redick has authored two books Monetary Revolution USA, and Rebuild America Now.  Mr. Redick is a "Ron Paul Style" Republican running for Wisconsin State Assembly and supports establishing a state bank.

Related Article by David Redick:
The Impact of Fiat Money as The World's Reserve Currency

Other Related Articles:

The After-the-Fed Solutions Debate Begins: Greenbackers vs. Goldbugs

On Inflation, Saving, and The Nature of Money

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Crisis of Fiat Currencies: US Dollar Surpluses Converted into Gold

Dees Illustration

China, Russia, Iran are dumping the dollar

Bob Chapman -- Global Research

Something is going on that your government does not want you to know about. Very few journalists have written about it and little or nothing has appeared in the mainstream media. The story could be one of major stories of our time.

Western powers have tried to destroy gold as a backing for currencies for many years. Presently the major media won’t touch the story and that is understandable.

Something we have been writing about for years is the Shanghai Cooperation Organization known as SCO. Few have been listening and few have been interested in what their mission is and what they have been up to.

Some of the members are large oil producers and some, like China, are large oil users. Some have very large US dollar surpluses. As well, some are large commodity and gold and silver buyers. In fact, members are in a great part responsible for driving these prices higher. It is debatable, but we believe there is a conscious effort to accumulate gold and silver, dump dollars and to back their currencies with gold. 
China and Russia are both large gold producers and for a number of years have been buying up domestic gold and silver production, so that it never reaches the market and does not affect prices. If anything the absence of sales tends to push the markets higher. As a matter of fact Russia and India are visible buyers. Even Iran with its oil surplus recently announced that they had purchased 340 tons of gold. Their recent gold purchases are very significant as affiliate members, which have access to the present and ultimate direction of the group. You might say buying gold has been a protective effort to shield members and close observers from the problems generated by dollar policies. They are accumulating gold, as many have been worldwide, for the past ten years, but particularly over the past few years. 
This buying, for protection, has served to thwart the efforts of US policymakers, the Treasury, other central banks in Europe and the Fed, from being able to continue the blatant suppression of both gold and silver prices. The malefactors, except for forays into derivatives and futures, which are transitory, have lost control and suppression of gold and silver prices, and it is only a matter of time before all visages of any control will be visible. Since 1988, in August when Present Reagan signed the Executive Order creating, “the President’s Group on Financial Markets” and the subsidiaries that have grown out of that policy, that the Treasury won many if not most of the battles. The SCO in part changed that and now they and the public are winning the war for a fair and free gold and silver market. The current class action lawsuits, including RICO, are a testament to the market manipulation in silver, which is finally coming to an end. HSBC and JPMorgan Chase, the latter that is the major owner of the Fed, are going to be finally prohibited from rigging these markets. Their officers all belong in jail, but elitists never go to jail; they pay fines, and keep right on robbing the public.

Other SCO members and observers are accumulating gold as well, be it in smaller amounts. We might add that other nations observing Russia and China and their gold purchases are buying as well. These participants must believe that there could be a return to sound money; otherwise they wouldn’t be gold buyers. Buying gold is certainly preferable to holding US dollars, which have consistently fallen in value versus other currencies over the past ten years. Then again all currencies have fallen versus gold over that period, some 19.6% annually. It is nice to see nations are finally waking up to the reality that fiat currencies will all over time deteriorate versus gold. The temptation is enormous to deficit spend.

The most interesting aspect of the SCO is that they do not strive for political agreement such as the European Union. They are interested in economic stability and development and security. There is no overall binding laws. Nations retain their sovereignty, which is the exact opposite of what the elitists in the US and Europe desire, and that is world government. The SCO has provided great flexibility something that is non-existent in elitist controlled countries. Another interesting facet is that the SCO probably represents half of the world’ population, far more than the US and Europe. As these nations accumulate gold so does some of their citizens, which puts strong upward pressures on gold prices on a continuing basis.

In addition some of these nations, such as China, are spending dollars by buying natural resources and other things in other nations in an attempt to relieve themselves of excess dollars earned in trade. Both Russia and China fully realize that the US dollar is in serious trouble and has been for a number of years due to fiscal debt and the unbridled creation of money and credit by the Federal Reserve. They well know the dollar is in serious trouble and what the outcome will probably be.

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