The Popping of the US Dollar

Some people say inflation has always slowly but steadily risen in terms of money supply itself. They say without that the economy would fail, and a healthy amount is okay. Unfortunately, they never want to see the real numbers on how high it really is.

If the CPI included gas, food, etc, then it would show far more of this than it actually does. In addition, an increase of money has been spent by the government in the form of debt, thus driving up the overall money supply to a far higher number than most people realize. Inflation does exist at a much higher rate than most people think, and even though you can see the proof of that on the FEDS websites (links below), you can just open your eyes and look around you.

   Consider this. In 1964, $4.60 in dollars, half-dollars, and dimes was worth 4.60. In 2011, $4.60 from 1964 is worth $106.00. This is due to the fact that more money was being flooded into the banks, and taken on in the form of government debt than we had silver and gold to back. In the 60’s a wall was hit in which our system become unsustainable, and it could no longer afford to make silver coinage. In March 1968, they could no longer offer currency redeemable for silver.  In 1982, they could no longer afford to make pennies made of copper. Both the left and the right accumulated the debt by making a strong warfare-welfare state.

   This is in part because we became a consumer driven economy which would not have been so bad without the state growing in equal proportion. As long as the production of the consumer products stayed in the US, this would not have presented a problem either. But as regulations, taxes, foreign wars, and crony capitalism continued to increase, we went from being a producer of real goods, to one where most of the economy is based on services provided.

   Service providing is all good and well, but it relies upon the import of goods from other places. These places will accept such payment as is given them as long as they get something for it. Yet, once it becomes apparent that the services the receiving country is provided to them no longer adequately pays them what they consider the value of their work, they will drop it. Thus, the governing bodies do the only thing they know how – encourage more debt and more money. This, of course, is ineffective, as the underlying policies that slowed progression to a near halt remain in place.

   Silver and gold are hardly the only measure of loss of wealth to the degradation of a money supply. Copper is probably one of the most highly used metals. We use it for wiring, plumbing, other electronics; the list goes on and on. Those who work with copper, know that it’s price has dramatically increased over the last decade. The government could not even afford to make pennies out of it anymore.

   Pennies minted before 1982 were 95% copper and worth 1 cent in monetary value. Today, pennies from 1983 on up are 97.5% zinc, and worth a penny. However pennies minted in 1982 and below are now worth 2 cents in actual copper value. Pennies minted from 1983 and up are worth less than half of a cent. Starting to get the point? And don’t worry – the other coinage is catching up rapidly. This is why it is illegal to melt down pennies. Think of how easily you could collect a mass amount of them (1982 and below of course), melt them down, and sell the copper for a nice profit. Being that it is so widely used in production (and more available than silver), copper has never been illegal to own. But lord forbid, you melt old pennies that no one really uses anymore to make it.

   You can melt silver coins all you want though (quarters on up). However, this is a bad idea, as silver coinage has never been confiscated, only bullion has. This basically means that if you do melt your silver, it can be confiscated once again.  So if you have silver coins – don’t melt them.

   So yes inflation obviously does exist – and you don’t need to go to a gas pump or grocery store to see that – you just have to look into your own wallet.

Ah, if only that were the end of the story…

   The dollar no longer says ‘silver certificate’. It now reads Federal Reserve note. A quick recap here, the FED is NOT a government entity, least of al,l not federal. It is a private board that sets the nation’s monetary policy, charged with maintaining a stable currency, and ergo economy. I think this gives the word failure a new definition.

   Some people say that there is not enough gold and silver to back a stable currency. This is of course an admittance that a monetary system that relies on inflation to work can only be backed with paper. Such paper is valued not on any hard items, but rather, on the valued output of that nations total production – mostly measured in GDP. As long as production exists of real goods, then the money may maintain it’s value. Minus the production of real goods, there is nothing of solid value backing it, so it is very fragile. Once we stopped production, the dollar started losing what little value it may still have had.

   The term gold standard itself is highly misleading. Gold and silver are not the only precious metals in the world, not by a long shot. In short, you could always have some kind of money that is backed by some kind of specie, and have it hold its value. In addition such a standard that is expanded into other precious metals could in theory compete with each other, and at the same time, serve as a method of stabilizing itself. The idea that everyone would be forced to actually carry the specie around in their pockets is both ludicrous and ignorant at best.

   This leads us to the next major issue on the US dollar – only 1 organization can print it, and that is the US treasury. Even worse is that the amount of dollars in circulation can only be controlled by guess who, the Federal Reserve!

   When I said earlier in a separate article that the FED and the Treasury are reliant upon each other to maintain each other’s debt, I wasn’t kidding.  This means that when government makes a bad decision that costs more than it can afford, even in the issuance of debt, that the FED bails them out. Some people refute this, as the FED has said that they don’t just print new money to buy government debt. This is, in fact, technically true, but it does not contradict what I said – and that was merely that the FED assumes control of US Treasury bonds onto its own books, thereby expanding the government’s ability to issue more of them. It is called monetizing the debt, and it is not pretty.

   The ultimate problem with this is that the money doesn’t even exist save for on the balance sheets. At this point it is not backed by anything, not even GDP. It is also at this point that the holders of the US debt begin to drop their holdings of US treasuries and stop buying more. When this starts happening full swing, all we have left with is an en economy that cannot produce, is internationally worth far less than it thought, and stuck with only paper to ‘keep it going’.

   In 1970 such a thing happened in England. More money was printed officially to meet the price of imported goods, yet because the production levels never grew in contrast, the exporters to them would just keep raising their prices. Soon everything was rationed – water, electricity, gas, you name it.

   Think it can’t happen here? It will, and it is too late to stop the initial process.

   The only thing we can do at this point is to hope that someone gets into office who will not declare martial law, de-regulate like it was going out of style, take a massive hunk out of government spending, and start dismantling the state piece by piece. This way, there might still be some kind of peace left at the end of the day rather than a violent form of control which will only lead to the ultimate survival of a state unfit to exist to begin with. In an insane world, it is the sanest choice.

Links: (note that M3 has not been published since 2006)  – the US does not have enough gold left to pay even a fraction of its debt – if any at all as gold supply has not been audited in a while – high government debt, lower household incomes etc.

The Popping of The Dollar $

The Popping of The Dollar $

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