The History of Money

[Warph]

"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." — George Washington

"Of all contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money." — Daniel Webster

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." — Alan Greenspan

"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." — Vladimir Lenin

"Experience shows that neither a state nor a bank ever have had the unrestricted power of issuing paper money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obligation of paying their notes either in gold coin or bullion."
— David Ricardo

"The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."
— US Constitution Article I, Section 8, Clause 5

"No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt."
— US Constitution Article I, Section 10, Clause 1

This short 2 part video gives a very good historical summary of US currency and its slow mutation from a Constitutional form of money which is gold or silver; to a fiat currency system which is simply paper and not backed by anything of real value.


Money - A Brief History Of The American Dollar - Part 1 of 2

Money - A Brief History Of The American Dollar - Part 2 of 2

[Warph]

Only government can turn valuable items like paper and ink into something utterly worthless."
-Attributed to Ludwig Von Mises

Under the coinage act of 1792, our US dollar was set by a standard of weights and measures under the Constitutional powers allowing Congress "...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures" (US Constitution Article I, Section 8, Clause 5). Our money was originally made in the form of gold and silver and therefore carried its own intrinsic value by being a commodity itself. However, our money has slowly evolved from this constitutional form of money, to what is now nothing more than paper.

The following shows the devaluation of our dollar as we removed our currency from the gold standard. Notice the first date is 1792.  (Note: When looking at the price of gold, think of it actually as the value of the dollar. Lower gold prices = More US dollar value, Higher gold prices = Less US dollar value.)


Date/Price of Gold:

1792 $19.39
Our money was as good as gold, because it was gold as well as silver.

1913 $18.92 *2.4% decrease in 121 years*The Federal Reserve act was signed and the Federal Reserve Bank took control over the US Currency in 1914. Over the period of 121 years between 1792 and 1913, the US dollar actually strengthened, which is represented by the decrease in the price of gold. Notice, the value of the dollar remained relatively stable during that 121 year period. During the 20′s the Federal Reserve began to manipulate the economy with "monetary policy", where it began to expand the money supply, during that time the price of gold reached $21.32 with an average price of around $20.

1932 $20.67 *9.24% increase in 19 years*
The US begins printing massive amounts of paper currency in the form of Federal Reserve Bank Notes. These notes could only be redeemed at the reserve bank that issued them. This marks the beginning of the decline of the US dollar. President FDR also made the private ownership of gold illegal and confiscated private holdings at a rate of $20.67/oz. (notice: roughly 30% under market value). This was later revoked.

1933 $32.32 *65% increase in 1 year*
The US begins printing massive amounts of paper currency in the form of Federal Reserve Bank Notes. These notes could only be redeemed at the reserve bank that issued them. This marks the beginning of the decline of the US dollar. President FDR also made the private ownership of gold illegal and confiscated private holdings at a rate of $20.67/oz. (notice: roughly 30% under market value). This was later revoked.

1972 $63.84 *97.52% increase in 39 years*
The Bretton Woods System was in place at the time. This system which was created in 1944 artificially pegged the price gold in terms of US Dollars. In 1972, this peg valued the dollar artificially high. Which meant you could redeem more gold for 1 USD than it was really worth. The Federal Reserve continued to print money, inflating the currency. The peg was adjusted over this period to reflect some of the inflation of the money supply, but it didn't properly represent the true value of the dollar in terms of gold. The dollar was extremely overvalued, which was realized in 1973.

1973 $106.48 *66.79%% increase in 1 year*
Nixon closed the gold window and stopped the practice of redeeming "green backs" for gold according to the Bretton Woods System. At the time, only foreign holders of USD could redeem paper currency for gold/silver. Since the USD was overvalued, money began flooding into the US to be redeemed in real specie. To avoid depleting our gold reserves, Nixon closed the window and the price of gold instantly soared to its true value against the dollar.

2009 $948.80 (August 27) *791% increase in 36 years*
The further deterioration of the dollar can be attributed to a large increase in the money supply over time as well as US debtors loosing faith in the ability of the government to repay debt. This is largely due to our ever expanding deficit. For these reasons, countries such as China, Russia and India have recently called for a new reserve currency to replace the US Dollar.

The threat of even further deterioration of the dollar looms as the monetary base has doubled just in the past 12 months. That means the Fed Reserve has printed more money in the past 12 months than its entire existence.

[Warph]

MONEY.... I luv it!

[Patriot]

Something simple my father used to be mindful of:

Bankers are salesmen too.  They sell money.
And they make more money selling money than anybody makes selling anything.