When you look at the money in your wallet, or look at your banking and credit card statements, do you ever wonder if most people have a good understanding of the basics of money and banking? Do you ever feel that if more people had a better understanding of money, currency, banking, and wealth creation, it is very likely that America would not be on a disastrous and suicidal path to financial ruin?
This post will provide a brief overview of the importance of money, how money began, fiat currency, and why central banks were established to be the lender of last resort to troubled banks during times of financial turbulence … or were they?
The conventional view of money is that first there was barter … where you traded a few fish that you caught out of a river for a sack of corn. Next came various forms of money to standardize and formalize trade so that societies and economies could grow efficient and effectively. Finally, credit (also known as debt) was born as a way for more to have more … even if they could not afford it at the time of purchase. This highlights the ascent of man from knuckle-dragging barterer to tie-wearing mortgage holder!
This is not at all how it happened according to an anthropologist named David Graeber. He recently wrote based on his study of human civilizations, and their economies, that credit was first.
He states in a convincing way that in small villages and communities, trade happened on credit. When you think about it, it is hard to imagine it happening any other way. For example, it is not likely that someone walked into a local drinking establishment and put down two fish asking for a pint of ale (ie the barter system).
What happened was that you ran up credit, or added your purchase to a tab … also known as an entry in a tablet. When it came time to settle the debt, you negotiated a settlement where you most likely provided ten fish to cover the five pints of beer that you had consumed.
Just imagine, all across the village in a free market society, there would be numerous such credit slips (or tablet entries) for all kinds of goods and services. Over time, in a mostly civilized way, people settled these debts in broadly agreed-upon terms.
People resorted to barter when it was necessary to conduct trade with strangers, or even enemies.
Elaborate barter systems often spring up in the wake of the collapse of national economies. A recent example of this is Russia in the 1990s when rubles disappeared. Also, in POW (prisoner of war) camps and prisons, cigarettes are frequently used as a form of barter. These are examples of where people already familiar with one form of money, learn to make do without it.
Graeber goes on to point out that debt, hence credit, was modest for most of time and used to keep the wheels of commerce spinning.
The cash market first appeared around ancient armies and credit got out of control when money was created to finance wars. Kings and emperors would have coins made, ie money, and hand them out to soldiers in their army. This way the soldiers go out into the market and exchange their coins for food, supplies, and weapons. The merchants, who supplied the soldiers, could in return, go to the government of the king and exchange the coins for silver or gold at a previously agreed to, or a standard amount, as the coins were pegged to an ounce of silver or gold. And the cycle continued.
The amount of coinage circulating in the economy (known today as the money supply) was referred to as a war debt used to pay for the army and military action.
A central bank, known as the bank of the government (like today’s Federal Reserve Bank in the U.S.), was setup to institutionalize the way to meet, or provide for the funding needs of the state (ie the government) and the interests of financiers who issued the coins in order to keep the whole machine going.
Taxes were also instituted as a way to raise more silver and gold so that more coins could be issued.
If the expansion interests of the government exceeded the silver and gold on hand, taxes were raised to collect more silver and gold. Also, the purity of the coins was frequently diluted so that the silver and gold on hand would go further.
Fast forward to modern times, President Nixon took the U.S. off the gold standard in 1971 (meaning no one could convert 35 U.S. Dollars for an ounce of gold) partly in order to help finance the war in Vietnam and pay for the social programs instituted by President Johnson, his predecessor, who collected votes by offering both guns and butter. President Johnson, also known as LBJ, said the U.S. gov’t could provide both weapons for the war in Vietnam and money for the expanding social programs like Social Security, Medicare, and Medicaid. To meet the monetary needs of guns and butter, Nixon essentially was creating more coins, by printing more U.S. Dollars, not pegged to silver or gold, to finance the huge military-industrial complex. We now have a runaway currency because it is not linked, or pegged, to an ounce of silver or gold. Any paper currency not linked or pegged to a store of value, like silver or gold, is a fiat currency and this means it is only as good as, or worth, what the issuing government says it is worth. The U.S. Dollar, as well as most currencies in the world economy, are all now … fiat currencies.
As mentioned above, in order to keep the whole machine going in a world of fiat currencies, taxes have to go up and the value of the currency is frequently diluted. It is this currency dilution that is a key part of what causes inflation.
And, we have now entered a new financial age that nobody completely understands.
It is an age of credit but unlike the credit of old that was dependent on trust and honor but one based on military power and a servitude based on debt.
It is one held together by the threat of violence and the confiscatory threat of the IRS … meaning if you don’t pay your taxes, your property will be confiscated to pay the taxes you owe … to keep the whole machine going.
How this ends, as government debts continue to pile up, is the biggest financial question of our time.
Now that you have a better understanding of the mystery of money, credit, and gold in a free market society, you should be asking … what do I do?
My suggestion is to do what those who are savvy, like the insiders, do with their money in order to protect their hard earned wealth.
Obtain more financial education and learn how to protect yourself during these trying times of massive money printing, fiat currency, and soon-to-be runaway inflation. Purchase precious metals, including gold, to hedge or protect your net worth against the decreasing value of the US Dollar, which is just paper money.
With this in mind, it is a good idea to learn how to be an entrepreneur, become self employed and get self sufficient. Before I leave this topic, I want you to know that at the end of this post, I will introduce you to a top-tier income generating business opportunity where you can earn while you learn. This opportunity will provide access to education, tools, and best practices as well as a community that will provide support to you as you take action. Once you get traction, a whole new world will open up and you will see all kinds of business ideas and opportunities.
In addition, it is a good idea to protect the purchasing power of your money in gold; and there are several ways that may be appropriate to obtain this protection. These include direct ownership in minted coins, use of gold exchange traded funds, gold mutual funds, and junior gold stocks. Many are investigating having part of their IRAs in gold, silver, precious metals, and non-dollar denominated currencies.
For those that truly believe default of sovereign debt is the greatest risk we all face, it is wise to learn how to implement a multiple flag strategy to diversify this risk or provide protection against higher taxes, capital controls, hyperinflation, civil unrest, erosion of personal liberty, and the rise of a police state. With a multiple flag system, you consider taking preparations like, but not limited to, establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, dual citizenship, and carrying multiple passports.
I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.
If you are like-minded, be sure and join me here at this top-tier business opportunity as a way to be savvy with your money and get back in the game … Passionate Professionals ... Rebuilding Careers in order to generate top-tier income.
Finally, I want to thank Chris Mayer of Capital & Crisis, published by Agora Financial, as he was the source of some of the material mentioned in this post. Also, a great book to read on this topic is Debt :The First 5,000 Years by David Graeber.
In closing, be sure to Meet Me at my website, WhoIsMikeFarrell; Learn How to Get Self-Employed, at my HomeBizSocial website; Read about my Internet Marketing Business, at myaspenIbiz site; Obtain Some Tips About Being No 1 on Google, at aspenIbiz My Go-To-Market Partners website; and Learn How to Live Longer, at aspenIbiz My Life’s Advantage Today site.
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