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(The following excerpt is from a self-published book I wrote entitled, The Self-Reliance Manifesto, and has been modified from its original version. Current revisions are underway for the second edition’s release later this year.)
Paper currency (aka “fiat money”) has no value in and of itself:
Inherently, it is worthless.
Paper money was originally a receipt used as evidence that real money exists. It was, “As good as gold.” Over the years, the government has disconnected the paper from the actual tangible substance – which is money! What we now have are pieces of paper which are the evidence of nothing! The gold that was once ours in the banks and vaults of America have been taken by the government and kept from us.
April 5, 1933 (months after taking office), Roosevelt signed Executive Order 6102, “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates” by U.S. citizens. Anything over $100 worth of gold was confiscated and exchanged at the rate of $20.67/oz.
The best value we can say that money has is in the copper/nickel coins we are forced to use as legal tender.
Currently, copper’s market price is currently $3.10/pound; nickel is at $9.68/pound (source: look in the top left corner). If we were to give an honest exchange of value to the grocer, we would need a one-pound copper or a 5 oz. nickel coin to purchase a gallon of milk. These metals are almost completely worthless, and every transaction we make is a rip off to the person we are buying from. Because of our monetary system, every transaction we make with someone else is at a truly disproportionate exchange of value: dollars (or coins) with a literal worth of only a few dollars can be exchanged for literally hundreds of dollars worth of groceries!
Coinflation.com shows what the actual value of the metal contained in our coins today. At the time of this writing, the market value of each coin is as follows:
- Pennies are worth $0.0053329 (1/2 cent)
- Nickels are worth $0.0525026 (just over 5 cents)
- Dimes are worth $0.0183166 (1.8 cents)
- Quarters are worth $0.0457932 (4.5 cents)
- Half Dollars are worth $0.0915876 (9.1 cents)
Inflation’s Impact on Currency
Without an honest exchangeable value of a paper currency to its coins, paper currency is truly only “backed by the full faith and credit of the United States Government.” (Which, by the way, since we don’t have a Republic anymore, we, technically, aren’t the government. So does that mean the guys and gals in Washington are the ones responsible for this debt?)
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value … [Gold] stands as a protector of property rights.”
-Alan Greenspan, Gold and Economic Freedom
The pieces of paper we swap at the store for commodities are not, themselves, valuable (unless you tremendously value admiring the bust of dead presidents). With a 3.8 Trillion dollar budget, our government spends $10.4 Billion dollars a day. According to The National Debt Clock, “The National Debt has continued to increase an average of $4.09 billion per day since September 28, 2007!”
We are approximately 10 days away from hitting $13 Trillion dollars of National Debt. If South Carolina were to secede today, our portion of the debt to pay off (based on national population) would be approximately 1.48%, or $192 Billion. Amazingly, South Carolina’s GDP is roughly $145 Billion, something doesn’t seem quite right here. Dividing our portion by the total population of South Carolina (including children) and every man, woman, and child owes the federal government $42,000.
South Carolina’s portion of the national debt increases $60.5 Million each day; every man, woman, and child’s government debt increases by $13.27/day or $4,844/year. At this rate by the time today’s newborn will owe $129,000 to the government by the time he or she turns 18. Clearly, this is out of control. We recognize the problem but still need to raise awareness and start talking to people every day about what is happening. The sooner we can break free from the American Empire, the sooner we can manage at least our portion of the national debt and return to an honest exchange of value through our monetary and coinage systems.
How much longer will people continue working for money worth pennies on the dollar? Time will tell, maybe it just doesn’t hurt enough yet. After all, the baby boom generation hasn’t started pulling its money out of the market yet for retirement and health care still hasn’t hit full swing. There is a lot coming down the pipeline and unless we nip it in the butt now, our problems will continue compounding exponentially. That is, after all, the rate of change these days.
Three years ago when I began studying the gold market, the fair market value of gold was $680/oz and seemed to change dramatically each day. I watched gold jump up 20 points, then drop 10; jump 40, then drop 15. I picked up a book called Gold: The Once and Future Money and scanned the internet looking for ideas, trends, and insider information. (By the way, the best site I have ever found for daily market research is at usagold.com, and no I don’t get paid anything to say that.) I became fascinated in what drove the market and studied how news affected its value.
More than a year after I started I met with a private investor seeking a solid investment to park a few thousand dollars; she had heard about the prospect of gold over bonds, CDs, or other such paper assets, so I shared what I knew over lunch. At the time, something just wasn’t right. There was mass speculation all over the internet about the banking failures, international exchange rates, inflation, and the price of oil. Something big was about to happen in the gold market, and those of us who keep up with it every day knew it.
I shared this with her and she decided to go ahead and make the move. By now the clock read nearly 3 p.m. and it seemed too late in the day to go through the trouble of locking in on the day’s market price. “First thing tomorrow morning,” we decided; we would make it happen then. Well, the next morning some news had beat me to the punch: Fannie Mae and Freddie Mac were bankrupted! The market started the day at $780/oz and within an hour gold was pushing $800. I watched the price go out of control as the next bombshell hit the news: FDIC was almost out of money; they were nearly bankrupt also! It wasn’t until gold hit $840/oz that I locked her in at the day’s price, and it closed the day at $860/oz. Since then, of course, gold has continued to climb (it’s now at $1,230/oz not a bad gain since our buy-in), but missing the day’s 10% market gain would have been icing on the cake.
Nevertheless, the following quotes I found in a Business Week’s Website article, and I want you to notice any psychologically-driven propaganda here [brackets added for my comments]:
But even if gold keeps rising [it will]—a prospect very difficult to predict, given the metal’s volatile track record [like Wall Street's??]—there are several features of gold that make it treacherous for individual investors, financial advisers say [wow, treacherous huh?].
Gold might have a reputation as a “safe haven,” but nothing could be further from the truth [I beg to differ], says Susan C. Elser, of Elser Financial Planning in Indianapolis [oh wait...she gets paid on commissions of selling paper assets, not hard assets]. Unlike other commodities, gold has few industrial uses [exactly! That's why we use gold (as opposed to other medals) for money]. Unlike businesses owned through the stock market, gold earns no profits and doesn’t pay out dividends [it doesn't LOSE value either; fundamentally, gold ALWAYS holds its buying power value]. Unlike bonds, no one pays interest to holders of gold [this is NEVER a reason to buy gold anyway]. And, unlike insured bank deposits, there is no guarantee of your principal investment [umm...but there is security in Wall Street and the FDIC that almost went bankrupt a year and a half ago?].
“There is no downside protection on investing in gold,” Elser says. [THANK GOD!!! AT LEAST WE HAVE SOMETHING!!!!]
…
Gold used to be the backing for currencies, but no longer [don't worry, it will be again]. Now “it really is only a store of value because people say it’s a store of value, [...exactly, do go on.]” says Ken Eaton, principal at Stepp & Rothwell, a financial planning firm in Overland Park, Kan. [Oh wait, he gets paid from selling paper assets too...] That can lead to extreme volatility, which financial planners cite as one of gold’s biggest downsides. [*scratches head* Wait ... stocks, bonds, and mutual funds have not been EXTREMELY volatile???]
Gold is just one part of a diverse portfolio, she says, with a portfolio allocation often kept to 5 percent, though “you could argue for a higher percentage.” [STOP THE PRESSES! Portfolios should have minimum 10% and up to 30% diversification in precious metals depending upon how confident you feel in the dollar.] A small gold holding is typically recommended even by financial planners, like Eaton, who are skeptical of buying gold now [remember, he doesn't get paid when people buy gold]. Gold is one sliver of commodity holdings that make up 2.5 percent to 5 percent of his clients’ portfolios, Eaton says. [Our Founding Fathers would disapprove.]
Consider this:
The Federal Government’s budget for next year and every year thereafter pushes the $4 Trillion mark – they have no intention of cutting back – and they can barely pay the 1/2% interest on the debt they have now.
The Chinese Yuan (pronounced yoo-ahn) is expected to unpeg from the dollar sometime in the next month so the exchange rate can be properly adjusted by the natural market correction. Since early last year they locked the exchange rate on the IMF at 6.82:$1, and since then we have seen the dollar spiral out of control while the Chinese economy has grown steadily; some experts predict a gain against the dollar of up to 6% during this time. While that doesn’t seem like much, consider how many things are imported from China. As the exchange rates tighten, the cost of goods will increase as well.
Many businesses who are barely making payroll now may be forced to close shop if they do not raise their prices, and may have no other choice anyway. Currency investors across the world will likely convert a substantial portion of their dollar holdings into Yuan to earn on the initial adjustment. This makes every other currency less attractive and shifts money directly into foreign markets to fuel their economies.
Not for nothing, I still think gold is a good buy and will be the only saving grace of America’s economy when the Federal Government collapses. I don’t believe in the dollar, because I don’t believe in the government and few people are buying gold these days for the growth. Gold is not a short term investment, it is something you buy and plan on holding for years to come: People are buying gold so they will have REAL money when it all falls down.
For now, heed the wisdom of, “Buy the book before you buy the investment.” Before investing in anything, educate yourself accordingly.
