Monday, November 5, 2007

The Danger of the Current World Monetary System

“Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.” (Daniel Webster)
Definition of terms: Fiat (arbitrary [paper]) money is money that is created out of nothing by banks or central banks and without any work. Because of material misrepresentations and nondisclosure regarding the fiat “dollar,” it is prima facie fraudulent. Commodity money is a physical thing, such as gold or silver. It takes work to create it. There are compelling reasons why gold has been the preferred commodity money since antiquity.
In a prosperous society, people save considerable amounts for future needs, believing that they are providing for their retirement. They don’t realize until years later, when they attempt to exchange their “savings” for real wealth (shelter, automobiles, food, clothing, etc.), that it takes many more “dollars” to pay for these things than the savers could possibly have anticipated at the start. They find that their money, as the saying goes, has “melted.” A mysterious villain called “inflation” is cited as the cause of the loss of purchasing power.
In fact, while people are saving potential claims on wealth, those who receive the interest and transaction fees for creating fiat “dollars” are spending them and consuming the real wealth those claims represent.
It takes work to create wealth. “Dollars” are created without any work — how much more work is involved in printing a $100 bill as compared to a $1 bill? Not only are ordinary people in the United States being deceived, but foreigners who accept and save those “dollars” in exchange for their goods and services are also being cheated.
If there were full disclosure about fiat “dollars”, what elements would need to be included? At a minimum, the disclosure statement on each bill would have to state:
• “Dollars” are not redeemable into anything;
• “Dollars” have value because people believe that other people, both at home and abroad, will continue to accept them for their goods and services;
• In the US, people are forced by law to accept “dollars” for all debts public and private;
• “Dollars” are created out of nothing by the US banking system-mostly by commercial banks;
• If, in the judgment of the Federal Reserve, there needs to be additional “liquidity” in the system, then the Federal Reserve may create additional “dollars” in unlimited quantities. Generation of additional “dollars” will dilute the purchasing power of “dollars” that have been saved or promised for future payment, such as pensions;
• Creation of new “dollars” out of thin air has depreciated “dollar” purchasing power by more than 90 percent since 1950;
• “Dollars” are in no way obligations of the US government (the signatures of the Secretary of the Treasury and the Treasurer are gratuitous);
• “Dollars” are tokens, i.e., a paper tickets;
Without the misrepresentation just described and with full disclosure about the nature of the US dollar, it may very well be that some US citizens might continue to use and save fiat “dollars,”.. But surely foreigners, who cannot be compelled by US legal tender laws to accept our fiat “dollar,” would not save it, nor securities denominated in it, as they have been doing - to the tune of approximately $2 trillion. This non-disclosure of material facts contributes to the fiat money fraud.
Why we are in danger from the fraudulent fiat monetary system: The problem with fiat money, the kind we have now, is that the temptation for its creators — bankers, central bankers and/or politicians — to manipulate it for their own benefit, fraudulently transferring the wealth of society to themselves by employing coercion, misrepresentation and nondisclosure-has been so overwhelming that they have never been able to resist that temptation.
Fiat money is not wealth; it is merely a potential claim on wealth. As people realize that the real wealth on which the fiat money has a potential claim does not exist, the fiat money is said to “melt.” When fiat money melts, interest rates increase, the purchasing power of savings, pensions, and all forms of future payments denominated in the fiat money are greatly reduced, and people lose their jobs — all through no fault of their own. The suffering of ordinary people becomes palpable. In the US, the massive creation of nearly $6 trillion in new “dollars” has already depreciated the purchasing power of the fiat “dollar” by more than ninety percent since 1950.
Gold-as-money — honest monetary weights and measures — has competition: fiat money. The creators of fiat money, banks and central banks, despite their vastly inferior product, have succeeded because of coercion, misrepresentation and nondisclosure.
It is significant that, historically, gold did not become money because some potentate or government designated it so. Gold (and silver) have been the choice of the people in open markets from antiquity.

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