Money Vs Currency

Currency and money are very similar and many people think that they are one of the same. However, there is one major difference that separates the two. First, let's obtain a firm grasp of how they are similar. Both currency and money have to be:

A unit of account

A medium of exchange

Portable

Divisible

Durable

Fungible

Money must be all of the above, but has to also be a "store of value" over long periods of time. Paper is never a store of value because it can be printed at will and only has the value given to it as determined by the issuing government. Gold and silver have been used as "money" for over 5000 years because it satisfies every requirement stated previously. Once upon a time, the U.S. was on a gold standard. This meant that for every dollar printed, there had to be gold to back it up. Our dollar was considered "money" because of this gold backing. Thus, the phrase "good as gold" was coined (you could redeem your dollars for gold). Gold has to be mined and that process takes time and physical effort.

Gold's value comes from its rarity and the physical effort that it takes to mine it. When you're paid in gold or dollars backed by gold, the gold you redeem represents your efforts. You may ask, "Why is it so important to have our dollars backed by gold?" The gold standard prevented our government from printing excessive amounts of money. When governments are allowed to print money at will, without the backing of either gold or silver, this action always leads to price inflation. This inflation always turns to hyperinflation and the currency collapses on itself and goes back to its true value of 0. Our forefathers understood the concept of "real money" and deemed it unconstitutional for anything but gold and silver to be used as money because every great empire that had currency without backing, collapsed. The U.S. will be no exception. Here is a direct quote from the constitution: "No state shall enter into any Treaty, Alliance, or Confederation; grant letters of Marque and Reprisal; coin Money; emit Bills of Credit; make anything but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."

Former President Richard Nixon took the world off of the gold standard on Aug. 15, 1971 by ending the Bretton Woods Agreement. I say "the World" because the dollar holds "World Reserve Currency" status. The dollar was pegged to gold and the majority of all other major currencies were pegged to the dollar. Therefore, they were indirectly pegged to gold because the dollar was pegged to gold....I hope that makes sense...lol. The ending of the Bretton Woods Agreement caused all money worldwide to instantly become a worthless government backed instrument of debt (currency).

Currency is nothing more than an "I O U" (debt). All of the world's currencies aren't backed by anything and the Chairman of the Federal Reserve (private institution) is printing currency like it's going out of style. How does this affect you? Have you seen prices lately? The expansion of the money supply always leads to price inflation because you have more paper chasing the same goods. As a rule of thumb, prices don't rise, it is just the value of the paper in your pocket losing value. The old rule of money was to "save". This rule is no longer applicable in today's economic environment. Savers are losers.

The reason savers are losers is because the longer you save your money, the less purchasing power it is going to have in the future. Governments are going to continue to print money until all faith is lost in the currency and it reverts to its real value of nothing. If you don't believe me, just look at how far that $100 bill in your pocket goes today relative to how far it went just a few years ago. The dollar is on the verge of collapse and many Americans are oblivious to this fact because either they don't care or they are listening to the mainstream media which is pumping disinformation on a daily basis (keeping people sleep (sheep). America is headed face first into an economic tsunami. This economic tsunami will be disastrous for those holding their wealth in any dollar denominated asset.

There's a simple way to profit from this economic collapse and achieve wealth beyond your greatest imagination. Did you know that more millionaires were created during the Great Depression than any other time in American History? Well, the wealth transfer that is going to take place during America's next Depression is going to TRUMP that of the Great Depression 10 fold. You have a unique opportunity right now, to be on the right side of the wealth transfer. What you "don't know" will murder you financially.

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Failed Fiat Currencies In American History

During the early days of the Revolutionary War the American colonists were having serious trouble financing the revolution. Efforts to acquire additional money from England were slow at best. Furthermore the Continental Congress was forbidden to directly tax the colonists for war funding efforts. A solution for this immediate problem was finally created. The answer was to issue paper currency or bills of credit. This new money was called "Continental Currency" or Continentals which became America's first attempt at the use of fiat currency in the new America. At the time there were many congressmen who realized that over issuing paper currency was just a hidden form of taxation. However at the time this was the only option they had to levy such funds.

In June 1775 $ 2 million bills of credit were issued by order of the Continental Congress. At the time of issuance it was announced that this would be the only time these bills of credit would be issued. Four years later in 1779 the Continental Congress authorized an additional $200 Million continental's be printed. Knowingly, inflating the money supply and disregarding its own promise to only print $2 million four years earlier for one time only. The colonies were expected to pay back these funds. Depreciation, which had already started in 1776, was now accelerating. After many attempts on the collection of these funds the colonies still never paid it back. By 1780 the continental currency had devalued so much that a famous expression for that time was born. "Not worth a Continental" because its value then, was only worth 1/80th of a one dollar silver coin. The continental currency was finally replaced by the US dollar in 1785 becoming the unit of national currency by the Continental Congress.

76 years later fiat currency was again tested in America. At the American juncture of the American Civil War just a couple months after the United States Confederacy was created, a new fiat currency called the Confederate States of America dollar had begun to go into circulation. This money was created and used to pay for the South's war expenses. Printed in many designs, and denominations ranging from a $ 1/10th confederate dollar note to a $1000 dollar confederate note and all hand signed. They were printed between 1861 and 1865 with a total value of $ 1.7 billion in circulation.

These notes were very popular at the beginning of the confederacy within the Confederate States of America. The first notes printed were redeemable and payable upon demand and used for goods and services. However, as time went along the notes started becoming payable not upon demand, but rather into the future. At increased rates when these confederate dollars were printed, they would have an inscription upon them in varying forms. Such as "Six months after the ratification of a treaty of peace between the Confederate States and the United States The Confederate States of America will pay to the bearer on demand".

As the Confederate War continued on, more and more of these confederate dollars were printed and the dates in which they could become redeemable kept moving further and further into the future. Inflation at the time was skyrocketing. The actual value of the confederate dollar was quickly becoming worthless. With the war ending to a victory for the North, the South's gold bullion was confiscated and the confederate dollar was now completely destroyed.

50 years later, at the beginning of WWI in 1915 again the United States regressed to the use of floating large sums of fiat money during the course of the next ten years. This was done to finance the enormous costs for the war. The money for the war effort was loaned to America by the newly created Federal Reserve Bank. The American people had to pay this money back plus interest which made the owners of the new Federal Reserve Bank very rich.

The Bretton Woods agreement was in place from 1944 through 1971 where the US enjoyed a fairly stable 27 year period without fiat money. In 1971 President Richard M. Nixon was forced to close the gold window by taking the United States and the world out of the Bretton Woods Agreement. This removed the last peg attaching the US dollar to gold. After this event occurred the United States again inherited its fiat currency. A fiat currency backed by nothing other than the faith and promises of the US Government to pay the bearer and its acceptance from the American people. From this point on America has allowed the Federal Reserve's money press to run freely and drastically over inflated its money supply. From 1971 through today the US dollar has lost greater than 93 percent of its original purchasing power through inflation caused by excessive money creation.

It is a sad deal for America that the United States itself, could not even learn from its own past mistakes. Numerous times throughout history many nations have fallen by the use of fiat currency. Sadly America is close at hand to join them. Protect yourself and your family, by investing in physical gold and silver. As throughout history they have always been true stores of value. Physical gold and silver Act as insurance policies for asset protection, by hedging against inflation, deflation, or even the destruction of paper currency through hyperinflation.

Tom Genot -

Informational news, books, articles and videos to invest in gold and silver and where the best places are to buy it. Also find informational resources to educate you on alternate forms of investing and preparedness, for protecting you, your family and your assets from the pending economic crises and destruction of the US dollar. Author Tom Genot provides information and resources helpful to everyone. Insure you're prepared, while time is still on your side. Check us out at www.coinbullion.net

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Secession and The Gold Standard

One of the first issues for a new nation, formed as the result of secession from the United States of America, will be monetary policy. There will be tremendous political pressure for the new lawmakers to establish a fractional banking system and a new national currency that is a mirror image of the US monetary system. And that one decision will be the determination if the new nation will...or deserves to continue.

If any American state secedes and establishes a currency that is not a gold standard, you can be certain that, like in the song..."meet the new boss, same as the old boss." You've just traded one group of tyrants for a smaller group of tyrants.

No government in the history of mankind has devalued its money and survived.

Not One.

So, why does gold as money make sense?

First...gold IS money. Currencies of any type are paper representations of money. Tragically, most people think just the opposite. They view the paper slips in their wallets as money, and gold as a collectible trinket with value...little more than a Hummel figurine or a stamp collection.

Throughout history, all kinds of things have been used as money. Anything that can be used as a medium of exchange can be used for money. Sea shells, salt and even cattle have been used for money by civilizations. But problems arose with those types of exchange.

How do you give change for a cow?

So, gold has evolved into the best form of money on the planet, followed closely by silver. It is best because of the following characteristics:

1. Durability: You can't use something that deteriorates, molds, rots or crumbles away. Gold does none of those.
2. Divisible: Money needs to be divisible without destroying the value of the item used as money. That's why people don't use diamonds. Dividing a diamond into smaller pieces could destroy or diminish its value.
3. Consistency: You can't use things that are of different value, such as collectibles, artwork, real estate or autos. All of those things fluctuate in value and many of them depreciate over time.
4. Convenience: Pennies are copper, but copper is very heavy. You cannot carry a large sum of copper pennies without inconvenience. The same could be said for lead or steel or other minerals. Gold has a high value relative to its weight.
5. Base value: Gold has value in and of itself. It is not assigned a value by a government.

Over thousands of years of human commerce and trade, gold has proven to be the best form of money for the greatest numbers of people. And it has always been the worst enemy of governments that wish to grow unlawfully and use their citizens as sources of income.

Governments throughout the ages have found ways to devalue their money, and thereby keeping more and more for themselves. Governments are the only entities that can create inflation, and they do it by issuing more currency than they have money on deposit.

Just look at the American experience. In the early days of currency, banks issued paper notes with different denominations. Those "notes" were actually an IOU slip that promised the bearer that he could redeem the note at the bank. The note was not the money...the money was on deposit at the bank. The bank would then hand the bearer the amount of gold or silver equal to the denomination of the note. For example, if the note was a $50 note, the bank would receive the note from the bearer and in turn would hand the bearer a gold or silver coin with X number of grains of pure gold or silver.

But early in the 20th Century, the American Federal Government began disconnecting its currency from real money. The early Federal Reserve Silver Certificates clearly said: "This certifies that there is on deposit in the Treasury of the United States of America X dollars in silver payable to the bearer on demand." The term "dollar" was the weight of silver, not a denomination.

By 1968, that wording had been omitted from any and all Federal Reserve notes. Now, the currency bills say "This note is legal tender for all debts, public and private." But they are only redeemable for more Federal Reserve notes. So, truly, they are only worth what another person will accept in exchange.

For example, you go to the grocer and pick up a loaf of bread. Last week you bought an identical loaf of bread for $1.00. But this week, the grocer will not accept $1.00. This week, he will only agree to exchange his loaf of bread for $1.25 in Federal Reserve currency. Nothing about the bread has changed. So, that is not a price increase, but is a dilution of your purchasing power.

In today's America, we see the Federal Reserve printing trillions of dollars in paper money with absolutely no underlying value. Washington is flooding the world with our paper money. When the US military invaded Iraq, it carried PALLETS of $100 bills in the bellies of transport planes. Billions of dollars have simply vanished in Iraq with no trace of where they went.

Eventually, America will experience the same hyperinflation seen around the world in other collapsing nations. Americans lived it at the time of the Revolution of 1776. The term "not worth a Continental" was in response to the collapse of the paper money issued by the Continental Congress. Money issued by the Confederate States of America became worthless by a combination of issuing too much paper currency combined with the confiscation of the Confederacy's gold bullion after the war. Germans lived it in the 20th Century. The nation of Zimbabwe is experiencing a complete collapse of their money right now.

And all of these examples were due in part or in whole to the government disconnecting the currency from the money supply.

In my opinion, the best solution for a new nation would be to allow every individual bank to issue bank notes based upon its deposits of gold and silver. Fractional reserve banking (legalized counterfeiting) should also be made illegal so that money cannot be created out of thin air. The nation should determine the number of grains of pure gold or silver that constitutes a "dollar," and then allow the free market to find the equilibrium of value. The bank notes would instantly represent solid money, inflation would vanish, and capital would flow to the new nation in unending streams from around the world.

I recommend that those contemplating the formation of a national monetary policy and new currency spend time studying the works of Friederich Hayek, Ludwig von Mises and economist Murray Rothbard.

You might start by reading "The Case For a 100% Gold-Backed Dollar", found at:

100% Gold Backed Dollar

Eventually, some other nation of the world, in a desperate attempt to save its own economy, will go back to the gold standard. It may occur in an Islamic country, since Sharia law and the Koran define money as a certain weight of either gold or silver. And, with Islamic fundamentalism on the rise, it makes sense that this event would be found within Islam.

In recent days, news stories coming out of China tell that the Chinese government is encouraging its own citizens to begin buying and owning gold. The Chinese government sits on the largest pile of American dollars on the planet and doesn't want to get stuck with worthless script. Don't be surprised if something good happens in China relating to gold and money.

However, I'm confident that it will happen somewhere soon. It just seems more likely to occur at the secession of an American state from the Union. When any state secedes, the first thing it will be forced to establish is a currency. What a perfect time to assert the most trusted and reliable form of currency the world has ever known...gold and silver.

Copyright 2009 by Russell D. Longcore

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