Gold Standard and money supply growth

[Zippyjuan]

Would you only have gold coins or would you have paper money as well? If a gold coin is declared to have the value of one dollar and there is also a paper dollar out there at the same time- does it make a difference which one I carry? They are both worth a dollar. Would it cost more than the value of a gold coin to produce it? That would encourage people to hoard it and melt down the coins.

I can buy the same things with each- and the paper one fits in a wallet or pocket much easier. Most people today carry their money in the form of plastic rather than paper or metal. 90% of what is considered money is not in currency form but electronic now. Things like bank deposits and other accounts for both individuals and businesses. A "competing currency" would not necessarily lead people to choose gold over paper.

Another problem is when you have a trade deficit- which we have had for over 30years now. Gold leaves the country to pay off those foreign purchases and depletes your supply- lowering the value of your currency. Right now we import about $750 billion more in goods and services than we export.

When we had competing currencies in the early stages of our country, the result was confusion and all monies became worth less. That is why they were all unified into one single unit of exchange- the dollar. This led to faster economic growth and a healthier economy. That is also why Europe decided to undertake the incredible task of converting all their respective currencies into one- the Euro- to make all transactions between the various states or countries uniform and simple. The transition to both did have growing pains, but seem to have paid off. Going to more competing currencies would be a step backwards.

 

[Truth-Bringer]

Would you only have gold coins or would you have paper money as well?

There's nothing wrong with having as many options as possible. PEOPLE SHOULD BE FREE TO CHOOSE. As far as metals go they could use silver, platinum, & palladium also. This isn't just about gold.

If a gold coin is declared to have the value of one dollar and there is also a paper dollar out there at the same time- does it make a difference which one I carry? They are both worth a dollar.

No. If you're talking about a paper warehouse receipt, then it would be worth whatever unit of precious metal that it was marked for. And there is no need to carry either. One could have a bank account denoted in gold - and use checks and debit cards accordingly.

Would it cost more than the value of a gold coin to produce it?

No.

A "competing currency" would not necessarily lead people to choose gold over paper.

No, but it isn't any of your or my business what they choose, as long as their actions are peaceful, honest and voluntary.

Another problem is when you have a trade deficit-

And the root cause of that problem is government. Let the free market handle peaceful, honest, voluntary transactions and imbalances will always be manageable.

When we had competing currencies in the early stages of our country, the result was confusion and all monies became worth less.

Are you talking about after the Constitution was in place? If so, the money could not have become worthless since it had to be backed by gold or silver, and that metal would always have intrinsic value. Let's see your source on this one.

That is also why Europe decided to undertake the incredible task of converting all their respective currencies into one- the Euro-

One problem with this theory - how hard is it to calculate a conversion? It isn't that difficult. It's not like people couldn't do business. I worked in the international shipping industry and we easily handled many currency conversions on an hourly basis. This move to the Euro was done to consolidate power. The New World Order crowd was to first consolidate each continent and then consolidate the world into one currency and one government.

Now, I don't have a problem with the one world government thing, as long as government has no control over my peaceful, honest, voluntary activities - which means it could not legally force me to use one currency...

 

[Nicketas]

,.,.,.

 

[Gilby]

A lot of misconceptions in this thread. To answer the initial question about the need for an increase in money supply, it automatically happens in a free market. It doesn't matter what the common medium of exchange happens to be. The money supply is anything that can be easily traded for something else. In other words, all available goods and services are the money supply. The question asked is premised on the idea that as the economy grows, we'll need more money supply, but a growing economy means that the goods and services available is growing.

Today, how do I think a free market money system work? We'd probably all come down to using a common index as our unit. This could be gold, silver, a fixed raw materials index, or anything else that might be pretty stable. Let's say it happened to be gold. Again, it's simply an index, and is what we would list the price of a good or service in. When we went to the store, we may use physical gold, promissory notes, other physical commodities, or an electronic transaction method.

A promissory note may be issued from a commonly known private bank. Though, I envision a system where the note would have some encoding on them so that they can be digitally verified and then maybe have some kind of electronic transfer between institutions. For electronic transactions, there would simply be some asset (any asset) transferred between your bank and the stores bank. Again, that can be any asset. In a free market, you would go to the bank and the bank could offer you many different kinds of funds. You could have your funds in hard assets that are guaranteed to be safely stored for you. But you can also have it in a fund that provides an interest and you are therefore putting your assets in loans that other owe to your bank. You could hold your assets in pretty much anything. Take a look at the stock market, futures markets, bond markets, etc. Your bank can set up your account to hold the assets that meet your needs.

An increase in money supply is needed because otherwise there will be deflation as the economy grows. Deflation encourages hoarding and makes it difficult to acquire money when it is needed for a transaction.

That's an artificial occurrence when government forces a certain form of money on us.

They on average mine 3% gold a year, so there would be a 3% increase in the supply of money (inflation), to account for economic growth, and new population.

See my explanation above. The supply of goods increases by 3% and the supply of money increases the same. Could be any good or service.

Would you only have gold coins or would you have paper money as well? If a gold coin is declared to have the value of one dollar and there is also a paper dollar out there at the same time- does it make a difference which one I carry? They are both worth a dollar. Would it cost more than the value of a gold coin to produce it? That would encourage people to hoard it and melt down the coins.

What's a dollar?

I bet you can't pull a dollar out of your wallet.

That's because we no longer use dollars in the US.

A dollar is a unit mass of silver. This can never change, it is fixed. It is what was used in the US before the constitution was made, and since it was the common currency at the time, the US government decided to make it the official unit of account, and to mint it's own coins that had the same composition as the Spanish milled dollar that was in circulation at the time.

I can buy the same things with each- and the paper one fits in a wallet or pocket much easier.

No you can't. A dollar is 371.25 grains or 0.7734375 troy ounces of pure silver.

A federal reserve note denominated as a dollar is worth less than a 13th as much as a dollar, to you and I. To the government it can be used to pay off one dollar of debt to the federal reserve.

Now, let's get the powers of the federal government correct. They have no power to emit bills of credit, in other words, they have no power to issue paper money. All they have the power to do it coin money, by taking gold and silver and making coins out of them. Any paper money would be done in the free market by the people.

That is also why Europe decided to undertake the incredible task of converting all their respective currencies into one- the Euro- to make all transactions between the various states or countries uniform and simple. The transition to both did have growing pains, but seem to have paid off. Going to more competing currencies would be a step backwards.

What's the likelihood that the entire world would start to use the same index if the free market could choose? I would guess that it is very likely.

 

[smallsheep]

What's the likelihood that the entire world would start to use the same index if the free market could choose? I would guess that it is very likely.

QFT.

And if the controllers of that index abused their power in any manner even close to how the government currently does, then another index would spring to the forefront so fast you would hardly notice it.

The economy does need a growing capacity to exchange goods. It doesn't need a force-backed monopoly to decide how to grow that capacity.

 

[AisA1787]

Facts:

1) There is nothing inherently wrong with using "paper" money that is "backed by nothing." Money is simply a tool that makes it easier to trade goods and services, nothing more. Goods and services are wealth, not money. The reason money is worth anything is because it represents wealth, which is why you can trade with it. You don't need money that is "backed" by any sort of commodity, because it already has value since it is representative of goods and services that have value. If you want to go back to bartering with gold, silver, or wheat that's fine by me, but don't drag the whole country down with you. The problem is not paper money or an expanding money supply. The problem is the unjust power of a few to expand the money supply at whim.

2) The money supply does need to increase as the amount of goods and services available in the economy increases. Otherwise deflation occurs. If you think deflation is a good thing, then you're obviously not a small business owner with business loans or a homeowner with a mortgage. All loans and mortgages must be paid back with the same number of dollars that were borrowed plus interest on those dollars, regardless of the purchasing power of dollars in the economy. If deflation occurs, all debtors get screwed big time no matter whether their debt is good debt (e.g., a business loan that's helping a company and thus the economy grow) or bad debt (e.g. credit card debt from purchasing a flat screen TV that could not otherwise be paid for) because they are paying off old debts with dollars that now have more purchasing power. Deflation will kill an economy, even more so than inflation -- some businesses won't be able to pay off their debts, so they fire their employees, who already may have been struggling with mortgages in the deflated economy. They lose their homes. Etc., etc., etc. The last major period of deflation occurred in the late 1800s because of the gold standard -- the availability of goods and services was increasing much faster than the gold supply. The "free market" can't "fix" this sort of deflationary problem if it is rigidly dependent on the gold standard because then it's not really a free market, is it? In a free market one could use whatever one wants to trade with, "paper money" included.

4) The only good thing about the gold standard is that it puts a limit on how much the money supply can expand or contract, and thus puts limits on inflation or deflation caused by the monetary supply. That assumes that you trust government to properly administer the gold standard. I don't. Do you?

5) The only answer is to legalize competing currencies. That is why Ron Paul is advocating for this.

 

[Gilby]

And if the controllers of that index abused their power in any manner even close to how the government currently does, then another index would spring to the forefront so fast you would hardly notice it.

Who controls the index? If it were gold or silver, the controllers would be the buyers and sellers in the free market. Absent large scale coercion, which can only be done by government, the price of gold can not be manipulated. Even then, it can not be manipulated much. A government could buy up a lot of gold and hoard it so that supply is lower, but them buying it up will raise the price that they have to buy it for. Then they could sell the gold and again their selling will lower the price they have to sell it at. In all, their manipulation comes at a huge expense to them. The best thing they can do is steal it, which obviously is not unusual, as stealing is the prime action of government today.

The point is that the free market is going to choose an index that would not be able to be easily manipulated. Gold may work. Silver may be a better index simply because the total value of silver in the world is more than that of gold and therefore harder for any coercive organization to manipulate. Take it a step further, and we can have a fixed basket of raw materials that compose the index. That gets more difficult though, because a fixed basket would want to reflect what is commonly used in society, which changes over time and may need adjustments. A clear set of rules that allow the addition or subtraction of items that compose the index would be needed.

 

[NaT805]

A gold-coin standard could be a one world currency. Each state would have private minters of gold coins, the US Mint would make coins, and other countries will mint their coins. In the same size 1/10th, 1/4th, 1/2th, Ounce coins, each might have different face value, but the content of the coin will be the same, and universal. The money will be controlled by the earth, and by the people. Not by bankers.

The reason gold is money is because its, shiny, rare, tangible, well known, and it took labor to find the gold, it took labor to melt the gold and labor to mint the gold.

Hitting print and having it roll out doesn't take much labor.

The whole point of him legalizing competing currency is because the free market always chooses gold and silver. Look at history. Man has always used gold first, and silver second. But it wouldn't be a "forced" gold standard. The market would run its course and we'd end up on a voluntary gold standard.

 

[Gilby]

1) There is nothing inherently wrong with using "paper" money that is "backed by nothing."

It'd have no value if that were the case. Even the Federal Reserve Notes we have are backed by something. They are backed by the coercive power of government. Mainly taxation, by forcing us into taxation to create demand and only accepting FRNs. They also are backed by our military actions. Since the mid 70s, we've had a deal with OPEC to provide military security to member nations in exchange for only accepting FRN dollars for oil. That monopoly is ending.

Paper money is valuable, only when backed by the promise made by the issuer and their creditworthiness.

The last major period of deflation occurred in the late 1800s because of the gold standard -- the availability of goods and services was increasing much faster than the gold supply.

Specifics please. As far as I know, the problem in the 1890s was the result of manipulation of the money supply by government. They tried to fix the price of gold to the dollar, which does work when the dollar is a specific amount of silver. By doing all the manipulations they did back then, they caused a credit crisis. Get the government out of it! A Dollar is silver. An Eagle is gold. All the government should do is coin these without fixing any of the values and they should not emit bills of credit, which is what they did then and when government does that they always tend to emit more than they have to back it.

That assumes that you trust government to properly administer the gold standard. I don't. Do you?

Who ever said the government is to administer it. They are simply forced to only accept gold and silver for payments, but have no authority over the people. Again, the only power they have is to coin money.

 

[pappy]

Also, is there enough gold/silver in the world, mined or unmined, to back the dollar 100%?

Sure there is. Just not at today's prices!

 

[RonPaulalways]

The whole point of him legalizing competing currency is because the free market always chooses gold and silver. Look at history. Man has always used gold first, and silver second.

Actually I think silver has been used as currency much more often than gold throughout history.

 

[Zippyjuan]

And the root cause of that problem (trade deficits) is government. Let the free market handle peaceful, honest, voluntary transactions and imbalances will always be manageable.

Early trade deficits were because we had a more prosperous economy (and I go back no further than after WWII) and had excess demand for goods (more money to spend on them) that could be provided by foreign producers compared to other countries. Our deficit now is because we produce fewer goods to sell abroad on our own and instead rely on foreign countries to make them for us. Free trade encourages the flow of production to where the labor cost is lowest. The only way to eliminate this under truely free trade is to either lower our wages to those of China or try to get them to raise theirs. Or put barriers in place which is contrary to free trade.

Are you talking about after the Constitution was in place? If so, the money could not have become worthless since it had to be backed by gold or silver, and that metal would always have intrinsic value. Let's see your source on this one.

http://www.ronscurrency.com/rhist.htm

1836 State Bank Notes
With minimum regulation, a proliferation of 1,600 local state-chartered, private banks now issued paper money. State bank notes, with over 30,000 varieties of color and design, were easily counterfeited. That, along with bank failures, caused confusion and circulation problems.

1866 National Bank Notes
National Bank Notes, backed by U.S. government securities, became predominant. By this time, 75 percent of bank deposits were held by nationally chartered banks. As State Bank Notes were replaced, the value of currency stabilized for a time.

The Fed and a unified currency was brought in to reduce this confusion of the state banking system.

1913 Federal Reserve Act
After 1893 and 1907 financial panics, the Federal Reserve Act of 1913 was passed. It created the Federal Reserve System as the nation's central bank to regulate the flow of money and credit for economic stability and growth. The system was authorized to issue Federal Reserve Notes, now the only U.S. currency produced and 99 percent of all currency in circulation.

Gilby has some good points- although there are some I do disagree on.

What's a dollar?

I bet you can't pull a dollar out of your wallet.

That's because we no longer use dollars in the US.

Yes, we do still use dollars. It even says "One Dollar" on it. Look in your wallet. True it is not made of silver but a nickel is not made of nickel and a penny is not made of copper. That does not mean that it has no value. I can exchange it more easily for goods and services today than if I tried to hand a shop merchant an equivelent amount of gold.
If a gold coin of whatever size is stated to be equal to one dollar and I have a piece of paper which is also stated to be equal to one dollar, they have the exact same value.

I am confused by this statement:

A federal reserve note denominated as a dollar is worth less than a 13th as much as a dollar, to you and I.

How can a dollar (or anything) be worth one thirteenth of itself? That is not physically possible.

Paper or gold or whatever, money is a mutually agreed upon system of exchange. It has what value people assign to it. Changing a medium of exchange does not necessarily eliminate all shortcomings of the one in use.

We have had gold backed money. And during that time we had both higher deflation and higher inflation than we have seen since we stopped using it. We had economic crises under both- but more severe ones during the gold standard period. Some of this may be attibutable to the growing pains of both our economy and country. Returning to it will not make the economy of today magically better with no inflation and no recessions. Our current money system is run by people- and so is a gold backed system. Both can be manipulated if somebody in the right position wants to.

 

[Truth-Bringer]

http://www.ronscurrency.com/rhist.htm

Ron's Currency?

1836 State Bank Notes
With minimum regulation, a proliferation of 1,600 local state-chartered, private banks now issued paper money. State bank notes, with over 30,000 varieties of color and design, were easily counterfeited. That, along with bank failures, caused confusion and circulation problems.

The Fed and a unified currency was brought in to reduce this confusion of the state banking system.

What was the rate of counterfeiting then? Was it truly a wide-scale problem? Let's see his source on that. And let's see the evidence that it occurred at greater rates and was a high percentage of transactions. Counterfeiting will always exist to some extent. But I find it hard to believe in a zero tax environment, that criminals were fixated on wide-scale counterfeiting.

And note - there is no claim that "currencies became worthless." And they were not issuing paper money - they were issuing paper warehouse receipts indicating the proper amount of gold or silver that each of these notes represented.

And the bank failures occurred in large part due to corrupt government officials.

 

[Gilby]

Yes, we do still use dollars. It even says "One Dollar" on it. Look in your wallet.

I wrote "One Dollar" on a piece of paper. Do you think it has a value of one dollar? How about I write an IOU out for one dollar, does that still have the value of a dollar? An IOU of a dollar from me and and IOU of a dollar from someone else is going to have a different value, based on the likelihood of actually collecting that dollar from the person in the future.

If a gold coin of whatever size is stated to be equal to one dollar and I have a piece of paper which is also stated to be equal to one dollar, they have the exact same value.

I have a one ounce gold coin that is labeled $50. Yet, a $50 bill has a buying power that is much less than an ounce of gold.

How can a dollar (or anything) be worth one thirteenth of itself? That is not physically possible.

Like I said, those greenbacks in your pocket are not dollars, they are Federal Reserve Notes. They have a value of less than what they are labeled as on them.

They are obligations of the Federal Reserve to accept them for as much as they are denominated in to pay off any debt. The Federal Reserve holds the governments debt, so that means that the Federal Reserve issues these "bills of credit" so the government can pay back it's debt.

One dollar is defined as 371.25 grains or 0.7734375 troy ounces of pure silver. That is a dollar. It is fixed. It can not change. Period.

Even the treasury when listing the assets of the US, declare the value of it's silver that it holds as $1.29 for each ounce. Yet, it would cost me over 17 one dollar FRNs to purchase an ounce of silver.

Paper or gold or whatever, money is a mutually agreed upon system of exchange.

Mutually? No, I'd prefer not to use FRNs. They have been forced on us. They tax us when we use something else. They restrict the banking industry from trying to use anything else.

We have had gold backed money. And during that time we had both higher deflation and higher inflation than we have seen since we stopped using it. We had economic crises under both- but more severe ones during the gold
standard period.

The problems during the times of a gold standard were that the gold standard was not followed. Government coerced the market, which lead to the problems. A gold standard would not have problems if it was entirely a free market system with no government coercion.

 

[Zippyjuan]

One dollar is defined as 371.25 grains or 0.7734375 troy ounces of pure silver.

Where is this defined? There is a free market for silver and the price varies. Perhaps some like youself would like to see silver defined as at a certain price, but that does not mean that the world agrees with you. You are free to buy and hold silver if you feel it will preserve the value of what you have earned.

Mutually? No, I'd prefer not to use FRNs.

If you can get the party you wish to exchange goods with to agree, you can use whatever you want. You can trade gold for apples if the person with the apples agrees. But for most people, it is too cumbersome to negotiate every transaction in that manner. The rest of us use dollars. It is much easier to use.

But I find it hard to believe in a zero tax environment, that criminals were fixated on wide-scale counterfeiting.

Counterfitting is a matter of greed and ease of counterfiting- it does not depend on the tax structure.

Federal Reserve Bank of San Francisco (since you do not like Ron's Money as a source):
http://www.frbsf.org/publications/federalreserve/annual/1995/history.html

To finance the Revolutionary War, the Continental Congress in 1775 authorized the limited issuance of paper currency. These notes, called Continentals, were denominated in dollars and backed by the "anticipation" of future tax revenues, with no backing in silver or gold. They could be redeemed only upon the independence of the colonies.

Continentals were an interesting expression of the new nation's sovereignty, as they did not feature pictures of the crown or King of England. In fact, some were printed from plates engraved by Paul Revere to read "The United Colonies" and bore pictures of colonial minutemen.

Without solid backing and with rising inflation, the Continentals soon became worthless, thus the expression "not worth a Continental." Or, as George Washington put it, "A wagonload of currency will hardly purchase a wagonload of provisions."

The era of "competing currencies":

In 1791 the Bank of the United States received a charter to operate until 1811, followed by the Second Bank of the United States from 1816 to 1836. These two banks, chartered by Congress rather than a state, performed several central bank functions. Although privately owned, they were authorized to issue paper bank notes and serve as the fiscal agent of the government. Both banks, however, were unpopular with those wanting easy credit--primarily the western, agrarian interests--and in 1832 Andrew Jackson vetoed the recharter of the Second Bank.

Thus followed the "Free Banking Era"--a quarter century in which American banking was a hodgepodge of state-chartered banks with no federal regulation or uniformity in operating laws. State Bank notes of various sizes, shapes, and designs were in circulation. Some of them were relatively safe and exchanged for par value and others were relatively worthless as speculators and counterfeiters flourished. By 1860, an estimated 8,000 different state banks were circulating "wildcat" or "broken" bank notes in denominations from ½ cent to $20,000. The nickname "wildcat" referred to banks in mountainous and other remote regions that were said to be more accessible to wildcats than customers, making it difficult for people to redeem these notes. The "broken" bank notes took their name from the frequency with which some of the banks failed, or went broke.

Gold Notes:

Gold certificates, colorful and vivid, were first issued in 1863 and put into general circulation in 1882. They are among the most attractive of all currency issues, with the reverse a brilliant golden orange, symbolic of the gold coin they represent. In 1933, when the country faced a severe depression and a banking crisis, the public began to demand gold.

Runs developed on both Federal Reserve Banks (which had been established under the Federal Reserve Act in 1913) and commercial banks. In order to deal with this crisis, only Federal Reserve Banks were permitted to hold gold.

The Federal Reserve- responce to the problems of gold backed money and competing currencies:

Federal Reserve System

In 1913 a major change in paper currency occurred with the passage of the Federal Reserve Act aimed at resolving some long-standing money and banking problems which had led to bank failures, business bankruptcies, and general economic contractions. The Act created the Federal Reserve System as the nation's central bank to regulate the flow of money and credit for economic stability and growth. In 1914, Federal Reserve Notes, which comprise more than 99 percent of today's paper money, were issued by Federal Reserve Banks as direct obligations of the Federal Reserve System.They replaced National Bank Notes as the dominant form of paper money.

 

[therealjjj77]

Federal Reserve System

In 1913 a major change in paper currency occurred with the passage of the Federal Reserve Act aimed at resolving some long-standing money and banking problems which had led to bank failures, business bankruptcies, and general economic contractions. The Act created the Federal Reserve System as the nation's central bank to regulate the flow of money and credit for economic stability and growth. In 1914, Federal Reserve Notes, which comprise more than 99 percent of today's paper money, were issued by Federal Reserve Banks as direct obligations of the Federal Reserve System.They replaced National Bank Notes as the dominant form of paper money.

Herein is the problem. You see, banks were engaging in immoral and FRAUDULENT activities which caused their failures. They would print out more notes then what they had backed by gold in their reserves. Then when people would go to the bank to redeem their notes for gold, they wouldn't have enough.

Let's suppose that there are 5 of us. Juan, Jimmy, John, Jake, and Bill. Juan was a doctor, Jimmy a farmer, John a tailor, and Jake was in food service. Bill, however, was the gold smith.

Now let's suppose that Juan, Jimmy, John, Bill, and Jake each had one hundred 1 oz gold coins. Congress regulated these coins to equal $20 each. So they each had $2,000. Well, Jimmy, John, Juan, and Jake didn't like carrying around their coins so they went to the gold smith and had him house their coins in exchange for certificates and a small fee. Certificates were much easier to carry and exchange. Unlike coins, they didn't weigh much and didn't make noise. So these 5 made their transactions in bank certificates. Once a month one of the 4 would come to Bill and request to have their gold out.

So, while Bill was in his safe one day he saw all the gold sitting there and basically not doing anything for him. So he thought and thought and then came up with an idea. $8,000 at any given time was there and only 20% of the people would come to take out their gold. So he figured out that he could loan up to $40,000 in certificates, and no one would know any different. So he loaned out $40,000 in certificates at 10% interest per year. That means he made $4,000 per year in interest. However, this expanded the money supply to $50,000 which made everything worth less then it was before. Within a short period of time he had half of the money in the society. However, one day Juan, Jimmy, John, and Jake were reminiscing the good old days when they only used gold for exchange of goods. So they all determined to go to the bank and return their certificates. They now each had $5,000 in certificates or a total of $20,000. So they all went to the bank to get out their gold, but now Bill had a serious problem. He didn't have $16,000 in gold. He still only had $10,000. So he gave out what he had and then closed his doors and the other 2 were out of luck.

This type of scenario happened frequently during that time. The real problem, though, was that Bill was loaning out money that didn't exist and inflating the currency. That's fraud. Instead of dealing with that, we instead set up a bank that would back these fraudulent activities making currency fraud protected by our government.

 

[Zippyjuan]

A bank cannot loan out more money than they have in deposits. The case you describe is indeed a fraud- and not legal and not practiced by banks today.

 

[Truth-Bringer]

Counterfitting is a matter of greed and ease of counterfiting- it does not depend on the tax structure.

But in what environment are people more likely to steal? When they are losing 50% of their income under the threat of force of taxation, or when they aren't taxed at all and can keep all they earn? If you can keep all you earn, that is less incentive for you to go out and break other laws.

Federal Reserve Bank of San Francisco (since you do not like Ron's Money as a source):
http://www.frbsf.org/publications/federalreserve/annual/1995/history.html

Well the Federal Reserve as a source is a SLIGHT CONFLICT OF INTEREST, don't you think?

Gold Notes:

Without solid backing and with rising inflation, the Continentals soon became worthless

This was prior to the Constitution. Yes, the Continentals were fiat currency backed by nothing, and they could therefore become worthless. Money backed by gold cannot become worthless, because the gold always has value. The lesson of the Continentals was precisely why the Founders mandated gold and silver backing for the currencies.

In 1933, when the country faced a severe depression and a banking crisis

But what caused the banking crisis? Many were planned for specific reasons:

http://www.youtube.com/watch?v=__YFnUfYXZk&feature=related

Some of them were relatively safe and exchanged for par value and others were relatively worthless as speculators and counterfeiters flourished.

As for those that were safe, what were they doing better than the other banks? That's the question. Money can be made safer - without government interference. And the market would have gradually figured that out.

Again, each major crisis was specifically planned to give the central bankers what they wanted.

Federal Reserve System

In 1913 a major change in paper currency occurred with the passage of the Federal Reserve Act aimed at resolving some long-standing money and banking problems which had led to bank failures, business bankruptcies, and general economic contractions.

Total conflict of interest. Of course the Federal Reserve is going to claim it's the greatest thing since sliced bread when it comes to banking. But their statement means nothing.

 

[therealjjj77]

A bank cannot loan out more money than they have in deposits. The case you describe is indeed a fraud- and not legal and not practiced by banks today.

It is practiced every day. The Federal Reserve loans out notes that have no money behind them. They have monopolized this fraudulent activity. Where does that interest go? It doesn't go to provide services.

 

[Zippyjuan]

Only banks can borrow from the Fed. The interest paid goes into the Treasury.

Nice speech by Kennedy on newspapers (not banking or the Fed) to start your conspiracy theory video (combined with shots of his asassination- which some blame on conspiracy). Since that is out of context, I have to question the rest of the video. If you like you can read the entire Kennedy speech here: http://www.jfklibrary.org/Historica...s/JFK/003POF03NewspaperPublishers04271961.htm He was actually speaking before the Newspaper's Publishers Association urging them to use better self- censorship in the wake of the Bay of Pigs.
You have questioned my sources. Let's see some better ones from you. I have provided historical data to support my case. Can you provide historical data to show your side? Facts- not theory.

The FED uses the interest rates it charges to banks to control the supply of money- it does not print currency. That function is performed by the Treasury. The only other tool the Fed has to control the money supply is the reserve requirement- how much money it requires the banks keep to meet withdrawl demands. Lower interest rates encourages more borrowing- moving money more quickly through the economy. Raising the reserve requirements reduces the amounts that banks can lend out- tightening the supply. Lowering the reserve requirement increases the supply and raising interest rates does too.

Interest is not evil. Would you loan money out and only expect the exact same amount of money back? Do you put money only into non- interest bearing accounts? That is an interest free loan from you to the bank. The bank has expenses. The physical buildings and storage. The employees. If a bank charges no interest, it cannot remain in business. Yes, they are a business. You deposit money- which they pay you interest on. They loan out part of the money (not all due to the reserve requirement) at a higher rate than they are paying you so that they can pay their own bills and make a small profit. That person can either buy something with the money or put that money into another bank account. The process starts again.

The govermnent has an interest in a stable economy and low inflation. If inflation is high and the economy bad, those in office will be voted out. That has happened time and again. There is no conspiracy to destroy the economy.