The dollar is worth 4 cents compared to what it used to be worth back in 1913.
What happened in 1913? The Federal Reserve (The central bank of the U.S.) was created.
A central bank is not needed. Before 1913, banks used to compete with each other and were forced to be responsible or they would go bankrupt. The federal reserve removed this competition by uniting all the banks; kind of like when two companies get together and do price-fixing instead of competing. This is illegal if any other company does it.
History shows that money HAS to be something of value for an economy to prosper. That is why the Constitution says only Gold or Silver should be used as money. Before 1913, dollars represented actual Gold or Silver that were stored in banks. A dollar was really a receipt that you could use to get the actual gold.
Inflation (higher prices) is caused when more money is put into circulation. In a monopoly game, if you use twice the amount of money for every one, all the property prices will probably double because there is more money in circulation (everyone's money is now worth less).
When dollars are backed by gold, it prevents high inflation because in order to introduce more money into the economy gold has to be mined, which is not an easy or free process. So having a gold-backed currency protects us from inflation. Inflation causes the value of your saved money to go down (think of a pie that has to be split).
A gold-backed dollar keeps the politicians in check by limiting their power to spend and cause inflation. Without this power they would have to tell the people that they plan to directly raise taxes. The people would not be happy and they would be out of office.
The federal reserve eventually removed the requirement that the US dollar had to represent something of value (gold). It is now just a piece of paper.
Since it is a piece of paper, it can be printed in a printing press without the need to mine gold or anything else. Money can be created by just printing it!!!!
The Federal Reserve is a private organization. It doesn't belong to the government (it's not really federal).
When the federal reserve prints money and gives it to the government (to finance a war, for example), the Federal Reserve charges the government interest.They charge them interest for money that COST THEM NOTHING TO CREATE!! If the government were the one creating the money, they would not have to owe interest!!!
Where does the government get the money to pay the interest to the Federal Reserve?? From our taxes. So not only are we paying for interest for that money, but because inflation is created when the money is printed, we are also paying in higher prices.
How do the bankers benefit?
- They charge the government (really, it's the taxpayer) interest on created money.
- Also, the Federal Reserve serves as a safety net for all the U.S. banks. When there is a safety net, it encourages banks to be very irresponsible by lending too much money. By taking risks they make more money. If an irresponsible bank is about to go bankrupt, the Federal Reserve bails it out by creating more money.
- So basically, bankers can do whatever they want and the taxpayer pays for their mistakes. It's a perfect system for them.
- An example is the FDIC. The FDIC NEVER has enough money to insure all the deposits in all the banks. When it's time for the FDIC to help and they don't have enough money, more money is printed by the Fed Reserve. So as taxpayers we are paying for a bank's mistake, instead for the irresponsible bank to be allowed to close for being irresponsible.
How do politicians benefit?
- Politicians are afraid to tell people they will raise their taxes. But since people don't know how inflation works, it is very easy for them to go to the Federal Reserve and ask for a loan. The politicians get to spend as much as they want for whatever they want, without the people finding out that they have been taxed. They are taxed because the money that they have is now WORTH LESS and LESS everyday.
How special interest groups benefit?
Corporations close to the government who are paid directly by it will get the newly created money first. When they get it, inflation hasn't happened yet because it hasn't had enough time to circulate through the entire country. When all that money starts circulating, our saved money will be worth less. So they get to receive the money before the inflation happens. We, who are not close to the government, get nothing. We get robbed.
Also, the special interest groups lobby (bribe) congress people to pass laws that will benefit them, like subsidize their industry by helping them out with money.
If you read "The Creature From Jekyll Island" by Edward Griffin, you will see that this system was not a mistake. It was a calculated plan to protect the bankers at the expense of the taxpayer. Jekyll Island is a place in Georgia where these group of people met secretly to come up with this plan.
Woodrow Wilson (then president) who went along with it, even regretted it and said that he gave a group of elites the power to control the country.
Time and time again the government tries to fix problems that they actually created by getting involved. Free markets work. Government doesn't.
Let me know if this makes sense. Part of what the Ron Paul Movement is about is educating people about this stuff. The more people know, the harder it is for the government to screw us.
