Myths about Money

Have you ever had one of those dreams where you found lots and lots of money, either dollar bills or gold coins? So much you could roll and play in it? So much money that you have this huge smile on your face and feel so wonderful? That is, until you wake up. Then you hurriedly look in the bed to see if its still there, but its not. It seemed so real. And, it was just there, all around. But, you finally had to admit it was all just a dream.

Guess what. If you live in the United States of America, you are living that dream right now. The money myth here is that the United States of America is the richest nation in the world. The best place for a poor person to pull himself up by the bootstraps and make a success of himself, through hard work. The American dream is just that, however. It is a dream.

However rich or well-off you may think you are, you are not. Whatever 401k matching plan your employer provides, with you contributing the max, and whatever stock and securities portfolio you have built, to provide you the wealth you think you’ll need for retirement, at age 50, forget about it. Its just numbers on paper and not worth more than the paper its all printed on. That means, basically, zilch. Nada. Zero. You see, American money is invisible money. Its all make-believe or pretend. And, for math whizzes out there, a gazillion times zero is still zero.

Let me tell you a bedtime story that can put you back to sleep, so you can dream of money. Once upon a time the United States of America was a young, second-tier nation, working its way toward stability and growth. It didn’t even have a central national bank, although it contracted with banks to store its tax monies. A central bank didn’t come into being until 1913, when the Federal Reserve System was founded. That was just under 100 years ago.

There was a First Bank, created by George Washington, but it only lasted 20 years, when its charter ended in 1811. Its replacement, the Second Bank was chartered till 1836, but barely made it till 1832, when it was found full of corruption by President Andrew Jackson, causing its eventual demise. An Independent Treasury System and a National Banking System operated between the Second Bank and the Federal Reserve System, but neither of them was a true central bank. There were runs on the banks all throughout American history, due to it being part of a bank’s nature to skim off the top, coddle to the rich and squeeze the poor dry. Bank failures have long been an integral part of American national growth.

Andrew Jackson saw reason to distrust the Second Bank. He issued an executive order that made all payments for government lands be made in specie circular, meaning hard money coins, made out of gold or silver. Before this the Mint Act had determined the dollar as America’s currency, with silver and gold used to make these coins, based on a 15:1 ratio (15 times more silver, than the specified weight of gold, equaled one dollar). After the problems Jackson discovered and the changes he initiated, this ratio was adjusted to 16:1; but, while inflation was a worry to American pioneers, the backing of the currency on a true commodity, like gold and silver reserves, meant the U.S. Dollar was relatively stable between 1776 and 1913. Paper money was only used to keep one’s pockets from constantly ripping under the weight of metal coins.

The U.S. Constitution states: “no state shall require anything but gold and silver as tender in payment of debt,” in one of its clauses. Therefore, paper money (with the exception caused by the Civil War) was actually commodity money way back when, meaning the paper was to be exchanged for actual gold or silver. This is somewhat different than representative money. Representative money is paper money backed by something real, such as a commodity like gold, silver, oil, water, etc; but, the commodity is always kept in reserve, by the issuer of the paper (a country). It could, on principle, be exchanged for the tangible commodity backing its value. This is an important thing to remember, because paper money, by itself, is worthless. It is just like Monopoly money, unless it is backed by something of real value.

In America the gold standard became official in 1900. Such a standard is the one true way to ensure a nation’s strength. The gold standard is actually a way to control inflation and private abuse of the monetary system. Such abuses began to surface all over the world during the Great Depression, when lacks of gold reserves caused $1,000,000-mark notes to appear in Germany. The United States Federal Reserve actually printed $500 bills in 1934, due to such wild inflation internationally. In America, President Franklin Roosevelt had made it illegal for Americans to own gold, in 1933. America left the gold standard then, with the old gold notes backed by Silver Certificates. We changed to the silver standard because of an international lack of actual gold reserves.

This silver backed dollar lasted only until shortly after John Kennedy was shot dead. Rumor had it Kennedy wanted to return America to the gold standard. He wanted to ensure that America lasted a long time, without the inflation and corruption weak reserves of metal lead to. But, due to one lone gunman’s rage, thoughts of America returning to a gold standard would forever be buried with the last politician realizing that need. To commemorate JFK’s departure from American economic planning, the Federal Reserve Note replaced the Silver Certificate. Shortly after, all silver coins became silver plate over copper. How cheap.

What this means is America is on the fiat money standard now. Fiat money is money backed by a government, issued as currency for payment for goods and services. It means, you work hard producing goods and/or services and you get paid in paper dollars that will never be convertible to the hard stuff. Of course, if you find yourself out in the cold, because rampant inflation has just lost you your home, you can always rub two $1 dollar bills together to make a small fire.

Since 1913, when the central bank of the United States became the Federal Reserve System, inflation has been running uncontrolled. Banking failures and corruption have been in the news constantly. People like Alan Greenspan have become more important that the president, certainly lasting longer in power. Everything has become as real as what’s in the movie the Matrix. It is all a dream the government wants you to believe. They want you to believe America is strong and vital. They want you to believe that because you are important. You are the commodity that backs the dollar bill now. You are a slave in reserve for America.

That’s why the Fed can keep the printing presses running day and night. Out of control inflation keeps honest Americans running and running, just to make ends meet. It means the Fed is always printing more and more of the invisible stuff. Between 1995 and 2005 the number of dollar bills in circulation doubled! Where did the extra backing come from? It came from the extra value America puts on you, to be a good slave and produce more and more good slaves.

Need another $400 billion to rebuild Iraq? Need a yearly $3 billion to arm Israel and make it secure in the Middle East? No problem. Print more. Actors and sports figures, once the least respected professions in a society, are now paid like kings and queens. Do they deserve $20 million to make a new movie? Do they deserve 7-year $250 million contracts? The real answer is, “Of course not! I only make $45k a year and I have to now pay $10 to go to a movie and $100 to take my kid to the game.”

But, you shouldn’t think that way. They want you to dream of what it would be like to make millions. They want you to fantasize about winning the lottery. They want you to imagine you are rolling in dough, happy as a lark. You see it all the time on TV, so it can’t be a myth. Wealth is real and really possible to common folk like you.

Go to sleep now. Dream of great wealth. Tomorrow you will go back to work and get back on that treadmill. Work, work, work. That’s the goal. But, for now, just dream its all okay.