Some points below on fiat money, the USD and where we are heading. Prior to reading check out Long’s Fiat Money chart below. The wheels are still spinning, until….
Before proceeding, welcome to the great Recovery;
Post by Hmmmm;
Throughout its history, the United States has avoided hyperinflation by continually shifting between a fiat currency and a gold standard. As we have already discussed, from 1785 to 1861 the dollar was backed by gold after the disastrous experiment with ‘Continentals’ ended in 1785 (in fact, it was very soon after this episode that Thomas Jefferson wrote his famous ‘standing armies’ letter to John Taylor):
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country”
- Thomas Jefferson, Letter to John Taylor, May 28, 1816
The fiat Greenback lasted 17 years before a return to a gold standard in 1880 brought stability and virtually no inflation until the outbreak of WWI necessitated a fiat currency again in order to pay for the cost of the conflict.
1926 saw the reintroduction of a gold standard once more and this lasted until The Great Depression fostered a run on gold that forced the dollar back to its fiat ways and culminated in FDR’s now infamous Executive Order 6102 and the confiscation of gold (right). This version of a fiat dollar reigned supreme – for 14 years, until the huge economic dislocations that became evident in the lead-up to (and in many ways resulted in) WWII.
In 1944 the Bretton Woods Accord was signed and this time, the gold standard thrived for 26 years (although during that time, the first Federal Reserve Notes with no promise to pay in ‘lawful money’ quietly appeared, the $1 silver certificate disappeared for good and all coins save the Kennedy half-dollar saw their silver content wiped out – the Kennedy half-dollar being reduced to 40% on the orders of President Lyndon Johnson who went one step further in 1968 when he proclaimed that all Federal Reserve Silver Certificates were merely fiat legal tender and could not really be redeemed in silver).Then came Tricky Dicky.
Five months after Nixon closed the gold convertibility window to (cough) “protect the position of the American dollar as a pillar of monetary stability around the world” (cough) from those (cough) ‘evil speculators’ (cough), a new and ingenious plan was hatched as the Smithsonian Agreement was passed, pegging the world’s fiat currencies to ….. ANOTHER fiat currency in the shape of – you guessed it – the dollar.
A mere two years later though, in 1973, as it became clear that a fiat peg to a fiat currency was just not going to work in the longer term, the signing of the Basel Accord ushered in the current status quo.
So now we’re up to date, “what the hell is the point of this seemingly random trip through the history of the dollar?” I hear you asking.
Well, I’ll tell you.
Full report, Hmmm Jul 09 2011
EU Debt Crisis, Wall Street and IMF. How do they cooperate in stealing the assets of Europe. Welcome to Neofeudalism. Keiser reports, and check especially Hudson starting 14 minutes into the interview.