So, what is money?

Money is a medium of exchange. Simple as that. You trade your labor to your employer to receive money. You then use this money to exchange a portion of your labor for say, a loaf of bread. Without this medium of exchange, you’d have to work for the baker to gain this loaf of bread. If you also wanted a gallon of milk and a dozen eggs, you’d be so busy working for each supplier, you might not have time to make yourself breakfast.

What’s A Dollar?

Be careful. You didn’t learn the answer to this one in school. In fact you may have never learned the correct answer to this one anywhere.

Article 1, Section 8 of the U.S. Constitution gives Congress the power to “coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.”

The Coinage Act of 1792 fixed the value of a dollar at 24.1 grams of pure silver. The $10 coin was fixed at 16 grams of pure gold. So …

One dollar = 24.1 grams pure silver

Ten dollars = 241 grams pure silver = 16 grams pure gold

This allowed for a silver/gold ratio of 15/1. In other words it took 15 ounces of silver to equal one ounce of gold. The Coinage Act of 1834 changed that ratio to 16/1. At that time one ounce of gold equalled $20.67. And one-ounce gold coins (90% gold/10% copper) we’re stamped “TWENTY DOLLARS.”

What’s all this mean? Simple. A dollar could be defined only as it relates to a certain weight of gold or silver.

Back in the day, not many people wanted to carry around a pocket full of $20 gold pieces. So the U.S. Treasury began to issue $20 Gold Certificates. There were Silver Certificates as well, down to a denomination of $1. What’s important to understand is that these paper certificates could be exchanged on demand at any bank for an equal amount of gold or silver coin.

What Is A Note?

Well, it’s a piece of paper acknowledging a debt and promising payment; aka, “promissory note.” When you owe someone money and you have none to pay, you might write out an IOU. That’s a promise to pay at some time in the future.

Now go in your pocket or wallet and pull out what you call a “dollar.” Does it say “Federal Reserve Note” on the face? Then what exactly are you holding in your hand? It’s a note! An IOU. A promise to pay. It’s money as money is defined, but it’s certainly not a dollar.

So what’s really happening when you exchange your Federal Reserve Note for that loaf of bread? You’re promising to pay the baker lawful money (gold or silver). When? Whenever you’re paid in gold and silver from the bank that gave you the Federal Reserve Note in the first place. When will that happen? Probably never since gold and silver were taken out of circulation ages ago. That’s why we’re using Federal Reserve Notes today instead of Gold and Silver Certificates.

So what does it matter? You still get your loaf of bread and the baker can use that Federal Reserve Note for anything he wants. True. But …

The Big Switcheroo

On the evening of December 23, 1913 when most Congressmen had gone home for the Christmas holiday, the few that remained passed the Federal Reserve Act. Essentially what this Act did is give the “power to coin money and regulate the value thereof” to a private bank, the owners of which were located, for the most part, in Europe.

Right about now I could go off on several tangents dealing with moral, ethical and legal issues. I won’t. That’s not the purpose of this email. I just need to give you some background now so all this makes sense later. Just note that the Federal Reserve is a private corporation (NOT a Government entity). You are using their private money. And they have the right to regulate and value their money any way they wish.

What Is A Fiat Currency?

It’s money a government simply declares to be legal tender. So a twenty dollar Federal Reserve Note is worth twenty dollars because the government says so and it must be accepted by all creditors. But there’s no gold or silver backing the value of that $20 bill. It’s just declared as such.

Your Money Ain’t No Good Here!

Think about it. If a bank had $100 in gold coin on deposit, it could theoretically lend out 100 paper dollars. But what if there were no relationship between the gold coin and the paper currency? What if there were no gold at all? How much could the bank lend out in paper currency? One hundred dollars? The answer, really, is as much as the Central Bank wants to put into circulation. It could be $1,000. Or $1,000,000. It’s all paper. It has no real value.

Gasoline was 32 cents a gallon in 1970. You would have paid six cents for a First Class postage stamp. And that loaf of bread? Twenty-five cents. Wow! You say. Prices have really gone up. No, not really.

What’s really happened is the Federal Reserve has been devaluing your dollar through inflation, taxes, bailouts, etc.

Prices seem higher only because your currency is worth less is terms of real money – gold and silver.

Remember the words of Thomas Jefferson from yesterday’s installment?

If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. – Thomas Jefferson

How bad is it? If a dollar was worth 100 cents when the Fed was established in 1913, it’s worth an estimated two cents today. That means 98% of your money’s buying power has been lost. What does this really mean?

It means the money powers have been stealing your wealth all your life.

And it’s perfectly legal because you agreed to use their private currency simply by accepting it. You didn’t know any better.

What The Heck Is Inflation Anyway?

It’s an increase in the money supply. It’s too many dollars chasing too few goods. It’s the Fed printing more money than there is gold or silver to back it. And when everyone has lots of this money in their hands, the cost of all the goods in the world increase. Basic supply and demand.

Inflation means higher prices and higher capital gains for business and higher tax revenues for the government, all at the expense of someone else: YOU!

Inflation means higher real estate prices. Inflation means higher gold and silver prices. Inflation means higher prices for all goods and services. So it stands to reason that if you are an average consumer, you’ll need to spend more of your dollars to buy what you usually buy. That makes your money worth-less.

You Can Beat Inflation

For the investor, someone who understands the rules of the game, the opposite is true. You invest in real estate because as the old adages go, they’re not making anymore land and everyone needs a place to live.

Real estate investment gives you huge tax advantages as well as capital appreciation (the value of your asset increases). And on rental property, you earn money to boot!

You invest in gold and silver because they’re the classic “hedges against inflation” and as my previous business partner, Michael Maloney from GoldSilver.com says, “gold has never been worth zero.”

Federal Reserve Notes, on the other hand, are pretty damn close to being worth zero.

Gold and silver historically rise in time of high inflation (like now!). And you can expect the price of gold and silver to skyrocket in the years to come as the true cost of all these stimulus packages comes back to bite the government in the ass. Hyperinflation is not being ruled out by smart economists and money watchers.

More Ways To Beat Inflation

You invest in businesses that produce products people need, and need on a recurring basis. In other words, people will never not need these things. This is the basic premise of all great business opportunities.

Here is where you can earn an income that has the potential to grow at exponential rates in a short period of time. You do this by leveraging the labor of others. And the best part is you earn a high income without incurring the liabilities of a business owner.

We’ll take a more detailed look at each of these smart money strategies in the next few days. But please understand what I’m offering you in this mini-course is merely a primer. I can help you understand the basics of money and wealth in this series, but if you wish to attain true wealth, you’ll need to learn much more.

If That’s Your Goal, GO HERE

 
To YOUR Success,

Business & Marketing Mentor
Phone: 805-874-2410