Gold Eagle
The United States’ decision to abandon the gold standard in 1971 has led to a catastrophic collapse of its currency. This pivotal event, orchestrated by President Richard Nixon, has had far-reaching consequences, ultimately dooming America to a financial crisis of unprecedented proportions.
Key Events and Consequences
In 1971, President Richard Nixon severed the US dollar from the gold standard, a move that allowed the Federal Reserve to print unlimited money. This led to a series of consequences:
- Massive Inflation: Government spending increased, fueled by printed currency, leading to rising prices.
- Currency Devaluation: The value of the dollar decreased, making it take more dollars to buy the same goods and services.
- Surging Gold Prices: As the dollar lost value, the price of gold increased, making it take more dollars to buy the same ounce of gold.
- Runaway Consumer Prices: The purchasing power of the dollar decreased, leading to rising costs for food, fuel, housing, and other necessities.
This chain reaction is a result of the US abandoning the gold standard and allowing the Federal Reserve to print unlimited money, leading to the eventual destruction of the currency’s value.
US Economy After The Gold Standard
After the United States abandoned the gold standard in 1971, the economy experienced significant changes. One key takeaway is that the Federal Reserve gained more flexibility in monetary policy, allowing it to respond to economic downturns more effectively. This shift enabled the U.S. to print fiat money and manage interest rates independently of gold reserves, which was a factor in stabilizing the economy during recessions. However, this flexibility also led to issues such as the real estate bubble that contributed to the Great Recession in 2008, as the Federal Reserve maintained easy credit conditions from 2001 to 2006.
What’s the dollar tied to? The dollar is a type of currency used in exchange for goods and services. It used to be backed by gold and silver but now the good “Faith in the Credit of the American People” (Tax Payers) to pay debt. Our currency is a fiat debt based system. An “I owe you” you could say. In the past, the value of the dollar was tied to the value of gold. This means that if you had a certain amount of dollars, you could exchange it for a corresponding amount of gold. Like the Silver Certificate that could be exchanged for 1 Silver Dollar on Demand.
What happened in August 1971? President Nixon and his advisors decided to break this link between the dollar and gold. This meant that the value of the dollar was no longer tied to the value of gold, and its value was now determined by the market.
What does this mean for the global economy? By breaking the link between the dollar and gold, the global monetary system changed. It allowed countries to print more money and control inflation (the rate at which prices rise). It also gave countries more flexibility in setting their interest rates and managing their economies.
Fractional Banking and Money Creation When the link between the dollar and gold was broken, banks were able to create new money by lending existing deposits. This is known as fractional banking. Here’s how it works:
- A bank takes in a deposit of $100.
- The bank uses $10 to cover its own expenses, leaving $90 as a reserve.
- The bank can then lend out the $90, but it’s not actually lending out the $90 itself. Instead, it’s lending out a new $900 (10 times the original deposit) in the form of a loan.
- The borrower uses the $900 to make purchases, which increases the money supply.
- The bank takes the $900 as a deposit, and the process repeats itself.
This creates new money out of thin air, which can lead to inflation (a rise in prices). When there’s more money circulating in the economy, each dollar is worth less, and prices tend to rise.
Printing Money and Inflation As the money supply increases, the value of each dollar decreases. This leads to inflation, which can be a problem for consumers and businesses. To combat inflation, central banks like the Federal Reserve can raise interest rates. Higher interest rates make borrowing more expensive, which can slow down the economy and reduce demand for goods and services.
Inflation Rate 2.4%
Consumer Price Index (CPI) 319.799
Released on April 10 for March. Next release on May 13 for April 2025.
https://www.usinflationcalculator.com/inflation/historical-inflation-rates
The Federal Reserve The Federal Reserve is the central bank of the United States. It was created in 1913 through the Federal Reserve Act, which was signed into law by President Woodrow Wilson. The Fed is responsible for:
- Regulating the money supply
- Setting interest rates
- Supervising and regulating banks
- Acting as a lender of last resort during times of financial crisis
Thomas Jefferson was opposed to the creation of a central bank. In a letter to John Adams in 1787, Jefferson wrote:
The Federal Reserve Charter The Federal Reserve’s charter is set to expire every 20 years, but it has always been renewed. However, there was a notable instance where the charter was not renewed. In 1863, Congress passed the National Banking Acts, which created a national banking system and established the Office of the Comptroller of the Currency. However, the charter for the Office of the Comptroller of the Currency was not renewed in 1913, and it was replaced by the Federal Reserve System.
Thomas Jefferson’s Money and Banking
Thomas Jefferson was opposed to the creation of a central bank. In a letter to John Adams in 1787, Jefferson wrote:
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” “I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” –Thomas Jefferson to John Taylor, 1816. ME 15:23
Sounds like we are living out what Thomas Jefferson feared would occur and in a sense, prophesied would occur.
“The art and mystery of banks… is established on the principle that ‘private debts are a public blessing.‘ That the evidences of those private debts, called bank notes, become active capital, and aliment the whole commerce, manufactures, and agriculture of the United States. Here are a set of people, for instance, who have bestowed on us the great blessing of running in our debt about two hundred millions of dollars, without our knowing who they are, where they are, or what property they have to pay this debt when called on.”
“I own it to be my opinion, that good will arise from the destruction of our credit. I see nothing else which can restrain our disposition to luxury, and to the change of those manners which alone can preserve republican government. As it is impossible to prevent credit, the best way would be to cure its ill effects by giving an instantaneous recovery to the creditor. This would be reducing purchases on credit to purchases for ready money. A man would then see a prison painted on everything he wished, but had not ready money to pay for.” –Thomas Jefferson to Archibald Stuart, 1786. ME 5:259
“If the debt which the banking companies owe be a blessing to anybody, it is to themselves alone, who are realizing a solid interest of eight or ten per cent on it. As to the public, these companies have banished all our gold and silver medium, which, before their institution, we had without interest, which never could have perished in our hands, and would have been our salvation now in the hour of war; instead of which they have given us two hundred million of froth and bubble, on which we are to pay them heavy interest, until it shall vanish into air… We are warranted, then, in affirming that this parody on the principle of ‘a public debt being a public blessing,’ and its mutation into the blessing of private instead of public debts, is as ridiculous as the original principle itself. In both cases, the truth is, that capital may be produced by industry, and accumulated by economy; but jugglers only will propose to create it by legerdemain tricks with paper.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:423
“The Bank of the United States is one of the most deadly hostilities existing, against the principles and form of our Constitution. An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. What an obstruction could not this bank of the United States, with all its branch banks, be in time of war! It might dictate to us the peace we should accept, or withdraw its aids. Ought we then to give further growth to an institution so powerful, so hostile?” –Thomas Jefferson to Albert Gallatin, 1803. ME 10:437
Regulating Banking Institutions
“The principle of rotation… in the body of [bank] directors… breaks in upon the espirit de corps so apt to prevail in permanent bodies; it gives a chance for the public eye penetrating into the sanctuary of those proceedings and practices, which the avarice of the directors may introduce for their personal emolument, and which the resentments of excluded directors, or the honesty of those duly admitted, might betray to the public; and it gives an opportunity at the end of the year, or at other periods, of correcting a choice, which on trial, proves to have been unfortunate.” –Thomas Jefferson to Albert Gallatin, 1803. ME 10:437
Paper Speculation: Gambling with public paper-i.e. Wallstreet Stock Markets.
“A spirit… of gambling in our public paper has seized on too many of our citizens, and we fear it will check our commerce, arts, manufactures, and agriculture, unless stopped.” –Thomas Jefferson to William Carmichael, 1791. ME 8:230
“Our public credit is good, but the abundance of paper has produced a spirit of gambling in the funds, which has laid up our ships at the wharves as too slow instruments of profit, and has even disarmed the hand of the tailor of his needle and thimble. They say the evil will cure itself. I wish it may; but I have rarely seen a gamester cured, even by the disasters of his vocation.” –Thomas Jefferson to Gouverneur Morris, 1791. ME 8:241
The fact that the Federal Reserve is a privately owned entity that is contracted by the government to manage the nation’s currency is a clear conflict of interest. The Constitution grants the power to mint coin and regulate the value of money to Congress, not to a private entity like the Federal Reserve. By allowing the Federal Reserve to manage the nation’s currency, the government is essentially outsourcing its constitutional authority to a private entity. This raises serious questions about the legitimacy and accountability of the Federal Reserve. If individuals were to print their own money, it would indeed be a crime, but the Federal Reserve is doing exactly the same thing, albeit on a much larger scale. The fact that the Federal Reserve is a privately owned entity also raises concerns about its motivations and goals. Is it acting in the best interests of the American people, or is it serving the interests of its private owners and shareholders? This is a classic case of crony capitalism, where a private entity is granted special privileges and powers by the government, often at the expense of the general public.
How will this effect us and our future generations? In future articles I will explore the history of the Federal Reserve, Our Government under Truman becoming Insolvent, and the history of stock market crashes and what it is leading to.
It’s time for the American people to wake up and demand accountability from their government and the Federal Reserve. We need to restore the Constitution and the principles of sound money, and hold those in power accountable for their actions.
Sources:
https://www.usinflationcalculator.com/inflation/historical-inflation-rates
https://seekingalpha.com/article/145722-what-really-backs-the-u-s-dollar
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