Quiz 2: What do all fiat currencies have in common?



Answer:

"Fiat currencies are always inflated to extinction."


Background to the quizzes

Prior to 1913, the first year of the Federal income tax, and the year of the founding of the Federal Reserve System, gold and silver coins, stamped by the U.S. Mint were the principal money used in this country. This was not merely tradition, but it was a constitutional imperative, as we shall see. The U.S. Coinage Act of 1792, consistent with the Constitution, provided for a U.S. Mint, which stamped silver and gold coins. One dollar was defined by statute as a specific weight of gold. The Act also invoked the death penalty for anyone found to be debasing money.

Gold & silver certificates were also issued, as a convenience. It was clear that they were not gold, but equally clear that they represented and could be redeemed for physical gold on demand.

Exhibit A: The Gold Certificate

Here is an example, from 1928, of a $10 Gold Cert




Note the change in verbiage. All references to gold have been subtly replaced, while retaining the overall appearance of the bill. A casual observer would hardly notice the difference. It still says that $10 dollars will be paid to the bearer on demand. But in what? It does not say.

And then there is the bizarre disclaimer on the face of the bill:"This note is legal tender for all debts public & private, and redeemable in lawful money at the U.S. Treasury or at any Federal Reserve Bank."

If the bill is redeemable in lawful money, doesn't it imply that the bill itself in not lawful money?

This disclaimer continued on the bills until 1963, when….

1963 - New Federal Reserve notes with no promise to pay in"lawful money" was released. No guarantees, no value. This is also the year of the disappearance of the $1 silver certificate. Once again, a subtle shift in plain view.

1965 - Silver is completely eliminated in all coins save the Kennedy half-dollar, which was reduced to 40 percent silver by President Lyndon Johnson's authorization.

1968 - June 24 - President Johnson issued a proclamation that all Federal Reserve Silver Certificates were merely fiat legal tender and could not really be redeemed in silver.

1971 - Aug 15 - President Nixon closes the international gold window. U.S. Dollars are no longer redeemable in gold for international settlements. This marked the beginning of the current, anchorless floating currency regime, an not coincidentally, a decade of inflation.

1980 - Gold reaches an all time high of $850/oz, as world confidence in the Dollar plunges.

This gets us fairly well caught up on the current situation. Clearly, the money we use today is not, by definition, constitutional, and has not been since 1934. We have come a long way from 1794, when the debasing of money was punishable by death. Now the government does it at will. Today, the dollar holds the record as the longest running fiat currency, ever. But the mighty dollar is an emperor with no clothes. It powers the world, sets the price of oil, gold, and a working man's wages, all without a constitutional leg to stand on, nor a standard of value to back it.

Conclusion: The Last Great Bubble

Make no mistake, the dollar is still rising against every other currency in the world. For now. The Yen, the Euro, the Canadian dollar, the Argentinian Peso, the South African Rand are all vastly inferior competitors. The dollar is viewed as a safe haven, and a no-brainer investment on the world market. It alone is rising, seemingly levitating as the rest of the world's currencies tumble. It is reminiscent of the last big bubble we witnessed up close, only 2 years ago: NASDAQ.

The final run up in NASDAQ was 86% in one year. But powering the advance was only a handful of about 50 stocks - the safe havens, the no-brainer big-cap investments. These were the Microsofts, Ciscos, Suns, Intels & Junipers. They were bought not merely because they were going up, but because everything else was going down! And up they went, until they too were discovered to be so many emperors without clothing. We are all familiar with what happened next.

The dollar's days are numbered, my friends. We know the truth. It's a phony. It's a giant momentum play, and the biggest bubble this world has ever seen. Time to wake up. We've been here before.

As Mark Twain said, history may not repeat itself, but it often rhymes.

Stocks are still at all time historic highs by PE measures, and still climbing. Gold is close to a 20 year low. What is your definition of a bargain?



* *This was not the first time the Constitution was violated by law, and it certainly will not be the last.




Quelle

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