The History of Fiat Currency

Good afternoon🌞

   I hope all is well. I would like to start by giving a special thanks to all those that have been supporting us. It's truly appreciated with last year's events and this year looking to be more of the same economic troubles. Buying tangible assets is the way to go in protecting your wealth. So thank you truly for choosing our family to help you and your family preserve your wealth. We're all in this together, and it will take us all to get us through the years to come. 

This blog is mainly for those of you that are new to the #preciousmetals community. With recent events and the effect they will have on our economy, we must start preparing. To prepare, we need to understand the difference between Real Money and Fiat Money. Fiat money is a government-issued currency note backed by nothing tangible assets such as Gold & Silver. Precious metals such as Gold & Silver have always been considered real money because they are tangible assets in short supply. It simply can’t be created like you can create Fiat money. In the beginning, both gold and silver were used as currency to buy and sell goods and services. Eventually, people grew weary of lugging around gold and silver bars and decided to replace them with various forms of paper currency throughout history. The paper currency was pieces of paper with a face value equal to gold or silver kept in the issuing bank or government. Should any citizen on a whim decide, he rather have his gold or silver than paper. He could just walk into a bank and demand an exchange, a bit like the “reserve banking” system we have today. It wasn’t until the Civil war when the first issuance of a fiat currency was introduced. Taking advantage of the needs of the armies and being restricted from lending due to the currency being backed by precious metals, the banks decide to run to Congress and demand they have the right to lend money without restrictions. Thus the birth of Greenbacks, the first currency in American history created that had no ties to precious metals. This gave banks the ability to fund both sides of the army. As the war continued, many people’s faith in the government depleted, and with rising prices, many feared what it would mean, so Congress implemented the Gold Standard. Some faith was restored in the government and the economy once again.

In 1791 the Treasury Secretary, Alexander Hamiton, urged Congress to establish a more centralized United States bank where they would pay the war debts they owed. It started out with a capital of $10 million, but most Americans were strongly against the idea of a large and powerful bank. And seeing as how the government’s war debt was largely paid off, so many felt no need for it, and when the bank’s 20-year charter finally expired in 1811, Congress refused to renew it by one vote. Those that were in favor of a more centralized bank were determined to establish yet another. Due to the war of 1812 causing Federal debt to start stacking up once again, this gave that small margin of Congress the opportunity to have their fellow congress members agree to charter the Second Bank of the U.S. Andrew Jackson, who was opposed to a central bank was elected president in 1828 and vowed to destroy it. His point of view struck a chord with most Americans and when the Second Bank’s charter expired in 1836 and was not renewed. Since there were no longer centralized banks, many banks took advantage of the opportunity to issue their own currency, which could be redeemed in gold and silver coins, and offered demand deposits to increase commerce. From 1836 to 1853, a jump in check transactions accrued, which led to establishing the New York Clearing House Association, which provided a way for the city’s banks to formally exchange checks and settle accounts.

During 1873-1907 there was a little bit of currency stability due to the rapidly growing country. Thanks to the National Banking Act of 1863, bank runs and financial panics were far from a thing of the past and perpetually plagued the economy. And in 1893, a bank panic triggered the worst depression the United States had ever seen. The economy was able to stabilize financial mogul J.P. Morgan swooped in to save the day. It became clear to many that the nation’s banking and financial system needed serious attention and reform. With everyone upset with what the Free Banking era had caused, talks of a “Decentralized bank” started occurring. A decentralized bank would be the middle man between the people and the bank. And in 1913, behind closed doors in the secret of the night, while all were sleeping Christmas eve night, President Wilson and a few members of Congress gave birth to the Federal Reserve. The signing of the Federal Reserve act allows one bank to control our money, so basically, our government borrows money from this private bank. Despite the breakout of World War I in the middle of 1914 and with the help of the emergency currency issued under the Aldrich-Vreeland Act of 1908, banks could continue operating normally. The bigger impact in the U.S. came from the Reserve Banks’ ability to discount banker’s acceptances, which allowed the United States to indirectly help finance the war and aid the flow of trade goods to Europe, until 1917, when the United States officially declared war on Germany and financing its own war effort became the number one priority.

From 1930-1933 Nearly 10,000 banks failed, which led to the Great Depression. And by March of 1933, freshly inaugurated President Franklin Delano Roosevelt declared a bank holiday while government officials desperately tried to fix the nation’s extreme economic problems. Many American’s were angry with the Federal Reserve and blamed them for failing to diminish the speculative lending that led to the crash in the first place. And to be fair, looking through history, the Federal Reserve was to blame for many things, as JP Morgan introduced our country to them. JP Morgan, who is, as I said earlier in the blog, a financial Mogul. Those who supported the decentralized bank argued that a fundamentally inadequate understanding of economics and monetary policy prevented the Feds from going after policies that could have arguably lessened the depth and effects of the Depression. After the Depression, Congress implemented the Banking Act of 1933 (or the Glass-Steagall Act), which separated commercial and investment banking which also established the Federal Deposit Insurance Corporation (FDIC), which gave the Federal Reserve control over market operations and required them to examine bank holding companies, and required government securities to be used as collateral for Federal Reserve notes. With this act came more restrictions on Gold and what began as small steps to have the dollar eradicated from the Gold Standard by Richard Nixon in 1971.

Central banks and Congress didn’t take long to figure out that keeping all that gold in reserve was a hassle, and people would spend money just as readily if there wasn’t a vault full of gold somewhere guaranteeing its paper value. This leads me to believe that this was all planned. Who in their right mind, after already experiencing a Great Depression and with nearly 10,000 banks failing, why would you take steps to remove your country from a stable currency? Since the establishment of the Federal Reserve and being pulled off the Gold Standard, the US dollar has lost 96% of its purchasing power. And as I stated in the previous blog, the Federal Reserve created 35% of all dollars ever created since it was established. All of this money printing history shows is never a good thing. And without our dollars tied to anything tangible, inflation is bound to run rampant like it did when they ignored the rising prices during the 1970s, where inflation skyrocket to the moon as producer and consumer prices rose, oil prices surged, and the federal deficit more than doubled. Last year our federal deficit Tripled. How much longer do you think your economy will be able to last? Our currency is currently ending its life cycle. We must take the required steps to prepare. Gold and Silver have been used as money throughout history. With the current economic crisis looming with Russia no longer holding dollars in its investments, it is important to take the needed steps for your and your family’s wealth today.

                                                                                               Peace & Love😘