Understand The Concept of Money
We know the concept of 'money' is an ancient tool used among peoples in search of a common value system. Money can be anything a people agree to use as a method of exchange. It just has to be durable, not easily counterfeited, and easy to handle and transfer. Thus it didn't take long for people to understand how metals could serve that role. In Old Testament times we see how precious metals like gold and silver were used a method of exchange. Precious metals like gold and silver have intrinsic value, which means regardless of being used as money silver and gold has value by itself independent of it being used as money.
Then later 'paper' was agreed upon to represent larger denominations, and for today, it's very important to understand how 'paper' came into existence as money.
How Banking Got Started
In early societies people needed a place of safekeeping for the gold and silver. From ancient times the smiths were practiced in craftsmanship working in various metals (see Genesis 4). In later times, the goldsmiths had those places for safekeeping their gold, so the people would bring their own gold to the goldsmiths and ask the goldsmith to store it for them as a Deposit. Then the goldsmith would hand them a paper Receipt note so as to retreive their gold when needed.
What the goldsmiths then noticed was that the amount of other people's gold held in their safe always was around 90%. The people would only withdraw about 10% of their gold out for daily transactions, the majority of it just sat there idle in the safe. That 90% of other people's gold in the safe was called Reserves. It just sat there, not being used.
Eventually, the goldsmiths figured that if they always left at least... 10% of other people's gold kept in their safe, then they could put that 90% which just sat their idle as Reserves, to use. They began to Loan out that 90% of other people's gold with charging Interest. That's how modern Banking got started, which still today uses those same basic principles of keeping a certain percentage of Reserves (other people's money) in safekeeping to do business. The Federal Reserve Banking System sets that Reserves percentage that today's U.S. banks must follow. One of the most famous places for those U.S. gold Reserves was at Fort Knox, Kentucky.
The U.S. Mint was created to shape gold and silver into coins, and by law had to receive gold and silver mined by the people, and turn it into coin money for them. Congress was empowered to regulate that coining per the U.S. Constitution. The gold rushes expanded the nation's Money Supply (amount of money in circulation) and was a positive influence upon the nation's growth. It did not change the Value (buying power) of the nation's Money Supply, it only increased the amount of available coins in the money supply.
Paper Money
With using gold and silver coins as the main source of exchange, difficulties with storage and transfer of large amounts became a major problem. Shipments of gold coins were bulky, heavy, and went down with sailing ships in bad storms and lost to raids by pirates. So the nations looked for an easier method of exchange. Paper receipts were given as Deposit Slips to the people when they deposited their gold with the goldsmiths and later with Banks, so the idea of using paper to represent real money was already there, it just had to not be easily counterfeited. With a numbering system on paper bills, if a paper shipment got stolen or lost in transfer it could easily be accounted for. Using paper to represent the silver and gold Reserves still meant maintaining to a Gold Standard currency system, since the paper money in circulation still had to equal the amount of gold held in Reserves.
So now the banking systems of nations had an easier method of exchange for the people and between nations, using the Paper Dollar. Once again, the Gold Standard system meant the amount of paper dollars in circulation had to equal the amount of gold held in Reserves. Any break down of Bill Denominations could be used, but it still had to equal the amount of gold the nation held. That meant the paper dollars were Redeemable Paper Notes for their amount equal in gold or silver. For a One Dollar bill, you could go to a Reserve bank and exchange it for an equal amount in coin, like one Silver Dollar. This meant absolutely no Inflation or Deflation of the value of the Paper Dollar. In the U.S., these type of paper dollars were called Silver Certificates.
Fractional Reserves, Fiat Dollar, and Inflation
Around the turn of the 20th century, and with the establishing of the Federal Reserve Act in 1913, the U.S. paper money supply began to move towards Fractional Reserves Banking. Ever so slowly, the Central Bankers began removing our U.S. paper currency away... from the Gold Standard.
The idea of Fractional Reserves meant only a 'portion' of the Dollar had to stay on the Gold Standard. The U.S. Dollar had to have only a portion of gold held in Reserves to back it. A 90% fractional Reserve meant each One Dollar amount had to be backed by 90% in gold Reserves. That also meant that 10% of each One Dollar did not have to be backed by ANY gold or silver, which meant Money Creation by Fiat.
Fiat means 'by decree'. It's a word that can ultimately be applied to how our Heavenly Father created the universe and everything in it, by His merely speaking The Word. He spoke, and it came into existence.
With paper money created out of thin air by Fiat, it means no gold or silver backing it. It simply comes into existence out of thin air by decree of Congressional approval. Money created by Fiat means currency ADDED to the existing money supply in circulation, which is Inflation of the Value of the dollar. This is how we can go to bed at night with the dollars in our pocket being worth a certain amount, and then overnight if Congress approves a trillion dollar Bailout of a third-world nation, we wake up in the morning and those same dollars in our pockets immediately are worth less, and won't buy as much. (I've seen many congressional Bailouts in my time, the largest corporate Bailouts with the global market events that started in the 1970's through 2009). How could this happen?
In the early 1970's, the Federal Reserve System completely... removed our U.S. Dollar away from the Gold Standard. The U.S. Dollar then became a... Federal Reserve Note, no longer exchangeable for equal amounts of gold or silver at a Reserve Bank.
Paper Debt
Under this system, our U.S. Dollar became a literal Debt Paper. It begins with a U.S. Treasury Note, which is a Promissary Note. A Promisary Note is simply a Debt Note, a promise to pay. It's the same idea when you write a Personal Check. Your Check is a promise to pay to whomever you write the Check to, like "Pay to the Order of:___________". Writing that Personal Check is depending on you having Funds in a Bank to back that Check, otherwise that check will Bounce, and you will be under a Penalty, usually having to pay a fine, and could turn into jail time if done many times and on purpose.
A Personal Check is a Debt paper note. So is the U.S. Treasury Note where today's Dollar begins its birth by Fiat with Congress placing an order to the Treasury to print it. Since the U.S. Dollar is no longer attached to a Gold Standard to back it, how do you think those U.S. Treasury Notes are backed? You guessed it, we the Taxpayer back it, as Congress promises to get the monies for it out of our own pockets through... Taxation. This is part of the shabby little secret of why Congress also passed the Progressive Income Tax system in 1933, and the founding of the Internal Revenue Service (IRS) to make sure... those Treasury Notes are backed by the American peoples through Taxation. So our U.S. Dollar is completely Debt-based now. It even begins... as a Debt Paper when those U.S. Treasury Notes are first printed.
Inflation and Deflation
You'll hear all sorts of wild explanations within the Media of what Inflation, Deflation, and Deficit Spending is. Most often their definitions are completely wrong, and designed to keep you off-track of what's been the real problems with our economic system since its removal from a Gold Standard and move to Paper Fiat Currency and Debt Spending.
Inflation and Deflation is about the Value of the U.S. Dollar. When more U.S. Dollars are Fiated by decree, created out of nothing, and added to the Dollars already in Circulation, it makes the Value of the Dollar go downwards. Remove Dollars in circulation and it Deflates the Value of the Dollar (strengthens its buying power). Yet Deflation is used to slow down economic growth at the same time. You will often hear that Inflation is good, and that Delfation is bad, simply because they base it on standards of economic growth. What 'we the people' really need, is a stable value Dollar that allows... economic growth at the same time. We had... that with following a Gold Standard.
Instead, the Economy is designed to progressively Inflate the U.S. Dollar, on average of 3-4% per year. What that means is, a Dollar worth 100 cents at 4% Inflation a year is worth only 60 cents at the end of 10 years. (10 years X 4% = 40% inflation for the total period). Cost of Living Raises at our jobs is how that Inflation of the Dollar was to be equalized. How many of you get a 4% income raise each year? Yeah, I thought so. Most of you do not. And in the past decade, the Corporate Trend on income raises has been to ask employees to discard those raises to help the Company stay economically strong, so no Employee Layoffs will happen to balance their lack of Revenues.
Deficit Spending
What the Fiat Paper Debt system of today's U.S. Dollar promotes is Deficit Spending. It means the Dollar is continually being weakened by continual creation out of thin air backed by nothing but the Taxpayer's ability to pay Taxes. Each time that is done it only produces more Debt the people have to pay through taxes.This is why Congress has to continually raise taxes upon us in order to pay for that created Debt by Fiat. it is the practice of Deficit Spening by Congress with keeping this Fiat system going.
It shouldn't take a lot of common sense to understand that eventually, the Dollar just cannot be stretched anymore in overcoming the Debt which the Fiat Paper system creates out of thin air. The more politicians are free to spend, and spend, and spend, at will, the more Debt created, and the more Dollars have to be printed to cover it, and thus more Taxes upon the peoples is required to pay for it all.
Eventually, the peoples pockets are fleeced, and they have not enough wealth to cover those Taxes. We've already long reached that point, which has produced a Deficit with our National Debt. We've reached the point to where just the Interest on the National Debt is difficult to pay off. It's because the Value of the Dollar has been made so weak by this Fiat system, that it's made the Dollar no longer strong enough to cover that Debt. To try and counter that weakness, foreign governments that were very willing to buy up part of that Debt with purchasing U.S. Treasury Notes (like Red China), are now having doubt as to those Notes being a good investment.
Taxation or Balance The Budget
We keep hearing basically only TWO offered resolutions to this Debt, more Taxation or Balance the National Debt, which is trillions of dollars in the red. Every major system of government cutting their spending is being proposed, while not much to really help the people is. And further, just balancing the budget by paying off the National Debt (with Interest) isn't going to correct the problem of Fiat Deficit Spending that got us to this economic point.
Going back to a Gold Standard economic system will... correct the Fiat Debt paper mistake. Yet Congress' thinking is going to naturally keep to what it's doing instead, and try to find another way to correct our U.S. monetary policy. But it won't be able to. Thus we are going to continually be Taxed until we become like a third-world nation, with no Middle Class society, and the wealth only in the hands of the ruling class, which is exactly what the Fiat Debt system is DESIGNED to do. It is designed to prepare us for the coming of the 'mark of the beast' requirement for buying and selling (Rev.13:11-17).
We know the concept of 'money' is an ancient tool used among peoples in search of a common value system. Money can be anything a people agree to use as a method of exchange. It just has to be durable, not easily counterfeited, and easy to handle and transfer. Thus it didn't take long for people to understand how metals could serve that role. In Old Testament times we see how precious metals like gold and silver were used a method of exchange. Precious metals like gold and silver have intrinsic value, which means regardless of being used as money silver and gold has value by itself independent of it being used as money.
Then later 'paper' was agreed upon to represent larger denominations, and for today, it's very important to understand how 'paper' came into existence as money.
How Banking Got Started
In early societies people needed a place of safekeeping for the gold and silver. From ancient times the smiths were practiced in craftsmanship working in various metals (see Genesis 4). In later times, the goldsmiths had those places for safekeeping their gold, so the people would bring their own gold to the goldsmiths and ask the goldsmith to store it for them as a Deposit. Then the goldsmith would hand them a paper Receipt note so as to retreive their gold when needed.
What the goldsmiths then noticed was that the amount of other people's gold held in their safe always was around 90%. The people would only withdraw about 10% of their gold out for daily transactions, the majority of it just sat there idle in the safe. That 90% of other people's gold in the safe was called Reserves. It just sat there, not being used.
Eventually, the goldsmiths figured that if they always left at least... 10% of other people's gold kept in their safe, then they could put that 90% which just sat their idle as Reserves, to use. They began to Loan out that 90% of other people's gold with charging Interest. That's how modern Banking got started, which still today uses those same basic principles of keeping a certain percentage of Reserves (other people's money) in safekeeping to do business. The Federal Reserve Banking System sets that Reserves percentage that today's U.S. banks must follow. One of the most famous places for those U.S. gold Reserves was at Fort Knox, Kentucky.
The U.S. Mint was created to shape gold and silver into coins, and by law had to receive gold and silver mined by the people, and turn it into coin money for them. Congress was empowered to regulate that coining per the U.S. Constitution. The gold rushes expanded the nation's Money Supply (amount of money in circulation) and was a positive influence upon the nation's growth. It did not change the Value (buying power) of the nation's Money Supply, it only increased the amount of available coins in the money supply.
Paper Money
With using gold and silver coins as the main source of exchange, difficulties with storage and transfer of large amounts became a major problem. Shipments of gold coins were bulky, heavy, and went down with sailing ships in bad storms and lost to raids by pirates. So the nations looked for an easier method of exchange. Paper receipts were given as Deposit Slips to the people when they deposited their gold with the goldsmiths and later with Banks, so the idea of using paper to represent real money was already there, it just had to not be easily counterfeited. With a numbering system on paper bills, if a paper shipment got stolen or lost in transfer it could easily be accounted for. Using paper to represent the silver and gold Reserves still meant maintaining to a Gold Standard currency system, since the paper money in circulation still had to equal the amount of gold held in Reserves.
So now the banking systems of nations had an easier method of exchange for the people and between nations, using the Paper Dollar. Once again, the Gold Standard system meant the amount of paper dollars in circulation had to equal the amount of gold held in Reserves. Any break down of Bill Denominations could be used, but it still had to equal the amount of gold the nation held. That meant the paper dollars were Redeemable Paper Notes for their amount equal in gold or silver. For a One Dollar bill, you could go to a Reserve bank and exchange it for an equal amount in coin, like one Silver Dollar. This meant absolutely no Inflation or Deflation of the value of the Paper Dollar. In the U.S., these type of paper dollars were called Silver Certificates.
Fractional Reserves, Fiat Dollar, and Inflation
Around the turn of the 20th century, and with the establishing of the Federal Reserve Act in 1913, the U.S. paper money supply began to move towards Fractional Reserves Banking. Ever so slowly, the Central Bankers began removing our U.S. paper currency away... from the Gold Standard.
The idea of Fractional Reserves meant only a 'portion' of the Dollar had to stay on the Gold Standard. The U.S. Dollar had to have only a portion of gold held in Reserves to back it. A 90% fractional Reserve meant each One Dollar amount had to be backed by 90% in gold Reserves. That also meant that 10% of each One Dollar did not have to be backed by ANY gold or silver, which meant Money Creation by Fiat.
Fiat means 'by decree'. It's a word that can ultimately be applied to how our Heavenly Father created the universe and everything in it, by His merely speaking The Word. He spoke, and it came into existence.
With paper money created out of thin air by Fiat, it means no gold or silver backing it. It simply comes into existence out of thin air by decree of Congressional approval. Money created by Fiat means currency ADDED to the existing money supply in circulation, which is Inflation of the Value of the dollar. This is how we can go to bed at night with the dollars in our pocket being worth a certain amount, and then overnight if Congress approves a trillion dollar Bailout of a third-world nation, we wake up in the morning and those same dollars in our pockets immediately are worth less, and won't buy as much. (I've seen many congressional Bailouts in my time, the largest corporate Bailouts with the global market events that started in the 1970's through 2009). How could this happen?
In the early 1970's, the Federal Reserve System completely... removed our U.S. Dollar away from the Gold Standard. The U.S. Dollar then became a... Federal Reserve Note, no longer exchangeable for equal amounts of gold or silver at a Reserve Bank.
Paper Debt
Under this system, our U.S. Dollar became a literal Debt Paper. It begins with a U.S. Treasury Note, which is a Promissary Note. A Promisary Note is simply a Debt Note, a promise to pay. It's the same idea when you write a Personal Check. Your Check is a promise to pay to whomever you write the Check to, like "Pay to the Order of:___________". Writing that Personal Check is depending on you having Funds in a Bank to back that Check, otherwise that check will Bounce, and you will be under a Penalty, usually having to pay a fine, and could turn into jail time if done many times and on purpose.
A Personal Check is a Debt paper note. So is the U.S. Treasury Note where today's Dollar begins its birth by Fiat with Congress placing an order to the Treasury to print it. Since the U.S. Dollar is no longer attached to a Gold Standard to back it, how do you think those U.S. Treasury Notes are backed? You guessed it, we the Taxpayer back it, as Congress promises to get the monies for it out of our own pockets through... Taxation. This is part of the shabby little secret of why Congress also passed the Progressive Income Tax system in 1933, and the founding of the Internal Revenue Service (IRS) to make sure... those Treasury Notes are backed by the American peoples through Taxation. So our U.S. Dollar is completely Debt-based now. It even begins... as a Debt Paper when those U.S. Treasury Notes are first printed.
Inflation and Deflation
You'll hear all sorts of wild explanations within the Media of what Inflation, Deflation, and Deficit Spending is. Most often their definitions are completely wrong, and designed to keep you off-track of what's been the real problems with our economic system since its removal from a Gold Standard and move to Paper Fiat Currency and Debt Spending.
Inflation and Deflation is about the Value of the U.S. Dollar. When more U.S. Dollars are Fiated by decree, created out of nothing, and added to the Dollars already in Circulation, it makes the Value of the Dollar go downwards. Remove Dollars in circulation and it Deflates the Value of the Dollar (strengthens its buying power). Yet Deflation is used to slow down economic growth at the same time. You will often hear that Inflation is good, and that Delfation is bad, simply because they base it on standards of economic growth. What 'we the people' really need, is a stable value Dollar that allows... economic growth at the same time. We had... that with following a Gold Standard.
Instead, the Economy is designed to progressively Inflate the U.S. Dollar, on average of 3-4% per year. What that means is, a Dollar worth 100 cents at 4% Inflation a year is worth only 60 cents at the end of 10 years. (10 years X 4% = 40% inflation for the total period). Cost of Living Raises at our jobs is how that Inflation of the Dollar was to be equalized. How many of you get a 4% income raise each year? Yeah, I thought so. Most of you do not. And in the past decade, the Corporate Trend on income raises has been to ask employees to discard those raises to help the Company stay economically strong, so no Employee Layoffs will happen to balance their lack of Revenues.
Deficit Spending
What the Fiat Paper Debt system of today's U.S. Dollar promotes is Deficit Spending. It means the Dollar is continually being weakened by continual creation out of thin air backed by nothing but the Taxpayer's ability to pay Taxes. Each time that is done it only produces more Debt the people have to pay through taxes.This is why Congress has to continually raise taxes upon us in order to pay for that created Debt by Fiat. it is the practice of Deficit Spening by Congress with keeping this Fiat system going.
It shouldn't take a lot of common sense to understand that eventually, the Dollar just cannot be stretched anymore in overcoming the Debt which the Fiat Paper system creates out of thin air. The more politicians are free to spend, and spend, and spend, at will, the more Debt created, and the more Dollars have to be printed to cover it, and thus more Taxes upon the peoples is required to pay for it all.
Eventually, the peoples pockets are fleeced, and they have not enough wealth to cover those Taxes. We've already long reached that point, which has produced a Deficit with our National Debt. We've reached the point to where just the Interest on the National Debt is difficult to pay off. It's because the Value of the Dollar has been made so weak by this Fiat system, that it's made the Dollar no longer strong enough to cover that Debt. To try and counter that weakness, foreign governments that were very willing to buy up part of that Debt with purchasing U.S. Treasury Notes (like Red China), are now having doubt as to those Notes being a good investment.
Taxation or Balance The Budget
We keep hearing basically only TWO offered resolutions to this Debt, more Taxation or Balance the National Debt, which is trillions of dollars in the red. Every major system of government cutting their spending is being proposed, while not much to really help the people is. And further, just balancing the budget by paying off the National Debt (with Interest) isn't going to correct the problem of Fiat Deficit Spending that got us to this economic point.
Going back to a Gold Standard economic system will... correct the Fiat Debt paper mistake. Yet Congress' thinking is going to naturally keep to what it's doing instead, and try to find another way to correct our U.S. monetary policy. But it won't be able to. Thus we are going to continually be Taxed until we become like a third-world nation, with no Middle Class society, and the wealth only in the hands of the ruling class, which is exactly what the Fiat Debt system is DESIGNED to do. It is designed to prepare us for the coming of the 'mark of the beast' requirement for buying and selling (Rev.13:11-17).