"To finance the Revolutionary War, the Continental Congress in 1775 authorized the limited issuance of paper currency. These notes, called Continentals, were denominated in dollars and backed by the "anticipation of future tax revenues," with no backing in silver or gold. Without solid backing along with rising inflation, the Continentals soon became worthless, thus the expression "not worth a Continental." Or as George Washington put it, "A wagon load of currency will hardly purchase a wagon load of provisions." The remnant of this experience was a deep distrust of paper money which was not issued again by the federal authorities until the Civil War when the federal government first issued paper money." Also Federal Reserve Bank of San Francisco.
Get it people? The 'money' became worthless because it was not redeemable nor backed by gold or silver, by their own admission. This is from the printed page of the Federal Reserve, not my opinion. Of course it is my opinion, as I have been writing for many years now. They admit that past currencies, as issued by THEM, became worthless because of a lack of backing or being redeemable in gold or silver.
The piece goes on and on, telling about how wonderful the printing of un-backed notes has progressed, casually mentioning that the South and North's paper money became worthless also, because they weren't backed, and were printed endlessly to pay bills for things which government had bought…usually for war. There was no welfare then, and "earmarks" hadn't been invented. Let's see now, they bought Alaska for two cents an acre, didn't they? And the Louisiana Purchase from France was for a pittance too, as I remember. The feds wasted millions financing the first continental railroads, which would have been built anyway without their assistance, which turned out to be one of history's most glaring boondoggles.
Here's some more from the Federal Reserve Bank of San Francisco, which tells the rest of the story. "Since October 1, 1877, all U.S. currency has been printed by the Bureau of Engraving and Printing, which started out as a six person operation using steam powered presses in the basement of the Department of the Treasury. Now, 2,300 Bureau employees occupy twenty-five acres of floor space in two Washington D.C. buildings. The Treasury also operates a satellite printing plant in Ft. Worth, Texas. Currency and stamps are designed, engraved, and printed twenty-four hours a day on thirty high speed presses. In 1990, at a cost of 2.6 cents each, over seven billion notes worth about $82 billion were produced for circulation by the Federal Reserve System." That was 1990. Today, I am sure that the number of presses has been added to in the last 16 years, and I am sure the production of bills is well over $250 billion a year, of course "for circulation by the Federal Reserve." Please tell me what Constitutional Authority does the Federal Reserve exist? Would the Founders approve of a private bank doling out the money?
But remember, that by its own admission, (1) Previous un-backed currencies became worthless due to not being backed by gold and silver, and (2) Dollars are being printed by the billions every day, and are not backed by a damned thing. Correction! They are backed by the "Full faith and credit of the federal government." In other words, they are backed by nothing, are being printed endlessly, and as far as the world is concerned, noting current conditions, that "full faith and credit," are woefully lacking, not that it is worth much anyway, since you can't hold it in your hands like you can gold and silver.
I wonder why, in its 1995 release quoted above, the San Francisco Federal Reserve Bank didn't put two and two together and note that since today's dollars are un-backed, and since they are being produced by a billion a day, they might well become worthless too? That isn't the half of it however. Today's world banking system doesn't need paper money, because billions are transferred in an instant by wire, and more billions are written in checks every day, with no physical bills needed to be handled or held. Think about the billions in food stamps which are printed daily, and the billions in "earmarks" which the Congressional politicos vote for and pass each week. These all place more dollars in circulation, be they printed notes, government checks, food stamps, welfare checks, or a host of other expenses paid for with un-backed paper currencies.
As "bridges to nowhere," highways, welfare, government handouts, increased numbers of government employees, new bureaucracies, new government buildings, projects, and expenses increase daily, so does the number of dollars in circulation increase. This, of course, doesn't count the interest due the privately owned Federal Reserve. The total income taxes collected, don't even cover the interest, so borrowing goes on forever, to pay the interest, plus more dollars needed to keep politicos re-elected.
Locally, two new sets of traffic lights are being installed at a cost of $650,000. They are the 'cat's pajamas,' with all sorts of timing devices, sensitivity to emergency vehicles, etc, and are all approved by the federal "DOT," or Department of Transportation (which transports nothing). I asked the engineer who is running the thing, what the feds had to do with the project. "Nothing, other than having of approve everything we do." I then asked him if the federal DOT served any useful purpose. "No." The sidewalks were newly poured recently and are really nice, with wheelchair access, etc. The federal DOT requires that they all be torn out and replaced with their specs. What will that cost in paper money which is un-backed? Plenty! For your information, the federal DOT has 59,000 employees and spends close to $60 billion a year.
On Tuesday, a plane landed without a nose gear, because it wouldn't go down. We saw it glide and stay aloft as long as possible and then skid to a stop with sparks flying from the nose which was dragging on the ground. It seems to me that Boeing and the airline would easily be able to determine why that nose gear didn't go down, but oh no. Nothing was to be touched until the NTSB came there and did its examination. More needless bureaucracy, costing a huge amount of un-backed dollars. When a Piper Cub (there still a few around, max speed 60) goes down, the NTSB must be there to 'examine' and declare what was at fault. A car runs in front of a train, and the NTSB must 'examine' and declare fault. To use the subjunctive…Keee-Rappp.
Why can't the public put two and two together, and come up with the obvious answer, right from the horse's mouth, (Federal Reserve Bank of San Francisco) which issued the statements quoted above? Money eventually becomes worthless if it is un-backed, or unredeemable in gold and silver. They admit it. Dollars are redeemable in more dollars, not precious metals. There is no legal limit on how many can be placed in circulation. I am certain other columnists will write about how the Fed and Treasury are doing their utmost to keep gold and silver down, because they are a fine temperature gauge of the economy, and the thermometer is rising once again. Will they succeed? Not in my opinion. Protect yourself.
June 22, 2006
Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com