Silver, Gold, Paper
Most people don't understand how modern money came into being or the economics of this vital method for human conveyance of wealth. Ages ago most people used gold or silver to save wealth not expended for survival. The trouble with this was you were susceptible to have your precious metals stolen and the more you had the worse this situation became. Plus gold and silver are heavy and difficult to lug around.
To solve this problem new urban areas developed banks to fill this need for security of one's gold and silver. The deal was pretty simple. You keep your gold and silver in the bank vaults, the banks give you paper receipts for your holdings and as long as you keep the metal in the bank you get paid interest. The reason is the banks lend out the precious metals to other people at a higher rates of return so as to make a profit after paying you interest.
This system worked very well at first. People would be paid in these paper receipts known as bank notes, some they would spend buying life's needs and some they would save in the banks. The trouble with this monetary system was once the banks had people used to using their bank notes these fat cat realized that they could lend out more paper receipts than they actually had gold and silver on deposit in their vaults. So everybody continued competing with one another to buy and sell things for profit but now they could use these borrowed paper notes, make the transactions, earn a profit and pay off the banks. Unfortunately, with this fake money widely available to almost anybody these borrowers kept competing against one another driving up prices for almost everything. Soon everything was costing more and more of this paper money. But most people did not realize why this was so. Even today most do not have a clue why prices continue to go up.
It's like with the housing price bubble. The Federal Reserve made lots of that same fake money available to many perspective home buyers. They in turn competed against one another for a limited supply of houses for purchase. Naturally the sellers held out for the highest bids. The central bankers were happy to lend out the inflated money to ice the deals. Then the bank pulls the plug on the money supply by tightening credit requirements or raising the lending rate causing the value of millions of parcels of Real Estate to plummet in value. Unfortunately for millions of suckered mortgage holders they are still obligated to pay the full inflated price for that property and many also are extra shafted with adjustable rates heading skyward as well.
Now that the banks have done millions of us over again and we are nearing a bottom in Real Estate value, wouldn't it make sense to replace the Federal Reserve fiat money system with a stable hard currency system that would stabilize prices and the value of your labor?
To solve this problem new urban areas developed banks to fill this need for security of one's gold and silver. The deal was pretty simple. You keep your gold and silver in the bank vaults, the banks give you paper receipts for your holdings and as long as you keep the metal in the bank you get paid interest. The reason is the banks lend out the precious metals to other people at a higher rates of return so as to make a profit after paying you interest.
This system worked very well at first. People would be paid in these paper receipts known as bank notes, some they would spend buying life's needs and some they would save in the banks. The trouble with this monetary system was once the banks had people used to using their bank notes these fat cat realized that they could lend out more paper receipts than they actually had gold and silver on deposit in their vaults. So everybody continued competing with one another to buy and sell things for profit but now they could use these borrowed paper notes, make the transactions, earn a profit and pay off the banks. Unfortunately, with this fake money widely available to almost anybody these borrowers kept competing against one another driving up prices for almost everything. Soon everything was costing more and more of this paper money. But most people did not realize why this was so. Even today most do not have a clue why prices continue to go up.
It's like with the housing price bubble. The Federal Reserve made lots of that same fake money available to many perspective home buyers. They in turn competed against one another for a limited supply of houses for purchase. Naturally the sellers held out for the highest bids. The central bankers were happy to lend out the inflated money to ice the deals. Then the bank pulls the plug on the money supply by tightening credit requirements or raising the lending rate causing the value of millions of parcels of Real Estate to plummet in value. Unfortunately for millions of suckered mortgage holders they are still obligated to pay the full inflated price for that property and many also are extra shafted with adjustable rates heading skyward as well.
Now that the banks have done millions of us over again and we are nearing a bottom in Real Estate value, wouldn't it make sense to replace the Federal Reserve fiat money system with a stable hard currency system that would stabilize prices and the value of your labor?
posted by Tomás Estrada-Palma at
8:25 AM
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