Redneck Review!
No. 228 - 9/9/2019
Continuing our recent effort to argue "Common Sense" is needed these days to solve U.S.  money problems, the following is submitted in support of claims made last week!
It was argued then that every nation has worked its way through an evolving money system, from BARTER in early stages to FIAT MONEY,  money with no value, just "faith" that the paper it is printed on will continue to purchase  goods and services!  That "Barter Chain" is reprinted here for review purposes:  Barter->Primitive Money->Sophisticated Money->Certificate Substitution->Reduced Reserves->No Reserves->FIAT MONEY!  The critical steps in this eroding value occur after Certificate Substitution, a still logical step in the evolution,  so long as the certificates are backed 100% by the gold or silver promised.  A $1000 silver certificate, backed by a 100% promise provided by the government, offered convenience and safety compared to carrying heavy metal coins in those large amounts!
But here is where the problem begins!  Very shortly, those certificates were no longer as valuable as the metal coins, BECAUSE THE GUARANTEED EXCHANGE SUDDENLY DISAPPEARED! Thus any nation at this point could print huge amounts of paper money, backed by nothing other than the government's promise to guarantee value! So it does not take long for any country to start printing huge amounts of paper money!
Following is a brief history of money in the U.S.  During the Revolutionary War, our national Continental Congress began issuing paper money called CONTINENTALS.  From 1775 to 1780,  this currency dropped in value to only 1/5th to 1/7th of its original value, leading to the slogan later that our money was "Not worth a Continental"  Between these dates, and 1834, several attempts were made to stabilize the value of our currency by backing each dollar by a promise to exchange it for gold or silver.  In 1834 a ratio was set at  16:1  silver to gold, meaning that 16 oz of silver was equal to 1 oz of gold.  Known as "Bimetallism." the DOLLAR was adopted as our national currency, and each SILVER dollar was required to be 90% pure silver, requiring about 77/100's of an ounce of silver in each dollar.  
The 16:1 ratio changed over time, impacted in one case by the discovery of huge silver deposits in the West leading to William Jennings Bryan demanding in his "Cross of Gold" speech, 1896, that silver continued to be coined into U.S. dollars. This huge increase in silver available meant of course that the ratio of silver to gold be adjusted, and this happened over several years, at one time hitting 35:1, silver to gold. Pressure on this ratio up and down occurred over the years, especially with the issuing of paper currency backed 100% by either of the two metals. Silver dollar certificates were issued by the U.S. from 1878 until 1964, meaning that each certificate included the promise that the certificate could be exchanged for a guaranteed amount of silver on demand by the holder. For a time, guaranteed gold certificates were also issued. 
After years of pressure, the metal guarantee rapidly disappeared!  In 1933, It became unlawful for U.S. citizens to own gold currency, eliminating that standard in the U.S. In 1971, the U.S. reneged on our promise to pay international debts in gold, eliminating that standard with foreign countries. Then  in 1964, the silver in each dollar was reduced to zero in dollar coins, and shortly thereafter to 40% in half dollars and then to zero in all "silver" coins!
So there you have it!  We now have paper Fiat Money only, with a huge debt of $22 trillion, and a silver to gold ratio around 85:1! And believe it or not, silver is now more scarce than gold!?! So ask yourself, which of the two metals would be a better buy today for value preservation? 
Jake Wren

Home

Classified Ads