Most people are not aware of this, but the U.S. dollar has lost 97% of its value since 1913 – the year the Federal Reserve was established. That marked to Government’s unofficial systematic program of de-linking the dollar from gold and the beginning of the modern fiat currency era. U.S. dollar.
HOWEVER, the first dissection of the dollar from the gold standard actually occurred during Lincoln’s Presidency, when Lincoln signed the Legal Tender Act, which authorized the use of paper notes not backed by gold/silver (specie) to settle Government war debts. The Government ran low on gold/silver and the Act enabled the Government to print “greenbacks,” or legal tender notes not backed by specie in order to pay its bills.
And so it began. Lincoln was really the first modern fiat currency culprit, not Wilson or FDR or Nixon. Perhaps one of the best ways to illustrate the ability of a gold standard to stabilize the financial system is with a long term chart of the Dow/gold ratio (Source: sharelynx.com, edit is blue is mine) – click to enlarge:
As you can see from the ratio graph, the Dow/gold ratio was very stable between roughly between 1 and 1.5 prior to when Lincoln signed the Legal Tender Act. After that, you can see the ratio “leaks” higher until 1913. After the Fed was established – which is when I believe the gold standard was officially destroyed, the Dow/gold ratio looks like the heart monitor screen of heart attack patient on meth.
I wanted to present this history of fiat currency by way of introducing Part 3 of a phenomenal series about the demise of the U.S. economic system by Brandon Smith of Alt-Market.com. In Part 3 Smith outlines the case for why the catastrophic issuance of Government debt is going to shatter our system:
This lack of structural integrity and stability is hidden from the general public quite deliberately by way of central bank money creation that enables government debt spending, which is counted toward GDP despite the fact that it is NOT true production (debt creation is a negation of true production and historically results in a degradation of the overall economy as well as monetary buying power, rather than progress). Government debt spending also disguises the real state of poverty within a system through welfare and entitlements.
It was the signing of the Legal Tender Act that started the fiat currency snowball that has turned into a deadly avalanche of Government debt. It is also the issuance of this debt than enables the elitists to transfer massive amounts of wealth from the middle to class to themselves.
I highly recommend reading the entire series, but here’s Part 3, which in and of itself describes the horrifying mechanisms being used to destroy the United States by unfettered greed of politicians and bankers: One Last Look At The Real Economy Before It Implodes – Part 3.
The true patriots and heroes in this country are the Edward Snowdens and Ron Pauls. These are the people making a last ditch effort at trying to save what was once a great country.