Letâs talk about money greenbacks, bucks, Benjaminâs, C-notesâthey’re all slang for the U.S. Dollar. Hereâs a shocker for many readers, what we call money today wonât be money forever. In fact, every paper currency ever printed has failedâ when given enough time.
Our Founding Fathers understood this. They created Article I, Section 10 of the U.S. Constitution which explicitly forbids the states from issuing “bills of credit” (promissory notes) or making anything but gold and silver coin âlegal tender”.
Last time I checked, there were no $20 Gold coins of $1 Silver Dollars in circulation. Today, a U.S. Dollar bill is really nothing but a piece of fancy printed paper with some anti-counterfeiting threads inside. How do we know itâs money? It doesn’t say itâs a U.S. Dollar anywhere. In fact it says itâs a FEDERAL RESERVE NOTE.
The Feds IOU Replaced Money Long Ago
This paper bill we call money today is really an IOU from the Federal Reserve! Yes, itâs money we can spend. It works today, but it has no guaranteed future valueâ not if we print them up by the trillions.
In order for money to function well as a medium of exchange, it needs certain characteristics:
- Scarcity establishes money’s value.
- Easily recognized and acceptable.
- Canât be easily copied or counterfeighted.
- It must be portable and transferable.
- Good money must be divisible.
- Stabile money acts as a store of value over long periods of time.
Real money is, among many other things, a commodity. The more of anything you have, the less valuable it becomes. Check this graph of extremely rapid money supply growth. It forecasts how much less our money will be worth in the future.
Never Let A Good Crisis Go To Waste
In any crisis, Washington sees opportunityâ the opportunity to spend more and more of the people’s money. Seems like theyâve made the decision, âWe’ll worry about destroying the U.S. Dollar later, we must fix the COVID Pandemic crisis today.â
The recent explosion of the M2 Money Supply due to the Covid Pandemic crisis excuses politicians for spending massive quantities of new fake money. Itâs free money to the government without raising taxes. What no one wants to admit is the vast influx of fake money virtually guarantees the U.S. Dollar will be worth less and less and less over time.
Americans Lose Buying Power
To replace the economy that was closed down for the Coronavirus Pandemic, the Federal Reserve injected a whopping $6 Trillion Dollars into the monetary system. And thereâs more fake money to come!
On top of that, Fed officials have promised to hold interest rates near zero. Does this risk future inflationâ or guarantee inflation?
The Government Always Counts on Inflation
Inflation is not new, itâs always been a part of government moving from Gold to paper money. Even though inflation has been officially declared to be low, even modest inflation destroys personal wealth over time.
This interesting chart is a simple expression of how much less a $100 bill buys over a long period of time.
âInflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.â Milton Friedman stated the facts succinctly.
Inflation is an intentional government action which uses newly created money to pay for its spending plans. Inflation is always a hidden tax on everyone. The middle class and lower income groups are hurt worse by inflation.
Warningâ Danger Dead Ahead for the Dollar
No nation in history has ever attempted to produce so much inflation in so short a period of time. We believe the Federal Reserve will be successful. They will produce inflationâ lots of inflation. Then, they wonât be able to control inflation, the same problem they had in the 1970s-80s.
I wish it wasnât so, but…
It’s most likely that the Federal Reserve will create another Trillion Dollars or two before the pandemic ends. Congress will find a way to spread the helicopter money across their friends, lobbyists, donors, drug companies, et al. Some newly printed money will inevitably find its way down to the unemployed and victims of the Corona Virus shutdowns.
However bad the Covid virus crisis may be, this is not the way to manage a country. This is not the way to abuse the U.S. Dollar our trading partners depend upon. Inflation is not the way to force a hidden tax on Americans.
Inflation is imminent, be prepared. Buy Gold, buy Silver, buy soon.
Greatest Inflation Quotes Ever
We end this article by sharing some thoughts on inflation from the best minds in financial history.
“The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” ~ Ludwig von Mises
“Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.” ~ Ayn Rand
“Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.” ~ Warren Buffett
We’re a nation living on borrowed money and borrowed time. Only Gold is inflation-proof money. Please prepare your finances accordingly.