Is it true that the US dollar is "backed by nothing"? by Harry P
Friday, January 11, 2008
It is a common assumption by those who try to explain the problems of our current US monetary system (Fiat dollars), controlled by the private bankers at the Federal Reserve Bank (FRB), to say that our money is created out of "thin air" and is "backed by nothing".
I believe that these terms are too vague and cause a lot of confusion about the argument that the US dollar is not sound money. Fiat Money is simply a paper currency made legal tender by law and not backed by gold or silver. What's so bad about that?
The US Dollar is "backed by nothing". I do not believe that this is a true or accurate assessment of fiat money. If the USD was truly backed by nothing, I doubt it would have continued to be accepted as the "world currency" even after it was divorced from any redemption in gold or silver. It continued to be accepted as such because the fiat dollar is actually backed by something even greater than gold; it is backed by the labor, wealth and property of "The American People"!
What does this mean? This may be great for the FRB bankers and their world banking counterparts. It may be great for governments receiving our dollars as "aid". But it has been and will continue to be at the expense of the property and freedom of every American. Why not accept the US dollar as the world currency when it gives the rest of the world a chance to "Own Us!!"
The US Dollar is created out of "thin air"! This is only partially true. If you mean that the FRB and our government central planners can create new money anytime they want, then the answer is yes. But, since the dollar is actually a claim against the assets of the American people, then no, it is not "thin air". Every new dollar creates new debt against our very livelihood.
I have changed my talking points about the elitist central planners; the FRB bankers and the corrupt government official in the pocket of big business and the military industrial complex to this:
"Ever since gold was removed as the backing of our currency, your personal labor and property have taken gold's place as collateral for our national debt. Every time the Federal Reserve Bank creates new money, it is a claim against your labor and property. It's not a coincident that the IRS was created at the same time as the FRB. It is their agency to collect your payments against your indebtedness.
Without a sound monetary system, we become the chattel for our national debt (9 trillion dollars and counting). This represents about $30,000 for every man, women and child in our country. That's $120,000 worth of debt placed directly on the shoulders of a family of 4. We have become property guaranteeing payment to the world bankers and other nations accepting our currency." (End)
When a person, business or a country's debt goes beyond its ability to pay, it will sooner or later face bankruptcy. We are already seeing a huge rise in home foreclosures across the country caused by run-away inflation by new dollar creation by the FRB. The bankers are collecting on the debt by taking the very homes of our fellow Americans (as predicted by Jefferson those many years ago). This will be one of the greatest transfers of wealth from the middle class to the central bankers and government central planners in history.
I think that one of the most critical issues of the 2008 Presidential campaign is the fall in value of the US dollar in the world currency markets. If this trend is not reversed, the United States will become a "second rate debtor nation" to the rest of the major world powers, who by the way already hold a large portion of our financial obligations. This most likely will lead to the end of our sovereign nation replaced by some United Nations type government. What we would never lose in war, we will lose in bankruptcy.
Of all the Presidential candidates, only Dr. Ron Paul will even discuss the issue of sound money. In every debate other candidates actually try to make fun of Dr. Paul about this issue (the debates he isn't excluded from!). After Iowa and NH, I'm not so sure the American people have suffered enough to see the truth but they will come to see the truth one way or another.
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The US dollar is backed by the debt created by the government in name of taxpayers. This debt is with the actual taxpayers or to foreign governments.
The US government issues bonds, which are promises to pay a certain amount in a certain future date. These are sold at a discount to holders who can in turn cash them in the day they mature. The only thing the government has to guarantee those bonds are future tax revenues.
The only thing that keeps the Dollar going is that there are too many (and I mean too many -- I think over $7 trillion) outstanding government bonds extending out to about 30 years.
Also, currencies around the world are paired to the dollar, which obligates the foreign governments to hold dollar reserves for trade.
There are those (I'm not saying I'm one of them) who believe that the whole Iraq war part 2 was triggered by Saddam's threat to start accepting payments for oil in Euros only, which would cause consumer countries to have to convert good part of their reserves from dollars to euros, flooding the market with dollars and forcing an incalculable devaluation of our currency.
(The dollar) is backed by the labor, wealth and property of "The American People"
That kind of makes sense, but between the 80's and 00's, we've tripled the national debt. So, does that mean our money is 3 times better today then it was in the 80's? Maybe I'm not thinking of this the same way. Does the debt matter? Will it really ever get paid back? And if we did pay it back, wouldn't it result in less money in existence?
If our money isn't three times better than it was in the 80's, then does it really matter if we pay it back?
If we don't pay it back will people still loan us money?
Do people really loan us money or do they just take our trade deficit dollars and move it from their checking account at the Fed to a savings account at the Fed and thus there really is no "new" money being created, it is just moved from the left side of the T account to the right side of the T account. At which point are we just on the hook for the interest charge?
Why do we pay interest on the debt anyway? Why can't the government just spend the money into the economy and using taxation create currency demand?
It seems to me that the "system" is gamed for profit, but not by you and me.
Posted By: Roger Stearns
Date: 2010-12-11 09:51:19
The most easily accessible quantifier of the U.S. dollar is the U.S. Dollar Index (USDX) which rates the value of the dollar against six european currencies, using an abstract equation. Even against these "loser currencies" the dollars continues to lose ground. If the dollar is to continue, we will have to go back to some semblance to the gold standard. This will happen.
Posted By: Salih Muhammad
Date: 2010-12-31 15:17:26
I really want to thank you for explaining this in simplistic terms. I now understand the reality of debt concerning the American citizen. Do you think the permissibility of immigrant workers allows the government alternative means to collect on this debt? I am curious to understand how many other issues are tied in with the repayment of a loan that I didn't even sign for....