US “Toilet” Paper Money!

In my search for truth probing through the devious & deceptive financial maze of the United States of America, utter shocks were uncovered & revealed. This article is intended for the average person in Main Street, who are now bearing the brunt of the financial crisis, still hopelessly & foolishly not knowing that they have been deceived & manipulated largely by the greed & irresponsibility of the big guys in Wall Street.

For ninety-five years now, not only those in Main Street, but globally too we’ve been led to believe in the wealth & strength of the United States of America. The US government was ably & irresponsibly issuing “fiat” money – “government issued coupons with expiration dates printed in invisible ink” (Darryl Schoon). If product has a “use-by” date or an expiry date, you would know what to do with it.

Environmental experts recently called toilet paper

“one of the greatest excesses of our age.”

In the process, the country has been transformed from one of productivity to that of indebtedness. “While productivity is doing more with less, fiat money allows governments to do more with nothing. Fiat currencies are a way for governments to spend what they don’t have; and while counterfeiting by individuals is a crime, passing government coupons off as money is legal because governments make the laws.” (Darryl Schoon). In truth, the issuance of fiat money by governments is a white collar crime & yet illegally made legal. Isn’t it kind of double standard?

From the Financial Sense University, we learn that “Fiat money is oxymoron” in which “faith unfaithfully kept it falsely true”. In simplistic sense, fiat money is useless, likened to the toilet paper we daily use. It is only as good & valuable as the extent with which the issuing body make it legal, & the faith placed upon it from within & without.

In economics, traditional money is a means of exchange. It’s redeemable in gold or silver or any set commodity. Thus the amount of money in circulation is backed by tangible assets. Not so in the case of fiat money. The only thing that gives the money value is its relative scarcity and the faith placed in it by the people that use it.

The present day classic example is drawn from Zimbabwe, where the government is broke – hyper-inflation exists & where unlimited printing of money is the order of the day & is in surplus circulation with denominations running into the millions or more.

If history is anything to go by, fiat money, to put it kindly, has been one of failure. Every fiat currency since the Roman times had ended in devaluation & eventual collapse – for the currency as well as the economy of the country. During the Song Dynasty, the Chinese experimented with paper money which however was redeemable. It took several hundred years but finally abandoned due to unacceptable levels of inflation as money printing exceeded production.

The fundamental flaw in a fiat monetary system lies with the human nature where greed sets in & there is no moral restraint on the amount of money that can be printed, allowing unlimited credit creation. If on an individual basis, you go on a credit spending spree, thereby creating an unlimited amount of credit, you’ll end up with unserviceable debt & consequently default. Sadly, both American individuals & the US nation are accustomed to credit & addicted to it.

When the going gets rough, the rough start printing. Governments cannot be trusted not to print too much money when it is not linked to a scarce commodity such as gold or silver. This is a case of being over-extended without any means of servicing as on the individual or national basis & it can only spell disaster.

For thousands of years gold & silver have demonstrated their utility. Unfortunately, governments historically have either debased & diluted the amount of gold & silver in their coins or “attempted to circumvent gold & silver entirely by mandating the use of paper money, sic fiat.” US unilaterally broke off its tie to gold standard during the presidency of Richard Nixon in 1971.

The imminent danger is implosion, contrary to explosion, as in a Blackhole in outer space. It’s most difficult to say exactly when this system will implode; but implode it most certainly will. The question is just how far can you push or stretch such a system without finally collapsing in defaults, deflation & depression. This will be followed by an accelerating distribution of wealth culminating in social unrest.

What’s most amazing & little known fact is that the Federal Reserve is not part of the US Government. It is in fact owned by a collection of the world’s biggest banks & the biggest family names like Rothschild & Rockefeller in Britain & America. Alan Greenspan (now since February 2006, Ben Bernanke), was but a pawn of the banks & the politicians – pulling out all the stops to maintain the illusions of fiat money credibility. While the system is doomed, there is still time for individuals to act quickly & save themselves. The politicians & bankers, however, may stop at nothing to keep the charade going on longer.

In retrospect, America has cheated death with its currency many a time in the historical past by alternating its monetary system between gold & silver with paper money. Whenever commodities run scarce, resources low & spending forever mounting, fiat currencies are a way for governments to spend what they don’t have. Credit-based or fiat money issued by central banks turns into debt with accruing compounding interest to be paid by the productive members of society, thereby draining & depleting its productivity.

The irony of it all is while the productive members of the society (that is, workers, businessmen, farmers, savers & taxpayers) are made to pay for the mounting compounding interest, the non-productive members of society such as bankers & politicians are joyously milking it. In a fiat money society, savers are unfortunately penalised while speculators are rewarded. The nation must wake up from its seemingly peaceful slumber lest it becomes its permanent slumber.

US has largely turned itself into a “self-service” nation which is uniquely destructive & subtle deadly in nature. It has bred a “speculative economy” through the establishment & growth of “financial services” giants such as Goldman Sachs, JP Morgan Chase, BoA, Morgan Stanley, Lehman Brothers, Wachovia etc. When these finally collapsed, their CEOs & CFOs were enjoying their “self-service” benefits by way of bonuses without the least of compassion for the economy.

Suffice to mention here in brief that US has roughed its financial way through its historical past – the American Civil War, the two World Wars, the Korean War, the Vietnam War, now with Iraq & Afghanistan chocking at its throat. Needless to say, in all of these, there have been insurmountable financial strain, economic waste, draining & depleting of the nation’s productivity & resources. The US is a bankrupt nation today, a shadow of its former greatness & power. Wealth is power in a stored stage. It can exacerbate suffering more than it can alleviate it.

This is turbulent changing time that we’re living in. The power in the world’s financial hegemony is shifting with the rise of one nation & the decline of another. Changes are inevitable as surely with the sun rise & the setting of the sun. Coincidentally, the rising is in the East with the setting in the West.

The Chinese have a saying about an “old tiger”. Its roar is still there, fierce & ferocious, but it is weak, no longer fast & quick in capturing its animal prey. That’s when an old tiger becomes most dangerous to mankind as it turns to be a “man-eating tiger”.

Prominent Austrian Economist Ludwig von Mises from the Austrian School of Economics has long held that no sound economy can long endure under fiat money, arguing in his book “Human Action” that, “What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.”

Will America survive? Will it go on feverishly printing its “fiat” money? How can the world keep on having faith in its currency?

Paul Chong

A Chinese by Descent

An Australian by Consent

Sunday, 3 May 2009

7.05 am

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