Real Money versus Fake Paper Currency

NOTE:  This article was written to give young people some basic knowledge on money, or currency. Many central banks around the world have printed money recklessly over the past 10 years or more. And the lack of knowledge we have about what is real money and what is not is causing us to see the value of our savings and retirement accounts drop — by a lot.  Anyone with any type of savings or retirement account should be angry about this.

Go ahead. Keep Spending. Spend until that paper is worthless.

We Americans have become dumb to the value of money. Or should it be called currency?

There is a difference between the two terms. Money is real and has value. The value can change over time but it’s real value, and the value is never lost. As an example, precious metals like gold and silver are considered money. On the other side of the fence is currency. It, too, has varying degrees of worth, having a higher value one day than the day before. But overall, currency ultimately loses it’s value over time.

Look at our currency — yes, the dollar bill. The value of it fluctuates a lot; and over the years it has lost much of its value. The reason is that there is nothing backing up its true value other than the promise of the government. Most currencies that have lasted the longest have been backed by something more than just a promise. Usually, that which backs currency is gold – in other words, money.

Up until 1971 the U.S. was on a gold standard, which means that the paper dollars you had in your pocket were worth the equivalent amount in gold. If you had one dollar in your pocket, you would be able to turn that dollar in for one dollar’s worth of gold. The U.S. government had a reserve of gold stored in Fort Knox, Kentucky or in one or more of the Federal Reserve Banks across the United States. President Nixon took the US off the gold standard, thereby beginning a devaluation of our currency.

At that point, in 1971, the US dollar was no longer money, but just currency. And it has been continuously devalued over time. By taking the dollar off the gold standard, the government gave itself permission to print more dollars. This is where the devaluation comes into play. As more currency is printed and placed into circulation, the less it is worth.

Notice in the last 8-9 years that the government, in coordination with the Federal Reserve, has printed trillions of dollars. They called it quantitative easing – or QE. This ultimately causes inflation because as more currency is printed, the value of it drops, and the prices of the stuff we want and need goes up. As economists say, “too many dollars are chasing the goods that are available.’’

As a currency loses value, you lose purchasing power. Common sense, right? Nope. We Americans have too much faith in the paper we have in our pockets without the financial knowledge to realize that our currency is worth a lot less.

Now look at real money. The price of gold was approximately $35 per troy ounce when the U.S. was taken off the gold standard. Now, in 2016, the price of gold is over $1,250 per troy ounce. That tells us this – the value of our paper currency (dollars) has dropped drastically compared to the price of real money (gold).

Remember, as of now, our government promises that our currency is worth something. We are not told that it has been devalued. We have to find that out when we go grocery shopping.

How long can the US government keep that promise? We have $19.5 trillion of debt. With that number continuously on the rise, it won’t keep its promise too long.