Fooling Everyone but the Experts

United States Paper Money

By Robert Ringer

Having taken firm control of the country's money reins, the U.S. government did not wait long to make its next major move. In 1917, it set the minimum reserves that a member bank had to keep on deposit with the central bank at 10 percent. The 10 percent was retained by the Federal Reserve in gold, but the reserve ratio meant that banks could loan out ten times as much in United States paper money ("notes," "currency," etc.) as they actually had on deposit in gold.

In other words, 90 percent of the receipts that banks could loan out were fraudulent! (Keep in mind that Federal Reserve notes, or "dollars," technically were only receipts for gold owned by others.)

The government arbitrarily printed these receipts and allowed member banks to lend them to unsuspecting individuals as though they were money. People, in effect, were paying interest on counterfeit receipts — receipts for gold that did not exist. The evolution toward United States paper money was in full swing.

The next big step in the debauchment of our money was when the government, in the early 1930s, abandoned the gold standard. Gold receipts (which by this time were referred to by everyone as "dollars") could no longer be redeemed for gold. In addition, the government stopped printing gold receipts altogether and replaced them with "Federal Reserve notes."

Again, government passed a law, this one forcing people to recognize Federal Reserve notes as "legal tender." Citizens had no choice but to accept pieces of paper — fiat currency — as the legal money to be used in all transactions.

The reason a government goes off the gold standard is that it allows it to increase the supply of paper money more easily. People become confused, because there is no way to judge the value of that paper money.

But financial experts are not confused. As soon as the U.S. went off the gold standard, the price of gold in the open market zoomed upward. The experts realized that gold was far more valuable than the United States paper money.

In less than 150 years, consider what had taken place:

1. Government entered the money business, in competition with other minters and warehousers.
2. Government outlawed all competitors and claimed a monopoly on the country's money system.
3. Government established a so called Federal Reserve System which, among other things, gave it the power to hold everyone's gold in its vaults and issue receipts far in excess of the value of the gold it had on deposit.
4. Finally, government made it illegal for people to get their own gold back and declared United States paper money (as opposed to receipts for gold) to be the legally recognized money of our country.

It was the most protracted theft in history, and a superb example of the power of gradualism. It had taken one hundred and fifty years for government to complete the appropriation of the American people's gold. But from that point on, it was in a position to speed things up considerably. The U.S. government now had all the gold. It could print paper money at will. And it was in total control of the money system.

Coming up xext: Life after the gold standard.

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