As I mentioned in my New Year note I am going to be putting out a book that I wrote last year in this format. If you are so inclined, you can print up each note and after about 7 or 8 notes you will have the existing content of the book. As I also said, I wanted to make this open-ended so that as new information becomes available it can be added.
Things are changing very rapidly and it appears that the endgame is rapidly approaching. I believe history will be the most kind to those who stare reality in the face and prepare to take it on.
This book is a look at the history of the US dollar, where we stand now and the plans of those “in charge” to issue in a new system which could, an apparently does, lead to “money” that can not only track everything you buy but can also be programmed to work here and not there, allow you to buy “approved” goods and not others and can be programmed to EXPIRE.
I will start with a history of the US Dollar which many may find a bit dry, but I believe to understand where we may be going, we need to first understand where we have been. Remember, those who have no remembrance of history are doomed to repeat it.
In the next few chapters, we will look at current circumstances and some likely outcomes and finish up with what we currently know about the planned rollout of CBDCs (Central Bank Digital Currencies) that have been mandated by the BIS (Bank of International Settlements aka “the central bank of central banks) by 2025.
The clock is ticking so I will attach the chapter “The Life and Death Of the US Dollar to this note.
If anyone would like to discuss any aspect of what I have written about I am available just about every day during business hours.
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Chapter One
The Life and Death of the US Dollar …
Every paper currency that has ever been issued has been “overprinted” by those in charge. There are many reasons for this, but it appears that the main reason is that it is just human nature to want to get something for nothing. Of course, there is no such thing as something for nothing but, as we have seen play out, it is extremely hard for the average guy or gal to understand that as money is conjured up out of nowhere creates NOTHING but purchasing power so those “in charge” can lavish gifts on those who donate to their cause and buy votes with the largesse. Then, over time resources become scarce, prices rise and as confidence is lost in the currency people bolt for the exits to purchase things that have VALUE rather than a declining in value currency. In many instances like Weimar Germany, Argentina, Brazil, and many others the decline in value is gradual and then sudden. This is one of the reasons I say I would rather be years early than a second late.
While many here in the USA think that “it is different here” and “America is exceptional” it is not different here and as we can clearly see now- while we MAY have been exceptional, we have certainly lost what made us great in the first place.
America was GREAT because America was good. We worked together. We supported each other. We listened to differing opinions. We wanted to know the truth. We taught our children important things like reading, writing, arithmetic, spelling, history, biology, geography and even homemaker skills. Today we are as divided as I have ever seen. Nobody wants to take the time to understand others- they just want to be “right”. I am not even going to go into the horrors that are taking place in our schools that are setting us up for a lost generation. That is a whole different book.
I believe that one of the reasons currencies fail is that, as that currency is printed up in seemingly unlimited amounts, the population likes the initial sugar rush and lets those “in charge” get away with debasing their currency. When you have an educated and well-meaning society those doing the conjuring up of cash would be called out and it would stop long before it got to the ridiculous heights that we see today in virtually all developed nations.
We appear to be near the end of the fiat US Dollar experiment, and I am writing this as a history of the dollar and to examine what appears to be coming- VERY SOON.
While the first official “money” here in America was the Continental, there were currencies issued prior to our independence. In 1690 the Massachusetts Bay Company issued COLONIAL NOTES to fund a military. Other colonies started to issue notes also. This produced a dilemma. The notes were printed up and signed. Anyone who could forge the notes could counterfeit them easily and ultimately could destroy the currency.
Since this was an obvious problem in 1739, Benjamin Franklin started to issue Franklin’s UNIQUE COLONIAL NOTES. He used leaves that were raised so that the notes would be VERY hard to forge since the leaves had their own unique fingerprint.
Our forefathers were so aware of what a danger counterfeiting was that the penalty was DEATH. Today we allow a private corporation (The Federal Reserve) to counterfeit with impunity. This is just one reason why history is so important- to LEARN from past mistakes.
In 1766 the Continental Currency started to be issued by the colonies and each colony had their own design which signified the individual colony’s values and virtues.
In 1775 the Continental made its debut. It was created to fund the Revolutionary war. Another important lesson was learned at that time. The English, whom we defeated in that war, knew all too well that forging the Continental would lead to a devaluation and make the war that much harder to finance. As they went on a printing spree they forged enough Continentals to greatly weaken its purchasing power. This led to the saying “Not worth a Continental”.
Ten years later in 1785 the United States officially adopted the $ sign. In 1791 Alexander Hamilton established the Bank of the United States to create a system of credit for the government and to facilitate borrowing and lending.
In 1792 the Coinage Act of 1792 was ratified by the second US Congress. The act specified the following:
- Gold Eagles $10.00 247 4/8 grain (16.04g) pure or 270 grain (17.5 g) standard gold
- Half Eagles $ 5.00 123 6/8 grain (8.02 g) pure or 135 grain (8.75 g) standard gold
- Quarter Eagles $ 2.50 61 7/8 grain (4.01g) pure or 67 4/8 grain(4.37g) standard gold
- Dollars $ 1.00 371 4/16 grain (8.02g) pure or 416 grain (27.0g) standard silver
- Half Dollars $ 0.50 185 10/16 grain (12G) pure or 208 grain (13.5g) standard silver
- Quarter Dollars $ 0.25 92 13/16 grain (6.01g) pure or 104 grains (6.74g) standard silver
- Dimes $ 0.10 37 2/16 grain (2.41g) pure or 41 3/5 grain (2.7g) standard silver
- Nickels $ 0.05 18 9/16 grain (1.2g) pure or 20 4/5 grain (1.35g) standard silver
- Pennies $ 0.01 11 pennyweights (17.1g) of copper
- ½ Cent $ 0.005 5.5 pennyweights (8.55g) of copper
As you can see, all of these coins had real tangible value. The real money of the USA was gold, silver and copper. The paper currencies were actually exchangeable for a tangible asset (gold or silver) and not on the reliance of someone else to repay a debt. Section 19 of the Act made the penalty for debasing these coins DEATH. They took the VALUE of money seriously then!
In 1861 and 1862 the US government issued “$10.00 Demand Notes”. Each Demand Note was immediately redeemable for gold at seven banks around the nation.
In 1862 the Treasury issued United States Notes. These were issued to replace the demand notes. They were issued in denominations of $1.00, $2.00, $5.00, $10.00, $20.00, $50.00 and $100.00. These were known as “Legal Tender Notes” and continued to circulate until 1971 when Richard Nixon severed the ties between the US Dollar and the ability to exchange it for gold.
In 1863 Congress established a national banking system and authorized the US Treasury to oversee the issuance of National Banknotes. This set Federal guidelines for chartering and regulating national banks. It authorized those banks to issue national currency secured by United States Bonds.
In 1865 the US Secret Service was rolled out to deter counterfeiters. In 1869 the US centralized the printing of United States Notes at the Bureau of Engraving and Printing. In 1877 Congress passed a mandate that all engraving and printing of notes, bonds and all securities of the United States be done by the Department of the Treasury.
In 1878 the US Treasury issued Silver Certificates. In 1890 the US Treasury began issuing Treasury Notes.
So far- so good. The country was on a solid and sustainable path with an asset-backed currency and not a debt load that would weigh it down.
This would all change in 1913 when the Federal Reserve Act allowed a private central bank to issue Federal Reserve Notes- which are actually a unit of debt owed back to the bankers rather than an asset-based unit. The first $10.00 note was issued in 1914 and in 1918 they started issuing larger denominations like $500.00, $1000.00, $5000.00 and $10,000.00. The $10,000.00 Note was never in public circulation but was used for large bank to bank transfers.
In 1928 serial numbers were added to the banknotes.
There was another major event in 1933 when FDR confiscated, or you could say nationalized, the gold held by American citizens. He made it illegal to hold any more than a few ounces of gold. When he took that action (Executive Order 6102) gold was priced at $20.67. When the action was mostly completed the price of gold was changed, as part of the Gold Reserve Act of 1934) to $35.00 per ounce. This appears to be the first major reduction in the purchasing power of the paper dollar.
Through the years there have been many changes to the design of our currency, but the major change is in the ability to have a wealth-based asset that holds value versus what we have now- a unit of debt.
A major change- and one that has led to our extraordinary privilege- took place in 1944 at Bretton Woods. As World War 2 was dying down most of the manufacturing base of Europe had been destroyed while the US industrial base was mostly unaffected. A lot of gold was moved from Europe to the USA because of a fear that the German Blitzkrieg would overrun Europe and the Nazis would steal the gold. This led to the USA holding most of the gold and was one of the few economies that were not destroyed in the conflict.
Since this was the case, it was agreed that the US dollar would be the world’s reserve currency. The USA promised to peg the US dollar to gold at $35.00 per ounce.
The system held in place with relative calm into the late 1960s. At that time the USA was involved in Viet Nam and also was involved in a “war on poverty”. This made it necessary to print up a whole lot more money than the $35.00 gold price could handle. As foreigners (mainly France) recognized what was happening they started demanding that their dollars be exchanged for gold at the $35.00 price. At that time the vaults were starting to empty, and it was obvious that if it continued the jig would be up.
This was really hammered home when, in August of 1971 Richard Nixon “temporarily” suspended the ability of dollar holders to convert the dollars for gold. This was mainly done for those who were settling international trades because in 1963 Congress prohibited the redemption for us regular folks of dollars for gold. As of 1971 no United States notes have been issued- only Federal Reserve Notes.
Keep in mind that, through all of this time, the dollar held its value pretty well. Debts and deficits were under control for most of the time excluding the war years and the additional expenses that come with that. Even with two world wars, we were able to pay down that additional debt over time.
It is not like the gold standard was suspended and all the debt was magically created. The actual act of decoupling from gold led to a situation where there were no more constraints on how many dollars were conjured up because now it was a totally fiat (backed by nothing) currency. The only thing keeping the central bank from printing all they wanted to, was the fear of inflation. It started out slow in 1971 and built up steam through the years as central banks went totally off the rails and instead of just printing money they got into the business of trying to manage the economy by buying bonds, buying stocks and manipulating prices of virtually everything to supposedly help the economy.
When inflation started to get out of control interest rates were raised to a level I have only seen once in my life. I remember 12% CDs for 5 years and 18% money markets. I also remember that as a young fellow at that time and just starting out- I paid 21% for a car loan and 16.75% on our first mortgage. OUCH!
Once the central bank- led by Paul Voelker at the time- had stemmed the tide of the falling dollar rates were lowered and basically, the bond “market” has been in a bull market for most of the time in the past 50 years. It appears that with rates and inflation rising the bond bull may be over.
It took 204 YEARS to amass our first TRILLION dollars in debt. Most of that came after the 1971 de-linking from gold.
Just to give you an idea of just how profound this is the total estimated cost of World War 2 for the USA was $288 BILLION.
Fast forward to today and our last TRILLION in debt (that they admit to) took one MONTH to amass. This is the type of outcome that happens when there is no fiscal discipline imposed upon those “in charge” as they run amok and “print” us to oblivion.
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
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