The Threat Of Hyperinflation

18June2010
In a free market system profits are passed on to shareholders, and losses are absorbed by the same.

The Federal Reserve creates a system where profits go to shareholders, and losses are partially absorbed by expanding the money supply. It is a a protectionist pact between government and a world banking cartel. Government gains centralized control of the economy, bankers gain the ability to expand credit infinitely, while protecting profits and socializing losses.

The "Elastic" inflation created by fractional reserve banking is what protects their profits; and it's also what fuels the business cycle, causing booms to go higher, and crashes lower. Early on the conspirators saw that if their plan was going to work, they had to steer the United States away from a commodities based currency.

The easiest way to explain a commodities based currency is to give a real world example of how one comes into existence. Anyone who's ever watched a prison movie can tell you that in the absence of what we traditionally think of as currency, anything of value can be pressed into service; case in point?

Cigarettes.

In prison, cigarettes are often used as currency. Those who don't smoke will still attempt to gain access to them, for their value to someone who does. They're small, uniform, easily stored, hidden and traded; all aspects of effective currency. As a commodity in constant demand, they make a perfect medium of exchange.

Assuming the rate at which cigarettes come into the system is a constant, the value of a cigarette should remain the same over time. If the ration of cigarettes were to suddenly jump - say the rations increased from a pack a week to two packs a week - each cigarette would now be worth roughly half its previous value. That's inflation. Too much currency chasing a finite supply of goods, and we can see that high prices are a symptom of inflation, not the cause. But if the prisoners smoke cigarettes faster than they are issued, the remaining cigarettes increase in value. That's deflation.

Traditionally the United States had a commodities based currency as well, only instead of using cigarettes, we used gold. When you think about it this made a lot of sense, for one thing gold is always in demand for its intrinsic beauty, people want to wear it on their fingers, and around their necks. It also has all of the characteristics of an ideal currency. It's divisible, portable, durable, and has the added bonus of a high value by unit of weight.

So initially the currency of the United States was gold and silver coin, and even when we began to issue a paper currency it was backed by gold bullion held at Fort Knox Kentucky. It was on a “Gold Standard”. One dollar was standardized as worth one twentieth of one ounce of gold, and could theoretically be exchanged for it at any bank.

But when the Federal Reserve was created, it was quickly realized that the value of a dollar could not be tied to any fixed amount of gold, if the money supply was to be made elastic. This prompted the transition for the United States currency from a commodities based currency, to a Fiat currency. Currency with no intrinsic value, but value based solely on the fact that the state says it has value.

It's lead to massive inflation since going off the gold standard. Those goods and services that could be purchased in 1913 for one dollar now cost more than 60 dollars to purchase.

How long until our money is worth nothing?