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By Root 803 0

fixed the price of gold at thirty-five dollars an ounce, and created a fixed exchange rate between all currencies of the world and the dollar. The Federal Reserve would store the world’s gold, and the rest of the world’s banks would store Federal Reserve notes as their reserves. Only foreign central banks were able to redeem their Federal Reserve notes in gold; individuals were denied this right. Since the right to trade is a natural right, the prohibition on gold ownership assaults that right.

The federal government would succumb to the temptation of printing more money than it had reserves in gold; and once the different international bankers became aware of this, they started to claim their share of the gold reserves. On August 15th 1971 came the nail in Bretton Woods’s coffin. President Nixon on that day instructed his treasury secretary to cancel the dollar’s convertibility into gold—only temporarily, he claimed. Recall Milton Friedman’s warning about the permanence of temporary government programs. This meant the dollar was backed by nothing, except the laws that made it the nation’s legal tender, and the government’s promise not to print too much of it. Naturally, massive inflation followed.

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Inflation and Its friends

Massive increase in the money supply, or inflation, by way of fractional reserve banking and a fiat-based monetary system (or a monetary system that has currency which is not backed by any intrinsic value and is considered money just because the government says it is; oddly reminiscent of legal Positivism) causes prices to rise as well as the boom-and-bust cycle. The people who benefit from this inflationary system are the ones who get their hands on the money first, the banks. The banks get to make their investments before the prices of assets rise in response to the increase in the money supply. By the time the money trickles down to the rest of the people in the economy, the symptoms of inflation will have begun to settle in and devalued money will mean the money has less purchasing power, which will cause the phenomenon of rising prices.

This inflationary system robs people of their savings. Every time the Federal Reserve expands the money supply through this system, all money that was already in circulation loses purchasing power, and the people who get their hands on the money first gain that lost purchasing power. Normally, the banks loan money to the government by purchasing treasury bills. Treasury bills have been one of the safest investments in the past since the federal government’s debt is guaranteed to be repaid with interest, by you and me, the taxpayers. The government can now decide what to do with this money, say, funding any one of its special interest projects, or even our collective welfare, if it feels so ambitious.

As you can see, it is the banks, the government, and the corporations the government favors that benefit from this system, while everyone else is robbed of their purchasing power in order to fund it. This is exactly what Jefferson predicted in a quote attributed to him: “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent [of] their fathers.”

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There is no difference between the Federal Reserve’s system of fractional reserve banking that inflates the currency to transfer your purchasing power to the special banking interests, government, and corporate interests and a thief who hacks into your bank account and removes funds from it. This inflationary system of theft that causes the boom-and-bust cycle makes it impossible for the average American to save for his own retirement (unless he converts his savings into gold and hopes the ghost of FDR in the White House at this writing doesn’t confiscate it). Prior to the abandonment of the gold standard, Americans could work and earn gold as their income, store it in a bank vault, and it