“It is well enough that people of the nation do not understand our
banking and monetary system, for if they did, I believe there would
be a revolution before tomorrow morning.”– Henry Ford.
Here lies the whole problem – people do not understand how this nation, or for that fact the world, operates its banking and monetary system. We place our trust in institutions and organizations that we know little of. We readily accept what we are being told through advertising, the media, religious leaders, sociologists, health care professionals, academics and elected officials. That is until something of cataclysmic event occurs, then we go looking for the truth. This is the result of our broken human nature that seeks out the path of least resistance. What I offer may be over simplified, but I hope it will serve as a basis for the beginning of some understanding to the issues we face.
As a sidebar to this discussion, you should be aware of two books that are extremely important to understanding a lot of the back story of what is going on in today’s society. The first is “Crystallizing Public Opinion” by Edward L. Bernays first published in 1923. He was the nephew of Freud who took his uncle’s principles and developed them into what we now know as advertising. Interestingly, this book was used by the Nazi movement to form its propaganda machine and it was used by the founders of CBS News in shaping that organizations delivery of modern television broadcasts. Bernays is considered the father of advertising and is studied today. Another important book by Bernays is “Propaganda” published in 1928. A quote from Bernays that I find all telling is this one “The conscious and intelligent manipulation of the organized habits and
opinions of the masses is an important element in democratic society.
Those who manipulate this unseen mechanism of society constitute an
invisible government which is the true ruling power of our
country.”-Edward Bernays, Propaganda
Bernays served on Woodrow Wilson’s Committee on Public Information helping to transform the peace platform to the war machine against the German Kaiser. He also was the one who shaped most of the advertising concepts behind the American Tobacco Industry.
The other author to explore would be Marshall McLuhan. His book “Understanding Media: The Extensions of Man” gives great insight into how technology influences and shapes thought – ancient and modern. This book has a tendency to be a little overwhelming but McLuhan dealt with that in his next book “The Medium Is the Message”. These books where written during the late 50’s early 60’s. You can see his influence today through the misquoted “the media is the message” and the phrase global village. These are both McLuhan terms used to describe the impact of our electric and electronic age.
Now back to the original subject.
Our financial system is a totally artificial environment. There is no real value to the currency/bills/notes that you have in your wallet, in the bank, in stocks, bonds or other securities. Its value is only that which you and financial institutions place on it. It is not backed up by any gold or silver. It is not backed by any real commodity. It is based solely upon people’s agreed upon trust. At this point if the government is in need of more cash, they simply print it or borrow it from another country’s stock pile of paper. The world economy is based upon paper. That is why speculators in the oil market never have to exchange actual cash for oil. They “buy” a piece of paper for the future possible price of oil per barrel, then can turn around and sell that piece of paper to another institution or person without ever having to take delivery of the oil. Yet what happens is that the speculator can amass a large amount of “money” in a short time to buy actual goods.
To help with this concept get a dollar bill out and take a good look at what it says. The telling indicator of our economy is printed right there. Few of us ever really look to see what is printed on it other than what president resides on it and what denomination it is. The first thing to look at is the banner in the border that states that this is a “Federal Reserve Note” . The word note is what I want to focus in on.
According to Webster’s Dictionary fourth definition of what a note is: ” A piece of paper money (especially one issued by a central bank)”, and the ninth definition is “A promise to pay a specified amount on demand or at a certain time”. Nowhere is there any mention of actual value. Usually in context a bank note is one that you sign when you want to buy something that you do not have enough personal items of value that you can trade in kind to purchase a new item. The note represents a promise by you that you will give the person(s), government or institution back an item of equal or greater value in repayment for letting you use their things of value. The note states that if you do not repay that amount back in the set period of time, at the specified times of payment, plus what ever terms of interest set between the two parties; they have the right to claim that property or property of equal value as payment. At that point they can then sell or trade that item to whomever has the ability to pay for it. Notice that in this transaction there is something of value or something real to be claimed.
The concept of a note was to bring about easy trade. Rather than carrying large amounts of goods, gold, silver or items around so you could purchase something, you just took one of these notes from a place that held your items in a secure place, so that the other party could collect them or trade the note to someone else for other goods and services. The note was the promise with a guarantee that something of real value was backing up the piece of paper, script, money, bill or note. You could go get it. But we still haven’t gotten to what our money actually represents. We assume that it is something of value that is backing it up.
The second item that is interesting on the dollar bill is on the left hand side just under The United States of America in very small letters “This note is legal tender for all debts public and private”. Back to the Webster’s Dictionary and the meaning of tender as a noun. The first definition is : “Something used as an official medium of payment.” and the third definition “A formal proposal to buy at a specified price.” Again notice the lack of particular measure of value. In these and the above definition of note, we are talking about agreed upon value between two parties, you the holder of the note and the government who issues them. You can, by authority of the US Government, use this piece of paper to pay off any debt acquired as long as the other party accepts it (which most do).
Now put that lovely little word legal in front of the word tender (or note) and things really become clear. Again to that noble book Webster’s Dictionary for the definition of legal as an adjective. The first definition : “Established by or founded upon law or official or accepted rules.” and third “Having legal efficacy or force”. Efficacy is capacity or power to produce a desired effect.
So what does this mean? Basically that the government has the power by legal authority or force to tell you what that piece of paper is worth. By definition it does not have to have any real value – just value that they tell you it is. One dollar supposedly equals the potential of obtaining one dollars worth of goods and services, that someone else has fixed a value to.
Now as we know, the government during the 70’s, took us off of the gold standard of money value. What that meant was that for every piece of paper money issued, there was the exact amount of gold in the federal bank (Fort Knox was one of the vaults) to back up the claim that a dollar was indeed worth one dollar. They did away with that standard. Now all we have is the promise of our dear Uncle Sam that the piece of paper called a note. According to the definition that note is a promise that represents “A promise to pay a specified amount on demand or at a certain time”. Try demanding your actual value of a dollar back from the government. They will give you a litany of reasons why it could not be done. We are just supposed to take their word that it does have actual value as promised by them. They will point to the fact that your hours worked are redeemable through use of some sort of financial vehicle as goods and services you need. However, no matter how you slice this lump of facts, it still remains that there is nothing really backing it all up but their word.
That piece of paper does not really have a constant value. It can go up or down according to how people perceive it to be valued against other pieces of paper. The economy is doing good – your piece of paper is worth more. When the economy is bad – your piece of paper is worth a lot less. All of it based upon someone’s opinion of what that value is. What happens when a government fails? Basically, the money becomes worthless because there is nothing or no one to back up the promise of opinion value. The government and/or governments are the one’s who make up the rules as they go.
Somehow I think we are getting the short end of the stick once again. These are the same people, regardless of political party affiliation, that promise you everything you want when it comes time for election to government and give you little or nothing in return for our belief and trust in them to do the right thing by voting for them. And here we are in the middle of another economic crisis, that everyone saw coming, caused by out right greed and fraud of we the people, banking, securities, and manufacturing industries. All of it based upon, condoned and sanctioned by the government who promises much but delivers little.
Now this house of paper promises is crashing down around our ears. People who had no real ability to keep a promise of paying back a note, where given the ability to purchase things of higher value than they where really worth, with notes that were manipulated to appear to be of higher value. The people who originated these notes then sold them to other institutions in exchange for cash. The people in the middle – the speculators – made the money in these transactions. The people at either end of the transaction got stuck with a lot of worthless paper, and broken promises.
Our system of banking and money is based upon absolute trust. There is nothing of solid, perceive with your senses, value behind any of it. It is just a piece of paper with a promise written upon it, secured by another promise written on another piece of paper that the first piece of paper is actually worth something. That is why the government hates counterfeiters because it competes with the paper that they issue. The difference between the two is that the government says that their paper is worth something and the counterfeiters never make that claim. Counterfeiters know their money is worthless but they know that people will believe that if it looks like the real thing – that people will believe that it is the real thing and accept it. People become too trusting of what they are told. They are not active in knowing what the truth is.
Add to this mixture the reality of little if any actual paper trades places. Just a lot of digital representations between financial institutions, and the government. Nothing real changes hands. Think of it, this is how the whole system works – debit cards, credit cards, stocks, bonds, commodities and cash. It is just someone or something’s ability to place a mark next to your name on some database stating that you have something – yet nothing really exists. Do you begin to see how easy it is and would be to manipulate the entire system with a few keystrokes, issued paper and promises?
We have placed our trust in what people tell us that things are worth. We have all bought products that have cost us significant amounts of money, based upon promises that this is a true value. That this thing is worth exactly a precise amount or much more than they are asking. We are promised that it does much more than they say it can do. Then we get it home and find that it is not what we thought it was, it does not do what they said it would do, and that it is worth far less than we paid for it. Like new cars that come off of the dealers lot and plummet in double digit percentages of value . Houses that if you really figured out what a 30 year mortgage costs (upkeep, taxes, insurance, and factoring in inflation) can not be sold for what we paid for them. Yet, we are willing to toil for years and years to pay for them. Why, because we trusted others opinion that something is value – not based upon what we believe or know it to be worth.
Perhaps we should think twice about removing the statement from the back of our monetary notes that states “In God We Trust”. If you believe in a deity it may very well be that it is this god that keeps our trust in this fictional system from falling completely down around our proverbial ears. If you do not believe in a deity – there is little difference in putting your trust in a supposed mythological being than trusting in your supposed just government in honoring its promises. We place too much trust in the government, banking, securities and stock markets for too many things.
We willingly trade our time, talents, efforts and our lives in chasing these pieces of paper with perceived value. Yet few if any of us ever collect enough of these promises of value in compensation for our toil. Our paper money is buying less and less. We are working harder and longer for less but have to pay out more. What have we gained in exchange?
We have traded things of real value for the things of perceived value. We have become slaves to the things that do not have lasting values. We work to pay for the upkeep of these things. The sad thing is that after all that is said and done, I have never met a person, who when faced with their own death, says that they wished that they had time to buy just one more thing. Their biggest regret is that they did not have more time with family, friends, and caring for each other – the things of true value. You can not put a price on your health, on love, on peace, and understanding. These are priceless.
We write the value equation backwards by putting price tags on what people can do for us rather than who they are. Human life is priceless yet we value it so little. We continue to prove that we value our lives so little in our willingness to trade it all for things that will rust, crumble, break and turn to dust.
That is why we are all in the mess we are in – we value the worthless and throw away the priceless.