You don’t see the name splattered on the newspaper or internet headlines every day but there is a Central Bank of the United States and it’s called the Federal Reserve. For an excellent discussion of how the Federal Reserve came into existence, find Creating Wealth podcast show #84, where Jason interviews G. Edward Griffin.
What is a central bank anyway?
Simply put, a central bank is a bank that issues money that is not backed by gold or silver. It’s funny money with no intrinsic value that is not redeemable for any precious metal and is only worth anything because the government say it is.
Does that seem like a rock solid basis for the world’s remaining superpower to base an economy on? No, but we do it anyway. The truth is that at no time in history has a central bank ever printed money not backed by gold or silver that did not lead to rampant inflation.
Thus it is in the United States.
Up until 1934 every dollar bill had the following phrase printed on it: “This note is legal tender for all debts public and private and is redeemable in lawful money at the U.S. Treasury in gold.” Hard to believe but that used to be absolutely true. If the urge struck, you could march right up to the Treasury Department and trade in your paper money for gold.
Try that today.
The Federal Reserve prints endless amounts of money. It might as well be Monopoly money. What does this mean for you? It means we are so far from the gold standard there is virtually no chance of ever returning. Inflation will continue to climb. Investing in stocks, bonds, mutual funds, etc will continue to be a losing game and real estate will be your only hope of creating wealth. It’s not too late to get started but the clock is ticking.
Flickr / rlinger
