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By July 10, 2012 Read More →

How Does the Currency Affect Us? A Prepper’s Viewpoint

How Does the Currency Affect Us? A Prepper’s Viewpoint

By Chris Watson –The Prepper’s Poitin Hour on

Earlier this month, I tackled the economy on my show and let me tell you, I felt stupid.  The morass that is our economy could only exist with a monetary system that is as fraudulent and empty as ours is at its core.  I have observed that many preppers have little grasp of economic and monetary policy, myself included, YET, we have an instinctual, visceral distrust of it and its viability in the future.  So, I endeavored to shine some light on the matter for my audience, as well as for myself.

Have you ever heard the phrase, “Backed by the full faith in the U.S. Government?”  This is the sole backing that the US currency has.  We have little tangible backing, except for MAYBE Saudi petroleum, for greenbacks anymore.  In 1971, President Richard M. Nixon eliminated the gold and silver standards completely and finished the currency dismantling that was begun by the likes of Presidents Wilson and FDR.  These three presidents took it upon themselves to nationally eschew gold and silver, which has been known to be used for currency since 610BC.  Apparently, the powers that be knew a better way than the standards accepted and used for millennia.

While Wilson opened the door for the fiscal crises that have beset this nation for the last century, it was FDR who waged open war on gold and silver backed currency.  He helped to enact legislation that confiscated privately held gold for a criminally low restitution rate of $20.67 in 1933.  This allowed the government to put more paper money into the economy.  In 1934, FDR signed into law the Gold Reserve Act that fixed gold pricing to $35 per troy ounce.  This effectively controlled the value of the greenbacks that were flooding the Depression era market and obscured the realization that inflation was taking place.

As an aside, even Alan Greenspan has acknowledged that the British dropping the gold standard was a possible major cause of the Great Depression.

It was about this time that an economist named Keynes would gain much influence in western economic management circles.  Keynesian economics were a way to allow governments to control the economies and their citizens through socialistic and manipulation tactics.  Keynes was quoted as saying, “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.”  Compare that statement to the economic headlines of today and see what conclusions you arrive at.

However, let us not focus solely on FDR since there are others in this Rogue’s Gallery.  Wilson’s administration gave the nation an early Christmas present in 1913.  He signed the Federal Reserve into existence.  With the stroke of a pen, he ceded control of our money and fiscal policy to a handful of PRIVATE BANKERS who would control our currency valuation, fiscal health, and economic well-being going forward.  In other words, the public treasury would be largely controlled by private bankers who did not have public oversight nor much accountability.  While the Fed, as we have come to call it, has had Constitutional debates rages since its inception, let us be fair and mention that US has had national banks previous to the Federal Reserve System.  President Andrew Jackson and Alexander Hamilton are famous for their opposing viewpoints on the Constitutionality, necessity, and efficacy of federally controlled banking.

Moving along, we delved into some history as we looked at some failed economic systems.  Some of the hallmarks of these failures were centered on their currency.  Their currency was intrinsically worthless mediums of exchange that had no tangible backing other than “faith” in the strength of the government and the production of that nation.  These currencies were also subject to manipulation.  Again, I refer you to Keynes statement, “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.”

Failed economies often have bubble, boom, and derivative markets that are fueled by rampant and reckless speculation with little accountability for the fraudulent bad actors.  These failures had a currency system that allowed the market forces of supply and demand to be manipulated and sabotaged through the inflation of the money supply with its attendant devaluation.  By printing more money, they were able to do away with the idea of finite and fixed tangibles determining their own value through the market.

So where are we now?  We are at a crossroads where we are looking into the abyss that Keynesian social economics has led us and we can go on or attempt to arrest the slide to ruination by instituting some supply-side economics and returning to a freer market.  This has become known as the Austrian school of economics where supply and demand regulate the price of goods and labor.

A brief look at Greece, the Weimar Republic, post USSR Russia, Argentina, and Zimbabwe show us where the world and national economies are heading.  When fiat currencies are only backed by the taxes on the producing class, then you effectively have a form of slavery.  Hence when the tax bases shrink, then the currency plummets in value and people hoard their currency to stave off perceived ruin.  This hoarding takes money out of the consumption system and leads to government printing more money to pump into the system.  This is inflation and with more money, the money is valued less.

So what will governments do to effect the negative outcomes of this failed fiat system?  Well common sense calls for reductions in spending, less social entitlements, and a return to tangibles backing the currency; however, history shows that most governments will perpetuate the decline.  They will manipulate the currency, tax the producing class more, and the wealth divide with grow ever larger.  This will eventually lead to totalitarianism and slavery or a total collapse and rebuilding whereby sanity has a chance to prevail, after a fashion, for a few decades, maybe.  Which way will the US go?  Only time will tell and I do not think much time will pass before we can tell.

In conclusion, what can we as preppers and liberty lovers do to MAYBE increase our economic situation?  Well, first and foremost, pay down your personal debt, especially on financed real property.  Invest in tangibles to hedge your losses should the economy crater.  Buy precious metals, food, land, equipment, education and other tools for self-reliability and sustainment.  Buy local and keep your money in your community.  Support your gray markets like Craigslist and flea markets.  Barter services and goods.  Finally, vote for fiscally responsible candidates that want to abolish the Federal Reserve.

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