Money

Money & Economy

There are 2 type of money

 

Intrinsic money – has a commodity of value (gold/silver) as reserve, backing its value – virtually non-existent
Fiat money – has no value and has no reserve backing it – we have fiat money. Fiat money can only exist if society believes in its perceived value.

Central banks (Bank of England) create fiat money out of nothing and loan it to government with interest, they don’t loan the interest, that has to come from somewhere else. The Bank of England, set up in 1694 is a private company owned by the Rothschild banking family. Most Countries central banks are private companies including the US Federal Reserve, which is not federal and holds no reserves. We need central banks, but they should not be under private control, they should be run by the state and money should be printed  by the state without interest.
When the government has money printed by BoE they raise bonds against the amount, they could just instead print the same amount. Nowadays, only about 5% of money in the economy is actually money as notes or coins in circulation, the rest is electronic money.
The fiat money we use is no different to monopoly money in the game, if everyone agreed it was legal tender, it could be used in general circulation. You could argue that the notes we use are printed on superior paper and use superior ink and there is a metal strip, but regarding actual value, we are talking pence or even a fraction of a pence. A £20 sterling note may be larger, more colourful and more robust than its monopoly counterpart, but they are pretty much the same amount in real terms.
Then again, how much is a cheque torn from a cheque book worth? Pretty much as much as you are prepared to trust it to be worth. If the amount is large you can request a banker’s draft, but that is still only a piece of paper. The value of money is an absolute illusion. If you want to own something of value (other than property) buy gold, silver, platinum and other precious metals and  precious stones, as well as some collectibles such as postage stamps, antiques and coins.

Banknotes are promissory notes or IOU’s

If you look at the front of a £10 note it says “I PROMISE TO PAY THE BEARER ON DEMAND THE SUM OF TEN POUNDS“, but ten pounds of what? If I owe you ten pounds, and I give you a £10 note, all I have done is given you a promise to pay, as I have nothing else of value to give. If instead I gave you twenty hours of labour, mowing your lawn, cleaning your house and car you would have received something of value. You may then use the £10 note I gave you to ‘pay’ someone else, my promise to pay has passed onto you, so who will pay and when? The answer is no-one will ever pay because paper money has no intrinsic value whatsoever – none! GB pounds are also known as sterling, now if I paid you in sterling silver weighing ten pounds, that would currently be worth in excess of 3,000 pounds, that has real tangible value. If we are to use notes to represent something of value, those notes need to be backed by something of real value or on a ‘standard’. Because all we can ever do is pass on promises to pay (at some unspecified future time) we are perpetually in debt, and to be in debt is a crime, making us debt slaves.

How much is fiat currency actually worth?

Each £5, £10, £20 or £50 note is worth approximately 3 or 4 pence, based on the cost of printing paper, printing ink and the thin metallic strip.

A £1 coin weighing 9.5 grams consists of 70% copper (6.65g), 24.5% zinc (2.33g) and 5.5% nickel (0.52g). Based on the spot price of those metals on 4th January 2011 each one pound coin is worth 12.4 US cents, based on the exchange rate at the same time that was 8 pence.

A 50p coin weighing 8g consists of 75% copper (6g) and 25% nickel (2g), value as above is 4 pence.

Contrast those with a 2013 UK Britannia 1 ounce silver bullion coin (32.454g) available from the Royal Mint is worth just under £19.00

A 2013 UK proof full sovereign coin weighing 8g (same as 50 pence), 22 carat gold is worth around £203.00.

At one time we had intrinsic money, first with the gold standard and then the silver standard, but these were both eventually replaced (UK came of the gold standard in 1925) by the paper standard – aka fiat money. Under the gold standard, if you had a £20 note then held somewhere in secure vaults would be an amount of gold equivalent in value to back that note. If there were a £100 billion of notes in circulation, there would be 100 billion pounds worth of gold held in reserve to back that currency. Now we only have goodwill and faith backing every penny of currency in circulation.
Some people are advocating a return to a gold standard, that may sound like a good idea, except that there is probably not enough gold to cover the amount of money in circulation (Worldwide), its supply is controlled by the same people who control the money and it is very susceptible to speculation – once again by the people who control the money. If the commodity markets decided to suddenly half the value of an ounce of gold, governments would then need twice as much to cover the reserves.
In reality anything of value can be used as a reserve, the government could use the value of all government buildings (houses of parliament, downing street, Whitehall, city halls), palaces, castles, hospitals, schools, libraries, bridges, roads, power stations, water treatment plants, railways, airports, harbours in fact anything under public ownership, could be used as collateral to back the value of money.
Bank notes carry the following phrase “I promise to pay the bearer on demand the sum of xx pounds”, this confirms the money as being legal tender, and that it must be accepted in payment of a debt. If you are owed a debt, then legally you are required to accept payment by banknotes for that debt, because it is defined as legal tender, you cannot, for instance, insist on payment in gold, silver, gems or house deeds. This incidentally means that a bailiff cannot enter your property (certainly without your express permission – despite what they may say, they have no right of entry) and confiscate your goods if you offer cash, they are legally obliged to accept cash.
Because ALL money in circulation is debt, if all debts were to be paid off, there would be no money in circulation at all, a difficult concept to grasp.

Top 150 economies 2012

The graphic below shows that since 1990 in the US thirty-seven (37) banks have merged to become now only four, Citigroup,JPMorgan Chase, Bank of America, Wells Fargo. How long before this becomes only two, or even just one gigantic bank? Will that still be too big to fail?

 

 

 

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