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What is money? From Wikipedia, the free encyclopedia Jump to: navigation, search The US twenty-dollar bill For other uses, see Money (disambiguation). Money is anything that is generally accepted as payment for goods and services and repayment of debts.[1][2] The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment.[3][4] Money originated as commodity money, but nearly all contemporary money systems are based on fiat money.[3] Fiat money is without value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private". The money supply of a country consists of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency.[5][6] Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money, being generally accepted as a form of payment.[7] History of money A 640 BCE one-third stater electrum coin from Lydia. Main article: History of money The use of barter-like methods may date back to at least 100,000 years ago, though there is no evidence of a society or economy that relied primarily on barter.[8] Instead, non- monetary societies operated largely along the principles of gift economics. When barter did occur, it was usually between either complete strangers or potential enemies.[9] Many cultures around the world eventually developed the use of commodity money. The shekel was originally both a unit of currency and a unit of weight.[10]. The first usage of the term came from Mesopotamia circa 3000 BC. Societies in the Americas, Asia, Africa and Australia used shell money – usually, the shell of the money cowry (Cypraea moneta) were used. According to Herodotus, and most modern scholars, the Lydians were the first people to introduce the use of gold and silver coin.[11] It is thought that these first stamped coins were minted around 650–600 BC.[12] The system of commodity money eventually evolved into a system of representative money.[citation needed] This occurred because gold and silver merchants or banks would issue receipts to their depositors – redeemable for the commodity money deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi" evolved from promissory notes that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The gold standard, a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made legal tender, and redemption into gold coins was discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold. After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended the convertibility of the US dollar to gold. After this many countries de-pegged their currencies from the US dollar, and most of the world's currencies became unbacked by anything except the governments' fiat of legal tender. Etymology The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located.[13] The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique). In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in specie, meaning 'in kind'.[14] Functions In the past, money was generally considered to have the following four main functions, which are summed up in a rhyme found in older economics textbooks: "Money is a matter of functions four, a medium, a measure, a standard, a store." That is, money functions as a medium of exchange, a unit of account, a standard of deferred payment, and a store of value.[4] However, most modern textbooks now list only three functions, that of medium of exchange, unit of account, and store of value, not considering a standard of deferred payment as a distinguished function, but rather subsuming it in the others.[3][15][16] There have been many historical disputes regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a medium of exchange is in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate.[4] Others argue that storing of value is just deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time.[17] The term 'financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender. Medium of exchange Main article: Medium of exchange When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the 'double coincidence of wants' problem. Unit of account Main article: Unit of account A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect. Store of value Main article: Store of value To act as a store of value, a money must be able to be reliably saved, stored, and retrieved – and be predictably usable as a medium of exchange when it is retrieved. The value of the money must also remain stable over time. In that sense, inflation by reducing the value of money, diminishes the ability of the money to function as a store of value.[3] Standard of deferred payment Main article: Standard of deferred payment While standard of deferred payment is distinguished by some texts,[4] particularly older ones, other texts subsume this under other functions.[3][15][16] A "standard of deferred payment" is an accepted way to settle a debt – a unit in which debts are denominated, and the status of money as legal tender, in those jurisdictions which have this concept, states that it may function for the discharge of debts. When debts are denominated in money, the real value of debts may change due to inflation and deflation, and for sovereign and international debts via debasement and devaluation. Money supply Main article: Money supply In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). These financial instruments together are collectively referred to as the money supply of an economy. Since the money supply consists of various financial instruments (usually currency, demand deposits and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate. Modern monetary theory distinguishes among different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money. Market liquidity Main article: Market liquidity Market liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter. Liquid financial instruments are easily tradable and have low transaction costs. There should be no (or minimal) spread between the prices to buy and sell the instrument being used as money. Measures of money The money supply is the amount of financial instruments within a specific economy available for purchasing goods or services. The money supply is usually measured as three escalating categories M1, M2 and M3. The categories grow in size with M1 being currency (coins and bills) and checking account deposits. M2 is currency, checking account deposits and savings account deposits, and M3 is M2 plus time deposits. M1 includes only the most liquid financial instruments, and M3 relatively illiquid instruments. Another measure of money, M0, is also used, although unlike the other measures, it does not represent actual purchasing power by firms and households in the economy. M0 is base money, or the amount of money actually issued by the central bank of a country. It is measured as currency plus deposits of banks and other institutions at the central bank. M0 is also the only money that can satisfy the reserve requirements of commercial banks. Types of money Money is an abstraction, idea or concept, token instances of which are the physical bills or coins which are carried and traded. Currently, most modern monetary systems are based on fiat money. However, for most of history, almost all money was commodity money, such as gold and silver coins. As economies developed, commodity money was eventually replaced by representative money, such as the gold standard, as traders found the physical transportation of gold and silver burdensome. Fiat currencies gradually took over in the last hundred years, especially since the breakup of the Bretton Woods system in the early 1970s. Commodity money Main article: Commodity money Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity.[18] Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies. Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that emphasis is laid on their direct link to the prevailing value of their fine gold content.[19] American Eagles are imprinted with their gold content and legal tender face value.[20] Representative money Main article: Representative money In 1875 economist William Stanley Jevons described what he called "representative money," i.e., money that consists of token coins, or other physical tokens such as certificates, that can be reliably exchanged for a fixed quantity of a commodity such as gold or silver. The value of representative money stands in direct and fixed relation to the commodity that backs it, while not itself being composed of that commodity.[21] Fiat money Main article: Fiat money Fiat money or fiat currency is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat). Usually, the government declares the fiat currency (typically notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts, public and private.[22][23] Some bullion coins such as the Australian Gold Nugget and American Eagle are legal tender, however, they trade based on the market price of the metal content as a commodity, rather than their legal tender face value (which is usually only a small fraction of their bullion value).[20][24] Fiat money, if physically represented in the form of currency (paper or coins) can be accidentally damaged or destroyed. However, fiat money has an advantage over representative or commodity money, in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it can be otherwise proven to have been destroyed.[25] By contrast, commodity money which has been lost or destroyed cannot be recovered. Commercial bank money Main article: Demand deposit Commercial bank money or demand deposits are claims against financial institutions that can be used for the purchase of goods and services. A demand deposit account is an account from which funds can be withdrawn at any time by check or cash withdrawal without giving the bank or financial institution any prior notice. Banks have the legal obligation to return funds held in demand deposits immediately upon demand (or 'at call'). Demand deposit withdrawals can be performed in person, via checks or bank drafts, using automatic teller machines (ATMs), or through online banking.[26] Commercial bank money is created through fractional-reserve banking, the banking practice where banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand.[27][28] Commercial bank money differs from commodity and fiat money in two ways, firstly it is non-physical, as its existence is only reflected in the account ledges of banks and other financial institutions, and secondly, there is some element of risk that the claim will not be fulfilled if the financial institution becomes insolvent. The process of fractional-reserve banking has a cumulative effect of money creation by commercial banks, as it expands money supply (cash and demand deposits) beyond what it would otherwise be. Because of the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank. That multiple (called the money multiplier) is determined by the reserve requirement or other financial ratio requirements imposed by financial regulators. The money supply of a country is usually held to be the total amount of currency in circulation plus the total amount of checking and savings deposits in the commercial banks in the country. Monetary policy Main article: Monetary policy When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining. This rate of increase will accelerate during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought back gold and silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop, causing deflation. Deflation was the more typical situation for over a century when gold and paper money backed by gold were used as money in the 18th and 19th centuries. Modern day monetary systems are based on fiat money and are no longer tied to the value of gold. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”[29] A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union. Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include: changing the interest rate at which the government loans or borrows money currency purchases or sales increasing or lowering government borrowing increasing or lowering government spending manipulation of exchange rates raising or lowering bank reserve requirements regulation or prohibition of private currencies taxation or tax breaks on imports or exports of capital into a country In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England. For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz[30] supported by the work of David Laidler,[31] and many others. The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased. See also Money supply: M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money.[12] MB: is referred to as the monetary base or total currency.[13] This is the base from which other forms of money (like checking deposits, listed below) are created and is traditionally the most liquid measure of the money supply. [14] M1: Bank reserves are not included in M1. M2: represents money and "close substitutes" for money.[15] M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation.[16] M3: Since 2006, M3 is no longer published or revealed to the public by the US central bank.[17] However, there are still estimates produced by various private institutions. MZM: Money with zero maturity. It measures the supply of financial assets redeemable at par on demand. The ratio of a pair of these measures, most often M2/M0, is called an (actual, empirical) money multiplier. [edit] Fractional-reserve banking Main article: Fractional-reserve banking The different forms of money in government money supply statistics arise from the practice of fractional-reserve banking. Whenever a bank gives out a loan in a fractionalreserve banking system, a new sum of money is created. This new type of money is what makes up the non-M0 components in the M1-M3 statistics. In short, there are two types of money in a fractional-reserve banking system[18][19]: 1. central bank money (physical currency, government money) 2. commercial bank money (money created through loans) - sometimes referred to as private money, or checkbook money[20] In the money supply statistics, central bank money is MB while the commercial bank money is divided up into the M1-M3 components. Generally, the types of commercial bank money that tend to be valued at lower amounts are classified in the narrow category of M1 while the types of commercial bank money that tend to exist in larger amounts are categorized in M2 and M3, with M3 having the largest. Reserves are deposits that banks have received but have not loaned out. In the USA, the Federal Reserve regulates the percentage that banks must keep in their reserves before they can make new loans. This percentage is called the minimum reserve. This means that if a person makes a deposit for $1000.00 and the bank reserve mandated by the FED is 10% then the bank must increase its reserves by $100.00 and is able to loan the remaining $900.00. The maximum amount of money the banking system can legally generate with each dollar of reserves is called the (theoretical) money multiplier, and is calculated as the reciprocal of the minimum reserve. For a reserve of 10% the money multiplier, followed by the infinite geometric series formula, is the reciprocal of 10%, which is 10. [edit] Example Note: The examples apply when read in sequential order. M0 Laura has ten US $100 bills, representing $1000 in the M0 supply for the United States. (MB = $1000, M0 = $1000, M1 = $1000, M2 = $1000) Laura burns one of her $100 bills. The US M0, and her personal net worth, just decreased by $100. (MB = $900, M0 = $900, M1 = $900, M2 = $900) M1 Laura takes the remaining nine bills and deposits them in her checking account at her bank. (MB = $900, M0 = 0, M1 = $900, M2 = $900) The bank then calculates its reserve using the minimum reserve percentage given by the Fed and loans the extra money. If the minimum reserve is 10%, this means $90 will remain in the bank's reserve. The remaining $810 can only be used by the bank as credit, by lending money, but until that happens it will be part of the banks excess reserves. The M1 money supply increased by $810 when the loan is made. M1 money has been created. ( MB = $900 M0 = 0, M1 = $1710, M2 = $1710) Laura writes a check for $400, check number 7771. The total M1 money supply didn't change, it includes the $400 check and the $500 left in her account. (MB = $900, M0 = 0, M1 = $1710, M2 = $1710) Laura's check number 7771 is accidentally destroyed in the laundry. M1 and her checking account do not change, because the check is never cashed. (MB = $900, M0 = 0, M1 = $1710, M2 = $1710) Laura writes check number 7772 for $100 to her friend Alice, and Alice deposits it into her checking account. M0 do not change, it still has $900 in it, Alice's $100 and Laura's $800. (MB = $900, M0 = 0, M1 = $1710, M2 = $1710) The bank lends Mandy the $810 credit that it has created. Mandy deposits the money in a checking account at another bank. The other bank must keep $81 as a reserve and has $729 available for loans. This creates a promise-to-pay money from a previous promise-to-pay, thus the M1 money supply is now inflated by $729 (MB = $900, M0 = 0, M1 = $2439, M3 = $2439) Mandy's bank now lends the money to someone else who deposits it on a checking account on yet another bank, who again stores 10% as reserve and has 90% available for loans. This process repeats itself at the next bank and at the next bank and so on, until the money in the reserves backs up an M1 money supply of $9000, which is 10 times the M0 money. (MB = $900, M0 = 0, M1 = $9000, M2 = $9000) M2 Laura writes check number 7774 for $1000 and brings it to the bank to start a Money Market account(that don't have a credit-creating charter)e M0 goes down by $1000, but M2 stayed the same, because M2 includes the Money Market account, but also everything in M1. (M0 = $4900, M1 = $6710, M2 = $6710) Foreign Exchange Laura writes check number 7776 for $200 and brings it downtown to a foreign exchange bank teller at Credit Suisse to convert it to British Pounds. On this particular day, the exchange rate is exactly USD $2.00 = GBP £1.00. The bank Credit Suisse takes her $200 check, and gives her two £50 notes (and charges her a dollar for the service fee). Meanwhile, at the Credit Suisse branch office in Hong Kong, a customer named Huang has £100 and wants $200, and the bank does that trade (charging him an extra £.50 for the service fee). US M0 still has the $900, although Huang now has $200 of it. The £50 notes Laura walks off with are part of Britain's M0 money supply that came from Huang. The next day, Credit Suisse finds they have an excess of GB Pounds and a shortage of US Dollars, determined by adding up all the branch offices' supplies. They sell some of their GBP on the open FX market with Deutsche Bank, which has the opposite problem. The exchange rate stays the same. The day after, both Credit Suisse and Deutsche Bank find they have too many GBP and not enough USD, along with other traders. To move their inventories, they have to sell GBP at USD $1.999, that is, 1/10 cent less than $2 per pound, and the exchange rate shifts. None of these banks has the power to increase or decrease the British M0 or the American M0; they are independent systems. Money can be described as a token which is used in our society to settle debts and to pay for the services and commodities which are provided to us. In other words, money is the medium of exchange in our society which has also been accepted by the law. There are several types of money varying in liability and strength. The society has modified the money at different types and in this way several types of money are introduced. When there was ample availability of metals, metal money came into existence later it was substituted by the paper money. At different times, several commodities were used as the medium of exchange. So, it can be said that according to the needs and availability of means, the types of money has changed. Some of the major types of money are: Commodity Money Whenever any commodity is used for the exchange purpose, the commodity becomes equivalent to the money and is called commodity money. There are certain types of commodity, which are used as the commodity money. Among these, there are several precious metals like gold, silver, copper and many more. Again, in many parts of the world, seashells (also known as cowrie sells), tobacco and many other items were in use as the mediums of exchange. Fiat Money The word fiat means the command of the sovereign. It is the type of money that is issued by the command of the sovereign. The paper money is generally called as the fiat money. This type of money forms a monetary standard. It has been made mandatory by law to accept the fiat money, as an exchange medium, whenever it is offered to anyone. Fiduciary Money Today's monetary system is highly fiduciary. Whenever, any bank assures the customers to pay in different type of money and when the customer can sell the promise or transfer it to somebody else, it is called the fiduciary money. Fiduciary money is generally paid in gold, silver or paper money. There are checks and bank notes, which are the examples of fiduciary money because both are some kind of token which are used as money and carries the same value.\ A little more on money… real money as enumerated in the U.S. Constitution: THIS WAS OUR CURRENCY. Figure 1 is a picture of what certainly used to be our currency, our current coin, before it was switched with Federal Reserve debt. Below is ONE DOLLAR of silver. Figure 1. The coin pictured above is exactly what the U.S. Constitution mandates we citizens of the United States of America use as money. The laws, and the code, of the United States of America at that time sustained the circulation and use of this piece and others like it as money. Does anyone bother to respect the Constitution anymore? Our money was not debt. It was wealth. It was born of nature and worked by the National mint into what it is. It was an asset which was not simultaneously someone else's liability. Debt freedom, once achieved, was much closer to absolute under such a money system. It bore no interest except when its owner consented to lend it to a borrower for a rate of return. When it was spent, it was considered at common law that a debt was paid. And it respected the tradition from time immemorial that in exchange, value would be exchanged for value; it was equitable. When it was saved, instead of spent, it preserved the wealth of the saver, who could reasonably expect prices to be within reasonable range of what they were when the coin was saved. "As banker Vince Rossiter has pointed out, 'from 1814 to 1913, the U.S. fought four wars, enjoyed greater increases in population than any other nation in the world, suffered significant short-term inflation and deflation at intervals, and still it was possible to buy substantially the same basket of food in 1913 for approximately the same price that it cost in 1814, 100 years earlier.' " (1.) Try and do that now, with the base year of 1974, for example. You'll find it takes multiples the money to buy the same item. Our currency enjoyed the protection of the law and counterfeiters faced capital punishment. Coin clipping, shaving, sweating, mixing with base metals, all being ways in which kings and princes cheated the public, even our own government was prohibited from such activities. And Figure 2 is another picture of what used to be our currency, our current coin. Below is one dollar of gold. Figure 2. Paper money was in use and that was acceptable as long at the paper promised to pay gold or silver coin on demand. If the paper circulated, then the coin it represented was on deposit; if the coin was circulating, then the paper was not circulating. The silver and gold certificate was a token, but a lawful claim on the real coin. See Figures 3 and 4. Figure 3. It is not easy to see but it reads, "This Certifies That There Has Been Deposited In The Treasury Of The United States Of America Payable To The Bearer On Demand One Silver Dollar." This was our money. And so was the following. It is accurate enough to call this a "promise to pay" because it does indeed promise to pay something, dollars in coin. It was an evidence of debt only in the sense that the Treasury owed the bearer the specified coin, on demand. See Figure 3. Figure 4. Again, it is not easy to see but it reads, "This Certifies That There Has Been Deposited In The Treasury Of The United States Of America Payable To The Bearer On Demand Twenty Dollars In Gold Coin." This was our money. It is indeed a promise to pay. Spending a silver or gold certificate was acceptable because, although it was a money substitute, it was a reliable and dependable proxy for coin. See Figure 4. By law, the SUBSTANCE of OUR money was gold and silver bullion, and the LAWS of money in the United States made gold and silver coin LAWFUL MONEY. Where do you find such specimens of money today? In coin shops and personal collections. What we had then (gold, silver coin) was replaced with what is today in your pocket and your bank account. Today, we use THEIR money. You cannot tell me that Federal Reserve Notes are our money. The Constitution does not contemplate them. The First Money Act of April 2, 1792 does not contemplate them. The code of the United States for most of our history does not contemplate them. It is not our money. It doesn't matter that it has been around since granddad was a young man. Crime has been around for a long time too. The long lived perpetration of a wrong does not lend it legitimacy. It is alien to the Constitution, and our money is effectively in exile. Their money resembles ours, more or less, if you need glasses or don't read; there are pictures of our dead Presidents on it. Many Americans simply believe it is our currency because that is the way it has been since their birth, and they don't know what they are looking at. Or they do and do not distinguish between real value and debt. We, including those of us who know better, begrudgingly use it mainly because our own government refuses to follow the Constitution on the money issue. And we must use something so we use this. Our government has long since bought into central banking with debt-based irredeemable paper. If you want to read why, look up Alan Greenspan's essay, "Gold and Economic Freedom," which gives as good an explanation as any: it is the easiest way to set up and maintain a socialist welfare state. There is no SUBSTANCE associated with their money. It may read X Dollars on the face, but dollars of what? Above you saw a dollar of gold and a dollar of silver. Above you saw gold and silver certificates that promised on demand to pay a dollar of silver or ten dollars of gold. A Dollar was a unit of value that related precious metal to a weight measured in grains. "The central idea of the American money system is the 'dollar.' What is a dollar? This question has been the subject of volumes of discussion. The answer to the question has become involved in a wilderness of theory---lost in a maze of abstractions---as a result of which the reader is led to believe that there is great difficulty in understanding just what a dollar is. Fortunately, we do not have to read all this literature and wrestle with all the hypothetical problems propounded. The whole matter is settled by one section of the United States statutes. The Act of February 12, 1873 (Sec. 14), establishes "25.8 grains of gold" 900/1000 fine (or 23.22 grains of fine gold), which bears the required stamp and impress. The statute says that this is a dollar---not that it resembles a dollar, or that, for the purposes of discussion, it may be considered a dollar, but that it is a dollar. Furthermore, the statute again cuts off all controversy regarding the worth of a dollar; for it says that the dollar (the printed piece of gold containing 25.8 grains of gold 900/1000 fine) 'shall be the unit of value' in our money system." (2.) This is our money. But a Federal Reserve Note is not that which was just described; it doesn't even come close. It is not a dollar. It is not any number of dollars. It is a mere slip of paper signifying nothing more than a way by which to discharge your tax liabilities, with the right to spend your surplus slips of paper on other things as if they were lawful money of gold and silver. So the One Dollar Federal Reserve Note, for example, is not one dollar, but claims to be on its face. Is that a lie? In my world it is. Thou shall not bear false witness. Even if the Act of February 12, 1873 wasn't perfect, and needed revising or fine tuning, who can imagine how we in this nation went from a dollar of the above description, to throwing it all out and then adopting the current fiat paper dollar of no legal description other than the vague, "it is an obligation of the United States," as the new central idea in the American money system? The Federal Reserve Note, which is their money is not even a promise to pay. It makes no promise at all. Read any bill, you will not find any promise. What is in your pocket or your bank account is debt. As a nation, we have borrowed our own tax coupons and in commerce we accept and use them as if they were money. You do not own your currency free and clear. Borrowed first by the national government, it automatically arrives to the American people with interest due. It is a fiduciary asset which is absolutely simultaneously someone else's interest-bearing liability. It bears interest for the benefit of its issuer and creator, the central banks and their stockholders, the instant it goes into circulation. The central bank, which supplanted the existing system---which was unique and American---was modeled after the Bank of England. "The Creature From Jekyll Island," by E. G. Griffin, explains how that happened. Does that sound like our system? Yet when you lend your own money today, as a private lender, you are lending someone else's debt. And when you spend it, you are discharging your immediate debt. When you accept it someone else's immediate debt to you is discharged. But our collective perpetual debt remains. All debts become relative with our government being a first-level debtor, and we citizens being secondlevel; third-level debtors depending on how our borrowing is structured. The game we play is to cleverly move debts around until we have what we want and hopefully don't find ourselves insolvent at some point. Even if you are technically debt free, all mortgages paid off and car loans too, you are responsible, in the eyes of the government, for your share of the national debt. Your debt freedom is relative, not absolute. How do you know they won't come to you at any time to call for the principal, or principal and remaining interest? Do you have that guarantee? And being on the hook for a share of the national debt; and knowing that your children will also be so burdened; and knowing that all the currency that we use is borrowed, how could anyone refer to the currency we use today as our currency? You may not be directly paying interest on the national debt, but you are, now, indirectly paying interest on our unpayable perpetual national debt to our creditors by way of your taxes. And you will continue to pay, to an even greater degree, to the one world government if and when it gets here. One final observation about their money, it has the tendency to lose its purchasing power relatively fast. Not as fast as some inflations, to be fair. However, nickel's worth of American money in 1913 could buy approximately what a paper fiat dollar buys today. And next year, the inflation calculators on the internet will have even worse to report about the purchasing power of their money. Savers who save in terms of their dollars lose more wealth over time. This loss of wealth to savers is a continuation, as of 1913, of the tradition of coin clipping and shaving. "....Henry VIII debased the coins. In those days they didn't have computers, so the rascal prince simply shaved the coins when he wanted to cheat the public. Nowadays we punch a few figures into a giant computer at Culpepper, Virginia and create federal notes, bills, and bonds, and float these out into the financial community so reserves can follow a certain formula, and money can be created via the creation of loans. When you create money this way you inflate to the extent this money isn't answered by earned income. This is our modern method of shaving coins." (3.) It is difficult to imagine the level of intrigue that must have gone on as they, the early central bankers, the financiers to the world, persuaded our government to incrementally dismantle the Constitutional monetary system that was working as it should have, and replace it with a system entirely based on debt. What we have today (their money) is exactly what the Amero would be except it would have different printing on the paper and it would be intended to circulate among three nations, or substates, whereas the paper of the Federal Reserve System is more or less designed for the United States. The printing, "The United States of America," the portraits of the dead presidents, at worst makes Mexicans and Canadians who handle US Dollars feel they are handling another nation's or central bank's currency, and they are. Yet, changing the name to the "Amero" and putting other faces than our dead presidents or, emulating the Euro, no face at all on the bills would only allow our neighbors to believe the currency is of their nation, or Union if that is what is coming. Nothing will have changed in the nature of the money. It will still signify a debt to the central bank monopoly. And, should such a Union succeed, you might imagine that it would be even harder to repair the damage done and return to a Constitutional money system, if such a thing were not already impossible. In the final analysis, no one should be worried about our money being replaced with the Amero, because (A) the coin money of the Constitution as already been replaced and we have been using their irredeemable debt-based money for a long, long time. We are using exactly the money that the bankers, not the founding fathers, would have us use. The move from the above shown coin money of the Constitution, to that of the Federal Reserve System was unimaginably VAST in terms of its legal, financial, and sovereignty implications. And (B) we are not really being threatened with a second replacement, but only a cosmetic alteration to make it psychologically acceptable to this so-called "Union." To rephrase substantially the line in the National Register article that started all this inquiry: The plan to replace gold and silver coin with central bank debt was the necessary giant step closer to socialism's perverse dream of a one-world government. Socialism is not new. It goes back to the mid 1800's. They've had since their beginning, their agenda for the supremacy of the state and the limitation of individual property rights and individual liberties. A depreciated paper currency and State control of credit has always been part of their agenda. It is pointless to be alarmed about the Amero today with no way to go back to the gold and silver coin of the U.S. Constitution as the national money. It is as insignificant as changing the designs that appear on our copper quarters. Jason Kirby [email protected] June 20, 2006 References: 1. Parity. ACRES, USA, by Charles Walters, Jr. Page 14. 2. Funds And Their Uses, by F. A. Cleveland, Ph.D., Wharton School of Finance and Economy, University of Pennsylvania, D. Appleton and Co. Publishers, 1916. 3. Parity. ACRES, USA, by Charles Walters, Jr. page 16. The Revolutionary War caused by Bankers? A Moldy Crust Of Unprecedented Arrogance, Treachery And Deceit! Posted by Richard Allan Jenni on March 5, 2010 at 5:30pm Send Message View Richard Allan Jenni's blog Unmitigated arrogance, especially combined with immense political power, dwarfs all other revolting combinations of puffed-up self-importance- and Obama has long crossed that disgusting threshold where the average American can stand no more- at least without vomiting to relieve the unbearable pressure of overwhelming nausea inexorably evoked by his vapid persona. Barry reminds me of a wannabe concert violinist whose wealthy friends have bought him a few minutes of fame at the conclusion of a magnificent performance by one of the world’s great concert orchestras. He walks out on stage to strut his stuff before a packed house- but the instant bow meets string, hundreds gasp in horrified realization that their evening of musical excellence has been ruined by an imposter. The reverent audience immediately becomes an angry crowd. They rise as one body and boo. A spoiled tomato is hurled at the stage by an old man who knew what was coming. As gifted musicians all run for cover, our determined violinist holds his ground. Finally the great hall is quiet and empty- save the solitary screeching of this inept violinist- a rotten tomato splattered on his insolent brow… We have seen such unbridled arrogance before. It started with the Currency Act of 1764. Ben Franklin would later write, “The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.” And in fairness to King George, the sinister taproot of this arrogance was not the English throne, but the bankers who controlled it. In 1791 as the first Secretary of the Treasury, Alexander Hamilton was instrumental in creating the First Bank of the United States, which had a 20 year charter and was empowered to issue our paper money. Hamilton by his treachery earned the contempt of Presidents Thomas Jefferson and James Madison. Poetic justice that Jefferson’s vice-president Aaron Burr mortally wounded Hamilton in a duel at Weehawken, New Jersey on 11 July 1804! President Madison said, “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.” Expiration of that charter in 1811 motivated the Rothschilds to foment the War of 1812- and in 1816, Congress granted a 20 year charter to the Second National Bank, betraying every drop of patriot blood spilled in that war. Putting his reelection entirely at risk in 1832, President Andrew Jackson vetoed early renewal of the Second National Bank’s charter. In his second term, Jackson ordered the withdrawal of all federal funds from its vaults- and fired two treasury secretaries before finding one who would carry out that order. Jackson thereby greatly reduced the bank’s lending power- and the anemic financial institution gasped its last breath when the charter expired in 1836. When President Jackson was asked to identify his greatest accomplishment, he answered tersely, “I killed the bank.” Fast forward to 1861. President Abraham Lincoln needed money for the Civil War- and appealed to the large Rothschild-controlled banks. He was offered a deal reminiscent of today’s credit card interest rates. Honest Abe stepped through the horns of his dilemma- and started printing his own greenbacks. By April 1862, he’d printed about $49,338,902 worth… Lincoln would later lament to Congress in 1865, “I have two great enemies, the Southern Army in front of me, and the financial institutions in the rear. Of the two, the one in my rear is my greatest foe.” Fast forward again to 1963. President John Fitzgerald Kennedy signed Executive Order 11110, returning power to our government to issue currency- independent of the Rothschild-controlled Federal Reserve. Should nary a shred of additional evidence be offered on his behalf, Jack Kennedy hereby established himself as one of the great Presidents in American history. We may chase the last crooked politician from the halls of Congress. We may completely eradicate the last vestige of socialism from American society. And yes, we may exterminate Islamic extremist supremacy- but such victories will not save our republic, lest we destroy the root of the great evil which assails usnamely the stranglehold of the international banking cartel upon our economy. And does not the combined patriot wisdom of Presidents Jefferson, Madison, Jackson, Lincoln and Kennedy accentuate the present paucity thereof in the White House? Without even half a loaf of loyal Presidential leadership, we choke upon a moldy crust of unprecedented arrogance, treachery and deceit! Tags: abraham lincoln, arrogance, barry obama, deceit, federal reserve, john f kennedy, lies, treachery Share Twitter Facebook Sources: Ron Paul, Pillars of Prosperity, The Revolution- a Manefesto, END THE FED G.Edward Griffin, The Creature from Jekyll Island Thomas E. Woods, Meltdown Aaron Russo, Freedom to Fascism The US Constitution, James Madison The Declaration of Indepence, Thoams Jefferson The Bible, God The Who What Where When of the Federal Reserve, Joe Plummer Money as Debt, a video on Google Video The Origins of the Federal Reserve (History) by Murray Rothbard a google video The above cited references in note form copied and acknowledged by Wikkopedia One might check other resources such as Campaign for Liberty: www.campaignforliberty.com www.mises.org www.thedailybell.com This just in from the Daily Paul: (concerning the Goldman Sachs /FED Scam) http://www.dailypaul.com/node/128255?utm_source=feedburner&utm_medium=email& utm_campaign=Feed%3A+dailypaul%2FFClq+%28The+Daily+Paul++Continuing+the+Ron+Paul+Revolution+Ron+Paul+for+President+2008%29&utm_cont ent=Yahoo!+Mail The link to Debt as Money a must watch to understand the development of banking Fraud: http://video.google.com/videoplay?docid=-2550156453790090544#