The Problem With The Value And Faith We Put In Paper And Electronic Currency

If you reach into wherever it is that you keep your on-hand cash and pull it out, there are four things that you should keep in mind:

• You have exchanged something of value to you in order to obtain that note, and you should have a good understanding at all times of just how much of that valuable thing you traded for that note
• From the time you exchanged that item of value for that note, there has been and will always be continual fluctuation in how much of that valuable thing each note is worth to you and others
• The actual note in your hand only has a perceived value, granted to you by others who also believe in that same perceived value, otherwise all you hold in your hand is a piece of paper
• Without an exchangeable value other than its perceived value, all of the value you put into that note could completely disappear instantly…yes, instantly!

No matter where you sit on the political spectrum, no matter how you earn your money/dollars/notes, and no matter your age, location in the world, or your socioeconomic conditions, these four things apply to you. Pretty scary, isn’t it, especially that part about the value of your notes disappearing instantly, right?

There was a time in history when all of the paper currency in the world, whether issued by a bank or a government, was exchangeable for, and therefor backed by, a stockpile of precious metals somewhere. The value of the paper money in your hand was tied to the value of gold, silver, or some other metal that was under lock and key somewhere, and any time you wanted, you could go and trade in your paper money for that tangible precious metal. Today, however, this is no longer the case. And that is why whenever we are dealing with paper currency, we need to remember those four things above.

But, how did we get here, and why? That’s the trillion-dollar bill question, isn’t it?

Sadly, the answer is very simple. It all boils down to the fact that governments need your value through either your labor or your money, in order to operate and exist. That means that governments need to provide a currency that can be used to perpetuate their economic system and provide the means to take value from you. But today, there are far too many people, there is far too much potential value, and there is far too little precious metal to have paper currency tied to actual tangible real-world assets any longer. In short, the world’s governments and their economic systems need far more value in paper money than all of the already-mined precious metals in the world can provide.

Following the chaos of World War II, the 44 Allied nations came together and agreed that in order to create economic stability, they would all peg their paper currency to a gold standard and that each of their gold standards would be tied to the U.S. dollar at an exchange rate of one ounce of gold for 35 U.S. dollars. This created a scenario in which these nations and their central banks could exchange U.S. dollars for gold on demand. This system worked well and helped fuel the economic growth that would ensue for the next 25 years.

But that amazing growth would yield a problem by the 1970s. The Allied nations’ populations and economies had grown so large that the amount of U.S. dollars in circulation had far surpassed the amount of gold the U.S. held in reserves. This meant that if the world’s governments cashed in their greenbacks, there would not be enough gold to pay everyone their stored value. Fearing that this would cause a run on U.S. gold and result in economic collapse, in 1971, the U.S. government removed the gold standard from U.S. currency, allowing the central bank to just print money that has no actual real-world, tangible value except for what we perceive in our minds as a collective. No longer could the world’s governments exchange U.S. currency for a fixed amount of gold. Instead, the value of each piece of currency would be tied to its perceived, or market value.

Let’s think about that for a second. When banks and the U.S. government first started printing paper money, the value of that paper money was tied to a precious metal like gold or silver, but that meant there could never have been more paper money out there in circulation than the amount of physical precious metal the bank or the government had on hand. That also meant that at any time, you could walk into the bank or the right government office and demand precious metal in exchange for the paper currency in your hand.

Do you see how this system of paper money based on a precious metal stockpile makes perfect sense? People no longer had to carry cold coins in a purse or large amounts of gold bars on a carriage, but instead, just had to carry light paper currency in their pocket.

But now, people can no longer walk into the bank or a government office and demand something of real-world value in exchange for the paper currency in their pocket. Today, all you can get for that paper money in your pocket is other forms of paper currency, or worse, a balance on the bank’s or government’s electronic ledger.

And, if the fact that paper currency is no longer tied to anything of actual real-world value is not scary enough, the next step, which is already well underway, is to transform that paper money into electronic numbers on an electronic balance sheet somewhere in the cloud.

Imagine a planet where the governments of the world convince us all that the cost of producing that actual paper currency is just too high, and even worse, completely unnecessary now that we have this beautiful digital world in which everything is stored on electronic ledgers and we can all carry around little plastic cards in our pockets instead of that costly-to-produce and now completely unnecessary paper money. Oh, and don’t even get them started on producing coins! It costs a nickel to make a penny now. How impractical is that? You humans don’t actually want to carry around coins any more, do you?

If you don’t believe this is where the governments of the world are taking us, think a little about how you transact now compared to ten or twenty years ago. How often are you using actual paper currency versus those plastic cards in your pocket? How many of your bills do you pay with a paper check, and how many do you simply pay online?

See how this is all progressing along nicely for the governments?

And what is the problem with the governments doing away with physical currency all together? Well, the biggest problem is that people will no longer have the ability to hold currency outside of the electronic system - meaning no one, ever, will be able to hide currency from the government's greedy hands.

Then, all it will take is for the government to sit at a keyboard and it can have complete access to the value of everything you own. Remember how earlier we talked about you exchanging the value of something for that currency? Well, once all currency is electronic and there is no way for you to hold that value in something tangible, then it can all be wiped out, entirely wiped out, with just a keystroke. That’s everything you have worked for your entire life – gone in an instant.

Couple this with a current movement to get everyone on the planet an electronic ID by 2040 and every single person on the planet and their electronic currency will be reachable by governments and global governing bodies like the UN at any moment, anywhere in the world.

Can't wait to see the black markets this creates for alternative currencies! We'll be using commodities as currencies to barter with each other outside the government's ever-watching eye like it was the Dark Ages again. How many chickens for a sword?

Think of what this will do to the price of precious metals. That is, if the governments even allow us to own precious metals any longer once they do away with all physical currency.

While we will have to see where governments and technology take us, unfortunately, there is very little we can do about the tangible real-world value in our paper money, other than exchanging some of it for precious metals while we’re still allowed. The main thing to remember each time you look at those paper notes in your hand is to ensure that your portfolio of assets is as diverse as possible.

Never keep all of your value in eggs, and never keep all of those eggs in one basket.

Photo by The Digital Way via Pexels

The $10 Bill....

In 1861, the first $10 bill was issued near the outset of the Civil War.

It featured a portrait of Lincoln and is the only time a sitting president appeared on U.S. currency.

In 1861, a $10 bill could have bought you an entire barrel of flour, a month’s stay in a New York City tenement, or a ride on the Great Eastern steamship from Manhattan to Cape May, New Jersey.

In 1901, the $10 bill depicted explorers Lewis & Clark on the edges with a large American bison in the middle, and bought you ten private ballroom-dancing classes, a housepainter’s labor for eight days or a full eye exam and 10 pairs of glasses.

In 1929, all U.S. currency was changed to its standard size of today. Despite the popular belief, the car on your 1929 standardized $10 bill is not a Model T Ford, but a composite of cars from the day. In 1929, your $10 bill got you a year’s worth of accident and sickness insurance, a waffle iron, or a one-minute phone call from New York City to London.

In 1942, just after the bombing of Pearl Harbor by the Japanese, special $10 bills were printed for Hawaii with the state’s name printed on the front and back and the serial numbers printed in brown ink instead of red. This was done so that if the Japanese invaded Hawaii, the U.S. Treasury would declare these $10 bills worthless.

Keep an eye out for the new $10 bill coming early in 2006. Its design is still mostly green, but now features shades of orange, yellow and red and has renderings of the Statue of Liberty torch and the words, "We The People..."

When It's 2010, 2015, & 2050...

When it’s 2010, the average life expectancy of men turning 65 will be 81.4 years, while women turning 65 in 2010 will live to 84.1 years.

Mean household income, which is $92,553 today, will get up to $113,361 in 2010 and $133,831 in 2015.

Americans’ taxable payroll which is at $4.7 trillion today will go up to $5.4 trillion in 2010 and $6.1 trillion in 2015.

The U.S. GDP which is at $12.1 trillion today will shoot up to $13.9 trillion in 2010 and $15.7 trillion in 2015.

Today, Social Security revenue is 12.73 cents per $1 of taxable payroll with 11.05 cents of revenue being paid out and 1.68 cents of revenue being put into the surplus fund. In 2010, Social Security revenue will go up to 12.83 cents per $1 of taxable payroll with 11.34 cents being paid out and only 1.49 cents being put away. By 2015, Social Security revenue will reach 12.95 cents per $1 of taxable income with 12.26 being paid out and only 0.69 cents being put away.

Today, U.S. unemployment is at 5.25% and is expected to go down to 5.21% in 2010 and 5.20% in 2015.

The U.S. population, at 288 million people today, will go up to 309 million in 2010, 323 million in 2015, and reach 421 million in 2050.

Within the U.S. population, people over the age of 65 make up 12.4% today, will make up 13.0% in 2010, make up 14.5% in 2015 and make up 20.7% in 2050.

So what else is in store for 2050?

According to Elizabeth Gardner from Financial Planning Magazine:

• There will be "solar" paint with embedded semiconductor particles that can power the electronic devices that are painted with it
• Wearable electronic devices will run on power generated by the wearer’s skin (a process patented by Microsoft in 2004 that will help the company reach $1.4 trillion in market value by 2050)
• People of two or more races will be so common in the U.S. that the Census Bureau will consider dropping the "race" question from the census (the CB will actually drop the question sometime after 2100)
• Printable transistors will be woven into clothing so that people can sell commercial time on their clothing to advertisers
• Distance learning will replace institutions of learning like Harvard for the most part (where annual tuition will be $320,000 in 2050) and individual instructors who teach students all over the world remotely will become the new icons of learning
• California will be forced to institute once again an English-only policy for official city and state signage as ethnically-centered populations have resulted in entire cities having official signs in only that city’s most popular language
• Human tissue, bones and organs will be custom-made using devices that build three-dimensional structures of living cells, revolutionizing prosthetics and the plastic and restorative surgery industries
• The penny will finally be officially eliminated by congress, but other cash and coin in the U.S. will still be around for private, in-person transactions, while a new form of currency that is worldly universal for use over the Internet and electronic shopping methods will have been popularized and replace the U.S. dollar as the defacto standard for the world’s currency
• Land-fill mining companies will be becoming popular, mining old landfills for metals, minerals and other materials whose natural resources have been exhausted
• The youngest baby boomer will be 86, the oldest 104
• Books will be a retro luxury much like vinyl records are today with some pretty common books by today’s standards being displayed in museums while book-binding will become a well-to-do hobby like home wine-making or beer-brewing is today
• To deal with seething social unrest caused by an excess of single men, China will offer attractive financial packages to Chinese girls adopted buy U.S. families to get them to come back to China
• There are 800 million cars on the world’s roads today, but there will be 3.25 billion by 2050

Why Is Ben On The C-Note?

Have you ever wondered why Benjamin Franklin is the only person featured on American paper currency who is not a former President of the United States? To find the answer, we must travel back to Ben Franklin’s day, but make a quick stop in an America on the brink of civil war.

When Abraham Lincoln took over the presidency, despite nearly one hundred years of existence, our fine country still did not have a federal, nation-wide currency. Realizing that war was eminent, and that a federal currency would be needed to fund and control war-time spending in the North, Mr. Lincoln ordered the first printing of the US federal dollar.

So, what did America do for money for the first hundred years? Would you believe that local banks printed currency notes themselves? You went to your bank, withdrew a note for a pre-designated amount and traded it with a store owner for goods on the pretense that the store owner could go to your bank and draw on the bank’s funds or have money put in his account to cover the amount of your purchase.

Bank notes back then worked much like a check works today. One of the main problems with this bank note system was that at any given time in pre-Lincoln America, up to 2/3 of the bank notes being passed around were counterfeit. In fact, one of the major British war efforts in the 1770s was to flood the American colonies with fake bank notes to destabilize our new, independent economy.

Some of the bank notes were easily forged by the monarchy, while others were very difficult to copy. And whose were the most difficult to copy? Why, the ones designed and printed by Mr. Benjamin Franklin of Philadelphia, or course. Hence, the well-deserved honor of gracing the $100 bill.