Balanced Federal Budget, Federal Deficit Solution
Federal Deficit Problem
Federal Government Budget
Balanced Federal Budget
Federal Government Budget
Gold, Money, and the Federal Debt

               For thousands of years, gold had been valued for its scarcity, beauty, malleability, uniformity and permanence. All five factors contributed to its use in jewelry. Three factors, scarcity, uniformity and permanence, made it useful as collateral for paper money.
               In July 1944, delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, for the United Nations Monetary and Financial Conference. There, they signed the Bretton Woods Agreements.
               The key element of these agreements was to codify gold as the backing for all Allied nations’ currencies. U.S. money was pegged at thirty-five dollars to one ounce of gold, and all other nations’ currencies ultimately were de facto pegged to the U.S. dollar.
               The word “backing” is a synonym for “collateral.” The backing for a debt is its collateral. The paper dollar bill, also known as a “federal reserve note,” is a debt instrument signifying an obligation of the U.S. government. (“Bill” and “note” are words signifying debt.)
               The reality that all U.S. money is debt, and conversely, all financial debt is money, is not understood by those who wish to reduce the amount of U.S. debt. Doing so would reduce the amount of U.S. money and cause a depression. In fact, on six separate occasions, when the federal government attempted to reduce its debt, i.e., reduce the amount of federal money in circulation, the U.S. experienced depressions.*
               Bretton Woods’ primary failure was not allowing for national flexibility in the money growth necessary for economic growth. In 1940, U.S. public debt was more than $40 billion. Today, it is about $9.5 trillion, a 200-fold increase. Were Bretton Woods still in effect, the U.S. would need 200 times more gold than it owned then, an impossible scenario.
               The other flaw relates to gold’s limited intrinsic value. It is a commodity, much like copper, iron and diamonds, but with less usefulness. Its price results more from history and convention than from underlying utility value. For that reason, gold was a weak form of collateral that never could protect the value of paper money.
               Faced with the alternatives of inadequate money growth leading to recessions and depressions vs. removing the fiction that gold somehow protected money, President Nixon, in 1971, chose the latter and removed gold as the collateral for the dollar. As a result, gold has no relationship to the U.S. dollar, and the federal government has gained the unlimited ability to create money, which it does by creating debt.
               The word “debt” contains such negative inferences, that politicians, the media and even some economists, who should know better, continually call for a reduction in federal debt. “Reduce federal debt" is another way to say, “Reduce the money supply,” an act that repeatedly has caused the abovementioned depressions.
               Today, the collateral for the dollar is the U.S. government’s promise of full faith and credit, a seemingly insubstantial collateral, but one with much greater safety than gold provided. This promise tells the holder of federal government debt he can use that debt to buy anything in America and to pay his federal, state and local taxes -- two key attributes gold could not provide.
               While gold backed money for thousands of years, it has been only a few decades since it was divorced from money. Old habits are hard to break, so some people and some nations (the U.S. included) continue to hoard gold, under the erroneous belief there is financial safety in this yellow metal. They would be far wiser to hoard copper or fresh drinking water, both of which have far more utility than gold.
               FREE MONEY explains more about the relationship between gold and money.

Please click the cover to see excerpts from FREE MONEY.
Questions? Ask the author, Rodger Malcolm Mitchell at:

*Why Federal Debt Is Necessary For Economic Growth

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1998-2001: U. S. Federal Debt reduced 9%. Recession began 2001    

  1. Stagflation
  2. Federal Budget Deficit
  3. Social Security and Medicare Solutions
  4. National Debt Letters
  5. Federal Deficit Solution
  6. Concord Coalition.
  7. Balanced Federal Budget
  8. Federal Deficit Problem
  9. Federal Government Budget
  10. US National Debt
  11. National Debt Solution
  12. A Child In Arms
  13. Inflation and Stagflation
  14. Glossary of Economic Terms Debt, Money, Deficit, Spend, Owe
  15. U.S. National Debt
  16. US National Debt Clock

The Interest Rate Fallacy | Social Security Solutions | Medicare Solutions | Economic Solutions | Recession | Federal Debt of the U.S. | Federal Budget Deficit | Stagflation | National Debt Letters | Federal Deficit Solution | Balanced Federal Budget | Federal Deficit Problem | Federal Government Budget | US National Debt | National Debt Solution | A Child In Arms | Glossary of Economic Terms Debt, Money, Deficit, Spend, Owe | US National Debt Clock | Inflation and Stagflation | Pseudoeconomics   | Money supply and the weather | Do low interest rates help? | The solution to Federal Taxes | Social Security Reform | Does Federal Debt Cause Inflation? | The 5 Myths That Damage Our Economy | 10 Reasons to Eliminate FICA | GETROYS | Rodger M. Mitchell -- Ideas | >