Last July, US Congressman Ron Paul asked US Federal Reserve Chairman Ben Bernanke, “Is gold money?” On YouTube you can watch Bernanke squirm in his chair.
The US Federal Reserve is a money- spewing monster. Like any central bank, its main function is to print money. However, the more they print, the weaker the currency becomes.
A private banking cartel created the US Fed in 1913. The bankers got rich, but the US dollar has retained only 2% of its 1913 real value, so the average citizen – and this applies to Canada as well – haswatched wages and savings diminish in value.
An American or Canadian dollar bought about 20 average loaves of bread in 1913. Today a dollar gets you less than half a loaf. Ninety-eight per cent of its nominal value disappeared. Paper currency is money without intrinsic value. When no one believes in it anymore, it becomes a rather poor stove fuel. History is littered with examples.
At the Roman Empire’s zenith, its greatest expenditure was the military (sound familiar?), and a soldier earned 250 silver coins (denarius) per year.
Near the end, the wage had risen to hundreds of thousands of denarii. The Roman treasury paid this inflated rate by shaving silver from the coins and adding copper until the entire coin was copper. Most soldiers by then were foreign mercenaries willing to take the debased currency.
In the 1920s, Germany debased their currency until frugal fraus realized that a wheelbarrow load of Deutschmarks had more thermal value than the coal it would purchase. Photographs from that era show women firing their furnaces with their national currency.
In modern times, Zimbabwe printed money so fast, that by 2008 they were printing 100-trillion dollar notes. Today you can buy 100 of those notes on E-Bay for $1, great for party favours as bookmarks or le papier de toilette. American and Canadian currencies are headed in the same direction.
Bread, bikes, and Popsicles
At age seven, I walked to our local bakery each day for a loaf of fresh bread: 12 cents. One day, raging customers packed the store to protest: Bread had gone up to 13 cents! At eight, I saved five months allowance to buy a bicycle: Seven dollars and fifty cents.
Five cents bought an orange Popsicle, but I rarely had that much. Mr. Toman at the local corner store let me buy half for three cents and a week later I could get the other half for two cents. Later, When I attended boarding school, my mother reminded me that the school cost $45 per month so I had better get my money’s worth. I rarely went home for weekends so I could eat in the cafeteria and get our money’s worth.
When I was twelve, I worked for Pacific National Exhibition in Vancouver, hawking ice cream and peanuts on commission. For three days, I averaged $6.11 per day, the highest paid boy. Then, one day, just as the high wire artist stepped onto the sliver-thin wire, I yelled into a nearby microphone, “Peanuts, Popcorn, Ice Cream – Real Cheap.” I got fired.
Someone felt sorry for me and gave me a job cleaning up at a food concession. I worked 16 hours a day at 40 cents an hour, which worked out to a pay raise. One day, while sweeping the floor, I found a purple $10 bill. On a relative scale, that may have been the greatest payday of my life.
As a teenager, I worked in the general store at Refuge Cove on West Redonda Island for fifty cents an hour. I helped at the fish-buying station and quickly figured out where the local ATM machine was located. The Klahoose at Squirrel Cove rowed to Refuge Cove in dugouts, stopped at the reef near Centre Island, caught lingcod, and traded their catch for supplies. I borrowed the store’s boat, rowed out to the reef, and jigged for ling. The store paid eight cents a pound, head off, guts out. Rarely did a fish weigh less than 25 pounds, and it took me about an hour to catch 200 net pounds: $16 per hour.
At eighteen, on $1,200 Canadian, I travelled the world for eighteen months. In Spain, in 1962, I stayed at a pension for a dollar – a clean room plus four superb meals each day. In Ethiopia, I lived on three cents a day.
On my way to Russia, on a tip, I went onto an American air base in Iran and bought cases of Wrigley’s Spearmint chewing gum. Inside Russia, gum was money. One stick of gum fetched one ruble, worth about $1.11 at the time. I travelled first class on trains, stayed in the best hotels, and ate pheasant under glass at the Moskva, the most expensive hotel in Moscow for five sticks of gum.
What is money?
In 1967, my wife Denise and I bought a house in east Vancouver with a monthly mortgage payment of $88. University tuition cost $188 per year, and $20 bought a week’s groceries for us and our two children, Michael and Lisa.
In 1972 we moved to Refuge Cove and formed a housing co-op. We bought a general store, full of stock, a gas dock and floats, seven cabins, 186 acres of forested land, with a mile and a half of water front, on the most protected bay on the BC coast for $140,000. Some people thought we got ripped off.
During the 1973 Arab oil embargo, the price of fuel tripled. That was the end of summer boating for blue-collar workers. Thereafter, the store catered to rich yachters. I was surprised when the price of beef suddenly tripled. We did not yet understand that the oil price drove the price of everything else. We thought we’d have to shut down our butcher shop, but no. The yachters paid, musing “It’s got to be good at that price.”
I used to be amazed when companies reported 100 million dollar profits. Soon, companies were talking about billions in profits. today, we hear about trillions in national debt, and the notional value of the world’s derivative market is reportedly about a quadrillion dollars, and nobody even knows what a derivative is. Why do the numbers just get bigger and bigger? Well, that’s the difference between paper currency and real value.
On a financial site on the Internet, I recently saw a new type of ATM machine in the most luxurious hotel in Dubai, plated in gold and dispensing gold. All you do is put in paper that it recognizes, and out comes gold.
Gold is quite different from paper money. Why? Let’s go back to 1913, when the price of gold was US $20.67 per ounce. Today gold is fluctuating around US $1,700 per ounce. Recall that in 1913, a dollar bought 20 loaves of bread. Today, that dollar only gets you a few slices. The paper dollar has lost 98% of its value. However, an ounce of gold in 1913 would buy about 400 loaves of bread. Today an ounce of gold buys … well, the same 400 loaves of bread! Gold kept 100% of its real value over the last century, whether you’re buying bread, steak, a bottle of Scotch, or a Popsicle.
Other things have good inherent value as well, such as arable land or clean water, but can’t be carried around and traded. Gold can. Inflation is the bankers’ secret tax. If you kept dollars for 100 years, you paid 98% inflation tax.
So, when US Congressman Ron Paul asked Fed Chairman Ben Bernanke, “Is gold money?” you may now understand why Bernanke squirmed in his chair and mumbled out a thoroughly unconvincing, “No. Well, it’s an asset …”
You see? The chief economist for the Federal Reserve had to evade this question, because if he told the truth, people might stop believing in the paper that his private bank has systematically printed, pushed, and devalued by 98% this century.
Norm Gibbons is a BC native and founder of Redonda Sea Farms and Chamadaska Gardens.