US Dollar Evolution 01-17-2012

8/3/2019 US Dollar Evolution 01-17-2012

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Copyright January 17th, 2012

HE EVOLUTION of the United States dollar has been one of the most misunderstood

issues of all time. There has been far more at stake in the Rise & Fall of the dollar than

meets the eye. This is not an issue of Intangible v Tangible (Paper v Gold). This is the core

issue of the migration of the Financial Capital of the World that has taken place through

time and circumstance. The rise of the dollar represented the Decline & Fall of Europe.

The Decline & Fall of the Dollar today, represents the collapse of Western Society for the one thing that

destroys a nation has been its debt and fiscal mismanagement. Until the day comes when the people

remain diligent to temper and control their various forms of government, there is just no hope in sight.

The Financial Capital of the World has migrated perpetually because of fiscal mismanagement we the

Sovereign Debt Crisis today is merely a manifestation of the past in an endless loop of reruns. What lies

in wait just ahead is the classical conclusion of Machiavelli history repeats because mans passions

never change.


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Of

course there is the epic Fall of Rome in 476AD with the last Roman Emperor to hold the throne in the

West being Romulus Augustus (475-476AD) a most fitting name since Rome was founded by Romulus

and the first Roman Emperor was Octavian who was bequeathed the name Augustus (27BC-13AD)

meaning father of his country. The fall of Rome ushered in the Dark Age for Europe. Nonetheless, its

eastern half with the capitol of Constantinople in

modern Istanbul continued into 1453. Its fall shifted the

Financial Capital of the World to India.

During the Byzantine reign of Constans II (641-668AD),

the Muslim hoards were rising taking both Egypt and

Rhodes. In the north, the Slavs were also presenting a

threat. The frontiers of the Byzantine Empire were now

being contested. Constans II relocated his administration

to Sicily at Syracuse. When he sent for his family, the

senate refused to let them leave fearing he was in fact relocating the capital of the empire and the

solution was his assassination. By 1092, gold had vanished as

the Muslims cut off access to Numidian gold mines. The

emperor bore the illustrious name Constantine XI (1448-

1453). He died in battle defending the walls against the

Muslin invasion.

While the Muslim invasion saw the end of the Byzantine

Empire, it had also set in motion the gradual decline and fall

of India. While Byzantium fell into economic turmoil and


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crisis going into 1092, India had risen to the Financial

Capital of the World. India had been trading with the

Romans going back to the birth of Christ. Not only are

genuine Roman coins discovered in India confirming

the extensive trade, but we also find Indian simulations

(counterfeits) of Roman gold aurei of Septimius

Severus (193-211AD) that also illustrates how Roman

coinage was being used as part of the money supply in

India. This is the same pattern that we see with US

dollars circulation in Russia.

As India became the Financial Capital of the World, we then

find Indian gold coins circulating in Asia as well as in the

Middle East. Indian gold coins tended to be popular in China

when there were no actual gold coins minted by China. China

was living in the shadow of India. It had absorbed its religion

and culture.

India indeedhad peaked

as the Financial Capital of the World during the reign of

Somesvara I (1043-1068AD) due in part to the rise of

the Muslim empire that had begun to carve out its place

in history. While the Muslim world was expanding both

into Europe as well as into Asia, the balance of trade


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began to shift against India. Mahmud of Ghazni

(971-1030AD), was the most prominent ruler of

the Ghaznavid dynasty who reigned from 997AD

until his death in 1030AD in eastern Iran.

Mahmud had turned the former provincial city

of Ghazni into the new wealthy capital of an

extensive empire that included most of Iran,

Afghanistan as well as Pakistan stretching into

North-West India. Mahmud became the first

ruler to carry the title Sultan (meaning

"authority"), to signify the vast scope of his power and empire.

The 21 year-old Sultan el-Fti (the Conqueror) Mehmed II (b:

March 30, 1432, 14511481) captured Constantinople on May 29

1453 and assumed the title of Caesar. As the Ottoman Empire

began to rise India began to decline. That decline, however, was

slow taking the form of steady erosion. Nonetheless, the title of

financial capital of the world not passed to the Ottoman Empire.

Instead it passed to China. By the mid-19th century, it was now

Chinas turn to shine. It was the riches of India and China that

had attracted Britain. With a steady pace, eventually Britain

became Great and captured the crown of Financial Capital of

the World during the Victorian Age from Asia. But alas,

arrogance of officialdom emerged as always and with it fiscal

mismanagement. By 1913, the jealousy of rivals in Europe led to

World War I and with it, the peak in European greatness. The title of Financial Capital The World now

shifted from Europe and Great Britain to the United States.

During the late 15th century a new denomination of money appeared known as the guldengroschen

which was a silver coin of 28.8 grams. Silver discoveries continued and in Bohemia, these silver


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discoveries led to coins known as the "Joachimsthaler" that came from the city of Joachimsthal

(Jchymov). The slang term became "Thaler" the origin of the American dollar where Thalin German

means "valley". Therefore, the word "thaler" was the slang term for a person or a thing " from the

valley" a sort of a hick. Therefore, the word dollarwas the English translation for thaler that no

longer carried the slang meaning. It was now a monetary unit after about 200 years.

Yet the path for the dollar would reflect both the fiscal mismanagement of Britain as well as Spain.

Despite a new world of tremendous wealth, Spain borrowed far more than the next ship was always

carrying. For this reason, Spain became a serial defaulter beginning in 1557 followed by 1570, 1575,

1596, 1607, and 1647 ending in a 3rd world status. Their economic model was one of conquest rather

than constructing a viable economic establishment. The persecuted the Jews and Muslims and that

religious fanaticism led to massive migration of capital and talent. The Jews abandoned Spain and fled to

Amsterdam causing the Dutch to emerge as the initial Financial Capital of Europe. That then shifted to

England when in 1689 they adopted a Dutch King. Britain on the other hand, extracted precious metal

from the American colonies and would only pay copper. These two fiscal mismanagements on the part

of Britain and Spain set the tone for the American Revolution due to the shortage of money in the

colonies. By the 1700s, the Spanish 8 reals were commonly called dollars in America and cutting themup became a piece of eight.

United States dollar was thus the adoption of the German monetary unit thaler that had become

synonymous with the silver coin of about 28 g. Therefore the dollar was actually based upon the Spanish

silver 8 Reales coins commonly called dollars which had become the mainstay of the colonial monetary

system. Such coins were first minted by the Spanish in America during 1530. These early pieces are

known as cob coinage and tended to vary in weight in addition to being struck rather irregularly. The

designs were never fully struck and as such the coinage appeared very crude. Introduction of machine

milled coinage did not take place until 1732 and

thus it is from that period onward that we find

the term milled dollars distinguishing the

standardized products from that of this early

cob coinage. The gold coinage was often

referred to as a doubloon. There is the famous

Brasher Doubloons issued in 1787 by Ephraim

Brasher who was a Dutch gold and silversmith and

jeweler who lived next door to George


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Washington. In 1787, Brasher and John Baily petitioned the New York Assembly for the contract to coin

coppers for the state. A committee of the legislature investigated the matter and recommended that

the matter be postponed indefinitely. Possibly to stimulate interest in his proposed coinage, Brasher

issued his famous gold doubloons. These rare coins are the equivalent to the Spanish doubloon (or 8

escudos piece), weighing approximately 408 grains or 39.4 grams, and, when issued, were worth about

$15 in colonial money.

There had been a great scarcity of coins in the New World, especially in the more remote

areas. The early colonists sometimes used other mediums of exchange, such as bullets,

tobacco, animal skins, and even adopted the Indian monetary system using mussel shells

strung-together into what

would appear to be a

necklace called wampum

composed of polished

beads made from

seashells. Throughout

much of the 17th and 18th

centuries, the exchange

rate for white wampum

was 360 beads = 5

shillings and 6 beads = 1

penny. Even tuition at

Harvard University was

payable in wampum as

was transportation costs

such as the passage on

the Brooklyn Ferry.

Wampum became less

important for barter;

however it was not until around 1890 that the last wampum mill shut down.

In the Americas, there was clearly the

dominance of Spanish coinage and the absence

of English silver or gold coinage that provided

the incentive for the establishment of paper

money. Here is a Massacushets Bay note from

1690.

These Spanish silver milled dollars were also

known also as Pillar Dollars based upon the

design showing two worlds the old and the

new. They were minted between 1732 and 1771

with a weight of 26.8 grams.


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The term Piece of Eight refers to the fact that these coins were often cut into pieces to make small

change. These pieces were called a bit representing 12.5 cents and thus 8 bits was equal to 8 shillings

which equaled a pound. By the time the US dollar was created in 1794, "two bits" was equal to 25 cents

(quarter dollar). Here we have two bits stamped Saint Lucia Island declaring this to be a valid coin of the

colony.

These bits are common also among the cob coinage. They tend to be referred to also a fleet money

implying their ultimate export to Europe. They are also commonly reffrered to as pirate money since

this is the booting seized from a treasurr ship.

The Act of April 2, 1792, which established the U.S. Mint, authorized the production of the United States

Silver Dollar .8924 fine silver with a weight of 416 grains or 26.9563 grams. A troy ounce weighs 480

grains and thus the silver dollar began with a gross weight of .866 of an ounce with a fine silver weight

of only .773 of a troy ounce. The United States continued to mint silver dollars until 1804. Britain had

stopped striking gold coinage in 1797 and did not resume until 1813 after the Napoleonic War. It was


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during this period in time that Britain was counter-

stamping Spanish silver dollars and this in 1804 it

began to over-strike these coins with British designs.

The United States did not resume striking silver

dollars until 1837.

By 1853, the value of a United States Silver Dollar

had contained in gold terms, $1.07 of silver. With the

Mint Act of 1853, all US Silver coins, except for the

US Silver Dollar and new 3 cent coin were reduced by

6.9% as of weight with arrows on the date to denote

reduction. The US Silver Dollar continued to be minted in very small numbers mainly as a foreign trade

with the Orient.

There was to be absolutely political meddling

in finance under Andrew Jackson (1757-1845;President 1829-1837), who note merely

began the Bank War, but created the Panic of

1837. Jackson was intent upon destroying the

Bank of the United States and did quite a nice

job of it that he set the stage for the Great

Panic of 1837. Jackson has decentralized

banking and encourages massive widespread

fraud whereby private banks issued their own

currency. There was no Federal paper

currency until the Civil War in 1861. This is

the period known as the Broken Banknote

and Wildcat Banking era for there are numerous state banks that all issued their currency and

defaulted on a massive scale. This idea that banks issue paper money ironically stems from this whole

idea that money is tangible. The idea that a bank issues its own currency backed by its own reserves was

the cornerstone of banking. It was to be a place of safe keeping that was it. Not a lender of your

money.


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The United States government issued no paper currency until the Civil War. Financing the Civil War was

accomplished with paper currency just as Britain had ceased the production of gold coins resorting to

paper during the Napoleonic War. There were demand notes that simply promised to pay in coin

eventually as was the case with the Continental Currency. However, there were interest bearing notes

as well as compound interest bearing notes. This provided a form of circulating bonds.


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There were also Gold Certificates, which were quite rare. Clearly, the term Greenback became thename of notes that neither were backed by gold nor paid interest as a

hybrid bond. Thus, the term Greenback referred purely to the lack

of anything on the reverse but green ink. Here we also see a $5

Louisiana note that also paid interest and note the coupons attached

to the right side.

In 1863, to encourage the sale of government bonds, the government

created the National Banking Act. Individual banks could issue their

own currency according to standardized federal designs up to 90% of their holdings of federal bonds.

Thus, they were monetizing the debt in a very clever manner as illustrated here.

The idea that a bank issues the notes was

clearly nothing new. This was the very idea from

which this whole tangible idea emerges. A bank

held assets and monetized those assets by

issuing currency that reflected the tangible

assets held by the bank be it gold, or in this

case, bonds. Currently, the entire monetary

system is still based upon this concept where

central banks hold reserves of US dollars, but

they are in the form of bonds, not actually

paper currency. In truth, MONEY has become

really bonds that the government pretends is

not MONEY but in fact they represent reserves

in the same manner as these National Bank

Notes that began in 1863.


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Just in time for the Panic of 1869 when Jim Fisk sought to force the price of gold higher on the New York

Stock Exchange where Greenbacks then traded, we have the Legal Tender issue of currency, which was

also not backed by gold or interest baring. However, because of the Panic of 1869, we begin to see Gold

Bank notes emerging in California during 1870.


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Of course the whole Panic of 1869 was about pushing gold higher and the idea was that when the

United States would have to return to the Gold Standard, it would have to accept whatever price it was

trading at on the market at that moment in time. James Fisk (1835-

1872) and Jay Gould (1836-

1892) managed to get gold

to rally up to $162 and

ounce on September 24th,

1869. This was the financial

panic where bankers werebeing dragged out to the

streets and hung and they

had to send in troops to

suppress the panic, which

gave rise to the term Black

Friday.


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National Bank Notes first came into being by passage of the National Banking Act of 1863. By the

terms of this act, the government was enabled to grant federal bank charters to banks which were

then allowed to issue their own notes, but only up to 90% of the par value of the United States

Government bonds which the banks had previously deposited with the government as security for

the notes about to be issued. Each bank had its own charter number, which appeared on all notes

issued after 1875. The charter for any bank was valid for a period of twenty years. After that

period, a bank could renew the charter for an additional twenty years and continue to keep

issuing notes. These National Bank Notes, although issued by individual banks, were still

conventional United States paper money produced by the Bureau of Engraving and Printing under

the same conditions as regular Treasury issues and were legal tender. This was a clever means of

selling US national debt and as such clearly the idea that borrowing did not increase the money

supply and was less inflationary did not apply to this point in history. That comes purely post-

National Bank Note period with the emergence of economic theory that first appeared as a

separate course taught at Cambridge University in 1902.


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Currency has often been tied to

debt. In order to make

government securities more

popular and more easily within

the reach of the average citizen,

Congress passed the Act of

February 26, 1879 creating

Refunding Certificates. This Act

made it possible for the Treasury

to issue to the public the

Refunding Certificates of 10

Dollar denomination. These

certificates bore interest at the

rate of four per cent per year

and at the time of issue, it was

meant for the interest to accrue

indefinitely, as no time limit was

set. This was the inducement for

the public to keep on holding

these notes.

However, in 1907, an Act of Congress stopped the interest on these notes as of July 1 of that

year. By that time, the interest alone amounted to $11.30. Technically, interest is still accruing on

these notes, but their rarity far exceeds the original face value including more than 100 years of

interest.

There were two types of these Refunding Certificates. On the first type, the name of the

purchaser was written in on the obverse on a line provided for that purpose. The reverse of this

type is completely different from the second type (see the illustrations in the text) as it consists

of an assignment form for conversion of the note into a four per cent bond. The obligation on this

note is as follows:

"This certifies that the sum of Ten Dollars has been deposited with the Treasurer of the United

States under Act of February 26th, 1879. . . . convertible with accrued interest at 4 per cent

per annum into 4 per cent bonds of the United States issued under the Acts of July 14, 1870

and January 20, 1871 upon presentation at the Office of the Treasurer of the U. S. in sums of

$50. or multiples thereof."


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Silver Certificates are extensive series that lasted into the 1960s. Two Acts of Congress authorized

all the Silver Certificates that were issued, the Acts of February 28, 1878 and August 4, 1886. The

first issue consisted of notes from $10 to $1,000 for the series of 1878 and 1880. These notes areparticularly different for on the obverse they state "Certificate of Deposit" suggesting that it

represents silver coins actually on deposit. This term not appear on the later issues. The

obligation on this first issue reads as follows;

"This certifies that there have been deposited with the Treasurer of the U. S. at

Washington, D. C. payable at his office to the bearer on demand .. .. silver Dollars. . ..

This certificate is receivable for customs, taxes and all public dues and when so received

may be reissued."

The second issue of Silver Certificates consisted of notes from $1 to $1000 denominations for the

series of 1886, 1891 and 1908. The third issue consisted only of $1, $2 and $5 Dollar notes of the

series of 1896. The fourth issue consisted only of $1, $2 and $5 Dollar denominations for the

series of 1899. The fifth issue consisted only of $1 and $5 denomination notes for the series of

1923. Thereafter, silver certificates were issued in the current small size note format.


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Gold Certificates are by far the most colorful and vivid of all the USA currency issues. Although

there were nine emissions of gold certificates prior to the confiscation of gold, only four of the

issues were actually circulated to any extent, namely the fourth, seventh, eighth and ninth issues.

The first three issues appeared between 1865 and 1875. These notes remained in general within

the confines of banks and clearing houses and were used in settling gold balances without having

to actually move gold around.

The seventh issue consisted only of $10 and $20 Denomination notes of the series of 1905, 1906

and 1907. The $20 Dollar notes of 1905 are considered the most beautiful of all gold certificates

because of their color. Their basic design is similar to that of other 20 Dollar notes, but the

obverse center portion of the paper is gold tinted and part of the legends are printed in gold ink,

and not the black and white of other issues. These notes also have a red seal and red serial

numbers. Thus, the color combination formed by black and white and gold and red, makes a very

pleasing impression.


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The eighth issue of Gold Certificate consisted only of $1,000 Dollar Notes of the series of 1907. It

is one of the largest notes in gold coin to actually circulate. The ninth and last issue of the Gold

Certificates is the most common today. These notes are series of 1913 and 1922 and the issue

consisted of all denominations from $10 to $1,000 Dollars. Up until the series of 1922, the obligation

on gold certificates read as follows: "This certifies that there have been deposited In the Treasury of

the United States of America Dollars in gold coin payable (or repayable, series 1882) to the bearer

on demand.

The fourth issue of 1882 included $20 to $10,000 Denominations. The fifth and sixth issues of

Gold Certificates were the series of 1888-1900 and consisted of $5,000 and $10,000 Dollar

denomination notes only. These tended to be used largely internally at banks reflecting reserves.

You will notice that the $10,000 note is printed on one side and is cancelled by the Federal

Reserve.


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The Federal Reserve Act of December 23, 1913 also authorized the first issue of Federal Reserve Bank

Notes. All denominations were issued from 5 to 10,000 Dollars. The notes from 5 to 100 Dollars are

series of 1914. The higher denomination notes from 500 to 10,000 Dollars are series of 1918. With the

establishment of the Federal Reserve System, a new type of currency came into existence. The notes

issued under this system are the Federal Reserve Bank Notes and the Federal Reserve Notes.

The Federal Reserve Bank Notes were also inscribed "National Currency"; the Federal Reserve Notesare not so inscribed and are currency of the system as a whole rather than issued by individual banks in

the system. The obverse designs of these two issues are markedly different while the reverses are

similar.

The Federal Reserve Notes were issued by the United States to all twelve Federal Reserve Banks. The

notes were not issued by the banks themselves (as were the Federal Reserve Bank Notes) and the

obligations to pay the bearer were borne by the government, and not by the banks. Hence, these notes

were not secured by United States bonds or other securities as had been the case with the National

Bank Notes. In reality, the notes were secured, but the nature of the security is not certified on the

actual notes. The obligation on the Federal Reserve Notes is completely unlike that on the FederalReserve Bank Notes, and is as follows,

"The United States of America will pay to the bearer on demand Dollars . . . This note is

receivable by all national and member banks and Federal Reserve Banks and for all taxes,

customs and other public dues. It is redeemable in gold on demand at the Treasury De-

partment of the United States in the city of Washington, District of Columbia or in gold or

lawful money at any Federal Reserve Bank."


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There were two separate issues of the Federal Reserve Bank Notes, the series of 1915 and series of

1918. The first issue was authorized by the Federal Reserve Act of December 23 rd, 1913 and consisted

only of 5, 10 and 20 Dollar notes. These were not issued by all twelve banks in the system but only by

the banks at Atlanta, Chicago, Kansas City, Dallas and San Francisco. The last named bank issued 5 Dollar

notes only. These notes are inscribed "National Currency" and are similar to the earlier National Bank

Notes. The obligation to pay the bearer on demand is made by the specific Federal Reserve Bank and

not by the United States. The obligation on the first issue of Federal Reserve Bank Notes is similar to

that on the National Bank Notes. There is a slight variance in the wording but not in the meaning.

The second 1918 issue ofFederal Reserve Bank Notes was authorized by the Act of April 23, 1918. The

notes were issued by all twelve banks. Part of the obligation on this issue differs from that on the first

issue, as follows,

"Secured by United States bonds or United States Certificates of indebtedness or United States

one-year gold notes, deposited with the Treasurer of the United States of America. ... "

Federal Reserve Bank Notes are all quite rare for most were redeemed. The Treasury Department

records only a little more than $2 million dollars is still outstanding out of a total issue of nearly $762

million dollars. Obviously, such notes were redeemed most likely prior to 1934 and the confiscation of

gold under Franklin D. Roosevelt. To reduce the cost of printing currency, the notes were reduced in size

to the current format by theAct of July 10th, 1929. After the enactment of the Gold Reserve Act of 1933,

the obligation was changed to read: This note is legal tender foe all debts, public and private, and is

legal tender for all debts, public and private, and is redeemable in lawful money at the United States


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Treasury, or at any Federal Reserve Bank. Of course gold was no longer lawful money domestically, so

exactly what could the notes be redeemed for was at best coins.

Yet through all of this, there is a tremendous problem with this perception of the role of the Federal

Reserve. It is absolutely true that we NEED the Federl Reserve to provide stability to the banking system.

However, that NEED is to be limited to the role of J.P.

Morgan during the Panic of 1907. All the Fed should

have done was to be there to provide liquidity in times

of economic upheaval. A bank would place its secured

loans up at the Fed if it needed instant cash to stop a

run. It has been Congress that just cant keep its hands

in its own pockets. The Fed when designed had 12

regional branches each functioning independently sothat interest rates would NOT be a single national rate

because the United States is not a single economy by

diverse with industry, agriculture, commodity

production (oil & mining) all in different regions.

Service industry tends to be clustered predominatly

with the population. So one size does not fit all. During


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commodity booms in oil, Texas is living the large life andd New York is suffering. This single rate

nonsense was usurped in 1927 by the Fed trying to bailout Europe. We forgot this part of the design.

The reason for the BANKS operating the Fed was to divorce the two words Political Economy. This was

not an evil design, but politically practical. For you see, to stimulate the economy, the Fed was initially

set up to buy corporate paper injecting money directly into the local economy. Because of World War II,the Democrats were worried about the war creating oinflation as did every war before it. Thus,

Americans were traditionally isolationists and did not want to get into Europes battles. After much

manipulation, FDR managed to get the USA into the war. To eliminate the effects of the massive

expenditures, they changed the Feds role. FIRST, they formally usurped all powers consolidating it into

one national poliicy. SECONDLY, instructed the Fed to create MONEY to support the Federal bonds at

PAR to prevent any decline. THIRDLY, they eliminated the Fed buying corporate paper to stimulate the

economy instructing it to buy only Federal bonds instead. We can see in this perpetual index of Federal

Bonds from 1798 to 1991 the impact of these policies.

Here we have the interest rates between 1800 and 1991 showing the spikes during the Civil War and

World War I. This was neutralized during World War II but the political usurpation of the Fed.

Our problem is NOT the Fed, it is the role it keeps being forced into. Now the Fed is in charge of the

economy and it can bailout anything, not just banks. So you can see that we have gone from the plain

and simple role of J.P. Morgan into a complex entity that keeps being changed and reshaped by people

who have no clue what they are doing.

There have been many attempts to create a monetary system within the United States which have

plagued politicians resulting in a highly tortured past. The US dollar currently is the established de facto

WORLD RESERVE CURRENCY ever since 1944 and Bretton Woods. However, it has been our

misconception of MONEY that has driven these failed attempts at creating some sort of superpowerwithin the economy, and then we yell

and scream that the Fed is own by

bankers. It was not created for the

purpose it is being used today.

Because the US dollar is the RESERVE

CURRENCY, our domestic policy

objectives in the USA are exported via

the currency to the entire world

making this entire system completely

nuts. We are far beyond any rationaldesign here. This is because politicians

keep tinkering with the role of the Fed

for political objectives, not sound

economics.


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The Reserve Currency

that pays interest

Thanks to two world wars, the USA became both the arms dealer and the breadbasket for the world.That status caused the gold to flow to the United States in addition to the instability of a political

economy in Europe. Europe and Asia had been devastated by war. There were no tanks that invaded

America. Nevertheless, the US dollar became not merely the reserve currency thanks to Bretton Woods,

but it has constructively been transformed into currency that pays interest. The misnomer that we

simply print money which is inflationary has been pure fiction. The actual printed currency is less than

5% of the total money supply. What is far worse is that

the dollars held by foreign countries accumulated initially

through trade are not printed dollars at all but bonds

paying interest. Therefore, the dollar has actually come

full circle. We have returned to the Civil War era whenthe currency used to pay interest as an incentive to

further encourage its acceptance. In effect, some of the

earliest federal issues of currency paid interest and were

a hybrid form of circulating bond. The term greenback

meant there was no interest or gold backing. We have re-

created that through our sovereign debt structures

which have been furthered by Marxism to justify

perpetual borrowing on the part of government. As they

say, the road to hell is paved with good intentions.

The establishment of the US dollar as the reserve currency at Bretton Woods in 1944 illustrates the

inability of government to honestly create a stable monetary system. When politicians are an elite

separate class and not mere citizens who represent the people, DEMOCRACY crumbles into a PUBLIC v

PRIVATE confrontation. While some see the gold standard as a symbol of stability, they have failed to

realize is that the professional political class does not function in the same manner as directors of a

private corporation. Government devolves always into a confrontation over power between the people


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and the government. They have the tanks, the guns and the courts to enforce their decrees and see

themselves as law givers not public stewards of our LIBERTY.

The gold standard of Bretton Woods collapsed because this professional political class continued to

spend money without any link to the convertibility of paper dollars into gold. Politicians tend to be

specialists in creating laws but lack a common sense of the money manager. For this reason,governments perpetually collapse due to fiscal mismanagement. The self-interest of government is

ALWAYS AND WITHOUT EXCEPTION, diametrically opposed to LIBERTY of the people. It must be that

way because government produces nothing, consumes the wealth of the people, and its power is

defined by governing and dictating to the people. Government is not GOD and there is no benevolent

design that kindly watches over the welfare of the people. It see everything as power and control of the

people and then hunts them down as a food source to consume their wealth to sustain itself. This is why

historically FISCAL MISMANAGEMENT destroys every for of government

In Platos Republic there is a debate recorded between Socrates() (ca. 469 BC399 BC) and

the sophist Thrasymachus () (ca. 459-400 BC). I believe the former made the mistake of

observing history and trying to think that in contrast to a tyrant, a democracy composed of the people

would somehow ensure that justice would always prevail. Thrasymachus wisely disagreed. He said:

"the different forms of government make laws democratical, aristo-

cratical, tyrannical, with a view to their several interests; and these

laws, which are made by them for their own interests, are the justice

which they deliver to their subjects, and him who transgresses them

they punish as a breaker of the law, and unjust. And that is what I

mean when I say that in all states there is the same principle of

justice, which is the interest of the government; and as the

government must be supposed to have power, the only reasonableconclusion is, that everywhere there is one principle of justice, which

is the interest of the stronger."

Consequently, our greatest problem is our confrontation with government not what constitutes

money. It is our inability to have any form of a benevolent government. Once we allow a professional

political class to emerge that becomes the elite, our lives change forever. Their survival depends on our

subjugation. The founding fathers of the United States did not authorize a government that regulates

everything. The word regulate meant to make regular and the only authority to do so was granted in

what is known as the Commerce Clause.

Article I, Section 8 of the United States Constitution defines the extent of the power of government. The

entire object of the Commerce Clause was to ensure free trade among the states to establish a single

common market eliminating the competition to trade among the states as was the case in Europe. Over

time, hand-picked judges who always interpret law in favor of more power to government, have

transformed the Commerce Clause into oppression of trade and all about governments expansive right

to regulate everything within trade, right down to wages, work hours, and taxes. What was to ensure

free trade has been used to control everything not make it regular.


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If one reads the Commerce Clause as expansive allowing laws about absolutely anything as long as it can

be said the subject matter has to do with trade among the states or nations, then there is no limit to the

power that can be created and justified. This is then blended with the Necessary and Proper Clause and

you suddenly can justify everything in that list. This is what judges cannot be selected by politicians or

political parties. They will always select those who will read their powers expansively. Thus,

Thraymachus was correct. It matters not the form of government, for justice is alwa ys merely the self-

interest of the political elite. To fix society, we MUST understand the source of the problem. If we do not

do this, we face another Dark Age for governments self-interest ALWAYS destroys civilization to sustain

its very life.

U.S. Constitution - Article 1 Section 8

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide

for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall beuniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the

United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and Post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the

exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be

employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers,

and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may,

by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United

States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in

which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all

other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer

thereof.


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While it is true that the gold standard aspect ofBretton Woods collapsed, it is NOT true that the entire

structure created in 1944 collapsed. To the contrary, everything else remains in place from the World

Bankand IMFto the fact that the dollar remains as the RESERVE CURRENCY of the world. However, this

monetary system of 1944 remains as the chicken that is still running even though the head (gold

standard) was cut off. This gave birth to the Floating Exchange Rate System we have today that was not

designed and is simply ad hoc. This is also why it has not been taught in any university because nobody

designed it. The dollar is no longer an IOU for gold representing some TANGIBLE asset. MONEY has

transcended beyond that Western tradition of being a receipt for something tangible and has thus

undergone a metamorphosis evolving into a completely new medium of exchange that nobody has quite

fully understood VIRTUAL MONEY THAT PAYS INTEREST. The dollar has become precisely as

illustrated here an 1864 Compound Interest Note with the schedule of payment on the reverse.


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Therefore, this whole idea that we can live the high-life, be whatever we dream and never have to paythe consequences is simply dead wrong. The

confusion that the Gold Standard advocates

have created is this misconception that we

print money and that is fiat that results in

inflation. This is a far too simplistic view of

finance. It presumes printing of actual

dollars without restraint. Simply put, HAD WE

PRINTED dollars instead of BORROWING

DOLLARS, the national debt would be about

40% of its current size. Printing is MUCH LESSinflationary than borrowing. The reason,

borrowing necessitates the creation of MORE

money to pay the interest whereas printing

does not.

If you simply add the accumulative interest

each year, you will find that this is driving the

debt higher and thus not even any motion to

compel a BALANCED BUDGET will have any

effect whatsoever on the stopping the crisis

we now face the extinction of Western

Civilization percolating with nuclear weapons.

The United States poses the exact threat that

USSR did upon collapse rouge nuks in the

wake of political disintegration!


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The debt is on automatic pilot. It will grow at the expense of EVERYTHING ELSE until it defaults. Theconsequence of all of this debt creates a serious problem. Not even a BALANCED BUDGET is a solution

because the interest on existing debt will continue to rise as a percent of total. This means that ALL

other spending social and military will be crowded out by the obligation to service the debt by paying

interest of which 40% is exported.

The accumulative interest expenditures will simply rise to the point they bring down the entire system.

For you cannot cut the interest expenditures without defaulting on the debt. Austerity is not the answer

for cutting spending, raising taxes, will reduce economic growth, increase unemployment, and cause a

further decline in tax revenues. There is just way too much debt to get out of this trap without some

clever default. And, on top of all of this, the USA is in the best shape compared to Europe and Japan.

The longer we postpone political-economic reform, the worse the problem is becoming. We are

standing on the edge here about to commit suicide. We cannot hunt down everyone for taxes. That will

reduce the VELOCITY of money and cause the hoarding of wealth instigating an economic implosion. We

must STOPthis insane policy of lets just worry about today with no long-term planning. For unless we

address this problem soon, there will be no tomorrow to worry about. When Rome fell the Romans

were still laughing. As Sinatras hit song, Send in the Clowns so poignantly stated, dont bother they

are already here. This is what the Sovereign Debt

Crisis is all about.

That said; the US Dollars still remains the best of the

three ugly sisters. Japan and Europe are in far worse

shape than the United States. We will see both

Europe and Japan collapse BEFORE the United

States, SO prepare for the worst yet hope for the

best.


31/31

We will be starting up the subscription and per access service to the regular forecasting. This will not

alter the current public service reports on explaining the events that surround us. The subscription

services will be the computer generated reports that will cover the entire world. These reports will

provide the specific forecasts for time and price. Those who are not trading will still have free access to

the reports provided currently. Nothing there will change.

As far as services are concerned, there will be the general written reports on a monthly basis per

market. You can obtain access on this level that will be reasonably priced for the average individual. For

the institutions and individuals, there will be the daily reports available per access so you can gear the

level of service and the number of markets to you particular needs.

We will also restore the alert service where you can input which markets to watch and the computer will

send you an alert when it is time to add a position or to change direction. This will provide the full world

economy for those with major portfolios. Those interested may get on the list by sending an email to:

Documents

US Dollar Evolution 01-17-2012