The Inevitable Transition from Dollar Bills to Gold as Currency
Gold is one of the safest investment options available these days, but
not many people are jumping on the bandwagon. The reason is simple: we've
gotten away from using gold as currency, so people just don't think of gold
as real money.
Paper money was initially issued in 1785 as an easy-to-use substitution
for gold. At that time, the dollar, which was backed by gold under penalty
of law, was created. In fact, President George Washington touted the
importance of backing the national currency with gold or silver, and he even
contributed some silver from his own private stash for the first coins
America first switched to fiat money, which is currency that isn't backed
by a physical commodity such as gold, in 1862. These dollar bills, otherwise
known as Greenbacks at the time, were basically IOUs issued by the federal
government to help pay the overwhelming expenses of the Civil War. Along
with paper bills, the government also issued Gold certificates, which
reinforced the government's promise to repay the bills in gold at a future
The drawback of a fiat money system is that there's no limit to the
amount of money that can be created out of thin air. Pouring more money into
a failing economy may seem like a good thing, but the creation of too much
fiat money can lead to hyper-inflation, aka the death of a fiat money
system. When it reaches this stage, fiat money rapidly loses its value,
which leads to a rapid loss in consumer confidence in the money. Because
consumer confidence sustains the value of fiat money, a loss of confidence
can make the money virtually worthless.
These days, more and more Americans are defaulting on their mortgages and
credit card bills, while at the same time facing higher prices at the gas
pump and in the grocery store. They can't pay their bills and find
themselves sinking deeper and deeper into a bottomless pit of debt, and the
government's only answer is to create more worthless fiat money.
Unfortunately, this move only serves to devalue the dollar bill even
further, bringing us closer and closer to the hyper-inflation kiss of death
for our monetary system.
No matter how many times people have tried to rely on a fiat monetary
system, they always find their way back to gold. Why? Because fiat money
systems always end up crashing and burning. So we go back to
its rareness guarantees that it will retain its value. You can't just create
gold out of nothing like you can fiat money. The more common printed dollars
become, the less value they hold. Let me put it this way, if dollars were as
common as rocks lying on the ground, they wouldn't be worth much, now would
they? As they become more and more common, they lose more and more value.
There has never been a better time to consider gold investments. As we
face the inevitable death and devaluation of our fiat monetary system,
you'll find yourself wishing that you had less fiat money and more precious
metals in your possession.