The "Coincidence" of 1913.

[Kwabena]

This is going to be a little lengthy, so I ask the reader to pardon me.

 

Lately (about four to six months ago), I picked up a new hobby to tickle my brain (aside from gardening, of course). I've been studying the Austrian School of Economics. This school of thought represents the original economics before the type taught in college classes—known as Keynesian economics—came along. The relatively modern school of thought is named after the British intellectual John Maynard Keynes.

 

This is, of course, a highly simplified version of what I've learned so far.

 

In Austrian Economics, one of the primary focuses is on money—its origins and what makes certain types of money "hard and sound." Examples of hard and sound money include gold or silver, or currencies backed by these two precious metals, due to their rarity.

 

The history of money taught me that when a government's currency is backed by hard money, inflation (the dilution of money's purchasing power) becomes very difficult. When inflation is curbed, it incentivizes individuals to live a calmer, more stable lifestyle. Fiat money (non-hard and unsound money), on the other hand, lacks scarcity and is highly prone to hyperinflation. This destroys the quality of life for ordinary people. A clear example of this can be found in the hyperinflation that occurred in the Weimar Republic of Germany.

 

Back in the day, the US dollar was backed by gold. This meant that if you held a dollar, it was essentially a receipt for a certain amount of gold in your name. You could go to the bank and exchange your dollar bills for gold. However, this system ended in 1971 when the US government decided to take the dollar off the gold standard. Why? Because the amount of dollar bills issued far exceeded the gold reserves in the vaults. From that point on, the US dollar became a fiat currency, meaning its value is derived solely from the government's decree.

 

This single factoid can explain a lot of the economic and social hardship in the US, including some of the reasons for the widening wealth gap between the haves and the have-nots..

 

Check out this graph.

 

 

Source: wtfhappenedin1971.com

 

You can see the divergence starting around 1971.

 

Now, how did this accounting error occur in the first place? How did the number of receipts exceed the amount of gold in the vault? It turns out the central bank of America used the gold to fund large-scale expenses, such as the two world wars, and was unable to replace it. Although the Federal Reserve was officially created to stabilize the banking system, it seems that funding wars became one of its primary functions early on.

 

When was the Federal Reserve created? 1913. And when did World War I start? 1914.

 

It’s true that World War I began with the assassination of Archduke Franz Ferdinand of Austria-Hungary, an event that had nothing to do with Anglo-America. However, history shows that the war would not have lasted as long or claimed as many lives if not for the involvement of the US and Great Britain.

 

How did the US and Great Britain acquire enough money to prolong the war? The central bank of America, which had been created less than a year earlier, provided the means.

 

After that war, almost every subsequent war has had some connection to the central bank.

 

History shows that since World War I in 1914, there has likely not been a single day without some form of armed conflict occurring somewhere in the world.

 

Isn’t that strange?

Edited yesterday at 12:02 AM by Kwabena