The Cyclical Stages of Economic Rise and Fall: What stage is the U.S. in now?

During The Great Depression in the United States from 1929 to 1932, what the bankers thought would never happen did finally happen. A wave of "bank runs" happened when depositors in large numbers panicked and withdrew their funds at once causing then President Franklin D. Roosevelt in March 12, 1933, to close all banks. Then in 1933 he proceeded to outlaw private gold ownership (except for the purposes of jewelry), gold was taken out of the picture completely with the exception that the value of paper money was still stabilized by the fixed price of an ounce gold. 

Then on August 15, 1971, President Richard Nixon ended the fixed price of an ounce of gold allowing the value of money to become unstable. With the gold standard erased banks went to what's called a fiat currency. The words printed on the dollar bill changed from "This Bill Is Redeemable in Gold," to “This Bill Is Legal Tender For All Debts, Public and Private."

So what exactly is a fiat currency? A fiat currency holds value by mutual agreement. For example: all the citizens of a country agree to accept a means of exchange by mutually agreeing to do so. It’s also accepted by “order of the Government”, meaning that the money has value because the Government has ordered it to be so and this order is backed by the full military might of the Government and its willingness to force anyone to accept the currency. 

Should another country not agree to accept the currency of another, this is means for war. Money has been and still remains the only reason for war. The value of a fiat currency is ruled by world supply and demand and is inflated or deflated by interest rates fairly easily, this is why gas used to be $0.50 per gallon but now it's $4.00 per gallon. It is not that gas actually went up, it is the value of the money used to purchase gas went down.

Once a currency becomes a fiat its value doesn't exist. Instead of holding value in tangible resources, it has become common for people to hold it in the means of exchange and a fiat medium of exchange does not have any real value. This is why the term real estate means real and tangible property.

All economies of Empires eventually reach the point of having a fiat currency they all go through the same stages:

All Empires start out with money of real value which is precious because of its limited quantities. To allow the rich to enjoy their money without interruption by revolt of the poor the empire implement social programs to meet the survival needs of its poor for food and shelter, in the United States this is done with programs such as food stamps and section 8 housing projects.

The Empire's wealth is poured into expanding its military. The expanded military is put to use in unnecessary wars. The wars drive up the expenses of the empire as a result the money is replaced with a type of money that can be produced in unlimited quantity and is of no real value such as paper money (Fiat money). The value of the new money continues to decrease (inflation) which is seen by the people as if the cost of real goods such as food is actually increasing.

The wealthy begin to move their wealth out of the valueless money and back into precious commodities such as gold, cotton, land or silver, the price of precious commodities increase drastically because of the new demand and the fact that the fiat money has not real value and eventually dies. Those who have not moved their wealth back into items of real value will be left bankrupt.

Over the last 100 years 30 countries have gone through this cycle the United States have gone through it twice in the last 200 years. The most millionaires are made during economic depressions and millionaires also become billionaires. 


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