Friday, September 10, 2010

Exposing the Thief...the Lie of the Federal Reserve

   Economist describe inflation as the silent thief. It is not seen only felt. In my life I had a Kodak moment

within the darkroom of my mind. It gave me the picture. For you, today, it will help you ascertain the truth

about gold and fiat money in correlation to the Federal Reserve.

   Back in 1971, I worked the graveyard shift at a Hess Station in New Rochelle, New York while attending

college during the day. The price for regular gas was .31 cents per gallon and high-test which were 101

octanes went for .34 cents per gallon.

   The price never changed until October of 1973 when the Organization of the Petroleum Exporting

Countries put an embargo on oil exports. The purpose was dual. One, to punish the US and other Western

nations for their support of Israel during the Yom Kipper War. This was the fourth Arab-Israeli War. The

other reason was not widely known. It was to capture the lost revenues due to inflation caused by the excess

printing of dollars by the Fed. This printing by the Fed eroded the value of the dollar.

   The impact was immediate. The price for a barrel of oil on the exchange quadrupled. At the pump the price

for regular gas rose to .61 cents per gallon and high-test went for .68 cents per gallon. There were many

days when service stations had no gasoline. Commerce was disrupted and conflicts surfaced everywhere.

The Macroeconomic Effect 

   There were a number of tactics employed by government to limit the oil embargo. Odd-Even was

introduced at service stations. This meant that if your license plate ended with an odd number you could only

purchase gasoline on odd numbered days. It worked the same way foe even numbered plates. Keep in mind,

that today, if you have a vanity plate, you may want to rethink its usefulness. There will be another shortage

or other disruptive oil event during our lifetime.

   My light bulb registered on the price of gasoline. How could it double in one day? I began to study the

market with a cause and effect mentality. One aspect kept returning - gold.

Viet Nam and the Great Society

   President Nixon ended the convertibility of the US dollar to gold in 1971. By this act the Bretton Woods

system of currency agreements was terminated. He did this to stop the outflow of gold to foreign nations who

wanted gold for US paper dollars. Switzerland redeemed $50 million. France took over $190 million. Global

nations were feeling the thief and they knew gold held its value. It took seven years of deficit spending and

the excess printing of dollars by the Fed from 1964 to reflect the affects of the silent thief in 1971.

   Prior to the military conflict in Southeast Asia, candy bars were a nickel-a-piece. You could purchase a

new Mustang for $1999. A Volkswagen Bug cost only $1600. I could go on-and-on with price examples,

but the bottom line is the purchasing power of the dollar. Correlate this to a labor report from the

Occupational Employment Statistics in 2009 shows that the US medium salary was $32,390 and it buys

what the medium salary of $7,500 bought in 1971. Wages have been stagnant for 40 years! It is basic

economics. More supply lowers the price and less supply raises the price. The excess printing of dollars

lowers its value along with deficit spending and nothing other than faith in the currency is soon tested.

   I began to study the price of gold. In 1971, it increased from $35 dollars per ounce to $38. In 1973, it

doubled to $97 dollars per ounce and the ratio of gold-to-silver began to widen from 20 in 1970 to 38 in


Unrecognized Genius

   There was one voice who opposed our fiat currency and deficit spending policy. As early as 1950, Walter

Spahr sounded the alarm. He was shouted down by the screened pundits of his day. His work, "Our

Irredeemable Currency System" stated that a fiat currency and deficit spending would end in ruin. He

reminded the powers-to-be that the convertibility of dollars for gold by our citizens established the right of

our citizens to express their disapproval of the fiat system. Redeem ability was our vote. This is the heart of

the gold issue. Gold is more than an investment. Gold is money. The Federal Reserve, Wall Street and the

banking industry have gotten us off the gold standard which is in violation of the constitution and they plan to

keep it that way. Consider what they learn in basic banking from one of their pioneers, Mayer Rothschild

who in 1836 said, "Give me control of a nations' money, and I care not who makes the law."

    The pundits of today are screened for their viewpoint between the gold standard and our fiat currency.

This is why you only hear that gold is volatile and it is not a good investment. Wall Street reminds you that

gold does not pay dividends and cost you to store it. This is true because they(three amigos)fight the concept

of gold and through their lobbying, pass laws against gold. Banks will not tender or exchange it and they will

charge you to store it. However, gold is written into our constitution because the Founding Fathers knew it

would provide a strong currency and that in turn would promote the general welfare. Keep in mind what a

one dollar gold coin can purchase today and compare that to a one dollar piece of paper. Debate over!

   Gold is the fighting meme for our citizens against the tyranny of the three amigos. The Federal Reserve,

Wall Street and the banking industry. The internet is our town crier. It informs, educates and motivates all of

us. It is through this form of communication that our government leaders may get the courage to end this fiat

currency and wasteful deficit spending, and terminate the Fed. If not, we can find real leaders amongst us

who will carry the ball for real change. A change back to the principles of the Founding Fathers and written

into the constitution. JFL.