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
1973.
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.
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