digital divide network - article database

In the earliest of times trading and bartering were used in the exchange of goods and services. The trading of such items as herd animals, sea shells, salt, tobacco, gold, gemstones and other similar items were commonly used by man before actual currency was invented.

The first currency ever used, was in coin form and dates back to 600 B.C. by then King Croesus of Lydia in Asia Minor. At that time Lydia was located in what is now present day Turkey. These coins were minted from a naturally occurring alloy of gold and silver called electrum. And each coin had a specific weight of 4.7 grams. These coins functioned as a medium of exchange, unit of payment and were capable of preserving value.

In 400 B.C. it was the Great Aristotle that defined what characteristics should make up a sound currency. Here wrote that a currency should meet the following criteria.

• Scarcity

• Durability

• Homogeneity

• Divisibility

• Transportability

• Be easy to store

• Be difficult to falsify

Gold and silver meet all of the above requirements that Aristotle defined so many years ago.

A paper currency is one that has mechanisms in place to control it from debasement. This is accomplished by pegging the currency against a specific amount of tangible assets such as gold.

An example; In 1944 shortly after World War II America and other major countries were experiencing inflation due to the economic strains from funding the war. All the Major Central Banks at the time had a meeting at Bretton Woods in New Hampshire for 3 days. During that meeting the attendees all agreed that the US dollar would be attached to 10% gold. And the other respective countries could hold US dollars in their Central Banks to insure the stability of their own currencies. This became known as the Bretton Woods Agreement.

This is when the US dollar became the World’s Reserve Currency. That meant the amount of money that could be printed by the US. Federal Reserve was limited to 90 percent. They had to maintain the additional 10% in actual gold bullion which acted like a check valve against inflation.

From the time the Bretton Woods Agreement was enacted through 1971 inflation was kept in check within the United States and many other countries because gold protected the value of paper currency.  During these times The US dollar was considered sound money due to the gold that was backing it.

Paper money also referred to as Fiat currency alone, can never hold any value by itself. Paper money can only become valuable when a government decrees it is to be used as a medium of payment and exchange. Another requirement is that the society as a whole must accept it as such. Basically faith in the paper money is met by both the government and its people. At this point paper money is classified as a Fiat currency.

Fiat currencies are not backed by any tangible assets such as gold or silver nor any kind of merchandise. Therefore it is very easy to debase or devalue this type of currency by simply printing excess amounts of it. This through time creates inflation in a society.

In modern times Fiat currency was born into America and in many major countries throughout the world when in 1971 US. President Richard Nixon was forced to temporally end the Bretton Woods Agreement. When this happened it removed the last obstacle from money printing as there now was nothing to back the US dollar and nothing requiring it to be printed with any kind of accountability.

From 1971 until now, inflation has eaten away at the dollar losing more than 90% of its purchasing power. Sadly over all these years no US. President has ever tried to re-establish the Bretton Woods Agreement that Nixon temporally removed.  Fiat currencies throughout history have always failed. Failing in Roman times, Greek times and soon history will repeat itself once again in modern times.

Tom Genot -

For informational, news, articles and videos for investing in gold and silver and where the best places are to buy it. You will also find information for preparing and protecting you, your family and your assets from the pending economic crises and destruction of the US dollar. Author Tom Genot, provides information and resources helpful to everyone. Insure you’re prepared beforehand. Check us out at www.coinbullion.net