The bailout is one way the elite transfer wealth from our hands to theirs. But it is certainly not the only way, nor is it the most sophisticated. Perhaps the cleverest scam of all is the actual "money" they've created for us to use.

Just like the fraudulent mechanisms we've outlined in previous chapters, our money has theft built right in. By design, it enables wealth to be secretly transferred from those who've earned it to those who create and control it.

Few know the history of money or the many different forms money can take. Some forms of money are more prone to fraud than others, and our ignorance of this fact works to the advantage of those running the scam. They're more than happy to make us believe only they are smart enough to understand the "complex nature of money." Our monetary policy, so they say, is best left to the experts; we should just trust them.

Knowing the ultimate goals of those who created our monetary system, we could hardly make a more dangerous mistake.

Defining money

To accurately define what money is, we can't simply hold up a U.S. dollar or a Russian ruble or a Mexican peso and say, "This is money." We're better off to start by defining the overall purpose of money. What does money do?

In the simplest terms, money enables us to purchase products and services from other people. Using this basic description, we might go on to say: Money can be anything that is widely accepted as payment for products and services.

Having defined money in this way, it will be easier to explain the different forms of money and why some are far superior to others. However, before we actually get into the different forms of money, it's a good idea to touch on what existed before money. It was known as barter.

Barter

To "barter" basically means to pay for something you want with products or services instead of paying for what you want with money.

As an example, imagine you grow tomatoes and your neighbor grows corn. It's possible to imagine a scenario where you and your neighbor agree to trade 25 pounds of your tomatoes for 25 pounds of his corn. In this case, you have each paid for what you want with something other than money.

Although barter provides an opportunity to engage in trade with others, this type of trade is far more limited than what we're used to today. To illustrate: What if your neighbor also grows wheat and you need 25 pounds of that too? You offer him another 25 pounds of tomatoes, but he declines. (He has no use for any more tomatoes.) Now what do you do?

You might try to find another person who grows wheat and trade with them. Or you might find somebody who has something that your wheat-growing neighbor wants, trade your tomatoes for that item, and then trade that item for the wheat. But clearly none of these options are as convenient as simply trading your neighbor money for his wheat, his corn, or anything else he might be willing to part with. As you can see in this example, barter was far from ideal.

Even though barter was limited in its usefulness, it played a major role in developing the concept of money. While trading with each other, people realized certain commodities were always in demand. For instance, corn eventually became so high in demand that it could be traded for almost any other product or service. From that point forward, corn took on a value that exceeded its consumption value.

In other words, even though your neighbor already had all the corn he needed for food, he would continue to grow or acquire more because he knew the corn would be accepted as payment for the products and services of others. The more corn he had, the more purchasing power he had.

In this way, many different commodities (corn, wheat, animals, etc.) eventually evolved into reliable forms of "commodity money."

Now, with that brief explanation of how barter eventually led to commodity money, let's move on to...

Commodity money

Cows, sheep, corn, wheat — all of these commodities had some intrinsic value, were highly in demand, and, as such, people were nearly guaranteed to accept them in trade.

For this reason, these commodities became some of the earliest forms of commodity money. But just as barter was limited, so too was the ability to easily "buy" using indivisible items, like a cow. Perishable food items had their limitations as well.

When mankind discovered metal and learned how to craft it into tools and weapons, the metals themselves soon took on the role of commodity money. Metal was superior in many ways. For starters, metal didn't need to be fed, watered, and cleaned up after. And, unlike wheat and corn, you didn't have to worry about metal going bad, becoming contaminated with bugs or mold, etc.

Perhaps best of all, metal was easily divisible. Compare the flexibility of purchasing something with iron versus purchasing something with a cow: Assuming a cow is equal in value to 100 pounds of iron, and an item is for sale valued at 10 pounds of iron (or one-tenth of a cow), the individual buying with iron has a distinct advantage. He can easily produce the exact amount of money needed.

The same cannot be said for the man who is attempting to purchase the item using his cow. Sure, he can divide the cow into 10 pieces, but the other nine wouldn't be worth much for very long.

The value of metal ingots was originally determined by weight. Then, as it became customary for the merchants who cast them to stamp the uniform weights on the top, they eventually were valued simply by counting their number. ... [I]n this form they became, in effect, primitive but functional coins.[1]

Just as barter led to the concept of commodity money, and that led to metal becoming the commodity of choice, centuries of experimenting with different kinds of metals produced a clear favorite around the world: gold.

Gold's ability to function as a stable form of money is unmatched. (Though silver runs a close second.) When it comes to monetary stability, the Federal Reserve System has failed miserably compared to gold and silver. But knowing the real aims of those who crafted the system, we shouldn't be surprised.

Some argue that our modern economy can't use gold as money because "there isn't enough of it to go around." But that isn't true. Buyers and sellers will ultimately determine gold's purchasing power based on its supply. So, if there are only 10 million ounces of gold circulating in an economy, its purchasing power per ounce will be higher than if there are 100 million ounces. This basic economic truth applies to all money, regardless of the form it takes.

Explaining further:

The more money there is circulating in an economy (whether we're talking corn, sheep, gold, or paper), the less purchasing power that money will have.

For example, if we create a community from scratch and give everyone an equal amount of money, say $10,000 each, prices for products and services within that community will be set based on the available money supply. If instead we give each person $100,000, the same thing will happen; prices will be set based on the available money supply. If we give everyone $10 million, it's no different. The fact everyone has $10 million in our third example will not provide them additional purchasing power. That's because "more money," chasing after the same number of products and services, only bids prices up.

Knowing this, imagine what happens if somebody starts dramatically inflating/increasing the amount of money in circulation?

If everyone in the community starts with $10,000, prices in the economy will settle based on that money supply. But if somebody doubles the money supply a year later (without an increase in newly available products and services), the flood of new money will only bid prices up.

Not long ago, when somebody used the term "inflation," they were referring to the actual act of inflating/increasing the money supply. But now the term is almost always used to describe the illness that monetary inflation creates (rising prices).

This works out great for those causing the problem. Instead of blaming the real culprits (the people printing the money), the public is encouraged to blame the greedy businessmen who "keep raising their prices."

Well, don't be fooled. Your money's purchasing power is being destroyed. As its value decreases, prices must rise. It's the same with any currency. (When the value of each monetary unit is driven down, the number of monetary units it takes to purchase products and services goes up.)

I'm getting ahead of the story a little bit, but here is an important point to consider. Imagine for a moment you are an unscrupulous (yet highly intelligent) banker who's been given the legal authority to control the amount of money in the community that we just mentioned. Can you think of a way you might be able to use your inflationary power to your advantage? I'll provide an example.

Let's say the community begins with a total combined money supply of $50 million. As a banker, you earn money by making loans and charging interest on those loans. So, you begin making loans to the community's inhabitants.

Per the current fraudulent banking system, the money for your loans is created out of thin air. They cost you nothing. All you've got to do is enter "$100,000" (or whatever the amount may be) into a borrower's checking account, and poof: You just created the money for the loan.

Unfortunately, by creating this money for the loan, you also add $100,000 to the total money supply.

You do this over and over and before long, the community's money supply doubles from $50 million to $100 million. Soon, the effects of inflating the money supply start to take their toll; prices are rising, people who actually saved money prior to the inflation are having "purchasing power" stolen from every dollar they earned,[2] and people on fixed incomes are finding it increasingly difficult to get by. But you're doing just fine earning interest on the $50 million in "loans" that you've put into the community.

But why stop there? Being the unscrupulous (yet highly intelligent) banker that you are, you have an idea. You notice real estate prices have doubled from the inflation. Some might even call the massive rise in prices a "bubble."

You wonder what would happen if you popped that bubble. You wonder what would happen if you began to decrease the amount of money in circulation. But you don't really wonder; you know exactly what will happen. As the money supply decreases, the purchasing power of each dollar will begin to rise. As the money becomes more valuable, prices for products and services will begin to fall.

Specifically, all the real estate prices that had been bid up when there was $100 million in circulation will begin to correct downward. Ah, but the mortgages on all those properties aren't going to correct downward; no, sir. The people who borrowed $200,000 from you to buy their home when the bubble was at its peak will still owe you $200,000. This despite the fact, with the money supply tightening, they'd be lucky to sell their home for $150,000. And a couple months from now (caught in the ensuing panic of people trying to sell before their home loses more value), they might not be able to sell it for $100,000!

And that isn't all they've got to worry about. Payments on a $200,000 mortgage were much easier to make when hourly wages in the community were based on a total money supply of $100 million. With only $50 million to go around, it's becoming nearly impossible to earn enough to keep up with (what are now) ridiculously high monthly mortgage payments. And if they are lucky enough to stay employed and earn enough to actually pay off their mortgage, their big reward is they'll end up paying double what the home is actually worth. Many will have little choice but to give up their homes and try to find another place to live. But is that such a bad deal for you, the unscrupulous (but highly intelligent) banker who created the money for the loans out of nothing? Probably not.

Let's see: First, you earned millions in interest payments on "loans" that were made with money created out of thin air. Now, you get to seize real physical assets (people's homes) because that "money" (keystrokes in a computer) wasn't paid back.

Best of all, those millions in interest payments you earned when people were able to make their payments will now buy twice as much in the economy you just crashed. What a great time to go bargain hunting for new assets, no? Looks like a win-win-win (or a lose-lose-lose, depending on which side of the game you're on).

Would anyone in their right mind want to give a banker (or bankers) this kind of control over their community's money supply? No? OK, then it certainly doesn't make any sense to give that kind of power to a banker (or bankers) over our entire nation's money supply. But that is exactly what our elected officials have done.

If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.

-- attributed to Thomas Jefferson[3]

It doesn't get any more straightforward than that.

Returning now to the original point of all this: The argument against gold (that there isn't enough to go around) is fraudulent. The real reason our banker friends don't want an honest monetary system (one that prevents them from creating limitless piles of money out of nothing) is because of what it would do to their wealth and power.

When they insist our modern economic system requires an elastic money supply to function properly ("elastic" meaning they can inflate or deflate as much as they like), they are actually telling us the truth. That is, our modern economic reality of endless bubbles and bursts, steady inflation, bailouts, inescapable debt, and the covert transfer of wealth from our hands to the hands of others really does require the system they've created to function properly.

The problem is our modern system is unacceptable. It wasn't created to serve our needs; it was created to serve the needs of those who lied it into existence.

On the issue of needing an elastic money supply, professor of economics Murray Rothbard writes:

There is no need whatever for any planned increase in the money supply, for the supply to rise to offset any condition, or to follow any artificial criteria. More money does not supply more capital, is not more productive, does not permit "economic growth."[4]

The idea of making money more elastic isn't new. Even under the discipline of a gold coin monetary system, unscrupulous individuals figured out how to inflate the money supply. By shaving off a small portion of each gold coin that passed through their hands, merchants and kings were able to amass piles of gold shavings, which were then melted down and cast into new coins.

By now, you can surely predict how this affected the economy. Those who created the money would spend it at full value, and as the newly created coins began to inflate the existing money supply (driving down the value of existing coins), the number of coins it took to purchase products and services went up.

As governments became more brazen in their debasement of the currency, even to the extent of diluting the gold or silver content, the population adapted quite well by simply "discounting" the new coins. That is to say, they accepted them at a realistic value, which was lower than what the government had intended. This was, as always, reflected in a general rise in prices. ... Governments don't like to be thwarted in their plans to exploit their subjects. So a way had to be found to force people to accept these slugs as real money. This led to the first legal-tender laws. By royal decree, the "coin of the realm" was declared legal for the settlement of all debts. Anyone who refused it at face value was subject to fine, imprisonment, or, in some cases, even death.[5]

The king's legal tender laws forced individuals to accept coins that they would have otherwise rejected or, at the very least, discounted heavily.

As an example, imagine an economy where all trade is conducted using gold coins. Suddenly, the king decides to start minting coins made of wood. By "royal decree," he demands his new one-ounce wooden coins be accepted at the same rate as one ounce of gold. He declares them legal tender. What would the people do?

Well, there is no need to guess. We can simply look at what citizens actually did do in response to the first legal tender laws. They began hoarding their truly valuable gold coins. After all, if you were forced to accept junk coins as payment, would you (out of the kindness of your heart) continue making your payments in gold?

The same thing happened in America in the 1960s when silver dimes, quarters, and half dollars were replaced with new coins made out of a mixture of copper and nickel. Within months, a good percentage of the silver coins had already been stashed away. Sure, the new "cupronickel" quarters said they were worth the same as the old quarters (25 cents), but that didn't mean they really were.

To put it in perspective, a roll of 40 quarters has a stamped face value of $10.00 whether the quarters are made out of silver or the cupronickel of today. However, the real value of a roll of silver quarters (based on the weight of the silver alone) is currently over $165.00[6] So, which would you rather have? Would you trade a $165.00 roll of silver quarters for a $10.00 roll of cupronickel quarters?

Of course, today our rulers have more sophisticated ways to debase our currency. Rather than shaving coins or replacing solid coins with "plated coins" or intentionally diluting the purity of the gold or silver content, they instead achieve what they want through our modern banking system.

Alan Greenspan spoke out against the consequences of this practice in 1966. Ironically, about 20 years later, he was elected chairman of the Board of Governors of the Federal Reserve! "Even the wisest of men can be corrupted by power and wealth."[7] Nevertheless, in 1966, Mr. Greenspan laid out the truth in no uncertain terms. He wrote:

The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. ...

The law of supply and demand is not to be conned. As the supply of money ... increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus, the earnings saved by the productive members of the society lose value[.] ...

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.[8]

And on that note, even if gold isn't the absolute perfect choice for our monetary system, it surely beats the blatant fraud and exploitation inherent in the system we have today.[9]

So far, we've seen how trade first began as barter, and from barter came the discovery that certain commodities were always in demand. Those commodities (sheep, wheat, corn, etc.) became the first form of commodity money, widely accepted as payment for other products and services. Commodity money evolved, eventually leading to the use of metal coins and then finally to the use of gold and silver as the most widely sought and accepted coins.

But these coins also had their limitations. First, they were heavy. Today, we take for granted that we can carry $1,000 in paper money as easily as we can carry $1. This wasn't the case in a silver or gold coin economy where $1,000 worth of coins weighed 1,000 times more than $1 worth.

Also, lugging a large quantity of gold or silver coins around wasn't safe, and trying to find a truly secure hiding place to store your coins wasn't much fun either.

Eventually, receipt money emerged as the solution to these problems. Like the other forms of money mentioned in this chapter, receipt money (in its original form), provides an example of honest money. Here is how it came into being.

Receipt money is born

Goldsmiths handled large stockpiles of gold and silver in their trade. Logically, they needed a safe place to store those stockpiles, and for this purpose, they built very strong and well-guarded vaults.

Citizens eventually figured out there was no need to worry about hiding their own coins because, for a small fee, they could simply store them in the goldsmith's vault. The goldsmiths happily agreed to the arrangement as it was a way to earn some easy extra money.

As a citizen renting space in the goldsmith's vault, you would take in your supply of gold coins, say $1,000 worth, and you would be given a receipt as proof of your deposit. The receipt would state the value of the gold coins you'd deposited (in this case $1,000), and it would be stamped "payable on demand." This meant whenever you decided to present the receipt to the goldsmith, he was required to take it from you and, in exchange, give you back $1,000 worth of gold.

However, it was rare for people to withdraw their gold. (They would just need to find another place to store it if they did.) Instead, most just continued making deposits and collecting receipts as proof of each deposit they'd made.

Soon enough, everyone was walking around with these paper receipts in their pockets. Because the paper receipts literally were "good as gold," people began using the receipts to purchase products and services. As an example, if you wanted to purchase an item for $1,000, rather than go to the goldsmith to withdraw your gold coins, you'd simply give the seller your $1,000 receipt. This not only made it easier on you; but it was easier on the seller too. (If you had paid in gold coins, chances are the seller would have just taken the coins right back to the goldsmith for safe storage.)

This paper receipt money (100% backed by gold) was a huge improvement in the evolution of money. And it improved even further when different denominations of receipts were made available at the time of deposit.

For instance, if you brought $1,000 worth of coins to the goldsmith, you could now ask for ten $100 receipts or twenty $50 receipts, etc. instead of just a single $1,000 receipt. This of course led to the receipts themselves being exchanged for different denominations. (If you had a $100 receipt, you could easily exchange it for ten $10 receipts, so on and so forth.)

It was honest paper money at its best. But it didn't last long.