There are three basic areas of economics that need to be studied and understood if you are going to be able to survive the coming Storm. They are as follows:

1. Money – what it is, what it is not.
2. What is the Federal Reserve?
3. Forms of Government & their treatment of Capital – the means of Production.

First, we look at Money –

“A feast is made for laughter, And wine makes merry; But money answers everything.” Ecclesiastes 10:19

“For the love of money is a root of all [kinds of] evil, for which some have strayed from the faith in their greediness, and pierced themselves through with many sorrows.” I Timothy 6:10

Very few people today understand what money is and what it is not. And, not understanding that difference could co$t you - dearly. Most Americans think that the Federal Reserve Notes in their wallets and purses are the same thing as ‘money’. We may call Federal Reserve Notes (FRN’s) ‘money’, as the Dollar bill used to be ‘money’ or at least could be exchanged for a tangible substance such as gold or silver. Before the Federal Reserve Banking system existed, the US Constitution gave Congress the authority to coin money from gold of silver. The US Treasury used to have LOTS of gold stored away in Ft. Knox, Kentucky. The US Treasury printed ‘paper money’ that was exchangeable for gold or silver by the government. It was much more convenient to carry these light paper bills vs. the heavy gold or silver coins. The Federal Reserve came about in 1913 and it was given authority to loan money to the US Government. And the Fed printed ‘Federal Reserve Notes’ that were originally redeemable in gold. -- We will discuss the origins and power of the Fed in more detail in the next post.

So, FRNs, Federal Reserve Notes, were exchangeable for gold until President Richard Nixon removed the ability to exchange FRNs for gold during his administration because of the number of FRN bills available vs. the amount of gold had become uneven. In other words, the government printed more money than there was gold to back up the money. But first, the “gold window” allowing US citizens to exchange their dollars for gold was closed and only foreign governments could exchange US Federal Reserve Notes for gold, as agreed upon at the Bretton Woods Agreement of 1944. Bretton Woods was an attempt to stabilize world currencies and adopted gold and the US Dollar as the standard. At that time, the US held 80% of the world’s gold supply. The ‘beauty’ of having a ‘gold standard’ is that it limits the amount of ‘money’ that the government can spend, since, God isn’t making new ‘gold’. The problem with tying a country’s money supply to a tangible standard, like gold, is that it limits the amount of ‘money’ the government can spend to the amount they can raise through taxation; or, by borrowing. But, if the currency is not tied to a tangible substance, such as gold, then governments can raise more ‘money’ just by printing more of it…for 'free'! There were some sinister forces at work during the Bretton Woods Conference that were trying to establish a world currency. While they failed, they did set in motion the IMF, International Monetary Fund, which was a stepping stone to their goal of a one world currency.

The US Government increased spending significantly during the Vietnam War to fund the war, but, the US Government did not raise the new money by taxation, it just ‘borrowed’ more from the Fed. So what happened? There were now more paper bills in circulation; but, not anymore gold. So, the price of gold ‘rose’ significantly. But, gold did not suddenly gain more intrinsic value. No, the paper bills became more plentiful and LOST value relative to the gold. However, the foreign trading value for gold remained unchanged for the foreign exchanges. As a result of the “cheap dollar”, foreign governments were trading in dollars for gold – US gold in Ft. Knox, at about half of its domestic value and Fort Knox was being “raided” by foreign holders of US Dollars. President Nixon had a choice of either closing the gold window, or de-valuing the dollar by 50%. He chose to close the gold window. Shortly after, the exchange for silver was ended as well, and the actual silver in coins was diminished as well, which made it easier to manipulate the “money” supply. Or, it made it easier to spend more money without making the taxpayer pay. Or, actually, everyone who owns any FRNs or is paid in FRNs pays, without realizing it and the ‘dollars’ in their pocket and bank account become worth less and less. -- So much for printing 'free' dollars.

These paper currency bills are known as ‘fiat money’ since they are declared to be worth something by the power and word of the issuing government. However, they are actually worth nothing of tangible value. And, they only work as a medium of exchange as long as people do not figure out that they are actually worthless.

At the Bretton Woods Agreement in 1944, the dollar was ‘pegged’ to an ounce of gold at a ratio of $35 per ounce. Today, gold is worth about $991 per ounce. What happened? Did gold become scarcer? No, the amount of bills became more plentiful. Basically, the American public has been systematically robbed. Additionally, due to the ‘progressive’ taxation brackets, people have been moved into higher percentage tax brackets due to the decrease in the money value, which is called ‘inflation’. So, your dollar bill is worth less. Your employer gives you a ‘Cost of Living’ pay increase. And, you get to pay more taxes on the ‘increase’ in your salary. What a program! We call an increase in the money supply ‘inflation’ for the effect it has on prices. However, it is actually ‘deflation’ or a shrinkage of the buying power of the currency due to the increase in the availability.

The Bible has a lot to say about money and a whole lot to say about a system of unfair scales and balances. “And how can I tolerate all your merchants who use dishonest scales and weights?” Micah 6:11 -- “The Lord abhors dishonest scales, but accurate weights are his delight.” Proverbs 11:1 See also Proverbs 16:11; Proverbs 20:10; 22:7

The Federal Reserve Banking System epitomizes the un-Biblical practice of unjust scales and measures. We will explore the Fed in the next note…maybe I can call it a “Federal Reserve - NOTE”?