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Decline of Dollar

Essay by   •  February 10, 2012  •  Research Paper  •  1,968 Words (8 Pages)  •  1,305 Views

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It should come as no surprise to any US citizen to hear on the news that the decline of our dollar is not only a current economic issue, but possibly at a crisis point. The United States dollar's decline is accelerating as low interest rates, inflation concerns, and the massive federal budget deficit undermine the currency. With no relief in sight for our dollar on any of these fonts, the downward spiral is expected to continue. We as American citizens are relying on our elected government officials to maintain our economic status as a top world country, but sadly they have not met this responsibility. I am personally terrified not only for my children's future with our economic state, but my own! I fear the crisis is in the near future and not enough effort from the government is being utilized to protect the future of this country. Instead of maintaining a sound dollar, Congress has by both default and deliberate action promoted a policy that systematically depreciates the dollar.

The two words that scare me the most about this issue is, fiat money. As someone that is very interested in conspiracy theories, I have read long ago about the possibility of a major bank collapse in the United States, the North American Union, and the convergence to the Amero coin (the possible future fiat money). It's a scary thought, but I view all theories as 'I would rather have the knowledge (truth or not) about an issue than to be completely unaware of the possibilities, as lucrative as they may seem'. Imagine if one day everyone wanted or needed to take their money out of the bank; it's impossible because of fiat money. Without going into too much detail yet, this is the reason my family does not keep extra money in any bank and we have invested in gold and silver for the past five years. When the day comes, not IF, that our money has no value, I want my family to be prepared with something like our silver and gold, that will still have value all over the world. Because there might very well come the day that our dollar is only worth the 3 cents that it contains of paper, ink, and other materials (Tucker, 399).

According to Representative Ron Paul, ten years ago trust in the dollar was being lost. In 2002 the value of the dollar went down 18% compared to gold, which he says is the history's oldest and most stable form of currency. He thus believes that Congress should only permit silver and gold to be used as legal tender (Paul). Our founding fathers intended the dollar to be real money. Quarters were made of real silver and paper bills were gold certificates, not legal tender, or fiat money. Since the Federal Reserve was created in 1913, the value of the dollar has shrunk by ninety percent, thus failing from saving Americans from economic crashes as promised. The Federal Reserve, which is not a government bank, but a private bank owed by the elite has slowly converted real money into fiat money. This process was completed when President Nixon completed the abolition of the gold standard which would weaken the dollar against other currencies, thus adding to inflation by driving up the price of imported goods (Chosen).

The downside to the old gold and silver backed money was that the money supply was limited to the amount of gold or silvery in the treasury, and was in turn a safety net, as one cannot print money out of thin air as counterfeiters do. But what is being done by the Federal Reserve can be considered legalized counterfeiting because they can make money out of thin air (Chosen). Central bankers and politicians hate Paul's idea to revert back to gold because it restrains spending and denies them the power to create money and credit, because there is only so much gold out there. Those who promote big government, whether to wage war or to finance the welfare state here at home, cherish this power (Paul). So while the dollar has lost 30% of its value since 2000, gold has surged 70% in the same period. Even the New York Times in 2004 said that gold was now a more favored currency than the U.S. dollar (Paul).

The world financial markets, our creditors like the Asian central banks, are betting against the dollar. With our own federal government's huge debt and enormous deficit spending, make our economy dependent on the actions of foreign governments and central bankers. Yet few Americans realize the extent to which their own government has "sold out" American sovereignty by borrowing so much money from overseas. With the U.S. borrowing $1.8 billion every day we have lost the ability to live within our own means. The relentless increase of the money supply from the Federal Reserve will artificially stimulate the expanding economy. When dollars are abundant, they are worth less (Paul). This pretty much sums up quantitative easing at its finest. Now that the two ways that the government depended on to stimulate the economy, which was government spending and cutting interest rates have quit working they revert back to creating more money because they are the Federal Reserve and only they can do such a thing (Davidson, Blumburg).

The money made by the Federal Reserve is loaned to the government at interest, which then they secure these loans by printing bonds in exchange for Federal Reserve notes. Thomas Edison was quoted as saying, "It is absurd to say our country can issue $30 million in bonds and not $30 million in currency". The money loaned from the banks involves the payment of interest and the money to pay this interest also comes from the Fed again, and this new money has interest attached to it (Chosen). When the Federal Reserve began cutting interest rates in 2008, the dollar traded against the euro at .73 Euros to the dollar. The 14 percent decline in the dollar over the succeeding months can tracked to the cuts made by the Fed. Simply explained, the lower the interest paid on a currency, the less likely foreign investors will want to invest in bonds, and money market funds, and the more likely the U.S investors will want to search for

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