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Wednesday, December 9, 2009

a little piece of advice that's actually worth something in this dying economy...


Part 1:

Look up the definition of fiat money. http://en.wikipedia.org/wiki/Fiat_currency

You don't have to understand all of it, but you do need to understand two things:

1. The real purpose of money.

2. How fiat money is different from real money and what gives it value. (not the "value" of the dollar)

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Part 2:
 
Find out who creates our money...our dollars.
 
 
Q:  Where does our money come from?  Is it a government entity? 
 
A:  The Federal Reserve (The Fed).  No it is not a government entity.  It is owned by its member banks - the banks to whom it freely gives money whenever it wants (cashing checks from company accounts to the owners with cash that didn't exist yesterday).
 
 
Q:  Who is in charge of the Fed?
 
A:  Congress sorta tells the Fed what its job is, but that's about it.  The Fed messes with the money supply whenever it wants to create short terms booms in the economy...at the expense of long term crashes.
 
 
Q:  Why does this matter to me?  I can still buy a gallon of milk for $4.99.
 
A:  It matters because the Fed creates/controls artificial inflation.  Yeah, $4.99 huh?  Well milk used to cost $1.00 a gallon.  No, it is not that much more expensive to produce milk.  The price is driven up by inflation (created only by the Fed).  The increase in the price of milk is not price inflation, per se.  The cause of the increase in the price of milk is inflation.
 
Any questions?

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