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Friday, February 17, 2012

Look Ma, I Shrunk the Dollar....

What Happened to The Buying Power of the Dollar Over the Past One-Hundred Years?

Picture of one dollar bill
Who Shrunk The Dollar?
They call me "The Wizard of the Oz" Ma, it was so easy.  A couple of business buddies and I got together down on Jekyll Island. 

We came up with this brilliant idea:  Let's be a private central bank and pass a bill that allows the United States and all the other private banks to borrow the money they need from us. They pay us interest for it.  To pay the interest, we get another bill passed requiring everyone to pay income tax. 

All this happened in 1913.  We told all the American people that this would stop panics and runs on the banks. Why?  Because we could  just loan the banks as many dollars as they needed. The  loans were just entries we made on our ledger.  Out of thin air, Mom; we created them out of air!!! 

By 1929 we had loaned a whole lot of money to the banks and the US Government. We loan money to the US Government by buying its bonds on the open market. And they both just kept borrowing it and loaning it and spending it.  They had to pay us back of course, with interest!!

A bad thing happened in 1929, Mom.  But we fixed the problem real good--we just loaned out more money!! We created this money on our books out of guess what? Yes, that right, thin air!!!  They call it fractional banking, Mom.

Now that it's been going on for a hundred years, we have a little problem on our hands.  The Us Government and all the banks have borrowed and loaned out or spent everything we could pile on them.  All that spending has driven up the price of everything.  Now the whole country is living on thin air...

Ma, don't tell Dad this.  He will kill me.  He still believes in the old money -- gold, silver, nickel, copper, platinum.  He thinks all these metals are real currency because they have intrinsic value. 
Picture of a wizard

The green paper is supposed to be a certificate representing them, or at least something of intrinsic value.

That's just plain silly, Ma. These "relics" can't be used as a money!  Ha Ha Ha Ha Ha Hee Hee, I'm glad we are past such Neanderthal thinking. 

Every country in the world has some sort of Wizard like me. In all these Emerald Cities we do things differently.  And if you just follow the Yellow Bricks you'll understand why they call us, "Wizards." 

Ma, I got to go.  I need to create more money by putting some computer entries into a ledger.  I love this work, Ma.  It's so easy and the pay is outstanding......

                                             Related Reading:

The Wonderful Wizard of OZ
                 L. Frank Baum  May, 1900

The Creature from Jekyll Island: A Second Look at the Federal Reserve      
                                                                    by G. Edward Griffin

Related Page:
More About Author L. Frank Baum


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