Health & Fitness
What's in your wallet?
Most Americans don't believe the U.S. dollar will collapse, even though the dollar has lost 95% of its purchasing power since the Federal Reserve was created in 1913.
Fiat Currency: Any money declared by a government to be legal tender, which is not convertible to anything of intrinsic value, nor fixed in terms of any objective value, nor backed by anything other than government trust - i.e. "full faith and credit of the United States of America".
Fact: The demise of a fiat currency is not limited to third world countries. There is no discrimination as to the size or perceived stability of a nation’s economy. If the leaders abuse their currency, the country pays the price.
Fact: All fiat currencies fail eventually, without exception. The average lifespan of fiat currency is 40 years. The U.S. fiat Dollar has survived since 1971 when President Richard "I'm not a crook" Nixon removed the last vestiges of the dollar's convertibility to gold.
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Fact: Most people doubt that the U.S. dollar could go to zero, yet the dollar has lost 95% of its purchasing power since the Federal Reserve was created in 1913.
Fact: The common denominator that led to the downfall of each fiat currency (pictured above) was large debts and large deficits. This year’s U.S. budget deficit will be $1.5 trillion, an amount never before seen in history. Our total debt, including the present value of future liabilities (like Social Security and Medicare) exceeds 400% of GDP.
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Fact: Once a country’s payments on debt exceed 30% of tax revenue, the currency is “done for”, meaning that the currency never recovers. The current interest on debt is about 18% of revenue, but all it would take is for interest rates to go up a few percentage points to push debt service past 30% of revenue.[a]
Fact: Today, there are 9.2T U.S. dollars in circulation (cash and equivalent). There are (presumably) 8,134 metric tonnes of gold in U.S. reserves, which is 262M troy ounces. Divide 9.2T by 262M ounces to arrive at $35,200 of fiat dollars for every 1 oz of gold in reserve. Today's price of gold is $1,650/oz. [b]
Which do you think will occur first: The dollar hits zero or gold hits $35,200/oz? [c]
Just say'n.
References:
[a] - This Time Is Different: Eight Centuries of Financial Folly
[b] - 1 metric tonne = 32,150.7466 troy ounces
[c] - Global fiat currency stock is 45T ($US equivalent) and global gold reserves are 30,562 metric tonnes, which equates to an average fiat currency value of $45,800/oz.
