Money organically appears in the marketplace through thousands of transactions. Then governments and bankers use money to tax and steal from people, first by controlling money then by corrupting it. Red type indicates corruption.
- Direct trade or barter: People directly trade for products and services: a sweater for a table.
- Indirect trade: People indirectly trade products and services: a sweater for a gold coin that is traded for a table. The gold coin is the medium (middle-man) for the exchange.
- Money products: One or more products become popular for indirect trade. People choose products that are durable, valuable, light, popular, etc. People, not politicians or bankers, have chosen gold, silver, fine cloth, and many other items.
- Coin Fraud: Kings or goldsmiths melt down gold coins, mix in worthless metal, and re-coin the metal with a pure gold finish. They trade the coins as if they are worth the face value, such as one ounce. If a person accepts a gold coin that has 10 percent less gold than expected, then the king stole 10 percent of gold from that person.
- Banking: Entrepreneurs offer to store money (whether it’s gold or beads or cloth) and issue receipts or â€œbank notes.”
- Money Substitutes: People conduct indirect barter with the notes, making the notes money substitutes.
- Banker Fraud: Bankers realize that people never redeem their notes and decide to lend out the money from people’s accounts. As long as everyone doesn’t redeem the notes at the same time, the banker can earn interest on the new notes. However, holders of the new notes bid up the prices of goods and thereby steal value from the other people holding notes. Eventually, people notice more notes than usual and “run” to the bank to redeem their notes. The fraudulent bank collapses and many people do not get their money. Ideally, more people would investigate banks before depositing money and honest banks would thrive, while poorly run banks go out of business. Instead governments usually provide insurance to all banks.
- Monopoly Bank: The government opens a bank (UK, 1694; US, 1782, 1791, 1816, 1933) and either taxes notes from other banks (Australia, 1910), to put them out of business or gives the new bank the exclusive right to issue bank notes, making it a monopoly “central” bank.
- Monopoly Bank Fraud: the monopoly central bank issues bank notes not backed by money
- Paper Money: The monopoly bank stops redeeming bank notes for money and thereby confiscates all money (meaning gold) stored at the bank (USA, 1933). The bank notes, no longer receipts for a money such as gold or silver, are now money with no value. In other words, pieces of paper are used as money. Whereas people used to be allowed to use gold as money, and gold had a primary value in its use in jewelry, ornamentation, and electronics, now people are forced to use paper as money, and this paper has no primary use; it is only money by law, or by fiat.
- Legal, forced tender: The government requires people to accept the paper in trades via “legal tender” laws, also known as forced tender laws.
- Hidden taxation via fiat money: The government creates more fiat money to pay for government programs and wars. This is a tax because the value of the new money, such as new dollars, comes from all existing dollars. People see and complain about higher prices, but what is really happening is the government is taking value from people’s dollars and those dollars can’t buy as much.
- People protect their wealth: People begin to convert the fiat money into real products to preserve their wealth. Some buy land, others gold, others diamonds. In areas without electricity and rapacious governments, people have been known to buy DVD players as a means to avoid inflation; anything is better than the official fiat currency.
- Taxes on fake gains: The government taxes gains on investments in alternative monies even though the gains are only based on the value of depreciated fiat money. In essence, a person re-sells a gold coin for double the purchase price but can only buy the same amount of food with the proceeds. There was no real gain, but the government still taxes the difference.
- Taxes on popular alternatives: Governments increase taxes on alternative monies to keep more people holding the fiat money. In the U.S., taxes on investment earnings from gold are about 50 percent more than taxes on other earnings.
- Hyperinflation: The government prints so much new fiat money that all the fiat money becomes practically worthless. Hyperinflation is actually hyper-devaluation or hyper money creation. Most governments try to avoid this step, but often it can’t be avoided as people request more and more of the devalued money for a service. When no one will accept the fiat money, the government cancels the money and either issues a new fiat money or joins with other nations to issue a new fiat money under the pretense that a union of countries can better manage money.
- Monetary Choice: People prevent their government from issuing money, directly or indirectly through a monopoly central bank, and the people instead allow themselves to use any product as money.
Knowing how money comes into existence will help you make better choices on how to preserve your wealth.