QUESTION:
I wonder if you would care in a future blogpost to cast some light on the following?
The sole ‘legal tender money’ in the final analysis is the FRN (Federal Reserve Note — coins aside) collateralized by the Fed’s assets.All other ‘money’ is private bank credit money or suchlike,including Money Market Funds and other said-to-be money-like instruments.Despite the aspersions that surround Fiat money it is in toto a small number — around $1.6 bn. However there are promises to pay in FRN on demand.
Does that last fact account for the talk about banning cash ( ie the FRN) ?
Like the promise to pay in Gold it seems impossible to pay in the FRN were that ever to be demanded in size. De Gaulle ended the gold-on -demand offer so could something similar could happen to the FRN ? Back then Gold rose against all assets — ditto the FRN ?
I hope you are reading this in some comfortable place, given the atrocious weather in Florida.
Best Rgrds
Bill
ANSWER: Most money is actually created by the private sector through leverage and bank loans today. This is why when there is a crash, the contraction takes down banks for it is the leverage that collapses. When you have a debt based system, then the monetary system becomes leveraged. With the fall of Rome, the Catholic Church adopted the Sin of Usury thanks to Saint Thomas Aquinas and his 20 volume work, Summa Theologica.
There has never been actual tangible money issued by any government that was worth strictly its metal content. It was always valued greater than its intrinsic value. Even the first coins issued by any government took place in Lydia, located in modern Turkey.
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