I talk with prospective brokerage clients all the time, and find it revealing, although not surprising, that while they’ll lose sleep worrying about how many dollars their holdings are worth, it rarely occurs to them to worry about the worth of the dollars themselves.

That’s an enigma that shouldn’t be an enigma. In a well managed economy, dependable purchasing power should not be a problem. Domestic investors shouldn’t have to worry about the dollar.

The fact that the declining dollar is a domestic problem and people aren’t generally aware of it shows how successfully the government has used the consumer price index (CPI) as a red herring to divert attention from the real cause and extent of inflation.

FundsI talked about how the public is being bamboozled, not just about inflation but about economic realities in general.

In the article that follows this one, I’ll focus on inflation, how it’s become the government’s silent partner, and where it’s leading us.

In this article, I talk about money and how the difference between real money and fiat money lies at the very root of our monetary crisis and the impending collapse that hangs like the sword of Damocles over our markets and our economy.

Americans are quickly running out of time to protect themselves. I can only hope that this article has found you while the economic clock is still ticking and that you have the good sense to implement the strategies outlined in later articles s before it stops.

But now let’s talk about money. The American economy’s grim predicament could not have developed if the US. dollar was still real money.

The present-day US. dollar is what is called fiat money. Fiat money is money in name only. It’s money because a sovereign government says it’s money. It has no intrinsic metallic or redemption value. Its nominal value is what the government engraves on its face. Its real value is what it will buy in the marketplace. In the international marketplace, its real value is what it is worth in exchange for another country’s currency.

That has not always been the case. Until 1971, when the Nikon administration made the historic decision to abandon the gold standard, the dollar was backed by a percentage of the country’s gold reserve. Without gold backing, the value of the dollar is nothing more than its purchasing power. How, reliable that purchasing power is depends on how well the US. economy functions and how the supply of money is managed. The last point is key.

The dollar’s declining value is thus more a symptom than a root cause of economic problems, although the problems we have today couldn’t exist to the extent they do if the dollar represented real money instead of fiat money.

Before the development of money as we know it, and going back to ancient times, trade was facilitated using the barter system. Like our friends, Farmer Jones and Farmer Chant, one of whom grew oranges and needed apples while the other grew apples and needed oranges, they simply traded one product for the other.

However, the barter system was cumbersome and time consuming. For example, if Farmer Chant wanted to buy a chair, he needed to find a chair maker who wanted oranges. As a result, people soon realized the practicality of finding one commodity in their particular culture that would be accepted in exchange for any other good or service. That became the first money, and it existed in such diverse forms as sheep and cattle in ancient times or beads made from seashells, called wampum, which the Indians took in exchange for the island of Manhattan. A more recent example was the use of cigarettes as money by American GIs in Europe following World War II.

What these different forms of money all had in common was that they represented an agreed-upon material value. As such, money facilitated the exchange of goods and services, made division of labor possible, and generally increased productivity and standards of living. The more easily exchanged the money was, the more vigorous the economy.

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Our Declining Currency, Dollar