How Money is Created? And Why it Is Bad for Your Wealth Strategy

“In the US, money is created as a form of debt.” –

Kevin Smith

Do you know what money is?

It is not that piece of paper in your wallet or coin in your pocket. Money used to be stable with intrinsic value, which made it worthwhile to accept as a secure form of payment and save as liquid asset.

Today, money has lost its mojo. It’s reduced to nothing but fiat currency, printed as government have a need for it. Money is no longer based on production and is no longer backed by anything of tangible value.

Yes, although money doesn’t grow on a tree — even worse — it materializes out of thin air. But, how did it get to this? To answer this question we must track back to history.

History of Money in the US

Before the American revolution, The colonials us English, Spanish, and French currency. The first American currency was printed in 1690 with the “anticipation” of being backed by tax revenues . However, without solid backing and ease of counterfeit, it was quickly devalued— Giving popularity to the phrase, “not worth a colonial”.

In 1785, the dollar was established as the unity for the national currency by The Continental Congress, which also gave way to “Congress chartered the First Bank of the United States, and authorized it to issue paper bank notes to eliminate confusion and simplify trade.

1861 the us Treasure issued the first of it’s kind, a non interest baring note called Demand Note. The Demand Note would eventually finance the civil war.

How money was created between 1800 to 1933

The Demand Note was replaced by the United States Note also called the Greenbacks because of the green tint meant to discourage photographic counterfeiting. It was lasted issued in 1971.

By 1879 both gold and silver certificates were in circulation lasting till 1957 for silver certificates. 1913 the Federal Reserve act was passed, creating the Federal Reserve system, the nations central bank and the Federal Reserve Note, it’s currency.

How is Money Created Today?

Today, money is literally printed.

First the US Treasure creates a bond at the expanse of the ta payers (I’ll explain in a second). The bond then goes to the Fed or the Federal Reserve. The Federal Reserve print money.

Then the money is send to the BIG Banks using a process call quantitative easing. Quantitative easing is when the fed introduced new supplies of money into circulation.

The bank finally release this fake money in to the economy in a form of debt. The new flow of currency into the economy encourages spending, borrowing, and lending, at the same time, it stripes buying power off of every dollar in your possession.

In the process banks get richer the taxpayer get poorer. And tax payer assume the bill for the bond that was created by the Treasure. Rinse and repeat.

Who Prints Money?

Contrary to what the masses believe, the government doesn’t print money. That power is handed over to The Federal Reserve.

In 1913 the Federal Reserve Act establishes the Federal Reserve, a central banking system.With it the Federal Reserve Note —a new currency —was issued.

Many people dont’ know this, but the Federal reserve is not a government agency. It’s a private charter bank, more specifically, its family owned.

Now, if the constitution government to collect tax, how much more unlawful is it for a private agency that’s pretending to a government agency to do so?

How Creating money Affects You?

The amount of currency in circulation affects the buying power of money in your pocket. The more money we have circulating in the economy, the less buying power it has —the less we have circulating, the stronger the buying power.

This increasing of prices of goods and services is called inflation.

Inflation happens when you have more money supply chasing less goods. However, inflation is not just how much things increase in price, but more importantly, how much the dollar loose value (buying power).

As the Feds print or create more money, the less valuable it becomes. That’s why the wealth store wealth in assets and banks keeps money moving. Because parked money is dead money.

True wealth is in real money. Don’t waste your working years saving currency like majority of the population. Redirect your income to you so you can strategically use it to eliminate bad debts, increase your cash flow buy assets.

Your thoughts….?

How does knowing how money is created affect how you see 401k, IRA, and other traditional retirement methods?