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Historical ‘Timeline’ of Key Political/Monetary Events!

February 19, 2014

A good way to understand the changes which have occurred to our political/monetary regime is to view a timeline of key events. As a teacher of monetary history, I find that a timeline does help me remember why events have changed and then how these changes affect our current situation. Change has been continual and exponential. Let’s start with the founding of our country and then bring events up to our present situation. I think this timeline will help us discern what has happened and where we find ourselves today! Following is a brief summary which may help us understand why events today are so chaotic and volatile:

Our World has changed but our philosophical System has remained the same. Can this continue indefinitely? What is likely to replace our current System called Free Market Capitalism?

1775 – 1781:  American revolutionary period and the reign of the Continental currency unit. The Continental currency was a paper fiat currency which totally collapsed after six years in circulation. ‘Not worth a Continental’ became the motto after the collapse.

1785:  Thomas Jefferson among others chose the ‘name’ for a new American currency unit. The ‘name’ chosen was the American ‘Dollar’. What is a ‘Dollar’, however?

1792:   Congress passed the Coinage Act of 1792 which defined our new currency unit. The definition of our Dollar became 371.25 grains of silver. Silver and gold were viewed as our Money and the Dollar became our official Currency. Article I, Section 8 declared that Congress would coin our Money and regulate the Value thereof. Value is regulated via a definition for our Dollar in terms of the chosen Money item (initially silver). Gold also became official (secondarily) and our gold Dollar was defined as 24.75 grains of gold. The Silver/Gold ratio at the time was 15 to 1.

1873:  Congress officially declared that our Dollar should be defined in terms of Gold (rather than silver). Our Dollar was officially defined as 23.22 grains of gold. One ounce of gold would equal $20.67. Silver was dropped as the official definition of our Dollar. Silver continued as legal tender and also Money, however. Gold became the reference point for our Currency from 1873 on.

1913:  Congress passed the Federal Reserve Act on December 23, 1913. This Act changed our monetary system from a Decentralized market system to a Centralized banking system. The FED was allowed complete independence from our Congress (and Article I, Section 8 of our Constitution). Many viewed this Act as unconstitutional yet the Act was signed by our then President, Woodrow Wilson, and it became the Law of the Land. A new Currency called the Federal Reserve Note emerged after the creation of this Centralized entity (also called the 4th branch of our Government by many).

1933:  Under the Franklin D. Roosevelt administration, gold ownership was prohibited (for Americans) and our Dollar was redefined (devalued) to 13.71 grains of gold (a 40% devaluation). Also, under the FDR administration, our Treasury collected all the physical gold from American citizens (1933) and also purchased substantial supplies of gold from foreigners (after 1933) at the new definition of $35 for each ounce of gold. By 1944 our Treasury had some 740 million ounces of gold in storage at Fort Knox (some 70% of the world’s official supply). Gold confiscation (1933) was viewed as necessary to get our economy back on a positive trajectory (now with a paper fiat currency system in control)!

1944:  A new international conference was held at the Mount Washington Hotel, Bretton Woods, New Hampshire. Some 44 allied nations attended (730 delegates). The architect’s of this new international currency regime were John Maynard Keynes (Great Britain) and Harry Dexter White (United States). The outcome of this conference was a declaration that the American Dollar would be the World’s Reserve Currency and all international currencies would be ‘tied’ to the American Dollar. To make the Dollar viable for international acceptance, the Dollar was defined as 13.71 grains of gold ($35/ounce of gold) and would also be ‘convertible’ (by foreign Central Banks) into our gold at the defined numbers. This Agreement at Bretton Woods essentially made our Dollar as GOOD as GOLD and acceptable for settlement of all international trade relations (settlement of trade accounts).

1971:  From 1944 on the American Dollar was viable for settlement of all trade accounts and also the Reserve Currency for the World. On August 15, 1971, however, our then President, Richard M. Nixon, became aware that our gold supply (which was 740 million ounces in 1944) had declined to some 272 million ounces (a 60% decline). America’s mis-management of the Dollar (mostly under Kennedy, Johnson, and Nixon administrations)  provided foreigners the option to exchange excess dollars (accumulated within their reserve accounts) into our gold supply (at $35/ounce). The trend was considered serious and this resulted in Nixon closing the Gold Window (to foreigners). The result of this decision created a new ‘Floating Currency Regime’ for the entire international community. Metaphysical currencies (globally) became the norm for settlement of all trade and international accounts.

1973:  The breakdown in the Bretton Woods System and the closing of the Gold Window allowed a new index currency regime to emerge. The American Dollar became a weight average of some six international hard currencies (called the index dollar). All international fiat currencies became ‘floating’ mathematical numbers which were subjectively ‘valued’ against each other and against the new American Index Dollar. All ‘valuations’ became relative and changing from day-to-day. Gold was removed as official legal tender (internationally) and also as a settlement money for international reserve accounts. The American Dollar continued to hold its status as the World’s Reserve Currency and final settlement currency for all international trade accounts.

1975:  All the OPEC nations agreed to ‘price’ their oil with the American Dollar creating what is called the Petro-dollar. This control over ‘price’ (using the Dollar) was initially negotiated by America’s Secretary of State, Henry Kissinger, in 1973 with the Saudi Government. In 1975 all the OPEC nations agreed to ‘price’ their oil in Dollars (allowing the Dollar to remain the World’s most important Reserve Currency and Pricing Unit). Oil and energy became the reference point which gave the American Dollar creditability after the closing of the Gold Window in 1971. Without this agreement between OPEC and the United States, it would have been unlikely that the American Dollar would have lasted as a World Reserve Currency. Congress approved Gold ownership for all Americans again (this option had been closed since 1933).

1970’s and after:  The trend towards Debt and Credit expanded exponentially. Americans started to receive Credit Cards and official encouragement to spend now and pay later. Debt started to accumulate as Americans borrowed, spent, and increased their outstanding Debt. America’s mindset of spending and accumulating debt continued with new mortgage debt, consumer debt, student loan debt, and credit card debt. Our National, State, and Local Governments expanded their empires via new spending, borrowing, and accumulation of new public debt. Today, Americans have record debt (now mostly unpayable) and our National Government has record debt (also mostly unpayable). See this website for the details:

1980’s – 90’s and after:  The new technology called the computer emerged with a bang for Americans and the World community in the 1980’s. Gradually (since the late 80’s), all financial instruments and currencies have been converted into Digital instruments (digitization and virtualization of paper documents). A World Wide Web emerged (called the Internet) in the 80’s and 90’s. This international communication system expanded as most communication was converted to speed of light digitization (2000 and after). The underwater submarine fiber optic cable system was mostly completed in 2010, allowing further expansion of global mobile devices for real-time communication and information flows. This computerization (and digitization) of all paper documents, paper currencies, and paper financial instruments has allowed electronic markets to grow and expand globally. Today, most stock exchanges and futures exchanges are electronic. Trading is now mostly 24/7 and in real-time globally.

2014 and after:  The trend towards a global system of trade and finance has emerged and is now ubiquitous (globally). The global Internet (digitization and virtualization) has changed our communication system for now and the future. We now live with speed of light communication, smart phones, and electronic transmission of information. Our global society is becoming ‘cashless’ as the digital revolution grows exponentially and pervasively. World institutions are now ruling our planet. The primary players are: The International Monetary Fund, The World Bank, The World Trade Organization, The Federal Reserve Banking System, The Bank for International Settlements, The European Economic Community, The G-20 Nations, the Council of Foreign Relations, and the United Nations and its Global Subsidiaries. Where will this lead us and who will govern this planet of 7 billion going forward?

Who will/can Govern a planet of unique individuals who demand personal freedom and autonomy?

The above timeline should reveal what has happened over the years. It is now obvious that our historical System of Capitalism is inadequate for the future of a global community of 7 billion citizens, our inter-dependent society, and our inter-connected world of real-time communication and relationships. One global village is a reality today! Speed of light communication is a reality today! Fighting over needed natural resources can not work in today’s inter-connected/real-time world. The philosophy of the most dominant Super Power (the USA) has been the philosophy of ‘Might makes Right’. This philosophy is unlikely to work going forward! Now may be a good time to inform our leaders of these realities! Guns and Might can not work when the average citizen has access to real-time information. Wisdom is needed going forward!

         I am:

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