What's the Alternative to the Money We Have Today?

It's hard to blame the American people for their complacency about the economy, when up until now it has been well-rewarded.

I have a STACK of auto-reply letters on fancy letterhead from my Representatives and Senators in Washington. They all say the same thing -- nothing.

I feel like a smart, motivated American who is ready, willing and able to help guide this country in the right direction, willing to help educate my friends and family as to the truth about the American economy, ready to deal with the harsh consequences of our leaders' bad decision making.

But, it doesn't matter. We can talk or write until we are blue in the face about the coming financial meltdown, and none of it will matter to, or motivate any of, the vast majority of Americans to DO something about it.

I think it will take a total collapse of the financial system, along with all the pain and suffering that will accompany it, in order to convince the American public that we need to do things differently.

Our fractional reserve central banking system must change. Radically. We must put ourselves back on a gold standard, and we must enforce the discipline of maintaining some very high proportion of deposits on reserve throughout our congress-controlled national banking system (if we even have one).

One of the questions we face (more of an unknown) is this: How much gold to we have? There are credible analysts who believe we (the United States) have sold ALL our gold to other countries and sovereign wealth funds. If we are truly out of gold, or have very little, starting over again with a our currency backed by gold will be very difficult if not impossible.

How to get it back? Good question.

The answer: BE PRODUCTIVE.

Let banks earn interest and income the old-fashioned way. Allow credit only to the extent that it is covered by collateral assets. In other words, lend only to those who don't need to borrow...

Where will the money come from to pay interest on loans if all the money on "day zero" is accounted for and backed by gold? It will come from productive borrowers earning more money than they owe, and paying a portion of their earnings to the lender as interest.

In a gold-backed financial system with very high fractional reserve requirements (such as 50% or 75% of deposits in physical possession in the banks) credit will be harder to get, borrowers will be far more qualified, and lenders will "create" far less money-from-nothing through the liquidity of credit.

Not all money will be "loaned into existence," as it has been from 1913 until now. Loans will have to be repaid with real money and real interest, effectively canceling the money created when the loan was originated. This will help immensely with the control of inflation, if not entirely eliminate it.

Wouldn't it be a great world if we could live without inflation? Our American ancestors did, for more than 300 years from prior to 1670 until 1970. The ONLY inflation during this entire span of history occurred during times of war, when the government printed money to finance their adventures. After the hostilities, the fiat currency was always rejected by the American people and withdrawn from circulation by the government. That choice between two forms of money was fundamental and key to the re-establishment of stable money after bouts of fiat-inspired inflation.

When allowed to freely choose among gold, currency backed by gold and currency backed by a "promise to pay," people invariably choose gold or the gold-backed currency.

In 1971 Nixon de-coupled the Dollar from gold, and starting at that moment, our economic fate was sealed. People no longer had a choice between fiat money and gold-backed currency.

Paper money began to inflate, and with every entitlement, defaulted loan, corporate bailout and FDIC-rescue of a failed bank, the future debt of this country continued to grow unchecked, placed squarely on the back of US taxpayers and continuously deferred ad infinitum.

It's going to be ugly.

But from out of the chaos that seems inevitable, we will hopefully be able to create a sane and stable money system, backed by gold.