Currencies of God and Man by Ray Istre (Part 3 of 6)
Manipulation of the Currency
When the dollar is strong, commodities, such as gold and silver, food, etc., cost less in the total number of dollars it takes to make a purchase. When more money is injected into the economy, it takes a while for inflation to take effect. Inflation means higher prices for everything like gold, silver, food and materials. At the beginning of the influx of the easy money that is injected into the economy, it can be used to buy gold and silver at very low prices per ounce. As more and more money is injected into the economy, inflation begins to cause the prices of commodities such as gold, silver, food and materials, to rise in dollar amount. As more money is printed and injected into the economy, the value of each dollar is less so it takes more dollars to make purchases of real commodities. This is when gold, silver, food and other commodities begin to go up in price.
As people begin to clamor for more and more paper money it is created and injected into the economy by political pressure placed on the FED. Before the commodity bubble bursts, gold and silver can be sold at inflated prices. Silver, for instance, was under $3 per ounce in early 2000 when the dollar was strong. It is currently at $31 per ounce now in early 2013 and threatening to go higher as the dollar weakens. At some point, money is taken out of the economy by the FED so that the weakened dollar can gain strength once again. Of course, the option remains that they would just keep printing the dollar until it became totally worthless and had to be replaced with a new currency.
The Chinese invented paper money around 800 AD. Instead of carrying gold and silver from city to city for business transactions, they kept the money in one place and wrote paper contracts that represented the gold and silver. Thieves would steal their gold and silver on the road, so it seemed like a good idea to carry paper instead of gold and silver. About 400 years later, Genghis Khan continuously printed money to finance his blood thirst and empire. He printed money far beyond any gold or silver deposits to back it up. After so much money was in circulation, the people lost faith in the paper currency. It became totally worthless without the faith of people and was finally refused as payment for goods and services offered. This has repeatedly happened to paper currencies since then.