Why is your dollar worthless?  The answer is because it has no tangible backing.  For over 4000 years of human history the most common backing of currencies was either gold or silver.  The reason why nations for over 40 centuries backed their currencies with gold or silver was that it tied or anchored their currency to the earth.  They could only expand their monetary unit in tandem with the production of gold or silver.  It took monetary control away from the political class to manipulate the supply of money and its eventual debasement.

Today, the U.S. dollar is a true fiat currency (meaning it has been decreed a currency the central government).  It has no backing other than the full faith and credit of U.S. politicians.  Scary!  President Nixon ended the last gold backing of the dollar on August 15, l971.

Now, politicians can expand the total debt of the U.S. to pay for any program or programs they wish without having to worry about draining the gold supply from Fort Knox.  If worse comes to worse (it will), they can always print the dollars to pay for their programs.

How long can this game continue.  Simple—it can continue until confidence in the government’s ability to manage its financial affairs is lost.  Then, the game is over.

I can’t predict when, but eventually the U.S. will have to return to some type of commodity backing of its currency.  The result of this will be deflationary

Be Solvent & Prosperous,

Sanford Kahn, Business Author/Speaker